Sitting of 17 June 1986

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

    Falkland Islands
    Mr. McCrindleasked the Secretary of State for Defence if there has been any change in the pattern of patrols in the south Atlantic following the sinking of a fishing vessel by the Argentine navy off the Falklands Islands.
    The Minister of State for the Armed Forces (Mr. John Stanley): My hon. Friend will, I am sure, understand that I cannot provide details of Royal Navy patrol patterns in the south Atlantic. However, Her Majesty's Government have strongly condemned the deplorable attack on an unarmed fishing vessel in international waters by an Argentine coastguard vessel on 28 May, with resultant loss of life.
    Mr. McCrindle: I understand the Minister's inability to be specific, but will he give the House an assurance that the Government remain satisfied that the level of naval patrolling within our terroritorial waters around the Falklands remains adequate to deter the sort of movement to which I referred in my question? More generally, has the incident caused Her Majesty's Government to reconsider the prospect, to which they look forward, of reducing the garrison on the Falkland Islands?
    Mr. Stanley: I can assure my hon. Friend that we keep our force levels under review, and at present we are certainly satisfied that our force levels in the south Atlantic are appropriate to meet the threat.
    Mr. Cartwright: As the seas around the Falkland Islands now seem to be becoming a traffic jam of foreign trawlers, all intent on stripping the islands of one of its most important assets, is it not time that Britain and Argentina got together to try to agree some sensible policy for protecting the fish stock?
    Mr. Stanley: The hon. Gentleman will appreciate that fisheries policy is a matter for my right hon. and learned Friend the Secretary of State for Foreign and Commonwealth Affairs. He will also be aware that Government policy is to try to produce a multinational solution to that problem.
    Sir John Biggs-Davison: Are Her Majesty's Government aware that, as a result of this example of frightfulness, the British people of the Falkland Islands are the more resolved that they shall not pass under the sovereignty or administration of Argentina?
    Mr. Stanley: I am grateful to my hon. Friend. He knows, as well as anybody else, that on every possible occasion in recent years the people of the Falkland Islands have made it clear that they wish to remain under a British Government.
    Mr. Dalyell: Whatever the ministerial responsibility, what are the Government, as a whole, going to do about the ecological disaster of over-fishing?
    Mr. Stanley: As I have already said, the Government are trying to negotiate a satisfactory multinational fishing regime.
    Mr. Cyril D. Townsend: Will my right hon. Friend continue, privately and effectively, to point out to the Foreign Office the extra burden that will fall upon the Royal Navy should Britain decide to go for a unilateral conservation regime in that part of the world?
    Mr. Stanley: My hon. Friend makes a very pertinent point.

    Chemical Weapons
    Mr. Cabornasked the Secretary of State for Defence what are the implications for the speed of the North Atlantic Treaty Organisation's reaction to a chemical attack from the Union of Soviet Socialist Republics in a future conflict of all North Atlantic Treaty Organisation chemical weapons being stored in the United States of America.
    Mr. Stanley: If the hon. Member is implying a reaction with chemical weapons, the implications would be determined by a variety of factors, such as which delivery systems the United States chose and whether there had been any contingent deployments of chemical weapons to other NATO countries by the time any Warsaw pact attack with chemical weapons took place.
    Mr. Caborn: I thank the Minister for that answer. Does he agree that such a movement of chemical weapons across the Atlantic could be seen as being extremely provocative in times of tension? Has he seen any estimates of shipping such weaponry across the Atlantic, for example, for the stockpiles in West Germany?
    Mr. Stanley: On the basis of the hon. Gentleman's argument, NATO would have no reinforcement plans whatsoever. I would put to him a contrary point of view: that, at times of tension, it is fundamentally important that the NATO Alliance shows its resolve to resist and so preserve deterrence.
    Mr. Lyell: Is it not a fact that, at the moment, the Russians have a massive chemical capability which would put our conventional forces at a huge disadvantage if there were an attack in north-western Europe, and that unilateralism and its disadvantages apply just as much to chemical warfare as to nuclear disarmament? Should the House not remember that before the second world war Britain had a massive gas capability and that, as a result. Hitler never dared to use gas?
    Mr. Stanley: My hon. and learned Friend is entirely right to draw attention to the relationship between preserving a viable chemical deterrent and preserving our conventional deterrent. He is entirely right to stress, as we have done often from the Dispatch Box, that if the Warsaw pact, through being able to launch chemical

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    attacks on our forces with impunity, was able to oblige our forces to fight continuously in protective clothing while not being under any such disadvantage itself, it would confer an enormous advantage on its conventional forces.
    Mr. Wallace: Does the Minister think that the deployment of chemical weapons across the Atlantic at a time of tension would help to heighten, or to relieve, tension?
    Mr. Stanley: That would obviously depend entirely on the circumstances of the time. As I said in reply to the hon. Member for Sheffield, Central (Mr. Caborn), we believe, as previous Governments believed, that it is critical that NATO countries should have reinforcement plans and show their will and determination to reinforce at a time of tension.
    Mr. Tony Lloyd: Why is it automatically assumed that the way to deter chemical weapons is by the use of chemical weapons and that the way to respond to a chemical weapon attack is to use them, when there are plenty of other options which the Minister does not seem to allow for in his answers?
    Mr. Stanley: The hon. Gentleman will be aware that the NATO defensive posture is one of flexible response. It is, therefore, open to NATO countries to use the range of their capabilities. The essence of our deterrence is that we do not signal in advance the form of response that we might make to any form of Soviet agression.
    Mr. Terlezki: Does my right hon. Friend agree that we ought to ask the Soviet Union to get rid of 300,000 tonnes of chemical weapons so that there is no need for other countries to produce or use them, thereby increasing the peace, security and well-being of the whole world?
    Mr. Stanley: That is, and remains, the first objective of the Government's policy. Everybody's defence and security interests would be best served by disposing of these weapons altogether. As some of my hon. Friends have already rightly said, the Soviet Union has been responsible for this major escalation and extension of the chemical threat, as it has modernised and expanded its chemical stocks, when none has been produced by Britain since the 1950s and by the United States since 1969.
    Mr. Denzil Davies: Is it not a fact that these binary weapons are no use in the United States, and that they are of use only if they are located in Europe, because that is presumably where the war would come? Does the right hon. Gentleman agree that the next step is for the United States to request that the bigeye bomb and other versions of these weapons be located in Britain at Upper Heyford and Lakenheath? If so, what would be the Government's response?
    Mr. Stanley: As we have told the right hon. Gentleman and the House often, United States policy is that these weapons should remain in the United States during peacetime. As to what would happen at a time of tension or war, as we have said many times it would be matter for decision by the Government of the day in the light of all the circumstances at the time.

    Nimrod Airborne Radar Programme
    Mr. Alex Carlileasked the Secretary of State for Defence what progress has been made towards completion of the Nimrod airborne radar programme.
    Mr. Gerald Howarthasked the Secretary of State for Defence if he will report on progress being made in bringing Nimrod airborne early warning aircraft into service.
    The Parliamentary Under-Secretary of State for Defence Procurement (Mr. John Lee): A full statement on the Nimrod airborne early warning project was made to the House by my right hon. Friend the then Minister of State for Defence Procurement during the debate on the Royal Air Force, on 26 February, at columns 962–65 of the Official Report. The present position is that we have received proposals for AEW systems from six contractors, including GEC Avionics and three United States companies — Boeing, Grumman and Lockheed. In addition, we have had proposals from the United States Government to supply either of the systems in current United States military service through foreign military sales arrangements. All contractors have been asked to submit firm price proposals by 7 July.
    Mr. Carlile: Why has the tender date for the programme been moved so often—four times, I believe? Does the hon. Gentleman accept that the constant moving of the tender date has caused great uncertainty, especially for one of the companies concerned? Does he agree that the tender date has been moved so often because of a running dispute between the Department of Trade and Industry and the Ministry of Defence?
    Mr. Lee: We are running a fair competition and we intend to he totally even-handed.
    Mr. Howarth: My hon. Friend will be aware that a number of the overseas proposals would provide aircraft other than the Nimrod. Will he say whether he foresees that, in the event of one of these contractors being selected, the 11 AEW Nimrods could be redeployed in the ASW role?
    Mr. Lee: I am grateful to my hon. Friend for his contribution, and his suggestion will be considered, as will any cost-effective solution.
    Mr. Campbell-Savours: Is not the scandal of Nimrod. made my Marconi Underwater Systems Ltd. surpassed only by the scandal of Marconi's Tigerfish—the torpedo that does not work? Does not Marconi Underwater Systems Ltd. need a major shake-up? Is not the only reason why it purchased the services of the right hon. Member for Waveney (Mr. Prior) that it could effectively, perhaps, impress Cabinet members with undue pressure?
    Mr. Lee: All I would say to the hon. Gentleman is that in fact we are in the air, not under water, at the present time. I repeat, that this is a project of which historically neither the industry nor the Ministry of Defence can be particularly proud.
    Sir Antony Buck: Ignoring the rather intemperate remarks of the hon. Member for Workington (Mr. Campbell-Savours, is my hon. Friend able to say when he will be able to say something definitive about the programme? Will it be a matter of months, or a year? When will he be able to to tell us something rather more firm and specific about the future of this programme?
    Mr. Lee: Obviously we shall carefully evaluate the proposals. At present we have a team of about 50 officials working on the overall project.
    Mr. McNamara: Does the Minister accept that the last statement seems to indicate that the Ministry is all at sea over this particular matter? Will he explain why on this occasion, as on previous occasions, the Ministry has decided to move the goal posts in terms of tendering? This has all the unsavoury atmosphere of what attended the tendering for the RAF trainer. Will the Minister tell the House whether the Ministry has given up all belief in a British early warning over the horizon radar system? Will he give an undertaking that the announcement of the decision about which system is to be adopted will be made in this House and will not be either leaked from the Ministry or slipped out while the House is in recess?
    Mr. Lee: I am sure that in due course the decision will be announced in this House. although the decision will be for my right hon. Friend the Secretary of State for Defence. I repeat. in reply to the hon. Gentleman's earlier points, that in this competition we intend to be totally even-handed.
    Sir Hector Monro: Does my hon. Friend agree that in the Nimrod we have a first-class airframe with a first-class engine and many experienced RAF crews to operate them? Is it really beyond the wit of this country's electronics industry to provide an adequate radar set with which to fulfil the contract?
    Mr. Lee: With respect, it would be inappropriate for me to answer that question or to be drawn, apart from repeating once again that we are in full and genuine competition.

    Chemical Weapons
    Mr. Pikeasked the Secretary of State for Defence whether the North Atlantic Treaty Organisation force goal on chemical weapons includes air-delivered munitions.
    Mr. Stanley: This force goal invites the United States to modernise its chemical weapon stocks with binary munitions. The force goal itself is classified. The United States Government's plans for the modernisation of its chemical weapon stocks are set out in the United States Defence Secretary's annual report to Congress for the fiscal year 1987 and includes an air-delivered weapon.
    Mr. Pike: Have the Government discussed with the Americans contingency plans about where, in times of crisis, these appalling chemical weapons will he sited in this country? If such discussions have taken place, will the Minister make the public of this country aware of where they will be placed? If discussions have not taken place, will he tell the House in what circumstances they will be sited in this country?
    Mr. Stanley: No such discussions have taken place to date. As we have said many times, if a proposal is put to us, it will be considered by the Government at the time.
    Mr. Conway: Bearing in mind the amount of time that British troops in Germany spend on training in nuclear, biological and chemical safety suits, what are the chances of protection for those troops if we follow the advice of the Labour and Liberal parties and independently and unilaterally do away with our nuclear deterrent, which does afford those front-line troops some protection, as we did with chemical weapons and got no response from the Soviet Union?
    Mr. Stanley: My hon. Friend is entirely right to draw attention—and I hope that it will be noted more widely — to the one-sided disarmament tendencies inside the Liberal party.
    Mr. Denzil Davies: The Minister said that there would be an air-delivered system. Why does he not make it clear that by air delivery what is meant is the F111s at Upper Heyford and Lakenheath delivering bigeye bombs, as that is the only way in which they can be delivered? Why does he not admit that plans for that are already in operation'?
    Mr. Stanley: No such plans have been put to us, but if the right hon. Gentleman is concerned about the alternative means of delivery for the United States chemical weapon deterrent, I hope he will hear in mind that the Soviet Union is now able to deliver chemical weapons over any of the NATO countries of western Europe from the sea, from the air, from land-based missiles and from artillery.

    Experimental Aircraft Programme
    Mr. Robert Atkinsasked the Secretary of State for Defence what lessons have been drawn by his Department from the experimental aircraft programme.
    Mr. Lee: The experimental aircraft project is yielding; valuable practical experience in the integration of a wide range of advanced technologies for new sophisticated combat aircraft.
    Mr. Atkins: Is it not essential that the first British fighter for 30 years should fly within its full flight envelope at Farnborough this year in order to maintain the technical lead that we have over the French counterpart, which will fly? Will he join me in urging all those involved in the industrial dispute at British Aerospace to resolve their difficulties as a matter of urgency and get back to making aeroplanes that can beat the competition?
    Mr. Lee: I was with my hon. Friend and my right hon. Friend the Secretary of State for Defence at the impressive roll-out of the experimental aircraft project in April. The industrial dispute at British Aerospace at Warton is sad and disappointing, and one wishes that it will be speedily resolved. It is very much the intention of British Aerospace, and our hope, that the EAP will fly at Farnborough. My understanding is that, where possible, work on the programme has been continuing.
    Mr. Carter-Jones: Apart from the importance of the British element in avionics and airframe construction, will the hon. Gentleman give a firm undertaking that. for strategic, employment and technological reasons, Rolls-Royce will continue to have a strong interest in this aircraft?
    Mr. Lee: That would be our intention.
    Sir Peter Blaker: Does my hon. Friend agree that a settlement of the industrial dispute would be helpful not only in connection with the experimental aircraft programme but in the context of our order for Tornados for Saudi Arabia and the efforts that the Government and British Aerospace are making to secure further sales for that aircraft?
    Mr. Lee: My right hon. Friend is right. I remember that those workers who are now on strike were, some months ago, desperately concerned about their jobs and possible

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    redundancies at Warton, but then we had the extremely successful aerospace package sale to Saudi Arabia. Sadly, we have now moved into an industrial dispute. We all hope that it will soon be resolved.
    Mr. Denzil Davies: The Minister mentioned the sale to Saudi Arabia. Can he confirm reports that the Saudis are seeking to renegotiate that deal because British Aerospace is being paid in oil which, as we know, is a depreciating currency? Is that agreement under review? Why did the Government enter into an arrangement for payment in such a depreciating currency as oil?
    Mr. Lee: I have no knowledge of any renegotiation.
    Mr. Stern: In the context of the Rolls-Royce contribution to this project, will my hon. Friend take the opportunity to impress upon those trade unionists who are trying to poor mouth the achievements of Rolls-Royce to date how much Rolls-Royce has contributed to this project and, in doing so, has contributed to the growth and future prosperity of Rolls-Royce?
    Mr. Lee: I am more than happy to pay tribute to the contribution of Rolls-Royce in this and other projects.

    Trident
    Mr. Livseyasked the Secretary of State for Defence how much has been (a) committed and (b) spent to date on the Trident project.
    The Secretary of State for Defence (Mr. George Younger): To date, £2,400 million has been contractually committed on the Trident project, of which some £620 million has been spent.
    Mr. LivseyCan the Minister say what effect the expenditure will have on our conventional forces, especially in terms of frigates and Challenger tanks, and the opportunity costs of that?
    Mr. Younger: If such a comparison is to be made, the effect of having no Trident deterrent in the mid-1990s onwards would be much more expensive in the vastly greater number of conventional arms that would be needed to replace it.
    Mr. Squire: Has my right hon. Friend ascertained whether the hon. Member for Brecon and Radnor (Mr. Livsey), in asking that question, was speaking on behalf of the Liberal party leadership, the SDP alliance, or the Liberal party conference? Should we not be told the position?
    Mr. Younger: I had hoped that the hon. Gentleman would be able to enlighten us on what his leader thinks about the matter. The only thing that I have been able to ascertain so far is that he will not be able to make up his mind for some years yet. The House may feel that that makes Ethelred the Unready look positively constructive by comparison.
    Mr. Douglas: In view of the considerable expenditure of which the Secretary of State has given notice to the House, will he indicate the unique nature of the Trident contract that has been placed with Vickers? Will he provide details of the background and say why it was necessary to have a contract whose cancellation would involve 125 per cent. of the official price? Additionally, will the Secretary of State assure my constituents, who are
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    extremely perturbed about the way in which the Ministry of Defence is going about the expansion of Rosyth naval base, that full disclosure will be made in terms of safety and other environmental aspects to the people in the locality of Limekilns regarding the proposed expenditure for Trident at Rosyth?
    Mr. Younger: On the hon. Gentleman's first point, there is a copy of the contract with the contract-break clause for HMS Vanguard in the Library of the House. The contract shows that, in the event of cancellation in the limited period before the second Trident boat is ordered, the MOD has agreed to meet properly incurred liabilities up to 125 per cent. of the sum payable for completing the contract. That sum would be paid only if the liabilities had been properly incurred.
    On the second part of the hon. Gentleman's question, I apprediate his constituents' concern about safety. Those concerns will be considered with the greatest care. I think that his constituents are really concerned whether the Labour party, in government, would cancel the Trident project and destroy most of their jobs.
    Mr. Leigh: If my right hon. Friend believed that not only should Trident not be replaced at any cost but that Britain should unilaterally disarm, if his right hon. Friend the leader of the party believed that Trident should not be replaced but that Polaris should be allowed to linger on as an increasingly decrepit and hopeless system, and if his deputy leader believed that Polaris should be replaced by cruise, would people not say that the Conservative party's defence policy was a shambles? is that not precisely the policy of the alliance? Does it not bear less resemblance to the real Alliance that protects our freedom and—[Interruption.]
    Mr. Speaker: Order. The question concerns the amount of money spent on Trident.
    Mr. Leigh: Does he agree that it bears a resemblance not to Ethelred the Unready, but more to the Mad Hatter's tea party?
    Mr. Younger: My hon. Friend is quite right to say that there is immense confusion as to the precise position of all members of all the Opposition parties. I think the House might agree that any party which goes before the public without a credible defence policy is doomed to disappointment.

    Nuclear Arms Race
    Mr. Strangasked the Secretary of State for Defence what discussions he has had with his European counterparts within the North Atlantic Treaty Organisation about how best to halt the nuclear arms race; and if he wll make a statement.
    Mr. Younger: I had useful discussions with both my European and North American counterparts at last month's meeting of the Defence Planning Committee. We confirmed our objective of seeking balanced, equitable and verifiable arms control agreements involving United States and Soviet nuclear forces and expressed our strong support for the United States stance in the Geneva negotiations. Details are contained in the DPC communiqué, a copy of which is in the Library.
    Mr. Strang: Does the right hon. Gentleman recognise that the whole world was dismayed at President Reagan's

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    threat last month at that very meeting to breach the SALT 2 treaty later this year? Do the Government support the American Administration on this matter?
    Mr. Younger: The hon. Gentleman should look carefully at what the American Administration has said. As my right hon. Friend has already made clear, we welcome President Reagan's decision to continue to respect, for the time being, the constraints of the unratified SALT agreement by dismantling two Poseidon submarines. The President's statement on 27 May makes it clear that, if the Soviet Union takes constructive steps between now and the end of the year to alter the current position, the President will take that into account in reviewing whether the United States should exceed SALT 2 limits. Thus the door has been left open, and there is a clear opportunity for the Soviet Union to respond constructively.
    Mr. Forman: Does my right hon. Friend agree that the best next step that the Government could take and urge upon their allies to limit, if not halt, the nuclear arms race would be a progressive step-by-step reduction in not only frequency hut the number of' underground nuclear tests, as recommended by Chancellor Kohl?
    Mr. Younger: I appreciate my hon. Friend's point. We have repeatedly made it clear that we favour a comprehensive test ban, if that can be achieved. The key is adequate steps for verification, and we shall pursue that line.
    Mr. Allan Roberts: Will the right hon. Gentleman confirm that one way to help to prevent the arms race is to support non-proliferation treaties? To that end, is it not unwise to re-process other people's spent fuel at Sellafield, as we plan to do with the THORP project, to produce plutonium, which we would send back to countries such as Germany and Japan? We know that plutonium can be used only to produce nuclear weapons.
    Mr. Younger: That is a different question. The position in this country has always been that, provided adequate safety provisions are carefully adhered to, these industrial matters should he pursued in an industrial manner.

    BAOR
    Mr. Proctorasked the Secretary of State for Defence if he has any plans to change the size of the British Army of the Rhine; and if he will make a statement.
    The Parliamentary Under-Secretary of State for the Armed Forces (Mr. Roger Freeman): On present plans we intend to increase the size of BAOR to 56,000 by the end of the decade, as announced in the 1985 Statement on the Defence Estimates.
    Mr. Proctor: May I take this opportunity to congratulate my hon. Friend on his well-deserved appointment. Will he explain the reasoning behind the increase?
    Mr. Freeman: I am grateful to my hon. Friend for his kind remarks. For the past 30 years we have had a NATO commitment to maintain on the continent an army of 55,000. It makes operational sense to concentrate those forces in the Federal Republic of Germany to deter and repel an invasion by land.
    Mr. Robert C. Brown: If BAOR's strength is to be increased, is it the Government's intention to proceed with
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    the order for 78 new Challenger tanks? If so, will the hon. Gentleman give an unqualified assurance that Royal Ordnance factories will have to put forward tenders, as do their competitors, such as Vickers at the Scotswood works in Newcastle upon Tyne? Does the hon. Gentleman agree that it would be monstrous to award the contract to the ROF at Leeds without tender?
    Mr. Freeman: That question is not one that I can answer specifically. I can give the hon. Gentleman the assurance that, in addition to increasing the strength of BAOR from 55,000 to 56,000, we are improving the equipment available to that Army, including the provision of six regiments of Challenger tanks.
    Mr. Conway: I welcome my hon. Friend to the Dispatch Box. Will he assure the House that the less than 4 per cent. of the Army budget spent on the Territorial Army's battalions which are committed to NATO represents good value for money? Will he assure the House that the proposed expansion of the TA, which is much welcomed, is on course and will not he long in coming?
    Mr. Freeman: I thank my hon. Friend for his kind remarks. I join him in paying tribute to the Territorial Army and to the important role that it has played, and will increasingly play, in the defence of Europe.

    Helicopter Procurement
    Mr. Ashdownasked the Secretary of State for Defence if he will make a statement on future helicopter procurement.
    Mr. Lee: As in all aspects of defence procurement, our objective in future helicopter procurement will be to meet the forces' requirements for future helicopters and to obtain the best value of money for the taxpayer, with international collaboration where appropriate.
    Mr. Ashdown: The Minister will recall that on 26 April he said that the Government would do all that they could to ensure Westland's future capabilities and position. Is he aware that the company's most pressing need at present, in planning for the future, is to know with clarity what the position is with regard to the support helicopter for the Army? Will the Minister say when the review for that order will be completed and when a decision will he announced?
    Mr. Lee: I know the position at Yeovil. I was there for the commissioning of the EH101 simulator last month and I saw the situation on the production lines. Therefore, I am cognisant of the position. The conceptual study is under way and it is the intention that it will report to the Chiefs of Staff in the autumn. We would hope for a decision probably early in 1987.

    Warship Procurement
    Mr. Bruceasked the Secretary of State for Defence if he will make a statement outlining his plans for the future of warship procurement for the next five years.
    Mr. Lee: It is our intention, within the resources available to us, to modernise our surface and underwater fleets appropriate to the threat.
    Mr. Bruce: Is the Minister aware that that reply is rather less than forthcoming on the prospects for future ship orders in the United Kingdom? Will he acknowledge that, for a maritime nation such as Britain, the provision

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    of ships should be our key contribution to NATO defence? What assurance can he give that there will be enough orders coming forward for our shipyards, especially for the shipyard in my own area, Hall Russell, which is starved of orders and being privatised by the Government?
    Mr. Lee: Everyone, including the hon. Gentleman, knows full well that there is substantial overcapacity in our warship yards at present. Therefore, I cannot give him the guarantee that he seeks. Nevertheless, the Government have a record that we can be proud of in supporting the conventional and nuclear Navy. Since 1979 we have ordered 52 warships, including 19 major ones, and at present the current value of naval orders is approximately £3·5 billion.
    Sir Patrick Wall: Is my hon. Friend aware that there is considerable anxiety that unless the Government order three type 23 frigates each year they will not be able to keep their promise to maintain 50 frigates and destroyers? Is he also aware that Fearless and Intrepid are getting very old and unless there are plans to replace them this year the future of our amphibious force is very grim indeed?
    Mr. Lee: I repeat the assurance that I have given previously that we shall be making a decision on the way ahead on amphibious ship replacement during 1986. Frigate orders are very much dependent on the availability of resources. However, it is our intention to make an announcement on frigate orders before the House rises.
    Mr. Duffy: Is the Minister aware that his first reply was lamentable, even disgraceful? Even if we were to act on the recommendation of his hon. Friend the Member for Beverley (Sir P. Wall) and start to order warships again — which the Government have not done for two financial years — and even if we were to resume the obligatory pattern of three warships a year in order to maintain or at least achieve the objective of 50 warships, by 1990 one third of that fleet would be 25 to 30 years old? That is the problem that the Government are storing up for the Royal Navy.
    Mr. Lee: I have nothing further to add to the replies that I have given previously.
    Sir David Price: Is it my hon. Friend's continuing determination to maintain the pace and scale of the single role minehunter programme? Is he aware that if he slackens on it for Treasury reasons it will have an extremely adverse effect on the programme and on the admirable shipyard of Vosper Thornycroft?
    Mr. Lee: I know that my hon. Friend lobbies consistently for Vosper Thornycroft. The order for O1 of the single-role minehunter was, as he knows, placed with Vosper Thornycroft in 1985. However, no decisions have been taken on the size or timing of future orders.
    Mr. Denzil Davies: Has the Minister not in effect confirmed what we all thought, that the Government will not be able to honour the commitment to a 50-warship Navy, which would mean ordering three type-23 frigates a year for some considerable time? Why does he not say, as he implied in his earlier answer, that the Navy will be cut and run down in order to pay for Trident?
    Mr. Lee: The right hon. Gentleman is totally wrong. I repeat that it is our intention to maintain a running fleet of about 50 vessels.
    Mr. Speaker: Order. There is a good deal of back-chat going on, although we are still in the middle of Question Time.

    Overseas Expenditure
    Dr. Michael Clarkasked the Secretary of State for Defence if he will indicate the proportion of the defence budget that is spent overseas: and if he will make a statement.
    Mr. Younger: Direct defence expenditure overseas, net of receipts, is expected to comprise some 14 per cent. of total defence expenditure during 1986–87.
    Dr. Clark: I thank my right hon. Friend for that answer. I recognise the need to spend money abroad in order to secure the defence equipment that we require, but will my right hon. Friend give an assurance that we will use our purchasing power as a major buyer of foreign equipment to secure offset agreements with the companies from which we purchase?
    Mr. Younger: My hon. Friend is right about that. When we buy overseas equipment, either because it is cheaper or better, or both, we always try, wherever possible, to tie in offset agreements to help British industry.
    Mr. McNamara: How much of that money is spent in Gibraltar and, in particular, how much of it has been spent on the Appledore company, which is supposed to be managing the dockyard in Gibraltar? Will the Secretary of State confirm that that private company, which took over the work at the dockyard, put a screw on a frigate back to front, so that instead of going forwards it would have gone backwards, and vice versa, and that it mended the pumps on a private vessel so that when the crew tried to pump water overboard, the water came into the ship and it sank in the harbour?
    Mr. Younger: If the hon. Gentleman will table a question about how much of the money is spent in Gibraltar, I shall be glad to give him an answer. However, he may be interested to know that the 14 per cent. spent overseas includes the net cost of our forces overseas and all the foreign equipment that we buy. I hope the hon. Gentleman will feel that that is a fairly encouraging figure.
    Mr. Nicholas Winterton: As I have just returned from the annual presentation of the Think British campaign, which was made by the deputy chairman of the Conservative party, may I ask my right hon. Friend to accept from me that spending 14 per cent. of our defence budget abroad is too high a figure? Over the years our Royal Ordnance factories have produced high quality products, and it is nonsense that we should send orders overseas so that we can say that we are providing competition for our Royal Ordnance factories, which already have such an excellent record in this country.
    Mr. Younger: My hon. Friend is not quite correct to draw that conclusion. The figure of 14 per cent. relates to all overseas expenditure, net of receipts. If the procurement element is taken alone, between 90 and 95 per cent. of our procurement budget is spent at home.

    Chemical Weapons
    Mr. Cohenasked the Secretary of State for Defence how many representations he has received concerning the North Atlantic Treaty Organisation force goal for United States chemical weapons: and if he will make a statement.
    Mr. Stanley: To date this year my Department has received about 50 letters from Members of Parliament and some 90 direct from the general public on the subject of United States plans for chemical weapon modernisation.
    Mr. Cohen: Is the Minister aware that a United States Senator recently described the bigeye chemical weapon as the turkey to end all turkeys? The British public do not want it on their soil, and it does not represent a realistic form of defence for Britain. If the earlier statement that it will be kept in the United States in peacetime is to be believed, will it not he a sign to the Soviet Union that war is imminent if it is shipped over here? Should we not make it an early Christmas for that turkey, by saying that we will not have it on our soil?
    Mr. Stanley: I note the hon. Gentleman's view that NATO would be better served by having no reinforcement plans whatever. That is not the view on this side of the House.

    Intercontinental Ballistic Missiles
    Mr. David Atkinsonasked the Secretary of State for Defence if he will make a statement about his Department's policy for the disposal of redundant intercontinental ballistic missiles.
    Mr. Stanley: At the end their useful lives the nuclear warheads for our Polaris missiles are dismantled and reusable materials, which include all special nuclear materials, are recovered. Non-reusable components, including conventional high explosives, are disposed of in accordance with strict safety and security regulations. The disposal of complete redundant Polaris missiles will not occur until the mid-1990s and the disposal policy has not yet been decided.
    Mr. Atkinson: In view of the frightening Soviet lead in space, as reported by Jane's today, and of the crisis over launchers in the United States of America and in Europe, what studies has the right hon. Gentleman's Department made on utilising our existing missile stock in restoring our defence satellite programme?
    Mr. Stanley: My hon. Friend will understand that those two do not relate to each other. He is entirely right to point to the enormous investment and the great progress that the Soviet Union has made in space.

  PRIME MINISTER

    Engagements
    Mr. Craigenasked the Prime Minister is she will list her official engagements for Tuesday 17 June.
    The Prime Minister (Mrs. Margaret Thatcher): This morning I had meetings with ministerial colleagues and others. In addition to my duties in this House I shall be having further meetings later today, including one with His Majesty King Hussein.
    Mr. Craigen: In what sense can the Prime Minister claim that her Administration are giving moral leadership on South Africa?
    The Prime Minister: We tried at the Commonwealth conference to see whether we could get the solution to the South African problem by negotiation and we helped to set up the Eminent Persons Group. That Eminent Persons Group was widely welcomed. It was due to our leadership. I believe that had it not been for the bombing of the three capitals, that group would have continued and could have come through to a conclusion.
    Mr. Latham: When my right hon. Friend meets King Hussein today, will she describe to him her extremely successful visit to Israel —[interruption.]—oh, yes—and encourage him to enter into negotiations directly with Mr. Peres, the Prime Minister of Israel?
    The Prime Minister: Of course I shall discuss with King Hussein the visit to Israel. I do not think that there is any point in trying to encourage King Hussein to have direct negotiations with the Prime Minister of Israel. I do not think he would contemplate that without the support of the other Arab nations. My hon. Friend is only too well aware of what happened to one of the King's ancestors on just such a similar occasion.
    Mr. Kinnock: When Bishop Tutu and his colleagues, as well as the ANC and the UDF, together with other organisations representative of majority black opinion in South Africa, all say repeatedly that economic sanctions are the most effective non-violent way to pursue the end of apartheid, what right has the Prime Minister to disagree with them?
    The Prime Minister: With all due respect to the right hon. Gentleman, we each have a right and a duty to formulate our own opinions.
    Mr. Kinnock: In that case, we can tell that the right hon. Lady is not black and in South Africa, where they do not have the right to formulate their own opinions. That is what is wrong with the system. Since she offered her opinions, as she is freely entitled to do, last Friday, about what was best for the black people of South Africa, what was her authority for stating that?
    The Prime Minister: I have given, and shall continue to give, our views on the lack of effectiveness of economic sanctions. I shall continue to give our view that the important thing is to try to end apartheid by negotiation and to try to get a suspension of violence on all sides. That will continue to be our objective.
    Mr. Kinnock: And the Botha regime will continue to mock it. Does the right hon. Lady not understand that if she really wants negotiations they can come only through pressure, and that economic sanctions are vital to pressure?
    The Prime Minister: Perhaps the right hon. Gentleman will remember what previous Members of his party have said about sanctions and what Mrs. Helen Suzman has said about sanctions, that they clearly would not be effective and would be counters-productive. The right hon. Gentleman wants sanctions, which will increase unemployment in South Africa and in Britain. How does he think that that will bring about peaceful change?
    Mr. Richard Page: Does my right hon. Friend the Prime Minister agree that the recent honour to Sir Ian MacGregor was well deserved and——
    Mr. Speaker: Order. The hon. Gentleman must not ask a question about the Prime Minister's advice on honours.
    Mr. Page: Does my right hon. Friend believe that Sir Ian MacGregor's task to create the most efficient steel industry in Europe, if not the world, was made so much more difficult through the lack of courage of the Labour Government between 1974 and 1979 in not implementing the recommendations of the Beswick review?
    The Prime Minister: The fact that the Labour Government did not implement certain recommendations on the steel industry made it more difficult for this Government. I believe that, partly as a result of the foundations laid by Sir Ian, British Steel is now trading profitably for the first time in 12 years.
    Mr. Willie W. Hamiltonasked the Prime Minister if she will list her official engagements for Tuesday 17 June.
    The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Hamilton: With regard to the Prime Minister's meeting with the Queen tonight, and in view of Her Majesty's known anxiety about the need to preserve the unity of the Commonwealth, especially in connection with South Africa, will the Prime Minister—despite what she said last week—give Her Majesty an assurance that she places the unity of the Commonwealth above the unity of the Conservative party?
    The Prime Minister: Had the hon. Gentleman listened earlier, he would have heard that I do not have an audience of Her Majesty this evening. When I do have an audience of Her Majesty, there are certain matters that I discuss only with Her Majesty and not with others.
    Mr. St. John-Stevas: Will my right hon. Friend the Prime Minister convey to Her Majesty the concern of the hon. Member for Fife, Central (Mr. Hamilton) about her welfare?
    The Prime Minister: I have nothing to add to what I have already said.
    Mr. Steel: Will the Prime Minister explain to the House, in advance of this afternoon's debate, the distinction in her mind between sanctions, effective economic measures and effective measures? Is she aware that most of us find it humiliating that Britain is seen as being dragged along towards the inevitable international action to bring pressure to bear on South Africa for peaceful change? Should we not be taking the lead in these matters?
    The Prime Minister: Had the right hon. Gentleman listened to my earlier remarks, he would have known that it was we who took the lead in setting up the Eminent Persons Group, which would have been successful but for the circumstances that I mentioned earlier. It is important to secure effective measures to bring the system of apartheid to an end and enable black South Africans to play their proper part in the government of South Africa.
    Mr. John Browne: Does my right hon. Friend accept that, with regard to race, our superb armed forces are
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    effectively colour blind, with recruitment and promotion based on aptitude and merit? Does she agree that ethnic monitoring will lead to positive discrimination and enhance racialism and non-merit promotion? Can she please assure the House that ethnic monitoring will not be accepted in the armed forces?
    The Prime Minister: It is always important that promotion should take place based on individual merit and ability and not on other factors. There is no monitoring of ethnic origins in the armed forces at present. A review is being conducted, which is nearing completion, and an announcement will be made in due course.
    Mr. Home Robertsonasked the Prime Minister if she will list her official engagements for Tuesday 17 June.
    The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Home Robertson: Is the Prime Minister aware that my constituents do not want the Torness nuclear power station to be commissioned until such time as they can have satisfactory answers to vital questions about the Chernobyl disaster and about Scotland's future energy needs? As I received reliable information today about serious defects in the insulation of the reactor at Torness and about hot spots that may be having an effect on the steel and concrete linings of the reactor, will the right hon. Lady halt the loading of the reactor until those vital questions can be answered?
    The Prime Minister: No, Sir. The matters that the hon. Gentleman raises are for the Nuclear Installations Inspectorate, which I am sure he is the first to recognise is an excellent inspectorate, with a superb record in this country.
    Mr. Hirstasked the Prime Minister if she will list her official engagements for Tuesday 17 June.
    The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.
    Mr. Hirst: Is my right hon. Friend aware that Bishop Mokoena, the leader of the Independent Reform Church in South Africa, with 4·5 million black Christian adherents, is presently in the United Kingdom, and has brought a clear message to the British people that, while apartheid is totally unacceptable, he believes that economic sanctions and disinvestment would be profoundly unhelpful and damaging to the South African people'?
    The Prime Minister: I have heard reports of the bishop's views. That underlines the view that we take, that any measures must be effective, to try to bring about the end of apartheid. Economic sanctions are punitive and negative in their effect. We are much more interested in positive measures if they can be shaped for that purpose.
    Mr. Allen Adamsasked the Prime Minister if she will list her official engagements for Tuesday 17 June.
    The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Adams: Is the Prime Minister aware that she failed to satisfy me last Thursday when I asked her or her Ministers to give me an assurance about the future of aero-engine production in Glasgow? May I now ask the Prime Minister, against the background of defence questions this

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    afternoon, whether she is prepared to give the House, Scotland and the United Kingdom as a whole a commitment about the future of shipbuilding on the Clyde and in Britain as a whole? Is there any point at which the Government will become involved in protecting British jobs in British yards?
    The Prime Minister: The future of British yards, and also of British jobs in factories, will depend upon our securing the requisite orders. All Governments in power, of whatever complexion, know that.
    Mr. Roger King: Has my right hon. Friend read reports that the Church Commissioners are not able or willing to withdraw investment from South Africa because it may affect the livelihood of the clergy in this country? Does it not follow that hundreds of companies and tens of thousands of work people in this country will be similarly affected if there are swingeing trade sanctions against South Africa?
    The Prime Minister: I agree with my hon. Friend. That stresses the correctness of the view that the Government have taken, that the matter must be considered very seriously and deeply, along with our partners, because the purpose is not to hurt those whom we least wish to hurt, but to bring about an end to apartheid. Anything that we do must be directed towards that end.
    Mr. Ashtonasked the Prime Minister if she will list her official engagements for Tuesday 17 June.
    The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Ashton: Is it not a fact that the Prime Minister's party is now split down the middle on South Africa, just as it was on British Leyland, the Shops Bill and Westland helicopters? Yesterday even a former Prime Minister split with his party on the NHS. The alliance is now split down the middle on defence. Is it not a fact that the only party that is united in its policies in the House and fit to run the country is the Labour party?
    The Prime Minister: Why did the previous Labour Government vote against sanctions in the United Nations? Why did the previous Labour Foreign Secretary say, about economic sanctions, that those who we do not wish to hurt would suffer most if economic sanctions were imposed?
    Mr. Nelson: In answer to an earlier question by my hon. Friend the Member for Rutland and Melton (Mr. Latham) my right hon. Friend was rightly cautious about urging on King Hussein later today bilateral direct discussions with Israel. However, does not the presidency of the European
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    Community later this year provide a golden opportunity for a forum for discussions for all the participants in the middle east, in which context the recent visit of President Assad of Syria to Greece is encouraging? May we hope that my right hon. Friend will place this high on her agenda of priorities?
    The Prime Minister: It is a cause of concern that at present there is no initiative to solve the middle east problem. We come back in the end to two problems: who should negotiate along with King Hussein—who should be the Palestinians who truly represent the Palestinian people and who would also be acceptable for the negotiating process; and what form should the international grouping behind the negotiations take. So far we have not been able to come to a conclusion about that, but we must keep on trying. To that extent I agree with my hon. Friend.
    Mr. Roy Hughesasked the Prime Minister if she will list her official engagements for Tuesday 17 June.
    The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Hughes: Will the Prime Minister pause to consider that, in the past 12 months or so, she has presided over a massive contraction of the British coal industry? Now there is speculation about a further 10 per cent. reduction in manpower in south Wales. In the post-Chernobyl era, is that not a grave mistake? Is not what is now needed massive investment in the industry to put it at the centre of the British energy industry?
    The Prime Minister: As the hon. Gentleman knows, there has been massive investment in the coal industry—about £2 million for every day that we have been in power. He also knows that the coal industry has been doing very well and has had a record-breaking year for productivity, which is now over 3 tonnes per man shift. For industry to have a future it must be efficient, and the coal industry is becoming really efficient and working well.

    STATUTORY INSTRUMENTS, &c.
    Mr. Speaker: With the leave of the House, I shall put together the two motions relating to statutory instruments.
    Ordered,
    That the draft Merchant Shipping (Life-Saving Appliances Regulations 1980) (Amendment) Regulations 1986 be referred to a Standing Committee on Statutory Instruments, &c.
    That the draft Merchant Shipping (Dangerous Goods) (Amendment) Regulations 1986 be referred to a Standing Committee on Statutory Instruments, &c.—[Mr. Archie Hamilton.]

Remands in Custody (Compensation)
3.31 pm
Mr. Gerald Bermingham: I beg to move,
That leave be given to bring in a Bill to establish the right to compensation for time spent in custody prior to an acquittal; and for connected purposes.
The Bill is designed to overcome some injusticies which we may have in our system. Reaction to the Bill during the past few days from various journalists and members of the public has been one of surprise that in English law a person accused of a crime where there is a presumption of innocence who is then brought to court and remanded in custody—[Interruption.]
Mr. Speaker: Order. Will those hon. Members who do not want to remain in the Chamber please leave quietly?
Mr. Bermingham: It seems surprising to many that those who are remanded in custody and refused bail in respect of a matter which is denied by them, when they come to trial and are subsequently acquitted, are merely handed back their personal possessions and shown the door. There is no way in which the months, weeks and sometimes years in custody, sometimes with the loss of jobs, homes and livelihoods, and sometimes the break-up of the family, are compensated for by our society. That must surely be a blot on the fairness of our society. After all, a person who is remanded in custody before trial and found guilty has that time spent in custody before trial taken into account when the sentence is assessed. Therefore, the time that a person serves in custody stands to his credit when he is found guilty. A person who is found to be innocent, as many are in any one year, receives no credit for that time; it is simply ignored. The number of persons involved in such matters in a year is sometimes as many as 2,000.
Of course, it is easy for all of us to say that a person should not have got himself charged, but people are charged in respect of crimes that they do not commit. Cases which on the face of the papers appear to be so strong, the allegations so tough, crumble and fall under questioning.
A prosecuting counsel whom I know told me a lovely story about a case which on the face of it was perfect. He asked the complainant the first question and the case began to trundle, but by the third question he had thrown in his hand. First, he asked the complainant if he was Mr. So-and-So and the reply was, "Sometimes." The second question was, "Is that the man who is supposed to have hit you?" The complainant said, "No." In reply to the third question, "Who did hit your, he pointed to somebody sitting in the gallery and the case was over.
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The defendant in that case had spent 11 months in prison because the allegation was an extremely serious one. It was not the fault of the police officers or of the courts, but that man lost his job and his livelihood and has suffered many other personal hardships. At the end of the case he was simply handed his small change and other personal property and sent on his way.
Some years ago I sought to introduce a 10-minute Bill to limit the time that a person could be held in custody before trial. People asked me why I was doing it and I said that the Scots do it. They also asked me what benefit it would be. Two years later it is beginning to become part of our law. If there are limits on the time people can be held in custody, we will cut back on the 2,000 people I am talking about, because fewer people will be in custody.
If this Bill were to be given serious consideration by the House, it might prompt the courts to look again at the findings a couple of years ago of the Select Committee on Home Affairs about bail. That again would reduce the number of people to whom this Bill refers. No system is perfect, but eventually only a small number of people each year will be remanded in custody. They are denied bail, despite making all the applications, because of such factors as evidence that appears to be very strong but who, when they come to trial and justice begins to emerge, are found not guilty.
If we are to have a fair and balanced society, occasionally we have to look at matters like this which affect small numbers of people who, because of our system, will always escape whatever safety net we seek to put in place. Those people suffer real injustice. As I say, it is ironic that if one pleads guilty or is found guilty the time spent in custody stands to one's credit. However, if a person is found not guilty, time spent in custody stands to his loss. That is not fair. We can effect a remedy. I hope that the House will support the Bill, and will give it a Second Reading.
Question put and agreed to.
Bill ordered to be brought in by Mr. Gerald Bermingham, Mr. Gordon Oakes, Mr. Allen McKay, Mr. Tony Blair, Mr. David Clelland, Mr. Terry Patchett, Mr. Robert Parry, Mrs. Margaret Beckett, Mr. Richard Caborn. Mr. David Winnick, Mr. Guy Barnett and Mr. Kevin Barron.

REMANDS IN CUSTODY (COMPENSATION)
Mr. Gerald Bermingham accordingly presented a Bill to establish the right to compensation for time spent in custody prior to an acquittal; and for connected purposes: And the same was read the First time; and ordered to be read a Second time upon Friday 4 July and to be printed. [Bill 182.]
Opposition Day
[I6TH ALLOTTED DAY]
Opposition Day

  South Africa
  Mr. Speaker: I have selected the amendment in the name of the Prime Minister. Well over 40 right hon. and hon. Gentlemen have written to me expressing their wish to take part in the debate. There may well be other hon. Members who wish to take part. Between 7 o'clock and 9 o'clock I propose to limit speeches to 10 minutes. May I say to Privy Councillors who may be called before that time that I hope that they will hear in mind that there are other hon. Members who wish to take part in the debate.
  Mr. Andrew Faulds: On a point of order, Mr. Speaker.
  Mr. Speaker: Order. Is it connected with this debate?
  Mr. Faulds: Yes, Sir. You will know, and the House is well aware — although it is often more regarded in its breach than in its observance — that if a Member of Parliament has interests he should declare them. Is it not incumbent on right hon. and hon. Members who have benefited from trips to the Republic of South Africa within the last year under the auspices of that Government to declare in this debate that they have done so, so that the House and the public can know why they speak as they do?[Interruption.]
  Mr. Speaker: Order. The hon. Gentleman well knows that we have an established Register of Members' Interests in the House in which trips to overseas countries are recorded. Obviously, if any hon. Member has a direct financial interest, he will declare it.
  3.40 pm
  Mr. Denis Healey: I beg to move,
  That this House calls upon Her Majesty's Government, in view of the worsening situation in the Republic of South Africa and in the light of the Report of the Commonwealth Eminent Persons Group, to work actively with the European Community, the Commonwealth and the United Nations for the imposition of effective economic measures against the Government of South Africa.
  All hon. Members will agree that this is one of the most important issues which the House has ever debated, because the future of the people of South Africa and of the whole of the southern half of the African continent is at stake. The future of the Commonwealth is also at stake. Last year at Nassau the Prime Minister created a gulf between Britain and all other members of the Commonwealth, both old and new. If she deliberately widens that gulf this year, the Commonwealth may not survive. Moreover, Britain is a key member of all the international organisations now seized of the South African problem — the Commonwealth, the European Community, the Organisation for Economic Co-operation and Development and the United Nations. The Opposition deeply deplore the Government's refusal to send arty representative to the United Nations conference in Paris on this problem this week.
  Inside South Africa a situation already intolerable to all decent people has dramatically deteriorated in the past few days. South Africa 1986 is the embodiment of the world
  914
  of George Orwell's "1984". We have in South Africa today a police state in which the Government's agents have a licence to arrest without explanation and to kill without being called to account. South Africa today suffers from a news blackout far more complete than any Communist country has ever known. [Interruption] Even in Poland in the worst days of the Solidarity crisis, foreign journalists were always free to report on the persecution of Solidarity and to publish in the press or on television interviews with opponents of the regime. That is not possible in South Africa today.
  Mr. Stefan Terlezki rose——
  Mr. Healey: Armed men can break up church services, but no word may be published about what has happened. The apartheid regime has blotted out the truth in the blackest arctic night. Even before the latest state of emergency the Eminent Persons Group described the system in South Africa as "awesome in its cruelty." I am glad that the Prime Minister welcomed that report and I believe that——
  Mr. Terlezki rose——
  Mr. Speaker: Order.
  Mr. Healey: You have appealed to all of us, Mr. Speaker, to limit our remarks, and I do not think that I would serve the House's interests if I were to give way in the first 60 seconds of my speech.
  I regard the report of the Eminent Persons Group as one of the most valuable products of the Commonwealth. It is all the more impressive because it was compiled by men and women of various parts of the Commonwealth, with many different types of experience, most of whom have little or no previous personal knowledge of apartheid on the ground. The group included a Conservative ex-Prime Minister of Australia and a Conservative ex-Chancellor of the Exchequer of Britain, who has strong financial interests in South Africa as chairman of the Standard Chartered Bank. He was appointed to the group by the Prime Minister. I hope that the report, in its Penguin publication, will have a massive circulation throughout the world. I assume that the Prime Minister shares this hope.
  The report describes in chilling detail a system in which the blacks outnumber the whites by six to one, yet whites have six times more land; a system in which the living standards of the whites are 10 times higher than those of the blacks; in which the state has used, and is still using, brutal violence on a colossal scale to uproot blacks from their homes and dump them in rural slums; and which separates husbands and fathers from their wives and children—in fact, makes 8 million blacks foreigners in their own land. The report describes a system in which the shooting or torture of political opponents is accepted practice and where the state systematically uses excessive violence against peaceful demonstrators against it, including mutilating the faces of schoolchildren with sjamboks. All this is to be found in the report.
  On television last week, all that the Prime Minister could find to say about the system, after reading the report, was:
  "It must be so irritating, so full of resentment. I understand how they feel."
  Does she really understand? Can she really understand? Can she not see that on South Africa, as on so many issues

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  closer to home, her total incapacity to understand how the victims of society feel about their predicament makes her unfit for office in a democratic state?
  Mr. Terlezki rose—
  Mr. Healey: I am glad to say that the Eminent Persons Group was shocked and astounded by the reality of apartheid. It was equally astounded by the quality and moderation of those who oppose apartheid. It points out that for the first 13 years of this remorseless pressure the African National Congress remained loyal to Chief Luthuli's commitment to a non-violent struggle. It was only the massacre at Sharpeville which compelled them to reassess this commitment and even then the congress restricted its direct action to sabotage.
  But 10 years ago another massacre in Soweto, in which most of the victims were children and a third were shot in the back, had an inevitable consequence. The provocation was more than flesh and blood could stand, but the Eminent Persons Group points out that, in the past 20 years, only 20 deaths have been the result of action by members of ANC when thousands were killed by the Government forces.
  Mr. Terlezki rose—
  Mr. Healey: Sit down. The Eminent Persons Group—
  Mr. Speaker: Order. The hon. Gentleman knows that the right hon. Gentleman is not giving way and he must not persist.
  Mr. Healey: The Eminent Persons Group found the leaders of the ANC and the United Democratic Front whom they met, to be men of moderation—
  Mr. Terlezki: On a point of order, Mr. Speaker.
  Mr. Speaker: Order. I shall have to hear it, but is it a point of order?
  Mr. Terlezki: Yes, Sir. I seek your guidance about whether I am entitled to ask the right hon. Gentleman—
  Hon. Members: No.
  Mr. Speaker: Order. I have told the hon. Gentleman that if the right hon. Member for Leeds, East (Mr. Healey) does not give away the hon. Gentleman must not persist.
  Mr. Terlezki: There is no harm in trying.
  Mr. Healey: They were found to be men of moderation who wanted to achieve a multiracial society by peaceful negotiations and prepared to suspend the use of violence to achieve it. I am again drawing upon the report which the Prime Minister has rightly praised.
  Until very recently, the Government refused all contact with members of the ANC. Even now, they refuse to allow their Ministers to talk to the ANC, although American Ministers do so regularly. Instead, the British Government, like the American Government, chose the path of what they called constructive engagement with apartheid. The apartheid regime rewarded them with systematic deception. Again, I quote the Eminent Persons Group, which said:
  "The SA Government has perfected a specialised political vocabulary which while saying one thing, means quite another".
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  The Prime Minister and President Reagan swallowed it hook, line and sinker. The House will recall being told by the Prime Minister two years ago that President Botha had agreed with her to take his troops out of Angola. They have been there ever since, even to the extent of blowing up American oil installations at Kabinda. Only last week they were shelling a port in Angola.
  On 9 October 1984, the Foreign Secretary told us that there were encouraging developments in the Nkomati accord with Mozambique and rapid progress on Namibia, but President Botha broke the Nkomati accord even before the ink was dry, set up a puppet Government in Namibia and is now conducting military action against neighbouring Commonwealth countries, starting with attacks at the very moment at which the Eminent Persons Group was about to meet Ministers.
  President Botha has played the Prime Minister and President Reagan for suckers. He finally admitted it last week when he said in his address to his own Parliament that countries which do not invoke sanctions against South Africa can continue to trade with her but cannot expect to exert any political influence on what the South African Government do, so that constructive engagement was a farce from the beginning. The Prime Minister herself agreed to that at Nassau last year because she signed a communiqué which said that the policy of constructive engagement was a failure in both of its objectives —ending apartheid, and getting freedom for Namibia.
  It is sometimes argued that what happens inside South Africa is none of our business, but South African aggression against its Commonwealth neighbours is our business. It is the business of the whole of the outside world. This aspect of the problem has received far too little attention in the House and elsewhere.
  Since 1980, the South African Government have engaged in systematic use of armed force against eight majority ruled states in the region. The list of its violations of international law makes a crime sheet of daunting terror. We have had South Africa invading the capitals of three independent countries and invading four other countries. We have had South Africa trying to assassinate the Prime Ministers of two neighbouring states. We have seen South Africa backing terrorism, which has brought two of its neighbouring states to economic chaos and which has caused grave disorder in two others.
  South Africa has disrupted deliberately the oil supplies of six of its neighbours and it has attacked the vital railway communications of seven of its neighbours. In consequence of South African action in neighbouring states—these figures are quoted in the report—100,000 people have died and millions have been displaced. It cost the region $10 billion in the years 1980 to 1984—more than all the financial assistance that it received from the outside world. It is now costing the region about $5 billion a year.
  Mr. John Carlisle: The right hon. Gentleman has referred to the alleged cost of South African actions. What would he the cost of the economic sanctions that the right hon. Gentleman supports to the rest of the Commonwealth and to the West if such sanctions were to be imposed?
  Mr. Healey: I am very grateful, for once, to the hon. Gentleman, because that is precisely the point to which I am about to turn.

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  It is the cost already imposed by the apartheid regime on South Africa's Commonwealth neighbours which has led all of them, despite the real risk of economic sanctions, to support sanctions as the only means of shortening their agony. President Kaunda of Zambia used those very words this week on BBC radio. It is no good the hon. Member for Luton, North (Mr. Carlisle) shaking his head. That is President Kaunda's view. He knows better what is in the interests of his country than a Member of Parliament who has accepted hospitality from the apartheid regime in South Africa.
  If the present situation continues, agony it will be. In introducing his report the other day, Mr. Malcolm Fraser said that the slaughter and bloodshed would be worse than in Vietnam. The Commonwealth group as a whole said that it
  "could be the worst bloodbath since the Second World War."
  And it is a bloodbath, as Mr. Fraser pointed out, that the blacks are bound to win in the end but that they want to avoid, if humanly possible.
  The Eminent Persons Group describes the leaders of the African National Congress and the United Democratic Front as men of goodwill who want a multiracial society. I prefer its views to those of the prejudiced bigots who sit below the Gangway on the other side of the House. But the Eminent Persons Group also reached the conclusion that there cannot be peaceful negotiations unless effective economic measures, as set out in paragraph 352 of the report, are applied by the outside world. The key paragraph of the report is the penultimate one, paragraph 354. It says:
  "The question in front of Heads of Government is in our view clear. It is not whether such measures will compel change; it is already the case that their absence and Pretoria's belief that they need not be feared defers change."
  That is a direct condemnation of the Prime Minister by a jury of her peers, a jury that she helped to appoint. It was her action at Nassau that prevented effective action by the Commonwealth and she gloated about it when she came back to Parliament. If she were to veto action once again, the delay could be fatal for South Africa and inflict lasting shame on her Government, a shame from which I fear the British people as a whole could not escape. Indeed, if the Prime Minister vetoes action once again, then, as Mr. Fraser made clear, the Government who emerge from a decade of mounting violence will be bitterly hostile to Britain and the West. All our economic interests will be destroyed and all our hopes of political influence will be gone. We have seen this already in Angola and Mozambique, and we would have seen it in Zimbabwe if Lord Carrington had not persuaded the Prime Minister to reverse her policy just in time.
  The future of South Africa is even more important than what has happened in other neighbouring countries. South Africa has a major population, important natural resources, a developed industry and a large mass of skilled manpower. It also occupies an important strategic position. To throw those assets away because of the imperious vanity of one person would be inexcusable folly.
  How we tackle this important issue may yet determine whether the Commonwealth survives as an institution. I regret warnings given by some Commonwealth leaders that they may leave the Commonwealth if the Prime Minister exercises, her veto again.
  Mr. Nicholas Winterton: Good riddance.
  Mr. Healey: I hope that they would not carry it out, because within two years we shall have another British Government which will have a very different policy on South Africa.
  The Government cannot ignore those warnings, nor, as the Prime Minister knows, can the Palace. If the Prime Minister prefers to use the word "measures" rather than "sanctions" to save her face, I have no objections, nor has the Commonwealth, although I am bound to say that, in a discussion with me on television last week——
  Sir John Biggs-Davison: On a point of order, Mr. Speaker. Is it in order for a right hon. Gentleman to seek to involve the Palace in a debate in support of his argument?
  Mr. Speaker: Order. I do not think that the right hon. Gentleman was wrong. However, it is not in order to use members of the Royal Family to influence the debate in any way.
  Mr. Healey: I am grateful for your advice Mr. Speaker.
  Mr. Robin Maxwell-Hyslop: Further to that point of order, Mr. Speaker. It must be in order, because it cannot be avoided in this debate, to point out the position of one who is the Queen of the Commonwealth and not just of the United Kingdom.
  Mr. Speaker: Order. The hon. Gentleman knows "Erskine May" as well as any hon. Member. He knows that it is not in order to use members of the royal family to advance arguments in a debate.
  Mr. Allan Roberts: Further to that point of order, Mr. Speaker. Although I accept your ruling that it is not in order to use members of the royal family to further an argument, cannot one refer to the Head of State and to the Head of the Commonwealth?
  Mr. Speaker: Order. I think that I can clear this matter easily. I have already said that the right hon. Member for Leeds, East (Mr. Healey) was in order to refer to the Palace, but that it is not in order to use members of the royal family in advancing an argument.
  Mr. Maxwell-Hyslop: Further to that point of order, Mr. Speaker. This is not a superficial matter. It is wholly out of order in the House to criticise the Monarchy. It must be in order to debate the position in which the Head of the Commonwealth is placed by policies that may or may not be advanced.
  Mr. Speaker: Order. That is not in dispute.
  Mr. Healey: I thank you for endorsing my words, Mr. Speaker, which were used at Prime Minister's Question Time today, and have been used by hon. Members at other times.
  The arguments that the Government are using against sanctions look increasingly threadbare and contradictory. The first argument, which the Prime Minister uses every time that she appears on television, is that they never work; but if they never work, why did she impose sanctions on Poland, to deal entirely with the internal situation, on Argentina, Libya and Iran, and accept them on Zimbabwe by not opposing them when in opposition? She knows as well as I do that the sanctions imposed on Iran, Argentina and Zimbabwe played an important role in the resolution of those issues.
  The United States is also operating sanctions against Nicaragua, and when it was accused yesterday of some

  919
  inconsistency a spokesperson of the State Department said that if South Africa were a Communist dictatorship, it would be different. I suspect that that is the secret, private view of the Prime Minister.
  The second argument is that sanctions would hurt the blacks and the front-line states, which would not like them. However, all the representatives of the blacks except Chief Buthelezi have argued that they want sanctions in order to shorten their agony, and this is the argument used by the front-line states as well because, like the Eminent Persons Group, whose work the Prime Minister has commended to us, they see sanctions as offering the only hope of promoting dialogue between the regime and the blacks.
  I find it slightly disgraceful that the Government sneer at countries such as Bermuda and Australia that might make economic gains out of sanctions, but sneer even more loudly at Governments that support sanctions but know that they will suffer as a consequence. I find that profoundly distasteful and typically graceless of the Prime Minister.
  The Prime Minister's real concern is with her view of Britain's economic interests. I remind her that in 1986 we are not talking of economic interests as they were in 1946, 1956, 1966 or 1976. The value of our investments has already fallen by half with the value of the rand, and more and more British companies as well as multinationals are getting out as fast as they can. There is the imminent prospect of the South African Government imposing exchange controls, which will prevent British companies from repatriating their profits, and an immediate prospect of South Africa defaulting on its debts. South Africa is no longer a shining pillar of industrial enterprise. It is sliding fast into the condition of the banana republic.
  Why do the Government oppose sanctions? Having read the Government's amendment, I ask myself whether they oppose sanctions. The Government's amendment would be quite acceptable to me, provided the omission of the word "economic" does not exclude economic measures. The objectives that the Government set out in their amendment are acceptable, as I have already made clear. Indeed I was tempted to accept the Government amendment when I started, and if the Foreign Secretary can allay my doubts about the meaning of the amendment I may still discuss with my right hon. and hon. Friends the possibility of accepting it.
  Make no mistake, if the Government mean what they say, and if the words are not part of the South African vocabulary that long contact has led the Government to adopt, they are committing themselves to a course of action that means increasing pressure on the apartheid regime, steadily over a number of years, until it finally agrees to negotiations.
  The objective set by the Government—the suspension of violence — has been accepted by the ANC and rejected by the South African Government. Any effective measures taken at this time must, as a minimum, mean all the measures on which other members of the Commonwealth agreed at Nassau, plus the measures now being put to the American Congress which, I gather, are certain to be passed by the House of Representatives and perhaps the Senate.
  I believe that circumstances will compel the outside world to increase pressure on South Africa as the crisis
  920
  deepens and as the slaughter mounts. We would be wise to consider — I hope that the Government are considering it — graduating economic and other measures to be applied at intervals, as envisaged at the Nassau meeting, until finally netgotiation takes place.
  If that is what the Government are recommending to the House, that is fine by me. If not—if they are simply weasel words by which the Government hope to escape criticism and responsibility for a few months— I warn them that they are riding straight for disaster. If the Prime Minister believes that she can, once again, come out of a a Commonwealth summit bosting that she has outwitted her colleagues, that she has given only a "tiny hit" of what they asked for, she will be condemning this country and the Commonwealth to disaster.
  I put to the Prime Minister and her colleagues that, at this time, manner is almost as important as matter. We in Britain have become used to the chilly indifference of the Prime Minister to human suffering. We are used to her armour-plated complacency on issues where her ignorance is total. We are used to it, but we are also sick and tired of it. We cannot accept the monstrous, sacro-egoismo which allowed her to say on television last week, "If I were the odd one out and I were right, it would not matter. would it.?"
  I ask the Prime Minister to recall that she is not always right. She nearly wrecked the negotiations in Hong Kong before they started by her disastrous pontificating in Beijing and Hong Kong from which the Foreign Secretary. doughty fighter for British interests that he is, finally rescued her. She would have wrecked the negotiations on Zimbabwe if the then Foreign Secretary had not pulled her back from the brink. She could have brought down the Government on the Westland and British Leyland affair earlier this year by her certainty that she is always right. If she allows her fatal, conditioned reflexes to determine her actions on this crucial question, she will bring disaster to Britain, the Commonwealth and the whole of southern Africa.
  4.13 pm
  The Secretary of State for Foreign and Commonwealth Affairs (Sir Geoffrey Howe): I beg to move, to leave out from 'House' to the end of the Question and to add instead thereof:
  'calls upon Her Majesty's Government, in view of the worsening situation in the Republic of South Africa and in the light of the Report of the Commonwealth Eminent Persons Group, to work actively with the European Community, the Commonwealth, and the Economic Summit Seven countries for effective measures which will help achieve a peaceful solution in South Africa based on negotiations and a suspension of violence on all sides.'.
  The right hon. Member for Leeds, East (Mr. Healey) has engaged the House with a characteristically simplistic opening to the debate. He closed by enunciating a number of the Government's achievements — the conclusion of the Zimbabwe independence negotiations, the conclusion of the Hong Kong joint declaration. the conclusions of the Commonwealth-Nassau declaration, and the conclusion of the Fontainebleau summit of the European Community. The achievement of each of those successes was due to the leadership of the Government by my right hon. Friend the Prime Minister.
  The right hon. Gentleman referred to the concept of imperious vanity. There is no more outstanding example in the House of imperious vanity than the right hon.

  921
  Gentleman. I do not want to be unfair to the right hon. Gentleman, but if I had to identify one consistent thread running through his entire approach to foreign policy, it would be his insistence that Britain should now do everything that it did not do when his party was in government. The right hon. Gentleman has become an echo of his pupil's voice. If the problem were as easy to solve as the right hon. Gentleman suggests, it would have been solved long ago.
  I am able to start the debate from one plain piece of common ground. On behalf of the Government, I join the right hon. Gentleman in expressing our complete and absolute condemnation of apartheid and indeed of racialism wherever it is practised in the world. I have visited South Africa only once. That visit included a visit to Soweto under the guidance of a black community leader. Those responsible for my arrangements had not found it possible to organise such a visit in my programme.
  We entered the township in Soweto 10½ years ago without a pass and without leave. Whenever we saw a South Africa police vehicle — the presence of such vehicles was not inconspicuous—we had to turn quickly out of sight. Our guide felt and had to behave as if she were — I take the graphic phrase from the report of the Eminent Persons Group — "an alien in her own country". That was an alarming and a deeply moving experience. We forecast with unhappy precision almost exactly the tragic explosion of violence that occurred a few months later, 10 years ago. Such incidents are inevitable in a society that has institutionalised the denial of human rights, that has done so, and continues to do so, explicitly on racial grounds. That is the vice of apartheid, which is condemned by all hon. Members.
  In January, President Botha, reaching forward to a better future, described apartheid as "outmoded". No phrase could have been more revealing because, for the rest of the world, such institutionalised discrimination has never been acceptable. Apartheid casts a heavy shadow, not only over South Africa but over the entire region. It is the defence of that indefensible system that has brought South Africa into conflict with her neighbours. For the people of this country, for successive Governments of this country, the problems of South Africa and the impact of apartheid have been for decades a cause of profound and growing anxiety.
  We have major economic interests in South Africa. That fact was completely ignored by the right hon. Gentleman. He took no account of the extent to which British capital, skills and people have contributed much to South Africa's economic vitality. In considering the measures we should adopt to promote change in South Africa, it would be quite wrong to overlook completely the fact that up to 120,000 jobs in this country still depend directly on trade with South Africa. One is entitled to ask: what guarantee is there that, if those jobs were destroyed in Britain, they would not be recreated elsewhere in the world?
  Mr. Allan Roberts: Does the right hon. and learned Gentleman agree with the statement by the President of Zimbabwe that, by not applying sanctions, the British Government are protecting British interests in South Africa but, unless sanctions are applied, those interests will go up in flames?
  Sir Geoffrey Howe: I do not propose to deal with the speech of the President of Zimbabwe.
  922
  In considering the difficult balance that we must strike, it would be wrong to disregard entirely those interests. There are other ties as well. It is estimated that there are at least 2 million persons of British birth and descent in South Africa, of whom 800,000 or more may be entitled to claim the right of abode in this country. All those people aspire to play a part in the development of South Africa; so, too, do all the other peoples of South Africa —so, too, does the black majority—yet, for all of them, that future is at risk, if it is to be dominated by armed struggle, racial conflict and bloodshed. Much more than their future will be at risk, if the South Africa that eventually emerges from such conflict sees itself as having done so in the face of opposition from Britain or the West.
  It is against that background that my right hon. Friend. the Prime Minister and I have repeatedly made plain the objectives of our policy towards South Africa. We wish apartheid to be brought to an end at the earliest possible date. We wish to see established in its place a non-racial society with democratic, representative government and with proper safeguards for all minorities. That can be the only secure foundation of a prosperous South Africa, living in harmony with its neighbours. We wish those changes to be brought about peacefully, without violence, by dialogue and reform, not by revolution.
  It would not help in any way to promote change of that kind if we were to implement policies that would ruin the South African economy, risk economic upheaval for South Africa's neighbours, fuel an explosion of mounting racial strife and tribal violence and risk possibly grave consequences for racial tolerance throughout the world. It is precisely to avoid such consequences that we hake for so long concerned ourselves with the future of South Africa and of all its people.
  In that context, it is wrong to see the question of "sanctions" — to use that hard-worked, over-simplified word—as though it is one that has arisen today. this year, last year, for the first time. For years, successive British Governments have been taking measures to hasten the process of peaceful change in South Africa. Those measures have helped to press the case for change in South Africa; so, clearly, too, have the mounting pressure of events in South Africa and the growing economic pressures from the world outside. Increasingly, the judgment of world capital markets has been bringing borne to South Africa the urgency of the need for far-reaching change. Changes have been made but, so far as I could hear, the right hon. Member for Leeds, East did not acknowledge them. It is only right that we should acknowledge them.
  Mr. A. J. Beith: Were not the banks facing precisely the risks which the right hon. and learned Gentleman has just described for the South African economy when they threatened not to reschedule South Africa's debt? Was that not the most powerful instrument for change that we have seen in recent years?
  Sir Geoffrey Howe: Measures of that kind taken as part of the course of business dealings are measures from which neither party can sensibly escape. They strike home dramatically and plainly on those responsible for deciding matters concerning the economy. They are different from measures of the type under discussion being imposed collectively by the world outside.
  In the past year or two, we have seen the repeal of much petty apartheid, including the Mixed Marriages Act,

  923
  section 16 of the Immorality Act and the Prohibition of Political Interference Act. Those matters cannot be brushed aside. We have seen fundamental reforms in labour legislation and the extension of freehold rights to urban blacks. Only a few weeks ago, a Bill to reform the pass laws was introduced. A year or two ago, those changes would have been beyond imagination. One must acknowledge that they have been made.
  Dame Judith Hart rose——
  Sir Geoffrey Howe: Most members of the South African Government no longer try to defend the apartheid system. They have recognised the need for fundamental reform.
  Dame Judith Hart: Will the right hon. and learned Gentleman give way?
  Sir Geoffrey Howe: I am sorry; I shall not give way at the moment.
  The South African Government have begun to find the courage to make a start on that task, but they have not yet found the final courage of conviction that apartheid in all its guises must be swept away. That conviction is necessary. In the absence of that commitment, the tide of violence has continued to rise. That tide reflects the anger and frustration of people who, in the words of the report of the Eminent Persons Group, are
  "no longer prepared to submit to the oppression, discrimination and exploitation"
  of apartheid.
  It is still possible to assert that what is going on in South Africa is primarily a matter of law and order, but that is to miss the real issues. Of course we must recognise that there is an internal security problem in South Africa. No one who learned of the Durban bomb explosion on Saturday or heard of the appalling necklace killings or other incidents of brutality in the townships can fail to have been chilled by what is happening. We cannot, and must not, turn a blind eye to that. Such action will not bring justice in South Africa one day nearer hut, as the report of the Eminent Persons Group rightly pointed out, violence is firmly rooted in the apartheid system. Treating the diverse forms of violence only as a security problem, without tackling the underlying cause of the problem, can only make things worse. It is that underlying problem, the nature of the system itself, that stands in need of change —change not by violence but by dialogue, in the context of a suspension of violence on all sides.
  It was for that purpose that last autumn the international community decided to put in place a series of additional measures designed to hasten the process of change—the United States Congress on 9 September, the European Community countries at Luxembourg on 10 September and, finally, the Commonwealth at Nassau on 20 October. In none of those cases was the approach based solely on taking measures against South Africa.
  The Commonwealth's approach, particularly, was combined with a political initiative. The establishment of the Eminent Persons Group was a far-sighted endeavour to break the impasse and to end the cycle of violence. We arrived at that conclusion as a result not of the "isolation" of my right hon. Friend the Prime Minister but of our determination to act in concert with the rest of the Commonwealth in support of the establishment of the
  924
  group. The Eminent Persons Group could never have been put in place without the energetic support of my right hon. Friend the Prime Minister.
  Mr. Frank Cook: Will the right hon. and learned Gentleman explain why he finds it so necessary to oppose economic measures in the instance of South Africa when, within the Commonwealth, he countenances the application of economic measures against a Commonwealth ally simply because of its reluctance to have nuclear weapons within its territory? I refer to New Zealand.
  Sir Geoffrey Howe: I am afraid that the hon. Gentleman's intervention is a mile from the point under discussion. We shall look forward to hearing his views on relations between this country and New Zealand in a different context and at a different time.
  When we met at Nassau and contemplated the possibility of forming the Eminent Persons Group and creating a political initiative that would help to find a way forward in South Africa, my right hon. Friend the Prime Minister had clearly in mind the part played by the Commonwealth some years before at the Lusaka conference. But on that occasion, it was the intervention by the Commonwealth that created the circumstances in which it was possible for the Government under my right hon. Friend's leadership to bring about a solution to the long-standing problem in Rhodesia and Zimbabwe. It is a matter on which the Government and my right hon. Friend are entitled to massive credit. The problem eluded solution for years under the Labour Government. We concluded that the Commonwealth conference at Nassau was right to try to formulate an initiative that would pave the way forward for a new solution in South Africa.
  Mr. Faulds: Is not the right hon. and learned Gentleman—for whom the House has much regard and for whom I have a great personal regard—as a major Minister speaking from the Government Benches on this momentous and appalling issue ashamed of himself to be speaking in such feeble terms?
  Sir Geoffrey Howe: I am deeply moved by the regard in which the hon. Gentleman claims to hold me, although I am continually astonished by the way in which he chooses to express it.
  Mr. Faulds: I love the right hon. and learned Gentleman but he does not deserve it.
  Sir Geoffrey Howe: I bask in glory at that tribute.
  The Commonwealth group showed the range of expertise and experience that the Commonwealth can offer. The fact that we were able to fashion that group underlines the importance of the Commonwealth to this country and the world. What is more important is that the initiative attracted growing support, not just from the Commonwealth but from the rest of the world.
  The group was set a specific task by the Commonwealth Heads of Government: to encourage the process of peaceful political dialogue in South Africa in the context of a suspension of violence on all sides.
  The Commonwealth Heads of Government called upon the South African Government to take a series of specific steps: to declare that the system of apartheid would be dismantled and to set out what specific actions it would take to achieve that end; to terminate the state of emergency; to release immediately and unconditionally

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  Nelson Mandela and all others imprisoned or detained for their opposition to apartheid and to establish political freedom, in particular by lifting the ban on the ANC and other political parties. One has only to read that list to regret the lack of progress that has been made.
  However, the group was able to make much more progress than many expected. It was able to overcome the initial climate of suspicion and distrust. It offered the South African Government an unprecedented opportunity to break out of the vicious circle of violence. The group offered the negotiating concept which it had discussed with opposition groups and Nelson Mandela. It must be to the great regret of the House, as it is to my right hon. Friend the Prime Minister and myself, that the South African Government have so far declined to take that opportunity. The way ahead is inevitably more difficult. We shall still urge upon the South African Government the need to be ready to think again about that.
  Even if the group did not secure the breakthrough for which we all wished, it has charted a course for the negotiations that must eventually take place. It has identified many of the obstacles ahead and some of the ways round them. Its mission would have been worthwhile for that alone. We all owe the Eminent Persons Group a debt of gratitude for the dedication and effort it brought to its task. I am sure that the House will join me in extending our warmest thanks to the group.
  Mr. Neil Kinnock: I echo the debt of gratitude to the Eminent Persons Group. The right hon. and learned Gentleman has frequently referred to negotiations, as has the Prime Minister, and he has referred to dialogue. Does he realise that the Eminent Persons Group said that the concrete and adequate progress which it looked for has not materialised? It says:
  "in recent weeks the Government would appear to have moved consciously away from any realistic negotiating process."
  I live in hope, as does the right hon. and learned Gentleman. However, what grounds for hope has he got that the Botha Government will enter into any realistic negotiations?
  Sir Geoffrey Howe: It is because the group concluded as it did that the House is contemplating the motion and the amendment for the consideration of measures in that context. One must still believe that the mission, which went as far as it did, which helped to identify the way in which negotiations could take place, can be our starting point.
  Whatever our standpoint, even starting from the position of the right hon. Member for Islwyn (Mr. Kinnock), we must ensure that the contribution made by the group is not wasted. In the end—sooner, rather than later, we must all hope—the only way forward is to be found by dialogue and negotiation. If the task is harder today than it was six months ago—and it surely is—the objectives must surely remain the same as those defined at Nassau.
  Mr. Maxwell-Hyslop: There are one or two questions to which my right hon. and learned Friend has not yet addressed himself. Is it not the case that South Africa is the only country to which Britain has ever given independence without the entire population being entitled to elect the successor Government? Therefore, does that not give us a particular obligation, which we have in no other circumstances?
  926
  Secondly, my right hon. and learned Friend rightly refers to peaceful negotiation and the consequences. However, if South Africa threatens or executes military action against its neighbours such as Botswana, or strangles them economically, should we not warn South Africa that that is an act of war, which will be met accordingly?
  Sir Geoffrey Howe: My hon. Friend has raised two points which he obviously intends to develop later. They are both points which deserve further examination. In answer to my hon. Friend's first question I would say that I am not sure that he is right in his historical analysis. He generally is right. Certainly, the background of South African independence is one reason, not the only reason, for substantial and continuing concern by this Parliament on the future of South Africa.
  Two propositions stand out today with even greater clarity than before. First, it becomes increasingly clear that, in the long run, the forces of law and order in South Africa will be able to maintain the peace only if their authority is founded clearly upon the consent of all the races in South Africa. That lesson must be learned and applied.
  Secondly, it is also increasingly clear that the key to the commencement of dialogue, if one has to try to find one key, is the unconditional release of Nelson Mandela. That must be seen as the most important act of reconciliation that is necessary to pave the way for peace.
  Mr. John Townend rose—
  Sir Geoffrey Howe: It is to secure swift progress in that direction that we need, as our amendment points out, effective and co-ordinated international action. As my right hon. Friend the Prime Minister said on 13 June:
  "We have to consider what would be the measures that would he most likely to bring about the change we all wish to see, which is the end of apartheid and the black people of South Africa having rights which they do not have now, rights to take part in the democratic process of the country."
  My right hon. Friend's words are an accurate description of our objectives. The right hon. Member for Leeds, East has argued that only the imposition of sweeping measures aimed directly at the South African economy can force that progress. The Eminent Persons Group reaches no conclusions as to the measures which should be adopted.
  Mr. Healey: The right hon. and learned Gentleman must be aware that the Eminent Persons Group says:
  "We are convinced that the South African Government is concerned about the adoption of effective economic measures against it. If it comes to the conclusion that it would always remain protected from such measures, the process of change in South Africa is unlikely to increase in momentum and the descent into violence would be accelerated. In these circumstances, the cost in lives may have to be counted in millions…it is already the case that their absence, and Pretoria's belief that they need not be feared, defers change."
  If that is not a demand for economic measures to influence the South African Government, what the devil is it?
  Sir Geoffrey Howe: The Eminent Persons Group plainly leaves it, as the Commonwealth Heads of Government did, which is absolutely right, for the Commonwealth Heads of Government to consider and decide what measures should now be taken. It is in those circumstances that the House is now considering it.
  All experience teaches us that such measures directed at the economy of a country, punitively on a universal

  927
  basis, are most unlikely to be effectively enforced worldwide. The right hon. Member for Leeds, East cited the case of Poland. He must know that in that case economic measures did not produce the effects intended. He cited the case of Rhodesia and he must know that they did not produce the effects intended in that case. If ever they were to be applied in that way to South Africa, their effect would be almost entirely negative. No one should under-estimate the length of time for which resistance within South Africa could be maintained if that economy was seen to be under seige. Meanwhile, there would be severe and long-term consequences for the whole of southern Africa. That is the basis on which the Government are now considering, in consultation with the international community, what measures should be put in place. I shall tell the House the principles that we should have in mind when considering that question.
  If such measures are to be effective, any steps that we take must be directed not at the destruction of the South African economy but at influencing opinion in South Africa more firmly in the direction of reform. If they are to be effective, any steps that we take must give the South African Government the incentive to respond positively rather than the excuse to retreat still further into isolation. If they are to be effective, any steps that we take should be designed to encourage the South African Government and the South African business community to press ahead with the agenda of reform. If such measures are to be effective, any steps that we take should be calculated to command, and should secure, the fullest international support at every stage. In the absence of such support, any action would be no more than an empty gesture.
  As my right hon. Friend the Prime Minister told the House last Thursday, we shall now be in touch with
  "our Commonwealth partners, our European partners, and our economic summit partners to discuss this report."—[Official Report, 12 June 1986; Vol. 99, c. 490.]
  As the House knows, the seven Commonwealth Heads of Government appointed at Nassau, including my right hon. Friend the Prime Minister, will be meeting for that purpose in early August in London. We shall of course be in touch with the other Commonwealth Heads of Government long before then.
  Meanwhile, we are consulting with Governments of the summit seven. Within Europe, consultations have already begun. At yesterday's meeting of the Community's Foreign Affairs Council in Luxembourg, we had an exchange of views, and commissioned an urgent report from our Political Directors. The Government will be taking a leading and active part in all of these discussions.
  As stated in the amendment, which I commend to the House, we shall be working for measures that will be effective in helping to achieve a peaceful solution in South Africa.
  Mr. Tony Banks rose—
  Sir Geoffrey Howe: South Africa is a land that we all know to be rich in human and other resources. Yet today South Africa stands closer to a future of violence and misery than ever before. That prospect can be averted only by a process of genuine dialogue and reconciliation. That requires two things: first, the total renunciation of apartheid in all its forms, and secondly, the suspension of
  928
  violence. Only the Government and peoples of South Africa can achieve those things. Above all, it is for the South African Government to act, and act now.
  Mr. John Hume rose—
  Sir Geoffrey Howe: The international community acting together, can and should take steps to encourage the South African Government to take that action. This Government can and will work actively with our international partners to promote that action now, before it is too late. I invite the House to support the amendment.
  4.42 pm
  Dr. David Owen: It must be clear to anyone who listened to the Foreign Secretary's speech that the Government have not made up their mind what, if anything, they intend to do. That may be an advantage to us all, because this debate has come early enough to influence possibly some of the decisions. Indeed, it is helpful to us that the Prime Minister is in her place in the Chamber. No one is under any illusion but that it is the Prime Minister who will determine whether this country takes the responsible action now necessary to maintain the unity of the Commonwealth.
  I believe that an important crack has appeared in the solid facade that white South Africa has presented to the world. There are signs of a crack in the moral judgment of the Dutch Reform Church. Its council is meeting in October, and there are signs that if we can bring international pressure to bear, through the whole international body of Churches, an extremely important change may be made in those very things that underpin apartheid. I say to the Prime Minister that on this issue, above all, a little more genuine moral indignation about what is going on in South Africa would not come amiss.
  Without indulging in moral judgments, there is still a desperate need to show that this country is prepared to pay a price in order to live up to our feeling of moral repugnance at what is going on inside South Africa. We must not judge every economic action that may be necessary by the cost to us. There will be costs. Let us evaluate them carefully and make effective judgments.
  There has also been a shift of National opinion. It is only a start, but National Members of Parliament are no longer an absolutely solid block. Many of them have understood that they can no longer mend their fences or build bridges back to the far Right. The far Right has chosen its course, and the Nationals are increasingly having to keep the support of the majority of the whites in South Africa, which often includes the English-speaking population. There is now a grouping that goes across Afrikaner and English-speaking South Africans.
  There is a major crack, which could become a fissure, in the business and commercial community. It is only too well aware that the pressures from the international business world are increasing so savagely that it will not be long before the economy can no longer stand the strain. The withdrawal of confidence and the private bank actions of last year and this year were of crucial importance in that regard.
  Against such a background, what action is needed? Any sanction or measure must have the support of the entire international community. We saw what happened in Rhodesia without the solid support of the international community. But before the Prime Minister can pray in aid

  929
  the failure of sanctions on Rhodesia, she should acknowledge that one of the greatest weaknesses was that the common border between Rhodesia and South Africa was openly and totally breached with the full connivance of the South African Government.
  Furthermore, only a brief reading of the Bingham report shows that successive British Governments connived in the breaking of sanctions. Therefore, it does not lie in the mouths of right hon. and hon. Members to say that sanctions did not work in Rhodesia. Nevertheless, for 15 years sanctions were one of the only ways of showing the world's condemnation of what was going on inside Rhodesia. Although ultimately the armed struggle was the critical pressure, no historian of the independence of Zimbabwe will ever say that sanctions had no impact on the Smith regime. They did. The tragedy was that they could have been much more powerful, and that if they had been carefully and determinedly applied, the armed struggle would not have reaped such a toll.
  Mr. Jim Spicer: Will the right hon. Gentleman give way?
  Dr. Owen: No, because Mr. Speaker has asked us to be brief.
  Mr. Spicer rose—
  Dr. Owen: All right: I will give way to the hon. Gentleman.
  Mr. Spicer: The right hon. Gentleman has made it clear that he believes that sanctions can be effective only if they have total support. He was Foreign Secretary when we had an arms embargo that in theory had the support of the whole world. Yet he must have know, as everyone else did, that although we honoured the embargo throughout that period, other countries were supplying arms on a massive scale. There was no problem whatever from the South African Government.
  Dr. Owen: The hon. Gentleman has made my point. The arms embargo was dishonoured when it was not mandatory. But from 1977 onwards, when it became mandatory, there were many fewer breaches. There were some minor but important breaches, but a fundamental change came about when mandatory sanctions were applied in 1977. The South Africans have developed an arms industry, and if we take action, they will, of course, develop their own indigenous supplies.
  However, I turn to the specific areas in which this Government should lead international opinion in taking action against South Africa. First, they should recognise that we must cross the threshold of economic sanctions. The best way of doing that is to put a ban on new investment. That would not have an immediate impact. It would not immediately create mass unemployment, but it would he the clearest and most positive signal to South Africa's business community that the squeeze was being, and would be, relentlessly applied. The South African Government know that there must be a topping up of new investment year in, year out, if the economy is to deal with the demographic and social problems and the strains which are imposed upon it.
  It would be beneficial if we could devise an international strategy that would restrict loans to South Africa, but we should be under no illusion that other than for direct Government-to-Government loans that would be difficult to apply. There has been a good deal of
  930
  experience in this, following the United States attempt to ban loans to Iran. The legislation that the United States Government introduced then and, indeed, the legislation that is before the Senate and the House of Representatives at the moment on the banning of private loans as well might be helpful. That is the most important economic pressure. It will bite slowly but it will he a clear indication to the South African Government that the patience of the international community is fast running out.
  The other measure to which I should like to give serious consideration is a ban on direct intercontinental air travel into South Africa. Understandably that causes concern in this country as there are 800,000 people in South Africa with United Kingdom passports. People feel that they would not be able to visit relatives in South Africa. They are afraid that if relatives were ill, they would not be able to go there to visit them in hospital. But there would riot be a total ban on air flights into South Africa; it would be a ban on direct flights. Humanitarian flights through the rest of Africa would still be allowed; people could fly out of and into South Africa only by flying to an airfield which was in the control of a black African Government. For the first time, the balance of power in Africa would be tilted in favour of the black states. The problem at the moment is that the black states, particularly those surrounding South Africa, are dependent on rail links into South Africa and out through South African ports.
  The House has only to think what would happen were there to be a ban on all intercontinental direct flights into South Africa. The ban would have to be applied by the Swiss as well. It is no use having an exclusion clause for flights to Zurich and Geneva. If there were a total ban on intercontinental direct flights, business men would have to travel through black African countries. If the South African Government carried out a raid against Gaborone, Harare or Lusaka, as they did in outrageous circumstances a few weeks ago, those black African states would no longer allow direct flights between their countries and South Africa and the whole balance of power would have shifted—
  Mr. John Carlisle rose—
  Dr. Owen: No, I shall not give way. The hon. Gentleman can make his statements in support of the South African Government later in the House or, as he frequently does, elsewhere.
  The banning of direct flights would exert powerful pressure, which should be applied now.
  One other sanction has been much discussed—it has been suggested by the Commonwealth and also by the Dutch Government in the European Community —namely, whether we ought to take action against trade in fruit and vegetables. I need to be convinced about that. The best argument for it is that it would be a way of impacting on the Afrikaans farmer. I think that such action could be evaded and would not have much pressure, but, in singling out the different groups of people to whom we have to bring home the impatience of the world, the Afrikaans farmer is an important element. That sanction might be undertaken in the full knowledge that over the medium term it might not have a great impact, but in the short term, until it could be evaded, it might have a psychological impact.
  Mr. Robert Jackson: Does the right hon. Gentleman accept that many people in fruit farming in

  931
  South Africa are not Afrikaners? Much more important, does he accept that the people who work on fruit farms — the blacks— are often the worst paid and that they would immediately be the most severely hit by that sanction?
  Dr. Owen: I agree that that is an objection, but we have to take account of the fact that those black workers, not just their leaders, are saying loud and clear that they want sanctions to be applied. [HON. MEMBERS: "No."] Time and again we hear from Conservative Members, who risk neither their lives nor their income, that no sanctions should be taken. The fact is that black South Africans are now prepared, as events increasingly show, to risk their lives. They are prepared to lose their income. They went on strike yesterday to remember the massacre in Soweto. They lost their income when they did that. It is not a question that they are not prepared to make a sacrifice. Is this country not prepared to make any sacrifice?
  The honest answer must be faced: that there is now a mood in South Africa among the blacks that they are prepared to endure sacrifices to win their freedom. The whole history of the independence movement in South Africa has been that people have been prepared to make immense sacrifices. Look at the sacrifices that were made in Zimbabwe and in Kenya before independence was gained. Hon. Members should consider what was said in the House before Kenyan independence came and before Robert Mugabe became Prime Minister of Zimababwe. It needs to be remembered that there were great massacres. That same pattern of violence will occur again. It is tragic. None of us wants it.
  What we want and have the right to demand are genuine negotiations. It is not for us to dictate the constitutional settlement that will have to be reached in South Africa. All we can say is that there must be an open agenda and that there cannot be consultation by hand-me-down. We cannot have the South African Government setting the agenda and choosing the people with whom they should negotiate. They must recognise that genuine negotiations mean an open agenda to be discussed with the true representatives of black opinion. That means recognising that a charismatic figure like Nelson Mandela is necessary to keep the unity of black Africa in any negotiations in which compromise is to be struck.
  Looking back over the history of Kenya, how much easier it was for the compromises to be achieved because there was an outstanding leader, Jomo Kenyatta. The same can be said of many other African countries as they went from a period of armed struggle and violence towards the transition to independence and democracy. It may be different democracy from what we have here. I should like to see much better democracy. But let us remember that little Botswana, which was taken out by the South Africans, is one of the best representatives of democracy. [Interruption.] Conservative Members should look back at what they said would be the fate of Kenya. They should remind themselves that Kenya, which is a one-party state, nevertheless has a stable Government who rule, broadly speaking, in the interests of most of its citizens.
  I say finally to the Prime Minister that there is not much time. The right hon. Lady thinks somehow that it does not matter if she is the only one who is left out, but it does matter. There are one or two countries — Nigeria is
  932
  certainly one — which are not enthusiastic about continued membership of the Commonwealth and might like to have an excuse to leave the Commonwealth on an emotive issue. We ought not to give them the opportunity.
  Furthermore, even if the Commonwealth staggers through, and the Prime Minister, kicking and screaming, struggling to the last comma, eventually concedes and we cross the threshold of economic sanctions, great damage will have been done to our standing. We may be the 19th industrial nation in the world, but we still have moral values and a commitment to democracy that needs to be heard. Many Commonwealth countries want to hear that voice, and they want to hear it from the Prime Minister before it is too late.
  4.59 pm
  Mr. Francis Pym: There is not the slightest doubt from the speeches that we have heard so far that the House appreciates the gravity of the issue. I see two aspects to that. The first is related to the lives of the people in South Africa, the hardships that many of them know, the privileges enjoyed by some, and the aspirations of all. It is the people who are suffering. The second aspect is the perception of South Africa by the rest of the world. The disquiet that has long existed has grown over the years to a detestation of that regime. It has reached the point where there is almost a universal feeling that it is no longer adequate to be a spectator and wring our hands. Very few of us find it acceptable to do nothing. That international reality is clearly of the utmost significance.
  We must also understand something of the history of the issue. The issue is more complex than the language that we use can express. The racial conflict in South Africa— and that is what it is—has deep roots. The present generation are the innocent inheritor and victim of events of long ago for which they bear no responsibility. I have no doubt that there was some kind of discrimination in the days of the great leaders such as Smuts and others. However, they were inspired by their vision of a promising future for their rich country that benefited all races and the whole population. Discrimination was no part of their outlook. Only in the past 30 years has discrimination become the basis of policy.
  I would like to remind the House of the words of my noble Friend the Earl of Stockton when he was a Prime Minister. In a debate in the House on 22 March 1961, when the House was debating South Africa leaving the Commonwealth as a result of its vote to become a republic, the then Prime Minister, my noble Friend, said:
  "the Prime Minister of South Africa, with an honesty which one must recognise"—
  and here my noble Friend was referring to the Commonwealth Heads of Government conference that he had just attended—
  "made it abundantly clear beyond all doubt that he would not think it right to relax in any form the extreme rigidity of his dogma, either now or in the future. And it is a dogma. To us it is strange, but it is a dogma which is held with all the force of one of those old dogmas which men fought and struggled for in the past." —[Official Report, 22 March 1961; Vol. 637, c. 445]
  That dogma has been pursued ruthlessly ever since, to the point where millions in South Africa, who suffer under it, can take it no longer. They are sending out a cry for help, as would any drowning man. The most valid and authentic

  933
  expression of the present position is the report of the Eminent Persons Group with its compelling opening sentence and its conclusions.
  The meaning of the report is clear. All endeavours to influence South Africa in its internal policy have so far failed, and evidently there is no prospect of South Africa changing if left to its own devices except in so far as internal violence might force that. However, no one would wish that course to be pursued. My right hon. and learned Friend the Secretary of State for Foreign and Commonwealth Affairs referred to some changes in his speech. However, I believe that the drift of those changes is that the South African Government are maintaining rigid control. The right hon. Member for Plymouth, Devonport (Dr. Owen) said that he had detected the possibility of hopeful changes. I hope that he is right.
  A great many countries, including virtually all of the Commonwealth and the whole of Europe, have reached the stage where it is too uncomfortable to continue to do nothing. The feeling is that inaction in this case is immoral. I am especially glad to note that Her Majesty's Government share the desire for some form of action, that they accept the need for that and, in the amendment, they are asking the House to support a policy
  "to work actively…for effective measures."
  I would hope and expect the House to support that.
  However, there is an urgent need for action. The problems are self-evident and people's patience is running out. The period immediately ahead must be one of vigorous activity to carry the words in the amendment into practice. That brings me to the issue of sanctions. That issue is overloaded with emotion on both sides of the argument. We have already seen that expressed this afternoon. There is a place for emotion but policy, especially on such a delicate and difficult issue, must be based on rational argument.
  I believe that the arguments against comprehensive sanctions or economic sanctions are intellectually strong and intellectually valid. The case against them is not proven by experience. However, it must be said that that experience is not encouraging. It is also true that sanctions would inflict hardship on individuals in South Africa and on the national economy with all the consequences that that would bring. But it must also be said that the opposite policy of not applying sanctions or doing nothing has not resulted in political progress, let alone power-sharing. Rather, the result has been to increase the laager approach and the use of emergency powers. That has also inflicted hardship on individuals just as the policy of sanctions would although they are different in detail.
  It is a Catch 22 position. I believe that the Eminent Persons Group report shows the way. The hope was that the group would find a way forward, and that it would set in motion a peace process based on negotiations and a greater degree of mutual understanding within South Africa.
  Mr. David Winnick (Walsall, North): Will the right hon. Gentleman give way?
  Mr. Pym: The hon. Gentleman will forgive me if I do not give way.
  That is why the group came into existence after the Commonwealth Heads of Government conference. However, it has failed. The report clearly implies that, in its unanimous view, further measures are required. I would like to see my right hon. Friends and the British
  934
  Government take a positive lead in identifying those measures. I do not want to see the Government being a reluctant co-operator. I want to see the Government set their objections aside. I did not feel that my right hon. and learned Friend the Foreign Secretary, for all that he said this afternoon, had any great enthusiasm for the task ahead. He did not appear to be approaching such an immensely difficult task with the vigour and enthusiasm that are required.
  We have reached the point when further measures are essential and we must use our experience and international position to help the Commonwealth, the European Community and all our friends around the world, to find a solution. We must have the support of the United States, Japan and Germany as well as the Commonwealth — and I speak as an enthusiastic supporter of the Commonwealth. The task is formidable and urgent. I do not believe that any other country can fulfil that task as we can and we must look to my right hon. Friend the Prime Minister and my right hon. and learned Friend the Foreign Secretary to take the initiative and lead the way. The sooner the first measure is put in place, the better. If that turns out to be a restriction on investment, so be it.
  There is an added and important reason why, in my view, together we must succeed. On any geopolitical or strategic analysis, the so-called free world—the Western democracies, call it what you like—need South Africa for its huge resources and its geographical position. It matters that South Africa is a part of the free world. No wonder the Communists do all that they can to undermine South Africa.
  We must find the way to bring South Africa back into the fold of our civilised democracies. That, aside from the great disarmament issue, or even despite it, is the greatest challenge facing the world today. We look to the British Government to meet that challenge.
  5.8 pm
  Dame Judith Hart: I would like to tell the House something about another panel of eminent persons. I am sorry that the Prime Minister is leaving the Chamber. because I do not think that she has had an opportunity to read our report. I was a member of a panel of eminent persons appointed by the Secretary General of the United Nations last autumn, which reported the weekend before the Nassau conference and before the Commonwealth Eminent Persons Group was set up.
  Our group was set up to hold public hearings in New York for a week on transnational corporations, South Africa and Namibia. We heard from, put questions to and had discussions with people, such as the International Chamber of Commerce, the South African Chamber of Commerce, the African National Congress, economists and various representatives of interest groups, and we produced a report.
  I tell the House this because it has not been reported in the British press. I am probably giving the House information of which it is not aware. The report was accepted by the Economic and Social Council of the United Nations in April by a vote of 23 to two. Britain and the United States were the two countries that voted against. The report goes to the General Assembly in the autumn. It is also before the United Nations conference on sanctions against South Africa, which is being held in

  935
  Paris this week and which I shall attend tomorrow. However, again, it is not being attended by the British Government.
  I shall refer to the report's recommendations in relation to today's debate. Everybody who has spoken so far, from both sides of the House, has been in agreement about one simple proposition—that we all hate apartheid and we all want to do what we can to end it. I know that one or two Conservative Members might not agree wholly with that point of view, but 98 per cent. of the Members of the House of Commons do.
  Mr. Winnick: That is what they all say.
  Dame Judith Hart: I give them credit for believing it.
  Mr. Winnick: They say that.
  Dame Judith Hart: I give 98 per cent. credit for believing it.
  Today we are attacking the question of measures. Personally, I hope very much that the Opposition will not vote against the Government amendment to our motion. I am prepared to welcome any study of measures, because it takes us further forward. I believe that our motion is stronger and better, but I hope that we shall not oppose the Government amendment.
  The real issue at stake is what those measures should be. If we agree that measures are to be taken, and that measures to try to influence an end to apartheid in South Africa are to be welcomed, we are in the ball game of deciding what they should be. We should be absolutely clear about that. This is where the right hon. Member for Plymouth, Devonport (Dr. Owen) was indulging in a fair amount of mudge and smudge. We must decide. Do we seek measures, which we hope will make Botha and the South African Government feel ashamed of themselves, and make them say, "The international community does not really like us very much. We are disapproved of very much. We had better do something about it"?
  I say to those who take that view that measures should seek only to influence opinion in South Africa. The former has been tried for a long time now has not succeeded. What is more, the partial action envisaged, such as banning air flights and avocados, is designed to stiffen the resistance of the extreme Right in South Africa. If nasty things are being done to someone, which he does not like and which make him feel guilty and bad, such things do not change the person. He says, "What horrible people they are who are doing these things." Such measures are likely to be counter-productive. Therefore, I reject any measures that seek merely to say to South Africa, "Behave better. We do not like you."
  I am after the sort of thing that the Prime Minister talks about—effective measures. I now come to some of the recommendations of the report by the panel of which I was privileged to be a member. We were dealing with transnationals, which included transnational banks. We dealt with the activities of the transnationals in a country in which, as in all other countries, they have to obey the law. South African law includes the key point, that every transnational corporation operating in South Africa is bound to secrecy. That is part of the law. On behalf of the South African Government, the transnationals have to operate legislation against various people whom the
  936
  Government do not like. The transnational corporations have to be wrapped up in that; they have to be part of it if they are to obey the laws of the country. They may not operate if they cannot obey the laws of the country.
  The transnationals are involved in the supply of various things that are absolutely crucial and critical to the South African economy. I am talking not about destroying the South African economy, but about the elements in the economy that depend almost entirely on the support of foreign transnational corporations in critical areas.
  Examples are the supply of computers, electronic equipment and vehicles. South Africa cannot operate its apartheid system without the direct involvement of transnational corporations that supply not only the equipment but the know-how in computers, electronics and vehicles. One needs computers to operate a sophisticated system such as apartheid. It is not a casual system. We have seen that in the arrests in the past week, whether of 1,000 or 3,000 people. The South African Government know precisely where everybody is. A computer system is needed for that. South Africa has that system because it has had the assistance of the transnational corporations which are operating in South Africa.
  I am not criticising the transnationals at this stage. South Africa has had their co-operation in the supply of know-how, equipment and managerial skills, and in the transfer of technology in the nuclear industry.
  Mr. Nicholas Winterton: What about the exchange of high technology and the provision of cheap food to the Soviet Union?
  Dame Judith Hart: What has that got to do with it? The hon. Gentleman is so foolish as to be abysmally unworthy of being in the House.
  Mr. Winterton: Will the right hon. Lady give way?
  Dame Judith Hart: I am not giving way.
  Mr. Winterton rose—
  Dame Judith Hart: I am not giving way. The hon. Gentleman can attack me later or report me to the Freedom Association. I do not care which.
  Therefore, certain trans-nationals in some sectors are crucial to the South African economy. The banks are particularly important. I agree with the right hon. Member for Devonport about loans. The activities of the trans-national banks are probably the most critical factor of all. I hope that the Prime Minister and the Foreign Secretary, and the group of officials in the EC who are to report to Heads of Government next week, will have noted that the period when it seemed hopeful that change was occurring in South Africa, when Botha was introducing certain important reforms, was the very period when the banks and the International Monetary Fund, following last August, said, "We are not sure whether we shall reschedule. We are not at all sure whether we shall help you." When did it all go sour again? When did the South African Government begin to tighten up again and abandon all hopes of reform? In January, when the IMF and the banks agreed to reschedule and let the South African economy tick over as usual.
  I am in no doubt whatever about that, and the Bank of America, for example, which has withdrawn from South Africa, is in no doubt. Other American banks, way ahead of our British banks, see the writing on the wall. As the

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  Foreign Secretary said, there was less investment because of the judgment in world capital markets. He was right. But what the banks do is not just a matter for their private judgment. What they do is largely influenced and determined by what the IMF does. It was what the IMF reported in December that led to the rescheduling in January. Governments play a key role in the IMF, as they do in relation to the major banks in Britain and in the United States.
  What our report suggested was simple. I offer this as one kind of measure. I am not necessarily saying that there should not be others, but this should be included on the agenda of measures. Our proposition, which has been accepted by the Economic and Social Council of the United Nations, is that transnational corporations operating in key sectors should disinvest if they consider that obedience to South African law is in conflict with their asserted moral duty to oppose apartheid. They should not just decline to participate in any new investment; they should disinvest. if they do not disinvest by January 1987, there should be international resolutions to ensure that they do.
  As many people have said, there is no doubt that influencing, not destroying, the economy of South Africa is the key factor. When the South African chamber of commerce talked to us in New York, it made it clear that it considered the future of business enterprise in South Africa as dependent upon the existence of a multiracial democracy. It wants that and, as we know, it has already talked to the African National Congress. Only by that sort of effective financial measure and disinvestment in key sectors of the transnational corporations' activities which are so essentially involved in apartheid shall we strengthen the hand of the business community in South Africa. Ultimately that is probably the only voice that will count against the extreme Right in South Africa which is forcing Botha, or with which he is willingly going along, towards an increasingly Fascist type of repression.
  Whatever decisions are made about effective measures there are other criteria which should be taken into account and against which judgments must be made. One of those criteria is whether what is proposed is likely to command effective international support for trade sanctions. I do not understand why, in any logical analysis of the problem before us, so much emphasis has been placed on trade sanctions. They are just one of the measures that can be taken, but they are open to evasion by commercial organisations or countries. I do not understand why, when people talk of sanctions, they automatically assume that sanctions equal trade sanctions. There are many others, as I am trying to suggest.
  It must be right that whatever measures are adopted are capable of universal application. In that regard it is important to recognise, according to the information that we have, that three countries command or control most of the transnational corporations operating in South Africa: 142 transnationals are West German, 341 are British, and 407 are American. Other countries have comparatively fewer transnational corporations in South Africa.
  However, we must consider the need for self-protection and minimising the damage to Britain. Of those many transnational corporations, probably 90 per cent. have only a minute fringe marginal involvement in South Africa. They will not be damaged if they have to leave. Of the others, even of those major transnationals which have
  938
  a considerable involvement in South Africa, I doubt whether their involvement represents more than a relatively small proportion of their total economic activity.
  This is where we need to apply some economic analysis. I do not know what proportion of the activities of the British Oxygen Co. Ltd. — whose director, Sir Leslie Smith, is now the chairman of the British Industry Committee on South Africa — are dependent on its. South African activities. I suspect that it is only marginal. I was cheered when I heard Sir Leslie Smith say, "If we think that sanctions will be effective, we will sacrifice our own self-interest." That is splendid.
  Effective financial sanctions and disinvestment by key transnational corporations in key sectors of the South African economy need not present great damage or loss of jobs to the British economy.
  A further criterion is that in our judgments about what are the best measures to take against South Africa, we must also take into account that some measures which we ask all countries to adopt could produce the maximum retaliation against the front-line states. That would not be sensible because the front-line states are immensely vulnerable. It has already been seen that South Africa has no hesitation whatever in taking ruthless military retaliation against the front-line states. We must consider that factor.
  It would be all very well to say, "Stop the supply of fruit and vegetables; stop the supply of avocados; stop the supply of exports from South Africa through the southern African routes." But we must bear in mind what the consequences of that might be for the front-line states. That is a valid factor that we have a duty to take into account. That is not to say that the front-line states are not prepared to accept tremendous sacrifices, but it is something to be put into the books when one considers the pros and cons.
  Out of what I regard as a fair amount of muddle and confusion surrounding the issues that we are debating, I hope that we can now move to sensible economic analyses and judgments which take account of all the information available to us and the fact that we are not only meeting a demand from our colleagues in the Commonwealth when we study the matter and seek to produce satisfactory answers, but that we are also likely to be answerable to the wider forum of the United Nations, at least by, if not before, the autumn.
  5.29 pm
  Sir Anthony Kershaw: I agree with much of what the right hon. Member for Clydesdale (Dame J. Hart) has just said, as I am sure do other hon. Members. The problem, as the right hon. Lady said, is not whether we want to get rid of apartheid but the best way to do that. Some of the solutions that the right hon. Lady suggests should be adopted.
  However, I do not agree with what the right hon. Lady said about the transnational corporations. She omitted one thing. The presence of the transnational corporations in South Africa can be beneficial provided that they take with them the practices, especially the employment practices, which they have in their own countries. I believe that that can help.
  In general, I join those who believe that trade sanctions are not appropriate because I do not believe that Botha intends to relinquish power, whatever the pressures and whatever the cost. That is the opinion of the Eminent

  939
  Persons Group and many others. It was, for example, the opinion of Dr. van Zyl Slabbert, who, as the House knows was the leader of the loosely described liberal party's national party in the South African Parliament. He came before the Foreign Affairs Select Committee and described his parliamentary policies and activities. He then returned to South Africa and almost immediately resigned from the House there. I had the advantage of seeing him later and I asked why on earth he had done that; he gave us no hint that he would do it. The reason, he said, was that he had had four interviews with President Botha as soon as he got back, and after the last one he was convinced that President Botha did not mean a word that he said and had no intention of introducing any meaningful reforms.
  If that is so, neither sanctions nor anything else are relevant to changing Mr. Botha's mind. That is where the Eminent Persons Group went wrong. Sanctions will be an exercise by us in moral indignation. Of course, as the Eminent Persons Group says, the South African Government fear sanctions. They will obviously make life more difficult and less comfortable. But it does not follow that they will change their mind because of them. The idea that the present regime in South Africa will turn to one man, one vote and agree, in effect, to commit suicide, which is the prospect before them, is vain.
  Sanctions will have an effect all right. They will bring, if universally applied, and are intended to bring, unemployment, poverty and despair, leading not, as I have argued, to surrender by Botha, but to revolution or attempted revolution and then civil war—in fact, the bloodbath foreseen by the Eminent Persons Group—sooner rather than later.
  My second objection to sanctions is less important but it should not be overlooked. History warns us that sanctions will be not universally observed. We shall probably witness much damage to our air routes, interests, markets, investments and employment. We shall see those opportunities being snapped up by others less scrupulous. There are also those who stand to lose nothing at present by sanctions but who do stand to benefit by the alteration in trade patterns which they would bring with them.
  Some states and peoples, besides ourselves, will suffer, and suffer badly. They, or perhaps their leaders principally, are, we are informed, willing to endure the hardship which trade sanctions would bring upon them. That is their decision and one cannot but admire their courage and fortitude in that matter. But we should put down a slight caution: let them not come running to us to make up what they have lost in South Africa.
  Furthermore, there are 800,000 British passport holders in South Africa who have a right of abode here and who may, if there is a war, come to the United Kingdom. Zola Budd would be only the forerunner—if that is the right word. We might see an influx of refugees—
  Mr. John Carlisle: Let us hope that they are cricketers.
  Sir Anthony Kershaw: Those refugees will have left their possessions behind them. Their chance of livelihood destroyed.
  Mr. Carlisle: They can bring their cricket bats.
  Sir Anthony Kershaw: They can do various things with cricket bats, but not earn much money with them.
  940
  Those refugees would be entitled to stay here and, bereft of the resources that they have left behind, would have to be supported by the state.
  My last objection to sanctions is that they do not bring the parties to the conference table. Rhodesia has been mentioned this afternoon. Sanctions in Rhodesia did not end the Rhodesian problem. It was the war which ended that. If it is said, "So be it. Let us have sanctions. Let us provoke a war," I say that that is not the price which we, from outside, are entitled to ask the peoples of South Africa to pay.
  It may be right—the right hon. Lady referred to this — that some lesser measures than universal sanctions should be taken to show our abhorrence of apartheid. Her Majesty's Government have already made clear their feelings about that matter. Our policy that Mandela should be released without conditions and that the basic changes should take place in the South African state is something which we can only continue to affirm with ever greater resolution.
  It may be right to do that, apart from anything else, to meet the deeply held feelings of other Commonwealth countries. It would be a diplomatic disaster in many ways —not for Britain alone—if the Commonwealth were to start to break up because of this matter. But the measures which could be taken must be universally agreed and applied and should not be such as to ruin South Africa and to bring about quickly the tragedy that we seek to avoid.
  Mr. Nicholas Fairbairn: Will my hon. Friend consider the vast possibilities of economic pressure such as having a Marshall plan for southern Africa and the front-line states for development, of which South Africa deprives itself if it does not immediately put a line through the word and legislation of apartheid?
  Sir Anthony Kershaw: My hon. and learned Friend is right. I see political difficulties in turning 180 degrees and starting to invest heavily in South Africa at present, but it would be desirable if we could bring prosperity to South Africa. It is far more likely that we would get our way about apartheid in that way than otherwise.
  But we do not, as the right hon. Member for Clydesdale said, have to pass many resolutions in the House or anywhere else on economic measures. They are happening by themselves. If we were to pass a decree now that no one should invest in South Africa, it would not be necessary. Who is investing in South Africa? We can tell the bankers how to behave, but they are already behaving in the way that we would wish. That is unnecessary. Nevertheless, we must consult our partners in order to agree what the object should be. I am sure that it is possible to do that in a way which would bring home to South Africa that the time has come when it will have to bend.
  My hon. Friend the Member for Wantage (Mr. Jackson) said that fruit and vegetables should be allowed to come to Britain. I agree. The people who produce the fruit and vegetables are the poorest in South Africa, and it would be a tragedy and a great mistake to strike at them.
  The senior leadership on both sides in South Africa appears to be beyond redemption. They both demand all or nothing and no compromise is possible for them. But surely, in contemplation of this, many of the younger people in South Africa, not only whites but blacks and not only the English but the Afrikaners, are starting to see that a compromise must be found.

  941
  The business world is very much against sanctions. No managing director could stand up and ask for sanctions which would ruin his company. Nevertheless, they are inclined to think that a compromise is possible. They see that it is inevitable. I can think of many compromises, as could any hon. Member. One which has been bruited around— I do not know whether it has any chance of success — is that Natal, which is largely English speaking, should have a provincial Government, mixed with black and white. It has been said that the obvious candidate for the president or leader would be Chief Buthelezi. Once that sort of thing was started, it could never be stopped. Such important changes could be made.
  We must also recognise, as my right hon. and learned Friend the Foreign Secretary said, that President Botha has proposed some remarkable changes. The trouble is that we do not believe him, and nor does anybody else, but I hope that they can be done. If he finds that he has support, perhaps he will change his mind and do what he says he wants to do.
  Has diplomancy really been exhausted? Is our only policy that intended to provoke civil war in which the voices of the moderates would soon be drowned by the bombs and the machine guns? I hope that we shall not be stampeded by the shouts of those behind us — I am speaking metaphorically— who in many cases stand in no danger and perhaps even hope to gain. Let us not be stampeded into a policy of all-out sanctions which can justly be described as a policy of "Cry havoc and let slip the dogs of war."
  5.38 pm
  Mr. Guy Barnett: I was encouraged, as was my right hon. Friend the Member for Leeds, East (Mr. Healey), by the terms of the Government's amendment to the Opposition's motion. The Opposition's motion refers to
  "the imposition of effective economic measures against the Government of South Africa",
  The Government's amendment refers to "effective measures" leaving out the word "economic". That presumably means that the Government are prepared to consider, with our partners, other forms of pressure on the South African Government provided that they are seen to be effective in influencing the way in which the South African Government operate.
  One measure, which is presumably included in the terms of the Government amendment, is the supply of arms to the African National Congress in order to strengthen it in putting pressure on the South African Government. The Government amendment leaves out the word economic, so presumably it encompasses the possible use of force by Britain, by other countries in the Commonwealth or by countries which believe that the future of South Africa could become so disastrous as a result of doing little or nothing or by using economic sanctions that prove ineffective, that the use of force would be the only way to solve the problem.
  It has been said in the debate that economic sanctions were ineffective against Rhodesia, and that it was the use of force that finally got rid of Ian Smith and his racialist regime and led to the birth of Zimbabwe. We may find all too quickly that that will happen in South Africa and in that sense I am encouraged by the terms of the Government amendment.
  Mr. Donald AndersonBefore my hon. Friend becomes too enthusiastic in his textual analysis, will he note that the Government amendment leaves out the United Nations?
  Mr. Barnett: I am grateful to my hon. Friend for his intervention. I do note that the United Nations has been left out of the Government amendment. Nevertheless, it is interesting to see that the phrase "effective measures" is included in the amendment. I, and I daresay many of my hon. Friends, were disappointed by the terms of the Foreign Secretary's speech. It seemed that he had either not read the Eminent Persons Group report or was riot living in the real world. That report contains an introduction by the Secretary General of the Commonwealth in which he says:
  "Apartheid must end. It will end; if necessary through a bloody struggle."
  In concluding their report the members of the Eminent Persons Group used the following horrifying sentence:
  "There could he little doubt that the alternative to a negotiated solution would he appalling chaos, bloodshed and destruction."
  That is the situation facing the House. With due respect to the Foreign Secretary, he did not give a proper picture of the urgent problem that we face. In his speech the hon. Member for Stroud (Sir A. Kershaw) said that Dr. Botha is intransigent. Because of that we must find effective measures to deal with a situation that will not be dealt with by peaceful negotiation, a phrase of which the Foreign Secretary was fond. If there is not already a war in southern Africa there soon will be, and certainly, the amount of violence in South Africa and the violence committed by South Africa against its immediate northern neighbours are the first signs of developing bloodshed that will affect the whole of southern Africa. For that reason this is a desperately urgent problem, and the Government's present attitude does not measure up to it. The attitude is that we can wait until the Commonwealth Heads of Government meeting in August. That is, if there is not some need now for a strongly worded statement in the face of the deteriorating situation in South Africa and nearby.
  There is violence in South Africa's townships and there are signs that that violence is moving out of the townships and into the white areas, into the cities and the towns. As I have said, there have already been examples of violence in South Africa spreading beyond its borders and affecting innocent countries such as Botswana. This is not merely a minor civil war, something going on within the borders of another country; it is taking place on the international stage, and for that reason it directly concerns the Commonwealth. That was clearly recognised at the last Heads of Government meeting.
  Events in South Africa directly concern the Commonwealth because Heads of Government meetings year after year have been characterised by an interest in racial equality, a hostility to racialism, and an interest in the contrast between the wealth of the West and the poverty of the South. The Commonwealth Heads of Government in Nassau were bound to take seriously events in South Africa. Those Heads of Government could not stand aside from something that not merely affected South Africa but was certain to engulf, as has been said before, much of southern Africa and which could have disastrous consequences for the African continent.

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  For a long time I have believed in the unique value of the Commonwealth in world affairs. It may be that an accident of history brought the Commonwealth into existence, but it has flourished with very little encouragement from British Governments. The latest example of the way in which the Government devalue the Commonwealth is that the post of the head of the Commonwealth co-ordination department in the Foreign and Commonwealth Office has been degraded. That is another example of the attitude taken in Britain to an association that is more deeply valued in other Commonwealth countries than it often appears to be in Britain.
  Mr. David Crouch: Did the hon. Gentleman see an article in The Daily Telegraph yesterday by Mr. T. E. Utley, who spoke of the Commonwealth as more of an encumbrance than a reality? It is sometimes from Fleet street that we get the worst advice.
  Mr. Barnett: The hon. Member for Canterbury (Mr. Crouch) will be well aware of the long hostility of The Daily Telegraph to the Commonwealth and of the general hostility that exists in large sections of the British press. That causes enormous distress in the Commonwealth and does Britain great damage in Commonwealth countries. Many hon. Members travel abroad, either with the Commonwealth Parliamentary Association or under their own auspices and, it is to be hoped, we do something to restore the balance by demonstrating that at least many hon. Members value the Commonwealth.
  The Commonwealth has enormous relevance to the current situation, just as it had relevance to the situation in Zimbabwe. It also has enormous relevance in drawing a contrast between wealth and poverty. It would be the most appalling disaster if, through action or through a failure to act by the Prime Minister and the Government, the future of the Commonwealth were to be endangered or if, as an association, it came to be devalued and people looked elsewhere for international association and cooperation. The Commonwealth has an enormously valuable contribution to make not just to members of the Commonwealth but to international peace. We ought to take seriously the fact that we currently find ourselves in a minority of one. We should do everything that we can. through debates in the House and through the way in which those debates are represented outside, to reassure other members of the Commonwealth of our commitment to a non-racist policy and to effective measures, economic or otherwise, that will change the course of history in southern Africa.
  5.49 pm
  Mr. Peter Thomas: The hon. Member for Greenwich (Mr. Barnett) made a helpful contribution to this sensitive, difficult debate which contrasted with the speech of the right hon. Member for Leeds, East (Mr. Healey), who adopted a characteristically belligerent and partisan tone which does not accord with the general type of speech we have had so far.
  The hon. Gentleman referred to the Commonwealth group's report, and it is right that he and others should have done so, because the debate has been brought about by it. The Commonwealth group of seven eminent persons from five continents have produced a report which will
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  inevitably have a major impact on international opinion and which cannot and must not be ignored. One may have reservations about some of its conclusions and regrets about some of its omissions, but when unanimity is shown by eminent and to some extent disparate people on a sensitive, contentious subject such as South Africa, their views inevitably command respect.
  The right hon. Gentleman mentioned Lord Barber, who is well known to many hon. Members. No one could accuse him of being prejudiced against South Africa or of being other than an objective realist. He wholly supports and endorses the report. The group visited South Africa to try to find a path for peaceful change. Its objectives along that path were the dismantling of apartheid and the establishment of a non-racial representative Government. Sadly, it felt that its efforts to promote those objectives had been unavailing and that its mission was a failure. Therefore, its report is one of considerable gloom.
  The group saw a country in upheaval and witnessed great human suffering. It expressed little doubt that the alternative to a negotiated solution would be appalling chaos, bloodshed and destruction. It is the group's considered view that, despite appearances and statements to the contrary, the South African Government are not yet ready to negotiate a non-racial representative Government, except on their terms, which, in the group's view, fall far short of reasonable black expectations and well accepted democratic norms and principles.
  The only hopeful part of those views are the words "not yet". It is the Eminent Persons Group's opinion that the South African Government are seeking not to end apartheid but to give it a less inhuman face, and that their commitment to power sharing when analysed means that overall white control would never be surrendered. The group also reached the conclusion, with which I agree, that there can be no possibility of meaningful negotiations without including the African National Congress.
  The EPG was by no means unaware of the many difficulties facing the Pretoria Government. I have no doubt that President Botha is anxious to bring about reform. Indeed, many changes have been made, and were mentioned by my right hon. and learned Friend the Foreign Secretary and my hon. Friend the Member for Stroud (Sir A. Kershaw). But when those changes have been made the President has received little appreciation or encouragement from outside. That has intensified the anxieties and demands of the Right wing of his party. That and organised black violence have produced a white backlash which is a major obstruction to the acceptance of meaningful reform. The EPG was left with the impression of a divided Government, but its avid impression that white opinion as a whole may be ahead of the Government in significant respects and ready to respond positively if given a bold lead is an important matter to bear in mind.
  Mr. Fairbairn: Does my right hon. and learned Friend agree that when we are discussing the matters to be undertaken it is important that we ensure that the white opinion which is at present ahead of the South African Government is not driven back behind that Government?
  Mr. Thomas: My hon. and learned Friend is right. Obviously, that is the implication of what I said and the reason why I raised the matter, but I am grateful to him for elucidating it beyond doubt.
  Mr. Richard Caborn: Does the right hon. and learned Gentleman agree that Mr. Botha is in a not dissimilar position to the Prime Minister because 42 of her hard Right-wing colleagues have signed an amendment stating that they are "resolutely opposed" to sanctions? That also creates similar problems for the Minister who will reply.
  Mr. Thomas: I am rather sorry that I gave way. I hoped that the hon. Gentleman would try to assist me in making my speech and even try to assist in the debate, but his intervention was wholly outside anything that I said or was likely to say.
  It is sad that the EPG found that not one of the five steps of the Nassau accord which the Government of Pretoria were called on to take as a matter of emergency had been taken. It has found that there is no genuine intention to dismantle apartheid; that the state of emergency, far from being terminated, has been further strengthened; that Nelson Mandela and the other political leaders remain in prison; that political freedom is being more rigorously curtailed; and that the cycle of violence and counter-violence has spiralled and there is no prospect of a process of dialogue leading to the establishment of a non-racial representative Government.
  That is a sad, sombre picture. What can be done? What remaining influence does the international community have? In the words of the report:
  "What can major states do to help avert an otherwise inevitable disaster?"
  The EPG recommends effective, concerted action and suggests, without determining their nature or extent, the adoption of effective economic measures. The operative word is "effective";— measures which will be effective and help to promote clear objectives. What are those objectives? For most of us they are the end of apartheid, the end of violence and the promotion of a structure of non-racial democracy.
  I agree with those who believe that full economic and financial sanctions which put South Africa into economic isolation will not be effective in promoting those objectives. They would achieve precisely the opposite effect and would not persuade Pretoria to succumb to international opinion. All experience has shown that states which are treated as outcasts behave as outcasts. Comprehensive economic sanctions on South Africa would fortify strong Afrikaner isolationism, pander to the siege attitude and mentality there and, above all, divorce South Africa, particularly that white opinion which is ahead of the Government, from all worthwhile outside influence. The only justification for such sanctions is that they promote moral uplift for those who propose them. It is an interesting question whether such moral uplift can be sustained when it becomes clear that the effects of sanctions could be large-scale black unemployment and increasing black deprivation and depression.
  I agree with Sir John Killick, the eminent ex-diplomat, who, in his letter to The Times today, wrote:
  "There has surely never been a time when it has been more necessary to apply cool and dispassionate judgment to the problem of South Africa."
  I therefore wholly support the Prime Minister's amendment. The EEC, the Commonwealth and the economic summit seven must consult and co-operate coolly and dispassionately and try to agree measures which
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  will be effective in helping to achieve a peaceful solution for South Africa based on negotiations and a suspension of violence on all sides.
  The measures must not be designed to drive South Africa into isolation and possible chaos but must be politically effective. The measures must show Pretoria that the international world is determined that apartheid must go and progress must be made towards the other objectives. The measures must not finally close the door to outside contact and influence but must be effective in their impact and carry with them a united international warning that more will follow should progress not be made. I wish the Government and my right hon. and learned Friend the Secretary of State all good fortune in their task.
  6.1 pm
  Mr. Tom Clarke: The right hon and learned Member for Hendon, South (Mr. Thomas), in common with many of his hon. Friends, once again opposes meaningful sanctions. Once again Tory Members offer no solution to the House on how to deal with this problem. I am afraid that this attitude is all too typical, not only in this debate but in many debates we have had on the subject over the years.
  It is true—many Conservative Members have said this—that it may well he impossible to make progress in South Africa and to achieve a multiracial society without there being sacrifices. This has been accepted by all who are in favour of progress. Throughout our history few meaningful achievements in democracy have been made without individual sacrifices. We are seeing that before our very eyes today.
  What is astonishing — I felt this when the Foreign Secretary was making his speech and referred to the jobs that might be lost in Britain —is that the Government pay such little regard to the passionately held views of the British public who want to see social justice and freedom emerge in South Africa. They have made it clear that they are prepared to pay a price.
  There is nothing new in this. On 26 July 1833, the Bill for the abolition of slavery passed its Second Reading in the House. It was a Government measure and its success was assured. When Wilberforce heard the news he said:
  "Thank God, that I should have lived to witness a day in which England is willing to give twenty millions sterling for the Abolition of Slavery."
  I believe that the spirit that inspired those remarks and which helped towards the abolition of slavery, despite the fact that there was a cost, still exists. I will not accept that the British people, the people of the Commonwealth, of Europe and the United States are not prepared to contribute towards a solution to the problem, even though the Government gave no suggestion that they are searching for that solution.
  What worries me—this emerged in the debate today— is that, sometimes, the Government give the impression that they simply do not want to listen. The facts are there, even though they are not always widely reported because of the restrictions in South Africa. It is absolutely absurd that we could not hear of the meeting of Bishop Tutu and President Botha on Sunday because the South Africans decided that, somehow or other, to report such an event would represent a challenge to their state. Is it not also absurd that a Conservative Member could say on TV-am today that Bishop Tutu does not have

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  much of a following? Does anyone imagine that the President of South Africa would have spent a single minute, far less one and a half hours, with Bishop Tutu, if that were the case?
  We are arguing over a serious issue and the background to that problem has been absolutely plain over the years and especially in recent months. We have all witnessed years of oppression, the denial of human rights and state-sponsored killings. Indeed on Sunday, The Observer mentioned that even today, 2,000 people are in detention. The black majority are reacting, as we would expect them to do, to the existence of oppressive rule by the minority 15 per cent. of the white population. I am not for a second suggesting that all the white minority agree with what the regime is doing. Nevertheless the kind of reactions we are seeing are inevitable when democratic institutions are not available. The majority cannot assert themselves or assess the values which Bishop Tutu and many others share.
  Mr. Andrew Hunter rose—
  Mr. Clarke: I am sorry, but many hon. Members wish to speak and I do not want to stand in their way.
  The British Government's position is shamefully negative. Nothing we have heard today will alter my view. The Government, at the United Nations, the EEC and within the Commonwealth, when they have had every opportunity to influence the direction of history, have been weak. They have been ambiguous and have failed to offer the kind of solution that I believe the British people want.
  Meanwhile, in South Africa the shout for progress and freedom has become louder still, and why not? On every test, from the rate of infant mortality to educational expenditure, to the payment of wages, coloureds and Asians are at a disadvantage and the Africans are the most underprivileged of the lot. Many blacks are receiving a fifth of the average monthly wages of their white counterparts for doing exactly the same jobs. In 1983 to 1984 the South African Government spent nearly six times as much on education on every white head as on every African one. I regard that as shameful.
  Discrimination is evident in the health service. There are two distinct patterns for blacks and whites. Whites have a much lower infant mortality rate and a much greater life expectancy. Obviously, there must be a challenge to that type of society within South Africa and it is clear that there is.
  It is equally obvious when we consider the regime's response to that challenge— oppressive Acts, detention without trial, bans on meetings and organisations, curfews, news censorship and so on, many of which were practised even before the emergency was declared —that it accepts that kind of approach to a very difficult and delicate problem but is also in the process of institutionalising powers that enhance the role of the military and the police to continue the oppression that my hon. Friends and I regard as absolutely repugnant.
  We have recently witnessed developments in that direction. At the very time when the Eminent Persons Group might have been making some progress—even President Botha was giving the impression that he was trying to co-operate — President Botha panicked, pandered to his extreme Right wing and there were dramatic military raids on Zimbabwe, Zambia and
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  Botswana, as well as related actions. As a result of such an indefensible record, 70,000 people are homeless. It is no wonder that The Observer reported
  "Those are the actions of a government which has shut its mind to world opinion."
  That is extremely sad, but just as sad is the fact that our Government do not seem to be responding to world opinion. The future of the Commonwealth is important. It appalled me to hear at least one Conservative Member say "good riddance" earlier today—I understand that it was the hon. Member for Macclesfield (Mr. Winterton). That is no way to peace and co-operation between nations. Nobody fought an election on that programme and I believe that such an idea is utterly inconsistent with the attitudes and aspirations of the British people.
  While we have behaved like Pontius Pilate, other members of the Commonwealth have spoken for themselves and for freedom in South Africa. We have witnessed the passing of a new American sanctions Bill by the House Foreign Relations Committee, which reflects growing opinion in the United States. The United Nations mandated world conference on sanctions started in Paris yesterday. It is a pity that we were not represented.
  The march towards progress and democracy will go on. The Government's stance on sanctions represents a lost opportunity for Britain, to say the least. I hope that even the Government will reflect on the influence of their passive approach and that they will accept that it does not help even long-term British investment to go along with what is happening in South Africa.
  Before more people lose their lives and before the real bloodbath, which can still be prevented, takes place, Conservative Members — I accept that there are many who take this view—should stand up and be counted and urge on the Government the fact that the time for sitting on the fence has long since passed. We can make a contribution to freedom and progress in South Africa. The sooner the Prime Minister and her colleagues listen to that plea, the better it will be for all concerned.
  6.12 pm
  Sir Patrick Wall: When I hear the phrase, "social justice and freedom in Africa" I begin to wonder what kind of world the person speaking lives in because I cannot think of many, if any, countries in that continent which enjoy social justice and freedom.
  We are discussing apartheid, which is the denial of rights to the majority race. The issue becomes especially emotional because the minority are white. I am often worried at how little emotion is displayed when black oppresses black as in Uganda or Ethiopia.
  We all know that the National party of South Africa set up apartheid by gerrymandering the constitution about 40 years ago. I believe that it is now in the process of dismantling apartheid. I admit that it is going far too slowly, but it has started. My right hon. and learned Friend the Foreign Secretary gave examples of that, such as influx control, property rights, which are now available, the restoration of citizenship and so on.
  As politicians, we must consider what happens to politicians in other countries. The result of the reforms that I have described is a move to the extreme Right. That move is enhanced by external pressure and the traditional laager mentality of the Afrikaners.

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  The object of the debate is to decide how best to get rid of apartheid. The Government, pushed by the Commonwealth, advocate
  "effective measures… based on negotiation and a suspension of violence".
  That is a limited objective, as are the measures. The Opposition advocate
  "effective economic measures against the Government of South Africa."
  If English means what it seems to, the Opposition want to overthrow the Government of South Africa and presumably replace it with an ANC Government, which will obviously veer in the Marxist direction. I believe that one man, one vote is unacceptable in South Africa as it would mean chaos and civil war, although I know that that is what some hon. Members want.
  What would be the result of economic sanctions? In Africa, the South Africans would return about 1 million blacks to Lesotho, Zambia and Zimbabwe, among others, which would immediately destroy their economies. For the rest of the world, some countries would gain. Those that sell gold and coal would gain by having no competition from South Africa. The USSR would gain a great deal because she would then have a monopoly of supply of chrome, manganese and various other strategic minerals. For the United Kingdom, the effects of sanctions have already been outlined. They would involve 120,000 jobs, £12 billion worth of investment, £1 million worth of exports would be at risk and—perhaps most important, as the Opposition always seem to want to increase coloured immigration to Britain — 800,000 poverty-stricken whites might come to Britain. I wonder how the Opposition Front Bench would react to that.
  More sanctions would mean less freedom of action for the South African Government. They would mean a continuing move to the extreme Right. They would mean the laager and civil war. I do not believe that, in the short term at least, the blacks would win that civil war.
  I entirely disagree with my hon. Friend the Member for Macclesfield (Mr. Winterton) about the Commonwealth. I believe that it is important. I also believe, however, that the Eminent Persons Group has made a rather one-sided report. It has not dwelt enough on ANC violence. I think back to how the Monckton commission report started the destruction of the Central African Federation and wonder whether this will he a similar story.
  I do not know whether hon. Members listened to the BBC at lunchtime, but if they did, they will have heard Colin Eglin, who is the Leader of the Opposition in the South African Parliament, coming out strongly against economic sanctions and what he calls coercive action from outside. He rightly said that the problems must be solved in South Africa.
  In Britain, the far Left seems always to side with the extremists, in this case with the ANC. I agree that there must be talks with the ANC, but I wonder whether it can now control the wild young men of the townships. Perhaps that time has passed. I am all for the release of Nelson Mandela, who has now said that he will agree to end violence. According to the Eminent Persons Group, the ANC has agreed to eschew violence. I wonder, however, whether the time has gone when even the ANC can lead the black people of South Africa.
  Mr. Allan Rogers: What is the answer then?
  Sir Patrick Wall: I am just coming to that. We should give much more credence to Chief Buthelezi. I believe that
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  his scheme of amalgamating K wa Zulu and Natal should be a good pattern for the future of South Africa. What is more, I believe that it is possible, as Natal is mainly English speaking. We should also remember that the Zulus are the most powerful tribe in. South Africa, especially if it comes to a fight, as many past generations in Britain discovered.
  My right hon. Friend the Prime Minister is entirely right when she says that if pressure is to be exerted—and there may be a case for pressure, not for economic sanctions — it should be positive and have limited objectives. It took us 15 years to get off the hook of Rhodesian sanctions. We do not want the same pattern to apply to South Africa. Effective economic sanctions, which is what the Opposition want, would mean revolution. That is what some people on the Left—not necessarily in this House but in the country—would like to see. We, on the other hand, want evolution, although not necessarily through a European-style democracy, which has not worked in Africa. That is why I referred to one man, one vote. The House knows the phrase so well, but throughout Africa there has been one man, one vote only once.
  The answer probably lies in President Botha's original concept of a kaleidoscope of states. Unfortunately, he seems to have moved away from that concept, presumably because he has been pushed by his Right wing. I visualise the future of southern Africa as a confederation of small states: some white-led, some coloured-led, some black-led. Some of them will perhaps be led by people of mixed race, and others may be multiracial. A kaleidoscope of small states in a confederation could overcome the difficulties that face southern Africa today. I do not believe that the whites will transfer power to the blacks without the bloodshed that has been mentioned already in this House. It is only right for us to do all that we can to try to encourage, by all possible means, a peaceful solution to this racial problem, which is probably the most difficult problem that our world has ever faced.
  6.22 pm
  Mr. Richard Caborn: On 25 and 26 June 1955, just outside Johannesburg, 2,888 delegates gathered from all parts of Africa. After that two-day congress, what is now commonly known as the "freedom charter" was adopted. It is referred to in the report of the Commonwealth Eminent Persons Group. I wish to put on record the preamble to the charter, as many things have been said this afternoon about the African National Congress. The charter said:
  "We, the people of South Africa, declare for all our country and the world to know: that South Africa belongs to all who live in it, black and white, and that no government can justly claim authority unless it is based on the will of all the people; that our people have been robbed of their birthright to land, liberty and peace by a form of government founded on injustice and inequality; that our country will never be prosperous or free until all our people live in brotherhood, enjoying equal rights and opportunities, that only a democratic state, based on the will of all the people, can secure to all their birthright without distinction of colour, race, sex or belief; And therefore, we the people of South Africa, black and white together—equals, countrymen and brothers — adopt this Freedom Charter. And we pledge ourselves to strive together, sparing neither strength nor courage until the democratic changes set out here have been won."
  I recommed Conservative Members to read the full charter. It lays down in simple terms a system that operates

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  in the United Kingdom, a system for which the House of Commons has stood for centuries, and that operates throughout the Western world. I refer those hon. Members who are highly critical of the African National Congress to that document, because the ANC sponsored the 1955 Congress. The charter was adopted after more than half a century of trying to obtain freedom through dialogue, discussion and consultation. The Government of South Africa had been asked to meet the wishes of the people and the international community had been asked for assistance in getting round the negotiating table with the Government of South Africa. The people of South Africa wanted a peaceful transition. For more than 300 years they had been confronted with racialism, and for decades since the nationalists came to power racialism had formed part of the constitution. That racialism—apartheid—is based upon more than 300 laws. South Africa is the only country that has enshrined in its constitution laws that segregate people because of the colour of their skin.
  After the 1955 charter had been signed, 156 people were arrested on treason charges. Those charges were based upon their support for the charter. However, they were asking only for fundamental and basic freedoms. For four years the South African courts heard the cases of those 156 people. All of them were found not guilty.
  At the same time, the African National Congress and other organisations that were fighting for peaceful change were banned and pushed underground. In 1960 there was Sharpeville, although that was no more and no less than the ANC and other organisations in South Africa asking for a dialogue and for the right to put their case, resulting in a peaceful transition to black majority rule. However, 69 blacks were shot in Sharpeville.
  For how long can we expect people to suffer the indignation of apartheid? More than 300 laws upholding apartheid are enshrined in the South African constitution, and 85 per cent. of the population hold only about 15 per cent. of the land. The reverse of that is that only 15 per cent. of the population — whites—own the majority of the land. The fact is that 3·5 million people have been lifted out of their homelands and displaced by the authorities. There are over 3,000 doctors for every group of 1 million white people, whereas for the same number of black people there only about 11 doctors. The average income for white people is four times greater than that for the blacks, and spending on education is seven times higher for the whites than it is for the blacks.
  After 15 years of trying to bring about peaceful change in South Africa is it any wonder that the African National Congress was left with no alternative but violence? There was no alternative because countries throughout the world did not hear the cry of South Africa. The international community did not respond to that cry, even after the publication of the freedom charter and even after the ANC's case had been placed fully before the international community.
  In 1960, therefore, the ANC took its decision to turn to the gun. However, it was made clear in 1960 that this would mean acts of sabotage, not acts against the person. My right hon. Friend the Member for Leeds, East (Mr. Healey) said that the report of the Commonwealth Eminent Persons Group shows clearly that only about 20 people have been killed in South Africa by the ANC. It is
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  deplorable to hear Conservative Members referring to members of the ANC as terrorists. It is Conservative Members who are destructive.
  I draw an analogy with the people in my city who fought Fascism in the second world war. I was taught at school about the resistance movement in France, Germany and Holland. I was a member of the European Parliament and sat side by side with many people who fought in the resistance movement. They were fighting Fascism, the kind of Fascism that has been clearly indicated in the report of the Commonwealth Eminent Persons Group. That type of regime exists today in South Africa.
  On that analysis and parallel, these people are not terrorists. They should be put alongside the freedom fighters who fought in France against Nazi Germany in the second world war. They are the same type of people.
  It is inevitable that pressure has continued to grow on South Africa. A state of emergency has recently been applied in South Africa because of the 10th anniversary of Soweto. Let us consider what happened then. Some 15,000 schoolchildren were objecting to being taught Afrikaans. I have already said there is a ratio of 7:1 in the way that resources for education are divided between the whites and the blacks. The young blacks decided that it was better to be taught in English and that the limited resources that they got should be employed in giving them the skills and basic education that they needed than to be taught Afrikaans. They then had a demonstration in Soweto on 16 June 1976. The police opened fire on those 15,000 schoolchildren, and, in the weeks after that event, nearly 1,000 blacks were killed on the streets of South Africa because those children had decided, despite opposition from the boards of the schools and teachers, that they should be taught in English.
  The Foreign Secretary told the House, and Conservative Members have repeated, that the system of apartheid is being changed and that the President is making concessions. I refer to two paragraphs in the report of the Eminent Persons Group that demolish the Foreign Secretary's arguments. Paragraphs 50 and 51 read:
  "Indeed, the State President has specifically ruled out 'the principle of one man one vote in a unitary system.' …
  The concept of white domination — of power-sharing without losing white control—is enshrined in the present Tricameral Constitution in which whites, coloureds, and Indians are given their own parliamentary chambers, with some power over their 'own affairs'. Not so blacks, responsibility for whose 'own affairs' is vested in the State President."
  To tell the House that the Botha regime is prepared to start conceding is nothing less than misleading the House. The ANC and many other organisations asked for a boycott of the tricameral elections and received much effective support. That shows that the blacks and the coloureds were not prepared to accept the further departmentalisation written into the constitution by participating in such an election. The fundamental point about South Africa is not about messing around at the edges, or the cosmetics, but about whether there will be universal suffrage. [Interruption.] We know the rubbish talked by Members of the Conservative party. The realities will come through. The hon. Member for Macclesfield (Mr. Winterton) can make all the noise that he wants—
  Mr. Nicholas Winterton: It was not me.
  Mr. Caborn: The hon. Gentleman has been making a noise all afternoon. I have no doubt that his constituents will hear him.
  The Foreign Secretary said—in this he was supported by the Prime Minister — that if we apply economic sanctions we shall lose 120,000 jobs in the United Kingdom. The United Kingdom South Africa Trade Association is saying that it will cost 250,000 jobs. The then Minister with responsibility for southern Africa, the right hon. and learned Member for Edinburgh, Pentlands (Mr. Rifkind) said that there will be about 50,000 job losses. The United Kingdom South Africa Trade Association brought out a report in 1979 and again in 1982 that would not pass O-level economics. That was shown in the way in which it did its calculations and arrived at its total of 250.000 jobs.
  Two reports on this subject have come out, one from Bailey and Rivers and one from Rogers and Bolton. The former report was based on the Treasury model of the British economy and concerned a loss of export equivalents. That showed that if full economic sanctions were applied immediately —which is most unlikely —there would be a loss of about 20,000 jobs in the first year, which would taper off. The Rogers and Bolton report was slightly more sophisticated and said that in the first year, again on the scenario of immediate sanctions, there would be a loss of 13,000 to 14,000 jobs. However, that does not consider what jobs would be created if the investment of companies which previously invested in South Africa were to be invested in the United Kingdom. Nor did it take into account the point made by a number of my right hon. and hon. Friends of what will happen after the apartheid regime is removed and how relationships will change not only with the people in South Africa but with the front-line states.
  How the Conservative party can support a Government such as this I do not know. Only today I had a telephone call from the Sheffield branch of Oxfam, which is an active organisation. It said that yesterday somebody working under the auspices of the Council of Churches, to which it had given money to try to develop some harmony in Crossroads, had been picked up off the street and held in detention. This man has never carried arms and was merely trying to help.
  How the Conservative party can support a Government who are illegally occupying Namibia against United Nations resolution 435, have bombed three Commonwealth countries and perpetrate acts of terrorism on their neighbours, I do not know. People can read the history and judge, as the Eminent Persons Group has. By the criteria of humanity, basic democratic needs and the rights of people within a country to determine their own destiny, the only course is to support the Opposition motion.
  6.38 pm
  Mr. Julian Amery: I was interested in the parallel that the hon. Member for Sheffield, Central (Mr. Caborn) drew with the resistance fighters during the war. I shall return to that later. First, I should declare an interest. I have been associated over a number of years with the Anglo American Corporation of South Africa and that association has given me the opportunity to explore the country in considerable depth and to meet people of all races.
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  I think that we are all agreed that apartheid in uniquely abhorrent. This is not because it is uniquely oppressive. It is not as oppressive as a great many other regimes. The right hon. Member for Leeds, East (Mr. Healey) said that he thought that it had become as oppressive as the countries in the Soviet bloc. I understand from the newspapers that he is going to South Africa on Monday. I do not think that such a visit would be allowed to many Soviet bloc countries in a crisis. any more than a visit from Mr. Waite, the Archbishop of Canterbury's representative. Nor is it uniquely a minority Government.
  I agree with the hon. Member for Sheffield, Central that South Africa is the only developed country of which I can think whose regime is based on racial discrimination' enshrined not in custom or convention, but in law. That is what we find unacceptable and difficult to swallow. When we talk about dismantling apartheid, surely what we mean, in logic, is the repeal of the laws which discriminate against sections of the community—the majority of the community, as it happens—on grounds of race.
  I think that we would be on common ground in saying that most of the pillars of both petty and grand apartheid have been dismantled over the past five or six years. More dismantling has taken place in the past 18 months. Two pillars remain—the Group Areas Act and the exclusion of the black population from the political process at national level.
  The group areas have been substantially eroded in the big cities. The local authorities have turned a blind eye to the movement of more prosperous non-whites—Indians, coloureds and blacks—into some of the surburbs. It will not need much of a push to get the Government to accept that that process should continue, subject always to good provisions of town planning to prevent shanty towns being built up around the big cities.
  As far as the inclusion of blacks into the political process is concerned, the President has proclaimed publicly what he seeks to do. He has said that there will be a national council, and that he will discuss with representative blacks how it should be brought about.
  I had hoped, when the Eminent Persons Group visited South Africa, that it would have assessed the prospects of dismantling those last two pillars which, if dismantled. would mean the end of apartheid in the strict sense of a regime that discriminated, in law, against sections of the population.
  Because I hoped that that would be the case—and here I must say that I had some encouragement from my right hon. Friends—I urged the President to co-operate with the eminent persons and to give them all the facilities they required. Having read the report, I regret that I did so. I cannot endorse the view of my right hon. and learned Friend the Foreign Secretary that we should be grateful to the eminent persons. I shall say what I think about their report in a few minutes.
  The eminent persons agreed that there have been substantial reforms, but they condemned what they called the
  "quest for power sharing without surrendering overall white control."
  That is a rather surprising statement. When the British aristocracy accepted the Reform Act 1832, it did not agree to a transfer of power. It agreed to the association of the rising middle classes with itself. That was also the case with

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  the later reform Bills. Had we accepted the Chartist proposals, I doubt whether Britain would be a democracy today.
  I think that the eminent persons stretch beyond logic when they say that dismantling apartheid means a transfer of power and a social and economic revolution. I am not saying that a transfer of power is wrong or that a social or economic revolution is wrong, but it is not what dismantling apartheid means. Dismantling apartheid means repealing the laws which entrench white supremacy by law. Once those laws are gone it becomes a state, such as many others with which we do business, where minorities dominate, as they do in the Soviet bloc and in many military dictatorships in other Third-world countries.
  The eminent persons claim that they should not dictate South Africa's future. No one who has read the EPG's report can possibly doubt that it regards the African National Congress as the natural successor to the present regime. The extent of the emotional commitment to the ANC goes beyond anything I have read in any state paper. In the report Mr. Mandela is canonised and Mr. Tambo is beatified. Nothing too praiseworthy can be said about him. No one else receives such encouragement. Chief Buthelezi gets a mention. None of the other homeland chiefs are treated with any regard at all. The Ministers in the regime are regarded as, at best, machiavellian demons and, at worst, devils incarnate. It is an odd way to approach the problem. The commitment to the ANC is underlined by the negotiating conditions which the eminent persons proposed to the South African Government.
  Mr. Simon Hughes rose—
  Mr. Amery: I wish to develop the point.
  The eminent persons' second condition was that the South African Government should withdraw the police and the army from the townships while negotiations took place—the hon. Member for Foyle (Mr. Hume) may think that is a good idea — and that the townships should become no-go areas. Some of the townships might, during the negotiations, come under ANC control. I cannot imagine any Government in their right senses accepting such a condition.
  I think that the eminent persons felt that on that point they were on weak ground. Instead of the eminent persons arguing that the dismantling of apartheid involved a transfer of power, they went on to a new line of argument. They warned that there would be a blood-bath unless the transfer of power took place. They tried to make British flesh creep by suggesting that unless we helped the process of the transfer of power, our interests would be seriously damaged. Mr. Malcolm Fraser developed the idea at a press conference in the United Kingdom.
  I think that the eminent persons may have exaggerated the effectiveness of the ANC. It is perfectly true that there have been casualties, but nothing like the Lebanese, Ugandan, Sri Lankan and, as far as I can make out, the Punjab casualties. I would not underrate the danger that there could be further casualties in future, but I think that the eminent persons failed to understand the basic position in South Africa.
  Over the past 15 years, a generation of black middle class intelligentsia has arisen. Some are lawyers, doctors,
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  journalists, teachers, churchmen, shopkeepers, and business men. In the homelands, some are Ministers and Government officials. Others are skilled workmen and trade union leaders. Some are radicals and sympathise with the ANC and other radical movements. Many—although they are by no means supporters of Mr. Botha's Government—have no love for the ANC and no desire to see repeated in South Africa the kind of semi-Communist experiment that has taken place in Mozambique and Angola, or even the Socialist experiment still in the making in Zimbabwe.
  Both the radical and the moderate blacks know that the whites must do a deal with the blacks. The question is, which blacks? Attachment to private enterprise, tribal structures—we have seen in Matabeleland how strong the tribal influence still is — and anti-communism, inculcated by the Churches, favours co-operation between the moderate blacks and the whites. It would be foolish to brush aside the moderate blacks. Chief Buthelezi probably commands the allegiance of some 6 million Zulus. His Inkatha organisation has bashed the ANC hard in some townships. The Church of Zion, which claims 2·5 million supporters, gave President Botha a tremendous welcome at Easter last year. Bishop Mokoena, who has visited Britain, claims the support of more than 4·5 million. Add up numbers and jot them down, and one will find that more than 10 million blacks are already in the, I would not say Botha camp, but anti-ANC camp.
  The real confrontation is between not black and white, but between radical and moderate blacks. That is why I am interested in the analogy drawn by the hon. Member for Sheffield, Central—I am sorry that he is not present—with the resistance movement during the war. Those who have studied the movements—I lived through them—saw that, as the end of German domination became clear, they began to fight each other, even before the Germans had gone, to see who would be in charge. That is what is happening in South Africa. I would not underrate for a moment the radical forces of the ANC or the moderates. I believe that the white-moderates combination, if it comes off, is more likely to prevail than the radical revolution, and it is in our interests that it should. It is anti-Communist and pro-private enterprise. It would be, on the whole, more favourable to our way of thinking. I think that it will develop if South Africa is left to itself.
  The real danger of the report of the Eminent Persons Group—tendentious, one-sided and emotional as it is—is that it will discourage the moderates and the whites from doing a deal. The moderates will feel that the outside world is going towards the ANC and will ask whether they should go with the tide. The whites will feel that they must batten down the hatches. That is why I deprecate the report and the tone of much of what has been said in the House today.
  I urge my right hon. Friend the Prime Minister to stand absolutely firm against economic sanctions. A great deal of progress has been made in South Africa, especially in the past 18 months. More is in the pipeline and more could be obtained by quiet diplomacy. I see no justification for punitive measures. Indeed, if progress is made on the Group Areas Act and on bringing the blacks into the political process, I think that that would justify lifting existing sanctions on oil and arms.
  Mr. Rogers rose—
  Mr. Amery: I urge my right hon. Friend the Prime Minister to avoid what are called "measures". The setting up of the Eminent Persons Group was a measure, devised at the time to gain time. It has proved to be a Frankenstein monster. To yield any further and adopt measures to push the South African Government in the direction of the report of the Eminent Persons Group would be, in effect, to accept that the transfer of power to the ANC is our aim. It should not be our aim. Even to move towards it is to place ourselves on a slippery slope, and it will not be easy to find a sure foothold on which to draw a halt.
  Great national interests are at stake. Great national interests are at stake for the Americans and the Germans. I agree that strong emotions are engaged, but not just on one side. There are 2 million people of British descent, or almost, living in South Africa. On my best estimate, that means that 8 million or 10 million of their relatives are over here. To embark on an anti-South African policy—my right hon. and learned Friend the Foreign Secretary came close to it—would be to divide the nation and. I may add, my right hon. and learned Friend's own party.
  6.54 pm
  Mr. David Winnick: I do not believe that I would be doing the right hon. Member for Brighton, Pavilion (Mr. Amery) an injustice if I said that he has always associated himself with the South African Government's point of view. He wants some changes in South Africa, and I would not wish to deny him that, but he wants no fundamental change. I remember one of the few conversations I have had with the right hon. Gentleman outside the Chamber. 16 years ago, when he put forward a view very similar to the view he advanced today. I said to him that history would prove him wrong. We shall see whether he is right or I am.
  In the past 18 months, we have seen the increased determination of the black majority in South Africa to win their freedom. They have demonstrated that they are no longer willing to tolerate in silence a system of government that totally denies them any effective say in how their country is governed, simply because of the colour of their skin. It is an indictment of Western Governments, especially Britain and the United States, that so little has been done over the years to apply effective pressure to the South African authorities to change their ways.
  I must make one point clear about the Conservative party, because we should he perfectly frank in debate. My view, which I am sure is shared by my hon. Friends, is that that party has always been extremely reluctant to take any action against the apartheid regime. Of course, as we have seen today with the Foreign and Commonwealth Secretary and other Conservative Members, they always tell us how much they oppose apartheid. I have not forgotten that, within days of the Tories returning to office in 1970, they reversed the Labour Government's policy and allowed arms to be sold to South Africa. It is just as well that, since 1977, there has been a United Nations Security Council arms embargo binding all member states or, I am sure, the Government would have been in favour of selling arms to South Africa. One Conservative Member has already told us today that arms should be sold to South Africa.
  The Government constantly tell us that economic sanctions would be counter-productive and would only make the regime in South Africa more determined to resist change and be more self-reliant. If so, why are the South African Government so strenuously opposed to sanctions?
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  Why are their defenders and apologists in the House and elsewhere so determined to prevent sanctions being applied?
  It is interesting in this regard to read the letter of 24 April from the South African Foreign Minister to the two co-chairmen of the Eminent Persons Group. In that letter, which is in the report, the Foreign Minister expressed concern about what he called "punitive action" against South Africa. Clearly, the last thing that the South African Government want is action —sanctions or otherwise. Those who resist such measures are bound to be seen to be defending the South African regime.
  Mr. Fairbairn rose—
  Mr. David Maclean rose—
  Mr. Winnick: I apologise for not being able to give way. but time is short.
  The report of the Eminent Persons Group states that. South Africa consistently applies sanctions to its neighbours. That is certainly so, but obviously, as the report adds, the South African Government have no wish for the international community to follow suit against that regime.
  One thing is clear: whatever the limited and mainly cosmetic changes which have occurred in South Africa —I agree with the right hon. Member for Pavilion that. changes have occurred— they come about only because of pressure, both internal and external. If it had been left to the South African authorities no such changes would have occurred. Surely that explains why it is unlikely that the changes, which are so essential and which many Conservative Members and Ministers agree should be applied in South Africa, will come about unless effective measures are taken by the international community. The report of the Eminent Persons Group concludes that if the South African Government believe that they will always remain protected from economic measures, the process of change is unlikely to increase.
  The report also makes it clear that if the blacks believe that such international measures will not be applied by Britain or other Western countries they will come to the view that there is only one option left, that of increasing violence. I do not like some of the violence undertaken by the blacks in South Africa recently. I would not wish to defend or act as an apologist for such action in any way. However, if people are denied their legitimate rights and aspirations, see no possibility of change and are denied political and human rights and their representative organisations are outlawed, is it surprising that violence comes about? Is that not one of the most important lessons of history through the ages?
  We know how the leaders of the South African blacks have been imprisoned. Nelson Mandela has been in prison now for well over 20 years and his only real crime is that he was the representative of his people. Mandela is by no means the only one. The African National Congress, undoubtedly the main representative organisation of the blacks in South Africa, has been outlawed. Therefore, it is understandable that there is the view there that only violence will shift the South African authorities. If we want to change that view we must ensure that the Western community, in particular, is determined to take effective action against South Africa.
  I can understand the right hon. Member for Pavilion being disappointed by the report of the Eminent Persons

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  Group. I am sure that many people came to the view, when the group was appointed, that it would report in a very different way. I am pleased by the report. I think it is an honest report because the people concerned, some of whom have not been so much involved in South African matters over the years, saw for themselves what was happening and they came to their conclusion, which I endorse.
  In the past few days the repression in South Africa has got worse. When one sees what is happening in South Africa one can only come to the view that it is almost a police state. We know about the ban on reporting and the actions taken by South African authorities to hide the news, not only in South Africa but from the outside world. We know of all the measures of banning and arrest and of people being questioned for days on end and then being re-arrested and continuing in detention. That is an illustration of the determination of the South African authorities not to change their ways in any effective manner. It is an illustration of the way in which the South African authorities are telling the world that they will not be willing to undertake fundamental changes.
  The Labour party wants to declare its solidarity today with all those people in South Africa, black, coloured and white, who are opposed to the system of repression in their country, many of whom are in prison, We declare our solidarity because we believe that they are right and that they are victims of repression. For so long Ministers have been telling us that they are opposed to apartheid and they recognise that change is important. However, at the end of the day, a choice has to be made. It is a simple choice. Are the Government on the side of the oppressed or the oppressors? They cannot remain neutral. They cannot give the impression that they are against apartheid and, at the same time, do whatever they can to prevent international measures, such as sanctions, being applied against the regime.
  What has caused much understandable concern in this country is not only that the Government are opposed to effective measures being undertaken but they are trying their best to prevent other countries undertaking such measures. They are acting in a manner which can give only comfort to the apartheid regime. That is why we are so critical of the Government and the stand they have taken. It is Britain's misfortune that at this time we have a Government who refuse to take a lead over South Africa and are doing their best to deny effective measures against the regime.
  Last year, after the Commonwealth meeting, the Prime Minister boasted about how little had been done about sanctions. We all saw her on television as she mocked the limited action being undertaken. She made her position clear. Labour Members want to make their position clear in this debate. We are in favour of sanctions.
  In the past the House, perhaps after a long struggle, has always come out on the right side. My hon. Friend the Member for Monklands, West (Mr. Clarke) referred to the debate over 150 years ago about slavery. It would not be too difficult to imagine some hon. Members, if they had been present, who would have been arguing for slavery.
  Mr. Tony Banks: They probably still do.
  Mr. Winnick: That is probably so. Some years later the House declared itself on the side of the Government of the
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  United States against the South, which was defending slavery in that country. Nearly 50 years ago the House decided, at long last, that a stand had to be taken against a monstrous racist tyranny, which was intending to enslave all Europe. The right hon. Member for Pavilion knows much about that and he played a distinguished role in that war. I believe that the same is true today over South Africa. As I have already said, one can no longer be neutral. One is either on the side of oppression or the oppressed. The Labour party is on the side of the majority of people in South Africa who want their freedom and who are sick and tired of being denied their basic human rights and are determined to win their freedom. We are on their side and we are proud to be so.
  Mr. Speaker: I remind the House that at the beginning of the debate I said that because of pressure I would operate the 10-minute limit on speeches between 7 o'clock and 8.50 pm. We are now in that period.
  7.8 pm
  Mr. Alistair Burt: Three weeks ago my hon. Friend the Member for Southwark and Bermondsey (Mr. Hughes), my hon. Friend the Member for Burnley (Mr. Pike) and myself paid a visit to South Africa and Zimbabwe at the behest of Christian friends. We went not as a parliamentary delegation but as brothers in Christ. We would like our speeches to be seen together and in breach of a convention in the House, we will refer to each other as hon. Friends. I hope that Hansard will take note and will understand why we would prefer to refer to each other in that way.
  Each of us will describe a different part of the visit but we believe that together they form a rather different pattern and a different sort of trip from trips that the House has heard about for some time. Convinced as we are that our political activity is only one way in which the Lord wishes us to follow His will for the world, we went to see our friends in South Africa and learnt of their problems at first hand. It may embarrass others, but not us, to admit that mankind alone will not solve the world's problems. We proclaim that the love of Jesus Christ was never more necessary than it is in South Africa today.
  I address my first remarks to those we met and left behind. There is a large group of people in South Africa whom many have ignored. They are those of all races who are working patiently for simple fellowship and reconciliation in pure human terms by meeting each other and sharing their lives and experiences. It was largely with those people that we spent our time, and through their friends across the political spectrum that we had contact with their politics.
  Some of those with whom we stayed were white opponents of apartheid and had been so for decades, but all were people who realised that the abolition of the legislative structure of apartheid is almost secondary to the struggle to change hearts and minds. They should not be ignored, for if any group epitomises hope in South Africa, it is that group.
  When Michael Cassidy began the National Initiative for Reconciliation last September, he lit the fuse for people to come together and then spread such a message throughout the country. But with so many political imperatives facing us, why should this one be so important? The fear and suspicion that apartheid represents and that so polarises communities in South

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  Africa is built on the ignorance of one race for another. I do not say that from my own observations; eight days in South Africa would not give me the right. I simply repeat the comments that I heard there.
  The reason for that ignorance is simple but chilling. The tragedy of South Africa is not that apartheid has failed but that it has succeeded all too well. It has prevented the ordinary human contact between people which allows one to know another, to learn his point of view, to evolve beliefs and to resolve fear of the unknown. Such separation is at the root of the South African tragedy. So to those whom we left behind we must say, "God bless you and your work in Cape Town, Mitchells Plain, Crossroads, Soweto, Alexandra, Johannesburg, Durban and Ulundi. We saw it, we shared it, and we shall not forget your fellowship and kindness nor your excitement and hope for a new South Africa amidst all your worry."
  The task is how best to help South Africans to build a future for their country. I believe that it is self-evident that their political system is inadequate to meet the aspirations of those people. We should address ourselves to encouraging the process of reform which will allow all in South Africa to have a voice. The main political question is no longer apartheid but power. The question is not "whether change"? but "when". It is not good enough for the House to promote steps that will lead to change for the sake of change. We must look beyond, and not destroy the inheritance of South Africans even before it is claimed.
  Quick change, based on violence and not constitutional reform, would be a dangerous road to follow, but only as dangerous as not responding to the urgent demands for reform now.
  The experience of going to South Africa has changed my understanding of the situation, which is hardly surprising. All three parliamentarians revised their views whilst there, and I express my support for my two hon. Friends the Members for Southwark and Bermondsey and for Burnley, who may be saying slightly surprising things to their parties.
  Why should Conservative Members consider a change in policy? The first reason for considering a change is the urgency of the matter. I say that not just because the security situation is dire but because the polarisation of views within the black community and the white community, and therefore between them both, is increasing frighteningly quickly: hence the breakdown between generations in the townships, the anarchy and the frightening necklaces. That undermines the work of reconciliation. It is vital that such polarisation is arrested quickly, for it contains the seed of an African Lebanon. It calls for prompt action internally and begs the question of action externally.
  The second reason for considering a change in policy is that I must honestly report to my colleagues that, although our view on sanctions is understood intellectually by both blacks and whites in all sections of South African society, sometimes wholeheartedly and sometimes with reservations, there is genuine scepticism among black South Africans about whether we are doing all we can. Despite assurances of our position, that we oppose apartheid, seek the release of political prisoners, and support the unbanning of political groups, there is a feeling that that is not enough.
  I report that feeling objectively, but I stress to colleagues the respect in which Britain is held, the need for Britain to be a leading part of the international community
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  and the Commonwealth, and the crucial point that such a view of our position must not be lost. I firmly believe that the Government's position until now has been right. I suggest only that, in response to the EPG and other opinion, we should take note of the pace of change and of developments in South Africa.
  Between full economic sanctions, which I do not support, and the measures that we have already taken, which I do, there is a fair gap. Moving into that gap, in concert with others—for it must be so—in a limited way should now be an option for the Government to consider. But there is another side. I return firmly convinced that the people of South Africa need more support, not less, more encouragement and persuasion and less isolation. Any effective reform process must be fuelled from inside and not outside South Africa. That is where the pressure now comes from.
  The political imperatives for positive support must be obvious. Give those who are attempting reform nothing —and they include members of the white Government—give them no credit or support whatever, and what does one put in their hands with which to defeat the white Right wing? Even more obviously, we must put something in the hands of moderate black African leaders. They must have some fruits for their patience and non-violence —otherwise, why should their people follow them? I believe that the key to such positive action lies in identifying the priorities in South Africa for the development of black aspirations both outside and inside the political arena. The political agenda is already well developed, and I hope that I do not need to elaborate my support for a quick end to apartheid and for constitutional reform. But there is an urgent need for equality of health care, for improved housing and, above all, for education.
  Those are areas in which the international community can assist further, and in which this Government are already working. By identifying non-governmental agencies through which to act, some of the basic problems of poverty and ignorance, which fuel political instability throughout the world, could be tackled. That must be coupled with, and be in step with, internal political reform. I believe that that represents the best hope for the development of a sound future for all races in South Africa. I commend it to those who seek only the negative road of sanctions, for this is a positive way of showing support for the black community, and I believe that it would do us much credit.
  I shall develop just one of those points, that relating to education. The scale of the problem of education for black South Africans is immense. South Africa has huge rural areas, and townships where some blacks claim that there has not been effective black education for 10 years. Over generations the failure of black education has removed a generation of moderate, effective black African leaders who could, even now, join those who already exist to resist the radicals. Of course, educational reform is long-term. However, there is no time to lose. We might think seriously of supporting the calls to give black education back to the churches. That is how things were in the past, and it may ensure goodwill and success for the future.
  I turn finally to those who believe that the bulk of the trouble is caused by Communist agents among the black South African people. Let me tell them that, if a western democracy is to be created in South Africa, if capitalism is to survive there, and if we are to remain friends with the South Africa of the future, some of the things in which we

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  believe will have to work. One cannot lecture the black migrant worker who earns nothing and lives in a hostel in Alexandra about capitalism and tell him that it is good for him. One cannot lecture the disfranchised and tell them that Communist state control will take from them the wealth and power that they have never had. One cannot lecture those with no aspirations, or hope of advancement for themselves and their families in the present system, that something else will be worse, and genuinely expect to remain credible.
  If we are to secure a commitment to ideals that we hold dear in democratic, social and economic terms, all South Africans must have the benefit of them now, and we must make sure that they system works. That is the best and only way—not repression — of reassuring those who propose alternative political and economic systems. We should have the courage to support reform in South Africa, to join those working for reconciliation and fellowship there, and to show that we are on the side of those who say no to oppression, no to fear, no to injustice, and no to revenge. They include all good black, white, coloured and Indian people working with the spirit of God in South Africa—truly the South Africans of the future. We have seen them; give them a chance.
  7.18 pm
  Mr. John Hume: I intend to be brief, as there is nothing new to say about this subject. All hon. Members seem to agree—that is, if they mean what they say—that apartheid is an evil and inhumane system that should go. There seems to be general agreement about the remarks of the EPG that the South African situation threatens the worst bloodshed to be seen since the second world war. Consequently, I wish merely to ask what hon. Members would do if they were black South Africans faced by that situation. What would they do in a situation where the normal democratic rights and processes do not exist? They do not have a vote or access to any of the normal democratic institutions to deal with the assault on their fundamental human dignity, nor do they have the right of peaceful protest. They are banned when they try it; they are shot and gassed.
  In such circumstances is it not remarkable that there has not been a great deal more violence? Martin Luther King said of South African blacks 20 years ago that they had withstood abuse and persecution with a dignity and calmness of spirit seldom paralleled in human history. How much more is that tribute due to the South African blacks today? The right hon. Member for Brighton, Pavilion (Mr. Amery) listed many areas in which there had been massive violence and admitted that there had been a great deal less in South Africa. The question that Conservative Members have to ask themselves is, what would they do as blacks with no access to any peaceful method of redressing injustices?
  What are the blacks doing? Those who see that violence brings its own evils are asking us for something moderate. They are asking Britain to do less than it did when its territorial rights were threatened in a small dispute in the South Atlantic affecting only 1,800 people. Then the British Government asked for international sanctions, which they backed up with great physical force. The blacks in South Africa are not asking for that. They are asking simply for international sanctions to help them create
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  circumstances in which dialogue can begin between black and white about the creation of a non-racial democracy in South Africa. That is all they are asking.
  In Tokyo some weeks ago the leaders of the most powerful industrial nations met, rightly, to discuss the threat of international terrorism and to take action to deal with it. I say "rightly" because it is a serious problem, but it is in no way as serious as the problem which, in the eyes of eminent world statesmen appointed by the leaders of the Commonwealth, threatens violence and bloodshed on the scale of the second world war. Mr. Shultz, the American Secretary of State, walked out of that Tokyo meeting and said. "Gaddafi, pal, you have had it; you are isolated." What is wrong with the same leaders meeting again to discuss the serious situation in South Africa and with Mr. Shultz, or anyone else, saying, "Botha, pal, you have had it; you are isolated."? What is wrong with taking the necessary steps to ensure that he is isolated?
  7.23 pm
  Sir Peter Blaker: Like the hon. Member for Foyle (Mr. Hume) I recognise the horrors of the apartheid regime in South Africa. There has been virtually no disagreement in the House all day on that. The question is, how can we in this country help to change that regime? I want to make a vital distinction between general economic sanctions, which I do not favour, and particular measures about which I shall say more in a moment.
  President Kaunda was quoted as calling for sanctions to shorten the agony of the front-line states. That remark reminded me of a statement by Lord Wilson of Rievaulx, then Prime Minister of this country, at the Commonwealth Heads of Government conference in Lagos in 1966, when he said that it was likely that the rebellion in Rhodesia would be over in weeks rather than months. Yet it lasted for another 15 years. I do not think that the duration of the Rhodesian UDI gives much guidance about how long the problem may last in South Africa before apartheid is removed. If anything, the chances are that it is likely to last longer than the problem in Rhodesia. That is what makes me nervous about any suggestion of all-out economic sanctions.
  The ratio of the population in South Africa makes it more difficult for the blacks to achieve success. The ratio of black to white in South Africa is 5:1 against 22:1 in Rhodesia. The economy in South Africa is stronger and it is in the hands of the whites. There would be more incentive for outsiders to evade sanctions because the pickings of evasion would be richer and buccaneers from all over the world would be plunging in to take those pickings.
  It would be easier than in Rhodesia for people to evade the sanctions because South Africa has thousands of miles of coastline. Rhodesia did not have a coastline, although it had an opening to South Africa. To the north of South Africa there are front-line states that could not be expected to impose full economic sanctions because they are so totally dependent on commerce with South Africa. For example, 94 per cent. of Zimbabwe's trade goes through South Africa.
  Another factor that leads in the same direction is the history and nature of the Afrikaner. Very little has been said about that. The white population of Rhodesia was largely of British stock. We can be stubborn at times, but

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  I do not think our stubbornness is a patch on the stubbornness of the Afrikaner. Those who call for full economic sanctions fail to take that into account.
  The Afrikaners have been in South Africa since 1652. They believed from the beginning that they had a covenant with God to rule that country. That required them to be top race, and the black man, by God's ordinance, was inferior.
  Mr. Fairbairn: He was not there.
  Sir Peter Blaker: The Hottentots and others were there. The British arrived in South Africa only in 1805—many decades after the Afrikaners. The Afrikaners have only one passport. Unlike many people of British stock in South Africa, they do not have the option of going to another country.
  The right hon. Member for Clydesdale (Dame J. Hart) said that influencing the economy was the key to solving the problem. I think that she is wrong. Influencing attitudes is the key to solving the problem. If we think that influencing the economy is the key, we are deluding ourselves dangerously. Influencing the economy may indirectly influence people's attitudes, but it is the attiudes that we have to consider, and the stubbornness of the Afrikaner should not be underestimated. The road through general economic sanctions would probably be long, hard and bloody. Indeed, general economic sanctions might arrest the processes of change in South Africa, such as they are at present.
  I do not rule out more measures. Some are mentioned in the report of the Eminent Persons Group. My right hon. and learned Friend the Foreign Secretary spelt out some of the criteria that we should apply in considering measures. I agree with the criteria that he stated. We have to choose them carefully and make sure that they stiffen white resistance as little as possible. We have to make sure that they will do the minimum harm to the blacks. They must be applied internationally. It is no good if just a small group of countries applies measures.
  My next point echoes the remarks of my hon. Friend the Member for Bury, North (Mr. Burt) who made an excellent and constructive speech. Incidentally, I have not found much constructive content in the speeches of Opposition Members. We must try to remove the fear of the Afrikaners and the whites in general so far as we can. We should he looking for non-confrontational ways to encourage the South African Government to release Nelson Mandela. From what I have heard of Nelson Mandela, that would be a positive and helpful move to achieve a dialogue. Those who have met Mr. Mandela speak highly of his moderation and good sense. His involvement in a dialogue would be a key to progress.
  If there is to be a dialogue, there must be an agenda for dialogue. That is missing at present. It would be a mistake to imagine that we could impose an agenda. An obvious impression of interference from outside will not work. The agenda must be South African generated and there must be a South African solution. Many of those who call for drastic sanctions overlook the fact that the solution can only come from inside South Africa.
  We should be assisting those who believe in peaceful change. I agree with earlier comments that we should support Chief Gatsha Buthelezi. The experiment in Kwazulu-Natal and the indaba there is enormously interesting. Under that experiment, 30 organisations are
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  sitting down to thrash out how to achieve a common administration and a common assembly. As I understand it, the principle of a common administration has already been conceded by the Pretoria Government.
  I was very interested in the remarks of my hon. Friend the Member for Bury, North about help for African education. That idea is worth following up.
  Those who call for all-out economic sanctions may find that such a call makes them feel better —my right hon. and learned Friend the Member for Hendon, South (Mr. Thomas) made that point very well — but they will achieve very little else that is positive. Their policies might result in more bloodshed than is likely at present, and they certainly would not work for decades.
  7.31 pm
  Mrs. Ann Clwyd: It is 11 years since I visited South Africa and Kwazulu and witnessed some of the things described by Conservative Members, but which Opposition Members have described more accurately. I visited the Legislative Assembly in 1975, and black after black went to the microphone and declared that they were not afraid to die for their freedom. It is now 1986 and little has changed. If the blacks were saying that 11 years ago, what can they be saying now?
  Kwazulu was supposed to become one of the eight viable, independent states within South Africa, where the black man could enjoy separate development. An article in the Rand Daily Mail stated:
  "In practice, they will amount to little more than a chain of labour reservoirs to which white South Africa will send requisition orders for workers. There cannot be many who believe in the theory any more."
  The Zulus do not believe it and to suggest that they do is a totally inaccurate portrayal of their feelings.
  Having reluctantly agreed to implement the Government's policy of separate development, the Zulus are beginning to realise that the homelands policy is based on diverting the attention of the blacks away from clamouring for justice and equality in a common society.
  Speaker after speaker in 1975 argued that agreement must be reached soon on a fair share for all in the considerable economic wealth of South Africa; anomalies in land, development, education and opportunity, and the long list of inequalities and discrimination had to be ended. That was said 11 years ago.
  Many Conservative Members have quoted from Chief Buthelezi's speeches. I interviewed Chief Buthelezi 11 years ago while I was working as a journalist. He said:
  "We have been prepared to endure abuse in the hope that the Government's policy may he a road to real fulfilment for blacks. If this road is leading only to a cul-de-sac, then our only alternative is to seek fulfilment not in unreal separate freedoms, but in one South Africa and the only seat of power which is Parliament."
  It is obviously a false premise to suggest that Chief Buthelezi has adduced the argument that some Conservative Members have put forward.
  The speeches made in that assembly 11 years ago were very interesting. The guest of honour was the Minister for Bantu Administration and Education. Among his several platitudes was a remark which, taken in the context of South Africa's annual expenditure, completely gives the lie to Nationalist claims that their policy for the blacks is one not of separation, but of equality. He said:

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  "I think that we are all agreed that a properly educated and trained people is the most essential prerequisite for a developing country and can perhaps be regarded as the cornerstone of the infrastructure to be provided."
  A simple look at the Government's figures shows that they count defence and the maintenance of white privilege as their top priorities. In education, as some of my hon. Friends have said, the gap between the amount spent on whites and that on blacks has widened year by year. Six times as much is spent on white education as on black education.
  How long must the blacks wait? Does the House recall the "Give us six months" speech of Mr. Vorster in 1975? That certainly raised expectations, but little has happened.
  I address my next question to people who have not been to the homelands. How would they feel if they were black, living in the homelands and had to watch their children die from measles because they could not afford the vaccine to treat the measles? How would they feel if they were in hospital and the surgeon had to send the instruments 30 miles down the road to be sterilised? That is the reality of life in the homelands of South Africa. If anyone needs to confirm that evidence, they can speak to the Dutch doctors who are trying to provide medical services in some of the poor hospitals in the homelands.
  To see children dying from measles and other dseases, which could be treated, simply because they are black, lays the lie to any arguments that equality is being sought in South Africa, which is one of the richest countries in the world. By choosing the publication day of the Eminent Persons Group report to declare a state of emergency and to gag the media, the South African Government have destroyed their last vestige of credibility—if they ever had any.
  People have argued that there have been reforms. For the blacks, probably the most important reform since apartheid was first introduced has been the abolition of that document of repression—the pass—without which a black could not work in an urban area. Failure to produce that meant immediate arrest. Even its abolition has not give blacks a feeling of freedom, according to the Eminent Persons Group. The report stated:
  "The abolition of the 'pass'… has evoked at best scepticism, at worst indifference."
  The idea that black people are to have a new form of mobility and will be able to move into urban areas is clearly nonsense when the housing shortage is acute in all urban areas. The system will continue under which men and women are separated and prostitution is encouraged by the South African Government. Men are herded into hostels; the women are left to scratch a living in the nonviable homelands and to raise their children in great poverty. That is the reality of life in South Africa today.
  Surely, sanctions are the least and the most at the moment that the outside world can do to put pressure on South Africa. The Government's reluctance to make any credible suggestions today shows how deeply involved they are financially in propping up that abhorrent way of life in South Africa. The City of London and some Conservative Members have more than a passing interest in retaining the status quo. Otherwise, why not have a boycott on South African gold, which is so essential to its economy? That could be changed overnight—as soon as a policy that will do justice to the majority in that country is put into action.
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  Sanctions, even at this late stage in the history of South Africa, would represent an attempt to alter the course of history. Now is the time to stand up and be counted. The Government's feeble response to the tragedy that is now unfolding before our eyes in South Africa is an indictment of their refusal to face reality. I ask them tonight to change their mind on this issue, before they are indicted for more murders in South Africa.
  7.40 pm
  Mr. Ivor Stanbrook: The hard truth about South Africa is that the South African Government are determined to keep control of the country in the hands of the white community, come what may. We British, on our colonisation of Africa, never seriously pretended that we would be there permanently, because our ethos of government is and was democratic. We who worked in the African colonies know that we were working ourselves out of a job. We trained Africans to take over from us, and we taught them our values and our standards of government, many of which remain, despite outward appearances. We always believed in government by consent. That is why the empire developed into a Commonwealth.
  However, the South Africans of the National party, the majority of the Afrikaners, reckon that they are there to stay, as an alien minority. They have nowhere else to go. They intend to buttress their position. In order to do so, they evolved a theory of racial superiority, which gave them a spurious moral justification to disregard democracy. That theory, when applied at ground level, person to person, is inevitably cruel and offensive. The South African regime, in its determination to retain power at all costs, is as vile and wicked as anything that we can see in the contemporary world, despite the outward trappings of civilised society.
  I see no difficulty in supporting the Government's amendment. Indeed, I see no difficulty in supporting the Opposition's motion I would not vote against it. It is wrong for people to suggest that there is a split in the Conservative party or in the House as a whole. We are talking about the practical difficulties of securing fundamental change in South Africa, not about the principles of the matter.
  It is clear that the Government wish to see an end to apartheid and a fundamental change in the political control of South Africa. The question is what sort of change and how to achieve it. We must not allow ourselves to be regarded as being on the side of South Africa simply because we do not know what to do to change that control. We have to do something, both as a moral duty in dissociating ourselves from what is going on there, and because, like it or not, inaction will surely bring greater disasters both for South Africa and for supposed friends such as ourselves.
  We do not want to bring about changes by destroying the South African economy, nor do we want to take measures ourselves that will not be effective and supported by all the countries that matter. But action—real action — of some sort there has to be. Our need to defend South Africa's right to pursue its own domestic policies without outside interference, taking into account our investments there and its strategic position, has been like a millstone around our neck. If we do not cast it aside and insist on significant and fundamental changes, it will be our interests in Africa that will perish.
  7.45 pm
  Mr. Allan Rogers: It is a pleasure to follow the hon. Member for Orpington (Mr. Stanbrook), and particularly the hon. Member for Bury, North (Mr. Burt). I share his Christian faith, but, alas, I lack his strength to carry it out with the same commitment. I see the hon. Member for Luton, North (Mr. Carlisle) smiling again at the expression of someone's Christian faith, in the same way as he did when his hon. Friend was speaking. I do not know why he should be embarrassed by Christ. Many people in the world are not.
  More so than any other hon. Member who spoke, the hon. Member for Bury, North reached the essence of the argument. Stripping away the economic, political and social arguments that can be put up, at the end of the day the debate is essentially about morals, as the hon. Member for Orpington said. Those two hon. Members should bear in mind the attitude of many of their hon. Friends. As has been said by my hon. Friends, the Tory party is a friend of apartheid. It is strange that Conservative Members preface all their remarks by saying, "We do not like apartheid. We deplore apartheid, but … We do not like it, but …"
  The Tories think that the National party rule in South Africa is very good, and that President Botha should be given the benefit of the doubt. They welcomed him to Britain in 1984. They now welcome his reforms, calling them positive measures and denying that they are irrelevant. But only two out of the 317 apartheid laws have been removed, and Botha has made it clear that he is opposed to any removal of white minority rule.
  The opposition of Tory Members of Parliament and the Tory party to apartheid is half-hearted for a particular reason. At least 34 Conservative Members have declared directorships and interests in companies with assets in South Africa. At least six Tory Members of Parliament have been on South African Government-sponsored visits since 1983. Indeed, with the hon. Members for Macclesfield (Mr. Winterton) and for Luton, North, we wonder whether they represent South Africa in this country as their paid lackeys.
  The Liberals make tine remarks about apartheid, but they still have their sister party in South Africa — the white-led Progressive Federal party, which supports the notorious federal solution. The Social Democratic party talks of a confederal solution in southern Africa, but its economics adviser, the hon. Member for Stockton, South (Mr. Wrigglesworth), is a paid adviser of Barclays Bank, a key bank in South Africa.
  The arguments against apartheid have been made on many of the levels that I mentioned at the beginning of my speech. but I should like to look at the role of Wales and the relationship of Welshmen to South Africa. I am not pleased to say it, but some of that relationship has been grossly shameful. It does not apply to all Welsh people. It is long ago that Dai Francis, the general secretary of the National Union of Mineworkers, with Glyn Simon, Archibishop of Wales, held a vigil on the night when Nelson Mandela was sent to prison. He has since been incacerated for an obscene number of years. Many good Welsh people have struggled continually over the years in the fight for the anti-apartheid movement. But not all of them. To personal and national shame, many people have
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  sought to forge cultural and sporting links with South Africa, giving succour and credence to the anti-Christian regime there.
  On Friday 11 February 1983 The Guardian published an article entitled "How South African money is made to talk in Britain." I am sorry that the right hon. Member for Brigton, Pavilion (Mr. Amery) has now left the Chamber because I wanted to ask him to explain his role as a council member of the Foreign Affairs Research Institute, which is a Right-wing publishing house and lobbying group with which the hon. Members for Luton, North and for Macclesfield and the noble Lord Chalfont are associated. The institute is funded by South African secret service money. The South African secret service also funds the Freedom of Sport Association, of which the noble Lord Chalfont is president.
  Mr. John Carlisle: Rubbish.
  Mr. Rogers: The hon. Gentleman knows that what I have said is so. He knows the truth.
  When Lord Chalfont was challenged as he got off the plane at London airport on his return from South Africa, he said, with a convenient lapse of memory, when he was asked who had paid for his ticket, "I have forgotten," or, "I do not know." One cannot imagine someone making a visit to South Africa and then not knowing who had paid for his ticket.
  The record of people, as outlined in many publications during recent years, is shameful in their connection with the filthy money that is given out by the South African secret service.
  Mr. John Carlisle: On a point of order, Mr. Deputy Speaker. I seek your advice on whether it is in order for an hon. Member to cast aspersions on Members of this House and another place with an accusation that we are in receipt of money from a South African source?
  Mr. Deputy Speaker (Mr. Harold Walker): Hon. Members should not cast doubt on the integrity and probity of Members of either Rouse. The hon. Member for Rhondda (Mr. Rogers) did not go quite that far, but I hope that he will bear in mind that, when the 10-minute rule applies, it is difficult for an hon. Member to seek redress by intervening.
  Mr. Rogers: It is indeed. That is why I went out of my way to mention the Foreign Affairs Research Institute and the Freedom of Sport Association and stated that those organisations receive their funding from the Bureau for State Security—BOSS—the South African Government and from the South African Rugby Board, which incidentally, got a quid pro quo grant from the South African Government equivalent to the amount of money that they gave to the Freedom of Sport Association.
  Those are the links between Britain and South Africa that are funded by that money. We know why those people are associated with those links. I wish that they would be honest about it. If they wish to advocate their views for whatever political reason, it is up to them; but it is not for them then to come to the House and say that they are against apartheid and that they do not support the regime in South Africa when they have bent all their efforts for many years to be apologists for South Africa in the same shameful way that the House many years ago had apologists for Hitler and the Fascist regimes that were developing in Europe.

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  Opposition members have no problem. We have laid down our markers. We are against apartheid and we wish to do something about it. That is the essential difference between the two sides of the House.
  7.53 pm
  Sir Ian Lloyd: It is extraordinary that the House should be subjected to such a corrosive flow of cynicism on the subject of South Africa. It is extraordinary that the view of the hon. Member for Rhondda (Mr. Rogers) should be that no hon. Member—this is the conclusion that I am compelled to draw — can ever adopt any view based on genuine personal conviction; there must always be some rather nasty association. The hon. Gentleman can wave papers at me but that does not dispute my point.
  It is important to note that the distinction that the hon. Gentleman and many like him fail to make about many Conservative Members is that we do not support apartheid. We do not support the South African Government, but we have a genuine interest in South Africa and all its people and we wish to see them improve their position, flourish and survive. That is an entirely genuine and legitimate aspiration for any hon. Member. Having that aspiration does not associate an hon. Member with any part of apartheid. That point must be made repeatedly.
  The right hon. Member for Plymouth, Devonport (Dr. David Owen), the leader of the SDP said that there was not enough moral indignation. I am sorry that he is not in his seat. It seems to me, listening to the debate this evening, that so great has been the flow of moral indignation on the subject, year after year, decade after decade, that it could be described as the longest running political show in town.
  Does it matter whether we show moral indignation at this time'? We are trying to do something effective; the word "effective" appears in both the motion and the amendments on the Order Paper. We should direct our attention to the word "effective". In that context I remind the hon. House of the warning given long ago by the great German poet Goethe who said:
  "Beware those in whom the urge to condemn is overpowering."
  We see a lot of hon. Members tonight in whom the urge to condemn is overpowering. I should like to see the urge to help, to analyse, to assist and to find solutions coming forth from the House rather than the urge to condemn.
  The wheel has turned full circle since we debated Rhodesia and sanctions on that country nearly 20 years ago. I shall not attempt to make any ritual condemnation of apartheid to make my purpose clear. My purpose is to define the objective and to examine, if time permits, the Eminent Persons Group report.
  It is not difficult to define what is needed in South Africa. We all want a stable, prosperous, self-confident society in South Africa, which enjoys self and international respect. No one would dispute that. What are the conditions of recovery? First, they are partly a constitutional process, which as several right hon. and hon. Members said, only the South Africans themselves can devise, so complex is their position. Let us never forget that. It is without doubt the most complex political system on the face of the earth today.
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  Secondly, we want to see equality of opportunity and treatment. How do we get there? We want to see an acceptable and defensible structure of power. How do we get there? We want to see an acceptable amalgam —again that is something which is unique to South Africa —of racial relationships and attitudes, which will be not offensive but acceptable. How do we get there?
  The problem is not so much to interpret the problems, each of which in itself is profoundly difficult, as to find the route to solving them. How do we get from the position in South Africa today to what will exist in perhaps three, five or ten years' time? I would be the first to concede that there is not much time left.
  The best definition that I have ever heard of racial prejudice is
  "false fears leading to real sorrows."
  South Africa has got beyond that. It has reached the point where those fears and sorrows have been fulfilled and extended. Real sorrows now lead to real fears and real fears to intransigence and intransigence to the entrenchment of prejudice, violence and destruction. That is the vicious circle that we must break. The political processes are increasingly frozen into immobility. The road back is difficult. The road back from any cauldron of hatred and suspicion—whether it be Beirut, Sri Lanka, the Punjab, Soweto, Uganda or even Ulster — is not known or signposted for political tourists, even those who go to those countries for visits of two or three weeks. There are no route maps. There is plenty of advice but few listen. We are deafened. They are deafened by the violence. The only criteria which the communities out there obey are the criteria of day-to-day survival.
  Will sanctions break the cycle? No, they will compound the difficulties. They will entrench the attitudes. They will justify the "I told you so's". They will postpone the solutions. The choice has never been better put than it was put in the House nearly 200 years ago by Burke. It is a choice between "change by insensible degree" and
  "the unfixing of old interests at once."
  Burke outlined the difficulties for us. Of the former, he said that it
  "has all the benefits which may be in change without any of the inconvenience of mutation".
  Of the latter, he said that it
  "is a thing which is apt to breed a sullen discontent. A gradual course … will prevent men under long oppression from being intoxicated with a large new draught of new power, which they always abuse with a licentious insolence".
  Burke was as correct then as he would be today.
  Anything that aggravates the political or economic discontent in South Africa or anywhere else will stimulate insolence and enlarge license. But my main objection is much more fundamental. Sanctions are an indiscriminate method of attacking a particular objective. They are totally indiscriminate and undiscriminating in their consequences. They could be described, although I would not seek to press the anology too far, as a form of political terrorism.
  What are we attacking? We are attacking a detestable political perversion, not unlike the psychopathic behaviour of an individual. But for the individual we identify the symptoms, we give treatment that is specific, we isolate if all else fails and we do not starve and assault the patient.
  Do sanctions differentiate between those who detest and those who support apartheid? Do they differentiate between those just born and those about to die? Do they

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  differentiate between those who have the power of decision and those who have no power of decision? Do they differentiate between those — there are such in South Africa —who love freedom and those who have nothing but contempt for it? Do they differentiate between the poor and the rich? Do they differentiate between those who understand our motives in this House and those who have nothing but contempt for them? Do they differentiate between those who value western opinion and those who hold it in contempt? Do they differentiate between those whose fathers and grandfathers died in Flanders and at Alamein and those who sympathise with Hitler? Do they differentiate between those who nurture and nourish racism and those who are ashamed and disturbed by any lapse of human dignity and courtesy, whether it occurs in South Africa or anywhere else? Do they differentiate between those who have devoted their lives to bettering the conditions of Africans everywhere in southern Africa and those who, for whatever reason, have done nothing? Do they differentiate between those who have £1 million in their bank accounts and those who have very little in their bank accounts? Finally, do they differentiate between those who wish to negotiate change and those who are intransigent about change?
  The answer, as the House well knows, to everyone of those questions is no. Sanctions do not differentiate. They are a blunt and ineffective weapon. I entirely support Her Majesty's Government in refusing to support sanctions.
  8.3 pm
  Mr. Simon Hughes: Until three weeks ago my justification for speaking in the debate would have been my theoretical and political opposition to apartheid. But, as the House has already heard, three weeks ago my hon. Friends the Members for Bury, North ( Mr. Burt) and for Burnley (Mr. Pike) and I went to southern Africa. All of us would now say, as the Foreign Secretary implied about his visit to South Africa, that that experience has probably changed our lives more profoundly than any other experience to date.
  To be in Crossroads a matter of a day or two after 20,000 to 30,000 people were made homeless from that squatter camp, where their homes had been only corrugated iron shacks; to be in Soweto talking to somebody who had survived necklacing, but only just, a matter of a few days before; and, on the other hand to be in Alexandra township in a church with people who are still prepared to keep faith and believe that it is possible for justice to be done; and to be with Christian politicians who are prepared to meet across political parties and colour boundaries to work for reconciliation, has left us all profoundly changed. We all share the words that the Eminent Persons Group used to begin the first chapter of its report:
  "None of us was prepared for the full reality of apartheid."
  That visit was a privilege. It was a privilege to be invited by Christians in southern Africa as Christians from Britain. We came back more than ever convinced that the future of South Africa is the most important moral, spiritual, political and international issue today.
  The United Kingdom has a uniquely important responsibility. As a former colonial power, as head of the Commonwealth in practical terms over the years, as a key European Community nation, as one of the seven economic Western powers and as the country with nearly 45 per cent. of direct and indirect investment in South
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  Africa, we have probably the key international responsibility. What is more, in South Africa we are perceived as having probably the key international responsibility. I say in all honesty, as my hon. Friend the Member for Bury, North said, that, whatever the words used by the Government and whatever their honesty, the other perception is that we are not committed to bringing about a change in time.
  The goal is obvious. The House has enunciated it often. It is to dismantle apartheid. It is to achieve a just society. It is to bring about a prosperous non-racial South Africa. What are the realities? The realities are that there is a third world country for the black peoples of southern Africa and a first world country for the whites; that the inequalities are enormous; that the economic situation is declining with rising unemployment, a worsening financial situation and companies increasingly pulling out; and that the Government regime is on the defensive.
  The Government have wanted reform but they have not yet committed themselves to the dismantling of apartheid. Reform, as the Eminent Persons Group has clearly said, is all that the Government are willing to support so far. Many are people who have prejudice and fears. Sonic have accepted the need for fundamental change. Many have moved out of their laager, which has been taken by the extreme Right. Many know that they cannot go back, but do not yet have the courage to go forward. They probably have all sorts of inhibitions about doing so.
  There has been superficial desegregation. Some legislation has been repealed, but, as hon. Members have said, the two pillars of apartheid—the lack of political equality and the Group Areas and Registrations Act which underpin apartheid—are still there. Increasingly, in the white, Indian and coloured communities people are desperate for the Government to move in South Africa. But in the black communities there is a far more severe problem. Increasingly large numbers — thousands, probably millions, particularly of the younger peoples in townships—of black youngsters are losing patience and many are taking the law into their own hands because they have concluded that white capitalist Christianity has not shown them any solution.
  Mr. Terry Dicks: How does the hon. Gentleman know that?
  Mr. Hughes: I know that because they have told us and because we have seen that. It is because it is not in anybody's interests that that should continue that my right hon. Friends the Members for Bury, North and for Burnley and I, as three politicians from different parties, have a duty to say that to the House today. The black archdeacon whom we met in Johannesburg said:
  "You Europeans came here and preached your faith and European culture on the basis of Christian equality and then you rejected us as equals."
  What can people feel like after that? That leads to violence.
  South Africa will never be able to accommodate all people. There will always be extremists who will not be willing to accept any solution, but we must push them to the margins to reduce their numbers and we must not overplay the Right-wing backlash. Only 15,000 people turned up at a rally at which 60,000 were expected on republic day at the Voortrekker monument at the end of May. But many more people are willing to become extreme in the townships, and that is something that the international community cannot allow to continue.

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  What action can we take that would be in the interests of all the people of South Africa? Action is taking place internally and political pressure is mounting to end apartheid and to see the beginning of economic, social and political justice. We should judge other action by its effect on South Africa and on Africa and only then on the United Kingdom and the West. Events in South Africa are leading towards bloodshed and death and are reducing the prosperity of Africa as a whole. Events are alienating the United Kingdom from a future black South Africa and from the greater continent, and are leading to alienation of the West, which will prevent us from playing any key role in the future of that black continent.
  How may we judge which action is effective? The test, as people have begun to enunciate, is what brings about a change of attitudes in South Africa. We may have differences of view, and so do people in South Africa. Increasingly, however, more people, black and white, are saying that economic sanctions are now the only course to follow. That is the only peaceful way of filling the vacuum between diplomatic sanctions, which are too meagre, and the military option, which is too severe. The South African Government know the effectiveness of sanctions as they periodically use them against their neighbours. Sanctions have proved effective on them.
  It may not be in our short-term interests, but it will be in our mid and long-term interests to use sanctions, and we must base our decision on that and not on the interests of tomorrow or next week. The issues are not simple, but pressure has to include economic pressure on South Africa. If the House did not believe that before, it should believe it now after the Eminent Persons Group has made that very clear.
  My party's policy on this issue has been clear for many years. In 1959 the Liberal party called for a national boycott of South African goods in Britain. In the same year, we condemned the Conservative Government for voting against a motion condemning apartheid at the General Assembly of the United Nations. In 1969 we called on the Labour Government to stop the South African cricket tour that was to take place in 1970. In 1974 we attacked the Labour Government for carrying out naval exercises with the South African navy, and in 1977 we called upon the Labour Government to implement effective economic sanctions against South Africa. People in South Africa have heard about those policies and they complimented me on the position which the Liberal party has been taking for many years.
  As an example of bringing about reconciliation we ought to look at Zimbabwe. It has a non-racial society. It does not have a Westminster-style democracy but people are beginning successfully to live together. [HON. MEMBERS: "Zimbabwe is a tyranny."] No, it is not a tyranny. Black and white people believe that Zimbabwe can have a prosperous future, and I share that belief.
  My party says that now is the time to tighten the screws on South Africa. The matter is urgent because we do not have much time. As a British newspaper recently commented, Britain has reached a watershed in its policies on South Africa. I know that, traditionally, the advice to the Foreign Secretary by the Foreign and Commonwealth Office has been that sanctions are not very effective, but
  976
  increasingly the advice he is now getting is that they must be used and that we must take the initiative in those international organisations of which we are members.
  We must not be seduced by arguments about constructive engagement. Lord Barber, of the Standard Chartered Bank Ltd., a former Conservative Chancellor, says that we must now take effective economic measures. Lord Barber is the Foreign Secretary's former Cabinet colleague and friend. The Foreign Secretary should listen to him and give our Government credibility. Our constituents require that we now begin to move. The timetable is urgent and a window of opportunity is still open. We must take that opportunity on behalf of all the citizens of South Africa. In large part, their hopes rest with this House.
  8.15 pm
  Mr. Robert Jackson: I should like to start with a comment on some of the Opposition speeches. When they reflect on this debate tomorrow some of them will, or should, regret many of the things that they have said and especially the tone in which they were said.
  Let me declare a personal interest because I was born in South Africa. My father's family emigrated there in the 1840s to farm sheep in the Karoo and many of them are still farming there in that strange arid landscape. I was educated in South Africa and came to Britain for the first time at the age of 18. I go back to South Africa frequently and I have a deep concern for the future of that beautiful, complex, and tragic land. It is against that background that I support further sanctions, not as an expression of moral outrage—because it is far too late in the day for that in Anglo-South African relations — but as an instrument of diplomacy: if I may use the expression, I support them in the spirit of continuing constructive engagement.
  This diplomacy should be aimed in two directions: first at the internal situation in South Africa, and, second, at the shaping of international policy towards South Africa.
  The right hon. Member for Plymouth, Devonport (Dr. Owen) analysed correctly the growing divisions among South African whites, between the verkrampt and the verligt within the Government, within the South African military — an important factor—and notably, as the right hon. Gentleman stressed, within the National party. There is a growing convergence between many nationalists and a majority of the English speakers, and I believe that this is a more important political change than the growth of the Afrikaner Right wing because it opens up the possibility of a return to the formula by which South Africa was governed between 1910 and 1948—as long a period as that since 1948. There is also growing pressure from South African business. Criticisms have come from that quarter in the past, but now they are becoming more anguished and more effective—and more and more it includes Afrikaner business.
  British diplomacy and the diplomacy of the West as a whole should be directed to play on those divisions and to promote dialogue, negotiation and accommodation. I was hopeful that this could be done without sanctions and when I returned from South Africa in February I was optimistic about the noises we were picking up about the Eminent Persons Group. But as I should have probably foreseen, the verkrampt tendency has prevailed in the recent attacks on South Africa's neighbours and in the declaration of the state of emergency. The hard-liners have

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  prevailed for the time being, but not necessarily for all time; and so we are inevitably in a new phase—the phase of sanctions.
  My right hon. Friend the Member for Brighton, pavilion (Mr. Amery) made an excellent speech. He concluded that further pressures would be unnecessary and potentially counter-productive. That of course is a matter for judgment and, for what it is worth, I do not agree with my right hon. Friend. International pressures have already played a big part in bringing about those important measures of progress that have occurred in South Africa.
  Moreover, I say to my right hon. Friend the Member for Pavilion that we need also to think in terms of influencing the trend of international policy towards South Africa. There is a worldwide drift towards sanctions against South Africa and this drift is now irresistible, whether in the EEC, or in the Commonwealth—where I think we now have an implicit commitment flowing from the Nassau accord—or in the United States where the pressure is coming from within the Congress, if not from the Administration.
  Outside South Africa no country's interests are more deeply affected by this drift than Britain's, and it is crucial that we should be able to influence and, to the extent that we can, direct this irresistible international trend towards sanctions. But we can do this only by joining in that trend.
  So we should commit ourselves to further measures against South Africa in order to be better able to promote constructive developments inside South Africa and a constructive international policy towards that country. That raises the rather basic question of what developments we should regard as constructive and especially that of the sort of sanctions that we want to encourage. I submit four criteria. The first is that we should avoid unnecessary hardship. I note an element of inconsistency in the speech of the right hon. Member for Devonport, who urged a ban on new investment because it would be less harmful than other forms of economic pressure, but then went on to talk about a ban on fruit and vegetable imports. As I pointed out in an intervention, that would be very damaging immediately to a lot of very poor people. Secondly, the sanctions we adopt should be such that everybody will operate them—and that must mean that they must be limited. Third, they should also be capable of being effectively monitored.
  My fourth criterion is more controversial: our sanctions should be specifically targeted. Here I take up a hint from the speech of the right hon. Member for Leeds, East (Mr. Healey) who spoke about a rolling programme of sanctions. Implicitly, he was saying that we should convey the threat that if nothing is done sanctions will be further increased. I would add the further thought that we should offer the prospect of some relief from those sanctions, if progress were made. I hope that the right hon. Gentleman will accept that this important point is another implication of his concept of a rolling programme of sanctions.
  Finally, what sort of steps within South Africa should we regard as progress? Here I strike a note of dissent from my right hon. Friend the Member for Pavilion in that I believe we must get the South African Government to recognise that it is no longer merely a question of the reform of economic and social apartheid, where admittedly there has been some real progress. Now we must get the South African Government to recognise that
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  the issue is not what they do for the blacks, but what they do with the blacks. It is a question not of economic and social apartheid being abolished, but of political apartheid being abolished.
  On the political front, I agree with the right hon. Member for Devonport that we should not seek to dictate the future shape of the South African constitution. In particular, we should not prejudge the difficult, indeed the central, question of the balance between the ethnic principle and the principle of a common South African citizenship. Both elements are likely to be present in any settlement. Certainly a common South African citizenship is fundamental for us; but I agree with my right hon. Friend the Member for Pavilion that ethnicity also reflects a fundamental reality in South Africa which probably cannot be disregarded.
  Those are, however, matters for the people of South Africa to work out for themselves. The basic objective of our policy should be, not so much to press a particular outcome but to promote a process — a dialogue which involves all parties, all personalities and all interests. Let that dialogue and those negotiations take place and then we may have to have a genuine debate in this House about the acceptability of its outcome. Meanwhile, the reality is that we are not much divided, so let us unite behind a policy which is designed to get that dialogue going.
  8.21 pm
  Mr. Peter Pike: I welcome the opportunity to speak in this important debate as I, together with my hon. Friend the Member for Bury, North (Mr. Burt) and my hon. Friend the Member for Southwark and Bermondsey (Mr. Hughes), have recently returned from South Africa. My speech is slightly different from what it would have been if I had not visited South Africa. I have been a member of Anti-Apartheid for 26 years and the only reason why I visited South Africa was because we were invited as three Christian Members of Parliament, and were sponsored by Christians in this country and in South Africa. The arrangements for us were made by Anthony Cordle, who is following this debate closely, and who co-ordinated our Christian contacts in this country and in South Africa.
  We had a busy time in South Africa at 39 meetings. We met well over 90 people in formal settings and many people in informal settings. Obviously, our visit to Crossroads, Soweto and Alexandra in Johannesburg had a drastic impact on us. While one may be aware of the position in South Africa from newspaper and television reports, one cannot judge it until one sees it at first hand.
  The basis of our visit enabled us to meet people and speak frankly and openly with them, something that would not otherwise have been possible. We met people across the political spectrum of South Africa—from the extreme white Right-wing Members of the Herstigte Nasionale party and Conservative party to the younger Left-wing black extremists in Soweto. It was interesting to meet them and to discuss matters with them.
  It is important that the House recognises the importance of the Church in South Africa. Seventy-eight per cent. of the population profess and practise a Christian faith, as is evidenced by church attendances and the way in which people lead their lives. It became clear that whatever legislative decisions are taken by the South African Parliament—they are important and essential—

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  apartheid will not be ended by a parliamentary decision. Only a change in people's hearts and minds will finally resolve the policy of apartheid.
  At times when we spoke to members of the HNP and Conservative party I was tempted to wonder why we were wasting our time speaking to people with extreme views who not only believe that no further concessions should be made, but that far too many concessions have already been made. I am in no doubt that we were right to speak to them because it put the issues and difficulties into perspective.
  Whether we like it or not, we must accept that, under the tricameral system, the white Parliament has supremacy over the other two Chambers and can take the final decision. The white Parliament and State President Botha have the power. I have grave doubts about whether President Botha genuinely wants to make changes. One of our hosts, who knows the President well, said that 20 years ago President Botha would have been the person least likely to want to make changes. He now believes that President Botha genuinely wishes to make changes but is trapped by the Right-wing extremists in his party. He believes that President Botha needs support and encouragement to make the type of changes that he wishes to make. I do not know whether that is correct.
  I listened to the television coverage of Pik Botha's comments at the Pietersburg meeting at the weekend. He is said to be a potential leader of the National party and a more liberal member of that party. I do not know how to judge him from those comments and I wonder how much pressure he was under to make that type of speech.
  The clear message from all sections of the community was the urgency of resolving the matter, as there was not much time to resolve it without major bloodshed. We all wish to avoid that. If we fail to negotiate a settlement peacefully the white extremist Afrikaner Weerstandsbeweging will grow in strength and there will be a further white backlash.
  If the South African Government do not recognise the African National Congress and release Nelson Mandela, in a few years' time they may not have to deal with the ANC and certainly not with the ANC as it is at present. More people want to take more extreme measures to achieve their desired solution. Can one blame them when for 40 years they have tried to negotiate an end to apartheid around a table? How would we feel if we were blacks in that position? Without the power to vote and elect representatives, they have few options.
  There is a narrow borderline between the French Resistance movement in France during the second world war, who are celebrated as heroes, and the ANC, whose violence is condemned without question. I am totally opposed to violence and hope that we can achieve a settlement in a negotiated and sensible way. One must remember that that country has been occupied by colonial powers for many years. I do not dispute that the colonial powers developed the country but the country is occupied —[HON. MEMBERS: "No."] Hon. Members may say no, but the people have a right to speak.
  I believe there is time to negotiate a settlement to achieve a solution but that opportunity must be seized before it is too late; otherwise the non-violent option will cease to exist. I believe that the majority of ordinary white
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  people in South Africa share that view and the blacks and coloureds also believe that there should be a negotiated settlement rather than a bloody settlement.
  Within the next few months there will be a key conference of the National party followed by a special session of the South African Parliament. Those opportunities should be positively seized if the right solution is to be achieved. It is absolutely essential that we should end the Act which requires people to be classified and registered by their race. That Act is fundamental to the apartheid system and once it is ended it will remove a fundamental plank of apartheid. It is also essential to abolish the Group Areas Act.
  There must be positive change. Many people have argued that some of the changes that have already taken place are not positive and genuine. Although, in theory, a black can now marry a white the question arises where that couple may live because they are restricted as to the areas in which they can reside.
  It is no good saying that apartheid has ended on the trains and that there are two mixed carriages on trains when there are still three white carriages at the front. The positive changes are essential because time is fast running out for South Africa. The Dutch Reform Church has its synod within the next few months and it must take a decision to end apartheid within its Church.
  If the opportunities are seized a peaceful solution is possible. I hope that that is the case because that is what this House wants, as do the blacks, whites, coloureds and Indians in South Africa.
  8.31 pm
  Mr. John Carlisle: Time does not allow me to comment on the speech of the hon. Member for Burnley (Mr. Pike) or to refute fully the allegations made by the hon. Member for Rhondda (Mr. Rogers). The disgraceful attack made by the hon. Member for Rhondda upon Lord Chalfont and myself will be remembered by the House. He devalued his own argument, if indeed it had any value. His speech was a disgrace to his party, to himself and certainly to the good name of the House.
  Apart from that speech and the belligerent attitude of the right hon. Member for Leeds, East (Mr. Healey)—his speech was characteristic, if not, as per usual, ignorant —the debate has been sensible with rational argument from both sides. It is clear that there is an absolute determination on the Labour Benches that revenge should be sought on P. W. Botha and his Government on the basis of sanctions and any measures which can be imposed upon South Africa.
  It is appalling that those in South Africa who are now desperately seeking some form of reform are to be visited with the sins of their fathers. There are people in South Africa of all colours and races who genuinely want to see peaceful change. On the whole, this debate has been a useful contribution towards that change. If Opposition Members continue to wear their consciences on their sleeves and to try to parade various untruths, the argument is lost.
  In the short time available to me, I wish to explode one or two myths which have been advanced both inside and outside the House. The first and obvious myth—it was put forward by Opposition Members — is that the African National Congress represents all black opinion in South Africa. That is blatantly untrue and the figures

  981
  prove it. It is not representative of all the blacks, although it is representative of a section, be it a minority. It is apt at catching media coverage, and one cannot deny that.
  The ANC is the perpetrator of many of the murders which have been committed in South Africa in the past few months. It is the perpetrator of the intimidation which has occurred. That was obvious yesterday in Soweto when it kept people from work. It is the perpetrator of the horrific necklace murders supported by Winnie Mandela. It is the perpetrator of the bombings in black and white areas, and the perpetrator of the campaign to undermine the South African Government and those who are moving towards some form of change.
  I am pleased to see that my hon. Friend the Minister is here, but I must disagree with her assertion in the House the other day that she was worried that the ANC would fall into Communist hands. The ANC has always been in Communist hands.
  Mr. Caborn: Where is the evidence?
  Mr. Carlisle: The South African Communist party has always had members in the ANC, and I believe that their influence has grown. The greatest threat that faces South Africa is the onslaught of Communism and the fact that it has given some respectability to the ANC. The Government have no business to be talking with the ANC unless it totally refutes the violence which it has perpetrated.
  The South African Government are right to assert that, if Nelson Mandela is to be released—I hope that that will happen in the short run—it must be on the basis that he and the ANC renounce all violence and the policy of violence.
  The other common myth is that, because the Eminent Persons Group report has failed, there will be bloodshed. The report said that. I share the view of my hon. Friend the Member for Wantage (Mr. Jackson) that the tragedy of the situation is that many of us held out great hope of the report. We believe that there was a genuine dialogue between the members of the Eminent Persons Group and members of the South African Government. The fact that that dialogue has broken down and that the group has produced a one-sided report must be regretted. Many of us on this side of the House, knowing the nature of the Commonwealth secretariat in London and its continued opposition to anything to do with South Africa, will not be surprised that that type of report has been produced.
  One must criticise the report because of its lack of evidence. I do not deny that many people were seen, but unfortunately many people were missed out. There is virtually no account or condemnation of the black versus black violence which has now taken over from the violence which previously occurred. I totally condemn the violence which has been perpetrated by some people in South Africa.
  There is scant regard in the report for the position of Chief Buthelezi and the 7 million Zulus whom he represents. The report states that there are virtually no reforms in South Africa, but that is nonsense. Many substantial reforms have taken place. Although the reforms may appear to be inadequate to us, we must acknowledge that the situation in South Africa has changed and we should encourage the South African Government to make further changes.
  The report has gone wrong and appears to be a failure when one considers its various recommendations. The first
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  recommendation is that the South African Government should terminate the state of emergency. I agree with my right hon. Friend the Member for Brighton, Pavilion (Mr. Amery) that if that were to be done and the security forces were withdrawn there would be terrible bloodshed within the townships. That would not only make them no-go areas: they would be under the total control of the violent section of the ANC. The report declares:
  "the system of apartheid will be dismantled and specific and meaningful action taken in fulfilment of that intent."
  The South Africans are on the road and still have some way to go. The report also recommends establishing
  "political freedom and specifically lift the existing ban on the African National Congress and other political parties."
  The South African Government would be quite willing to lift that ban if only the ANC would abandon its violent policies.
  Perhaps the greatest myth which has been espoused by Opposition Members and, to some extent, by some of my right hon. and hon. Friends is that sanctions would help. The report almost argues that, if there were sanctions, the violence would cease immediately. That is nonsense. Everybody admits that sanctions would mean more unemployment. I am rather amused by Opposition Members, who blamed the recent inner-city riots in Britain on unemployment and bad conditions, who now advocate measures against the South Africans which would have exactly the same effect. How can they believe that there will be change against a background of violence and unemployment?
  Sanctions would stifle the aspirations of the black middle class, much of which has been encouraged by British companies. The tragedy is that the Opposition's criticism of British companies is quite unfounded. Some of our great companies such as BP and Barclays bank have done an enormous amount of good in South Africa. They have lifted black employees into much better conditions than they would otherwise have enjoyed.
  I intend to support the Government on the basis that the effective measures of which the amendment speaks can be positive rather than negative. The Government should be encouraging British companies to invest more in South Africa to help the blacks in their employment and social problems and to raise their wages.
  I must tell my right hon. Friend the Prime Minister and my right hon. and learned Friend the Foreign Secretary that, if they take one step towards the escalation of sanctions, they will alienate a large section of the Conservative party inside and outside the House. We are very encouraged so far by the unique stance that my right hon. Friend the Prime Minister has taken. She is held in respect throughout the world and many look to her for a solution of the problem. There should be no more punitive measures. Rather there should be encouragement, dialogue and participation.
  8.42 pm
  Mr. Tony Banks: It is always a distasteful task to speak after the hon. Member for Luton, North (Mr. Carlisle) when he is acting out his role in the House as an apologist for apartheid and racism. I should like to remind him of something that he wrote in a pamphlet entitled, "South Africa and the West:"
  "The myth that the Republic is a police state and the non-whites an oppressed race should have been buried long ago."
  So should the views of the hon. Member. They are not fit to be heard in the House.

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  The Government's attitude to South Africa and apartheid is one of breathtaking hypocrisy. The Eminent Persons Group, of which we have heard so much today, was originally a device designed by the Prime Minister to try to delay taking any action. She expected it to come back saying, "Do nothing," or, "Do very little." She certainly did not expect it to come back saying that economic sanctions should be imposed. We had evidence to suggest that from the hon. Member for Luton, North, who clearly expected the group to come back with just such a judgment.
  Lord Barber is alleged to have said that he would not have become a member of the Eminent Persons Group if he had known at the outset that it would recommend sanctions. In my opinion, it is clear that he was colluding with the Prime Minister in thinking that the group would be a means of delaying definitive action.
  We have heard today from the Government the ritual denunciation of apartheid, but they revealed themselves to be steadfastly opposed to any effective measures to end it. The Government are apartheid's greatest friend outside South Africa. They are as much a mainstay of apartheid as the whips and guns of Botha's police. Whatever twisted justification the Prime Minister can now devise to prevent effective sanctions, the world knows the truth—when it comes to South Africa, the present British Government are unprincipled, hypocritical and racist. They will take no effective action against South Africa because of the profits that British companies are making out of apartheid. That applies especially in regard to the profits being made by their Tory friends in the City. Why can the Government not be honest and admit that? They would not get any credit from the Opposition for saying so, but at least we would be able to understand their honesty.
  This is a moral issue, not a narrow economic one, although there is an economic perspective. Britain's long-term economic interest also demands effective sanctions now. If South Africa eventually goes up in flames, all British investments now in South Africa will be lost. It will be pointless for a future British Government to go to the new majority black Government and ask, "Please can we have compensation for all the British interests that we lost in the civil war which followed our failure to do anything to prevent it?" We will not be able to do that—we will just be laughed at.
  I should like to pick up three arguments which I have heard Conservative Members advance — I have sat through the whole debate. It is argued that what happens in South Africa is not our business and that anyway, we do not impose sanctions on the Soviet Union. My right hon. Friend the Member for Leeds, East (Mr. Healey) dealt with that argument at the beginning when he said that we must be involved if South Africa is involved with attacks on Commonwealth states.
  Mr. Fairbairn: So is Russia.
  Mr. Banks: So is Russia, but Britain owns half of all foreign investment in South Africa. I was not aware of our owning a large slice of foreign investment in the Soviet Union. That makes a difference. Britain's direct investments in South Africa are worth about £3 billion. I heard the Foreign Secretary say that South Africa is part of the free world. That also should make what happens there our responsibility. I do not accept, however, that
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  South Africa is part of the free world. The hon. and learned Member for Perth and Kinross (Mr. Fairbairn) should try to tell that to the 24 million blacks who are denied the right to vote or organise. Living in the free world is a pretty sick joke for them.
  We also hear that sanctions will seriously damage the interests of blacks in South Africa and the front-line states. That concern comes ill from Conservative Members. They have never before shown any interest in the blacks in South Africa. Where have they suddenly discovered it now? I prefer to listen to the genuine representatives of black South Africans such as the ANC and representatives of front-line states such as Kaunda and Nyerere. I should also like to know what damages the interests of blacks most, sanctions or apartheid. It is not surprising that, although they know that they will suffer from sanctions, many blacks and their representatives are prepared to say that they want sanctions now because the evils of apartheid are so much worse.
  The third argument is that South Africa has made some progress in dismantling apartheid and that, if we impose sanctions, we will imperil that progress. Whatever miserable concessions have been made have been made only because of domestic unrest and external pressure. The people who tell us now not to impose sanctions are the very people who resisted earlier pressure, even the Gleneagles agreement on sporting sanctions.
  The truth is that Botha and his Government understand only force. They are terrified of that force and look to the Tory Government to protect them from it. In his speech, the Foreign Secretary made no positive suggestions. He referred only to the need to negotiate. I believe that he deceives himself, and that he deceives himself willingly. President Botha will not negotiate apartheid out of existence. He has said as much, and the Eminent Persons Group verifies it. He will concede only when he is faced by force.
  The Government's amendment to the Opposition motion calls for an end to violence on all sides. Apartheid is institutionalised violence. The black majority is denied a part in the political process of South Africa, it is denied the right to form its own organisations, and it is not allowed to vote. We know that Botha will not negotiate, so what is the black majority to do? Is it to sit and wait for the Conservative Government to introduce a few mild sanctions that will not work and that are designed not to work? What options does the black majority have, other than armed resistance?
  The fuse in South Africa has almost burned down. Total economic and political sanctions might—but only just—bring about fundamental change. I feel that South Africa is now firmly set on a course for civil war. The cause of the coming bloodbath relates entirely to the brutal system of apartheid. That system has been supported for years by the British and American Governments. We have surrendered any moral influence that once we might have been able to exercise. We are now effectively isolated from the rest of the world. We are in the laager, with the racists of South Africa, and it will remain an eternal stain on the reputation of our country.
  8.51 pm
  Mr. Nicholas Fairbairn: I shall not attempt to follow either the tone or the manner of the hon. Member for Newham, North-West (Mr. Banks). In the

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  few minutes that are available to me, I want to make what I hope will be a civilised contribution to a very complicated problem.
  In case any hon. Member does not understand the frightfulness of apartheid, let me remind him that it was thought up by the British in order to try to give to the Dutch whites a share in the wealth of South Africa. It is equivalent to me, as a Scottish Member of Parliament, coming to London and being forced to live on the Broadwater Farm estate. That is an absurd and offensive concept, but it is illustrative of the idiocy and frightfulness of apartheid.
  When I was in South Africa in October, I said to the South African Government that apartheid cannot be dismantled letter by letter. One cannot take off the "a" and make it "partheid". One cannot take off the "p" and make it "artheid". Apartheid must go, and it must go at once. That is a fundamental concept, whose difficulties I comprehend. Nevertheless, its removal is an essential condition for progress in South Africa. Apartheid must go. It must not go with reluctance. It must be given away — destroyed — with celebration. I tried to leave that message with the South African Government, and I believe that that message should go forth from this House.
  However, compared with the last time that I was in South Africa, which was about 18 months previously, I found that there had been a fundamental and huge change. Everybody I met — Indians, blacks, Chief Buthelezi's family, with the exception of a few freaks among the whites and a few freaks among the members of the African National Congress — agreed that we must strike at apartheid and its legislation and work for a constitutional form of government, which will not be and which cannot be the Westminster form of government but which must accommodate what we are all trying to preserve the prosperity that could be the prosperity of any other African country that had had the benefit of European genius for 300 years. Mozambique could have it and Angola could have it; so could Zambia and Malawi. We must try to preserve South African prosperity for the African so that he can share in it. That prosperity must not be destroyed because of a fictional desire to create what are called democratic rights. That is only the right to share in poverty.
  The danger in South Africa is that the whites look to the states to the north for their lesson. They say, "Look at what has happened in Zimbabwe, Zambia, Malawi and Mozambique." They are entitled to look with fear at what has happened in those countries. But the blacks do not say to themselves, "Ah, yes, we have better education and better hospitals in Soweto than they have in Malawi or Zambia." They look to the white areas of South Africa and make different comparisons.
  Let us remember that there is apartheid in Russia against the Jews, that there is apartheid in the middle east against the Palestinians and that there is apartheid in Zambia against those who are not party members, as there is in Poland and in a dozen other countries. When we say that we are against apartheid and that we are for human equality, let us remember that although apartheid is a word that emanated, thanks to the British, in South Africa, it is not a word that applies only to South Africa and that the concept of apartheid is practised in many other countries.
  What do we want to achieve in South Africa? Do we want South Africa to have a Government similar to that
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  in Zimbabwe? There is active, tribal persecution in Matabeleland. Do we want to let loose the terrible conflicts of religion and race that South Africa prospectively is undergoing? I watched the funerals of some of those who were the victims of necklace killings. I saw the fear. Is that what we want to let loose?
  Let us not imagine that this is a simple problem. South Africa is not a colonial territory. The blacks, as they are condescendingly called in South Africa, did not live there before the Europeans came. When the Europeans arrived, the Hottentots were there. The Europeans removed the Hottentots. South Africa has a problem that is even bigger than apartheid. It is migration. Blacks are consistently migrating from Mozambique, Malawi, Zambia, Zimbabwe and Angola in order to participate in the wealth that is created by the Europeans.
  There is no point in us saying, "Should they not equally share in it?" if we are not willing to think of an intelligent change that will enable the wealth-creating system to continue. There is no point in ruling over a society in which only those who happen to be in power have any wealth, as in Zambia. Let us not be so aesthetic as to say, "Forget these Zambians, Malawians and Mozambicans and sacrifice them all for sanctions." What I noticed most in my recent visit was the vast change by those who are Afrikaans-speaking and previously immoderate to a path of moderation and acceptability. We must not alienate them.
  We could do one thing. Knowing that the Afrikaners have "tendencies of contrasuggestibility", and that they have many weapons that they could use not only against us but against the world and their neighbours, we could adopt the policy of what I call "positive sanctions". 'We could offer a Marshall plan for Southern Africa, to the constellation of states around South Africa, from which it will be excluded until the weight of moderate opinion has been able to use its force in South Africa. The weight of moderate opinion in South Africa is now overwhelming, but if it is driven away from that moderation, to which it has only so recently come, we shall have created the reverse of our intention.
  Therefore, I hope that the industrial countries will create what southern Africa could be—a place where dignity, prosperity, the inheritance of the European tradition, the Christian Church, the African characteristic and the Indian contribution shall thrive and survive with all the area's great benefits and natural resources. However, South Africa will be cut out of that for ever if it does not, now and forever, strike out the obscenity of apartheid.
  9.1 pm
  Mr. Cyril D. Townsend: Talking to an hon. Friend a few weeks ago at 9 o'clock, I forecast that the Shops Bill would sail through and that we would not be so stupid as to allow the Americans to use our bases to bomb Libya. Any hon. Members who doubts my forecasts on South Africa is in an understandable position.
  Although the media give the impression that apartheid is about to disappear and that the Government of President Botha is about to be struck off the map, I would say, to the contrary, that they have great strength. Small boys throwing rocks against Casspir armoured cars will not bring down the Government. The army has hardly been used to any effect. When the Botha Government do collapse, there is every chance that they will be replaced

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  not by a nice moderate black Government but by a nasty immoderate white Fascist Government, who will use the police and the well-equipped army with far greater vigour than President Botha has. We should brace ourselves not for a clear-cut reform in that great country but for seeing another Lebanon in the south of Africa, and the country disintegrating into a conflict of black against black and white against white, with much further bitterness and bloodshed.
  In 1977 I spoke in favour of sanctions against Idi Amin's regime in Uganda. That tyrant might have come straight from the pages of Gibbon's "Decline and Fall of the Roman Empire", as he was responsible for the deaths of 100,000 people. In his prisons, a prisoner was told to smash the skull of the man in front of him and then the same thing happened to him. Rightly, the Labour Government of the day did not back sanctions against Idi Amin's Uganda, on the grounds that if one knocks down a regime one does not know who or what will replace that regime. Secondly, there must be some respect for the principle of sovereignty, which is a strong principle in the United Nations.
  On 25 May 1979, I had an Adjournment debate on trade with South Africa. It was noticeable that the Minister replying had been given a draft speech, I suspect prepared for a Labour Minister, as he was ad libbing and changing as he went along. The comments that I made in that debate are still valid. If one is backing full-blooded economic sanctions, one must consider military means to enforce those sanctions. If South Africa runs short of a crucial ingredient, perhaps oil, it will be prepared to use its navy to run the gauntlet. Who will supply that gauntlet? Will it be the Soviet Union, the United States or the Royal Navy?
  I remember the words of Lord Salisbury when he was Prime Minister, about not hanging around the carcases of dead policies. Times have changed. We must move on and face reality. I beg the Government to notice the new mood in this country, and the Commonwealth, and to notice the events that have taken place in South Africa since I was there a year ago.
  I am convinced that our friends in the Commonwealth do not expect us to throw away our principles. They do not suggest that we should destroy our economy. They are saying to us—I believe that they are entitled to do so—"Your country has a unique historic responsibility for South Africa. Your country is in a position to give a lead. We trust that you will do so."
  I thought that the setting up of the Eminent Persons Group was a most remarkable event. I cannot think of a similar mission, representing as it did some 49 Commonwealth countries which in turn represent over a billion people.
  We are told by the South African Government that the three raids into the three Commonwealth countries were coincidental. If one considers the military effectiveness of those raids, how can one believe that? Surely we must draw the conclusion that those three raids were launched for the purpose of destroying the Eminent Persons Group.
  I believe that the Government are right in seeking to move from their previous position and policies on full-blooded economic sanctions. They are right to look for ways of bringing pressure on the South African Government. I would be the first to admit that the state
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  President has made important moves, but I doubt whether he has been fully supported by all Members of his Cabinet, let alone the white community in South Africa.
  It is appropriate for us to re-examine our policy. I conclude by saying—I hope that the Foreign Secretary, who has just entered the Chamber, will consider my remarks—that Britain's role is not to frustrate, thwart and deny the mood in the international community. Rather, it is to participate and co-operate and to make a strong British contribution inside an international framework for action.
  9.8 pm
  Mr. Donald Anderson: This historic and remarkable debate is timely because it takes place at the time of the 10th anniversary of Soweto when hundreds of Africans were shot. The debate has matched the seriousness of the occasion. The matter is of considerable importance for us in the West. That importance was underlined at the beginning of this month by United State's Secretary of State George Shultz, who said:
  "South Africa imposes an intolerable moral, strategic, economic and political burden on Western interests."
  How much greater a burden does it impose on the black Africans in the front line who have been humiliated and repressed, especially over recent days, in the new detentions, the new gagging of newspapers, and so on? That repression was graphically described in the first 39 paragraphs of the report of the Emminent Persons Group. I witnessed that humiliation and repression when I stayed in Soweto and saw the institutionalised evil that is aparthied.
  How should we in the West, especially in Britain, react to such a minority Government who claim to base their system on the same values as ours? In particular, how should we in Britain respond to the call by the Eminent Persons Group for concerted action, which may offer, in its view, the last opportunity to avert what could be the worst bloodbath since the second world war? How can we influence attitudes and bring effective pressure to bear on South Africa? I was immensely impressed, as, I am sure, were all hon. Members, by the spiritual dimension which was raised by my hon. Friend the Member for Burnley (Mr. Pike) and the hon. Members for Bury, North (Mr. Burt) and for Southwark and Bermondsey (Mr. Hughes) following their visits to South Africa.
  On some matters, of course, the Government and the Opposition agree. We agree that South Africa is in crisis, that the pace of change has increased, and that there is not likely to be the lull which occurred after Sharpeville in 1960 and after Soweto in 1976. A new dynamic is now endemic and is developing in South Africa which the most reasonable men may not be able to stop. At one stage, it appeared that the Eminent Persons Group had provided a "god out of a machine" — some form of external mediation which might have prevented the ultimate tragedy. There may still be some hope, as the Foreign Secretary said, but it was probably blasted by the raids on 19 May on the front-line states. As the Foreign Secretary will surely acknowledge, those raids must have been planned by the South African authorities some time in advance. They must have been made in the sure knowledge that they would torpedo those talks at a sensitive stage. The intention must have been to do precisely that. That was the clear message.

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  We acknowledge that the current period is one of intense anxiety for all in South Africa, whatever their colour, and that there have been substantial changes in the Afrikaner Volk. Some of that overweening self-confidence has gone. Hon. Members may point out the increasing moderation that they see, but I point out the new extreme ultra-grouping, the AWB, to which President Botha clearly reacted in his raids on the front-line states.
  When we read Security Council resolution 560 of March last year and the Nassau communiqué, both agreed by the Government, we acknowledge that the Government go at least part of the way with our analysis of the situation. The Government and the Opposition recognise that there is a substantial British stake in South Africa —in financial, commercial and human terms—but we draw different conclusions. The Government argue that that immense stake should make us more cautious in our response to the South African tragedy. On the contrary, we conclude that the stake that we in Britain undoubtedly have imposes an even greater responsibility on us because of our unique position. We have that position by being members of all the relevant alliances. We are members of the EEC and assume the Presidency on 1 July. We are members of the Commonwealth, we have close links with the United States and Japan in the Group of Seven, and we are a permanent member of the Security Council. We are uniquely well placed to play a positive role, if we are prepared to play such a role.
  The Opposition begin to differ from the Government in the assessment of the capacity of the South African Government to adapt and as to whether they have the capacity to take the giant steps necessary to reach an accommodation with their own majority. The Government are tempted to trumpet every change, however cosmetic, as something of seismic proportions. However, 26 years after the Sharpeville massacre, and 10 years after the Soweto uprising, the black majority in South Africa is still totally excluded from the national political process. The British Government still appear to cling to the view that President Botha is not intransigent and that the system is capable of being reformed without outside pressure, as if the business interests and those building bridges within South Africa can persuade President Botha to negotiate with his majority and take those necessary giant steps. The Government still cling to the doctrine of constructive engagement.
  We are interested not in the reform of apartheid but in its abolition. Constructive engagement should be not just with the white minority but with the black majority. As an indication to the Government on the bona fides of the Botha Government, we point out that nine years after Security Council resolution 435 on Namibia, in spite of all the promises made by the South African Government, Namibia still seems as far from independence as it was in 1978. We point to the mala fides of the Nkomati accord, the clear breaches by South Africa and the attacks on and continued destabilisation of the front-line states — conservatively estimated to have cost the front-line states £10 billion since the formation of the South African Development Co-ordination Conference in 1980.
  The Eminent Persons Group concluded that the South African Government are not yet prepared to negotiate fundamental change. The report is a damning indictment. Do the Government concur with that indictment and, if so, what are they prepared to do about it?
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  The Government's faulty analysis of South African willingness to change has led to mistakes and to their own isolation over the past two years. We should examine some of the milestones in Government policy over that period. Two years ago, in June 1984, the Prime Minister welcomed President Botha to Chequers on the eve of the establishment of the tricameral legislature, that apartheid cul de sac into which South Africa then moved. In September last year at Luxembourg the Government entered "a reservation" at a time when the EEC was agreeing a weak package of measures. The right hon. and learned Member for Edinburgh, Pentlands (Mr. Rifkind) had the humiliation of rushing back to this country saying that he could not agree even to the withdrawal of military attaches from South Africa because, he claimed, they gave us some forewarning of possible South African manoeuvres against the front-line states. We did not withdraw our military attachés until the end of the year. We still have South African military attachés in London.
  At Nassau, in October last, we agreed on a strict and rigorously controlled embargo on the import of arms, ammunition, military and paramilitary equipment from South Africa and on an embargo on all military cooperation with South Africa, yet last Saturday's edition of The Guardian contained clear evidence that our own Department of Trade and Industry allows a large South African defence electronics corporation to license a company in the United Kingdom as a front for its own military products. I refer to Grinaker Electronics. Does the Minister seriously suggest that that decision by the Department of Trade and Industry is in accordance with the letter and spirit of the Government agreement at Nassau or with the EEC?
  We were, of course, isolated at Nassau. The Prime Minister insulted the Commonwealth thereafter by talking about the "teeny weeny" measures that she had agreed. Subsequently, we prevented the colony of Bermuda from imposing its own sanctions.
  We agreed at Nassau to impose a ban on the import of krugerrands. That was in October 1985. But we did not then impose that ban on krugerrands. Tardily and reluctantly, we were dragged into that, but we did not impose the ban until May 1986, after pressure, and after the attack on the front line states on 19 May.
  At the Tokyo summit, the world leaders vetoed a move by the Prime Minister to voice concern for the safety of South Africa whites. The majority of blacks identify with the ANC, yet the Government are still not prepared to meet it at ministerial level. Thus, the meeting with President Botha, the Commonwealth Nassau summit, the Tokyo summit and relations with the EEC all represent negative signals. The Government are sending those signals out to the world and thus clearly showing their attitude towards change in South Africa.
  Mr. John Carlisle rose—
  Mr. Anderson: Throughout those two years, the Government have consistently given the wrong signals, and identified with the white minority Government. It is hardly surprising that the hon. Member for Luton, North (Mr. Carlisle), as he stated tonight, should find the Prime Minister's attitude "encouraging".
  Even if the Government criticise South Africa, the South African Government know that they can still ultimately always depend on a British veto at the Security

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  Council. The Government's massive failure has been that they have not grasped the scale of the human tragedy in South Africa or the urgency of the situation. As several hon. Members have said, and in particular the hon. Member for Orpington (Mr. Stanbrook), it is not just a question of apartheid. After all, apartheid is just a means by which the elite can impose its power and privileges on the majority. Some months ago, at one of his party conferences, President Botha quoted with approval what President Kruger said in 1898 to the Uitlanders. He said:
  "You do not want the vote. You want my country."
  That is the signal that President Botha gave to his party faithful, and it shows the measure of the willingness of the South African Government to compromise and negotiate.
  Any changes are designed to retain power in safe, civilised white hands, whether they involve a confederal solution redrawing of boundaries or toy with solutions based on ethnicity. Throughout, the purpose is to retain power and privileges in the hands of that elite.
  Mr. Hunter rose—
  Mr. Anderson: Time is indeed running out. We ignore the inexorable dynamic of developments at our peril. When we talk about the importance of our investments, have we seriously considered what value those investments will be if there is a bloodbath? Already, as a result of the private sanctions that have been so effective since last August, the value of the commercial rand has fallen to less than $0·40. As the Minister of State will probably know, today's definition of a patriotic South African is someone who is unable to sell his house. The EPG concluded that all the changes had left the structure of apartheid intact and that the absence of concerted external pressures would only defer change.
  How shall we respond? I concede that sanctions as such are a form of negative pressure. They have to be coupled with positive pressures such as those that were included in the EEC statement at Luxembourg on 9 September last.
  What will be the response of the Prime Minister? Has it not been this: "How little can I get away with in response to world pressure? How can I continue to put a brake on Commonwealth and EEC pressures? How can I play for time? Let us delay a decision in the hope that the problem will go away so that we can have business as usual with the apartheid regime. Since the Palace has become tiresome, let us see if we can do something teeny weeny to placate it."?
  The Foreign Secretary gives the impression of seeking a reasonable solution and of wanting a civilised chat about the future of South Africa, as if he were in an Oxford common room with congenial colleagues, while the flames are licking around the windows and while the Prime Minister, like a latter-day Canuta, stands vainly against the tide, and that for an inglorious cause.
  That response is not good enough. We have to show that we are against apartheid not just in word but for real. We should be interested to find out what objection the Government have to our motion, as we have no particular objection to their motion. They claim that they are against ecomomic measures. What is the ban on krugerrands that was agreed at the Commonwealth summit if not an economic measure? We believe that sanctions or measures —call them what we will—are supported by the blacks. We refer the Government to the surveys that were reported
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  in yesterday's Financial Times. We know that sanctions or measures are supported by the majority of people in South Africa and in the front-line states.
  Mr. Nicholas Winterton: What about Buthelezi?
  Mr. Anderson: I exclude Chief Buthelezi from that majority. He appears to be the only black who finds favour on the Conservative Benches.
  Sanctions on their own will not bring the walls of Pretoria down. They can only reinforce and interact with the internal pressures that are by far the most important. Those pressures come from COSATU—the trade union movement—the UDF and all those forces within South Africa that are seeking fundamental change and that rely on us from the outside to assist them in their cause.
  We accept the importance of the private sanctions which have already had such an effect on South Africa. The purpose is not to punish; it is to bring pressure to bear on the minority to seek an accommodation with its majority, and to have a dialogue with the majority. Our task is not to prescribe an agenda or to set out the constitution of a new South Africa. Our job is to give assistance to the progressive forces in South Africa and to force the South African Government to talk to their majority and not to exclude them, as they do at present, completely from the national political process.
  The British Government should begin by picking up the package that was left on the shelf at Nassau when they persuaded their colleagues in their isolation to go forward with the Eminent Persons Group, which has now failed. The spotlight is again on our Government. They may not respond, but I remind them and the South African Government that there will be a general election in this country within the next two years, and there is a more than reasonable chance of a change of Government.
  The Labour party is pledged to isolate South Africa until it changes its policy and to promote effective external pressure. Under a Labour Government, South Africa will not longer be protected by the British Government in the United Nations Security Council and elsewhere. The South African Government and their friends should be left in no doubt that there will be a fundamental change of attitude under a Labour Government. We will not be a brake on developments within the EEC and the Commonwealth. Rather we will take the lead and go as far and as fast as our colleagues will go. We will make the embargo on arms and military material complete. We will support the enforcement of United Nations mandatory comprehensive sanctions. We will end economic and military collaboration with South Africa.
  In short, the next Labour Government will not make ritual condemnations of South Africa but will be passionately determined to take concerted effective action as recommended in the Eminent Persons Group report. The next Labour Government will, by word and action, identify themselves with the South Africa of the future.
  9.33 pm
  The Minister of State, Foreign and Commonwealth Office (Mrs. Lynda Chalker): The hon. Member for Swansea, East, (Mr. Anderson) was right to say that the debate was taking place at a historic time. There cannot be a more tragic time in the affairs of southern Africa.
  Tonight's debate has forcibly underlined — more forcibly than ever before—the utter repugnance felt by

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  this House and by the nation towards the system of apartheid and our deep concern at its consequences. Many right hon. and hon. Menmbers have shown real understanding of the details of the complicated problem. We have heard thoughtful speech after thoughtful speech tonight and I would like to mention especially the hon. Members who were sponsored by the Churches to visit South Africa recently.
  In the debate, hon. Members have referred several times to similarities between the Government's amendment and the Opposition motion. There is a difference. The aim of both sides is to bring an end to apartheid. In that we do not differ, but the difference is that the means to achieve that objective vary. That is what we are discussing tonight.
  As the right hon. Member for Clydesdale (Dame J. Hart) said, we believe that the measures taken must be effective. They may not be limited to economic measures alone. There is no point in simply penalising South Africa. We need real results, which will bring an end to apartheid. We are pressing for the change through genuine dialogue, to be conducted in an atmosphere that is free from violence on both sides. Violence will not solve the problem.
  In saying that we totally reject apartheid, we condemn utterly the sheer waste of a system that attempts to keep power and privilege in the hands of the few at the expense of the majority. We condemn, too, the waste of human resources and endeavour. It is particularly tragic that that should have happened in a part of the world that is so well endowed with resources. South Africa is a country that could offer all its people, regardless of colour or creed, a good life and make an enormous contribution to the economic health of the whole region.
  Mr. Amery: Will my hon. Friend give way?
  Mrs. Chalker: I am pressed for time. I hope that my right hon. Friend will forgive me.
  We are aware, especially this week, of the legacy of violence and death that apartheid has left to all South Africans.
  Mr. Amery rose—
  Mrs. Chalker: But despite what has happened, there must be further effort. We must not turn our backs on the countless numbers of South Africans, black and white, who continue to work towards the goal of a non-racial, democratic system of government. We must redouble our efforts—
  Mr. Amery rose—
  Mrs. Chalker: —and do whatever we can to ensure that South Africa can be rescued from the brink. I give way to my right hon. Friend.
  Mr. Amery: I am grateful to my hon. Friend for giving way. I am sorry to have pressed her. Does she agree that what we reprehend and condemn in apartheid is the existence of laws that discriminate against any section of the population, particularly against the majority section of the population, but if those laws are repealed, it is no part of our war against apartheid to insist on majority rule?
  Mrs. Chalker: My right hon. Friend has long experience of South Africa. Of course we reprehend the laws of apartheid, but the actions that go with the laws are what we find repugnant. They discriminate between persons of different coloured skin or those of different
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  creeds, effectively those from different tribes with different beliefs. That is what we in this country, and, I believe, those throughout the free world, are not prepared to see continue. With regard to majority rule, we cannot support a society that does not give a democratic vote to each and every one of its people.
  We have not seen much in the news over the past few days because there has been a state of emergency. We were glad when the original state of emergency was lifted in March. Now it has been reimposed. The House knows more than anyone that muzzling the press will never break the spirit of all those seeking to end discrimination, whether it be in South Africa or elsewhere. A state of emergency has never produced a solution, and will not do so now. The unrest in South Africa underlines the urgent need for genuine debate and a suspension of violence on both sides.
  Everybody has been impressed by the immense hard work and dedication of the Eminent Persons Group. We may not agree with all that it has written, but I wish to pay a deep tribute to its efforts. I am sure that it fully shares our regret that in the end, despite its incredible efforts, it was unable to bridge the gap between the South African Government and others who want to be involved in the future government of South Africa. In the end, it certainly achieved much more than some thought might be possible at the outset. Its work will help us to find a way in future to obtain a negotiated outcome.
  However, I must refute the bitter speech and downright misrepresentations of the hon. Member for Newham, North-West (Mr. Banks), especially in respect of Lord Barber. Lord Barber is an open and fair-minded person. If I may say so, without giving offence in any way, he is almost a second Lord Soames and that is how he will be remembered for his efforts.
  The Eminent Persons Group called for concerted and effective Commonwealth action if South Africa is not to slide into even worse violence and bloodshed. We shall not ignore that call, but, as the report recognises, it is for the Heads of Government to decide on the nature of that action, and, clearly, if that action is to be effective it must involve the countries of the European Community and the seven members of the economic summit as well as the Commonwealth.
  Let us hope that, although the Eminent Persons Group's work has come to an end for the time being. it will in time help to chart the way to a peaceful settlement in South Africa. That is what we all seek.
  The Eminent Persons Group was particularly impressed by Nelson Mandela and what it believed was his commitment to a negotiated settlement. That strengthens our view that his immediate and unconditional release would constitute an important step towards the reconciliation that is most urgently needed. His unconditional release could play a key role in binding the wounds of bitterness and distrust.
  The Eminent Persons Group concluded that there could be no settlement in South Africa without the ANC. The ANC is by no means the only voice in South African black opinion but we do not doubt that it has considerable support. We know that members of the ANC have a wide range of views, but they are united in their determination to bring about the elimination of apartheid. We know that there are Communists in the ANC but they are not in a majority and Communism will only thrive on the lack of dialogue and progress towards a non-racial democracy.

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  We established official contact with the ANC to make clear our total commitment to the search for a peaceful solution in South Africa.
  Mr. Barnett rose—
  Mrs. Chalker: Let me finish what I am saying.
  That does not lessen our condemnation of violence or terrorism to attain political objectives. Nor does it lessen our attempts to persuade all those involved to cease that violence. Those who resort to the violence of the gun and the bomb, on whichever side they may be, are only delaying the day when a peaceful settlement might be secured. Violence encourages those who hope to profit from a South Africa torn apart by a hideous racial war. It does nothing to solve the problems.
  Mr. Barnett: I am most grateful to the hon. Lady for giving way. Many of my hon. Friends will be delighted by what she said about the ANC. I rise only to ask, in view of the clear approval of the hon. Member and the Government of the ANC and the part that it is playing in South Africa, what practical help the Government hope to be able to give to the ANC in the position in which it finds itself?
  Mrs. Chalker: The hon. Gentleman is taking what I said a good deal further. In the officials' dialogue with the ANC there has always been a call by the Government for a suspension of violence. In discussing the aspirations of black people in South Africa we listened not only to members of the ANC but to other black groups who have made contact with our officials and, indeed, with Members of Parliament.
  Mr. John Carlisle rose—
  Mrs. Chalker: The most important change has been the change in the role of business. The Eminent Persons Group report recognised the potential of the business community in South Africa for bringing pressure to bear on the Government. We have always firmly believed that the business community is an important element in that irresistible force for change that the economic development of black South Africans represents. Some 13 years ago we pioneered the code of conduct for British firms, and at that time such ideas were extremely unfashionable. We have made it clear to British companies that we expect them to live up to that code which, since 1977, has applied to all European companies. It has been strengthened in important areas by the recognition of trade unions, in education and training, and by community projects. Because we introduced that code, we see more strength being exhibited by the business community to promote change.
  I am glad to say that British companies have responded to the code and have set example after example. Most have either recognised independent black trade unions or are willing to do so. Some 92 per cent. have minimum wage levels at or above the level required by the code and many are becoming actively involved in projects to benefit the wider community. No less than £6·5 million was spent by just 10 companies last year on such community projects.
  Mr. Frank Field: The Minister spoke about the development of the code of conduct. The recent report on ethical investment spoke about underpayment by British firms in South Africa. How can the Government
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  expect to be taken seriously when they say they will not impose sanctions because of the economic harm they would cause the blacks in south Africa, when many of the largest recruting sergeants for poverty are British firms who underpay their South African workers? Will the Minister follow up that report and call in those firms that are clearly underpaying and not abiding by the code of conduct?
  Mrs. Chalker: I shall certainly look into what the hon. member for Birkenhead (Mr. Field) said, but there is no way in which Governments should interfere in an internal matter. Through the British Industry Committee on South Africa we bring the code of conduct to the notice of all British firms in South Africa. I shall look again at the point raised by the hon. Gentleman.
  Mr. Conal Gregory: My hon. Friend is strong on diplomacy. I admire that in view of her position. Since the feeling of the House is clearly against apartheid, when will she respond to that opposition with some teeth that will destroy that system?
  Mrs. Chalker: My hon. Friend anticipates my speech. I should not have given way to him and that would have enabled me to get to the point much quicker. It is not just that which we are pressing companies to do, because foreign companies can and do exert increasing pressure. I would not wish to bring all that to an end by cutting links and blocking our influence. It is not just business that is involved in promoting change. We, too, are giving special shcolarships to black South Africans and looking for ways in which they can be assisted. As my hon. Friend the member for York is tempting me to say, we already have in action restrictive measures against South Africa. I shall not list them all because we have been through the large number of measures implemented by the Government, and they number far more than any other country on its own has begun to implement.
  The hon. Member for Swansea, East asked about The Guardian evidence. I think he said it appeared on Saturday. I am aware of the recent suggestions, but we are looking into the allegations in the first report. I have heard nothing to suggest that the Government are in any way in breach of their obligations under the United Nations arms embargo. I shall write to the hon. Gentleman when I have finished the investigation.
  Hon. Members have been asking what can be done to end apartheid. Many have made proposals tonight and the right hon. Member for Plymouth, Devonport (Dr. Owen) said that this was a good time to have a debate to collect ideas. Obviously, there are many measures that individual hon. Members would like to see introduced and they will all be studied because it will be through some further action that we shall take with our partners that we shall increase the pressure on the South African Government to end apartheid.
  I well understand the suggestions for a ban on air links, on new investment, and on the import of agricultural produce, and I share the feelings that caused hon. Members to make those suggestions. I am in no way seeking to duck the possible help which they may bring, but as the right hon. Member for Clydesdale said, we must examine exactly what the impact would be. What would be the impact on black workers in South Africa and on South Africa's neighbours, such as Zambia, Zimbabwe and Botswana? Most important, would they have an

  997
  effective impact on the South African Government? There is no point in introducing measures unless they have a significant effect on the South African Government.
  We must not forget that the objectives are to promote dialogue and to suspend all violence. We all agree that that is crucial. There is a necessity to send clear, effective signals, not to make gestures that would do more harm than good. That is why we have said that we must assess the effect of each and every measure, not only on South African people, but on all peoples in southern Africa, particularly in the front-line states.
  Mr. John Carlisle: My hon. Friend said that she would consider "further action" in consultation with our Community partners. She owes it to the House and certainly to some Conservative Members to explain a little more fully exactly what she envisages by "further action".
  Mrs. Chalker: As my right hon. and learned Friend the Foreign Secretary said in his opening remarks, and as I have said, we shall consider the report of the Eminent Persons Group, the suggestions made in the House and all measures— [Interruption.] — because if we do not, we cannot be judged to have come to a reasonable conclusion on what it would be best to do, in order to bring an end to apartheid, which even my hon. Friend said he wanted to see.
  For all those reasons, the Government are not prepared to make hasty decisions or to comment in detail on all the many ideas put forward. However, we shall consider all the policy options in consultation with our partners in the Commonwealth and the European Community, and with other countries. Our objective must be to find the most effective way to hasten that real change.
  The House is united in praying that all South Africans, black and white, will find a way to emerge together and in peace from the present crisis. We must not contemplate any alternative. We must lead all our potential partners in the EC, the Commonwealth and the seven members of the economic summit to an effective solution which will persuade the South African Government —[Interruption.]—not to erect further barriers against the people of their country but to break them down. That is what everyone seeks to achieve. That can be done only be ensuring that the methods we adopt will have an effect on the South African Government.
  The ideas that have been promulgated tonight lead one to consider how the business community will react. These ideas cannot be implemented by Government alone; they can only be carried through in consultation with the business community. That is why I will not respond as hon. Members are seeking to tempt me.
  Violence and civil unrest, wherever they occur, will lead only to further violence and to deeper human misery. In South Africa, the current tragedy is a direct consequence of the evil of apartheid and the repression that is used to enforce it. These are sombre times for the people of South Africa. If apartheid is not rooted out and destroyed we shall achieve no settlement and the catastrophe perceived by the Eminent Persons Group will become a reality.
  What we need to do is to persuade the South African Government to take an axe to the main limbs of this poisonous plant and to do it now. Nothing else will do. It is the South African Government who must take that axe to the poisonous plant.
  Mr. Dennis Canavan: What will the Government do?
  Mrs. Chalker: Even the noisy hon. Member below the Gangway on the Opposition side has given no hint, except in his shouts, of what he sees as an end to the matter. Negotiations between all the interested parties on a new non-racial constitution must take place and that cannot wait.
  Hon. Members are anxious to know the details. I have already said that the challenge to the international community is to assist that process, but it is a tense and dangerous situation. That is why I have said, and I repeat, that it would be foolhardy to rush into any decision and that is why Her Majesty's Government are looking at all the suggestions that have been made.
  Mr. Simon Hughes rose—
  Mrs. Chalker: We seek the destruction of apartheid. We do not seek the destruction of South Africa and its economy. The emergence of a non-racial democracy needs to be in an economically healthy South Africa which can grow. To destroy everything in South Africa for the simple and, perhaps to some, totally desirable reason, of ending a Government, but then to leave black people in South Africa with nothing on which to build, would be just as much of a tragedy as some of the things we are witnessing today.
  If we are to make a real impression, the United Kingdom cannot act alone. This has become clearer and clearer. That is why we are discussing the issues fully with our partners.
  Mr. Canavan: Will the Minister give way?
  Mrs. Chalker: That is why we must find an effective way of responding to the call for effective action—
  Mr. Canavan: Will the Minister give way?
  Mr. Speaker: Order. There are three minutes left. The hon. Lady is not giving way and I ask the House to give her a fair hearing.
  Mrs. Chalker: Our sole aim is to work for the best interests of the people of South Africa.
  Mr. Canavan: Will the Minister give way?
  Mrs. Chalker: No, I will not give way, especially not to a Member who has not been in the Chamber for any of the debate.
  Our sole aim is to work for the best interests of all the people of South Africa. We have to help them emerge from the present nightmare, free from apartheid and able to take a place in the community of nations. We are not daunted by the enormity of the challenge but we are conscious of the dangers. We cannot, we must not and we will not lose sight of our goal, which is to seek peaceful transition to a system of government in South Africa under which all can live and prosper in freedom and justice.
  Mr. Canavan: Absolute hypocrisy.
  Mrs. Chalker: I believe it was in the book "Cry, The Beloved Country" that Alan Paton wrote of slavery, fear and freedom. What we have to do is overcome the problem of fear. We have to give all the people in South Africa that freedom. I urge right hon. and hon. Members to support the Prime Minister's amendment.
  Question put, That the original words stand part of the Question:—
  The House divided: Ayes 206, Noes 331.

  Division No. 226]

  [10 pm

  AYES

  Abse, Leo

  Faulds, Andrew

  Adams, Allen (Paisley N)

  Field, Frank (Birkenhead)

  Alton, David

  Fields, T. (L'pool Broad Gn)

  Anderson, Donald

  Flannery, Martin

  Archer, Rt Hon Peter

  Foot, Rt Hon Michael

  Ashdown, Paddy

  Forrester, John

  Ashley, Rt Hon Jack

  Foster, Derek

  Ashton, Joe

  Foulkes, George

  Atkinson, N. (Tottenham)

  Fraser, J. (Norwood)

  Bagier, Gordon A. T.

  Freeson, Rt Hon Reginald

  Banks, Tony (Newham NW)

  Freud, Clement

  Barnett, Guy

  George, Bruce

  Barron, Kevin

  Golding, John

  Beckett, Mrs Margaret

  Gould, Bryan

  Beith, A. J.

  Gourlay, Harry

  Bell, Stuart

  Hamilton, James (M'well N)

  Benn, Rt Hon Tony

  Hamilton, W. W. (Fife Central)

  Bennett, A. (Dent'n & Red'sh)

  Hancock, Michael

  Bermingham, Gerald

  Hardy, Peter

  Bidwell, Sydney

  Harman, Ms Harriet

  Blair, Anthony

  Harrison, Rt Hon Walter

  Boothroyd, Miss Betty

  Hart, Rt Hon Dame Judith

  Boyes, Roland

  Hattersley, Rt Hon Roy

  Bray, Dr Jeremy

  Haynes, Frank

  Brown, Hugh D. (Provan)

  Healey, Rt Hon Denis

  Brown, N. (N'c'tle-u-Tyne E)

  Heffer, Eric S.

  Brown, R. (N'c'tle-u-Tyne N)

  Hogg, N. (C'nauld & Kilsyth)

  Brown, Ron (E'burgh, Leith)

  Home Robertson, John

  Bruce, Malcolm

  Howells, Geraint

  Buchan, Norman

  Hughes, Dr Mark (Durham)

  Caborn, Richard

  Hughes, Robert (Aberdeen N)

  Callaghan, Rt Hon J.

  Hughes, Roy (Newport East)

  Callaghan, Jim (Heyw'd & M)

  Hughes, Simon (Southwark)

  Campbell, Ian

  Hume, John

  Campbell-Savours, Dale

  Janner, Hon Greville

  Canavan, Dennis

  Jenkins, Rt Hon Roy (Hillh'd)

  Carlile, Alexander (Montg'y)

  John, Brynmor

  Carter-Jones, Lewis

  Johnston, Sir Russell

  Cartwright, John

  Jones, Barry (Alyn & Deeside)

  Clark, Dr David (S Shields)

  Kennedy, Charles

  Clarke, Thomas

  Kilroy-Silk, Robert

  Clay, Robert

  Kirkwood, Archy

  Clelland, David Gordon

  Lamond, James

  Clwyd, Mrs Ann

  Leadbitter, Ted

  Cocks, Rt Hon M. (Bristol S)

  Leighton, Ronald

  Cohen, Harry

  Lewis, Ron (Carlisle)

  Coleman, Donald

  Lewis, Terence (Worsley)

  Concannon, Rt Hon J. D.

  Livsey, Richard

  Conlan, Bernard

  Lloyd, Tony (Stretford)

  Cook, Frank (Stockton North)

  Lofthouse, Geoffrey

  Cook, Robin F. (Livingston)

  McCartney, Hugh

  Corbyn, Jeremy

  McDonald, Dr Oonagh

  Craigen, J. M.

  McGuire, Michael

  Crowther, Stan

  McKay, Allen (Penistone)

  Cunliffe, Lawrence

  McKelvey, William

  Cunningham, Dr John

  MacKenzie, Rt Hon Gregor

  Dalyell, Tam

  Maclennan, Robert

  Davies, Rt Hon Denzil (L'lli)

  McNamara, Kevin

  Davies, Ronald (Caerphilly)

  McTaggart, Robert

  Davis, Terry (B'ham, H'ge H'l)

  McWilliam, John

  Deakins, Eric

  Madden, Max

  Dewar, Donald

  Mallon, Seamus

  Dixon, Donald

  Marek, Dr John

  Dobson, Frank

  Marshall, David (Shettleston)

  Dormand, Jack

  Martin, Michael

  Douglas, Dick

  Mason, Rt Hon Roy

  Dubs, Alfred

  Maxton, John

  Duffy, A. E. P.

  Maynard, Miss Joan

  Eastham, Ken

  Meacher, Michael

  Edwards, Bob (W'h'mpt'n SE)

  Meadowcroft, Michael

  Evans, John (St. Helens N)

  Michie, William

  1000

  Mikardo, Ian

  Short, Mrs R.(W'hampt'n NE)

  Morris, Rt Hon J. (Aberavon)

  Silkin, Rt Hon J.

  Nellist, David

  Skinner, Dennis

  O'Brien, William

  Smith, Rt Hon J. (M'ds E)

  Orme, Rt Hon Stanley

  Snape, Peter

  Owen, Rt Hon Dr David

  Soley, Clive

  Park, George

  Spearing, Nigel

  Parry, Robert

  Steel, Rt Hon David

  Patchett, Terry

  Stewart, Rt Hon D. (W Isles)

  Pavitt, Laurie

  Stott, Roger

  Penhaligon, David

  Strang, Gavin

  Pike, Peter

  Thomas, Dafydd (Merioneth)

  Powell, Raymond (Ogmore)

  Thomas, Dr R. (Carmarthen)

  Prescott, John

  Thompson, J. (Wansbeck)

  Radice, Giles

  Thorne, Stan (Preston)

  Randall, Stuart

  Tinn, James

  Raynsford, Nick

  Torney, Tom

  Rees, Rt Hon M. (Leeds S)

  Wainwright, R.

  Richardson, Ms Jo

  Wallace, James

  Roberts, Allan (Bootle)

  Wardell, Gareth (Gower)

  Roberts, Ernest (Hackney N)

  Wareing, Robert

  Robertson, George

  Weetch, Ken

  Robinson, G. (Coventry NW)

  Welsh, Michael

  Rogers, Allan

  Wigley, Dafydd

  Rooker, J. W.

  Williams, Rt Hon A.

  Ross, Ernest (Dundee W)

  Wilson, Gordon

  Ross, Stephen (Isle of Wight)

  Winnick, David

  Rowlands, Ted

  Woodall, Alec

  Ryman, John

  Wrigglesworth, Ian

  Sedgemore, Brian

  Young, David (Bolton SE)

  Sheerman, Barry

  Shields, Mrs Elizabeth

  Tellers for the Ayes:

  Shore, Rt Hon Peter

  Mr. Chris Smith and

  Short, Ms Clare (Ladywood)

  Mr. Mark Fisher.

  NOES

  Aitken, Jonathan

  Butterfill, John

  Alexander, Richard

  Carlisle, John (Luton N)

  Alison, Rt Hon Michael

  Carttiss, Michael

  Amery, Rt Hon Julian

  Cash, William

  Ancram, Michael

  Chalker, Mrs Lynda

  Arnold, Tom

  Chapman, Sydney

  Ashby, David

  Chope, Christopher

  Aspinwall, Jack

  Churchill, W. S.

  Atkins, Rt Hon Sir H.

  Clark, Hon A. (Plym'th S'n)

  Atkins, Robert (South Ribble)

  Clark, Dr Michael (Rochford)

  Atkinson, David (B'm'th E)

  Clark, Sir W. (Croydon S)

  Baker, Rt Hon K. (Mole Vall'y)

  Clarke, Rt Hon K. (Rushcliffe)

  Baker, Nicholas (Dorset N)

  Clegg, Sir Walter

  Baldry, Tony

  Conway, Derek

  Beaumont-Dark, Anthony

  Coombs, Simon

  Bellingham, Henry

  Cope, John

  Bendall, Vivian

  Corrie, John

  Benyon, William

  Couchman, James

  Best, Keith

  Cranborne, Viscount

  Bevan, David Gilroy

  Critchley, Julian

  Biffen, Rt Hon John

  Currie, Mrs Edwina

  Biggs-Davison, Sir John

  Dickens, Geoffrey

  Blackburn, John

  Dicks, Terry

  Blaker, Rt Hon Sir Peter

  Dorrell, Stephen

  Bonsor, Sir Nicholas

  Douglas-Hamilton, Lord J.

  Bottomley, Mrs Virginia

  Dover, Den

  Bowden, A. (Brighton K'to'n)

  du Cann, Rt Hon Sir Edward

  Bowden, Gerald (Dulwich)

  Dunn, Robert

  Braine, Rt Hon Sir Bernard

  Durant, Tony

  Brandon-Bravo, Martin

  Edwards, Rt Hon N. (P'broke)

  Bright, Graham

  Evennett, David

  Brinton, Tim

  Eyre, Sir Reginald

  Brittan, Rt Hon Leon

  Fairbairn, Nicholas

  Brooke, Hon Peter

  Fallon, Michael

  Brown, M. (Brigg & Cl'thpes)

  Farr, Sir John

  Browne, John

  Favell, Anthony

  Bruinvels, Peter

  Fenner, Mrs Peggy

  Bryan, Sir Paul

  Finsberg, Sir Geoffrey

  Buchanan-Smith, Rt Hon A.

  Fletcher, Alexander

  Buck, Sir Antony

  Fookes, Miss Janet

  Budgen, Nick

  Forman, Nigel

  Bulmer, Esmond

  Forsyth, Michael (Stirling)

  Burt, Alistair

  Fowler, Rt Hon Norman

  Butler, Rt Hon Sir Adam

  Fox, Sir Marcus

  1001

  Franks, Cecil

  Lawler, Geoffrey

  Freeman, Roger

  Lawrence, Ivan

  Galley, Roy

  Lawson, Rt Hon Nigel

  Gardiner, George (Reigate)

  Lee, John (Pendle)

  Garel-Jones, Tristan

  Leigh, Edward (Gainsbor'gh)

  Glyn, Dr Alan

  Lennox-Boyd, Hon Mark

  Goodhart, Sir Philip

  Lewis, Sir Kenneth (Stamf'd)

  Goodlad, Alastair

  Lightbown, David

  Gorst, John

  Lilley, Peter

  Gow, Ian

  Lloyd, Sir Ian (Havant)

  Gower, Sir Raymond

  Lloyd, Peter (Fareham)

  Grant, Sir Anthony

  Lord, Michael

  Greenway, Harry

  Lyell, Nicholas

  Gregory, Conal

  McCrindle, Robert

  Griffiths, Peter (Portsm'th N)

  McCurley, Mrs Anna

  Grist, Ian

  Macfarlane, Neil

  Ground, Patrick

  MacGregor, Rt Hon John

  Grylls, Michael

  MacKay, Andrew (Berkshire)

  Gummer, Rt Hon John S

  MacKay, John (Argyll & Bute)

  Hamilton, Hon A. (Epsom)

  Maclean, David John

  Hamilton, Neil (Tatton)

  McLoughlin, Patrick

  Hampson, Dr Keith

  McNair-Wilson, M. (N'bury)

  Hanley, Jeremy

  McNair-Wilson, P. (New F'st)

  Hannam, John

  Madel, David

  Hargreaves, Kenneth

  Major, John

  Harris, David

  Malins, Humfrey

  Harvey, Robert

  Malone, Gerald

  Hawkins, C. (High Peak)

  Maples, John

  Hawkins, Sir Paul (N'folk SW)

  Marland, Paul

  Hawksley, Warren

  Marlow, Antony

  Hayes, J.

  Marshall, Michael (Arundel)

  Hayhoe, Rt Hon Barney

  Mates, Michael

  Hayward, Robert

  Maude, Hon Francis

  Heath, Rt Hon Edward

  Mawhinney, Dr Brian

  Heathcoat-Amory, David

  Maxwell-Hyslop, Robin

  Henderson, Barry

  Mayhew, Sir Patrick

  Heseltine, Rt Hon Michael

  Merchant, Piers

  Hickmet, Richard

  Meyer, Sir Anthony

  Hicks, Robert

  Miller, Hal (B'grove)

  Higgins, Rt Hon Terence L.

  Mills, Iain (Meriden)

  Hill, James

  Mills, Sir Peter (West Devon)

  Hind, Kenneth

  Miscampbell, Norman

  Hirst, Michael

  Mitchell, David (Hants NW)

  Hogg, Hon Douglas (Gr'th'm)

  Moate, Roger

  Holland, Sir Philip (Gedling)

  Monro, Sir Hector

  Howarth, Gerald (Cannock)

  Montgomery, Sir Fergus

  Howe, Rt Hon Sir Geoffrey

  Moore, Rt Hon John

  Howell, Rt Hon D. (G'ldford)

  Morris, M. (N'hampton S)

  Howell, Ralph (Norfolk, N)

  Morrison, Hon C. (Devizes)

  Hubbard-Miles, Peter

  Morrison, Hon P. (Chester)

  Hunt, David (Wirral W)

  Moynihan, Hon C.

  Hunter, Andrew

  Mudd, David

  Hurd, Rt Hon Douglas

  Murphy, Christopher

  Irving, Charles

  Neale, Gerrard

  Jackson, Robert

  Needham, Richard

  Jessel, Toby

  Nelson, Anthony

  Johnson Smith, Sir Geoffrey

  Neubert, Michael

  Jones, Gwilym (Cardiff N)

  Newton, Tony

  Jones, Robert (Herts W)

  Nicholls, Patrick

  Jopling, Rt Hon Michael

  Normanton, Tom

  Joseph, Rt Hon Sir Keith

  Norris, Steven

  Kellett-Bowman, Mrs Elaine

  Onslow, Cranley

  Kershaw, Sir Anthony

  Oppenheim, Phillip

  Key, Robert

  Oppenheim, Rt Hon Mrs S.

  King, Roger (B'ham N'field)

  Osborn, Sir John

  Knight, Greg (Derby N)

  Ottaway, Richard

  Knowles, Michael

  Page, Sir John (Harrow W)

  Knox, David

  Page, Richard (Herts SW)

  Lamont, Rt Hon Norman

  Parkinson, Rt Hon Cecil

  Lang, Ian

  Patten, Christopher (Bath)

  Latham, Michael

  Patten, J. (Oxf W & Abgdn)

  1002

  Pattie, Geoffrey

  Stern, Michael

  Pawsey, James

  Stevens, Lewis (Nuneaton)

  Peacock, Mrs Elizabeth

  Stewart, Allan (Eastwood)

  Percival, Rt Hon Sir Ian

  Stewart, Ian (Hertf'dshire N)

  Pollock, Alexander

  Sumberg, David

  Porter, Barry

  Tapsell, Sir Peter

  Portillo, Michael

  Taylor, John (Solihull)

  Powell, William (Corby)

  Taylor, Teddy (S'end E)

  Powley, John

  Tebbit, Rt Hon Norman

  Prentice, Rt Hon Reg

  Terlezki, Stefan

  Price, Sir David

  Thatcher, Rt Hon Mrs M.

  Prior, Rt Hon James

  Thomas, Rt Hon Peter

  Proctor, K. Harvey

  Thompson, Donald (Calder V)

  Raffan, Keith

  Thompson, Patrick (N'ich N)

  Raison, Rt Hon Timothy

  Thorne, Neil (Ilford S)

  Rees, Rt Hon Peter (Dover)

  Thurnham, Peter

  Renton, Tim

  Townend, John (Bridlington)

  Rhys Williams, Sir Brandon

  Tracey, Richard

  Ridley, Rt Hon Nicholas

  Trippier, David

  Ridsdale, Sir Julian

  Trotter, Neville

  Rifkind, Rt Hon Malcolm

  Twinn, Dr Ian

  Rippon, Rt Hon Geoffrey

  van Straubenzee, Sir W.

  Roberts, Wyn (Conwy)

  Vaughan, Sir Gerard

  Robinson, Mark (N'port W)

  Waddington, David

  Roe, Mrs Marion

  Wakeham, Rt Hon John

  Rossi, Sir Hugh

  Waldegrave, Hon William

  Rowe, Andrew

  Walden, George

  Rumbold, Mrs Angela

  Walker, Rt Hon P. (W'cester)

  Ryder, Richard

  Wall, Sir Patrick

  Sackville, Hon Thomas

  Waller, Gary

  Sainsbury, Hon Timothy

  Walters, Dennis

  St. John-Stevas, Rt Hon N.

  Ward, John

  Sayeed, Jonathan

  Wardle, C. (Bexhill)

  Shaw, Giles (Pudsey)

  Warren, Kenneth

  Shaw, Sir Michael (Scarb')

  Watson, John

  Shelton, William (Streatham)

  Watts, John

  Shepherd, Colin (Hereford)

  Wells, Sir John (Maidstone)

  Shepherd, Richard (Aldridge)

  Wheeler, John

  Shersby, Michael

  Whitfield, John

  Silvester, Fred

  Whitney, Raymond

  Sims, Roger

  Wiggin, Jerry

  Skeet, Sir Trevor

  Winterton, Mrs Ann

  Smith, Tim (Beaconsfield)

  Winterton, Nicholas

  Soames, Hon Nicholas

  Wolfson, Mark

  Speed, Keith

  Wood, Timothy

  Speller, Tony

  Woodcock, Michael

  Spencer, Derek

  Young, Sir George (Acton)

  Spicer, Jim (Dorset W)

  Younger, Rt Hon George

  Spicer, Michael (S Worcs)

  Squire, Robin

  Tellers for the Noes:

  Stanley, Rt Hon John

  Mr. Carol Mather and

  Steen, Anthony

  Mr. Robert Boscawen.

  Question accordingly negatived.
  Question, That the proposed words be there added, put forthwith pursuant to Standing Order No. 33 (Questions on amendments), and agreed to.
  Mr. SPEAKER forthwith declared the main Question, as amended, to he agreed to.
  Resolved,
  That this House calls upon Her Majesty's Government, in view of the worsening situation in the Republic of South Africa and in the light of the Report of the Commonwealth Eminent Persons Group, to work actively with the Europeen Community, the Commonwealth, and the Economic Summit Seven countries for effective measures which will help achieve a peaceful solution in South Africa based on negotiations and a suspension of violence on all sides.

  Medicinal Products
  10.15 pm
  The Parliamentary Under-Secretary of State for Health and Social Security (Mr. Ray Whitney): I beg to move,
  That this House takes note of European Community Documents Nos. 9630/84 and 5752/86, proposals for draft Directives and a Recommendation, and Amendments to the proposals, on the marketing and testing of medicinal products, and of the supplementary explanatory memorandum from the Department of Health and Social Security dated 8th May 1986; endorses the aim of strengthening biotechnology in respect of medicinal products within the Community; and welcomes continued progress towards removing the remaining barriers to trade between member States, whilst fully protecting public health.
  These proposals deal with European Community rules for the testing and marketing of medicines. This is a complex and highly technical subject. I cannot avoid detail, but the House will be primarily concerned with the principles underlying the detail. I shall therefore concentrate on the principles.
  The marketing of medicines in the Community is governed by Community legislation — directives —adopted between 1965 and 1983. Subject to certain specific exceptions, such as vaccines, which have not yet been brought within the scope of European Community rules, national regulatory authorities are bound to apply the provisions of the pharmaceutical directives when considering an application for marketing authorisation. In addition, a Council recommendation has been adopted containing guidelines for the preparation and consideration of marketing applications covering a number of safety and efficacy aspects. United Kingdom arrangements for applying Community legislation in this field operate under the provisions of the Medicines Acts of 1968 and 1971, and subordinate orders.
  Some of the proposals now before the House concern veterinary medicines as well as medicines for human use, and as such are a matter for my right hon. Friend, the Minister of Agriculture, Fisheries and Food, but where this is so, the particulars are similar, and DHSS and MAFF interests are identical. My remarks therefore apply to both where relevant.
  My right hon. and learned Friend the Paymaster General and Minister for Employment, when he was Minister for Health, submitted, on 22 January 1985, an explanatory memorandum which described the proposals as they were drafted at that time, and identified a number of issues which required careful study, and possible amendment before they could be accepted. I shall deal with those issues later.
  Discussions in Brussels, which are still in progress, produced explanations and some textual amendment. My right hon. Friend the Minister for Health therfore submitted a supplementary explanatory memorandum to the House on 8 May. I shall also expand on this later. Also, the European Commission forwarded, on 5 March 1986, some amendments to its original proposals. These Commission amendments represent reactions to opinions expressed by the European Parliament, and also, in the Commission's own words,
  "take account of scientific and technical developments since the initial Commission proposals were submitted".
  1004
  This batch of Commission amendments was dealt with in my right hon. Friends explanatory memorandum, also dated 8 May 1986.
  It will, I think, help the House if I explain that the primary purpose of all European Community regulation in this area is the protection of public health. That is the overriding consideration, but associated with that purpose is a determination not to hinder the development of the pharmaceutical industry, and trade in medicinal products. In the medium term our aim is to harmonise national regulations and standards of assessment, and so on, so as to achieve the free movement of medicines between member states. In any case, we plan to abolish all Community internal barriers to trade by 1992. This state of affairs is intended to apply to medicines by way of the mutual recognition of national marketing authorisations granted by individual countries. I need hardly add, in this context, that when mutual recognition is eventually achieved, there will be no lowering of United Kingdom standards of protection for the public.
  I turn now to the subject matter of the proposals. They represent further progress down the path towards mutual recognition. They extend the opportunities and, in some cases, the obligations for national regulatory bodies to discuss issues concerning particular products before individual decisions are taken. Such discussions will assist the development of mutual understanding which is a prerequisite of mutual recognition. They will help also to identify and to deal with differences of view in a positive way, focussing on specific and concrete issues.
  Priority will be given to biotechnology and other "high technology" manufacturing processes. Thus, the exchange of views provided for in these proposals, and the development of agreed opinions, will assist not only progress towards mutual recognition but the pharmaceutical industry by the establishment of certainty in respect of national regulatory requirements on a Communitywide basis in these very important and rapidly developing areas of science. There is no doubt that industry faces problems because of the varying requirements as between member states, and even more so when uncertainty exists about regulatory requirements because of large sums of money need to be invested early to secure a competitive position.
  The proposals consist of a package of measures, four directives and a recommendation. Some touch on the general issues which I have already mentioned. Others contain more detailed improvements to the existing rules. The proposed recommendation simply adds another 14 guidelines on safety and efficacy considerations for the preparation and consideration of marketing applications. These guidelines were produced by extensive discussion in the Committee for Proprietary Medicinal Products which deals with medicines for human use. The guidelines were the subject also of consultation with representatives of the pharmaceutical industry. I believe that they are non-controversial.
  The first proposed directive is new. Its most important element is the introduction of compulsory reference to the CPMP or the Committee for Veterinary Medicinal Products for applications involving major biotechnology innovation. The range of applications concerned is identified in the annex to the proposal at list A of the first directive. The directive also encourages reference to the Committee for Proprietary Medicinal Products or Committee for Veterinary Medicinal Products, in agreement with the company concerned, for other "high

  1005
  technology" products as described in list B of the annex. As I have already said, the Government agree with the European Commission that co-ordination in this highly complex and rapidly advancing area of science is good for the public, manufacturers and the European economy.
  Mr. Tony Marlow: As my hon. Friend will accept, this is a technical and complex issue, but perhaps he will answer two questions. First, with a view to what is happening to the LD50 test, does the directive mean that United Kingdom patients are likely to be subjected to medicines that have not undergone the strict testing undergone by current medicines? Secondly, will the directive affect parallel imports—products which are made before the patent has expired in this country but which can be made in another country? If so, will it be to the detriment or to the benefit of the United Kingdom's pharmaceutical industry?
  Mr. Whitney: If my hon. Friend will bear with me, I shall come later to the LD50 test. As for parallel imports, the directive will not have a detrimental effect on the United Kingdom's pharmaceutical industry.
  The improvements to the text and explanations received have removed the concerns expressed in the 22 January 1985 memorandum. I shall not go into them in detail unless asked to do so.
  The first proposed directive, in article 5, also introduces for medicinal products arrangements similar to those already in place for the generality of products, whereby the Commission and other member states are notified of proposed new technical regulations. The idea is to prevent the imposition of unjustifiable technical barriers to trade between member states, by allowing time before new regulations come into force so that all those concerned have an opportunity to raise objections, and to have those objections considered. The Government fully support this measure.
  I turn now to the second and third proposed directives. I can deal with these together, because they contain similar measures; the first covering medicines for human use, the second covering veterinary medicines. Each contains two distinct elements. Neither element presents the United Kingdom with any difficulty. The first element introduces arrangements designed to assist the rapid updating of data requirements in support of marketing applications.
  The Government agree that data requirements should be kept under review and modified promptly as indicated by experience and the advances of science. We also accept that it is a sensible way to avoid unnecessary delay on such important, if technical matters; we are perfectly content to accept qualified majority voting; and we do not think it essential to progress through all the exceptionally long European corridors involving, as they do, the Council of Ministers and the European Parliament, and so on. I am also reassured to learn that the so-called "committees for adaptation to technical progress" will, in fact, consist of people with special expertise in this field nominated by member states—the same people as form the Committee for Proprietary Medicinal Products and the Committee for Veterinary Medicinal Products.
  The second element amends particulars required in support of marketing applications under parts 1 and 2 of the annex to directive 75/318/EEC and directive 81/852/EEC as relevant, dealing respectively with "Physico-chemical, Biological, or Microbiological Tests"
  1006
  and "Toxicological and Pharmaceological Tests". It may assist hon. Members if I say that the amendments of the annex to directive 765/318/EEC and the corresponding amendments to directive 81/852/EEC were added in March of this year under EC document 5752/86, whereas the amendment to part 2 of the annex to directive 75/318/EEC and the corresponding amendmemt to directive 81/852/EEC were in the original 1984 document.
  The "part 1" amendments, as they are known, bring into effect detailed improvements to the text recently agreed by the CPMP and the CVM P. The "part 2" amendments are perhaps of more general interest. They do two things. The first is to require that safety tests are undertaken in compliance with the principles of good laboratory practice. The second removes the absolute requirement to determine the dose level of a prospective medicine which results in death for 50 per cent. of the animals used in the test.
  My hon. Friend the Member for Northampton, North (Mr. Marlow) will recognise that I am referring to the lethal dose 50 test. For other hon. Members I should perhaps explain that the LD50 test is one of a battery of tests to establish the toxicity of a new substance before it is tested in human beings. Scientists now universally agree that the arbitrary choice of a 50 per cent. death rate is inappropriate. The appropriate death rate will be determined on a scientific need basis for each substance and will usually be lower than 50 per cent. This will avoid the unnecessary death of animals, which I am sure hon. Members will welcome.
  Mr. Marlow: Will the Minister undertake to guarantee, although we are all quite properly concerned to reduce the unnecessary death of animals, that the level of protection for the human patient will be at least as high as it has been in the past?
  Mr. Whitney: Within the limits of my own capabilities. It is a scientific determination and the careful judgment is that the scientific need basis, to which I have referred, will give the sort of guarantee that my hon. Friend is seeking and, indeed, that the Government must insist upon. Therefore, we share that objective.
  I now turn to the fourth proposed directive. Yet again, the proposals are in discrete parts. The first, and more important concerns the data which must be submitted in support of an application for marketing authorisation. These are dealt with in article 4 of directive 65/65/EEC. The proposal is for amendment of Article 4.8, which deals with the results of tests and trials.
  In general, applicants must provide the results of tests and trials, but where the constituent or constituents of a product have a well-established medicinal use with an acceptable level of safety—like many of the medicines that we can buy over the counter without a doctor's prescription—it would be ridiculous to require detailed data for each new application. What would be the point of using animals to produce unreliable models of possible effects in man in respect of a substance which had already been used by man himself for many years? The general rule to provide data is therefore relaxed in such circumstances.
  On the other hand, it is important to take account of the valid commercial interests of innovatory companies, so that the results of their original research and development cannot be pirated. This protection of the results of original work is particularly important when companies are

  1007
  obliged to supply details in several languages for discussion in the CPMP or CVMP, and where patent protection may not be available, or patentable only with considerable difficulty, as with biotechnology medicines such as insulin or interferon, which are analogues of natural substances.
  The picture is complicated by differences in practice between the regulatory bodies of the various member states. Some are more stringent than others in pressing for test results in respect of the constituents of products which are already on the market. Others, says the Commission, give an unfair advantage to copiers by using commercial information supplied to the original licence holder when assessing the copy application.
  The Commission tried to reconcile the somewhat conflicting interests described above in its proposed amendments to article 4.8. The original proposals were generally acceptable to the United Kingdom. But we are not so clear about the effect of compromise suggestions made during negotiations. There seemed to be a possiblity that efforts to obtain maximum harmonisation of practice between member states would produce a text which went too far towards obliging national regulatory bodies to demand test results for already well-known constituents.
  That was the stage that we were at when my right hon. Friend the Minister for Health signed the supplementary memorandum on 8 May. But my officials have now been able to study the new text in detail, and they have satisfied me that their anxieties were unnecessary. The problem, in fact, turned on interpretation.
  The second, and comparatively minor part of the revision of directive 65/65/EEC — I interject here, no doubt to the relief of some hon. Members, that this is the last point of detail that I propose to bring to the attention of the House—repeals the obligation to mark external packages of narcotics with a double red band. The intention of that marking was to help pharmacists to keep all such products under proper surveillance, but experience has shown that the markings are also at least as helpful to drug addicts or thieves who, on breaking into pharmacies, can quickly identify their loot.
  As I hope I have made clear, the proposals contain useful improvements and additions to the present arrangements for controlling the safety and the marketing of medicines within the Community. At the same time, they provide assistance to research-based pharmaceutical companies, particularly those engaged in biotechnology, and represent useful progress towards removing the remaining barriers to trade between member states. I invite the House to agree that we should welcome adoption of the proposals contained in European Community documents 9630/84 and 5752/86.
  10.32 pm
  Dr. John Marek: The proposals are very technical, and it is extremely difficult to judge their merits. There is no doubt about the content of the proposals, because I can read English, but I have no direct research experience of this matter, and so it is difficult for me and, I suspect, for most hon. Members to judge their merits.
  Nevertheless, when drugs are imported, it is important to know exactly what they contain. It is also important to know about the conditions of manufacture, and to know what impurities may exist, particularly in the case of
  1008
  parallel imports. I am not against importing generic substitutes, but the proper concern of British pharmaceutical companies—that they should be able to continue research and development in the United Kingdom —must also be protected. Of course, that can be subject to licences of right, and to generic substitution once patents have run out.
  There are now substantial imports from the EEC, and we should know exactly their quality and content, in order to protect the public. On the one hand, the public must be protected and, on the other hand, one must not stifle innovation in research and development.
  Given my initial statement about my limitations in understanding the proposals, I can give them a cautious welcome. The amendments ought to strengthen public safety without doing damage to the research and development required in producing new pharmaceuticals using biotechnology. Existing directives will be amended so that a new biotechnological product must be considered first by the CPMP, which is the expert EEC committee, before the DHSS can give a product licence. That is to the good as a principle in itself.
  There are limitations, but one does not want to delay unnecessarily the introduction of important new drugs. Provided the committee does not deliberate too long—I do not think it will—it can only be to the advantage of the public if it examines any biotechnological product. Therefore, we have no objection to that.
  We have to be careful that we do not remove responsibility from the Minister on product licences. Responsibility for what is marketed in this country should remain with the Minister. He will have his expert committees which should continue to advise him.
  There is a danger that if the Common Market produces an expert committee, say, the CPMP, which has all the information available to it, it will perhaps accrete to itself such power that national committees may more and more take for granted the word of the EEC experts committee. Nothing must he taken for granted. Anything that the CPMP considers should be taken into account by our national expert committee, but it would be a pity if the investigative function of the expert committees of member states was not used as much and those committees relied almost exclusively on the opinion of the CPMP. Therein lies a danger. Provided we do not allow that to happen, the referral of products to the CPMP is an advance that I welcome.
  I understand that there will be standardisation of data requirements within the EEC. That should speed up the introduction of new products and drugs, so long as public safety requirements are not relaxed.
  In explanatory memorandum 8232 on document 9630/84, paragraph 2.4 says:
  "The arrangements for rapid data updating involve the establishment of a Committee for the Adaptation to Technical Progress of the Directives on the Removal of Technical Barriers to Trade in the Proprietary Medicinal Products Sector. This Committee would be chaired by a representative of the Commission, and act by qualified majority (as also would the council of Ministers when considering Committee proposals). The Commission is also given power to effect changes to data requirements on its own account if the Council of Ministers has not acted on the Committee's proposals within three months."
  There are certain doubts in my mind about that. I know that the arrangements are for data updating, but there is a possibility of the committee acting by qualified majority.

  1009
  I wonder whether the Minister can envisage the United Kingdom losing out, perhaps if it voted against a proposal but was outvoted by a qualified majority.
  The committee is for the adaptation of directives on the removal of technical barriers to trade, but I do not know exactly what the committee will consider. For example, it could consider the importing of more drugs into this country. Am I right in thinking that the United Kingdom could object to proposals to allow an increase in drug imports, with less stringent controls and safety built into the conditions, but we could be outvoted by a qualified majority? If that is so, or if there is a similar situation, there is cause for concern. I hope that I have misunderstood that paragraph. If I have, I would welcome the Minister's comments so that he can put my mind, and, I am sure, other people's minds at rest.
  Paragraph 5.3(c) of the same document refers to
  "The requirement to consult the CPMP and the CVMP before Member States can grant or revoke marketing authorisations for the listed range of products."
  That paragraph will be put into the directive. I welcome it, if it is a matter of introducing new products. Provided that there is no unnecessary delay, the intention to consult the CPMP and the CVMP is good. On the other hand, I wonder what happens the other way round. Let us suppose that a product has a product licence, but for some reason it has to be taken off the market. Again, I may have misunderstood the provision, and I may be asking a naive question, but I believe that it is important. Will the United Kingdom retain its right to revoke a product licence for any product immediately without having to consult the CPMP about it? If the Minister can say anything about that, I should be grateful. Indeed, that requirement is one of the controversial elements in the directives. It is controversial from the point of view of revoking a product licence. But it is not controversial if it is a matter of introducing a new product.
  I welcome the extension to medicinal products of the community "stand-still" arrangements concerning draft technical regulations of a member state. That can only be good if there is prior compulsory consultation, and delay if an objection is raised. I also welcome the removal of the absolute requirement in determining dose levels of a drug for human use which results in the death of 50 per cent. of the animals used in the test. The Minister referred to it as the LD50 test. I am persuaded by the scientific evidence, of which I have seen quite a lot, and to which the Minister referred, that it is no longer necessary to have an LD50 test.
  I hope that that relaxation of the absolute requirement will be used by the United Kingdom, and that fewer animals will have to die as a result of experiments. I am persuaded that that can be done with no detriment to public safety standards. I say as an aside that, if there are any tests on patients, all patients should be told that they are being tested. There has been some doubt about that in recent times. The matter does not come within the directives, but perhaps the Minister should take it on board. Sometimes there must be tests on patients, and there is no harm in that so long as the tests are properly controlled, and the patients must know what is happening; if the patients are children, their parents should be told. In other words, proper control must be exercised.
  Another important proposal is the provision to ensure a 10-year period of protection from the date on which the marketing authorisation was granted. While I do not
  1010
  object to that in principle, I do not want to see it as a first step in extending protection from 10 years to 16 or 20 years or perhaps even longer.
  Problems could arise with the phrase "essentially similar products", words which appear in the English translation of the directive. Difficulties may arise with the definition of that phrase. Perhaps the Minister can put our minds at rest on that.
  EEC document 5752/86 emanates from a letter from the Vice-President of the Commission of the European Communities, Lord Cockfield, to Mr. Hans van den Broek, President of the Council of the European Communities. It amplifies some of my concern about the definition of substances and the meaning of words. Page 7 contains this insertion in the directive:
  "the description of the substance, set down in a form similar to that used in a descriptive item in the European Pharmacopoeia, shall be accompanied by any necessary explanatory evidence, especially concerning the molecular structure where appropriate; it must be accompanied by an appropriate description of the method of synthetic preparation. Where substances can only be described by their method of preparation, the description should be sufficiently detailed to characterise a substance which is constant both in its composition and in its effects."
  Probably no substance is absolutely constant in its composition and, therefore in its effects; substances over time change in their composition, and I should not be surprised if the toxicity of some substances changed over time. If the passage that I quoted is all that is being added to the directive, I wonder whether it will enable us to define sufficiently precisely substances when product licences are being granted. Shall we be able to assess them when considering if they are "essentially similar" to other substances? That might be consideration in deciding whether to give them 10-year protection. I am not convinced from the paragraph I quoted that we have the provision sufficiently accurate for there to be no doubt about its application in any of the cases that I cited.
  On the same theme is the question of the provision of information. Annex 1 to the Council recommendation relating to tests in document 9630/84 deals with placing proprietary medicinal products on the market. Paragraph
  3(b) says:
  "Whatever species or strain of animals are selected it is essential that the following information should be provided, age, sex, weight, origin and the time in the laboratory before tests, whether or not the animals are classified as being free or specific pathogens, whether or not the animals have been vaccinated or submitted to any other procedure. Details of housing and environmental conditions should be given. Access to and the nature of the diet and the availability of water should be stated. All the above factors are known to affect the acute toxicity of substances."
  I am sure that all the information is necessary to make a decision on the toxicity of substances, but is it sufficient? The document says nothing about that. Does the Minister have any information on that?
  In addition, there is a problem about the definitions and their interpretation in the various member states. It may well be that some definitions will be applied in different ways. Under the new British legislation there will be licences for animal experiments, and so on, and I hope that there will inspectors to make sure that there is control and standardisation in Britain, so that when any tests are performed the public can be sure that they have been done properly and not on the cheap.
  Shall we simply take on board the testing and analyses of other member states and accept that their standards

  1011
  must be high enough? What criteria will the Minister use? Is he worried that the procedures in other member states may not be as good as those in the United Kingdom? I do not say that in any political way. I hope that all hon. Members would wish to be satisfied about that.
  Other questions can be asked about the proposals, but apart from matters of detail there are a few essential questions. Will safety and the confidence of the public in medicines and medicinal products be increased, and will research and development into new medicines be encouraged, or at least not discouraged? Will the proposals help in animal replacement in experiments where that is practical and possible? Will there be a greater exchange of views among experts in the various fields? I hope that the House will bear in mind my earlier comments about the European experts committee. Finally, will new important medicines become available more quickly on the market?
  The answer to those questions will probably be yes, but I hope that the Minister, with the advice and expertise available to him, will be able to answer the questions before the end of the debate.
  10.53 pm
  Mrs. Edwina Currie: The Chamber may have emptied, but the subject that we are talking about tonight — the generation of drugs through biotechnology—is probably as important in our lives and is likely to be as important in future as the effect of South Africa on our lives today and I am glad to have an opportunity briefly to discuss it.
  I think that it was Magnus Pike who pointed out that the creation of drugs through fermentation has been with us as long as there have been human beings and the first thing that Noah did when he came off the ark was to learn about fermentation and then get very drunk.
  I take a personal and a constituency interest in the matter as the brewing industry in Burton-on-Trent, which is of long-standing, provides a large volume of materials for parts of the pharmaceutical industry in my constituency through companies such as English Grains Ltd. They will be pleased to see the stand taken by the Government in the Minister's letter of 8 May 1986, to which my hon. Friend referred, which said that full test data, will not be a mandatory requirement for the new applications in respect of well-established products, because that is exactly what the pharmaceutical companies in my constituency are producing — well-established, long-used products. To have to go through the whole business of re-testing them simply to satisfy a Common Market directive would be arduous.
  I should also like to congratulate whoever produced "Biotechnology: A Plain Man's Guide." It emanates from the laboratory of the Government Chemist. Perhaps I ought to ignore the sexism of the title, but I am delighted to see that the person on the front who looks so puzzled at the whole business is, indeed, a man. For that reason I refuse to take exception to the title. The book is first-class and I hope that people producing documents in other Government Departments will take a leaf out of it.
  It is easy to understand and easy to find one's way around. It links the different departments extremely well and is full of delightful little cartoons, such as two bugs discussing whether to eat a piece of cake.
  1012
  The sections in the book that refer to Wales, Northern Ireland and Scotland are highlighted by, in the case of Wales, a lady with a daffodil, in the case of Scotland, a bearded chap with bagpipes, and in the case of Northern Ireland, a leprachaun with a shamrock sticking out of his hat. Things like that make it easy to follow. The sense of humour and the style of the person who wrote this to be commended.
  My own links with this industry started some 20 years ago when I was employed for a while in the product-testing laboratory of Eli Lilley and Company in Speke near Liverpool. Part of my job resulted in my getting the cold shoulder from a lot of the people that I travelled home with, because it involved taking bacteria, feeding them agar agar and Bovril, allowing the bacteria to grow — and, as a result, to become exceedingly smelly—then testing the effect on them of various concentrations of drugs, such as penicillin and penicillin derivatives. The trouble with doing that job was that the pong clung to one's hair and skin and riding home on the bus was a rather unpleasant experience for all the other passengers. For doing that job I was paid £10 a week. I suspect it was quite a dangerous way to test commodities and I sincerely hope that nobody messes about in quite that way these days.
  When trying to understand the material that is before the House, I noted with interest that Eli Lilley and company is still very active in the field of biotechnology and last year had the largest single number of patents granted in biotechnology in the United States of America. The company had 28 out of just over 1,000 patents. In the last three years over 3,200 patents have been granted in the United States of America, so we really are into a growth industry. I have seen estimates that the biotech market will grow to 100 billion dollars by the year 2000, which is not very far away. The sad thing is that although two thirds of these patents were of American origin, and one third were not of United States origin, the largest single other country was Japan. The Common Market countries are a long way down the list and last year the United Kingdom had only 32 patents approved in the USA. That is barely more than than patents granted to one company, Eli Lilley. From what I could see, the total from all the Common Market countries came to less than 100—in other words, less than 10 per cent. of the number of patents granted in the United States. That is sad when we consider that the origins of this extraordinary technology were entirely British and resulted in a number of Nobel prizes, the most recent being awarded to Cambridge university in 1984.
  Biotechnology is a strange world. It is a world of immortal cells that will go on reproducing themselves indefinitely. It is a world of activities and ideas that we can only begin to grasp. I suspect that when these changes were first announced and first became the subject of investigation by such organisations as the Common Market we probably overestimated the possibilities. They are certainly coming now.
  Recently some hon. Members were given a demonstration in the Commons of some of the diagnostic techniques that are the subject of today's papers. We were shown, for example, the development of the Wellcome Foundation in the detection of AIDS. We were shown the possibilities that are soon to become commercial in which a pinprick of blood will be taken, perhaps in a doctor's surgery, and will be tested for a wide range of reagents and reactants

  1013
  in the blood and will enable us to detect instantly whether someone is suffering from an illness or what the course of a chronic illness might be. Some of these commodities are already on sale so we are not talking in these documents about theory. Human growth hormone, for example, and insulin are already available. Treatments for such diseases as herpes, hepatitis B, thalassaemia, sickle cell anaemia and so on, are being actively worked on and tested under these regimes. It is hoped that a great deal of the work will help cancer patients, and much research is being funded by cancer charities, which is to be welcomed.
  My hon. Friend the Member for Northampton, North (Mr. Marlow) asked about changes involving animals and animal testing. The question about the LD50 test for animals is raised in directive 75/318/EEC. I am by no means a qualified scientist, but the material is specifically genetically engineered and intended for a particular purpose and a particular species. Our main concern is about human beings. Therefore, it seems peculiarly inappropriate to use that test. We shall not learn much from the effect of that material on animals. We want to learn of the effect on people. I should be grateful if my hon. Friend the Minister will clarify that matter when he replies.
  It is nice to know that the new mechanisms for creating this material will to a large degree obviate the use of animals. When the technology started animals such as mice were used for the original antibodies. Now companies such as Celltech are using mechanical bioreactors on an enormous scale. It is nice to know that this is a British company. It was set up some five years ago by the National Enterprise Board, partly as a response to our complete failure to patent some of the ideas we had been developing and getting Nobel prizes for. Despite the activities of the NEB it is now 85 per cent. privately owned, and it is doing well. It has, for example, the world's first licence to be granted by the United States' Government for bulk production of monoclonal antibodies, and is selling the stuff by the kilogramme. That is absolutely fantastic and will open up the opportunities for research in a big way.
  I hope that my hon. Friend the Minister will bear in mind the comments made about safety. Recently, in the United States there has been a case, referred to in the literature, not concerning human material hut an animal vaccine for use against pig pseudorabies. It was licensed for use last January—not six months ago—and within four months its product licence was removed because of an action brought by the Environmental Protection Agency in the United States in which it was alleged that testing had not been done properly. It was apparent from the evidence circulated that the real anxiety was that genetic material might be leaked into the environment and have damaging effects, like of which none of us could guess at. The response of the health inspectorate in the United States — which rejoices in the acronym APHIS, the Animal and Plant Health Inspection Service—was that the vaccine would go into the pig and no further, and that there would be no environmental leakage. Nevertheless, it is a matter of some concern.
  In the light of some of the anxiety about pesticides and the effect of their inappropriate storage and use, these EEC directives on manufacturing and testing are not sufficient. We need to be reassured about storage use, and training for use of those materials, especially when we are
  1014
  talking not only of human vaccines and drugs, but animal and plant use. It is essential that we maintain the highest standards so that we can reassure the public.
  Provided we retain an awareness of the dangers of dealing with these powerful commodities, I hope that that with encouragement and careful Government supervision across Europe much more rapid progress can be made.
  11.3 pm
  Mr. Charles Kennedy: The hour is late and the Minister is facing an unprecedented degree of harmony across the Floor on a health issue. Therefore, I intend to be extremely brief.
  Without being flippant about the speech of the hon. Member for Derbyshire, South (Mrs. Currie), I must say that I endorse her views about the inherent sexism in the presentation of the document to which she referred but which I have not had the opportunity to see. The caricaturing inherent in that title can equally be applied on a nationalist level to display everyone in Ireland as a shamrock-waving leprechaun and everyone north of the Border as a bagpipe-playing Scot. I hasten to say that we certainly play the bagpipes better than we play football these days, but that is another story.
  For once, I find myself supporting a Government motion. It seems to be eminently sensible. I will not repeat the qualifications and proper reservations which have already been expressed.
  I agree with the hon. Member for Derbyshire, South about the crucial importance of biotechnology to the future of medicine. There is a revolution in primary health care. The Health Service, at local level, through the general practitioner's surgery, can meet many of the demands which hitherto were considered to require specialist treatment of a more exclusive type — I use that word advisedly. The revolution has been made possible by the growth and development of biotechnology techniques.
  It makes good common sense to have as free an internal market in Europe as possible, consistent with the maintenance of adequate health and safety levels.
  It is important to stress that, in drawing up these directives and the accompanying material, the Commission has said that the
  "most recent Directive (83/570/EEC) will lead towards the establishment of a genuine common market for medicinal products by evolutionary process, but that medicinal products derived from biotechnology and other forms of advanced technology cannot wait."
  The hon. Member for Derbyshire, South referred to the briefing, which we both attended, on some of the developments that are taking place. It is evident from the expert and informed opinion of the British companies involved that there is some urgency. I echo what the hon. Member for Derbyshire, South and the companies have said to the Department and I trust that the Minister will make satisfactory progress. We shall certainly give him support.
  I am glad that the Government are welcoming the continuing progress towards removing the remaining barriers to trade between member states in the Community. In that respect, I support these measures.
  With regard to research and development, reference has been made to the general concerns of the United Kingdom industry. At a recent annual dinner which some of us attended, the Minister for Health laid great stress on the tremendous contribution which the pharmaceutical

  1015
  industry makes to research and development, and to exports. That is correct, and I hope that the Government will see their way to negotiating with the industry a better deal on potent life. That would enable a better deal for the industry and permit greater opportunities for the research taking place in Britain to remain a domestically based development capacity and, therefore, an export potential. In the past, patents have passed on to North America or Europe at the expense of the British economy and developments.
  Subject to the obvious expressions of concern about the maintenance of adequate standards of health and safety for the public, we welcome these proposals.
  11.9 pm
  Mr. Roger Sims: We have a successful and innovative pharmaceutical industry. To the extent that these proposals will enable and facilitate the development and marketing of products in the Community, they are very much to be welcomed.
  I am worried, however, that in the earlier memorandum, dated 3 October, among the items which the Department described as "Controversial Elements" was
  "(e) The security of commercially confidential information."
  This is clearly an important matter. Although, once established, a product may be protected by patent, information might have to be passed under these proposals before the patent application has gone through. We know from experience that there are some not too far away from these islands who are quite likely to steal information and use it. A product and enormously expensive research by British firms could be seriously undermined.
  In the later memorandum, dated 8 May, we are simply told:
  "We are satisfied with the progess of discussions in Brussels so far on all the features listed in"
  the previous memorandum. That seems a rather vague reference to this all-important matter of the security of commercially confidential information. I wonder whether, in winding up or later, my hon. Friend will assure me and the industry that the matter has been covered fully and that his officials are satisfied that the earlier reservations have been met.
  11.11 pm
  Mr. Whitney: With the leave of the House, I should like to reply to the debate.
  This has been a short but interesting and informative debate. I assure the House that any suggestion that British standards will be limited or degraded by these measures is unjustified. Our standards will unquestionably remain as high as they are at present. The arrangements for determining responsibility for how drugs may be marketed will also remain in force. Whatever arrangements might be proposed to remove remaining barriers to trade between member states by 1992, we shall insist on retaining the right to deal with medicine in a way which suits United Kingdom conditions if we consider such action to be necessary.
  Mr. William Cash: Could I have my hon. Friend's assurance that there is nothing in the directive—
  Mr. Deputy Speaker (Mr. Harold Walker): Order. the hon. Gentleman has just walked into the Chamber. He has not heard anything of the Minister's speech or that of any other hon. Member. I hope that he is not trying to reopen matters that he could well have understood if he had been here at the beginning of the debate.
  Mr. Whitney: Thank you, Mr. Deputy Speaker. If my hon. Friend has any misgivings, no doubt we can exchange correspondence on the matter.
  The hon. Member for Wrexham (Dr. Marek) asked about testing procedures in other countries and whether they are as high as in Britain. The UK licensing authority will continue to have the benefit of the expert independent committee, the Committee on Safety of Medicines, which will continue to examine critically all the scientific evidence to satisfy itself about the safety, quality and efficacy of products for which licences have been applied for.
  My hon. Friend the Member for Chislehurst (Mr. Sims) asked about commercial secrecy in consequence of applying the obligatory consultation procedure, in addition to the usual protection offered by the requirement imposed on the participants in relevant Community committees. There is also the additional protection that is offered in the fourth directive, with which I dealt in my opening speech, of the 10-year indirect protection for the original licence holder of scientific data needed to support an application. This would prevent someone who obtained confidential information about a product from using it to obtain marketing authorisation for a copy product.
  We also had our own worries in the context of confidentiality about the reference to the use of
  "ad hoc groups of experts or highly qualified outside consultants."
  However, when we explored this matter in discussions we found that it was a semantic difficulty and that what the Commission had in mind was no different from the existing CPMP and CVMP arrangements. Confidentiality continues to be of great importance, and I assure my hon. Friend that we shall watch the matter with extreme care.
  Concern was expressed by the hon. Member for Wrexham about the Government's right to revoke licences. It would be unacceptable if the effect of any of these proposals were to delay the removal of what might be a public health hazard—for example, a medicine that was shown to have unacceptable side effects. The revised text that is now before us makes provision for emergency action, when necessary, without prior consultation. We are now fully satisfied with the arrangements.
  I have covered most of the main points. In particular, I hope that I have covered the points raised in the, as always, impressive contribution of my hon. Friend the Member for Derbyshire, South (Mrs. Currie). If I have not covered all her points, I shall seek to do so in correspondence.
  The hon. Member for Wrexham quite properly ended his remarks by asking whether these measures will increase public confidence and encourage research and development and whether they will make a beneficial contribution to reducing the use of animals in testing and promoting greater interchange in the pharmaceutical industry within the European Community. I give the House an unqualified assurance on all those points.
  These are sensible measures. They will help in the creation of a common market within the European

  1017
  Community, at the same time maintaining standards in the crucial areas of pharmaceutical and veterinary products.
  Therefore, I commend the documents to the House.
  Question put and agreed to.
  Resolved,
  That this House takes note of European Community Documents Nos. 9630/84 and 5752/86, proposals for draft Directives and a Recommendation, and Amendments to the proposals, on the marketing and testing of medicinal products, and of the supplementary explanatory memorandum from the Department of Health and Social Security dated 8th May 1986; endorses the aim of strengthening biotechnology in respect of medicinal products within the Community; and welcomes continued progress towards removing the remaining barriers to trade between member States, whilst fully protecting public health.

  Medicinal Products

    BUSINESS OF THE HOUSE
    Ordered,
    That, at the sitting on Thursday 19th June, notwithstanding the provisions of Standing Order No. 3 (Exempted business), if proceedings on the Motions in the name of Mr. Secretary King relating to the draft Northern Ireland Assembly (Dissolution) Order 1986 and the draft Northern Ireland Act 1974 (Interim Period Extension) Order 1986 have not been previously disposed of, Mr. Speaker shall at Eight o'clock put forthwith the Questions thereon.—[Mr. Neubert.]

  "The Observer"
  Motion made, and Question proposed,That this House do now adjourn.—[Mr. Neubert.]
  11.17 pm
  Mr. Tim Smith: I am grateful for the opportunity to raise this evening the subject of the appointment and role of the independent directors of The Observer newspaper.
  On 9 July 1981, my right hon. Friend the Lord Privy Seal, who was then Secretary of State for Trade, gave his consent under section 58 of the Fair Trading Act 1973 to the transfer of The Observer newspaper from the Atlantic Richfield Company to George Outram and Co. Ltd., a subsidiary of Lonrho plc. He had received an application for his consent on 27 March 1981 and, as required by section 59 of the Act, he had referred the matter to the Monopolies and Mergers Commission for investigation and report. By a majority of seven to one the Commission decided to recommend that Lonrho be permitted to acquire The Observer, subject to certain conditions. The dissenting member, Dr. R. L. Marshall, concluded that:
  "In particular the crucial relationship between editor and chief officer is too close, subtle and continuous to be subject to control by third parties, or amenable to effective mediation by them in circumstances where the trust and mutual forbearance on which their relationship is ultimately based has broken down under the strain of a legitimate clash of interest. Accordingly I do not believe that the proposed safeguards would be effective."
  I believe that Dr. Marshall was right and that the safeguards have been ineffective. The safeguards were that five independent directors should be appointed to the hoard of The Observer and that the articles of association of The Observer should be altered in certain respects.
  Among others, there were to be requirements that the editor of The Observer should retain control over all content of the newspaper and over any political comment published in it, and should not be subject to any restraint or inhibition in expressing opinion or in reporting news that might directly or indirectly conflict with the opinion or interest of any of the newspapers proprietors of The Observer. Any dispute concerning these or certain other matters between the editor of The Observer, the directors of The Observer Ltd. or the directors of its holding company was to be referred to the independent directors, and their decision was to he final and binding.
  I believe that subsequent events have shown these conditions to be inadequate in two respects. First, while they envisaged a situation in which the editor might be restrained from reporting news which conflicted with the proprietor's commercial interest, they did not envisage a situation in which the editor might be encouraged to report news which furthered the proprietor's commercial interest. Secondly, the independent directors were given a positive role only in the event of a dispute between the editor and the directors. But if the editor and the directors" or a director, were acting in collusion, no positive role was specifically given to the directors.
  It appears that the independent directors have, in effect, regarded these conditions as the terms of reference of their appointment and have chosen to interpret them narrowly. It is true that they meet together regularly as a group. It is true also that they meet the editor and the staff regularly independently of the other directors. I believe, however, that they go along to hear what the editor and the staff

  1019
  have to say rather than to raise issues with them. I suspect that this is because they see their role as one of protecting the editor and his staff from the proprietor. They feel constrained by their terms of reference and are inclined to overlook the fact that they also have all the responsibilities of any company director. If they were to interpret their role in a less restrictive fashion, they would perhaps see that it is not their job to protect the editor regardless of his quality, and that it is their job to take a more active interest in the editorial policy of the paper and in the commercial aspects of the business. They should be as aware as any other director of their ultimate responsibility to the shareholders of Lonrho and wary of the possibility that the proprietor might be more interested in using The Observer to further his particular interests than in making a commercial success of it.
  I have two examples to support my case. The first occurred in April 1984 when, following a visit to Zimbabwe, the editor wrote a story about Zimbabwe security force atrocities in Matabeleland. The chief executive of Lonrho, Mr. Tiny Rowland, subsequently wrote the Prime Minister of Zimbabwe, Mr. Robert Mugabe, a letter of apology. He said that his editor had been discourteous, disingenuous and wrong. His story was not substantiated and not based upon any research.
  As there was a clear dispute between the editor and at least one director, the independent directors were able to intervene. They concluded that Mr. Rowland's criticisms constituted an inhibition, if not a restraint, on the editor's freedom and improper proprietorial interference in the accurate presentation of news and free expression of opinion. Mr. Rowland's response to this was to reduce the fees of the independent directors from £4,000 to £1,000. He described them as "troglodytes" and said that they had served no useful purpose.
  The second example is current and concerns the House of Fraser plc. I think that it is well known that for many years Lonrho had hoped to acquire this company. In November 1984, Mr. Rowland agreed to sell Lonrho's 29·9 per cent. shareholding in the company to Al Fayed Investment and Trust (UK) Ltd., a company owned by the Fayed brothers. This enabled them, in March 1985, to launch a successful bid for the company.
  Since then, The Observer has run a succession of stories to the effect that the Sultan of Brunei financed the Fraser purchase. The most recent appeared on 18 May. It claimed that powerful new evidence had emerged that Mark Thatcher visited Brunei with Mohammed Fayed at a crucial time in the Harrods takeover battle. It said that The Observer was in possession of a certificate signed by the former permanent secretary in the Ministry of Home Affairs in Brunei confirming the visit.
  The story alleged that the two men flew in Fayed's private jet on 24 October 1984 and left two days later. It said that that was just a week before the Monopolies and Mergers Commission's report into Lonrho's bid to buy the House of Fraser was delayed for three months. According to the story, the Egyptian Fayed brothers used that time to acquire the group with the help of the sultan's millions. The story was written by a staff reporter.
  In relation to a previous story in January, also written by a staff reporter, the UK Press Gazette commented that it had been written or "pulled together" by the editor himself. It said:
  1020
  "Why him? Because it came to the paper through the proprietor, 'Tiny' Rowland, a fierce business rival of Fayed's."
  The story on 18 May made a number of other claims. I believe it to be largely a fabrication. I believe the certificate to be a forgery. I have seen a statement signed by the permanent secretary in the Ministry of Home Affairs on 2 June in which, he declares that the certificate is an outrageous forgery and that
  "it is an absolute lie to suggest that I am the author of that document."
  Can it be just a coincidence that it is The Observer, owned by Lonrho, which has been running this series of stories and that other newspapers have hardly touched it? Perhaps it is. Writing in The Sunday Times of 11 August last year, Ivan Fallon reported that most Fleet Street newspapers, including The Sunday Times, had investigated the allegations without finding any link between the vast wealth of the sultan and the Harrods takeover. The Mail on Sunday of the same date went further and claimed that a letter purporting to be from the sultan to Mohammed Al Fayed and on which a story in The Observer of 28 July had been based was a forgery. I am convinced that it is not a coincidence that The Observer has been running such stories. I am satisfied that they are largely untrue.
  The matters were inquired into by the Director General of Fair Trading last year. Mr. Rowland claimed that he had evidence to support those assertions, but, in response to a request from the Director General, he declined to make it available. Nevertheless, the Director General inquired into the assertions. He was given information which satisfied him that none of the assertions was well-founded.
  I am sorry that, in those circumstances, the directors of The Observer are either unable or unwilling to prevent Mr. Rowland from pursuing his personal vendetta against the Fayed brothers. It seems to me that, in circumstances in which such claims are made, the independent directors of The Observer in particular ought to be able to intervene. They feel unable to do so, however, on the ground that there is no dispute between the proprietor and the editor. On a strict interpretation of their terms of reference, they may well be right. That is why l believe those terms of reference to be defective.
  In a recent article in the Spectator, Paul Johnson drew attention to the fact that The Observer is also subject to censorship by the unions. He reported that the print unions had recently told the editor that he must not print a review in the paper's literary section by Bernard Levin. Levin has a freelance contract with the The Times and writes passionately in support of individual freedom and democracy in the unions.
  The editor decided not to publish the Levin review. Readers of The Observer were given no indication that they were buying a union-censored newspaper. Mr. Johnson argued that the danger in such cases is not only that a weak editor submits to blackmail—in this case he had been given an ultimatum "Put in Levin and you will not have a paper" — but that he almost unconsciously begins to do what he thinks the bully boys want him to do, without their even having to ask.
  An even more serious danger for The Observer, Mr. Johnson continued, was that its proprietor, seeing the way things were going, would take advantage of editorial weakness. He said that a man such as Rowland does not mind the unions getting their way on the bits of the paper

  1021
  which concern them, so long as he too gets his way on the hits of the paper which concern him. But between the pair of them, there is not much left of the newspaper's old independent voice. Perhaps it would be fairer to readers to print under the newspaper's masthead the slogan
  "Owned by Lonrho and censored by the unions".
  Union censorship should, of course, be the concern of all the directors, but perhaps here, too, the independent directors feel unable to intervene because there is no dispute between the proprietors and the editor. My conclusion is that they should approach their task in a more positive and less circumspect manner. However, if they genuinely feel constrained by their terms of reference, those terms should be extended so that it becomes clear beyond doubt that, in the context of The Observer, it is their responsibility to defend and uphold the freedom of the press.
  I put it to my hon. Friend the Minister that these matters should now be examined as part of the Government's review of competition policy. Sections 57 to 62 of the Fair Trading Act 1973 deal with newspaper merger references. Consideration might be given to the possibility of allowing the Secretary of State to impose conditions going beyond those recommended by the Monopolies and Mergers Commission. More importantly, consideration should be given to the kind of conditions attaching to a consent to the transfer of a newspaper that would prove effective in practice. Mr. Rowland has made a laughing stock of the existing policy, and the review of competition policy is therefore most timely.
  11.31 pm
  The Minister for Information Technology (Mr. Geoffrey Pattie): I thank my hon. Friend the Member for Beaconsfield (Mr. Smith) for drawing attention to this topic. I shall begin by explaining the role and responsibility of my right hon. Friend the Secretary of State in this matter, which is very limited. I shall then go on to refer briefly to some of the specific criticisms that my hon. Friend has raised.
  My right hon. Friend has a role in the transfer of ownership of newspapers because of his responsibilities under the Fair Trading Act 1973. This legislation contains special provisions relating to newspaper mergers. These differ from those applying to the generality of mergers. These provisions spring from the 1962 report of the Royal Commission on the press. This concluded that action should be taken to regulate the increasing concentration of newspaper ownership, which could threaten the freedom and variety of expression of opinion, and which might, in extreme circumstances, threaten the unbiased presentation of news.
  The Act provides that the transfer of a newspaper to someone who already owns newspapers requires the Secretary of State's consent. Consent is required if the combined paid-for circulation of those papers is 500,000 or more, or if the transfer increases the combined paid-for circulation above 500,000. A transfer without the Secretary of State's consent when consent is required is void and unlawful. It is also a criminal offence.
  Except in closely defined circumstances, my right hon. Friend must refer any application for consent for a transfer to the Monopolies and Mergers Commission for investigation and report. In making its investigation and report, the commission considers whether the transfer would be expected to operate against the public interest,
  1022
  taking into account all matters which appear in the circumstances to be relevant and, in particular, the need for accurate presentation of news and free expression of opinion.
  In considering whether to give his consent, the Secretary of State must have regard to the report of the commission, but he is not bound to follow it. He may give unconditional consent to the transfer, or he may impose conditions.
  I turn now to the application of these arrangements to the case of The Observer. In 1981,The Observer was owned by the Atlantic Richfield Company. Lonhro plc applied to my right hon. Friend's predecessor for consent to the proposed transfer of The Observer to its wholly owned subsidiary, George Outram and Co. Ltd. That subsidiary already owned newspapers—the Glasgow Herald and the Glasgow Evening Times. Another Lonhro subsidiary, Scottish and Universal Newspapers Ltd. was then publishing 23 local weekly and bi-weekly newspapers in Scotland.
  None of the closely defined exceptions permitting the Secretary of State's consent without a reference to the Monopolies and Mergers Commission applied in this case. These exceptions have to do with the economic viability of newspapers as going concerns and urgency. The matter was referred to the Monopolies and Mergers Commission for investigation. The commission's report, published in June 1981, concluded that, if the transfer were made subject to conditions described in the report, it might be expected not to operate against the public interest. The commission recommended that consent to the proposed transfer should not be given unless those conditions, designed to safeguard editorial independence, were attached to it.
  The commission's role in newspaper mergers is purely advisory. As I have said, it is for my right hon. Friend the Secretary of State to give, or to withhold, consent to a transfer and to impose whatever conditions he—and I stress he — thinks fit. In the case of The Observer he accepted in principle the commission's recommendations But he thought it right, before he finalised his conditions, to give interested parties an opportunity to comment. He was particularly concerned that the conditions which were to be imposed should be no more than the minimum necessary to safeguard editorial independence, and to permit the running of The Observer with the smallest degree of interference from outside authorities.
  In the event, the conditions that my right hon. Friend's predecessor decided to impose following these consultations with interested parties differ from those suggested by the Monopolies and Mergers Commission. The purpose of the conditions actually imposed was to secure the independent position of the editor in determining the content of the newspaper. This was achieved by requiring amendments to the articles of' association of Observer Ltd., the company which is the direct owner of the newspaper. The articles were further required to provide that the editor should not be subject to restraint in expressing opinion or reporting news that might conflict with the opinion or interest of the proprietor. His control over the journalistic staff of the newspaper would be set out. The articles would, in addition, provide for five independent directors, who would have the special responsibility for resolving any disputes on matters of editorial independence between the editor and the directors of Observer Ltd. or its parent companies,

  1023
  including Lonrho. The consent of the majority of these directors would also be required for the appointment or dismissal of the editor and of any of the independent directors themselves.
  Other conditions ensured that these arrangements should continue if The Observer were to be transferred within the Lonrho group as the result of a company reorganisation, and provided for consultation with the board of Observer Ltd., if Lonrho proposed to dispose of The Observer outside the group at a future date. These articles of association may not be altered in any way affecting the requirements as to editorial independence without the consent of the Secretary of State.
  As I have said, the object of these conditions was to ensure that the editorial independence of a newspaper—an important and distinguished national newspaper —such as The Observer, was safeguarded against any danger of undue influence from its proprietor. The conditions were also intended—and I make no bones about this—to ensure that the policing of this editorial independence was removed from the political arena. This was clear from the statement made in the House on 9 July 1981 by my right hon. Friend the Member for Shropshire North, (Mr. Biffen), now the Leader of the House. I think that it would be quite wrong—and I have little doubt that this would be widely supported on both sides of the House—that Ministers should interfere in day-to-day matters affecting the editorial policy of great national newspapers. I have little doubt that my hon. Friend the Member for Beaconsfield, as well as hon. Members on both sides of the House would be the first to complain if Ministers started interfering in these matters. If Ministers started interfering they would no doubt do so in the name of editorial freedom. But there is a narrow line between that and ensuring or preventing the publication of views or facts of which they approve or disapprove.
  Against that background, the role of my right hon. Friend, as I said earlier, is limited. He has a role to play if the conditions to the consent are broken but only if they are broken. The conditions, as I have said, required the articles of association to be altered in certain ways. The articles were amended in those ways. I am aware of no evidence which suggests that the articles had been further amended without my right hon. Friend's consent in circumstances when such consent was required. Nor have I any evidence that The Observer has been transferred to another member of the Lonrho group without my right hon. Friend's consent.
  It is only these matters which amount to a breach of the consent. Within the framework created by the amended articles of association, the operation of the arrangements directed at editorial independence is a matter for the independent directors, and not one for my right hon. Friend. It is up to the independent directors to agree to any dismissal or appointment of an editor. Any dispute between the editor and the proprietor is to be referred to them. The way in which they discharge these responsibilities is a matter for them and not for my right hon. Friend.
  My hon. Friend the Member for Beaconsfield has described a series of stories in The Observer about Lonrho's attempted takeover of the House of Fraser and the eventual takeover of that company by the Al Fayed brothers. He has described the accounts given in that
  1024
  newspaper about the alleged role in those matters of my right hon. Friend the Prime Minister, members of her family, my right hon. Friend the Chancellor of the Duchy of Lancaster and others. I need say only that my right hon. Friends have made it clear that the allegations in The Observer that they behaved improperly are unfounded. Others who are mentioned in these stories may wish to take legal advice about the remedies open to them in the courts. That is a matter for them and not for me.
  My hon. Friend the Member for Beaconsfield has suggested that the appearance of these stories in The Observer means that the editor has taken instructions from the proprietor on editorial matters. He suggests that this shows that the arrangements for editorial independence established by the consent given in 1981 are inadequate. He says that the independent directors can intervene only when a matter is referred to them; and that they cannot volunteer their good offices. He says that this is a weakness. He says that the proprietor is letting the paper lose money; and that the independent directors should play a more active role in the development of the paper's commercial policy.
  These are all matters for the independent directors, not for my right hon. Friend the Secretary of State. In order for an editorial dispute to be referred to the independent directors, there has to be a dispute: and either the editor or the proprietor must acknowledge the existence of such a dispute and refer it. If one or other of them does not do so—and I say if, because I do not know whether in any particular set of circumstances one or the other has not acknowledged the existence of a dispute — that is his decision and not mine. Any set of arrangements of this kind will depend for its effectiveness on the readiness of the individuals governed by it to make use of it. There is nothing that I or my right hon. Friend can or should do to oblige them to make use of it, if and I repeat if, they choose not to do so.
  As my hon. Friend the Member for Beaconsfield knows, my right hon. Friend the Secretary of State has no power to change these arrangements. His consent was applied for under the Fair Trading Act five years ago and was duly given. The matter has been dealt with and was discussed in the House at the time. My right hon. Friend has no powers to reopen the matter or to refer it at this stage to the Monopolies and Mergers Commission. The transfer has taken place. The conditions are being complied with. I have no evidence that they have been broken.
  My hon. Friend the Member for Beaconsfield expresses the hope that in a future case of this kind, tougher arrangements will be made to ensure editorial independence. I do not accept that the existing arrangements are inadequate. He will understand that I will not be tempted into committing my right hon. Friend's attitude on a future occasion.
  Mr. D. N. Campbell-Savours: Will the Minister give way?
  Mr. Pattie: No.
  Mr. Campbell-Savours: Why will not the Minister answer questions on this matter?
  Mr. Pattie: I can assure my hon. Friend the Member for Beaconsfield that in any future case where editorial independence is a vital element in our decision, we will

  1025
  ensure that appropriate arrangements are made to balance that consideration against the need for the newspaper concerned to flourish profitably.
  11.42 pm
  Mr. D. N. Campbell-Savours: I rise only briefly to intervene, although there are five minutes left in which to debate this issue.
  I condemn the action of the hon. Member for Beaconsfield (Mr. Smith) in raising this debate. The only reason for it is that an attempt is being made by Conservative Back Benchers and Government Ministers to silence The Observer over the whole question of the takeover of Harrods by the Al Fayed brothers.
  During the past four months, The Observer has repeatedly levelled accusations, yet none of them has been answered. Letters have been sent to the Prime Minister by The Observer and also by Mr. Rowland. Despite what the Minister said, there have also been repeated references in other organs of the press. The Prime Minister has refused to answer. The Order Paper is effectively blocked. Questions are being asked about the role of Sir Gordon
  1026
  Borrie, the Director General of Fair Trading, as to why he was willing to give permission for the takeover. He was in a crucial position, because he read the submission by Kleinwort Benson.
  Much controversy surrounds the nature of the statements that the company has made on the matter. The House tonight is seeing a disgraceful attempt to shackle The Observer in a legitimate campaign that it is carrying out. If The Observer is wrong, Ministers should answer the questions. If there is a full and complete statement from the Dispatch Box by the Government on all the circumstances surrounding the takeover of Harrods, the whole matter can be brought to an end. But until that statement is made, The Observer will legitimately raise questions of public concern and hon. Members are entitled to persist in asking questions orally on the Floor of the House because the Order Paper is effectively blocked on this important matter.
  Question put and agreed to.
  Adjourned accordingly at fifteen minutes to Twelve o'clock.

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  Drug Offences
  Drug Offences
PRIME MINISTER
  British Pensioners (Canada)
  British Pensioners (Canada)
  Lance-Corporal Simon Cockton
  Lance-Corporal Simon Cockton
  Legal Aid Funding
  Legal Aid Funding
  Hurn (Visit)
  Hurn (Visit)
  Parking Fines
  Parking Fines
  Engagements
  Engagements
EDUCATION AND SCIENCE
  Universities (Funding)
  Universities (Funding)
  Hemel Hempstead School (Ministerial Visit)
  Hemel Hempstead School (Ministerial Visit)
  Secondary Schools
  Secondary Schools
  Select Committees
  Select Committees
  Certificate of Pre-vocational Education
  Certificate of Pre-vocational Education
  Higher Education
  Higher Education
  Teachers
  Teachers
  Students
  Students
NORTHERN IRELAND
  Inter-governmental Conference (Maryfield Secretariat)
  Inter-governmental Conference (Maryfield Secretariat)
  Asbestos
  Asbestos
  Investment
  Investment
  Higher Education
  Higher Education
SOCIAL SERVICES
  NHS Central Register
  NHS Central Register
  Benefits (Fraud)
  Benefits (Fraud)
  Health Records (Law Enforcement)
  Health Records (Law Enforcement)
  Health Authorities (Computer Records)
  Health Authorities (Computer Records)
  Cross-boundary Charging
  Cross-boundary Charging
  British Pensioners
  British Pensioners
  Hospital Closures
  Hospital Closures
  Ancillary Services (In-house Contracts)
  Ancillary Services (In-house Contracts)
  Severe Weather Payments
  Severe Weather Payments
  Departmental Staff
  Departmental Staff
  Heart Patients (Deaths)
  Heart Patients (Deaths)
  Ambulance Service (Bromley)
  Ambulance Service (Bromley)
  Baby Care Units (North-Western Region)
  Baby Care Units (North-Western Region)
  Capital Projects
  Capital Projects
  Angioplasty
  Angioplasty
  Motor Neurone Disease
  Motor Neurone Disease

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

British Rail: Status
Lord Beloff: 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 have any plans for changing the status of British Rail.
Viscount Davidson: No, my Lords.
Lord Beloff: My Lords, while thanking my noble friend for that extraordinarily informative reply, may I ask him whether he is aware of the steady deterioration of services on Southern Region? Perhaps I may give him the example that a journey from Oxford to Brighton, which used to be by through-train taking two hours 20 minutes, now involves two changes of train and is timed to take four hours? May I further ask the noble Viscount whether he is aware of a continuous and expensive publicity campaign by British Rail to dress up deteriorating services as though they were improved services? Finally, does the noble Viscount agree with me that to call Southern Region Network South East only makes sense on the assumption that a net is something in which you catch helpless commuters?
Viscount Davidson: My Lords, I am sure that those concerned in British Rail read Hansard and they will take note of everything that my noble friend has said. I do not think I can comment further than that.
Lord Jacques: My Lords, is the noble Viscount aware that I use the southern network daily and I can say that the services, particularly between my station, Westminster and London, have improved immensely and are not likely to be further improved by any idea of privatisation?
Viscount Davidson: My Lords, I am not aware of the actual line on which the noble Lord travels; but I am delighted to hear that he thinks that services have improved. I should like to say that the Government are extremely keen on privatising certain areas of British Rail, particularly in the catering field. Since May, train catering has come under Inter-City management, and British Rail are spending £12 million in switching to high quality at-seat catering with food services supplied by the private sector. I think that noble Lords who use British Rail will agree with the noble Lord, Lord Jacques, that catering services have improved dramatically since they have been tendered out to the private sector.
Lord Campbell of Croy: My Lords, my noble friend Lord Beloff referred to a journey between Oxford and Brighton. I do not expect my noble friend on the Front Bench to have statistics with him, but could the answer perhaps be that nowadays there are fewer demands by dons and others for journeys to Brighton than there were in the past?
Viscount Davidson: My Lords, I think that my noble friend is probably quite right.
Baroness Seear: My Lords, may I ask the noble Viscount whether the privatisation of catering services that he mentioned has extended to the buffets? As a practically permanent traveller on British Rail I have not noticed the slightest difference in the food at the buffets. They have the same sandwiches.
Viscount Davidson: My Lords, I do not know where the noble Baroness finds the old British Rail sandwich, but I am told that it is fast disappearing and is being replaced by a very modern and very tasty one.
Lord Broxbourne: My Lords, whatever may be the view of my noble friend about the status of British Rail, will he use his formidable and not necessarily monosyllabic eloquence to persuade them to take a more positive view about improving the performance of their railway lines and consequently their image? Can he get them to realise that their present, somewhat narcissistic practice of congratulatory self-contemplation is not enough? Will he urge them to substitute action by way of improving the position for the travelling public, in particular at stations, by improving the cleanliness and conditions, by the use of an increased supply of porters and luggage trolleys, and even perhaps by having a few seats for the accommodation of patient and weary travellers to save them from despondency and despair?
Viscount Davidson: My Lords, to answer my noble friend's polysyllabic question, I take note of what he says.
Lord Underhill: My Lords, is it not the case that there is always room for improvement and are not British Rail one of the least publicly supported railway networks in Western Europe, particularly in contrast to those of Germany and France? If the purpose behind the question of the noble Lord, Lord Beloff, is privatisation, is it not also the case that the only undertakings that the Government dispose of are those which are a success, usually as a result of the work put in by public ownership?
Viscount Davidson: My Lords, noble Lords will remember that British Rail has already privatised Sealink Ferries, 29 hotels, the hovercraft business and over £400 million of surplus property. British Rail attracts a grant of £800 million a year and is doing its very best to attract more and more customers by using private methods and private contracts.
Lord Taylor of Gryfe: My Lords, does the Minister agree that the deterioration in the service of British Rail may be due to the old rolling stock that exists? Is it consistent with maintaining an efficient railway

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system when substantial redundancies are declared in the railway maintenance workshops?
Viscount Davidson: I seem to remember, my Lords, that when I last answered a Question on the subject I was able to tell your Lordships that British Rail was introducing a whole range of new railway stock over the next few years.
Lord Beloff: My Lords, may I hasten to assure the Minister and ask him whether he is aware that I certainly had no idea of privatisation in mind when I asked my original Question? I was cured of any interest in privatisation by his noble friend's defence of British Telecom. I should like to ask the Minister whether he will suggest to his right honourable friend that, as part of the Channel tunnel deal, the French railways which run very well take over the whole of Southern Region.
Viscount Davidson: My Lords, I shall tell my right honourable friend of my noble friend's suggestion.
Lord Strabolgi: My Lords, is it not true that the French railways run very well because they are subsidised by their government?
Viscount Davidson: I think, my Lords, that that is a matter of opinion.
Lord Elwyn-Jones: My Lords, in relation to the noble Lord's first supplementary question, who wants to go to Oxford anyway?
Viscount Davidson: My Lords, the noble and learned Lord and I both had the good fortune to go to another place, and so I would agree with him.
Baroness Faithfull: My Lords, does the Minister know that I wish to go to Oxford? I live there.
Viscount Davidson: Maybe, my Lords, but my noble friend does not want to go from Brighton.
Lord Somers: My Lords, is the noble Viscount aware that the Swiss railways, which are perhaps the most efficient in the world, run perfectly happily with a partly private but chiefly nationalised system?
Viscount Davidson: My Lords, I am grateful to the noble Lord.

Foodstuffs: Radioactive Contamination
2.45 p.m.
Lord Bruce of Donington: 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 aware of the widespread anxiety concerning the possibility of the radioactive contamination of foods, including liquids, and their sale to the public; and whether they will take steps to secure the effective monitoring of such foods, including those imported prior to their being offered for sale.
The Minister of State, Ministry of Agriculture, Fisheries and Food (Lord Belstead): My Lords, in order to ensure that there is no risk to the safety of food in the United Kingdom from radioactive contamination, we have set up an extensive monitoring programme of milk and other foodstuffs, including those imported from abroad. The purpose of the monitoring is to ensure that there is no risk to consumers from food on sale in the United Kingdom. Our monitoring programme will continue for some time yet.
Lord Bruce of Donington: My Lords, is the noble Lord aware that his reply will give some measure of reassurance to the public at large? But can he say how extensive is the monitoring? As equipment to monitor radioactive substances is comparatively cheap, might not an extension of the network to an extent which we cannot yet know of be desirable? Will he indicate whether the monitoring procedure covers fish taken from the Irish Sea?
Lord Belstead: My Lords, there has been monitoring of milk, vegetables and meat since the Chernobyl disaster. The monitoring of milk and meat is continuing. The results of the monitoring efforts have been published as frequently as has been possible, in particular on 6th, 10th and 15th May, with a publication recently on 30th May. With regard to the Irish Sea, as a matter of habit the Ministry of Agriculture has monitored the areas around nuclear power stations. The reason that the public hears nothing about that is that there has been nothing to report.
Lord Molloy: My Lords, is the noble Lord aware that what he said in reply to my noble friend's question about monitoring is very welcome? But what steps will be taken if it indicates serious contamination of foodstuffs? What warning will be given? How will foodstuffs be withdrawn from stores and how will other contaminated foodstuffs be prevented from finding their way on to the table of the ordinary family?
Lord Belstead: My Lords, we shall continue to monitor and to publish the results.
Lord Winstanley: My Lords, although I wish to underline the importance of the matters referred to in the Question, may I ask the Minister to seize this opportunity to tell the British public that the principal sources of radiation to which they are exposed come not from the sources referred to but from diagnostic X-rays, many of which are performed not for necessary clinical or medical reasons but for medico-legal and other extraneous purposes? Will he ensure that patients are told that they are not serving their best interests when they press their GP to send them for unnecessary X-rays and that GPs in their desire to be helpful are not serving the best interests of their patients if they accede to such requests?
Lord Belstead: My Lords, I am extremely interested to hear that, but it is a matter for the medical profession.

Sports Premises: Rating Anomalies
2.49 p.m.
The Earl of Dundee: 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 are their immediate plans, prior to the proposed reform of the rating system, to remove or mitigate the existing anomalies between Scotland and England in rating valuations of sports club properties.
The Minister of State, Scottish Office (Lord Gray of Contin): My Lords, the Government are aware that there are some differences in valuation practice between Scotland and England, but harmonising the two independent systems will take time. However, statute already gives rating authorities discretion to remit part or all of the rates payable by non-profit organisations like sports clubs, and when my right honourable friend the Secretary of State for Scotland meets the Convention of Scottish Local Authorities next month, he intends to discuss with it its use of this discretion.
The Earl of Dundee: My Lords, I thank my noble friend for that reply. Does he accept that if the existing arrangements for the derating of Scottish amateur sports clubs are not soon improved, opportunities for sport and recreation in all Scottish communities will suffer a great deal? Does he further agree that the Scottish Office and CoSLA should try to persuade all local authorities to adopt the practice in which Fife Regional Council has recently indicated that it may take a lead, of a 50 per cent. derating for all sports clubs meeting a certain definition but regardless of whether they are licensed premises?
Lord Gray of Contin: My Lords, I am most grateful to my noble friend for what he has said. I shall certainly communicate it to my right honourable friend in view of the meeting that he is soon to have with the local authorities. We must always be careful to compare like with like. We must bear in mind that south of the Border rateable values of English clubs are still expressed in terms of the level of rents at the time of their 1973 revaluation. We must bear in mind that Scotland has had two revaluations since then and all types of property in Scotland have on average increased almost eightfold.
Lord Taylor of Gryfe: My Lords, may I press the noble Lord the Minister about his promise to iron out some of the anomalies in the respective rating systems in Scotland and England? Is he aware that the Exxon Company opened a £400 million ethylene plant in Fife last week and that the local authority has imposed on it a rates burden of £10 million per annum? The firm has said that that is four times the amount of rates it would have to pay if that factory had been situated south of the border? Can the noble Lord the Minister give me some assurance that those disincentives to investment will be taken care of in any new statutes?
Lord Gray of Contin: My Lords, the noble Lord, Lord Taylor of Gryfe, as he so often does, has hit on
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a very important point. It is for reasons such as those that he has described that the Government have produced a Green Paper Paying for Local Government. We are already well advanced with our proposals of how that might be achieved in Scotland.
Baroness Carnegy of Lour: My Lords, is the noble Lord the Minister aware that the extraordinary rate anomaly that exists, despite the fact that there has not been a revaluation in England since long before the revaluation took place in Scotland, results in the Perthshire Cricket Club, which is situated in a local authority-owned park, paying £18,500 per annum in rates whereas Lords Cricket Club in London pays only £22,000? Is he further aware that Lanark Bowling Association has a rateable value of £22,500 while a similar stadium erected at about the same time but in Carlisle is valued at only £2,000—one-eleventh of that amount?
Lord Gray of Contin: My Lords, yes I can confirm to my noble friend that I am aware of those and many other anomalies which are revealed in the different systems north and south of the Border. I reiterate what I said to the noble Lord, Lord Taylor of Gryfe—that that is one of the reasons why the Government are determined to press ahead with a complete review of the system.
Lord Carmichael of Kelvingrove: My Lords, is the noble Lord the Minister aware of the excellent adjournment debate that was held in the other place on 19th May last when all-party feeling was that there was something very wrong with the rating system? Many other examples were then given besides those which we have heard of today from the noble Baroness, Lady Carnegy. In my old constituency the Western Baths, a modest but good local baths club, pays £19,500 per year while the RAC Club in Pall Mall, which is at least 10 times as large, pays only £35,000. We could go on giving examples. Will the noble Lord the Minister tell the House whether he has any information about the appeals which have been lodged with the assessor? I know that the process is still going on, but some may have been decided by now. When the Government meet CoSLA will they be able to help the hard-pressed local authorities to assist sports clubs by giving the local authorities any new money?
Lord Gray of Contin: My Lords, there will be no new money at present for the local authorities. It is entirely up to each authority to determine whether it should invoke the powers of rebate that it has. With regard to the noble Lord's earlier remarks about the all-party interest in the situation, I hope that that all-party interest will be reflected by giving the legislation a speedy passage when it is presented.
Lord Harmar-Nicholls: My Lords, when my noble friend is talking to his right honourable friend about the imbalance in rates between Scotland and England, will he press upon him that what we desire is for the Scots to have their rates brought down and not for the English to have their rates put up?
Lord Gray of Contin: My Lords, I shall pass on that message to my right honourable friend.
Lord Underhill: My Lords, does the noble Lord appreciate that that might be a view expressed by an English Peer? He said that there will be no extra money. Will that not place local authority members in a terrible predicament in that they will have either to assist the sport and health facilities of their people or, shall we say, make a cut in social services?
Lord Gray of Contin: My Lords, I think that it can be achieved without any cut in social services. There will be cases which merit a rebate and there will be others which, in the view of the authorities, do not justify it.

Plutonium: Reprocessing Incident
2.56 p.m.
Lord Brockway: 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 were the circumstances under which eight kilogrammes of plutonium were sent from Sellafield nuclear plant in Cumbria to the Dounreay plant in Scotland.
Lord Gray of Contin: My Lords, residues containing plutonium from the fabrication at Sellafield of fuel for the prototype fast reactor at Dounreay are sent from Sellafield to Dounreay for recovery of the plutonium. A discrepancy was identified between the estimated plutonium content of materials sent and the plutonium recovered. Some eight kilogrammes of plutonium were subsequently found to be still undissolved within the reprocessing plant. This was recovered. There was no possibility of an explosion and there was no danger to staff or to the public.
Lord Brockway: My Lords, I thank the noble Lord the Minister for that reply. Does he agree that we should not have known the facts of this case had it not been for the "World in Action" television programme and the detailed investigation by the Observer newspaper? Will he confirm the extraordinary and disturbing fact that 8,000 grammes of plutonium—enough to make two atom bombs—were officially listed as missing in 1984 and that it was not found until 11 months later at the bottom of the dissolver vat at Dounreay? Will he confirm that it was wrongly labelled when it was sent from Sellafield and that it should not have been sent at all because it had not been sintered and it would not dissolve in nitric acid? Will the Government take action to prevent a recurrence of that extraordinary event?
Lord Gray of Contin: My Lords, I fully appreciate the noble Lord's concern about this matter, but I cannot accept that we would not have heard about it had it not been for the "World in Action" programme or the Observer newpaper. In fact, mention was made of it to the Nuclear Installations Inspectorate. The local liaison committee was told of the incident in general terms, and the director of Dounreay has given a general account of what happened to the current inquiry into a European demonstration processing plant at Thurso.
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With regard to the suggestion that the noble Lord made about the manufacture of plutonium bombs, I cannot confirm that the quantity involved would have been sufficient to manufacture two bombs. What I can tell him is that there was no risk at any time of this material being so used.
Lord Molloy: My Lords, will the noble Lord say what was the basis of the error? Should he not respond to the last part of my noble friend's question and give the assurance that, whatever happened then, enough examination will take place to make sure that so far as is humanly possible such a thing never happens again?
Lord Gray of Contin: My Lords, what I can say to the noble Lord is that there was clearly some misunderstanding between British Nuclear Fuels Limited and the Atomic Energy Authority about the quantity of potentially insoluble material sent from Sellafield. Both BNFL and the AEA are taking steps to ensure that there is no recurrence.
Lord Jenkins of Putney: My Lords, as we are talking about the movement of plutonium, will the Minister say to what extent the American missile system is dependent on plutonium exported to that country from this country?
Lord Gray of Contin: My Lords, I am afraid that without notice I cannot answer that question. I shall take advice and communicate with the noble Lord.
Baroness Masham of Ilton: My Lords, is it a fact that there have been found to be more cases than usual of leukemia in the Dounreay area in the county of Caithness?
Lord Gray of Contin: My Lords, there is a Question on the Order Paper for, I think, 30th June relating directly to this matter. At that time, following the taking of advice, a full Answer will be given.
Lord Avebury: My Lords, when the Minister says that steps will be taken to see that this does not happen again, does he mean that the Government will initiate a review of the accounting procedures for dealing with quantities of plutonium at Sellafield and at Dounreay? Can he say whether the accounting procedures have to be approved by the International Atomic Energy Agency? If so, will a copy be placed in the Library of your Lordships' House so that any changes made as a result of the Government's review can be noted by your Lordships?
Lord Gray of Contin: My Lords, in answer to the noble Lord's first question, indeed, it was as a result of the present accounting procedures that the initial discrepancy was discovered. The safeguards office of the Department of Energy and EURATOM were aware of the discrepancy and were kept informed of the investigation into the reasons for it and of the eventual discovery of the undissolved residues containing the eight kilogrammes of plutonium. I cannot elaborate on what I said in answer to a previous question—that the Government are taking steps to ensure that all the procedures are being carried out correctly in order to avoid any repetition of this.
Lord Stoddart of Swindon: My Lords, would the noble Lord not agree that we really cannot be complacent about this and that eight kilogrammes of plutonium was an enormous amount of plutonium to lose bearing in mind that it is measured and accounted for in grammes? Has not the impression been given that there is slackness and bad management at Sellafield that really must be put right and furthermore a lack of confidence between Dounreay and Sellafield? I hope that the noble Lord and the Government will take steps to ensure that nothing of this sort happens again and that all operations other than military operations at Sellafield and indeed other nuclear establishments are open to scrutiny by the public, and that the public are given all possible information about leaks and what goes on at these establishments?
Lord Gray of Contin: My Lords, while recognising the noble Lord's concern and while I agree that the nuclear industry must always adopt the highest possible standards so far as safety in concerned, I would not accept the rest of what he says. I believe that a great deal of care has been taken throughout by the industry in order to ensure that there is no danger in the transportation of materials between Sellafield and Dounreay. Indeed, I have given an assurance that these procedures are being checked. A high standard has already been attained. The nuclear industry has a safety standard of which it can be justly proud. Indeed, it is more open about its dealings and about its mishaps, however minor they may be—not that I suggest that this was a minor one—than probably is any other industry in this country. I know that all that has been said in your Lordships' House today will be be carefully studied by the Government. I can give the assurance that all measures will be taken to maintain safety.
Lord Brockway: My Lords, does the Minister not appreciate that such failures could lead to a disastrous catastrophe? Does he remember that in the television programme, this was described as,
"one of the most potentially serious incidents in the history of the British nuclear programme".
Will the Government exert a tight discipline to prevent this danger?
Lord Gray of Contin: My Lords, the Government will certainly do everything they can, as will the industry, to ensure that there is no recurrence. I would not necessarily take as gospel everything that is said in a television programme.

Business
3.6 p.m.
Lord Denham: My Lords, it may be for the convenience of the House if I announce that the Committee stage of the Social Security Bill will be adjourned at approximately 7.30 p.m. for approximately one hour, and that during this adjournment the Committee stage of the Forestry Bill will be taken.

Safety at Sea Bill
The Earl of Lauderdale: My Lords, I understand that no amendments have been set down to this Bill and that no noble Lord has indicated a wish to move a manuscript amendment or to speak in Committee. Therefore, unless any noble Lord objects, I beg to move that the order of commitment be discharged.
Lord Boothby: My Lords, may I rise to give a warm welcome to the Bill?
The Lord Chancellor (Lord Hailsham of Saint Marylebone): My Lords, I must put the Question first, if noble Lords will be seated. The Question is, That the order of commitment be discharged.
Moved, That the order of commitment be discharged.—(The Earl of Lauderdale.)
Lord Boothby: My Lords, I understand that I can now speak. I beg your Lordships pardon for trying too soon, and I apologise to the noble and learned Lord the Lord Chancellor. I wanted only to say that this is a very good Bill. I am certainly not proposing to move any amendment. I am particularly proud that it should have been introduced and put through another place by my successor as Member of Parliament for Banff and Buchan, Mr. Albert McQuarrie. It has given him, I am sure, great satisfaction. The key to the Bill, of course, is the automatic rocket. I have no doubt that it will save a great many valuable lives. I believe that your Lordships would wish to join me in expressing the hope that the passage of the Bill will bring some comfort to Mr. McQuarrie in the grievous personal loss that he has suffered.
On Question, Motion agreed to.

Health Service Joint Consultative Committees (Access to Information) Bill
Baroness Carnegy of Lour: My Lords, I understand that no amendments have been set down to this Bill and that no noble Lord has indicated a wish to move a manuscript amendment or to speak in Committee. Therefore, unless any noble Lord objects, I beg to move that the order of commitment be discharged.
Moved, That the order of commitment be discharged.—(Baroness Carnegy of Lour.)
On Question, Motion agreed to.

Civil Protection in Peacetime Bill
Lord Renton: My Lords, I understand that no amendments have been set down to this Bill and that no noble Lord has indicated a wish to move a manuscript amendment or to speak in Committee. Therefore, unless any noble Lord objects, I beg to move that the order of commitment be discharged.
Moved, That the order of commitment be discharged.—(Lord Renton.)
On Question, Motion agreed to.

Social Security Bill
3.10 p.m.
Baroness Hooper: 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.—(Baroness Hooper).
On Question, Motion agreed to.
House in Committee accordingly.
[The EARL OF LISTOWEL in the Chair.]
Clause 1 [Minimum contributions to personal pension schemes]:
Lord Banks Lord Banks moved Amendment No. 1:
Page 1, line 10, after ("prescribed,") insert ("age-related").
The noble Lord said: I beg to move Amendment No. 1 and, with the leave of the Committee, I should like also to speak to Amendment No. 19A. The Bill provides that an employee may choose to switch from being contracted into the state earnings-related pension or from being a member of a contracted-out occupational scheme to a personal pension scheme. That personal pension scheme would itself be contracted out provided it complied with certain conditions. The employer and the employee would pay contracted-in rate national insurance contributions and the Department of Health and Social Security would return to the provider of the personal pension scheme an amount equivalent to the rebate given on national insurance contributions to employers and employees in a contracted-out defined benefit occupational scheme. This amendment would ensure that the amount returned by the Department of Health and Social Security in this way was related to the age of the employee and varied in accordance with it.
The Bill also provides for money purchase occupational schemes to be contracted out of the state earnings-related pension scheme. Hitherto this has been possible only for defined benefit occupational schemes. These are schemes where the ultimate benefits are stated in relation to final or average salaries. Under a money purchase scheme the ultimate benefit is not defined, but the contribution to be made by employer and employee is defined. The benefit is the product—whatever it may be—of such contributions. Where money purchase schemes are contracted out the employer and employee will enjoy the same rebate on national insurance contributions as is enjoyed by defined benefit schemes. Amendment No. 19A would ensure that the minimum contributions necessary to a money purchase scheme for contracting out were also age related. A flat-rate rebate is perfectly satisfactory in the case of defined benefit schemes since they are designed to fund for benefits taking into account average or final salaries and age.
With money purchase schemes, whether occupational or personal, the older an employed person is, the more expensive it is to provide pension. Therefore a different annual contribution is necessary at each age of entering the scheme to provide the same amount to pension. Furthermore, pension relating to
732
increments of earnings due to inflation, wage negotiations or promotion become progressively more expensive to fund for a given amount of pension as the employee gets older. From the viewpoint of building up pension rights privately rather than through the state earnings-related pension scheme, contracting out of money purchase schemes, whether personal or occupational, must be more attractive to the younger rather than the older employee. Having contracted out at a young age the employee, if his pension is to keep up with his earnings, will find paying for his pension becoming more and more expensive. Either he meets the increasing expense under a personal pension scheme, or he and his employer meet the expense under occupational money purchase schemes, or his pension suffers. There will come a time when it will pay the employee in the case of personal pension schemes to contract into the state earnings-related pension scheme again. Under the Financial Services Bill he must be advised to do so.
Where younger employees have been induced to leave defined benefit schemes, those schemes will become progressively more expensive as the average age increases and employers may wish to contract in their schemes eventually, thus frustrating the Government's aim to increase contracting out and thus relieve the burden on the state earnings-related pension scheme. There might also be a substitution of money purchase occupational for defined benefit schemes which would not, in my view, be a desirable outcome.
In a contracted-out defined benefit scheme the varying value of the flat-rate rebate has its effect on the cost to the employer averaged between all his employees and not on the individual benefits. If many younger members leave the scheme for personal pension schemes, they deprive the scheme of their favourable rebates and so make the rebate inadequate for the remaining group of members.
This amendment would relate the rebate paid by the Department of Health and Social Security in the case of personal pension schemes to the age of the individual concerned. I beg to move.
3.15 p.m.
The Parliamentary Under-Secretary of State, Department of Health and Social Security (Baroness Trumpington): Perhaps I may ask the noble Lord to clarify this point. He referred to this amendment being taken with Amendment No. 27. In my list of provisional groupings I have it grouped together with Amendments Nos. 62 and 19A. I am not sure whether the noble Lord mentioned them all, but I should be grateful if this could be put in order. I think that it is perhaps agreed.
Lord Banks: I thought that I referred to Amendment No 19A; I think I mentioned it at first. It is not my intention to move Amendment No. 27.
Baroness Trumpington: Amendment No. 62—
Lord Mottistone: Amendment No. 62 is down in my name. If my noble friend is agreeable, perhaps I may speak to it now. Bowing to the wish of my noble friend on the Front Bench I have agreed to speak to

733
Amendment No. 62 in this debate. I am advised on Amendment No. 62 by the CBI. They have the same view as the noble Lord, Lord Banks, about this issue. I should not wish to weary the Committee by again stating the reasons which have just been explained so very clearly by the noble Lord, Lord Banks.
My Amendment No. 62 is mainly a probing amendment—I do not know what the noble Lord, Lord Banks, cares to do about his amendment—because I wish to find out from the Government what is their reaction to it. Although the logic of the situation lends itself to such a provision—and the logic of the situation is what the CBI are concerned with—I have to tell the Committee that my elder son, who I hope one day will sit in this Chamber, is an insurance broker. He says that in the real world the logic of the situation will not be like that because people will not necessarily react in exactly the way that one hopes they will. He says that the Government, either through ignorance or deep understanding, evidently recognise that we do not live in a perfect world. I am therefore not full of enthusiasm for this, but I wait with great interest to hear what my noble friend on the Front Bench has to say about it.
Baroness Turner of Camden: I have little to add to what the noble Lord, Lord Banks, said in moving his amendment, except to say that we on our Benches support it. The main reason is that, in our view, not having the differential rate that he proposes would mean that the contracted-out approved personal pension schemes would be attractive to younger earners only. That would have a very destabilising effect in our view on occupational schemes and might leave them entirely with older people in and thus undermine them. For those reasons we should like to support the amendment.
I believe that when the initial blue booklet on personal pensions was first issued the Government at that time seemed to be in favour of age relation in this way, and I am rather sorry to see that they do not appear to have provided for it in the Bill. With those comments I wish to support the noble Lord, Lord Banks.
Baroness Trumpington: I must confess to some trepidation so early on at having to jostle with Members of the Committee who are expert in so technical and complicated an area as the subject of these amendments. Equally, though, I am glad that we have an opportunity to debate the issue of age-related rebates because it is one which is of considerable interest and concern to many people in the pensions world.
I have to say to the noble Lord, Lord Banks, that his amendment would not achieve the effects desired. The amendment that has been moved to Clause 1 would not create age-related minimum contributions for personal pensions without a number of other changes to this Bill and earlier legislation. And much the same point applies to the amendment to Schedule 2, which is intended to introduce age-related contributions to money purchase occupational schemes. Moreover, Clause 7 is about the 2 per cent. incentive payments
734
for newly contracted-out occupational schemes, not the minimum payments to contracted-out money, purchase occupational schemes provided for in Schedule 2. Indeed, I must confess that we fail to see what the incentive payments have to do with the argument about age relation. However, I do not want to dwell on these objections.
As has been made clear in the other place, we thought long and hard before moving away from the age of sex-related structure for personal pensions which, as the noble Baroness said, was envisaged in our 1984 blue consultative document. The decision to move to flat-rate minimum contributions for personal pensions and to stick with a flat-rate contracted-out rebate for occupational schemes was made to keep things simple, comprehensible and workable. We are now convinced that the 1984 proposals would have turned out to be impossibly complicated in practice. The fact that we have changed our minds proves that we do listen to what people say to us in response to consultative proposals, and is all the more significant for that reason.
All kinds of dire things have been predicted as a consequence of flat-rate minimum contributions to personal pensions. We are told, for instance, that they will make personal pensions unattractive for the older employee. However, we have never claimed that, when they are introduced, personal pensions are likely to be a suitable option for the older person. Our decision to protect the rapid build-up of state earnings-related pension rights for the rest of this century, and into the beginning of the next, makes it impossible for money purchase pensions to compete on equal terms. We are also told that people who take out a personal pension when young will switch back into SERPS when they are older. But it is hardly credible that people would desert their personal pensions just at the time when these should be starting to consist of significant capital sums.
We fully accept that flat-rate minimum contributions will make personal pensions attractive for the younger person. We see nothing wrong in that, given our objective of expanding pension cover outside the state scheme. The Government do not accept—and this is a point to which we shall have to return on later clauses—that flat-rate minimum contributions will encourage significant numbers of young people to opt out of their occupational schemes to take a personal pension. Those who claim that this is a real threat tend to gloss over the fact that employers will be under no obligation to put more than the minimum, via the national insurance contribution rebate, into personal pensions. And there will be no statutory right of return to an occupational scheme for someone who opts out.
Age-related minimum contributions for personal pensions would have to be accompanied by age-related minimum payments to contracted-out money purchase schemes as the noble Lord, Lord Banks, has recognised, or people would otherwise switch between the two, depending on their age. But age-related contributions to occupational schemes would be a ghastly prospect. We simply could not seek to impose such complexities on employers and their schemes in good conscience. It would make an absolute nonsense of our commitment to reduce burdens on business.

735
As I hope I have made clear, the Government do not accept the view that flat-rate minimum contributions and rebates will have the detrimental effects that some people claim. Only time will tell of course whether we are right. But if we do prove to have been unduly optimistic, no great harm will be done. A future government will always be free to alter the terms for contracting-out from SERPS to get things on an even keel again.
Flat-rate minimum contributions and rebates are essential to get the new options in this Bill off to a good start and to achieve the expansion of occupational and personal pension coverage we all want to see. Pensions have been too complicated for too long. The flat-rate approach is a move to keep things simple and within people's grasp. For that and all the other reasons I have set out, I am afraid that we could not accept any of these amendments.
Lord Banks: I am grateful to the noble Baroness for the reply which she has given; but in my view it is not a very satisfactory one. Perhaps I may say at the outset that when the noble Lord, Lord Mottistone, mentioned insurance brokers he reminded me that I should have declared an interest in rising to speak earlier in that I am an insurance broker specialising in the pensions field.
The noble Baroness said that other changes would be required to the Bill—and she put that forward as if it were an obstacle—if this particular amendment were to be passed. I accept that that is so. However, we have plenty of time and opportunity to make any consequential amendments that may be required. If this amendment were to be passed, at least the principle would be established that where one is dealing with money purchase schemes, where benefits are not defined but contributions are defined, it is necessary that they should be on an age-related basis.
I should like to point out again, because the noble Baroness made reference to it, that I am not proposing to move Amendment No. 27 which, as she rightly said, relates to the 2 per cent. incentive and is not concerned with what we are discussing at present. The noble Baroness said that it would be very much simpler to keep matters as they are at present. However, it is of course the Government who have started down this path by introducing these particular arrangements, and having done so we must ensure that they work fairly. The noble Baroness says, "The objections that you raise will not occur. This will not happen". All I can say in answer to that is that that is not the view of a great deal of expert opinion both in the insurance world and in industry as well as in the actuarial field. That being so, it seems to me that this is quite an important principle.
The noble Baroness said that young people could hardly be expected to desert their personal pension plans when they are beginning to accumulate a certain amount of capital. However, they would not be deserting them, ditching them or leaving them for ever; they would merely be making them paid up. They would not be losing what they had already put into them. If it was made clear to them—and it would have to be explained to them—that it was better at that particular juncture to go back into SERPS, then I
736
think that many would do so. That is the danger that we have to face.
Therefore, in my view the objections to the amendment have not been strong enough to overcome the arguments in its favour, and I should like to test the opinion of the Committee.
3.29 p.m.
On Question, Whether the said amendment (No. 1) shall be agreed to?
Their Lordships divided: Contents, 103; Not-Contents, 123.

DIVISION NO. 1

CONTENTS

Airedale, L.

Listowel, E.

Allen of Abbeydale, L.

Llewelyn-Davies of Hastoe, B.

Amherst, E.

Lloyd of Hampstead, L.

Ardwick, L.

Lloyd of Kilgerran, L.

Attlee, E.

Lockwood, B.

Banks, L.

McCarthy, L.

Birk, B.

Mackie of Benshie, L.

Blease, L.

McNair, L.

Blyton, L.

Maybray-King, L.

Boston of Faversham, L.

Mayhew, L.

Bottomley, L.

Milford, L.

Bruce of Donington, L.

Mishcon, L.

Burton of Coventry, B.

Molloy, L.

Carmichael of Kelvingrove, L.

Murray of Epping Forest, L.

Chitnis, L.

Nicol, B.

Crawshaw of Aintree, L.

Northfield, L.

David, B. [Teller.]

Oram, L.

Davies of Penrhys, L.

Parry, L.

Dean of Beswick, L.

Ponsonby of Shulbrede, L.

Diamond, L.

Rathcreedan, L.

Donaldson Of Kingsbridge, L.

Rea, L.

Elwyn-Jones, L.

Roberthall, L.

Ennals, L.

Rochester, L.

Ewart-Biggs, B.

Ross of Marnock, L.

Ezra, L.

Sainsbury, L.

Fisher of Rednal, B.

Seear, B.

Fitt, L.

Seebohm, L.

Foot, L.

Serota, B.

Gallacher, L.

Shaughnessy, L.

Gladwyn, L.

Silkin of Dulwich, L.

Gormley, L.

Stallard, L.

Graham of Edmonton, L.

Stamp, L.

Grey, E.

Stewart of Fulham, L.

Hampton, L.

Stoddart of Swindon, L.

Hanworth, V.

Strabolgi, L.

Harris of Greenwich, L.

Swann, L.

Hatch of Lusby, L.

Taylor of Blackburn, L.

Heycock, L.

Taylor of Gryfe, L.

Hirshfield, L.

Taylor of Mansfield, L.

Hooson, L.

Turner of Camden, B.

Houghton of Sowerby, L.

Underhill, L.

Hughes, L.

Vernon, L.

Hunt, L.

Walston, L.

Irving of Dartford, L.

Wedderburn of Charlton, L.

Jacques, L.

Wells-Pestell, L.

Jeger, B.

Whaddon, L.

Jenkins of Putney, L.

Williams of Elvel, L.

John-Mackie, L.

Wilson of Langside, L.

Kilbracken, L.

Wilson of Rievaulx, L.

Kilmarnock, L. [Teller.]

Winchilsea and Nottingham, E.

Kinloss, Ly.

Leatherland, L.

Ypres, E.

NOT-CONTENTS

Aldington, L.

Bathurst, E.

Allenby of Megiddo, V.

Belhaven and Stenton, L.

Allerton, L.

Beloff, L.

Ampthill, L.

Belstead, L.

Annan, L.

Bessborough, E.

Auckland, L.

Blanch, L.

737

Boyd-Carpenter, L.

Kimball, L.

Brabazon of Tara, L.

Kinnaird, L.

Brougham and Vaux, L.

Kitchener, E.

Broxbourne, L.

Lansdowne, M.

Bruce-Gardyne, L.

Lauderdale, E.

Buckinghamshire, E.

Liverpool, E.

Caithness, E.

Long, V.

Cameron of Lochbroom, L.

Lovat, L.

Campbell of Alloway, L.

Macleod of Borve, B.

Campbell of Croy, L.

Maude of Stratford-upon-Avon, L.

Carnegy of Lour, B.

Cawley, L.

Merrivale, L.

Cayzer, L.

Milverton, L.

Chelmer, L.

Monk Bretton, L.

Cottesloe, L.

Mottistone, L.

Cowley, E.

Mowbray and Stourton, L.

Cox, B.

Moyne, L.

Cromartie, E.

Munster, E.

Cullen of Ashbourne, L.

Murton of Lindisfarne, L.

Davidson, V.

Nugent of Guildford, L.

Denham, L. [Teller.]

Orkney, E.

Denning, L.

Orr-Ewing, L.

Dormer, L.

Porritt, L.

Drumalbyn, L.

Portland, D.

Dulverton, L.

Rankeillour, L.

Dundee, E.

Reigate, L.

Eccles, V.

Renton, L.

Effingham, E.

Rochdale, V.

Elles, B.

Rodney, L.

Elton, L.

Rugby, L.

Enniskillen, E.

St. Davids, V.

Erne, E.

Saltoun of Abernethy, Ly.

Faithfull, B.

Sandford, L.

Ferrers, E.

Sandys, L.

Fortescue, E.

Sempill, Ly.

Fraser of Kilmorack, L.

Shannon, E.

Gainford, L.

Sharples, B.

Gardner of Parkes, B.

Skelmersdale, L.

Gisborough, L.

Somers, L.

Glanusk, L.

Stodart of Leaston, L.

Glenarthur, L.

Strathcarron, L.

Gray of Contin, L.

Swinton, E. [Teller.]

Gridley, L.

Thomas of Swynnerton, L.

Hailsham of Saint Marylebone, L.

Torrington, V.

Tranmire, L.

Halsbury, E.

Trefgarne, L.

Harmar-Nicholls, L.

Trenchard, V.

Harvington, L.

Trumpington, B.

Henley, L.

Vickers, B.

Hives, L.

Vinson, L.

Home of the Hirsel, L.

Vivian, L.

Hood, V.

Ward of Witley, V.

Hooper, B.

Westbury, L.

Hylton-Foster, B.

Whitelaw, V.

Inglewood, L.

Wise, L.

Ironside, L.

Young, B.

Kaberry of Adel, L.

Resolved in the negative, and amendment disagreed to accordingly.
3.38 p.m.
Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 2:
Page 3, line 1, at end insert ("with the consent of the earner").
The noble Baroness said: This is a small amendment. The intention of it, so far as I can see, is an attempt to tidy up subsection (9). Subsection (8) says:
"Where an earner and the trustees or managers of an appropriate personal pension scheme have jointly given notice to the Secretary of State, in such manner and form … as may be prescribed … that scheme is the earner's chosen scheme".
Subsection (9) says:
"Either an earner or the trustees or managers of a scheme may cancel a notice".
738
What I want to insert after the word "scheme' at the end of the first line is the wording,
"with the consent of the earner".
It seems to me that if there is to be a situation in which a notice is to be cancelled, it ought to be quite clear that this decision is actually with the consent of the earner. It is not a major amendment and it may not be as important as many before the Committee today; but I wanted to put it down in order to hear what the Government had to say and to see whether or not this wording could be included. I beg to move.
Baroness Trumpington: I have listened to what the noble Baroness has said, and I hope I can satisfy her that the Bill does not have the undesirable effects that she fears and that I can persuade her to withdraw this amendment.
Apart from giving employees the right to choose not to belong to a particular pension scheme, this Bill does not, and I think should not, interfere with people's freedom to devise and enter into lawful contracts with one another and to withdraw legally from those contracts. The question of the circumstances in which membership of a personal pension scheme can be terminated by either the member or the scheme is properly, I think, a matter for the membership agreement and not for social security legislation. This amendment may reflect a misunderstanding arising out of a debate on a similar amendment tabled in another place and I am very glad to have this new opportunity to clarify the position.
It was then suggested that Clause 1(9) confers a right on schemes to cancel a person's membership unilaterally. It does not. Its effect is far more limited, because it provides only for cancellation of the notice to the DHSS that minimum contributions should be paid to the scheme. It does not provide for cancellation of membership, which must be a matter for the scheme to sort out properly with its members under its rules.
We shall be consulting later in the year on proposals for regulations which will set out, among other things, the date from which any cancellation under Clause 1(9) could take effect. Normally we think this would not be until the beginning of the next tax year. There may occasionally be circumstances when cancellation notices would be received from a scheme rather than from the members—for example, where a scheme is intending to wind up. The regulations will make sure that proper arrangements are made for informing the earner and inviting him to make arrangements for his minimum contributions to go to another personal pension scheme. There are also of course powers to deal with existing protected rights in schemes which wind up. The noble Baroness will see them in Clause 5. I hope that this brief explanation of Clause 1(9) will have served to reassure the noble Baroness, and that she will agree to withdraw her amendment. If my explanation has not satisfied her, I shall very gladly write to her.
Baroness Turner of Camden: In the view of that reply, and in view of the noble Baroness's explanation, for which I thank her, I shall not press my amendment.
Amendment, by leave, withdrawn.
Clause 1, agreed to.
Clause 2 [Appropriate schemes]:
3.45 p.m.
Lord Banks Lord Banks moved Amendment No. 3:
Page 3, line 20, at end insert—
("( ) An appropriate scheme shall be subject to the provisions of the Policyholders Protection Act 1975.")
The noble Lord said: I beg to move Amendment No. 3. This amendment would ensure that appropriate personal pension schemes are brought within the provisions of the Policyholders Protection Act 1975. In 1975, in order to safeguard the position of the policyholder, the insurance companies were brought within a statutory scheme for ensuring at the industry's expense, that compensation in the region of 90 per cent. of claims would be available to policyholders in the event of the insolvency of any insurance company. This was achieved through the Policyholders Protection Act. This Act covers both general assurance and life assurance—and life assurance covers personal pension contracts. I presume that the Act will cover personal pension schemes offered by life offices as a consequence of the Bill now before us.
However, the Bill opens the gate to other providers besides life offices. Building societies and others are to enter the field. It seems only right that they too should come within the provisions of the Policyholders Protection Act, thus ensuring that those who take out personal pension schemes with them are protected, and that these new providers contribute to the costs of such protection. That is the aim of the amendment. I beg to move.
Baroness Turner of Camden: I rise to support the amendment moved by the noble Lord, Lord Banks. As he says, the Policyholders Protection Act was introduced in 1975 following the collapse of a life office. The insurance industry itself is involved in funding. It seems to us that the need now is even greater than it was perhaps in 1975, because later this year we shall be facing deregulation in the finance industries. That means that everybody in the industry will be able to do everything else. Building societies will be able to sell life insurance, insurance companies will be able to offer mortgages, and banks will be able to offer pension schemes, and so on.
The Government themselves have, incidentally, asked the Occupational Pensions Board to look at providing some cover for people who have personal private pensions. In the letter received by the Occupational Pensions Board, of which I happen to be a member, the Secretary of State referred specifically to the kind of protection offered by the Policyholders Protection Act. In the light of that, I hope that the Government will find it possible to accept this amendment which provides some sort of protection which I think is very necessary in this field.
Baroness Trumpington: Once again, the noble Lord, Lord Banks, has raised an issue which will be crucial to the success of the new pension arrangements; namely, compensation for personal pension holders in the event of things going wrong. Although we have some sympathy with the thinking that lies behind this amendment, we cannot accept it for reasons which I hope to make clear in a moment. The noble Lord may
740
recall that in paragraph 2.44 of the Social Security White Paper, the Government said:
"There will be further consultations about compensation requirements, but, in principle, everybody with a personal pension should be at least as well protected as someone with an insurance policy covered by the Policyholders Protection Act".
As a first step in these consultations, in February of this year, the Secretary of State asked the Occupational Pensions Board, which will be responsible for the approval and supervision of personal pension schemes, to take a look at compensation requirements. It is worth quoting the terms of this remit in full:
"To consider and advise on the requirements to be met by personal pension and money purchase occupational pension schemes for providing compensation in the event of fraud, theft or negligence, in the light of the Government's decision that, in principle, everybody with a personal pension should be at least as well protected as someone with an insurance policy covered by the Policyholders Protection Act, and in the light of the desirability that such requirements should be kept as simple as possible."
The board's remit amply demonstrates the Government's commitment to providing adequate protection for people with personal pensions. The board have not yet reported back to the Secretary of State and I cannot of course anticipate what they might say. As the noble Baroness certainly knows, the Policyholders Protection Act provides protection for policyholders who may be affected by the inability of authorised insurance companies to meet their liabilities; and the Act will therefore apply automatically to personal pensions which are provided by insurance companies. But the Act does not cover the new providers—banks, building societies and unit trusts—that the Government consider will have a major role in the new pension arrangements alongside the insurers who are already well established in pensions business. It would not be possible or appropriate to bring these new providers under the umbrella of the Policyholders Protection Act, since that legislation relates to insurance business only. Nor for that matter would it be right to legislate in such a way that only insurance companies could be personal pension providers.
Our objective must be to ensure that all of the personal pension providers are required to be party to fully adequate compensation arrangements, in order to protect everybody who takes a personal pension. And this is the purpose to which our Amendment No. 10 to paragraph 10 of Schedule 1 (which we shall also be debating today) is directed. That amendment will give the necessary powers to set requirements about adequate compensation to be met by all schemes.
Just what these requirements should be is something to which we need to give further thought. We cannot reach firm conclusions just at present, for there are two major uncertainties. The first, as I have explained, is the outcome of the Occupational Pensions Board's study of compensation arrangements. The second stems from the work being done by the shadow bodies set up with a view to assuming the regulatory responsibilities for investment business once the Financial Services Bill has been enacted. Noble Lords may have seen reports in the press of the possible forms of compensation schemes that would be arranged by the regulatory bodies, funded by levies on investment businesses whose customers would be liable for compensation. Unit trusts providing

741
personal pensions could be covered under these arrangements, though we have to await detailed proposals before forming a view on whether the scale of compensation envisaged is sufficient for pension scheme members. And other arrangements may be required for other providers.
We shall of course consult widely when we have developed proposals for compensation arrangements for holders of personal pensions. With this assurance, and in the light of the explanation that I have given, I hope the noble Lords, Lord Banks, and Lord Kilmarnock, will accept that there are other more flexible ways of achieving the aim of the amendment and that they will not pursue it further.
Lord Banks: I am glad to know from the noble Baroness that the Government have sympathy with the thinking behind this amendment. I was very interested in what she had to say about the consultations which are going on and the consultations particularly with the Occupational Pensions Board. In view of her statement that it is the intention of the Government to ensure that people who enter personal pension schemes provided by bodies other than those at present covered by the Policy Holders Protection Act shall not be in any worse position and that they shall enjoy the same protection, I do not wish to press this amendment at the moment.
I hope that the burden on providers will be the same-that is to say, there will not be a heavier burden on one set of providers than on another. I hope there will be equity between the different proposals which are proposed for the new providers and the proposals which exist for insurers at present. But in view of all that the noble Baroness has said, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 2 agreed to.
Schedule 1 [Appropriate personal pension schemes]:
Lord Kilmarnock Lord Kilmarnock moved Amendment No. 4:
Page 87, line 10, leave out ("may") and insert ("shall").
The noble Lord said: Schedule 1 is an extremely important schedule, but it appears to me to be defective as it stands, notwithstanding the recent remarks of the noble Baroness. It stems from Clause 2 which introduces the concept of appropriate personal pension schemes. Clause 2(2), which the Committee have just passed, states that a scheme can only be appropriate if the requirements of Schedule 1 are satisfied in its case. But many of these requirements are still wrapped in mystery and left to regulation.
I want to stress at the outset—and this is very important—that I am a supporter of money purchase personal pension schemes. I believe in them. I believe they are desirable for increased job mobility and freedom of choice. I do not believe that joining an occupational scheme should be a condition of service. Nor do I think that people should be bribed into personal pension schemes; but these schemes should be an available alternative. This means that complete clarity about their workings is essential for the protection of those who opt for them. This is not
742
adequately provided for in the Bill as written. The immediate objective of these two amendments is to ensure that regulations which are merely permissive become mandatory. I have only sought to amend paragraph 2 in this sense—it may be necessary to go further at a later stage of the Bill—but I believe that the present amendment is an adequate peg on which to hang a number of queries about the Government's intentions. In the first place, I find it difficult to understand why regulations describing the type of persons or bodies who could offer such schemes are merely permissive—that is to say, the Secretary of State does not have to make such regulations at all. Next the Notes on Clauses make it clear that paragraphs 3, 4 and 6 of the schedule are also merely enabling.
We are, as always, grateful for the Notes, but they are strewn with such phrases as, "the intention is to use the power" and, "regulations are likely to specify" and also with references to other legislation with which this legislation will presumably have to be construed. Among that other legislation is the Financial Services Bill which has not yet reached this Chamber so we are in the dark on rather a lot of things.
I have received, as no doubt other Members of the Committee have, a thorough submission on this part of the Bill, and on this schedule in particular, from the National Association of Pension Funds. I do not share all those worries, but the association raises some important points that need clarification. I shall, as briefly as I can, mention some of them. Paragraphs 2, 3, 4, 5 and 6 of the schedule all deal with aspects of investor protection. It is these paragraphs, together with Clause 12 on advertisements, that will provide the main protection for members under this Bill. But it is as yet impossible to see how any regulations that may be made under this legislation will interact with requirements imposed under the Financial Services Bill. I must therefore seriously ask the noble Baroness to let us know clearly where the main protection is intended to lie, under this Bill or under the Financial Services Bill?
The trouble about what is written down here is that there is not even a requirement to use the powers given in these paragraphs under this schedule; but a wait and see how it develops approach is not good enough, because it is in the early years when new personal pensions are being sold to a wide range of new clients that the protection is most necessary.
The detail missing from these paragraphs concerns the type of institution authorised to provide personal pensions, the conditions concerning investments, the limits on deductions for administration and commission expenses. I think the noble Baroness, Lady Turner, has an amendment seeking to address the latter point. A possible way out would be to cross-reference the Bill with the Financial Services Bill so that the Secretary of State for Trade and Industry will in consultation with the Secretary of State for Social Services give to the Securities and Investment Board other duties concerning personal schemes set up under this Bill.
The Occupational Pensions Board is written into this schedule, but the Occupational Pensions Board has insufficient powers and sanctions or even staff at its disposal to act as an effective watchdog; so there is a

743
great deal to be said for the investment board to be involved at the outset rather than having a complex OPB/SIB liaison. I should like to hear what the noble Baroness has to say about that.
However, we are in a difficulty with the Government's huge load of legislation. The Financial Services Bill is behind this Bill in the queue—or perhaps I should say in the log jam. So I repeat that the noble Baroness must tell us where the real onus of protection is supposed to lie.
Under paragraph 4 the scheme must only comply with such regulations "as may be prescribed". But, at the very least, potential investors in personal pension schemes must know how much of their first and subsequent contributions will be invested for pensions purposes and how much will be returned in the event of early termination. Paragraph 6 refers vaguely to,
"such other requirements as may be prescribed".
I suggest that this could be activated to prohibit cold calling for pension services. "Cold calling" is a term of art or jargon which means door-to-door, "sign on the dotted line", salesmanship which is subjected to a 14-day cooling-off period under the Financial Services Bill. It may be thought that a longer cooling-off period would be appropriate under this Bill where employees have been subjected to high-pressure salesmanship and might need, say, four to six weeks to compare the advantages of a new scheme with those provided by the one that they are contemplating leaving. They will need time to seek advice and perhaps to consult an independent intermediary.
There is also the problem that where an employee opts for an appropriate scheme, he will also be opting out of membership of his occupational pension scheme and the latter will need to take effect as soon as the decision is confirmed; otherwise he will be contributing to two pension schemes in relation to the same earnings. This dilemma would be lessened if, as suggested by my noble friend Lord Banks, Clause 14 were amended to require schemes to permit their members to pay additional voluntary contributions to personal pension contracts. Unless that amendment is made, no one would be able to be a member in relation to the same earnings of both an occupational and a personal pension scheme.
There are a number of other areas concerning protective rights, annuities, early death, widows and widowers and the tax regime to which the personal pensions will be subjected and other matters with which, at this stage, I shall not take up the time of the Committee. My objective at this stage, as I said at the outset of my remarks, is to draw the Government out on their intentions in a very important area of consumer protection. The noble Baroness seems to think that it is amusing. But it is a very important area of consumer protection on which the Bill, as drafted, is quite remarkably vague. The noble Baroness said in answer to the last amendment of my noble friend Lord Banks that new members under these new schemes will be at least as well protected as members of occupational schemes. But that is not in the Bill. The Government may have excellent intentions and these intentions are expressed in the Notes on Clauses but they are not written on the face of the Bill. We must get it clear where this protection is going to come; whether
744
it is going to come under this Bill, whether it is going to come under the Financial Services Bill or whether it is going to come under some system of cross-referencing between two Bills. I submit that this is not at all clear. On those grounds I beg to move the amendment.
Baroness Gardner of Parkes. I think that the wording in the present schedule is perfectly appropriate and leaves a degree of flexibility. Surely by inserting the word "shall" we are just pinning the Government down to making a detailed list which may not be appropriate and which may not leave the same degree of flexibility. I do not support the amendment.
Baroness Trumpington: I listened very carefully to the words of the noble Lord, Lord Kilmarnock. He suggested that I found them amusing. I rarely find the words of the noble Lord amusing. An amendment in another place reworded paragraph 2 of Schedule 1 so that the Secretary of State will not be obliged to exercise the power which the paragraph gives to prescribe who may "establish" a personal pension scheme. At the same time a new power was introduced which is now paragraph 6 of the schedule.
The intention is to use the power in paragraph 6 to make regulations about the form and nature of appropriate personal pension schemes. For example, the regulations are likely to specify that schemes which are "authorised unit trusts" under the financial services legislation, or which offer particular kinds of contract under insurance company legislation, may qualify under Schedule 1. This approach will enable us to make sure that the investor protection provisions which apply to existing forms of investment business will apply automatically to personal pension schemes receiving the minimum contribution.
Together with other legislation (for example, the Building Societies Bill) these regulations may be all that is needed to enable new providers—unit trusts, banks and building societies—to become involved in the provision of personal pensions, because they will be able to do so by setting-up or being associated with appropriate forms of investment business offering such pensions. It will therefore quite possibly not be necessary for the power in paragraph 2 to be used to enable them to enter this market. They will be able to do so by virtue of the fact that nothing in the law prevents them from establishing a personal pension scheme in the form of, say, an "authorised unit trust" and so meeting the requirements of regulations made under paragraph 6.
As things stand the Occupational Pension Board does not have sufficient powers, sanctions and staff. Clause 2 gives it full power to withdraw approval if it is not satisfied for any reason; and its staff is increased to deal with the new work. With regard to the National Association of Pension Funds, paragraphs 2, 3, 4, 5 and 6 deal with investor protection, as does Clause 12. The interaction with the Financial Services Bill is one reason why it is necessary to leave this to regulations. In many cases it may not be necessary to use the powers of the Financial Services Bill if it provides adequate protection; but we intend to use them to the extent that it does not.

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The change from one scheme to another will be dealt with adequately. Normally a personal pension scheme will begin to receive minimum contributions from the start of the next tax year, giving time to sort out the change of membership. Given our continuing commitment to widening the range of providers of personal pensions, as proposed in the White Paper, and in the light of the explanation that I have given as to how this will be achieved in the legislation, I hope that the noble Lord will feel able to agree to withdraw the amendment.
Lord Williams of Elvel: May I ask the noble Baroness for clarification of what she has just said? As I understand it, the Financial Services Bill is going to be the master Bill for the purposes of regulating who can or who cannot sell insurance or pension schemes under the present provisions. What she seems to be saying is that it is only when the Financial Services Bill—which has yet to come to your Lordships' House, and so we have not yet even started to discuss it—is through with the legislation in its present form and if that fails that this Bill, if passed into legislation in its present form, will bite. Is that what she is saying? If she is saying that, she will recognise that her honourable friend in another place has refused to make a list of those people—and I come back to what the noble Lord, Lord Kilmarnock, has said about cold calling—who could be authorised under the financial services legislation to do exactly what the noble Lord, Lord Kilmarnock, has so graphically described.
Baroness Trumpington: I can do no better than repeat that it may not be necessary to use the powers if the Financial Services Bill provides adequate protection. But we intend to use them to the extent that it does not. It is not a question of the Bill's failure; it is a question of how far the financial services controls go.
Lord Williams of Elvel: I am sorry to press the noble Baroness on this. The Financial Services Bill sets out to devise a scheme of investor protection, which I think is exactly the point which the noble Lord, Lord Kilmarnock, was making. If the Financial Services Bill can do that successfully, the powers in this schedule are not required at all. If the Financial Services Bill is not going to work successfully, it seems to me that the powers should be strengthened.
Lord Kilmarnock: I think we are in a rather unsatisfactory situation, as the noble Lord. Lord Williams of Elvel, has just underlined. The noble Baroness in her reply talked about the intention to use the powers in paragraphs 6 or 7, that regulations were likely to do this, that or the other and that unit trusts and other types of institutions might qualify. If they did qualify they would be subject to the existing protections which apply to their operations. The noble Baroness admitted that the Occupational Pensions Board does not have sufficient powers or staff at present and they would have to be increased: I do not know whether that is mentioned in the Explanatory and Financial Memorandum. She referred also to the Financial Services Bill and said one reason why it was necessary to leave all these regulations so vague is that
746
it is all going to be patched up in that Bill when it comes along. The noble Lord, Lord Williams of Elvel, referred to it as "the master Bill" and the Government appear to see it in the role of a long stop to remedy any deficiencies in this Bill.
But that Bill is still coming down the corridor. The regulations are supposed to fill in gaps in the Financial Services Bill; but we do not know until that Bill is passed what gaps there will be and so it seems to me that we must legislate in this Bill. This is the one that is before your Lordships and we must legislate in this Bill for adequate consumer and client protection. I support these schemes but I want them to be properly protected. Therefore it seems to me that we must come back at a later stage of this Bill and try to fill in such gaps. If the Financial Services Bill comes along later and does much the same thing, then there could be consolidation; but we must get what we want in this Bill.
Baroness Trumpington: Before the noble Lord sits down, the way the Bill is set at present, it is the long stop. It is not a question of patching anything up. It is because both that Bill and our present Bill are not yet passed that these matters are left to regulations for consultation later this year on the full details. The Financial Services Bill sets up a system of self-regulatory protection for all sorts of investments and not just pensions. There may be a need for extra measures because of the special position of pensions. In the very unlikely event of the Financial Services Bill not being passed, there are fully sufficient powers in this Bill to do all that is necessary to protect personal pension holders.
Lord Kilmarnock: I must say that I still find this situation deeply unsatisfactory. What the noble Baroness is asking us to accept is a long stop which is not in statute but in regulation and at the entire discretion of the Secretary of State. I think that is most unsatisfactory. For example, if the Financial Services Bill comes to us with a provision for a cooling-off period to be only 14 days and we think it would be more appropriate to have 30 or 45 days in this Bill, we cannot have that because it is not in the statute and we are dependent upon the Secretary of State's good nature for him to come along at some later stage and introduce this. I really think this a very unsatisfactory answer.
We have had an interesting debate and I am most grateful to noble Lords for their support and in particular the noble Lord, Lord Williams of Elvel, with his great knowledge of these matters. Obviously we shall come back to this at some later stage in the Bill. It is not only we who are concerned but also the industry, and I should like to say that I am speaking from the point of view of a supporter of these schemes. I am anxious to see that these are copper-bottomed schemes and that people are getting a square deal. That is the whole point. On that note, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 5 not moved.]
4.15 p.m.
Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 6:
Page 87, line 42, at end insert—
("which taken jointly shall not exceed five per cent. of total premium.").
The noble Baroness said: I rise to move this amendment motivated in some part, I think, by the kind of feelings that motivated the noble Lord, Lord Kilmarnock, because we are concerned on these Benches about the protection of the consumer. In particular we are concerned to ensure that people who opt for private personal pensions are not exploited.
The evidence that was given by the Occupational Pensions Board to the inquiry into provisions for retirement which they gave in 1984 examined the administrative costs of personal pensions and found that, taking the average experience, the administrative charges for personal pension schemes were 18.4 per cent. of premiums, compared with around 5 per cent. for occupational pension schemes and about 1½ per cent. for SERPS. What we are anxious to do in this amendment is to ensure that people who opt for personal private pensions are not exploited, because it occurs to us that this is the sort of business which may very well attract unscrupulous entrepreneurs. The Government themselves, in their blue consultative paper in 1984, accepted that this could well be the case. Indeed in that document it stated that care would have to be taken to ensure that the consumer was properly protected.
This is one of the ways of ensuring that people who go into the market and offer PPPs may do so only if they comply with certain requirements and if the amount they are able to charge by way of administrative expenses or commission is a reasonable amount. We have set 5 per cent. of the total premium as a reasonable figure but if by any chance it is felt that another figure would be more appropriate, perhaps that could be considered. Certainly I think some limit needs to be put on the amount that can be charged for administrative expenses of PPPs and on the amount that can be charged by way of commission. It is for that reason that I beg to move this amendment.
Lord Boyd-Carpenter: The difficulty about the proposition put forward by the noble Baroness is, I think, that if you set 5 per cent., or indeed any other arbitrary figure, in the Bill as a maximum there is a very considerable risk that it may become a minimum. If you contemplate (as you would if you put this amendment into the Bill) that 5 per cent. is a reasonable figure, it would be extremely difficult for the Secretary of State in his supervisory role to take action against people who were in fact charging 5 per cent., even though, on the merits, that was far too high. I think it is wiser to leave this to the general supervision of the Secretary of State and not to give people a figure which they would feel entitled to go for regardless of the merits. I think there are real dangers in that.
Lord Williams of Elvel: If I may respond to the noble Lord, Lord Boyd-Carpenter, the idea running through this whole legislation is, as I understood it, that there should be competition, and competition for the selling of personal pension plans, as I think there is
748
at the present time—the noble Lord, Lord Banks, will know this better than I do. There is a certain amount of competition. So in stating a maximum we are not behaving in the way some wage negotiators behaved in earlier years by saying, "This is the norm", and so everybody starts asking for the norm. Competition is meant to regulate the extent of the commission which insurance companies and others may charge. It does not seem to me that the amendment sets a maximum figure which will be the norm or, if it does set such a figure that is the norm, it seems that competition is not working in this particular market. One either has one or the other: one either has a figure which is set by statute or one leaves it to competition.
Lord Boyd-Carpenter: May I put this point to the noble Lord? If he is right—and I hope he is—in saying that competition will set the figure in this field, then there is absolutely no justification for putting this figure into the Bill.
Lord Williams of Elvel: But if competition is operating, as the noble Lord points out, then there is every justification for putting a maximum figure into the Bill in order to stop the cowboys.
Lord Vinson: Every one of us in this Chamber has a vested interest in retirement, and I must declare my personal interest in it. But it seems to me that we are making too excessive an issue of this. We have now nearly 1 million people self-employed who have personal pensions of a sort currently on the market. I am not aware that noble Lords opposite have highlighted any great scandal in the administration or the marketing of such schemes, so we are not talking about anything new: we are merely talking about broadening the market. We all have concern to see that people are not exploited or "cowboyed", but I do not think that is happening at the moment; and the more pension providers there are the less likelihood there is that this will happen, because of the greater interest in competition. So I think that this is a non-worry.
Lord Banks: At the present moment, in order to contract out a scheme has to undertake to provide a certain level of benefit. You cannot get away from that, and it is laid down. The change that this Bill makes is that for certain categories of contracting out it will be possible to do so by making a minimum contribution to a pension and not guaranteeing the benefits at all. In those circumstances, it seems to me—and this amendment refers only to minimum contributions—there is a very strong case for imposing a limit.
The noble Baroness said that the Government might suggest a different limit from this, but when we are dealing with minimum contributions we are not dealing with something which is a purely commercial project. It is something which depends on this legislation. Anything over and above the minimum contributions—and presumably people will be able to pay more, and presumably employers will be able to pay more, into a personal pension scheme if they are inclined to do so—would not be at all subject to this restriction. But here, where people are being allowed to contract out of the state earnings-related pension

749
scheme, which will give a specific benefit, in order to make contributions to a personal pension plan, it seems reasonable that these minimum contributions which allow them to do so should not be exploited by those who are providing the personal pensions. I think there is a strong a case for a limit.
Baroness Trumpington: The Government share the view of the noble Baroness that charges for personal pensions must be kept down. Some commentators have pointed out that charges can amount to as much as 20 per cent. of contributions in some "Section 226" retirement annuity contracts, the only type of personal pension currently available. This is far too high, and we believe that the great majority of people would find it unacceptable. However, we also believe this amendment is undesirable, and I shall return to our reason for believing so in a moment.
Paragraph 4 of Schedule 1 enables regulations to be made that would in practice control the level of charges, including commission. We hope that in the personal pensions market, where new providers will join insurance companies in offering pension schemes, competition between providers will lead to significant reductions in charges. Disclosure of charges will be required by law, to assist people to make informed choices between products. But if competition and disclosure do not bring charges down to an acceptable level, we stand ready to use the power to control charges; indeed, we have not ruled out using it from the outset.
Noble Lords will understand that there is a delicate balance to be struck here. If we were to control charges, it would be necessary to devise a formula, probably of the sort which set a maximum proportion of contributions or maximum proportion of the product of those contributions—that could be used to cover expenses. If we set that proportion too low, we would run the risk that the providers would find the whole business uneconomic and that no one would be willing to offer personal pensions on those terms. So we would want to consult interested parties before going down that road, and it would be most unhelpful indeed if such consultations were rendered meaningless because our hands were unduly tied by the primary legislation.
That brings me back to the acceptability of the amendment. As now drafted, paragraphs 4 and 5 leave the Government two sets of choices. First, we can choose whether or not to exercise the power to make regulations. Secondly, if we did choose to exercise it we would have considerable freedom to determine precisely how we would exercise it. The amendment would restrict us on both counts. First, it fixes at 5 per cent. a maximum proportion of contributions that can be used to cover charges and commissions. At this stage, it would be most unwise to fix an arbitrary and rigid limit, for the reasons I have already mentioned. Secondly, when taken with subparagraph (2) of paragraph 5 the amendment could be overridden by regulations made under paragraph 4. To put it another way, if the amendment were accepted and it was found to be discouraging providers from entering the market, it could only be negated by the Secretary of State making regulations under paragraph 4. I do not know
750
whether this is what the noble Baroness intended, but we find it a most undesirable approach to legislation.
All existing types of personal pension insurance policies are well-known to carry higher administrative charges than other forms of investment. As my noble friends Lord Boyd-Carpenter and Lord Vinson said, bringing in the new providers, such as building societies, unit trusts, etc., will mean major new competition from providers which traditionally have much lower charges than the most expensive insurance policies.
I repeat my earlier assurance that we will not sit back and let charges settle at an unacceptably high level. All we ask is that the Government be left with the discretion to act with all interested parties in this sensitive area—including, of course, consumer interests. I hope that the noble Baroness will now feel able to withdraw the amendment.
Lord Vinson: I wonder whether I may be permitted, in support of the Government, to make a further point. We seem to visualise that the pension market and pension provision will remain much as it is now, but once personal portable pensions are more freely available on the market one can visualise many pension departments and pension managers adopting a very benign and helpful attitude to their employees.
One of the reasons why the apparent costs of existing pension arrangements are low is that they are heavily subsidised by existing companies. The cost of the pension administration of companies which contract out of the state scheme is written off as part of the overhead costs of the companies. But, in future, one visualises that companies will say to their employees in many instances, "We think that you, a short-term computer programmer, will be much better suited by having a personal and portable pension. We will supplement that pension over and above what we are required to give by the Government, and we will advise you to go into the most efficient least front-end loaded" (which I think is the technical expression in terms of expenses) "scheme". So there will be a wealth of advice within companies.
Companies have in the past, for very good reasons, set up pensions: first, for philanthropic reasons; and, secondly, as golden shackles on their employees to lock them in. Do not let us run away from that. That is one of the reasons why we have to introduce greater mobility. I think that has wide support across this Chamber. But the pension fund managers will change their approach and they will say, "Yes, in your case we will help you into this personal pension. In your case, we think you will be well advised to go into the company scheme. We will advise you where to go", and the providers will be offering schemes with the minimum of commission. So I think that the more widely the personal pension is spread the wider will be the competition available and the wider and better will be the advice. So I repeat my belief that the Government are ready to stick to their last in not accepting the amendment. I do not think we have the problem here that is anticipated.
Lord Williams of Elvel: May I comment on two points that the noble Lord, Lord Vinson, made? He is a great expert on portable pensions and I would

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certainly agree with a number of points that he made, but there are two points where I would disagree. First, in this legislation we are talking about people who contract out of occupational pension schemes and into portable pension schemes. We are talking about people who contract out of SERPS, and that is quite a different order of people. There may be a lot of people in companies who will advise employees on how to get the best pension scheme and all the rest of it, but that will not happen in the case of the categories we are discussing.
Secondly, I assume the noble Lord, Lord Vinson, is not saying that companies themselves will charge a commission for this service of advising where is the best portable pension scheme for their employees to invest in. I assume that companies would probably give this advice free. Therefore I do not see the noble Lord's argument on that front being relevant to the amendment we are discussing.
Lord Vinson: Perhaps I may reply to that. Their advice will be free because it will be part of the service that they offer to their employees. As they will be able to recommend the cheapest and the lowest commission for personal pension schemes, those schemes will flourish and the worst schemes will be highlighted—no doubt there will be a league table—so that the market will sensibly and properly work and protect those who invest in this way just as it protects the self-employed currently.
Lord Williams of Elvel: I do not want to bore the Committee further. All I am saying is what I said to the noble Lord, Lord Boyd-Carpenter, earlier on. In that case, what is the problem with specifying the maximum?
Baroness Turner of Camden: Perhaps I may reply to the debate, which has been a most interesting one. I thank all noble Lords who have contributed. I do not find the arguments for not accepting the amendment extremely convincing. We are concerned here with the protection of people who are least able to protect themselves. Indeed, this point was made by my noble friend Lord Williams when he referred to the kind of people who would be going on to the personal portable pension market for the first time in their lives. For this reason it is necessary to have some kind of limit put upon what they can be charged by way of administrative expenses and by way of commission.
I do not find the argument very convincing that perhaps if this were applied, somehow or other it would become the maximum. What we have done in putting down this figure is to put what we think is a reasonable figure in all the circumstances. Since I do not find the answers convincing and since I think it is quite important, and since, as the noble Lord, Lord Banks, says, all we are talking about are the minimum contributions, I intend to test the feeling of the Committee on this amendment.
4.32 p.m.
On Question, Whether the said amendment (No. 6) shall be agreed to?
Their Lordships divided: Contents, 100; Not-Contents, 136.

DIVISION NO. 2

CONTENTS

Airedale, L.

Kilmarnock, L.

Amherst, E.

Kirkhill, L.

Ardwick, L.

Leatherland, L.

Attlee, E.

Listowel, E.

Banks, L.

Llewelyn-Davies of Hastoe, B.

Birk, B.

Lloyd of Hampstead, L.

Blease, L.

Lloyd of Kilgerran, L.

Blyton, L.

Lockwood, B.

Boston of Faversham, L.

McCarthy, L.

Bottomley, L.

Mackie of Benshie, L.

Brockway, L.

McNair, L.

Bruce of Donington, L.

Mayhew, L.

Caradon, L.

Milford, L.

Carmichael of Kelvingrove, L.

Molloy, L.

Chitnis, L.

Murray of Epping Forest, L.

Cledwyn of Penrhos, L.

Nicol, B.

Crawshaw of Aintree, L.

Northfield, L.

David, B. [Teller.]

Oram, L.

Davies of Penrhys, L.

Parry, L.

Dean of Beswick, L.

Phillips, B.

Diamond, L.

Pitt of Hampstead, L.

Donaldson of Kingsbridge, L.

Ponsonby of Shulbrede, L. [Teller.]

Elwyn-Jones, L.

Ennals, L.

Rathcreedan, L.

Ewart-Biggs, B.

Roberthall, L.

Ezra, L.

Rochester, L.

Falkland, V.

Ross of Marnock, L.

Fisher of Rednal, B.

Seear, B.

Fitt, L.

Serota, B.

Foot, L.

Silkin of Dulwich, L.

Gallacher, L.

Stallard, L.

Gladwyn, L.

Stewart of Fulham, L.

Glenamara, L.

Stoddart of Swindon, L.

Graham of Edmonton, L.

Strabolgi, L.

Grey, E.

Taylor of Blackburn, L.

Grimond, L.

Taylor of Gryfe, L.

Hampton, L.

Taylor of Mansfield, L.

Hanworth, V.

Turner of Camden, B.

Harris of Greenwich, L.

Underhill, L.

Hatch of Lusby, L.

Walston, L.

Heycock, L.

Wedderburn of Charlton, L.

Hooson, L.

Wells-Pestell, L.

Houghton of Sowerby, L.

Whaddon, L.

Hughes, L.

White, B.

Irving of Dartford, L.

Wigoder, L.

Jacques, L.

Williams of Elvel, L.

Jeger, B.

Wilson of Langside, L.

John-Mackie, L.

Wilson of Rievaulx, L.

Kearton, L.

Winchilsea and Nottingham, E.

Kennet, L.

Kilbracken, L.

Ypres, E.

NOT-CONTENTS

Aldington, L.

Colville of Culross, V.

Allenby of Megiddo, V.

Cork and Orrery, E.

Allerton, L.

Cottesloe, L.

Alport, L.

Cowley, E.

Ampthill, L.

Cox, B.

Belhaven and Stenton, L.

Cromartie, E.

Beloff, L.

Cullen of Ashbourne, L.

Belstead, L.

Davidson, V.

Bessborough, E.

Denham, L. [Teller.]

Boyd-Carpenter, L.

Denning, L.

Brabazon of Tara, L.

Derwent, L.

Brougham and Vaux, L.

Dilhorne, V.

Broxbourne, L.

Dormer, L.

Bruce-Gardyne, L.

Drumalbyn, L.

Buckinghamshire, E.

Dulverton, L.

Caccia, L.

Duncan-Sandys, L.

Caithness, E.

Dundee, E.

Cameron of Lochbroom, L.

Eccles, V.

Campbell of Alloway, L.

Elles, B.

Campbell of Croy, L.

Elliott of Morpeth, L.

Carnegy of Lour, B.

Elton, L.

Cawley, L.

Enniskillen, E.

Chelmer, L.

Faithfull, B.

Coleraine, L.

Fanshawe of Richmond, L.

753

Ferrers, E.

Murton of Lindisfarne, L.

Fortescue, E.

Nugent of Guildford, L.

Fraser of Kilmorack, L.

Onslow, E.

Gainford, L.

Orkney, E.

Gardner of Parkes, B.

Orr-Ewing, L.

Gisborough, L.

Porritt, L.

Glanusk, L.

Portland, D.

Glenarthur, L.

Rankeillour, L.

Gray of Contin, L.

Reigate, L.

Gridley, L.

Renton, L.

Hailsham of Saint Marylebone, L.

Rochdale, V.

Rodney, L.

Halsbury, E.

Rugby, L.

Harmar-Nicholls, L.

St. Aldwyn, E.

Harvington, L.

St. Davids, V.

Henderson of Brompton, L.

Saltoun of Abernethy, Ly.

Henley, L.

Sandford, L.

Hives, L.

Sandys, L.

Holderness, L.

Seebohm, L.

Home of the Hirsel, L.

Sempill, Ly.

Hood, V.

Sharples, B.

Hooper, B.

Skelmersdale, L.

Hylton-Foster, B.

Soames, L.

Inglewood, L.

Somers, L.

Kaberry of Adel, L.

Stodart of Leaston, L.

Kimball, L.

Swann, L.

Kinloss, Ly.

Swansea, L.

Kinnaird, L.

Swinfen, L.

Lansdowne, M.

Swinton, E. [Teller.]

Layton, L.

Teviot, L.

Liverpool, E.

Thomas of Swynnerton, L.

Long, V.

Torrington, V.

Macleod of Borve, B.

Tranmire, L.

Malmesbury, E.

Trenchard, V.

Mancroft, L.

Trumpington, B.

Marley, L.

Tweedsmuir, L.

Masham of Ilton, B.

Vickers, B.

Maude of Stratford-upon- Avon, L.

Vinson, L.

Vivian, L.

Merrivale, L.

Ward of Witley, V.

Mersey, V.

Westbury, L.

Middleton, L.

Whitelaw, V.

Milverton, L.

Wolfson, L.

Mottistone, L.

Young, B.

Munster, E.

Zouche of Haryngworth, L.

Resolved in the negative, and amendment disagreed to accordingly.
4.41 p.m.
Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 7:
Page 88, line 5, leave out paragraph 6 and insert—
("6. A scheme must comply with such requirements as may be prescribed in a manner satisfactory to the Occupational Pensions Board, and with any directions of the Occupational Pensions Board, that a statement shall be provided to the member in a prescribed form before notice is jointly given to the Secretary of State, as regards—

(a) the amount of commission, fees or other payments that will be paid by the scheme to an intermediary, broker, agent or any other third party;

(b) the amount to be deducted to cover administrative expenses;

(c) the net amount that will be invested on his behalf;

(d) the amount payable in the event of the member wishing to transfer to another scheme, showing the amount available in each year from the date of commencement of the scheme until normal pension age;

(e) the value of rights under the scheme, in accordance with a statement by an actuary.").

The noble Baroness said: This amendment is again concerned with consumer protection, but it approaches it from a slightly different angle. As the Committee is aware, the Occupational Pensions Board is a body that was established under existing legislation and it has a range of responsibilities in looking after the interests of pension scheme members. At present, those areas of responsibility are fairly limited. I was
754
glad to hear from the noble Baroness, Lady Trumpington, earlier this afternoon that, anyhow, the intention is to increase the number of staff that the OPB will have, to deal with the extended work that it certainly will have under this legislation.
The idea of making this amendment to Schedule 1 is to set out the kind of requirements that will have to be met if a scheme is to be regarded as satisfactory. It is our belief that the body that should determine whether or not a scheme is satisfactory in the respects that are specified in our amendment to the schedule is the Occupational Pensions Board. We believe, as is set out in the amendment, that a statement should be given to the member in a form prescribed by the Occupational Pensions Board as to,
"the amount of commission, fee or"—
and not the word "of", as appears on the Marshalled List—
"other payments that will be paid by the scheme" …;
"the amount to be deducted to cover administrative expenses";
the amount that will be invested on behalf of the individual concerned;
"the amount payable in the event of the member wishing to transfer to another scheme";
and
"the value of rights under the scheme, in accordance with a statement by an actuary".
In other words, we are saying that the individual concerned should have disclosed to him, by virtue of those provisions, exactly what he is purchasing, exactly what is covered, and exactly what it is costing him. We believe that if there is to be an extension of private personal pension provision—and plainly the legislation envisages that—then there is an obligation to ensure that the people who opt for it are not exploited and left without adequate resources in their old age.
It is essential for all of us that our fellow citizens should not make unfortunate choices or be misled. If that happens, then ultimately the taxpayer will have to pick up the burden, because we simply cannot allow our fellow citizens to starve in old age. It becomes a matter of state benefit, for which we will all otherwise have to pay.
It would be helpful, for the right choices to be made, if such a statement were to be made available to the individual. The Occupational Pensions Board is the right kind of body to have the responsibility set out in the amendment, to ensure that the individual opting for such arrangements has the necessary information on which to make an appropriate decision. I beg to move.
Lord Kilmarnock: I revert to one or two of the anxieties that I expressed on Amendment No. 4. The noble Baroness has told the Committee that it is the intention of her amendment to "beef up" the Occupational Pensions Board for those new responsibilities, but some doubts must remain as to whether it is the only appropriate body to be active in that area, and whether the Securities and Investments Board is not a more appropriate watchdog. Even with the proposals of the noble Baroness, one wonders whether the OPB has sufficient muscle to do what is expected of it in the amendment.

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We shall certainly have some kind of interaction or inter-relationship between the pensions board and the Securities and Investments Board, and it would be helpful if the noble Baroness could tell the Committee how she envisages that link taking place. There is a worry here. We are back in the difficulty of having this Bill before us before we consider the Financial Services Bill, which may clear up some of the problems but which may not. It will be interesting to hear the comments of the noble Baroness on that point.
Baroness Trumpington: Again, I must ask the noble Baroness to reconsider this amendment. I hope I shall be able to satisfy her that there are already sufficient powers in the Bill to meet her concerns, and that we fully intend to use those powers to provide adequate information to members of personal pensions.
The Bill does not itself include a specific provision about the information that schemes must provide to members; and the noble Baroness may very reasonably have supposed that the general power in paragraph 6 of Schedule 1 was intended to cover that. In fact, it is Clause 16(1)(a) that provides the necessary power to cover disclosure by personal pensions and a number of other vital matters. That clause enables regulations to be made bringing personal pensions within the scope of all the existing legislation that applies to occupational pension schemes—for example, the legislation about preservation, equal access for men and women, the right to a transfer value, revaluation of early leavers' benefits, etc. and disclosure. I can assure the noble Baroness that we intend to apply the power in Section 56A of the Pensions Act to personal pensions, and to use it to make regulations that ensure that full information is available to scheme members and beneficiaries.
I must ask the Committee not to support this amendment for two other reasons. First, its wording might in practice result in difficulty in making full and adequate regulations about disclosure by personal pension schemes. We want to build on those that apply to occupational pension schemes to ensure consistent application of the law as between the two types of scheme, and it is therefore appropriate to apply the existing powers in the Pensions Act. I can assure your Lordships that those powers are wide enough to deal with all the matters of concern to the noble Baroness, and that we shall be including the disclosure provisions in the consultative proposals that we shall be issuing later this year.
Secondly, the effect of this amendment would be to narrow the present general power in paragraph 6 of Schedule 1 to a specific one dealing only with some (and by no means all) aspects of disclosure. The power in paragraph 6 is couched in wide terms. First, it is intended to encompass regulations about the "nature" of personal pension schemes. Those will be by reference to forms of investment business that are defined or regulated by other legislation, and so it is necessary to use fairly wide wording to cover that. Secondly, the freedom to take a personal pension in place of SERPS or an occupational pension is a new departure for retirement provision in this country, and we need to be certain of having all the necessary powers to ensure that investors' interests are
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adequately safeguarded. We shall of course be subjecting our proposals for regulations to full consultation later this year.
With regard to the role of the OPB, all the matters covered in Schedule 1 are conditions which the scheme must satisfy under Clause 2, and it is for the Occupational Pensions Board to decide under that clause whether this scheme satisfies those conditions.
The noble Lord, Lord Kilmarnock, said that the OPB was not necessarily the only appropriate watchdog. There is no intention of making the OPB the only watchdog. All the other existing and proposed forms of statutory and non-statutory protection will apply to personal pensions. Again, for the reasons that I have given, I hope that the noble Baroness will feel able to withdraw this amendment.
Baroness Turner of Camden: I am grateful for the very full explanation that has been given by the noble Baroness. I am glad to learn that a great deal more work will be done on disclosure and I agree that disclosure could cover much more than is listed in the amendment that I have tabled. In the circumstances I shall not press the amendment this evening and I ask leave to withdraw it.
Amendment, by leave, withdrawn.
Baroness Hooper Baroness Hooper moved Amendment No. 8:
Page 88, line 15, leave out ("or") and insert ("pension scheme or protected rights (within the meaning of the Social Security Pensions Act 1975) under an").
The noble Baroness said: I beg to move Amendment No. 8, with which I propose to discuss Amendments Nos. 22 and 23. These are purely drafting amendments which are needed to ensure that protected rights are clearly defined and that Schedule 1 works correctly when modified by Schedule 2. I beg to move.
Baroness Jeger: We accept that these are largely textual amendments and subject to the reservation that we might want to come back to them again when we have read them twice, we shall not take any action this afternoon.
On Question, amendment agreed to.
Baroness Hooper Baroness Hooper moved Amendment No. 9:
Page 89, line 15, leave out sub-paragraph (3) and insert—
("(3) Effect may be given to protected rights by the provision of a lump sum if—

(a) the lump sum is payable on a date which is either the date on which the member attains pensionable age or such later date as has been agreed by him; and

(b) the annual rate of a pension under sub-paragraph (1) above or an annuity under sub-paragraph (2) above giving effect to the protected rights and commencing on the date on which the lump sum is payable would not exceed the prescribed amount; and

(c) the circumstances are such as may be prescribed; and

(d) the amount of the lump sum is calculated in a manner satisfactory to the Occupational Pensions Board by reference to the amount of the pension or annuity.").

The noble Baroness said: On behalf of my noble friend perhaps I may say that this, too, is a technical drafting amendment to make sure that paragraph 9(3) of Schedule 1 to the Bill works as intended. Paragraph 9(3) provides that where a protected rights pension (resulting from the minimum contributions to a personal pension or money purchase contracted-out scheme) is very small, it may be commuted for a lump

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sum payment. This lump sum should be payable at the time the pension would have started. The present wording of the paragraph would, however, have allowed the payment of the lump sum to be deferred—perhaps to a time when a pension would not be so small as to be commutable. The revised wording puts this right. I beg to move.
On Question, amendment agreed to.
Baroness Hooper Baroness Hooper moved Amendment No. 10:
Page 90, line 17, leave out from ("with") to end of line 46 and insert ("any such requirements as may be prescribed for meeting the whole or a prescribed part of any liability in respect of protected rights under the scheme which the scheme is unable to meet from its own resources—

(a) by reason of the commission by any person of a criminal offence;

(b) in such other circumstances as may be prescribed.").

The noble Baroness said: On behalf of my noble friend I should like to say that this amendment results from a number of representations that we have received, including representations from the National Association of Pension Funds and the Association of Pension Lawyers. My noble friend Lady Trumpington has already referred to this amendment when speaking to Amendment No. 3.
It appears that paragraph 10 of Schedule 1 to the Bill will not work in its present form for money purchase schemes and is largely irrelevant to them. Its wording follows existing provisions in Section 40 of the Pensions Act which apply to contracted-out salary-related schemes, and, on reflection, we agree that those provisions do not translate happily into the money purchase context.
The primary intention of paragraph 10 was to allow regulations to be made requiring personal pension schemes and money purchase contracted-out schemes to make arrangements to fulfil their obligations in respect of protected rights if they suffer loss of funds due to fraud, theft or negligence, as proposed in paragraph 2.44 of the White Paper. This amendment therefore replaces paragraph 10 with a specific provision.
I should further like to reassure the Committee inasmuch as there will of course be further consultations about compensation requirements, but in principle eveyone with a personal pension should be at least as well protected as someone with an insurance policy covered by the Policyholders Protection Act. I beg to move.
On Question, amendment agreed to.
Schedule 1, as amended, agreed to.
Clause 3 [Amount of minimum contributions]:
Viscount Hanworth Viscount Hanworth moved amendment No. 11:
Page 4, line 16, leave out ("the aggregate of").
The noble Viscount said: Amendments Nos. 11 and 12 are to be taken together, and I think it may be for the convenience of the Committee if I also speak on the question that Clause 7 should stand part of the Bill, as all these points are related.
The purpose of this amendment is to oppose the extra 2 per cent. of earnings contribution which the
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Government are proposing to pay until April 1993 in addition to the minimum contribution for those commencing a personal pension after April 1988 (that is in Clause 3) to an employer setting up occupational pension schemes after the 1st January 1986—and that is in Clause 7. The main aims of the Government are to encourage people to leave the state earnings-related pension scheme (SERPS) and to take out a personal pension, and to encourage employers to set up inferior occupational schemes instead, thereby further reducing the long-term liabilities of SERPS.
However, the proposal goes even further. The extra 2 per cent. will also be paid to anyone who is at present in a contracted-out occupational pension scheme, provided that he opts for a personal pension and leaves the occupational pension scheme. The likely effect of this proposal is that members of occupational pension schemes, particularly the young, the low paid and married women, will be attracted by the immediate advantage of the lower contribution rates for personal pensions enhanced for a period by the Government, and will opt out of the occupational pension scheme which will give them not only a larger pension on retirement but also security for themselves and their dependants should they die or become ill before retirement. Payment of the minimum contribution plus the 2 per cent. to a personal pension cannot match the benefits of a good occupational pension scheme. It is immoral in these circumstances for an incentive of this type to be offered to people who almost certainly with the passage of time will suffer from their decision.
However, there are also sound economic reasons against this particular proposal by the Government. If only one-tenth of the existing members of occupational pension schemes opted for a personal pension, the cost to the state could be £1 billion over five years. It really is iniquitous of the Government to introduce a Bill which on the one hand gives away £1 billion of taxpayers' money and on the other reduces the social security benefits of over 4 million people.
What is really worrying in all this is that the young do not look much to the future. I certainly did not; 45 years was as far as I looked. Young people are bringing up families and money is vital to them at the time. They simply do not have the knowledge to protect themselves against the many sharks in the insurance world, in an area that has always been recognised as one where schemes tend to be oversold.
There they are, children in the wilderness, who will not think for the future. The Government are encouraging them not only to get out of SERPS but to get out of occupational pension schemes. They are storing up trouble for future governments in the next century through people who will not make adequate provision for themselves or their dependants. I beg to move.
5 p.m.
Baroness Turner of Camden: I rise to support the noble Viscount in relation to this amendment and the other amendments to which he referred. I suppose that this is where we begin what could be called the battle of the bribe, because bribe it is. The Government are offering a positive inducement for people to contract out of SERPS and also occupational pension schemes and to participate in personal private schemes. As the

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noble Viscount said, the incentive will represent 2 per cent. of earnings for a five-year period and on the Government Actuary's estimate will cost £60 million if half a million contributors contract out.
Contracted-out occupational pension schemes already have to meet defined benefit requirements. They offer a guaranteed income in retirement, whereas personal pensions cannot offer such a guarantee. Indeed, as the Under-Secretary of State said at the Committee stage in another place:
"The nature and meaning of money purchase is that the value of the benefits which those contributions buy must depend upon investment returns experienced by the scheme".
There has been considerable opposition to the idea of a 2 per cent. bribe to get people to leave occupational schemes. As the noble Viscount said, it may well prove attractive to younger people. As he also said, it is difficult to persuade younger people to take an interest in pensions. People frequently do not do so until they are over the age of 40. If young people find PPPs attractive and opt out for the bribe, that will have a destabilising effect on good occupational pension schemes.
Those are the views not only of the TUC and these Benches; they have been strongly expressed by the CBI and the National Association of Pension Funds as well. They have been expressed not only by people who might be thought to have a vested interest in things as they are; in other words, people who are already involved in strong, collective occupational schemes. A large number of organisations concerned with help for the poor, such as Age Concern, the Disability Alliance, the Family Service Unit and indeed the organisations that make up the Social Security Consortium have been busy lobbying against the idea of a 2 per cent. bribe paid by everybody but of only limited benefit to a small number of people.
We on these Benches are against the bribe altogether, whether it is intended to encourage people to come out of occupational schemes or whether it is intended to encourage people to leave SERPS. We do not think that that subsidy should be made available to those who seek to make a profit out of the sale of personal private pensions. It will give them an unfair advantage that they should not have. If they can do so much better than either occupational pension schemes or SERPS, they should demonstrate that by standing on their own commercial feet without the help of a subsidy from the rest of us.
The noble Baroness, Lady Trumpington, said at Second Reading that the Government had not made up their mind about this. I hope that since that time they have had second thoughts and that we shall learn what those are this evening.
Baroness Trumpington: I thought that the Committee might appreciate it if I spoke at an early stage in the discussion of the amendments in order to clarify the Government's position. I hope that what I shall say will allay the fears of those Members of the Committee who have spoken to the amendments. First, I should like to put it on the record again that we have never seen the 2 per cent. for personal pensions as a threat to occupational schemes. Its essential purpose is to increase the attractions of personal pensions for people who have no pension of their own now outside
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the state scheme. We are not convinced that a modest 2 per cent. premium available for a maximum of five years will tempt people out of good occupational schemes. But we are concerned that some people have interpreted the 2 per cent. as a sign that we do not mean what we say when we stress our commitment to occupational pension schemes. We want occupational schemes to prosper and expand, and we are very conscious of the major achievement made by existing schemes in maintaining and improving the living standards of so many people in retirement.
I know that there are some people in the pensions world who argue that the Government have been doing altogether too much in relation to occupational schemes, but I believe that we have a track record to be proud of. Everything we did in the Social Security Act 1985, with its improvements for early leavers and new rights to information for scheme members, should strengthen schemes and not weaken them. The simplification of contracting out for salary-related schemes, the introduction of money purchase contracting out and the new occupational scheme incentives in this Bill should all result in many more people being covered by occupational schemes.
I now turn to the substance of the amendments. When the Secretary of State said in the other place that we wanted to reconsider all that had been said about the 2 per cent. and personal pensions, he certainly did not have in mind any thought that we might do away with it altogether. I have to tell the noble Baroness and the noble Viscount, Lord Hanworth, that we are not at all persuaded by their amendments or their arguments.
We firmly believe that there is a strong case for an incentive to get the new scheme going. The idea of an introductory incentive is neither new nor particularly original. But all the evidence is that it works. You have only to look at how many magazines are now promoting their subscriptions with special deals for new readers to see what I mean. I am not, of course, equating personal pensions with magazines; they are far too important for that. But their importance and the promise that they can hold out for so many people provides all the more reason for giving them a little something extra at the outset.
The inescapable truth about pensions is that they generally do not excite or interest people until they are nearing retirement. There is an awful lot of inertia to overcome before we shall get younger people to take as much interest in pensions as they ought to for their own sake. The noble Lord, Lord Banks, pointed out at Second Reading that employed people not in occupational schemes already have access to a sort of personal pension—the so-called Section 226 retirement annuity—yet less than 5 per cent. of those eligible among employees take up this option. There are drawbacks to Section 226 contracts; they cannot be contracted out from SERPS and employers cannot contribute to them. Both drawbacks will disappear with the personal pensions to follow this Bill. But we doubt whether that alone will be sufficient to encourage enough interest. We need to set the ball rolling in a way which catches the imagination. I am convinced that the 2 per cent. will do just that and it must remain as an essential, albeit small, part of our strategy for reducing dependence on the state.

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Having said all that, I am glad to be able to make very much more encouraging noises in the direction of noble Lords who are not seeking total removal of the 2 per cent. but who do not want it to go to people who have been in occupational schemes, and whose amendments we shall be considering after these. I made clear at the beginning of my remarks that the Government remain sceptical about the dire effects some—most notably the National Association of Pension Funds—have predicted for occupational schemes if the incentive stays. But what we do not doubt is the sincerity of those who make these claims.
We also recognise that their concern is as much about what they see as an issue of principle as the possible effects of the 2 per cent. on occupational schemes. After very full and careful consideration, we have therefore decided to modify the proposal to pay the 2 per cent. incentive so that it does not go to personal pensions held by people who have been in occupational schemes for a reasonable period of time. I undertake that we shall propose an amendment on Report to enable that to be done. Proposals for the content of the regulations will be subject to full consultation with the pensions industry and other interested parties, including the Occupational Pensions Board. The principle we are accepting is already clear. The 2 per cent. incentive will not be available for personal pensions held by someone who had been in a contracted-out occupational scheme for a reasonable period and who was still eligible for membership of that scheme after leaving it.
In view of that undertaking, which I thought it would be helpful to give at the earliest opportunity during the consideration of this clause, I hope that the noble Viscount, Lord Hanworth, and the noble Baroness, Lady Turner, will feel able to withdraw the amendment.
Lord Banks: I regret one thing that the noble Baroness said, and I welcome what she said about another. I regret that she is committed to the maintenance of the 2 per cent., but I welcome what she said about the position of those who are already in occupational schemes and whether, if they transfer, the 2 per cent. should be paid. When we come to Amendment No. 13 we can perhaps go into that matter a little further.
I shall summarise what seem to be the four principal arguments against the 2 per cent. The first is that it does not seem right that contributors' and taxpayers' money from the national insurance fund should be used to induce people to leave the state earnings-related pension scheme for private provision. There should be a free and fair choice for employers and employees without any subsidisation of private as opposed to state schemes. Secondly, if such a reward is to be paid, it does not seem right that it should not be paid to those who are already contracted out. We read in the Bible of those who came late on the scene receiving the same reward as those who bore the heat and burden of the day, but we do not read of them receiving a greater reward.
Thirdly, it does not seem right that those who are in an already contracted-out final salary scheme should be induced to leave that scheme for a personal pension
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scheme. The noble Baroness has agreed to that point. Fourthly, we have already seen that the flat-rate rebate may well involve younger members contracting out of good defined benefit occupational schemes for a personal pension scheme. The 2 per cent. incentive will of course accentuate that inducement with the consequences which we have already discussed.
5.15 p.m.
Lord Vinson: Much heat has been generated in the pensions industry over the 2 per cent. inducement. I hope that the amendment suggested by the Government will reduce that heat and will be regarded, when it is fully worked out, as a satisfactory compromise by which the Government still stick to their principle of encouraging people to go into personal portable pensions but recognise the understandable worries that pension fund managers have about the withdrawal of some of their membership.
At the same time, we should recognise that a campaign, which has been nothing short of vilification, has been mounted to try to effect a change. Once one starts throwing mud one rather invites it to be thrown back. For example, after the original SERPS exercise was introduced many of us on both sides of the House may have felt with the wisdom of hindsight that the whole exercise was misplaced and misjudged, but it is with us. To encourage companies to contract out and not in, the national insurance rebate was set at such a level that most companies benefit to the extent of about 1 per cent. on payroll by contracting out. If anything were an inducement—dare I say bribe?—that was.
If those who object to inducements do not like that, the Government would be right to withdraw the 1 per cent. bonus to contracted-out companies. We should then be "even Stevens" in terms of the debate. We must try to get these matters in proportion.
The noble Viscount, Lord Hanworth, started by saying that personal portable pensions were likely to be inferior to company pension schemes. It is lovely to join the bleeding heart brigade, if I may put it that way, and we all care deeply about the welfare of young people and young women in particular. Under existing schemes, the early leaver, which is a euphemism for those who change jobs frequently, has been subsidising the long stayer. Early leavers are practically always young women going off to have babies and people changing jobs. We have penalised the young and those who through no fault of their own put their family obligations first. Those in occupational schemes have ridden on the backs of such people. There is no gainsaying that.
By enabling people to start early in life with a personal portable pension, with or without a rebate—I think that it is wise and proper that they should have a rebate—they will finish with a pension far better than they would have done under existing schemes. We always hear how good existing schemes are. They are, for those who last to the end of the road, and do not change jobs. They are a pretty poor deal for a highly mobile workforce. It is wrong to talk about inferior schemes. The Government are right to say that they want to encourage choice. There will be complete freedom of choice as to which schemes and which

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route one takes. No doubt those active agencies which advise companies and individuals will continue to do their best to make certain that people make the right choice.
I hope that the suggestion that the Government have made to modify the 2 per cent. inducement will meet the understandable fears of the pension profession and will draw the heat out of the argument so that we can look at the point rationally and try to obtain the pension provision which is best suited for all our workforce, not just the lucky ones who happen to be in long-term employment with major companies.
Lord Houghton of Sowerby: The Committee will be aware that there is a tax bias in favour of occupational pension schemes. Tax relief is given on all contributions. Other reliefs are given to the pensions institutions. Taking them all together, about £3.25 billion a year in revenue is forgone in tax concessions for occupational pension schemes.
Contributions to the state scheme are not allowable for tax relief. Those going over in part to occupational schemes will increase the amount of revenue forgone. As I understand it, the clause is a booster for occupational schemes. The minimum contribution is what I should call "pushing the boat out." We find a contributor who only has the benefits of the state scheme and say to him, "Be a bit more adventurous, go outside, get something better and get something of your own. This is a very strong attraction. This is a personal pension. It is worth going for. Off you go. To send you on your way happy and smiling, we shall pay a minimum contribution on your behalf."
I do not know what is the tax position of the minimum contribution being paid by the state to outside pension interests. I point out only that all the time, not only in this regard but in the matter with which we shall be dealing on Friday when we come to the mortgage boom, an enormous sum of revenue is going out in tax reliefs. In my opinion that aggravates the whole problem of public expenditure and the use of taxation for social policies. I am not pressing for any particular reply. I should just like to know whether Ministers on the Bench opposite understand what they are doing.
Lord Boyd-Carpenter: As my noble friend the Minister consciously anticipated the debate on later amendments, and, if I may say so, did so very wisely by making her announcement as to the Government's intentions in respect of an amendment to deal with the question of occupational schemes and the so-called bribe at the Report Stage, perhaps I may be allowed briefly to say how much I welcome her announcement. It is perfectly true, as my noble friend Lord Vinson said, that there has been some exaggeration in the pensions world about the possible effect of this. But when all was said and done, it appeared that as the Bill originated there was a provision that would go against what has been the considered policy in similar legislation for many years of giving direct encouragement to the development of good occupational schemes. As I understand my noble friend's announcement, that threat of possible damage will be removed. I should like warmly to express a welcome to it.
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As a matter of curiosity, I referred a moment ago to the consistent policy of Governments over many years. I happen to have in my hand a report of a speech of the then Minister to the autumn conference of the Association of Superannuation and Pension Funds in 1961 in which he spelt out in clear terms that one of the major objectives of the Act of 1959 was to preserve and encourage the best development of occupational pension schemes. I am very glad that my noble friend is continuing with that sensible policy.
Lord Swann: One of the disadvantages of being a Cross-Bencher is that one finds oneself sympathising in considerable measure with powerfully held views on both sides of the Committee. Anticipating that this would be the case, I put down Amendment No. 14. It would be helpful, I believe, if I say that I am delighted to hear what the noble Baroness the Minister has said and to say that I shall not be moving Amendment No. 14.
Viscount Hanworth: I agree with what was said about the non-portable pension. I left the army in 1958. I suppose that I worked outside for eight or 10 years. My pension for those times is precisely £25 a year. I thank the noble Baroness and the Government for being flexible on this issue which worries many of us. I did not expect for one moment that she would agree to scrap the 2 per cent. incentive. I now call it an incentive and not a bribe—
Baroness Trumpington: Hear, hear!
Viscount Hanworth: We are more concerned about keeping occupational pensions as they ought to be, keeping them at the same level of provision as they are at the moment. I am extremely happy therefore to withdraw the amendment.
Baroness Turner of Camden: I, too, welcome the noble Baroness's statement. I am glad to learn that occupational schemes in future will be protected against people opting for PPPs on the basis of the 2 per cent. incentive. What bothers me is that it seems to me that this still leaves the state earnings-related pension exposed. So far as I can see, the incentive still exists for people to opt against SERPS in favour of PPPs. I do not believe that this is very fair either. It provides an incentive for which all of us pay through the national insurance fund. Yet, in order to do so, we are encouraging people to opt against SERPS and into the PPP arena, and in so doing subsidising commercial operators who will be offering PPPs to a whole range of new people who otherwise might not have considered this as a possibility.
While very much welcoming—I really do welcome —what the noble Baroness has said about occupational schemes, because it was of considerable concern to this side of the Committee, I regret that it has not been found possible to extend the same consideration in respect of people who are covered by SERPS. Those covered by SERPS, in the main, are even worse off in many instances—a great deal worse off—than those covered by occupational pension schemes. It is for that reason that I am not able to offer an unqualified welcome to what the noble Baroness has said.

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As to statements made about early leavers, I am glad to say that there has been some legislation that covers the situation of early leavers in a way that the Occupational Pensions Board recommended a number of years ago. As for the comments made by my noble friend Lord Houghton on tax concessions, I would remind him that the Chancellor has already said that he will introduce regulations in relation to pension fund surpluses that become operative from next year and that will force pension fund surpluses to be reduced. If not reduced, the regulations will compel them to be returned to employers and, if returned to employers, they will attract 40 per cent. taxation. It seems to me, in respect of tax concessions, that if the Chancellor cannot get it one way, he is proceeding to get it another way through taxation of pension fund surpluses.
To return to the main point, I regret very much that SERPS is still at the mercy of the 2 per cent. incentive or bribe—whichever way you care to look at it. This is not a happy situation. It will be a problem, I am sure, for people who are not normally involved in personal private pensions. They may find themselves tempted to leave SERPS and to do so via the 2 per cent. incentive. However, when they are in personal private pensions instead of SERPS, they may find that they have a very poor bargain indeed.
Baroness Trumpington: It would be most ungracious of me if I did not say how much I appreciate the very pleasing words of the noble Viscount in welcoming the Government's future amendment, and even the guarded welcome expressed by the noble Baroness. I am particularly glad that the noble Viscount should have withdrawn the word "bribe". It is a pity that the word ever existed. The purpose of the incentive is clear in its name. It is to get the new arrangements off the ground and to ensure that pensions coverage, for many years stuck at half the workforce, will expand and grow.
The noble Lord, Lord Banks, was concerned that the 2 per cent. would be paid for from the national insurance fund. The noble Lord will recognise, I am sure, that the cost of SERPS falls on the fund. So it must be sensible to use the fund now to help reduce the long-term burden that has lain on it. I thought that I would like to express my thanks.
Lord Williams of Elvel: Before the noble Baroness sits down, I wonder whether she will respond to the specific point of my noble friend Lord Houghton relating to tax treatment of the 2 per cent?
Baroness Trumpington: Yes. The answer is that the employee's share of the minimum contribution will be subject to relief just like any other sort of pension contribution. This point was made in the White Paper. Employers of course get relief on national insurance contributions from which their share of the minimum contribution is derived.
Amendment, by leave, withdrawn.
[Amendment No. 12 not moved.]
5.30 p.m.
Lord Banks Lord Banks moved Amendment No. 13:
Page 4, line 22, at beginning insert ("Subject to subsection (4A) below").
The noble Lord said: With the leave of the Committee, I should like also to speak to Amendment No. 15. I understand that the Government agree completely with the aim of the amendments. I welcome very much what the noble Baroness Lady Trumpington had to say about it. I join with all others who have welcomed what she said. I move these amendments in order to try to discover how much the Government agree with the substance of them as the method of putting into practice the principle which they have now agreed. The amendments are very similar to those moved by my honourable friend Mr. Archy Kirkwood in another place at Report stage although there is one important difference.
The purpose of the amendment is to ensure that when somebody switches from an already contracted out scheme to a personal pension scheme the 2 per cent. is not paid. The amendment seeks to achieve that by creating a new category of non-qualifying earner in respect of whom the 2 per cent. incentive will not be paid. Non-qualifying earners are those already members for more than a period of time to be specified in an occupational pension scheme contracted out under Part III of the Social Security Pensions Act 1975. The specified period of time is known as the "cooling-off" period and this brings me to the difference between this amendment and that proposed in another place by my honourable friend.
In another place the Secretary of State criticised my honourable friend's amendment for lack of flexibility. He pointed out that someone who had been in an occupational scheme for, say, a week would find himself caught, perhaps before he had begun to assess his situation, and would be unable to receive the 2 per cent. on opting for a personal pension scheme. He would be free to switch but not to receive the 2 per cent. In order to meet that objection the cooling-off period has been introduced. This would allow the 2 per cent. to be paid in respect of a switch within that time.
I would have much preferred that the 2 per cent, incentive were got rid of altogether but if it is to remain I should certainly be much happier if it were restricted in the way that these amendments propose. What the noble Baroness said earlier led me to hope that perhaps she was contemplating that they would be restricted in that way. I beg to move.
Baroness Trumpington: With these amendments the noble Lord, Lord Banks, is seeking to withhold the 2 per cent. incentive from members of occupational schemes who opt for a personal pension. I have already made clear that the Government have decided to modify the proposal for the 2 per cent. incentive so that it does not go to people who have been in occupational schemes for a reasonable period to time; and as I have spoken at some length about the incentive, and why we think it is necessary, I do not propose to weary members of the Committee by repeating the arguments.

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We recognise that the amendment has been written in a way which seeks to meet our concern—voiced by the Secretary of State in another place—that the incentive should not be denied to someone who joins an occupational scheme for a short time, feels he has made a mistake and wants to take a personal pension.
However, despite all his considerable effort I am sorry to have to tell the noble Lord that the amendments are not acceptable. We have to provide properly for the various exceptional circumstances that will arise and we are not persuaded that the main amendment would enable us to do so. For example, there will be people with more than one job, only one of which may be contracted out. There is no reason for them to be denied the incentive if their personal pension relates to earnings from a job which does not carry a pension scheme membership.
I hope that the firm undertaking that I have given previously to bring forward a Government amendment at Report stage will persuade the noble Lord, Lord Banks, not to press this.
Lord Banks: I am sorry that the noble Baroness does not think that my amendment would achieve the purpose which she has in mind. I am sorry that she does not think it satisfactory. We shall look forward to her amendment and shall judge whether we consider that it will achieve the purpose that she says she has in mind. I beg leave to withdraw.
Amendment, by leave, withdrawn.
[Amendments Nos. 14 and 15 not moved.]
Clause 3 agreed to.
Clause 4 [Effect of payment of minimum contributions on rate of certain benefits]:
Baroness Hooper Baroness Hooper moved Amendment No. 16:
Page 5, line 20, after ("earner") insert ("sections 16(2B), 28(7A) and 59(1A) of the Social Security Act 1975 and").
The noble Baroness said: On behalf of my noble friend, I beg to move Amendment No. 16, and for the convenience of Members of the Committee, to refer also to Amendment No. 20. These are very technical amendments, the effect being to ensure that the provisions of Clause 4 and new Section 29(2A) of the Pensions Act (inserted by Schedule 2) apply for the purposes of Section 16(2B), 28(7A) and 59(1A) of the Social Security Act 1975. I beg to move.
On Question, amendment agreed to.
Clause 4, as amended, agreed to.
Clause 5 [Personal pension protected rights premium]:
Baroness Hooper Baroness Hooper moved Amendment No. 17:
Page 6, line 22, at end insert ("section 52C of or paragraph 16 of").
The noble Baroness said: On behalf of my noble friend, may I say that this again is a technical amendment. Clause 5(6) provides for consequential words to be added to Clause 5(4)(a) if and when Section 52C of, or paragraph 16 of Schedule 1A to, the Pensions Act apply to personal pension schemes.
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(There is power to apply these provisions, with modifications, to personal pension schemes in Clause 16(1)(a) of the Bill). A reference to Section 52C is therefore needed in the opening words of Clause 5(6). This was omitted as an oversight and the amendment puts this right. I beg to move.
On Question, amendment agreed to.
Baroness Hooper Baroness Hooper moved Amendment No. 18:
Page 6, line 41, after ("29") insert ("(2) and").
The noble Baroness said: I beg to move Amendment No. 18, with which I propose to discuss Amendments Nos. 25, 127, 128, 129 and 130. One of the central tenets of the new pension arrangements and opportunities introduced by this Bill is that contracted-out rights should be capable of maximum transferability between occupational and personal pension schemes. We do not want to build new rigidities and unnecessary barriers to transfer into the new arrangements.
We have made it clear that in the interests of protecting the finances of existing occupational schemes we shall not be requiring them to provide transfer values of rights built up before the new arrangements begin, in a case where a person decides to leave the scheme while continuing in the job. However, having said that, where the right to a transfer value is available, we do not want to put unnecessary restrictions on what can be done with any "guaranteed minimum pension" which may be included in that transfer value. Where the individual wants to (but not of course otherwise), it seems reasonable that he should be allowed to apply the value of the GMP to purchasing "protected rights" in a personal pension or money purchase contracted-out scheme.
These amendments do not provide for that in detail. They extend the powers in Section 38(1) of the Pensions Act to allow regulations to be made setting out the conditions for such transfers; and they make consequential amendments to Section 29 of the Pensions Act and to this Bill. Details of the regulations about transfers of GMPs and protected rights under the new arrangements will be included in the consultative proposals which will be issued later this year. The amendment has two other effects which I should mention in commending it to Members of the Committee.
First, it enables GMPs to be transferred to and from schemes which have ceased to be contracted out but are still supervised by the Occupational Pensions Board. This is a useful and practical easement, proposed to us by the board themselves, to assist their task of ensuring that proper arrangements are made for GMPs which are still the responsibility of such schemes.
Secondly, it enables GMPs which have been "bought out" as insurance policies or annuity contracts later to be transferred again to a pension scheme. This again is an easement which allows more flexibility to meet individuals' wishes as to the source of their income in retirement. I beg to move.
Lord Kilmarnock: I should like to ask the noble Baroness a question. The noble Baroness referred to the consultative proposals that will be issued later on,

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particularly in relation to the possibility of transferring GMP rights into personal schemes. Is the noble Baroness able to tell me about the status of those proposals? How and when are they coming out and where do they bear upon the legislation?
Baroness Hooper: I regret that at this moment I cannot give the noble Lord an answer, but I shall let him know. I believe that they may come out at the end of the year.
On Question, amendment agreed to.
[Amendment No. 19 not moved.]
Clause 5, as amended, agreed to.
Clause 6 agreed to.
Schedule 2 [Money purchase contracted-out schemes]:
[Amendment No. 19A not moved.]
Baroness Hooper Baroness Hooper moved Amendment No. 20:
Page 91, line 18, after ("section") insert ("and sections 16(2B), 28(7A) and 59(1A) of the principal Act").
On Question, amendment agreed to.
Baroness Hooper Baroness Hooper moved Amendment No. 21:
Page 93, line 35, leave out from ("to") to end of line 39 and insert ("minimum contributions there shall be substituted references to minimum payments and any payments by the Secretary of State under section 7 of the Social Security Act 1986;").
The noble Baroness said: This again is purely a drafting amendment to make the provision work properly. I beg to move.
On Question, amendment agreed to.
Baroness Hooper Baroness Hooper moved Amendment No. 22:
Page 93, line 49, leave out from ("rights") to ("pension") in page 94 line 1 and insert ("(within the meaning of the Social Security Pensions Act 1975) under another occupational pension scheme or protected rights under a personal").
On Question, amendment agreed to.
Baroness Hooper Baroness Hooper moved Amendment No. 23:
Page 94, line 4, leave out ("for the reference in paragraph 9") and insert ("in paragraph 9—

(i) for the reference to an occupational pension scheme there shall be substituted a reference to a personal pension scheme; and

(ii) for the reference").

On Question, amendment agreed to.
Baroness Hooper Baroness Hooper moved Amendment No. 24:
Page 95, line 19, leave out ("improve") and insert ("approve").
The noble Baroness said: The gremlins found their way into the Bill on its way here from another place, substituting the word "improve" where the word "approve" was before. While I can assure the Committee that we are always ready and willing to improve the Bill in every way we can, I feel that in this case the gremlins have been overzealous and that the substitution of "improve" here is not an improvement. The amendment puts the text back as it was. I beg to move.
On Question, amendment agreed to.
Baroness Hooper Baroness Hooper moved Amendment No. 25:
Page 96, line 1, after ("29") insert ("(2) and").
On Question, amendment agreed to.
Baroness Hooper Baroness Hooper moved Amendment No. 26:
Page 98, line 11, leave out ("after the definition of "accrued rights" ") and insert ("before the definition of "guaranteed minimum pension" ").
The noble Baroness said: This again is purely a drafting amendment. The definition of "average salary benefits" cannot go after that for "accrued rights" in the Pensions Act, because the definition of "accrued rights" was repealed by the 1985 Social Security Act. The correct placing of the new definition is before that for "guaranteed minimum pension"; and the amendment provides this. I beg to move.
On Question, amendment agreed to.
Schedule 2, as amended, agreed to.
Clause 7 [Schemes becoming contracted-out between 1986 and 1993]:
The Deputy Chairman of Committees (Lord Nugent of Guildford): We now come to Amendment No. 27 which stands in the name of the noble Baroness, Lady Trumpington.
Lord Banks: This amendment appeared in the first Marshalled List under my name and I did, in fact, submit it. However, I do not intend to move it.
[Amendment No. 27 not moved.]
On Question, Whether Clause 7 shall stand part of the Bill?
5.45 p.m.
Baroness Turner of Camden: It had been my intention to move that this clause should not stand part of the Bill because my understanding of Clause 7 is that it provides for incentive payments to be made in respect of occupational pension schemes either salary-related or money purchase. The noble Baroness has already dealt with that matter and so there does not seem to be any point in opposing the clause. However, I still feel concerned about SERPS, and I may come back to the matter on Report. At present, I shall not oppose the clause.
Clause 7 agreed to.
Clause 8 [Abolition of requirement relating to requisite benefits]:
On Question, Whether Clause 8 shall stand part of the Bill?
Baroness Turner of Camden: I beg to move that Clause 8 should not stand part of the Bill. As I understand it, and as set out in the very helpful documentation that we have received, Clause 8 removes the requirement in the Pensions Act that to qualify for contracting-out a salary-related occupational pension scheme must provide so-called requisite benefits.
As I understand it, "requisite benefits" mean that, broadly, pension rights must build up at one-eightieth

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of average or final pensionable salary for each year a person is a member of the scheme. I believe it is claimed—indeed a number of pensions interests claim this as well as the Government—that the requisite benefits test is unduly complicated, and this clause is seen as a necessary simplification to do away with it. That may very well be so. However, on the other hand there is the possibility that removal of this requirement could result in lesser pension benefit for people than they have at present, because although it is true that it is not necessarily the case that requisite benefits are higher than GMPs, they frequently are higher.
We are anxious to ensure that occupational pension schemes, if they offer very reasonable terms and conditions, should continue to do so. While there is no indication that schemes would necessarily change their rules to provide for lesser benefits if the requirement were removed, the possibility exists that they may feel tempted to do so if they no longer had to meet the requisite benefits requirement. For those reasons, it seems to us that, despite the fact that this clause is intended to reduce complication and to provide greater simplification, it is a clause which should not stand part of the Bill, and I therefore beg to oppose it.
Lord Kilmarnock: I should like to seek some clarification from the noble Baroness on this matter. The suggestion put forward, certainly by the National Association of Pension Funds and other interests, is that this clause is a welcome simplification. However, I am informed that the intended simplification will not be achieved unless the clause applies retrospectively to 6th April 1978, and that is because the conditions are most arduous where early leavers exercise options to take a transfer or a buy-out, or where schemes are required to notify rule amendments in accordance with Section 50 of the Pensions Act.
If the requirements continue to apply from 6th April 1978 until the effective date, they will continue to cause complications for some time to come. It may be that the intention is that the clause should apply retrospectively, but if that be the case there is no indication of that either in Clause 8 or in Clause 84. In one or other of those clauses wording comparable to that in paragraph 27(b) of Schedule 10 would seem to be necessary to achieve retrospection—if that is the intention. Perhaps the noble Baroness could shed a little light on the matter.
Baroness Trumpington: In our earlier debates I have stressed how committed the Government are to the expansion of occupational pension schemes. So far in my remarks I have tended to emphasise the benefits of money purchase schemes for small employers, industry-wide schemes and so on. I hope that nothing I have said has caused people to think that I, or my fellow Ministers, have some kind of prejudice against salary-related schemes. Nothing could be further from the truth.
We are very happy for them to continue and to thrive where employers and employees agree they are the right answer for them. We do not forget that, of the half of the workforce already in occupational schemes, about 90 per cent. are in salary-related schemes. We doubt if many existing schemes will switch to the money purchase basis. And as new employers set up
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schemes, no doubt a fair proportion of them will be of the salary-related variety. With Clause 8 we are doing our bit to help them by simplifying the conditions they have to satisfy in order to contract out from SERPS. We believe that employers will have been put off setting up contracted-out schemes for their employee, not just because of the need to underwrite the salary-related benefits but also because of the many elaborate and hard to understand conditions that schemes have to satisfy under present rules.
One condition which has proved to be both unnecessary and an onerous complication is the so-called requisite benefits test. Broadly speaking this test requires final salary schemes, as well as providing minimum guaranteed pensions broadly equivalent to SERPS pensions, to give people a pension worth one-eightieth of final pensionable salary for every year of service up to a maximum of 40. So someone with 40 years in a scheme gets a pension worth half his final salary.
But this rule is even more involved than it might appear at first glance. Among the complications are that the pensionable salary to which it relates may be lower than actual earnings (for example, overtime payments may not be pensionable) or the rate of accrual might be lower, and last but not least lump sum payments can be taken into account in working out whether the fraction test is satisfied.
The basic test that will continue will be the provision of a guaranteed minimum pension for members and surviving spouses. We think this is entirely satisfactory as a minimum requirement. It is comforting that the honourable gentleman leading for the Opposition in the other place should have said on 18th February:
"Our view is that contracting out of the state scheme is fine so long as there is a guarantee of at least equivalent pension".
For once we are only too happy to agree with his view.
The noble Lord, Lord Kilmarnock, said that the clause needs an amendment to make it retrospective. The NAPF, who have welcomed the clause, say it needs amendment to make it retrospective, or all the existing complex conditions will continue to apply. Our legal advisers say that this is not so. After an appointed day a scheme will not have to have requisite benefit rules in order to be contracted out. A scheme that removed its requisite benefit rules would not have to provide requisite benefits for members or their dependants from the date of the rule change, I hope that the noble Lord, Lord Kilmarnock, heard what I was saying.
I of course understand the fear that removing the requisite benefit test could lead to a reduction in the level of benefits that existing schemes offer their members. But I am glad to give the Commmittee our assurance that we believe this fear to be without foundation. The guaranteed minimum pension will be the basic contracting-out test for a salary-related scheme, but the majority of schemes will provide something very considerably better on a voluntary basis.
There is no evidence at all that schemes which existed prior to the present scheme's introduction in 1978, and which provided better than requisite benefits, then reduced them to the minimum. Indeed, surveys conducted by the Government Actuary's

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Department show that whereas some 88 per cent. of contracted-out schemes were providing better than eightieths in 1979, by 1983 this had risen to 95 per cent. And in the remaining 5 per cent. it is known that some pay a guaranteed minimum pension worth more than requisite benefits would be. This is because the GMP is based on total earnings—up to the national insurance upper earnings limit—whereas, as I have explained earlier, requisite benefits may exclude some earnings.
The removal of the requisite benefits test will reduce bureaucracy, it will encourage new, and the retention of existing, salary-related schemes, and we are confident that it will not be detrimental to scheme members. I trust that these arguments are sufficiently persuasive for noble Lords not to press their objections to the clause. I am conscious that this is all disagreeably complicated. I hope I have explained what is at issue here with sufficient clarity to persuade the Committee that what we are about with Clause 8 is an improvement on the status quo which has been widely applauded by pensions experts.
Viscount Hanworth: As the noble Baroness has herself said, this is rather complicated. I should like to study what she has said and consider further action, if any, at Report stage.
Baroness Turner of Camden: I listened with great interest to what the noble Baroness had to say. I still have some fears that the clause, as it stands, could result in lesser benefits in certain schemes. It certainly gives an opportunity for occupational schemes to offer less good benefits than they do at the moment, and that would be a great pity. Nevertheless, in view of what has been said and in view of the hour, I shall not press this.
Clause 8 agreed to.
Clause 9 [Guaranteed minimum pensions]:
Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 28:
Page 11, line 19, leave out ("1989") and insert ("1988").
The noble Baroness said: Amendments Nos. 28 and 29 run together. Their purpose is to deal with the matter of widowers' benefits under Clause 9. At present the clause provides that the scheme need not provide for widowers of earners who died before 6th April 1989 to be entitled to guaranteed minimum pensions. The question we raise is, why 1989? Why not 1988 when the rest of the legislation becomes operative?
The subsequent amendment, Amendment No. 29, is really consequential on moving the date back. If it is changed to 1988 instead of 1989, the clause has to be amended accordingly. I hope that it will be seen that this is a reasonable suggestion. As it now stands, the widowers in an occupational scheme would benefit only for 1988–89. The amendment backdates this to the beginning of the scheme; that is to 1978. I see no reason why this should not be done, as over a long period of time there has been agitation on behalf of the equal rights lobby—of which I am proud to be a
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member—that there should be provisions under which widowers are treated equally with widows in pension provision, and this provides an opportunity to do that. I am glad that the opportunity has been taken in the legislation. I simply want to date it differently, and for those reasons I put forward these two amendments. I beg to move.
6 p.m.
Baroness Gardner of Parkes: While I am not able to support this amendment, because I do not know the exact financial or actuarial implications of the change of date, I should like to take this opportunity to say how pleased I am to welcome the pension provision regarding widowers. I have myself for many years, as a national health practitioner, paid an equal pension and thought it wrong that if my husband died, I would get a pension but that if I died, he would get nothing. That seemed wrong. So many women I know who have worked for pensions for years have really felt this. Very often in this Chamber I am busy fighting for women's rights, but in this instance I welcome an improvement in the situation of the men who can find themselves left in a very difficult position if perhaps they have small children. I think it can be even more difficult for a man to be left to bring up a family on his own. So I am delighted to see this provision in the Bill and I believe that it is something we have long wanted.
Baroness Trumpington: I am all for equal opportunities for men. It may at first sight appear odd that whereas the majority of the changes proposed in this Bill begin in April 1988, the provisions for widowers' GMPs do not take effect until April 1989. But there are very good reasons for this.
Under the provisions of the Pensions Act 1975 both SERPS additional pensions and guaranteed minimum pensions under contracted-out schemes are calculated on the basis of earnings-related contributions paid between April 1978 and the end of the tax year immediately before the one in which the pension becomes payable. So, for example, in the case of a widow's GMP the calculation is based on the contributions paid up to the end of the tax year before the husband's death.
Employees who are members of contracted-out occupational pension schemes, and their employers, receive a rebate on their national insurance contributions in recognition of the estimated cost to the scheme of providing guaranteed minimum pensions. Contracted-out schemes will be required to provide a widower's GMP in respect of contracted-out employment from and including April 1988, when the majority of the changes come into effect, and the rebate will be recalculated from the 1988–89 tax year to include an allowance for the estimated cost of providing such cover for widowers. As the rebate will not include an allowance for widowers' GMP's until 1988–89, that is the earliest year in which contracted-out employment can be taken into account for widowers' benefits, and it therefore follows that the earliest a widower's GMP can become payable will be in respect of deaths occurring on or after 6th April 1989.
If we were to require a widower's GMP to be paid for deaths from 6th April 1988, it would be necessary

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to recalculate the national insurance rebate from the 1987–88 tax year, and we are not prepared to do that.
I hope that that has satisfactorily explained the arrangements to the noble Baroness and that she will withdraw the amendment.
Turning to Amendment No. 29, as I explained on Amendment No. 28, the national insurance contribution rebate will include an element for widowers' GMPs from 1988–89. This amendment would require contracted-out schemes to base the widower's GMP on the deceased's contracted-out employment right back to April 1978 when the scheme began. That would place an unreasonable burden on schemes, since their funding will have been based on the assumption that they were not required to provide GMPs for widowers, and the compensation they will receive by way of the contribution rebate will be related only to rights built up fromApril 1988. In effect we would be requiring them to increase the scale of cover provided by the scheme for periods when the premiums did not include provision for such cover.
Actually, it is plain to me. For those reasons I cannot support this amendment. So I am afraid neither amendment can be supported by the Government and I hope the noble Baroness will understand that although it sounds complicated, it is quite a simple point.
Baroness Turner of Camden: I thank the noble Baroness very much for that explanation. I shall look at the record and try to understand the position a little better. Of course, I understand that there is always the difficulty of making legislative provision for pensioners in retrospect, so to speak; it is quite hard. In view of what the noble Baroness has said I shall withdraw the amendment and look at the record to see where we go from there. I thank the noble Baroness and beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 29 not moved.]
Baroness Trumpington Baroness Trumpington moved Amendment No. 30:
Page 12, line 10, at end insert—
("(h) section 52D,").
The noble Baroness said: This amendment simply adds to the list of amendments in Clause 9(4) which provides for certain provisions in the Pensions Act which refer to widows to refer also to widowers following the introduction of widowers' GMPs. Section 52D is concerned with GMPs secured by means of insurance policies or annuity contracts, and I am afraid that this particular consequential amendment was overlooked. I beg to move.
On Question, amendment agreed to.
Baroness Trumpington Baroness Trumpington moved Amendment No. 31:
Page 12, line 15, after ("earner") insert ("in any case where he is entitled to a widower's invalidity pension, but that reference shall be so construed where he is entitled to any other benefit").
The noble Baroness said: The purpose of this amendment is to provide that where a widower is entitled to an invalidity pension based on his late wife's national insurance contributions under Section 16(4) of the Pensions Act and also to a widower's GMP from her occupational pension scheme, the
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GMP is to be deducted from any SERPS additional pension paid as part of the invalidity pension. This accords with the general arrangements in the Pensions Act whereby any SERPS entitlement is reduced by the amount of any GMP. I beg to move.
On Question, amendment agreed to.
Baroness Trumpington Baroness Trumpington moved Amendment No. 32:
Page 14, line 42, at end insert—
("(14A) Where in any tax year subsequent to 1989–90 the trustees or managers of a scheme make an increase which is partly made otherwise than in pursuance of this section, they may deduct the part of the increase made otherwise than in pursuance of this section from any increase which, but for this subsection, they would be required to make under this section in the next following year.").
The noble Baroness said: I beg to move amendment No. 32 with which I shall take Amendments Nos. 33, 34 and 35. We are back to very highly complex but necessary technical amendments. Put as simply as possible, their purpose is to ensure that where an occupational pension scheme increases the rate of a pension and part of that increase is used to increase the rate of the GMP, under the new Section 37A that same part of the pension increase does not count towards the GMP increase due at the beginning of the next tax year. In other words, these amendments make sure that they receive their full entitlement.
On Question, amendment agreed to.
Baroness Trumpington Baroness Trumpington moved Amendment Nos. 33 to 35:
Page 14, line 43, leave out ("or (14)") and insert (", (14) or (14A)").
Page 15, line 2, at end insert—
("(16) Where by virtue of any of those subsections guaranteed minimum pensions are required to be increased in pursuance of this section by an amount less than they otherwise would be, their amount shall be calculated for any purpose as if they had been increased by that full amount.".").
Page 15, line 5, leave out ("or (14)") and insert (", (14) or (14A)").
On Question, amendments agreed to.
Clause 9, as amended, agreed to.
Clause 10 agreed to.
Baroness Trumpington Baroness Trumpington moved Amendment No. 36:
After Clause 10, insert the following new clause:
("Auditors.
The following shall be inserted after section 56N of the Social Security Pensions Act 1975—
"Auditors

Regulations as to auditors.

56P. The Secretary of State may by regulations make provision as to—

(a) the appointment, resignation and removal of auditors of occupational pension schemes;

(b) the duty of employers and auditors of employers to disclose
information to the trustees or managers of occupational pension schemes and the auditors of such schemes;

(c) the duty of trustees or managers of an occupational pension scheme to disclose information and to make available documents to the auditors of the scheme.").

The noble Baroness said: I beg to move this new clause. We have received representations from the accounting profession that auditors of occupational pension schemes might encounter difficulties in carrying out an audit of a pension scheme if they were refused access to essential information by an employer

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or by the scheme trustees. This clause enables my right honourable friend the Secretary of State to make regulations which will ensure free access for auditors to the necessary information and which will prescribe the conditions for the appointment and termination of auditors of occupational pension schemes. We propose to consult fully the accounting profession and other interested parties before making the regulations.
On Question, amendment agreed to.
Clause 11 [Contributions to schemes]:
Baroness Trumpington Baroness Trumpington moved Amendment No. 37:
Page 16, line 44, after ("(4)") insert ("or (6)").
The noble Baroness said: With this amendment I propose to speak also to Amendment No. 38. These are technical amendments. I beg to move Amendment No. 37.
On Question, amendment agreed to.
Baroness Trumpington Baroness Trumpington moved Amendment No. 38:
Page 17, line 24, after ("(4)") insert ("or (6)").
On Question, amendment agreed to.
Clause 11, as amended, agreed to.
Clause 12 [Regulations as to form and content of advertisements]:
Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 39:
Page 18, line 9, leave out ("may") and insert ("shall").
The noble Baroness said: I should like also to speak to Amendments Nos. 40 and 41 at the same time, because they all have to do with the same concept. The intention of these amendments is to strengthen Clause 12 in regard to the form and content of advertisements. It has been demonstrated in the debate earlier this evening that a number of noble Lords have great concern about consumer interests when it comes to the purchase of a pension provision, whether it is a private personal pension, an occupational pension or whatever. The reason for these amendments is that they provide for the Occupational Pensions Board to have a role in setting standards, because Amendment No. 41 specifies that they shall conform to standards set by the Occupational Pensions Board. Amendment No. 40 provides a time and a date not less than six months before the commencement of the preceding parts of the Act. In other words, all this has to be attended to not less than six months before the Bill, as an Act, becomes operative.
The first amendment also makes it obligatory because "may" is altered by my amendment to "shall". I hope that the Government may find it possible to accept these three amendments. They are intended to be helpful. They are intended to strengthen the arm of the Government in ensuring that the advertising which is indulged in should meet certain requisite standards and that people who opt for pensions, whether private, personal or any other kind of pension provision, should not be misled by the advertisements that the entrepreneur may indulge in to sell his wares. I beg to move.
Lord Kilmarnock: Before the noble Baroness replies, I should like to support this amendment because it brings us back to the area of consumer protection to which I was referring when earlier we discussed Schedule 1. As written, this clause is purely permissive:
"Regulations may be made relating to the form and content of advertisements".
The noble Baroness, Lady Turner, seeks to make that mandatory. We must support her on that.
There is also the question—perhaps the noble Baroness the Minister may like to refer to this—of the interaction with the Financial Services Bill when it comes to us. The noble Baroness has told us before that the Financial Services Bill will do all sorts of things for us in this area. But theoretically we do not know that until we read it. We need to know in advance how the regulations that the Secretary of State may make under this Bill and which the noble Baroness will have him make will tighten the requirements proposed by the Securities and Investments Board; what the penalties for failure or noncompliance will be; and who will be responsible for enforcing such requirements. These are all serious lacunae in the Bill and I do not think it is adequate for the noble Baroness to say that it will all be filled in later. It seem to us that tighter requirements will be necessary under this Bill. It is unsatisfactory that they should be left entirely to permissive regulations. As a minimum it seems to be reasonable to require the Secretary of State to make regulations on these matters as the noble Baroness has proposed.
6.15 p.m.
Baroness Trumpington: Let me say at the outset that the Government fully agrees that advertising in relation to pensions must be controlled. Notes on Clauses set out our views on the type of control we believe is needed. We want to prevent advertisements—and any other material—from containing misleading, exaggerated and unhelpful projections of the eventual benefits promised by a pension scheme.
To achieve this, it is very possible that we shall have to make regulations under Clause 12 of the Bill. If that is the only way, then we shall do so. But we think it important to retain the discretion not to make regulations under Clause 12 if our objectives can be secured by another route. This alternative route—here, perhaps, I am answering the noble Lord, Lord Kilmarnock—is through the Financial Services Bill, which also includes a provision to make rules governing advertising in relation to investment business. I understand that draft rules will shortly be published for comment by the shadow bodies which expect to have delegated to them the relevant regulatory functions of the Secretary of State for Trade and Industry once that Bill has reached the statute book. If the financial services rules will achieve what we believe to be necessary for pension schemes, then we would simply be introducing an unnecessary complication if parallel regulations had to be made under social security legislation. If, on the other hand, the financial services controls are not wide enough, then we shall certainly exercise the discretionary power at Clause 12 of the Bill.

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The second amendment to Clause 12 is consequential on the first amendment. In the light of the assurance I have given I hope the noble Baroness will feel able to withdraw both.
The third amendment places a duty on the Occupational Pensions Board to set "standards". Were this amendment accepted, I believe there would be a serious blurring of responsibilities for making rules between regulations—which, if they are made under Clause 12, will be made by the Secretary of State—and standards which would be set by the board. In an already administratively complex area, I cannot think this would be helpful. Nor do we consider it to be necessary. Under the Bill the board is given important major new opportunities in supervising personal pensions and contracted-out money purchase occupational schemes.
In exercising this duty the board would be bound to take into account significant breaches of any relevant rules, including advertising rules, irrespective of whether the rules were made under social security or financial services legislation. This will be an important safeguard for scheme members and prospective members. We will of course consult the board about the content of any regulations to be made under Clause 12, and we will ensure that it is able to offer views on rules proposed by the financial services regulators. So the upshot is that the board will have a significant role in formulating and applying advertising rules, without the need for this amendment. I hope, accordingly, once more, that the noble Baroness will feel able to withdraw it.
I must not complete my remarks without paying tribute to the very distinguished contribution the noble Baroness, Lady Turner, has made as a member of the Occupational Pensions Board. I hope what I have said will reassure her that the board's role will be of vital importance in this as in many other aspects of personal pensions.
Lord Kilmarnock: Before the noble Baroness decides what to do with her amendments, I am rather inclined to stiffen her resolve.
Baroness Trumpington: I wonder whether the noble Lord, Lord Kilmarnock, could possibly stand back when he is under that microphone, because, as usual, I cannot hear him.
Lord Kilmarnock: I shall move along to the end of the Bench and perhaps the noble Baroness can hear me better. I will remember that in future and move to the end of the Bench.
I should like to stiffen the resolve of the noble Baroness. I believe we need something in this Bill. We are back in this area of doubt as to what may be on the way in another statute. We are discussing a Bill which presumably will become statute law before the other one does. Obviously the OPB has certain sanctions at its disposal such as the withdrawal of the appropriate or contracted-out certificate; but the fine that it can impose may be inadequate in an area of high-pressure salesmanship. Similarly, the withdrawal of an appropriate or contracted-out certificate may merely ensure that the employees concerned are thrown back into the state scheme by the payment of the state
780
scheme premium with the possibility that any losses that are incurred as a result of unfair advertising could not be recouped.
The difficulty is that this Social Security Bill is concerned primarily with the terms of personal pension contracts and will not impose requirements or penalties on the responsible institutions, as such. Those regulations are not yet even pencilled in as far as I can see. It is true that a threat to report the institution to the Securities and Investments Board or any other responsible body might be as effective as the threat of a penalty, but it is unsatisfactory that requirements imposed under this Bill should rely for their enforcement on threats and on effective liaison with authorities appointed under another Bill. They are not referred to in this Bill, which is the Bill before the Committee this evening.
The answer in this area may lie in requiring the Securites and Investments Board and other bodies appointed under the Financial Services Bill to assume responsibility for enforcing any tighter requirements concerning personal pension schemes that may be imposed under this Bill. But my contention is that we simply have not got enough to go on in the Bill as written. We simply have this permissive Clause 12 which the noble Baroness seeks to amend and to make mandatory. I think that at least we should have this safeguard in the Bill. The Secretary of State must make regulations which will cover these points. I think we want them here in this Bill this evening. I hope she will not withdraw her amendment.
Baroness Trumpington: Perhaps I may reply to the noble Lord, Lord Kilmarnock, on one or two points. If the OPB withdraws the certificate—is the noble Lord, Lord Kilmarnock, interested in my answering his questions? If the OPB withdraws the certificate, that will kill a personal pension. He asked about penalties for breaches of any regulations under Clause 12. There is no power in the Bill to provide that these are offences and subject to a penalty of a fine. If we look at Clause 52, we see that the maximum fine is £400 plus £40 a day for a continued offence.
Baroness Turner of Camden: I do not think that the noble Lord, Lord Kilmarnock needed to stiffen my resolve, because it is my intention to test the feeling of the Committee on Amendment No. 39. I do so despite the explanation given by the noble Baroness, Lady Trumpington, whom I thank for her kind remarks about my services to the Occupational Pensions Board. I feel that Clause 12 as it now stands is really far too vague. As I understand the noble Baroness, what she was saying was, "Well, it's there and we will make regulations if we think we ought to make regulations". What I am saying is that there ought to be regulations made relating to the form and content of advertisements and that this should be a mandatory provision so far as the Government are concerned under Clause 12. I intend to press Amendment No. 39 because it is my view that the provision is not strong enough, that it has to be strengthened, and that it ought to be mandatory.
Baroness Trumpington: Perhaps I may intervene before the noble Baroness proceeds so that I may

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correct myself. I understand that I said that there is no power in the Bill to provide for penalties. There is power. I must correct that before it goes into Hansard. I am sorry.
Lord Kilmarnock: Did the noble Baroness say that £400 was the maximum penalty?
Baroness Trumpington: Yes, plus £40 a day.
6.24 p.m.
On Question. Whether the said amendment (No. 39) shall be agreed to?
Their Lordships divided: Contents, 71; Not-Contents, 109.

DIVISION NO. 3

CONTENTS

Airedale, L.

John-Mackie, L.

Alport, L.

Kilbracken, L.

Amherst, E.

Kilmarnock, L.

Ardwick, L.

Kirkhill, L.

Attlee, E.

Llewelyn-Davies of Hastoe, B.

Banks, L.

Lockwood, B.

Blease, L.

Longford, E.

Blyton, L.

McIntosh of Haringey, L.

Boston of Faversham, L.

Mackie of Benshie, L.

Briginshaw, L.

Mulley, L.

Brockway, L.

Nicol, B.

Brooks of Tremorfa, L.

Parry, L.

Bruce of Donington, L.

Pitt of Hampstead, L.

Carmichael of Kelvingrove, L.

Ponsonby of Shulbrede, L. [Teller.]

Cledwyn of Penrhos, L.

David, B. [Teller.]

Rochester, L.

Davies of Penrhys, L.

Ross of Marnock, L.

Dean of Beswick, L.

Seear, B.

Diamond, L.

Serota, B.

Ennals, L.

Stallard, L.

Ewart-Biggs, B.

Stewart of Fulham, L.

Fisher of Rednal, B.

Stoddart of Swindon, L.

Fitt, L.

Taylor of Blackburn, L.

Foot, L.

Taylor of Gryfe, L.

Gallacher, L.

Taylor of Mansfield, L.

Glenamara, L.

Truro, Bp.

Graham of Edmonton, L.

Turner of Camden, B.

Gregson, L.

Underhill, L.

Grey, E.

Walston, L.

Hampton, L.

Wedderburn of Charlton, L.

Hanworth, V.

Wells-Pestell, L.

Heycock, L.

Whaddon, L.

Houghton of Sowerby, L.

White, B.

Hunt, L.

Williams of Elvel, L.

Irving of Dartford, L.

Wilson of Rievaulx, L.

Jeger, B.

Ypres, E.

NOT-CONTENTS

Airey of Abingdon, B.

Campbell of Alloway, L.

Allerton, L.

Carnegy of Lour, B.

Ampthill, L.

Carnock, L.

Ashbourne, L.

Coleraine, L.

Bathurst, E.

Colville of Culross, V.

Belhaven and Stenton, L.

Colwyn, L.

Beloff, L.

Cork and Orrery, E.

Belstead, L.

Craigavon, V.

Bessborough, E.

Craigmyle, L.

Brabazon of Tara, L.

Croham, L.

Brougham and Vaux, L.

Cromartie, E.

Bruce-Gardyne, L.

Cullen of Ashbourne, L.

Buckinghamshire, E.

Davidson, V.

Buckmaster, V.

Denham, L.

Caccia, L.

Dilhorne, V.

Caithness, E.

Donegall, M.

Cameron of Lochbroom, L.

Dormer, L.

782

Dulverton, L.

Mountevans, L.

Elliott of Morpeth, L.

Moyne, L.

Elton, L.

Munster, E.

Enniskillen, E.

Murton of Lindisfarne, L.

Faithfull, B.

Onslow, E.

Ferrers, E.

Portland, D.

Fortescue, E.

Rankeillour, L.

Fraser of Kilmorack, L.

Reigate, L.

Gardner of Parkes, B.

Renton, L.

Geddes, L.

Rochdale, V.

Glanusk, L.

Rodney, L.

Glenarthur, L.

St. Aldwyn, E.

Greenway, L.

Sandford, L.

Gridley, L.

Seebohm, L.

Hailsham of Saint Marylebone, L.

Shannon, E.

Skelmersdale, L.

Henley, L.

Somers, L.

Hives, L.

Stodart of Leaston, L.

Holderness, L.

Strathcona and Mount Royal, L.

Hooper, B.

Hylton-Foster, B.

Swann, L.

Inglewood, L.

Swinfen, L.

Kimball, L.

Swinton, E. [Teller.]

Lauderdale, E.

Terrington, L.

Layton, L.

Thomas of Swynnerton, L.

Lindsey and Abingdon, E.

Thorneycroft, L.

Liverpool, E.

Tranmire, L.

Long, V. [Teller.]

Trefgarne, L.

Lucas of Chilworth, L.

Trumpington, B.

Macleod of Borve, B.

Tryon, L.

Malmesbury, E.

Vickers, B.

Marley, L.

Vinson, L.

Marshall of Leeds, L.

Vivian, L.

Maude of Stratford-upon-Avon, L.

Ward of Witley, V.

Whitelaw, V.

Merrivale, L.

Windlesham, L.

Mersey, V.

Wolfson, L.

Milverton, L.

Young, B.

Mottistone, L.

Zouche of Haryngworth, L.

Resolved in the negative, and amendment disagreed to accordingly.
6.33 p.m.
[Amendments Nos. 40 and 41 not moved.]
Clause 12 agreed to.
Clause 13 agreed to.
Clause 14 [Terms of contracts of service or schemes restricting choice to be void]:
Viscount Hanworth Viscount Hanworth moved Amendment No. 42:
Page 18, line 18, leave out from beginning to ("any") and insert—
("Subject to the exception of occupational pension schemes which at the date of enactment are contracted out for the purposes of the Social Security Pensions Act 1975 and other such exceptions as may be prescribed.").
The noble Viscount said: I do not want to divide the Committee but to find out what the Government say about this amendment and the attitude of the Committee as a whole. The clause as it now stands would prevent an employer from making membership of a particular pension scheme compulsory. This would enable existing members of schemes to opt out of their employers' occupational pension schemes and contribute to a personal pension scheme. The clause already provides for exception to be made to provision, but no indication is given in the Bill as to what such exceptions might be. The amendment therefore seeks to define established occupational pension schemes which are contracted-out under the Social Security Pensions Act 1975 at the date the Bill comes into force, as an exception, within the wording of the Bill.
I am concerned that many employees may opt out of membership of good occupational pension schemes, such as, for example, the electricity supply pension scheme, and contribute to a personal pension scheme simply because of the immediate saving in contributions which would be obtained, rather than by a reasoned comparison of the future benefits that each provides. Many young employees might make such a decision on the basis of saving in cost at a time when they have other family commitments such as mortgage payments and the cost of bringing up and educating children. Similarly, many married women might make such a choice on the basis of the saving which could be obtained, and they rely on their husbands to provide any shortfalls in their retirement benefits which might arise as a consequence.
On an earlier amendment, I described the difficulties of going out into the private sector for pensions because, as I said then and will not repeat now at length, this is an area where very high pressure salesmanship is used. As I think many Members of the Committee will appreciate, having listened to the proceedings on this Bill, the whole thing is extremely complicated. One really cannot make right decisions without expert advice. Therefore, one is concerned that people might move out of occupational pension schemes which provide benefits not only for themselves but for their dependants, and move in, on a short term basis, to find something cheaper outside. That, in the end, may not serve their old age (which perhaps they do not worry about at that time) and may even, in terms of what the Government have to do, provide a major problem in the future century. I beg to move.
Baroness Turner of Camden: I rise to support the amendment which has been moved by the noble Viscount, Lord Hanworth. I have an amendment myself of a similar kind which we shall come to later, but I am inclined to the view that perhaps the amendment of the noble Viscount is rather better than mine.
Clause 14 is the clause which prevents employers from making it a condition of employment that employees should join the company's occupational pension scheme. I have to say to your Lordships that this could very well have a bad effect not only on pensions but on industrial relations generally. Trade unionists regard pension provision as deferred pay. For years now pensions have been matters not just for employers' discretion and benevolence and sometimes a means to keep key employees—although of course they are often that—but they are part of negotiated terms and conditions of employment, and terms and conditions which are negotiated collectively. If employees can opt out of one negotiated term of employment, that could set a very bad precedent so far as other collectively-negotiated terms of employment are concerned.
Moreover, I can remember the days when membership of schemes was not compulsory and many people in those days reached retirement, and are still reaching retirement, without adequate pension provision. Many of those people of course were women. I remember earlier on in my working life many women with whom I worked decided not to join
784
the firm's pension scheme, even though there was one. When they came to retirement, they discovered that they did not have the same kind of pension provision that the others of us had who had opted to join the firm's pension scheme. That kind of thing came to an end when we had the new legislation—the legislation which this present Bill seeks to amend.
The purpose of my amendment is to protect a defined benefit scheme. The amendment of the noble Viscount, Lord Hanworth, goes rather more broadly than that and it provides that where there are contracted-out schemes they should be exempt, and, as I understand his amendment, it would make it possible, if there is a contracted-out scheme and the employer can offer contracted-out pension provision, that can then form the basis of a term and condition of employment and it would not be invalidated by this clause. If that is the situation, and if that is what his amendment means, I hope that he will press it because it is a worthy amendment and I shall certainly be supporting it.
Lord Vinson: The question of compulsion really stands at the heart of alternative pension provision. We need to look forward to the labour market conditions that are rapidly developing in this country, where we are seeing a contraction of the sort of cradle to the grave jobs that we had in the past, and an inevitable increase in part-time employment or multiple employment. The existing pension arrangements that have been built up over the years, and very often for the best possible reasons, will simply not be satisfactory, and are even now unsatisfactory, for a great many people of the wider national workforce.
It is argued that people will of their own free volition leave a good pension scheme and go to one that is worse. One can understand those who want to keep the status quo exactly as it is putting forward the worst possible construction on the future, but I do not think it will happen in that way. Most people who opt for personal pension provision are going to do so because they think it will suit their future better.
It is ridiculous at the moment where, if somebody decides to go self-employed as a window cleaner, nobody objects to him currently having a personal and portable self-employed pension. I hear no reports of great abuse or that he is being unfairly dealt with. Yet a learned professor of economics, a member of his university pension scheme, has to be a member and has, at the moment, no choice as to whether he would rather run his own affairs. So to say that a window cleaner can have a personal and private portable pension but a professor cannot illustrates the absurdity of the current situation.
We must give people free choice and we must work on the assumption that most people will exercise that choice wisely. To argue that, if people are no longer made to join a company scheme, that scheme will become untenable seems to me to be reaching the point of absurdity. It would mean, as I tried to point out on the Second Reading of this Bill, that companies would be so worried about the viability of their pension schemes that, even in recession, they would be recruiting labour in order to keep their pension scheme solvent. Of course, they would do no such thing. It is precisely because company pension schemes can learn

785
to live without recruits during a period of recession that they can learn to live without recruits coming to those pension schemes at all times, apart from the fact that the whole business of pensions insurance means that your contributions, even in pool schemes, average out in order to pay, ultimately, for the pension you may be getting.
No actuary worth his salt will advise a pension scheme that it simply has to recruit additional members, and no actuary worth his salt will set up a pension scheme that would become insolvent if it failed to recruit members. So it is a bogus argument to say that it will damage them. There may be some lesser grounds for saying that people might leave a company scheme to their own disadvantage, but I do not think it will happen in that way.
So I think that the question of free choice in a free society, with an increasingly sophisticated workforce, is very important indeed in terms of pension provision, and we have to remember that there is no compulsion to leave a company scheme. People will only do so of their free volition. For that reason, this is a very important part of the Bill, and I hope the Government will resist any amendments that sacrifice the forthcoming freedom of choice.
6.45 p.m.
Baroness Trumpington: I must say that I am a little surprised and disappointed that, nearly two years after the personal pensions debate began, there are still people who are not yet persuaded that every individual, whether in a public or a private sector scheme, a salary-related or money purchase scheme, should be allowed this basic freedom of choice. Although there has been some strong opposition to certain aspects of the Government's pensions proposals, I think it is now increasingly recognised, even by the opponents of personal pensions, that this option should be available to all.
I should at this point stress that the Government have never suggested that the personal pension route is the right one for every employee. We are very well aware of the excellent benefits provided by the great majority of existing occupational pension schemes, and we certainly do not expect to see a significant exodus from these schemes into personal pensions. Those who do predict a bigger movement out are, admittedly, rather fewer in numbers than they used to be. But I must admit that I am dismayed by their defeatism. They have such a good product to sell to their members: all that really remains is for them to go out and sell it rather more effectively than many of them have had to do up to now.
Among people now in occupational schemes we see the personal pension option as being most appropriate for those who expect to change jobs frequently, or who wish to have a more direct say in the investment of their pension savings. But far more important will be the opportunity personal pensions provide for employees who are currently tied to the state scheme. While we think it would be quite wrong to deny the new options to scheme members, we rather doubt if many of them will take it up, and we do not expect the providers to aim their marketing efforts at them.
786
It has been suggested that some individuals may be persuaded out of their occupational scheme by high-pressure salesmen making superficially attractive promises. I can offer considerable reassurance on this point. The Government have never lost sight of the importance of providing protection against such practices. This protection will primarily take the form of the "cooling-off period" provided for in the Financial Services Bill, which will allow for the cancellation of any agreement within certain time limits. We are also taking powers—debated in relation to Clause 12—that will enable us to prevent personal pensions being marketed on the basis of misleading projections.
We do not want to see individuals enticed out of their occupational schemes on the basis of a false prospectus and we shall do our utmost, with the very significant help of the financial services self-regulators, to ensure that they are not. But what we do want to see is occupational schemes responding to the challenge by making their members more aware of the considerable benefits they offer.
With regard to exceptions, we are considering, first, schemes providing only lump sum death benefits for dependants, subject to this being permitted under tax rules; and, secondly, contracted-out salary-related schemes could be compulsory for employees who did not join a personal pension. Both of these possible exceptions were discussed in another place and will be subject to further consultations later this year.
The ideal for which we aim is that every employee should be in a position to make an informed decision on the best pensions option for himself and his family, and then to act freely on that decision. Ours is an administration which has already made great strides in widening choice and giving people more freedom to act in their own best interests. The changes we are making to pensions come squarely in that tradition and we are convinced that, at the end of the day, our reforms will result in a stronger, healthier occupational sector. This, coupled with personal pensions will reduce dependence on the state, and that is why we feel that we must strongly resist these amendments.
Baroness Gardner of Parkes: Some mention was made of this being a parallel situation to the cases where women were in the past able to elect to pay for no pension, but as I understand it this is not a parallel. You would be either in your company's scheme or in a personal pension plan. Therefore, the same situation will not arise. It is important to appreciate that we are not envisaging here going back to the position where a woman would have no pension whatsoever at the end of the day.
Baroness Trumpington: It is a parallel, I would say.
Baroness Gardner of Parkes: Oh, is it?
Baroness Trumpington: Yes.
Baroness Turner of Camden: Perhaps I may respond to that. I understand that that is the situation. I was simply referring to the position that applied before it was compulsory to belong to any scheme at all. I was speaking in support of the notion that where there is

787
good occupational pension provision and where this is part of a contract of employment that position should not be invalidated by this clause.
Viscount Hanworth: I thank the noble Baroness for a very full explanation. What I wanted to do at this stage has been achieved, and therefore I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Banks Lord Banks moved amendment No. 43:
Page 18, line 21, leave out ("must be a member of") and insert (", on becoming eligible, join")
The noble Lord said: With the leave of the Committee, I should like to speak also to Amendments Nos. 44, 47, 48, 49 and 50. I share the concern about the destabilising effect on occupational schemes of allowing members of occupational schemes to opt out of them at any time, a concern expressed by my noble friend Lord Hanworth and the noble Baroness, Lady Turner, when we were discussing the last amendment. I seek to deal with that in a way which goes not nearly so far as the amendment that has just been moved and the amendment which stands in the name of the noble Baroness, Lady Turner.
These amendments are intended to do three things. First, they seek to limit the opportunity to choose between occupational schemes and personal pension schemes to the point when an employee first becomes eligible to join the occupational scheme. In other words, he does not have to join; he can choose a personal pension scheme instead. But if he chooses to join, the employer can make his continued membership a condition of future service. Secondly, the amendments seek to allow those contracted out before the commencement of the Act a six-months period within which they could switch to contracted out personal pension schemes if they wished to.
Thirdly, the amendments seek to allow members of occupational schemes, whether contracted in or out, to pay additional voluntary contributions into a personal pension scheme. So even if a person was under these arrangements in his occupational scheme as a condition of service, having decided to enter it when he first had the opportunity to opt out, he would nevertheless be able to put additional voluntary contributions into a quite separate personal pension scheme if he wished to.
Additional voluntary contributions can be made at the moment into the employer's occupational scheme or into a separate occupational scheme for the purpose maintained by the employer. The contributions are limited in that total contributions including the additional voluntary contributions—that is, what goes into the occupational scheme and what is paid by way of additional voluntary contributions—must not exceed 15 per cent. of the employee's earnings. Additional voluntary contributions cannot however be made to Section 226 personal pensions policies at the present time. The amendment would allow additional voluntary contributions to be paid, if the employee so desired, to a personal pension scheme.
I submit that, taken together, these amendments constitute a more satisfactory approach, if a more cautious one, to freedom of choice. I beg to move.
Baroness Trumpington: I hope I have already made clear today the importance which the Government attach to the new right that this Bill will give to members or prospective members of occupational pension schemes to opt for a personal pension. We believe it is now widely recognised that it would be quite wrong to deny any individual this basic freedom of choice.
With these amendments, the noble Lord, Lord Banks, while not looking to remove that right altogether, nevertheless has sought to restrict considerably the opportunity for people to opt for a personal pension by making it a "once only" right. For prospective members, that opportunity would be limited to the time at which they first become eligible to join their occupational scheme. So should they decide to join that scheme they could then be tied into it for the rest of their working life unless, of course, they changed jobs. With his usual thoroughness, the noble Lord has also catered for people who are already members of schemes by allowing them a period of six months from the date of commencement of this Act in which to exercise their new right to opt for a personal pension. But again the effect is that they then would lose that right forever unless they changed jobs.
Despite my enormous respect for the noble Lord, Lord Banks, I must say that that would amount to a very feeble extension of freedom in pensions. We fully recognise the importance of protecting schemes against a "free-for-all" of people opting in and out as they choose. That is why we think it is right that employers may decide whether or not to accept back into their occupational scheme an employee who has opted for a personal pension. We are also taking steps to protect the finances of existing schemes by limiting the right to a transfer value where a person leaves an occupational scheme but continues in the job.
But if the new right is to be a real one people must be allowed more flexibility and time in deciding whether or not, and when, to take the personal pension route to retirement—a flexibility that will allow them to take fully into account the career path they wish to follow and, in particular, the number of job changes that that may involve, a flexibility that will allow the employee who develops a desire to have more say in his financial affairs to invest his pension savings in the financial institution of his choice. These are not decisions that can be made overnight or should be restricted to one arbitrary six-month period in a person's life.
But there is a more fundamental point to make. We do not now, and never have, accepted that the new options will encourage significant numbers of people to opt out of good occupational schemes. Personal pensions will be attractive mainly for people without an employer's scheme. However, that observation does not justify denying those who are members of occupational schemes, the opportunity and right to reverse that decision if they so wish.
The noble Lord, Lord Banks, was taking Amendment No. 50 as well, which is not grouped with the first two amendments. I am sure that the noble Lord is aware that his Amendment No. 50 would not achieve the end he desires. There is nothing in existing social security legislation or this Bill which prevents

789
members of pension schemes making additional voluntary contributions to other schemes. The point is quite simply that tax rules do not permit it; or to be more precise, any such contributions would not qualify for tax relief and the scheme receiving them would lose its tax exempt status. This is why the new right which Clause 11 gives scheme members to make additional voluntary contributions deals only with AVCs within the scheme.
Your Lordships may recall that in his Budget speech in another place the Chancellor of the Exchequer said:
"I intend later this year to publish detailed proposals designed to give personal pensions the same favourable tax treatment as is currently enjoyed by retirement annuities. Publication of these proposals will enable there to be the widest possible consultation prior to legislation in next year's Finance Bill".—[Official Report, Commons, 18/3/86; col. 176.]
I cannot predict what will be in those consultative proposals but I am sure that Treasury ministers will be very glad to reflect on what has been said in this debate and to consider representations once proposals are published, which I understand is likely to be in the autumn. On the basis of my last remarks, I hope that the noble Lord, Lord Banks, will withdraw his amendment.
7 p.m.
Lord Kilmarnock: Before my noble friend decides what to do with his amendment, perhaps I may ask the noble Baroness to clarify one point. She is very much attached to freedom of choice, and I am much in agreement with her in most circumstances. The amendment of my noble friend Lord Banks would give members of contracted out occupational schemes the capacity to make additional voluntary contributions to a personal pension plan that is not contracted out—that is, to a different scheme. That would seem to me by definition to be an extension of choice. However, I believe that I heard the noble Baroness say that in the last Finance Bill, those AVCs could only be made within the existing scheme. That would seem to be a narrowing of choice and I should like clarification as to whether that is the case. If it is, then it does not seem desirable, and Amendment No. 50 of my noble friend Lord Banks does seem to be desirable.
Baroness Gardner of Parkes: As we are speaking to Amendment No. 50 also, I should like to take up the points made by the noble Lord, who was speaking a moment ago. As I understand it, one can pay anything one likes to any pension plan at the moment but one cannot have the tax advantages of doing so. That is what Amendment No. 50 is all about, and that is what I should like to see. I support the principle of Amendment No. 50. It would be a very good thing if we could persuade the Chancellor to encourage people to make better provision for their old age through additional contributions. There is no doubt that the way people will be encouraged to do so is by making some tax allowances towards it. We saw what effect it had on life assurance when premium relief was removed. It would be very pleasant if we could see some further tax relief allowed for people who wished to take either of the actions suggested in Amendment No. 50. If this debate will be among the other matters to be considered by the Chancellor in due course, then
790
certainly I am pleased to place on record my support for the principle of Amendment No. 50.
Lord Vinson: We seem to have strayed on to Amendment No. 50, and I was rather looking forward to the opportunity of agreeing very much with the noble Lord, Lord Banks, and the noble Viscount, Lord Hanworth. There is much merit in Amendment No. 50, which I believe should be supported. As we have reached discussion on Amendment No. 50 already, I take this opportunity of saying that I wholly agree with it.
Lord Banks: The noble Baroness Lady Trumpington, described the choice that was given by the set of proposals contained in Amendment No. 43, and in the others to which I have spoken as "feeble". Yet they give a choice to every eligible person in the country. Those who are at present in occupational schemes would have the opportunity during the six-month period to switch to a personal pension scheme if they wished. Those who come to the point where they are eligible to join in the future will have the opportunity to make the choice at that time.
The noble Baroness said that there was a lack of flexibility in what I was suggesting, but there is the further flexibility of being able to apply an additional voluntary contribution within the 15 per cent. limit that now prevails to a personal pension plan and enjoy the same tax privileges. I agree entirely with what was said by the noble Baroness, Lady Gardner of Parkes, when she spoke about the purpose of Amendment No. 50. Its purpose is to place an additional voluntary contribution to a personal pension plan in the same category as additional voluntary contributions to occupational pension schemes, or schemes specially for the purpose, that are maintained by the employer.
It seems to me that all those points together represent a particular approach to freedom of choice that is more satisfactory in their effect than that proposed in the Bill. I regret very much that the noble Baroness does not see her way to accepting any of the proposals. I shall consider carefully what she has said about taxation, and in the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 44 not moved.]
Baroness Turner of Camden Baroness Turner of Camden had given notice of her intention to move Amendment No. 45.
Page 18, line 22, leave out ("particular")
The noble Baroness said: I believe that we had the discussion on this amendment when moving Amendment No. 42. In the circumstances, and in view of the time, Amendment No. 45 is not moved.
[Amendment No. 45 not moved.]
[Amendments Nos. 46 to 50 not moved.]
Lord Swann Lord Swann moved Amendment No. 51:
Page 18, line 38, at end insert—
("( ) Where an employed earner who is a member of an occupational pension scheme gives notice to his employer in such form as may be prescribed that he wished to withdraw from the scheme the employer shall have the right to require—

(a) that notice shall be given in writing; and

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(b) that it shall contain an acknowledgement of the fact that after the date of withdrawal from the scheme there shall be no further liability on the scheme in the event of death of the earner to provide such benefits for dependants as may be described in the said notice.")

The noble Lord said: This is a modest amendment and it will not take me long to explain it. It is not a matter of life and death, although in a sense it is a matter of death. There is one facet of the Bill that worries me, which is the possible effect of someone who opts out of an occupational pension and who dies when he is relatively young.
More people die when they are young than might be imagined by most. I have it on good actuarial authority that something of the order of 2,000 people in their twenties who are members of occupational schemes die every year as a result of illness or accident, and that 2,500 die in their thirties. Therefore, in the average life of a government, something like 20,000 breadwinners die who are in occupational pensions.
Under this Bill, employees will be able—quite rightly, in my opinion—to opt over to personal pensions. I do not want to get involved in an argument about occupational pensions versus personal pensions, because there are points to be made on both sides. However, one thing that occupational pensions do rather well, and which by their nature personal pensions do not do well until one has been in them for quite a long time, is pay benefits on death for dependants in general and for widows, orphans, and indeed widowers, and so on.
Even if the employee is quite young, one will get from most occupational schemes a handsome lump sum for the widow and a continuing income. In a personal pension scheme, until one has had quite a number of years in which to build up one's capital sum, one's widow will get very little indeed.
If everyone is perfectly efficient, then the husband, or whoever it might be, when he opted out of his occupational scheme, would remember that he would not have death benefits for his widow, or at any rate that he would accumulate them only slowly. He would no doubt tell his wife. They could then discuss the situation and he could take out an insurance policy or something of that kind.
Unfortunately, life is not generally like that. I suppose that as a small but unfortunate by-product of that situation, one is going to find over the years quite a number of widows, caused through accident or illness, who will find that they do not receive what they thought they were going to receive under the previous arrangements. I do not suggest, and I do not think it is possible, that one can enter into family relationships and require that dependants give their consent. I do not think that one could even require, and it would be unenforceable, that the scheme member should inform his dependants. However, there is a possible half-way house, which may look rather odd, and even a little unsympathetic, but which is probably about the only way that one could give effect to what I consider is a necessary humanitarian gesture on the part of the whole system.
I have only one final observation, which is that I do not hold any great brief for the wording of this amendment. It may be all wrong and it may be in the
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wrong place, but I think that if possible something ought to be done, because, as Members of the Committee will recall, as a result of the Social Security Act last year disclosure of information will shortly be required and members and their dependants will be able to find out as of right what their benefits will be. It would seem to me that this is a wholly logical extension of such thinking and therefore I hope that the Committee will look kindly on this rather modest contribution. I beg to move.
Baroness Turner of Camden: I rise to support the amendment moved by the noble Lord, Lord Swann. As he rightly says, most occupational pension schemes provide quite generous compensation for people who die while in service. Indeed, the Inland Revenue maximum is four times the annual salary as a lump sum paid on death in service. Most schemes provide two-and-a-half times the annual salary as a lump sum, and, as the noble Lord rightly points out, there are also continuing survivors' benefits.
The problem to which he has drawn attention is that there could be a situation in which the earner has opted for a private personal pension, and if unfortunately he dies, his widow—and usually it will be a widow I am afraid, though of course this measure applies to widowers as well—will expect to receive a lump sum and some continuing benefit because she has not been told that her husband had changed the arrangements. As has already been indicated, if the earner has opted for a private personal pension, that may very well not happen, particularly if the earner is relatively young.
I think that it was to try to cover that situation that I gave this matter some thought and wondered whether it would be possible to devise an amendment which would make it obligatory for the spouse to be notified if there were a change to a personal private pension, though that might be terribly difficult to provide for in legislation. I think that the amendment of the noble Lord, Lord Swann, seeks to cover that situation and to spell out that the notice shall be given in writing and that there should be an acknowledgment of the fact that should the earner die in service—and it will mostly be a "he", I expect—the benefits that exist in the occupational scheme will simply not be coming to his dependants. I think it is very necessary that we should have a provision of this kind in the legislation. I therefore support the amendment.
The Earl of Buckinghamshire: May I just say that I agree with the noble Lord, Lord Swann, that his is a modest and innocuous amendment; nevertheless it is important, as the noble Baroness has just said. As I understand it, the amendment does not wish to rely solely on statutory release from the liability but is seeking an active disclaimer from individuals when they opt out from a personal pension. Let us add some figures to the numbers of people who die at a relatively young age. If 5,000 people die in their 20s and 30s, we are talking of something in the region of £1 billion worth of death benefits payable to dependants, excluding widows' pensions which add a further £1 billion plus. So quite a lot of money is at stake, and therefore I think that this is an important amendment.

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As I have some experience of administering pension schemes, I can see that there will be quite a lot of discussion taking place as to who is and who is not a member at any moment in time, and I think that if my noble friend does not find this amendment particularly to her liking, certainly trustees and companies will wish to seek a disclaimer in order to establish the position. Perhaps I may conclude by saying that I support this amendment and I hope that my noble friend will find it to her liking as well.
7.15 p.m.
Lord Vinson: I am sure that we are all grateful to the noble Lord, Lord Swann, for drawing this matter to the attention of the Committee, but I should like to put the case the other way round. We do not necessarily want the existing occupational scheme to stress all the negatives to anyone who wishes to move to a personal and portable pension scheme. The fact is that an employee who has relatively recently joined an occupational scheme would probably obtain life cover, because that is very cheaply bought, and most occupational schemes throw it in as an addition, but it is very unlikely that his widow would get anything more than a pension that was pro rata to whatever he might have received at that time relative to the length of time over which he made contributions.
What I think would probably meet the very important point of the noble Lord, Lord Swann, is for the providers of personal portable pensions to be encouraged to couple the pension with life cover, which for young people—which is the point he was making—can be bought extremely cheaply, so that lump sum benefit life cover can be obtained by anybody. That, coupled with a personal and portable scheme would certainly meet the life cover point. It probably would not meet the point of someone who is fairly elderly buying cover for his future widow, but that is the sort of person who in any case is not likely to wish to transfer out of an occupational pension scheme.
So in welcoming the noble Lord's indication of concern for this particular area I should like to suggest to the Government that his point would be better met by encouraging the providers of personal pensions to couple such pensions with life cover.
Lord Banks: I, too, should like to support the amendment that has been moved by the noble Lord, Lord Swann, for the reasons that have already been expressed. I should like to ask the noble Baroness, Lady Trumpington, one question. Is there anything in the Bill which prevents an employer making compulsory a group death-in-service scheme; that is, making it a condition of service? It might be possible to have the option to change available for members of the pension scheme, and to run quite separately alongside it a group death-in-service benefit scheme which could be made a condition of service.
Baroness Trumpington: The noble Lord, Lord Swann, chairs with distinction the Company Pensions Information Centre. There are all sorts of surprises in store for anyone taking up a ministerial post at the DHSS—some pleasant, and some rather less so. One
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very pleasant surprise for me was to discover the existence of the CPIC. The people who work there carry out a not often widely noticed, but very important and influential, role in disseminating information about occupational pension schemes to employers and employees. We appreciate what they do and look forward to an expansion of their activities in the brave new pensions world which this Bill seeks to create.
The noble Lord has made very clear the thinking which underlies this amendment. I do not suppose that he will be very taken aback when I tell him that we cannot accept it as it stands, but I hope that he will listen to me and not be too disheartened.
There are two main reasons. First, we think that it is technically defective—as the jargon goes—in that one unintended effect might be to allow schemes to relinquish liability for surviving dependants which they would otherwise be obliged to retain. Secondly, we think it very likely that employers would be able to do much of what is sought by this amendment without specific statutory authority—and I think that was what my noble friend Lord Vinson was suggesting.
It seems to us to be eminently reasonable that employers should be able to require written notice before terminating scheme membership, and it may well be sensible for such notices to include a statement from the person concerned that he is aware of the implications for his own pension rights, and those of his dependants in the event of his death, which follow from his decision. I gladly undertake to examine further whether there is any need to put anything on the face of the Bill to allow this to happen. If, as we suspect, there is not, we shall examine with the pensions industry, including the CPIC, what sort of guidance might be offered to schemes and whether there is any case for a new disclosure requirement under the Social Security Act 1985.
The noble Lord, Lord Banks, asked me a specific question about death-in-service schemes being compulsory. The answer is no. With regard to death benefits in personal pension schemes, we expect most personal pensions to offer life assurance cover as an optional extra and most people with dependants would take that up if it was properly explained to them. Clause 14 of the Bill would prevent a compulsory death benefit scheme, but we are considering making this an exception under that clause.
I hope that the noble Lord, Lord Swann, will think that I have been fairly forthcoming. But I must add a warning note. We shall have to be very careful to respect the privacy of couples and not to intrude in the private affairs of husbands and wives. This is an area where the state should become involved only when things have gone badly wrong. We should be most reluctant to encourage interference when there is no such difficulty. I think that, from what the noble Lord said when moving the amendment, he had already latched on to that possibility. Despite having to end on that note of caution, and taking account of the feeling of the Committee, I hope that my general message has been sufficiently encouraging to persuade the noble Lord to withdraw his amendment.
Lord Swann: I must indeed thank the noble Baroness and perhaps remind her that in this very House a year or so ago, commenting on something that I had said, she said that she felt like Mrs. Mopp and she wished to ask, "Could she do me now, Sir?". She has done me twice this evening splendidly and most graciously. I shall try to respond equally graciously, and so I beg leave to withdraw my amendment.
Amendment, by leave, withdrawn.
Clause 14 agreed to,
Clause 15 [Actuarial tables]:
Baroness Hooper Baroness Hooper moved Amendment No. 52:
Page 19, line 30, after ("applies") insert ("(including changes affecting adjustments under the regulations)").
The noble Baroness said: This is a technical drafting amendment to clarify that the Government Actuary's report on changes to the factors affecting the actuarial tables may include changes affecting adjustments to the tables. I beg to move.
On Question, amendment agreed to.
Clause 15, as amended, agreed to.
Clause 16 agreed to.
Baroness Hooper: This may be a convenient moment to break for dinner. In moving that the House do now resume, I suggest that we return in an hour's time, at 8.25 p.m. I beg to move that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

Forestry Bill
7.24 p.m.
Lord Gisborough: 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 Gisborough.)
On Question, Motion agreed to.
House in Committee accordingly.
[The LORD MURTON OF LINDISFARNE in the Chair.]
Clause 1 [Restocking]:
Lord Kilbracken Lord Kilbracken moved Amendment No. 1:
Page 2, line 2, leave out ("period, not exceeding ten years,") and insert ("such a period of not less than ten years as shall be").
The noble Lord said: I raised this matter on Second Reading. Clause 1 of the Bill inserts a new section in the Forestry Act 1976 under which the commissioners may serve a notice, referred to as a restocking notice, on any person who has felled trees illegally, requiring him to restock that land or other land that may be specified. The Bill at present lays down that the trees planted must be properly maintained for a period specified in the notice of not more than 10 years after planting. The amendment would make 10 years the
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minimum rather than the maximum period, without any upward limit. The Bill at present follows the language used in Section 12(1) of the Act, where "not exceeding 10 years" is the period for which trees planted on foot of a felling licence must be maintained after they are planted.
In reply to my remarks at Second Reading the noble Lord, Lord Gisborough, gave that fact as one reason for using that same phrase here. I did not agree on Second Reading and I still do not. In the first place, I should be happier anyway if a longer minimum period were specified in the Act. Secondly, the circumstances in this case are materially different and there is no need for the same words to be used here.
In the Act we are considering an occupant who respects the law, as he has shown by applying for a felling licence. We may assume that he is much more likely than not to conform with the spirit as well as the letter of the law, and that has been borne out by the experience of the commissioners. In the Bill we are considering a case of a blatant law-breaker. He is someone who has contravened Section 9 of the Act by felling trees without a licence, for which certainly he would have had some very good reason. I think that it would therefore be acceptable that in this case a different, longer maintenance period should be required.
What danger exists in the present wording of the Bill? We know that for some reason the rascal involved believes that it would be profitable to clearfell the land. As the Bill stands, he has only to wait a maximum of 10 years (perhaps only seven or five years) until the designated maintenance period has ended. He will then normally be able to clearfell the area, unless a very large area is involved, with complete immunity up to, I reckon, about 1.2 hectares or some three statutory acres.
He can do that because trees with a breast-height diameter of up to 8 cm do not require a felling licence under Section 9(1) of the Act. Even if softwoods are planted, probably not more than some 10 per cent. will have reached that size in a decade and very few indeed—perhaps none—if only a period of five or six years is specified in the restocking notice, as is now possible. Any that then remain can be felled under Section 9(2) of the Forestry Act, which permits the felling without licence of trees totalling up to 5 cu. m, as now amended, which is a lower total than previously, in any quarter. Even a fast-growing species such as sitka spruce after the maximum period of 10 years will not hold more than 0.03 cubic metres on average. That would require a useful length of 2 metres with an average diameter of 15 centimetres. That is quite a tree after such a short period. At least 330 more trees could be cut without any licence within three months of the ending of the maintenance period out of the few trees left behind. It may be one in 10 of those over 8 centimetres in diameter. I calculate that 3,300 trees occupying 1.2 hectares could be removed.
I should prefer to see the period specified in the Bill extended to 20 years. I am not asking for that. I propose that 10 years should become the minimum instead of the maximum period, and that the commissioners should be able to extend that to 20 years or more in cases where they may have suspicions. By that time the trees will be much more

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fully established. No one would wait that long to carry out his nefarious and illegal purposes. I beg to move.
7.30 p.m.
Lord Gisborough: I can understand the concern of the noble Lord, Lord Kilbracken, to ensure that an owner or tenant who has been found guilty of an illegal felling and who is served with a restocking notice should be bound to maintain the trees for at least 10 years. It is important to recognise, however, that someone who is having to replant after an illegal felling is in exactly the same position as someone having to replant as a condition of a legitimate, licensed felling.
The objective of the restocking condition or notice is the same. It is to ensure that the trees will be maintained until they are properly established. The longer term conservation or protection of the woodland is not the aim. That is covered by the general felling licence provisions. An owner may choose to remove trees before they reach licensable age. The age at which they might do so varies widely depending on the species and the conditions under which the trees are grown. That assumes that an owner would be willing to destroy what is becoming a valuable asset. In the Forestry Commission's experience that rarely happens. If a woodland is of high amenity value, the local authority has the power to place a tree preservation order on it.
The risk of the young woodland being destroyed is therefore small. That apart, I return to the point that restocking conditions under the felling licensing regulations are aimed at the re-establishment of woodland not at its longer term protection.
I have been assured by the Forestry Commission that it has experienced no problems with a maximum period of 10 years as laid down in the Forestry Act. It does not anticipate any problems arising simply because a restocking requirement arose from an illegal felling. The noble Lord can also be reassured by the fact that where broadleaves are concerned the Forestry Commission's practice is to specify maintenance for a full 10 years.
The effect of the noble Lord's amendment would be to introduce an inconsistency. In the great majority of cases where restocking is taking place following a legitimate felling, the trees would have to be maintained only for the period that the Forestry Commission thought necessary to see the woodland properly established. That is a matter of professional judgment. In a tiny minority of cases following illegal felling trees would have to be maintained for at least 10 years even when the faster-growing conifers were involved. The commission's felling licensing regulations work well. This clause simply seeks to extend them to cover an illegal felling. It is closing a loophole, but no more than that.
The noble Lord should also consider that if trees in their 11th year were still under 8 centimetres, which would be poor growth, the cost of grubbing would have to be taken into account, and the high value of the asset. There is a limit to the bureaucratic controls which should be imposed. If trees were that small, one would wonder whether the site were suitable for growing trees. It would be unfortunate and confusing
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for those who have to administer the felling licensing regulations if we were to end up with two slightly different sets of restocking conditions especially when, as I have explained, all restocking requirements are for the same purpose. I am afraid, therefore, that I cannot give my support to the amendment.
Lord John-Mackie: We cannot but agree with the noble Lord, Lord Gisborough, who has very carefully put the Forestry Commission's point of view as to what the situation would be. We must congratulate the noble Lord, Lord Kilbracken, who has looked at this matter in a slightly different way. Somebody who had disregarded the law comes under the same conditions as the law-abiding citizen. I think that the noble Lord, Lord Kilbracken, wanted something a little harder for someone who had broken the law.
The noble Lord, Lord Gisborough, said that the conditions would make it almost impossible to grub up trees. He said that the amendment would create more bureaucratic controls. I do not know how many areas are involved. There must be quite a number to make the Forestry Commission want to bring in the Bill. Although we are disappointing the noble Lord, Lord Kilbracken, we sympathise with his point of view.
Viscount Davidson: I should also like to thank the noble Lord, Lord Kilbracken, for giving the Committee an opportunity to discuss his amendment. I do not have a great deal to add to what my, noble friend Lord Gisborough said in his cogent speech. He brought out the point very well that the whole purpose of the restocking requirement following felling is the proper re-establishment of the woodland. The number of years for which the trees have to be maintained to achieve that end is very much a matter for the professional judgment of the Forestry Commission.
I can confirm that the commission has found a maximum maintenance period of 10 years to be wholly adequate. I should emphasise the point made by my noble friend that the maximum 10-year maintenance period is now always applied in the case of broadleaves. If young trees of high amenity value are thought to be at risk, there is always the fall-back protection that a local authority can provide by means of a tree preservation order.
I agree with my noble friend that it would be unfortunate if in extending the scope of the felling licensing regulations to cover the aftermath of an illegal felling, we should end up with two different conditions for the maintenance of trees planted under a restocking requirement, especially when there is no obvious need for that.
The Government's view is that a maximum period of 10 years during which the trees have to be maintained in accordance with the rules and practice of good forestry covers all reasonable circumstances. I therefore hope that the noble Lord will not press his amendment.
Lord Kilbracken: I am grateful to the noble Lords who have taken part in the debate and for some words of comfort from my noble friend on the Front Bench and the noble Viscount the Minister. Even the noble Lord, Lord Gisborough, seemed to agree with some

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aspects of what I was saying. I do not intend to press the amendment because if it were carried it would cause a great deal of difficulty in getting the Bill through another place. I always think that it is unfortunate when this occurs. One feels under some inhibition about letting through an amendment that might otherwise find acceptance, because if it is accepted, we shall not get the Bill.
I should like to make one or two comments on remarks that have been made. The noble Viscount, speaking for the Government, said that a 10-year period has been found to be absolutely adequate. I agree that a 10-year period is absolutely adequate if one wants to make sure that the planting is fully established. Some sitka spruce trees that I planted six years ago have now formed a canopy in two metre square spacings. These have done exceptionally well. I do not have to go near them again until I start taking thinnings out of them. But that is not really what I am talking about. I am talking about whether this is long enough to prevent someone cutting down trees in order to clear an area where for some reason he does not want trees.
The noble Lord, Lord Gisborough, said that a tree that had only reached eight centimetres breast height diameter after 10 years was not much of a tree and perhaps the land should not be in trees at all. I know that my trees grow remarkably quickly. They often put on over a metre a year in height. If all trees reached a breast height diameter of eight centimetres after a decade, one would not have anything to complain about.
The noble Lord, Lord Gisborough, said that he thought my amendment was closing a loophole. That was, I believe, the phrase that he used. I will check it in Hansard. If there is a loophole, it should be closed. My noble friend Lord John-Mackie has already referred to the point that I made that there is no reason for the words to be identical or for the conditions to be the same as those used when a felling licence is granted. Here, we are dealing with a blatant law-breaker. I am grateful to my noble friend for his support. It is, I believe, certainly the case.
It is my intention to withdraw the amendment. While not looking for any undertaking from the noble Lord, Lord Gisborough, I would express the hope that between now and the Report stage—I shall not put down the amendment again—he may think the matter over with his friends and officials and perhaps let me know what conclusions he reaches. With those words, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 1 agreed to.
7.45 p.m.
Lord Dulverton Lord Dulverton moved Amendment No. 2:
After Clause 1, insert the following new clause:
("Increase in maximum number of members of regional advisory committees.
. In subsection (3) of section 38 of the said Act of 1967 (which provides, inter alia, that the maximum number of members of a regional advisory committee shall be nine) for the word "nine" there shall be substituted the word "twelve".")
The noble Lord said: I gave an indication on Second Reading that I felt moved to ask your Lordships to consider the subject of this amendment. It is my strong
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belief that the amendment could commend itself to the Committee, other things being equal. However, they are not because of our colleagues in another place. I tried briefly at Second Reading to explain that the Forestry Commission, as forestry authority, has given its mind to criticisms of certain environmental lobbies that its regional advisory committees—generally known as RACs—were too sympathetic to new forestry applicants for planting grants. The Forestry Commission has suggested in a paper I hold here, entitled The Composition and Procedures of the Forestry Commission's Regional Advisory Committees the addition of three members to its RACs from people representing interests other than that of forestry itself.
I need hardly tell the Committee that the role of the RACs is to examine applications for planting grants or indeed felling licences of any scale that give cause for concern to other interests such as farming, nature conservation, amenity and recreation. They are asked to advise the forestry authority of their findings. Where any party is dissatisfied at the end of the day, there remains an appeal to the Minister concerned. I would remind the Committee, as I said the other day, that where the decision goes against the applicant for a planting grant, Timber Growers United Kingdom, a body to which I belong that represents the private sector of foresters—it is the recognised body—strongly advises its members not to go ahead with their proposals as they might in some circumstances do without the planting grant. In other words, they are asked to respect the decision of the forestry authority as advised by the RAC.
When applications of any substance reach the forestry authority, it informs the agriculture ministries, the two Countryside Commissions, the Nature Conservancy Council, in certain cases the local authorities and in Scotland the Red Deer Commission, in addition to one or two perhaps illogically chosen voluntary agencies. If any of these bodies objects, the appropriate RAC is called into action to examine each case on the ground. That has not happened very often. When it has, there have been very few cases over which the RACs have failed to arrive at decisions acceptable to all. "The system may indeed claim to have worked well and with a great degree of responsibility. Now it is being suggested that the membership of the RACs should include more voices from land use interests outside forestry. At present, there is a chairman, four forestry representatives, one representative from trade unions, one from environmental interests, one from farming interests and one from planning interests. It is suggested that there should be added one from nature conservation, one from amenity/recreation interests and one from farming interests. This would give, apart from the chairman (who is chosen for a wide spectrum of experience), a ratio of four forestry-orientated members to seven representing other interests.
Should we not applaud and welcome this broadening of the consultative base offered by the forestry authority rather than throwing it away as happened in another place? It really must be a move in the right direction. The objections to this simple and laudable move were made on the motivation of the Royal Society for the Protection of Birds, the Council

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for the Preservation of Rural England and the Royal Society for Nature Conservation, to all of whose main objectives I have long subscribed. I deplore, however, their present line of action. I believe that others of their members would do so if they knew about it. To be outspoken, they seem to me to be acting quite irresponsibly and/or with ulterior motives at a time when foresters are genuinely trying to meet the interests of conservation in its widest sense.
Having been in touch with the Association of County Councils, I learn that it, too, welcomes the expansion of interests on the RACs, although it is critical of certain aspects of their modus operandi. Perhaps it would not have been quite so critical had it really studied this paper from the forestry authority that I have already waved at the Committee. It seems to me to contain a well reasoned line of thinking. In any case, that latter question is not one directly related to the matter now before us. I have a hope that, whatever we may do now, indications may be given from all sides of this Chamber of support for the simple measure of providing stronger representation of the interests of farming, nature conservation, amenity and recreation on the RACs, from which my amendment is motivated.
Some Members of the Committee know that I have a deep and abiding interest in nature conservation. I am all the more sorry to see the organisations which I have named, and which I have supported over the years sometimes in substantial degree, taking such a regrettable and confrontational stand. I beg to move.
Lord Taylor of Gryfe: I congratulate the noble Lord, Lord Dulverton, not only on the content of his amendment but also on the very persuasive and succinct manner in which he has moved it. No one is better qualified than the noble Lord, Lord Dulverton, because of his abiding interest not only in forestry but also in the broader field of wildlife conservation and nature conservation in general. Whatever respect the conservation lobby has for the noble Lord, Lord Dulverton, here in this country, he has been recognised internationally for his interest in wildlife conservation.
The noble Lord has pointed out that the objectives of his amendment are to provide a wider consultation framework. This is in line with the Forestry Commission recommendations. The Forestry Commission is extremely anxious to respond to the pressures of conservationists and others who feel that they are inadequately represented in the constitution of the RACs. The Forestry Commission would certainly welcome the adoption of the amendment that is before the Committee.
As the noble Lord, Lord Dulverton, has pointed out, the present statutory framework for RACs provides a reasonable balance between the requirements of good land use, amenity, recreation and nature conservation, and the individuals who act on the RACs are concious of the responsibilities in all these fields. It should be recognised that there is no call for any dramatic change other than an extension of the representation because this conciliation machinery works very well. It would be a retrograde and unacceptable
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proposition—as is threatened from some of the amenity and conservation lobbies—to have this scrapped and replaced by planning procedures. Planning procedures governing forestry would be bureaucratic and probably delaying and frustrating. The people concerned in looking at planning applications for forestry are not necessarily qualified in this field. The RACs and the local forestry conservators and their staff are intimately concerned with the land over which they have stewardship.
I hope, therefore, that by supporting this amendment we shall be giving an indication to some of the conservation lobbyists that Members of the Committee believe that the RAC principle should be observed and that the principle of conciliation and consultation which has served us so well in this field should not be scrapped in favour of some kind of bureaucratic control.
Let us look at the cases that have been referred to the RACs. In the past 10 years 9,000 applications have been made for planting grants; 18,000 applications have been made for felling licences. In the case of the planting grants 0.6 per cent. of these have been referred since they were not approved by the usual conciliation machinery. In the case of the 18,000 felling licences 0.1 per cent.—that is, 18—have been referred. This indicates that the machinery for consultation has been working effectively and that there is no cause for the introduction of any other framework.
I must say that as a former chairman of the Forestry Commission I joined it without any forestry background. If I had any interest in forestry it was in the excellent facilities for recreation in the forest. But I grew to respect the judgment and the deep concern of foresters for the land over which they had responsibility. These foresters are not vandals in the countryside. They are people who live in the countryside, enjoy living in the countryside, enjoy working in a rural environment, and certainly accept all the responsibilities that go with that.
Let me say one final word because the case has been so well represented by the noble Lord, Lord Dulverton. Let me quote for a moment from the excellent booklet published by the Timber Growers United Kingdom called The Forestry and Woodland Code, in which they lay down for their members the code of behaviour that should be observed in forestry development. It starts in the foreword:
"The countryside is a community of interests. Forestry is an important and established part of that community, and like the other members, it has a responsibility to co-operate with and respect the legitimate interests of its neighbours".
That has certainly been the practice with the Forestry Commission. As most people who have practised forestry in this country recognise, the Forestry Commission has been a good neighbour; and similarly the private sector is now laying down that forestry in the private sector should be equally responsible.
A letter has been sent in connection with the regional advisory committee by the Royal Society for the Protection of Birds. This letter was sent to the Forestry Commission. I regard it as one of the most offensive and arrogant letters that I have ever read in any business or any other connection. The secretary of the RSPB writes:

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"To be frank we consider the RACs to be partial, overly secretive, and offering nothing more than a cosmetic gloss to the FC's activities. It would have been simple for us to propose that the RACs be scrapped and contend that they are beyond redemption … I should caution you"—
he says, writing to the Forestry Commission—
"that unless a more realistic approach to the membership of the RACs"—
and so on. I want to say to this gentleman: "I should caution you" that there are people in this country who have a respect for the countryside and for the preservation and the protection of birdlife who will lose sympathy with your organisation, with consequent effect on their finances, if you go around threatening and cautioning in such terms as this letter. I hope that that will be noted.
Let me look for a moment at the case about forestry threatening birdlife. The Institute for Terrestrial Ecology have had a number of studies on this subject, one with the Professor of Terrestrial Ecology at Edinburgh, who is a specialist in birdlife. He concluded in his recent interesting essay that,
"It must be said that the effects of upland afforestation on birdlife have so far been mainly beneficial. No species has yet been seriously threatened on a national scale from the effects of commercial forestry, but some have markedly declined on a regional scale".
That is fairly authoritative and I would recommend the study of that essay to the Secretary of the Royal Society for the Protection of Birds. I have very great pleasure in seconding the amendment which was so well moved by the noble Lord, Lord Dulverton.
8 p.m.
Baroness White: I had not intended to speak in this debate. I simply came out of respect for the noble Lord, Lord Dulverton, and to listen to what he had to say. However, having listened not only to the noble Lord, but also to the noble Lord, Lord Taylor of Gryfe, I feel moved to intervene very briefly because there is another point of view.
I entirely appreciate the sentiments of the noble Lord, Lord Taylor of Gryfe, but he is living somewhat in the past. Those of us who are worried about the future have some reservations about a slight improvement in the representation on the regional advisory committee, which would give those committees what some of us may consider to be a not altogether reliable breadth of view, although such a change may appear to be making matters rather better than they may otherwise be.
We are looking towards the future. Already in Scotland, and it is apprehended also in Wales, we may have a very dramatic increase in areas devoted to forestry because of changes in the current situation of agriculture. For that reason I believe—although I have not consulted the bodies mentioned and I am not directly concerned with any representations that they may have made—that to rely upon the RACs of the Forestry Commission may not be adequate protection for certain areas of land. If one listens to the Minister of Agriculture, Mr. Jopling (as I do fairly regularly on the radio), one understands that those areas of land are likely to be diverted from the present pattern of agriculture, because of the changes in the CAP and so on, and be devoted to forestry on a scale and over an area which some of us would prefer not to—
Lord Dulverton: I am—
Baroness White: I was about to give way to the noble Lord; I just wanted to finish the sentence.
Lord Dulverton: I am sorry to interrupt the noble Baroness, but information which I have received quite recently is that the new planting in Wales last year was no more than 200 hectares. That will not alter the face of Wales very much.
Baroness White: But we have not yet, by any means, experienced the full effects of the changes in agricultural practice which we apprehend may be about to develop in the less favoured areas in the Principality over the next decade or so. It is for that reason that simply to add three members, one of whom will be representing farming interests, another representing recreational interests and one representing conservation interests, may not be sufficient protection. I do not wish to prolong the debate, but I felt, particularly in the light of the remarks made by the noble Lord, Lord Taylor of Gryfe, that I ought to indicate that there are people who hold slightly different views.
Lord John-Mackie: The noble Baroness is perfectly correct: there are people who hold different views. Like the noble Lord, Lord Taylor, who was my predecessor in the Forestry Commission, I have tremendous respect for the noble Lord, Lord Dulverton, and for all that he has done for forestry, conservation and the environment not only in this country but also abroad. I have seen a great deal of his work. He is the right person to put forward this proposal because nobody could possibly criticise what he has done. He put the case very clearly and I cannot but support him.
There are two sections of forestry in this country. First, there is public forestry which is covered by the Forestry Commission and, secondly, there is private forestry. Both work very well together. During my time as chairman of the commission one fact which was obvious was how well private forestry and the commission worked togther. When situations arose, as they did from time to time, the way in which the RACs solved the problems and held consultations and so on was a sign that those bodies did a first-class job. I attended quite a few of their consultations and was most impressed by the way in which they got on.
Like the noble Lord, Lord Taylor, I very much deprecate the letter which he read out and which was sent to the commission. I should like to give two instances of the type of situation that arises. The first example arose in Wales, which has already been mentioned, and in particular in North-East Wales. There was quite a large planting programme and the argument was that the kites would be pushed out of their habitat. I felt it was my duty to go and see the situation. I went there and naturally I discussed the matter with the ranger in that area. He had been in that area since planting had started and he said, "All I can tell you, Mr. Mackie, is that over the last eight or 10 years since planting started on a big scale there are more kites now than there were before". That is the type of situation that can arise.

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Secondly, I went to another forest in Wales; namely, Newborough Forest in Anglesey. A tremendous job had been done of planting almost in pure sand. A tremendous forest had been built up in that area covering coal mines and almost reaching the shore. The forester there, a Mr. Griffiths, who was a very nice Welshman—all Welshmen are nice, but he was particularly nice—showed me around with great pride because he had been there at the planting. He said, "Of course we had to put up with all these people who came along with placards objecting to the planting. We are now at the stage when we shall be cutting shortly, and I am looking forward to seeing them come back with their placards to stop us cutting it down".
In my view the pressure which is being put on MPs in another place to object to this amendment puts our parliamentary system into a lower key, and I do not like it at all. Apart from anything else, the conservationists in this country have been reorganised on a much bigger regional scale. There were nine people on those bodies previously. Surely to add an extra three and thus increase the size for a bigger area is sensible. As has been pointed out by the noble Lord, one of those people will represent recreation, another will represent the environment and the third will represent agriculture. I cannot for the life of me see why that should be objected to. Such a course would do nothing to stop any further consultation between environmenal and conservation bodies and the Forestry Commission. It would not stop it at all, but that seems to be the argument.
In supporting the amendment I feel that it should be given a chance. However, I know the feeling about the matter and I am aware of what can happen in another place. I shall look forward to hearing what the Government have to say and to seeing what the noble Lord, Lord Dulverton, does after he has heard the Government's comments.
The Earl of Bessborough: Like the noble Baroness, Lady White, I had not intended to take part in the debate. However, I was most interested to hear the arguments on both sides on this particular matter of increasing the number of members of the RACs. I rise because I sponsored in this House a complementary Bill last year called the Town and Country Planning (Amendment) Bill, which assured that any protected woodland tree destroyed in contravention of a tree preservation order would have to be replaced, etc. I am glad to support this present Forestry Bill, which has been so ably introduced in your Lordships' House by my noble friend Lord Gisborough.
The arguments are well balanced on both sides. Like the noble Lord, Lord Taylor of Gryfe, I have the highest possible opinion of my noble friend Lord Dulverton, who is no doubt the greatest authority on these matters in your Lordships' House. I am glad that he has spoken. He has argued the Forestry Commission proposals cogently in so far as you can make a case for increasing the number of members of the RACs. I see the point about broadening their base.
However, I should like to agree with the noble Lord, Lord Taylor of Gryfe—and this is one of the reasons why I have risen this evening—on the incredibly
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offensive letter by the Royal Society for the Protection of Birds. I cannot believe that my noble friend Lord Blakenham, their chairman, can have approved it himself. This seems to me quite extraordinary, and I shall be interested to hear what comes out of that. While I appreciate the arguments on both sides, I should like above all to hear what my noble friend Lord Gisborough has to say on this amendment before making up my mind, and also what my noble friend Lord Davidson on the front Bench has to say.
There is one important point that was made in regard to the previous amendment, and that is that we do not want to lose this Bill. It is a most valuable Bill, which I strongly support. By the adoption of this amendment by my noble and highly respected friend Lord Dulverton, I feel there might be a chance of losing the Bill, and that I do not wish to do.
Lord Gisborough: I should like to congratulate my noble friend Lord Dulverton upon the succinct and persuasive manner in which he has presented the case for the reintroduction of the clause which was removed from the Bill in another place. The noble Lords, Lord Taylor of Gryfe and Lord John-Mackie, also spoke to good effect on this amendment.
I am on the horns of a dilemma in this matter. I should like to accept this amendment, since I wholeheartedly agree with its aim. But this is a case where my head must rule my heart and I must, for reasons which I shall shortly explain, and which have been anticipated to some extent by the noble Lord, Lord John-Mackie, argue against it. The amendment seeks to increase by three the maximum number of members of each of the Forestry Commission's regional advisory committees. Such a change would enable the commissioners to appoint additional members to broaden the representation of farming and environmental interests on these committees. This would meet present criticisms that, because of statutory limitations on membership, they are overweighted in favour of forestry.
An improved balance in the committees' membership would be of particular value in the important role they play in seeking to reconcile conflicting views in disputed grant and felling licence applications, and in giving advice to the commissioners when no reconciliation is possible. Indeed the commissioners themselves favour a change in the balance of membership of the regional advisory committees and have sought views on how the extra places might be allocated. This amendment would therefore seem to be a sensible and welcome measure.
I regret the fact that this measure has not been welcomed in all quarters, as has been mentioned on all sides.
A number of conservation bodies are opposed to it. I understand that their opposition stems from their wish to see more comprehensive changes introduced following the consultation exercise currently being undertaken by the Forestry Commissioners into the composition and procedures of the regional advisory committees.
I believe that the bodies opposing this measure would really like to see forestry come under planning control. This is not a subject which I wish to debate

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today. I merely mentioned this to illustrate the ultimate and far-reaching change which these bodies may have in mind. However, such a fundamental change could not be introduced without a great deal of thought, and could only be justified if the evidence pointed to an irreparable breakdown in the present consultative system. There is no such evidence. Indeed, the present arrangements, as the Forestry Commissioners have made clear in their consultation paper, have a truly excellent record. Over more than a decade, there have been only two significant areas afforested without clearance from the commission out of more than 9,000 cases dealt with satisfactorily through the present consultative procedures.
The Forestry Commissioners recognise that the balance of membership of the regional advisory committees, which have a vital role to play in these procedures, could be improved. This is what the Bill originally sought to do by increasing the membership from nine to twelve. It is astonishing that interests which would have benefited from the change have rejected what was clearly a bird in the hand in the hope of getting more. To have accepted the proposal would not have prejudiced further changes being introduced at a later stage if the case were made out for them. As it is, we shall be left with the present balance of membership on the committees.
It is plain that the bodies which brought pressure to bear to have the clause removed from the Bill have not had any change of heart. I must regretfully advise your Lordships therefore, that, if the clause is restored as a result of my noble friends amendment, the Bill as a whole will be placed in jeopardy when it is returned to another place. This is not because of any general lack of support, but because just one objection would mean the loss of the Bill as a result of absence of time for debate. This is what bedevilled the Bill in its earlier stages and led to the present position.
It gives me no pleasure to oppose a measure which I am sure the Committee would welcome, but I do so with the interests of the remainder of the Bill in mind. I hope that with this explanation my noble friend will agree to withdraw his amendment.
Viscount Davidson: I can be brief. It is clear that most of your Lordships agree that the amendment proposed by my noble friend Lord Dulverton makes a great deal of sense. It made sense when the same provision was in the Bill when it was introduced in another place. However, for reasons which my noble friend Lord Gisborough has made clear, it was subsequently removed from the Bill in response to pressure from certain conservation bodies.
It is unfortunate that this had to be done in respect of a proposal which clearly has a wide measure of support in both Houses. However, the procedures under which the Bill was introduced in another place made it particularly vulnerable to any objection. It is not a Government Bill, although we wish it well. It is, however, vulnerable to outside pressure and we must accept that fact.
In short, if we amend the Bill is it almost certain to be lost when it is returned to another place. No matter what our individual or collective wishes may be about this amendment, I am sure that your Lordships would
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not wish the sound measure contained in Clause 1 of the Bill to fall by the wayside. I hope therefore that in those circumstances my noble friend will not press his amendment.
Lord Dulverton: I should like to say a heartfelt thank you to those noble Lords and the noble Baroness who have spoken to this amendment. I am flattered that I was followed by two ex-chairman of the Forestry Commission, and my noble friend Lord Bessborough, the president of the Men of the Trees.
The Earl of Bessborough: I am sorry; I did not declare my interest.
Lord Dulverton: I am very grateful for the kind remarks which all noble Lords have made as well as for those of the noble Baroness, Lady White, whose love of rural Wales I know full well. I could wish that she was as keen as I might be to see some of the vast prairies of bracken replaced by beautiful growing trees. But we will leave that aside. My noble friend Lord Gisborough moved this Bill very ably and of course I entirely respect the thoughts he has just given us. I regret that this should be the case, as he has explained and my noble friend the Minister also has explained it. I know this to be the case, but I hope that some people outside this House may somehow get to know of the support. I led off on this matter by saying I hoped the support would be coming from all sides of the House; it has done so and I hope some people will take note of it. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 2 agreed to.
House resumed: Bill reported without amendment: Report received.
Lord Skelmersdale: I beg to move that the House do now adjourn during pleasure until twenty-five minutes past eight o'clock.
Moved accordingly, and, on Question, Motion agreed to.
[The Sitting was suspended from 8.23 until 8.25 p.m.]

Social Security Bill
House again in Committee.
Clause 17 [Retirement pensions]:
Lord Banks Lord Banks moved Amendment No. 53:
Page 21, line 3, at end insert—
("( ) From the commencement of this Act the basic pension shall be increased in real value by not less than 2 per cent. per annum for five years; this increase will only be paid to the extent that it exceeds the additional component provided by the State or a guaranteed minimum pension or the product of minimum contributions to a contracted-out money purchase occupational scheme or a contracted-out personal pension policy.")
The noble Lord said: I beg to move Amendment No. 53. This Bill is much concerned about pensions in the future; there is a great deal of concern lest those retiring 50 years from now should do so with nothing more than an inadequate basic pension. Hence the

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maintenance of SERPS, though to be reduced, and the opportunities for occupational pensions and persons pensions.
In moving this amendment, I am concerned about those already retired with little or no SERPS, and with no occupational or personal pension. After all, nobody will have a full SERPS pension before 1998 and everybody will not be on a full, though reduced SERPS pension until well into the next century—in fact, not until all those born before 1933 have died.
In their comment in the Green Paper, Age Concern said:
"Age Concern believes that the basic state pension is too low, as do 69 per cent. of the public, according to a recent MORI poll (April 1985). It should be raised to a level which permits pensioners to live and participate fully in society."
The House of Commons Social Services Committee, in their report on the age of retirement published in 1982, said that many, and in particular those with poor employment records, would receive little or no additional component. They said that the future of those pensioners was of major concern. There would emerge a gap in pension levels, particularly between those currently retiring and those due to retire in and after 1998.
They went on to say that they were convinced that some sort of assistance for older and poorer pensioners was inevitable and that future governments, of whatever political complexion. would have no choice but to regard this as one of the first calls on any additional resources.
The Social Security Advisory Committee in their report for 1982–83 quoted these words and said that they shared the Social Services Committee's conviction. They said that the special problem of lower income among those who had not had the opportunity on grounds of age to take advantage of the earnings related element was a transitional one. "We believe", they said, "it needs to be tackled in a way which will not add to the long-term costs of the scheme or affect its build up for younger contributors".
This amendment is designed to tackle the problem precisely on that basis. First, it would increase the real value of the basic pension by 2 per cent. per annum for five years, approximately a 10 per cent. increase in real value achieved over five years. That is a modest enough improvement, and it may be said that the percentage may be higher and the term longer; but, after all, I am seeking to persuade the present Government.
Secondly, when someone is in receipt of SERPS or GMP or pension from minimum contributions to money purchase occupational schemes or to a personal pension scheme, the increase in real value will only be paid to the extent that it exceeds that additional component. Thus if the increase in real value—just to take easy figures—is worth £200 per annum and a pensioner is receiving £100 of additional component, he would only draw £100 extra as a result of this amendment. If the additional component amounted to £200, he would draw nothing, but if he had no additional component, as millions now retired have not, he would draw £200. Thus the amendment would help the poorest. I estimate that the cost in the first year would be about £320 million.
In considering that sum, we also have to consider the view of Age Concern, of the House of Commons Social Services Committee and of the Social Security Advisory Committee that the basic pension will have to be increased. The cost would build up for five years and then gradually reduce so that eventually it became minimal. The proposal thus complies with the Social Security Advisory Committee's view that the problem should be tackled in a way which will not add to the long-term costs of the scheme or affect its build-up for younger contributors. The Government of the day might want to continue the increases for longer than five years, but even an increase over five years would do something to enable pensioners to catch up with earners. Pensioners are falling behind as pensions are linked to prices whereas earnings have been increasing consistently at a faster rate than prices. If this continues the basic pension will become a smaller and smaller proportion of the total state pension. To solve all these problems I hope that the Government will feel able to accept this amendment. I beg to move.
8.30 p.m.
Baroness Turner of Camden: I rise to support from these Benches the amendment moved by the noble Lord, Lord Banks. It must be a matter of concern to everyone that the position of people who are existing simply on the basic state pension—and there now are many of them—should be in many instances in penury. The noble Lord, Lord Banks, has already referred to representations made by reputable organisations such as Age Concern. What he is suggesting seems to us to be an extemely modest suggestion under which there would be an increase in the real value of the basic state pension for the period mentioned in the amendment. By real value he means, I take it, that not only would the basic pension be increased by the inflation rate in regard to prices, but there would be an increase on top of that. I should very much like to see this, and therefore I believe that this amendment should be supported.
Lord Vinson: All of us would like to see an increase in the basic state old-age pension. Indeed, I believe I share with the noble Lord, Lord Banks, the belief that were we starting from scratch we would abolish SERPS and increase the basic state old-age pension, which would be far more equitable as it would treat all our citizens alike, whatever the work or employment pattern of their careers. But the fact remains that it is inescapable that we are sharing the rice in the rice bowl and the greater one increases retirement provision the greater one raises regressive taxation. It is inescapable that the higher the pensions paid the more difficult becomes the problem of the poverty trap. There is no such thing as a free pension: it has to be paid for by the working. What we are talking about in simple terms is how we divide the rice bowl between rewarding the working and rewarding the retired. This is the dilemma that lies at the basis of all our discussions tonight.
There are many people who believe that once pensions are funded in some way this no longer affects the economy. But one man's tax privilege is another man's tax rise. It all comes back to the division of the rice bowl. While I should be the first to support a

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fundamental increase in the old-age pension—indeed, governments always have done their best to increase this in line with inflation, or more importantly in line with what the nation can afford—it would be wrong by statute to build in an automatic increase over a period of years.
While I sympathise totally with the noble Lord, Lord Banks, in the terms of his amendment, in practice it would be impracticable and it should be left to the discretion of governments, because at the end of the day it falls to the Government to share out the rice equitably. In that case they would be right to oppose this motion and to review the level of the old-age pension regularly from time to time but without automatic increases being written in by statute.
Baroness Trumpington: I should like to say how much I agree with the wise words of my noble friend Lord Vinson. The noble Lord, Lord Banks, seeks to provide a substantial real increase in the value of basic retirement pension, but to pay it only to those who do not have any, or only a small, earnings-related pension. This device is similar to the guaranteed additional component discussed during the 1970s. It would also be in line with the recommendations of the Social Services Select Committee in another place, which in 1982 recommended action to narrow the income gap between those who had already retired with little more than the basic pension and those who would be receiving substantial extra sums under the earnings-related pension scheme.
I have much sympathy with the noble Lord's objectives, but I have to say that the amendment would not be acceptable. First of all, it would be costly—an additional £1,310 million in the fifth year. In the first year costs would be an additional £270 million.
Secondly, it would complicate the pensions awarding arrangements, though I would not wish to make too much of that. But, thirdly, I do not think it would achieve its aim. Under any system where part of a pension is tied to earnings-linked contributions, some people will do worse than others because they have not earned, or not earned as much. That will be just as true in forty years' time as in the next five years. But under the noble Lord's scheme as expressed in this amendment, only the product of 10 per cent. of the basic pension after five years from 1988 will be available to help narrow the gap between the pensioner with the basic pension and the pensioner with high additional pension. Since it is currently possible to receive additional pension up to £23 a week, and 10 per cent. of the basic pension is £3.80, the noble Lord would be setting up a rather complicated scheme to produce a mouse.
The Government are very conscious of the need to protect pensioners' living standards, and we believe our record is a good one. But we do not believe an amendment of this kind is the right way to help those pensioners who are less well off.
Lord Ennals: May I add a word to the arguments that have been put forward both by my noble friend and by the noble Lord, Lord Banks? Yesterday I had a meeting with 28 longstanding traditional welfare
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organisations, several of which have been in existence for over 100 years—the Soldiers', Sailors' and Airmen's Families Association; the Family Welfare Association, and so on. Many of them deal with the problems of the elderly. All of them say that they find greater poverty among the elderly than they have known in recent years. I certainly should not say in the last 100 years—nothing like that. But there is no doubt that many of these organisations working for the elderly are quiet charities which have been doing their best. They have come together because of their concern, not just about the state of welfare of the elderly but about other things that we shall deal with later in the Bill. I do not believe that the noble Baroness should feel any sense of complacency about the feelings and the degree of poverty and hardship that exists among many of our elderly in society.
The second point I should like to make is to remind the noble Baroness and the noble Lord, Lord Vinson, that while this Government have rightly and marginally more than covered pensioners' pensions against the rising rate of inflation—the rate of inflation is lower than it has been for some 15 years, all credit to be given—until this Government came to power pension increases, as the noble Baroness will know, were linked with the level of earnings rather than the level of inflation.
One of the things that must trouble this Government at the present time is that earnings are rising so much faster than inflation or production; and it will have its consequences. Had legislation not come in that linked the pension to inflation proofing rather than earnings-level proofing, pensioners would now be getting a much more substantial increase than they are. One way to do it is as has been suggested by the noble Lord, Lord Banks.
Of course, the noble Baroness says, and no doubt others of her supporters will say, "We can't afford it. It's a matter of priorities". We have to ask ourselves as a society what our priorities are and where in our priorities is the welfare of the elderly compared with all sorts of other things that the Government have to consider. The welfare of the elderly should come very high and I believe that this five-year proposal with the 2 per cent. increase which has been suggested by the noble Lord, Lord Banks, would at least make a contribution to easing poverty among the elderly in our society.
Baroness Gardner of Parkes: That was a very interesting speech and we all agree that we want to see as much help as possible for the elderly. But I do not think that this amendment is the way to do it. The elderly certainly suffered terribly during the years of very high inflation when we had 20 per cent. inflation. That is what cut back the savings that people had made for their old age—people on a fixed income—and they were terribly hard hit during those years. This proposal, as I see it, would only perpetuate the poverty trap for the elderly and, indeed, for the whole of our society because it would mean increasing the rate of taxation in order to meet the additional financial commitment that is set out.
I think that instead it is far better to deal with the elderly through the social fund, which comes up at a later stage in this Bill and which is geared to give real

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help to those in real need; and many of the elderly are in real need. If we could also get through to many elderly people the feeling that they are entitled to whatever help the Government can give them, it would be of great importance.
I happen to be the first ever president of the War Widows' Association. I am so impressed by the frugality and pride of these women. They will re-use an envelope two or three times without thinking that to most people an envelope is nothing. To them an envelope is an important thing. They watch every penny. These women are so proud of managing that they hate to ask for anything. If we can get through to them the point that they will be quite entitled to take their needs to the social fund and get help in that way, that will be far better than building in anything that is suggested in this amendment. For that reason I could not support this amendment.
Lord Ennals: May I respond very briefly to the points very eloquently made by the noble Baroness. It is quite right that elderly people are very proud and do not like to go and ask for means-tested benefits. This is the advantage of the amendment that has been put forward by the noble Lord, Lord Banks. The noble Baroness says that it is an entitlement, but it is an entitlement only when you have proved the extent of your poverty. That is the case. To me that does not mean an entitlement. An entitlement is something that the state accords to you because you are an elderly person and not because you are poor. That is why I think it should be in this part of the Bill and not simply related to the social fund.
Baroness Gardner of Parkes: I thank the noble Lord for that reply. I should like to come back again and say that to my mind if it is something which is given as a blanket hand-out to everyone, it loses its merit because it is so uniform that it does not help those in real need.
Baroness Trumpington: May I come back to what the noble Lord, Lord Ennals, has said. The Government are certainly not complacent but, as my noble friend Lord Vinson said, it is better to take decisions on the level of pensions at the time that uprating decisions are taken than to enshrine a fixed increase in a statute, regardless of what the state of the economy is at the time. As my noble friend Lady Gardner has said, our success in the fight against inflation is the best news that pensioners have had.
8.45 p.m.
Lord Banks: I should like to thank the noble Baroness, Lady Turner, and the noble Lord, Lord Ennals, for their support of this amendment. I regret that the noble Baroness, Lady Trumpington, has felt that she must turn this down along with most other things. I think that she has to answer the argument—and I do not think that she has—put forward by the three bodies that I mentioned. It may be said that Age Concern, excellent organisation that it is, has obviously a vested interest in looking after the interests of old people. When it comes to the Social Services Committee in another place and the Social Security Advisory Committee, they are grappling with problems across the whole range of social security.
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Both those bodies have felt it necessary to say, "Here is a problem which, as far as we can see, governments will have to tackle, will have to take up, will have to solve". The noble Lord, Lord Vinson, said that it would be nice to do something, but do not let us put it into the Bill; let us leave it until the time when the Government feel they can to it. We know that governments do not often have these feelings. Therefore, if you want to make some progress, it is essential to get it written into the law. If we were to have this particular system which has been suggested, which has the merit that it follows the guidelines suggested by the Social Security Advisory Committee, I think it would be essential to introduce it by means of statute. I do not see how we can have the offset otherwise.
Incidentally, the noble Baroness, Lady Gardner of Parkes, has said that there is not much point in giving a benefit if it is uniform. We could argue about that. But this particular benefit is not uniform because of the offset, and so that particular argument of hers would not seem to hold.
Then the noble Baroness complained that it is too much money producing too little result. Of course, we could have it higher if she would prefer that. The £1,310 million extra by the end of five years, introduced over that period of time, is, she says, something which we cannot contemplate. Yet we contemplate paying out much more than that for pensions in the next century. We hold up our hands in horror at the thought that people in the year 2030 or 2040 may not have these pensions that we think are so desirable. But the only people whose pensions we are asked to pay for are the people who retire today. We are not going to pick up the tab for paying the pensions in the years 2030, 2040 or 2050. We are picking up the tab for paying today's pensioners. Yet we expect other people to do more in the future than we are prepared to do today.
This particular amendment is rather important to us on these Benches. We have made it clear that while we are prepared to talk about modification of SERPS and while we realise that there could be a problem about expense in the middle of the next century, we cannot agree to it unless there is some increase in the basic pension. Therefore, this affects our view on other amendments which are to come later and on our whole attitude to this part of the Bill. That being so, I feel that it is essential—
Lord Vinson: I hope the noble Lord, Lord Banks, will forgive me for coming back again. He said that we, this generation, will be paying for the pension. Of course, he is absolutely right. But the point that I think he should dwell on is that it is not the better off in society who will be paying for it; it is actually the very low earners in society, those who are the victims of the poverty trap. The higher the pension you pay, the more rice you dish out to those in retirement, the less rice there is to pay for those who are actually earning.
This is an inescapable problem that all governments try to solve. Of course we should like to pay our pensioners more but, equally, had the noble Lord, Lord Ennals, just come from a meeting of the low-paid who were complaining that their rate of tax was far too

815
high, he—and I am sure we all would agree—would wish to see the lower-paid pay less tax.
We know the dangers of the poverty trap and how socially it is incredibly unjust. So we have two injustices to deal with: the injustice of not paying pensioners enough and the injustice of taxing the low-paid too much. How do we strike the balance on this? I merely suggest that the right way to do it is for governments to try to take that decision relative to the good fortunes or bad fortunes of the economy at the time and not to enshrine it in an Act.
Lord Banks: If what the noble Lord says has any validity, it would seem to me to apply now, yesterday and tomorrow just the same. It does not seem to be an argument that is related to our particular situation at the moment. It would seem to be an argument against pensions of any size at any time and one that you could bring out just as strongly against pensions in the year 2030 as pensions this year. The noble Lord nods: that is so—yet the Government are placing an obligation, without knowing what the circumstances will be at that time, on people 50 years ahead to pay at certain rates. They are not at all concerned about it and they are very anxious that they should not be involved in paying this bit extra at the present time. I feel this is a matter on which I should like to test the feeling of the Committee and that I must therefore press the amendment at this stage.
8.50 p.m.
On Question, Whether the said amendment (No. 53) shall be agreed to?
Their Lordships divided: Contents, 35; Not-Contents, 57.

DIVISION NO. 4

CONTENTS

Airedale, L.

Jeger, B.

Banks, L.

Kagan, L.

Blease, L.

Kilmarnock, L.

Buckmaster, V.

Lloyd of Kilgerran, L.

Cledwyn of Penrhos, L.

McNair, L.

Crawshaw of Aintree, L. [Teller.]

Nicol, B.

Northfield, L.

Darcy (de Knayth), B.

Parry, L.

David, B. [Teller.]

Pitt of Hampstead, L.

Ennals, L.

Rochester, L.

Ewart-Biggs, B.

Seebohm, L.

Ezra, L.

Serota, B.

Faithfull, B.

Stoddart of Swindon, L.

Grey, E.

Strauss, L.

Hacking, L.

Taylor of Gryfe, L.

Hanworth, V.

Turner of Camden, B.

Hatch of Lusby, L.

Underhill, L.

Henderson of Brompton, L.

White, B.

NOT-CONTENTS

Allenby of Megiddo, V.

Cork and Orrery, E.

Ampthill, L.

Craigavon, V.

Auckland, L.

Davidson, V.

Belstead, L.

Denham, L.

Birdwood, L.

Dilhorne, V.

Boyd-Carpenter, L.

Donegall, M.

Brabazon of Tara, L.

Dulverton, L.

Brougham and Vaux, L.

Elton, L.

Buckinghamshire, E.

Enniskillen, E.

Caithness, E.

Gardner of Parkes, B.

Carnegy of Lour, B.

Gisborough, L.

Colville of Culross, V.

Glanusk, L.

816

Glenarthur, L.

Munster, E.

Gray of Contin, L.

Rankeillour, L.

Hanson, L.

Renton, L.

Harvington, L.

Rochdale, V.

Henley, L.

Rodney, L.

Hives, L.

St. Aldwyn, E.

Hooper, B.

Sharples, B.

Inglewood, L.

Skelmersdale, L.

Kaberry of Adel, L.

Swinton E, [Teller.]

King of Wartnaby, L.

Tranmire, L.

Layton, L.

Trumpington, B.

Long, V. [Teller.]

Vinson, L.

Lucas of Chilworth, L.

Whitelaw, V.

Macleod of Borve, B.

Windlesham, L.

Margadale, L.

Young, B.

Mersey, V.

Zouche of Haryngworth, L.

Mountevans, L.

Resolved in the negative, and amendment disagreed to accordingly.
8.58 p.m.
Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 54:
Page 21, line 13, leave out from beginning to end of line 14 on page 22, and insert—

("(a) in relation to any surpluses in the pensioner's earnings factors for the tax years in the period beginning with the tax year 1978–79 and ending with the tax year 1987–88, the weekly equivalent of 11 per cent. of the amount of these surpluses;

(b) in relation to any surpluses in the pensioner's earnings factors in a tax year after the tax year 1987–88, the weekly equivalent of the relevant percentage of the amount of these surpluses; and in this paragraph "relevant percentage" means:

(i) where the pensioner attains pensionable age in the tax year 2009–2010 or any subsequent year, 1;

(ii) where the pensioner attains pensionable age in a tax year following within the period commencing with the tax year 1999–2000 and ending with the tax year 2008–2009, 1+X, where X equals 0.025 for each year by which the tax year in which the pensioner attains pensionable age precedes the tax year 2009–10;

or, if there are more than 20 such surpluses, of those 20 which give the largest weekly equivalents.").

The noble Baroness said: Clause 17 of the Bill is the clause which seeks substantial amendments to the state earnings-related pension scheme. A major feature of the scheme, as everyone knows, is that entitlement is based on the best 20 years' earnings rather then averaged out over a lifetime. Our objective on these Benches is to try to retain this vital element of SERPS. This was always seen as a major advantage to certain groups. Those were, and are, women who spend years out of the workforce with domestic responsibilities, the disabled who have a chequered work pattern, manual workers, some of whom also have a chequered work pattern, the unemployed and indeed everyone who for one reason or another could not remain in employment continuously over a normal lifetime of work.
The greatest benefits of the scheme in any event would not come into effect until 1999: yet it is that date on which the Government have chosen to end the "best 20 years" rule. Clause 17 of the Bill provides for SERPS to be calculated over a lifetime's average earnings for contributions over a lifetime. Clearly this will disadvantage those whom SERPS was originally meant to assist.
A great deal of stress has been laid on the fact that there is said to be no urgency about any of this. The

817
SERPS protection does not cease to apply until 1999, which is when the "best 20 years" rule will disappear. This is made clear in the Notes to the Bill with which we have been supplied, and it has misled many people into thinking that people working today will not be affected; but they will be. The pensions of many young and middle-aged men and women will be affected. For example, a 20 year-old man in 1988 who is unemployed from 1988 until 1993 will lose five years from the pension he will receive in 2033. The old SERPS would not have disadvantaged him in this way.
It is true that the Bill now before us provides some protection for certain people, but it does not provide anything for the unemployed. Moreover, the effect on women who work part-time and in low paid work for some years during their working lives will not be a good one. There has been a welcome acknowledgement by the Government that special protection is needed for those bringing up children, for the disabled themselves and for those caring for disabled people. However, they also have periods of low earnings outside the home and those years of low earnings would reduce the ultimate value of the pension.
This has not escaped the attention of the Equal Opportunities Commission. In fact, they have already made a statement on this question in which they say:
"In principle, the plan to apply home responsibilities protection (HRP) to SERPS is designed to recognise women's different working patterns. However, this new scheme looks set to discriminate against the majority of married women, who, after starting a family, return to part-time work.
"This is because under the new system a woman who does part-time work for a large part of her working life will receive a smaller (SERPS) payment than a woman who has chosen to claim the new home responsibilities protection for a greater number of years, but who has worked full time for the rest of her working life."
The commission suggest that the way out of this kind of anomaly would have been for the Government to leave the best 20 years provision alone.
If we look at some of the arguments that have been advanced for emasculating SERPS—because that is what it is—I do not think that they stand up to real examination. The most common statement is that we cannot afford the old-type SERPS. The Government Actuary is frequently called in aid here, yet the rate of growth predicted by the Government when talking about social security provision is different from and lower than that referred to when they are talking about rates of growth in other connections.
Even so, the argument that we cannot expect future generations to pick up the bill is really not a worthy one. Each generation relies on the work that has been done by previous generations. The standard of living that we enjoy, the systems of government that we have inherited and the material benefits of this generation compared with previous ones all are due to the work of our predecessors. Each generation has an obligation to fulfil to future generations. Incidentally, I do not think we are fulfilling it very well at the present time to those working people now retired, though those of us who voted for the amendment which has just been before the Committee attempted to do so. But the whole idea of SERPS was to lift future generations above that standard.
It is not an argument to say that provision can be made through private personal pensions. Many of the people covered by SERPS now have not the expertise—indeed, why should we expect them to have?—to make choices between the various schemes which will be on offer after SERPS has been emasculated. Pensions are provided from total resources, whether publicly or privately provided, and what the Government are really saying is that we should not commit ourselves to seeing that those who come after us, and who are now at work or beginning to work, should have a reasonable standard of living when they retire. The standard of living offered by SERPS is, after all, not a luxurious one. It is a basic earnings-related one. For that reason, it should not be allowed to disappear. The object of this amendment is to preserve the best 20 years provision and I therefore commend it to your Lordships. I beg to move.
Baroness Faithfull: It would seem sensible, having heard the noble Baroness introduce this amendment, to speak also to Amendment No. 56, because that covers exactly the same points as the noble Baroness has made. Is that acceptable to the Committee or does the Minister prefer not to do that?
Baroness Trumpington: I think we would rather not, because we have Amendment No. 56 grouped with a different set of amendments.
Baroness Faithfull: I will speak later.
Lord Ennals: If the noble Baroness is not going to expand the argument, and having sat like a Trappist monk until the last amendment, perhaps I may say a word on an issue on which I feel very strongly. Having myself been involved in the introduction of the new pension scheme as Secretary of State, I want to express myself and to state the arguments.
I think the noble Baroness will remember that on Second Reading on 3rd June at col. 683 of the Official Report she said:
"I know that some concern has been expressed in another place about the position of other groups who currently stand to gain from the "best 20 years" rule but for whom we have not so far announced any special protection"—
I notice the words "so far", and therefore I live in hope—
"in particular the long-term unemployed, some disabled people, mothers returning to part-time work. I am sure we shall have ample opportunity to debate the situation of particular groups when we come to consider Clause 17".
We are now doing so.
When the pension scheme, SERPS, that is now being amended was introduced, the best 20 years formula was an essential part of what we sought to do. I would remind the Committee that, at the time when we introduced the best 20 years formula in 1975, it—as well as the rest of that legislation—was supported totally by the Conservative Opposition and not totally by the Liberal Party, as I almost always have to say. There was a very wide measure of support for the Bill and for the principle of the best 20 years.
It was recognised that a pension formula based on the individual's lifetime average earnings could not produce adequate pensions for people whose working life was interrupted by periods of sickness, as may have

819
applied to many, by unemployment—and we had not contemplated at that stage that it would be anything like its present level or what looks like being its future level—by domestic responsibilities or in cases where earning capacity was reduced by disability. Obviously the noble Baroness was aware of these problems when she made the points that she did in the Second Reading debate. Taking into account only the best 20 years' earnings would mean that people in all these situations would be able to earn a decent pension—that is what it is about—an average of which even the best occupational schemes could not match.
One of the main aims of the 1975 scheme was to give a better pensions deal to women, whose careers are usually interrupted by pregnancy and child rearing and in relation to whom in so many cases a professional career is given up to looking after elderly parents, as people are living so much longer these days—elderly people or disabled members of the family. The best 20 years formula was an important element in the achievement of this aim. Together with the provisions for home responsibility protection, it enabled a woman to earn a full pension if only half her working life had been spent in full-time paid work.
It may be said—and perhaps the noble Lord, Lord Vinson, is waiting to leap up and say so, though I have a lot more to say before he does, so he must contain himself—that we must not be too generous. The noble Lord will know that by international standards the best 20 years formula is not abnormally generous. In France, for example, the pension formula was changed as long ago as 1971 to give pensions based on the best 10 years' earnings, so we are falling far behind the arrangements of our friends and competitors—whichever way one likes to look at France.
One advantage of the best 20 years formula is its simplicity. The scheme as a whole has been criticised as being unduly complicated, but this aspect of it is very clearly understood. It is expressed in only 16 words in the Social Security Pensions Act 1975, and I quote:
"or, if there are more than 20 such surpluses, of those 20 which are the largest".
Compare this with the algebraic complications of the present provision. I should love to hear the noble Baroness actually explain exactly what is set out on page 21 of the Bill. Perhaps she will do so in reply to me. But if one is talking about simplicity, I must say that the words I quoted are a little simpler than those set out in the new scheme.
The reason for the complexity is that, having decided to base the pension on lifetime's earnings instead of the best 20 years, the Government realised that this would create major anomalies and injustices. In fact, not surprisingly, it would penalise precisely those people whom the best 20 years formula was designed to protect. The clause makes a rather feeble attempt to remedy that situation. It does this by leaving certain years of a person's working life out of the total number of years over which the lifetime's earnings are to be averaged. That is what all this algebraic stuff is about. But it simply creates new anomalies. Arbitrary distinctions are made between years that are included and those that are excluded. The most blatant injustice is that years of
820
unemployment will count as part of the working life. Pension rights will be protected to some extent during periods of long-term sickness or domestic responsibility, but not at all during periods of unemployment. How can that be fair? No justification has been offered for this latest discrimination, if I may call it so, against the unemployed.
The Bill provides special protection for some groups but not for the unemployed. The Government have resisted all attempts to extend protection to these people, though the words of the noble Baroness at Second Reading give me hope that she may say that the Government will come forward with some protection, particularly for the groups I want to protect. During the Committee stage in another place the Minister of Health said, (and I quote from Standing Committee B, col. 439):
"While I do not in any way suggest that there may not be a problem in relation to this group"—
the unemployed
"in the early part of the next century, I think it is a problem"—
this will commend itself to the noble Lord, Lord Vinson—
"that exists at that time and is not one which we need to settle at this time".
This is in a sense a very persuasive agrument, but it totally disregards the anxieity of people who are unemployed now and who have no guarantee that a government at the end of the century will change the rules to protect them. Again, this Government have hidden behind a statement, repeated frequently by Ministers, and have refused to recognise the injustice of the mathematical calculations used for the assessment of those people who are disabled or are caring for children, or disabled people who try to work within their capacity or who need to work part-time but who earn above a certain low earnings limit. In those circumstances, they will not receive protection and the years of low earnings will serve to reduce the pension. The injustice of that situation will then be apparent, in that those who work and contribute will have a lower pension than those who do not go to work. How often have I heard Ministers speaking about not discouraging people from going to work? The clause that we are seeking to amend does precisely that.
Equally indefensible is the fact that under the proposed formula many people will find that by taking a job at a lower rate of pay, or by working part time, they will lose part of the pension that they have already earned, because each year of low earnings will reduce the average on which the pension is based. That will particularly affect married women and disabled people considering whether to return to work. I hope that the noble Baroness, who showed a measure of understanding in the quotation with which I started this brief intervention, will realise that now is the moment, in Committee on Clause 17, to deal with precisely the issues she recognised that we would want to deal with.
9.15 p.m.
Lord Vinson: I feel somewhat handicapped in replying to the noble Lord, Lord Ennals, and the noble Baroness, Lady Turner of Camden, because we share

821
so many of the same goals. We want to see that those who have chequered earnings have a higher rate of pension. Incidentally, I may not have had chequered earnings but I have had a chequered career, which is a wholly different thing.
If I may say so, the arguments of those opposite are misplaced. The whole time they are arguing for those who are lucky enough to have been eligible to get into SERPs at all. One is talking about only half the working population. The other half are not in SERPs. They also have chequered earnings—they have no earnings at all. They stay at home to look after handicapped mothers. They live in rural areas where there are no jobs. They have large families and cannot go out to work. They live nowhere near créches and so could not go out to work even if jobs were available. So the whole time, this marvellously genuine gush of compassion is directed at only half the population.
If we are really concerned, then we must look at the whole population who have chequered earning patterns. We must then remind ourselves—and I am sorry to keep returning to the rice bowl analogy—that if we do not somehow try to balance the rice that we give to those who have been fortunate enough to be in work, then we will find that there is less rice to give as a general rise in the general old-age pension. I want to see—and I hope that in future generations we will see, and that the economy will be able to support it—a major rise in old-age pensions that will treat all those people for whom we are so concerned alike and uniformly. I hope that it will be possible to so treat those who have not been fortunate enough to be in work. If we do not accept—
Lord Ennals: The noble Lord recently asked the noble Lord, Lord Banks, to give way. Will he now give way?
Lord Vinson: Of course.
Lord Ennals: I am most grateful. The noble Lord was saying that only half the population is included in SERPs. I would ask the noble Lord why that is so. We should like to see included the whole of the population who have had earnings at any stage during their working lives. That can apply to people who were at some stage unemployed and who were at some stage employed. It can apply to disabled people who may have gone through training courses, who have been earners but who are now disabled and unable to work, but who may perhaps return to part-time work. It could apply to women and all the other categories about which I was speaking, who are all people we want to see within SERPs.
The noble Lord says that those people are not within SERPs, and when he adds the phrase "gush of compassion", I do not know whether he is talking about me or about the noble Baroness, because I have not seen much of a gush of compassion from the other side of the Committee in this debate.
Lord Vinson: I was speaking about the state earnings-related benefit. If one does not happen to earn, then one does not get the benefit. There is a whole raft of our citizens, particularly women, who do
822
not earn and who are not in a position to earn. We are talking about how we look after the one half of the population who earn, and who relate some pension to their earning capacity. I am equally concerned about the other half who do not earn, in trying to relate some pensions to them.
If one is sharing out the rice in the rice bowl then it would be more sensible to say that those who have been lucky enough to earn have had both earnings and now a pension on top, but for those who have not been lucky enough to earn—the other half of the population—then we must do our best to give them more rice and raise the old-age pension. I should like to achieve the same goals as noble Lords opposite would like to achieve, not by keeping the rate of SERPs reward higher, but by switching that rice to the general level of old-age pension. Then we could treat all the cases over which we share compassion uniformly and fairly.
Baroness Trumpington: This amendment does very little to reduce the huge cost of SERPs which would be passed on to future generations of contributors in the next century. Admittedly, it does contain an element of pruning by eventually reducing SERPs pensions from 25 per cent. of earnings down to 20 per cent. of earnings over a 10-year transitional period from 1999. But the most extravagant and badly targeted feature of the scheme, the 20 best years rule, is left untouched. It means in effect that everyone who has been in the scheme for the first 10 years from 1978, whatever their age, will be half way toward a full SERPs pension by 1988. They will already have earned a pension based on 12½ per cent. of their earnings over those years. Ten years later they will have earned a full SERPs pension, the remaining years only serving to top up that entitlement for any years in which the earnings come within the best twenty. Meanwhile, the occupational pensions of better-off people in good occupational schemes will be being indiscriminately topped-up by the state, because GMPs will have been building up more slowly over the whole working life, and the state pays the difference between the two.
Our proposals for protecting people who have qualified for home responsibilities protection or national insurance contribution credits for incapacity or with invalid care allowance will be much more accurately targeted on the people we want to help, and will avoid the indiscriminate excesses of the 20 best years rule.
The amendment rightly preserves SERPS rights earned before April 1988 on the 25 per cent. basis, and we have already provided for this in Clause 17. Likewise, we have provided for a gradual transitional reduction from the 25 per cent. rate down to the 20 per cent. rate. But we cannot agree to retaining the 20 best years rule, which is the single most expensive feature of the scheme. Its abolition will save £5.9 billion in 2033–34 and accounts for half of the total savings which our proposals for SERPS will produce—savings which will help put SERPS on an affordable and sustainable footing for the future.
The Government actuary's central assumption for earnings is that they will grow at 1½ per cent. a year above prices. This is a little less than experience since the last war but better than the record for the last 100

823
years. The Government actuary has given us a range of public projections of future pension costs taking different assumptions about growth. When we are talking about burdens on future generations we have a responsibility to use realistic projections. Unemployment is assumed by them as at 6 per cent. We should be accused of over-optimism if we assumed a lower figure, given present levels. The demographic assumptions are based on recent trends in mortality and an optimistic assumption that fertility returns to a 2:1 per mother replacement rate (compared with 1.75:1 now).
We must be cautious when making assumptions for long-term commitments like SERPS. It would be an abdication of responsibility to base plans for the future on the most optimistic assumptions. At the time we made clear our reservations about pay-as-you-go schemes, which are a blank cheque drawn on the future, and my right honourable friend the Secretary of State warned specifically that the financing of SERPS could become extremely onerous. The latest projections have confirmed how right he was.
I think it was the noble Lord, Lord Ennals, who mentioned the French scheme; but comparisons with other countries are notoriously difficult, and indeed can be misleading because their schemes both in funding and in benefits are all on different bases, and one must also take account of other provisions.
However, our total spending on all programmes for the elderly compared with the gross domestic product is the third highest in the European Community. I suggest that that is a much better comparison. I have to say that when I was in Athens last autumn for a social security conference the worry expressed by all the other European nations concerning their pension plans and the situation for the future was more serious than ours. They looked at our plans with the greatest interest. They too have aged populations.
With regard to part-time married women workers being worse off working than not working, we have seen the various representations made about the possible effect of the special SERPS protection in Clause 17 on women returning to part-time work, having stayed at home to bring up children. I must say that the examples quoted tend to use unrealistic earnings levels and work patterns to produce exaggerated effects. Nearly half of all part-timers earn below the national insurance lower earnings limit. If they have dependent children under 16, they will continue to get the full benefit of the special SERPS protection. It is also at least arguable that women with higher earnings could be expected to make more provision for their old age than women with no earnings.
The important points to bear in mind are, first, that we already have powers in the Bill to make the regulations which could deal with the problem; and, secondly, there is no great urgency about this. No one's state pension will be affected until 1999 and there is plenty of time to smooth away rough edges between now and then. DHSS records are held in a way which would allow full and effective backdating of additional protection if that were considered necessary in the future.
The noble Lord, Lord Ennals, referred to a lack of simplicity in Clause 17. I agree that the material on
824
page 21 of the Bill appears to be rather complicated. The reason for that is that we have ensured that there are generous transitional arrangements for reducing SERPS from 25 per cent. to 20 per cent. of earnings over a long period. Transitional protection is by nature complicated, but I do not accept that the regulation-making power for protecting people's SERPS rights is complex. It is a wide power, deliberately short on details.
We have endeavoured to do that in the fairest way, very much on the rice-bowl system expounded by the noble Lord Vinson. It is no good shouting out emotional statements and getting carried away by the rhetoric of the thing. One has to look at this from a sensible but a caring point of view, and we have done both.
Lord Ennals: I quoted an important statement that the noble Baroness made on Second Reading when we were talking about the unemployed. It was that she did not in any way suggest that there might not be a problem in relation to this group in the early part of the next century. She thought that it was a problem which could be sensibly examined in relation to the unemployment problem that existed at that time and was not one which we needed to settle at this time. She said that it was an issue that we could look at in Committee. Did she not at that stage give us hope that there might be a morsel thrown towards us?
Baroness Trumpington: One man's idea of a morsel is another man's idea of something quite different. I think that the noble Lord must have misunderstood me.
Baroness Turner of Camden: I am rather disappointed with the noble Baroness's response to the amendment. As she rightly said, its effect is to retain the 20-year rule. We have not sought to change the proposal to reduce the accrual rate from 25 per cent. to 20 per cent. Although we do not like it, we have accepted that that is not part of this amendment. We are anxious to retain the best 20 years provision because we think that it is important. I should almost describe it as the heart of SERPS. It is one of the reasons why when SERPS was introduced it was welcomed on all sides of the House. It was seen that it would provide cover for people who hitherto had not had adequate pensions cover in occupational schemes or by private provision.
It was an arrangement under which people who had a chequered work pattern and who had spent time out of the work force and then returned into it would nevertheless be able to have a pension entitlement based on their best 20 years' earnings instead of having them averaged out as is now proposed.
The familiar arguments have been advanced, which I do not accept, that we have somehow to cut the cost of SERPS because we cannot afford it. The demographic considerations to which the noble Baroness referred were the same 10 years ago as they are now. I do not accept that it has suddenly been discovered that we have somehow to make a change because of the demographic prognostications.
I believe that we are under an obligation to those who come after us to ensure that we leave with them

825
a pensions arrangement provided by the state which will ensure that they can look forward to at least a reasonable level of retirement benefit. If we abandon the 20-year rule, we shall be unable to do that. That is a great pity.
I am reluctant to divide the Committee but I intend to because it is important that we should have an opportunity to test the Committee's views on this most important element of SERPS. I therefore intend to press the amendment.
9.32 p.m.
On Question, Whether the said amendment (No. 54) shall be agreed to?
Their Lordships divided: Contents, 28; Not-Contents, 55.

DIVISION NO. 5

CONTENTS

Banks, L.

Kilmarnock, L.

Blease, L. [Teller.]

Lloyd of Kilgerran, L.

Buckmaster, V.

McNair, L.

Cledwyn of Penrhos, L.

Masham of Ilton, B.

Crawshaw of Aintree, L.

Parry, L.

Ennals, L.

Pitt of Hampstead, L.

Ezra, L.

Rochester, L.

Grey, E.

Seebohm, L.

Hanworth, V.

Stoddart of Swindon, L. [Teller.]

Hatch of Lusby, L.

Henderson of Brompton, L.

Taylor of Blackburn, L.

Houghton of Sowerby, L.

Taylor of Gryfe, L.

Jeger, B.

Turner of Camden, B.

Kagan, L.

White, B.

Kilbracken, L.

NOT-CONTENTS

Ailesbury, M.

Brabazon of Tara, L.

Allenby of Megiddo, V.

Brougham and Vaux, L.

Ampthill, L.

Buckinghamshire, E.

Belstead, L.

Caithness, E.

Boyd-Carpenter, L.

Carnegy of Lour, B.

826

Colville of Culross, V.

Layton, L.

Cork and Orrery, E.

Long, V. [Teller.]

Craigavon, V.

Lucas of Chilworth, L.

Craigmyle, L.

Macleod of Borve, B.

Davidson, V.

Margadale, L.

Denham, L.

Mersey, V.

Dilhorne, V.

Munster, E.

Donegall, M.

Onslow, E.

Dormer, L.

Rankeillour, L.

Dulverton, L.

Renton, L.

Elton, L.

Rochdale, V.

Enniskillen, E.

Rodney, L.

Gisborough, L.

Sandford, L.

Glenarthur, L.

Skelmersdale, L.

Gray of Contin, L.

Swinton E. [Teller.]

Greenway, L.

Tranmire, L.

Hanson, L.

Trumpington, B.

Harvington, L.

Vinson, L.

Henley, L.

Whitelaw, V.

Hives, L.

Windlesham, L.

Hooper, B.

Young, B.

Inglewood, L.

Zouche of Haryngworth, L.

King of Wartnaby, L.

Resolved in the negative, and amendment disagreed to accordingly.
9.39 p.m.
Baroness Trumpington Baroness Trumpington moved Amendment No. 54A:
Page 22, line 4, after ("contributions") insert ("or earnings").
The noble Baroness said: This is a consequential, technical amendment that flows from the proposals in Clause 72 and Schedule 8 which relate to earnings factors. Under those provisions, people entitled to credits would be credited with earnings rather than contributions. This amendment takes account of that proposed change. I beg to move.
On Question, amendment agreed to.
Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 55:
Page 22, line 9, at end insert—
("( ) was entitled to national insurance credits because of incapacity for work, unemployment, or approved training; or

( ) paid national insurance contributions amounting to less than 52 times the class 1 contribution payable on the lower earnings limit for that tax year, or

( ) was, by virtue of training or apprenticeship, paid at a rate which is less than the normal adult wage for that category of employment; or

( ) was not resident in the United Kingdom; or

( ) was, for any part of the tax year, for any reason, credited with national insurance contributions; or

( ) was entitled to Home Responsibility Protection.")

The noble Baroness said: We have had an interesting debate on the issues of the best of 20 years. I now want to move Amendment No. 55. The intention of the amendment is to try to give some cover to people who spend some time out of the workforce through unemployment, or because they are undergoing training or apprenticeship, or for any other reason.
Baroness Trumpington: The noble Baroness is due to move this amendment and to speak to Amendments Nos. 56. 57 and 58.Am I correct?
Baroness Turner of Camden: Yes—because I think that they cover much the same kind of ground.
The intention of these amendments is to provide some kind of cover and protection to individuals who spend some time out of the workforce through unemployment or because they are undergoing training or something of that kind. That is spelt out in some detail in the amendment. The problem, as has already been highlighted during the previous debate, is that with the disappearance of the provision concerning the best of 20 years there will be many people who will spend some time being unemployed or possibly undergoing training; or they might be disabled. There will be some reason why they are not in the workforce. Because of that it is necessary to provide some kind of cover for them. That is the object of the amendments. I beg to move.
Lord Kilmarnock: On these Benches we should like to support the noble Baroness on this amendment and the categories which she wishes to exclude. It seems to me particularly important that if one is to abolish the best-of-20-years rule one must take into account those who have very low earnings, or no earnings, or are in other special situations. It seems to me to be entirely inequitable that those years should have to be counted in for the qualifying period. Therefore on those grounds we support the amendment.
Baroness Trumpington: These amendments seek to add a multitude of additional categories to those for whom we have said we shall provide special protection of their SERPS rights following the abolition of the 20-best-years rule. I am tempted to say that this amendment, with Amendments Nos. 56 and 57, attempts to re-invent the 20-best-years rule. But I have to say that we are not convinced that a case has been made for extending the protection of SERPS right
828
beyond the groups we have already identified.
Clearly there is a case for protecting the position of people who are out of the workforce for long periods of time and for whom the 20-best-year rule was originally intended. Women who give up work to bring up children, the long-term sick and disabled and those caring for them are the obvious examples, and we have said that we shall protect them. However, people covered by the other categories in these amendments are, by and large, out of the workforce, or suffer earnings reductions, for shorter periods when looked at in the context of a whole working lifetime.
Amendment No. 57 would extend the special protection specifically to people who have been unemployed and available for employment; the unemployed are also included in Amendment No. 55. Of course we are all concerned about present levels of unemployment. But we must not let our grave concern about unemployment cause us to make hasty judgments about pension rights which will not become payable until well into the next century for most of those concerned. It is perhaps appropriate for me to remind the Committee that the abolition of the 20-best-years rule will not affect people reaching pension age before the end of this century and its effects will build up gradually as the new century progresses. It is our view that it is much better to decide what action, if any, needs to be taken nearer to the end of the century when we shall have the actual unemployment figures for the periods in question, and a much clearer picture of the extent to which people's pensions rights will be affected.
Amendment No. 56 seeks to extend the protection, in prescribed circumstances, to people whose surplus earnings factors in a particular year are lower than 75 per cent. of their average earnings factors for the preceding years. We are well aware that there will be cases where, because of, for example, reduced earnings following disablement, or when a mother returns to work on a part-time basis, some people could fare less well in some years, so far as SERPS is concerned, than those people with little or no earnings who qualify for the special protection. It is inevitable that the abolition of the 20-best-years rule will mean some people receiving lower SERPS pensions next century than they would have done if the rule remained in force. Our priority has all along been to protect those people who will be hardest hit—that is, those people who are prevented from working, or have very low earnings, as a result of disability, and those who take time off work to look after their children or a disabled person.
It is also inevitable with any concession of this kind that some people will fall the wrong side of the dividing line, wherever that line is drawn. But we have made clear in another place that we are prepared to extend the proposed protection to disabled people who would have qualified for incapacity credits but for the fact that they had earnings just above the annual lower earnings limit for national insurance contributions, and we have also said that we shall consult with the Social Security Advisory Committee and disablement organisations on the detail of the proposed regulations. But at the present time—14 years before the abolition of the 20-best-years rule even begins to take effect—we do not consider that there is a case for going further than that.

829
However, I am sure that it has not escaped the Committee's attention that the proposed new subsection (2B)(a) in Clause 17 contains a very wide regulation-making power which would allow any of the proposed categories of people covered in these amendments to be protected without the need to amend primary legislation. We believe that it is right to deal with any anomalies nearer to the time they are likely to arise. That is why we have deliberately provided such a wide power. It will enable a future administration to add additional categories to those which will be specially protected at any time if they consider that there is a case for doing so. What we have done is to have the courage to state clearly where we think the line should be drawn.
Turning to Amendment No. 58, the proposed regulation-making power appears to allow a person's earnings, which would have counted towards SERPS, to be disregarded if that particular year is one which is excluded from the working lifetime over which the person's average earnings are calculated, because it was a year of home responsibilities protection or credits.
In cases where there is entitlement to home responsibilities protection or credits there will of course be no surplus earnings factor, because HRP and credits are only awarded when earnings are below the annual lower earnings limit for contributions. The noble Baroness has raised an important point with regard to the position of disabled people with earnings just above the lower earnings limit, in respect of whom we made clear in another place we would extend the special protection by virtue of the power in new subsection (2B)(c) of Clause 17.
Once a year has been excluded from a person's working life, he has in effect been compensated for the effects of the abolition of the 20-best-years rule for that year. On the fact of it, it seems right that the surplus earnings factor in that particular year should also be excluded from the average earnings calculation so that the person is not over-compensated. I am grateful to the noble Baroness for drawing this to our attention. We should like to give the matter some further consideration and shall return to it on Report.
Viscount Buckmaster: I rise to support Amendment No. 55, and I should like to speak particularly to subsection (4), or is it paragraph (d)? I must confess that I find the nakedness of the numerology somewhat disconcerting. I should like to speak particularly in the context of ethnic minorities. Those members of the ethnic minorities who enter the job market last will experience fairly harsh repercussions from the changes proposed in this Bill. In particular of course such people will receive a reduced national insurance retirement pension.
Let me briefly explain. In the first place, many such people will often experience long delays before they are accepted in this country, whether they come here as seekers of asylum—that is to say, as refugees—or whether they come here for other reasons; for example, to join spouses or other members of their families. Indeed, it is not uncommon for such people
830
to wait three years or more before they are accepted. I have had Ugandan friends who have had to wait up to four years before their entry has been finalised. Those from the Indian sub-continent in particular are often subject to lengthy delays.
Then of course there are those who arrive late in life. They arrive in their thirties or forties and have only 20 or 30 years before their retirement. Not only will such people receive a reduced retirement pension, but their opportunities to earn a second pension to offset the need for related state benefits in retirement may be severely diminished. Already a disproportionate proportion of ethnic pensioners, because of their late start in the British job market, have to claim a supplementary pension. This denies them the chance of earning more than £4 a week, as compared with those pensioners with a full national insurance retirement pension who can earn up to £75 a week with no loss of pension. On these grounds, I strongly support this amendment and commend it to the Committee.
Baroness Faithfull: I feel that I must speak to Amendment No. 56. I do not want to be done out of my little speech. I apologise if I repeat what has in some cases already been said; but I should like to make two points. First, I believe that the wording of Amendment No. 56 is perhaps a wiser wording than the noble Baroness's Amendment No. 54. When I was a social work student, more years ago than I care to admit, I found that I had to study economics and social policies; and even as a student I found that social policies and economics cut across one another. I find it so in this Bill. I have hesitated to recommend what I wished because of financial aspects. Throughout the whole of this Bill we have had to strike a balance and look at priorities.
The three groups of people who are very much touched by this amendment are the unemployed, women, and the disabled. It is surely right that we should think of them. I should like to take a much wider picture than has been taken before. The unemployed will suffer under the 20-year rule. The women are the ones I am deeply concerned about. I know that I have been pressing women not to go out to work when their children are very young. But it would seem to me—particularly perhaps with fairly professional women—that if they think that this 20-year rule is going to operate they will look for other ways to look after their children. My noble friend Lady Darcy (de Knayth) will speak about the disabled.
It is a question of balancing the financial position and the priorities of those vulnerable in our society whom we really care about. I would like to look at a much broader view of the whole of society and what is the cost benefit to society as a whole. We often look at policies in one department and in another department, but we do not look at the policies overall. I suppose that we do not do this because it is very difficult to cost it, and that is partly our problem.
I have said in your Lordships' House on several occasions that I wished that there was a central policy unit within our Government which would look at

831
policies right across the board. Therefore, I am in a very great dilemma over this amendment. I believe it to be a good amendment. I believe it would help the unemployed, women and the disabled, however, in society as a whole, taking into account how women must care for children and how greatly the disabled would be helped by the amendment, I recognise that a balance must be struck taking into account the money that we have.
I would make one point: ought we not to look more at the here and now instead of looking into the next century? Things can change and we hope that they will change for the better. I beg to move Amendment No. 56.
Baroness Darcy (de Knayth): I too should particularly like to support Amendment No. 56, which is, thankfully, pretty free of complicated-looking mathematics and which would help those disabled people who would not, as the Bill stands, receive protection because they were earning just enough to pay contributions although they were on a low wage. I am a fool about pensions, but I think the noble Baroness, Lady Trumpington, has offered some help for precisely these people; I am not quite certain what, so I shall carry on supporting Amendment No. 56 for the moment. I feel very strongly that we should do everything possible to encourage disabled people to return to work or to enable them to continue working for as long as possible.
Members of the Committee have already talked very much about their problems: there is not much left to say, but it seems to me illogical to spend a lot of time, money, energy and expertise in nursing and rehabilitating someone who becomes, for instance, a paraplegic after an accident, and then to make it difficult for him to achieve total rehabilitation by returning to work. He may well be able to support himself and his family eventually, but he will very likely have to work part time at first before returning to fulltime work, or he may have to change his job and take a cut in wages.
Also, I think it is true that he will stay fitter and happier and consequently his family will be happier if he remains at work. It is also true that someone with a progressive disease—for example, multiple sclerosis—will remain fitter physically and psychologically if he can continue work within his capacity. This may well be part-time work interspersed with periods of full-time work for as long as he can. As I understand it, as Clause 17 stands at the moment, every year he continues to work on a lower wage could mean a reduction in his pension. Surely he should be encouraged to continue to work for as long as he can.
I rather hope the Minister will like this amendment, because I think it is moderate and flexible. It would apply only in prescribed circumstances and I hope the noble Baroness will agree that it not only has value in terms of human happiness but is also sensible when one considers the cost of restoring people to fitness or caring for them when they are ill.
10 p.m.
Baroness Gardner of Parkes: We seem to be dealing with some quite different amendments here, but we are linking together Amendments Nos. 55, 56, 57 and 58. I should like to comment in particular on both Amendments Nos. 55 and 56. I think Amendment No. 55, as worded, is far too wide. I must say that I do not agree at all with the noble Viscount, Lord Buckmaster, about giving credit to people who are not resident in the United Kingdom. To me that is quite unbelievable. I came here from another country fortunately at an age when I was at the beginning of my national health pension time, but I would have found it a remarkably generous country if I had come some 10 years later and I had been given 10 years' credit for the years when I was not resident in the UK. That is the rather unbelievable category that is suggested here.
As regards the unemployed, of course, I should like to see a credit given. I see that in Clause 17 it is covered, but we must be very aware that although the great majority of unemployed people are genuinely unemployed a few are voluntarily unemployed, and there would be every incentive to be voluntarily unemployed if you could get full credit for everything while you were unemployed. We would have to be quite sure that those people receiving full credit were those who were genuinely unemployed. Amendment No. 57 would have covered this point. I hope the Government take that into consideration because it is important that the unemployed should have prescribed circumstances and be available for employment. In that sense I support the sentiment of that, but I think the wording of Clause 17 already covers that and allows for the regulations to be so worded as to cover that aspect.
Amendment No. 56 has a sound principle in it that I think should be carefully considered by the Government, if not in its presently worded form certainly in principle. It is greatly to the disadavantage of women to lose the 20-year situation. It will not be so good for them to have their pensions worked out on a 30-year basis. But I do not accept for a minute the argument put forward many times that for every working year worked at a lower rate you earn less towards a pension. I do not think that is correct. If it is averaged over the whole of someone's earnings it will still be averaged over 30 years, or whatever years are allowed. I cannot see that earning anything can take someone down instead of up because it must give additional earnings. The only point in dispute could possibly be whether you might be entitled to a year of credit and that year might be higher than a year of low earnings. That point is something that would have to be covered. But if people are saying that a year of low earnings would be worse than nothing, if someone was not entitled to a credit, then that part of the argument would not follow.
I feel strongly about the disability argument. It is greatly in the nation's interests and in the interests of individuals to encourage people who have intermittent disability or partial disability to be fully occupied. I know that all sorts of employment laws have been made to help the employment of the disabled, but many of them cannot do a full-time job. That is

833
something that the Government should consider. I hope, too, that in due course they will consider the issue of part-time work, particularly for married women who have been in full-time employment and have given up to look after their children. I understand this clause will give them credit for that period when they are at home. Many do not then wish to go back to full-time employment because they can care better for their family in part-time employment. I hope that the Government will try to think of some way to help women in part-time employment as that would help to compensate for the changeover from 30 years to 20 years.
In conclusion, I hope that the Minister will consider these points that have been made and perhaps think of some solution, unless she can assure us that the clause as worded is already wide enough to cover the various concerns that we have all expressed tonight.
Baroness Macleod of Borve: If I may I shall briefly ask one question on a subject that has not been mentioned tonight as far as I know, and that is the problem of widows who have worked most of their lives and have then lost their husbands. Often they take quite a long time to readjust to a life where they have to go back to work without the support of the man in their life. I am wondering what view the Government take about this problem vis-à-vis widows.
Baroness Trumpington: Perhaps I may try to answer a few of the questions that have come up. May I immediately say to the noble Baroness, Lady Turner, that it was Amendment No. 58 to which I was referring when I said that I was grateful . I thought I had better clear up that point. The noble Viscount, Lord Buckmaster, talked about people arriving in this country late in life. Proposals for SERPS, which were based on earnings-related pensions on the whole working life, bring the arrangements into line with the occupational pensions. We are concerned here with pensions which relate to earnings and we consider that it is right that, apart from the special groups that we propose to protect, such pensions should be based on the earnings of those years of membership of the scheme in just the same way as occupational pensions.
A number of noble Lords talked about Amendment No. 56. We could not accept an amendment which tied us to the 75 per cent. as it says in that amendment. The quest for completely even-handed treatment has resulted in an impossibly complicated social security system. If we are to get a reasonably simple and workable system, there are bound to be some rough edges. Some of the losses projected in the press for part-time women workers as a result of our proposals are very exaggerated because they are based on unrealistic earning levels. Over half the part-time women workers earn less than the lower earnings limit. Many of them will qualify for home responsibilities protection and thus protection for their SERPS rights.
In another place we have said that we shall protect the position of disabled people whose earnings just exceed the lower earnings limit. We intend to consult fully the Social Security Advisory Committee and disablement organisations, and I should like to suggest that we include in those consultations representations from widows' organisations on the detail of the
834
regulations. The powers in the Bill are wide enough to allow us to deal with problems at the margin like this. We have plenty of time to sort it out. The new SERPS protection will not start to affect people's pensions until 1999 or 2000.
The noble Baroness, Lady Darcy (de Knayth), talked about disabled people on low-paid work. Disabled people will be protected automatically if they are incapable of work. We will also protect such disabled people with earnings up to and just over the lower earnings limit. We shall consult fully on our detailed proposals before the relevant regulations are made.
The noble Baroness, Lady Faithfull, spoke on Amendment No. 56 and said we should not look at the next century but should consider the position now. I must stress that we are proposing no changes for SERPS until the next century. We have wide regulation-making power which will enable us to cover as necessary any of the categories mentioned in the Committee and no further special protection or provision is necessary.
My noble friend Lady Gardner talked about averaging out over the working life. She is right when she says that earnings are averaged over the whole working life in the way she explained. The widows about whom my noble friend Lady Macleod spoke will qualify for national insurance widows' benefit. This includes widows' husbands' SERPS pension. On retirement, the widow will be able to add the inherited SERPS up to a maximum sum to her own SERPS. That is really all I want to say for the moment.
Baroness Turner of Camden: I am rather disappointed, as Members of the Committee may not be surprised to hear, with the response of the noble Baroness. I had hoped that she would have found it possible to have accepted at least one of these amendments. So far as concerns Amendment No. 55, that is a very wide amendment and I take the points that have been made in the debate. I shall not be pressing it this evening. I note that there is to be consultation and some possible steps taken in relation to disabled people. I welcome that, and we shall have to see what those steps turn out to be.
However, on the whole matter of the unemployed I do not really accept that it will not affect people for a very long time and therefore we do not have to bother about it. I said earlier when I was talking about the best 20 years that a 20 year-old man in 1988 who is unemployed from 1988 to 1993 will lose five years from the pension he will receive eventually from SERPS. Quite obviously, unemployment is going o affect people's ultimate pension entitlement quite substantially because of the loss of the "best 20 years" rule. Therefore it seems only reasonable that some kind of protection should be given to people in those circumstances.
I think on reflection that possibly the best amendment on this score is Amendment No. 57, which talks about people who are unemployed and available for employment. I think that is quite a reasonable point which was made by the noble Baroness, Lady Gardner, and I am disappointed that the noble Baroness, Lady Trumpington, has not found it possible to take that on board.

835
However, when we turn to women and the effect of the loss of the "best 20 years" provision in relation to them, I am interested in what the EOC has to say in its press release, because it seems to me that the position is described with great clarity, in these terms:
"In practical terms, a woman who does part-time work for a substantial part of her working life will receive a smaller SERPS entitlement than a woman who has chosen to claim home responsibilities protection for a greater number of years but who in the rest of her working life has worked full-time. Because many married women work part-time when their children are young (and many earn enough to pay national insurance contributions) the effect of the new provision will be to gain extra contributions from mothers working part-time whilst reducing their ultimate SERPS entitlement, which is manifestly unfair."
The EOC has made a proposition to counteract this effect and it recommends to the Secretary of State:
"that a further option be introduced into the new SERPS arrangements. In any tax year when a person pays national insurance contributions but, had he or she not earned, would otherwise have qualified for home reponsibilities protection, he or she should have the choice of whether to include that year's earnings for SERPS calculations or to have the earnings disregarded and claim home responsiblities protection".
I commend that as a possible solution of the part-time problem to the noble Baroness, Lady Trumpington. In the circumstances and in view of the late hour, I do not intend to press these amendments to a Division although I reserve the right to look again at the situation and possibly bring back something similar on Report. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Faithfull Baroness Faithfull had given notice of her intention to move Amendment No. 56:
Page 22, line 12, at end insert—
("or (d) in prescribed circumstances earned so little that his earnings factor for that year was less than 75 per cent. of the annual average of his earnings factors for tax years prior to that year taken into account for the purpose of calculating N.")
The noble Baroness said: I should just like to thank my noble friend the Minister for what she had to say in relation to Amendment No. 56. With the noble Baroness, Lady Turner, I should like to consider this amendment and perhaps return to this point at the Report stage.
[Amendment No. 56 not moved.]
[Amendments Nos. 57 and 58 not moved.]
10.15 p.m.
Baroness Trumpington Baroness Trumpington moved Amendment No. 58A:
Page 22, line 16, at end insert—
("(5) For the purpose of determining the additional pension falling to be calculated under section 6 of the Social Security Pensions Act 1975 by virtue of section 7, 13 or 16(4) of that Act in a case where the deceased spouse died under pensionable age, the following definition shall be substituted for the definition of "N" in section 6(2B)—
"N=the number of tax years which begin after 5th April 1978 and end before the date when entitlement to the additional pension commences, except that where—

(a) in a case in which the deceased spouse was a man, that number would be greater than 49; or

(b) in a case in which the deceased spouse was a woman, that number would be greater than 44,

N=49 or 44, as the case may be;".
(6) For the purpose of determining the additional pension falling to be calculated under section 6 of that Act by virtue of section 14 of that Act (invalidity pension for persons under pensionable age), the following definition shall be substituted for the definition of "N" in section 6(2B)—
"N=the number of tax years which begin after 6th April 1978 and end before the first day of entitlement to the additional pension in the period of interruption of employment in which that day falls except that where—

(a) in a case in which the person entitled to the pension is a man, that number would be greater than 49; or

(b) in a case in which the person so entitled is a woman, that number would be greater than 44,

N=49 or 44, as the case may be;".")
The noble Baroness said: This is a technical amendment. I beg to move.
On Question, amendment agreed to.
Baroness Turner of Camden Baroness Turner of Camden had given notice of her intention to move Amendment No. 59:
Page 22, line 16, at end insert—
(" (5) In section 14 of the Social Security Pensions Act 1975 (invalidity benefit and disablement pension) for the words "shall for any period of interruption of employment be" to the end of the section, there shall be substituted "shall for any period of interruption of employment be—

(a) in relation to any surpluses in the earnings factors for the tax years in the period beginning with the tax year 1978–79 and ending with the tax year 1987–88, the weekly equivalent of 1¼ per cent. of the amount of these surpluses.

(b) in relation to any surpluses in the earnings factors in a tax year after the tax year 1987–88, the weekly equivalent of the relevant percentage of the amount of these surpluses; and in this paragraph "relevant percentage" means;

(i) where the period of entitlement begins in the tax year 2009–2010 or any subsequent year, 1;

(ii) where the period of entitlement begins in a tax year following within the period commencing with the tax year 1999–2000 and ending with the tax year 2008–2008, 1 + X, where X equals 0.025 for each year by which the tax year in which the period of entitlement begins precedes the tax year 2009–2010.

or, if there are more than 20 such surpluses, of those 20 which give the largest weekly equivalent.')
The noble Baroness said: The object of this amendment is to deal with the whole question of invalidity pensions. The effect of the amendment would be to retain the 20 years rule in respect of invalidity pensions paid before pensionable age, although without changing the proposal to reduce the accrual rate from 25 per cent. to 20 per cent.
Baroness Trumpington: This came up with Amendment No. 54—
Baroness Turner of Camden: I beg the Committee's pardon. I do not move the amendment.
[Amendment No. 59 not moved.]
On Question, Whether Clause 17, as amended, shall stand part of the Bill?
Lord Ennals: I fear that I gave notice that I would move that Clause 17 should not stand part of the Bill, although I hoped that I would not have to do so because we would have had something from the noble Baroness. I know she said that she would look again at Amendment No. 58, but that is not enough. I believe that this is the most important clause in Part I of the Bill. It is absolutely fundamental, because it

837
contains the main changes to SERPS and, therefore, the assumptions on which the Government have embarked upon this project.
I want to deal with these in a moment or two, but before doing so I want to say that I am amazed by what seems to be a total change in attitude in 10 years by the very same people. I well remember Mr. Norman Fowler, when he was speaking for the Opposition on health and social security, not just supporting the Bill but arguing exactly the opposite of what the noble Baroness has been arguing; namely, that it was necessary to have a long-term scheme in order that people could plan for the future, in order that we could see.
Norman Fowler at that time, and Kenneth Clarke his deputy, then in opposition, shared our hope that by the time the scheme fully matured, and from then on, people would retire on pensions which would keep them above the supplementary benefit level. That was the objective. We were aware and talked of occupational pension schemes, which, after all, are themselves enabling those who are part of them to plan for their own retirement, to know roughly what they will get in 20 years' time. Obviously, that will depend on the inflation rate as well as a number of other factors, but an occupational pension scheme sets out to enable those who are part of it to know what to expect when they retire.
It may be true that younger people do not take so much notice of this. I take a great deal of notice of it; in fact, I wrote to the noble Baroness only a day or two ago to ask whether she would have a look at how I was going. I knew where I was going, but I wanted to check what were my entitlements. My entitlements are based on my payments, and that is how it should be.
To paraphrase the noble Baroness, she said that it does not really matter that happens 15 years from now, and that is an absolute denial of the position that was being taken 10 years ago—
Baroness Trumpington: I think the noble Lord is not quoting me or paraphrasing me at all correctly. I never said that it did not matter. I simply said it was wrong to take judgments so far ahead, when there is plenty of time for those in the future to judge what is needed in that day, just as 10 years later the situation will have changed for those same people about whom we were talking just now, and they will plan accordingly. I really cannot be misquoted like that.
Lord Ennals: I am most grateful to the noble Baroness for getting up and saying exactly what she said, because that is always far better than any attempt to paraphrase. I disagreed with what she said just as much as I was going to disagree with my paraphrase of what she said. I do not believe that every 10 years we should have a look at our pension scheme and therefore change people's expectations. What matters is not just the SERPS cuts but the total effect of the Government's policies on the future value of the state pension, basic earnings-related, as a proportion of pre-retirement earnings. If earnings rise by an average of 1.5 per cent. per annum, as the Minister suggested was the basis (and we know it is) of the Government's calculation, the effect of tying the basic pension to
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prices rather than earnings will be even more catastrophic than the actual SERPS cuts, and it will hit all pensioners, not just those retiring after 1999.
The figures in the first part of the technical annex to the White Paper Reform of Social Security, together with figures published in reply to parliamentary Questions in another place, show the effects of the Government's policies on men and women with typical patterns of lifetime earnings. The pension expectations of low earners would be cut by about 50 per cent. as a result of this clause and what goes with it; the expectations of high earners would be cut by about 45 per cent. I am not making any great point that high earners get a smaller cut than the rest but nevertheless that is how it works out. For a high earning man the cut is divided equally between the basic pension and the earnings-related pension. But in every other case most of the cut is in the basic pension.
I do not know what the Minister will say when she replies—she may not feel it necessary to do so—but she may reply that the basic pension is tied to prices only as a minimum and in practice will go up more or less in line with earnings. That is roughly the line she has been taking. The figures in the technical annex all assume that pensions will rise only in line with prices. The statement in paragraph 2.2 of the White Paper that the earnings-related scheme as it stands would account for more than half the total cost by 2033 is also based on this assumption. So we are right in assuming that it will largely be based on the inflation rate.
The Government claim that the cost of SERPS if not reduced will become intolerable in the next century. That is why the change is being made; that is the justification for it. It is expected, and it was expected when the scheme was introduced, that demographic trends would result in a steep rise in the proportion of pensioners in the population from about 2020 onwards. We made this assumption 20 years ago and my noble friend Lady Turner was right when she said that the demographic assessments which were made 10 years ago vary hardly at all from the demographic assessments which are made now. The proportion of pensioners in the population will rise from about 2020 onwards, though the proportion will actually fall again after 2040.
What is not generally realised is that a bigger increase in the proportion of pensioners to the population of working age has already occurred since the 1950s than is expected to occur in the next century. We have had the biggest upward swing in the level of the pensioners. Yet over that period pensions have actually risen significantly in real terms. If I were to stand here and say that they had not risen in real terms, the noble Baroness would leap to her feet and say that, certainly in the past seven and a half years or however long it is, they had risen. Today's population has been prepared to ensure a rising pension level for its current pensioners.
The Government Actuary's report on the Bill shows in Table 5 what contribution rates would be required in the next century depending on whether SERPS is cut or stays as it is, and whether the basic pension rises in line with prices or earnings. The present 1986–87 contribution rate for contracted-in employees in 17.65 per cent. On the basis of the Government's present

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plans for cutting SERPS by tying the basic pension to prices, the peak contribution rate in 2033 to 2034 would be about 14.4 per cent. Actually, therefore, there would be a cut in the proportion of contributions. But it is plainly absurd to assume that contributors will not be prepared to accept any increase in contribution rates over that period, especially as the rates are likely to fall again after 2040.
I really do not understand why Ministers and those who support them in this Committee and in another place assume that the responsibilities that we are prepared to take today for our pensioners are responsibilities that our children, when they are our age, will not be prepared to accept for their pensioners. I absolutely challenge that pessimistic assumption.
I ask myself what is the difference in the calculation between that which was made in 1975, or rather, in preparation for the 1975 Act, and now. It is not the demographic practice at all; it is the Government's confidence in the development of the improvement of the economy. The Government have so little confidence in what the economy is going to do—less than we had 10 years ago—that they are saying, "Ah! We cannot afford this for our senior citizens 20 and 40 years from now".
According to the Government Actuary's table, if there were no SERPS cuts but the basic pension rose in line with prices only, the 2033–2034 contribution rate would be 18.5 per cent.—very little more than the present rate. On the basis of the Government's assumption that the basic pension is tied to the price index, the SERPS cuts are therefore clearly unnecessary. It is because we believe that they are absolutely unnecessary that I am making this argument.
Only if SERPS in its present form is combined with raising the basic pension in line with earnings does the contribution rate look at all problematic. In fact, one would come in 2033 not to the figure of 18.5 per cent. that I gave earlier but to one of 27.3 per cent. I can understand the Govenment saying, "We need to reduce our commitment", but to reduce their commitment to that extent they are simply saying, "We will do as we are doing now, linking pensions with prices and not with earnings". On the basis of the Government's assumption that the basic pension is tied to the price index, the SERPS cuts are therefore absolutely unnecessary.
The figure of 23.7 per cent., as I have said, is nearly 10 per cent. above the present contribution rate. Compared with the increases in contribution rates imposed by the Government in the last few years, even an increase of 10 per cent. over a period of half a century does not seem all that alarming, especially bearing in mind that that level of contribution would be needed, in all probability, for only a few years, because the number of pensioners in the population would then begin to fall.
Finally, there is the argument that even if we could afford such a provision, we ought not to pre-empt resources on such a scale 50 years ahead. That is the basis of the argument that has been put forward perhaps particularly effectively by the noble Lord, Lord Vinson. However, as I said at the beginning, that is precisely what occupational pension schemes are all about, and he knows that is what they are all about.
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That is why when we introduced the new earnings-related pension scheme we had the objective not only of ensuring that everyone would have a decent pension when they retired—two pensions, in fact, in the form of a flat-rate and an earnings-related pension—but also of improving upon the level, standard and provision of occupational pensions. That has been done to an extent, but not to an entirely satisfactory extent. The Government propose to tear up that guarantee, not only in relation to the state scheme but also in respect of private schemes, which they hope will in future be built on the shifting sands of money purchase.
I and my colleagues on this side of the Committee will be determined at each stage of this Bill to ensure that nothing is done by the Government's conviction in the value of money purchase arrangements to undermine occupational pension schemes, any more than we want to see SERPS undermined. It is because we do not want to see SERPS undermined that I do not want, any more than do my honourable or noble friends, to see Clause 17 stand part of the Bill.
10.30 p.m.
Lord Vinson: We have heard a number of speeches here tonight, and earlier on in the evening I have said how much I agree with the ultimate goals of the noble Lord, Lord Ennals; but really his speech just now was a triumph of hope over actuality. Things will not necessarily work out that way. As he rightly says, the only way that higher pensions can be ensured in the future is by having a more prosperous economy. Indeed, he recognises that the Government have raised pensions substantially faster than he might have anticipated 10 years ago, which I think shows that the Government have great confidence in their future policies.
But as I tried to point out earlier this evening, there has been a very substantial downside to that achievement, which is that the general level of taxation required in order to pay higher pensions has been kept high; the regressive level of taxation has been harder, and as a result we have exacerbated the poverty trap. The inter-relationship between these two points was well brought out by the noble Baroness, Lady Faithfull. We simply cannot and must not run away from these realities.
In retrospect and with the wisdom of hindsight, many of us feel that SERPS was badly conceived. There are many people who work in the pensions field who feel that actually it is a thoroughly inequitable piece of legislation. But we are lumbered with it—and I say "lumbered" because of the complexities that we have been going through tonight to try to make certain that unto those who have work shall be given more, and unto those who have not had work shall be given nothing. Previously we were talking about how to average out the earnings of those who have been unemployed, or those who have been handicapped or disabled, or those who have had to look after parents and work at home, and how those with a chequered pattern of earnings could have their SERPS made up. In reality we are talking about making up 20 per cent. of their average earnings.

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For the people at the lower end of the wage scale that probably represents a factor of about £3, £4 or £5 a week. We could be much more equitable to all our citizens—including the other half of them who do not and are not entitled to state earnings-related pensions—if we raised the basic old-age pension; but we cannot raise the basic state old-age pension if we give it away by (excessive) provision through SERPS—I put "excessive" in brackets because we should all like to see the maximum provision made for people in retirement. But I am sure that it is right to look after those who have not had the chance to earn and save, and therefore have that additional spending power. We must also keep SERPS and the payments we make to SERPS in balance and in relation to the payments the state feels that it can afford under the basic state old-age pension, which treats all alike, including those who are unfortunate enough not to be able to earn through SERPS.
I did not notice this balance appearing in the speeches of the noble Lord, Lord Ennals. I share with him totally the desire to raise the old-age pension; but I wish he would try to view these problems more in the round, looking at what the nation can afford and at the equitable treatment of all its citizens.
Lord Banks: I made it clear in our debate on Second Reading of this Bill that in the Liberal Party we had a long record of arguing for a much higher basic pension and that we felt that if we could obtain a much higher basic pension it should be possible to leave earnings-related pensions to the private sector, whether they are occupational or personal pensions.
Given that we were to have a state earnings-related scheme, we have not been opposed to the 20 years rule. Clearly it has some merits and they have been demonstrated during our discussions tonight, but we have been concerned about what we have regarded as a bad principle. There have been arguments as to whether or not the nation can afford it. But whether or not we can afford it, it seems to be a bad principle to commit future generations to paying for their pensioners much more than we are prepared to pay for our pensioners today. Because we were concerned about that principle, the Alliance parties were prepared to consider a modification of SERPS if there were to be an increase in the basic pension. But the Government have voted that down tonight. They have voted down a comparatively modest increase in the basic pension over five years. They have even refused the exceptions that we were discussing in the most recent amendments. In those circumstances, we support the proposition that Clause 17 should not stand part of the Bill.
Baroness Turner of Camden: I rise to support the Motion moved by my noble friend Lord Ennals that Clause 17 should not stand part of the Bill. We have had a lot of discussion this evening about SERPS and the best 20 years provision. I repeat that in my view that provision is the very heart of SERPS. For that reason it attracted a lot of support at the time that it was introduced. Like all other Members of the Committee, I have undergone a lot of lobbying on the Bill from various organisations. I do not think that I
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have received more lobbying on any aspect than on the 20-year rule. Many organisations have written to me, and undoubtedly to others, protesting about the disappearance of that provision if the Bill passes unamended.
I respect the arguments of those who say that there ought to be better basic state provision; quite clearly there should be. But, on the other hand, it has been made clear by the noble Baroness in the debate that we are not likely to see a real improvement in the basic state pension. That being the case, I fail to see why we should continue with the scheme to emasculate SERPS.
I believe that basically the reason for the Government's insistence on that is that they want to push people in the direction of making private personal pension provision. Even though the noble Baroness was good enough to say earlier this evening that the 2 per cent. incentive was being rethought in relation to occupational pension provision, there is to be no rethinking on SERPS. As I understand it, there will still be an incentive for people to opt out of SERPS. That simply strengthens my view that that is because the Government want to encourage people to take PPPs rather remain with SERPS.
Private pensions are by no means the best solution for large numbers of people currently covered by SERPS and relying on the best 20 years provision. Among the organisations that have written to me is the Royal Association for Disability and Rehabilitation (RADAR). It is very concerned about that feature of the Bill, which it says diminishes the role of contributory benefits in favour of private provision. It says that private pensions are unavailable to many disabled people and in general pay very modest benefits to people struck down by illness or disability early in their lives. It continues by saying that the key benefit for people unable to work is being attacked. It says that it is being attacked with the disappearance of the 20-year rule.
That is only one section of the population who will be disadvantaged if the 20-year rule disappears. We have discussed the position of the unemployed. The Government have introduced provisions which are not adequate to cover the situation of women who spend some time off out of the workforce caring for children. All those complications would be unnecessary if the Government simply retained the heart of SERPS—the best 20 years provision. For that reason I back the Motion that Clause 17 should not stand part of the Bill.
Baroness Trumpington: The so-called 20 best years rule is the single most expensive feature of SERPS. It was originally intended to help women and people with years out of the workforce, but it has turned out to be badly targeted.
To return to the statement made by the noble Lord, Lord Ennals, that my right honourable friend the Secretary of State was a party to the Pensions Act 1975 which brought SERPS into existence, I must tell him that we made clear at the time our reservations about pay-as-you-go schemes which were a blank cheque drawn on the future. My right honourable friend warned that the financing of SERPS could become

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extremely onerous. The latest projects have confirmed how right he was.
The main cost of the 20 best years rule comes from topping up good occupational pensions of people in contracted-out schemes. This is because guaranteed minimum pensions are calculated on lifetime's average earnings, and pensioners who have been contracted-out get the difference between their GMP and their SERPS rights paid as a balance of SERPS pension. The abolition of the 20 best years rule will bring the calculation of SERPS into line with the calculation of GMPs in occupational pension schemes. However, there will be special protection for people who take time out of work to bring up children or to look after someone who is disabled, or because they are themselves disabled.
Under the special power in Clause 17(3) people who qualify for home responsibilities protection for their basic pension, or who qualify for national insurance contribution credits for incapacity or for invalid care allowance, will be able to have those years excluded from the years over which their average earnings for SERPS will be calculated. We also made clear in another place that we shall protect the position of disabled people who would have qualified for credits but for the fact that their earnings were just above the annual lower earnings limit for contributions. We shall use the additional power in Clause 17(3) to treat them as entitled to credits and thus to the protection of their SERPS rights. Our detailed proposals will be subject to consultation in due course.
The second change is that for people retiring next century; SERPS rights will be calculated at 20 per cent. of relevant earnings instead of 25 per cent. However, there will be a generous transitional period over which this change will take place. Everyone retiring this century will have his SERPS rights earned up to 1988 calculated on the 25 per cent. basis. The change to 20 per cent. will be phased in gradually over 10 years from the year 2000, so that it will not fully apply until people reach pension age in 2009.
I should remind the Committee that these provisions do not apply to people retiring before the end of this century. They will continue to have their SERPS rights calculated in exactly the same way as now. The effects on people retiring later will be gradual, and they will have plenty of time in which to build up alternative provision if they wish.
Our modification to SERPS puts the scheme on a sustainable and affordable footing for next century by cutting down on its more extravagant features. It reduces by half the intolerable burden which would otherwise be passed on to future generations of contributors—a burden which could well turn out to be unbearable and lead to broken faith with the then generation of pensioners. Bringing the future costs of the scheme down to more manageable proportions will also give future governments greater flexibility in deciding the allocation of resources to meet the priorities of the time than they would otherwise have with a large proportion of those resources pre-empted by an unmodified SERPS.
The noble Lord, Lord Ennals, quoted the Government Actuary's figures. In 1975, he warned of a sharp increase in the number of pensioners after
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2009, but the figures were not given. Some 10 years later we have a much clearer picture of how sharp that increase will be. The latest figures look ahead to 2035 and use revised mortality assumptions. We must face the fact that by 2035 there are expected to be 4 million more pensioners. It is not just a question of whether SERPS can be afforded; at the end of the day, the Government must decide whether it is right to allow the burden of SERPS for future generations to continue to mount and mount and pre-empt future resources.
We have no intention of undermining good occupational schemes. We propose to widen the choice and increase occupational cover into areas where at present occupational schemes do not reach.
The noble Baroness, Lady Turner, referred to the best-of-20-years rule as the very heart of the SERPS scheme. But it is a very expensive and extremely badly targeted heart of the scheme. Half of its cost ultimately goes on topping up the good occupational pensions of better off people in contracted-out schemes. I can do no better than conclude by quoting the noble Lord, Lord Houghton of Sowerby, who said at Second Reading:
"Taking all the things together they think it is doubtful whether our scheme would be acceptable in its commitments to those who would have to pay for it when the time comes and that we ought to modify it to make it more acceptable in any foreseeable circumstances. That I call prudence and I think it is to be commended".—[Official Report, 2/6/86; col. 643.]
Clause 17, as amended, agreed to.
Clause 18 agreed to.
10.45 p.m.
Lord Tranmire Lord Tranmire moved Amendment No. 61:
After Clause 18, insert the following new clause:
("Entitlement of married women to Category A retirement pensions. 1985 c. 53. 1975 c. 14.
—(1) Subsection (2) of section 11 of the Social Security Act 1985 shall be amended by the substitution of the date 6th April 1979 for the date 22nd December 1984.
(2) In consideration of the additional condition for the entitlement of a married woman to a Category A retirement pension imposed by section 28(2) of the Social Security Act 1975 the second condition shall be deemed to be satisfied for each of the years the contributor concerned was precluded from employment by responsibilities at home.")
The noble Lord said: Earlier today the Minister said that pensions have been too complicated for too long. This is particularly true of the married women's half test under which older married women today are worse treated than the younger. Unfortunately, complicated legislation has put them in a very difficult position. Looking at the history of the treatment of married women under the national insurance Acts, one finds that the 1946 Act dealt with them purely by regulation. Section 59 left to regulation the treatment of married women for insurance purposes. There was nothing in the Act to warn women that they were in danger of losing the benefit of their past contributions unless they re-entered the scheme as voluntary contributors.
When the appointed day came in July 1948 most married women who were insured discontinued their contributions. Under Section 59(2)(b) of the 1946 Act their past contributions could be credited to them for

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maternity allowance purposes. There is little evidence that I can find that married women were warned of the danger of not continuing contributions. This is particularly true of many women serving abroad in the services who married during, or at the end of, the war. Governments could be forgiven for not circulating details to troops serving in theatres of war.
The 1975 Act brought into statute law the married women's half test rule. Four years later Parliament passed the 1979 Act which said that for women reaching pension age on 6th April 1979 or after the married women's half test would no longer apply. That was really a recognition by Parliament that the married women's half test was wrong, that there was undue discrimination against married women, and that this should be put right. However, it left out completely the older married women who reached pension age before 6th April 1979. That is why we come to the present new clause in an attempt to put this right.
The following stage was when the European Community issued a directive pointing out that the marrried women's half test of the 1975 Act was unduly discriminatory. Then Parliament in the 1985 Act tried to put this right and made it apply to all women, but backdated it only to 22nd December, 1984. One had the position that women covered by the 1979 Act—the younger married women—received their pension directly when they came of pension age, whereas the older married women, who probably needed it more, received it only from 22nd December, 1984, a difference of five-and-a-half years.
In attempting to try to reduce this anomaly and injustice, the amendment which the noble Lord, Lord Ennals, and I are introducing in subsection (1) is putting the date back from 22nd December, 1984 to the same date as in the 1979 Act—6th April, 1979. That would remove the unequal treatment. One will never correct the basic anomaly in this discriminatory married women's half test. What we can do is to see that married women are treated alike. I think one can do that by this provision.
I put subsection (2) in the amendment because to me there has been very little evidence in the correspondence that I have seen between the ministry and the women affected that this provision has been applied. As I understand the law, it does not appear to apply to the older married women. If my noble friend tells me that it is unnecessary, obviously it could be removed. But I think for the sake of clarity it is wiser to include it.
It is a long-festering injustice and I hope that this amendment may help to remove that injustice and remove some of the indignation felt by some of those married women whom this situation affects. I beg to move.
Lord Ennals: It would be presumptuous and quite unnecessary for me to add any further argument to the very well argued case put forward by the noble Lord, Lord Tranmire, who himself drafted the amendment. I was impressed by it and put my name to it because I felt that there was a case here to put right an injustice. This was, in my view, typical of the noble Lord, whom I had the privilege of knowing when he was in another
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place. I say no more than that I totally support every word he said and the amendment that he proposed.
Baroness Hooper: As has been said, the half-test was an additional contribution condition that married women had to satisfy before they could receive a pension on their own contributions. It provided that a pension could be awarded only where a married woman had paid full rate contributions for at least half the years between marriage and the date of retirement.
As my noble friend Lord Tranmire has said, this was a complicated provision—as indeed are so many in this field—but the half test was abolished from 6th April, 1979 for women retiring after this date, although it still affects women who retired earlier.
Following the implementation of the European Community Directive on equal treatment in 1984—and I must correct my noble friend by saying that the European Community Directive did not refer to the half-test in any way—the Government decided in the light of the Directive that the half-test should be completely abolished. It was found that these residual effects of the half-test could also be held to be discriminatory, and the Government accordingly took steps to remedy the position from 22nd December, 1984, when the Directive came into force.
The Committee will remember that we discussed the issue during the passage of the 1985 Social Security Bill. Since then an extensive exercise has been undertaken to identify married women affected by the remains of the half-test, and pension has been awarded to about 20,000 women. However, in many cases it was found that this did not mean any additional payment because most women affected by the test were already receiving a higher amount of pension on their husband's contributions.
The amendment seeks to backdate the abolition of the half-test for those who reached age 60 before April 1979. I have to stress that this is not acceptable to the Government for several reasons. First, the administrative effort required to search all records of married women who reached pension age before April 1979 would be considerable, and as I have already noted from the previous 1984 experience in many cases the result would give no additional benefit to the pensioner, because her entitlement on her own contributions was less than the pension she was already receiving on her husband's contributions.
Secondly, as my noble friend has said, the half-test was introduced at the outset of the national insurance scheme in 1948 and was accepted by governments of both parties. It was designed to distinguish between those women who chose on marriage to pay the special low-rate married women's contribution while in work and to rely for pension on their husbands, and those women who sought to retain an independent contribution record.
I remind the Committee that married women had and have a unique advantage in being able to receive a pension of their own without contributing at all. Indeed, until 1975 men and single women had to pay compulsory contributions even if they did not work. Married women had the privilege of choosing whether or not to pay contributions. A married woman who failed to satisfy the half-test had, by definition, decided

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deliberately not to maintain a full contribution record. It seems unfair to change, seven years after the event, the conditions of their entitlement to pension, and particularly to award them contribution credits for years at home during which they paid no contributions, as the amendment also seeks to do. But if one is to do it, why choose 1979? The half-test affected women from 1948 onwards; and 1979 is only relevant because it saw the end of the first year of the earnings-related pensions scheme and the abolition of the married women's reduced-rate contribution. Thus it is significant for women retiring into the new scheme and contributing on new conditions, but not for those who retired earlier. Most of the older women to whom my noble friend referred now have high pensions on their husband's insurance.
Retrospection is not in general a feature of contributory benefits. Pension and other benefit rights are determined under the legislation in force at the time the benefit is required. Such rights cannot be reassessed at every subsequent change in the law. The point about the abolition of the last effects of the half-test from December 1984 was that from that date European law overrode domestic legislation. It makes no sense, and establishes dangerous precedents, to abolish it from an earlier stage.
A further point is that these benefits are awarded for maintenance. It has long been held that even where entitlement existed, if a claim had been made, there is no sound reason to pay benefits long after the period for which they were intended when the claimant clearly has maintained himself or herself without them. Thus there is an absolute rule that benefits are not backdated for more than a year except in cases of official error. This amendment would breach that principle.
On the second premise in the amendment, I can assure my noble friend that the present arrangements for home responsibility protection broadly have the effect that this amendment seeks to achieve, but instead of deeming a woman as satisfying the second contribution condition it reduces the number of years for which she needs to pay contributions for a full pension. The provision is therefore unnecessary. For all these reasons the Government cannot accept the amendment. The half test has indeed wholly gone. In the circumstances, I trust that my noble friend will feel able to withdraw his amendment.
Lord Tranmire: In view of what the noble Baroness has said I beg leave to withdraw the amendment, although I am dissatisfied with the decision.
Amendment, by leave, withdrawn.
[Amendment No. 62 not moved.]
Baroness Hooper: I beg to move that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.
House adjourned at one minute past eleven o'clock.

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