Sitting of 20 June 1986

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

  The Arts
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Garel-Jones.]
  9.35 am
  The Minister for The Arts (Mr. Richard Luce): I am delighted to have this opportunity to debate the arts. The arts are a British success story. Not only can we take pride in our rich heritage, but we can marvel at their almost astonishing vigour over recent years. They have enjoyed a remarkable expansion on nearly every front.
  Since the last war, seven new opera companies and five major new dance companies have been established. Since 1967, the number of arts centres has risen almost tenfold. Over the past 15 years the number of museums in England and Wales has doubled. Over 40 million people a year now attend our museums and galleries and, in the past 30 years, over 30 new theatres have been set up in England alone. It is telling, at a time of considerable national excitement over England's fortunes in the football World Cup, that more people now attend the theatre in Britain than go to football matches.
  Increasingly, the arts are a resource for the many, and not confined to the few. That is exactly how it should be. The arts cannot, and will not, grow in a vacuum. They must have an audience. As they expand, this audience—and they have shown quite clearly their capability to do so—they will also enrich and enliven everybody's existence. As Keats said:
  "A thing of beauty is a joy forever".
  No more impressive example of such vigour and commitment is available than the story of the arts since the abolition of the Greater London council and metropolitan councils. Hon. Members will remember the dark forebodings, the prophecies of doom and Armageddon that flowed from the lips of Opposition spokesmen. We were warned of worthy arts bodies going to the wall, and bleak forecasts were made of first-class artists finishing up in the dole queue. Despite all that, and despite some moments of very real and understandable uncertainty, this has proved to be a success story. The fact is that funding from central Government and local government has more than filled the overall gap left by abolition. This in itself is a tremendous achievement.
  Mr. Tony Banks: I am sorry to intervene so early in the Minister's speech, but he should not be quite so controversial so early in the morning. No one has said that the immediate impact on the arts following the abolition of the GLC and MCCs would be one of appalling slaughter of the innocents. We know that it will work its way through the system. The Minister
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  intends to reduce the amount of substitute money that he put in to replace the GLC's and MCC's money. He should not congratulate himself quite so soon.
  Mr. Luce: The hon. Gentleman is quite wrong. In a moment I shall return to the point. I shall quote exactly what the hon. Member for Paisley, South (Mr. Buchan) said last autumn.
  The blossoming of the arts can be helped and facilitated by the Government, but essentially it depends upon the creativity of individuals. British creative genius has left us an artistic heritage among the richest in the world. Britain's artistic life and heritage acts as a powerful magnet for tourism from overseas which in turn means more jobs and a better standard of living for us in this country. Former United States President Jimmy Carter this week is giving welcome encouragement to American tourists by his visit to Wales to see the home of one of our finest poets, Dylan Thomas. Against the background of this efflorescence of individual talent, the Government's basic political pledge to the arts was clear: to keep up the level of Government support and to create the right climate in which the arts could develop and grow by attracting additional support from other sources. That pledge has been kept.
  In fact, our spending record outstrips our manifesto commitment. Since 1979–80, central Government spending on the arts, libraries, museums and galleries has gone up by more than 10 per cent. in real terms, or 25 per cent. if this year's extra central abolition money is included. Within this context of growth, let me now turn to specific areas within the arts, each with its own admirable success story.
  Since 1979–80, we have increased the Arts Council's grant from £62 million to £136 million or by some 7 per cent. in real terms—32 per cent. including abolition money. We have strongly supported the Arts Council in its "The Glory of the Garden" strategy which is delivering to the regions a fairer share of the overall arts budget.
  In now turn to abolition. It is right that I should return to that success story. It is fair, I think, for me to quote the hon. Member for Paisley, South, who on 21 October 1985 referred to
  "the cataclysmic collapse in arts funding".—[Official Report, 21 October 1985; Vol. 84, c. 16.]
  as a result of abolition.
  Mr. Norman Buchan rose——
  Mr. Luce: I hope that the hon. Gentleman will let me complete this passage. He will have a full chance to reply to it.
  Let me now contrast that statement with what actually happened in the real world. The Government gave a total of more than £43 million of extra taxpayers' money to help safeguard the arts in the abolition areas, £17 million of which went to the museums and galleries, and £25 million of which went to the Arts Council. Partly due to the negotiating success of the Arts Council the British Film Institute and the regional arts associations, and partly due to the positive co-operation of the successor authorities, now relieved as they are of the substantial precepts formerly paid to the GLC and the other metropolitan counties, some £15 million of local authority funding was secured. Only last week, I was glad to note that the last remaining major problem area of Merseyside had achieved a settlement of its funding of the arts. That agreement

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  means that no major problems remain. Indeed, the fact that the overall combined subsidy from central and local government will be substantially up in real terms over the previous year's figure represents a very notable achievement. I must congratulate the Arts Council, the BFI, the regional arts associations and the local authorities concerned.
  Mr. Harry Greenway: Without widening the debate unacceptably, does my right hon. Friend accept that the extravagant remarks of the hon. Member for Newham, North-West (Mr. Banks) are typical of what was said by those who opposed the abolition of the GLC? We were promised race riots, the end of travellers' free passes, rates explosions, and so on. Remarks on the future of the arts were made in that extraordinarily and ridiculously extravagant context. I am pleased that they have been proved to be totally erroneous. My right hon. Friend is to be congratulated on that.
  Mr. Luce: I am grateful to my hon. Friend. I agree that now is the time to compare the remarks made at that time by Labour Members with what events have demonstrated.
  The Arts Council allocated some £9 million to the South Bank board. Its chairman, Mr. Ronnie Grierson, and its staff have managed the takeover of the South Bank with great skill. Their intention is to produce a coherent strategy for the whole complex, making it an arts centre to rival any such arts centre anywhere in the world. This lively and impressive approach will, I am sure, meet an enthusiastic response from the public.
  Mr. Tony Banks: Will the right hon. Gentleman give way?
  Mr. Luce: I have just given way. The hon. Gentleman will have a chance to contribute to the debate, as he so often does.
  The BFI is adding to the glories of the South Bank by constructing a museum of moving image. The BFI made it clear from the outset that this was an enterprise that it could manage on its own, and indeed it has. The institute has raised £5 million from private sources for it and the museum will open in the latter half of next year. I wish it every success.
  The BFI is constructing also a new conservation centre for the National Film Archive. This is a splendid example of plural funding in action. The BFI has raised £3 million from private sources for it. We have not reduced the level of central Government funding to it just because these private funds have become available. I am conscious that organisations such as the BFI should not be penalised for their success in raising private funding.
  In the six years from 1979–80 funding from the arts budget for the national museums and galleries increased by 15 per cent. in real terms—once again a picture of growth. It is fair to say that we have concentrated this increase on much needed capital works and maintenance and on improving the conservation and display of existing stocks and that we have, as a consequence, restricted the overall level of purchase grants. But, we now have the National Heritage Memorial Fund to ease the pressure in that respect.
  Looking to the future, the picture is one of general further expansion and development. With commendable
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  initiative, for instance, the Imperial war museum is raising £2·5 million to help supplement Government funding for a major redevelopment; and, to take another example, the "Tate in the North" project will be a significant boost for the Merseyside area.
  I am anxious to help the museums and galleries meet the challenge of the late 1980's, which I think I can sum up as making themselves more outgoing and as making themselves more attractive to an increasingly discriminating public. That is why I lose no opportunity to encourage museums and galleries to make their collections more available and accessible to the widest possible audience. They must not be tempted to sit on their treasures. It is right that I should pay tribute to the fast-changing image of the world of museums and galleries from that of fusty buildings housing static displays to that of exciting centres of interest and enjoyment. The growth and vitality of independent museums are critically important here. They are on the leading edge of change. Recently, I visited the Ironbridge Gorge museum, where through the commitment and innovatory talent of its administrators and staff, a whole valley once in decay or decline has been completely revitalised. Earlier this week, I was pleased to announce the museum of the year award to another independent museum, the Beamish museum, which once again has expended effort on making its exhibits "live" and on cultivating the virtues of personal warmth and human interest that act as an irresistable draw to members of the public.
  I was very pleased therefore, to be able to announce formally on Monday of this week the implementation of my plans to change the financing arrangements of the nationals to grant-in-aid. Not only will they now have the important flexibility of carrying money over from one financial year to the next and of retaining the revenue earned through their own efforts but, critically, this measure will give them a stimulus to implement innovative marketing strategies.
  One of the most important responsibilities of Government is to safeguard Britain's priceless heritage. This has been a major part of our strategy since 1979. In 1980, for instance, we created the National Heritage memorial fund. Since then, it has received over £60 million of public funds. This has enabled the fund to help save for the nation stately homes such as Keddleston, Weston park, and Calke abbey.
  Last year, the Government announced an important improvement in the arrangements for acceptance of works of art in lieu of tax. This allows access to the Contingency Reserve for acceptances of pre-eminent heritage items up to an average of about £10 million a year. Wider publicity for these arrangements could help to reap a fine reward for posterity.
  I attach great importance to my responsibilities, which cover public libraries, although, of course, the vast bulk of expenditure on libraries is undertaken by local authorities, supported by the rate support grant. The Government have taken two major initiatives: first, we have introduced the public lending right scheme, intended to give a fair return to authors and reflect the size of their readership in public libraries; secondly, we have begun work on the very major project of building a new and modern British library at St. Pancras. On final completion this new library will provide splendid conditions, and house 180 miles of shelving for 12 million books. Services for readers will be immeasurably improved, as will

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  conservation of the books. The tiresome shuffling of stored books between 20 buildings in Greater London will then be a thing of the past.
  Crafts go from strength to strength with more and more people taking up crafts, both professionally and as a leisure interest. The Crafts Council has recently devised a strategy for the national development of the craft economy and education.
  As the House knows, the United Kingdom will shortly assume the Presidency of the European Council of Ministers. On the arts side, the United Kingdom is taking the initiative in pressing for more co-operation in sponsorship, conservation and public lending right. During our Presidency, I hope to announce the Government's choice of the United Kingdom city that will become the European city of culture in 1990.
  I have spoken of the basic pledge fulfilled by the Government of keeping up support for the arts. Of course, I realise that there are considerable pressures on many arts bodies in the light of the expanding demand and that Government funding falls short of meeting their full aspirations. However, my task goes far beyond setting the priorities of core support. The Government have a broader role than just producing £320 million worth of taxpayer's money for the arts. Indeed, Government expenditure on the arts has never been more than a modest proportion of the total amount of money flowing in to the arts. Essentially, my task is to create the framework and conditions under which the arts can flourish. In pursuing that strategy we have undertaken a co-ordinated pattern of measures and initiatives that I believe now open up prospects of unparalleled opportunity for the arts in this country. I hope that the various arts bodies will respond eagerly to the challenges which this new climate of opportunity presents.
  Firstly, let us deal with the challenge of business sponsorship. Business sponsorship of the arts has increased dramatically in recent years and now plays an important part in the funding of the arts. From the starting point of £500,000 in 1976 business sponsorship has now risen to over £20 million per year. The Government's business sponsorship incentive scheme, introduced in 1984, must take a good deal of the credit for that impressive performance. Over £7 million has been raised in that way.
  The strengthened Association for Business Sponsorship of the Arts has also ably administered the incentive scheme on my behalf. I shall be announcing more awards under the scheme in two weeks. In addition, one of the largest arts sponsorship programmes ever undertaken by a first-time sponsor will be announced shortly. It will be of tremendous benefit to the arts organisations involved. Recently I announced the continuation of the scheme for 1987–88 and I hope that arts bodies and sponsors will continue to exploit the opportunities it offers to the full.
  Then we have the challenge of private patronage. The arts have always enjoyed important support from private patrons ranging from the very wealthy to the very humble. In recent years we have seen a major upsurge in private giving to the arts. As the House knows, Mr John Paul Getty II has made major contributions to British arts and heritage, principally to the BFI and the National Gallery. I hope that the House will share my pleasure on learning of Mr. Getty's honorary knighthood, announced last Friday.
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  We have also seen a most notable contribution from the Sainsbury brothers with their generous commitment to the National Gallery extension. Nor should we forget Mrs. Sainsbury—no relation—with her donation to the Royal Opera House and Miss Woodroffe with he donation to the National Art-Collections Fund. Gifts from major patrons have ranged from £1 million to £50 million. In addition to those gifts of cash, the arts also benefit from gifts in kind. An important recent example was the gift of the trustees of the Stefan Zweig collection to the British library of a very important collection of 180 musical and literary autographed manuscripts spanning three centuries. I join the British library in regarding that as an act of outstanding generosity to the nation.
  Then we have the challenge of the Budget changes. The Government are proud of their record in improving the tax incentives and tax reliefs for charitable giving, particularly through the covenanting system. No one should underestimate the Government's major proposals in the 1986 Budget designed to encourage and stimulate charitable giving. In all, they represent an immense opportunity for the arts to develop and expand their plural funding.
  A new tax relief for single gifts by companies to charities will bring valuable benefits for both revenue and capital projects. From the beginning of April this year, companies will be able to obtain relief on donations to charities up to a limit of 3 per cent. of the dividend paid in any one year. By introducing relief for single gifts, we are offering companies greater flexibility to arrange their charitable giving. Those arrangements will allow a company that might hesitate about taking on a commitment over several years to undertake to give what it can when it can.
  Perhaps the most radical innovation is the proposed introduction of the new payroll giving scheme next year. From April next year employees will be able to have up to £100 a year for charitable gifts deducated from their pay and relieved of taxation. Schemes will have to preserve the donor's freedom of choice and the Government intend that they should be economical to run both by the Revenue and by employers.
  Of course, we must control any possible misuse of charitable reliefs for tax avoidance purposes. With that in mind the 1986 Budget introduced measures to control these abuses. My right hon. Friend the Chancellor's announcement on 4 June should allay fears that the anti-abuse provisions in the Finance Bill will adversely affect arts bodies.
  These various new Budget reliefs, combined with those that already exist, now add up to a very substantial package of measures, providing a powerful stimulus to the expansion of private funding of the arts.
  As I have said, the arts do not live in a vacuum: they depend critically on their relationship with their audience. Reaching the public is not only a measure of appreciation of success of the arts, it also provides a source of income, in sum much greater than that derived from the state. For that reason, marketing is something that no sector of the arts can afford to neglect. Small percentage increases in attendances can make all the difference to the finances of many arts bodies. Consumer spending is buoyant and more and more money is being spent on leisure. Arts bodies can gain by making their grants go further through managing themselves as efficiently as possible, and by marketing themselves more effectively. Marketing is not.,

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  and should not be, a dirty word in the arts world. After all, no skilled gardener would wish his roses to blush unseen.
  To sustain the momentum of this sea change in attitude, I am currently studying ways in which my office could help to encourage arts bodies to market and manage themselves even better. I welcome the Arts Council's own initiatives in that regard. I believe that we are beginning to see examples of many arts bodies showing more thrust in the marketing sense.
  Against the background of all the initiatives that we have undertaken there remain some differences of approach between ourselves, and the Opposition parties. Let me deal briefly with the alliance position. The Social Democratic Party has not produced a policy paper on the arts in its first five years. Perhaps that is an indication of the priority which it attaches to the field. In 1982, the Liberals produced a paper promising a wide range of uncosted measures, and the establishment of what seemed like a centralised sounding ministry of culture. Perhaps the two parties ought to get their act together, as they should on their defence policy.
  There are two aspects of the Labour party policies that I should highlight. First, Labour would take the funding responsibilities away from the Arts Council, and deal direct with the regional arts associations. That inevitably implies greater centralisation, more direct Government intervention, and most important, an abandonment of the arm's length principle, upon which the independence and free expression of the arts has hitherto depended.
  Secondly, the hon. Member for Paisley, South has announced Labour's intention to double expenditure on the arts. I suspect that he means to double it, not as the Government have doubled in cash terms over a period of years, but rather at a stroke as part of Labour's totally unrealistic and dangerous programme of £24 billion of extra Government expenditure. I wonder to what extent the hon. Gentleman is aware of the more realistic approach of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) who said on 13 May:
  "The days have gone when we could hope to achieve all our ambitions in the lifetime of a single Parliament. It is necessary for us to fix our clear priorities and to insist that all other tasks and targets take second place."
  Perhaps the hon. Member for Paisley, South can reassure us as to whether his proposals have now become a little more realistic.
  Sustaining the level of public funding for the arts, and encouraging a new climate of opportunity for the arts add up to a substantial record of achievement for this Government. We have fully accepted the responsibility to supply the core funding needed to preserve our heritage, sponsor excellence and to provide the seedcorn for experimental work and pump-priming. We have also enabled the arts to grow and prosper to meet the rising and legitimate public demands upon them.
  The late John F. Kennedy said:
  "The life of the arts, far from being an interruption, a distraction in the life of a nation, is very close to the centre of a nation's purpose, and is a test of the quality of a nation's civilisation."
  By any standards, the strength of Britain's artistic life ensures that we pass that test with flying colours. But the quotation also has a deeper significance. The arts lie at the heart of our civilisation. They are not something
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  monolithic, which can be developed by diktat from above. The strength of our arts lies in their diversity and independence. The best way of safeguarding that and providing the basis for sustainable growth is for arts bodies not to be dependent on a single source of finance, but to draw their funding from a variety of sources among which the public itself must always be a vital component. I have explained how the Government have devised a framework by which those developments can be facilitated.
  All too often, we in Britain have the habit of running ourselves down, always looking on the black side, and failing to recognise genuine opportunities and successes. That national habit of self-denigration is nowhere less appropriate than in the arts today. Increasingly we are seeing more and more of our population enjoying the entertainment and enlightenment which the arts offer. Government policies have created a climate of opportunity to continue that remarkable expansion. For all our sakes, it is important that the arts bodies respond to that challenge and opportunity with an appropriate alacrity.
  10 am
  Mr. Clement Freud: I thank you for calling me, Mr. Deputy Speaker. I should like to express my gratitude in particular to the shadow Minister for the Arts, the hon. Member for Paisley, South (Mr. Buchan), who has consented to let me speak at this point, as well as to the right hon. Member for Blaenau Gwent (Mr. Foot), a fellow supporter of Plymouth Argyll who, surely, had a higher claim than did I.
  The Minister said that the Social Democratic party seemed to give little priority to the arts, in that it has been in existence for some time, and its publications have not yet come to the Minister's attention. I remind him how little priority his Government give to the arts, in having this important debate on a Friday morning, at short notice, when so many people who would have wanted to be here are unable to do so. I accept that it is not the Minister's own doing. Nevertheless, while he is performing a considerably appreciated job at the Office of Arts and Libraries, it is a disservice of Government to have a debate of this importance on a Friday.
  I welcome much of what the Minister has done in the way of tax relief and personal schemes, and some of what he has done for the libraries and museums is appreciated there. However, rather than using my speech to make party political capital, I am concerned with the job of Government vis-a-vis the arts: it is to create a climate in which they can flourish. What is needed is an economy that is sufficiently buoyant to permit people to go to see the living arts, music, drama, ballet in which quality must be encouraged. That can be done only by underwriting the centres of excellence. Every person who goes to the National Theatre, the Royal Opera House or the ballet, then goes back and takes his enlightenment and joy to wherever he came from, and perhaps tries to emulate it for his own community.
  It is right for the Government not only to encourage more people to participate in the arts, but to make it easier for them by providing transport and ensuring that the training schools for actors and dancers and musicians continue to flourish, in underpinning the infrastructure of training that is so necessary if our supreme position in the arts is to be maintained.

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  I understand that, pound for pound, we are lower in the league table than most other countries in Europe, but I also accept that the highly sophisticated schemes that were introduced recently are of enormous help and benefit to the theatre. There is the imaginative business support for the arts scheme and incentive schemes. I wish that more people in the House would realise how much those who participate in the live theatre appreciate the presence of the Minister, and of Members of Parliament in general at live performances because it is our endorsement of the living arts that makes those artists feel that we are on their side.
  The Edinburgh festival is a marvellous example of what can be done without a proscenium arch and all the impedimenta that most theatres possess. At Edinburgh, one can go into the station waiting room and the actors will show one a marvellous production with dancing and music. There is now a scheme where one can have actors come into one's own hotel room and produce a play there. if one has a bathroom, they will present an even better play.
  I very much share in what the Minister said about marketing. I hope that the next time he looks at the business sponsorship scheme, he will make it clear to businesses that, on the whole, what theatre people need most is marketing expertise which, mostly by being theatricals, they tend to lack.
  Mr. Toby Jessel: Will the hon. Gentleman give way?
  Mr. Freud: I shall let the hon. Gentleman make his own speech.
  .Mr. Jessel rose——
  Mr. Freud: I shall give way if the hon. Gentleman insists.
  Mr. Jessel: I am grateful to the hon. Gentleman. I intervene as I believe that he is leaving early. He referred to business sponsorship. Is he aware that his party's so-called manifesto for the arts in 1984 referred to business sponsorship as being of marginal importance? Will he repudiate that absured statement in veiw of the growing and tremendous importance of business sponsorship, which has increased 40-fold to £20 million a year in the past 10 years?
  Mr. Freud: I am sorry that I gave way. It wastes time. Of course, business sponsorship is of marginal importance, and of course every item of marginal importance adds up to being quite important in the long run. Let us not overestimate. I am sure that not even the Minister would.
  I want specifically to raise one point in respect of a constituent of mine who has a theatre. I shall concentrate for a moment on that venture, which is a summer theatre. It runs for eight weeks. The company takes over the church hall with the good will of the local community, and translates that church hall to a theatre between Friday evening, when the school has its prizegiving to the Saturday first night. The Saturday first night. The company puts in raised seating, curtains, flowers, a restaurant and so on.
  The local authority—Waveney council—gives£4,000 towards the theatrical production. All local shopkeepers take advertising space. Lloyds Bank gives a small amount of money. The Happy Eater up the road takes the back page of the programme, and pays more than its due. The theatre is encouraged by the whole community. In a season, there are 30 actors, a producer, a manager, a
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  director, a cloakroom lady, a designer, a stage manager, a props manager and a costume lady. Each gets £110 a week, which is the minimum and also the maximum. Many of the actors are playing at night, rehearsing in the daytime and, late at night, reading the part that they will start rehearsing in two weeks' time. At the end of the 1985 season, with a 94·6 per cent. attendance in a 226-seat theatre, the company lost £158, but the VAT man received £3,428.
  I have gone on a bit on that subject because the constituent involved is my wife, and I know about the financial sacrifices. It seems to me that if the Government genuinely want to help the theatre, an awful lot of giving that is being done now could be achieved much more successfully if so much were not taken away through VAT which in other, and more enlightened countries is either at a much lower rate or non-existent for the living arts.
  I am grateful for having been called before the hon. Member for Paisley, South. I wish the debate all the power and success that it deserves.
  10.10 am
  Mr. Norman Buchan: I, too, thank you, Mr. Deputy Speaker, for co-operating in allowing a slight role-reversal.
  I tend to come to these debates with two thoughts. First, I have such a mass of material that I do not know how to arrange it. Secondly, as I arrive at the Dispatch Box, I think that I have nothing to say. Then I hear the Minister and, by jove, there is plenty to say.
  The uxorious Member for Cambridgeshire, North-East (Mr. Freud) was right to complain about the Government's habit of choosing occasions for debates on the arts when it is difficult to obtain publicity. The last time that we had a major debate on the arts, they chose the day of the European elections. Today, despite the major arguments raging about the arts, the debate is on a motion for the Adjournment of the House and on a Friday. That is disgraceful. It is not good enough for the Minister to make his lying-in-state speeches about the state of the arts when the Government are not prepared to meet the challenge by allowing the House to debate and vote on the matter in prime time on a proper day when the House could express its feelings about the arts.
  Mr. Jessel: Why not use a Supply day?
  Mr. Buchan: After the boasting that we heard from the Minister this morning, the Government should be proud to put their record before the House without waiting for a Supply day.
  The picture that the Minister paints of the arts bears no relation to the picture seen by everyone involved in the arts. A week ago, he and met two of the leading administrators in Britain, one theatrical and the other involved with museums. They spent most of the time discussing the problems of having to scrabble, for funds from various sources. Of course, there is a case for a multiplicity of funds. However, a few months ago, I spoke to a group of arts administrators in Birmingham who represented 70 organisations. Each of them said that instead of spending time developing an arts policy in development and in planning, he was having to spend time searching for funding. That is the picture of the arts today.
  The Minister reminds me of the story from Stendhal which my right hon. Friend the Member for Blaenau

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  Gwent (Mr. Foot) once mentioned. The husband entered a room and found his wife in flagrante delicto. As he upbraided her, she said, "How do you dare to put the evidence of your eyes before taking my word for it?" The Minister uses statistics to suggest that the arts are healthy, but those involved know they are not. One reason is that this philistine Government — philistine because as monetarists they believe that cash is the only solution—are not even good monetarists. They see the deployment of money only as expenditure and, therefore, in the Prime Minister's terms, wasteful, instead of as an investment. They forget that such expenditure can be an investment.
  Although the Minister is a decent and nice guy, he does not give the impression of understanding the pressure and urgency of the matter. His language is the language of generosity—of the Government having given this and that—and he gave a list of patrons and donors. I am prepared to honour the Gettys and the Sainsburys of this world for what they have done for the arts. It is perhaps an honour to them, but it shames the Government that those patrons have had to protect and defend our national institutions, such as the National Gallery, against the Government's depradations. The Government should not boast about the fact that Getty has saved the National Gallery, which the nation should be protecting and developing. The Government claim that the concept of patronage and sponsorship of the arts, which is too often a mark of shame to them, is somehow an honour for them.
  The Government's failure to understand the importance of the arts either in human, spiritual terms or in economic terms has been a catastrophe. The Minister said that he would consider the British application for the city of culture of 1990, but he has already warned local authorities that no Government resources will be available. Can one imagine Greece, France or Germany inviting applications for a city of culture but then saying that no Government support would be available? The Government are mean-minded and petty, and it is time that they altered their attitude to the arts.
  The Government take some pleasure in poking fun at the Liberal party and the SDP for not having a cultural policy. The Minister has forgotten the essay written by the good doctor, the right hon. Member for Plymouth, Devonport (Dr. Owen), for the National Campaign for the Arts paper. The good doctor said that the arts were important because they helped to create a climate of awareness in which ideas can be more readily received. He quoted two examples—"Cathy Come Home" and "The Boys from the Blackstuff". I was interested in all that, because I wrote exactly the same thing a year before the good doctor did. I am pleased that the SDP is picking up intelligent policy from somewhere, even if it is only from
  us.
  The Minister also mentioned the problems of libraries. The moneys forthcoming from his Department are not for libraries in general. The bulk of the money is for the necessary expansion of the British library. They boast that they will pay for an expansion that is being forced upon the library. The truth is that the funding of public libraries has collapsed by 15 per cent. during the past five or six years because of the squeeze on local authority funding.
  The Minister's main point was abolition. Again, he treated it as a success story for the Government, because other people have pulled together to save something from
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  the wreckage that the Government's philistine and reckless decision imposed upon local authorities and the arts. The decision to abolish the GLC and the metropolitan county councils was done out of political pique and dislike of Mr. Ken Livingstone. For no intelligent reason, the arts were wrecked and everyone had to pull together to salvage them. The Minister said that the Government have more than recompensed the arts. Does he remember that the grant was already £10 million short — at that level of Arts Council spending, it meant about 10 per cent. short — of what the Arts Council and the local authorities, with Government backing, estimated was necessary? And that was on top of another £9 million already short — £19 million in all. Instead of the £35 million that was estimated to he necessary, the Government gave £25 million and boasted that they had solved the problem. The truth is that the intelligent work of the Arts Council, the intelligent organisation, discussion and hard negotiation by the regional arts associations, and the generosity of local authorities — even though they faced cuts in Government funding—saved the Government's bacon. Yet the Government now boast that they have solved the problems that they created, and more than recompensed the arts. Next year, there will be another cut in funding. The Government will create a taper in the former metropolitan county and GLC areas.
  The Arts Council, not a body given to making alarmist statements, said:
  "The Council is alarmed at the prospect of a reduction in 1987–88 in its funds for organisations affected by abolition … The Government has suggested that the Council's funds for this purpose will he reduced from £25 million to £21 million in 1987–88. This would considerably impair its ability and that of the RAAS to maintain current activities, particularly if spending by local authorities is also to be further restricted."
  The Arts Council estimates that its base line grant next year, according to Government indications, will be 2·5 per cent. in cash, but costs in the arts are under more severe pressure than the retail price index.
  They say the council's grant is "likely to he cut again in real terms. The Government have boasted of expanding art funding, but the reality which confronts everybody involved is that there are cuts. There are cuts despite the 4 or 5 per cent. increase because so much of that is earmarked, because of Government intervention in relation to Priestley and because they are using a wrong deflator to claim increases.
  The hon. Member for Welwyn Hatfield (Mr. Murphy), no doubt in association with the Minister—that is fair enough as it is part of the procedures of the House—has asked a series of questions to elicit by how much the Government have increased arts funding. The answer always comes that, since 1979–80, funding has increased by 7 per cent. or 9 per cent. in real terms. No one else understands where those figures come from. The briefing paper from the National Campaign for the Arts says that it does not understand and that
  "the Minister provided no evidence for his claim"
  that they had risen by 7 per cent. in real terms, "nor did he explain how he reached the figure."
  I can give two explanations, one of which I have analysed at great length in the House before. It is the famous incident of the delayed payments in 1979–80 and 1980–81. There happened to be a computer strike. Several million of pounds were earmarked but not paid until the Government took office.

  1319
  My second explanation is that the Government use the gross domestic product indicator or deflator instead of the RPI. In regard to almost every form of spending except the billions that go on defence, for example, we go by the RPI, according to which there has been a drop of 1·5 per cent. in funding since the Government took office. If we include something else that the Government wiped out and have forgotten about—the Housing the arts budget—far from there being a real terms increase of 7 per cent, there has been nearly a 5 per cent. collapse in real terms. We should remember that the Arts Council is working permanently on the margin.
  Mr. Jessel: Will the hon. Gentleman give way?
  Mr. Buchan: That is a brief answer to some of the nonsense that has been put forward by the Minister, but I am quite prepared to answer any further nonsense that might come from the Conservative Back Benches.
  Mr. Jessel: This will not be nonsense. It will be a very sensible question. I have listened with interest to the hon. Gentleman, who has gone on almost entirely about financing. Why does he not devote a little more of his considerable intelligence to asking whether the money that is being provided is helping to produce satisfactory artistic performances which give pleasure to those who see or hear them?
  Mr. Buchan: I was dealing with some of the material that the Minister presented, but of course performance is the end point of our discussions. I should much prefer to deal with real things that matter—the end product—than the funds with which they are produced. If the hon. Gentleman does not believe that the squeeze on theatre and on music does not have its consequences in terms of artistic production, he is far adrift.
  My brother writes plays, especially for the amateur theatre. He now writes them for "three male and two female" or "four male and one female" parts. That is the extent of the squeeze. I went to see the recent production of "Antony and Cleopatra" with Redgrave herself, but it was not a production which would have stood in terms of scale with the Beerbohm Trees of the past. All theatres are cutting, except the massive tourist—orientated blockbusters, such as "Chess".
  The Government's response is private patronage and sponsorship. The most frightening thing that the Government have said—the Minister has repeated it Often—is that any future expansion or development must come from the private sector. Will the Minister confirm that he means that there will be a standstill in the real level of public spending? That is the implication of what he has said. If that happens, we shall be in immense difficulties. The hon. Member for Twickenham (Mr. Jessel)—mentioned one—the effect on the arts.
  The Opposition accept the case for multiple sources of funding—from local authorities, Government, box offices and aspects of sponsorship. Hon. Members know that I oppose certain forms of sponsorship such as that of tobacco companies but, by and large, I am not against multiple funding. On the contrary. I believe that, although multiplicity is not a substitute for more formal methods of maintaining the freedom of the artist, it can help to retain a sense and, to a considerable extent, an actuality of such freedom. That is now being reduced by the Government's
  1320
  squeeze on public spending, their cuts in local authority spending and their cutting of the real value of central funding. That is making a mockery of any freedom.
  When the Minister speaks of my policy as beginning to reject the arm's length of Government, he forgets that a squeeze on funding and a push towards sponsorship can have the same effect. No theatre that relies on sponsorship can afford to put on a play that offends its sponsor. We are witnessing an enforced scampering after sponsorship in a bid for survival, a quest for alternative sources of funding and the need to avoid risk and innovation to secure a box office response. That is turning arts administrators into fund raisers rather than planners, innovators and developers and it has begun to distort the content of the work that is produced. The new, the innovative and the challenging will be at risk.
  There was a conference on sponsorship of the visual arts at the Tate Gallery last year at which one of the sponsors explained his multinational firm's attitude to sponsorship. His comments were revealing and bland. He said:
  "We prefer to sponsor exhibitions with which we feel confortable."
  He meant the glamorous and the safe rather than the innovative, the risky and the adventurous. There is already a distortion, if not censorship, therefore. We therefore oppose the concept advanced by the Minister and the Government that sponsorship is an alternative to proper Government funding of future developments.
  The problems that face the arts are easily categorised. They are underfunded. There is far too narrow a concept of what are the arts. There is a narrowness of concept about what is high culture and what is popular. There is a lack of esteem for the arts, as is exemplified by the Government's behaviour today. It is inevitably establishment—London dominated— not London-dominated. When the Arts Council produced "The Glory of the Garden", it should have realised that we are not dealing just with geographical differences and separation from the South Bank. Brixton and Hackney are just as far away from the South Bank as Warrington and Manchester. The structure of the arts organisation is elitist. There is nothing elitist about "Fidelio"—it is a marvelous revolutionary opera but there is a great deal that is elitist in the ambience of Covent garden and in the administration of the arts.
  How do we cope with that? First, the arts are underfunded. There is only one answer—there must be substantially more funding. If one looks at the state of the disrepair of our national museums and galleries, such as the National Gallery, the British museum and the Victoria and Albert museum, and if one considers that some are being forced to make admission charges to provide funding, it is clear that between £35 million and £45 million needs to be spent over the next three years to bring them into a decent state of repair. When one considers the cuts in central funding and the Arts Council over the years., it is clear that we need to double central funding, although the Minister pokes fun at that phrase. Certainly £140 million would be needed to bring some of our regional and national theatres and music organisations back into full proper use. I do not deny the need for a major injection of funds for that.
  A major element of' that injection will come from the restoration of local government funding. We intend to impose a statutory obligation on local authorities to

  1321
  provide for the arts, entertainment and museums, rather than through a mandatory rate, as sometimes the Labour party has suggested. An element for the arts and for museums should be added to the rate support grant for libraries as encouragement and support for local authorities. As a consequence of that, we shall ask each local authority to undertake a process of consultation with all interested bodies, including arts organisations, trade unions and community organisations, and with local neighbouring authorities, and to publish a plan for the development of the arts in their areas.
  We have been dealing with the arts in too narrow a way. The answer to that is to bring all the arts under a single Ministry. We can no longer keep the main cultural fare of our people, broadcasting and films, separate from a Ministry of the arts. That is nonsense. Ministers for the arts or for culture in western Europe do not understand why broadcasting, films and popular arts are not brought under one Ministry in the United Kingdom. We must bring them under a unified Ministry.
  Moreover, films, television, independent production, video, young people doing their own thing in studios, and popular music are a single entity, which we have come to refer to as the culture industries. We must broaden the concept of the arts. We can no longer separate some art for them and some for us. We must therefore include the popular arts.
  We must recognise that the best way to restore esteem for the arts is to have a Minister in charge of arts and communications, including publications and the printed word, in the Cabinet as of right. The question of access and participation is not solved by central planning alone. I cannot understand why my policy that the major disbursement of funds should go to the regions has been attacked as centralist. That makes no sense to me. It is the opposite of centralising because it gives power to the regions, which know better than 105 Piccadilly, with the greatest of respect to it.
  The Minister says that I am smashing the arm's length principle in relation to our national institutions by saying that they should be funded directly from the Ministry. First, the principle has already been dramatically weakened by the Priestley intervention, which I am not criticising, involving direct Government funding. Secondly, no Arts Council has the freedom to decide not to give funding to one or other of our national institutions. Imagine the Arts Council saying, "We have decided to abolish the National Theatre, so we are giving it no money." That is nonsense. Thirdly, the best freedom we can give to our national institutions, as to our theatres, is sufficient funding to give them the courage to put on the productions they choose, instead of forcing them to scramble for funds and sponsors.
  I am not alone in my view, but hacked by the all-party Education, Science and Arts Committee. I discovered only in the past 48 hours that it had come to the same conclusion as me. Recommendation 17 of the Committee's report on "Public and Private Funding of the Arts" states:
  "In conjunction with the Minister, the Arts Council should make special arrangements to administer a separate grant for the national companies as earmarked by the Minister,."
  From my experience in other Departments, the correct way to deal with the arts is for major funding to go to strengthen regional arts development bodies, in place of
  1322
  the regional arts associations, for national institutions to be funded by the Minister, and for it to be a statutory right of the new Arts Council to discuss and negotiate with the Minister about that. That worked perfectly satisfactorily with other Departments such as Agriculture, in the old days, and is the best democratic process for the arts.
  The Arts Council should not be appointed by the Minister, because that means that it plays footsy with him and becomes his instrument. It should be elected directly from the regions and the arts if it is to be a powerful, independent voice, speaking for the arts to the Minister. If that is called smashing the arm's length principle and centralising, I do not know what is not.
  The present genuine crisis in the arts is a parallel to the crisis facing Britain as a whole. It is a deep basic crisis, not only of politics and economics, but of philosophy, ideas and values. We have adopted values unparalleled since the late 1930s. The whole settled good of the past half century of a commitment to social concern and community values has been replaced by a cash-based ideology, both sharper and cruder than pre-Victorian times. We cannot answer that assault on our values merely by campaigning on policy or examining section 22 of a Social Security Act. At present there is a clash of values.
  We in the Labour party want to develop policy-making as an expression of the new and better society which we wish to achieve. However, if we are fully to involve the imagination and commitment of our people as a whole in the creation of a better society, we must also engage in the battle of ideas. Without that, no Government will be backed by a radical drive from the people for the sort of change that we need, and the elan that is necessary to keep us on course.
  For that reason, we as Socialists have always cherished the artist. It is not because we demand of them the enforced commitment to a particular set of values, but because we recognise that artists provoke questioning, remove our blinkers, awaken compassion and fray at the nerve edge of our consciousness and awareness. Therefore, artists frequently set the agenda for which we as Socialists can provide the ultimate answers. That is why we have a common purpose with artists. Artists speak the truth as they see it and we seek to provide answers to the problems that their questioning has posed. Artists let us see more clearly the real nature of the present crisis because, above all, they deal with it as it touches the individual. Therefore, they emphasise the need for change even more clearly and sharply than the propagandists.
  Mr. Bowden rose——
  Mr. Buchan: As we are the party for change, we are on the side of artists. We recognise with Shelley that the poet is the unacknowledged legislator of the world. We not only support the arts for the individual artist and creator, but for a further reason to do with the engagement of values.
  We live in a grossly unequal world which is also unequal within the arts.
  Mr. Bowden rose——
  Mr. Buchan: We need to restore to our people the rich heritage of culture which has been taken from them, whether in our congested inner cities, our inadequate suburban schemes, or in our remote rural areas. New technologies will either open up possibilities of

  1323
  enormous richness or one of defeated squalor. We must take control of our future in which the arts will play an increasingly significant role.
  10.39 am
  Mr. Toby Jessel: If Opposition Members do not like the use of a Friday for a debate on the arts, it is open to them to use one of their Opposition days for such a debate. However, I cannot help noticing that they have not done so.
  We have not done too badly over the amount of time devoted to debating and discussing the arts. Only three months ago we had a full-scale debate on business sponsorship of the arts; and I believe that questions on the arts come up about every three weeks. I believe that what the Opposition really dislike is not Friday debates on the arts, but the Conservative Government's success story in relation to the arts, and the tremendously impressive list of achievements that my right hon. Friend the Minister set out. I shall return to that later. I wish first to discuss the levy on tapes. The Government have proposed a 20p levy on blank tapes. That is absolutely right. Musicians work hard to earn their living. They are not as well off as they should be. They derive their livelihoods partly from recordings on which they receive royalties. Recordings may be put on discs or tapes. Anyone can buy a blank tape quite cheaply, borrow a record and then tape it, thus saving himself the expense of buying the recording. In that case, the musician or musicians who performed the music will not receive any royalties. That is unjust. We can begin to put things right—as the Government propose to do —by imposing a levy on tapes, and the proceeds could go towards the royalties received by professional musicians. These days, 20p is quite a small amount. It is not much more than the price of a cup of tea or coffee in a third-class cafe. It is not exactly a back-breaking sum.
  Nevertheless, the manufacturers of blank tapes have mounted a massive advertising campaign against that wise, sensible and fair Government proposal. A series of full-page advertisements have recently appeared in national newspapers. Perhaps you could remind me, Mr. Deputy-Speaker, whether it is in order to quote from those newspapers?
  Mr. Deputy Speaker (Sir Paul Dean): It is.
  Mr. Jessel: Thank you. That full-page advertisement in The Times says that it is issued by the "Tape Manufacturers Group." I understand that those manufacturers are all to be found abroad, and that 60 per cent. of them are Japanese. The advertisement says that it is issued by that group.
  "in the interest of the tape buying public."
  It continues:
  "Oppose the tape levy. It is a gift to the greedy…if you have to cough up more money because of lobbying by greedy record companies, there must be plenty of other fat cats waiting in the wings for their extra dollop of cream. A Tape Levy is wrong on moral and legal grounds. If it is imposed during the next session of Parliament it sets a ghastly precedent for the righting of any number of imagined wrongs."
  That is sheer nonsense.
  It is laughable to say that a tape levy is wrong on moral grounds. As for saying that it is wrong on legal grounds, if the House, following the proper procedures, authorises a levy on tapes, it is legal. The advertising agency or public relations company who wrote that advertisement did so in
  1324
  ignorance of that fact. The tape manufacturers have been unwise in their choice of advertising or public relations company.
  I hope that the Government will not give in, and have no truck with this advertising campaign by the tape manufacturers. I also hope that my right hon. Friend the Minister for the Arts will convey our feelings to my right hon. Friend the Secretary of State for Trade and Industry, who is responsible for such issues. The Government should stick to their guns, hold firm, and proceed with the levy in the interest of live musicians. They should give further proof—if any is needed—that the Conservative party, and this Conservative Government care about the arts and want fair rewards for professional artists. If the Government hold firm, they will earn the lasting appreciation of the musical world.
  The hon. Member for Paisley, South (Mr. Buchan), who is sitting in the Gangway next to the former Leader of the Opposition, but who is now returning to his seat on the Opposition Front Bench, was full of doom and gloom. Characteristically he exaggerated, using words such as catastrophic, depredations, philistine, reckless, squeezing and so on. But none of that could disguise the fact that in the United Kingdom the arts are flourishing as never before. My right hon. Friend the Minister gave a tremendously impressive list of achievements. I shall not repeat it, as it will appear in the Official Report. But the hon. Member for Paisley, South clearly did not listen to my right hon. Friend. The hon. Gentleman went on to talk about abolition in a tone of gloom and doom, I recall that two years ago he mentioned a crisis in the arts. Most of that talk focused on Greater London and then, to a lesser extent, on the six metropolitan counties. None of his prophesies came true.
  Mr. Buchan: The hon. Gentleman must remember that the worst did not happen because I sounded the alarm bells and helped to mobilise resistance. We won. The credit that the hon. Gentleman takes should be given to the Arts Council, the regional arts associations and the local authorities. The Ministry deserves no credit, as it under-funded by £19 million.
  Mr. Jessel: It is the Government who should take the credit, because they took the decision and had to find the money to make up the difference when many competing claims were put forward in every conceivable area of the Government. Many hon. Members in all parties asked for that to be done, and the Government were right to take that decision. Of course, there had to be a period of uncertainty, because there had to be consultation. If people are to be consulted and representations are to be made, there must be a period of uncertainty before the decisions are finally taken.
  During that period the hon. Gentleman asked for things to be done even though they were probably going to be done anyway. The point is that those decisions were taken.
  The arts are now buoyant. That is a tremendous national asset. It is enormously important, because if the arts flourish, they can enrich and enlarge people's lives. They also give great enjoyment.
  Even if one looks only at the economic aspect of the success of the arts in the United Kingdom, it is of tremendous value to the country. The live and visual arts, taken together with our national heritage of buildings and

  1325
  the monarchy, with which our heritage is linked, comprise our main tourist attraction, drawing overseas visitors to the United Kingdom. Foreigners come here not for our weather but to see our old towns and cities, our historic houses, churches and cathedrals, our art calleries and museums, and the royal family and everything to do with it. They come to see our theatres, concerts, opera and ballet.
  As one would expect of a great capital, London is one of the arts centres of the world. Nowhere else, with the possible exception of New York, is there such a full and splendid mix of the live and visual arts, and the heritage.
  Our theatre is second to none both in quality and quantity, ranging from the National Theatre and the Royal Shakespeare Company to theatre of all sorts. Britain is superb musically, with orchestral concerts, chamber music, instrumental and solo work. We have four great orchestras based in London. A first-class season of promenade concerts will shortly commence. We have excellent opera, ballet and dance at Covent garden, the Coliseum and Sadler's Wells. On the South Bank, the Royal Festival hall, the Queen Elizabeth hall and the Purcell room are going well. The South Bank board is doing an excellent job in its future planning.
  Opposition Members' gloomy forecasts of what would happen after the abolition of the GLC have been confounded. The South Bank board is managing perfectly well without the GLC. The Barbican complex in the City is a bold, imaginative venture which owes much to the vision, courage and generosity of the Corporation of the City of London.
  I know that the House will forgive me if I make special reference to an institution in my constituency, the Royal Military School of Music at Kneller hall in Twickenham. It trains the finest army bands in the world. These are one of the prides of this country. They will be seen marching on the way to the Royal wedding in four weeks' time. For the past three years I have been fighting to prevent Kneller hall, being moved from Twickenham to some unsuitable site on the coast, there to be merged with the training of the bands of the Royal Marines and the Royal Air Force. If that happens it will reduce musical standards.
  I am, therefore, grateful to no fewer than 164 of my right hon. and hon. Friends for signing early-day motion No. 397. I am also grateful to my right hon. Friends the Prime Minister and the Secretary of State for Defence for each having found the time to see me on this matter. As a result, a full-scale review of the decision is being made and the costs are being re-examined. I believe that the original decision two years ago, taken by my right hon. Friend the Member for Henley (Mr. Heseltine) to move the Royal Military School of Music from Twickenham, was a mistake. The result of the review is expected during the summer. I trust that the Government will take into account not only the great sense of feeling in this House, as shown by 164 of my colleagues, but the strength of feeling in another place where there was a debate on a starred question in February; and the views of 18,679 people who signed petitions to keep the Royal Military School of Music permanently at Kneller hall.
  I turn to another type of music school—the great academies and colleges such as the Royal College of Music, the Royal Academy of Music and the Guildhall School of Music, all in London, and the Royal Northern
  1326
  School of Music in Manchester. By and large, they produce performers and teachers of very high standards. Two weeks ago I was fortunate to visit the Guildhall School of Music, together with my hon. Friends the Members for Dulwich (Mr. Bowden) and for Dudley, West (Dr. Blackburn). We toured the school and saw work of a very high standard. A violin master class was being taken by the celebrated violinist Yfrah Neaman; an examination was taking place that included a performance of Mendelssohn by a piano trio, which was technically highly difficult and which was played to a remarkable standard; and there was a rehearsal of an opera by Chabrier. All those works were being performed to a high level that made them a delight to hear.
  There has recently been talk of the Royal Academy of Music being singled out to become what has been described as a centre of excellence. I should wish to hear both sides of the argument before seeing my right hon. Friend the Secretary of State for Education and Science. So far, I have heard only one side and therefore prefer to suspend judgment. However, I know that the matter is worrying the musical world. The key question is whether sufficient improvement would be generated to justify possibly cutting the ground from under the feet of other institutions with excellent standards. Therefore, I hope that the Government will exercise caution.
  In London there are excellent visual arts, with some magnificent museums. I salute the courage of the Victoria and Albert museum staff, led by its director Sir Roy Strong, on two widely different matters — first, for seeking to recreate the spirit of that great Victorian building by refurbishing it, with Government support, and secondly, on their courage in seeking to attract voluntary donations from the visiting public.
  Hampton court in my constituency is a Royal palace but also serves as another great museum. It suffered from a terrible fire some 11 weeks ago, and great damage was caused. I am glad that the Government, through the Secretary of State for the Environment, have decided to provide funds so that the damage can be repaired. Ninety per cent. of the palace is now open to visitors. The number of visitors has fallen off since the fire, and perhaps the fact that it is now open again is not widely enough known. I hope that there will be a resumption of large numbers of school parties and other visitors in the near future. I am worried that the part that was damaged may take as long as four years to repair and restore. I hope that the Secretary of State will think again on this matter to find a way to effect repairs more quickly.
  My right hon. Friend the Minister said that our museums must not sit on their treasures. I agree. The whole point of a work of art is for it to be perceived. It is much more important for works of art to be seen and enjoyed than to be hoarded for some academic motive to do with the integrity of the collection. The academics in museums tend to put too much weight on the second purpose, when they should put nearly all the weight on works of art being seen. There really is little point in them being stored in cellars and hardly ever seen.
  I hope that my right hon Friend will vigorously encourage those museums with more works of art than they are able to show, to lend them to other museums around the country so that they can be seen by more people. It would provide opportunities for people to see

  1327
  works of art in the provinces. That is being done to some extent already, but not to the sort of extent that I would wish.
  Sponsorship has been mentioned by both the Labour and Liberal spokesmen. The Labour party appears to be against it, and the Liberals to denigrate it. I believe sponsorship to be tremendously important. My hon. Friend the Member for Welwyn Hatfield (Mr. Murphy) produced a paper on the subject to the Council of Europe, and we debated the matter in February. It is surely of great value that sponsorship of the arts by businesses has multiplied 40-fold from £500,000 to £20 million during the past 10 years, with three-quarters of the increase being during the past seven years under a Conservative Government.
  It is good and right that our great business corporations should act as patrons of the arts and thereby extend the opportunity to the general public to enjoy concerts, exhibitions and operas. That should be enthusiastically encourged by both sides of the House, not only by Conservative Members. The lukewarm attitude of Opposition Members to this important new dimension of support for the arts is pathetic—they should reconsider their attitude, and do so quickly.
  10.59 am
  Mr. Michael Foot: Eager though I am to compress my remarks, I do not believe that I shall be able to do so in the 30 seconds or so before the next business. Perhaps I may advertise what is to come later by inviting those Members lucky enough to come into the Chamber now to stay for the rest of the debate. I hope that that is a proper use of this advertising moment. I appeal to all who have come in at this late hour not just to participate in questions but to hear the later debates.
  I think that I have used up the time available. I would not wish to interrupt you, Mr. speaker, and I was watching carefully to ensure that I did not incommode you in any way.
  It being Eleven o'clock, MR. SPEAKER interrupted the proceedings, pursuant to Standing Order No. 5 (Friday sittings).

  GCHQ (Disciplinary Action)
  11 am
  Dr. Oonagh McDonald(by private notice) asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on disciplinary action at GCHQ.
  The Minister of State, Department of Foreign and Commonwealth Affairs (Mr. Tim Renton): My right hon. and learned Friend the Foreign Secretary, in his statement to the House on 19 March, reported what he had told representatives of the Council of Civil Service Unions concerning the action that would be taken in respect of the few members of the staff of GCHQ who had accepted the revised conditions of service but had then gone back on their undertakings and had rejoined unions. My right hon. and learned Friend said that those staff had been asked to honour their original commitment by resigning from the unions they had rejoined and that if they failed to do so they would be subject to disciplinary procedures. I understand from the director, GCHQ, that disciplinary action has now been taken against 13 such employees of GCHQ and that letters have been sent to them informing them of the penalties that are to be imposed.
  Three other members of the staff at GCHQ who have informed management that they have rejoined a national trade union will also be subject to disciplinary action in the next few weeks.
  GCHQ has also warned those concerned that so long as they remain in membership of a national trade union they will be in breach of the conditions of service which apply to them in GCHQ and may be subject to further disciplinary action in accordance with the procedures and penalties prescribed in the Civil Service code. GCHQ therefore proposes to seek suitable alternative posts for them elsewhere in the home Civil Service, in which they can continue in national trade union membership if they wish. In the meantime, for so long as they remain in GCHQ, if they should become eligible for promotion their conduct will have to be taken into account, they will not be considered for an overseas posting, and they will continue to be ineligible for inclusion in the proposed restructuring.
  I wish to stress to the House that we are talking here of a very small number of people. More than 99 per cent. of GCHQ staff members have accepted and comply with the revised conditions of service, morale is high, and restructuring is going ahead in consultation with the staff federation.
  Dr. McDonald: Is the Minister aware that the methods of informing the civil servants concerned are quite inadequate, that only five of the 13 have received the letters and that the information has been given to there indirectly, through the general secretaries of their trade unions? Is he aware that the penalties are much more severe than the Government pretend and that for the senior civil servants involved the fine imposed will be between £3,000 and £4,500? Is he further aware that they will suffer from continuing pressure to take alternative jobs in the Civil Service and from continuing threats of further disciplinary action, which will make it difficult For them to perform their duties?
  Is the Minister aware that the terms of the letters sent to the five civil servants are extremely harsh? He referred

  1329
  to the meeting between the Foreign Secretary and the Civil Service unions on 18 March, but is he aware that the threat of continuing action amounts to reneging on the Foreign Secretary's assurance on that occasion that this would be the only piece of disciplinary action against trade union members? Is he aware that the Opposition believe that disciplinary action of this kind should not be used against civil servants on the sole ground that they are trade union members and that we find it entirely objectionable?
  The Minister is aware that the whole question of trade union membership at GCHQ is before the European Court of Human Rights, which will make a judgment on the admissibility of the case later this year. Is it not wrong for the Government to pursue action of this kind while the case is still pending?
  Is the Minister aware that, far from morale at GCHQ being high, as he claims, this action will damage morale still further not just at GCHQ but throughout the Civil Service, and that the reaction received by the trade unions this morning has been one of deep anger and resentment by civil servants throughout the country?
  Finally, is the Minister aware that, to take action of this kind against trade union membership in the Civil Service when the whole question of human rights is very much to the fore in our consideration of South Africa, is deeply insensitive? In a democracy, trade union membership is a basic human right. By taking this action, the Government show that they have no understanding of that fact.
  Mr. Renton: To answer some of the points raised by the hon. Lady, so far as I understand it all the letters to the few people involved were posted at the same time. The details of the penalties are, of course, a matter for the director and management of GCHQ. I should point out that all the employees concerned were given proper notice of the date of the boards convened to consider their behaviour and of their right, in accordance with established procedures, to attend the disciplinary board and to be accompanied, if they wished, by a friend or colleague who could have been a member of a union, but none of those charged chose to attend. It is incorrect to say that the penalties in any way constitute a reneging on what my right hon. and learned Friend the Foreign and Commonwealth Secretary said to the House on 19 March.
  The European Commission of Human Rights still has to decide on the admissibility of the case, which could be a very lengthy process. So far as I am aware, there is no general practice in this or any other country for Governments to refrain from taking action pending court decisions.
  Finally, I repeat that morale at GCHQ is high. The hon. Lady and her friends would do far better to put their weight behind encouraging the 99 per cent. of GCHQ staff who have accepted the new conditions of service and encouraging the staff federation.
  Sir Peter Blaker: Am I right in believing that one very simple way for the staff affected to have avoided this situation would have been not to go back on their word?
  Mr. Renton: Yes, that is absolutely correct.
  Mr. Simon Hughes: Is there any justification in the unions' claim that the
  1330
  Government action now anounced flies directly in the face of the assurances given by the Foreign Secretary just a few months ago? Secondly, does the Minister accept that, whatever the ultimate decision, if there is one, by the European Commission or the European Court, it is extremely tactless for the Government to seek yet again to interfere in GCHQ in this fashion, given that the courts have made it clear that the original Government action was unjustified?
  Lastly, does the Minister understand that, even if only a small minority of people are involved, those people have civil rights? Are not the Government yet again flying not only in the face of the courts but in the face of the rights of minorities? Does the Minister accept that minorities, in trade unions or anywhere else, deserve to be protected and not bulldozed by Government? That is what we object to.
  Mr. Renton: To take the last point first, I fully accept that all employees at GCHQ are individuals whose position must be very carefully examined, but so must the position of national security in which GCHQ is involved. I submit that the management of GCHQ and the Ministers involved have taken a great deal of time and patience to consider this case, particularly the position of those who originally said that they would leave their union and accepted the A option but then rejoined. A lot of patience has been exercised.
  No undertaking was given by my right hon. and learned Friend the Foreign and Commonwealth Secretary that no further disciplinary action would be taken following the present round. As my right hon. and learned Friend told the House on 19 March, the A option rejoiners were asked to honour their commitment — we are talking about them today— by resigning from the unions which they had rejoined. As long as they fail to do that they are in breach of their conditions of service and must remain subject to disciplinary procedure.
  Sir John Biggs-Davison: Is my hon. Friend aware that many of us who are trade unionists believe that trade unionism with no guarantee against industrial action is inappropriate in establishments which are vital to the national security? As for civil rights, to which the hon. Member for Southwark and Bermondsey (Mr. Hughes) referred from the Liberal Benches, what civil rights will there be if this country is unable to defend itself against the enemies of freedom?
  Mr. Renton: I very much agree with my hon. Friend. This goes to the heart of why it was considered that national union membership was unacceptable at GCHQ, in the light of the long periods of disruption there. What we have now done at GCHQ brings that communications headquarters into line with other security and intelligence agencies in France, the United States and Italy where there are similar policies of no union membership in intelligence agencies.
  Mr. Alan Williams: Does the Minister realise that his announcement is petty, vindictive, spiteful and, above all, stupid? It is stupid in that it will provoke the very industrial action that the Government say they want to avoid and will destroy the morale of which the Minister boasted this morning.
  Is the Minister aware that his statement is vindictive in that, despite the assurances by the Foreign Secretary, it is

  1331
  clear that, in addition to the fines of up to £4,000, those involved will face a continuing campaign of punishment and persecution under this Government?
  Is he aware that the statement is petty and spiteful because the Minister is trying to enforce an agreement which clearly was entered into under duress? In that context, will the Minister confirm that some of the members have tried to return the £1,000 Judas money to the management, and that GCHQ management has returned the cheques and refused to accept the money?
  Will the Minister give a categorical assurance that at least he precludes dismissal and loss of job from this continuing programme of persecution?
  Mr. Renton: I listened carefully to what the right hon. Gentleman said about the money being returned, and I shall check that with GCHQ management. I totally disagree that my statement is petty, vindictive and spiteful. It is the opposite. GCHQ management has shown much patience in considering how to deal with the few who have rejoined their union. It would be entirely inappropriate for disciplinary procedures not to be taken against those who remain in breach of their conditions of service. It would also let down the more than 99 per cent. who have accepted the conditions of service.
  The right hon. Gentleman asked about further penalties. It is impossible to forecast whether or when further disciplinary procedures might be thought appropriate. It would be still less appropriate to say what, if any, penalties might then he imposed.
  Mr. Ian Cow: Is it not clear that in the case of the small number of civil servants who have been disciplined, the proper disciplinary procedures were followed meticulously? Is it not also clear that those who have already been disciplined could have avoided that disciplinary action by abiding by the terms of their contracts and that all future cases of this kind could be avoided if only those who enter into an agreement with their employer abide by that agreement?
  Mr. Renton: My hon. Friend is correct on all three matters. The proper procedures were followed exactly. What is more, those to whom the letters have been sent are — I stress this — to be found appropriate jobs in the home Civil Service and they can retain trade union membership. Furthermore, they could still deal with the problem and remain at GCHQ by resigning their trade union membership and accepting the conditions of service, as the vast majority of their fellow workers have already done.
  Mr. Tony Banks: Is the Minister aware that the people of this country fought for years to establish free trade unionism and that it is the mark of Fascism to try to eliminate the right to belong to a trade union?
  Is the story on the front page of today's Guardian true? Is it correct that the rejoiners have been told that incremental salary increases due to them will be docked for two years and that in most cases this will mean a loss of between £1,600 and £2,000? If the Minister manages to force out those people who wish to remain in a union and they have to go elsewhere in the home Civil Service, can he give an assurance from the Dispatch Box that they will not be victimised by this most vindictive Government?
  Mr. Renton: It is a great pity that the hon. Member for Newham, North-West (Mr. Banks) does not bend some of his passion and eloquence to putting his weight behind the 99 per cent. who have accepted the conditions of service and who are doing their hardest to build up GCHQ into an even more effective national security unit than it is already. The details of the penalties are for the director and management of GCHQ. I understand that in the letters those concerned have been told that they will not he entitled to either one or two increments for up to two years. I repeat that the vast majority have accepted the new terms of service, as can the handful about whom we are talking by resigning from their union membership now.
  Mr. Michael Marshall: Does my hon. Friend accept that the problem highlighted today is merely an extension of the problem that arose when disruptive action put our national security at risk? Does he agree that, with the revised arrangements, people must now feel that they no longer have divided loyalty to external organisations?
  Mr. Renton: My hon. Friend is right. Morale is high, not least because of the restructuring which has simplified the employment structure at GCHQ, which is much welcomed because it recognises the unique contribution to national security made by the staff at GCHQ.
  Mr. Harry Greenway: On what day was the last warning given to the individuals concerned and what contact has taken place since then? What will he the last day at work at Cheltenham for those involved?
  Mr. Renton: I cannot give my hon. Friend the precise details, but I can assure him that the precise procedure for such cases laid down by the Civil Service code was followed exactly. None of those involved bothered to attend the meetings to which I referred earlier.

  Sheepmeat (Caesium Levels)
  11.18 am
  The Minister of Agriculture, Fisheries and Food (Mr. Michael Jopling): With permission, Mr. Speaker, I should like to make a statement on the control on the movement or slaughter of hill sheep and other sheep.
  My Ministry and the other agricultural Departments have been carrying out an extensive programme of monitoring of all foodstuffs likely to be affected as a result of the Chernobyl accident. The latest batch of results is being published today. These present a satisfactory picture overall and there is no reason for anyone to be concerned about the safety of food in the shops.
  However, the monitoring of young unfinished lambs, not yet ready for market, in certain areas of Cumbria and north Wales indicates higher levels of radio-caesium than in the rest of the country. These are the areas of high rainfall during the weekend of 2 and 3 May. While these levels will diminish before the animals are marketed. my right hon. Friend the Secretary of State for Wales and I have decided to use the powers in the Food and Environment Protection Act 1985 to make absolutely certain that when these lambs are marketed they will be below the internationally recommended action levels for radio-caesium of 1,000 bq/kg.
  We have therefore made an order which we are laying before Parliament to come into effect today which will prohibit for the next 21 days the movement and slaughter of sheep within the two areas designated in south west Cumbria and parts of north Wales. This will enable us to monitor closely the sheep flock in these areas.
  The areas subject to restriction will be reduced as soon as monitoring results, based on a rigorous sampling programme, confirm the expected fall in levels. Testing is also being undertaken in Scotland and Northern Ireland, where similar restrictions will he imposed if necessary.
  The main season for marketing young lamb from the designated areas will not start until July. The Government recognise that these measures may cause some interference with the marketing plans of farmers in the areas concerned, but I am sure that they will appreciate that the measures taken for the protection of the consumer are in the general interest of the British sheep industry. If however it should prove to be necessary, the Government will be prepared to discuss cases of compensation for severe loss in particular circumstances to specific farmers.
  Mr. Brynmor John: I thank the Minister for making this statement. May I say to the Leader of the House that once again it appears not to have been possible to give reasonable notice to those affected of the intention to make an agriculture statement?
  We recognise that the primary interest and responsibility lies in the safety and health of the consumer. We must recognise also that the areas concerned are heavily dependent on sheep. The economy and livelihood of a number of individuals, and perhaps even an entire sector of agriculture, are likely to be affected. The fact that the right hon. Gentleman has chosen, in my view entirely correctly, to make a public statement is bound to evoke some public alarm, especially in view of the complacency which has been exuded by MAFF up to the present about the affects on the food chain of the Chernobyl accident. For example, we were getting ——
  Sir John Biggs Davison: Not complacency.
  Mr. John: The hon. Gentleman, who is making sotto voce remarks—perhaps he is making his only speech of the Session—had better listen to some of the facts on agriculture before he starts interjecting.
  There were press stories three weeks ago about the level of caesium and hot spots. Nevertheless, it is only now that MAFF has chosen to act. It is better that the House voices its worries than for worries to be felt and remain unanswered and, therefore, to fester.
  I shall ask the Minister a number of specific questions to which I hope he will reply. First, are cattle likely to have a higher level of caesium? Can he be categorical that there has been no effect upon milk supplies? We understand that one of the ways, although a minor way, in which young, unfinished lambs contracted the infection is by grazing on grassland.
  Secondly, bearing in mind that in the post-Chernobyl weeks there must have been many movements of lambs, sheep and cattle out of the areas concerned, will the Minister say whether caesium has been traced only in young lambs? Is there any danger of caesium having been contracted by sheep? There was no mention of that in a parliamentary answer that was given on 4 June. Has caesium been traced in older lambs and are they being monitored? When does the right hon. Gentleman think that the presence of caesium in older animals will become apparent. if they have contracted it?
  The Minister has referred to areas in Cumbria and north Wales and has said that the order will have a duration of 21 days. A period of 28 days is allowed under the Food and Environment Protection Act 1985, and I hope that the right hon. Gentleman will take action that will lead to parliamentary scrutiny of the order in due course.
  Are the other western sheep-rearing areas being monitored and is the right hon. Gentleman satisfied that at present the movement of lambs in those areas represents no danger? The right hon. Gentleman has talked about areas in north Wales and south-west Cumbria and I should like to know the overall area and the number of lambs and sheep that are affected. Is it a matter of a number of hot spots or is there general infection across the areas that he has mentioned?
  The Minister has mentioned the assistance that is to be given in compensation. If necessary, I hope that action will be taken in international law to enable proper compensation to be given to those who are affected by the presence of radio-caesium in their animals, and that compensation will not be confined to domestic assistance.
  What is the position on the charges that are due under the Agriculture Bill 1986? The Minister has stubbornly maintained so far that charging will take place for public health tests under the new Act. We understand that this radioactive infection of sheep and lambs may occur and continue for many years. May I have the right hon. Gentleman's assurance that no charges will he made to the affected farmers or any other worried farmers in the areas concerned for the undertaking of public health checks? Will he reconsider his attempt to make such checks chargeable under the Agriculture Bill?
  Finally, it is inconceivable that the effects noted in the United Kingdom should not be present in other EEC member states or countries outside the EEC. If we are to

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  learn something and come out of this episode somewhat wiser, will the right hon. Gentleman confirm that he is re-examining the restrictions on trade between any two countries to ensure that the ban on potentially affected animals is as tight as it can be? Will he undertake to make information on our experience of radioactivity in lambs as widely available as possible, so that all countries in a similar plight may benefit?
  Mr. Jopling: I am grateful to the hon. Member for Pontypridd (Mr. John) for what he has said about his belief that it was correct to make a statement today. I think that he was wrong when he said that the statement might give rise to alarm. There is no reason for that to happen. As I said clearly in my statement, there is no reason for anyone to be concerned about the safety of food in the shops. We have taken the steps which I have outlined as a precaution. to ensure that young lambs coming on the market in future— July, August and September are the months when they are likely to come on the market—can be the subject of a proper check.
  The hon. Gentleman asked me about the effect on other animals. The monitoring that the Minister has been carrying out shows low levels of radio-caesium in food generally, including vegetables, dairy produce and meats other than lamb. I can give the hon. Gentleman that assurance. I utterly reject the hon. Gentleman's remarks about complacency on the part of the Ministry.
  I believe that we have been in the forefront of all European countries in testing meat, and especially young animals. It is that testing which has come up with these results, which have caused us to take precautionary steps about future supplies. The order will last for 21 days, and I hear what the hon. Gentleman says about the need for parliamentary scrutiny. My right hon. Friend the Leader of the House is present and he, too, has heard the hon. Gentleman's remarks.
  We shall continue to monitor other areas as well as those to which I have referred. We are continuing with sampling and work is continuing through the Institute of Terrestrial Ecology, which has undertaken most helpful work in allowing us to identify the areas concerned. Rather than attempting to explain in detail the exact area that the orders will cover, I shall deposit in the Library today maps of the two areas concerned so that Members are able to see for themselves.
  The hon. Gentleman referred to ADAS charging. I assure him that, during the running of the order which I am laying today, no new steps will be taken to introduce any new arrangements for ADAS charging.
  Mr. Cyril D. Townsend: Does my right hon. Friend agree that the cautious but sensible measures he announced this morning will be widely perceived by the public as having achieved the right balance between over-reaction and under-reaction? Will the Government continue to take all measures appropriate to reassure the public?
  Mr. Jopling: I am grateful to my hon. Friend for what he has said. We shall continue to monitor the position in terms of the rigorous monitoring programme that I mentioned earlier. I am sure that my hon. Friend is right when he says that we have set the right balance between realism and prudence. We intend to do that. I think that
  1336
  the public will understand that there is no reason for anyone to be concerned about the safety of food in the shops.
  Mr. Robert Maclennan: I welcome the Minister's decision to make a statement today. I believe that the steps he announced were prudent and wise. They are a means of ensuring that caesium does not come on to the market from young unfinished lambs. There is a general assurance in the Minister's speech that the position overall is satisfactory. However, the Minister said that in Scotland and Northern Ireland specifically there is a possibility of imposing similar restrictions, if necessary. To avoid any doubt, can the Minister say that the satisfactory position covers Scotland and Northern Ireland? I believe that the rainfall was heavier in those areas.
  Mr. Jopling: I am astonished that the hon. Gentleman, in the course of a short question, said that I was prudent and wise. It is rather unusual to hear such kind words from him. I am most obliged to him. As I have said, the overall position is satisfactory. Testing is being undertaken in Scotland and Northern Ireland. I know that my right hon. Friends will make similar restrictions if they feel that that is necessary.
  Mr. Mark Hughes: Generally, I welcome the measures announced by the Minister. I raise three or four small points. First, is the caesium concentrated in specific organs in the bodies of lambs? Secondly, will kids and goats be included in the restricted orders, since they were born at about the same time as the young unfinished lambs, and, presumably, were faced with the same intake of enriched rain? Thirdly, what is the position regarding compensation to the owners of abattoirs and markets and hauliers whose livelihood will be severely affected? It is not just farmers who will be affected. Fourthly, what is the position over fallen stock? Can the Minister assure the House and the country that fallen stock meat from those bodies does not enter the animal food chain in the form of meat for dogs, cats, and so on? What happens to the meat from animals in the field which die while the order is in operation?
  Mr. Jopling: We have found that the radio-caesium is spread evenly throughout the muscular tissue, which is the carcase of the animal. It is not concentrated in parts of the carcase. I shall consider the question regarding kids and goats. I am not aware of any problem regarding goats. The order which we are laying today refers only to sheepmeat. I have heard what the hon. Gentleman has said about compensation for people other than farmers. I can only repeat that, if it should prove to be necessary, the Government will be prepared to discuss cases for compensation for severe loss in particular circumstances to specific farmers.
  The hon. Gentleman referred to fallen stock. If the animal has died, as he suggested at the end of his question, that is one thing. Under the regulations there is no question of meat from animals which have died coming into the human food chain. The slaughter of animals will be permitted for welfare reasons. That is already provided for in the order, on condition that the meat does not go for human consumption or feeding stuffs.
  Mr. Frank Dobson: Can the Minister guarantee that the irradiation concerned results

  1337
  exclusively from the Chernobyl incident? Is there any connection between the areas concerned and the nearby locations of nuclear installations in this country?
  Mr. Jopling: I thought that a Member such as the hon. Gentleman would not have missed the opportunity to make that point. I make it clear that we are dealing with two caesium isotopes—caesium-134 and 137. The ratio between those two isotopes which are found in lambs are characteristic of the Chernobyl fallout. I am glad to be able to tell the hon. Gentleman that it is not characteristic of anything to do with Sellafield.
  Mr. Tony Banks: Is the Minister aware that when he turns up during the middle of an arts debate mob-handed and tells us all not to panic, it will be a little difficult not to feel concerned, especially as he made this statement on a Friday when people will be out purchasing meat for the weekend? Perhaps he should have waited until Monday before he made the statement. That would have been more convenient for those hon. Members who wish to discuss the arts. An article which appears in today's Guardian states that the Ministry of Agriculture, Fisheries and Food is understood to be postponing publication of the latest radiation readings from monitoring stations all over Britain. If that article is true, why is that so? Perhaps the Minister should give the people of this country some advice over the weekend that if they intend to eat any hill sheep they should add some iodine to the mint sauce.
  Mr. Jopling: The reputation which the hon. Gentleman has achieved since he became a Member of Parliament is entirely in keeping with such foolish remarks. If the hon. Gentleman would care to listen—clearly he has not been listening— [Interruption.] I know that he would have been one of the first to be critical if we had waited until Monday and had not come forward as soon as we believed it was right to take such steps.
  Action is being taken as soon as it became apparent that there was a risk of meat above the action level reaching the market in the near future. We shall be able to prevent that. I am sure that all Members would agree —the hon. Member for Pontypridd said so—that it was right to come forward today. The hon. Gentleman referred to an article in the Guardian newspaper. That is why I accused him of not listening. If he had been listening, he would have heard that I said in my statement—that the latest batch of results will be published today.
  Mr. John Home Robertson: It is right that the Minister should have made this statement. However, some aspects of the statement pose more questions than they answer. The Minister said that the order would prohibit, for the next 21 days, the movement and slaughter of sheep within the two areas designated. Can we take it that that includes the movement of sheep in and out of the designated areas? That is an important point of detail that he should cover. As a Scottish Member, I am bound to say that the statement will arouse
  1338
  considerable concern and uncertainty among sheep farmers north of the border. Can we expect a statement from the Scottish Office on this subject? We all know that, at the same time as radioactive rain was falling on Cumberland and north Wales, there was heavy rainfalls in Scotland.
  What arrangements are the Government making to compensate farmers and other producers for the direct effect of these restrictions and for the disposal of carcases, where necessary? What compensation will there be for the inevitable disruption of the market which is likely to flow from the alarm that will inevitably be felt, whether the Minister likes it or not? I trust that the long-term costs of monitoring agricultural produce will be carried by the Government, not by the farmers, in the severe cases to which the right hon. Gentleman referred and in others.
  Is it not emerging that the Government should have given advice to farmers to bring livestock in milk—both sheep and cattle—indoors while the radioactive rain was falling? That action was taken in Denmark, the Netherlands and other European countries. Why on earth has it taken so long for that information to get through in this country? If lambs have excessive levels of caesium, what assurances do we have that calves and, indeed, humans have not picked up larger amounts than they should have?
  Will the right hon. Gentleman join me in appealing to the Secretary of State for Scotland to think again before commissioning another nuclear site at Torness in my constituency?
  Mr. Jopling: There will not be market restrictions on sheep brought from out of the area for sale in the area. Markets in the affected area which are no longer allowed to market sheep that emanate from within the restricted area will be able to bring in sheep for sale from outside that area.
  The hon. Gentleman will have heard me say that testing is proceeding in Scotland and Northern Ireland. The Secretaries of State for Scotland and for Northern Ireland will not hesitate to impose similar restrictions, if they feel that that is necessary in the light of emerging monitoring.
  As I said earlier, the Government will be prepared to discuss compensation.
  The hon. Gentleman asked about animals being brought indoors during the period when the Chernobyl cloud was moving over the United Kingdom, and I suppose that I should not have expected anything else from an eastern counties arable farmer. I point out that it would have been totally impractical on the mountains and hills of the Lake District and the Snowdonia range to house sheep indoors during that period. Those facilities did not exist.
  I realise that the hon. Gentleman threw in the point about Torness at the last minute. I hope that he will refer that question to my right hon. Friend the Secretary of State for the Environment whose responsibility it is.
  Mr. John: On a small point, Mr. Speaker.
  Mr. Speaker: I think not.

  The Arts
  Question again proposed, That this House do now adjourn.
  11.43 am
  Mr. Michael Foot: As I listened to the earlier debate on the arts, I was encouraged to believe that it would be a good day for this country when my hon. Friend the Member for Paisley, South (Mr. Buchan) takes over the task of the Minister for the Arts. I am sure that he will, with his natural eloquence, bring good policy into practice and, with his great determination, raise this matter to the level it deserves. I do not say that to disparage in any way the present Minister for the Arts. He must face an extremely difficult task in trying to sustain civilised standards in this Government. The right hon. Gentleman does his best.
  However, my hon. Friend the Member for Paisley, South and I criticise the level of support that the Government give and their general approach to the arts. I think that I quote the Minister correctly when I say that he claimed that the Government were keeping up support for the arts. That is not satisfactory, especially in view of our present critical social circumstances, which were described by my hon. Friend the Member for Paisley, South. At a time of heavy unemployment, when society is under great stress in other respects, the money, resources and intelligent effort devoted to providing for the arts all over Britain should be greatly increased. That is the test that should be applied to the Government. It is applied by some of those who are trying to grapple with our problems.
  For the past 10 or more years, there has been a considerable increase in the communities in Wales who support the arts. Of course, the choirs are one of the most notable signs of culture there. The great revival in those areas is due partly to the determination of the communities —all the resources have come from them to recognise that, when faced with this crisis, there must be a great expansion of the arts. That is one way to deal with the problem. Individuals and communities such as mine in Wales are seeking to do that. We do not get anything like the support from the Government that we should have.
  I recall the attitude of the previous Labour Governments to the arts. Yesterday, I read an ignorant article in The Times by Mr. Bernard Levin on this subject. Of course, I do not pay for The Times—I read a copy when I come here. Until the Wapping dispute is over, I do not propose to pay any money for it, and I am even less likely to do so having read Mr. Bernard Levin's article. He wrote as though the Labour party were opposed to the development of the arts. Everyone knows what Labour Ministers for the arts have done. Jennie Lee, especially, set new standards for Ministers for the arts. She was not called "Minister for the Arts", but she did that job. She did a splendid job and played a leading role in introducing the Open university. That system was set up when there was fierce competition for resources and the Department of Education and Science and the department with responsibility for the arts were faced with the strain of choosing priorities. Jennie Lee was one of those who insisted on the choice being made by Cabinet. She took the case to Cabinet.
  I am proud when I see on the walls of the cottages of mineworkers, steelworkers or others of my constituents
  1340
  certificates from the Open university. Those people have been able to profit from the Labour Government's decision to go ahead with the Open university, despite all the attacks by those against it and the attempts to prevent money from being supplied to it. They ensured that it went ahead on the basis of applying the highest academic standards. I think that everyone recognises that, although I point out that the Government still restrict the amount of money available. The Government should increase the resources available instead of restricting the numbers of people who can make use of a full university education, some of whom might not have been able to take advantage of such education earlier.
  One of the most disagreeable features, to put it mildly, of these restrictions is that they are often imposed by people who have had a good university education. Apparently, they are prepared to restrict the opportunities offered to other people. There were elements in the Department of Education and Science who wanted to resist the Open university because they said that there were other priorities. The Open university has now become the biggest university in the land. It is catering for wider and different sections of the community than ever before. That was done at a time of financial crisis and it shows what can be achieved under a Government with the will and imagination necessary to carry such matters further.
  I am glad to hear the support that the Government are giving to libraries. However, much more ought to be done. Many of the provincial libraries are having the greatest difficulty in sustaining their service to the community because of the general restraints and cuts that the Government have imposed on the rate support grant. Individual libraries, such as the Fawcett library, are in danger of closing. I know that that is not the Minister's immediate responsibility, but he should be using his influence to try to ensure that resources are provided for that library. The same applies to the museum of labour history and other such institutions. There are many areas where, if the Government had the energy and imagination required, great assistance could be given to ensure that many varied institutions, at a time of social crisis, get the support they deserve. I hope that the Government will not be complacent. I hope that it will not be too far ahead when my hon. Friend the Member for Paisley, South (Mr. Buchan) will be able to take his proper place in the next Labour Government and place the service of the arts in the proper perspective that it should hold in a civilised nation. That is what we want to see.
  I wish to refer to one specific matter on which I hope that the Government will give us the backing that I believe they could. It is a matter that I have taken up with the Minister before, but I shall emphasise it again now not just in the interests of the body—the Byron society, of which I am a member—but in the interests of the nation as a whole. The duocentenary of Byron's birth will take place in 1988. It will be a big occasion throughout this country. There will be big celebrations at Cambridge university, where Byron went, much against his will. He would have preferred to go to Oxford, he made that quite clear. There will be celebrations at Newstead and throughout the rest of the country.
  It is by no means certain that what we do in this country will not be surpassed by what may happen in many other countries. So great was Byron's fame, so wide his influence and so important the place he holds in the literature of our country and in world literature, that there will be similar

  1341
  celebrations in Greece, Italy, the United States and many other places. There are now nearly 30 Byron societies throughout the world. Recently a society was formed in China and some other parts of the world and it provides a great service to the country as a whole. I hope that the Government will approach this matter in a properly imaginative spirit.
  There has been a transformation in Byron's reputation over the past 50 or 60 years. If anybody doubts what I say, they have only to look back at the controversy in 1924 when the last major Byron centenary was arranged, 100 years after his death. At that time there had been so much defamation of his character that it was almost allowed to denigrate his poety, works and achievements. We did not have a Byron society in those days, but those who had gathered to try to present the matter properly to the nation and the world, found they were facing a defensive battle and that they had to present great arguments to protect Byron from the assaults from so many quarters, even 100 years after his death. That protection succeeded and in the past 60 years his reputation has been transformed.
  It would be churlish for us in this country to deny the contribution that has been made by those in other countries, especially the Americans. The American scholarship has made great contributions to try to ensure that Byronic literature should be properly represented to the world. Over the past 10 years we have had a magnificent production of Byron's letters by Professor Leslie Marchand — published, naturally, by John Murray. That has now been matched by an almost equally magnificent production of Byron's poetry by Professor McGann, published by Oxford University. Byron is coming home to his first love of Oxford at last and that is a great development.
  We certainly acknowledge the worldwide interests, especially the interest of American scholarship. However, we must take account of what has been achieved and contributed in this country.
  Among the people at the meeting in 1924, to which I referred, when a few people got together to say that they were determined to protect Byron's reputation from the assaults that were made upon it, was a young and beautiful woman who for almost the first time came to hear about the name of Byron. She later applied her particular aptitude to writing about Byron. I think that everyone who has studied the matter will agree that she has probably written about Byron with greater Byronic wit and imagination than anyone else. I am glad to say that she is still with us. I went to see Doris Langley Moore the other day. Her biographical works, as I have said, have matched any that have come from across the Atlantic and exceeded them in wit and understanding. I am glad to say that she is still alive and radiant and I trust that she will play a prominent part in the celebrations of 1988, just as I hope that the Government will make special efforts to ensure that the occasion is celebrated in a proper spirit.
  The best that the Government could do to celebrate the occasion—it does not exclude all the other things—would be to respond to the appeals which have come afresh from the Greek Government for the restoration of the Parthenon marbles to the people and the land of Greece. I know that there have been plenty of arguments about that. I am not asking the Minister to reply now. In fact, I hope that he will not, because I daresay he will give
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  us the old official reply he has trotted out before, and we do not want that. I know that there has been plenty of argument among people who do know the facts. I am not necessarily including the Minister in that respect.
  For example, one of the most respected Presidents of the Byron society, William St. Clair, who has written probably the wittiest and most graceful book on the subject, appears to come down against the proposition of the return of the marbles. That does not make the argument conclusive, by any means. There are a whole range of arguments on the other side, especially those advanced by Byron himself. Anyone who reads what Byron wrote could see that he was discussing not only what should happen and why he protested so strongly against the spoliation of the Parthenon, which caused a sense of outrage among Greeks at the time, or about what was happening to Greek heritage— they have as much right to cherish their heritage as we have to cherish ours —but was expressing his sense of ourtrage when he saw great nations trying to trample on the rights of small ones.
  Therefore, the great poetry that Byron wrote on that subject was directed not only to what was to happen to the Parthenon marbles, but to the way in which the world was going, and what was to be the reputation of our country in this age and time. One of the things that we shall celebrate in 1988 is the spirit in which Byron looked forward to the ensuing century and more, and foresaw a different role for our country from the one that we were performing at that time. He looked forward to an age when our country would be speaking in the name of freedom, not in the name of an imperial power. He looked forward to the time when we would be able to show our common heritage with all those other countries. It is partly because Byron expressed that almost more successfully and brilliantly than any other of our poets that he commands that worldwide allegiance.
  Therefore, I say to the Government: let them not reply to what I am proposing today. Let them consider it carefully, because when the deed is done, the Government who take the final step of restoring the Parthenon marbles to where they belong will be acclaimed for their magnanimity. It would be a good thing for this Government if they did it. However, I am glad to know that, when my hon. Friend the Member for Paisley, South takes up his position, and when my right hon. Friend the Member for Islwyn (Mr. Kinnock) takes his position as Prime Minister, we shall carry out that act of magnanimity. That at least should be some incentive to the Minister and the Cabinet, which I know he has such difficulty in converting to any wise courses on those great matters.
  12.1 pm
  Mr. Michael Marshall: I hope that the right hon. Member for Blaenau Gwent (Mr. Foot) will forgive me if I do not follow him too far in his Byronic interlude. As usual, the House listened to him with interest. His eloquence is seductive. As usual, I find that I have to check one or two of the omissions in remarks which, otherwise. are agreeable. The right hon. Gentleman was a little mischievous in trying to divide the loyalties of my hon. Friend the Member for Cambridge (Mr. Rhodes James) with regard to his educational background and his constituency interest. However, I know that my hon. Friend will look after himself.

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  The right hon. Gentleman also referred to the Elgin marbles. I was fascinated by the unholy alliance between himself and Melina Mercouri. Perhaps on another occasion he will tell us more of that. He also touched on the history of the Open university, but he was a little partial in not referring to the role played by my right hon. Friend the Prime Minister in saving it from an early death.
  I declare my interest as a parliamentary adviser to the Society of West End Theatre. I should like to talk about the live theatre, particularly the commercial part of theatre. Because I know that other hon. Members wish to speak, I shall not rehearse the arguments and, indeed, the whole ethos that has given us such splendid live theatre. The figures are well known. My right hon. Friend the Minister referred to the scale of theatre going and its role in the tourist industry.
  I pay particular tribute to my right hon. Friend the Minister, because the hon. Member for Paisley, South (Mr. Buchan) said, entirely Fairly, that there is a problem with the arts because it affects so many Government Departments. However, my right hon. Friend has been playing an especially valuable part in trying to co-ordinate efforts on the arts. I hope that I can encourage him to continue to do so in specific areas. I shall refer to other Departments in a moment.
  The Minister's part was evident in the transitional arrangements after the abolition of the Greater London council. Again, my right hon. Friend played a signal role in obtaining tax relief for charities, the result of which we saw in the Budget. My right hon. Friend has said that he regards himself as a sponsoring Minister for theatre. I shall return to that matter.
  The problems that face commercial theatre can be summed up simply. They are, that it is essentially a high-risk business. Only one in five productions is a major commercial success. Fortunately, there are those who wish to help the theatre, who are popularly referred to as angels. Although, naturally, they would like to see some return on their investment, often they are prepared to take a risk because of the personal association that their backing gives them with the theatre and because of their willingness to see cultural activity that may work on the margin. However, those people need more support, and the theatre itself requires that such people should be encouraged.
  The Department of Trade and Industry has a key role to play in the future of our west end theatre and, indeed, in live theatre as a whole. For example, a problem might come up unexpectedly, such as the frequency for radio microphones. Perhaps it will be known to many hon. Members that no major musical production is put on these days without the use of a radio microphone, the frequency of which has to be related to the whole frequency spectrum, taking into account every other radio broadcast. In the recent allocations of frequencies, we have run into problems. If those problems are not resolved, in a production of grand opera or a major musical, there would be a real danger of the leading singer suddenly being interrupted by a message from Joe's Taxis. That problem is serious. I am glad to say that my hon. Friend the Parliamentary Under-Secretary for Trade and Industry, the hon. Member for Coventry, South-West (Mr. Butcher), and his officials are showing a good deal of commendable urgency in considering the matter. I know that my right hon. Friend the Minister for the Arts is keeping an eye on it, too.
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  There is one major problem in which the Department of Trade and Industry has a particular role to play, where urgency is needed, and that is on overcharging for tickets. This country, particularly London, has a great reputation of value for money in live theatre. That reputation is suffering due to the activities of an unfortunate minority who have been exploiting the system. The figures, which have been published, are well known.
  It affects shows such as "Cats", "Les Misérables", and "Starlight Express" where three times the going rate is the norm according to scalpers' prices. Just the other day, two tickets at £6·50 were sold for £80. Such exploitation is not good for theatre. It is not good. enough for our reputation as a tourist centre, and for broadening the habit of theatre going among the population. It is a manifestation of an Arthur Daley society rather than the best aspects of the Society of West End Theatre that I should like to see. What I find hard is that the society tends to bear the brunt, along with tourist authorities, for complaints.
  What can he done to resolve that problem? Several things could be done. I shall not repeat the difficulties that there have been over registering agreements. There was a time, until a few years ago, when registered agreements among theatre owners would have allowed agreements on theatre ticket prices to apply. I can see the argument about opening up competition in other areas, but I am concerned about the side effects and casualties, as in this case.
  The most useful way in which the problem could be tackled would be if the Government could bring forward, as a matter of urgency, the Bill on consumer goods and services, on which consultation is now taking place. That legislation is likely to include a proposed code of practice, which will contain an obligation to publish the commission element. If that were done, it would meet the recommendation of the Society of West End Theatre that at all times the full face value and the amount of commission that has been charged should be shown on the ticket.
  I hope very much that my right hon. Friend the Minister will feel able to add his voice to the deliberations in the Department of Trade arid Industry. I think that he will be aware, as he represents a south coast constituency next to mine, that the tourist industry is a fragile flower., and if the reputation of overcharging becomes part of the disincentive to come to this country, the effects could extend further than live theatre.
  I welcome the tax relief for charities announced in the Budget, although it will do little for the theatre because of the nature of charities. I wish to consider ways of assisting the commercial theatre, given the high element of risk that is involved in its work. Hon. Members have mentioned value added tax. The Minister will know that there is a. belief that the movement towards standardisation in the EEC may lead to change. I hope that he will add his voice to those which say that if we move in the direction of assistance for the arts, it should be in the form of exemptions rather than zero-rating. We must be consistent. Communications must not be seen as subject. to indirect taxation.
  As for the tax incentives to the angels — who are sometimes called casual investors, although I prefer the term occasional investors, because it is not a casual process but a high-risk activity—we could return to the pre-1972 position by which tax relief on losses could be offset against other income or capital gains. I recall that there were problems and that people were said to be living on

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  farms which became their country houses. It is not beyond the wit of man—I have already urged this on my right hon. Friend the Chancellor of the Exchequer—to create exemptions which could be related to centres of excellence and to employment. That is certainly the case with the theatre.
  More specifically, the Department of Trade ad Industry could consider the implications of legislation affecting limited partnerships. Much of the law governing them is old and relates to the Limited Parterships Act 1907. That limits the number of partners in an enterprise to 20. Section 12 of the Companies Act 1967 contains exemptions to that rule. It is clear to hon. Members that that number is not large enough for theatrical enterprises. One is talking about a band of angels, 100-strong or more. I hope that the Minister can be persuaded to use the powers available in the Act and I hope that he will help in the process of reform.
  Only one theatrical production has been financed through the business expansion scheme, so it is a bit early to judge its effectiveness. However, the five-year restriction on tied investment must be seen as a deterrent to theatrical investment. If the scheme is to be reviewed, that matter could be considered.
  I have stressed the problems of theatre having to deal with several Departments, and I praise my right hon. Friend the Minister for his role in trying to improve co-ordination. In the recent changes, including the abolition of the GLC, many of us have been worried about the problem of consistency. Even now, it is said that local authorities may wish to take over the activities of the Health and Safety Executive. If that is to be the case, there could be different interpretations of the rules applying to theatres throughout the country. I hope that that might be regarded as no more than a proposal which will be subject to representations, especially for activities which need an overall approach that could be effectively monitored by my right hon. Friend.
  If my right hon. Friend has a chance to reply to the debate, will he undertake to examine his Department's ability to make known its views to the Department of Employment before any change is agreed?
  Before my right hon. Friend took office, the Society of West End Theatre had been told by the Office of Fair Trading that it could not trace a sponsoring Department for it. At that stage, anyone interested in live theatre was worried about whether they would ever have a proper dialogue with the Government. Of course, a distinction was drawn with the publicly funded sector of the theatre, which had a link with the Arts Council. But that sector has many problems similar to those in the commercial theatre, and it does not rely solely on state funding. It must look to markets for the resolution of many of the problems that I mentioned. But there was a hiatus in the commercial theatre— the area that touches most upon the lives of the majority of our citizens and visitors. My right hon. Friend has stepped into that hiatus. He said that he was in charge of a Department that had a sponsoring role. We are grateful for that, and for his action on transitional problems. I hope that he will not take it amiss—he has broad shoulders—when I say that much remains to be done in other Departments. I count on him to use his influence to carry them forward in the right direction.
  12.16 pm
  Mr. Jim Callaghan: The last time that I spoke in a major debate on the arts I mentioned a wide range of subjects. Today, I shall concentrate on a narrow area that is vital to the British people.
  In the early 1970s, the experiment of charging entrance fees for art galleries and museums proved to be unpopular and an economic disaster. In 1974, the then Minister for the Arts, Hugh Jenkins, abolished the fees. He was supported in debates on the charges by the right hon. Member for Chelmsford (Mr. St. John-Stevas), who subsequently became Minister with responsibility for the arts. The right hon. Member for Chelmsford believed that legislation should be introduced to prevent the reim-position of admission charges for art galleries and museums. However, today, there are fears that the charges will be reimposed.
  It has been denied that the changes in the Government's methods of funding are in preparation for charging admission fees at museums and art galleries. On 11 February this year, The Times said:
  "Financial incentives have been announced to encourage national museums and art galleries to charge entry fees."
  How have the proposed changes in funding art galleries and museums given rise to such fears?
  The Government have latched on to a recommendation in a report from the Select Committee on Education. Science and Arts as a way of making up the shortfalls in running costs imposed by the Government's restrictions on public spending. Hence the encouragement of voluntary admission charges for art galleries and museums. The Select Committee's eighth report of 1981–82, entitled, "Public and Private Funding of the Arts", recommended:
  "The 're-vote' procedure for national museums and galleries should be abolished and where they engage in successful trading they should have the right to retain their profits."
  No one could disagree with that. The report also recommended that museums and galleries should be encouraged to expand all available sources of income. Again, no one could object to that.
  The Government's response in Comnd. 9127 seemed to agree with
  "the need to provide incentives to maximise earnings."
  Ay, there's the rub. On 26 July 1985, the then Minister for the Arts, Lord Gowrie, said:
  "The Government intend to change this system to provide greater incentives for the national museums and galleries both to maximise their receipts (whether by the operations of their Vote-financed trading activities such as shops, by charging for admission where appropriate, or in other ways) and to use these more effectively. This also should improve the institutions' ability to respond flexibility to the needs of their visitors, in hours of opening and other matters…These changes should markedly improve the ability of the institutions to help themselves."—[Official Report, House of Lords, 26 July 1985; Vol. 466, c. 1541–2.]
  All that I can say to that is that Sam Smiles is never dead.
  On 10 February 1986, the Government proposed that the present net grants should be grants in aid, the main aim being to provide a tangible incentive to earn revenue, the change taking effect from the 1986–87 financial year. For each institution, it is proposed that there will be a single grant in aid which covers its purchases and its running costs.

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  To give the institutions a stable basis for their forward planning, the Government do not intend to make any further changes in the arrangements for at least the first three years of the grant in aid system.
  I have tried to outline the financial background to the proposals which have led to fears about the imposition of charges at museums and art galleries. The Select Committee on Education, Science and Arts sought the opinions of distinguished directors of major galleries on the new financial proposals in written and oral evidence. I am a member of that Committee and I took part in discussions with four major directors. I should like to support what Sir Roy Strong said in a letter to the Committee on 24 April:
  "our primary concern about the change to grant-in-aid is that the system will be used as a means of reducing government support to the institutions. The Government has given a commitment that, for at least three years, the level of grant will be unaffected by the level of receipts. In real terms, Government support is already reducing: the planning figure (2½ per cent. increase) for the next two years will not keep pace with inflation and does not include a realistic allowance for pay increases outside our control. We fear that our increasing earnings will provide the opportunity for Government funds to be diverted elsewhere. The fact is that current and past funding has been totally inadequate and we shall need every penny of our increased earnings in order for us to achieve the level of performance, efficiency and service to the public which is our aim."
  When giving evidence to the Select Committee, Sir Roy said:
  "Over the last five or seven years the funding of the V & A and the other national collections has been at an increase which is a figure which Government says inflation is and then there is a pay settlement for the Civil Service which is almost always in excess of that. At the moment we have a 2·9 per cent. increase for 1986–87 but it looks as though there will be a 6 per cent. pay settlement for the Civil Service. That has happened every year for five or seven years. No extra money has been given, whereas in the old days there…'We therefore saw and still see no advantages for us in the Minister's proposal for change, and I believe a majority of the institutions affected shared our view.' Do the other members of the panel share that same view?"
  We also heard from Dr. Cossons, another famous director, on 24 April. He agreed with Sir Roy Strong and said:
  "We therefore find ourselves in the situation where the increase in the level of basic funding is so far below the level of pay settlements and inflation that it is leading to a state of serious reduction in real terms in the level of museum funding from the Treasury. The implication of this for museums is very serious."
  I asked him to expand on that statement and he replied:
  "Yes, I think Sir Roy has probably said everything I could say. The national museums are the victims of a system which is a cash limit system in which our grant is related to a predicted inflation rate, and when the salary and wage award is substantially larger than that — and we are all highly labour-intensive organisations—a large part of our budget goes on people. The amount which those people then have to spend to do the job which they are employed to do is seriously diminished so we reduce the staff numbers or both, but the net effect is one of reducing what we can do for our collections and for our public. It was precisely that pressure that propelled the trustees of the National Maritime Museum, on my recommendation, to go for a plural funding approach with admission charges in April 1984—I was Director of the National Maritime Museum until nine weeks ago. The Science Museum has no plans at present to charge admission but it is, nevertheless, faced by exactly the same problem and we have to address that issue within the next six months."
  I am convinced that, in all this, there has been completely inadequate funding for our national museums and art galleries. I was appalled some years ago when,
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  during a visit to one of our national museums, there was a thunderstorm and I saw staff running around putting down bowls and buckets to catch the rain water. On making inquiries, I discovered that Government funding for repairing that ancient building was totally inadequate. We had a silly system. The Department of the Environment gave a grant of £1 million for repairs, but the Treasury charged 15 per cent. VAT on those repairs. I suspect that we shall never plug the leaks.
  I raised the matter on the Floor of the House at the time. The present Minister said recently in Committee that the Government had gone some way to improve the system by providing more money for repairs. I hope that he will he able to mention that today. The proposed method of funding our museums and galleries is, I believe, merely a back-door method of introducing admission charges to help with the running of our national institutions. If that is so—I invite the Minister to say whether it is or not—it will have a devastating effect on those in our society who cannot afford to pay admission prices—old-age pensioners, the young, the unemployed and the extremely poor.
  I hope that the Minister is not about to put the clock back to the 1970s by sending out a message to our citizens that we get what we pay for—the age-old prerogative of the harlot throughout history.
  12.29 pm
  Mr. Christopher Murphy: In recent years much has been written and spoken of the significance of increasing leisure time. I should like to contribute to that in terms of the value of the arts during this debate.
  From the outset, and despite the ritual carping of the Opposition, it should be recognised and appreciated that the Government have fulfilled the two major strands of their arts policy: to keep up the level of state support and create the conditions in which the arts can develop by attracting additional funds from other sources, and to safeguard Britain's heritage. In the light of the economic difficulties inherited from the Opposition parties that is no mean achievement in more ways than one. The hon. Member for Paisley, South (Mr. Buchan) criticises the picture painted by my right hon. Friend the Minister, but the Government's picture has its provenance and the Opposition's painting is a fake.
  The role of the arts in the tourist industry has already received wide analysis and by now should be self-evident. What has apparently received only narrow analysis is the role of the arts vis-a-vis the developing lifestyle of Britons. Clearly, in the short term, with the unfortunate rise in unemployment, more free time has been available to some people. But perhaps of more long-term significance is the positive choice that is being made between work and leisure, and between increased income and increased time off.
  Already more people go to the theatre than attend football matches. Indeed, to put that in perspective, more than 40 million people a year attend our museums and galleries. This changing pattern of life needs to be reflected in Government policy decisions and in the actions taken by private enterprise. A good example of such forward thinking is to be seen in the London docklands, where the regeneration of that derelict area seeks a balance between the needs of work and play and those of commercial and residential use.

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  It is neither sufficient simply to recognise the new importance that has been attached to the arts, nor to expect that the Government should be left to provide the necessary funds. Obviously, there is a role for the Treasury Bench in national funding and fiscal incentives, but there is an even greater role for the arts to increase their income through marketing and self-development. I urge them, as my right hon. friend has done, to step up their efforts in those directions.
  While such attention is being devoted to the future it is especially welcome that great value has been placed on our past, because our heritage is strongly bound to the arts. In that context, it should be recalled that at the end of last year the Government acceded to the convention for the protection of the architectural heritage of Europe under the auspices of the Council of Europe. Such a commitment for caring for the past, as further evidenced by a budget of nearly £100 million, will provide valuable opportunities for the arts of the future. Enjoyment of the heritage has become a major pastime of many families and of our foreign visitors.
  The logical connections between the arts and the heritage, and between them and the growth of leisure are fully comprehensible, but the schizophrenic attitude towards charging is wholly incomprehensible. I fear I must disagree with some of the views expressed by the hon. Member for Heywood and Middleton (Mr. Callaghan). The public expect to pay to visit a stately home, but not a public museum. Why not? The public expect to pay to attend a theatre or concert hall, but not to pay to visit a public gallery. Again, why not? Voluntary contributions are already pointing the way, especially after the signpost erected firmly by Sir Roy Strong at the Victoria and Albert museum.
  Mr. Jim Callaghan: I am grateful to the hon. Gentleman for giving way, but he has just mentioned me by name. He asked why we should not charge for entrance to museums. In my speech I pointed out that charges would affect the poorer sections of our community. However, the Institution of Professional Civil Servants has recently done some research on the charges made at the Victoria and Albert museum. It says:
  "Thousands of people have been put off visiting one of Britain's cultural meccas…In December 1985, just 66,692 visitors came, compared with 128,005 in December 1984. The November figure was 27,049 down on the same month the previous year. This makes a nonesense of the museum's aim to raise £500,000 through charging from 1,700,000 visitors"
  Charging is just nonsense.
  Mr. Murphy: I appreciate what the hon. Gentleman says, but he must recognise that the contributions made at the Victoria and Albert museum are voluntary. I sought to stress the value of voluntary contributions and the lead to museum and gallery charges by Sir Roy Strong and the Victoria and Albert museum.
  Mr. Gerald Bowden: Is it possible that the picketing outside the Victoria and Albert museum by civil servants and curatorial staff from neighbouring museums did more to put off visitors than voluntary contributions?
  Mr. Murphy: My hon. Friend makes a very valid point. It is probably far too early to draw many conclusions about the consequences of contributing at the Victoria and Albert museum. But I believe that economic reality tells us
  1350
  that if—I emphasise "if"— the institution is allowed to keep the finance that it gains through charging, that should be encouraged and will produce beneficial results. Indeed, I think that the hon. Member for Heywood and Middleton may agree with me on that. With the necessary safeguards for students and the elderly, and perhaps a free day as is often found on the continent, let us gain the revenue from people enjoying their leisure, and that will include a great number of tourists from overseas. Such gain would enhance our arts and heritage, as the growth in private museums and private galleries that charge has emphatically shown.
  Mr. Tony Banks: Could it not be that the British tourist industry is strong partly because people are attracted to Britain by our free museums and art galleries? Perhaps the hon. Gentleman should put that factor into the equation. Moreover, those of us who live in London already pay rates and taxes, so why should we also have to pay admission charges?
  Mr. Murphy: One of the great attractions for overseas tourists is the arts and heritage to be found in the United Kingdom. Moreover, I believe that tourists would still want to come to Britain even if they were expected to pay, just as they pay in many other European countries which also have a great arts and heritage to offer to both tourists and their own people. The Government are extremely keen to cut the amount of taxation. Those who wish to contribute further towards the arts and the heritage should have the opportunity to do so through admission charges. Even if the hon. Member for Newham, North-West (Mr. Banks) does not agree with me, I hope that he will feel that I have answered his points.
  As the arts, and with them, the heritage become associated more and more with the leisure activities of the many rather than the personal pursuit of the few, the partnership between the public and private sectors must become more and more realistic, to the benefit of us all.
  12.40 pm
  Mr. Tony Banks: This is our second full day's debate in 1986 on the arts, and I wish that we were discussing either some proposal from the Government, the Arts Council's budget or its allocation to client groups, rather than indulging in an artistic jog through the arts world. Nevertheless, the debate is welcome.
  The hon. Member for Twickenham (Mr. Jessel) mentioned the number of arts questions tabled. Now that we have a Minister able to answer arts questions in this House, there is some point tabling arts questions. However, 10 minutes once a month is hardly sufficient. The average number of questions per month over the past 12 months has been 10, and we are not even getting through those. Perhaps the hon. Gentleman would ask his right hon. Friend the Leader of the House for more time for arts questions; that would be supported by both sides of the House.
  The House has always had a great interest in the arts, but I detect that that has become sharper in recent years. The arts have taken a higher political profile for two main reasons. First, in part, is the current economic climate, in which even the arts world recognises that it must fight its corner in an era of attempted public expenditure cuts. Secondly, the activities of the local authorities, mainly

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  Labour-controlled, have greatly broadened the definition of arts and therefore the extent of public expenditure on the arts. I use the phrase "expenditure on the arts" rather than "subsidy of the arts" advisedly, because we must get the terminology right. Otherwise we could lose many of the arguments about resource allocation by suggesting that investing in the arts is not a fit and proper way to use public expenditure, whether national or local—it is a soft option, a sort of dream topping, on which one should not spend public money. We hear the terms "defence expenditure" and "arts subsidy". My terminology would be that we invest in arts, education and housing, spend on defence and subsidise agriculture—although that point is rather lost as the Ministers who were in the Chamber a short time ago have now gone. It is important that the terminology is correct.
  The definition of what is the arts is not simply metaphysical: it holds the key to the public purse. By broadening the definition of arts and by moving from a rather elitist, essentially 19th century understanding to one that recognises a more popular cultural base means that many more art forms have become eligible for public investment by local authorities and regional arts associations. Therefore, it is essential to keep moving the frontiers of definition within the arts.
  There is little doubt that Mozart and Bach would have composed film and television scores and used electronic keyboards and synthesisers. Shakespeare would undoubtedly have written plays for television — indeed, posthumously he has—[Interruption.] Posthumously, he has been given a great deal of television coverage, although, unfortunately, he has not benefited from the repeat fees that he no doubt would have welcomed. It is an interesting point. I believe that it has been said that if we had been able to claim all the copyright fees from Shakespeare since Tudor times, there would never have been a balance of payments problem in this country.
  Had Shakespeare been knocking around today, he might also have been contributing to EastEnders and Coronation Street, because he was essentially a commercial playwright who earned his bread.
  Mr. Gerald Bowden: Does the hon. Gentleman accept that if Shakespeare had been around today he, like Sam Wanamaker, would not have been allowed to establish a playhouse in Southwark because of the short-sightedness and small-mindedness of Southwark council?
  Mr. Banks: That is an interesting point. I know that Sam Wanamaker has been pushing that idea around for a long time, and I have spoken to him about it in the past. I should very much like a playhouse to be established in Southwark on the site of the old theatre. I believe that it would add a great deal to London, provided that we did not start treating the arts merely as heritage. The hon. Member for Welwyn Hatfield (Mr. Murphy) rather suggested that he still sees the arts as heritage, but Shakespeare was very radical in his day. Had he been around today, some Conservative Members might have said that his plays were too political and should not receive GLC subsidy. Those are all interesting points, but I agree with the hon. Member for Dulwich (Mr. Bowden) that that theatre should be established in Southwark.
  Mr. Murphy: To correct any misunderstanding, I should make it clear that I do not necessarily equate the arts with heritage. Like the hon. Gentleman, I accept that
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  there is a great role for the living arts and looking towards the future. On the subject of Shakespeare, does the hon. Gentleman accept that Shakespeare was an excellent example of private sponsorship and that succeeding Governments could have gained considerably from such sponsorship?
  Mr. Banks: The GLC was not around at the time, but had we been around I am sure that we would have given Shakespeare a grant.
  Mr. Buchan: I am sure that the GLC, especially under my hon. Friend's chairmanship, would have given Shakespeare a grant. It would then no doubt have been attacked by Conservative Members for profligacy.
  Mr. Banks: As many people subsequently realised, Shakespeare to some extent re-wrote history in favour of the Tudors, which may have had something to do with the source of his funding.
  Mr. Greenway: In his day and posthumously, Shakespeare was one of the richest men of all time, but the GLC would no doubt have given him a grant all the same.
  Mr. Banks: If he was that rich, he would no doubt have been contributing a great deal in tax and rates./
  I feel that the drift of my speech has been somewhat lost, although I am glad to have stimulated so much activity on the Tory Benches. One could go on to talk about Leonardo da Vinci using photography and video but I shall not go into any further examples for fear of raising too much interest among Conservative Members. I have used those examples to demonstrate the clear link between art forms and the state of technology, a link which is not recognised in the enabling legislation relating to the arts.
  The Local Government Act 1972 defines culture very much in 19th century terms—classical orchestral music, ballet, opera and art galleries—and no one would deny that they are art forms, but 20th century art forms such as television, photography, video, record distributions, community radio and community bookshops simply do not figure in that legislation. That is important. because, although authorities such as the GLC tried hard to promote cultural diversity, we found the legislation serverely lacking and at times exceedingly frustrating when we sought to extend the range of arts organisations to be funded.
  The Minister, in his opening speech, congratulated the Government on muting the impact of the abolition of the GLC. In our last debate on this, I said that within six to 12 months
  "Up to 100 arts organisations in London could cease to exist". — [Official Report, 28 February 1986; Vol. 92, c. 1183.]
  I would not wish to change one word of that, because the impact will be felt most in the ethnic and community arts sectors. It will not be evident to Ministers and hon. Members but it will be felt deeply by the communities affected.
  Last Monday I asked the Minister a question about the black arts centre at the Roundhouse. I have received a letter from Remi Kapo who is doing his best to get things going at the Roundhouse. He says:
  "I feel that it is unrealistic of the Arts Minister to expect a centre like the Roundhouse, in the light of the social situation that exists in Britain today, to be able to raise £8·5 million without the direct assistance of the state".

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  Now that the GLC has gone, the only source in London of capital money for the arts has also gone. The Arts Council has got rid of its housing the arts budget. Capital constraints on local authorities are such that they cannot make capital contributions. Where can the black arts centre at the Roundhouse go for the money? I ask the Minister at least to meet representatives from the Roundhouse so that they can explain their position to him and so that he can consider their plight more sympathetically
  When I walked into the Chamber today I had already predicted exactly who would be here because the subject attracts the same crowd. I recall years ago going to watch footbal matches. I turned up on the terrace and knew exactly who would be standing nearby and who would get the Bovril at half-time.
  Some right hon. and hon. Members believe that we should not provide money for the arts. They believe that the arts should stand or fall according to their resources. The matter comes up frequently at Question Time. The arts have been supported from outside for a long time. We enjoyed a diversion earlier when we discussed Shakespeare. In the seventeenth and eighteenth centuries the patronage of individuals enabled the arts to flourish. In the nineteenth and twentieth centuries the state has had that role. The state, on behalf of us all, not as an alien creation, invests in the arts. But many are still reluctant to acknowledge the state's role in cultural matters. Many think of the arts as an elusive private world rather than a complex social, economic and political structure.
  The state works through non-elected quangos, which are given an assumed indentity to make them look as if they are elected bodies. They are described as councils. I think of the Arts Council the Sports Council, the British Council and the Press Council. The illusion is that they are democratic, but we know that they are not.
  The state attempts to obscure its role in policy matters by adopting such spurious devices as the arm's length principle. I reject that principle. It is intendend to take the arts out of politics, but it does not. This debate is in a political forum. Under the arm's length principle Government influence is by remote control.
  The appointees to all the quangos described as councils tend to reflect the same view of the world as the politicians who make the appointments. That is only human and is as true of a Labour Government as of a Conservative Government. This shows the high level of hypocrisy that exists in British politics all the time and not only now. We delude ourselves if we say that politics can be removed from certain areas of activity. It is said more and more in the House, especially by those who do not like what is going on in the various spheres of social activity, that politics should be taken out of education, the Civil Service, health and the arts, and Mr. Widdicombe more or less suggested that we should take politics out of local government. That cannot be done. We in this place should know as well as anyone that politics are central to all aspects of society's organisation, even to the quality of the air that we breathe. At one time we could say that the graveyard was the only place where politics did not intrude, but given the controversy surrounding the death benefit I am not sure about that now.
  I have been assured by my hon. Friend the Member for Paisley, South (Mr. Buchan), who spoke from the
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  Opposition Front Bench, that the next Labour Government will set up a Ministry of culture that will cover all cultural activities. It will operate as far as possible through elected local authorities.
  The Minister has made great play about the amount of money that is being spent on the arts. I do not want to detain the House for too long by going through all the different forms of analysis that can be presented to show that instead of spending large sums on the arts, the Government have removed funding.
  If I could find the document among all the detritus on the Bench from which I am speaking, I would refer the Minister to a statement that has been issued by the Arts Council which shows that on the basis of the retail price index—this was argued by my hon. Friend the Member for Paisley, South—the arts have lost out in real terms since the Government were elected.
  I shall not cross swords with the Minister on that arid topic. I shall merely contrast the amount that we spend on defence, which is £18,000 million a year, with the budget for the arts that is operated through the Minister's Office. Only 0·6 per cent. of the Government's expenditure for 1985–86 was directed to the arts. The values of a society that can spend such vast sums on weapons of death and destruction and so little on great creativity that the arts present for the people as a whole are all wrong.
  We spend money on the arts because it is one of the finest areas of public investment in both social and economic terms. It is an investment in human creativity and there is no finer investment that we can make. It is in the arts and through the arts that we see people at their best, whether they are producers or consumers. The Minister has said that there are more people enjoying the arts than enjoy football matches. and that is true. Also we tend not to get the crowd violence at the opera house that we see, unfortunately, at football matches from time to time.
  My hon. Friend the Member for Paisley, South, has said that the Labour party would invest heavily in the arts. That is because the arts remove the blinkers from our eyes. The artist can convey powerful messages about the nature of the society in which a people live. That is why over the years, and in different systems, the artist has found that books have been burned and work has been suppressed. That has happened because of the immensely powerful medium that the arts presents for those who want to get over a message, and that is why the next Labour Government will invest in the arts in a big way. It is one of the finest forms of investment, and through the flourishing of the arts the British people will perhaps understand more of the nature of the society in which they live.
  If cultural activity is taken as a whole, it is an extensive industry. The Musicians Union produced some evidence recently to show that copyright produces about 2·5 per cent. of gross national product. The amount is greater than that produced by the motor car industry and the food manufacturing industry. That shows the size of the cultural industries we are considering.
  According to the institute of employment research at Warwick university, jobs in the leisure, artistic and sports category are set to increase by 30 per cent. during the 1980s. When that is added to the £6,000 million produced by the tourist industry, it can be seen that the cultural institutions are an enormous industry. The industry needs more planning, support and encouragement than it is

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  getting from the Government. I look forward to the day when my hon. Friend the Member for Paisley, South, as Secretary of State, with a full Cabinet position — the head of a Ministry of culture— will unveil to a packed House—there will be more people in it than there are today—the new, cultural industry strategy of the new Labour Government.
  1 pm
  Mr. Robert Rhodes James: I am not in complete disagreement with what the hon. Member for Newham, North-West (Mr. Banks) said. I shall present my case to the House. My first book was published when I was 26 years of age. It was the first of 14 books which I have written. That book is about to be reissued. I never received a penny of public money to be an historian and to write my books. I am a supporter of Government assistance and support for the arts. I should like the hon. Gentleman and the House to hear in mind that some people who entered the fields of music, art and literature have had to do so alone. Perhaps we have been better off—not financially —as a result.
  I am sorry that the right hon. Member for Blaenau, Gwent (Mr. Foot) is not present. I thought that it was fairly typical to try to attract Byron back to Oxford from Cambridge. I have a high regard for the right hon. Gentleman because he was the author of "The Pen and the Sword", which I still regard as one of the finest biographies, if not the finest, written in the past 30 years.
  I welcome the opportunity to make a brief intervention, not least because it is the first occasion I have had to congratulate, publicly, my right hon. Friend the Minister for the Arts on his appointment. He and I served happily in the Foreign Office under the leadership of Lord Carrington. I am glad that my right hon. Friend is in his present position. Perhaps I should declare an interest in public lending right in that last year over 20,000 people borrowed my books. As this week has been, so far, the best week for higher education in this Parliament, I hope that this benign generosity will continue.
  As the House is aware, there are five university museums—Cambridge, Oxford, Birmingham, London and Glasgow—whose costs are still met exclusively from the budget of the University Grants Committee. There has been a consistent annual reduction in the universities' budgets, in real terms, of 2 per cent. That has had a particularly strong effect on the universities and museums which are inevitably at the bottom of the list of priorities.
  If I declare a personal interest in the case of Fitzwilliam museum in Cambridge, it is not simply because it is in my constituency. My father's first cousin, the late Montague Rhodes James, who was most famous for his ghost stories, was the provost of King's and Eton, and the second director of the Fitzwilliam.
  With the exception of occasional donations and assistance for acquisitions, the museums are still treated as though they are part of universities; whereas in reality they are national institutions of real quality and importance. I remember, as a schoolboy, the great benefit I received from the Ashmolean in Oxford. The museums are not just for the universities; they are for the people of the cities, visitors, tourists and scholars. To regard them simply as part of the universities is, in my view, a ridiculous anachronism. I have made that point to previous Secretaries of State and I reiterate it to the new one. I ask
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  my right hon. Friend the Minister for the Arts to discuss this matter with the new Secretary of State and to look hard at this lamentable anachronism.
  Obviously, we in Cambridge are delighted by the news that the Royal Observatory is coming to Cambridge. We are grateful for the student grant review. As the vice-president of the appeal fund for Ely cathedral, I am delighted by the help that we have received from John Paul Getty II and the deserved honour that he has received. As trustee of the Cambridge symphony orchestra, I have looked again at the way in which the Budget has assisted the arts and the heritage.
  Perhaps my right hon. Friend the Minister for the Arts in his discussions with the my right hon. Friend the Chancellor will, while thanking and praising him for the changes in the Finance Bill, emphasise that this is a good first step but should not be regarded as the end of encouragement to business, industry and individuals to invest and to promote not only their past but their children's future in all elements of the arts.
  1.6 pm
  Mr. Michael Hancock: I apologise to you, Mr. Deputy Speaker. and to the Minister for having to leave after my contribution but I have to attend an important artistic event in my constituency — my daughter is dancing in the local festival —and I am committed to being there to see that major achievement.
  Mr. Tony Banks: It is a good excuse.
  Mr. Hancock: I am glad that the hon. Gentleman thinks so.
  The Minister hit the nail on the head when he commented on the lack of Social Democratic party policy on the arts. That lack is regrettable but I am pleased to say, and I am sure that the Minister will be pleased to hear, that we hope that the SDP's new policy on the arts will be produced by the end of July. I am sure that the right hon. Gentleman will eagerly await a copy. I am sure that it is aimed in the right direction.
  Mr. Buchan: Will the hon. Gentleman assure the House that, if that document is produced by the SDP, it will not immediately be repudiated by its leader?
  Mr. Hancock: I shall come later to the finer details of how we arrived at that policy.
  The hon. Member for Paisley, South (Mr. Buchan) rightly drew attention to the quote that he and my right hon. Friend the Member for Plymouth, Devonport (Dr. Owen) used. They drew the attention of the arts world and the population generally to the importance of the newer forms of the arts, as mentioned by the hon. Member for Newham, North-West (Mr. Banks). They both used the examples of "The Boys from the Blackstuff" and "Cathy Come Home".
  Mr. Tony Banks: Did I?
  Mr. Hancock: The hon. Member for Paisley, South did so. The hon. Member for Newham, North-West drew attention to the lack of importance given to new forms of the arts.
  Hon. Members used those programmes to stress the importance of the artistic ability of the writer and the performer to bring across to the population the many things that were wrong in society and the reasons why

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  there had been deterioration to such an extent that the new form of television production was the only effective way of getting them across. That is an important point.
  It is no secret that there has always been a certain unease in the relationship between artists and politicians. It has been increased of late by the master and servant relationship which has been such a feature of the Tory approach. That unease could be dispelled if the arts were made an issue of state. The arts are generally in need of that reassurance. I am glad to say that the alliance is pledged and committed to make the arts an essential part of its political manifesto at the next general election.
  There is no civilised society that does not recognise and respect artistic endeavour. There can surely be no healthy society where the arts are not vital to society's well-being. I hope that there is no future Government, of whatever persuasion, who do not aim to encourage the arts and to promote public participation in and appreciation of the arts.
  An effective cultural policy cannot be separated from the philosophy which it informs. Equally, it must embody a vision of society and an awareness of the consequences of current social change. At no time in recent history has our society faced such a rapid and overpowering change as it does now. It is a technological and social change for which our political institutions are, regrettably, insufficiently prepared. Meanwhile, two issues are being pushed from the political fringe to the main stream of the new political agenda and that push is long overdue. Those two subjects are the arts and the environment. Therefore, the importance of a cultural policy as an essential part of any political party's manifesto has never been more apparent or more important.
  In the 1960s much argument was devoted to what was labelled the technological society of the future. That future is now with us. Much has also been written about the increased leisure time, a concept which many hon. Members justly feel has been done to death. Yet increased leisure time has arrived for a significant number of people in the form of dehumanising and debilitating unemployment. How can questions concerning educational objectives be answered satisfactorily? I shall try to expose the weakness in the current policy and what we should be doing in the future to answer that undoubted need.
  In a post-industrial society the arts policy has a vital educational role to play, offering a range of solutions to questions about lifestyle and the use of time in the increasingly leisured age in which we find ourselves. It is not always commonly assumed that the Government have responsibility for leisure and the creation of pleasure. However, the ancient and unquestioned issues of state, such as defence, education and health, are merely self-serving if detached from the more central objective; the creation of a civilised society which combines work with leisure and labour with pleasure. The arts are inseparable from a civilised society and we must accept, once and for all, that the arts are an issue of state in their own right and should be recognised as such.
  The structural reform which I believe we undoubtedly need is having to be looked at seriously and hopefully that reform will take place. Nowhere is the divorce of the arts from the old issues of state more apparent than in the structure of the state support for the arts. The machinery of government is at fault. Broadcasting comes under the
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  Home Office, heritage comes under the Department of the Environment, the arts in education comes under the Department of Education and Science, the promotion of arts abroad comes under the Foreign Office. the subsidised arts are sponsored by the Office of Arts and Libraries and the commercial arts, until 1985, were primarily a matter for the Department of Trade and Industry.
  Can you imagine, Mr. Deputy Speaker, any Government structure more calculated to avoid all possibility of a coherent cultural policy? We must not continue to bind ourselves in a deep-rooted fear of a centralised Ministry of culture. We should all urge the Government and any future Government to reform the structure to create that Ministry, which is undoubtedly needed, and in whose support so many hon. Members have spoken.
  I am glad to say—I draw the attention of the hon. Member for Paisley, South to this point—that I and my colleagues in the Social Democratic party have at long last got our act together as regards our arts policy and our Liberal partners have devoted much of their time to the debate. Although our deliberations have been independent, I am glad to say that on this issue we came to the same conclusion.
  There are basic and practical reasons why there should be a Ministry for the Arts, combining the areas of common purpose, such as the arts and libraries, broadcasting and film. It is equally right and important that the Minister for the Arts should have Cabinet status. I hope that the alliance, if in a position of power, will propose that that responsibility should be exercised by one of the three non-departmental Cabinet Ministers, with the day-to-day responsibility resting with a Minister of State.
  The cultural quangos which have been spoken about by other hon. Members are things that the alliance would like to see fundamentally changed. We also share the anxiety over the position of non-Government cultural bodies such as the Arts Council, the BBC, the British Film Institute, the Museums and Galleries Commission and the Crafts Council. The concept of freedom and choice has come to be embodied in the arms length principle that other hon. Members have mentioned. However, that important principle has increasingly come under attack from Right and Left. I suggest that the Left denies its continued usefulness as a principle, while the Right abuses it by appointing to the quangos those who share the same political preferences.
  We in the alliance deplore those positions, and find them wholly unacceptable. We favour the retention of at least some quangos, but we are equally committed to radical reform of quangos by having directly elected people from regional organisations on them. Hon. Members might make the normal accusation that a balancing act is apparent in those suggestions but, as the hon. Member for Cambridge (Mr. Rhodes James) said, what is needed is for change to be taken a step at a time. The abolition of quangos in some areas and better ways of appointing members of quangos are the first steps that we should take. Therefore, I feel that the setting up of a Ministry is of prime importance, to give the arts the involvement that they undoubtedly need.
  I refer to the financing of the arts. Now that they are under pressure to offer a wider-ranging and more comprehensive service to society, it is obvious that extra resources must be found for them, yet no Government —I make no exception for the alliance—can promise

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  that vast increases in funds will be readily available: nor can the arts simply mark up their prices and still maintain access to everyone.
  There is a need for local authorities to produce a four-year arts development plan for submission to their regional arts associations, which could issue challenge funds for a range of agreed developments over that four-year planning period. The main concern would be to enable an expansion of resources by a participative approach, which would buttress the arts grant system with tax incentive structures and other legislative and fiscal measures. That w ill undoubtedly become apparent in our document, which I hope will be published by the end of July.
  One effective method of encouraging private citizens to give to the arts would be to extend direct tax breaks to the private donor. That would attract greater spontaneity of generosity than is currently possible under the unwieldy four-year covenant system, and it would provide an obvious incentive to the donor to do more.
  I have outlined some of the ways of financing the arts, but it must be stressed that direct Government expenditure must be forthcoming and must be seen in a more creative way than it is now. Hon. Members on both sides of the House have talked about the difficulties in which many people in the arts find themselves over VAT, and hon. Members have also rightly brought to the attention of the Minister the National Campaign for the Arts' latest handout, which refers to the sum of £140 million a year that the Exchequer gets directly from the arts. What a major step forward it would be if such resources could be directed back to the arts. What a major boost it would be at all levels if that innocuous sum could be put aside. I hope that the Minister will seriously consider the points made by his colleagues on that matter.
  The first phase of any increase should aim to achieve a fairer balance of expenditure between regions where investment in the arts has been low and metropolitan London where investment has been highest. The second phase should allow a general increase in per capita expenditure throughout the country. The implications of an enlightened arts policy extend far beyond the artistic community. The advance of information technology and cable and satellite will pose fresh challenges not only to a Government but to an artistic world through the 1990s and into the next century.
  The increase of tourism and leisure time will necessitate the upkeep of Britain's cultural image and the expansion of its cultural resources. The political view that there are no votes in the arts is outdated and misguided. The alliance has the will to act as a catalyst to the abundance of British artistic talent and to invest in that potentially powerful industry. The failure of any political party or politician to recognise that would be a major folly.
  My constituency of Portsmouth is rich in heritage and flourishing in the arts world. Nevertheless, the only theatre in the city of Portsmouth, the King's theatre, is under grave threat, once again through lack of resources and the lack of ability to produce the goods that are needed in an area with a population of nearly 250,000 people. Once again, VAT has grave implications for the organisation that runs the theatre. Valued though its attempts are to sustain the theatre, it cannot go on indefinitely trying to achieve what is best artistically in the city of Portsmouth. I do not want that theatre to close, or the theatre to suffer in my constituency. The Government should be committed
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  to helping theatres such as the King's theatre and others in the south which are struggling. That can be done only if there is a change of heart in the Government towards the way in which they treat the arts in general and theatres in particular.
  In an area so rich in heritage as Portsmouth and Hampshire, enormous bonuses could he obtained from investment in the right area, not only by creating more tourism but by creating instant jobs by opening more of our heritage to more people. It is sad that, after 50 to 60 years, people will be charged to visit HMS Victory. The same is true for museums. Charges will be a deterrent to people taking their families to visit major attractions such as HMS Victory. There is so much wealth in our heritage that the Government should be able to identify areas of special interest and place resources there. A few million pounds invested in pump-priming exercises would show a return not only of many hundreds of jobs but of countless millions of pounds brought into the country through tourism.
  I hope that today's debate is not exceptional, and that we need not wait another two years for a debate on the arts. The hon. Member for Paisley, South said that the previous large-scale debate on the arts was on 14 June 1984. That is interesting, because it is the day on which I was elected to the House.
  Mr. Buchan: We cannot have everything can we?
  Mr. Hancock: The excuse that day was that many Tory Members had to be in Portsmouth, South, defending that Tory seat from my challenge. Their presence hindered their candidate's ambitions of getting here, and helped mine. It was distasteful that the Government used my by-election and the European elections to hide the arts debate then, and they are using a Friday today.
  I hope that the number of hon. Members who have taken part in the debate shows the Minister that he has the sympathy of the House. All that he needs is the strength to take this issue to the Cabinet and get more resources from the Government.
  I apologise for leaving the Chamber now, but on this occasion my family is more important than this place.
  1.22 pm
  Mr. Gerald Bowden: The hon. Member for Paisley, South (Mr. Buchan) indulged in a romantic reverie about the ideal future—the Socialist utopia—in which the arts would be fully funded by the state, or fully directed by the state. Did he take into account the reality in areas where local authorities have a responsibility to promote the arts but have reacted in a small-minded and philistine way? I cite examples in my constituency. The right hon. Member for Blaenau Gwent (Mr. Foot) kept his conscience clean by saying that he did not buy The Times, but he took advantage of the copies in the Library. Such privileges are not available to my constituents who cannot read some newspapers in the public libraries because of the censorship exercised by Southwark borough council. The council refuses to stock some newspapers, for political reasons. Is that the generous attitude to the arts which the Socialist authorities of the future will adopt? If it is, we should note it now.
  I noted also the patronizing—if not denigrating and disparaging — way in which the hon. Member for Paisley, South quoted the firm which said that it wished

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  to sponsor only those exhibitions with which it felt comfortable. Has he considered the activities with which Socialist Councils feel comfortable? In my constituency, there is a fine heritage site at Nunhead cemetery. It is a remarkable legacy from the past. Through beneficial neglect, it has become a nature reserve with wildlife exceptional in south London. An enthusiastic band of people have formed themselves into the friends of Nunhead cemetery to help to preserve and conserve it and to ensure that the facilities are made known to the area and treasured by it. But they are prohibited by the restrictive trade union attitudes of Southwark borough council from taking any part in maintaining the paths or clearing the ground.
  Is that the way to harness enthusiasm for and participation in the arts? Is this how a Socialist authority will in future supervise, mastermind and direct the arts? If so, there is every reason to have "The Glory of the Garden", with a great deal of diverse funding and activities, rather than one central coherent cultural policy. That would be the dead hand which would devastate the flowering of the arts.
  The Globe playhouse and Shakespeare's role in Southwark was referred to earlier, and I am pleased to see that the hon. Member for Southwark and Bermondsey (Mr. Hughes) is now present. We have seen the absurd hostility which Southwark council has directed towards this imaginative scheme, and I wonder whether the Opposition spokesman for the arts will use his influence to assist Southwark council towards enlightenment and to encourage it to reconsider the matter.
  It is interesting to note that Shakespeare, who has been prayed in aid for the Opposition's view, worked at diverse levels. He produced great art, as we now recognise it; he produced popular entertainment, as we might now perceive it; and he was involved in a commercial activity which made great profit, to the ultimate benefit of the community at large. Edward Alleyn, the actor-manager of Shakespeare's company, made a great fortune which he used to establish schools in the southern end of the borough in Dulwich. He left other charitable bequests for the care for the young and the elderly.
  Mr. Tony Banks: I thought for a moment that the hon. Gentleman was about to claim that Shakespeare was one of his constituents. Returning to the reconstruction of the Globe in Southwark, has the hon. Gentleman spoken to the Minister to see whether any funds are coming from that source, because Southwark borough council is extremely hard-pressed?
  Mr. Bowden: It is a matter of planning rather than of funding, and the hon. Gentleman may like to use some of his influence on his Socialist colleagues on Southwark council. If we could overcome their inexplicable hostility to an imaginative cultural centre, it would do a great deal to regenerate life in an otherwise deprived part of London. I know that the hon. Member for Southwark and Bermondsey will forgive me for putting it in that way. I wish that Southwark council would think again. What I say will have no influence, but what the Opposition say may influence it.
  From Edward Alleyn's schools and almshouses came the offshoot of a most interesting private gallery, the Dulwich picture gallery. I shall not go into its history, but
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  a series of incidental and almost accidental events produced a magnificent collection of pictures of worldwide fame and status. The gallery is private -and responsible for its own upkeep, but it has harnessed the community to it in a most constructive way. It makes an entry charge. I have no qualms about that, because many people are prepared, and indeed happy, to pay to see this great private benefaction. It has brought into play the friends of the Dulwich gallery who give of their services, time, expertise and enthusiasm voluntary to ensure that the gallery is staffed in a way which would not be possible if salaries had to be paid for their attendance.
  I am grateful to the Minister's predecessor for looking favourably on the appeal launched by the Dulwich gallery to improve its security. It received sums from institutional donors, individuals and the Government, for which the people of Dulwich are extremely grateful. The Dulwich picture gallery appeal had a mixed bunch of contributions, rather than funding from a single source. I see that the hon. Member for Newham, North-West (Mr. Banks) is present. In a previous incarnation he made some contribution to the Dulwich gallery as chairman of the arts committee of Greater London council. It was gratefully received, but it was not without strings, whereas that which came from Government came freely and without any pressure.
  Multiple funding and support is a strength of arts provision in Britain. I hope that I shall be forgiven by my hon. Friend the Member for Dorset, South (Viscount Cranborne) if I trespass into his constituency, but I recently came upon a most interesting form of private enterprise provision in the arts, which, perhaps, cannot be found elsewhere.
  A private gallery has been established on the island of Portland on the Chesil beach. Those who walk along that wild, romantic seafront come across a small stone building which is an art gallery. One might not think of that part of Portland as a centre of arts excellence, but this gallery plays a full part in community life there. It is multi-faceted. It recently mounted an exhibition on the work being done to improve the seaworthiness of the Chesil beach. The firm of civil engineers involved sponsored an exhibition at the gallery to show the local community what is happening. The arts are being used as a form of communication and community adherence there.
  The gallery was founded by an enthusiastic individual who had been a teacher in an art school. She wants to give young artists who are unable to get sponsorship through commercial galleries or those who wish to display their work without going through the difficulties of mounting an exhibition in a big gallery the opportunity to show their work while living in the gallery. That has not been promoted by the local authority or the Arts Council: it might be described as private patronage. It is the sort of initiative to be encouraged.
  I fear that, if we had a Minister of culture and a "coherent culture and arts policy", there would be no momentum for such private promotion. The opportunity would still exist, but without that blend of enthusiasm, challenge and a hint of commerce it would lack spark. I wholeheartedly applaud the approach which my right hon. Friend the Minister has taken. We should not look to just one source to finance the arts. We should seek pluralism. In that way, we will ensure the strength of the arts so that they may flourish, their independence assured.
  1.33 pm
  Mr. Mark Fisher: No Opposition Member would disagree with the hon. Member for Dulwich (M r. Bowden) about a plural approach to the arts. We complain that the Government are neglecting their resposibilities as part of that plurality.
  The hon. Member for Dulwich will remember that the Minister's predecessor, Lord. Gowrie, had a high profile as the Minister with responsibility for the arts. When he was Minister, the arts were on the political agenda. At least, the Minister was on television. That might not be quite the same thing, but Lord Gowrie felt that the two were synonymous. Unfortunately, the energy and activity that he brought to the arts and art policy was almost wholly destructive.
  Under the new Minister, the Government have returned to the more usual quietude, near passivity, even, possibly, torpor in regard to arts policy. Perhaps most people in the arts world would say that that passivity is preferable to the damage wrought by his predecessor.
  If someone cannot do good, he should at least do nothing. The Minister's languid non-style demonstrated just how that passive attitude towards the arts has developed in the Government's thinking. I listened carefully to the Minister's speech and shall take up some of his points. He laid down what he believed was an adequate framework for the arts. He used words such as challenge, tremendous, outstanding, and immense, which were all verbal attempts to inject vigour into a policy that was noticeable for its lack of it. No amount of tired adjectives can hide the complete inadequacy of the Government's policy towards the arts.
  The Minister said that after 10 years, business sponsorship now amounted to £20 million out of his figure of £320 million spent on the arts. That is less than 7 per cent. It was complained that that was not even on the margin. One must agree that 7 per cent. represents a very marginal element of expenditure on the arts. The Minister also referred to private patronage and spoke about the generosity of John Paul Getty and the not entirely unconnected fact that he was made a knight. He also mentioned Mrs. Sainsbury—perhaps she can expect to be made a dame in the near future.
  My hon. Friend the Member for Newham, North-West (Mr. Banks) said that the Government's policies were more like those pursued in the 19th century. Typically, he was being too generous. In lauding private patronage, the Minister was bravely leading the country back to the 18th century. The Government can certainly take no credit when it comes to funding the arts. They are doing little to promote private patronage through tax incentives even though that might be consistent with their views.
  Undoubtedly some very good things flow from private patronage. One need think only of the Sainsbury bequest to the University of East Anglia, which represents a most remarkable embellishment of that part of the world and is much to be welcomed. But such bequests reflect no credit on the Government and do not represent an adequate national policy for the arts. The Minister also referred to Budget changes, and to immense opportunity. Perhaps he could put some figures on that benefit. He shakes his head, because he probably knows full well that those changes will have a minimal impact on the arts. If he demurs, he should tell us what the benefit to the arts would will be in cash terms.
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  The Minister also exhorted people to attend performances. We would all agree with that, as it is a fine and laudable aim. But it is riot an adequate policy for expanding the range and variety of audiences or for making the arts available to everyone. His words would have more impact if he was prepared to put pressure on the Chancellor of the Exchequer in order to abolish VAT on the performing arts. That, together with a more expanded economy would have an effect on audiences
  The Minister made great play of marketing and claimed that Opposition Members and many of those in the arts thought that marketing was a dirty word. That is absolute nonsense. One of the best examples of marketing the arts that the world has ever known was supplied by the Labour-controlled GLC. It did more than anyone to promote, energise and excite people about the arts in Greater London. Marketing was its speciality. When the GLC existed, one could not open a newspaper without seeing well-designed, attractive and seductive advertisements telling people to visit the South bank or other projects. One seldom sees such advertisements for the South bank now, perhaps because the South bank is under-financed and cannot promote its programmes which were, of course, inherited from the GLC.
  Thus the Government's policy is one of marketing, increased exhortation to attendance, tax changes, private patronage and business sponsorship. They are the old Conservative nostrums. They all have a part to play, and no one doubts that. My hon. Friend the Member for Paisley, South (Mr. Buchan) made it clear that the Labour party believes in a pluralist approach. All of those aspects of policy have a role to play, but they do not add up to a national policy. Thus the Government's policy is totally inadequate. The Government do not even begin to address the wider variety of the arts or the need for experimentation, for education, and for community arts, or the needs of rural areas, public libraries and arts centres. All those things must play a role in the arts, but none of them is assisted by any of the policies outlined by the Minister.
  The truth is that this Government have created a crisis in the arts that has demoralised artists and administrators throughout the country. If the Minister listens to those he meets when he travels throughout the country, he will know that that is true. If he has not heard that, he has not met the right people. Those administering or creating the arts and the audiences say that the Government's policies. are wholly inadequate. The Minister must be deaf or be: meeting only a selective range of people because one has. to tread carefully to meet people in the arts world who congratulate the Government on their policies.
  Some vital and exciting things are happening in the arts because of the Arts Council, such as the building of the Victoria theatre in Stoke-on-Trent — the first purpose-built theatre in the round in this country, rather amazingly. It will be a magnificent theatre and I urge the Minister to visit it. We are grateful to the Arts Council and local authorities for making it possible. However, that does not disguise the fact that so much could and should be happening that is new, exciting and good in the arts. That is not happening because the arts are under funded and administrators are being distracted by having to rush around defending their budgets against inflation and other factors.
  The Minister mentioned funding, especially that for the Arts Council. Can he confirm that in a recent letter to the

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  Arts Council—which I understand is not confidential—he indicated that the 1987–88 grant would include an increase of only 2·5 per cent? Can he further confirm that such an increase would be below the likely rate of retail price index inflation? Does he, as a fair-minded man, accept that RPI inflation is not the same as inflation in the arts, which are very labour-intensive? The arts have particular problems, so even if the grant were protected against the normal rate of inflation, it would not be adequate to protect the Arts Council's clients in that year. I should be grateful if the Minister would answer those points when he replies.
  If I am right in my fear, the Minister must admit that it is a cut in real terms, and inevitably the whole regional development thrust of the Arts Council will have to be frozen. The Minister will know from previous debates that I am not one who fully likes "The Glory of the Garden". I accept that it was probably better than nothing as a regional policy, but although its critique that too much money was being centralised on London was correct, its remedy and treatment were faulty. There is a danger that it will simply recreate in the centres of excellence the same imbalance regionally as hitherto there was nationally.
  There must be a dimension to "The Glory of the Garden" for rural areas, arts centres, diversity and touring, which did not have a look in in that document. However, I accept that it is the right direction for the Arts Council, if the wrong specific development. If the Arts Council is to suffer a cut in real terms yet again, that policy will probably have to go as well.
  The Minister attempted to make us believe that everything was fine with funding for metropolitan counties. That is not true. Because of the work of local authorities—and no thanks to the Minister—the damage from abolition that could have been wrought on the arts has, for this year, been prevented to some extent. I welcome last week's agreement with Merseyside city council about funding. However, the Minister must acknowledge that even that agreement will leave half a dozen clients—for example, the Philharmonic hall—with a shortfall of funds.
  The Minister's idea that everything is fine on Merseyside and elsewhere is simply not true and he knows that because he is a fair-minded man. The situation may not be so bad as some of us feared, but that is thanks to the local authorities. All is far from well this year and the impact of abolition for the metropolitan areas in 1987–88 will be grim indeed. Is it true that the Arts Council funds to address the problems of abolition in 1987–88 are to be tapered from £25 million to £21 million? Is the Minister still asking local authorities to find £4 million more, and how does he intend to resolve that problem? Will he urge his right hon. Friend the Secretary of State for the Environment to release local government from its financial constraints so that it can address that and the many other problems facing it?
  There is one further specific point to be dealt with in this catalogue of questions about the Arts Council. Will the Minister side with the Arts Council in its attempt to get a fair deal for visual artists and photographers who, in my view and that of experts who know far more about the subject than I do, are being put in a highly invidious position by the Government's failure to ratify and implement the Berne convention. As I am sure the
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  Minister knows, counsel's opinion is that section 4(3) of the Copyright Act 1956 is in contravention of the Berne convention and is enormously to the prejudice of visual artists and photographers. Will the Minister join the Arts Council in putting pressure on the Department of Trade and Industry to resolve the matter and to ensure that new legislation equalises the position and brings it into line with the Berne convention? I think that that will cost the Minister nothing, but the arts world, and especially the visual arts, will be extremely grateful.
  To return to my central point about the funding of the Arts Council in the metropolitan areas, the whole thrust of expansion of the arts in those areas has been lost. The money may have been saved, but the enormous drive that those authorities — as bodies as well as funding organisations — to expand the arts in those areas has been lost, together with the impulsion towards new audiences and new ways of looking at arts provision and further expansion of arts content. The metropolitan authorities and even the GLC had only begun a process that must continue for the good of the arts world. They gave a brief glimpse of the kind of arts culture that would benefit this country and reflect all aspects of life in this country, an arts culture that would reflect in our cities and rural areas the views, aspirations and ideals of minorities as well as wider communities, of those who dissent from what the Government are doing as well as those who applaud it, those who are suffering under the Government as well as those in other parts of the country who are prospering, those who are angry at what is happening in our society and wish to change it as well as those who are content. The arts policy of the metropolitan counties allowed that variety of expression and that kind of vision of the world in which we live, and that is what the arts should be doing.
  The metropolitian counties were also starting to increase the audience for the arts as well as training in the arts, but there is a great deal more to do. I am sure that the Minister, like other hon. Members, will have received letters from constituents who have enormous talent, or whose children have enormous talent, but cannot go to the drama, dance and music schools that they need, and to which the country needs them to go, because they can no longer obtain discretionary awards. Some of the most frustrating and tragic constituency cases involve young people with talent, ability and great enthusiasm whom local authorities are having to inform that there is no money for discretionary awards so they cannot help them develop into dancers, visual artists or actors. The Government are saying, "If you have money, fine, you have a chance to develop. If you have no money, tough luck." That is not fair to the individuals. It is not good for the arts or for the country that such talent should be wasted. What does the Minister intend to do to address the question of discretionary awards and in-service training?
  Mr. Simon Hughes: The hon. Gentleman's remarks are pertinent to me because recently I was told about a 12-year-old who is an excellent dancer with a wonderful pedigree and background but who is unable to obtain the funding to go to the only place in Britain to give her a chance of a career as a dancer. The problem affects not only teenagers and young adults, but the very young. Other countries which attach importance to culture ensure that young people with talent are supported.
  Mr. Fisher: I agree. Such young people will not necessarily be Nureyevs, David Hockneys or Janet Smiths, but they should be allowed to develop their love of and interest in the arts and to provide the basis of the new audience which will comprise not only middle class people with an enriched education or people with a home background that widens their appreciation, but be a wider and new audience. To some extent local authorities were helping to develop that wider audience. I hope that the Government will examine seriously the possibility of imposing a mandatory rate so that all local authorities will be able to take the arts as seriously as the metropolital authorities took them.
  We must consider the importance of the rural areas. We must establish arts centres in such areas and encourage touring dance and drama groups, large and small, to perform before expanding audiences. We must target interest on the neglected sectors and potential audiences.
  I am thinking of the ethnic minorities and the rich mutual exchange of arts culture and arts dialogue. The new and wider audiences will come from the young through theatre and dance in education, artists in residence and writers in schools. Arts education must be built into the core curriculum and should be part of the core teacher-training curriculum. It is important that primary school teachers in particular have an understanding and love of arts teaching.
  The excellent Gulbenkian report lies on the shelves gathering dust because of lack of funds. That is a tragedy. The majority of young people experience no educational drama. In some secondary schools they have that opportunity, but the majority of secondary schools are not able to offer such education. The majority of young people experience no dance education. The visual arts are crammed in with design technology, which is an insult to the worthy elements of a curriculum.
  Children leave school without confidence in their ability to think or express their feelings through creative writing. The awful truth is that many young people leave school without visiting the theatre, a museum or a gallery and without having been to a dance performance or concert. They have never even been given the taste of the possible horizons. The Minister might find that hard to believe, but it is true throughout the country.
  The Minister should address the neglect of young people which will make it impossible to create the wider audience. There is no sense in what the Minister is doing. The arts are central to life and to the life of our young people. The arts are important in terms of how we see our world and how we interpret it, to the stories that we tell ourselves and to the way in which we help each other to look at the world around us. They are important to the way that we open our eyes and express ourselves. All that is important to our young people and to the health of our society. Unfortunately, the Government are doing little to expand the waiting audience that could be benefiting in so many ways. It is sad that the Government lack the necessary vision. It was certainly not apparent in the Minister's speech, well intentioned though he is. If the Government have a policy, it tends to be one—this is the view that is expressed by Conservative Back Benchers rather than by the Minister—that is based on the arts being a placebo. Conservative Members regard the arts as a source of pleasure and decoration and, possibly, even a distraction from the problems that face our society, but that is not enough for the arts. The arts must be much
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  more than that. They must be challenging. They must extend our vision and make us question and reflect on our life, our culture and the way in which we interact. The arts must concentrate our minds and thoughts rather than distract us. That is a vision for the arts that the Government lack.
  Serious though the underfunding and under-resourcing of the arts are, it is a fact that we have a Government and a Minister with responsibilities for the arts, well- intentioned though he is personally, who lack the necessary vision. That is why the arts arc in crisis. That is why artists throughout the country are despairing. Incidentally, they are waiting with impatience for the next general election so that they can vote for a Labour Government who will have the necessary vision and will provide the funds to implement it.
  1.56 pm
  Mr. Harry Greenway: I could not possibly go down the same road as the hon. Member for Stoke-on-Trent, Central (Mr. Fisher), especially as it led to an absurd and unacceptable conclusion upon which the nation will repudiate him within two years of this moment, or thereabouts.
  The hon. Member said that when many children leave school they are unable to express themselves through creative writing. That is an extravagant claim. If children leave school with that inability, that must be the result of bad teaching. There has never been a time when there has been a richer culture for our children. Some television programmes, for example, are bad and crude, but many of them are extremely rich. Children are able to pick up much from television as well as from reading.
  Mr. Fisher rose——
  Mr. Greenway: The hon. Gentleman spoke for 26 minutes and I believe that I should be allowed to continue uninterrupted.
  I am currently marking 500 or 600 English language examination papers at O-level or above. They include some most interesting and imaginative essays that are full of highly creative writing on all sorts of topics. They come from all parts of the country, including deprived areas, the hon. Gentleman's assertion is bunkum.
  It has been tedious to listen to a catalogue of woe from the Opposition Benches, including those occupied by the Liberal and SDP parties, which has been directed only to money. It seems that Opposition Members have no concept of the content of the arts, no concept of the joy of beholding a piece of sculpture, reading a fine book or watching a fine film. There is none of that concept on the Opposition benches.
  Mr. Fisher: Rubbish.
  Mr. Greenway: As I have said, I listened to the hon. Gentleman for 26 minutes and I have a right to make my contribution.
  The danger of the Opposition's approach is to undermine the role that individuals and groups of individuals can play. It is all very well to sit back and feel good because millions of pounds of other people's money are being spent on the arts, but individuals want to make their own contribution to the arts according to their means as well as to other things. The Opposition are wrong to overlook that attitude and to dismiss it.

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  It will be recalled that £71 million of the former GLC's money was redistributed to the London boroughs recently, including Labour-controlled boroughs. For example, £4·2 million was received by the London borough of Ealing. Not one penny of that sum has gone into the arts. That was a windfall if ever there was one for that borough, and other boroughs had similar windfalls. That is true right across London. It is dreadful that none of the money has been directed to the arts.
  I know the hon. Member for Heywood and Middleton (Mr. Callaghan) well and regard him highly and I am sorry that he is not in his place. I was surprised by his assertion that the museums are charging. The hon. Gentleman sat with me on the Select Committee on Education, Science and Arts. We heard the Minister—he is in his place today—say to that Committee only a few weeks ago that contributions to museums were contributions only. They were made voluntarily. It was additional money for the work of the museums and would never become charges under the Government. The hon. Gentleman said that they were charges and that the Government had something to answer for. He was not even-handed when he said that.
  Recently, in written and oral questions, I asked about the future of the Sadler's Wells theatre. I ask my right hon. Friend in his response to the debate, to reiterate the Government's commitment, in principle and morally, to the Arts Council and to the work of Sadler's Wells, which is greatly appreciated in London and elsewhere. On more than one occasion recently, Sadler's Wells has found itself threatened with possible closure. If that theatre feels that it has the moral support of the Government, the Arts Council—in terms of cash—the support of the public. which unquestionably it has, the support of industry, business, and so on, it can have confidence in its future. I am sure that the theatre has a rich future and that it is appreciated by hon. Members.
  My hon. Friend the Member for Dulwich (Mr. Bowden) referred indirectly to newspapers and magazines. There is no greater expression of the nation's ability to read, write, think, argue, discuss, debate and develop points than our diverse newspaper industry. That includes magazines and the rich background of book writing and pamphleteering. Newspapers and magazines on tape are available for the blind and the elderly. If the elderly can no longer see they can listen to tapes.
  Newspapers have always been available in public libraries in this country for anyone wishing to read them. They are available in the Library of the House of Commons. The newspapers available and distributed in libraries have always included way out publications, from my point of view—it may not be everyone's point of view — such as the former Daily Worker and the Morning Star of today. Such newspapers are dedicated to undermining our political system.
  Sadly, many Labour authorities are banning The Times, the Sun and other National Union of Journalists newspapers from libraries which, after all, are run by public funds. That deprives those who wish to read newspapers of their right to do so. The Labour party must face the fact that that is censorship of a serious and unacceptable kind. The country is disturbed about it. A council in Ealing has banned newspapers from Ealing's
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  libraries which have been available for generations. The public, some of whom voted Labour, are up in arms about that, and rightly so.
  If it is the duty of the House to support the arts—that includes one's right to read what one wishes and one's right to say what one wishes, within the law—it must follow that it is outright censorship and downright aggression by the Labour party that newspapers should be banned. The Labour party must face the hard word censorship, which it does not like.
  If such action increased and if newspapers such as The Guardian and The Observer were banned, we would be reduced to a Russian position, where people are allowed only to read Pravda. That is a logical conclusion to what the Labour party is doing in many boroughs.
  If Labour local authorities take it upon themselves to censor newspapers and magazines, the Government have a duty to preserve freedom of speech. I hope that my right hon. Friend the Minister will exercise the powers which I believe he has under the Public Libraries and Museums Act 1964 to order those local authorities to ensure that The Times, The Sun and the other publications which have been banned in that Fascist manner are restored to libraries.
  Freedom of speech is fundamental to the life of the nation. When it is attacked, as I have described, the House has a duty unremittingly to keep the matter before the nation. Conservative Members will continue to do that. We are not concerned with what is happening at Wapping. That is a different issue.
  Mr. Buchan: It is not.
  Mr. Greenway: It is a different issue. The central issue is a man's freedom to read and to speak. I shall not go into the rights and wrongs of Wapping, because that is another matter. It is outrageous that the Labour party allowed it to happen and condoned it in the House. I hope that Labour Members will change their minds and support freedom of speech, as they have always done.
  2.6 pm
  Mr. Buchan: By leave of the House, Mr. Deputy Speaker, I should like to pick up the last point made by the hon. Member for Ealing, North (Mr. Greenway). I shall fight side-by-side with the hon. Gentleman in defence of the presence of publications in libraries, so long as he will join with me in condemning the monopoly whereby about three people, including Murdoch and Maxwell, dominate the press. That is infinitely worse than any censorship exerted by any local authority. We have fewer newspapers than any other major country. There are aspects of expression and ideas which are not reflected by the press. There is a monopoly by the class supported by the hon. Gentleman. I shall go along with the hon. Member for Ealing, North to defend publications if he will join me in my condemnation. I have said that publicly; let him say the same.
  Will the hon. Member for Ealing, North, come with me to see the major wholesalers—Menzies and Smith—and insist that they offer at every outlet every journal published in this country? If he does, I shall go with him on a deputation to his local council in relation to the local library. I shall leave it at that, unless the hon. Gentleman says yes.
  A number of valuable points have been put forward but I have to concentrate on only a few of the main themes.

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  I should like to pick up a point raised by my hon. Friend the Member for Stoke-on-Trent, Central (Mr. Fisher), supported by my hon. Friend the Member for Newham, North-West (Mr. Banks), on abolition. We are concerned not just with funding but with the fact that the abolished local authorities were those that had given us a vision of the type of developments that can play a part in the arts. One of the greatest tragedies for the arts has been the fact that abolition is destroying those local authorities.
  Conservative Members claim that there has been full restitution of funding. On the contrary, there are two major aspects where there is still a calamitous and potentially dangerous situation. There are not only the half a dozen companies to which reference has been made but the other groups, about which we do not hear, which would have received support from local authorities, if moneys had not been salted off to make the restitution. Local authorities, regional arts associations and the Arts Council have found the funding, on top of the Government's initial amount, for the bodies that were put at risk, but it has meant that that amount does not go to the rest of the arts. That is an important point.
  My hon. Friend the Member for Newham North-West referred to some of the minor groups about which we have not heard. We have heard about Sadler's Wells, but we have not heard about the consequences for other organisations which have been put at risk because their money was necessary to save Sadler's Wells. That is the crucial point.
  The other aspect is that the Government's funding was desperately short. It was £10 million short by the Arts Council's second calculations but it was £19 million short in the total calculations because £9 million should have come from major capital projects which the Arts Council said it could not cope with. By my calculations the funding was between 14 per cent. and 16 per cent. short. That is the truth about abolition and it is no use the Government or the Minister saying anything to the contrary.
  Another aspect of the debate is the economic case for the arts. I want to stress three points which I think have been minimised by Conservative Members. It is not a case of the Government somehow generously dipping into pockets and giving out — the donation concept that Conservative Members have mentioned. The hon. Member for Ealing, North complained that we are always talking about money. He asked why we could not lift our eyes to higher things than money. I have noted that it is those people who are well-heeled who are always talking about other people raising the question of money.
  Mr. Greenway: I am a teacher.
  Mr. Buchan: The hon. Gentleman is as well-heeled here as I am. That issue was reinforced by the Bernard Levin article, which has been referred to. Bernard Levin was talking about working men, and trade unions. He said why cannot they raise their eye from the trough
  "to those areas of life which cannot be measured in terms of cash, but which constitute the reason for living? When? Not, to be sure, while the Labour Party is led by men like Michael Foot, and Neil Kinnock nor while the TUC is represented by men like Norman Willis.
  He dared to talk about Michael Foot, Neil Kinnock and Norman Willis in connection with the trough. We have a poet as the General Secretary of the TUC. We should be pleased about that. The truth is that the Government have made an absolute apotheosis of the trough. They say, "Get
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  into the trough and take the pickings," and "Get on your bike and look for jobs." They say we should invest and ban exchange controls, and let investment go where it will. The Government have made a positive idol of the trough. Working men who have to struggle should not be dealt with in this way.
  I want to deal with the real economic case for the arts. I will talk about the trough because people require jobs. In the arts we have a group of people who are among the worst paid and suffer longer periods of unemployment than almost any other section and who often work in the worst conditions. In fact, the arts are not receiving donations; they pay for themselves. The National Campaign for the Arts shows that value added tax returns £140 million to the Exchequer. That is more than the amount of money coming into the arts from the Arts Council. The arts in this country are self-funding and they are magnificently more than that in relation to the amount they contribute to the general economy of the country through tourism. Were it not for tourism and North sea oil, under the Government we would now be in a terminal condition in relation to our balance of payments. That is the contribution the arts make. We should not talk about spending on the arts because it is a crucial investment for the whole economy of the country.
  Mr. Simon Hughes: I wonder whether the hon. Gentleman will accept and reinforce to the Minister the point that in areas of great deprivation, such as my area in the docklands of London, instead of the money and profits going into a sector which does not benefit the local people, we could do much to promote the extension of the South Bank into the docks. There are many young people looking for training and work in the arts, and opportunities in places central to our capital city would bring tourism, revenue and artistic progress. That is what we should be promoting in the docklands, not the capital profit that is made by developers of office blocks, which will have no benefit for local communities.
  Mr. Buchan: What the hon. Gentleman says about the South Bank and the docklands is true of the economy as a whole.
  Let us look at the scale of the arts. About 200,000 to 250,000 people are in broadcasting. About 200,000 people are in printing, the press and publication—the written word. About 70,000 are involved in the popular music industry—in recording, as artists, producers and so on. We are dealing with a major industry. Broadcasting alone is bigger than the whole computer industry, about which we hear so much. So we are dealing not with small dollops of money to a small group of people, but with the necessity for more investment to a very large section of our community.
  The arts pay. The Government's method of creating jobs is to make tax cuts. We say that there should be direct investment in jobs. One area should be the arts. Through tax cuts, it costs about £47,000 a year to take someone off the dole. It takes just over £2,000 to take someone off the dole through investment in the arts. At one thirteenth of the cost, we begin to get jobs back, so the arts pay for themselves. They are self-funding and massively productive in the economy.
  I should love to have gone into the Shakespeare business, but I am afraid that I cannot because I am short of time. However, I shall deal with three specific points.

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  The first is the Roundhouse. We should like the Minister to give us an assurance that he will come forward, if not with the £8 million that I think he should for the whole of the black community in this country, at least with the £1 million, so that a start can be made on proper production there.
  Secondly, I refer to the squeeze on the universities and its effect on university museums. I have had discussions with directors of most of the university museums. I hope that shortly I shall he able to say something more publicly. But I recognise that they are public institutions as well as university institutions. The task is how to give assistance while still retaining the relationship with the university. We take the point on board.
  Finally, I refer to charging. The Conservative party, which says that we should not keep talking about money, is the very party that has been squeezing our museums and galleries so that they are being forced into charging for admission. I shall refer to the irrelevance of the term "charging" in a moment. The Conservatives encourage that by saying that the museums will keep the money that they make. But it would be easier for a poor man to enter the Kingdom of Heaven than for him to squeeze his way between the cash desks at the V and A without the embarrassment of paying. There is a world of difference between erecting a sign at the exit, as is done at the Burrell, saying, "If you have enjoyed this museum would you like to contribute?", and having two girls at cash desks with a narrow space between, through which working people have to pass. We have seen from the figures that some people turn away. It has not helped attendences, and there is no excuse for it. We should be encouraging admissions.
  If ever there was a sign of the bankruptcy of ideas and spirit in relation to the arts, it is the fact that one of our major institutions has had to depend on American benefactors to bail it out, to its shame, and that one of our national institutions has introduced charging, not even honestly and openly as direct charging, but as a voluntary contribution. That is all done under the benevolent gaze of this torpor of a Government.
  2.18 pm
  Mr. Luce: With the leave of the House, I shall seek to answer some of the many points raised in the debate in a short time. Unfortunately, that means that I have to disallow myself from referring to a complimentary reference in Shakespeare — after all, this is a debate about Shakespeare — to a wonderful character called Luce. However, I shall not take up the time of the House on that score.
  I listened with care to what the hon. Member for Paisley, South (Mr. Buchan) said and to the forceful speech by the hon. Member for Stoke-on-Trent, Central (Mr. Fisher). He feels passionately and strongly, as does the hon. Member for Paisley, South, about the arts. But when he accuses me of lacking vision, that is below his normal standard. He really means that people can have vision only if the state does everything for the arts. That applies to other walks of life. Simply because I have a genuinely different approach from the hon. Gentleman —I respect his views—it is unfair to accuse me of not having vision. Yes, I have vision, but it is of a different scale and nature to that of the hon. Gentleman.
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  Before I reflect upon the two speeches of the hon. Member for Paisley, South, may I respond to some of the excellent remarks made by my hon. Friends and others. My hon. Friend the Member for Dulwich (Mr. Bowden) mentioned the importance of diversity in the arts. That goes to the heart of one of our great differences of opinion with Opposition Members, who constantly say that they do not oppose sponsorship, the Budget changes or museum recipts measures, yet at the same time try to disparage them. The strength of the arts depends upon diversity, not only in funding but generally, and upon not assuming that central Government should interfere in every aspect.
  My hon. Friend the Member for Twickenham (Mr. Jessel) made an excellent speech and raised many issues, many of which related to his constituency. I fully endorse his comments, especially about the importance of tourism and the contribution that the arts can make to tourism.
  My hon. Friend the Member for Ealing, North (Mr. Greenway) made a distinctive speech and mentioned Sadler's Wells. I repeat that I agree entirely that Sadler's Wells is a great centre of excellence. I am glad that the Arts Council has played its part in funding it for this Financial year, along with a great diversity of funding from sponsors and other sources. That has provided a solid base, and we can look to the future with confidence.
  My hon. Friend the Member for Cambridge (Mr. Rhodes-James), who could not be a better Member for that great university town, does great service for that city. He spoke strongly about the university museums and highlighted the Fitzwilliam museum. I note carefully what he said, and I respect the work of the great university museums. I shall take into account his important remarks on that score.
  My hon. Friend the Member for Welwyn Hatfield (Mr. Murphy) mentioned the importance of marketing and sponsorship. I agree with him, but I pay tribute to his work in the Council of Europe in promoting many of the Government's policies and thoughts about the arts.
  The hon. Member for Newham, North-West (Mr. Banks) raised many points. He especially probed again about the Roundhouse. I sought to answer his questions at Question Time the other day. but he asked me whether I would consider meeting representatives from the Roundhouse. I am prepared to do that, as long as he understands that the Arts Council will provide the money to fund the transitional period. I shall listen to their views.
  The hon. Member for Heywood and Middleton (Mr. Callaghan) mentioned the policies, which have been confirmed this week, to remove some of the obstacles to museums raising extra revenue. He suggested that that is a back-door method of forcing museums to introduce charges. I must take the opportunity to refute that. The Government's policy is to leave it to the discretion of the trustees of museums— who after all know the position best and can judge whether it is right and will easily generate extra revenue, and enable them to improve their services—to introduce charges or voluntary donations. It is entirely up to the trustees and no part of my policy to try to force the issue.
  The Select Committee on Education, Science and Arts recommended unanimously in 1981–82 that we should remove some of the obstacles to revenue-raising. The decision in line with that should be broadly welcomed by the museums and galleries.
  Mr. Greenway: Will my right hon. Friend give way?
  Mr. Luce: I have very little time and I must not give way if I am to be fair to other hon. Members.
  The right hon. Member for Blaenau Gwent (Mr. Foot) made a powerful speech and focused on the Byron Society and asked me to take an interest. He gave me notice that he could not be here for the winding-up speeches, but I assure him that I shall take a close interest in the arrangements for the 1988 celebrations of the 200th anniversary of Byron's birth.
  The right hon. Gentleman then led me down an avenue towards Melina Mercouri and the Elgin marbles. The Government's stance is quite clear and oft-stated. We have replied to the Greek Government. I understand that, if it is ever returned to power, the Labour party will return the Elgin marbles. Has it thought the matter through properly? The marbles are important, but they are not unique. There are other great and marvellous collections of Syrian and Egyptian material for example. Do the Opposition realise where the precedent of returning the Elgin marbles would lead'? I wonder whether they have thought it all through.
  The hon. Member for Portsmouth, South (M r. Hancock), who also gavenotice that he could not be here for the winding-up speeches for good reasons, confirmed for me the confusion that still exists in the so-called alliance. I was not clear whether he was for the arm's length policy or against it and I became even more confused when I listened to him.
  The hon. Member for Cambridgeshire, North-East (Mr. Freud), my hon. Friend the Member for Arundel (Mr. Marshall) and others mentioned VAT. I note what they said. It is part of the wider Government policy on VAT and indirect taxation that VAT should be as broadly based as possible. Hon. Members know that the Government have introduced other tax incentives to try to help the arts.
  My hon. Friend the Member for Arundel does a great deal for the west end theatres and I was glad to meet the
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  Society of West End Theatre. I have noted the additional arguments that he made and I shall try to respond in more detail by letter.
  I hope that I have now responded to all except the hon. Member for Paisley, South. His speech bore out everything that I said at the beginning. However sincere he may be, he is in the habit of being a prophet of doom. Of course there are many problems, but he will not acknowledge that there are good things in the arts world. It is far more difficult for me to give credibility to what he says and to what the hon. Member for Stoke-on-Trent, Central says if they do not pay some tribute to the good things that are happening.
  The hon. Member for Paisley, South must understand that the policy that he is adopting towards the Arts Council, which has been supported by successive Governments, would undermine it and the principle of the arm's length policy. If the hon. Gentleman were Minister with responsibility for the arts, he would increasingly take decisions about the disposal of funds. That would mean more centralisation.
  I must also consider the difference in approach and philosophy towards the public and private sectors. The hon. Member for Paisley, South believes that arts funding should be done by the state, 'whereas I believe that there should be a partnership between the state and the private sector. With the right framework, tax measures and encouragement—not just sponsorship, the Budget and the receipts policy for museums — we shall create an environment in which the private sector can play a much more positive role in increasing funding for the arts. That is what we all want, but we differ in our philosophy and approach. The hon. Gentleman believes that the state should do everything, whereas I believe that the strength of the arts is in its diversity. It has become evident during this excellent, admirable debate in which many hon. Members have participated that our approach is different in that respect, and the Government feel strongly about it.
  It being half past Two o'clock, the motion few the Adjournment of the House lapsed, without Question put.

  Film and Television Industry (Scotland)
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Maude.]
  2.30 pm
  Mr. Jim Craigen: As we have debated the arts all morning it seemed timely to have an Adjournment debate on the film and television industry in Scotland. In many ways television and film as media bring the possibility of museums, galleries, theatre, ballet and opera into the living room for the majority of the population. Indeed, in some respects they encourage attendance at them.
  When I applied for the debate I entitled it, "Expanding the film and television industry in Scotland", but somehow the "expanding" got lost on the Order Paper. I mention that because someone asked me whether there was a film and television industry in Scotland. There is commercial ITV, BBC Scotland and the independent sector, which has been a growing segment of the industry. It is essential that in future years the reply should not be, "There was an industry, but it has gone."
  Scotland has had a tradition of documentary film making since the 1930s with the work of Dr. John Grierson who subsequently left for Canada but returned to Scotland in later life. The Scottish Film Council has already celebrated more than half a century of existence. I was pleased to note that Charles Oakley, a founder of that council, was this week given an honorary doctorate. My hon. Friend the Member for Monklands, West (Mr. Clarke) worked with the council, although I doubt whether he was even a twinkle in his parents' eye when it was set up in 1934.
  The film and television work in Scotland is both recognisable and capable of greater creative and technical achievement. It has talent which wants to work in Scotland and with that ability to look beyond Scotland. I understand that at present the talent in the independent sector is working at only half capacity.
  The film work of Bill Forsyth readily comes to mind, and includes "Gregory's Girl", "Local Hero" and "Comfort and Joy". I must confess a special liking for "That Sinking Feeling" which also included scenes shot in the Maryhill area. Charles Gormley's film "Heavenly Pursuits" was Channel 4's main entry to this year's Cannes film festival.
  The independent sector is growing, and there are possibilities for ITV production in Scotland, and for BBC Scotland, if it were given its head. This year the Scottish Trades Union Congress at Aberdeen had a motion from the Association of Cinematograph, Television and Allied Technicians introduced its general secretary Alan Sapper and seconded by the Scottish actor Phil McColl. It called for the generation of major new funding to underpin film and television development in Scotland.
  I do not know whether the Minister is aware of subsequent STUC general council follow-up on the development of the industry. Ministers constantly talk about growth in the service sector. No doubt they do so in order to make up for the tremendous contraction in manufacturing capacity. At one time film production was regarded as part of the manufacturing sector, but in more recent times it has been linked with the service sector.
  This branch of entertainment may not be a substantial employer although it is a significant employer as well as
  1378
  being a good overseas earner. If Scotland was used more often as the location for productions, it might give a significant boost to the local economies.
  On 25 March 1986 the Independent Programme Producers Association in Scotland gave a presentation in the House. Robin Crichton, the chairman, and John McGrath, the vice chairman, spoke about the problems of access to broadcast television outlets in Scotland, including Channel 4 which is at present the sole domestic outlet.
  I said on Second Reading of the Bill setting up Channel 4 that
  "One of the strengths of ITV I was that it has been able to take account of regional distinctiveness…in various parts of the United Kingdom." — [Official Report, 18 February 1980; Vol. 979. c. 118–119.]
  I was keen that Channel 4 should not be seen as some monolithic enterprise and that it should encourage existing Scottish commercial companies, such as STV, Grampian or Border, which has one leg in Scotland and the other in the north of England, to make a bigger contribution to the ITV network, including Channel 4. Although Channel 4 has opened up possibilities, because well over 10 per cent. of its audience is in Scotland, independent producers complain that they had only 12 hours, or 1·5 per cent., of Channel 4's total production time last year. They contrast their case with what goes on in Wales. There is a marked difference, although the existence of the Welsh channel makes the comparison less straightforward than it might seem.
  When the chief executive of Channel 4 opened Picardy Pictures, an independent broadcast facility based in Edinburgh, at the beginning of the year, he said that some £50 million had been commissioned in the independent sector last year. He was quoted in The Scotsman of 31 January 1986 as saying that
  "We would like to spend a proper proportion of that amount in Scotland."
  He made the point that he commissioned solely on merit. I concur with doing that. However, we must try to remove some of the obstacles that prevent a better and fairer spread of productions throughout the United Kingdom.
  The film-making industry is largely based in and around London. However, Scotland has the largest number of independent producers working outside the metropolis. Indeed, there is a need to develop post-production facilities so that there is less reliance on London. There is also a considerable video market potential. Many firms are concerned to brush up their corporate images and to promote their public relations. It would be interesting to know whether the Scottish Office, and even the Scottish Development Agency and some of the other public bodies in Scotland are still having to send much of their promotional and advertising work to London. Even lawyers' work—and I know that this will please the Minister—could be done in Scotland, and contracts could be drawn up in Scots law, although I accept that there may be a shortage of media law specialists.
  I mentioned scope for ITV and BBC. Indeed, STV put up half of the finance for "Gregory's Girl". The series "Held in Trust" must surely have given Scottish tourism a boost. Grampian with its series on oil, commissioned for Channel 4 and co-produced with Norwegian television, provides another example of what can be done in Scotland. It was something of an indictment that it took

  1379
  Harlech television and a German co-production team to screen Robert Louis Stevenson's "Kidnapped", with a German actor in such a self-evident Scottish story.
  Currently, we are awaiting the Peacock report. It would be disastrous if the BBC was in any way reliant on advertising. We heard about some of the problems of sponsorship of the arts during the previous debate, and it would be damaging if the unique reputation of public service broadcasting were to be eroded. It would also not be good for the commercial sector.
  Since the lobby in March, meetings have been held with ITV and IPPA, which have resulted in the setting-up of a working party under the aegis of the SDA to examine ways in which broadcast productions might be rationalised and integrated to a greater extent. It is examining the possibility of establishing a Scottish screen commission that could act as a distributor marketing overseas Scottish facilities, technicians and locations to attract inward investment. It could also operate as a production fund to top up investment in Scottish production to enable producers to retain their distribution rights and maximise potential overseas sales.
  The various sectors of the industry in Scotland would, of course, retain their independence and individuality. A Scottish screen commission would give sufficient strength and stature to maximise the opportunities offered by the new international markets that are emerging and are likely to emerge in the 1990s.
  The attraction of such a commission, if it can be proved economically feasible, is that it will bring together the various sides of the industry and the financiers, so that they can move towards a better base to exploit the opportunities offered by expanding markets and technologies, as well as marketing Scotland internationally. I understand that the working party includes Alistair Hetherington as chairman, Bill Brown of STV, Justin Dukes of Channel 4, Alex M air of Grampian, and may be joined by Jim Graham of Border. The SDA will provide the business development role.
  Robert Crichton, the chairman of IPPA in Scotland, has been in touch with the Secretary of State. I have a copy of a letter from the right hon. Gentleman's Private Secretary to Mr. Crichton, stating:
  "Mr. Rifkind has read the paper with much interest and is sure that it will prove a useful basis for discussions with the Scottish Film Council and the Scottish Development Agency."
  That typifies the right hon. Gentleman's skills of advocacy. I hope that today the Minister will assure us that there is positive Government backing for the initiative.
  The role of the Scottish Film Council is very important. Recently I talked to its assistant director, John Brown, about the work of the Scottish Training Trust —something that has been praised in a number of quarters —and the Scottish Film Production Board, which is a useful form of funding. However, it deals with limited finance even though the Fund is now supported by the Scottish Arts Council and Channel 4.
  The Minister may be aware that cinema attendances in Scotland are proportionately higher than for the United Kingdom as a whole. No doubt he will wish to comment on educational broadcasting, in which the council plays its role, and where there have been a number of significant improvements.
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  When referring to a Scottish screen commission, I do not mean Holywood spectaculars that can fall flat on their faces. Indeed, Charlotte square — the home of many finance companies and merchant banks in Edinburgh— contributes quite a lot through investment packages towards the success of both British and American films.
  It would be useful to achieve greater interest arid support for low budget and thus low risk film production in Scotland. I do not know whether the Minister saw arty of the series of Australian films shown on television here, but that comparatively new film industry received a considerable boost when the former Australian Prime Minister on a visit to the United States saw that an Australian film had actually made Time magazine. Mrs. Thatcher is a liberal by comparison with that former Australian Prime Minister, but when he went back he ensured that his country's industry received a boost.
  I am disappointed in a sense that the Minister with responsibility for industry and education in Scotland cannot be here as I gather that he has had informal talks on the subject, but the Minister with responsibility for local government and environment is the duty Minister today and will doubtless pass on all that has been said —I thought at first that it was because he missed my keeping him on his toes when I was Opposition spokesman on Scottish affairs and felt the need to come back for more.
  I hope that in reading his Scottish Office brief today he will give political support to the concept of a Scottish screen commission which is so necessary and let the forces of autosuggestion get to work at the Scottish Office. I do not mind if the Secretary of State comes along in three months or six months with this brilliant idea and says that he is all for it because I believe that it will be very good for the industry.
  The Government White Paper on film policy, Cmnd. 9319 published in July 1984, stated:
  "A film industry can be a matter of great national pride. And through its ability to project the national culture…it can thus enhance a country's international standing."
  Encouraging and facilitating the film and television industry in Scotland could produce considerable spin-off opportunities for the economy, opening up new opportunities in other spheres.
  The Minister should be aware of some of the fresh inspiration that came into the industry in Scotland following the conference on Cinema in a small country held in Edinburgh more than a decade ago. We now need the political imagination to encourage and facilitate that which already exists and go on to achieve much more in this area of entertainment, employment, culture arid education. As I said at the beginning, the industry's output is an immense part of our culture and education and has a broad appeal which I hope the Government will encourage.
  2.48 pm
  The Parliamentary Under-Secretary of State for Scotland (Mr. Michael Ancram): I begin by congratulating the hon, Member for Glasgow, Maryhill (Mr. Craigen) on raising this important issue today. I listened carefully to his speech, especially the part in which he became an adherent of the principle of auto-suggestion, a subject about which we shall no doubt hear more from him in the future.
  It is timely to debate the film and television industry in Scotland, when so many exciting developments have taken

  1381
  place or are in prospect. Before dealing with the specific issues raised by the hon. Gentleman, I should place on record the Government's continuing support for the development and growth of a healthy and viable commercial film sector in Scotland and the continued development of broadcasting provision geared to the needs of the community.
  Perhaps one of the most striking examples of the growth in confidence and enterprise in Scotland in recent years has been the emergence of a dynamic film industry with a distinctive style and the capacity to achieve box-office success. Not so long ago mention of Scottish films would have conjured up images of "Brigadoon" or "Whisky Galore", or of tartan westerns featuring Rob Roy and Bonnie Prince Charlie. Then, as the hon. Gentleman said, Bill Forsyth came along and demonstrated that good movies can be made by Scots, about Scots, in Scotland. The triumphs of "Gregory's Girl" and "Local Hero" have been followed by a series of low budget productions which show that Scottish film-makers are a force with which to be reckoned. Among the more notable recent successes are "Living Apart Together", "Restless Natives" and "The Girl in the Picture". They are only the tip of an expanding iceberg.
  The Government's view is that the prospects for the industry will ultimately depend upon the efforts of all those who work in it and on the industry's ability to produce good quality films that people want to see.
  One of the primary objectives of the Films Act was to rid the industry, and cinemas in particular, of unnecessary Government burdens and to help lay the foundations for the development of an industry which is free to make decisions on the basis of its own commericial interests. So, in May 1985 the Eady levy on cinemas was abolished and the legislative basis for domestic film quota was removed, along with the requirement for cinemas to be licensed.
  The abolition of the Eady levy led the Government to re-assess the valuable investment role played by the National Film Finance Corporation in encouraging newly merging British talent. That role has been taken over and enhanced by the new private sector body, British Screen Finance Ltd. to which the Government are to contribute £2 million a year for the next five years. BSF began its operations in January this year and has already committed funds to a number of projects.
  The Government's financial support for the industry is not limited to their contribution to BSF. Substantial sums are made available to the British Film Institute, to the Scottish Film Council and to the National Film and Television school. In addition, the Government contributed £325,000 to British film year, the success of which was, by all accounts, most encouraging.
  Following a seemingly inexorable decline, cinema admissions have shown a marked increase, accompanied by a substantial refurbishment and new development in the exhibition sector. We hope that an industry, now freed from anachronstic Government burdens will be able to build upon these foundations.
  The Scottish Film industry has felt the need, since the late 1970s, for the creation of an investment fund to provide Scottish film makers with the opportunity to raise a substantial proportion of feature film production costs north of the border. The hon. Gentleman mentioned that in particular.
  1382
  While the Scottish film production fund has been able to make a small contribution in this area, a much larger fund, backed by the commercial sector, would be required to meet the aspirations of would-be Scottish film producers. An initiative has recently been taken by IPPA. as the hon. Member said, which is proposing the establishment of a Scottish screen commission to fill that funding gap. The IPPA has entered into a dialogue with the Scottish Development Agency and the Scottish Film Council about this proposal and on the promotion of Scotland generally as a film centre.
  The hon. Gentleman asked for the Government's reaction. I welcome the initiative by IPPA, which is designed to stimulate the growth and development of the Scottish film industry in general.
  I hope that the discussions that have begun with the Scottish Development Agency and the Scottish Film Council, the broadcasting companies and other interested bodies will bear fruit. I am sure that the proposal will be supported by film-makers in Scotland, and that they will take advantage of the new opportunities which I hope will flow from the establishment of a commission or similar body that might emerge from the consultation.
  Scottish education department officials have already participated in discussions involving IPPA, the SDA and the SFC and will, of course, be keeping in close touch with the progress of the proposal. I am sure that the agency and the film council will offer whatever assistance and expertise that they can in taking the proposal forward.
  The hon. Gentleman drew attention to the concern expressed by Scottish members of the Independent Programme Producers Association that the amount of independently produced broadcast material utilised by the ITV companies is relatively low. In particular, the IPPA is concerned about the low level of broadcast material currently being commissioned from Scottish sources by Channel 4, and it is seeking increased access for its programmes on public television. I understand that the IPPA has received some support from Scottish Television, with both organisations stressing that sufficient work should come to Scotland to stimulate creative talent and innovation.
  I believe that in Scotland, with a population of just over 5 million, we are well provided with three and a half television companies serving our needs—BBC Scotland. STV, Grampian and a hit of Border—all of which produce high quality broadcast material. In addition, the independent programme and film producers make a valuable contribution to the excellent Scottish Television spectrum. I would welcome any increase in Scottish produced broadcast material, either by the larger television companies or by the independent programme or film producers. I would not think it proper— I rather gather that from the hon. Gentleman that he would not either— to try to coerce national television companies to accept a higher proportion of Scottish produced material by setting quotas of commissioned material based either on funding contributions to organisations such as Channel 4 or on the percentage of audience in a particular area.
  Indeed, the Government have no locus to arbitrate in such matters, which have properly been delegated to the responsible broadcasting authorities. In fact, a certain element of regulation already exists to ensure that a proper proportion—at least 86 per cent. of material shown on ITV and Channel 4—is of British origin. I think that it would be quite wrong to introduce further regulation to

  1383
  provide an artificial market for Scottish film and programme makers. I believe that, as commercial companies, IPPA's Scottish members and the Scottish television companies should be prepared to take their position in the United Kingdom market place. Their success in attracting funds from Channel 4, STV and other sources must depend on their ability to deliver the sort of product that the television companies and the public want.
  I take the hon. Gentleman's point that until recently the major inhibition on independent film and television production in Scotland has been the lack of adequate facilities. The problems have been especially acute for those television and film productions which depend on the use of studios. This is an area where the Government have been able to offer direct help.
  The Government's review of the regional incentive package of assistance available to industry in the United Kingdom identified clearly the role that the service sector now occupies within the United Kingdom economy. In November 1984, when we introduced changes in the incentive package, we sought to encourage service industry growth by widening the scope of the new regional development grant scheme. Consequently, the companies in Scotland in the film and television industry that are situated in the development areas can now benefit from the help of regional development grants that are aimed at encouraging job-creating investment. Moreover, the industry can also benefit from regional selective assistance, which, as before, remains open to both the manufacturing and service sectors of industry. Already the industry is becoming alive to this extra help that is available to it, and in the past 18 months my Department has offered nearly £1·5 million to the industry within Scotland. A further £150,000 has been provided recently through the SDA, which is considering a further major loan amounting to £1·7 million. The assistance is there to overcome that particular hurdle.
  1384
  One of the most important ways in which the Government have supported the growth of the Scottish film industry in recent years has been through the Scottish film production fund. The resources at the disposal of the fund are modest and they arc about £150,000 in the current year. Nevertheless, the fund has consistently shown how much can be achieved by the injection of quite small sums at critical periods in the development of a production. In the fund's first four years of operation a total of 64. projects have been assisted in this way. The list of its successes is impressive, ranging from Channel 4 documentaries such as "The Work They Say is Mine"— the role of women in Shetland communities — to full-length feature films such as "Girl in the Picture" and "Restless Natives". It is interesting and encouraging to note that a high proportion of projects started by the fund involve women film-makers. I am sure that the hon. Gentleman will welcome that.
  It is not possible in a short debate of this sort to respond in detail to all the issues raised by the hon. Gentleman. I hope, however, that he will recognise from what I have said that the Government attach considerable importance to the development and maintenace of a thriving film and television industry in Scotland. There are healthy signs in the continuing dialogue involving the main interest groups. I hope that all those involved will capitalise on what has already been achieved and co-operate to ensure the future of the industry. The Government will continue to play their part——
  The Question having been proposed at half past Two o'clock and the debate having continued for half an hour,MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
  Adjourned at Three o'clock.

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The House met at eleven of the clock: The CHAIRMAN OF COMMITTEES on the Woolsack.
Prayers—Read by the Lord Bishop of Truro.

Catering Industry: Staffing
Lord Molloy: 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 assistance will be made available through the Department of Employment to the Restaurateurs' Association of Great Britain in their efforts to fill vacancies in the catering professions throughout the United Kingdom.
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth): My Lords, the public employment service has always sought to help the hotel and catering industry in common with all sectors of the economy to find the labour it needs. In addition, the training division of the Manpower Services Commission provides considerable financial support for the training effort to meet the future employment needs of the industry, notably through the YTS, and across the range of its adult training programmes.
Lord Molloy: My Lords, I am grateful to the Minister for that reply. Is he aware that the Restaurateurs' Association has done a great deal itself in trying to attract people to the industry? It has been prepared to spend money and to hold all forms of display to encourage folk? All that I ask is that the Minister should be prepared to contact the association and perhaps offer it the assistance that it so richly deserves in providing employment for many people through the vacancies that it knows exist.
Lord Lucas of Chilworth: My Lords, I am grateful to the noble Lord, Lord Molloy, for his question. I can tell him that some £8 million is spent through the YTS scheme particularly in this sector of the industry. There are 46,000 students in non-advanced courses. Four universities and 15 polytechnics are providing degree and diploma courses. It might be of interest to your Lordships to know that my noble friend Lord Forte is chairman of the hotel management committee at Surrey University.
Lord Auckland: My Lords, is my noble friend aware of the enormous improvement in the standards of British catering? Is he also aware that I recently visited a YTS scheme in Peterborough and saw some of the youngsters in training for the catering industry. Can my noble friend give an assurance that everything will be done not only through the restaurateurs but also through the catering colleges and through hotels themselves to promote more employment for British cooks in particular?
Lord Lucas of Chilworth: My Lords, I am grateful for my noble friend's first question. On the second point, I did not know that he had made the visit. As to his third question, I can confirm that some 2,500 people are undertaking occupational training in hotel and catering trades through the job training scheme. Some 1,850 occupational trainees are undergoing other training schemes and there are 300 trainees on small business courses. There are 22 nationwide centres to analyse training needs which will continue to be an important part of the work of the Manpower Services Commission.
Lord Underhill: My Lords, will it interest the Minister to know that, through the kindness of my noble friend Lord Ponsonby, I have been pleasantly surprised, on looking through a brochure issued by the British Hotels Restaurants and Caterers Association, to find the vast number of people who are employed in this industry? It is most encouraging. Following the question of my noble friend Lord Molloy, can he indicate what is the proportion of vacancies and whether any vacancies might be due to inadequate conditions of work, particularly hours of work and wages?
Lord Lucas of Chilworth: My Lords, the number of employed people in this sector is increasing. There has been an increase of about 5 per cent. this year. Job centres were able to fill 65 per cent. of the 332,000 vacancies advertised last year. That is, I believe, quite a good record. As to conditions, in an analysis of people employed in the catering industry only 6 per cent. were found to be receiving wages below the agreed levels.
Lord Campbell of Croy: My Lords, is my noble friend rightly saying, in effect, to the restaurateurs that they should, in greater numbers, be booking the cooks?
Lord Lucas of Chilworth: My Lords, I feel quite sure that the industry itself is extremely aware of the necessity to maintain and to improve high standards in kitchens and throughout the entire range of staff who serve in this industry, including receptionists, clerks and so on.
Lord Monson: My Lords, does the noble Lord agree that the British catering trade would find it easier to recruit British staff if so many employers did not pursue a policy of actively cheating their employees? By cheating, I mean pocketing for themselves the 10, 12 or 15 per cent. service charge that the customer fondly imagines is destined for the employee. Can the noble Lord say whether Her Majesty's Government will legislate during the next Session of Parliament to put a stop to such abuses?
Lord Lucas of Chilworth: My Lords, I rather resent the implication of the question of the noble Lord, Lord Monson. I can perhaps answer him best by saying that my middle son is engaged in this industry. It is something that we discuss from time to time at home. I do not believe from the evidence that I have that the practice is at all widespread. I can certainly assure your Lordships' House that we have no intention of legislating in this area.
Lord Bruce of Donington: My Lords, why should the noble Lord resent the question in any way? The noble Lord drew attention to a fact which, although it may not be widely prevalent, nevertheless exists. Surely, the noble Lord will agree that it is the business of Her Majesty's Government to check abuses of this kind where they exist? Even though they are in a minority, they undoubtedly do exist.
Lord Lucas of Chilworth: My Lords, I resent the question in that it implied—I think that it went further than an implication—that the hotel and catering industry cheat. I do not believe that they cheat.
Lord Harris of Greenwich: My Lords, may I ask the noble Lord whether he takes the view that if a restaurateur appropriates this money that is objectionable conduct? Is that his view or is it not?
Lord Lucas of Chilworth: My Lords, there are various arrangements in most catering establishments with regard to the disposal or disbursement of gratuities. Different establishments operate different schemes.
Lord Bruce of Donington: My Lords, will the noble Lord have the goodness to answer the question? Is it or is it not cheating when that happens!
Lord Lucas of Chilworth: My Lords, I do not know because I do not know the precise arrangements that operate in individual establishments. If the noble Lord opposite or the noble Lord, Lord Monson, has a specific instance, I should be pleased to look into it.
Lord Mackie of Benshie: My Lords, will the Minister agree that whatever arrangements they have these transgress the Trade Descriptions Act.
Lord Lucas of Chilworth: My Lords, I do not know whether it is in breach. I should like to see precisely what the customer is being invited to pay for and whether that invitation makes clear what he is being invited to pay for.
Lord Campbell of Alloway: My Lords, will my noble friend agree—leaving aside the question of cheating which is perhaps an unfortunate and emotive term—that so far as this exists it is a thoroughly undesirable and somewhat unfair practice? Although no doubt one need not legislate, perhaps some means of ministerial disapproval in the form of an informal circular could be issued? That is if my noble friend the Minister is with me on the point I am making.
Lord Lucas of Chilworth: My Lords, it is for the industry itself to regulate its own matters. As I have said, different practices occur in different establishments. I believe that the industry will be interested in the exchange of views and will take note of what noble Lords have said on this subject.
Lord Sainsbury: My Lords, did I hear the Minister aright when he said that 6 per cent. of workers in catering were getting below wages council rates? If that is so, why are there fewer trading officers to police wages council rates to see that they are observed?
Lord Lucas of Chilworth: My Lords, the noble Lord heard me correctly. I said that in all wages council industries of all workers where pay was checked only 6 per cent. were found to be underpaid.
A noble Lord: My Lords, "only" 6 per cent?
Lord Lucas of Chilworth: My Lords, there is an inspectorate. It is the job of the inspectorate to establish those facts and take the appropriate measures.
Lord Stoddart of Swindon: My Lords, perhaps the noble Lord can tell the House how the wages council Bill now before the House will help the catering trade and restaurateurs? Will he not also agree that because we have the Bill before the House at the moment this is a golden opportunity to do something within that Bill about gratuities and the 10 per cent.—or whatever it is—surcharge to bills?
Lord Lucas of Chilworth: My Lords, since the noble Lord rightly reminds me that the wages council Bill Committee stage is in your Lordships' House next week, no doubt noble Lords will take the advantage of raising that during that stage. I take note of what the noble Lord has to say.
Lord Molloy: My Lords, may I ask the Minister whether he is prepared to consider, in relation to all aspects of the Question, whether an officer from his department could meet with a representative from the Restaurateurs' Association to examine everything that has been mentioned in the House today?
Lord Lucas of Chilworth: My Lords, I am quite confident that if the industry wished to discuss any points with my right honourable and noble friends, or indeed my honourable friends in the department, such a meeting could probably be arranged.
Lord Mackie of Benshie: My Lords, the noble Lord, Lord Sainsbury, raised a point which the Minister has not answered. Will he say how the 6 per cent.—which he says is "only" 6 per cent.—compares with other industries?
Lord Lucas of Chilworth: My Lords, I said "all wages council industries". I did not select any particular sector. I am afraid therefore that I cannot divide that figure over all the wages council industries.

Metropolitan Police: Training
11.18 a.m.
Lord Mellish: 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 intend to alter present training methods for new recruits to the Metropolitan Police.
Viscount Davidson: My Lords, the training given to recruits to the Metropolitan Police is subject to a

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continuous process of review and improvement, which has been considerably adapted and developed in recent years. Further development will take account of a review of recruit and probationer training throughout England and Wales conducted by a mixed academic and police team led by the University of East Anglia.
Lord Mellish: My Lords, I am much obliged to the Minister for that reply. The Minister is aware that I asked the question because I am very pro-police. I want everything possible to be done to ensure that they are brought up to establishment so that they can do the job which they have been given to do. It is a job which sometimes receives very unfair criticism. I ask this question to try to be helpful. Is it a fact that the length of time of the training course is a deterrent for many youngsters coming into the force, and that quite a number leave because of the long period that awaits them? Is this a hold-up to the recruitment that is required?
Viscount Davidson: My Lords, I am most grateful to the noble Lord, Lord Mellish. With regard to the training period, the noble Lord will remember that this was increased in 1982 from 15 weeks to 20 weeks, in the light of the report of the noble and learned Lord, Lord Scarman. In order to give greater emphasis to community and race relations and other problems of communication, there are no plans to reduce this period to 18 weeks. On the other hand, the development phase for training the trainers has recently been reduced from 97 weeks to 42 weeks due to pressures from the operational side. I think that the noble Lord will be interested to know that there has been a dramatic decrease in the drop-out rate, particularly over the last two years. It now stands at 2.4 per cent. compared with 20 per cent. 10 years ago and 8 per cent. three years ago.
Baroness Ewart-Biggs: My Lords, will the noble Viscount say whether there is any particular training course for members of the Metropolitan Police coming from the ethnic minorities? Will he also say whether he is satisfied with the proportion of recruits coming to the Metropolitan Police from the ethnic minorities?
Viscount Davidson: My Lords, there is no special course for recruits coming from the ethnic minorities. The noble Baroness will be interested to know that the percentage of non-white recruits compared to the total currently stands at 2.5 per cent. Recruitment campaigns specifically to attract non-whites are aimed at increasing that percentage, but there is cultural resistance, particularly among West Indian blacks, to the police as a career. It may also interest the noble Baroness to know that the drop-out rate for non-whites is exactly the same as for the remainder.
Lord Inglewood: My Lords, is my noble friend aware that the 15 weeks training course to which he has just referred is shorter than the training course for police in all major West European countries? Indeed, in Germany the training course is two-and-a-half years and not 15 weeks.
Viscount Davidson: My Lords, I am most grateful to my noble friend. I was referring to the initial course at Hendon, which lasts 20 weeks. However, that is followed by attachment to the Metropolitan Police division, and then appointment as constable is confirmed after two years of street training and other training on the beat.

Bus Services: Tendering for Subsidised Routes
11.22 a.m.
Lord Gainford: 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 any county or regional councils have completed the process of tendering for uncommercial but socially necessary bus services under the provisions of the Transport Act 1985 and what savings have been made.
The Parliamentary Under-Secretary of State, Department of Transport (The Earl of Caithness): My Lords, I understand that the Highland Region in Scotland are the first local authority to have completed the tendering process, and that they have saved some £179,000 on their budget while maintaining the level of bus services in the area.
Lord Gainford: My Lords, I thank my noble friend for that Answer. Would not the case which he has mentioned help to scotch rumours that the public transport business will suffer from increased fares, loss of service and more redundancies?
The Earl of Caithness: My Lords, I think that it is a little early to say because this is the first result that has come in as regards the tendering process, but I agree with my noble friend that it is certainly encouraging, especially when one bears in mind that it may have been thought that the Highland Region was not an area ideal for competition. However, even there most valuable savings have been made.
Lord Underhill: My Lords, I am sure that the noble Earl will be pleased to know that I am grateful to him for suggesting that it is too early to make a final decision. Is the noble Earl not concerned about some of the reports which have already come forth about the failure of some of the commercial routes that have been taken over under the new process? I know that the noble Earl is aware of some of them because I sent him four examples from one local authority alone. Is there not concern about this matter? I believe that the last date for tendering for subsidised routes is 25th October, which is some way ahead. What will be the situation if, because of the unreliability of some of the so-called viable routes, councils do not have sufficient money to proceed with the tendering process for the subsidised routes? Will the Government ensure that that matter is given reconsideration?
The Earl of Caithness: My Lords, I take note of the question asked by the noble Lord, Lord Underhill, who very kindly sent me a letter yesterday enclosing some cuttings. I shall be replying to the noble Lord in detail. I entirely agree with him that poor service is to be regretted under any circumstances. I understand that the examples which he has referred to me are temporary difficulties which will be rectified soon.
Lord Shepherd: My Lords, will the noble Earl explain what he means when he says that services are being maintained? Does he mean the number of services or that they will operate with the same frequency in terms of the daily operation which was previously in being? Does he also mean the maintenance of early morning and late evening services, which were factors which caused considerable concern?
The Earl of Caithness: My Lords, as I understand it, there will be the same level of service in the respects which the noble Lord has mentioned as operated in the previous year. The level of service from August 1985 to August 1986 is also proposed for 1986–1987.
Lord Campbell of Croy: My Lords will my noble friend convey congratulations to the Highland Regional Council for having been so expeditious in being first, as well as apparently effective in the way in which they have carried out the process? Will he convey congratulations to them from at least one Member of the House who is a resident in their area?
The Earl of Caithness: My Lords, I am grateful for my noble friend's question, and I shall pass his comments on to the Highland Regional Council.
Lord Shepherd: My Lords, I was grateful to the noble Earl for his reply. However, I should like to know when he will be able to place before the House a full layout showing the way in which the tendering process has gone through; how much has been saved; and whether there are any anxieties within the counties as to the shortage of provision of services.
The Earl of Caithness: My Lords, I should think that it would be towards the end of October or beginning of November because, as the noble Lord, Lord Underhill, has reminded the House, the tendering processes will not be completed until the end of October, and therefore the information probably will not be available until then.
Lord Cledwyn of Penrhos: My Lords, is the noble Earl aware that there is considerable concern throughout rural Wales, which is an extensive area mainly dependent on bus services, about the possibilities of this problem? Will he recall the result of the pilot scheme in the trial area of Hereford, when the long-term effect was the net loss of 23 rural routes? Will he give us an assessment of the cutbacks on the rural routes when de-registration takes place on 26th January? Is he aware that I am deeply anxious that the Government's plans should be successful in the interests of the rural population? It would be helpful if the noble Earl could give us some projection.
The Earl of Caithness: My Lords, I am aware of the concern. Indeed, there was concern in the Highland Region, which, as the noble Lord will know, is a fairly rural area. There they have made a success of tendering and they have saved the ratepayers and the taxpayers money as a result. Now that the noble Lord has drawn my attention to the matter, I shall watch the situation in Wales and let him know in due course.
Viscount St. Davids: My Lords, would the noble Earl not agree that it would be quite horrific if in any service that was privatised there were no failures at all? Would that not prove that those services were being paid for at a grossly inappropriate and high rate? Is it not the case that what should happen is that a service should be paid for at a reasonable rate because then the weakest would go to the wall and, therefore, later on better services would be produced somewhat cheaper?
The Earl of Caithness: My Lords, it is not only in the private sector that one expects failures; one sees failures in the public sector, too. However, I do not think that the bus services in the last 30 years or so could be classed as anything like a success story. As bus travellers have halved, so subsidies have doubled in real terms in the last 10 years, and fares have increased some 35 per cent. more than inflation.

Air Pollution: Reductions in Emissions
11.29 a.m.
Lord Brougham and Vaux: 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 reductions have occurred in the levels of smoke and sulphur dioxide emissions in the United Kingdom since 1970.
Lord Skelmersdale: My Lords, we can be justifiably proud that smoke emissions in the United Kingdom have been reduced since 1970 from 720,000 tonnes to 190,000 tonnes in 1984, a reduction of 74 per cent. Over the same period sulphur dioxide emissions came down by 42 per cent., from 6.12 million tonnes in 1970 to 3.45 million tonnes in 1984.
We have seen even greater reductions—50 per cent. since 1973—in the average ground level concentrations of these pollutants, which are the important indicators in terms of human health.
Lord Brougham and Vaux: My Lords, I thank my noble friend for that very interesting Answer, and also the industry for helping to achieve this great reduction. Will my noble friend say what has been the effect of this dramatic reduction?
Lord Skelmersdale: My Lords, I think that the effects have been obvious to everybody who lives in this country. Most of the country no longer experiences the above average winter morbidity and

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mortality rates which were prevalent, particularly when the two pollutants occurred together, and aggravated illnesses such as bronchitis. There have been amenity benefits in terms of visibility and winter sunshine. Central London now enjoys 70 per cent. more December sunshine than it did in the late 1950s. Over the same period an average winter day's visibility has increased from one and a half to four miles. A similar story can be told for Manchester and our other major cities.
Lord Grimond: My Lords, has the Minister seen that despite these encouraging diminutions of pollution, there are allegations that the damage is still very high, and possibly increasing, both in the Highlands of Scotland and in Sweden? Can this be reconciled? What is the Government's view about the damage done by acid rain and such like? If they are not in a position to give a detailed answer now, would they consider publishing an official statement about the situation?
Lord Skelmersdale: My Lords, I am grateful to the noble Lord for that question, and especially the terms in which he put it. This is a long and complicated story. It is true that the high stack policy that we have employed in recent years increases longe-range pollution by a factor of 10 or 15 per cent. But as I made clear in my original Answer, this is 10 or 15 per cent. of considerably less than it would have been.
Lord Mackie of Benshie: My Lords, can the Minister say how much of this welcome contraction is due to a reduction in the burning of coal? Can he also say how our measures compare with those of the Federal Republic of West Germany in the number of regulations with regard to the reduction of the sulpur content?
Lord Skelmersdale: My Lords, of course as new methods and greater efficiency in generating, particularly in electricity but also in the use of industrial processes have occurred and will continue to occur, this will reduce sulphur and smoke emissions. I am afraid that I did not hear the question on the Republic of Germany.
Lord Mackie of Benshie: My Lords, do our measures to control pollution through smoke go as far those in the Federal Republic of West Germany?
Lord Skelmersdale: My Lords, I am grateful to the noble Lord. Unfortunately, now having heard the question, I am totally unable to answer it.
Lord Stoddart of Swindon: My Lords, is it not a fact that research in Germany at the present time appears to show that high levels of ozone, produced as a result of nitrous oxide and hydrocarbons, which come mainly from fuel exhausts, are causing the damage there? Can we be assured that the CEGB will continue to spend its £3.7 million on research into sulphur dioxide emissions, and indeed the causes of acid rain and the damage to forests and lakes in Scandinavia and Germany?
Lord Skelmersdale: My Lords, research on a considerable scale is being conducted, as the noble
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Lord says, in West Germany and in this country by the CEGB and by my own department and others to find out exactly what is causing the damage to trees. Regarding lakes, there is now ample evidence to suggest that damage is due to acid deposition from stacks.

GCHQ Staff: Disciplinary Action
11.34 a.m.
The Minister of State, Foreign and Commonwealth Office (Baroness Young): My Lords, with the leave of the House, I shall now repeat the Answer which has been given to a Private Notice Question in another place on GCHQ. The Answer is as follows:
"In my right honourable and learned friend's Statement to the House on 19th March he reported what he had told representatives of the Council of Civil Service Unions concerning the action that would be taken in respect of the few members of the staff of GCHQ who had accepted the revised conditions of service but had then gone back on their undertakings and had rejoined unions. My right honourable and learned friend said that these staff had been asked to honour their original commitment by resigning from the unions they had rejoined and that if they failed to do so they would be subject to disciplinary procedures. I understand from the Director, GCHQ, that disciplinary action has now been taken against 13 such employees of GCHQ and that letters have been sent to them informing them of the penalties that are to be imposed.
"Three other members of the staff at GCHQ who have informed management that they have rejoined a national trade union will also be subject to disciplinary action in the next few weeks.
"GCHQ have also warned those concerned that so long as they remain in membership of a national trade union, they will be in breach of their conditions of service which apply to them in GCHQ, and may be subject to further disciplinary action in accordance with the procedures and penalties prescribed in the Civil Service Code. GCHQ therefore proposes to seek suitable alternative posts for them elsewhere in the Home Civil Service, in which they can continue in national trade union membership if they wish. In the meantime, for so long as they remain in GCHQ, if they should become eligible for promotion their conduct will have to be taken into account, they will not be considered for an overseas posting, and they will continue to be ineligible for inclusion in the proposed restructuring.
"I wish to stress to the House that we are talking here of a very small number of people. Over 99 per cent. of GCHQ staff members have accepted and comply with the revised conditions of service, morale is high and restructuring is going ahead in consultation with the Staff Federation."
My Lords, that is the Answer.
Lord Cledwyn of Penrhos: My Lords, the House is grateful to the noble Baroness for repeating the reply to

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the Private Notice Question in another place. This is yet another development in this regrettable and damaging story, and we must deplore what must seem to be an indefensible action. The pressures in my view are intolerable against able and loyal civil servants.
I wonder whether the noble Baroness can clarify two or three points for me. First, the fines are said in the newspapers to be in the region of £2,000. Would she say whether this is the case? Is it not also true that the fines for more senior officials are in the region of from £3,000 to £4,500? Secondly, is there not a real danger that the severity of these penalties will lead to further industrial action and not to a solution of the problem? Are they not contrary to certain assurances given some weeks ago by her right honourable and learned friend the Foreign and Commonwealth Secretary, who has throughout given the impression that he wishes to have an amicable solution to this problem?
Further, before this matter gets completely out of hand, will the noble Baroness and her right honourable and learned friend arrange for immediate talks with the Civil Service unions in an effort to resolve the difficulties? Would this not be far more desirable than step-by-step penalties, which can only worsen the atmosphere and indeed drive the Civil Service unions into the hands of extremists?
Finally, would the noble Baroness say whether the matter is now before the Court of Human Rights? Was it not imprudent and unwise in the extreme to take action in this matter before the findings of the court were announced?
Lord Harris of Greenwich: My Lords, in joining the noble Lord in thanking the noble Baroness for repeating this Answer, may I ask her whether she is aware that many of us who favour an unequivocally clear no-strike agreement regarding GCHQ, and have made that clear repeatedly, find this a deeply depressing statement? Is she aware that many of us take the view that this is a further attack on the civil rights of a small number of officials who have done excellent work on behalf of the whole community. Is the noble Baroness aware that this can do nothing to improve the rather poor morale at GCHQ? Is she further aware that this long-running dispute will considerably damage the whole intelligence community in this country?
Having asked that, may I put two specific questions to the noble Baroness? First, what right of appeal will those concerned have in the new situation? Secondly, as there is some fear, as far as the unions are concerned, that the rights of those concerned to go to the ECHR are in some way affected, will she give a clear undertaking that in no way are their rights affected by the Statement she has made this morning?
Baroness Young: My Lords, I recognise from what the noble Lords, Lord Cledwyn and Harris of Greenwich, have said, as the Government do, that this is a serious and important Statement. The noble Lord, Lord Cledwyn, raised a number of specific points. The first concerned the penalties that have been imposed. The Principal Establishment Officer at GCHQ has decided to apply the provision in the Civil Service code of loss of increments. I understand that the exact sum
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of money involved is not £2,000 but two annual increments; the actual sums will vary according to the grade of the particular officer.
The noble Lord, Lord Cledwyn, also asked whether or not my right honourable and learned friend the Foreign Secretary had in some way reneged on an undertaking that there would be no further disciplinary action. I welcome the opportunity to clear up the point should there be any misunderstanding on this. My understanding is that no such undertaking was given. My right honourable friend the Foreign and Commonwealth Secretary pointed out in his Statement of 19th March that the A optant rejoiners were asked to honour their original commitment by resigning from the unions they had rejoined. As long as they fail to do so they are in breach of their conditions of service and therefore remain subject to disciplinary procedures.
The noble Lord, Lord Cledwyn, went on to ask whether or not there could now be immediate talks with the trade unions. I note what he says and I shall take the opportunity to consider it. Both he and the noble Lord, Lord Harris, asked me about the position of the European Court. The European Court of Human Rights has still to decide on the admissibility of the case and this could be a lengthy process. It is quite proper that the Government should implement their policy pending consideration of the matter by the European Commission in the Court of Human Rights. There is no obligation, either under existing domestic law or the European Convention, for governments to refrain from taking action pending such consideration, nor is it general practice either in the United Kingdom or, so far as we are aware, in any other country for Governments to refrain from taking action pending court decisions.
May I just add on the general points that the noble Lord, Lord Harris, made about the statement that the disciplinary procedures which have been followed were those which were contained in the departmental regulations at GCHQ. They are in accordance with the Civil Service code and the right of appeal is to the Director of GCHQ.
Lord Elwyn-Jones: My Lords, is not this action an aggravation of the matters complained of before the European Court of Human Rights? Will this not worsen the Government's position and result in a more severe condemnation in due course from the court itself? Is there any precedent for fining a member of a trade union for belonging to a trade union?
Baroness Young: My Lords, on the point that the noble and learned Lord, Lord Elwyn-Jones, makes about the European Court, I hope I have set out in my answer to his noble friend Lord Cledwyn the position with regard to that. On his second point, the position is that the action has been taken under the Civil Service code of disciplinary procedures. There are a number of penalties which can be taken, of which the noble and learned Lord will no doubt be aware. They have been taken in this case because those few members of GCHQ who resigned from the trade union and agreed this and accepted the £1,000 which was given to those who did so, have subsequently rejoined. As my right honourable and learned friend made clear

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in the Statements that he made earlier this year, they would be subject to disciplinary procedures. That is what is happening, with the result that they lose increments. They have not had the extra money that they would have had had they kept to the agreement they originally made.

Chernobyl Accident: Movement of Sheep
11.46 a.m.
The Minister of State, Ministry of Agriculture Fisheries and Food (Lord Belstead): My Lords, with the leave of the House I shall now repeat the Statement being made in another place by my right honourable friend the Minister of Agriculture, Fisheries and Food. The Statement is as follows:
"My Ministry and the other agricultural departments have been carrying out an extensive programme of monitoring of all foodstuffs likely to be affected as a result of the Chernobyl accident. The latest batch of results is being published today.
"These present a satisfactory picture overall and there is no reason for anyone to be concerned about the safety of food in the shops. However, the monitoring of young unfinished lambs not yet ready for market in certain areas of Cumbria and North Wales indicates higher levels of radio-caesium than in the rest of the country. These are the areas of high rainfall during the weekend of 2nd-3rd May. While these levels will diminish before the animals are marketed my right honourable friend the Secretary of State for Wales an I have decided to use the powers in the Food and Environment Protection Act 1985 to make absolutely certain that when these lambs are marketed they will be below the internationally recommended action levels for radio-caesium of 1,000 Bq/kg.
"We have therefore made an order which we are laying before Parliament to come into effect today which will prohibit for the next 21 days the movement and slaughter of sheep within the two areas designated in South West Cumbria and parts of North Wales. This will enable us to monitor closely the sheep flock in these areas.
"The areas subject to restriction will be reduced as soon as monitoring results, based on a rigorous sampling programme, confirm the expected fall in levels. Testing is also being undertaken in Scotland and Northern Ireland, where similar restrictions will be imposed if necessary.
"The main season for marketing young lamb from the designated areas will not start until July. The Government recognise that these measures may cause some interference with the marketing plans of farmers in the areas concerned. But I am sure they will appreciate that the measures taken for the protection of the consumer are in the general interest of the British sheep industry. If however it should prove to be necessary, the Government will be prepared to discuss cases of compensation for severe loss in particular circumstances to specific farmers."
My Lords, that concludes the Statement.
Lord John-Mackie: My Lords, we are obliged to the Minister for repeating the Statement from another place. We would all agree that these restrictions are a very necessary precaution in the circumstances. The noble Lord may have noticed that this issue was raised on a Question in the House on Wednesday, so it is not altogether new.
The one matter we should make sure of—and I am sure the Minister and his department will do so—is to give the maximum information to the public. They do not all read Hansard and scare stories can appear in the press, which is not the best medium for giving accurate information. I feel sure that it is necessary that the public understand the situation.
I wonder if the Minister knows how many lambs are affected. Is it a very large number in these areas? That is rather important. And are there any older sheep involved? Were they not affected? It seems curious that only the young lambs are affected and not the older sheep. The noble Lord mentioned that this could affect breeders in these areas. There is quite a big export trade in these lambs and it would be rather disappointing—and one always goes back to the French—if the French take advantage of this and try to make use of it to keep our exports out of their country.
The Minister mentioned compensation. That would be one of the things that might happen that would affect the returns to farmers very considerably. I am sure that this must be looked into. Three weeks is quite a long time and, if the period is extended, a young lamb could become very much over-fat in that time and that will affect its price in the market. The other point that I should like to make is this. Can one presume that there is close collaboration—and I hope that the Minister can answer this—between the Ministry and the Department of Health and Social Security as they have a very real interest?
Lord Mackie of Benshie: My Lords, while it is an extremely disturbing Statement, what we have found out is that the Chernobyl accident has caused more radioactive trouble than did all the 30 years of air testing which we experienced before the cessation of the majority of air tests. It is satisfactory that the Ministry are doing their best and that they are going to compensate individual farmers; but have they got enough people to monitor quickly this sort of thing? It appears to me to have been a long time after the rain had fallen before they were able to come up with this Statement.
I think that the Minister ought to be able to assure us that further steps are being taken to monitor the whole country, because the fact that some places in Cumbria and in Wales are mentioned means that very small spots can be contaminated by a quick shower at the wrong time. This is obviously going to entail a great deal of work for the bodies who are monitoring the effects.
My main question is this. Are the Government going to expand the measures to trace and to find out about these very dangerous and disturbing spots for both the consumer and the trade? Can the Minister tell us when the tests will be finished in the West Highlands, which receives as much rain as elsewhere, and when we shall be able to get the results from there? I repeat that my main question is whether the Ministry

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are going to extend the service to be able to monitor much more quickly.
Lord Belstead: My Lords, I am grateful to both noble Lords for their reception of this Statement. The noble Lord, Lord John-Mackie, said that it was necessary for the public to be assured that they are going to get information properly. Ever since the Chernobyl disaster, using the incident room which was set up by the Department of the Environment, we have sought to publish on a regular basis the findings of monitorings which have been done by the Ministry of Agriculture, Fisheries and Food. The one thing that I would say in answer to the very wise remark of the noble Lord is that all food in the shops at the moment is safe. The restriction described in this Statement is in order to ensure that that should continue.
The noble Lord asked how many cases of this kind had been found. The answer is, two in Cumbria, and three in Wales. Incidentally, I have placed in the Library of your Lordships' House a map which will show the designated areas in south-west Cumbria and North Wales. The noble Lord asked why it was that lambs were affected and not older sheep. Our belief is that this has happened in relation to their body weight. Young lambs have been consuming much higher levels of forage than other livestock. It is the forage which was contaminated in the heavy rain of the weekend of 2nd and 3rd May in those particular areas.
The noble Lord, Lord John-Mackie, expressed the hope that our export trade would not be affected. As the noble Lord may know, there is an agreement within the European Community that the Community countries can place whatever requirements they think are right on their imports. In fact, no Community country has done this since the Chernobyl disaster, intra-Community trade has been proceeding on a normal basis and I believe will continue to proceed on a normal basis and we shall ensure that the importing countries' needs are met. Finally, the noble Lord, Lord John-Mackie, said that he trusted that there would be close collaboration with the DHSS. I give that undertaking to the noble Lord.
The noble Lord, Lord Mackie of Benshie, asked whether there would be enough people to see that the proper precautions, restrictions and monitoring are carried out. As the noble Lord knows very well, this is the same sort of procedure as when restrictions are put on for animal disease except that in this particular case an animal within the restricted area cannot be sent for slaughter.
If I may say so, I think that we are going to be devoting a good deal of resources to this. We will ensure that all the necessary resources to ensure effective application of the restrictions are made available. The noble Lord said that his main question was whether he could be assured that both in Scotland and in the rest of the United Kingdom, the monitoring and the precautions would be stepped up if necessary. My answer is that we shall be continuing with monitoring and we shall be seeing that monitoring undertaken in Scotland and in Northern Ireland continues, although, so far, no problems have arisen with animals ready for market in either Scotland or Northern Ireland.
Lord Stoddart of Swindon: My Lords, I feel bound to ask this question although perhaps it is a little wide of the Statement. The Government have made their Statement this morning and from that Statement it is quite clear that we are still suffering the effects of a nuclear accident that took place months ago, 2,000 miles away.
The Department of the Environment and the Department of Agriculture are undoubtedly doing their job of monitoring. That, I accept and applaud. At the same time, I read in the newspapers yesterday that the Secretary of State for Energy was going to undertake an advertising and promotion programme for the extension of the building of nuclear power stations in this country. I believe—and I hope that the noble Lord will take this on board—that it is really necessary for his department and for all the departments of state to examine the question of further nuclear power stations in this country very seriously and that this should not be examined on a departmental basis but on a totally governmental basis, because the health of the nation is at stake, and, indeed, it may very well be more than that.
I hope that the noble Lord will not mind my widening it to that extent. I hope that I can have his assurance that his department and the other departments of state are going to have an input into nuclear energy policy in future.
Lord Belstead: My Lords, if I may say so, although this is a serious point that the noble Lord, Lord Stoddart, makes, it is getting wide of the Statement. Of course, I speak on behalf of the Government in this House and on this particular Statement. On behalf of the Government, I say that I believe that our nuclear record in this country is safe. The Government will take every step possible to see that that continues to be the case.
Lord Cledwyn of Penrhos: My Lords, may I first thank the noble Lord for repeating this important Statement and for the fact that the Statement did not create alarm and despondency, which is the one important thing that we must all seek to avoid in the present circumstances? Is he aware however, that this could strike at the very heart of one of the most important sectors of Welsh agriculture—namely, the production of Welsh lamb? In the area in which I live, I know that farmers are generally concerned to do what is best in all the circumstances.
I am grateful to the noble Lord and to the Government for their reference to the possibilities of compensation. There is now a bar on movement but is there a bar on slaughter and on consumption? I think that is important for people who, like myself, live in the locality. How long does the noble Lord see this lasting and when will the Government consider the question of compensation? Is the noble Lord able to clarify the machinery by which it may be made? Finally, again, would the noble Lord confirm that the degree of caesium in these animals is nowhere near high enough to cause concern?
Lord Belstead: My Lords, I entirely understand why the noble Lord asks this question. The Welsh people have every right to be proud of the lamb meat which

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they produce, and no one knows that better than the noble Lord. I would say simply that we ought to remember that we are concerned here with a 21-day order, and, although it has been imposed by means of the special procedure under the Food and Environment Protection Act, my understanding is that debate would be needed for it to be extended. I believe I am correct in saying that but, if not, I will write to the noble Lord. Of course, I very much hope that the 21 days is going to be the maximum.
The noble Lord asked an important question about slaughter. As I sought to say to the noble Lord, Lord John-Mackie, the restrictions in the order are very much the same as those, familiar to noble Lords opposite, which have to be imposed in cases of animal disease. They are similar; but the difference is that if it is desirable for an animal to go for slaughter that is not allowed because the precise reason for the order is to prevent the meat entering the food chain. However, there is one very important exception and that is that if a slaughterhouse is within the designated area—and I can think of one particular example in North Wales—and the meat is coming from outside the designated area, then under the order it will be perfectly all right for this meat to come from outside the designated area to the slaughterhouse within it.
I do not think I ought to add anything on the question of compensation over and above what is actually in the Statement. I do acknowledge, in answer to the noble Lord, that the levels of caesium which have been discovered are in excess certainly of 1,000 Becquerels per kilogramme, which is the internationally recommended level for radio-caesium so far as lambs are concerned. That is what has caused this Statement today.
However, let us remember that there is a very big safety factor written into that particular level. I hope that at the end of this order's period it is going to be possible to come back and say that the figure is now below that level for lambs as well as for all other meat. Let us also remember that all food at the moment in the shops is safe.
Lord Mackie of Benshie: My Lords, if I could come back on my question, I think the Minister may have misunderstood me. The accident occurred in late April and the rain brought the pollution over here on 2nd and 3rd May. We are now having an order put down. Obviously the Government were caught completely by surprise. What I intended to ask was this: how quickly in the future will the responsible authorities know that a high and dangerous level of radioactive rain has fallen on an area? I think that is the important point. You can then put an order on at once and monitor the sheep and lambs concerned.
Lord Belstead: May I just say in answer to that that we are continuing to monitor but in fact the monitoring we are doing has been stepped up. The monitoring data at the moment is being built up from a wide range of results, including over 60 sheepmeat samples in England and Wales. It is that level of monitoring which we are now stepping up. That should make it the more likely that we could react with speed if it were necessary to do so. But, as I think we
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know, the levels of radio-caesium are now beginning to decline. The problem we are dealing with derives from 2nd and 3rd May.

Building Societies Bill
12.3 p.m.
Lord Brabazon of Tara: My Lords, I beg to move that the Bill be now read a second time.
The Bill before your Lordships is a major and fundamental piece of legislation for building societies. It completely replaces the existing Building Societies Acts, which, although largely consolidated into an Act of 1962, are still based in large measure on legislation which goes back to 1874. It is a very substantial Bill, running to 123 clauses and 21 schedules spread over 270 pages. That is because it deals with all aspects of the societies—their constitution, their powers and their supervision.
The present legislation has stood the test of time well. From their small beginnings, the societies have developed into major institutions whose activities affect many people. They have played a vital role in bringing home ownership within the reach of many of our citizens, and providing safe havens for their savings. The building society formula has been a successful one, and this Bill seeks to build on it.
The theme of the Bill is evolution with continuity. The environment within which the societies operate is changing fast. I need hardly remind your Lordships of the changes afoot in the financial markets, which are reflected in the Financial Services Bill shortly to come before this House, and in the proposals for fresh banking legislation in the White Paper published last December. The house buying markets are changing as new instutitions move into the estate agency field, simplified property services are set up, and conveyancing has become more competitive. New lenders and new methods and techniques are entering the mortgage market. And fresh initiatives have been developed in the housing fields in which the societies will wish to play their full part.
The Bill therefore modernises the legislation. It brings up to date the powers of the societies so that they can continue to compete effectively in the housing and financial services markets. It brings up to date the constitution of societies, making the law more appropriate for the major institutions the societies have now become. And it brings up to date the protection afforded to customers of societies, both by improving and modernising the system of prudential supervision, and by introducing the new statutory provisions for an ombudsman and an investor protection scheme.
The Bill is also a forward-looking one. It deliberately sets out not to ossify the legislation in its present form, but recognises that the societies and their markets may evolve further. So the Government have been careful to build flexibility into the definition of building society powers and the limits placed upon them; a flexibility, though, which leaves Parliament to decide the pace of change.
The Bill falls into eleven parts. Part I deals with the constitution of the new Building Societies Commission which is set up by this Bill to supervise

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societies. These functions are presently vested in the Chief Registrar of Friendly Societies, who will retain responsibility for registration functions and for the other societies, notably friendly societies and industrial and provident societies, for which he is at present responsible. The commission will build on the existing expertise of the registry, and there will be common staffing of the commission and the registry.
The commission will have responsibility for prudential supervision, including the authorisation of societies to raise funds from the public, for confirmation of mergers or conversions to company status, and for policing the compliance of societies with the provisions of the legislation. Its costs will be recovered through fees levied upon the societies. The commission will be required to lay an annual report before Parliament.
The intention is that the commission will have seven members initially, three full-time and four part-time. The present chief registrar will be chairman and first commissioner. The existing assistant registrar dealing with building societies' supervision will be one of the other full-time members. The appointment of three part-time commissioners has been announced: Mr. Sidney Procter, former chief executive of the Royal Bank of Scotland Group, Mr. Geoffrey Sammons, former senior partner of the law firm Allen and Overy, and Mr. Herbert Walden, past chairman of the Building Societies Association. I am sure your Lordships will welcome the agreement of three such distinguished men to serve. The names of the remaining full-time and part-time commissioners will be announced in due course.
Part II of the Bill provides for the basic establishment and constitution of societies. Under Clause 5, a society's purpose or principal purpose is to be the raising of funds from members for lending on security of mortgage. The existing Act provides only for a sole purpose, so that all other activities must be necessary or incidental to it. By introducing the concept of the "principal purpose", the Bill opens the door to a much wider range of permissible activities. Much of the detailed constitutional provisions are contained in Schedule 2, which makes some important changes to the existing law.
New provisions are introduced for streamlining the management of the affairs of societies, while improving their accountability to their members. For example, members are given new rights to circulate resolutions and supporting statements to annual general meetings, but subject to safeguards to protect societies from unnecessary circulation of frivolous material. And, for the first time, borrowers are given statutory rights to a say in certain circumstances.
This Part also deals with the raising of funds, including authorisation by the commission, about which I shall have more to say in a minute or two. It provides that the majority of funds must continue to be raised in the form of shares, thus safeguarding an important aspect of the mutual status of the societies. It also places a limit, initially 20 per cent., on the proportion of funds that may be raised from wholesale rather than retail sources.
Part III deals with the assets of societies. Principal among these are what the Bill terms commercial assets: their mortgage lending and the assets acquired
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under the new powers in the Bill. At least 90 per cent. of these must be class 1 assets, which may broadly be thought of as traditional home loans. These are loans secured on first mortgage of residential property which the borrower is, or will be, occupying as his main residence. This 90 per cent. minimum is one of the key provisions in the whole Bill. It will ensure that building societies continue very largely to concentrate on their traditional business, with residential mortgages providing a basis for a safe investment for savers. The remaining commercial assets may be either class 2 or 3. Class 2 assets will be other types of mortgage loan; for example, second mortgages or loans to bodies corporate, such as housing associations.
Other commercial assets will be in class 3. These are generally higher risk assets, and so will be limited to 5 per cent. of the total. They will include loans not secured on first or second mortgage, which will be subject to a maximum of £5,000, or £10,000 in the case of loans secured on mobile homes. Residential land may also be held in class 3, thus enabling building societies to own and manage rented property and participate in shared ownership schemes. Most of the powers to hold class 3 assets will be available only to the larger societies whose total commercial assets exceed £100 million. It is only the larger societies which can be expected to have the financial resources and management depth to go into this riskier business prudently. There will, nevertheless, be a wide range of new powers open to the smaller societies which the Government believe will give them every opportunity to continue to compete effectively with their larger brethren.
This Part also makes provision for building societies to hold a proportion of their assets in liquid form. It is, of course, essential for a deposit-taking institution to hold adequate liquidity, to meet short-term fluctuations in cash-flow and to reassure investors that they will be able to withdraw their funds when they need them. The clause also, however, places a maximum on the proportion of liquid assets, so as to prevent any society from turning itself into something akin to a money fund rather than a mortgage lending institution. The societies are also enabled to enter into financial contracts for the purpose of reducing the risk of loss from interest rate or other changes.
Part IV of the Bill sets up the statutory Investor Protection Scheme. This is closely modelled on the corresponding provisions in the Banking Act 1979, with two important exceptions. First, the level of protection provided is 90 per cent. on the first £10,000 rather than the 75 per cent. in the Banking Act. As my honourable friend the Economic Secretary to the Treasury said in another place, such higher protection, reflecting that in the existing voluntary scheme run by the Building Societies Association, is reasonable so long as societies continue to be markedly different institutions from banks, but this may need to be reconsidered if and when the limits of 5 per cent. on class 3 assets and 10 per cent. on class 2 assets are increased.
The second main difference from the Banking Act scheme is that no provision is made for a permanent fund to be set up. This reflects the experience over many years that building society insolvencies occur only very rarely indeed, whereas there have been a

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number of insolvencies of small licensed deposit-takers which have led to calls upon the Banking Act scheme since it was set up.
Part V deals with the powers of societies to offer services which are not necessarily directly incidental to their primary business of raising money to lend on mortgage. These critical powers are set out in full in Schedule 8. They will allow building societies to offer a much wider range of financial and housing services than they do now. The societies will be able to offer full money transmission services, with the rights and responsibilities of bankers. They will be able to invest in estate agency businesses. They will be able to offer full insurance broking services, rather than the limited service in respect of insurance related to loans that they offer now. They will be able to set up personal pension subsidiaries, and act as outlets for investment business, which will allow them to play their part in fostering wider share ownership just as they have fostered wider home ownership.
But with these wider powers will go increased responsibilities. Clause 35 accordingly incorporates two modest consumer protection measures: that building societies should not abuse their strength in the mortgage market by making offers of loans conditional on the use of other services; and that services should be priced separately when more than one is offered. The Government recognise, however, the undesirability in principle of legislating for one set of institutions alone, and will therefore be prepared not to bring this clause into operation if the building societies introduce and operate an effective code of conduct covering these matters.
Part VI deals with the powers of control of the commission. These cover a number of areas. First, there is the task of ensuring that building societies stay within the confines of the Act. This involves policing the various percentage limits on building society business set out earlier in the Bill, and preventing societies from stepping outside their statutory powers. To this latter end, the commission is given the role of determining whether particular proposals or activities are within building society powers, after hearing the society's views. The Government hope this will provide a quick and sensible alternative to arguing such matters out in court, although, of course, the courts will be available if the simplified procedure does not resolve a question satisfactorily.
Clauses 41 to 45 set out the commission's powers of prudential supervision. This is the function it will carry out to promote the protection of the interests of investors and depositors, and the prudent custody of their funds. The commission may direct a society to apply for fresh authorisation during the first five years of the Act. This is essentially a transitional provision, since all societies currently authorised to raise money from the public will be given automatic authorisation under the new Act. The commission may also, after taking account of representations by the society, impose conditions on its continued authorisation and, in the last resort, may revoke authorisation. Clause 45 sets out the important list of criteria of prudent management, which societies should seek to meet and which the commission may take into account in considering whether prudential action is necessary in
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particular cases. A right of appeal to an independent tribunal exists against the use by the commission of these powers.
The commission is also given powers to control advertising in the interests of potential investors with the society and to obtain from societies the information it needs to do its job. Such information must of course be treated as confidential, except in closely defined circumstances. These are set out in Clause 53, but the policy on this has been worked up further in consultation with those concerned with banking supervision and the Financial Services Bill, and the Government will be tabling detailed amendments to this clause for Committee stage.
Part VII contains provisions relating to directors. Many of these are based on the corresponding provisions in the Companies Act. But there are important new provisions in Clauses 60 and 61 governing the election of directors; and Clause 69 requires disclosure of the benefit derived from business with the society by firms in which their directors have an interest.
Part VIII deals with accounting aspects. These have been the subject of detailed consultation with the building societies and the accountancy profession. They include strengthened requirements for accounting records and systems of control of the business, as well as provision for the preparation, audit and publication of annual accounts. One important amendment which the Government will be tabling will be to Clause 82 on the dealings between auditors and the commission.
In accordance with the announcement made by my right honourable friend the Secretary of State for Trade and Industry on 9th June, we shall introduce a reserve power to require auditors to pass information on the commission in certain circumstances in line with the amendments proposed to the Financial Services Bill. This power would be activated only if a satisfactory relationship between auditors and the supervisors does not evolve on the basis of the guidelines now being worked up by the accountancy profession.
Part IX provides for building societies to belong to an ombudsman scheme in respect of the accounts of savers and of its lending. This major reform was introduced during the passage of the Bill through another place, and is the first ombudsman scheme to be provided for statutorily outside the public sector. While the provisions may appear unduly long and complex, I can assure your Lordships that they are necessary to secure a satisfactory scheme.
Part X deals with dissolution, winding up, mergers and conversions to company status. The provisions on dissolution and winding up are based on those in the existing legislation and in company law. Those on mergers develop the provisions in the 1962 Act, and introduce some important new features. First, borrowers must now approve mergers. Secondly, a merger between one society and another more than eight times its size must be approved by at least 20 per cent. of members of the small society eligible to vote on the proposal. This is intended to provide an encouragement to small societies to merge with those of comparable size to form stronger local groupings,

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rather than to transfer their engagements to large national societies. Thirdly, provisions are introduced which will enable the informal constraints currently placed by the registry on compensation to directors and bonuses to members on mergers to be put on a proper statutory footing. Finally, societies are to be required to report to their members any merger proposals received from other societies which the board would otherwise seek to block.
The provisions governing conversion to company status have of course excited considerable interest. They are based on proposals contained in a consultative document published by the Treasury last December at the same time as the Bill. There will be an opportunity in due course to consider these provisions in more detail, and I would only make some general remarks at this stage. The Government believe that the conversion option should be there for societies to provide maximum flexibility to meet future changes in the financial services markets. This principle is supported by many societies and by the Building Societies Association. But conversion should be undertaken only with the support of a substantial proportion of the membership. So we are proposing that it should not only be supported by investors on a special resolution and by borrowers on the borrowing members' resolution, but that the special resolution should attract a poll of at least 20 per cent. of those eligible to vote. Where the proposed transfer of business is into an existing company rather than a specially created one, the threshold will be even higher—at leat 50 per cent. of those eligible to vote on the special resolution must assent. Many noble Lords with experience of the building society movement will confirm that these are considerable thresholds of membership support. Other safeguards are included to ensure that conversions do not take place for reasons other than the best interests of the society.
Part XI contains the mixture of miscellaneous and supplementary provisions that it is usual to find at the end of a substantial Bill such as this one. It includes a power to modify certain constitutional provisions of the Bill by secondary legislation if the corresponding areas of company law are changed in future. And the transitional provisions make it clear that societies may carry out preparatory work for the new powers now even though they will not be able to offer the services to the public until the powers are actually available to them.
Clause 121 and Schedule 21 deal with conveyancing by institutions such as building societies, banks and estate agents. They go wider than the rest of the Bill, but this Bill is obviously an appropriate vehicle for them in view of the close links between building society matters and the house buying market. They implement the Government's undertaking to open up the provision of conveyancing services to institutions other than firms of solicitors and licensed conveyancers, subject to rules to be made by my noble and learned friend the Lord Chancellor. I know that these proposals have been criticised in some quarters as being too restrictive in preventing lending institutions from offering conveyancing services to their borrowers. But the Government believe that those critics have failed to appreciate the magnitude of the
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potential conflicts of interest involved, which have not so far proved susceptible to being eased by codes of practice or other ideas.
As will have been appreciated from this fairly quick summary of the Bill's provisions, it is a major and complicated piece of legislation. But, for all that, I hope it may prove not to be an unduly controversial one. The Government have been careful at all stages to consult as widely as possible with interested parties over a long period, and I am happy to report that the Building Societies Association has expressed itself generally content with its provisions. It has, moreover, left another place with the broad support of the opposition parties, and I very much look forward to an interesting and informed debate here today in your Lordships' House. I believe that it is a good Bill and I commend it to your Lordships. I beg to move.
Moved, That the Bill be now read a second time.—(Lord Brabazon of Tara.)
12.25 p.m.
Lord Barnett: My Lords, I suppose I should start as many do on this sort of Bill by declaring an interest not as a director but as a lender or investor and borrower—not necessarily both at the same time. Your Lordships will have appreciated that the noble Lord the Minister was obviously obliged to go through the 11 Parts of this rather lengthy 273-page Bill. Your Lordships will be pleased to know that I do not feel I have that same obligation. I have noted the reference to the new clause in relation to auditors that the Government have in mind to introduce. I would declare an interest in the sense that it is the same profession to which I have given some service over the years, although I do so no longer in that way. Your Lordships will, I am sure, be very interested in the problem that will arise out of the wording, whatever that may be, of the new clause when we see it in due course.
The Bill provides an opportunity for me to offer sincere congratulations to the building society movement, which has filled a great social and housing need. It has grown enormously since the building society movement began at the start of the nineteenth century. As the need has grown the building societies have grown to meet it. They have met demand in many different ways as and when that was required. They are now helping with many major social problems—for example, in the field of urban renewal, index linked finance, private finance for housing, private rented housing, shared ownership, the rescue of derelict housing stock and the building of cost housing, and also with home improvements, Indeed, with support for first-time buyers generally, sponsored housing, young persons schemes, housing for the elderly and in many other areas the building society movement has been doing a first-class social job. It really can claim, in my view, a first class achievement and a genuine success story which in many ways is peculiarly British. It is the envy of the world, and rightly so.
It is done in a way that sophisticated financial quarters may well question, and indeed have questioned, as being wrong, if not impossible; namely, to borrow short and lend long. Admittedly it has been

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helped by a tax system which has not necessarily helped everyone, for the building societies are able to provide lower mortgages than would otherwise be the case because they have a lower composite tax rate than the average basic tax rate. They do so because they are being financed by people who should not be investing in building societies in order to help those to obtain mortgages from building societies. It has gone on a very long time and many like myself have been somewhat concerned about it.
But I suppose it would be a little much to expect the building societies to advertise that pensioners who are not liable to tax should not invest with them. It was left to professional advisers to do that from time to time and I am sure the building societies will understand that that was necessary. But I was happy to note that from 6th April this year there has been a change at least for ex-patriate savers whereby interest can be paid gross to non-residents. It is a pity, as I have indicated, that it is not available more widely. Perhaps the Chancellor of the Exchequer might consider that.
Nevetheless, it is right to pay a tribute to the way the building societies have met the enormously increased demand for mortgages for United Kingdom house purchase. We have seen a huge growth in that area in the past 10 years from 1975, when it was £2,768 million, to 1985, when it was £14,318 million.
However, one recognises that the building societies do more than just provide mortgage funds. They have, as I have indicated, provided an important social function. My attitude to the Bill will be to ensure that nothing is done to put at risk the vital role that they perform in that direction. With the few reservations that I have, I nevertheless welcome the Bill because the building societies are working in a very different environment today from that which existed 200 years ago. Indeed, the environment, as the Minister made clear, has been changing rapidly, particularly in recent years. How the societies will cope with the Big Bang in October I doubt if they know, any more than anyone else in the City. Clearly, the whole of that changing environment requires the alterations that are to be found in the Bill, in order to bring building societies more up to date than they are under the present legislation.
The Bill removes restrictions that no longer make sense, and I accept that. The building societies need to be allowed greater scope to meet the demands and challenges of the fast-moving financial world. I am pleased to note the remarks of the Minister in another place, when introducing the Bill, when he stated that his primary theme is continually based on a successful formula. It is my concern precisely that that successful formula should not be endangered in any way.
That point brings me to my first reservation, indeed anxiety. It is a concern that has been expressed in another place by members on all sides and of all political parties. I refer to the danger to small building societies, and indeed to larger ones, through possible mergers, takeovers, and the opportunity to change from mutuality to plc status.
Let me say at once that I appreciate that the Government have sought to build safeguards that need to be examined in some detail at a later stage of the
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Bill. However, the question arises as to whether the existing safeguards are adequate and also whether we really need the conversion from mutuality, which has served the building society movement and the community well for a very long time. I know that is something that your Lordships will want to examine at greater length when we reach the Committee stage.
As to mergers and takeovers, it is not that I am personally worried about the large, efficient building societies not providing an excellent service. On the whole, they do—although one has to recognise that all very large organisations, whether public or private, have a built-in bureaucratic propensity to the worst kind of inefficiencies. My concern and, I know, that of many others is that small is also beautiful—a slogan that, it will be obvious to your Lordships, I have naturally supported all my life. There are many small building societies doing a first-class job. They are specially geared to local needs, and in the dash for modern methods, I hope your Lordships agree that we should not want to throw out the baby with the bathwater. We must see to it that the safeguards are adequate in that particular area.
Probably the biggest worry in that respect, as I have indicated, is the conversion from mutuality to plc status and the greater opportunity that will provide for the takeover by major financial institutions, either at home or from abroad, of what would be to them a very attractive financial proposition. I recognise that can happen with or without conversion to plc status, and I have no wish to attack—at least, not today—large multinational companies. In their own fields, frequently, they do an excellent job. But the building society movement, as I have indicated, works in its own very special field and serves the wider community in a way that is foreign to major multinational companies, whether British or foreign.
I quoted the Minister when he was introducing this Bill in another place as saying that his primary theme in this Bill is continuity based on a successful formula. The danger that that could be lost in the rush towards the 21st century should at least be noticed and should be watched very carefully by your Lordships when we reach later stages of the Bill.
I recognise that the Government have tried very fairly to look at the problem and introduce special safeguards, so that the conversion to plc status needs 20 per cent. of subscribers to vote and 75 per cent. of them to agree—plus, unusually, 50 per cent. of borrowers. So it will not be easy to achieve those percentages, but by order those percentages can be changed to much lower levels. Anyone who has experience of orders and of the inability to amend them in any way, and of the speed with which they pass through both Houses, will know that the adequacy of that safeguard needs to be examined very carefully.
On the takeover percentages, as the Government have built them in, it will be even more difficult, 50 per cent. of members will have to vote in favour. It sounds as though the Government are seeking to make takeovers and conversions almost impossible—although we must recognise that it will be possible for the takeover experts to make very tempting proposals to building society members.

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In Committee in another place, I noted that one Conservative Member asked, if the Government feel that such fundamental changes are nevertheless desirable, then should not the Minister make it easier rather than harder to make the conversion? If, on the other hand, the Minister was arguing that he was making the change very difficult, then why bother at all? It is a kind of, "Have you stopped beating your wife?" question. Nevertheless, it is a serious question, because if the Government, and your Lordships, do not want that kind of conversion, then one is bound to ask why it is to be allowed in the Bill at all, especially as it would have, it seems to me, a profound effect on the very successful formula to which the Minister referred at the start of his speech in another place, and which I have mentioned.
Some other areas have worried a number of my honourable friends in another place, and others elsewhere. For example, there are the dangers of allowing a small percentage of funds for non-housing. I am bound to say that I personally am not worried about that area because if the housing demand is there, I am confident that the building societies will meet it as they have done so far. And if the building societies do lend, for example, on unsecured loans, then again I am far from concerned. Indeed, I would welcome the competition, because there are some pretty exorbitant rates now being charged on unsecured loans, and if the building societies become involved in that area and provide better competition, I personally would welcome it.
The Minister referred to one major omission from the Bill that has created some controversy in another place, especially in respect of my honourable friend Mr. Austin Mitchell. From the noble Lord's current expression, I see that he must be delighted that my honourable friend is not a Member of this place. I refer to his, campaign that building societies should be permitted to undertake conveyancing, not just as the Minister said but in respect also of their own customers.
My honourable friend made a serious charge of bad faith against the Government in general and in particular against the Solicitor-General and the Prime Minister. It was a charge that they had betrayed a clear promise that they had made. I shall not trouble your Lordships with reading it out, but there was a very clear and specific promise made to my honourable friend in another place that if he dropped his Bill, the Government would introduce specific measures to permit that which he was seeking to be implemented in the Building Societies Bill. But as the Minister has said, the Bill, while it allows conveyancing, does so only in respect of customers other than those of the building society itself; in other words, not the building society's own customers. That is not what Ministers had promised my honourable friend.
The Minster said, as was stated elsewhere, that the Government's case is essentially the case of conflict of interest, and in particular, it has been said elsewhere, a conflict of interest over the terms of the mortgage. When I looked at this I began to have at least some sympathy at first with that argument. But the problem arises, with the greatest possible respect to the noble Lord the Minister, more in theory than in practice. The issue will need great consideration in Committee,
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so I will not bore the House with it at too great a length today. But it is important to put on record that most conveyancing—apart from the fact that it is not done by a qualified solicitor but rather by a junior clerk—would not involve the kind of conflict of interests that the Government have implied in that argument.
The real problem in practice is not whether the solicitor for the purchaser is independent or employed by a building society. The real questions for a purchaser are financial ones, and neither solicitor, in my view, is best qualified to advise. Indeed, nor do they. They quite rightly do not bother to advise. Many independent solicitors quite openly and ethically have connections with a building society. In practice, therefore, there is little or nothing between the advice, or lack of advice, of an independent solicitor and a solicitor engaged by a building society. Therefore, I feel that the conflict of interests argument is a bogus one.
I believe that competition could be good news for prospective purchasers, and it might well open up a true open market in which real financial advice would be available to a prospective purchaser, not just about the terms of the mortgage but whether, for example, the purchaser should use a particular building society, whether they should use a building society at all, whether they should use a bank, or whether they should have an insurance-linked borrowing. All that kind of information is not best given by a solicitor, whether he is an independent solicitor, so-called, attached through some connection to a building society, or one directly employed by a building society. In both cases they are unlikely to say to a prospective purchaser, "I do not think you should be going to this building society at all; I think you should go elsewhere. Do not bother with me. I can afford to lose the business, and so can the building society". That is a somewhat unlikely scenario, and in practice it does not happen, as most of your Lordships will know.
Therefore, this whole question of whether the Bill includes what the Government promised my honourable friend Austin Mitchell is something that I hope your Lordships will recognise is worthy of serious consideration.
There are a number of other worries concerned with the need to ensure adequate protection for consumers, investors, house purchasers and employees of the building societies. But many noble Lords will wish to speak today so, for now, I repeat my general welcome for the Bill, and for my part I shall certainly not seek to delay its passage. I seek only to ensure that the excellent service carried out by the building societies should be allowed to expand in the best interests of the community they have served so well for nearly 200 years.
12.43 p.m.
Viscount Chandos: My Lords, on behalf of the Alliance Benches I should like to thank the noble Lord the Minister for his clear introduction to the Building Societies Bill. I seem at the moment to be unable to speak in your Lordships' House without having to preface my remarks with a declaration of interest, but on this occasion I should declare that I am a director

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of a bank which is both involved in the home loan market itself as well as having a wide range of business relationships with building societies. In the same vein, I hope your Lordships will forgive me if, on this occasion, I am unable to attend as much of the day's debate as I should have liked—one example perhaps of the problems inherent in practitioner-based regulations or legislation.
As the noble Lord, Lord Barnett, has already said, the building societies have been the principal source of finance for home buyers throughout the post-war period and, indeed, for most of this century. They have provided in that time a good and valuable service. The steady increase in home ownership over a long period and the sharp rise in recent years resulting largely from the Government's programme of council house sales have been financed predominantly by the building societies and they have coped with these increasing demands remarkably well.
However, no area of business—least of all any part of the financial services business—can be immune to change. The combination of external competitive pressure on the building societies with internally generated impetus for change and development of their own business meant that the review conducted two years ago in the Green Paper, Building Societies: A New Framework, was necessary and desirable and that the consequent Bill being introduced today was an inevitable response to those changes.
As your Lordships' House will be considering in broader perspective when the Financial Services Bill is discussed next month, legislation in the area of the financial services industry must aim to strike a fair balance between the prudential protection of investors and depositors with the interests of users of credit or financial services provided by the institutions concerned. I believe that the Building Societies Bill should be judged by these criteria and, in general, I believe that the Bill comes out well.
It has been customary to think of the clearing banks as being the principal suppliers of credit and many other financial services to the retail market, notwithstanding the dominant position of the building societies in one specialised area; namely, the provision of home loans. In the various examinations of the clearing banks and their proposed mergers over the past 20 years the Monopolies and Mergers Commission has had to consider the right level of competition prevailing in that market. In potential conflict with that objective of maximising competition have been other factors, including the Bank of England's concern from a supervisory aspect as well as considerations that are unusually hard to define, such as regional or nationalist implications based on a bank, say, in Scotland or the North-West of England being acquired by, or merging with, a London-based institution.
It is difficult to feel very happy with the results of some of the decisions made over the past few decades, with the regional strengths of some traditional clearing banks being lost without any compensating improvement in the level of efficiency or competition provided by the major clearing banks resulting from that series of mergers. Britain has still been slow in its
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extension of banking services throughout the population compared to other developed countries, and much of the running in developing new customers for banking services has been made by institutions other than the main clearing banks—the foreign banks and consumer credit companies being at the forefront and, subject to the limitation of previous legislation, the building societies being other important innovators.
It is therefore against this background that we should welcome in principle the increased competition which the building societies could potentially offer the clearing banks and other financial institutions in providing a wider range of retail financial services, just as we should welcome the banks and insurance companies beginning to provide significant competition to the building societies themselves in the area of home loans. It would not only be unfair for the building societies to be kept under the same restrictions as existed 40 years ago while other financial institutions benefit from a period of deregulation in challenging the building societies in their own market, but it would also be detrimental a wide range of consumers and users of financial services if the societies were to be excluded from the potential provision of these new services.
Your Lordships may be aware of the deregulation that has taken place in the past six years in the United States in the equivalent market—that of the savings and loans associations. In a very different overall market, subject still to some unusual and possibly anachronistic banking regulations, the deregulation of the savings and loan industry has been an important part of the overall changes taking place in the United States banking system.
However, it cannot be said that the experiences of the Americans can be regarded as at all satisfactory, for in the last two years, despite an extraordinarily favourable trend in US interest rates, there have been unprecedented levels of failure among the savings and loans associations. FISLIC (Federal Insurance Company for the Savings and Loan Industry) now has serious difficulties in providing adequate cover for the number of failures that are occurring, with this problem exacerbated by a number of the healthiest savings and loans associations, through being acquired by banks, leaving FISLIC and becoming members of FDIC, the equivalent federal insurance corporation for the banking industry. The largest savings and loans association, FCA, was brought to its knees in 1984 by aggressive and ambitious management, which not only conducted its traditional business in a rash way but also participated speculatively in areas such as consortium take-overs and notorious "green mail" operations.
Despite the great degree of financial sophistication prevalent in the United States, the managements of the savings and loans associations have been ill-equipped in many cases for some of the diversification and expansion that they have undertaken since the deregulation process started. However, I believe that the Bill before us today has been drafted with reasonable regard to events in the United States and mindful of the pitfalls as well as the beneficial effects of deregulation and greater competition.

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In terms of lending opportunity the Bill proposes only modestly increased powers for the larger societies to make unsecured loans to individual borrowers and does not allow wholesale excursion into corporate lending or investment in corporate securities of the sort that has clearly caused so many of the problems in the United States. There is concern even with these proposals that increased competition in the provision of consumer finance may in fact lead to an unacceptable level of competition in this market for all participants, with a consequent reduction of profitability and indeed serious risk of loss, similar to that which has occurred in corporate and sovereign lending by international banks, thereby giving rise to consequent instability in the world banking system.
In trying to strip out the arguments of self-interest from those of genuine prudential concern, again I believe that the current proposals in the Bill offer a reasonable extension of competition and consumer choice without significant risk to the stability of either the building societies or the banking industry as a whole. However, it is obviously most important that the Building Societies Commission performs its supervisory function to the highest standards and with the greatest rigour to ensure that management of the societies is both prudent in its traditional business and competent in the new areas entered into.
I have mentioned the problems suffered by FISLIC in the United States in generating sufficient revenue to cover the increasing costs of reimbursing depositors with failed savings and loans associations, and the proposal for establishing a building societies investor protection board should be viewed in that light. To begin with I believe that it is right not to protect investors for 100 per cent. of the amount invested or deposited, since there has long been a problem in encouraging any degree of discrimination among the general public in the quality of institutions with which they deposit or invest.
The secondary banking crisis of the mid-1970s saw no part of the losses borne by depositors who had benefited in many cases from the often abnormally high rates of interest offered by the secondary banks which subsequently failed. Some degree of risk-sharing is correct, as was acknowledged by the subsequent Banking Act, and while it may be possible to argue whether the 90 per cent. level of insurance and £10,000 ceiling is correct, I believe that the principle is right.
I am sure that much attention will be given at Committee stage to these clauses, but in the belief that the new powers of unsecured lending are prudently modest, I am happy that the broad outline of investor protection offered by the proposed investor protection board is adequate. Like the noble Lord, Lord Barnett, I believe that the measures proposed to allow societies to change their status from that of friendly societies to that of public limited companies and to be taken over will be subject to more detailed and intensive discussion at Committee stage. The major building societies have certainly been concerned that the conditions proposed are unduly onerous, given the nature of their existing business and investor and depositor base, but we should be wary of accepting any measure of laxity when the friendly society or mutual
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status has served the industry well, not just in the past but very effectively at present when building societies' perceived credit standing has allowed them to tap the wholesale markets so successfully for additional funds.
As the noble Lord, Lord Barnett, also emphasised, we should be careful to ensure that the measures are not such that the building societies are merely seen as ripe for the picking by other financial institutions which are seeking to expand their retail financial network, with a consequent reduction in the level of competition and consumer choice which the Bill is intended to foster. A strong and independent building societies industry should be a long-term objective, and the measures which are proposed to foster local mergers are to be welcomed in that light. The Government's apparent firmness toward the lobbying of the major building societies on the threshold of conversion and take-over is to be welcomed.
Therefore, in general I should like to commend the Bill to your Lordships' House and hope that the contribution made by my noble friends and allies and by myself from these Benches toward the detailed discussion of the Bill will be seen by the Government and your Lordships' House as helpful and constructive.
12.57 p.m.
Lord Hill of Luton: My Lords, I am not sure whether a former chairman of a building society and a modest current investor needs to declare an interest but if so, then I do. I propose to concentrate my few remarks on one point and it is a point which may prove to be of crucial importance.
While varying in strength from time to time, the competition of the banks has been substantial, though building socieites have maintained their position in servicing 80 per cent. of mortgages. But will this situation continue? The banks and other financial institutions, by virtue of their position as public companies, are able to escape the restrictions that fall upon building societies. This point is absolutely crucial, even though there is no substantial effect on the major companies at present.
It is very important to contemplate the procedure that has to be followed if any building society can successfully claim to be in the same competitive position by having become a public company. One does not ask for more, but it seems to me that if banks and other organisations are really effective that must be an option to be pursued. It is on that point and that point only that I wish to say a few words.
There is a voting procedure laid down in the Bill for a building society which, for good reason at some time in the future, desires to acquire the role of a public company to compete on equal terms with the banks. The building society members, which means investors of £100 or more and borrowers, are entitled to vote on the issue of translation from one role to another. The constituency is extremely large. I think that I am right in saying that there are 1.5 million members of the Abbey National Building Society. Nevertheless, it is right that the Government should proceed to secure that permission is given by the members of an individual society desiring to make a change.
We should look at the voting procedure: and I must get the words exactly right. The terms proposed in the

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Bill under which a mutual building society can convert to company status are that 20 per cent. of members must vote and of that 20 per cent., 75 per cent. of investors and 50 per cent. of borrowers who vote must vote in favour of the conversion.
We should bear in mind the constituency which consists of investors of over £100 and borrowers on mortgage. We must ask, "What interest are they likely to show in this tremendous poll that is provided for before change can be made? I am not sure that the small investor, the very foundation of the building society, can be persuaded whether it is right or not that the legal basis of the building society should change to that of a public company. I do not think that there will be much enthusiasm; and, secondly, I do not suppose that the borrower paying off a mortgage will think that it is a matter that concerns him.
That leads me to the main point of criticism. It is not that the decision should be reached by a majority of the members; after all, that is the traditional way of making a decision—by a poll which requires a certain minimum vote. However, here 20 per cent. must vote and of that 75 per cent. of investors and 50 per cent. of borrowers must vote in favour. Why should they? There is a natural inertia about signing paper. They will need to be persuaded that it is a matter that affects them. I do not know how that will be done. I do not know how they are to be persuaded to have sufficient interest to reach the required minimum.
Bless my soul! 20 per cent. of the votes of a vast number of members must be obtained before the decision can be proceeded with. Then there is the requirement about the make-up of the majority. That seems to be a device which will ensure that a motion to change the basis will never be passed. With a minimum of 20 per cent. of a disinterested constituency required, there is then a requirement for a majority under different headings. Of course the decision should be reached by a majority. Of course the decision should be that of the members, despite the inconvenience of so vast a constituency.
To require a 20 per cent. vote of members as the basis of the formula is, I suggest, not an option but a non-option which will not facilitate the translation of a building society into a public company.
The banks may well indulge in an enormous campaign with which the building societies cannot compete. They will be left with only 5 per cent. of their money for purposes other then lending on houses. I urge that this proposal is examined most carefully. There will never be adequate competition with the banks. It will never be possible to put a building society on the same legal basis as the banks so that the two competitors can offer an equal range of services. I hope that that point can be dealt with at the appropriate later stage.
1.6 p.m.
Lord Shuttleworth: My Lords, it is not without a little trepidation that I rise to address your Lordships' House for the first time. In doing so, I have at once to declare an interest in the Building Societies Bill as a director of one of the country's large societies.
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It seems to me that the objective attached to the principles of the Bill is in essence a simple one—to reinforce success. Your Lordships have already been reminded of that success story. Building societies have almost half this country's total population as investors, and some 80 per cent. of mortgage business is held by them. Home ownership now encompasses 64 per cent. of households and is still rising. Legislation is needed now to ensure that as the financial environment changes so societies can continue to provide a valued and needed service in the new environment. The Bill must give societies the flexibility to compete and to conduct their primary, established business in the current financial climate.
Societies do not seek protection; they seek equality of competition. Without the same access to wholesale funding and without the power to offer the additional services required by members, which other competing financial institutions already enjoy, it will be extremely difficult if not impossible for building societies to continue to do what they have done so well for so many years. However, in providing those new powers for a successful future—here I entirely agree with the noble Lord, Lord Barnett—we must guard against destroying those still relevant factors which have contributed to such a successful past.
I refer to two in particular. The first is that societies have concentrated single-mindedly on their traditional purpose, which is lending for house purchase on first mortgage. The second factor is that societies, with their mutuality, are organisations with which people like doing business. It is important for the future of building societies to ensure that those two principles are not pushed to one side.
In order to provide what their members want, societies will, to a greater or lesser degree, embrace the new powers available, and whether they be unsecured lending, estate agency, pension provision, stockbroking or the development of residential land, societies will do that with professionalism and care. We must however keep the extent of those new powers in their true perspective. Only 10 per cent. of commercial assets may be committed to them, although there is of course provision in the Bill for the amount to be increased if future circumstances warrant. Initially, at least 90 per cent. of activity will continue to be in building societies' traditional mainstream business and so their principal purpose will not change under the Bill.
On mutuality, members' rights are in some areas increased with, for example, the circulation of election addresses and borrowers' new entitlement to vote on mergers. The adoption of any of the new powers requires members' express approval. Some may point—indeed, some have—to the provision in the Bill for conversion to plc status as the death knell for mutuality. A number of societies may well find that course of action suitable for them. I believe that the number will be few. The statutory procedure will make conversion very difficult to achieve in practice, requiring as it does this high figure of 20 per cent. of all members to vote. The case for conversion will have to be extremely convincing. It is not only for the board or the management but it is for the members, because it is they who will have to decide. In my view, both these factors, so contributory to past success—singlemindedness

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of purpose and mutuality—will continue to play a significant part under the new legislation. It is that which leads me to support the principles contained in it.
However, I should like to refer briefly to two points of detail in the Bill on which I should welcome further clarification—in my case, probably, correction of my interpretation. The first catches my eye as a chartered surveyor. The Bill authorises a society to hold premises of which only part is used for its business. However, if I understand it correctly, it provides that in prescribed circumstances, all such premises may have to be treated as forming part of a society's Class 3 assets, not just the part of the property not occupied for the society's business, but all of it. It seems to me to be somewhat counter-productive to encourage societies to undertake new services within Class 3 limits set out in the Bill while arbitrarily limiting the extent of Class 3 by requiring societies to include in it the total value of all their offices currently owned where any part is not used for their business. This will affect different societies in different ways. But some figures that I have seen indicate that it could reduce the availability of Class 3 assets for new services by as much as 25 per cent.
Another point that may cause some concern to those working in building societies relates to the ombudsman, or adjudicator as he is curiously called in the Bill. I speak as a layman in legal matters. I wonder whether it really is appropriate to provide that he may, in some circumstances, direct a society to take a certain course of action. He may even direct a society and a complainant to vary contractual rights subsisting between them at what amounts to the discretion of the complainant. The Bill provides that such directions may not be questioned in the courts. Such contractual rights to be altered might exist between a society and a large number of other members in addition to the complainant. Would it follow that all these other members' rights should be varied automatically once such a direction has been made?
The Bill goes on to provide some sort of let-out for societies by stating that an ombudsman's decision need not be implemented after all providing the society publishes the decision and its intention not to comply. The ombudsman scheme in the Bill contains more severe measures for building societies than non-statutory schemes applicable to other financial institutions. I do not think that it is reasonable to justify them by saying, in effect, to building societies, "Well, if you don't like the decision, even if it has been fairly arrived at, you can ignore it so long as you publish the fact". Nothing, surely, could be more calculated to cause offence to the members. And the building societies that I know would be most reluctant to behave in that sort of way.
Both the points I have referred to are really matters of detail. The fundamental point is that, with other competing financial institutions already operating under regimes not available to building societies, this legislation is essential to societies' futures. It will be important to maintain a constant review of the limits both for wholesale funding and for new powers. As circumstances change, it will be almost inevitable that
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these are raised. But this will be the proper way of ensuring that those factors that have made such a contribution in the past can be retained within a developing framework for building societies. This Bill can provide the flexibility to compete that societies seek. It will reinforce success. For these reasons, I strongly support it, and I look forward to the day that it reaches the statute book.
1.15 p.m.
Lord Strabolgi: My Lords, it is a great pleasure and indeed a privilege to be the first to congratulate the noble Lord, Lord Shuttleworth, on his maiden speech—a speech to which we have listened with the greatest interest, knowing the noble Lord's great experience in this field. The noble Lord is, I believe, by profession, a chartered surveyor. As he has told your Lordships, he is also a director of one of the largest building societies. The noble Lord was, I believe, too modest to say that in fact (I hope I am right in saying this) he is deputy chairman of that society. It is a great pleasure to welcome him to the House. I hope that he will be able to take part in further stages of the Bill and to give the House the advantage of his great wealth of experience on this subject. I hope, too, that we shall hear from the noble Lord on many other occasions.
Like other noble Lords who have spoken and like my noble friend Lord Barnett, I, too, welcome the Bill in general but with certain reservations. The reasons for the Bill are clear. They are the entry in recent years of the banks and finance houses into the building societies' traditional market, as the noble Lord, Lord Brabazon, implied in his speech. We are grateful to the noble Lord for explaining the Bill in such a lucid and, considering the length of the Bill, concise way. The Bill attempts to do two things—to preserve the present character of the building societies and to allow them, or at least the larger societies, to play a wider role in what is becoming an intensely competitive field. I hope that one result of the legislation will not be a drastic reduction in the number of smaller societies, and that these will continue to have a role to play, especially at the local level. Here, I, too, must declare an interest, as I am the chairman of a medium-sized building society.
The Bill ranges far and wide over a large field. I do not intend to speak for long. Many points have already been raised by noble Lords. I should like to deal briefly with two that are causing me concern. First, by Clause 116 the right to make unsecured loans is restricted to societies with commercial assets of over £100 million. The original proposal, I understand, was that a society must have free reserves of £3 million. The Government have now changed this qualification, replacing it with a requirement that a society's assets, discounting liquid and fixed assets, must be £100 million.
This is going to make it difficult for those societies (and I include my own) that are just below the £100 million mark although their reserves are fully adequate to make unsecured loans of up to £5,000 to any one person as allowed in the Bill. Such a restriction will make it difficult for these middle ranking societies to remain fully competitive in this field. The restriction will mean, for example, that such societies will not be able to offer modest loans for house repairs or improvements related to the main mortgage. Nor

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will they be able to offer small top-up loans in cases where a purchaser is, for example, buying a house at, say, £1,000 over the valuation, which might have been a rather cautious and conservative valuation. If a society cannot provide the shortfall, the purchaser is driven to take a second mortgage from a finance house at a much higher rate.
I should also like to say a word about the Investor Protection Scheme—perhaps I should call it "the so-called" Investor Protection scheme—in Part IV of the Bill. This statutory scheme limits the level of protection for shareholders to 90 per cent. of their investment, with a ceiling of £10,000. Here I should like to say that I do not agree with the noble Viscount, Lord Chandos. The present building societies' protection scheme, which is a voluntary scheme, has no limit at all. The Government are here trying to do two mutually exclusive things, if I may say so. They are, on the one hand, encouraging people to put their savings into building societies. To this end they have abolished the amount that an individual can hold. Latterly, this was I think £30,000 some months ago, but now there is no limit at all.
That, I think, was a very right decision on the part of the Government. But if things go wrong, it will not be much comfort for larger savers to discover that all the compensation they can expect if they have a holding of, say, £30,000 or £40,000 is £9,000. The percentage was originally 75 per cent. of £10,000, but this was raised in Committee in another place to 90 per cent., a difference (although it is largely academic) of about £1,500. In my own society more than 60 per cent. of investors have over £10,000 invested. I believe that this is the case in many other building societies, particularly the ones of medium range. These, I think, are two matters to which we should return in Committee.
I refer particularly to the question of the Investor Protection Scheme. This morning I had a letter from the consumers associations, who are most concerned about it as well. They have pointed out to me that it is not unusual for sums much greater than £10,000 to be lodged with a building society. For example, when a householder has sold one house before buying another, and lodges the money for some period—which could be quite a long one if they are taking time to buy a new residence—this could be a large sum. The sum of compensation of £9,000 seems quite inadequate.
I understand that the compensation scheme proposed in the Financial Services Bill is likely to offer at least 90 per cent. protection up to a maximum of £30,000. The compensation levels offered by the bankers' investment protection scheme are expected to be, I understand, reviewed in the forthcoming banking legislation. Perhaps the noble Lord, Lord Brabazon, would like to say a word about this when he replies. I therefore think that the present protection scheme is quite inadequate. It seems to me to have little purpose other than a cosmetic one. It is a matter which should be examined in more detail at a later stage of the Bill.
Apart from these two points, I should like to say that I welcome the Bill and hope that your Lordships will give it a Second Reading.
1.24 p.m.
Lord Campbell of Croy: My Lords, as the first speaker from this side of the House to follow my noble friend Lord Shuttleworth, I take great pleasure in congratulating him on both the fluency and content of an outstanding maiden speech. He speaks from knowledge and experience of the subject and I am sure that it is a general view that we look forward to hearing him again frequently in this House.
I should like to thank my noble friend Lord Brabazon for the excellent way in which he outlined and summarised a long Bill. I have to declare an interest as a director of one of the larger building societies. I welcome the Bill. Legislation which has catered for the building society movement for about 100 years now needs changes in order to apply to today's conditions and the prospects ahead. The Bill on the whole meets the challenge. The principal role of building societies has been raising funds by attracting retail savings and lending for residential housing. These, I am sure, will continue to be the building societies' predominant functions. But in future they will be able to play a wider role in housing generally and in the expanding competitive market for financial services.
I have in the past on occasions, and on other subjects, criticised the Government for lack of consultation before proposals or legislation were put forward. That charge is not applicable today. I believe that there has been full consultation with the bodies concerned. For example, the Green Paper in 1984 took fully into account the Building Societies Association's discussion document published early in 1983, the Spalding Report. When the Bill was introduced it was clear that there had been careful consideration of the comments which had been made on the Green Paper from the building societies and from others.
There has been a phenomenal expansion in the last 30 years by building societies. They have become a significant part of our country's financial establishment. In more recent times there has also been increasing competition. Other institutions have entered the market or are in keen competition with the societies. For example, National Savings compete on the investment side, and, on lending, the banks entered into that market in quite a large force some three years ago. The large building societies five years ago entered the wholesale market as they were then allowed by legislation, to a limited degree which was monitored by the registrar. For example, they were able to issue bonds and to carry out transactions in certificates of deposit.
A highly competitive market is also developing for retail financial services. Without the new powers building societies would be unable to take part. All this is good news for consumers, for the general public. They have already benefited from the increased competition and they stand to gain more in both convenience and price. With regard to convenience several services will be available at one counter or in one office, some directly associated with house buying.
I should like to draw attention to two or three provisions in the Bill and comment on them. On housing, I should like to see the building societies

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making a greater contribution to solving national and local housing problems. Hitherto they have been restricted because they have not been empowered to hold land or to make unsecured loans. The Bill changes this, although only for societies over a certain size. No doubt the threshold in the Bill will be the subject of comment. It has already been commented upon by the noble Lord, Lord Strabolgi. In future the societies will be able to own land provided that it is for residual housing or associated with such housing.
The building societies can tackle one particular national housing problem by helping to replace the diminishing private rented sector, either working in conjunction with housing associations or on their own. I understand that several building societies are ready to enter this field as soon as the new legislation is in effect.
The noble Lord, Lord Barnett, referred generously to what the building society movement had been able to do in the housing field, and in difficult areas of it, in the past. I believe that without conflicting with the requirements of those wishing to buy homes, the role which they can play in the private rented sector is an increasing one. They could meet the pressing needs of those who, because of the mobility required for certain kinds of job, or for other reasons, seek rented accommodation which is now difficult to find. I emphasise that the building societies can in future help in what has been a difficult housing problem, thereby also assisting industry and commerce where mobility is required for those working in various kinds of job.
The ability in future to make unsecured loans within certain limits will also help with housing improvements and repairs and the purchase of household equipment and chattels. Building societies are mutual institutions owned by their members. Membership of the large societies runs into several millions. The noble Lord, Lord Hill of Luton, made a guess at the number of members in the Abbey National. He said that there were 1.5 million members. My information is that there the figure is about 7 million, and the Halifax must have even more. Therefore, we are dealing with a very large section of the British public. It could be said that what is good for building societies is likely to be good for nearly half of the population who are either members or in the families of members.
I should like to comment also on the provisions which would enable a society to convert to a limited company. One view, strongly held and advanced in another place, is that mutuality should, if possible, be retained, and conversion to a public limited company should be made difficult. There is also another view; namely, that conversion is being made much too difficult in the Bill by the requirement that at least 20 per cent. of qualifying investors must vote in favour. That has already been put very cogently by the noble Lord, Lord Hill. As I understand it, that school of thought visualises that circumstances may arise in the future where a society would be at a disadvantage in competition with banks and other institutions which enjoy more flexibility by being public limited companies. Indeed, 20 per cent. is a very high hurdle.
My own recent experience may interest noble Lords because the society in which I serve was involved in the largest merger that has taken place in the building
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society movement. Last October, the new society, the Alliance and Leicester, emerged. I was a director of the former Alliance. As part of that procedure about 2 million people had the right to vote by post. I do not think that there had been as big an operation as that previously. We reckoned that we would be lucky if we got 10 per cent. to vote. In fact, that is what happened: about 10 per cent. voted. About 90 per cent. were in favour and so there was no difficulty about the result. It was a friendly merger; it was not one of those mergers which required a page of a national newspaper every two or three days. Nonetheless, there were hoops to be gone through. Therefore, I am very much aware of the difficulty which the noble Lord, Lord Hill, mentioned of getting a 20 per cent. threshold.
I should like to draw attention to the provisions in the Bill which allow that threshold and the other thresholds to be altered. The noble Lord, Lord Barnett, made reference to this matter and I should like to spell it out. Under Schedule 2(30)(6)—page 190—the Government, can amend these thresholds by order, through a statutory instrument under subparagraph (7), and that statutory instrument would be subject to annulment by either House of Parliament. So there are provisions for altering the thresholds and the Bill caters for changing circumstances in the future. If a situation were to arise a few years ahead where it was generally agreed that it should be made easier for a building society to convert to a company, then it is possible without having to introduce a new Act of Parliament.
Both of these views have been expressed today and no doubt we shall hear them again. However, the noble Lord, Lord Barnett, asked why all this is in the Bill at all, because if there was a general feeling in another place that conversion was not a good thing, why put it in with this very difficult hurdle and yet also have provision to get round it? The Government must answer such questions, but I shall offer one reason, and that is that it is sometimes wise and prudent to have powers in a Bill for use in unpredictable situations in the future.
The noble Lord, Lord Barnett, I am sure will recall from his time on the Front Bench in another place—as I do—occasions when something clearly needed to be done and Ministers were being urged to do it, but they then said that there was no provision in any Act of Parliament which allowed them to do it, certainly not in the relevant Act. I hope that we shall have further legislation on building societies well before another 100 years' time, but I see that there is some point in having provisions in the Bill so that if a situation were to arise such as the one to which the noble Lord, Lord Hill, referred, the building societies and the Ministers would not say, "There is absolutely nothing in the existing legislation to cover this point. We've got to try and get another Act of Parliament". Therefore, for my part, I am glad to see that there is also the provision for altering the thresholds in the Bill.
I am sure that we shall examine the Bill thoroughly and scrutinise those parts that may need to be revised in accordance with our traditional functions in this Chamber. I should like to congratulate the Ministers who have borne the heat and burden so far in another place. I ask the Government to do what they can to

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provide time at the appropriate intervals for the later stages of the Bill here. I know that this is difficult because there are several important Bills in the pipeline which are pressing on your Lordships' time. However, I am sure that everyone in every part of this House, while ensuring that the main, relevant matters are raised, will take no more than the time necessary to do so.
From the building societies' point of view, it would make a considerable difference if the Bill could be law before the Summer Recess, because the effective date for commencement could then be in January, which is the date for which they have been preparing; otherwise they would have to wait an extra three or four months. I recognise that that may not be possible, but I suggest that it is worth bearing in mind as we study the Bill which is a generally acceptable measure which will not meet with serious objections from any part of your Lordships' House.
1.38 p.m.
Lord Luke: My Lords, first I should like to thank the Minister for his introduction of the Bill and, secondly, I should like to add my congratulations to those of other noble Lords to the noble Lord, Lord Shuttleworth. I noted that in his speech the noble Lord, Lord Barnett, complimented the movement, and I agreed wholeheartedly with him when he said that the societies fulfil an important social function. I also noted his reservations.
This Bill has been subject to long and careful study in another place and its contents have been examined minutely for at least two or three years by the Building Societies Association on behalf of the whole building society movement. As we realise, the Bill is very detailed, which is as it should be—especially for those societies wishing to take up any of the new powers—and the guidelines are clearly set out. There has been a very large measure of agreement among all parties concerned. The Bill seeks to establish a completely new legal framework for building societies.
Building societies are to be given extended powers in a number of directions in addition to their main existing business, and a range of new services which are connected with their mainstream housing business. At the same time control has been assured through the setting up of the commission as a regulating body. The new commission, as the governing body, is to promote the protection by each society of its investors and the financial stability of the societies themselves, and many other functions of regulation and control. After all, it is not a bad thing to keep us all in order. This should be a source of confidence for the public.
On the housing side, the proposals would enable societies to make a greater contribution, in partnership with other institutions, to solving some of the major housing problems, and I note what the noble Lord, Lord Campbell said on that. No doubt the larger societies will avail themselves of functions outside the hitherto normal roles of investment and advances for housing purposes, for which societies have become specialists in their own field, but I would question the advisability of small societies entering into spheres—where other professions have been expert by tradition
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for a long time—without the necessary expertise themselves.
As chairman of a society—and I suppose I ought to have mentioned that a bit earlier—I welcome the Bill, and I am sure that it is right that in the present competitive financial field building societies should be given extra facilities to compete on equal terms. The provisions for the conducting of building society business with the public are important and necessary, but equally important are the parts of the Bill dealing with how societies should order their own affairs on behalf of their members whose money they are safeguarding.
There will of course be questions—already raised in your Lordships' House—on conversion and the powers of the ombudsman, or adjudicator (I do not know what we are supposed to call him) which may be worked out at the Committee stage. But I hope, with the noble Lord, Lord Campbell, that the passage of the Bill will not take too long, in order that the necessary provisions can be put into effect by 1st January. With those few remarks, I give the Bill a warm welcome.
1.43 p.m.
Lord Houghton of Sowerby: My Lords, I too should like to congratulate the noble Lord, Lord Shuttleworth, on his most competent and informative maiden speech. I sincerely hope that he will find it possible to be with us in the later stages of the Bill. I am sure that we would like to draw on his temperate and well-informed approach to this problem. I have a special regard for the noble Lord because he was a director of a society, which has now lost its identity in a merger, with which I had long association; and he was helpful and wise when I was chairman of the Civil Service Housing Association.
I have been connected with building societies ever since I was born in a house that my father bought through a building society. It was not one of the big, permanent affairs, but a tiny grouping of people who came together to form a small society in a small town in Derbyshire.
What this Bill is to do is to launch building societies into the new growth industry, which is the high street money market. In The Times newspaper of Tuesday last there were two articles, the third leader and a contributed article by Mr. Tim Congdon, on the worries which are bound to lie behind this new move to put building societies far forward in the financing of housing and generally taking their part in the wider financial affairs of the country. I share some of these worries, because I think that without in any sense blaming building societies we are bound to look at the position they occupy in our housing and financial policy at the present time.
I must draw your Lordships' attention to the imbalance at the present time of the housing policy of the Government which provides ample scope for the extension of home ownership on very favourable terms—with a large tax discount to reduce the effective rate of interest on their mortgages—with, on the other side, the position of houses to rent, which have virtually been reduced to being a social benefit subject to a needs test. That disparity is becoming almost a scandal. Where does one go for houses to rent?

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The total provisionally anticipated cost to central government of all housing benefits for 1985–86 is £11½ billion. Mortgage interest tax relief accounts for £4¾ billion of that, which is 41 per cent. of the total cost of housing benefits to the Government, including all supplementary benefits for rate and rent rebates and all that kind of thing. Since 1983–84 the total cost of rent and rates allowances to recipients of supplementary benefit, and rent and rates rebates outside supplementary benefit, has risen by 23 per cent.
The cost of mortgage interest tax relief has risen by 76 per cent. in that time. This is partly accounted for by the sale of council houses on bargain terms and the increased demand for mortgages for house purchase. All those figures were given in reply to a Written Question in the House of Commons Official Report, at column 432 on 3rd June. This tax forgone to assist home ownership is open-ended. The higher the borrowing, and the higher the income of those who borrow, the higher this raid on the revenue will become. I have not got the actual figures with me for the rise between 1983–84 and 1985–86, but the figure has risen to 41 per cent., and the increase was 76 per cent. during that period.
We know a great deal about the mutuality of the present system. I fail to see how mutual it is. Presumably mutuality is something between the investor and the borrower. But the investor has never made any money out of building societies. It is the borrower who makes it all. The investor has had the shabbiest treatment, along with small investors in other institutions, during the period of inflation. They had no hedge against inflation. The borrower did; the house purchaser did; but not the investor. The borrower was buying an appreciating asset which he paid for by payments in a depreciating currency. The investor was having his savings eroded all the time.
I do not want to be cynical about this, but I cannot help but say that home ownership has excelled as the best that borrowing can buy. Now I ask: where are the houses to rent? I sincerely echo the plea that was made just now by the noble Lord, Lord Campbell of Croy, that building societies should be encouraged. In fact, I think we should insist that they avail themselves of the opportunity of taking a share in the provision of houses to rent, which they have long said they have wanted to do and which I think now should be made almost a condition of the extension of their powers into the wider financial market. We do want their help in that direction. The part of the Bill that lifts the restriction but which still retains a limitation must be carefully considered in Committee.
As things are at the present time—when we realise that we have killed off the private landlord by rent control; we have reduced the local authorities' stock of housing by offering the sale of council houses at bargain prices, and have insisted that they should sell them; and have deprived local authorities of the right to use their capital accumulations from the sale of council houses to build more houses for municipal letting—we have made house purchase on mortgage almost the only option for thousands and thousands of people who are in search of accommodation at the present time. That is an intolerable situation. Furthermore,
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I do not think that it is entirely sensible to inflate more and more the already huge private mortgage borrowing requirement—a phrase used in Mr. Congdon's article in The Times last Tuesday. The private mortgage borrowing requirement might even exceed the public sector borrowing requirement before very long.
We must recognise that the draftsmen of the Bill have made a skilful and competent attempt to provide for the reasonable ambitions of all societies—large, medium and small—within the existing framework of the traditional building society. It was a hard job to do, and I think they have made a very good attempt at it. While I believe that the tax subsidy on borrowing for house purchase should be reduced as a matter of fiscal justice and social justice, there is no reason at all for refusing an extension of the ancillary services of building societies which are in this Bill. In fact, I believe that some of the larger building societies probably ought not to remain within the restrictions and framework of the building society law at all.
The two top building societies, the Halifax and the Abbey National, are twice the size in assets and membership of the next in the league table, which is Nationwide. The membership of the Halifax is not far short of 20 times the population of the town. I reckon that the first 28 societies in order of size, taken as a whole, are larger than the remaining 130 societies put together. That is the disparity between the top of the league table and the rest. Yet we are trying to provide within one Bill for societies of different size and potential, and to put the same framework upon them.
It is obvious that shareholder control cannot be effective in the largest and even medium size societies. We come to the question as to whether conditions should be imposed on the taking of polls for various important matters among such large constituencies. I think, for example, that the power and certain of the interests of shareholders should be encouraged by giving added weight to the franchise in proportion to individual shareholdings. One man one vote in societies of this kind is not enough to stimulate interest. If you have half a dozen votes to cast instead of one, you are tempted to use them. That is in accordance with all the conventions of trade unions, public companies and the rest. You vote according to your stake in the institution. I think probably £100 as a qualifying condition for voting could stay if there was an added vote for shareholdings above that. But if there is no added weight for shareholdings above that then I think £100 is probably too low. Also, the conditions for the ballots on mergers and particularly on conversions will have to be thoroughly examined in Committee.
What I think is wrong with a 20 per cent. minimum is that it is contrary to all the principles of democracy. If you are making an appeal to the ultimate authority, which is the members—the referendum, the ballot, is the appeal to the ultimate authority, that of the membership—you cannot put restrictions upon their right to reach a conclusion. You cannot say, "We shall appeal to the rank and file on condition that 20 per cent. of them vote". Mrs. Thatcher came to power on not much more than 20 per cent. of the vote! It is possible to lose your deposit in a Parliamentary

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election and still be elected. We do not impose these conditions anywhere else, in the body politic. There are no similar conditions to this in public companies; and certainly trade unions know what to do—they have a card vote. There is no point in having these conditions in the Bill if we judge that they are unrealistic and we then have to consider whether there should be any at all.
The noble Lord, Lord Campbell of Croy, gave us an interesting illustration of the problem of the ballot in a very large society. But his society, although they had 10 per cent. of the vote, did not have to be worried about getting 20 per cent. If the parties to the merger had been worried about getting 20 per cent., it would not even have gone to the poll. What would be shattering would be for big societies of repute and standing, with enormous interests at stake, to go to the poll and fail to win. That would be awful. To have a 20 per cent. minimum vote and then that 75 per cent. of those voting should be necessary to carry the day is a double hurdle that is quite unrealistic.
The person who does not vote should never decide elections. People who did not vote would decide the election if there was a minimum requirement that a certain percentage should vote. That I think we must bear in mind. I shall differ from my noble friend Lord Barnett if he is taking an opposite view. I shall be on the same side as the noble Lord, Lord Hill, and I think that we may examine this dispassionately when our time comes.
Now, my Lords, I must finish. I doubt very much the wisdom and the social justice of the intensification of the scramble for personal savings to be converted into personal consumption and not investment. This, I think, is the main financial and economic problem that this exercise and all others related to it are presenting to us. In "The Projected British Workforce for 1985–90" published in the Financial Times yesterday, only two groups are likely to employ more people than at present. It is expected that by 1990 employment in distribution and finance will be up 6·2 per cent. to 6 millions; in leisure, up 11 per cent. to what is nearly 3 millions. In every other industrial group, the prospect of the numbers employed is down. In manufacturing industry, the prospect is 12 per cent. down. If that is the prospect, we shall be in an economy of diminishing prosperity and our people will be largely debtors who will be borrowing their passage into the 21st century. That, I hope, is not a prospect that will be realised; but before being so happy about wider financial facilities and while we are making life almost carefree for a lot of people by the use of the credit card, I really think that we want to know a little more and to be more satisfied in our minds on where we are really going.
On the Bill itself, I pay the same tribute to it as have many others. In its detail, I shall be glad to co-operate in seeing it through, subject to the reservations that have been mentioned on particular matters. Much that I have said has nothing to do with trying to cramp the building societies. What it has to do with is the overall financial and economic policy and the housing policy of the Government, which I do not think fits what we are now doing.
2.3 p.m.
The Earl of Selkirk: My Lords, I should like first of all warmly to congratulate the noble Lord, Lord Shuttleworth, on a most notable maiden speech. I am delighted to think that I agree with almost every word that he said. I sincerely hope that he will come here more often than he has in the past. I have to declare an interest. I am a borrower, I am a depositor, and I am a vice-president of the Building Societies' Association; and I have been associated with it for a number of years.
It is worth remembering that this is only the second Bill of importance on building societies over the past 200 years. For the first 50 years, there was no Bill at all, there was no statutory background to building societies, such as they were, in the elementary stage. I think that it makes a very sharp contrast to what has happened in the case of the Companies Bill, of which we have one every other year, and have had, I think, for the last half century, in some aspect of it.
We have an opportunity here, and a very interesting one, of seeing a Bill put together with practically no references to any previous legislation. I would not say that it reads exactly like a novel, but it is at least comprehensible. You can read through it in a manner which, frankly, I have not been able to do to any Bill for a very long time. Therefore, I should like to congratulate the draftsman on being able to put together a Bill which is very largely understandable. As my noble friend Lord Campbell has said, I think that we should also congratulate the Government on the trouble they have taken in preparing this Bill. It has been a good two years under examination and it has been done with very careful consultation with those working with the building society movement. I think that they have benefited greatly both from the help of Mr. Boleat and Mr. Armstrong who has devoted an immense amount of time and trouble to seeing that it is workable and that it is in line with what can be effectively done. Therefore, I think that the result has been (and it is quite interesting) what I believe was a very agreeable Committee stage in the other place which some people have been described as jovial—a most unusual adjective to use in connection with Committee stages in the House of Commons.
The noble Lord, Lord Houghton, says that the depositors have had such very shabby treatment. It is a bit funny that £100 million should have been subscribed by these same depositors who have had such very shabby treatment. I find it just a trifle difficult to follow the exact practical forces of the arguments which he has used.
Lord Houghton of Sowerby: My Lords, there is nowhere else for them to go!
The Earl of Selkirk: My Lords, there are a number of banks in this country and there are investment companies, which I have heard of and about which I know very little. Nonetheless, I believe that they exist.
I think that the building societies are delighted that they are going to be allowed to go abroad. This is a step forward of great consequence which they have been wanting to do for a long time. I think that we must remember that the movement we started here, in

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succeeding in getting a method of borrowing short and lending long, has very seldom been reproduced in any other country. In America it really has never been copied. To a limited extent it is in South Africa, New Zealand and Australia, but in no other country. I believe that our European neighbours will benefit by getting the experience and knowledge of how we have been able to work it.
I should like to ask one question about the commission. I had thought at one time that the organisation would be put upon the Bank of England. I am told, it may be wrong, by those who know the Bank of England, that you are much better out of it. This may be an insult. If it is, I apologise. But the commission which has been put forward seems to be a very sensible one. My only point is this. Is it going to be too much under the Treasury? This should be an independent commission, reporting of course to the Treasury, and no doubt the Treasury will deal with the parliamentary work. But we probably ought not to have a chairman who is a former Treasury official. Certainly he should be a man of broad experience in the affairs of this world but really should not have been officially connected with the Treasury in any way. I say that because this is a very important body and it should take an extremely wide view of its duties. Of course, that does not mean that the members would not be in close touch with the Treasury.
As the noble Lord, Lord Houghton, has said, as indeed did my noble friend Lord Campbell, we shall be most interested in what Clause 3 investments will be able to do. The Minister himself said he hoped the money would be used for building, reconstructing inner cities and building for rent. Building for rent, as the noble Lord has said, has been a catastrophe. It has been destroyed by parliamentary action. It must be reinstated; I hope it will be. I have been a little sorry on occasions because the Government have not seemed to grasp the importance of rented property, renting being a perfectly proper way of holding property and land. It has fallen right away, and Parliament is responsible for that. I should like to think that we can regain something of the position that obtained in former times.
I have to say something about companies. I do not entirely share the full extent of the feelings expressed by the noble Lord, Lord Houghton. This is a complete change. If a building society becomes a company it is then just like any other joint stock company. It will come under the Bank of England. It is true it will have limited liability, which the building societies do not have, and it will be in the position where anyone with 51 per cent. of the shares controls the company. As my noble friend has said, anyone who has that number of shares in a building society has one vote; but this is a quite different proposition. In this case you do not have your vote by money but simply as an individual. That is a very big change and it is not one which should be made lightly.
I am not against those who feel they want to change to joint stock companies, but I do not think it will be easy. People have shown immense confidence in building societies and they have subscribed to them in a manner in which they have not subscribed to banks. I think that the continuity, which was mentioned in
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particular by the noble Lord, Lord Barnett, is enormously important.
Perhaps I might in passing mention a point on which I disagreed with the noble Lord, Lord Barnett. He spoke in the same sentence of mergers and of conversions to joint stock companies. If I may say so with respect, they are two totally distinct things. Mergers have gone on in the past, and of course will go on again in the future.
I should like to say to the noble Lord, Lord Strabolgi, that I quite agree with him that small building societies should be preserved; but they must be efficient. If they are not efficient they will be taken over. But there is room for them and they enjoy the confidence of local people in their area. For so long as they can maintain that confidence they are serving an extremely useful purpose indeed.
I do not think I need add anything more. I believe this is a very valuable Bill and it will release enormous resources to a wider field. I believe that building societies must be remembered for what they have done and I hope they will continue to be a movement. This is something which is quite different from a bank, an investment company or any of these other bodies. This is a movement in which the societies work together competitively among themselves. I believe that is a very healthy relationship. We should not speak too disparagingly of the word "mutual". Many people may intensely dislike the profit motive—they may be right; they may be wrong. But that does not exist with mutual associations, and the building society movement has been extremely successful. The limitation of its work has been statutory, not because the people concerned could not conduct that work. I believe they will make full use of the powers available, and that they will maintain the strength and ability of the mutual movement.
2.13 p.m.
Lord Kirkhill: My Lords, I, too, join with other noble Lords in congratulating the noble Lord, Lord Shuttleworth, on his maiden speech. I hope he would be in no way offended if I left it at that simple statement because, as the tail of speakers wags endlessly onwards, I think it becomes rather more difficult to say something fresh or interesting about what the noble Lord said, although I confess that I believe his speech was entirely interesting.
I, too, should confirm an interest, in that for many years I was a building society manager and, if I live long enough, I shall be the recipient of a building society pension. I think it is also fair for me to say that, in the meantime, I am one of the vice-presidents of the Building Societies Association.
Building societies are important institutions in the social, housing and financial fabric of the country. Over 6 million families are currently buying their homes with the help of building society loans, and the societies have helped owner-occupation to increase from 29 per cent. of all dwellings in 1950 to over 62 per cent. today. Societies have also provided a popular and efficient savings service, and now some two-thirds of all adults and well over one-third of all children have building society savings accounts. The

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societies hold over 50 per cent. of the liquid assets of the personal sector, amounting to well over £120 billion. The societies have become familiar institutions through their branch networks and their extensive advertising. They have a reputation for efficiency and friendliness, which I believe stems partly from their mutual nature.
The problem has been, of course, that the law under which building societies operate is effectively over 100 years old, as many Lords have mentioned, and it is time for a comprehensive reform. I think that is agreed by all of us. However, in my view, both Parliament and the building society industry itself need to ensure that the legislation preserves the basic characteristics of building societies while allowing them to adapt to a rapidly evolving market situation.
The arguments for new building society legislation are compelling. The current Act under which they operate, consolidated in the Act of 1962 but largely reflecting 1874 legislation, rather treats the societies as being local clubs where everyone knows everyone else and where the members effectively can have a major say in running the organisation. As societies have become much bigger, certain elements of the constitution have become inappropriate. It surely cannot be right for people with just £1 invested to have the same voting rights on matters such as mergers as those who have many thousands of pounds invested, and that over a long period of time.
Generally, however, the constitution of building societies has stood the test of time well and the mutuality concept is one that many find appealing, although my noble friend Lord Houghton has cast his own personal doubt upon the basic concept of mutuality in toto. I would not entirely accept his argument, although there is a change in the modern age. But most find it appealing, particularly, I believe, in the socially important area of housing. For my part, I am pleased to note that the Bill does little more than bring up to date the constitutional provisions, while preserving the basic mutuality concept.
The possible conversion to company status in certain circumstances would find scant support from these Benches, I believe, offending as it does against the concept of mutuality to which I have just referred, and I do not consider that we would give support to that aspect of the Bill at the later stages. Nevertheless, it is in respect of their powers that building societies need new legislation.
Societies have grown rapidly in the postwar period, partly because they have efficiently seized market opportunities, but also because they have not until recently been subject to great competition. Indeed, for much of the period they were unable to meet mortgage demand, and therefore did not have to be too responsive to the needs of their customers; nor did they need to be innovative to the mortgage market. Similarly, in the savings market societies have faced very little competition, partly because of government constraints on their natural competitors—the commercial banks and the savings banks.
All that has changed over the past few years. The commercial banks are no longer subject to direct
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controls on their lending or deposit-taking, and the savings banks have become much more commercial and, I believe, will become even more so, assuming that their flotation is finally completed, as it might well be by the end of this year. There is a range of new institutions in both the savings and mortgage markets able to take advantage of new technology, and we must keep that point very much in mind. It is now possible to offer a good rate of interest on a savings account, together with ready access to money through cash dispensers without the need of the expensive branch network.
Now that mortgage demand is being fully met, estate agents are seeing the opportunity to take over much of the business of originating mortgage loans and there has been a scramble among City institutions to purchase estate agencies. The customer increasingly expects a package of services. To the housebuyer the banks can offer this because unlike societies they can offer bridging finance without constraint, estate agency and insurance broking services. Similarly, in the savings market the customer is looking for a package of services, but building societies are prevented from offering even something as simple as a cheque guarantee card or an overdraft facility.
Not only do market conditions require building societies to offer a wider range of services, but the public also expect this. A market research survey conducted by the National Consumer Council in 1983 showed that 56 per cent. of building society customers said they would like their building society to offer a chequebook; 39 per cent. wanted standing orders; 32 per cent. wanted cash dispensers; 28 per cent. wanted personal loans; 26 per cent. wanted travellers cheques; and 20 per cent. wanted overdraft facilities. The National Consumer Council concluded:
"Bank customers who also have building society accounts tend to find building societies easier to deal with. Significant numbers of them would like their building societies to offer payment services, like chequebooks, which have traditionally been the exclusive preserve of the banks".
I am advised that recent market research conducted by the Building Societies Association shows a strong demand for building societies to offer estate agency and structural surveys, and similarly a strong demand for the new financial services which the Bill seeks to allow them to offer.
As my noble friend Lord Barnett pointed out in his opening speech, one of the most pleasing features of the housing market over the past few years has been the willingness of the various institutions to attempt to work together. Building societies, housing associations, local authorities and private developers are co-operating in a wide range of ventures. Societies have funded imaginative housing schemes and several have set up satellite housing associations. However, the same societies are inhibited from playing their full part in such developments because of the legal constraints under which they now operate.
The societies cannot, for example, own land. This point has been emphasised time and again during our Second Reading debate this afternoon. This prevents them from owning rented property, something for which, as many noble Lords have pointed out, there is huge demand. They are unable to make unsecured

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loans for housing purposes such as financing small repairs and improvements. For all of these reasons it is right that building societies should have wider powers related to their mainstream functions in the savings and housing markets. In my view, the Bill has the balance in this respect just about right.
The Bill before the House is very long, running to 270 or so pages. I am sure that this is much longer than either the Government or any of the rest of us would really have wanted. However, it is also an unusual Bill. The noble Earl, Lord Selkirk, touched upon this point just a few moments ago. It is a Bill that received an unopposed Second Reading and an unopposed Third Reading in the other place. My spies there tell me that the Committee stage of the Bill in the Commons was one of the most constructive and one of the most good humoured of recent times. There was only a handful of Divisions, and numerous amendments were made to the Bill as a result of the debate. As the noble Lord the Minister indicated in his opening remarks, most of the discussion took place in non-partisan terms.
There was a substantial delay of some 10 weeks between the end of the Committee stage and the Report stage. During that period the Government—and their initiative is to be commended—took the opportunity to bring forward amendments to meet commitments made at the Committee stage, and also to tidy up the Bill in a general way. As a result, the Bill before your Lordships' House is, in my view, in a much more satisfactory form than many of the Bills that arrive here from the other place.
It therefore now falls to your Lordships' House to scrutnise and—by way of constructive debate and persuasive argument, certainly from this side of the Chamber—to seek to improve the Bill and make amendments in certain key areas outlined by my noble friend Lord Barnett in his opening speech. With that proviso, I give the Bill a most general welcome.
2.26 p.m.
Lord Suffield: My Lords, I congratulate my noble friend Lord Shuttleworth, although he is not here, on his maiden speech, and I apologise for not being in the Chamber to hear it.
I also must declare an interest, as the president of the Corporation of Finance Brokers. I refer to one aspect of the Bill that has been brought to the attention of the Government in another place and to which my noble friend Lord Brabazon has referred in his speech. It concerns the situation where a building society has granted a loan to a client on his house or land and the society then seeks to impose a restrictive clause in respect of the original loan with the land registrar, to prevent its client from securing a further loan with anyone other than the society.
I ask the Government whether it is within the powers of the commission, and whether it is the commission's duty, to investigate and to take action if such a complaint as I have illustrated is addressed to the commission by an outside body. If not, who will deal with such a complaint? Will it be the Office of Fair Trading? Otherwise, I welcome the Bill.
2.27 p.m.
Lord Graham of Edmonton: My Lords, I must begin by saying how much I appreciated the comprehensive introduction given to the Bill by the Minister. I was also very heartened by the stimulating speech made from my Front Bench by my noble friend Lord Barnett. We shall certainly be in business when this Bill reaches the Committee stage, because my noble friend and others have raised a number of matters that will definitely need to be explored. Today, I wait to hear what the Minister has to say about the very pungent remark made by my noble friend in regard to Mr. Austin Mitchell and his interest in the conveyancing issue.
Like many other noble Lords who have taken part in this debate, I must declare a non-financial interest, in that I am a vice-president of the Building Societies Association, and I am of course proud to declare that interest. I also speak as a beneficiary of the building society movement—in my case, of the Nationwide. I am among a whole host of good friends in welcoming the Bill, and most, though not all, that it proposes.
I am well aware of the pressures for the Bill. I have to remind the Minister that although there has been a great period of consultation, the Financial Secretary in another place told that House on 4th June that he did not apologise for introducing 1,000 amendments to the Bill. So much for consultation and adequate preparation. If, despite all that, it is necessary to table 1,000 amendments, then I wonder how many we will have to table at this stage of the Bill in your Lordships' House. Certainly we shall need to do our job properly but the Bill will not be impeded by myself or, I suggest, any other Member of your Lordships' House.
We have been reminded that the Bill rests on a legislative framework which goes back to 1874, and that, of course, is part of the strength and, in this context of change, part of the weakness of the present situation. I certainly follow much of the general debate but I have to confess that my great anxiety stems more from the trends over the years than the specific proposals within the Bill. I have here, as have most noble Lords, a note from the Building Societies Association. It states that the Bill will retain the present characteristics of societies as being mutual institutions.
At this stage I declare two further tangential interests: my deep connections with the co-operative movement and also with the friendly societies movement; in particular the Ancient Order of Foresters. My concern is simply that there is grave danger that the mutuality concept, the principle of mutuality, has been eroded and is being eroded; and that that decline ought to be arrested.
What do I mean when I talk of mutuality? I mean self-help. I mean each member has a like interest with his or her fellow members in combining to achieve the objectives for which that society was formed. In that period 100 to 150 years ago there was a great burgeoning of organisations based on self-help and mutuality: co-operative societies, mainly in the aftermath of the industrial revolution and in the industrial north, friendly societies such as the Ancient Order of Foresters, and many others, in towns and

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villages; building societies fiercely local and parochial. Yes, all for the common good of those willing to subscribe and combine. But now, in 1986, it would be a brave soul who would assert that societies—co-operative, friendly or building, and some with millions of members—could still honestly claim to be mutual in their former and real sense.
This Bill is primarily about the head and too little about the heart. Those like myself who want to wish this Bill well by getting the head in good order can still be worried about the state of the heart. Some of us wonder whether the heart has gone out of our beloved institutions or whether we can breathe new life into them. There is a need to equip building societies with a framework of legislation which fits them better to survive and prosper into the 1990s and beyond, for they have not only their own shortcomings to overcome and their own house to put in order, but the financial climate now, and for the future, is savage and cut-throat. We wish the building societies, large and small, a useful life for there is litle doubt but that "we ain't seen nothing yet" when it comes to competition for the traditional use and users of building societies.
My noble friend Lord Barnett told us about the Big Bang which is due to come in the City. We know about that. It will unleash a torrent of sophisticated initiatives designed to attack hitherto sacred preserves. Not only does this Bill enable a broadening of related services for and from building societies, but the Financial Services Bill lets loose a set of circumstances which will test the professional capacity of those who manage and guide our building societies.
In this harsh world of the commercial and financial jungle those who live by the sword will perish by the sword. In that context, I wonder whether the Government and the Minister have taken on board the fears of those professions who see in the extension of building society services a real threat to their own professions and their living. The president of the National Association of Estate Agents has put it thus:
"Building societies will be able to indulge in many new ventures such as estate agency. It is not the competition that worries us. What is worrying is that these non-profit making institutions will be able to do all these things, and more, free of charge. Or at any rate free of charge in any particular circumstances. That could destroy estate agency as we know it. There are no effective safeguards. The Minister [in another place] has given assurances against cross-subsidisation. What protection have we when they can cross-subsidise to the extent that a service is free of charge?"
I wonder whether in his reply the Minister can tell the House that there is a problem or that there could be problems for estate agents and what he will do about this situation. I am sure that the estate agents themselves will be very interested to know.
I have referred to co-operative societies, friendly societies and building societies. They flourished particularly in the period of greater prosperity that followed the 1840s. At that time, and for some time after, by far the most important class of those associations consisted of the friendly societies. They had many more members in overall total than had any other type of institution. The legal and administrative framework that had been created to suit their needs not unnaturally was the one that was reflected in
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legislation. It was that framework which basically was also made to serve co-operative and building societies.
Whether or not that framework was appropriate to them—and it has changed little over the years—building societies learned to live with it and to make it work. In a way, of course, it still works, but it does not work now in the way that was originally intended; nor indeed, I believe, in the spirit of the statutory provisions.
The question must be asked whether it is really necessary or sensible that everyone who comes along wishing to deal with a building society should have to be made a member in the first place. Building societies themselves have long said that most of those whom they enrol as members are virtually only customers and that is all that they want to be. If that is true—and I am inclined to think that it is—do we want to perpetuate this unreality? After all, an organisation such as the Co-operative Insurance Society, which is one of the largest, most efficient and successful of insurance companies, issuing 14 million policies covering life, home and motor insurance, is, as its name proclaims, a co-operative society, but it does not make all its policyholders members of the society, and so far as I know none of them has complained about it.
The basis of the existing constitution of voluntary societies was that the members formed, belonged to and controlled an organisation which by its very nature was autonomous. Inroads have been made into that concept of autonomy and these inroads can be expected to increase with consequent inhibitions upon the powers and decisions of members as well as those of the board. A constitution which disregards these important and very real considerations loses much of its conviction both for members and for the outside world.
We all subscribe to the idea that democracy is a good thing, but unless we define its place in any organisation and provide the machinery to allow it to function efficiently, we are simply mouthing platitudes. Furthermore, there is no necessary connection between democracy and efficiency. Commercial efficiency in particular can be obstructed in an organisation in which the democratic structure is unsuitable or unwieldy, so that when, as now, the idea of competition is promoted as a means to commercial efficiency, the society that tries to operate in the most democratic way is likely to find itself with a handicap.
In conclusion, it is not just a question of considering the problems of democracy and exchanging views. So far as concerns building societies, it is even more important that we should take stock of their ability to continue in the future making the immense and generally successful contribution to the life of the people in this country that they have made over the past 150 years. I strongly believe that the philosophy and the system embodied in building societies, cooperative societies and friendly societies have an important role to play. These societies are therefore very much to be encouraged, developed and, if necessary, allowed to adopt a form more appropriate to modern conditions. That is why I welcome the Second Reading of this Bill.
2.40 p.m.
The Earl of Shrewsbury: My Lords, I shall begin by offering my congratulations to my noble friend Lord Shuttleworth on an excellent and interesting maiden speech. I must declare an interest as I am a director of a major building society. I have listened intently to all that has been said by noble Lords today, and I agree with a great deal of it. It is a considerable achievement to have all the parties involved in the drafting of this potential piece of legislation agreeing on so many points. It makes the task of your Lordships' House so much easier and the Bill's passage that much quicker. I am sure that those two things are preferable for all concerned.
We are of course dealing with a Bill which is a major updating of the business parameters of the building society movement. It will make the movement more able to compete within the financial services market; it will create a whole new spectrum of business; and, I am sure, it will make the movement much more competitive and more service-to-customer oriented. The industry has always taken a great deal of pride in its customer relations. In my view that can only he enhanced by the Bill. This is a highly competitive industry, and this type of legislation is long overdue.
A building society's primary aim must always be to provide finance for house purchase and in raising funds for that purpose provide the carrot of a good return to would-be investors. The mutuality of the nature of the business has always been paramount. I am confident that, with the various restrictions-on-lending criteria to be imposed by the Bill, that mutuality will be and must be retained. I say that because I feel that, as it stands, conversion to a plc will not be a feasible option for the vast majority of societies.
However, the door can be opened to alternative ways of raising finance by the services and new activities to be allowed by the Bill. Those can be only of benefit to both borrower and investor; both will have a much fairer deal. Customer service, stability and mutuality are the three most important factors governing the building society movement. I feel secure in the knowledge that the Bill safeguards those qualities adequately.
The appointment of an ombudsman is the only matter about which I have reservations. While I acknowledge that such an appointment is highly desirable and necessary, I feel most strongly that the ombudsman should not have powers which can set aside contracts which have been freely entered into by a society and its members. That is a constitutional point which I feel goes too far. I hope that Her Majesty's Government will see fit to introduce an amendment in Committee to alter that. In general, I feel that the Bill is just what is needed, and I shall give it my utmost support.
2.42 p.m.
Lord Morris: My Lords, at this late hour your Lordships will be delighted to know that I shall be extremely brief. At the start of the debate, I was exhilarated to hear those great champions of free enterprise, the noble Lords, Lord Barnett and Lord Kirkhill, support the Bill with such vigour. I think that they were right so to do. I welcome the Bill but I think
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that it is worth considering the rhetorical question, "Why are the insurance companies and the banks far and away the richest institutions in the United Kingdom?"
The cynic would undoubtedly reply, "Because they have been ripping off the public more successfully for far longer by providing less of a service to their customers than anyone else". Like all cynical observation, there is an element of truth in it. In so far as the Bill releases a cool and energising breeze of competition upon those services, I welcome it with great enthusiasm.
I have listened to a great many fascinating speeches during the debate, not least the excellent maiden speech of my noble friend Lord Shuttleworth and the speech of my noble friend Lord Shrewsbury. I agree entirely with what they said.
I am worried about whether those who should be consulted have been properly consulted during the Bill's preparation. By that I do not mean those institutions, organisations or associations which purport to look after the interests of the people who are most affected by the Bill—the public. I ask myself whether the public were consulted. If they were consulted, the question that I should have liked to see put to them is "In your experience, during the course of your life, have the banks done a good job?" The other question would be to ask whether the building societies have done a good job. After all, it is not the building societies, the banks, the insurance companies or the estate agents but the public whom potentially the Bill may greatly affect. I believe that the public would respond very simply by saying that the banks have not done a good job but that the building societies have done an extremely good job.
My concern about the Bill is the enabling power that it grants building societies, in effect, to change their nature. This has been mentioned and developed by other speakers far better than I am able to do. I would simply put forward one point. If you change fundamentally an institution's constitution, you undoubtedly change its nature. It is the nature, the character, of building societies that have inspired their modus operandi and their success. I support those, not least the noble Lord, Lord Barnett, who have expressed concern about this point. It should be examined with great care.
The other part of the Bill that causes me concern is Part V, which deals with the provision of services. In effect, this gives power to building societies to provide a whole range of services, some financial and, oddly enough, some not, although they are associated with housing matters. I believe that these powers have the potential and contain the risk of giving power to the strong. By the strong, I mean those strong financially and, above all, strongly placed in the market place—strongly placed not only in the sense of location but also in terms of time to do great harm to the weak.
Despite this Conservative Administration's much vaunted support of small business, they are giving, by virtue of this power, tremendous strength to the strong. There are thousands of highly professional and experienced small firms and, indeed, sole practitioners in insurance brokerage, surveyors and valuers, land agents and pension scheme administrators who do not

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want to be employees of building societies. They wish to remain in the same form and in the same state as they have enjoyed all their lives. This is a point well worth considering. It is, of its nature, a Committee point and will be worth developing at a later stage.
I should like to ask my noble friend a simple question. Do the Government really want a lively, diversified, competitive and locally operated mortgage and financial services industry? Or do they want to set the scene in 1986 for, say, the Big Five building societies together with the Big Four banks by the year 2000? This is my major concern. I beseech the Government to look to the example of the United States of America, where a lively market exists in these fields because the building societies, or, as they are called there, the savings and loans institutions, are, oddly enough, far stronger in total than the banks themselves. This is because the vast majority are small, locally orientated and very close to the community they serve. Part V, comprising only two clauses but a couple of pretty hefty schedules, needs close consideration.
2.50 p.m.
Lord Williams of Elvel: My Lords, we have had a very interesting debate today which has been characterised by a considerable degree of harmony from all sides of the House. We are grateful to the noble Lord, Lord Brabazon of Tara, for presenting this Bill to your Lordships in such a clear fashion. It has also been noteworthy that there have been a considerable number of speakers from all sides, even on a Friday, and there might have been more had the Government not chosen to take this business on a Friday. We are, of course, very grateful for the distinguished contribution that the noble Lord, Lord Shuttleworth, made. It is a subject on which he is a very great and acknowledged expert and his views will be of very great value to your Lordships' House in the future, not only on this matter, but I am sure on other matters as well. We are very grateful to him for his contribution.
I am perhaps unique among noble Lords who have spoken today in not having a conflict of interest. I am not a director of a building society. I am not a depositor in a building society, nor an investor in a building society, and I have no building society mortgage. Furthermore—perhaps this is the conflict of interest that I have managed to avoid—I have not received extensive briefing from the Building Societies Association. There may be other noble Lords in this happy position but I have yet to meet them; and I mean no disrespect to the noble Earl, Lord Selkirk, my noble friend Lord Kirkhill and my noble friend Lord Graham, if I say I hope very much that I can maintain this comparative virginity in this case.
There is, however, one point that the BSA has made, I understand, that I feel that I should comment on. The BSA advised many of your Lordships that at the end of the proceedings on the Bill in another place the Opposition Front Bench wished it well. Not quite so fast, my Lords, I regret to say. My honourable friend the Member of Parliament for Thurrock said quite clearly—and I quote from the Official Report, col. 1052—that,
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"we still have certain reservations about the Bill, but we wish the building societies well. We have emphasised during our debates the importance of their commitment to housing and their meeting of that social need in the past. We hope that in future the societies will remain as mutual organisations and will continue primarily to meet the housing need."— [Official Report, Commons, 4/6/86; col. 1052.]
She finished her speech by saying again:
"We wish the building societies well"—
the building societies, my Lords; not the Bill necessarily, nor indeed the Building Societies Association necessarily.
The fact remains also that the position was taken up consistently by the Front Bench of the Labour Party in another place, and, with the equal consistency which has been such a shining characteristic of my party over the years, I am glad to say that this is also the position of the Labour Front Bench in your Lordships' House.
But, again, the fact remains that the Economic Secretary to the Treasury in another place introduced something over 1,000 amendments, as my noble friend Lord Graham has pointed out. He was good enough to say that they were in response to representations that had been made, and to discussions which had taken place in Committee. Nevertheless, a lot of them were introduced on Report in another place and I think it is only right and proper that your Lordships should have full opportunity to hear the case for the Opposition, and other noble Lords who disagree with all or part of the Bill, and also to scrutinise the legislation very carefully to make sure that when it leaves your Lordships' House it is as good as we can possibly get it.
There is one general point that I should like to make before addressing the Bill itself. There are many measures coming before your Lordships' House at the moment—far too many, in my view. Not only is the timetable congested, which is bad enough, but Bills get re-written more or less on the hoof as they go along. Hasty drafting means bad final legislation. I must say that I noted, with a certain amount of regret, that the noble Lord, Lord Brabazon, indicated that the Government were going to table yet more amendments to this Bill in your Lordships' House. After all the consultations have taken place, to which noble Lords have quite rightly referred, after the full debates that took place in Committee in another place, and in the full House, it is rather sad that the Government have not yet got their legislation in a position where they do not have to table detailed amendments in your Lordships' House.
Every Bill that I have had anything to do with in the past two months has had one or more inconsistencies in relation to other Bills—particularly inconsistencies in relation to the Financial Services Bill, which of course your Lordships have yet to see officially. I am extremely concerned that in the Bill about which we are talking today there may well be similar anomalies.
I notice, for instance, that in this Bill the noble and learned Lord the Lord Chancellor has been given a starring role (if I can put it like that) in deciding whether or not to recognise institutions and individuals who may provide conveyancing services. Yet the Government have only recently refused in another place a proposal to keep a register of those allowed to sell insurance and pensions on the doorstep. I ask

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myself: are those positions consistent? Is there anything in the Bill which has a philosophical and political thrust different from those thrusts that we shall see when we come to debate the Financial Services Bill?
My noble friend Lord Strabolgi asked: would this Bill be consistent with the measures for banking supervision that are to be proposed next year? I think that he was particularly talking to the narrow point of investor protection. I am talking to the wider point: will the building societies, as they develop into markets in competition with the banks, be controlled in a similar fashion to the banks? There are many noble Lords—not just on this side of the House—who are very uneasy at the indecent haste with which a great deal of legislation is being put into the sausage-machine, and we find that it is not necessarily good legislation when it comes out.
Having made those general points, perhaps I may turn to the Bill itself in a little more detail. As I understand the noble Lord, the Bill has three distinct objectives to which a number of noble Lords have referred. The first objective seems to be to tidy-up and update the legislation governing building societies, in the light of developments over the past few years. The noble Earl, Lord Selkirk, described that in some detail. The clearing banks are obvious competitors. They have obviously been competing in an area which has been traditionally the preserve of building societies and they have competed, I think I can say, with varying degrees of enthusiasm and varying degrees of success. It has not been an unlimited success story for clearing banks in the mortgage lending market. Indeed, recently some of them have started to try and cut back on their mortgage lending. Nevertheless, they are there and, as I think one noble Lord remarked, they have approximately 20 per cent. of the mortgage market at present.
It is worth hearing in mind that the clearing banks intruded into this market because they felt that they were retaliating to what they regarded as rather unfair fiscal discrimination in their collection of deposits. Now that that has to some extent been rectified, they probably take a less aggressive view of the mortgage market. Nevertheless, other noble Lords have referred to even more recent developments and there is just one that I should like to pick out which I think will be very important over time.
There is a small but undoubtedly growing market in securitised mortgage investments by means of which obligations become tradable between one investor and another investor, and the price at which that mortgage obligation is traded is a matter of dispute and agreement between the buyer and the seller. This is a development which I think one can genuinely say is an import from the United States of America. It is quite large over there and it has started here. Indeed, one particular investment bank has announced in rather public terms that it is going to set up a market in this regard. It is those kinds of developments to which noble Lords have been referring when they say that building societies under the present legislation are not really in a position to compete, and that there are some aggressive, and indeed in some case unruly, intruders
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who seek to take advantage where they can. I have no doubt that we shall return to that matter at later stages of the Bill.
The question of principle that relates to this objective of tidying-up legislation is this. Does the Bill, as presented, provide the right framework for the societies to compete on a fair basis without sacrificing the traditional, and in our view very valuable, relationship that the societies have built-up with their investing and borrowing members? Nothing could be more destructive than the loss of local or regional identity; the loss of investor or borrower identification with the society of which he, or she, is a member. We shall scrutinise with great care in the ensuing stages of the Bill the measures that it contains to further this objective.
It is a fine balance. Some noble Lords think that it has been got right in the Bill; others think that it has slipped in one way or another. We shall be looking at that particular balance carefully. But if we wish the building societies well we must—and we from these Benches will do so—will the means to allow them to maintain their health in what is an increasingly competitive market.
The second objective, as I understand it, is to enable building societies to compete in markets from which they are at present excluded. Here I seem to find a certain lack of clarity in the societies' own motivation. At times, the argument seems to be that they wish to supplement their traditional activity, that of mortgage lending, by complementary services, such as loans to finance repairs and improvements to houses, without resort to these tricky schemes like agency service schemes, and providing homes for rent—and the noble Lord, Lord Campbell of Croy, and my noble friend Lord Houghton of Sowerby both spoke eloquently about this.
All that seems clear. But at times the motivation seems to go well beyond that and seems to reflect the ambition of some building society managements to participate in the financial services revolution. There is something called "A financial services revolution", and because they are big organisations they wish to participate.
I cannot see for the life of me how the services listed in Schedule 8 to the Bill relate to housing finance. Foreign exchange transactions? Unit trusts for the provision of pensions? Administration of pension schemes? Insurance broking? Advice on insurance? We have a plethora of institutions offering these services. Do we really need another set? If we do, then the question that follows from that principal objective is apparent. How are these services, and the providers of these services, going to be regulated? How are they going to be managed? By whom? Foreign exchange dealing is a risky and dangerous business, particularly when you allow people into currency futures and currency options, as one clause in the Bill (to which the noble Lord drew our attention) specifically sets out to do. Even if it is only conducted on behalf of individuals, it is still a dangerous business.
Who is going to monitor the currency exposure of building societies that are going to be engaged in this business? Who is going to pick up the pieces when an insurance contract goes wrong, or a unit trust loses its

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unit holders' money because it has made unwise investments? These are complicated areas, and the prudent management concept is certainly not enough, as we shall see when your Lordships come to debate the Financial Services Bill. A heavy burden will fall on the Building Societies Commission, and I join with the noble Earl, Lord Selkirk, in looking to see that the commission will be properly equipped, and that its expertise and remit will be at least equivalent to those of the banking supervisors and the proposed Securities and Investments Board.
The third objective is to allow the societies to compete adequately, to ensure a consistent flow of funds with which to finance their lending. This applies particularly to the retail sector. After all, societies (as I think the noble Lord, Lord Campbell of Croy, pointed out) have been granted access to wholesale money markets for some time now by being allowed to pay interest to non-residents gross of tax. Indeed, they have taken full advantage of this by borrowing I think as much as £30 billion largely in five-year to ten-year floating rate notes, which is a sensible instrument given the maturity portfolio of their lending.
All that seems to be eminently desirable. But in the retail market, where societies hold deposits in one form or another of over £100 billion—and that is more than half the total retail deposits in the United Kingdom—they are under attack from the clearing banks and other forms of saving. Here they put forward the view that to defend themselves they need to be able to engage in what I would regard as being banking money transmission services. The point has been made that they should have a cheque card system; they should have a cheque system; they should be able to give overdrafts, and should be able at least to perform the money transmission services that the high street clearing banks can.
I have a slight doubt about this. I share somewhat the doubts of my noble friend Lord Houghton of Sowerby about whether these are really the things that building societies should be doing. But there is a greater ambition on behalf of the largest societies to convert themselves into real banks by going the public company route and attempting to become—or, indeed, having to become if they are to be authorised by the commission to convert—recognised banks in the full sense of the Banking Act 1979. It is at this further point that we part company totally with the Government.
As my noble friend Lord Barnett said, we have enough retail banks in this country; why do we need any more? Will not any building society that takes—
Lord Morris: My Lords, does the noble Lord seriously think that four banks are enough banks for this country? There are thousands of branches, but we have only four banks. It is a monopoly.
Lord Williams of Elvel: My Lords, I am grateful to the noble Lord, Lord Morris. It is not actually true that we have four banks. We have four banks and several subsidiaries. Scotland has a different system. But the fact is that high street banks (if I can use that expression) are closing branches at the moment because they are unprofitable. If we allow building
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societies to convert their high street branches into branch banks we shall have a great plethora of people sitting on the high street offering the same service.
Lord Campbell of Croy: My Lords, the noble Lord, Lord Williams, referred to something I said. At a convenient moment after that I thought I should say that he has referred to the fact that the building societies have been in the wholesale market, as I said. My society was the first to go in about five years ago, but societies have been limited to a small percentage of the funds that can be raised from that source, and that will be in the Bill as well. I believe it is 20 per cent. Their main function must be still the retail side and on the high streets. If building societies are to be doing that, surely they ought to be able to have the powers of money transmission and other facets which the banks have.
Lord Williams of Elvel: My Lords, I am grateful to the noble Lord, Lord Campbell of Croy, for his intervention. My argument was tending towards the view that building societies should be given more ability for medium term wholesale borrowing. In fact, it is financially prudent. I think the noble Earl, Lord Selkirk, talked about the magic of borrowing short and lending long, and this is something that has been achieved only by the building society movement in this country. I believe it is financially prudent to match the maturities of your borrowing and your lending side, but that is a point to which we shall come in Committee. That was the burden of my argument.
We wish the building societies well. But we have to be satisfied that this new framework which is being proposed will not just be to the advantage of the societies but will preserve what my noble friend Lord Graham of Edmonton talked about: what is good and wholesome in this movement, and the links that it has built up over the years with its investors and borrowers. We on our side welcome this Bill. We welcome it with reservations. It is in that spirit that we shall be questioning the Government very closely when we come to Committee.
3.9 p.m.
Lord Brabazon of Tara: My Lords, it is fair to say that the Bill has in general terms received a welcome from all sides of your Lordships' House. I referred in introducing the debate to the great care that the Government have taken to consult as widely as possible about it and I am grateful to many noble Lords who have paid tribute to that. Throughout, the Government have sought to produce a Bill which sets the best possible framework for the future development of the societies and I believe it is a generally non-partisan measure. I am heartened that so many noble Lords share that view.
Our debate today has benefited from the participation of many noble Lords with considerable experience of building societies. I think that I am probably almost alone, with the noble Lord, Lord Williams of Elvel, in not having an interest to declare in this field. But that experience of many noble Lords will be of great value when we come to consider the Bill in detail, as their contributions today have shown. I should like to pay particular tribute to the close co-

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operation that the Government have received from the Building Societies Association in preparing the legislation. Their contribution has been very valuable. On such a substantial Bill as this one, it is inevitable that tidying up will be needed in your Lordships' House. Accordingly, the Government will be tabling a not insignificant number of amendments for Committee stage. I am glad to say that most of these will be of a technical nature, responding to points raised by the building societies and others and bringing the detailed provisions of the Bill into line with corresponding proposals for banks and investment business—which was a point raised by the noble Lord, Lord Williams of Elvel.
Some amendments will address slightly more important policy points, and I shall seek to ensure that those in particular are tabled as soon as possible and certainly well before the Committee stage. At the same time if any noble Lord would like to discuss the Government amendments or any other detailed points in the Bill, I shall be happy to help in whatever way I can. I should also say that Notes on Clauses will be made available as soon as possible.
Turning to the points raised in the debate, I am grateful to the noble Lord, Lord Barnett, for the general welcome that he gave to the Bill. Fairly early in his speech he raised one point about the payment of interest gross to certain depositors as a possibility. As he will be well aware, that is a matter for my right honourable friend the Chancellor and not something which we could attempt to introduce into this Bill. It is a Finance Bill measure. He reminded us of the changing environment which has taken place over the last few years in the building society movement. I would say to him, yes, even over the last six months while the Bill has been in another place there has been a tremendous increase in competition for the mortgage market from the banks.
The noble Lord's two main points, I think, were those on conveyancing and conversion. If I may, I shall return to the matter of conversion at the end of my remarks. On the subject of conveyancing, he accused the Government of not having fulfilled the undertaking allegedly given to his honourable friend the Member for Great Grimsby. If I may, I would refer him to the reply made by my right honourable and learned friend the Solicitor-General in Standing Committee in another place on 20th February this year (col. 480). I shall not weary your Lordships by reading the reply in its entirety this afternoon.
I am grateful to the noble Viscount, Lord Chandos, and his party for their general welcome to the Bill. He made some interesting comparisons with the experience of savings and loans associations in the United States. I can assure him that in the preparation of this Bill, we have taken fully into account what has happened over there.
The noble Lord, Lord Hill of Luton, was mainly concerned with the issue of conversion. As I have said, I shall return to that a little later. I should like to join other noble Lords in saying how much I enjoyed the maiden speech of my noble friend Lord Shuttleworth. He brings a great deal of experience of this subject to your Lordships' House. I am grateful to him for his support for the Bill and I hope that we hear from him
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not only during the later stages of this Bill but on other matters which come before us.
He asked me two specific questions. One was about the classification of premises used partly for business purposes. My noble friend asked for clarification as to the provisions of the Bill concerning the classification of premises used partly for business purposes. He was quite correct in saying there was a power for these to be treated in prescribed circumstances as held wholly in class 3. However, I can assure my noble friend that the present intention is that those prescribed circumstances should be limited to cases where only a relatively small proportion of a building is to be used for its business purposes, not where the building is mainly used for its affairs. A possible figure would be when less than 40 per cent. of the premises is used for business. It is only when the majority of the premises is rented to others—a relatively small number of cases—that they will be put into class 3.
My noble friend, and also my noble friend Lord Shrewsbury, asked whether the ombudsman should be able to override a contract between society and complainant. This is the nature of an ombudsman scheme. He is there to adjudicate on what is fair, over and above the strictly legal entitlement. If the power were removed, the ombudsman would be no more than an arbitrator or a court. It is because of this role that the Government have included the let-out by means of which a society may decide not to comply with the ombudsman's decision if it explains its reasons publicly.
Nevertheless, I recognise the concern expressed by my noble friends. It is not the Government's intention that the ombudsman should have unfettered discretion to rewrite the terms of contracts freely entered into. The Treasury have had discussions with the Building Societies Association and are now considering with the parliamentary draftsmen whether an amendment to make this clear would be appropriate.
The noble Lord, Lord Strabolgi—and, again, I thank him for his welcome of the Bill in general terms—brought up two particular points. One concerned the unsecured lending rights of small societies. I should make it clear that the qualifying asset holding will apply only to a minority of the new powers available to societies. Your Lordships need look no further than the service powers in Schedule 8 for evidence of that. Of the powers there, only the part of estate management service is required as a qualifying asset holding. Elsewhere the new forms of secured lending under Clauses 11 and 12, including the power to lend on second mortgage, will be available to all societies. Small societies will be able to offer unsecured loans as agents for others.
Therefore, a large number of new opportunities will be available to all societies, and societies will need to develop their businesses and requisite business capacities carefully. What the asset threshold will mean generally is that only those with sufficient management depth and capacity will be able to have powers in the least accustomed and more risky fields.
While I accept the criticism that the figure of £ 100 million is to some extent arbitrary, I think that arbitrariness is a small price to pay for ensuring that

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the higher-risk powers are available only to the 60 or so societies most likely to have the capacity to take them on.
The noble Lord also mentioned the investor protection scheme. Protection on the first £10,000 gives small depositors a reasonable level of protection but does not absolve them of their responsibility to judge the prudence of any deposit. That was a point made by the noble Viscount, Lord Chandos. It is the small investor who is in most need of the statutory protection. A higher ceiling of protection would catch many larger investors, including corporate investors who are generally better placed to judge the prudence of their investments. The £10,000 limit is the same as that applied in the Banking Act. Some people have called for 100 per cent. protection but we believe that would be quite wrong. As experience in the United States and elsewhere has shown, full statutory protection can be very damaging: investors do not have to judge the prudence of their decisions, and we believe it is important that they should have to do that.
I should again like to thank my noble friend Lord Campbell of Croy and also my noble friend Lord Luke for their reception of the Bill, and particularly for their remarks about the great contribution made by building societies in the housing field and what we can expect from building societies now under the new provisions. I know that one leading building society has already announced that it should be able to build 3,000 houses a year as a result of the measures which we propose. Again, my noble friend Lord Campbell of Croy talked about conversion and I shall return to that later.
The noble Lord, Lord Houghton of Sowerby, referred to the Government's housing policy in general, and particularly the question of mortgage interest relief. I have to say that the 6 million people buying their own homes with the aid of a building society mortgage will, I hope, welcome the firm commitment given by this Government to maintain the relief. The Government remain committed to encouraging home ownership and mortgage interest relief as a central plank of that policy. The noble Lord also mentioned houses for rent. One thing that this Bill encourages building societies to do for the first time is to provide accommodation for rent.
The noble Lord, Lord Houghton of Sowerby, said that over the years the concept of mutuality between investor and borrower in the building society movement had been—as I think he put it—a rip-off; investors had not made money out of building societies, and borrowers had done very well out of their house purchase. Certainly the latter is very true. All I can say is that under this Government, for the first time for many years, with inflation down to 2¾ per cent., investors in building societies are enjoying a real rate of return on their money.
The noble Lord mentioned the £100 qualifying shareholding for voting and suggested that it was too low. This is a matter of judgment, as the noble Lord recognised. The figure is a significant increase on those in existing legislation. Setting the threshold higher at £250, rather than at £100, would not reduce the electorate by very much, but in the Government's
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view it would cut out people who might legitimately expect to be able to play a role in their society.
My noble friend Lord Selkirk was particularly kind in complimenting the draftsman of this Bill, and about the consultation that had taken place. He asked about the composition of the Building Societies Commission. My noble friend will be aware that the present chief registrar will be the chairman of the commission. I do not know whether my noble friend knows him, but he is not a man to be in any way subservient to the Treasury. The commission will also have a majority drawn from outside central government members and will be established as an independent body which accounts to Parliament for its activities. Unlike the chief registrar under present legislation, who exercises supervisory powers in respect of individual societies, he will not require prior Treasury consent. So I hope my noble friend will to some extent have his fears allayed, because there will not have to be approval by the Treasury.
My noble friend also referred to the Rent Acts. I can only repeat the assurance which has been given from this Dispatch Box recently, that the Rent Acts are at the moment the subject of review and we very much hope to be able to bring in legislation in the next Session.
The noble Lord, Lord Kirkhill, broadly welcomed the Bill and reminded us of how building societies' customers themselves wanted many of the changes which we are proposing. My noble friend Lord Suffield and the noble Lord, Lord Graham of Edmonton, talked of complaints about unfair competitive practices. This is not a matter for the commission, whose primary concern is the financial position of societies and the protection of investors. However, the Office of Fair Trading have extensive powers under the competition and fair trading legislation to investigate anti-competitive practices.
In another place, a particular case was mentioned and my honourable friend the Economic Secretary to the Treasury said at Report stage there that this was a matter for concern. He has accordingly drawn the attention of the Director General of Fair Trading to it and I understand that his office are now looking into this matter. It is the Director General of Fair Trading who has the expertise and the powers to look into matters of this sort, and I am sure it is right to use that expertise rather than to graft a further function on to the commission.
The noble Lord, Lord Graham, talked about the concept of mutuality. I accept that the basis of mutuality has changed as societies have grown into larger institutions, but accountability to membership is an important factor in promoting efficiency. The Bill thoroughly overhauls the constitutional structure of societies while sticking to the fundamental mutual principles. The Government's aim has been to provide a framework for improved member participation and accountability and this will become evident on closer scrutiny during later stages.
My noble friend Lord Shrewsbury talked about the Ombudsman scheme which I think I have already covered. My noble friend Lord Morris talked in particular about the position of small, independent professionals and whether they would be lost as a

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result of the building societies moving into their traditional markets. We do not believe that the Bill will tend to diminish the role of small, independent professionals or that they will all have to become employees of building societies which, as my noble friend said, they might not want to do. In the Government's view, the small business will continue to be able to offer a distinctive specialist service. It will be able to respond to competition from building societies; and although evolution of their markets is inevitable, I believe that they will continue to thrive.
The noble Lord, Lord Williams of Elvel, put forward a number of points and asked whether the Bill provides the right framework for the societies to compete without damaging local or regional identity. I hope that is the case, and I hope that our proposals in regard to mergers of small societies will help in that direction. The noble Lord asked whether I thought it was right that building societies should be allowed to offer services such as foreign exchange, unit trusts, cheque cards, and money transmission services. It is inevitable if they wish to compete with the banks and to keep their customers happy; and their customers are demanding these services. It is surely a good thing for the building society movement that their customers should be able to get these kinds of services from the building society with which they place their savings on a regular basis.
I turn lastly to obviously the most important subject about which every noble Lord has spoken. I refer to the business of conversion into pies. I am sure that we shall come back to this in Committee stage so I shall not be too long on it at this moment, especially as time is getting on. We strongly believe that it is important to allow members of mutual institutions the choice; but specifically while mutuality has served building societies well, and I expect it will continue to do so in the future, it undeniably has its problems. There are problems of accountability and it is difficult to raise new capital. It is right to offer societies the option of continuing outside the framework of mutuality in the future. Some societies may find the use of their new powers taking them towards the limits under the Bill faster than the rest. In such circumstances it is surely better to allow such a society the chance to step outside the legislation rather than to relax the limits prematurely. If a building society were to get it into trouble, under the present constitution only another society could rescue it. Surely it is sensible to allow the possibility of a rescue by another outside institution.
Several noble Lords have taken the opposing view in that they believe that we have set the hurdles impossibly high. If in the event they turn out to be unreasonably difficult there exist provisions in the Bill to adjust them; but for the reasons I have given, I believe that the levels proposed are the appropriate ones initially. The noble Lord, Lord Houghton of Sowerby, said that it was undemocratic to require a 20 per cent. minimum number of members voting on this resolution. I would only give the noble Lord two examples. One was the Bill for the proposed devolution of Scotland and Wales, at the time the party opposite was in power, which required a yes vote of at least 40 per cent. of the electorate.
Lord Morris: My Lords, if my noble friend will forgive me, that was the result of pressure from this side.
Lord Brabazon of Tara: My Lords, I stand corrected by my noble friend; I am sure he was part of that pressure. I come closer to home, to say that when we consider the Bill in Committee, we will demand, as the noble Lord, Lord Houghton, will know, a minimum of 30 Peers present if matters come to a vote. If the number present falls below that, then the proceedings are suspended. That is quite a good example to give the noble Lord.
I have covered as many points as I can in the time available. I shall study with interest again everything that noble Lords have said, and if there is any particular matter that I have missed out, then I will certainly write to the noble Lord in question.
In conclusion, this Bill presents building societies with perhaps the most exciting opportunity in their recent history. They will be able to build on their past success and offer new services to their members in ways that their founders can scarcely have foreseen. The Government believe that the societies, guided by the new commission, will use their opportunities with wisdom and prudence, without losing sight of their traditions and roots. The societies have built their reputations on a tradition of service to their customers for more than a century. With this Bill on the statute book, they will be able to evolve and develop that tradition for many years to come. For all those reasons I commend the Bill to your Lordships.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

Merchant Shipping (Life-Saving Appliances Regulations 1980) (Amendment) Regulations 1986 Merchant Shipping (Gas Carriers) Regulations 1986 Merchant Shipping (Musters and Training) Regulations 1986 Merchant Shipping (Life-Saving Appliances) Regulations 1986 Merchant Shipping (Chemical Tankers) Regulations 1986M Merchant Shipping (Cargo Ship Construction and Survey) Regulations 1984 (Amendment) Regulations 1986 Merchant Shipping (Radio Installations) (Amendment) Regulations 1986 Merchant Shipping (Fire Protection and Fire Appliances) (Amendment) Regulations 1986 Merchant Shipping (Passenger Ship Construction) (New and Existing Ships) Amendment) Regulations 1986 Merchant Shipping (Dangerous Goods) (Amendment) Regulations 1986
3.32 p.m.
The Earl of Caithness: My Lords, I beg to move that the merchant shipping orders standing in my name on the Order Paper be approved en bloc.
The regulations will implement the 1983 amendments to the International Convention for the Safety of Life at Sea 1974. The 1983 amendments, the second set of amendments to the convention, were adopted by the Maritime Safety Committee of the International Maritime Organisation at its 48th session on 17th June 1983 and will enter into force on 1st July 1986. The subject matter covered by the 1983 amendments, and in turn by the regulations, includes construction, fire protection and extinction, life-saving appliances, radio equipment for survival craft, and the carriage of dangerous goods.
Of those regulations, six will amend existing regulations, four are new regulations, and one of those four will revoke current regulations on the same subject. The regulations apply in general to United Kingdom ships wherever they may be and to non-United Kingdom ships when in the United Kingdom or its territorial waters. The regulations are required to be laid under the affirmative procedure on acccount of their application to non-United Kingdom ships, and the powers for making the regulations are contained in Section 21 of the Merchant Shipping Act 1979. There has been full consultation with all sections of the shipping industry, including the relevant trade unions, as required by Section 22 of the Act.
As I said in my opening remarks, the purpose of these regulations is to implement the 1983 amendments to the International Convention for the Safety of Life at Sea 1974. In making the regulations, the United Kingdom will be fulfilling its international obligations in the important matter of marine safety. I beg to move.
Moved, That the draft regulations laid before the House on 22nd May and on 16th June [25th and 26th Reports from the Joint Committee] be approved.—(The Earl of Caithness.)
Lord Underhill: My Lords, I believe it would be wrong not to pass comment on the excellent summary that the noble Earl has made. He has done extremely well in giving the House a summary of 10 important regulations. We naturally welcome them. They are all concerned with safety of life at sea. In fact, some are very reminiscent of the Private Member's Bill that was recently introduced by the noble Earl, Lord Lauderdale, on the question of safety at sea.
The noble Earl said that a number of the orders apply to non-United Kingdom ships when they are in United Kingdom ports or territorial waters. Can he tell me whether there are any countries with substantial merchant fleets to which these orders do not apply? That could be an important point. Further, are there any countries with substantial overseas trade who do not have the same applicability as ourselves when applying the orders to vessels which are not of their nationality? With those two questions, we welcome the 10 orders as being very important for safety at sea.
The Earl of Caithness: My Lords, my understanding is that the orders will apply to all merchant shipping in territorial waters, United Kingdom or non-United
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Kingdom ships. Being a convention of the IMO, that well-known and respected organisation, they will apply to all the major trading fleets, and they jointly apply to all fleets on 1st July 1986 where they have not implemented them already.
On Question, Motion agreed to.
House adjourned at twenty-four minutes before four o'clock.

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