Sitting of 22 March 1993

Preamble
The House met at half-past Two o'clock
PRAYERS
[MADAM SPEAKER in the Chair]
Oral Answers to Questions
  NATIONAL HERITAGE

    Granada Television
    Mr. Sedgemore: To ask the Secretary of State for National Heritage what plans he has to meet the chairman of the Independent Television Commission to discuss the licence of Granada Television.
    The Secretary of State for National Heritage (Mr. Peter Brooke): None. That is a matter for the Independent Television Commission.
    Mr. Sedgemore: Can the Minister explain why Sir George Russell, the chairman of the Independent Television Commission seems determined to give in to Granada Television's slippery and disingenuous response to the meticulously researched document produced by my hon. Friend the Member for Cynon Valley (Mrs. Clwyd), which outlines breaches in its licence? Is he aware that Granada has expressed an interest in buying into Yorkshire Television? Will he halt all developments in that sphere, pending an inquiry into the reasons why Sir George Russell granted that company a licence when his staff presented him with a document questioning Yorkshire Television's viability?
    Mr. Brooke: In the context of the hon. Gentleman's extravagant language, the phrase "give in" is irrelevant, not least since the Independent Television Commission is fulfilling a quasi-judicial function. The second part of the hon. Gentleman's question is also a matter for the ITC.
    Mr. Sumberg: Instead of listening to those hon. Members who have no connection with the north-west of England, which is the area served by Granada Television——
    Mr. Sedgemore: I worked for the company.
    Mr. Sumberg: Will my right hon. Friend take it from me that I have not received one word of criticism about the quality of Granada Television from my constituents in Bury, South who, like me, will warmly welcome the fact that the ITC has roundly and completely rejected the unfounded criticism from the hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore) and other Opposition Members?
    Mr. Brooke: The hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore) has declared his interest in the matter in his own inimitable way. I am grateful for the endorsement that my hon. Friend gave in his question.
    Mrs. Clwyd: When very senior Granada personnel come to me and detail breaches of the company's licence, and when those same people are totally unconvinced by Granada's response, surely the ITC has a statutory duty to act rather than to accept wholesale misleading information? Why does the Secretary of State not admit that the Government and the ITC have made a complete mess of the licence applications, so that there are serious problems at Granada Television, Yorkshire Television and Tyne Tees Television? If there is a secret and explosive document—I know that there is, and that it relates to the financial viability of those companies—should it not be published so that we can see for ourselves whether the ITC has acted lawfully and with integrity? Or is there something to hide?
    Mr. Brooke: The hon. Lady referred to the ITC's statutory duty to act. She submitted a series of charges to the ITC, to which it responded and effectively disagreed with her. In that respect, the ITC has fulfilled its statutory duty.

    National Lottery
    Mr. Amess: To ask the Secretary of State for National Heritage what recent representations he has received about the site for the headquarters of the national lottery.
    The Parliamentary Under-Secretary of State for National Heritage (Mr. Robert Key): My right hon. Friend and I have received a number of representations about the siting of the headquarters for the proposed national lottery. Recent representations have been received on behalf of Penwith district council, Liverpool city council, Princess Dock Development Co. Ltd., Craven council, Clacton-on-Sea, Devizes and East Cheam.
    Mr. Amess: If my hon. Friend shares my desire for our national lottery to be the biggest, best and most exciting in the world, will he take my advice and have a word with the people responsible for the siting of its headquarters to encourage them to place it in Basildon—a town for a gamble and a town for winners?
    Mr. Key: My hon. Friend is absolutely right and he is, of course, such a winner. We shall see where the headquarters go. It will not be for Ministers to decide their location, although companies may wish to consider favourable schemes which may be on offer under the Government's assisted areas programme.

    Rugby Football
    Mr. Hain: To ask the Secretary of State for National Heritage when he next intends to meet the authorities of the rugby football unions to discuss public funding for that sport.
    Mr. Key: It is for the Sports Councils to decide how much, if any, financial support they wish to give to the rugby football unions. I have no immediate plans to meet the English Rugby Football Union.
    Mr. Hain: Will the Minister consider changing those plans in order to meet the rugby union authorities? When he does so, will he discuss not only funding, but lifting the ban on the Neath player, Stuart Evans, a former Welsh rugby international whose rugby league contract with St. Helens expired two years ago? Is the Minister aware that France and Australia interpret the rules more flexibly than our own authorities? Moreover, to end the hypocrisy of shamateurism and to avoid the likely humiliation of the rugby authorities, should Mr. Evans take his case to the European Court, will the Government press for changes in the rules so that rugby players can play rugby union and the oppressive and anachronistic bans may be ended?
    Mr. Key: I am grateful to the hon. Gentleman for giving me notice of his intention to raise this issue. It is, of course, for the rugby authorities to set and apply their own regulations and for players to decide which code they wish to play by and ensure that they are fully acquainted with those regulations. Only the courts can decide whether any breach of the law has occurred and it must be for the individual to decide whether to pursue the matter. The chairman of the Sports Council, Sir Peter Yarranton, has expressed his disappointment at this. He is a distinguished former English international and the immediate past president of the Rugby Football Union.
    Mr. Harry Greenway: Does my hon. Friend agree that national rugby football unions should be self-funded? With respect, Wales would be better able to fund itself if it played better rugby and won more matches. Does my hon. Friend also agree that those authorities have a function in helping school children into the game more widely through the clubs and should be funded to that end?
    Mr. Key: My hon. Friend is absolutely right about the importance of sport for young people, both rugby union and rugby league. That is why a number of programmes of the Sports Council and other bodies fund such schemes.
    Mr. Hinchliffe: Is the Minister aware of the contents of my early-day motion 1342, which has attracted 130 signatures from hon. Members of various parties, relating to the case of Mr. Steve Pilgrim, the Wasps rugby union player who was banned for a year by the rugby union for having an amateur trial with Leeds? He has not been signed by Leeds and now finds himself in a sporting no-man's-land. Is such an attitude appropriate for a sport which receives extensive public funding and in which players are already paid for playing rugby union, and rightly so? There are people in the Chamber now who have been paid for playing rugby union football.
    Mr. Key: The latter point is a matter for dispute. The Rugby Football Union and the other rugby organisations are responsible for their own rules, but I accept the general tone of the hon. Gentleman's remark and I, too, am disappointed about that particular case.

    Windsor Castle
    Mr. Mudie: To ask the Secretary of State for National Heritage when he expects the final decision on the form of restoration of Windsor castle to be made.
    Mr. Brooke: I hope to make a statement of progress on this shortly.
    Mr. Mudie: Does the Minister think it makes good sense to spend millions of pounds of public money on this scheme when the nation was told last week that it is so poor that pensioners' fuel bills must be taxed? Can the Minister defend that order of priorities?
    Mr. Brooke: As the hon. Gentleman knows, matters of public expenditure across the whole range are looked at individually. The commitment to Windsor castle goes back to an obligation undertaken by the state in 1831.
    Mr. Robert Banks: I hope that a decision to start the restoration work will be made as soon as possible. Might not the Queen decide on the form of that restoration as she has to live there?
    Mr. Brooke: I join my hon. Friend in hoping that we shall be able to make an early start. The decisions on restoration would be taken by Her Majesty the Queen on advice from the Government.
    Mrs. Clwyd: The Secretary of State has confirmed that the taxpayer will have to find between £30 million and £40 million towards the cost of restoration. Where is that money to come from? Will it really come from the hard-pressed national heritage budget? Is it to come from increases in value added tax which the poor and the old will be paying? How much money has come into the trust fund that the Secretary of State set up when taxpayers objected to the large blank cheque that he was signing on their behalf? Why did the Minister say to me in his letter of last week that
    "no representations have been made to the Royal Household about a contribution towards the costs"?
    If the taxpayers are having to fork out, why should not the Queen?
    Mr. Brooke: The immediate emergency expenditure on the castle, which runs to about £1·5 million in the current year, has been met from my departmental budget. I am discussing with colleagues how we would fund the subsequent restoration. Contrary to what the hon. Lady has said, the trust fund was not set up by the Government. It is run by independent trustees, to whom she should address her questions. As for the answer that I gave when the hon. Lady raised the issue with me on 11 March—when she appeared to be ignorant of the fact that a public inquiry had been set up—the reason why I gave her that answer was that it was true.
    Mr. Jacques Arnold: Will not the restoration of Windsor castle provide thousands of hours of employment for some of the best artisans in the world?
    Mr. Brooke: My hon. Friend is right in terms of the skills that will be required from craftsmen of every sort in the restoration of the castle.
    Mr. Maclennan: Does the Secretary of State realise that some of the greatest British architects have constructed important public buildings abroad, but have not been recognised in this country? In the context of the new opportunities for the display of the royal collection of paintings and other art works, will the Secretary of State give particular attention to the possibility of combining those challenges to provide an exciting new building at Windsor which would be representative of the best in Britain today?
    Mr. Brooke: I join the hon. Gentleman in saluting the achievements of British architects abroad, and I am delighted to say that those same British architects also design buildings in this country. The substance of his question forms part of the general debate on restoration, on which I hope to make an announcement shortly.

    West Coast Main Line
    Mrs. Jane Kennedy: To ask the Secretary of State for National Heritage what assessment he has made of the effect on the tourist industry in the north-west of the level of service on the west coast main line.
    Mr. Key: According to latest available figures, 13 per cent. of visitors to the north-west staying one night or more travelled by train. Improvements to the west coast main line will encourage greater use by everyone, including tourists.
    Mrs. Kennedy: I am grateful to the Minister for that answer, but what plans does he have for talks with his colleague the Secretary of State for Transport to ensure that such improvements actually take place so that day trippers and overseas visitors using the channel tunnel, other forms of transport and the west coast main line can visit exhibitions such as the Beatles exhibition and the Tate of the north in Liverpool?
    Mr. Key: The hon. Lady is right to say that it is important that the improvements take place. As my right hon. Friend the Secretary of State for Transport has announced, those improvements will take place as soon as resources allow.
    Mr. Hawkins: Does my hon. Friend agree that the announcement last week that the main channel tunnel terminus for routes to the north will be at St. Pancras will be of enormous benefit to tourism in the north-west, including my constituency and that of the hon. Member for Liverpool, Broadgreen (Mrs. Kennedy)? That is because the links between the north-west main line into Euston and the line from St. Pancras already exist, as was confirmed to me at a meeting as recently as this morning by the senior manager in charge of InterCity services for the north-west.
    Mr. Key: I know of no one—apart, perhaps, from my hon. Friend the Member for Blackpool, North (Mr. Elletson)—who is as well informed about Blackpool as my hon. Friend. He has hit the nail on the head. Of course it is true that a night service will run from Paris and Brussels up the west coast main line to Glasgow. There will also be daytime services from Paris and Brussels to Manchester, and a service between Paris and Birmingham. These trains are due to start towards the end of 1995. I understand that British Rail intends to run a connecting service between Manchester and Waterloo, to begin when regular train services commence from London in mid-1994.

    Libraries
    Mr. Gerrard: To ask the Secretary of State for National Heritage what assessment his Department has made of the impact of the current year's revenue support grant on public library provision; and if he will make a statement.
    Mr. Key: I collect information annually from English library authorities about their expenditure plans for the coming financial year and their actual expenditure in the previous year. This year's planned spending total was higher than the previous year's outturn.
    Mr. Gerrard: Does the Minister accept that public library services are declining and that closures of libraries and reductions in opening hours are becoming commonplace under local authorities of all political persuasions? Is that not the inevitable result of the Government's financial pressure on local authorities to cut spending? What does the Minister intend to do to help local authorities to deliver efficient library services?
    Mr. Key: No, I do not agree with the hon. Gentleman. Total gross expenditure on public libraries in England rose by 17 per cent. in real terms over the past 10 years. I have looked carefully at actual and proposed cuts and there is no current evidence of a breach of statutory duty. Book issues were up 3 per cent. in the last year for which figures are available, issues of children's books were up by 8 per cent., and a staggering 489 million books were issued that year.
    Mrs. Angela Knight: Is my hon. Friend aware that some local authorities such as Derbyshire see libaries as a soft target and will propose to close them or to curtail opening hours rather than trying to control expenditure in other areas? Will he undertake to keep such matters under careful scrutiny so that constituents such as mine in Erewash get the services that they require and pay for?
    Mr. Key: Yes, and I am grateful to my hon. Friend, and to the Conservative county councillors on her council, for keeping me so well informed about the situation in Derbyshire. I have looked at it carefully and I am confident that there is no breach of statutory duty. I will not, therefore, be setting up a public inquiry, but I assure my hon. Friend that we are keeping the situation under careful review, especially in Derbyshire, and if there is any such evidence my chief library adviser will, of course, advise me accordingly.
    Mr. Skinner: If the Minister intends to keep library services in Derbyshire under review, why does he not also guarantee that Derbyshire county council—which has had a mandate from the people against the Tory party, including the hon. Member for Erewash (Mrs. Knight), since 1981—has returned to it the £40 million of cuts in Government grant? Then no library in Derbyshire will be affected and the community education system will prosper. Let us have less hypocrisy from the Dispatch Box and from Tory Members about what is happening in Derbyshire, given that the Conservative Government are responsible for all the cuts.
    Mr. Key: It is always a pleasure to be questioned by the hon. Member for Bolsover (Mr. Skinner), although I wish he would change the record once a year or so. I recall a similar exchange with him before. Standard spending assessments are set to take account of library services. Derbyshire, along with other authorities, has one problem: it contains a lot of reactionary people who seem to think that libraries should not change to match the changing requirements, aspirations and demands of their people.

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    When libraries do change, they flourish—as has happened in the past few years, with more books and more expenditure on public libraries.
    Mr. Peter Bottomley: May I refer my hon. Friend to the good interview on LBC this morning, in which the non-statutory service offered by Westminster city council—the Westminster music library—was discussed? Will he consider the possibility of a national music library which might take over some of the funding responsibilities from Westminster, which currently provides a service—scores, compositions and other printed music—for most of the country's amateur and semi-professional orchestras?
    Mr. Key: Not for the first time, my hon. Friend has come up with an interesting idea. I should like time to think about it.

    Coarse Fishing
    Mr. Eric Clarke: To ask the Secretary of State for National Heritage what support his Department gives to the sport of coarse fishing.
    Mr. Brooke: Most Government funding of sport is made through the Sports Council. In 1991, the Sports Council paid grant of £20,000 to the National Federation of Anglers, the governing body for course fishing. The grant paid so far for 1992 is £15,000, but final levels of grant for that year and this are likely to be decided in May.
    Mr. Clarke: The Secretary of State will be aware that his right hon. and learned Friend the Secretary of State for the Environment is setting up the Environment Protection Agency—[HON. MEMBERS: "Reading."] Yes, I am.
    Madam Speaker: Order. That is just the sort of confession for which I have been waiting. The hon. Gentleman knows that during Question Time hon. Members do not read.
    Mr. Clarke: Will the Secretary of State ask his right hon. and learned Friend to confer with the 4 million anglers—it is the most popular sport in Britain—about the work of the proposed agency so that we can ensure that it benefits both the environment and the anglers who enjoy that most popular sport?
    Mr. Brooke: The hon. Gentleman makes what appears to be a wholly unexceptionable request. I will certainly talk to my right hon. and learned Friend.
    Mr. John Marshall: Does my right hon. Friend not find it slightly ironic that the cheers in favour of angling and fishing come from those who, on every other occasion, are against any form of blood sport?
    Mr. Brooke: That particular contradiction has been remarked on by others. I am grateful to my hon. Friend for mentioning it again.

    Children's Play
    Mr. Hardy: To ask the Secretary of State for National Heritage what action he is taking to support or promote children's play and recreation other than in regard to direct and organised sporting activity; and what steps are being taken towards the fulfilment of the United Kingdom's obligations in respect of the United Nations convention on the rights of the child.
    Mr. Key: We recognise the importance of play to children's development and are fully committed to providing appropriate funding and other support for it. From April 1993, the Sports Council will take over the play unit's responsibilities for the national play information centre and playwork education and training along with seven of the unit's current staff. Our obligations under the United Nations convention on the rights of the child are also being met through the work that both the Arts Council and the Sports Council are doing to promote wider leisure opportunities for young people, and through the policies of the Departments of the Environment and of Employment.
    Mr. Hardy: In the light of that answer, and following the recent and not unhelpful meeting held with hon. Members from both sides of the House, may we take it that the Under-Secretary of State is confirming that the Sports Council fully recognises the importance of children's play and that no lesser dedication of resources will be provided than under the previous arrangements?
    Mr. Key: I am grateful to the hon. Gentleman, who rightly said that the all-party group had a constructive meeting. I assure him that the Sports Council takes its commitment seriously. It has already earmarked £220,000 as a base figure. It is also considering further funding for the four national centres for playwork education and the National Voluntary Council for Children's Play.
    I should point out that this year the Great Britain Sports Council will be replaced by the United Kingdom Sports Commission and the Sports Council for England. We shall consider with them how their policy areas should develop.
    Dame Elaine Kellett-Bowman: Does my hon. Friend agree that the right of a child to recreation is preceded by the right to life? Does he therefore regret the fact that 4 million children have been murdered under the Abortion Act 1967, introduced by the right hon. Member for Tweeddale, Ettrick and Lauderdale (Sir D. Steel)?
    Mr. Key: No.
    Mr. Pendry: How can the Under-Secretary of State be satisfied that adequate resources will be made available to local play providers by the Sports Council at a time when that body is undergoing a major restructuring exercise following the Atkins review? Surely this is not the time to put at risk the good work of the play unit by merging it with the Sports Council—an organisation, incidentally, with no history of involvement in children's play other than that of accounting officer.
    In the light of recent tragic events in Liverpool and elsewhere, does the hon. Gentleman agree that it is vital that young children are offered stimulating alternatives to wandering the streets aimlessly? Even at this late stage, will he think again about the particular exercise that he is undertaking, because the play unit is the only agency dedicated to children's recreational needs?
    Mr. Key: If that were true, I should be inclined to think again, but I can reassure the hon. Gentleman that the decision was reached after substantial consultation over many weeks. I recognise our responsibilities under article 31 of the United Nations convention on the rights of the child, on which the Children Act 1989 is based. The Government's commitment is underlined not just by the

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    public money spent by the Sports Council, but through the Department of Employment. Its out-of-school care grant, paid via the training and enterprise councils, will be £45 million over three years and will give rise to 50,000 child care places.

    National Lottery
    Mr. Kilfoyle: To ask the Secretary of State for National Heritage what estimate he has made of the likely proceeds from the proposed national lottery which will be available for distribution to the arts, sport, heritage, charities and the millennium fund.
    Mr. Key: That will depend on the total turnover of the lottery and the amounts devoted to prizes, expense; and taxation.
    Mr. Kilfoyle: What does the Minister say to the many people who have high expectations of the national lottery, and who now realise that the Chancellor will take nearly three times as much of the proceeds as charities—and, indeed, any other beneficiaries? What will he tell those people, who realise that when—as is inevitable—the Chancellor raises the rate of taxation on the lottery, more money will go to the Exchequer than to all the other beneficiaries combined?
    Mr. Key: The latter part of the hon. Gentleman's question is pure speculation. In answer to the earlier part, let me say first that it was always thought right for some taxation to apply, as it was always envisaged that some expenditure would be displaced from other goods and services bearing tax. Secondly, let me say that I am delighted that the level of tax has been set at only 12 per cent., although the hon. Gentleman and other Opposition Members have been telling us for some weeks in Committee that it would be between 20 and 30 per cent.
    Mr. Tracey: I trust that my hon. Friend, and my right hon. Friend the Chancellor, will note that once the lottery's proceeds are distributed, the Treasury will make a considerable amount from VAT on capital projects and the like.
    Are my hon. Friend's officials taking the earliest possible steps to appoint a director general and to produce the tender documents for promoters? We hope that those documents will be as simple as possible, thereby encouraging innovation.
    Mr. Key: We are making progress as rapidly as we can, but we can make little further progress until the House has agreed to the legislation. We hope very much that we shall be able to do so before too long: following Royal Assent, which we hope will take place by the summer, we shall be in a position to make the appointments to which my hon. Friend has referred.
    Mr. Corbett: Given what the National Council for Voluntary Organisations has called the Chancellor's "sheer greed" in taking 12p off the top of every £1 ticket, will not the five good causes have to share a maximum of between 25p and 26p? As was pointed out by my hon. Friend the Member for Liverpool, Walton (Mr. Kilfoyle), that will leave the charities with 5p between them. Will the Minister join me in recognising that we made a mistake in Committee—that we should have nailed down a minimum
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    of 35 per cent. for good causes on the face of the Bill? Will he now undertake to table an amendment to that effect on Report?
    Mr. Key: No—for the very good reason that we debated that precise point at some length in Committee. I well recall explaining that putting a fixed figure on the amount to go to good causes would not necessarily be in the interests of those good causes, among whom the overall amount raised would then be distributed.
    Mr. Alan Howarth: I know that my hon. Friend wants to be helpful to charities. Will he give an undertaking to monitor any displacement of charitable giving that may result from the national lottery, and also to monitor the net impact of the lottery on charitable giving?
    Mr. Key: Yes, of course. That is precisely why we have laid down on the face of the Bill that the 20 per cent. to he received by each of the five categories of good cause should be reviewed by the House of Commons in the lifetime of each Parliament.
    Mr. Barry Jones: Will the Minister confirm that regional orchestras will receive money from the lottery's proceeds?
    Mr. Key: Fortunately, that will not be for Ministers to decide; it will be decided by the committees of the arts councils responsible. That is why I think that the establishment of a separate arts council for Wales will benefit Welsh orchestras.
    Mr. John Carlisle: If the proceeds of the national lottery are as generous as my hon. Friend and many other hon. Members hope, will my hon. Friend consider adjusting the ring fence that he has placed around it? It might then be possible for the money received to replace taxpayers' funding of the arts, sport and so forth. Public expenditure would be saved and sport would benefit, because, on that calculation, it would receive more than it receives now.
    Mr. Key: I think that my hon. Friend must have had lunch with my hon. Friend the Financial Secretary to the Treasury.
    Mr. Mackinlay: To ask the Secretary of State for National Heritage what examination his Department has made of the impact of the proposed national lottery on fund raising for non-league soccer clubs, rugby union and other sports clubs; and what representations he has had by or on behalf of such clubs.
    Mr. Brooke: We received a number of representations from sports clubs and have amended the Bill. We do not anticipate that the national lottery will have any demonstrable impact on the fund-raising activities of football or sports clubs. Participation in those activities is primarily motivated by an interest in or association with the organisation concerned.
    Mr. Mackinlay: Is the Secretary of State aware that thousands upon thousands of people enjoy and benefit from watching soccer at the level below the Football League—the Vauxhall conference, and the Diadora Isthmian, Beazer Homes and HFS Loans leagues? The clubs who play in those leagues, and other non-league clubs, are very much dependent on local lotteries and scratch cards. Will the right hon. Gentleman give an

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    assurance that those clubs will not be prejudiced in their fund raising by the impact of the lottery Bill and may continue to raise funds by a combination of scratch cards and their own lotteries, as well as benefiting from the spot-the-ball competitions that fund some of the clubs' activities?
    Mr. Brooke: The National Lottery Etc. Bill contains measures to increase the maximum proceeds in any one society or local authority lottery, to increase the maximum prize, and to amend existing registration requirements for lotteries. All those measures will make small lotteries more attractive. My hon. Friend the Minister and I listened to constructive criticism in Committee and have sought to make those changes more attractive.
    Mr. Alton: Will the Secretary of State introduce further amendments on Report? Is he not aware that many small football clubs, from Tranmere to Rochdale, and many small charities are concerned about the national lottery's effects on them? Does the right hon. Gentleman intend to use proceeds from the national lottery to finance Olympic projects in the Manchester bid? If so, is that not money which otherwise might have been used for sport and the arts?
    Mr. Brooke: My hon. Friend the Parliamentary Under-Secretary and I will look at observations that were made in Committee before the Bill reaches Report stage. When I watched Bolton Wanderers score a notable victory over Leyton Orient, Bolton Wanderers took the opportunity to make representations to me. I have not yet replied to them. In the context of the Olympic bid, it is important first to secure the nomination of Manchester in September.

    Libraries
    Ms Glenda Jackson: To ask the Secretary of State for National Heritage what assessment his Department has made of changes in public library opening hours.
    Mr. Key: I continue to assess the provision of public library services in England, including opening hours, by analysing statistics and by listening to users and providers of the service.
    Ms Jackson: Is the Minister aware that public libraries provide a great deal more than books, music and pictures for borrowing? They provide a safe, warm environment for many elderly people. As the Government have imposed value added tax on fuel, which will preclude the elderly and those on low incomes heating their own homes in future winters, will the Minister ensure that local authorities are encouraged to expand and extend public library opening hours, and are funded accordingly?
    Mr. Key: I should love to, but the hon. Lady ought to have a word with her own Labour council in Camden. It was Camden's misfortune to have to take a vote on whether its libraries remained open. It was a close-run thing. They remained open on the casting vote of the chairman, with the Conservatives in favour, but the Labour party voting against the libraries remaining open.
    Mr. Matthew Banks: Does my hon. Friend agree that flexibility is the most important factor in library opening
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    hours? Rather than having simply nine-to-five opening hours, libraries should open when it is sensible for them to open and when the public want them to be open.
    Mr. Key: My hon. Friend is absolutely right. That is as true of rural areas as of urban areas. The flexibility shown in rural areas by the use of mobile public libraries proves just how much library professionals are moving ahead of some who seek to govern them.

    Sports Commission and Sports Council
    Mr. Barnes: To ask the Secretary of State for National Heritage what consultations he has held with staff at the Sports Council concerning the creation of the United Kingdom Sports Commission and the Sports Council for England.
    Mr. Brooke: I have had no such discussions. The Sports Council is responsible for its own day-to-day management, including employee relations, and I understand that it is currently discussing the implications of the reorganisation with its staff.
    Mr. Barnes: When will the Sports Council be given the go-ahead to engage in the reorganisation that it proposed, which involves staff restructuring? The Secretary of State's answer was disgraceful. He should be involved in the discussions. Some people do not want to dither and dodge, as the Secretary of State's Department does, so the Sports Council should be allowed to go ahead with the reorganisation.
    Mr. Brooke: I received broad proposals regarding the functions and resources of the successor bodies towards the end of last year, and the detailed staffing proposals in support of them during January. My officials have been involved in detailed discussions with the Sports Council to ensure that the proposed package provides the best value for money. In the light of these discussions, I expect shortly to receive revised proposals from the Sports Council.

  ATTORNEY-GENERAL

    Police Officers (False Evidence)
    Mr. Peter Bottomley: To ask the Attorney-General if it is his practice to review other similar cases involving any police officer convicted of concocting or giving false evidence.
    The Attorney-General (Sir Nicholas Lyell): Whenever a police officer is convicted of such an offence, the Crown prosecution service reviews all pending prosecutions and appeals, of which it is aware, in which that officer is involved.
    Mr. Bottomley: The House will be glad to have heard my right hon. and learned Friend's answer. He will not know that one of my first cases 17 years ago was that of a young man who had been wrongly convicted on the false evidence of a detective constable. It was only by chance, five years later, when the detective constable had become a detective sergeant in a different police service, that we saw a newspaper report about his conviction, which led to the quashing of an unsafe conviction some time before. Will my right hon. and learned Friend consider consulting

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    the prosecuting authorities and the chief constables to find out whether it would be possible to re-examine concluded cases, sometimes going back over many years, in order to ascertain whether there have been miscarriages of justice which might be detected?
    The Attorney-General: It is not necessarily easy to trace back in every case to find out exactly which officer gave evidence. However, in any case where the Crown prosecution service has reason to believe that such an officer's evidence may have adversely affected the safety of a conviction, the Crown prosecution service will take steps to ensure proper disclosure to the defendant so that he may take such action, by way of appeal, albeit out of time, as he thinks fit.

    Convictions (Magistrates Courts)
    Mr. Ian Taylor: To ask the Attorney-General what proportion of cases pursued by the Crown prosecution service in the magistrates courts in 1991–92 resulted in a conviction.
    The Solicitor-General (Sir Derek Spencer): Of the 1,068,750 defendants tried in the magistrates courts during the year 1991–92, 1,040,997 were convicted or pleaded guilty, representing a conviction rate of 97·4 per cent.
    Mr. Taylor: Is my hon. and learned Friend aware of the increasing anxiety among police officers that attacks and assaults on them during the course of their duty are not being prosecuted with the necessary severity by the Crown prosecution service, which often downgrades the charges made, or even drops them altogether? Given that 239 officers in Surrey were assaulted in 1992 alone, is that not an outrage and should not people who assault police officers in the course of their duties automatically be locked up?
    The Solicitor-General: I hope that I can reassure my hon. Friend that things are not as gloomy as the picture that he has just painted. Whenever offences are reduced in gravity, it is always done consistent with the interests of justice. There is a wide range of penalties to deal with assaults and obstructing the police. My hon. Friend may be interested to know that, as compared with assaults on other victims, the use of custody as a penalty for police assaults is consistently higher—nearly twice as high for a section 20 assault, three times as high for a section 47 assault and five times as high for common assault.
    Mr. John Morris: In view of the appalling and worsening crime wave, what is the explanation for the apparent reduction in the number of cases coming before magistrates courts? Have any instructions been given that there should be greater use of cautioning and, if so, by whom? And is that connected with the Government's attempt to limit costs in the courts?
    The Solicitor-General: The Crown prosecution service is not responsible for the number of people charged or arrested. Last year, the discontinuance rate in the magistrates court was 13·3 per cent. and in the Crown court it was 7·8 per cent. Those rates were not gravely different from those of the preceding year. The purpose of the Crown prosecution service is to weed out weak cases. There is absolutely no point in the Crown prosecution
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    service conducting cases that are going to result in an acquittal. I assure the right hon. and learned Gentleman that discontinuance does not take place on ground of cost.

    Convictions (Fraud)
    Mr. Rowe: To ask the Attorney-General how many cases have been brought to trial by the Serious Fraud Office since its inception; and how many defendants have been convicted.
    The Solicitor-General: The Serious Fraud Office has brought 103 cases to trial, involving 221 defendants of whom 139 were convicted.
    Mr. Rowe: Is my hon. and learned Friend aware that that is some comfort? Is it not the case that, by concentrating so heavily on a small number of very well-publicised cases in which defendants have been acquitted, we are receiving a wholly distorted view of the important work of this office?
    The Solicitor-General: My hon. Friend is quite right. The SFO prosecutes cases that previously would not have been prosecuted because they were too complex and unmanageable. It is at the leading edge of criminal jurisprudence. A disproportionate amount of publicity is given to a few isolated acquittals. In the last year, 43 defendants were tried and 29 were convicted. That gives a conviction rate of 67 per cent.
    Ms Abbott: Is the Minister aware of public dissatisfaction with the work of the Serious Fraud Office, especially in the Guinness trial, when all manner of crooks and spivs were able to walk free? Why should there be one law for rich people who swindle millions of pounds of other people's money and another law for the poor?
    The Solicitor-General: The hon. Lady seems to have lost contact with reality. In the case that she quoted, a number of defendants were convicted. In fact, the argument that we hear about the powers of the Serious Fraud Office is that they should be extended to the fraud investigation group.
    Mr. John Marshall: Does my hon. and learned Friend accept that many believe that there are a few very lucky men in this country, and some people would like the Roskill report's recommendations on fraud trials to be brought into operation?
    The Solicitor-General: Most of the recommendations of the Roskill commission were brought into effect. One that was not brought into effect was the replacement of trial by jury with trial in some other way. That was a very serious step which the House decided not to take. Most people take the view that we should perfect existing means of trial before considering a trial other than by jury.

    Mr. Alan Moses QC
    Mr. Dalyell: To ask the Attorney-General on how many occasions Mr. Alan Moses QC has appeared as counsel to Her Majesty's Government.
    The Attorney-General: Alan Moses QC has appeared frequently for the Crown in civil and criminal proceedings. From 1985 until 1990, he was Standing Counsel for the Inland Revenue.
    Mr. Dalyell: Why did he say that he had read the relevant documents and did not consider them to be of any use to the defence for the foreseeable future? What explanation can there be, other than that so able and experienced a lawyer was trying, quite improperly, to protect Ministers, even though it meant that directors of Matrix Churchill could land up in prison? And, please, do not hide behind the skirts of Lord Justice Scott.
    The Attorney-General: Alan Moses is independent counsel of high standing and integrity. Instead of casting aspersions in his own way, the hon. Gentleman should await the outcome of the careful and independent inquiry being conducted by Lord Justice Scott.
    Sir Ivan Lawrence: Is not it the case that the defence counsel in the Matrix trial wrote to The Times and stated specifically that Mr. Alan Moses for the Crown had behaved perfectly properly in every way and had performed in accordance with decided cases? Is not it, therefore, an appalling slur on Mr. Moses that the hon. Member for Linlithgow (Mr. Dalyell) has totally refused to consult the defence counsel before making his allegation?
    The Attorney-General: My hon. and learned Friend draws attention to a letter which is in the public domain and which could well be consulted by the House generally. I suggest that it gives a more balanced view than that of earlier questioners.
    Mr. Dalyell: In view of the totally unsatisfactory reply, I should like to raise the matter on the Adjournment.

    Right to Silence
    Mr. Brazier: To ask the Attorney-General what submission his Department has made to the Royal Commission on criminal justice on changes to the right to silence; and if he will make a statement.
    The Attorney-General: I discussed this issue with the royal commission at a meeting at which it sought my views on a range of issues. My personal thoughts on the ability of the court to draw inferences from silence in appropriate cases were set out in my speech last October to the Howard League for Penal Reform, a copy of which is in the Library.
    Mr. Brazier: I thank my right hon. and learned Friend for that answer and I welcome his views, as far as they go, set out in that speech. Many people would like the Government to go further and to remove altogether the right to silence in cases in which people have been killed, such as cases in which children have been killed at home. The country looks to the Government and not to the liberal consciences of the Runciman commission to take the ultimate view on the matter.
    The Attorney-General: We should not anticipate the advice of the royal commission. I draw my hon. Friend's attention to the Murray case, a recent case in the House of Lords, which shows the proper balance to be considered when discussing the right to silence. It points to the fact that inferences can be drawn only in a case in which there is already a prima facie case and in circumstances in which it is proper, in the legal sense of that word, to do so.

  OVERSEAS DEVELOPMENT

    Russia
    Mr. Mandelson: To ask the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on British and EC aid to Russia.
    The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. Mark Lennox-Boyd): Since 1991, the United Kingdom has committed almost £400 million in bilateral help for Russia to support political and economic reform. We have also contributed one sixth of the EC's assistance programmes.
    Mr. Mandelson: As I recently visited Russia in the company of Lord Healey, will the Minister accept from me that the reports of Russia's economic crisis are certainly not exaggerated and that the crisis is considerably worsened by the political paralysis there? Does he agree with the view of the German Foreign Minister, Klaus Kinkel, that international aid needs to be increased radically if Russia's economic reforms are to have any chance of success? Will the Minister accept the view of the French Government that an emergency meeting of the G7 countries should take place to organise that effort?
    Mr. Lennox-Boyd: The Government strongly support President Yeltsin's economic and political reforms, which are going through an extremely difficult period. The G7 countries are urgently considering how best to demonstrate support for President Yeltsin, both politically and substantially, and that includes consideration of meetings at some stage in the early future.
    Mr. Garnier: What assistance, other than technical assistance, is this country giving to the Russians?
    Mr. Lennox-Boyd: Russia will, for example, receive the lion's share of our know-how fund, worth £100 million over the next six years, £13 million of which has been used in Russia so far with many projects now in the pipeline.
    Mr. Meacher: Will the Minister accept that whatever the needs of Russia are, the need of sub-Saharan Africa, which contains two thirds of the world's poorest 50 countries, is far greater? Why, then, does he propose a large real-terms increase in British aid to Russia and to eastern Europe at the expense of a large real-terms cut in British aid to Africa? Why does he also propose to triple the proportion of British aid that is channelled through the European Community over the next five years when EC aid policy does not concentrate on the poorest countries, but prioritises eastern Europe and when Commissioner Marin, the Spanish EC aid Commissioner, is now downgrading Africa in favour of Spanish-speaking Latin American countries?
    Mr. Lennox-Boyd: The hon. Gentleman should accept—as he never will—that the increase this year in aid generally to the poor world is 1 per cent. in real terms. Our contributions to European Community aid are determined by our share of European Community aid and are not for decision by the British Government in the first instance.

    Tools for Self Reliance
    Mr. Colvin: To ask the Secretary of State for Foreign and Commonwealth Affairs what assistance he will give Tools for Self Reliance in providing practical help to poorer countries.
    Mr. Lennox-Boyd: Tools for Self Reliance is welcome to apply to us for assistance.
    Mr. Colvin: Will my hon. Friend take this opportunity to congratulate Tools for Self Reliance, which has its headquarters in my constituency and runs some 165 centres for the collection and refurbishment of tools for export to third-world countries? As the Government's philosophy is that the intention of overseas aid should be to assist other countries in helping themselves, will my hon. Friend give favourable consideration to an application, if received, in respect of assistance for the refurbishment and export of tools to make tools, such as lathes and blacksmiths' equipment? If my hon. Friend has seen early-day motion 1050, which has all-party support, will he get the message across to other Departments of State—particularly the Ministry of Defence, which is unfortunately likely to have a large number of spare tools available in the near future?
    Mr. Lennox-Boyd: As I have suggested to my hon. Friend privately, I think that it would be a good idea if Tools for Self Reliance contacted the Overseas Development Administration and entered into discussion with it. Of course, British non-governmental organisations such as the one to which my hon. Friend refers have received strong Government support under the joint funding scheme, whose budget has increased rapidly over the past few years—indeed, it has more than doubled over the past four years. We do, indeed, help such projects, although we should clearly have to discuss what was proposed.
    Mr. Olner: Did the Minister see the exhibition in the Jubilee Room about tools for third-world countries? I agree absolutely that those countries need tools, but does the Minister agree that the reference made at that meeting to the young people of African countries gaining dignity through being able to work could apply equally to the young people of Birmingham, Nuneaton and the west midlands, or anywhere else in Britain, and that we should really be giving the young people of this country some dignity through work?
    Mr. Lennox-Boyđ: As regards Tools for Self Reliance and other similar organisations, the Overseas Development Administration gives significant help and certainly helps through grants in support of appropriate technology projects that help underdeveloped countries in Africa with tools. We certainly make a large contribution in that respect.

    Bosnian Orphans
    Mr. Thurnham: To ask the Secretary of State for Foreign and Commonwealth Affairs what representations he has received about the fate of Bosnian orphans; and if he will make a statement.
    Mr. Lennox-Boyd: We have received a number of representations and share the deep concern felt by many in this country about the fate of children who have been orphaned in the tragic conflict in Bosnia.
    Mr. Thurnham: Will my hon. Friend bear in mind the concerns of British couples who are prepared to adopt orphans abandoned by mothers who have been raped by Serbian soldiers? Will he confirm that up to 20,000 women were so violated?
    Mr. Lennox-Boyd: I cannot confirm the figures that my hon. Friend cites, but I can say that my hon. Friend the Under-Secretary of State for Health has taken a close interest in this particular tragic matter and has made it clear that, in appropriate cases, his Department will help with the adoption of children who have been conceived as a result of rape.
    Mr. Tony Banks: Does the Minister recall the suggestion of His Holiness the Pope that Bosnian Muslim women who had been raped should bear their children? Given that many of us found that offensive, what steps do the Government propose to take now to counsel those women who decide to take the Pope's advice?
    Mr. Lennox-Boyd: As the hon. Gentleman is aware, a report was carried out by Dame Anne Warburton into that dreadful area. The ODA has commissioned Marie Stopes International to examine the practical problems of managing and implementing the recommendations made by the Warburton mission in Bosnia.

    Somalia
    Mr. Fabricant: To ask the Secretary of State Foreign and Commonwealth Affairs if he will make a statement regarding the present level of British aid being sent to Somalia.
    Mr. Lennox-Boyd: Britain has pledged almost £43 million worth of emergency relief assistance for Somalia since January 1992, including its share of European Community aid.
    Mr. Fabricant: Is my hon. Friend aware that the United Nations has stated that British aid is the most effective in the western world? Is he further aware that Britain has peculiar and special expertise in the sourcing and finding of fresh water supplies in villages in Africa? What are we doing in Somalia?
    Mr. Lennox-Boyd: Britain is the third largest bilateral donor to the relief effort in Somalia: some £43 million has been pledged in the past 15 months. I would add that there is £5·5 million worth available immediately on the table for suitable non-governmental organisations and United Nations projects that may apply for it. The British Government have also given substantial money to the north of Somalia which includes, as my hon. Friend referred to it, rehabilitation of water supply projects.

Channel Tunnel Rail Link
3.30 pm
The Secretary of State for Transport (Mr. John MacGregor): With permission, I should like to make a statement about the proposed new railway line between the channel tunnel and London, and about the Ashford international passenger station.
I have today given the go-ahead for the Ashford international passenger station. I have given British Rail both a full approval and the funding it needs to carry out immediately all the track, signalling and platform works, totalling £30 million. In parallel, my Department and British Rail will explore urgently with the private sector ways of involving its expertise and capital in the construction of the station buildings. The Government are fully committed to having the station completed as soon as possible, so that Kent and other parts of the south-east can gain the full benefits from the channel tunnel.
Turning to the channel tunnel rail link, the House will recall that my predecessor announced in October 1991 the route corridor preferred by the Government, which approaches London from the east via Stratford and terminates at King's Cross; and he invited British Rail to refine the route. For this work, British Rail formed a subsidiary, Union Railways, which draws on the skills of both the public and private sectors. Its work has been thorough and professional.
Great effort has gone into achieving a route with proper environmental standards which largely follows existing transport corridors and at the same time reduces the costs substantially. As a result of this work, the line is now estimated to cost between £2 billion and £3 billion—considerably less than before, without any loss in the overall benefits, environmental or otherwise, of the route, and with some gain.
The Union Railways report offers a series of options on the precise route, and does not make recommendations between them. The Government have concluded that the route which should now be put to public consultation is as follows.
Between the channel tunnel and Detling, north of Maidstone, the route would largely follow the previously safeguarded route. However, at Ashford the route would run to the north of the town, with a tunnel under the M20 and then running parallel to the motorway. This route is environmentally superior to the former safeguarded route. It is also £86 million less expensive, and it would have less impact on existing and potential development within the town.
For the section of the route crossing the Medway valley, we prefer an option in the report which, from the east, would diverge from the M20 corridor, passing through a 4 km tunnel under Blue Bell hill, before crossing the Medway alongside the existing M2 bridge and following the corridor of the M2 and A2 on the surface. This is not the cheapest option, but it has substantial environmental advantages, at a modest additional cost.
South of Gravesend, there is provision for a connection to Waterloo. The main route would run along the Ebbsfleet valley then tunnel under the Thames, to run alongside the existing London, Tilbury and Southend railway from north of Purfleet to east of Barking. From there it would enter a tunnel to Stratford, where there remains an option for a station. This route overcomes a
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number of engineering and environmental difficulties associated with the more southerly route published in 1991.
West of Stratford, there are two options. One option is for a tunnel all the way to the proposed King's Cross low-level station. The alternative is for a tunnel from Stratford to a point on the north London line railway west of Dalston Kingsland station, then continuing alongside the north London line by reinstating the original four-track alignment within the existing railway boundaries, before finally swinging south over railway lands into St. Pancras station.
The tunnel route to King's Cross has significantly more impact on property settlement and noise levels than the route via the north London line, which is an important consideration from the environmental point of view. The St. Pancras option also appears to be less expensive than the King's Cross low-level proposal, and that is important in terms of practical feasibility, in relation both to public expenditure and private capital.
As my right hon. Friend the Chancellor of the Exchequer announced in his Budget speech, the Government's preference is for the St. Pancras option. We recognise that, before we come to the final view, futher work will be needed on the environmental, planning, regeneration, safety and engineering aspects of the proposal, and on exploring the options for developing the Thameslink services. I have asked Union Railways to carry this forward as a matter of urgency.
The new railway will bring great benefits. It will reduce journey times for international passengers, compared to what will be available in the early years following the opening of the channel tunnel, by at least 33 minutes, and by more in the commuter peaks, to 2 hours 27 minutes from London to Paris and 2 hours 7 minutes to Brussels.
The railway will transform commuting from many parts of Kent, with a large increase in capacity, enhanced reliability and dramatic reductions in journey times. Construction of the railway will create about 15,000 jobs. The railway will also contribute substantially to the regeneration of the east Thames corridor and more widely. The Union Railways report also sets out ideas for related rail projects which could stimulate further regeneration.
The Government consider that the benefits of this project are such that it should now go forward as a joint venture between the public and private sectors. The Government are prepared in principle to provide substantial public sector support in recognition of the domestic transport benefits from the new line.
The next stage is to consult on the proposals. I want the consultation to be thorough and well informed. It will be led by Union Railways, and I should like it to be completed by mid-October. Only then will we take the final decisions on the route, and I shall then safeguard it. In the meantime, I am releasing the safeguarding from the two sections of route which have been superseded by that which I have just announced. The Union Railways report and the independent review of Union Railways' work undertaken by my advisers Samuel Montagu and W. S. Atkins are available in the Vote Office.
In parallel with the public consultation, my Department, with Samuel Montagu and Union Railways, will be discussing with the private sector its participation in a joint venture. Our aim is to find a way of taking the project forward which offers the private sector a proper return on its investment and secures value for money to the

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taxpayer. Union Railways will be made into a separate, initially Government-owned, company once the relevant powers have been granted under the Railways Bill now before the House and we intend that in due course the project will be transferred to the private sector.
Following safeguarding, the project will proceed by hybrid Bill. Provided that we press ahead quickly, it should be possible for the railway to be completed by around the turn of the decade—[HON. MEMBERS: "Next century."] Equally, it should be completed by the end of the decade, which is only seven years away.
The time has come to end the uncertainty. Our decision to give the go-ahead to the new railway will enable us to secure the benefits which it will bring for international travellers, for Kent and Essex commuters, and for regeneration in the east Thames corridor. This will be a massive undertaking. The preferred route I have proposed today is environmentally sensitive, realistic and financially feasible as a joint venture.
Mr. John Prescott: It is almost five years since the decision was taken to build a dedicated channel tunnel high-speed rail route from London. The Secretary of State's announcement today confirms further delay, uncertainty and planning blight, with the completion of the line pushed into the next century—not to the end of the decade. The use of the line has been delayed until 10 years after the opening of the channel tunnel.
While Britain will enter the 21st century on the back of a 19th-century railway system, our French partners, who started at the same time, have built their modern system ready for the opening of the tunnel and 10 years ahead of Britain. Last week they announced a further 200-mile extension of their tunnel rail link to Strasbourg, at a price of £2 billion.
The delay can be fairly laid at the Government's door. It has been caused by their lack of strategic thinking and their ideological requirement that the rail link should be private finance-led, receive no public financial support, and be privately owned. That has maximised delay, planning blight and uncertainty, and damaged Britain's economic future in Europe.
The handling of the issue was typically illustrated by the way in which the Government botched even the delayed announcement of the route and the leak by the Meridian television company. They are a Government of blunder and blight. They lack vision, commitment and common sense. They will severely damage our economic processes in Europe and cause a decade of misery and uncertainty in large areas of Kent and London.
Will the Secretary of State confirm that the high-speed rail link to the channel tunnel cannot be financed by the private sector alone? His statement today seemed to suggest that Government money and guarantees will be required if proper environmental safeguards were to be met. Does the Secretary of State accept that the southern route was effectively cancelled by his predecessor Lord Parkinson in June 1989 because the Government were not prepared to find the £500 million capital grant guarantee required by the private sector? Does his statement today mean that there has been a change in the Government's policy to ensure that the priorities of least cost and maximum profit do not overrule the major environmental priorities, especially in the Kent and London area?
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Is it still the Government's policy that the environmental damage in Kent should be reduced by tunnelling, as in the London section? Will he reaffirm the assurance given in October 1991 by the previous Secretary of State for Transport, the right hon. and learned Member for Edinburgh, Pentlands (Mr. Rifkind) that the southern route, which involved 25 km of tunnelling, would be replaced by the east London route, which involved 38 km of tunnelling, including tunnelling under the beautiful area of the Boxley valley? Will the Secretary of State confirm that the Union Railways route which he has just announced represents less than one third of the original tunnelling proposal, and that yet again the Government are reneging on one of their past commitments?
Will the Secretary of State consider a more generous compensation scheme, along the lines proposed by the French in their channel tunnel rail project, in view of the tremendous disruption along any proposed route in the Kent and London areas? Is it still the Government's view that choosing the eastern route was justified because the eastern corridor provided tremendous regeneration opportunities for north Kent and east London? When can we expect him, or, indeed, the Department of the Environment, to make a statement on that?
Can the Secretary of State tell us anything about the station strategy on the route, especially as he appears to have decided that St. Pancras should be the London terminus and has announced the Ashford centre? What studies have been done to justify the selection of St. Pancras? What compensation has been paid by British Rail to the developers of the King's Cross site? What are the consequences for Thameslink, crossrail and the Jubilee line, all of which are dependent on private finance and all of which have been considerably delayed?
Does the Secretary of State accept that the channel tunnel is of utmost importance to areas outside London and Kent, and especially parts of the north? Will the choice of St. Pancras over King's Cross delay passenger through journeys to the north in any way? What plans does the Secretary of State have to modernise the west coast main line?
Does the Secretary of State accept that other areas need a Euro-gauge standard route for freight? Will he agree that it is necessary to review the present freight transport route, which is based at Willesden and requires London rail freight traffic to travel across London rather than around it, forcing thousands of lorries to use roads from the north through Kent, rather than the rail alternative?
If the Government had adopted Labour's proposals for the route, which were published three years ago, and if they had accepted public and private financing, it would now have been well on the way to completion. Britain will once again pay a heavy price for the Government's sheer incompetence.
Mr. MacGregor: I noticed that the hon. Gentleman accused me of incompetence last week because I did not make the statement then, but that was typical of him. I shall explain that incompetence to the House. It was outrageous of the hon. Gentleman, because I wished to make a statement last Wednesday, following the Chancellor's announcement, but did not do so and agreed to make a statement today to accommodate the Opposition, through the usual channels.
Then what happened? The hon. Gentleman got hold of a leak on Thursday and provoked unjustified worries and

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fears among many people in Kent, through widespread coverage of the leak. It is typical of the hon. Gentleman to accuse me of incompetence when I was trying to accommodate the Opposition, and when he himself led to the problem.
I find it amusing to discover that one of the hon. Gentleman's main opening attacks was to accuse me of saying that the channel tunnel would be completed next century, rather than at the end of the decade. Does the hon. Gentleman not know that they are both the same? It was a rather pathetic attack.
I shall deal with as many of the hon. Gentleman's questions as possible, although it would require a speech to answer them all. Obviously, I wish to diminish the delay, uncertainty and planning blight; that is why, the moment that I became Secretary of State, I focused on the channel tunnel rail link, and why I am pleased to announce the decision today. I am anxious to minimise the uncertainty, which the statement does to a great extent, including de-safeguarding some of the routes. I am anxious to get rid of planning blight as quickly as possible, and that is why we have removed quite a number of areas from it through the announcement.
I am keen to get on with consultation—I hope that the hon. Gentleman does not think that I am avoiding it—so that we can come to a decision finally on the route and its safeguarding.
On the comparison with the French, the hon. Gentleman will know that the Waterloo terminal is nearly completed and that there will be full connections until the end of the decade. The problem is that, after the end of the decade, there will be congestion on those lines, which is why we are going ahead with the channel tunnel high-speed link now. The hon. Gentleman does not seem to recognise that it is easier to carry through a route more quickly in the north of France, which is flat and less congested, and which has fewer of the many difficult areas and issues that we have had to tackle on the whole route through Kent, which is one of the loveliest but most geologically difficult parts of the country, as well as one of the most congested. The hon. Gentleman does not understand the difference between the two.
The hon. Gentleman referred to no public financial support. He clearly was not listening, because I made it clear today—in a specific, clear and new announcement—that the Government will give public financial support. The hon. Gentleman describes that as changing policy, but it comes as a result of a thorough investigation of the whole issue. I should have thought that he would welcome the announcement today. In recognition of the many benefits to domestic passenger services, particularly in Kent but also in Essex, it is right to make that public contribution, and we have made that clear for the first time.
Next, the hon. Gentleman asked whether we were going for the least-cost option. In some cases we are not. I have made it clear that, where environmental benefits justify it, we have gone for a more expensive option. I should have thought that the hon. Gentleman would have given credit to Union Railways and to the many people who assisted the company to produce a solution—as a result of defining more clearly all the aspects of the original Ove Arup route—that is environmentally more beneficial and costs less. I
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should have thought that he would have given them some credit for doing so, but it is typical of the hon. Gentleman to justify everything by the amount of public money that he wishes to throw at it, and not to consider whether we are getting value for money.
I shall be unable to deal with all the points raised by the hon. Gentleman, but, on tunnelling, the options are set out in the Union Railways report. In all but one case, the environmental impact of going for tunnelling would be worse or no better than not going for tunnelling. Let me be clear about that. In the one case where it would be better, which is the long tunnel at the Medway, the additional cost would be between £150 million and £200 million. We did not think that that was justified. At least three quarters of the route, as now defined, will be in tunnel or will make use of or be alongside existing transport corridors. The report has been extremely skilfully worked out, and has provided environmental benefits and less cost.
The hon. Gentleman asked me whether the choice of the east route was justified. I have already made it clear that I fully supported the route that was decided by my predecessor. It is justified not least because of the regeneration effects along the east Thames corridor. My right hon. and learned Friend the Secretary of State for the Environment will make a statement about that shortly.
The hon. Gentleman asked whether studies had been made to justify the option of St. Pancras. Yes, they have. Once we had decided to go for the route from Stratford and east of London, a key element was the fact that it became possible to consider the St. Pancras option. It would have been difficult to do that from the southern route. I asked Union Railways and British Rail to look again at that option. They gave me a report last month, and I thought it right to come to the House quickly to say that it is the preferred option. I have asked Union Railways to do more work on it.
We can agree about the utmost importance of the channel tunnel high-speed link to areas outside London, particularly the north and Scotland. I can confirm to the hon. Gentleman that, if we go for the option of St. Pancras, it will have no detrimental effect on the speed with which we can get direct services through to the north and Scotland. I recognise the importance of that.
Several Hon. Members rose——
Madam Speaker: Order. I shall not hesitate to intervene if Members make statements or long comments. This is question time, so brisk questions and answers, please.
Sir Keith Speed: Is my right hon. Friend aware that I very much welcome his statement about Ashford international station? Will he give an undertaking that the work will start as quickly as possible, because time is now of the essence? My constituents do not share his optimism about the route itself. Will the consultation process be a real one, so that people in my area can argue for the original safeguarded route if they so wish?
Mr. MacGregor: I am grateful to my hon. Friend. I know how hard and strongly he has pressed for the Ashford international passenger station. I am therefore extremely glad to have been able to make a statement about it today. I know that he has worked closely with the chairman of planning and transportation of Kent county council, Mr. Bruce Lockhart, and I recognise the strength of their case in respect of that station and the benefits that

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it will bring to Kent commuters. We have taken those benefits into account. I hope that the work will proceed very quickly.
As to consultation, I can assure my hon. Friend that it will be possible for those who still prefer the existing route to make their case. I think that there are many advantages in the new route, because the environmental assessment is superior, fewer properties are affected, and, of course, it is less expensive. We concentrated as much on the property and environmental aspects as on the cost, and they led me to believe that that was the preferred route.
Mr. Nick Harvey: Is it not true that the United Kingdom has wasted the six years since the Channel Tunnel Act 1987 was enacted—in stark contrast, whatever the Minister may say, to the French? Have we not wasted taxpayers' money on the south London route and the King's Cross option? Is not this statement about cutting costs? Is the Minister's timetable credible if public consultation must be followed by a hybrid Bill and a five-year engineering project? Whatever The Sun may have said about the Budget, is the Minister sure that it is wise for the route to go through the editor's golf club?
Mr. MacGregor: On the hon. Gentleman's last point, it is inevitable that such a controversial and difficult issue will adversely affect some areas. I hope that it would be prefectly possible to move that clubhouse were it to be affected by the route.
The hon. Gentleman must recognise, as I have certainly recognised during my time as Secretary of State for Transport, that this is one of the most controversial and difficult projects to be undertaken. I entirely reject the hon. Gentleman's accusations about cheapness. Not only is the project massively expensive, but it affects very large numbers of people and businesses, and will have a big environmental impact. We could scarcely have chosen a part of the country that would present more difficulties, but we had no other choice. It was inevitable that it would take time to resolve such problems, and that the process would be controversial. It was important to get the best answer, which is what we have ultimately achieved.
On procedure, I think that the hybrid Bill is the quickest way to proceed with the legislation, and I hope that we shall have the hon. Gentleman's co-operation in getting it through as quickly as possible.
Dame Peggy Fenner: My constituents will be pleased that my right hon. Friend took to heart the Ove Arup route over the Medway. Has the European Community done its environmental assessment? Will we receive any money from the EC for the important Euro-link, which will serve the rest of the country and, in doing so, present great environmental difficulties for Kent?
Mr. MacGregor: I recognise the environmental affects, to which we paid particular attention. I stress to my hon. Friend—to whom I am grateful for her remarks—that great attention was paid to environmental aspects in the report of the Union Railways, which was assisted by 12 environmental consultancies. Very shortly—early next month—they will publish their environmental report as an appendix to the Union Railways report that I am placing in the Vote Office today. There will be an opportunity to conduct the full environmental impact assessment as we move beyond the consultation stage. I assure my hon.
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Friend that we shall give as much attention as possible to—and meet all our European commitments on—tackling the environmental assessments.
Mr. Ron Leighton: Will the Secretary of State assure us that there will be an international passenger station at Stratford? He will know that he has the full-hearted support of the London borough of Newham for the eastern route. Would it not be a betrayal of that support if there were to be no international station at Stratford?
Mr. MacGregor: When the hon. Gentleman looks at the Union Railways report he will see that it lists a number of options, both for international stations and domestic stations to serve commuter lines. We have decided that at this stage it would not be right for us to declare preferred stations. We shall listen carefully to the responses to the public consultation on stations and to those from possible promoters and developers before taking final decisions. Clearly, Stratford is one option.
Mr. Andrew Rowe: I do not think that I heard my right hon. Friend mention the word "freight". Is he aware how very keen Kent county council and all the people in Kent are for a severely diminution in the number of lorry movements through Kent? Will he assure us that Union Railways, which is to become a private company, is sufficiently objective in its proposals to give independent advice to the Government, or will the Government ensure that it takes charge of the consultation process?
Mr. MacGregor: Clearly, we shall be heavily involved in the consultation process. The Government will introduce the hybrid Bill, so they will clearly be in the lead. It was entirely right that Union Railways, with the aid of its consultants, should conduct the study which I asked it to carry out. One of the benefits of the high-speed rail link is that it will enable additional freight to use it. As I asked, the report covers the two loops in the line. The main benefit will come from the fact that the high-speed rail link will release existing railways so that they can take more freight traffic, and the potential will exist for much more freight to go by rail.
Mr. Andrew Mackinlay: As the only Opposition Member of Parliament for Kent or Essex, can I ask the Secretary of State whether he is aware that his announcement will be greeted with great anger and dismay among people in those counties? How on earth can people have confidence in the consultation that he proposes if, as he has said, it is led by Union Railways? Will not Union Railways be judge and advocate in its own court?
Were we not reassured by the Secretary of State's predecessor, the right hon. and learned Member for Edinburgh, Pentlands (Mr. Rifkind), that there had been widespread consultation when he made the historic announcement about the route at the Conservative party conference in October 1991? What has gone wrong since then? What confidence can anyone in Kent or Essex have in a Government choosing a route that suits them politically instead of maximising the opportunities offered by the channel tunnel in the best transport interests of the United Kingdom?
Mr. MacGregor: If the hon. Gentleman is the only Opposition Member from Kent or Essex to be affected by the route, I must tell him that he has not made a good fist

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of it today: he is wrong on every point. The fact is that I will ultimately take the decisions on the route, just as I have made the announcement about the preferred route today. Union Railways studied all the options, and on that basis we made the decision about the preferred route.
Kent commuters will benefit greatly from the reductions in times—some of them are dramatic. In parts of Kent suffering from high unemployment, there will also be benefits in the form of regeneration. My announcement of the international passenger station at Ashford ensures that Kent benefits from the link. In Essex and east London there can be no doubt that the route that we have chosen, which the hon. Gentleman seemed to criticise, will greatly help the regeneration of the east Thames corridor.
Sir John Stanley: Is my right hon. Friend aware that his announcement today is warmly welcomed by my constituents and by me, especially in view of his decision to introduce a tunnel under Blue Bell hill, which represents a substantial environmental improvement on the previous scheme? Can he give me an assurance, however, that there will be no return to a mid-Kent parkway station in the northern part of the parish of Aylesford, as previously proposed? Can he give me a further assurance that the gradient of the new line will be such as to permit the heaviest and longest international freight trains to travel on it?
Mr. MacGregor: Yes, the line will be able to take the heaviest and longest international freight trains, although long trains of more than 1,000 tonnes may sometimes need two locomotives—but that is not a great bar. I can give my right hon. Friend the assurance that he seeks about the station at Kit's Coty. I am also most grateful for my right hon. Friend's first remarks. It seemed to us important in taking the decision about the Medway valley that the original proposal would have involved substantial environmental disbenefits, which is why we have gone for these proposals.
Ms Joan Ruddock: Will the Secretary of State accept that the people of south London, in my constituency particularly, will welcome his announcement that the southerly route is dead and buried? They will be far less happy, however, with his subsequent statement that there will be an increase in freight traffic along south London lines. Will he publish the changes that he expects in freight traffic? Will he look at the environmental impact and then do something about it? Furthermore, will he tell us exactly when he will be able to announce what will happen to the Thameslink services, which are crucial to transport movements in south London, and which are needed to compensate for the difficulties in our road network?
Mr. MacGregor: I have noted what the hon. Lady says about the freight impact on south London. It is rather early to be able to conduct any proper study of that, but I take note of what she said. We are, after all, talking about events into the next decade.
As for Thameslink, today's announcement was about the channel tunnel high speed rail link. It will remain possible, in the study that I am asking Union Railways to do of the St. Pancras and King's Cross options, if so desired, to take forward Thameslink 2000—in its currently
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planned or in a revised form—but that will depend on decisions to be taken later involving all sorts of implications. Meanwhile, I am asking Union Railways to take that into account in its further work.
Mr. Bob Dunn: Will the Secretary of State confirm that one of the reasons why a statement was not made last Wednesday was that the hon. Member for Kingston upon Hull, East (Mr. Prescott) was busy filming for the popular television programme "Through the Keyhole"?
As for the link itself, can my right hon. Friend confirm that as the route moves through the Ebbsfleet valley between Northfleet and Swanscombe, there will be a distinct possibility of the construction of an international station there?
Secondly, part of the proposal involves the movement of some passenger trains from the new route to the Chatham line, via the disused Gravesend, West line. Will my right hon. Friend confirm the status of that line? Is it a new line? If so, will it qualify for environmental protection? If not, will it qualify for it anyway?
Mr. MacGregor: I am not sure of all the reasons for the Opposition not wanting me to make a statement on Wednesday, but I was endeavouring to be as helpful as I could—so it was an extraordinary way to behave to give as much publicity as possible to a leak, and hence a great deal of provocation the next day. Then, to accuse me of uncertainty and of not coming forward quickly enough just compounded the error.
On my hon. Friend's two points, yes, it would be possible for the location that he mentioned to be a station. I have already said that we have taken no decisions about stations and that we will wait for the responses. On the question of reinstating the Gravesend, West branch line to find a means of making a connection between the high-speed channel tunnel link and Waterloo, so that international trains could continue to use Waterloo if they were coming up that link—which has considerable advantage—I can tell my hon. Friend that it would be the disused line. I have no reason to believe that the environmental and other impacts cannot be dealt with successfully.
Mr. Stanley Orme: The Secretary of State has referred to the effects of the proposal on the north and the north-west of England. Can he develop that a little further? We are extremely concerned about the lack of investment in and the deterioration of the north-west line. If nothing is done and if there is no investment, it will not be able to match the sort of development to which the right hon. Gentleman referred.
Mr. MacGregor: That is a separate issue from today's statement. However, I can tell the right hon. Gentleman that without question, and from both the passenger and freight points of view, I am keen to ensure that the north of England and Scotland gain as much benefit as possible from the channel tunnel and from the high-speed link. Therefore, an important consideration in looking at the stations was to ensure that those areas were not disadvantaged in any way.
Mr. Roger Gale: My right hon. Friend will be aware that the commuters of north-east Kent will welcome his announcement today for the benefits that, as he has rightly pointed out, it will bring to them by

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alleviating the congestion in south London. Can he confirm that any investment in the fast link will not be allowed to detract from the immediate investment in the necessary improvements to the Kent coast line?
Mr. MacGregor: I am well aware of my hon. Friend's views on this matter. We have already said that that line is one possibility—I cannot say any more until I get BR's recommendations—for the £150 million leasing proposals announced in the autumn statement. However, I cannot be certain at this stage. I assure him that British Rail—and, in due course, Railtrack—will be very much aware of the pressures to which he referred.
My hon. Friend will recognise that commuters from Kent will benefit very substantially indeed from this investment. I shall give a couple of illustrations to make my point. The time from Ashford to central London will be reduced from 70 to 42 minutes, and from Gravesend from 50 to 20 minutes.
Mr. Chris Smith: Why is the Secretary of State perpetuating the uncertainty and blight that affects King's Cross by not ruling out, once and for all, the over-expensive, low-level station at King's Cross, and instead going for the St. Pancras option? Is it not time that BR was instructed to withdraw the King's Cross Railways Bill from Parliament?
On the question of the north London line, will the right hon. Gentleman give a guarantee that the strictest environmental standards will apply to the stretch of line from Dalston to St. Pancras as well as to the stretch of the line east of Dalston?
Mr. MacGregor: On the hon. Gentleman's second point, we will apply the same strict environmental standards to all parts of the line. On his first, I am anxious to get on and to reach a decision. I could not do so today, because further work must be done on a number of aspects mentioned in my statement before we can reach a final view.
Mr. Jacques Arnold: My right hon. Friend will be aware that the route that he announced today passes a densely populated area in Northfleet and Gravesend in my constituency, within half a mile of 5,000 of my constituents. Will he ensure that all possible engineering and environmental expertise is brought to bear in the consultation process, to ensure that our environment is properly protected?
Mr. MacGregor: Yes, I assure my hon. Friend that all that will be carefully examined. There is a proposal for a tunnel in Pepper hill in my hon. Friend's constituency, but whether it will be a tunnel or a bridge-cum-viaduct can be explored in the public consultation.
Mr. Brian Sedgemore: Is the Secretary of State aware that I hope to present a petition tomorrow from the people of Hackney, against the easterly route—which goes through the heart of the borough? Is the right hon. Gentleman's promise that the line from Strateford and through Hackney will be in a tunnel—real and unconditional—or is it a politician's promise, which could be broken as part of a future cost-cutting exercise?
Mr. MacGregor: No, it is clear from my statement today that in so far as the link affects the hon. Gentleman's constituency, it will be tunnelled. We made that
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commitment clear in today's statement. I hope that the hon. Gentleman will not find it necessary now to present his petition tomorrow.
Mr. Robert Adley: I welcome this major investment in our railways, and I am particularly glad that my right hon. Friend has chosen a route that I first recommended nearly five years ago in my Conservative Political Centre book, "Tunnel Vision". Is my right hon. Friend certain that he will not find himself challenged in any way under section 42 of the Channel Tunnel Act 1987? Will environmental expenditure on the railway, which all right hon. and hon. Members welcome, be no less fundable from public sources than environmental protection in the case of road schemes such as the Winchester bypass? Also, will my right hon. Friend seriously consider the upgrading and full electrification of the Tonbridge-Redhill-Reading route, which would help so much in moving freight traffic around London and to the north?
Mr. MacGregor: I assure my hon. Friend that we will meet our obligations under section 42 of the 1987 Act, and that we will apply the same environmental standards and assessments to the channel tunnel high-speed rail link as we do to the road programme. I have no further comment on my hon. Friend's final point.
Mr. Jeremy Corbyn: Does the Secretary of State recall that, on 14 October 1991, his predecessor, the right hon. and learned Member for Edinburgh, Pentlands (Mr. Rifkind), at col. 37 of Hansard, gave me an undertaking that the route from Stratford to King's Cross would be wholly in tunnel? Why is the Secretary of State now proposing an overland route as one option? What will be the effect on local north London line services and on the environment of people living alongside that line both east and west of the proposed station, given the great increase in traffic on the link to the western region as well?
Mr. MacGregor: The route to King's Cross would have to have been in tunnel, but we are now talking about a route to St. Pancras, because that seems to offer considerable advantages. Quite a large part of it will be tunnelled, but not all of it. I hope that the hon. Gentleman will carefully study today's report and the later report from Union Railways.
Mr. James Couchman: My right hon. Friend stressed the benefit to Kent commuters of the new line. My constituents will be impressed if there will definitely be a station on the new line in the Medway area. In any case, like my hon. Friend the Member for Thanet, North (Mr. Gale), those of my constituents who are commuters will be much less impressed if that takes money from the Kent coast line, which is long overdue for upgrading in terms of both the line and rolling stock.
Mr. MacGregor: I note my hon. Friend's comments, and I know that he has often pressed that case. I cannot add today to my earlier comments about stations. There will be opportunities, and clearly we are anxious to secure benefits for commuters of the huge new investment. That is a main reason why the Government are prepared to make a substantial public sector contribution to stations as well as for other purposes. As to exactly where the stations will be, it will be wise to wait until we have received the full response to the public consultation.
Mr. John Fraser: Does the Secretary of State appreciate that, until the end of the century, virtually all the channel tunnel passenger trains—and freight trains as well—will travel through my constituency, from Herne Hill to Brixton? Does he realise that, if his earlier answer is correct, even after the turn of the century a good many freight trains up to 1,000 yd long will be travelling along the route—throughout the night in most cases—hauled, initially, by diesel locomotives? Can the right hon. Gentleman confirm that people whose property adjoins existing railways that will be forced to suffer environmental damage will receive the same environmental protection as was announced this afternoon for those living on new rail routes?
Mr. MacGregor: The normal rules relating to environmental protection and compensation will apply, but we are working with local authorities on arrangements for the type of line that the hon. Gentleman has mentioned. I am sure that, if he is anxious to mitigate the problem caused by the amount of traffic from the channel tunnel that travels along the lines between now and the end of the century, he will give all his support to the Government's attempts to secure the Bill's passage.
Sir Roger Moate: Is my right hon. Friend aware that, although Kent Members and many others will fight for environmental improvements, today's statement and the decision that he has announced will receive a broad welcome, contrasting sharply with the whingeing, carping, negative and destructive attitude of the Labour party? Will he take every opportunity to remind the country that, from the moment that the channel tunnel is opened, it will be possible to catch a train from the new Waterloo terminal and to be in Paris within three hours? I hope that he will deny all the denigrating, knocking stuff that we have heard from Labour.
Will my right hon. Friend explain why he has chosen to use the hybrid Bill procedure rather than the new order-making procedure, which was available to him and which would have provided greater opportunities for public inquiries, including local public inquiries? Does he understand that it is desperately important for Kent's support to know where the new stations will be? That is what will make the railway viable in terms of attracting Kent commuter traffic.
Mr. MacGregor: I am grateful to my hon. Friend. He is entirely right about the attitude of the Opposition, who can hardly bring themselves even to welcome a massive investment in Britain's transport infrastructure that will do a great deal for many generations to come. He is also entirely right to make it clear that, when the tunnel opens, it will take just over three hours to travel from London to Paris, and even less to travel from London to Brussels. That is already a substantial benefit, and I think that many people who currently travel to Brussels by air will quickly see the attraction of going by train.
My hon. Friend made two other points. I recognise the force of his comment about stations; that is why I am anxious to provide a comparatively short but reasonable time for public consultation. I hope that six months will be adequate, and will allow us to reach a view on stations.
As for my hon. Friend's other point, I think it right to use the hybrid Bill procedure to deal with a project of such magnitude and scale, which is receiving Government
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backing. The procedure will still involve a substantial process of investigation as the Bill goes through both Houses.
Mr. Jim Cousins: Does the Secretary of State admit that hon. Members whose constituencies are served by the east coast main line in Yorkshire, the north-east and Scotland consider that the proposal for the preferred route to St. Pancras would be better called "Disunion Railways"? Although the point is never addressed in the document, it is clear that there will be no direct link from the east coast main line to the channel tunnel except by means of shunting through St. Pancras mainline station. Will the Secretary of State deal with that point? Why has it not been considered in any of the documents?
Mr. MacGregor: Because it does not amount to a row of beans. There will be a direct line, and there will be no shunting. The train will have to come into the station and then go out, but that happens on high-speed links all over Europe; there is nothing very significant about it. The train will also have to stop at London, so that crews can change and border control personnel can alight. I do not believe that the system will have any impact on the speed with which passengers from Scotland and the north of England can go straight through the channel tunnel.
Mr. David Shaw: Will my right hon. Friend confirm that maintaining section 42 of the Channel Tunnel Act 1987—which will be of great interest, and give great pleasure, to those who work in Dover's ferry industry in the years ahead—will involve no back-door subsidy through the commuter mechanism, which would contravene that section and the principles behind it? Will he also confirm that money will not be spent on the construction of the rail link until, at long last, my constituents who use the railways to get from Dover to London have some decent rolling stock on which to travel?
Mr. MacGregor: Yes, I can confirm my hon. Friend's first point: that any Government support will be used entirely to provide internal, domestic benefits for commuters and that international passengers and international services will not be affected by it. Therefore, we shall be meeting our obligations under section 42. As for my hon. Friend's second point, I cannot make a clear correlation between the two, but I hope that my hon. Friend will agree that it is right—because of the benefits to so many people in Kent as well as to the rest of the country—that we ought to proceed with the high-speed rail link as quickly as we reasonably can.
Ms Glenda Jackson: Further to the question asked by my hon. Friend the Member for Islington, North (Mr. Corbyn), can the Secretary of State tell the House why the promise that was given in 1991 by his predecessor has been broken—that the line which runs parallel with the north London line should be via tunnels, given that King's Cross and St. Pancras are virtually next door to each other? Once the trains have reached St. Pancras, will the north London line to the west of the station be used to join the west coast mainline, and will tunnelling be excluded there, too?
Mr. MacGregor: On the first part of the hon. Lady's question, from the studies that I have seen so far—clearly, this is something that I have asked Union Railways to look

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into in more detail—there will be considerable environmental benefits, on balance, from using the existing north London line. Noise mitigation and so on, would all be carried out when the two lines that are not being used at the moment come into use. As for the hon. Lady's second question, the east coast mainline services——
Mr. Prescott: We are talking about the west coast mainline services.
Mr. MacGregor: Yes, I know, but I want to make a point about the east coast mainline services. The east coast and the west coast mainline services are all important to the north and to Scotland. The east coast mainline services that currently use St. Pancras can be accommodated in a new part of the station, west of the existing King's Cross station. Most west coast mainline services go from Euston. One possibility there is the use of a travelator between St. Pancras and Euston to speed up the connections.
Sir Teddy Taylor: Is it not a bit insulting to the people of Southend-on-Sea to put part of this glamorous and costly new line alongside the London, Tilbury and Southend line, which, as my right hon. Friend is well aware, is one of the most shamefully neglected of all British Rail's services in terms of investment and performance? Can he provide me with a clear answer as to why he now says that a great deal of taxpayers' money will go towards these rail links when a clear, specific assurance was given on 5 June 1986, in column 1187, that these rail links would not cost the taxpayer one penny, and when we were led to believe that these assurances were legally binding and could not be changed?
Mr. MacGregor: On my hon. Friend's first point, I do not see that it is at all insulting. My hon. Friend knows—I share his view—that it is very important that the London, Tilbury and Southend line infrastructure should be improved. He will also know that very recently, as a result of the public expenditure settlement that I agreed last autumn, British Rail has been able to go ahead with the announcement of a £40 million investment in the signalling on the London, Tilbury and Southend line.
As for my hon. Friend's second point, I can give him an assurance, which I repeat, that there will be no taxpayers' subsidy for the international aspects of this line and that therefore we shall be meeting our obligations under section 42 of the Channel Tunnel Act.
Mr. Brian Wilson: Can I place it on record that the comments made by the hon. Member for Dartford (Mr. Dunn) in respect of my hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) were inaccurate, as I believe the hon. Member for Dartford now recognises? The question is why the Secetary of State could not have made a statement on this subject last Thursday instead of wasting his time in Scotland trying to enthuse people about privatisation, which nobody wants.
Does this statement not represent another example of one story before the election and a different one after it? Is it not true that after all this time there is to be yet another consultation period and yet another decade before there is a high-speed link, even between the channel tunnel and London? Can the Secretary of State confirm that, for purely cost reasons, less than one third of the distance which his predecessor earmarked for tunnelling will now
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be subject to tunnelling, which will be at the expense of the evironment? Can he also confirm that the distance earmarked for tunnelling will not include Boxley valley?
Does the Secretary of State agree that the real tragedy of the statement is that there is still no national vision for fast rail links north of London? Does he understand that it is not merely a domestic Kent issue—important though such considerations are—but that the rest of the country now awaits a strategy for fast direct links, as opposed to the dog's breakfast and fragmentation which privatisation offer?
Mr. MacGregor: On the hon. Gentleman's first point, I wanted to make the statement on Wednesday so that the House was informed as quickly as possible. On Thursday, I was fulfilling substantial engagements in Scotland with ScotRail, the Scottish pensioners—[Interruption.] The hon. Gentleman would have been the first to criticise me if I had not been able to discuss with editors the whole issue of privatisation in Scotland, with Strathclyde PTE and SPEED, an organisation which, as he will know, is concerned with freight movement from Scotland. I was carrying out that extensive programme. He would have been the first to criticise me and would have described it as an insult to the Scots if I had not fulfilled that engagement. I thought that it was extremely important to complete those serious and prolonged discussions with people in Scotland, which I found extremely useful. I also found considerable enthusiasm for privatisation among ScotRail managers.
On delays, Union Railways has produced an excellent, thorough report, and very quickly. I pay substantial tribute to Union Railways for the way in which it carried it out. Once the route was decided—I confirmed it very soon after I became Secretary of State—we asked Union Railways to carry out this work which was essential before we proceeded any further. I presume that the hon. Gentleman is not suggesting that we should ignore all public consultation and should not have the usual processes of getting parliamentary approval for the project. He will therefore recognise that what we have been doing in the past year is to reach the present stage very quickly, and I intend to continue as fast as we possibly can.
I can tell the hon. Gentleman, as I have already said, that there is a substantial amount of tunnelling. In only one case could there have been environmental advantages from additional tunnelling, which would have meant substantial additional expenditure of between £150 million and £200 million. We decided that the short tunnel route, which is not the cheapest option but which is more expensive than one possibility, was the right one to take.
This is a massive investment of £2·5 billion on track and infrastructure alone. People travelling to the rest of the country will benefit just as much as people from London and the south-east because journeys through the channel tunnel will be cut by 33 minutes. Exactly the same amount of time will be saved.
Several Hon. Members: On a point of order, Madam Speaker.
Madam Speaker: Order. I have not finished. Sir Edward Heath.
Sir Edward Heath: May I thank my right hon. Friend for the statement, for the grasp that he has shown of the intricacies of this long-running

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project and for his obvious determination in pushing it ahead? I assure him that the people of Old Bexley and Sidcup will welcome the statement because, although passionately pro-European, they have always preferred that the fast link should run outside their borders.
Nothing, historically, can alter the fact that when the channel tunnel was suggested, British Rail said that no link would be necessary, but in 1985 it said that a link would be necessary. It is now eight years since that statement was made and we are still only in the process of making progress, which, I am afraid, is all too characteristic of the way in which this country tries to move into the modern world.
Will my right hon. Friend kindly enlarge on his statement that section 42 of the Channel Tunnel Act 1987 will be observed but will not inhibit him? Section 42 was included deliberately to prevent British Rail or other public money from being used for the purposes of looking after the environment on this scheme. As he has emphasised, a great deal is required for the environment and he is sure that it will be covered. Is it to be dealt with by public money?
Mr. MacGregor: I am grateful to my right hon. Friend for his opening comments. It has been my intention to move ahead on the matter as fast as we can. I am sure that my right hon. Friend recognises that today's announcement is a very important step forward in the whole process, not least in making clear the Government's determination and in clearing up the blight issues which have affected many people. That is why I was anxious to make my announcement as quickly as possible.
On section 42, the public sector contribution will come through the benefits to domestic commuters and through the services that are provided there. The precise split between the two will have to be decided in due course. I have said that we shall now engage in discussions with the private sector to work out all the arrangements for the
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joint venture. That will happen in parallel with the public consultation. The important thing today is to get ahead with the public consultation so that we can finally settle the route.
Mr. Tam Dalyell: On a point of order, Madam Speaker. What does "Erskine May" have to say about "a row of beans" as a parliamentary expression? Would that not give the Secretary of State the opportunity to clarify exactly what he meant when he replied to my hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Cousins)? Those of us who are concerned about the northern link want the Secretary of State to clarify why it should take no more time than was previously promised.
Madam Speaker: The hon. Gentleman is attempting to continue the exchange. I must tell him that "time's up" means "time's up".
Mr. Tony Lloyd: On a point of order, Madam Speaker. I do not want to continue questions on the statement, but I must point out that the Secretary of State failed to mention the country outside London. As a result of pressures on time, only two speakers from north of London were called. What opportunities will those of us who represent those areas, for which the link is crucial, have to put points and to have them answered by the Secretary of State?
Madam Speaker: I recognise that the matter is crucial to hon. Members, including myself, who represent constituencies outside London. As the Secretary of State said, there is to be an intensive consultation process. I hope that hon. Members can have an input there. It is true that I was not able to call the number of hon. Members who represent constituencies outside London whom I wished to call. I am afraid that questions on statements must sometimes be curtailed. I have to draw a distinction between the statement and today's other important business, with which we shall now proceed.

Ministerial Patronage (Parliamentary Scrutiny)
4.31 pm
Dr. Tony Wright: I beg to move,
That leave be given to bring in a Bill to make provision for ministerial appointments to public bodies to be subject to a Parliamentary scrutiny and confirmation process through Select Committees.
The Bill is about patronage—the patronage powers of Ministers and of the Prime Minister to appoint people to public posts. My contention is that those powers are excessive, often inefficient and frequently abused. The Bill is designed to make the patronage powers of Ministers more accountable to Parliament and to parliamentary scrutiny.
The issue has a long history. From the 18th century onwards, Parliament has been fighting for its rights against Ministers who have deployed the armoury of patronage and prerogative powers to bribe and buy their way through the House. The subject invites a certain delicacy. Patronage has been described as second only to the act of love in conferring pleasure on all parties concerned. Twenty years ago, Lord Rothschild's central policy review staff studied the matter. Later, he said:
"I thought I detected some resistance on the part of the authorities to the Think Tank studying the subject…patronage is a very precious and delicate commodity."
It is surely time to stop being coy about the matter. There is widespread concern in the House and in the country about the matter—and rightly so. At general elections, people think that they are electing a Government. What they do not realise is that they are also releasing the floodgates of ministerial patronage, which will sweep over and dominate the daily government of their lives.
This is the appointive state—non-elected, non-accountable and full of people, chiefly men, whose main and sometimes only qualification is to be acceptable to the Ministers who appoint them. There are currently more than 40,000 public appointments in the gift of Ministers, with the Prime Minister himself standing at the apex of this pyramid of privilege.
I recently asked the Prime Minister in a written question to reveal how many public appointments he controls. Back came those immortal words:
"The information requested could be provided only at disproportionate cost."—[Official Report, 16 March 1993; Vol. 221, c. 34.]
I suggest that there is now a disproportionate cost to our democracy in leaving such patronage unchecked. The present Government did not invent patronage. The last Labour Government made liberal use of it. What the present Government have done is to give it a crudely partisan twist. Out went the great and the good; in came those who passed the "one of us" test. A survey by the BBC in 1985 revealed that a quarter of the chairmen of a selection of major public bodies were openly Conservative supporters. A similar survey by the Financial Times earlier this year concluded:
"if, there is a new elite running Britain's public services…it appears the best qualifications to join are to be a businessman with Conservative leanings."
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That is manifestly so in the new trustified health service, while it is widely understood in Wales that the most secure route to public appointment is to be an unsuccessful Conservative candidate.
There is a problem about democracy here; there is a problem about efficiency, too. To take two recent examples, it is not immediately apparent that efficient management has been the hallmark either of the just-surviving chairman of the BBC or of the recently departing chair of the West Midlands regional health authority, both of them political patronage appointments. Last year The Times noted:
"Mrs. Thatcher's approach to patronage was the simple rule: those who are not with me are against me."
The Times went on to observe:
"A more tolerant use of patronage could spread the art of Government beyond a partisan ruling elite, and raise the quality of institutional debate. To exclude talented administrators and wise old heads just because they are of the wrong political colour is to impoverish political life."
Hon. Members may have noted that I have avoided the dreaded word "quango". I have done so deliberately. There is nothing quasi-autonomous and certainly nothing non-governmental about the public bodies to which I refer. We need a new word. I suggest that we call them "patronage bodies"—perhaps "patbods" for short—so that everyone can understand what they are really about.
As patronage bodies become ever more important—as elective government is increasingly replaced by appointive government—so control, too, becomes more important. The quango cull of the early 1980s has been overtaken by the patbod growth that has followed it. The advisory committee on Hadrian's wall may have been swept away, but in have come the agencies, commissions, trusts, councils, authorities and corporations that now dominate public administration on every side.
Such bodies now account for more than a fifth of total public spending—20 per cent. more in real terms than in 1979. What distinguishes them all is the fact that they are the creatures of Ministers, and that they exist in a no-man's land of non-accountability inhabited not by the elected but by the selected.
As a recent report from the European Policy Forum—a voice not of the left but of the right—pointed out, all this represents a major transformation in our system of government. The question is whether Parliament will now take up where the 18th-century radicals left off and assert its rights in relation to the patronage state.
This is not a partisan issue. It turns on the age-old question whether there should properly be power without accountability. The Bill embodies the belief that there should not. The modest proposal contained in it is that significant ministerial appointments should be scrutinised and approved by Select Committees of this House. That would convert patronage bodies into public bodies. It would also represent an affirmation of the rights of this House in relation to the arbitrary powers claimed by the Executive.
Question put and agreed to.
Bill ordered to be brought in by Dr. Tony Wright, Mr. Malcolm Wicks, Mrs. Bridget Prentice, Mrs. Anne Campbell, Mr. Nick Raynsford, Mr. Cynog Dafis, Mr. Calum Macdonald, Ms Estelle Morris and Mr. John Garrett.

Ministerial Patronage (Parliamentary Scrutiny)
  MINISTERIAL PATRONAGE (PARLIAMENTARY SCRUTINY)
  Dr. Tony Wright accordingly presented a Bill to make provision for ministerial appointments to public bodies to be subject to a Parliamentary scrutiny and confirmation process through Select Committees: And the same was read the First time; and ordered to be read a Second time upon Friday 26 March, and to be printed. [Bill 166.]
Orders of the Day
  WAYS AND MEANS
  Order read for resuming adjourned debate on Question [16 March].
  WAYS AND MEANS

    AMENDMENT OF THE LAW
    Motion made, and Question proposed,
    That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance; but this Resolution does not extend to the making of any amendment with respect to value added tax so as to provide—

    (a) for zero-rating or exempting any supply, acquisition or importation;

    (b) for refunding any amount of tax;

    (c) for varying the rate of that tax otherwise than in relation to all supplies, acquisitions and importations; or

    (d) for relief other than relief applying to goods of whatever description or services of whatever description.—[Mr. Lamont.]

    Question again proposed.

    Budget Resolutions and Economic Situation
    [Relevant documents: European Community Document No. 4683/93, the Commission's Annual Economic Report for 1993, and the draft Decision adopting the Report.]
    Madam Speaker: I draw the attention of the House to the fact that I must impose a 10-minute limit on speeches between 7 pm and 9 pm.
    4.40 pm
    The President of the Board of Trade and Secretary of State for Trade and Industry (Mr. Michael Heseltine): The Budget sets in place one more step in our strategy for industry. When coupled with the autumn statement, it must be seen as a comprehensive response to our industrial needs. First, it provides a sound economic background against which our companies can more effectively enhance their competitiveness. Secondly, it backs our drive on the export markets. Thirdly, it addreses a range of specific measures that industry has raised with us. Fourthly, it recognises the vital role that small and medium-sized firms play in economic vitality.
    No Government have done more to create a favourable climate for enterprise and wealth creation. Interest rates have been cut by 9 per cent. As a consequence, industry's costs have been reduced by £11 billion a year. The Government's privatisation programme is perhaps one of the most radical changes in the United Kingdom's economic and industrial structure since 1945.
    In 1978–79, the nationalised industries received subsidies of some £2·2 billion in today's prices. In contrast, in 1990–91, the privatised companies paid £3 billion to the Exchequer. The privatised industries are achieving striking improvements in productivity. British Airways has increased its productivity by more than 20 per cent. The number of customers per employee in respect of British Gas has increased by about 19 per cent. Productivity at British Steel, which is now considered to be one of the world's most efficient steel producers, has increased

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    dramatically. It now takes only 4·8 man hours to produce a tonne of liquid steel, compared with 13·2 man hours in 1979–80.
    Those improvements in productivity have been passed on to consumers as lower prices and rising standards of service. Since privatisation, gas prices have fallen by 18 per cent. for domestic customers and by 40 per cent. for large industrial customers. Those industries are, in many cases, now acting as flagships for Britain in overseas markets.
    During the Prime Minister's visit to India last month, British Gas signed an agreement with the Gas Authority of India enabling both companies to take gas from offshore Bombay and send it through a new distribution network to more than 60,000 offices, factories and homes.
    In Argentina, British Gas has won a $300 million contract to replace the Buenos Aires distribution system. The company is working as far afield as Indonesia and Kazakhstan. It is developing the Uisker oil field in Tunisia and converting the German town of Spremberg to natural gas.
    Since privatisation, Rolls-Royce——
    Mr. David Winnick: The Secretary of State has mentioned gas and electricity and there is much confusion in people's minds outside this place. Will the Government fully compensate pensioners, and particularly those on very low incomes, in respect of the imposition of VAT? Is it not necessary for the Government to be quite clear, before the vote at 10 pm, precisely what is to be done, bearing in mind the tremendous hardship and misery that so many people on low incomes already face when they pay their heating bills during the winter months?
    Mr. Heseltine: Of course that is important and that is why the Chancellor of the Exchequer made the position clear in his Budget statement and why my right hon. Friend the Prime Minister built on what the Chancellor had said when he addressed the House last Thursday. I will return to that subject when I reach that part of my speech.
    As I was saying, since Rolls-Royce was privatised in 1987, its share of the world civil engine market has risen from 10 per cent. to no less than 22 per cent. Its aero-engine order book has more than doubled and currently stands at £6·7 billion. More than 70 per cent. of its output is exported. Its industrial and marine activities are also world wide. It recently won power supply contracts worth £67 million in India and the subsidiary, NEI Parsons, secured a £100 million contract for turbines in Singapore.
    Ten years ago, British cars were hardly seen on the streets of Tokyo. In 1991, Rover exported 10,000 vehicles to Japan. The company produced 395,000 vehicles in 1991, of which about 40 per cent. went overseas, the bulk to other members of the single market.
    As I said in the House last week, British Telecom is now one of the world's foremost telecommunications companies. Last year, it won a £350 million contract to install a network for the New South Wales Government.
    Our water companies are making formidable strides in overseas markets. Thames Water is expected to sign a contract for £450 million for a water supply scheme in Izmit in Turkey to build, operate for 15 years and then transfer the scheme to the Turkish Government.
    Mr. Andrew Mackinlay: What about the unemployed in Dock road, Tilbury? What about real people?
    Mr. Heseltine: I heard the hon. Gentleman say, "What about real people?" Does the hon. Gentleman believe that real people do not work for those real companies? What sort of real people does the hon. Gentleman have in mind if people who export for Britain and design and manufacture for Britain are not considered by the Labour party to be real people? I suppose that, in the language of the Labour party, the real people are those who disrupt industrial relations, try to undermine Britain and talk the nation down: the real people of the left; yesterday's real people.
    Mr. Dennis Skinner: Will the right hon. Gentleman give way?
    Mr. Heseltine: Here is one of them. One of yesterday's real people stands before us.
    Mr. Skinner: As a matter of fact, I am making inquiries about today's real people. The Secretary of State knows as well as I do that the mining industry could do with participating in the exports to which he referred. After a 15 to 20 per cent. reduction in the value of the pound, we could be exporting coal and today's real miners could be taking part in that.
    Will the Secretary of State tell us today that the 20 million tonnes of coal imported into Britain will be massively reduced and that he will launch an export drive for coal? If we are exporting all those things to all those parts of the world, why has there been a announcement today of an increase in the balance of payments monthly deficit of £1·3 billion?
    Mr. Heseltine: I can help the hon. Gentleman. Yes, we can export coal the day that we produce it at a price which the export market will absorb. If the hon. Gentleman had put his mind years ago to advising his constituents about the productivity gains that we are beginning to see in the mining industry, we might not have these imports of foreign coal. The price that we have paid for the views expressed by the hon. Member for Bolsover (Mr. Skinner) and his right hon. and hon. Friends and their failure to bring home the realities of a competitive marketplace to the miners of this country is now being visited on those very people.
    Thames Water, as I said, expects to sign a contract for £450 million. Anglian Water has won a stake in a winning consortium for a Buenos Aires water privatisation project. North West Water, in conjunction with an Australian engineering firm, has signed a contract for 100 million Australian dollars to improve water quality in Melbourne.
    That is a remarkable transformation. Not only are those privatised companies no longer loss making, in tax terms, but they are paying large sums of money to the Exchequer. They are now winning for Britain in a way in which, for the past 30 or 40 years, we denied them the opportunity even to try to.
    I am not sure whether the hon. Member for Dunfermline, East (Mr. Brown) is in his place at the moment.
    Mr. Rhodri Morgan: I am grateful to the right hon. Gentleman for giving way before he goes off on one of those manic, last deckchair attendant on the Titanic

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    performances. Does he not realise that the reason why the water companies are able to make flash investments in places such as Turkey and New South Wales has nothing to do with the technology which they have to offer? It has everything to do with the guaranteed and ludicrously high prices which they are allowed to charge by the over-generous terms on which they were privatised by the Government in 1989. As a result of having that guaranteed income, the companies can spend overseas the capital which they have accumulated from the ordinary water and sewerage users in the United Kingdom. It is capital which we, the taxpayers, have provided. It is nothing to do with the skills of the companies.
    Mr. Heseltine: Here we have the revisited Labour party. This is the Labour party which does not want to see real people involved in making real products. We now have a new concept: if a privatised British company goes out and wins in the marketplace of the world, somehow it is doing so because it is taking on loss-making contracts. That is what the hon. Member for Cardiff, West (Mr. Morgan) said. British companies are not winning on their merits. They are winning contracts because, somehow or other, they are being artificially supported in the domestic marketplace.
    What sort of message does the hon. Gentleman think that he is sending to countries that are considering taking British tenders? The message has come from the British Labour party that it is a giant fix—that these are not competitive tenders but have all been sorted out on the back of the domestic market by the British Government.
    I hope that all those people out there who are selling for Britain are listening to this debate and to the support that they are getting from the Labour party in the House. Labour Members of the revitalised Labour party say that they are backing Britain. They are backing Britain everywhere except when it comes to winning contracts in the overseas marketplace. If the hon. Member for Dunfermline, East (Mr. Brown) were here today——
    Mr. George Foulkes: Get on with it!
    Mr. Heseltine: The hon. Gentleman should not worry: I shall get on with it. The hon. Member for Dunfermline, East said:
    "The central questions are how we invest in people for the future, how we invest in industry and how we invest in the social and economic fabric of our country to ensure that we will have not only rising production in industry but rising standards of living."—[Official Report, 17 March 1993; Vol. 221, c. 296.]
    That was the great sort of interrogation to which the Chancellor and the Chief Secretary were subjected by the hon. Gentleman.
    What is happening to improve the living standards? What are the facts? As a result of the changes which I have been talking about, real spending on the national health service in England has increased by 60 per cent. since 1979. There are 19,000 more doctors and dentists and almost 38,000 more nurses and midwives, and 45 per cent. more acute in-patients and day cases are treated each year.
    Dame Elaine Kellett-Bowman: Real doctors, real nurses, real patients.
    Mr. Heseltine: My hon. Friend is right: this is another example of real people doing real things because a Tory Government have made it possible.
    The investment programme in the privatised water industry is heading for an additional £30 billion by the end of the century. There has been record public expenditure on roads and the urban programme has been transformed. The essence of the matter is that, while Labour Members continue to talk about these problems, the Tory Government continue to do something about them. There has been much comment about the Chancellor's commitment to extend VAT to fuel bills. That applies with a rate of 8 per cent. in the year starting 1994 and moves to the full rate in April 1995. The Chancellor made his position clear in his Budget speech. On Thursday, the Prime Minister told the House that there would be extra help for less well-off pensioners and other people on low incomes. They will get the extra help from next April before the higher fuel bills come in. That help will be additional to the future increases in pensions and other benefits which will take place automatically. Cold weather payments will also be adjusted to reflect increases in fuel costs.
    I was intrigued to read in The Observer that the Chancellor and I were engaged in a furious row on the subject. Apparently, I was furious that I had not been consulted. Perhaps I may say a word about the matter. I was consulted in an orderly way. I made no protest, for the simplest of all reasons—I shared the Chancellor's judgment that it was necessary to raise taxes in the Budget.
    Of course any tax increases are likely to be difficult, but, frankly, I am not prepared to cop out of the difficult tax decisions on the most contemptible of arguments—that I agree with what the Chancellor is doing in principle, but I disagree with some specific examples of the difficult decisions which he must take. That is the sort of stuff of which Opposition arguments are made. That is the sort of argument which the Labour party relishes. Indeed, it is the sort of argument which keeps Labour Members pinned to the Opposition Benches.
    Why did not The Observer take the trouble to check the facts about this great row between me and the Chancellor? It cannot be because it did not know exactly how to get hold of me. That cannot be the case, because I received a telephone call from The Observer on Saturday wanting to take my photograph. The House will be delighted that I turned down that extremely generous offer. If the picture editor of The Observer knows how to find me, is it too much to think that the serried ranks of industrial and political correspondents somehow cannot manage the same trick—or were they frightened that, if they put to me the straight question, they would get the truth and the truth would deny them any sort of headline at all?
    I can see that this will be the revisiting of the inglorious past of the hon. Member for Livingston (Mr. Cook). This afternoon he will be in his element. If ever there was a story tailor-made for the hon. Gentleman, this is that story. There are millions of pensioners to frighten and spectres of ill-health and hardship to conjure up. The hon. Gentleman knows the arguments backwards, because, over the years, he has invented most of the arguments backwards. He is the seasoned practitioner on whom all those people out there will wish to make a judgment.
    In The Times of 14 December 1987, the hon. Gentleman described the Government's intentions as to

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    "leave the NHS as a ghetto service for those who are too poor to afford anything better".
    In The Times of 1 February 1989, he said of GP budget holders:
    "For the first time, GPs will have an incentive to turn away patients with a high price tag, the elderly, the disabled and the chronically sick."
    In The Independent of 5 October 1990, he spoke of
    "an NHS in which pensioners queue up for their operations in an end-of-season sale".
    What happened? All the trusts are still in the public sector, and 1 million more patients are being treated than when the hon. Gentleman was making his statements.. The hon. Gentleman is a man with a record. He has been through it all before. He should be judged by how true it all turned out to be.
    I took a little time off last Wednesday to listen to the hon. Member for Dunfermline, East, and I am glad to welcome him to our deliberations today. Some of us had the privilege to watch him. He was at his most ferocious. Psychologically, the red flag was up—I see that it is round his neck today. Red blood was flowing all over the carpets as he ended his speech with these fighting words:
    "There is no one left for this Government to betray; they have no credibility in this country. The electorate will never trust them again. If Britain is to have a new start, it will need a new Government—and that will be a Labour Government."—[Official Report, 17 March 1993; Vol. 221, c. 298.]
    Trust a Labour Government! In September 1964, the Leader of the Opposition, Mr. Wilson, said:
    "Over the period of a Parliament I believe that we can carry out our programme without any general increase in taxation."
    When that Government left office, they were collecting £2 for every £1 collected when their promise was made. In the same election campaign, the late George Brown—[Interruption.] Oh yes. Opposition Members may laugh now. I know that it is a long time ago, but it is a long time since we had a Labour Government. The reason why it is a long time is because the Labour party said these preposterous things and was found out.
    The late George Brown said:
    "For new mortgages we have something in mind of the order of 3 per cent."
    By the time that Government left office, mortgage rates were 8·5 per cent. By the late 1960s we had the then Prime Minister, Lord Wilson, proclaiming on 17 April 1969:
    "The Industrial Relations Bill is an essential Bill, essential to full employment and essential too for the Government's continuation in office."
    On 18 June 1969, the Bill was withdrawn from the legislative programme.
    For those who are interested in the flights of fancy of the hon. Member for Dunfermline, East about trusting a Labour Government, what about all the bravura claim in October 1964:
    "Labour will abolish poverty in Britain"?
    Six years later, the Child Poverty Action Group had sadly to conclude:
    "in many ways the plight of poor families is now worse than when the Labour Government took office."
    Worse it was, worse and always it will be. Trusting the Labour party is not a matter of investing in risk. It is a matter of investing in certainty. All out. All up. All over.
    The hon. Member for Bolsover asked a question about coal. I recognise, as will the House, that there has been much speculation in recent days about the coal contracts. Some progress has been made in respect of the base contracts. Work has continued now through several weekends. I hope that I am about to be able to report on
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    the position. I hope that I may be able to do that in the not-too-distant future. However, as I have said many times, I have no powers to make people sign contracts. In the meantime, I have agreed that British Coal can extend the redundancy terms until the end of December this year.
    Increases in productivity are often accompanied by falls in employment. We have had to face that problem in the coal industry over many years. But we are familiar with the general trend throughout manufacturing industry. Indeed, manufacturing employment peaked as far back as 1966. That phenomenon is not confined to the United Kingdom. Some decline in employment in manufacturing is evident in most industrial countries.
    Increased competition and continuing technical progress mean that many firms will reduce employment to stay competitive. That does not mean that those firms are in difficulties. Far from it. The vehicle industry in the United Kingdom is producing 300,000 more vehicles a year than 10 years ago, but it employs 100,000 fewer people. The paper, printing and publishing industries increased their output by more than a quarter between 1980 and 1991, but employment fell by 12 per cent.
    In many industries, successful firms are cutting jobs as they invest for the future to stay ahead of the competition. New firms and new businesses were the key to employment growth in the 1980s and they are undoubtedly the area of the economy to which we must look for new jobs in the future. We have been more successful in job creation than other European Community countries. The work force in employment grew by almost 1·5 million over the last economic cycle, between 1979 and 1990, so it is of critical importance that we recognise that every degree of support that we can give to new companies is most relevant to creating new jobs and new opportunities in our economy.
    The next matter of dramatic importance in what we seek to achieve and must achieve is support for our export companies. Our companies know that there is no such thing as a secure market. Overseas firms face the same pressure to win as we do. We are pushing forward with fresh initiatives to help exporters.
    Last November the Minister for Trade announced an export strategy to maximise our strengths and minimise our weaknesses. I have invited British companies to second to my Department 100 men and women to help us in the promotion of our exports. I am extremely gratified by the response that I am achieving. I believe that we shall have 100 such people by the summer of this year. That will give us experts with first-hand knowledge of overseas markets who will aim to identify and promote opportunities to help our companies to fulfil their potential.
    Mr. John Townend: I am sure that my right hon. Friend agrees that our exporters are doing a fantastic job, but is not the United Kingdom's problem the fact that we import too much? Do we not have a cultural problem? A large part of the British buying public still believes that it is smarter or better to buy foreign, even when British goods are competitive and of the right quality.
    I give my right hon. Friend an example from my constituency. I represent more pigs than people. We produce the finest pigmeat in the world. British charter bacon is of top quality and is internationally competitive. Yet 50 per cent. of the bacon bought by housewives is from Holland or Denmark. Is not that a national disgrace?
    Mr. Heseltine: I understand my hon. Friend's anxiety. That is why I was delighted to notice the seminar which my right hon. Friends the Prime Minister and the Minister of Agriculture, Fisheries and Food, with leaders in both the retail and producing sectors of the food industry, held recently to address some of those difficult issues. As my hon. Friend says, that part of our economy is particularly important because it represents one of the largest deficits in our balance of trade.
    The Budget of my right hon. Friend the Chancellor of the Exchequer will help business build on the achievements of the 1980s. It will promote the economic recovery by providing concrete benefits for business and a stable framework for business decisions. His Budget has successfully combined three aims, at least two of which were widely said to be incompatible before he rose last Tuesday and showed how it could be done. His Budget has avoided damaging the inevitably fragile early stages of recovery; it has achieved a substantial improvement in the public finances into the medium term; and it has done all this while keeping inflation within clearly defined limits. All three aims, and especially the continued control of inflation, are of vital importance to business.
    We now hear less than we did two or three years ago about short-termism as a feature of our industrial and commercial life. To a large extent, this is because we have got inflation down, yet I do not doubt for one moment that deep-seated short-term attitudes are prevalent in our affairs; or that this is one important strand in understanding why we as a nation have performed less well than many of our competitors.
    Such attitudes have led us to invest less than we might in technology and advanced means of production. They have encouraged growth in companies by acquisition and financial engineering, rather than through organic development and building on products and markets. They have led us to place far too great an emphasis on comparisons of near-term financial results in judging our companies, instead of considering the strength of management and its underlying strategy.
    Those attitudes are all of a piece. They reflect much that is cultural, and they can be changed only slowly. But they have one great mechanism of reinforcement—inflation. Inflation is an evil which narrows the focus of attention into the short term. Inflation must be kept low in the years to come if our performance is to be improved. The Budget measures will reduce burdens on business by £1 billion in the year ahead. They will assist small and medium enterprises to do what they do best—create the wealth on which the rest of the country depends.
    Ms Liz Lynne: On that specific point, can the President of the Board of Trade say why the Chancellor did not introduce a statutory requirement to pay interest on late payment of debt? That would have helped small businesses considerably.
    Mr. Heseltine: We have no doctrinal view on that measure, but there are many doubts about whether it would have the effect that the hon. Lady suggests. We have discussed the matter. My noble Friend Lady Denton has exercised significant influence on late payment of debts. There has been a substantial improvement in the rate of payment. Not the least reason for that is that the Government have paid their bills in a timely way and
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    encouraged large companies to do the same. My noble Friend has made it clear that she will take up specific cases if they are drawn to her attention.
    Mr. Robert Sheldon: I wish it were true that Government Departments had been settling their bills promptly. The Public Accounts Committee took evidence from the Property Services Agency, which was only paying when it received payment, and I shall shortly be criticising that strongly.
    Mr. Heseltine: I fully acknowledge the high position of responsibility that the right hon. Gentleman has in our affairs. If he has examples that my Department should explore, I assure him that we shall do so, as that is an important matter. We have tried to do what we can to speed up payments, but we are aware that a statutory process might not improve matters in the way that people think, and have therefore hesitated to move in that direction.
    For the second year running, no business will face a real increase in its rates bill. The package of value added tax measures introduced by the Chancellor will also be welcomed by every small firm. Finance for small businesses—a subject of great concern—will also be given a boost by the changes in premiums and loan size limits, under the small firms loan guarantee scheme. I have no doubt that my right hon. Friend the Chancellor has thrown a challenge to the banks. The Government have taken an initiative and it is now up to the banks to judge business plans and to make their loans in a way that will help businesses to grow.
    The changes to capital gains tax will encourage reinvestment by not penalising those who use their profits to start another business.
    I have referred to the need to help exporters. We are making available an additional £1·3 billion of cover for key markets. Together with the changes in the autumn statement that will mean that annual cover for United Kingdom exporters in priority markets will have increased by more than 75 per cent. in just four years. Premium rates have also been cut and are now more than 25 per cent. lower than in 1991–92. Those reductions will bring the average level of premiums charged in the United Kingdom down to around the average charged by the United Kingdom's competitors.
    The Chancellor announced a special scheme in the Budget to help persuade foreign-owned companies to choose the United Kingdom as a location for international headquarters companies. The present advance corporation tax rules are an obstacle to their doing so. The new rules, which will be implemented next year, will remove that obstacle, which should attract new business to the United Kingdom, and bolster London's role as Europe's premier financial centre.
    I know that oil companies have always recognised the responsiveness and stability that our North sea tax regime offers. However, the petroleum revenue tax regime was introduced in 1975, with the last substantial amendment in 1983. In keeping the tax system under review, it was important to keep in mind the fact that the North sea was maturing as an oil province—new fields tend to be smaller, and older fields are gradually declining. The Chancellor has now reduced petroleum revenue tax from 75 to 50 per cent. for existing fields from 1 July 1993, and abolished the

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    tax for future fields given development consent on or after 16 March. The Chancellor's proposals move the North sea from a high-tax to a low-tax regime.
    Conditions for recovery are in place. The United Kingdom has the lowest inflation rate for 25 years; the lowest interest rates since 1977; and the lowest base rates in the European Community. Interest rates have fallen by nine percentage points since autumn 1990, knocking £11 billion a year off industry's costs.
    We have a fiercely competitive exchange rate; a set of Budget measures to boost confidence and stimulate growth; and confidence is rising. The Confederation of British Industry, the chambers of commerce and the Institute of Directors show rising confidence in their surveys. Retail sales are at record levels; car sales are up sharply; manufacturing investment in the fourth quarter of 1992 was up by 5·5 per cent. on the start of the year; the increase in average earnings is the lowest for 25 years and we expect a further decline in the coming months.
    Rapid productivity growth means that United Kingdom manufacturing unit wage costs are lower than those in Germany or Japan, on recent OECD estimates, and they have fallen during the past 12 months. However, further pay restraint is vital to maximise the competitive advantages of sterling depreciation. This month's fall in unemployment is welcome, but too much should not be read into one month's figures, as the fall might not be immediately sustained and it may be some time before the underlying trend takes a downward turn. Unemployment is likely to be one of the last indicators to respond to any recovery in the economy.
    Exports and productivity are at record levels and Britain is moving ahead. British business now has clear advantages in competing in the rest of the world.
    Mr. Anthony Steen: While I agree with all that my right hon. Friend is saying, does he agree that the rules and regulations affecting small firms prevent them from competing with other countries on that famous level playing field? Something needs to be done to reduce the number of rules and regulations affecting small firms. Can he tell the House what the deregulation unit is doing about future and existing regulations, which are preventing the recovery that small firms so badly need?
    Mr. Heseltine: As my hon. Friend knows, we have started to review proposed regulations and those already on the statute book and are applying the review to domestic and European Community regulations. We have been fortunate in securing the services of Lord Sainsbury and those of various other chairmen and significant figures from the private sector, who have helped us to establish seven task forces, to consider the 7,000 existing regulations, which obviously create the climate in which industry has to operate. I shall report to the House as progress takes place.
    Mr. Peter Hain rose——
    Mr. Heseltine: I shall not give way.
    I assure the House that in all those ways the Government will play their full part to help the private sector in difficult circumstances.
    As I told the House in a recent debate, we live in a competitive world. As we export such a high proportion of our output, it is impossible to believe that we can operate as an island economy. We are broadly comparable with
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    many economies in the world. During the past year industrial production has fallen by 2 per cent. in Italy, by 2·5 per cent. in France, by 6·5 per cent. in Germany and by 7 per cent. in Japan, but in this country industrial production has risen in that period.
    Japanese gross domestic product fell by 0·75 per cent. in the second half of 1992, output fell in France and Italy and there were three successive quarters of decline in Germany. Since 1981—the trough of the last recession—United Kingdom manufacturing output has risen by more than a fifth, manufacturing investment is up by nearly two fifths and manufacturing productivity by two thirds. Our export volumes are at an all-time high and by the end of 1990 there were about 400,000 more businesses operating in this country than in 1979.
    The underlying strength of our manufacturing base can also be seen from our ability to attract inward investment. In 1991, we attracted one third of all inward investment into the European Community.
    So, as we have said many times, despite the severity and length of the recession, Britain is in a strong position to take advantage of prevailing domestic and world economic circumstances. That can be done only by making this country's economy competitive, which can be achieved only by the relentless grind on costs and the pursuit of improved quality.
    The Opposition are incapable of understanding those arguments, and view the British economy as an island apart from international pressures and the international marketplace. They keep peddling their view of an industrial strategy, which is simple and based on clear but irrelevant ideas: higher taxes to finance higher public expenditure; bigger training budgets; pushing up education standards; helping workers with statutory rights; and embracing the social chapter. They have pursued all those ideas in France, where their income taxes are higher and their education system renowned. They have extensive public ownership and have turned the social chapter into a Domesday book. What has happened under one of Europe's most substantial socialist Governments? The people living under it are sick to death of what is happening.
    The French election result, if replicated in this country, would take a scythe to the parliamentary Labour party. It would be down to a rump of about 10 people; the impregnable Labour strongholds might be all that would be left if we had a Labour socialist Government. What would that Government look like? Perhaps the hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) would be Foreign Secretary; the hon. Member for Rhondda (Mr. Rogers) would be Chancellor of the Exchequer; the hon. Member for Liverpool, Riverside (Mr. Parry) would be Home Secretary; and presumably there would be an early return to the Front Bench for the right hon. Member for Islwyn (Mr. Kinnock) as Secretary of State for Wales. We could count on the fact that the hon. Member for Bolsover would be there clambering on to any convenient barricade, searching for a starring role in "Les Miserables". What a brilliant piece of casting that would be, but it would be casting in the world of make-believe. The Budget contains real policies for the real world; I commend it to the House.
    5.19 pm
    Mr. Robin Cook: For the second time in a fortnight, the President of the Board of Trade has used a speech on the economy to make a statement on his energy review. For the second time, the statement that he made about that review consisted of things that he cannot do to save coal pits. The nation is tired of hearing what he cannot do to help the miners; what we are still waiting to hear, after six months, is what he will do to help them.
    Every time the right hon. Gentleman rules out another solution to the problem, as he did today, he confirms what we have always warned about: that the immense flaw in the structure of that review is that the man in charge of finding a solution that avoids closing the 31 pits is the same man who thought it was the right course in the first place. I must warn the right hon. Gentleman that he is coming dangerously close to admitting that he has wasted six months in coming to the conclusion that he was right all along and everybody else was wrong.
    If the President of the Board of Trade wishes to be remembered as the man who closed down Britain's coal Industry, the Chancellor will be remembered for his 1993 Budget. It was quite the most dramatic Budget since 1988, when Lord Lawson eyed up a overheated economy and poured petrol over it, creating a rip-roaring runaway boom which burnt itself out and left his successors sitting among the ashes—except for the President of the Board of Trade: he does not notice them.
    As I listened to right hon. Gentleman's speech, as he fumbled among the ashes of the Government's industrial and economic performance, I heard him describe them as a bonfire of success. I started to convince myself that the trade gap must be a statistical error, that job losses from companies and manufacturing industry are a sign of their success. I must say that I was saved from giving in to the right hon. Gentleman once his speech finally orbited out of touch with ground control and reality and he blamed my hon. Friend the Member for Dunfermline, East (Mr. Brown) for the 1964 Labour manifesto.
    I admire my hon. Friend and I have known him for 25 years—he was precocious even then, as a student—but I must admit to the right hon. Gentleman that, having known my hon. Friend that long, I know that he did not write the 1964 Labour manifesto. I predict that, 30 years from now, my hon. Friend will be sitting below the Gangway dignifying the Labour Bench and recalling to the House how the 1993 Budget swept him into the Treasury and Labour into office.
    What makes this Budget dramatic is the admission of the damage the Government have done to the economy. No plea of guilty has been entered, and nobody has even said sorry, in three days of debate. No request has been made for 14 years of other offences to be taken into consideration.
    But the admission was there in the lengthy speech of the Chancellor, which revealed the embarrassing and painful decisions forced on him by the severity of our economic recession. It is there in the thick Red Book that charts the bleak economic problems of the future. It was there in the admission of the damage that proved the curtain raiser to the Budget—the report specially commissioned by the President of the Board of Trade, which was leaked to The Sunday Times the Sunday before the Budget.
    That report, from the competitiveness unit of the DTI, said that our industrial base is fundamentally weak, that
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    our trade deficit will last for decades and that, instead of putting in place the conditions for recovery to which the right hon. Gentleman has referred, the Government have put in place low investment and low skills in industry.
    Many Opposition Members share the distress that the right hon. Gentleman must have felt at people employed by the Government talking Britain down in that way. For that reason, last week, I asked the right hon. Gentleman to publish that report in full, or at least put a chained copy in the Library. He said that he could not publish it because "the report clearly reveals the devastating inheritance of 1979".—[Official Report, 17 March 1993; Vol. 221, c. 282.] That is why he could not publish it. He does not want to embarrass us; he wants to spare our feelings. I must say that that is not a sensitivity I had associated with the right hon. Gentleman before.
    We know what the inheritance of 1979 was. It was manufacturing investment at 3·9 per cent., of GDP, a level the Government have never once returned to in 14 years in office. The legacy of 1979 was a surplus of £2·5 billion in manufacturing trade compared with a deficit of £7·5 billion last year. The legacy of 1979 was an unemployment rate of 1·1 million, which the Government have turned into an unemployment level of 3 million—and never in one month, in 14 years, have they got unemployment back to the figure with which they started. That is the inheritance of 1979.
    The reason that the President of the Board of Trade is afraid to publish that report and shrinks from doing so is that it spells out the legacy of 1990, which they inherited from themselves. It confirms that, after 14 unbroken years in office, they have achieved industrial production with the lowest growth rate in Europe except for Greece, a manufacturing investment level lower than when they started in 1979, and a proportion of the work force with skills at half the level of other countries. That is the background aganinst which this Budget must be judged.
    Dr. Keith Hampson: The hon. Gentleman is always very selective with his memory. Does he not remember that, in 1978, the previous Labour Government, against a backdrop of doubling unemployment and the collapse of manufacturing industry, commissioned the Finniston inquiry, which highlighted all our long-term failings to compete with our continental partners in the manufacturing and engineering industries?
    Mr. Cook: My breath is taken away from me when I hear a Conservative Member complain that the previous Labour Government doubled unemployment. When they left office, the unemployment rate stood at 1·1 million and was coming down; the Government have twice taken it up to 3 million.
    If the hon. Gentleman wishes to accuse me of selective use of statistics, it is particularly interesting that, in his selective use of them, he did not choose to express concern about the 68 per cent. rise in unemployment in his own constituency since the Prime Minister took office. If he is worried about rising unemployment, why does he not do his constituents the justice of expressing some concern on behalf of the 3,000 constituents who are now unemployed?
    Dr. Hampson: That is the wrong Leeds constituency, mate.
    Mr. Cook: With respect to the hon. Gentleman, in the event that we have the wrong figure, I assure him that I will give him the correct figure very shortly.

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    We have dealt with the inheritance of 1979 and 1990. What this Budget must be judged against is the background of 14 years in which the Government have run down industry. Judged against that background, the Budget fails to meet the test of what is needed by industry. Industrialists have already returned their verdict. Neil Johnson, the director general of the Engineering Employers Federation, said:
    This Budget does nothing to bring about the massive switch to investment which is essential for lasting recovery."
    The representatives of the Machine Tool Technologies Association have said:
    "This Budget fell short of directly encouraging UK companies to invest."
    We do not need to look outside the Government for those who tell us that the Government's policies in the Budget are failing industry. We can see the verdict returned in the Red Book. We only have to look at the contents of the Red Book to see the extent to which the Budget does not stimulate industry. My hon. Friends should handle the Red Book with caution, as it has never yet got it right. It has always erred on the side of unsupported cheerfulness and presented a best case scenario. Whatever the Government say in the Red Book, experience always turns out to be worse than the promises, which are bad enough.
    If the President of the Board of Trade wishes to tackle me about talking Britain down, he should note that it was not me who made the forecasts—they were deposited by the Economic Secretary. If the President fears another fit of moral indignation coming over him about people talking Britain down, he should take out his feelings on the Economic Secretary instead of me
    Before I turn to the financial statement and the Red Book I shall correct the hon. Member for Leeds, North-West (Dr. Hampson). He was wrong—the increase in unemployment in his constituency since November 1990 is 68 per cent., and unemployment currently stands at 3,264. I now fully understand why the hon. Gentleman did not refer to unemployment in his constituency—he does not even know the unemployment figures for his constituency.
    Dr. Hampson rose——
    Mr. Cook: No, I shall not give way to the hon. Gentleman, as it was perfectly clear that I was referring to the increase in unemployment since November 1990. If the hon. Gentleman does not know the increase in unemployment in his constituency since November 1990, I suggest that he does us all a favour, returns to the jobcentres in his constituency tonight and gives us an extra chance to beat the Government.
    Dr. Hampson: On a point of order, Mr. Deputy Speaker. For the record of the House, the hon. Gentleman chose a particularly——
    Mr. Deputy Speaker (Mr. Geoffrey Lofthouse): Order. What is the point of order for the Chair?
    Dr. Hampson: For the Official Report to be accurate, I should say that the hon. Gentleman chose a particularly good year, when unemployment was low.
    Mr. Deputy Speaker: The hon. Gentleman knows full well that that is not a point of order for the Chair.
    Mr. Cook: I chose the month in which the present Prime Minister took office, which was not a particularly good month for Britain, but that was the base that was inherited.
    Dr. Hampson rose——
    Mr. Cook: I am sorry to disappoint the hon. Gentleman, but we cannot have a private conversation; I must return to the debate.
    The Red Book shows that, in 1993 business investment is expected to fall for the fourth successive year. Ours is the only country in Europe in which business investment will have fallen for four consecutive years. Other countries worry about recession when the rate of growth in investment is not as fast as usual. The Government are so desperate that they claim a recovery when the rate of decline in investment is not as fast as usual.
    According to the Red Book, the consequence of the decline in business investment means that, in 1994, manufacturing output will be growing more slowly than in the rest of the economy. Since 1990, manufacturing output has collapsed faster than the rest of the economy. Now that the Government are claiming recovery, the growth in manufacturing output is expected to be slower than the rest of the economy. So much for the Prime Minister's passionate belief in expanding the manufacturing sector. According to the Red Book, the manufacturing sector will continue to decline as a proportion of gross domestic product.
    Any lingering hope that the Budget is a Budget for industry or that the Government believe that their Budget will stimulate industry vanishes when one turns to the Red Book predictions for the balance of payments. We already have a ballooning trade deficit of more than £1 million for every hour. The Red Book admits that that deficit will swell by half as much again. What is damning about the failure of the Budget to expand industry is that all that increase occurs in the manufacturing deficit. In 1993, the deficit in manufactured trade is expected to be as big as the deficit for the past two years added together—that is the measure of the Government's 14 years of failure.
    I notice that no Conservative Member is rising to ask about the Labour Government's record on manufacturing trade, and I know why. It is because they know that, in every year under the last Labour Government, there was a surplus in manufacturing industry. That is the inheritance that the Conservatives have squandered.
    Unlike the President of the Board of Trade, I do not believe in for ever talking down our inheritance. Britain has much to be proud of in its past. It should be proud of its inventions and the technology that it has given the world.
    In the two centuries since the industrial revolution, Britain has repeatedly led the way. It led the way in railway technology. We had a surplus in the trade of railway vehicles until 1979, when it stood at £260 million. Under this Government, for the first time, we have a deficit in the trade, of railway vehicles of £57 million. The pneumatic tyre was invented in Britain by John Dunlop, and we had a surplus in the trade in tyres until 1979, when it was £90 million. We now have a deficit of £38 million. The vacuum cleaner was invented in Britain and we had a surplus in the trade in vacuums until 1979, which has now, under the Government, been turned into a deficit.

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    I go some way to agreeing with the President and say that we should stop talking down Britain's proud past. We should start pinning the blame on the people who have pulled Britain down and turned our trade success into trade failure.
    A fortnight ago, when the President was accusing me of talking down Britain, he produced as evidence of the recovery and the good things about Britain, which he said that I did not mention, the 400,000 small businesses that had started up and said:
    "It is from the small and medium-sized company sector of the economy that jobs come".
    The right hon. Gentleman was so proud of that figure that he repeated it again at Question Time last week.
    The President is right to say that small and medium-sized enterprises are a vital source of innovation. He was also right in that, last year, 445,000 small businesses opened bank accounts for the first time. What the President did not tell the House was that, in the same year, 570,000 small businesses closed their bank accounts for the last time, and 125,000 more small businesses folded than started last year.
    The right hon. Gentleman invited the House to congratulate the Government on their record in a year in which the number of small businesses that folded rose by 4 per cent. Is that the best that he can do in trying to talk up the Government's record—to admit that it is from the small and medium-sized company sector of the economy that jobs are disappearing?
    Last Tuesday, Budget day, a bumper 110 of those small and medium-sized enterprises were advertised as going into liquidation, 19 of them in the manufacturing or engineering industry. They included MET Plastics in London, which were toolmakers and moulders. When asked why, the company said:
    "Bad debts and the length of the recession".
    HEE Equipment in Leeds made engineering machines, and when it was asked why it had folded, it said that it was because of bad debts. It was forced to make 100 people redundant. Hi-Spec Engineering in Nottingham made powered platforms and said that it had closed due to
    "The economic recession which resulted in an extended period of losses."
    Action Work Force of Batley provided personnel to factories, and at one time employed 150 people in Batley. It failed because business in the factories "dried up".
    When we rang up the companies, not one of them slammed down the phone accusing us of talking Britain down. Oddly enough, not one of those companies blamed the closures on the legacy of 1979 or mentioned how encouraged they were by the evidence of recovery around them. The President spent much time spotting that recovery. I understand that he is a noted bird fancier——
    Mr. John Smith: Bird watcher.
    Mr. Cook: I am grateful to my right hon. and learned Friend—bird watching is not one of my sports. I understand that powerful binoculars are standard equipment in that sport. I warn the President that he should put aside those binoculars when he scans the economic indicators for signs of recovery that are not visible to the naked eye.
    If the President wants to talk about recovery, I shall tell him what the Opposition understand by the word
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    "recovery" and what they accept as its definition. Recovery will be achieved when unemployment falls to the 1·1 million figure that the Government inherited from us in 1979. When they obtain that figure, they can start to talk about improving the economy.
    There is something much worse than talking Britain down—cheating. That is the next feature by which this Budget will be remembered—as an admission that the Government failed, and as an admission that they cheated.
    The right hon. Member of Shropshire, North (Mr. Biffen) was the first Conservative to speak after the Budget speech. I have a great deal of regard for him; in the past, he and I have occasionally found ourselves on the same side of an argument. But on this occasion I was stunned to hear him say:
    "I am happy to stand here, shamelessly, as a taxing Tory."—[Official Report, Tuesday 16 March 1993; Vol. 221, c. 202.]
    "Shameless" is probably the correct word in that sentence, because I have looked at the right hon. Gentleman's election address for Shropshire, North. He did not stand there then as a shamelessly taxing Tory—quite the reverse. What he told the good people of Shropshire, North was:
    "There is a strong need to be modest about election promises. They all have to be paid for with your money. As ever, I shall bear that strongly in mind."
    What the right hon. Gentleman said in his constituency was the very opposite of coming here as a taxing Tory. I travelled up and down the country throughout the last general election, and I did not find a single taxing Tory anywhere in Britain at the time. The Tories fought the last election on the single proposition that they would cut taxes and Labour would put up taxes.
    No one expressed this election strategy more succinctly than the President. In Corby on 21 March 1992, he said:
    "This election in the first week is about tax. In the second week it is about tax. And in the third week it is about tax. And if Labour were to win this election the next five years would be nothing but tax."
    This from a man who sits in a Cabinet that has presented us with the biggest tax increase of any Budget in history. The party that promised year-on-year tax cuts has become a Government delivering year-on-year tax rises.
    Mr. John Townend: I note the hon. Gentleman's opposition to tax increases. He will know that I am not in favour of high taxes, but does he accept that we have a major problem with the Budget deficit? It can be dealt with, but spending will have to be cut, or taxes will have to go up—or a combination of these. What spending reductions does the hon. Gentleman want in place of the Government's tax increases?
    Mr. Cook: What the Chancellor said at the general election was that he could foresee no circumstances in which he would have to extend VAT—but the hon. Gentleman may be ahead of the Chancellor. He may have been smarter and more far-seeing than the Chancellor. He may even have been more honest with his electors, so I invite him to point out to us the passage in his election address that mentioned that there was a severe problem with the public sector deficit and that it would be necessary to increase taxes when the Tories returned to office after the election. If he can do that, we will treat his intervention seriously——
    Mr. Townend rose——
    Mr. Cook: I look forward to hearing the passage in question.
    Mr. Townend: I did make it quite clear in my election address that I believed in sound Government finance. [Laughter.]
    Mr. Cook: I am sure that the good people of the hon. Gentleman's constituency read that on the assumption that they did not need to expect a swingeing tax increase from him—not even those numbered among the increase of 83 per cent. in unemployment in his constituency since the Prime Minister took office.
    I seem to remember a poster from the election depicting a bombshell with, slapped on the side, the figure £35 billion. That was what the Government said Labour would put up taxes by. It was always a lie. The tax increases proposed by Labour at the last election added up to one tenth of that sum—but the posters were distributed around the constituencies.
    If they went back to their committee rooms, perhaps Tory Members could find these posters lying around under chairs in back rooms. They might consider putting them up all around their constituencies again. All they need now slapped on the side of the bomb is the figure £28 billion, because that is the amount that the Government will take in extra tax if this Parliament runs another four years, even if the Chancellor never comes back and raises another penny in tax or extends the scope of VAT again or increases national insurance contibutions. That is the cost of Conservatism—£28 billion, or, as the Government prefer to express it, £1,000 for every household in the country.
    This is such a blatant deceit that even The Sun is embarrassed. No one was more diligent about repeating the Tories' tax propaganda at the election; no one was more naive about swallowing their threats of what Labour would do than was the editor of The Sun. And, bless his trusting heart, Kelvin MacKenzie feels cheated now. Last week he offered his honest, forthright advice to the Treasury: go away and
    "lie down in a darkened room."
    This was a Budget of failure and a Budget of cheats, but there is a third and final dimension that needs to be filled in if it is to be seen in the round. It is a budget of unjust men—unjust because they made the mistakes and they now expect everyone else to pay for them, not themselves. None of them will pay: everyone else will. They are unjust, too, because the tax increases that they have chosen will hit the poor hardest—such as the 500,000 people now being asked to pay more in national insurance even though they are too poor to be liable for income tax. These are the people who never saw any of the tax cuts of 1988. What right do the Government have to ask them to pay more when they all pay less in tax as a result of Budgets that they drafted?
    If the Government had more courage, they would ask those with more income to make an extra sacrifice, but no such sacrifice is asked of them in the Budget. However, an extra sacrifice demanded of pensioners paying their fuel bills. They are the ones being asked to make the real sacrifices to put the nation's finances to rights. The President has a special responsibility in this matter; he is the Secretary of State for energy. I read in The Observer that he was furious at the attempt to put VAT on fuel, and I thought that entirely plausible, as he has a very large house to heat.
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    We learned today, however, that the right hon. Gentleman was not furious. In fact, he is furious at the suggestion that he was furious. So he agreed to it. The Government's energy spokesman agreed to slap 15 per cent. on energy bills. I hope that we have heard for the last time ever the right hon. Gentleman say that he cannot save the coal pits because that might put up electricity prices. British Coal has been bringing down the price of coal while the Government have been putting up the price of electricity.
    There was plenty of time for this consultation. We know this because of the Chancellor's indiscretion on the "Jimmy Young Show". He explained to Jimmy Young that the origins of the new tax go back to last summer, to the Rio convention on global warming:
    "The moment the convention was signed I was sitting at home thinking, 'What are we going to have to do?'"
    [Laughter.] I am not kidding. Of course, it was a bogus claim. VAT is not being applied to fuel because the Chancellor has gone green. It is being applied because the Government's books have gone into the red.
    How can we believe that the Government are serious about curbing greenhouse gases after the vindictive way in which they have run down public transport, and made savage cuts in the home insulation programme? How can we believe that the Chancellor is serious about energy conservation, given the housekeeping bills from his Department in the last financial year, during which the Treasury's bill rose by 14 per cent.? Not much energy conservation there. The fuel bill at the Inland Revenue rose by 21 per cent., and at the Customs and Excise—the department that will apply the VAT to pensioners' bills—last year's fuel bill rose by 68 per cent. And these are the people who are going to ask pensioners to turn down their heating.
    I do not know whether the President was furious, but I can tell him that the nation is furious, because this measure will hit the poor hardest. Every study has shown that those at the bottom of the income ladder spend four times as much on fuel as a proportion of their income as do those at the top. For those at the bottom, their fuel bill is the biggest that they will get, and the Chancellor has just increased it by one sixth.
    The President was gracious enough to remind the House that I was once a health spokesman. It is a marked feature of the British mortality statistics that they are the highest in Europe in winter. Our figures are worse than those of Sweden, Norway or Switzerland, but not because we have colder winters—indeed, their winters are colder than ours. We lose more old people in winter than any other country in Europe, because we pay the worst state pensions anywhere in Europe. We leave more pensioners asking themselves whether to pay for their eating or their heating.
    We ask again the question that the Chancellor must answer before we vote at 10 o'clock: will pensioners and people on low incomes be fully compensated for the increases in their bills—not have them taken into account, but fully compensated?
    The right hon. Gentleman will not get away with saying that the increases will be reflected in the payments to those on income support and means-tested benefits. There are 1·3 million pensioners living on incomes just as low as income support, but not getting a penny of it. Some of them, perhaps because of a mistaken sense of pride, will not ask for a means test. There are another 1 million

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    pensioners living within 10 per cent. of the level of income support who will never qualify for a penny of it. Will they be compensated? We ask that because that is what they ask us.
    At the weekend, I received a letter from a constituent on invalidity benefit, who therefore does not qualify for income support. He said:
    "I am aghast and worried over the new proposed VAT on domestic fuels. At the moment I only put on my immersion heater for one and a half hours in the morning to heat the water and I have the gas heating on for an hour and a half in the morning and the same at lunchtime and in the evening. If I am too cold, I just make a hot water bottle and retire to bed since I must work within the limits of what I can afford to pay for my fuel bills."
    Do Ministers have any idea what it is like for those who have to work within the limits of what they can afford to pay for fuel? Do they have any idea of the hardship that those people will now face, with the choice of going to bed even earlier or doing without another necessity?
    Tonight, the House will have the opportunity to express its verdict on that proposal. We will vote against resolution No. 21 in order to record our contempt for a Budget of failures, of cheats and of injustices. We will do it to express our derision for the Treasury Bench of limpets clinging on to office after they have broken every promise that got them on to it. We will do it most of all to stop them making the poorest in society pay for their mistakes and their broken promises. It should not be the poor who pay: they should pay, and we will make it our job to ensure that they do.
    5.52 pm
    Sir Edward Heath: A large part of the debate on the Budget has been concerned with undertakings which have not been fulfilled. Election addresses have been cited. Indeed, I read in one newspaper that Labour party headquarters is busy the whole day going through every election address by a Conservative candidate to find suitable quotations. I therefore want to get that matter out of the way immediately. I said in my election address:
    "I opposed the Community Charge from the beginning because I believed it to be unfair, ill-planned, costly to administer and above all philosophically wrong and politically damaging. I was proved right. John Major, when he became Prime Minister, pledged himself to abolish it and has done so."
    I then went on to deal with the fast rail link. I did not look to the future of taxes, in whatever form. That exempts me from an embarrassing position.
    I believe that it is wrong for parties at a general election to give undertakings about taxation—either its rate or its nature. When I fought elections in the 1950s and the 1960s, that was not done. No Government or Chancellor's record justifies their being able to say with conviction that they can foresee the economic future for the following five years. It has never been proved that they can do so. All that declarations about rates of taxation can do is to mislead the electorate and lead to further embarrassments for Government, which then weakens our economic position internationally. I want a return to olden times. In fact, the practice was first broken in the 1959 election by Hugh Gaitskell, who promised to reduce taxes by 6d,
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    which so shocked the electorate that he lost the election. I hope that we now have a period during which we do not give such undertakings.
    When changes to indirect taxation are made by a Chancellor—changes which my right hon. Friend has justified—we know that that is bound to affect many people on social security benefits and those just above the limit for those benefits. The right thing for a Government to do is, at the same time as the charges are introduced, to say that they recognise the problem and that those people will be fully compensated for those increases. That is what Rab Butler did in the 1952 Budget, and it is what happened with Iain Macleod in 1970 and with Tony Barber in 1971. It shows that we understand the position of the millions of people who are affected by such changes. It gives them confidence that the Government of the day understand them and their problems, and it gives society as a whole confidence that we care about these matters and that we will take action to deal with them.
    My third point relates to my party in particular because of the targets that it has set for direct taxation. They are not achievable targets. I hope that my right hon. Friend the Chancellor will not say that, at some future time, we will reach the target of 20 per cent. and that the 40 per cent. rate will be reduced. There is no economic or moral justification for saying it. Although high taxes reduce efficiency and destroy a great deal of enterprise, we reach a point in the level of taxation where that is no longer the case. That is evident from the level of taxes paid by other countries with very successful economies, such as Germany and Japan, whose tax levels are higher than ours and higher than our targets.
    When told bluntly what is required from them, the British people will respond. It is not necessary to try to smooth the path. I accept that the path in front of us is very difficult, and I have every sympathy with my right hon. Friend the Chancellor and the Government in the problems that they face. The economic position, with high unemployment and the destruction of so much of our industrial base, means that it will take many years to deal with the problems. There can be no easy, quick solution. If that is brought home to the British people, they will support the necessary steps—one of which is that the wealthier people should be prepared to pay a higher rate of tax. I believe that they would respond to a demand that they do so.
    One thing that we desperately need in this country is a better superstructure. It is right to say that we have been spending more on that, but it does not meet the demands that our superstructure now makes.
    Sir Peter Hordern: I think that my right hon. Friend means infrastructure.
    Sir Edward Heath: Yes, I mean infrastructure. So many countries in Europe, North America and the far east have infrastructures infinitely superior to Britain's.
    We have only to look at London and the development needed there. There is no effective overall body to deal with that. Ours is the only major capital city in the world which does not have one. The former central body, the Greater London council, was abolished out of spite because of a handful of miserable Labour councils. Now we do not have that authority. To cite one specific example, when one drives out of London on the M4, as I frequently do, one must use a double-lane highway. In

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    recent years, high buildings have been erected right alongside that road, so that if ever we have a Government who recognise that the M4, which was built 40 years ago, is totally inadequate for modern requirements, various new buildings will have to be pulled down to enable the construction of a new highway. That shows no sense of responsibility towards the demands of a very modern society. That is another case which desires urgent action. After all, improving the infrastructure provides jobs for many people.
    As to the contraction of our industrial base over the past 12 years, we lost part of it at the beginning of the 1980s because we were so determined to push up the rate of sterling. Firms in my own constituency which has been established for 100 or 150 years went out of business. They never came back and they never will. That is happening in the present situation, with a further loss of our industrial base. My right hon. Friend the President of the Board of Trade rightly said that we must encourage industry, and he is doing so. Many of the measures in the Budget are extremely useful and make a great deal of sense. I am glad that they are being adopted by my right hon. Friends the Chancellor and the President of the Board of Trade.
    In the mid-1980s, small firms went into business with a rush, and we know from the figures that they are in immense difficulty now. The kind of people who start small firms now have learnt the lesson of the 1980s and will not take the same risks. They will not allow themselves to get into that position. They also see how this country's banks behave when small firms get into difficulty. There is no relationship between the banks and industry in this country as there is in Germany and France, and that is what is lacking.
    That apart, the major banks have enormous problems as a consequence of unwise investments, debts, loans and property purchases over the past decade. One must keep one's tongue in one's cheek when talking about London being the greatest financial centre in Europe or in the world; people outside know what is happening and can see the problems which have arisen in our banking system in the last 10 years.
    My right hon. Friend the President of the Board of Trade mentioned Rolls-Royce. I will add to his remarks, especially as I know the attitude of so many of my hon. Friends on the Benches behind me. We took over Rolls-Royce in 1970 because it was bankrupt and its directors were trading against company law. We took over the company to save it from being prosecuted for tens of millions or hundreds of millions of pounds, but we were careful to do so in terms of a private company so that it could be privatised. That was exactly our plan.
    That was not done without an attempt to persuade the private sector to look after Rolls-Royce. When a leading accountant reported to me that the company was not only heavily in debt but under contract to the Americans to produce an engine, would not make the delivery date, and would therefore be liable to a penalty of £400 million—a large amount of money in those days—I invited the chairmen of the four banks concerned to meet me in the Cabinet room. I explained the situation and said, "I hope that you feel that you can support industry in this country." All four flatly refused to help in any way at all. One chairman whose bank had offered a loan of £25 million, of which only £21 million had been taken up, promptly dashed back to his office and cancelled the
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    remaining £4 million.
    If we had not taken the action we did, all the military planes with Rolls-Royce engines would have been unable to obtain spares and would have gone out of action. The same would have been true of all civil aircraft with Rolls-Royce engines. It would have been grossly irresponsible for any British Government to fail to stand
    That company could have been privatised much earlier, but the management badly miscalculated what would happen to the dollar in the early 1980s, so privatisation had to be postponed. The company was subsequently privatised, and it is now successful, but it would not have remained in existence if the Government had failed to take action. There are instances when a Government is justified in taking action; I hope that my right hon. Friend the President of the Board of Trade will always bear that in mind.
    My right hon. Friend also mentioned delegations to various countries in support of British industry. I would take it a stage further. British Industry requires much more support from the Foreign and Commonwealth Office and from our embassies and consulates abroad. I do not in any way blame the Foreign Office—the three years that I spent there as Lord Privy Seal were among the happiest of my life. For a decade, the Foreign Office has been maligned and accused of every possible crime—of always selling out to the foreigner—and its staff has been drastically reduced. It needs its confidence restored and to be provided with an adequate level of staff. That means money from the Treasury. It is not good enough for the Treasury to say, "Where shall we slash? We'll make it the Foreign Office."
    The Japanese, for example, have a full consulate in every major city in the People's Republic of China. Britain has only one—in Shanghai—in addition to our embassy in Peking. The British consulate in Shanghai has a staff of seven—the consul-general, deputy, and press officer, and four assistants. Two of the four assistants are the wives of other consulate members. The Japanese have 410 in Shanghai. I am not urging that level, but we must face the challenge from other countries looking after their industries.
    Foreign policy should be directed at British interests, industry and finance. We are losing masses of trade in the middle east. That is true also of Iran, because of our relationships over that wretched book. If one writes a book and it offends, one can be protected in one's own country. I thought that the author in question was wealthy enough to protect himself, but we provide public protection—very well, but I see no reason why we should ruin our relationship with Iran, which can be a very profitable market.
    We are responsible for the United Nations resolution on trade with Iraq. Unfortunately, it affects companies which traded before Saddam Hussein invaded Kuwait and war broke out. Those companies cannot obtain payment for trade before the war. That cannot be justified. Other countries have already made arrangements with Iraq for the time when sanctions are removed. They will get all the business, because of our foreign policy. The same applies to Libya, where there is massive trade to be done. We are not touching it, because we are standing by the Americans.
    All that may sound like heresy to some people, but we must look after our interests through our foreign policy. If I am mistaken in any of my remarks, I am perfectly ready to stand corrected, but the fact remains that foreign policy

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    must take into account our trading and industrial interests. Much as one welcomes a delegation led by a Minister, it honestly does not have a big effect.
    The problem goes much deeper than anything that I have mentioned or that I have heard mentioned. I refer to the nature of our society in this country. That has been a problem for many years. Industry is still not recognised as a prime factor in our society. Do all the best and brightest in our universities say, "I must get into industry"? No; they want to get into the City, if they can—into some bank, preferably a private bank—or into public relations. The last thing they want is to work in industry. Nor am I certain that industry would welcome them; I am afraid that it does not always do so. Why is that? It is because comparatively few are management-trained at the top. Few have been to a top business school.
    I recall only too well my visit to INSEAD at Versailles to present prizes. I asked the British contingent which firms they were going back to; only one person was returning to this country, and he was with one of the oil companies. He said, "The company paid for me to come here, and I feel that I am under an obligation to go back. I do not mind, because the company told me that if I was successful I would receive an increase in pay." When I asked the others where they were going, they replied, "There is no point in going back: they do not want us, and they are not prepared to pay us." They said that they would go and work for American, French or German firms.
    That is the nature of our society. Despite all the changes of recent years—so many that we cannot even keep up to date with them—we have no satisfactory education system; we have not the major educational, scientific and technical system that the Germans have had since the last quarter of the last century. Moreover, we are not trying to secure such a system; we are not concentrating on that at all. Management feel that it would be rather a bore to employ people who have experienced a form of education that those currently at the top have never had, because there is just a chance that such people will know more than they do.
    I emphasise that all the measures in the Budget are desirable, apart from one about which I am not quite sure—the measure relating to self-assessment for tax purposes. A number of my constituents come to me and say, "Look at what the Inland Revenue has said about our accountants' report—can you arrange for some action to be taken?" Heaven knows how many cases there will be in the event of self-assessment, but I will let that pass. I am concerned with the nature of our society; that is what we must aim to change if we are to make up the loss of our industrial base and secure a top management who can return us to a reasonable position in the world economy.
    6.12 pm
    Mr. Robert Sheldon: In his powerful speech, the right hon. Member for Old Bexley and Sidcup (Sir E. Heath) made a plea for manufacturing industry, with which I shall deal at some length. He made another important point, however: he said that there were greater priorities than a 20 per cent. tax rate, and asked for
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    a larger contribution from those who pay the highest rate. A sad aspect of the debate is that we are unlikely to hear many echoes of that request; that is a great shame.
    In the past two years, the Thatcherite adventure has ended. Those 11 long years of folly started with the belief that the philosopher's stone of monetarism had been discovered, and reached the high point of hallucination—the hallucination that we were in the midst of an economic miracle. In fact, as we know, we were living on fool's gold. That is why we squandered £120 billion of North sea oil money, and £40 billion or more of privatisation receipts. Instead of using those enormous and wholly exceptional moneys to recreate our industry and restructure our essential services, we spent them on importing foreign luxuries, thereby ruining our own manufacturers.
    Personally, I can never forgive the Government for reducing the number of firms in my constituency by 30 per cent.—manufacturing firms, in the main; firms that provided the goods and services that we see in every country. The closing of some of those firms lowered what had been higher-than-average levels of employment and pay in the constituency.
    That period has now come to an end—notably in the Budget—with a suddenness that surprised only those who believed the Thatcherite nonsense that they so readily proclaimed. It was never a free lunch, and now the bill must be paid. The measure of that bill—in just this one year—is a £17·5 billion balance of payments deficit, and a £50 billion public sector borrowing requirement.
    How then do the Government intend to restore our finances, both internal and external? That is the critical question. There are no further increases in North sea oil to provide the necessary income; what the North sea is producing we are already spending. There will be few further receipts from privatisation: the barrel has been fairly well scraped. Indeed, whereas in the past the Government could rely on £5 billion a year—and spent it—they will suffer a fall in privatisation receipts from now on.
    The position is worsening all the time, which is one reason why the Government are so adamant in opposing the social chapter. They depend on a Britain with cheap labour and weak trade unions, attracting investment on the basis that it is a part of the European Community with certain unique advantages which they wish to advertise. The existence of cheap and docile labour is the Government's solution to the economic problems that they have inflicted on us. The social chapter runs directly counter to that vision; they will therefore fight fiercely to prevent its enactment. That is their solution to the Thatcher years.
    The Chancellor has repeatedly said how much assistance he is giving manufacturing industry, and the President of the Board of Trade said today that the Budget was one more step in the strategy for industry. I wish that I had observed any such steps. Undoubtedly, the right hon. Gentleman has been a great disappointment. There were those who strongly disagreed with much of his politics, but, when he said that he would intervene in industry at various times of the day, we thought that he would at least make some sort of effort: we expected something from a person of such energy and drive.
    The Budget has given some assistance here and there, but it provides little for manufacturing industry. The £900 million for advance corporation tax relief, the £400 million

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    for petroleum revenue tax abolition and a few other concessions may help some firms, but they do not matter much to the one industry that really counts in the long term—manufacturing industry.
    Let me say in passing that I welcome the easing of certain VAT penalties. The Inland Revenue operates on the basis of an understanding of the real world, whereas VAT is the direct descendant of excise duties that resulted from the fact that, over the centuries, the establishment of a harsh regime was the only way in which to protect revenue. The system of VAT collection did not allow sufficiently for an understanding approach to genuine error.
    I often feel that the greatest help that Government can give small businesses is to avoid adding to their burdens. Many small businesses would forgo any Government assistance if they could only be left alone. I know that, in this hard world, that cannot happen; but any help given by Government must be set alongside such a natural aspiration. Governments always require certain information to ensure that financial assistance is properly accountable; I understand that.
    In a small firm, however, frequently only one person can provide such information—the person who is engaged in running the business, and who is diverted from the essential operation of the company. That person is even more diverted when there are substantial penalties for not carrying out the tasks required by Government. I therefore welcome the easing of the VAT penalties.
    Let me turn to the next Budget that this Chancellor will present. The Chancellor has told the country that he does not wish to harm recovery by introducing large tax increases now; in the main, such increases will come later. Last week's Budget, however, is the first shoe to drop; while waiting for the second, people will be reluctant to spend. They know that the second shoe will soon follow, and their expectations will take account of that. The Government have shown us an unusual vista—the prospect not of jam tomorrow, but of vinegar for some years to come. This was a Government, however, who believed at one time in "rational expectations". Nigel Lawson believed that, by controlling the money supply, employers and trade unions would see that sterling M3 was coming down and would reduce pay claims on the basis of such "rational expectations".
    Of course, employers and trade unions did no such thing. It is amusing—though sad—to recount the folly of those times. Rational expectations, however, can work only if people actually believe that things are going to happen. If they truly believe that taxation will affect them in the way that the Government have stated, spending will be curtailed, not just next year and the year after but this year as well. The only way that that will not happen is if people do not believe the Government. There may be something in that view. The Government have already back-tracked on compensation for VAT on fuel for certain groups of people. Who knows what further U-turns might lie ahead? This is, after all, a very weak Government. Many policy changes are possible.
    There is a further factor that may change the income/expenditure picture to be painted by the Chancellor of the Exchequer in the autumn: that, while expenditure has to be fixed two or three years ahead, because of the planning required, revenue can be determined within a few weeks of the announcement. One does not have to make revenue plans anything like as far
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    ahead as one has to make expenditure plans. We can be pretty sure how much the Government expect to spend in 1994 and 1995, but how much they will raise in revenue is still an open question. The Chancellor of the Exchequer's statement, although said to be definite, is still only an opening shot.
    I particularly regretted, as did my hon. Friend the Member for Livingston (Mr. Cook) in his outstanding speech, the increase in VAT on fuel and power. In 1976, when we held the presidency of the Community, I negotiated the maintenance of our zero rating. That was always under attack by our Community partners, It was defensible, on the basis that it was the most important way of limiting the regressiveness of the tax. Without zero rating, VAT becomes a tax on the least well-off in our society. That remains true today. Those above income support levels, particularly the elderly, already find their gas and electricity bills a special burden. They spent most of their time indoors and have special needs for cooking and heating. They will be very unfairly hit by this tax.
    For those who believe in a progressive system of taxation, the excessive reduction in the high rates of tax, the emasculation of capital transfer tax and now the abolition of VAT zero rating on fuel means, in effect, a transfer from a progressive system of taxation to a regressive system. Whatever other policy decisions my hon. Friends will decide upon, the return to more progressive systems of taxation must be an essential part of them.
    What I found most depressing in the speech of the Chancellor of the Exchequer was the absence of any real help, which I believe that the right hon. Member for Old Bexley and Sidcup (Sir E. Heath) wishes to see, for manufacturing industry. The many limited measures set out to assist here were not satisfying. They seemed to he designed to placate the sufferers rather than to provide real solutions to real problems. The real problems are investment in our manufacturing industry and the restoration of the broader base, which has been allowed to shrink.
    Manufacturing industry alone can provide the goods and the exports that produce the wealth which enable more people to be employed in the service industries. I accept that we cannot assume that there will be a large increase in the number of jobs in manufacturing industry. As manufacturing becomes more efficient and finds more methods of automation—an idea that was prevalent 20 years ago—it is bound to shrink in size. However, manufacturing industry will produce more, and the selling of those goods will provide the wealth to enable us to have the service industries, the infrastructure developments and the various requirements that we expect of our social services.
    In the midst of all these problems, we have heard that low inflation and low direct taxation are the priorities, but if we are to have a priority among priorities, it must be our manufacturing industry. That is the fount of our prosperity. If we achieve success there, the balance of payments will improve and more money will be available for infrastructure development and the public services that I mentioned.
    Prosperity cannot come from trying to spend our way out of recession. That will lead to yet more imports. The weekly assessment of any rise in retail expenditure is looked upon as a sign that recovery is coming. Those with longer memories of our recent economic experience will

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    remember that such expenditure does not solve our problems. It is not consumption that will lead us out of recession. There was a case, of some sort, for that argument when we produced most of the goods that found their way into our shops. Today, so many of the goods we made we now import. Therefore, a rise in consumption is more likely to lead to greater imports and to a worsening of our trade deficit.
    The only long-term way out of recession is by investment, particularly in the production process, and by a level of the pound that stimulates exports and weakens our partiality to import. I still believe that there is room for the pound to go down, if we are serious about acting upon imports and encouraging exports.
    We need to limit the tendency to import, and that means a competitive pound. The voices of the City and the Bank of England, which would dearly like to emulate the power and independence of the Bundesbank, must be resisted. The lack of political influence of our manufacturing industry has always been one of the serious weaknesses of our economy. In any conflict between the needs of industry and the voice of the City, there is only one winner. As Winston Churchill said:
    "Finance should be less proud and industry more content."
    It is an unequal contest. It arises from our centre of finance being a mile or so down the road and the centre of gravity of our industry being a hundred or more miles up the M1, the M6 and the M4.
    Industry and the country require a competitive pound. If that means allowing the pound to decline still further, that will need to be accepted. We should not be in a hurry to return to the exchange rate mechanism, although I should prefer not only a competitive but a stable pound. There are great inefficiencies in foreign trade when the price of the goods purchased and sold cannot be precisely known. It is not sufficient that the forward foreign exchange currency market provides ample opportunities for hedging. The fact is that international trade is conducted on a basis more akin to the home market, with orders being delayed, deferred and cancelled with frequency.
    Few overseas orders nowadays are on a letter of credit basis, where the date of delivery is tightly specified. In those conditions, such forward currency precautions used to be a controlled way of limiting currency risks. In the present currency see-saw, the foreign exchange losses can be greater than the profit on a transaction. Therefore, it is far better to have a stable exchange rate that can be adjusted from time to time. In the past few weeks, we have seen variations of up to 5 per cent. in the pound's value against major currencies. Adjustments made as required need not be more, would happen infrequently and would result in the fine pricing of contracts, with advantage to international trade.
    What I had hoped to see was a Budget for industry. In 1991, we had a Budget that was supposed to be good for business. In 1992, we had a Budget that was supposed to be good for recovery. This year, we had a Budget for sustained recovery. What we needed was a Budget for industry. We did not get one. Therefore, the basic Problems that face our country are no nearer solution.
    6.28 pm
    Sir Terence Higgins: I suppose that this is positively my last appearance in a spring Budget debate. One of the pleasures over the years in these debates has been to follow the right hon. Member for Ashton-under-Lyne (Mr. Sheldon).
    I intend to say a few words about the Government's proposals to change the time of the debate from the spring to the late autumn. It raises a number of difficult questions. The Government have published a White Paper on the issue. It referred to a number of Treasury Select Committee reports that were prepared under my chairmanship but, strangely, not a report, also under my chairmanship, that was prepared by the Select Committee on Procedure (Finance).
    Trying to deal with public expenditure and taxation provisions at the same time will place a heavy burden on Treasury Ministers. Therefore, I commend to the Chancellor and his Treasury colleagues the Select Committee's suggestion that there is a strong case in future for dividing measures on taxation into three parts.
    The first would be a Bill dealing essentially with economic management and, therefore, primarily with changes in tax rates. The second would be a taxes management Bill which could be introduced at any time during the year. The third, if a new tax were introduced, would be the procedure that we adopted when we introduced value added tax—a Green Paper, draft clauses and so on. Unless such changes are made, the burden on the Treasury and on the House of dealing simultaneously with public expenditure and taxation will be a real problem.
    Following on from that, there is a danger that the House's opportunities to debate such matters will be significantly diminished. Until recently, we held debates on the autumn statement, on the public expenditure White Paper and on the Budget. If we debate the Budget only in the autumn, the opportunities for serious debate in the House, related to a specific proposal announced by the Treasury, will be reduced to one. We should not contemplate that, because it is important that the House should have the opportunity to debate these vital matters during the year.
    I deal now with what has become the political, if not the economic, centre of my right hon. Friend the Chancellor's proposals—the proposals to levy VAT on domestic fuel and power at a rate of 8 per cent. from next April and of 17·5 per cent. from the following April. It is rather curious that, although the date of the Budget is to change from spring to late autumn, the proposals for changing the rate of VAT will still come into effect in April. It is rather like the smile on the Cheshire cat's face remaining after the Cheshire cat has disappeared.
    When Iain Macleod and I, together with Professor Wheatcroft and Arthur Cockfield, devised the VAT system that we now have, we spent a great deal of time examining the experience of the countries of the Common Market, as it then was. We came to two clear conclusions. The first was that there should be only a single rate of positive VAT. The second was that there should be relief by way of zero rating for those at the bottom of the income scale. In that sense, the tax that we devised was superior to others in the Common Market.
    At the same time, of course, we abolished the selective employment tax and the multi-rate purchase tax. The

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    change from the SET and a purchase tax to VAT was not regressive because of zero rating. We got rid of a system of variable rates, or multi-rates, which had meant that the pattern of consumer expenditure was being distorted. Those two essential Conservative principles were important changes and meant that we introduced a better tax than those that we found in the European Community.
    Having said that, I clearly view with considerable misgivings my right hon. Friend's proposal for imposing a positive rate of VAT on fuel and power consumed domestically. I believe strongly that it is a mistake to change the structure of taxation for short-term or tactical revenue-raising reasons, which is what we arc in danger of doing now, or, to put it more accurately, next year.
    The change is not likely to be reversible. The right hon. Member for Ashton-under-Lyne intervened on my right hon. Friend the Chief Secretary on the second day of our Budget debate. The Chief Secretary replied:
    "The proper argument against Community intervention in our zero rates is the right of the House to determine our taxation rates. It is the right of my right hon. Friend the Chancellor…to decide what they should be."—[Official Report, 17 March 1993; Vol. 221, c. 302.]
    However, we know what enormous pressure there has been on this country to harmonise our system of taxation and bring it in line with that elsewhere in the Community. If we abandon zero rates on fuel and power, it will not be possible to reinstate them at a later date.
    Another worrying aspect is that the more one erodes the scope of zero rating, the greater the pressure from the European Community will become to remove it altogether, not only from fuel and power and newspapers but from food and other essential items. I am reminded of a remark made by my permanent secretary when we introduced VAT. The question of harmonisation arose, and he said, "If the Italians collect it, we'll harmonise it." There was something in that. We are increasingly under pressure to harmonise our VAT rate with a European form of that tax, which is less satisfactory than that which we originally devised. Therefore, the current proposal is an unfortunate development.
    I am rather worried about the proposal to increase VAT on fuel and power to 17·5 per cent. in stages and the imposition of an 8 per cent. tax next year. That raises the issue of multiple rates which I have always believed that we, as Conservatives, did not favour. Once people have paid their direct tax, we should not use the tax system to distort the pattern of consumer expenditure.
    I now come to the difficult question——
    Dame Elaine Kellett-Bowman: My hon. Friend says that we should not use the tax system to distort consumer expenditure. What about the differentiation between leaded and unleaded petrol, which is an environmental factor? One could say that the imposition of VAT on domestic fuel and power is also an environmental tax because it has followed on from the Earth summit and we must reduce fuel consumption.
    Sir Terence Higgins: I was about to deal with that point, and I hope to be able to satisfy my hon. Friend in that respect.
    I am bound to say that there has been a certain amount of confusion about the controversial question of compensation and precisely what the Government have in mind. I hope that my right hon. Friend the Chancellor will manage to clear it up when he winds up the debate this
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    evening. There has been much talk, especially from members of the Opposition Front Bench, about compensation in full for the imposition of VAT on fuel and power. I saw the shadow Chancellor on "Question Time" the other night, saying that the Chancellor would be increasing the cost of fuel by 17·5 per cent. That is, of course, an economically illiterate view. It would be valid only if the elasticity of demand for fuel and power were zero. It is always the case that when an indirect tax is imposed, even at the final stage, a certain amount of the tax is absorbed by the person supplying the goods or services. Therefore, the idea of full compensation——
    Mr. Ken Purchase: Not in the case of a monopoly.
    Sir Terence Higgins: Whether or not there is a monopoly. The idea of full compensation is, to say the least, difficult to define. In political terms, however much one compensates for the change, people will continue to say that it has not been enough. By way of an example, I cite the fact that we were unable to remove VAT from charities. When we introduced VAT originally, we introduced at the same time a number of proposals to give increased benefits to charities by way of covenants, and so on.
    On two, if not three, subsequent occasions, further concessions have been made to charities to compensate for the fact that we have not managed to exclude them completely from the scope of VAT. I have not the slightest doubt that the total of those concessions is vastly in excess of the burden of VAT on charities, but charities will continue to say that they need to be compensated. I fear that the same will happen in this case: if we impose VAT on fuel and power, however much we compensate people, the political reality will be that we shall still be blamed. Overall, I have considerable doubts.
    My hon. Friend the Member for Lancaster (Dame E. Kellett-Bowman) said that the tax was helpful for green issues and she referred to the Rio summit. We had a one-line Whip on the second day of the Budget debate and, curiously enough, I was invited to hear a speech at the Royal Geographical Society that evening given by Mr. Robert Swan, who is the United Nations roving ambassador on the environment. Rather more exceptionally, he is the only person to have gone on foot to both the north and south poles. He was desperately concerned about the effects on the ozone layer of global warming. I was impressed by his arguments which he put forward with immense expertise and passion.
    The other side to the coin, therefore, is that there is a strong argument on environmental grounds for imposing a tax on fuel and power. However, I am bound to say that the impact is estimated to be 1·5 million tonnes, which is only a small part of the likely decrease that will be needed between now and the deadline of the end of the century, by which time there should have been a reduction of about 10 million tonnes. A big change will be required.
    The vital point this year was that the Chancellor should do nothing to damage the present fragile recovery. I am glad that, by and large, the changes he has proposed for this year are broadly neutral. The Budget is not entirely neutral because there will be some increase in taxation. None the less, the Budget will not seriously damage the recovery that we all wish to see.

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    I have more serious doubts about the idea of saying that, as we must take account of the future deficit, we must legislate now for what happens next year and the year after, to reassure the City. Our record on forecasts is not so good that we can say that we shall legislate now for what happens in two years' time. I believe that one thing is sure. We do not know how much of our present fiscal deficit is structural and how much of it is cyclical. That is clearly recognised in the Red Book, which makes that point.
    We must remember that it was not long ago that we were in budget surplus. That might lead us to suggest that most of the deficit is cyclical. In any event, we need to wait for the recovery to go rather further before we can decide how much is structural and how much is cyclical. to anticipate what will happen and to say that we propose to legislate now for what will happen next year and the year after puts too great a weight on our expectations of what is likely to happen to the fiscal deficit.
    We must, of course, take account of the views of the financial markets which are worried about the size of the public sector borrowing requirement. My guess is that the Chancellor and the Treasury have overestimated the likely size of the fiscal deficit next year or the year after. I suspect that the deficit will not be as great as they suppose. That being so, there was a case for waiting until we saw rather more clearly how the economy was developing before proposing increases in taxation such as are suggested in the Budget. We can debate those matters during the proceedings on the Finance Bill and it is important that we should begin to approach the question analytically.
    My fundamental feeling is that it is right that the Chancellor has taken no action that will affect the recovery this year. With the successive cuts in interest rates and the significant depreciation in sterling, recovery is likely to come faster than we expect. One point that can always be made about the economy is that one always underestimates turning points, whether from up to down or from down to up. The underestimate of the importance of the turning point has increased over all the cycles. That being so, I believe that we shall see recovery, probably faster than we believe likely, and with a faster decline in the deficit than is supposed. I have considerable doubts, therefore, about anticipating what is likely to happen next year and the year after.
    6.44 pm
    Mr. Archy Kirkwood: It is always a pleasure to follow the right hon. Member for Worthing (Sir T. Higgins). I was interested in two points. He said that the Chancellor had done nothing to damage the prospects for recovery, which was one of the stated aims of the Budget. Why, then, did the Chancellor find it necessary to announce in advance—for the first time, in my experience in the House—imposts of taxation in future years? It would have been perfectly reasonable for him to say that he reserved the right to increase taxes "as and when". That would have been an unexceptional position. By making the announcement in advance, he may have damaged the process of recovery. People are not daft—they can see next year coming and they may begin to take evasive action, especially in relation to the increased costs
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    for fuel and domestic heating. I do not believe that the Chancellor can say that he has done nothing to damage the interests of and the prospects for recovery.
    The right hon. Member for Worthing is an eminent figure and his voice is listened to carefully by the Government—as it should be—but he did not carry the House with him when he tried to justify the increases in value added tax on heating and on domestic fuel. He said that such matters were difficult and that there would always be political blame. By taking that line, the right hon. Gentleman is encouraging his right hon. Friend the Chancellor to consider other matters in relation to VAT.
    The Government's stated position is that by the end of this Parliament they want to have a 20p rate of income tax. The only conceivable way in which they can do that, against the dire financial position in the past and in the future, is by increasing VAT, not only on newspapers and on sewerage, but on food, on new-build costs, on magazines and on children's clothes. That would be unconscienable. I hope, therefore, that the right hon. Member for Worthing will be careful about how he argues the justification for the changes made.
    This has been an interesting debate, apart from the purple passages in which the President of the Board of Trade went native, as he always does. The hon. Member for Livingston (Mr. Cook) made a powerful speech which was witty and well argued. The one point that he established beyond all peradventure was that the Budget is regressive. The House should be concerned about that.
    The right hon. Member for Old Bexley and Sidcup (Sir E. Heath) also made a powerful speech. I agree that we need urgently to assist exporters. We need to try to get a more industrial, scientific and technological ethic into our education process. I agree that, most importantly, the precedent for not making promises about taxation in political manifestos at elections should be considered carefully and that we should try to eschew such promises in future. Such promises serve no useful purpose. It does nobody any good to try to get political parties to anticipate financial and economic positions that they cannot foresee, and it does the political process no good to try to do so.
    The Chancellor would have had slightly more credibility if he had admitted candidly that although he would not increase income tax, he would increase taxes on income. That is a reasonable action to take when facing deficits which are getting out of control. However, as the hon. Member for Livingston said, the Chancellor did not have to do that through regressive means or to make the poor pay most.
    When the Chancellor set out his strategy, he said that he wanted to take no risks with recovery. He rightly said, too, that he had to cope with a burgeoning budget deficit. The economic difficulites that he faces are immense. The tax base has been eroded, and there is a long-term pattern of increase in public expenditure. Given that that is the case, certain things need to be done as a matter of urgency. As regards the balance of trade, the country is running an unsustainable deficit—and, what is worse, has been doing so during a recession. We cannot possibly expect to get away with an ever-deteriorating trade balance. In short, the economy is in a mess.
    The right hon. Member for Worthing wondered whether the problem was cyclical rather than structural. I think that the evidence is against him, although I accept that it may be too early to say. In my view, the damage and

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    the difficulties are structural rather than cyclical. As I said, history may prove me wrong. In any case, it is important to get the answer to that question right.
    It is the height of irony that the principal stimulus that the Chancellor said would be the engine of recovery should have originated from a policy that the Government strove, until last autumn, to avoid—namely, devaluation and interest rate reductions. No one has yet asked what is happening to the exchange rate mechanism in all this. Is that question in Ministers' minds? I should be interested to know what will happen in the near future.
    The growth forecasts in the Red Book are an awful lot more realistic than they have been in the past. I am staggered, however, to find that the forecasts for export volumes for 1994 are shown at 10 per cent. I am even more staggered to discover that the forecasts for import volumes for 1994 are shown at 9 per cent. Those are extraordinary figures. Frankly, I do not believe that it is possible to achieve such export and import figures in the period to which we are referring. Much of the Budget strategy is based on export-led growth. If the 10 per cent. growth in export volume is not achieved by 1994, all the Government's calculations may prove to have been built on sand. I do not think that the exchange rate is competitive enough to sustain export growth at the levels to which the Red Book refers. I certainly do not think that the European markets that we face at present are buoyant enough to enable us to achieve such targets. The level of market-led growth is therefore highly doubtful.
    What of the increase in national insurance contributions? I was interested to discover that the Chancellor had chosen that device. The longer I serve in this place, the more convinced I become that national insurance contributions should be abolished. As I said earlier, the way in which the Chancellor has chosen to introduce revenue-raising tax measures is extremely regressive, but it is both particularly bad and silly to have chosen national insurance contributions as a vehicle.
    National insurance contributions are anachronistic and anomalous and there is a strong case for sweeping them away and replacing them with a unified tax system. That would simplify matters and save a lot in administrative costs. We could then move, over a period, to an integrated system of tax and benefit—a partial basic income scheme of the kind that people have been discussing for some years. It would take time and effort, but it would be worth considering carefully the possibility of moving in that direction.
    Let me say something about Budget secrecy. The right hon. Member for Worthing has played a valuable role in persuading the Government to make progressive changes in the way in which the Budget is introduced. The departmental White Papers are better than they used to be and although a unified Budget in November and December may cause problems for the Treasury, because it will involve revenue and expenditure being dealt with at the same time, the changes have been well worth while. But we are still left with this ludicrous Budget purdah, which causes all sorts of difficulties. The Government experienced some of them this year.
    Other Government Departments need to know what is in the Chancellor's mind. The President of the Board of Trade had the confession dragged out of him that he was told about the proposed change in VAT on domestic fuel. If that is true, that is fine, but how much better it would be if all the Departments—the Department of Trade and
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    Industry and the Department of Social Security, for example—were notified. The campaign to increase council house sales that the Department of the Environment is pursuing may have been significantly affected by the mortgage interest tax relief change in the Budget. Departments are interrelated as regards such matters.
    How much better it would be to abolish Budget purdah and secrecy and have a draft Budget, or at least a White Paper outlining the options under consideration by the Chancellor, in the lead-up to the Budget. That would make for a better informed public debate and we should be able to sort out numerous difficulties. Lord Lawson experienced tremendous difficulties when he made changes in mortgage interest tax relief for people who were not married but living together. Such difficulties could be avoided if there were more openness.
    Much of the technical dross which took up two hours of the Chancellor's Budget statement could also be avoided. The technical stuff could be dealt with outside the ambit of the Chancellor's strategic statement. We must address that problem as a matter of urgency. People from outside this country think that the way in which we conduct the Budget—with Ministers going into purdah, saying nothing to anyone and having to report to the Chancellor all meetings with financial journalists—is daft and makes no sense in a modern democracy.
    What impact will the Budget have on the poor? The other day I heard the Under-Secretary of State for Social Security say that the increase in the 20p income tax band would help the poor. She was talking about increases in heating costs. The change does nothing of the sort. The only way in which we can get increased help to the poor—always supposing that that was what the Chancellor was seeking to do—is to increase personal allowances. The Chancellor did not do that; he froze them, which made the impact of the fiscal changes on the poor worse.
    I wonder whether the Secretary of State for Social Security knew about the changes in VAT on heating and fuel. If he did, he should have ensured that the Government's plans for compensation were well thought out in advance so as to avoid the confusion which followed the Budget statement. If he knew, but took no steps to clarify matters from day one, he bears a heavy burden of responsibility because he has caused great concern throughout the country. I still do not understand what the Government have in mind. Newspaper journalists cannot be blamed for engaging in speculation and stories which get more exaggerated every time they go along the rumour chain. It is unconscionable to inflict such concern on people who stand to be deeply affected by such changes.
    The Treasury had better look at the consequences outlined in the Scottish Economic Bulletin of February 1993. The Institute of Fiscal Studies conducted a study on the distributional aspects of environmental taxation. It ran a model, putting the 17·5 per cent. increase into fuel and petrol costs and running a test across England and Wales on the one hand and Scotland on the other. The conclusion is absolutely clear:
    "Using a tax rate of 17·5 per cent., the additional tax payments amount to some 2 per cent. of total expenditure amongst households in the poorest 20 per cent. of the income distribution, but only around 0·6 per cent. for households in the richest 20 per cent."
    That is what we have been saying for the past several days: the measure will have a much more marked impact on the poor. The Institute of Fiscal Studies is a perfectly

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    respectable and professional body of researchers. In February 1993, it showed that because of household types and access to different kinds of energy—particularly the lack of gas—there would be a widely disproportionate effect in Scotland. That is the kind of information that the Government should consider before gaily taking decisions to increase energy costs.
    Mr. Nicholas Winterton: The hon. Gentleman is referring to the difference between Scotland and England. Has he considered the difference between urban areas and rural areas? Most rural areas have little, if any, public transport. They are also more exposed to the elements. Households in such areas therefore require more heating.
    Mr. Kirkwood: That is absolutely right and that point has been made very clear. I commend the IFS report to the Treasury Front Bench as it would repay careful study.
    I have probably been speaking for too long, but I want to make a final point. The Government were elected in 1979. If someone had told me then that I was going to be in Government until 1996, with a working parliamentary majority, access to windfall resources from £100,000 million worth of North sea oil and gas and windfall revenue from £60,000 million of privatisation proceeds, but that I would end up with a public sector deficit of £30 billion, high unemployment and public expenditure running at 44 per cent. of gross national product, I would have considered that to be an absolutely appalling record. The Government forfeit any right to claim that they have a scintilla of economic competence.
    If the question is, "Have the Government got a grip on the economic situation in this country?" the answer must certainly be no.
    Several Hon. Members rose——
    Mr. Deputy Speaker (Mr. Michael Morris): Order. Before I call the right hon. Member for Horsham (Sir P. Hordern), I remind right hon. and hon. Members that Madam Speaker has imposed the 10-minute rule from 7pm to 9pm.
    7.1 pm
    Sir Peter Hordern: I hope that my hon. Friend the Financial Secretary will forgive me if I do not mention the favourable parts of the Budget, on which I would otherwise have dwelt extensively. In particular, I applaud the measures to help small businesses. They were admirable and very well thought out.
    I expect that the Budget will be judged—as it should be—by its overall effect on the economy. This is the first Budget that I can recall in which reducing the deficit has been postponed deliberately. I understand that the Government certainly do not want to trample on the recovery which is now under way. At the same time, as has been said, the Government must satisfy the City that enough is being done within the medium-term financial strategy to ensure that the deficit is dealt with.
    However, I believe that that is a peculiar judgment. It is also strange that the seven wise economists have been given a special section in the Red Book. Those Gentlemen are no doubt very eminent and they are certainly very well paid. However, it is Quite extraordinary to include their
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    opinions in the Government's Red Book to give the impression that they have official backing. That gives far too much importance to those sophisticators and necromancers.
    I recognised the same names among the 365 economists who wrote to The Times in 1982 describing the Government's policy as disasterous. There then followed the most sustained period of economic growth since the war.
    The public sector borrowing requirement for 1993–94, at £50 billion, is simply too large to finance without considerable difficulty. I remind my hon. Friend the Financial Secretary of a great change that has occurred in just one year. Last year, the Red Book forecast that the PSBR would be £6 billion in 1996–97. After the proposed tax increases of £10 billion, the deficit is still expected to be £35 billion in 1996–97. That makes a total increase of £45 billion. That shows that extraordinary swings are possible in such forecasts.
    The debt interest amounts to £19·4 billion next year, which is an increase of £2 billion over the year before. I calculate that if we delay the rising of those taxes, there will be an extra £400 million a year in debt interest. We will not improve matters by issuing IOUs in promises of future high taxation. Of course I understand the reason behind this: it is dangerous to trample on the recovery. However, surely the promise of higher taxation is likely to have an inhibiting effect on spending. Therefore, we might just as well get on with it, if not by the full £17 billion in the first year, certainly in the first two years.
    I know that there is much criticism about VAT on fuel and power. We have become accustomed to thinking that increases in VAT will feed straight through into price increases. I do not believe that that will be the case. In Sussex, Seeboard did not increase its prices last year, allowing for the rebate. I believe that there is every prospect that it will reduce its prices this year. That makes the coal review so important.
    So long as the nuclear levy is phased out, the extra VAT may be fully absorbed or nearly absorbed within the increase in the cost of living during the next two years or so. I do not know what that will do to carbon emissions and our Rio target, but I doubt whether the increase in the RPI will be as much as some people believe. We must not neglect the capacity of the privatised electricity distributors to absorb costs.
    It would have been better if we had got on with it. As it is, £50 billion is a huge sum to finance. Incidentally, I see that we are not going to finance it through full funding—that is, by selling gilts to the non-bank public. Instead, we are to allow the banks to buy gilts which will form their lending base.
    In other words—and perhaps in a more complicated way than in the past—we will resort to printing money for the balance of the funds that we will not be able to raise by selling gilts to the non-banking public. The potential for inflation is there. The argument is that as soon as inflation shows signs of taking off, interests rates will rise once more. I wonder whether we will be quite so precise in making that judgment as one would hope. That is why I believe that the very large borrowing requirement leaves too much to chance for my peace of mind.
    We will have to keep a close watch on inflationary signals and I hope that action will be taken at the right time. It would have been better not to have such a high PSBR in the first place.

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    I understand that we will deal with public spending in the next Budget and spending review. However, we must consider the matter carefully. My right hon. Friend the Chief Secretary to the Treasury is carrying out a careful survey of Government Departments. However, I do not believe that that is enough. Choices will have to be made between Departments and we will have to look at the long-term trends.
    Defence is an obvious candidate; in that respect, I am talking about equipment and not personnel. If we consider equipment that was authorised over the past 10 years and the original estimates and compare that with the outturn and then note what would have been available at the time and ask what our forces would have preferred, taking into account overseas defence sales, we discover a surprising result.
    We must also consider the cost of research and development on defence and the enormous sums involved. We must consider that in the context of an independent think tank to perform much the same function as the Rand Corporation in the United States. I served on the Public Accounts Committee with the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) for many years and I do not believe that it is good enough to expect the Ministry of Defence to make the estimates for us. The amount of money that we have spent on defence equipment, much of which has been absolutely wasted, is a standing disgrace. My hon. Friend the Financial Secretary should consider the matter very carefully.
    The same sort of problem will arise with social security. By the year 2021, one in five of the population will be over 65, compared with one in 10 in 1951. There will be fewer young people to pay. There were only 11·5 million people under 16 in 1988 compared with 14·3 million in 1971. There will be a major problem to tackle in providing for social services in the future.
    We must look to the future to see how social services will be provided. We must examine whether social services will need to be provided entirely through the state or whether they could be as they were of old—provided by the friendly societies or in some other way. We need to examine carefully the whole national insurance system and the national insurance fund to see what might be done. There is a great deal of scope.
    I commend my right hon. Friend the Chancellor for the Budget in all sorts of ways, especially in bringing spending and revenue together. I hope that it will concentrate the mind wonderfully.
    7.10 pm
    Mr. Ken Purchase: Value added tax on domestic fuels has been the main talking point in my constituency since the Budget was announced. Indeed, older people can talk of little else. Their fear is already clear: they will not be turning on the heating in the way in which they should simply to protect their welfare in future years. That must be wrong. It was damnable that the Government did not have a plan to ameliorate the effects of that imposition of VAT on those at the margin of poverty. It is an absolute disgrace.
    I shall refer to what was in the Chancellor's speech as a veiled but rather gratuitous insult suggesting that, first, his advanced corporation tax proposals were complex and, secondly, they would, as if by definition, be understood by only a few.
    Mr. Alex Salmond: Is the hon. Gentleman one of them?
    Mr. Purchase: I do not know; the hon. Gentleman will find out in a moment. He should not second-guess what I have to say.
    If it seems to many that the Chancellor—by his lack of common sense, he has got into more scrapes than most—can understand advanced corporation tax, by similar definition it should be possible for the rest of us at least to get a grip of the subject.
    Advanced corporation tax was introduced by the Tory Government in 1972–73. Amazingly, it worked well during the 1970s, when companies were making profits and could claim back their tax credits through the mainstream corporation tax. However, since the advent of Conservative anti-manufacturing policies and the determination to reward those who make money through shareholding rather than those who earn it through real work, advanced corporation tax has become a real problem for large and small companies.
    The tax system is simple rather than complex. It takes tax which is due at source from those receiving dividends, and is then set off as a credit against mainstream corporation tax. That is done on the assessable profits of the dividend-paying company. The arrangement allows for the Exchequer to gather tax earlier than would otherwise be the case, and sets the final tax bills against that credit.
    All that is okay while companies are profitable and able to use the tax credit which they have earned. However, recently companies have been obliged to pay dividends even though they have not made profits. In essence, that has meant that, first, an unprofitable company is producing a tax credit which it cannot reclaim in the relevant period for which it was paid and thus creating a surplus of tax; and, secondly—this is my theme—payment of the dividend has tended to reduce the net worth of such companies by bringing forward retained profits, which are properly intended for investment, to pay shareholders.
    On the tax credit and the subsequent surplus advanced corporation tax, the scale of the surplus is estimated at £5 billion. That is a tax mountain equivalent to the infamous EC beef mountain. I do not know whether all the beef will ever be eaten. My hon. Friend the Member for Wolverhampton, South-East (Mr. Turner) could make a go of it, but we shall have to wait to see whether that works out.
    I can say something about the tax mountain. Although companies are allowed to roll forward their credits against future profits, many thousands of firms will never benefit, for the simple reason that the Government have driven them out of business, especially those in manufacturing in the west midlands. Our wealth-creating base has been crucified by, first, the obsession with money supply and, secondly, phenonmenal real interest rates. Although interest rates are falling, they are still some distance from the historic norms of 1 and 2 per cent.
    I recall many companies in the west midlands falling under the Thatcher/Howe axe of the early 1980s. I especially remember a typical local firm in Wolverhampton which specified and ordered special machinery—machinery at the cutting edge of technology. The development period was about two years. The plant had scarcely been fully commissioned and brought into profitable use when the monetarist experiment closed down the opportunities in manufacturing for which the

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    special machinery had been planned and designed. The plant was unable to find new markets in time to meet the bank's demand for interest payments. A fine company of good managers and highly skilled workers was finished, and its surplus advanced corporation tax was lost for ever.
    Earlier, I said that many companies are forced into making dividend payments even when the current year's profits are non-existent. Such payments eat into the value of a company but are demanded by the short-term considerations of shareholders who have become accustomed to dividends which bear no relation to work or effort, especially in the privatisation programme. The privatisation programme deliberately undervalued share prices and then rewarded those buyers who became sellers—and they were able to make a killing on the way.
    In addition, the outrageous levels of interest which were offered to lenders and passed on as loans to borrowers by banks became more profitable and a safer haven for spare cash than the longer-term investments needed by manufacturing industry. Nevertheless, industry had to compete, which meant paying dividends at a time when none should have been available and at rates comparable to those available elsewhere from banks and building societies. In that way, companies were forced to damage themselves to keep the level of traded share values sufficient to attract investors.
    The changes to advanced corporation tax which have been trumpeted by the Chancellor should not be seen as unproblematic, except perhaps by the relatively few profitable companies and those which have large overseas earnings. Because the changes could be disadvantageous to pension funds in some circumstances, managers may well be tempted to be cautious and buy gilts rather than take a positive view about the long-term equity and earnings of manufacturers who desperately need a continuing share of investment.
    All in all, that aspect of the Budget does not provide a boost for industry. Indeed, the Chancellor claims that the measure will take £900 million in extra revenue from 1995–96 and that the benefit to companies will be restricted merely to reducing the rate at which advanced corporation tax surplus accumulates. Rather than being a boost for industry, the proposal serves to illustrate the appalling mess which has resulted from the Government's damning lack of interest in or knowledge of our country's wealth and welfare-creating manufacturing sector.
    7.17 pm
    Mr. Nigel Forman: Because of the constraints on time imposed by the Speaker, I shall not follow the hon. Member for Wolverhampton, North-East (Mr. Purchase) or some of his hon. Friends in the way in which I would have wished in my remarks. I should like to preface my comments by saying that the appropriate test to apply to the Budget is what I would describe as the Barry Riley test. Those who read The Financial Times on Saturdays will know Barry Riley's column. On Saturday 13 March before the Budget, Barry Riley said, among other things:
    "So the government's responsibility is not to engineer some kind of economic miracle, but rather to establish a stable financial framework and to attempt to reconcile people to the real world "
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    In a world of modest expectations—to which, alas, we have had to become accustomed recently due to the depth of the recession—that admonition from Mr. Riley is especially appropriate. By that test, the Chancellor will be seen to have succeeded—but, most clearly, in some months' time.
    The dual curse of all Budgets and debates on Budgets is that commentators and Members of the House tend to rush to judgment, which is usually a mistake. Almost everyone expects too much of a Budget which in this case may tighten the fiscal stance by somewhere between £500 million and £2 billion, depending on how one assesses the real effect, in an economy of more than £600 billion. I remind the House that our economy represents no more than perhaps 3 or 4 percentage points of world gross domestic product. If one puts all these figures together, it is clear that one should have modest expectations for the national Budget of a country of Britain's size and weight in the world.
    The Budget measures can be considered in greater and more appropriate detail in later debates on the Finance Bill. I wish to make a few comments on some of the key Budget judgments of my right hon. Friend the Chancellor and to examine his overall approach to economic policy. I intend to make my points as quickly as I can for reasons of brevity.
    First, my right hon. Friend chose absolutely the right objectives for his Budget at this stage of the economic cycle. He described his objectives in the following words:
    "first, to support the recovery in the year ahead; and secondly, to set out a clear medium-term strategy for bringing the borrowing requirement back towards balance."—[Official Report, 16 March 1993; Vol. 221, c. 169.]
    Secondly, my right hon. Friend was right to remind the House in his Budget statement of the profound impact of global developments on our national economic well-being. That is a truism, but one which is not sufficiently taken into account. For example, our export markets are principally—although not exclusively—in the rest of the European Community, as Opposition Members will know. Those countries are all going into recession after us, so just when we need them to pull us out on an export-led basis they will not be there in the strength that we would wish.
    Mr. Salmond: Will the hon. Gentleman give way?
    Mr. Foreman: I am afraid that I cannot give way in view of the time available.
    Equally, there is the super-competitive threat from the Pacific rim countries. That does not exactly assist us other than by sharpening the spur of competition, which is a good thing, of course.
    Thirdly, unemployment is obviously the most critical factor in both the symptoms and causes of our economic difficulties. It is responsible in itself, either directly or indirectly, for a large part of both the cyclical deficit and, increasingly, the structural deficit. Indeed, one could argue on that point like mediaeval schoolmen and not get far. It is all deficit, whatever one calls it. Therefore, my right hon. Friend the Chancellor was right to say that a deep-seated problem needs more fundamental solutions. That is what he said about the medium-term deficit. I shall say a few words later about the fundamental solutions.
    Fourthly, in the short run, my right hon. Friend the Chancellor was also right not to tighten his fiscal stance too much. Here I agree with my right hon. Friend the

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    Member for Worthing (Sir T. Higgins) and I disagree with my right hon. Friend the Member for Horsham (Sir. P. Hordern). If my right hon. Friend the Chancellor had tightened his fiscal stance too much by taking what would have been largely symbolic action to increase taxes now, that could have had serious behavioural consequences which would have damaged confidence. Confidence is fragile at the moment, and such action would have prejudiced the recovery that we all want to encourage.
    It is arguable that any Chancellor should act decisively for one year only at a given time. I agree with my right hon. Friend the Member for Worthing on that. A Chancellor should not imperil or mortgage the future by putting key decision-makers on the financial equivalent of death row—in other words, awaiting future fiscal execution. There is a great deal to be said for the old annuality approach of the Treasury, particularly on the revenue side of the accounts. My right hon. Friend the Chancellor's judgment for this year is right, but I hope that he will feel free to loosen policy still further if that proves necessary. He should do so preferably on the monetary side if the behavioural consequences of the Budget produce a half-hearted recovery. I very much hope that they will not, but we must guard against the possibility.
    The growth in the economy in the next few years predicted in the Red Book, coupled with the underlying growth in productivity, which goes ahead almost regardless of recessions because it is a function of technology, and so on, will probably not be enough to reduce unemployment or significantly lift economic confidence for at least the next three years. That needs to be considered. With that sombre prospect, my right hon. Friend was right to say:
    "Our strategy for sustained growth rests on three principles: first, that growth comes from the private sector, not from Whitehall; secondly, that a continuing commitment to low inflation is vital if competitiveness is to be maintained; and thirdly, that the only way to increase the country's long-term growth rate is by improving the supply side performance of the economy."—[Official Report, 16 March 1993; Vol. 221, c. 172.]
    I agree with that.
    The process of recovery is also critically dependent on events with a capital E outside the United Kingdom and largely outside my right hon. Friend's influence, let alone his control. Therefore, any British Government must concentrate on doing the positive things which are in their control. That is why I welcome so much the support for improved quantity and quality in our education and training system, and I was pleased to be involved with the recently planned boost for further education, which will do important things of benefit to Britain's competitiveness. That makes some of the comments of my right hon. Friend the Member for Old Bexley and Sidcup (Sir Edward Heath) on that point slightly dated.
    Looking to the future, my right hon. Friend the Chancellor may have been right to say:
    "interest rates at their current level are consistent with the achievement of the Government's inflation objectives."—[Official Report, 16 March 1993; Vol. 221, c. 173.]
    That may well be true, but the dilemma is that we shall probably need a sustained period of even lower interest rates to give us a real chance of achieving our objectives for economic growth. It is the old conflict between the growth interest and the anti-inflation interest.
    My right hon. Friend was right to warn of the medium-term threat of excessive public borrowing, especially when it starts as a cyclical deficit and could
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    easily degenerate into a structural deficit unless we safeguard against it. As my right hon. Friend the Member for Horsham said, it is significant that next year the debt interest is likely to amount to almost 3 per cent. of GDP. That is pushing up towards the limit set in the Maastricht guidelines.
    Both the personal and corporate sectors are rapidly restoring their balance sheets and will soon move into surplus rather than deficit. That would imply a further period of debt deflation. It is appropriate that the public sector should have a countervailing deficit until the effects of the private sector purgative have worn off and confidence and growth have reappeared. In other words, timing is everything. We cannot afford to allow the deficit to continue into the medium term. That is why it was essential that my right hon. Friend the Chancellor took the measures that he did. Equally, however, he was right to be cautious in the forthcoming financial year.
    I welcome my right hon. Friend's determination to take a radical look at what the public sector does, and how. Indeed, he intends to examine the very boundaries and definitions of the public and private sectors respectively. That is likely to yield much bigger savings and make a much larger contribution to eliminating the public sector deficit than even the hardest fought public expenditure survey round.
    I illustrate the argument with some examples. Should we continue for ever with a universal state pension and different pension ages for men and women? Probably not. Should we make a sustained attack on the tax expenditures and structural reliefs which now cost the Exchequer at least £90 billion—or £30 billion, according to the narrow definition? Those are some of the long-term questions that we need to consider. I commend the Budget for addressing them.
    7.28 pm
    Mr. Andrew Mackinlay: After the general election, unhappily I found that I represented not just Thurrock but a large proportion of south-east England. Apart from my hon. Friend the Member for Oxford, East (Mr. Smith) and my hon. Friend the Member for Southampton, Itchen (Mr. Denham), who are on the geographical edge of the south-east region, I am the only Opposition Member in the south-east outside Greater London. That gives me a special responsibility to speak for millions of people who are suffering the full brunt of the Government's policies and feel betrayed.
    More than half a million people are unemployed in the south-east region outside Greater London. The rate of male unemployment is 12 to 13 per cent. and I believe that it is rising. That area can legitimately be described as Thatcher's country, as the people who live in the south-east gave the Conservative party its successive parliamentary majorities and they now feel particularly betrayed by the Budget.
    People in the south-east can remember the 1979 poster, "Britain under Labour isn't working", which showed a queue of allegedly unemployed people. If that poster were replicated today, there is not a billboard in the land that could accommodate the length of the queue—I should love us to try to construct one. In 1979 there were 1·1 million unemployed people. Now it is 4 million. Half a million in

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    the south-east, outside Greater London, are unemployed, and languishing in the dole queue. Many of them have no hope of retrieving their quality and standard of life.
    One year ago, many of those people fell for the lie that the cost of a Labour Government would be £1,250 per annum for each family. They heard the Prime Minister say, "Vote Conservative on Thursday and the recovery continues on Friday." Now these people, many of whom are unemployed, and have lost their businesses during the past year, are wondering which Friday the Prime Minister was referring to. Has it been? Is it yet to come? Is it Good Friday? They have been betrayed and they know that the cost of electing a Conservative Government one year ago has been much more than £1,250. Many of them are on short-time working and many have lost their jobs or their businesses. It is time that the Conservative Government were indicted for cheating at the polls and for betraying the people of the United Kingdom.
    During the debate, Conservative Members have boasted, with a great deal of relief, about the slight drop in unemployment last week; but that is not the pattern in south-east England. Unemployment has increased in the counties of Essex, West and East Sussex and Berkshire and in many constituencies and travel-to-work areas including Crawley, Slough, Brighton and Heathrow. Unemployment is up and people cannot escape the fact that there is no sign that the rate will abate during the coming months.
    Throughout the region there is great anger at the way that the Government are clutching at straws, in this minor decrease in the figures, and at their apparent indifference to the unemployed and to those who are struggling to maintain small businesses in which they have invested their life savings and who are working seven days a week and doing everything that they can to protect and promote the interests of their families. The situation is tragic and Conservative Members are to blame because of their indifference and the policies that they have prosecuted during the past 14 years and not merely the past 12 months.
    In my county and in Kent, Harlow has more than 5,500 unemployed. Dover and Gravesend both have more than 5,000, while more than 6,500 betrayed people of Basildon are unemployed.
    The Financial Secretary to the Treasury (Mr. Stephen Dorrell)rose——
    Mr. Mackinlay: No, I shall not give way because I do not have time and because the President of the Board of Trade discourteously refused to give way when I tried to speak on behalf of the people of south-east England just over a week ago.
    We have been told that the Labour party is talking Britain down—what hypocrisy and humbug. The fact is that we wish to protect and to promote the people of this country and its enterprise and industry.
    The President of the Board of Trade painted a picture of time and space. He did not mention what we expected to hear—what will be done to create employment and maintain enterprise in the United Kingdom and particularly in the south-east, which is my concern. Instead, he took us to every corner of the globe and back in time. He even referred to George Brown, as if he were
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    to blame for the present situation. The Chancellor's Parliamentary Private Secretary was four when George Brown came to office and he was 18 when the Conservatives came to office. It was a long time ago. Only one group of people are to blame for the situation that the country is in—it is Conservative Members who have presided over Britain's decline and let Britain down.
    Great play is made of the fact that the Government have brought down inflation. Certainly it is down substantially but that is no achievement if there are 4 million unemployed and if businesses are going bust. Surely, the art and skill of government should be to temper and to balance those difficult areas, to ensure that one constrains inflation as well as maintaining employment. The Government have singularly failed to do so.
    Conservative Members have said a great deal about patriotism and implied that somehow we are letting Britain down. I and other Opposition Members are proud of our country, of its hills and landscape, of its great history and culture, and, above all, we are proud of its people. What is a nation but its people? Our people are being stabbed in the back by the Government's total indifference to the plight of those languishing in the dole queues, of those whose businesses are going bust and of the retired and poor people of this land, who will have to pick up the tab because of the imposition of value added tax on their essential fuel.
    That is the failure of the Government, and it is only the beginning—a trailer for subsequent Budgets, when the Government will extend the base of VAT, which will hit the poorest hardest. Labour Members are making a stand and the Labour party will resist that all the way. We shall watch tonight as Conservative Members go into the Lobby to support the Chancellor who hit the poorest hardest.
    The Chancellor's reference to the channel tunnel route was another feature of the Budget and it was a smoke screen for his inactivity and not knowing where to go. The Secretary of State for Transport also referred to the route in a statement this afternoon. The route, they argue, is important for the regeneration of south-east England and to create jobs. We must distinguish between enterprise which will create jobs in the south-east and this particular route, which is perverse and is dictated partly by the fact that the Chancellor needed something to divert attention from his inadequacies this week and partly to minimise the political impact on Conservative seats in Kent and south-east London.
    The route has not been tested against any of the normal planning criteria that should be applied in a democratic country. If you wanted to put up a structure in your back garden, Mr. Deputy Speaker, or if you decided to build an airport in Northampton, you would have to go through a rigorous planning application, and no doubt if you were refused you would have access to a planning inquiry. The people of Kent and of south-east England are being denied that opportunity over the channel tunnel route, and that is outrageous. The route has been brought to us as a smoke screen, which shows that we have a bankrupt Government who have repeatedly failed over employment and the environment.
    7.37 pm
    Mr. Iain Mills: I represent a constituency in the heart of England, in the centre of the car and car component manufacturing areas, and I am joint chairman

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    of the all-party motor industry group—[HON MEMBERS: "Hear, hear."] I hank my colleagues for their encouragement.
    I have carefully examined the effect of the Budget on new car sales. The combination of the autumn statement and the removal of special car tax, which seems to have been forgotten, as well as aspects of measures in the Budget, have been helpful. As a result, in December, car sales in the home market were extremely encouraging, especially sales of Rover cars. I welcomed the President of the Board of Trade's mention of Rover, which has its headquarters in my constituency. In addition, in terms of export sales, would my hon. Friend the Minister pass on to his right hon. Friend the Chancellor the fact that the Peugeot 405 model sold in France is made at Ryton in Coventry on the edge of my constituency, which is a marvellous achievement?
    Land Rover has also increased its sales through exports, as has Vauxhall, Ford and the Japanese manufacturers who have moved to Britain. The doom and gloom spread by Opposition Members ignores the fact that we not only managed to attract Nissan, the first Japanese car manufacturing company to come to Britain, which is now exporting cars made in Britain to Japan, but Peugeot, which is making French cars in Coventry and exporting them to France. They are not French cars but British ones. We have also attracted Toyota and Honda. All those companies have encouraged and sustained many component manufacturers. We have created a car manufacturing base that is a vast improvement on that of the past.
    Opposition Members often get confused because our productivity rate is now so competitive that it no longer requires a high level of employment. Our output has improved greatly, but, because of that improved efficiency, there are fewer available jobs.
    How has the Budget helped the car industry? The changes to car tax have produced excellent results, but I am rather suspicious about the changes in fuel duties and the recoupment of £750 million. The figures that have been provided to me by the Society of Motor Manufacturers and Traders, Ford and others suggest that between £1 billion and £1.1 billion has been recouped as a result of the changes in vehicle excise duty and the fuel duties. That is a lot more than £50 million, and I would be grateful if my right hon. Friend the Chancellor could comment on that difference.
    The Budget was a lost opportunity, because if those who use leaded petrol had been penalised heavily, that could have provided a great encouragement to the use of unleaded fuel and diesel. I was disappointed that that was not done, because that change could have offered an environmental improvement. It could also have recouped some of the revenues lost when the Government got rid of the special car tax, which was a welcome move.
    The future establishment of a simple system of company car taxation would be most welcome, because it is important. The Government have gone down the right route by offering a 35 per cent. discount, but I have a number of questions for my right hon. Friend the Chancellor. He said that, overall, the changes would have a neutral effect and that there would be gainers and losers. I believe that the proposals may create losers because some people's companies may have negotiated a low price for a car. In the proposed six or nine-month period, how will my right hon. Friend establish the cost of such a car?
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    If one company gets a better discount than another, will that be reflected in the taxation on an employee? Will the cost of the Austin Montego or the Rover 800 be established as a national figure in terms of the price at which a company could buy such cars, or will certain companies get a better deal?
    Mr. Peter Bottomley: It is calculated on the list price.
    Mr. Mills: The changes relate to the cost price. Those in the industry were aiming for the list price.
    Mr. Dorrell: The answer is that the assessment will be made on the list price.
    Mr. Mills: I am glad to know that, because I was not clear about the actual cost involved. If a company can get a better discount, however, that can create confusion, which is somewhat unfair.
    I do not know whether my hon. Friend the Minister has seen the article in today's edition of The Daily Telegraph, which states that the latest changes may discourage company car use. That is something I fear. A saving of perhaps £510 on a two-litre or 1·8 litre car could result if a person gave up his company car and bought a car or was given money by his company to do that. That would result in a great loss of revenue to the Treasury. It would also lead to lower company car sales. I am keen to encourage such sales, because those cars are normally produced in Britain by manufacturers of all kinds rather than imported.
    Representatives of Rolls-Royce came to talk to the all-party motor industry group and expressed great concern about possible changes in the Budget. I have spoken to Mr. Peter Ward, the chairman of Rolls-Royce, in the Select Committee on Employment, and I have corresponded with him in detail about the Budget changes. I have also written to my right hon. Friend the Chancellor about them, because I am concerned about how they will affect that company, which is facing great difficulties. The President of the Board of Trade referred to that company's success, but largely in terms of the aerospace industry.
    There may not be too much sympathy from Opposition Members for Rolls-Royce owners, but under the changes proposed in the Budget, as the result of the new formula, some of those owners will be paying more than £7,000 in terms of their personal obligations to the Inland Revenue through taxation. That may seem a tiny sum in view of the cost of those cars, but given today's depressed market, there is every likelihod that the sale of Rolls-Royce cars will be seriously affected at a time when that company is close to its margins on performance.
    It is desperately important to consider that issue, because the new arrangement imposes a burden of taxation on Rolls-Royce cars that is totally disproportionate to that imposed on other manufacturers. I shall be glad to correspond with the Financial Secretary on this, but I should appreciate his initial thoughts. The Chancellor should impose a cap on the new price structure at no more than £60,000 to avoid such unfair discrimination and distortion.
    The effect of the Budget changes on home market car sales will be neutral, provided that those changes do not lead to a change from company car ownership. I am slightly disappointed about formula one motor racing cars. I know that the Financial Secretary is aware that

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    their manufacture represents a major, high-technology industry in the south-east. Our industry dominates motor racing throughout the world. Despite the sad loss of our hero, Nigel Mansell, those companies will still produce the cars and the technology. I congratulate Nigel on his win in Australia on Sunday, and I wish that he would come back and join us.
    Capital allowances would have helped motor racing as well as many other industries. I know the complex arguments about the advantages and disadvantages of such allowances, but it is important to encourage high-technology industries such as the manufacture of formula one motor racing cars. I am aware, however, that the extension of such allowances would provide widespread and unspecific help to industries, but I should appreciate my hon. Friend's comments on that.
    As a member of the Select Committee on Employment, and as an hon. Member, I welcome the change in VAT regulations on horses. I congratulate the Paymaster General on his excellent ability to listen with sympathy and to make the right judgment on this matter. I am speaking on behalf not of the owners, but of the many thousands of people who are employed as grooms and stable lads, and in other occupations in the horseracing industry. I know that those Opposition Members who are punters will agree that the change is a good move.
    I must end on a slightly negative note, however. When I met members of my association and others at the weekend, the concern about VAT on heating fuels was marked. The imposition of VAT will take place in two stages, but it is causing great concern to pensioners who are above the income support level.
    Many such pensioners live in the older parts of my constituency, such as Castle Bromwich, and they feel that their savings have been eroded, particularly those who are dependent on the return on savings. The low levels of interest rates may be excellent for industry, but they offer a poor rate of return for those who have savings and who depend on interest payments. I ask the Financial Secretary to consider the effects of the VAT imposition on those pensioners who are not on income support.
    7.47 pm
    Mr. Alex Salmond: The speeches by Conservative Back Benchers could be described as downbeat, pessimistic and almost fatalistic. I hope that they have considered the economic aggregates that lie behind the Budget, because they would certainly then know that economics could be considered the dismal science.
    In the past week, I have been greatly impressed by the writings of Anatole Kaletsky in The Times. On 17 March, he wrote:
    "Mr. Lamont is assuming that the economy will never grow by more than 2·75 per cent. a year in the foreseeable future. Last year, even when the economy was still in the depth of recession, the medium-term assumptions always contained several years of 3·5 per cent. growth."
    That raises an important and serious point, particularly for an economy that faces a £50,000 million deficit in its public sector borrowing requirement.
    A 2·5 per cent. average growth rate will not be enough to close that deficit in the economy. That inevitably means
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    that extremely painful choices will have to be made about tax increases. It also shows the mirage of the so-called economic miracle of the 1980s.
    One might expect that any restructuring of the United Kingdom economy after the longest and most prolonged recession in living memory would bounce the economy dramatically into recovery. In fact, the Chancellor's figures do not forecast a bounce back in the economy, but a stagger back into some form of positive growth. It will be extremely difficult to square the circle of the £50 billion deficit in the public sector borrowing requirement and the disappointing growth rates predicted in the Chancellor's figures.
    In terms of the economic aggregates, the underlying reality of the balance of payments shows a £12 billion deficit at the pits of the recession. That deficit is forecast to rise to £17 billion over the coming year. Although there will be some quantity effect after the depreciation of sterling, it is arguable that there is no equilibrium in the United Kingdom's balance of payments, and successive devaluations of sterling will chase down an economy that is fundamentally out of balance and out of equilibrium. It may be that the destruction of vast parts of the manufacturing sector over the 1980s has been so great that there are now black holes in the economy that will keep it in a permanent state of disequilibrium.
    The dismal truth of those two underlying statistics is that there will be a strong emphasis on chasing the tail of recession, with constant tax increases, in a vain attempt to close a PSBR deficit which, because of the underlying poor performance of the economy, cannot be closed. That process would occur whatever Government were in charge of the United Kingdom, as the underlying message of the Budget is that Britain is bankrupt.
    It is true that other Governments elsewhere have faced tough choices on tax increases. However, the difference between our Chancellor and President Clinton is that, when the President faced a tough choice over tax increases, he tried to ensure that the taxes fell on those who were able to pay them, whereas every choice taken by the Chancellor has aimed taxation at those least able to pay. Every decision has been aggressive, which means that the losers of the boom of the 1980s will turn into the double losers of the recession through the 1990s.
    I shall mention three aspects of the Budget that are not just anti-poor—as the whole Budget is—but produce anti-Scottish effects. The first of those aspects involves the constant year-by-year increases in petrol taxation.
    Rural regions will suffer greatly, and transport costs in the Scottish economy will increase substantially. Those of us who are active in Scottish politics remember only too well the Kincardine and Deeside by-election, when the Liberal Democrats were slated by the Secretary of State for Scotland for proposing, not a constant annual increase, but a one-off increase, in petrol duty. The Secretary of State for Scotland waxed eloquent about the impact of that surcharge—as it was called—on the rural areas and the economy of Scotland, but now the Chancellor's Budget predicts a substantial year-by-year impost on petrol duty.
    The petrol increase might have been defended in environmental terms if some consequent attempt had been made to reinforce the transport infrastructure north of the border to sustain and develop the public transportation system. However, all the investments in public transport in the Budget are made in the south-east of England, where

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    billions more pounds are being poured into the transport infrastructure. The Budget contains nothing for anywhere north of Potters Bar.
    The second aspect involves oil taxation. The Chancellor announced with a flourish that he was abolishing some aspects of petroleum revenue taxation. Some commentators were even gullible enough to describe that measure as a boost for the oil industry. The consequence of the taxation will be perhaps as much as £600 million accrued by the Exchequer from the oil industry over the next year or so.
    There is a case for increasing oil taxation at a boom time, because oil is a cyclical industry, and a taxation increase can be defended as a means of lowering the pressure of demand in the sector. But what possible case can there be for increasing taxation when the sector is already depressed? The immediate impact of the Chancellor's Budget measures announced last Tuesday has been the cancellation of drilling contracts in the North sea over the weekend, and hundreds of job losses in a sector that was already moving into a downturn.
    The third aspect was the taxation on heating—by far the most controversial measure in the Budget. For many years, the Scottish National party has argued for a cold climate allowance to take account of the fact that, in some areas of Scotland, it costs 30 per cent. more to heat a home than in the south-east of England. We did not expect to achieve that allowance from the Government, but even we did not expect a cold climate surcharge, with the Budget measures increasing that disadvantage.
    A number of statistics lie behind my concern. The report "Warm Homes in Cold Weather", released in October 1991, showed that, while deaths in January between 1976 and 1984 were 4 per cent. above the monthly average in west Germany, and 7 per cent. above the average in Sweden and Norway, deaths in Scotland in January were 16 per cent. higher than the average. Many Chancellors have been slated for not acting on the cost of living, but the present Chancellor deals in statistics that involve the cost of dying—the most severe aspect of the Budget.
    Scotland is the most energy-rich country in Europe, and one of the most environmentally sensitive in terms of energy production. The Scottish electricity industry is either low-carbon or no-carbon in its production. It is ironic that poor people in Scotland—pensioners and those on low incomes—will suffer poverty amid plenty. Those are the serious effects of the Chancellor's Budget, which will not save the world through green taxation. The Budget sacrifices the poor and those most vulnerable in Scottish society and society elsewhere.
    The House should vote against the first Budget resolution, on amendment of the law. If we passed that resolution, it would gag and bind the Bill in Committee. The first resolution does not allow subsequent discussion of the Bill to include any amendment proposing zero rating or reduced rates of value added tax. If the first Budget resolution is passed this evening, it will mean that, in Committee, hon. Members will have no chance to move zero rating on fuel for specific categories or even to lower the rate for some categories. No Minister has specified the amounts and funds available to help those most vulnerable in society as a result of the Budget impost. It would be incredible if, in Committee, hon. Members could not substantially amend the measure.
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    I have heard concern expressed on the issue, both over the weekend and by Conservative Members tonight. Even if they are not prepared to vote directly against the Budget measure, they should at least vote against the first resolution. Unless we vote against it this evening, it will be impossible later to ensure justice for the pensioners and those most vulnerable in society.
    7.57 pm
    Mr. Nicholas Winterton: We are having a most interesting debate and I have much sympathy with a number of the contributions that have been made—not least that of my hon. Friend the Member for Meriden (Mr. Mills) and my right hon. Friend the Member for Old Bexley and Sidcup (Sir E. Heath). I particularly agree with what my hon. Friend the Member for Meriden said about Rolls-Royce motors. The Budget will greatly penalise one of the great motor companies of this country. It produces expensive cars, but I do not believe that its production should be penalised, as the Budget has done.
    I am deeply concerned about the impact of placing value added tax on heating and light, and the effect that it will have on those on low income, the unemployed and the elderly. I refer particularly to those on low incomes who fall just outside eligibility for assistance available under state income-related benefits.
    Unless we get categorical assurances from the Government that the position of these groups will be fully taken into account in respect of this large additional impost, I shall not be able to support the Government's measure.
    I come from an area where we have a good balance of industry and an excellent range of manufacturing industries, modern and traditional—Zeneca plc, the pharmaceutical division of ICI, Ciba plc, and a number of video technology, information technology and computer companies. We also have many companies in the traditional industries of textiles and clothing, such as Rieter Scragg, Mowbrays, Cressys and Adamley Textiles. These are traditional but still substantial employers, I am glad to say. We also have paper and board companies, and engineering firms, so we have a fine balance. I always seek to participate in these debates from a position of knowledge of manufacturing industry.
    When I spoke in the debate nearly a fortnight ago I made six suggestions for consideration by the Government: the introduction of 100 per cent. capital allowances; a commitment to a further reduction in interest rates; the abolition of stamp duty; the creation of a new task force to identify import substitution; a more favourable tax regime for fees for part-time study; and an explicit political commitment to promote British exports. I also called for a review of our laws on liquidation anti bankruptcy.
    For the very first time, the Chancellor has shown a receptiveness to the vital role that our manufacturing and construction industries play in providing employment and generating wealth. I am aware of the difficult balancing act that the Chancellor had to perform between the need to deal in the medium term with the threat of a spiralling PSBR and the need to ensure that the first weak breaths of economic recovery were not stifled by the dead hand of swingeing tax increases.
    I make these comments to show that I fully appreciate the problems faced by the Government and that I welcome

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    the greater attention that is being paid to our manufacturing and construction industries. The Manufacturing and Construction Industries Alliance, launched in this House about three weeks ago, together with the new all-party manufacturing group launched by my hon. Friend the Member for Coventry, South-West (Mr. Butcher) and the hon. Member for Huddersfield (Mr. Sheerman), and the initiatives in which the CBI and the Engineering Employers Federation are involved, have, I hope, had something of a catalytic, if not a causal, effect in concentrating the attention of the House and of Ministers on these important sectors.
    It is also clear that the Chancellor sought to deal with a number of the principles that I highlighted by giving greater and welcome assistance to our exporters through a boost in the export credit guarantee schemes, by reviewing the stamp duty on the sale of houses in the lower price bands, and by renewing his commitment to greater public spending, in partnership with the private sector, on infrastructure development projects. I also warmly welcome the change to the loan guarantee scheme, which will cut the cost and improve the availability of bank finance for smaller businesses. We want more long-term, fixed-interest loan schemes. We want more equity taken by the clearing banks, and fewer businesses financed by overdrafts.
    There is also much-needed help for small businesses in the form of a review of VAT procedures and an extension of the freezing of the business rate. Many thousands of small and not so small businesses will greatly benefit.
    If the Chancellor, however, is being asked by the House to walk a tightrope between curbing the PSBR and encouraging economic growth, we should not overlook the fact that he is being required also to juggle. If, as the Prime Minister and the Chancellor have both said, the conditions for economic growth—low inflation and low interest rates—are in place, then, in the absence of growth, we must look around for the missing factor in the equation. It is, of course, consumer confidence. In the months ahead, the success or otherwise of last week's Budget will be assessed against its impact on consumer spending intentions.
    That view, expressed by the alliance last week in a press release, is echoed by Mr. Howard Davies of the CBI, who, writing in the current edition of "The House Magazine", comments on the possible impact of the tax increases that have been announced by rightly saying:
    "There is a risk that they will affect spending decisions this year"—
    not in the years thereafter. If the fears of the alliance and the CBI prove to be justified, the Chancellor's Budget will have failed to give consumer confidence the boost that is so desperately required, and the overall impact of his proposals will not be, as he has said, neutral: they will be negative.
    When I spoke two weeks ago in a debate about manufacturing and construction, I called on all political parties to lay the foundations for a new cultural and political consensus that places the needs, problems and potential of these industries firmly on the parliamentary agenda. The intentions behind the Budget show that the Chancellor's mind is receptive to the proposals that I espouse, but, unfortunately, its practical proposals clearly show that he is not with us yet.
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    I ask the Paymaster General to assure me that any responsible proposals for greater help for manufacturers and exporters that are suggested in subsequent debates on the Finance Bill will be given careful and sympathetic consideration; and that if we make a convincing case for the introduction of 100 per cent. capital allowances, for example, it will be accepted and policies will be changed as a result.
    We have heard some first-class contributions to this debate. I am delighted to see the right hon. Member for Ashton-under Lyne (Mr. Sheldon) in his place. I agreed with much of what he said; it is only a pity that so few hon. Members are present to be influenced by these considered speeches. When we come to vote, we will be voting not on the merit of the debate but in accordance with party lines. That is tragic, because there is great ability in all parts of the House.
    Hon. Members on both sides have taken up the cudgels on behalf of manufacturing and construction. Let that expertise, experience and knowledge be put to good effect, so that we can once again regenerate the only source of non-inflationary economic growth: our manufacturing base. If we do, we will pass on a legacy to future generations of which the House and this Government can be proud.
    8.7 pm
    Mr. Gordon Prentice: I am pleased to follow the hon. Member for Macclesfield (Mr. Winterton). I represent the manufacturing capital of Britain. A higher percentage of people in Pendle than in any other constituency in the land work in manufacturing industry. My hon. Friend the Member for Livingston (Mr. Cook) opened the debate by referring to the fact—it is a fact—that the Government cheated their way back to power last 9 April. I want to pick up that theme, and to return to the Tory manifesto, "The Best Future for Britain".
    Manifestos are important, and this one is no exception. It represents a contract entered into between the Government and the people, so the Conservative manifesto cannot be lightly cast aside after 11 short months. In that time a great many things have been cast aside, most notably honesty. The whole political process in Britain has been corrupted by this Government, who told the British people that the Conservatives are
    "the only party that understands the need for low taxation."
    That rings hollow now.
    In the foreword to that manifesto the Prime Minister told the British people that he believed in low taxes—no doubt in the same way that he believed that the Government's duty should be
    "to protect the value of the currency without which all spending pledges are worthless."
    That was the man who devalued our currency. I doubt now whether he could talk about pledges, manifesto or otherwise, without being blown away in a gale of laughter. His pledges are totally devalued.
    The right hon. Gentleman used to believe in manifesto pledges and the mandates that they conferred. On 29 October, The Times informed us that he told a packed meeting of the 1992 Committee—in the context of the internal debate within the Tory party on Maastricht, which rages now as it did then:
    "The Conservative manifesto was not an a la carte menu from which they"
    that is, Conservative Members—
    "could merely pick the juicy items."

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    The fact is that the manifesto was not a menu at all; it was a work of fiction.
    At the CBI conference on 9 October last year, Mr. Philip Goldenberg of S. J. Berwin told the delegates, if that is what they were:
    "If the Government's election manifesto had been a company prospectus it would have had the entire Cabinet in jail."
    Quite so, but it is not just fabrication and invention that characterise the Government's record—it is also incompetence. The chairman of GKN, Sir David Lees, told the same conference:
    "A new economic theorem is developing known as Lamont's Law. It states that any economic indicator will invariably turn down once the Chancellor identifies it as a portent of economic recovery."
    He was telling us something that we already knew about—the green shoots syndrome.
    People have woken up to the difference between what the Chancellor has been telling them and what has actually been happening. The scale of duplicity and mendacity perpetrated on the people of Britain is truly spectacular. The Sunday Times, in an excellent editorial yesterday, said that the Budget was not
    "a budget for growth, or for jobs, or for business though it should have been for all three…It was a budget to pay for the past mistakes of John Major and Norman Lamont."
    There have been many mistakes.
    The Prime Minister of manufacturing presides over the relentless deindustrialisation of Britain. In my constituency a fortnight ago, Progress Engineering went down the tube, taking 40 jobs with it. Last week Wadkin Colne of Trawden folded, with a loss of 65 jobs. Those come on top of the cascade of job losses in my constituency month on month and year on year.
    The Prime Minister believes in protecting the value of the currency, but devalues in a move costing the country £5 billion. The Prime Minister pulled out of the exchange rate mechanism, although he had said that staying in the ERM was absolutely central to the Government's policy. The Prime Minister won the election on the basis of slogans such as "A double whammy" and "Labour's tax bombshell", but went on to hike taxes massively. I do not know what is worse—what was perpetrated on the British people 11 months ago, or what happened in 1979 when Saatchi and Saatchi said, "Labour isn't working'' and employment stood at 1·1 million: there are now 3 million unemployed.
    The £17·5 billion tax rise announced in the Budget is the biggest in British history. Allowances have been frozen, mortgage tax relief has been cut and value added tax has been loaded on to domestic fuel. Yet at the end of our debates on the Budget there are still no cast-iron guarantees that the poorest in society will be fully compensated. As the hon. Member for Macclesfield said, it is people just above the income support level who lose, and who will always lose unless there are such guarantees.
    What does it all mean for people in my region? In the north-west, 1,130,000 households will lose because MIRAS is to be restricted to the 20 per cent. rate and some 2,734,000 people will pay higher tax bills because allowances and thresholds have been frozen. Despite everything that the Government said at the time of the election about national insurance contributions—they lambasted Labour for its plan to remove the ceiling—there is to be a 1 per cent. rise which will affect 18 million employees generally, and 2,405,000 in the north-west.
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    Raising national insurance contributions is more regressive than a 1p rise in income tax because of the lower levels at which people start paying contributions.
    As my hon. Friend the Member for Livingston (Mr. Cook) said, about 500,000 people on wages so low that they do not pay income tax will be caught by the increases in national insurance contributions. What a state of affairs. The Sunday Times yesterday said that income tax was effectively being increased in the Budget through the sleight of hand of an extra 1 per cent. on national insurance contributions. Sleight of hand comes easily to a Chancellor who is also a conjuror and a member of the Magic Circle. However, it is not how everyone sees the Budget.
    I was speaking at a lunch meeting of the Pendle business club last Friday, which was presided over by Mr. Philip McIvor, the chairman of Farmhouse Biscuits. He told the meeting that the Budget was a Budget for jobs. That was pure fantasy, especially in Pendle where unemployment has risen by 85 per cent. since the Prime Minister entered No. 10. In the constituency in 1991—almost predating the current deep recession—269 companies registered for VAT, but 285 deregistered. It is not a Budget for jobs. In so far as Britain is pulling out of the recession, it is because there is a more competitive exchange rate which is likely to encourage export-led growth. That is purely fortuitous, because of what happened on 16 September when the Prime Minister and the Chancellor pulled Britain out of the ERM.
    The right hon. Member for Old Bexley and Sidcup (Sir E. Heath) said that he feared for the future of Britain because of the destruction of so much of our industrial base. Lord Prior, a former Conservative Cabinet Minister, said that it would take 20 years to repair the damage that has been done—
    Mr. Deputy Speaker (Mr. Geoffrey Lofthouse): Order. The hon. Gentleman's time is up.
    8.17 pm
    Mr. Peter Bottomley: Before discussing taxation and spending, I want to refer to what happened in Warrington on the weekend.
    We have our debates and our arguments; other people use bombs and bleeding, bullets and maiming as a substitute for political argument. I believe that the House would want the message to go out that we prefer debate and rational argument.
    If people want to put a point of view on Irish nationalism, they should get elected and come here, or get more than 2 per cent. of the votes for the Dail and speak in the Irish Parliament. They should not destroy children and crucify three-year-olds in pursuit of political argument.
    The Government should be praised for giving so much information to the House and to the country. In the autumn statement, they provided "Public Expenditure Analyses"—Cm. 2219—and gave most of the hints and clues on tax expenditure in appendix D, pages 135 to 138. In effect, they stated the options that they would be considering for reducing some of the gap between spending and taxation.
    In terms of extra duty on motor fuels, the Government were right. There are also strong arguments for their proposal to impose value added tax on domestic fuel. I criticise those hon. Members and commentators who take

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    it for granted that some of the factors that increase fuel costs cannot easily be changed. Sixty per cent. of pensioners live in homes that have inadequate heating systems. That should be tackled under a five-year programme that would create worthwhile work for those who need it most—in the same way that we tackled roofing problems some time ago during an earlier period of high unemployment.
    This coming week, we shall see the end of the coal obligation on generating companies—the requirement for them to pay an extra £1,000 million for the higher price of coal. The cost of burning coal to generate electricity and the extra profit margin involved probably have the same effect as VAT on domestic fuel. That obligation was accepted because it was felt that keeping more people under ground was a good thing, even though the cost must be met by electricity consumers. We have already heard that a higher proportion of that cost will be paid by those on low incomes, or the cost will account for a higher proportion of the incomes of those who are not earning. We should be realistic about both.
    In the same way, I suspect that some hon. Members and people outside the House would have regarded it as better if the cost of domestic gas had remained as high as in 1986, when British Gas was privatised, to avoid the 17·5 per cent. VAT imposition over the next two years, even if that made people worse off. After privatisation and competition, the real price of gas has become 20 per cent. lower than it has been, so even a 17·5 per cent. increase on that reduced index would have left users better off. We must be rational.
    As to reducing unemployment levels, I have a horror of not just the way that the coal communities appeared to have been disregarded but of the way that the debate has developed. If last autumn's argument was for an extra £100 million of spending a month to maintain an extra 25,000 jobs in mining communities, that represents £4,000 per miner job per month, or £48,000 a year.
    On the fringes of my constituency in south-east London, seven miles from this place, is the Woolwich Arsenal site. Over the past 70 years, it has lost 73,000 jobs—the equivalent of a colliery closing every single year for 70 years. The last 1,000 jobs go this year. Unemployment is running at 60 per cent. in the Arsenal ward of the hon. Member for Woolwich (Mr. Austin-Walker). That affects many of my constituents as well.
    A city challenge application asked for £12 million a year over five years—a total of £60 million—to generate between 2,000 and 4,000 jobs, with much private sector money coming in as well. It would have involved a development on derelict land seven miles from Westminster.
    We should ask whether the Government can rationally decide expenditure over and above the level of their taxation revenue, and whether the subsidy provided by the consumer or taxpayer to help transition in the mining industry could not be partly diverted to meet some of the city challenge applications that could not be approved by the Department of Environment. Both the economic and employment effects would be substantially better—in the same way that an extra £500 million of capital investment
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    in British Rail and London Underground would have a better economic and employment effect than transition being delayed too long for too many pits.
    Getting the framework of taxation right does not get proper attention. If I had longer to speak, I might question whether there should not be the same VAT arrangements in respect of greyhounds as those made for horses. Why should not the sport of kings' arrangement work for those of us who are going to the dogs?
    I praise the Government for acknowledging that they have lost £500 million a year in revenue on whisky—with or without an "e". We find that, because of fashion, recession and strangling the golden goose, whisky sales have been declining. In leaving whisky out of the count, and reducing the duty on that and other spirits, there may be a rebalance and people will be able to make a choice—especially when they are not driving.
    We should also examine the properness of tax expenditure. I have argued for most of my 17 years in the House that mortgage interest relief is counter-productive. I repeat also my comments on previous occasions about personal allowances. It is back to the Grey Book, which details the large sums of tax forgone by permitting personal allowances—and I refer not just to the married man's personal allowance. I welcome its reduction to 20 per cent. I would reduce the personal allowance to 20 per cent. and do the same in many other areas, so that help is concentrated where people need it.
    I remind of the House for the reason for the child benefit scheme, which was not mentioned in the Budget because it is dealt with relatively automatically. Child benefit is not a form of income support. I suspect that the Treasury would do better to wrap up the Department of Social Security and make its functions an adjunct to the Treasury, in the same way that the Inland Revenue and Customs and Excise are.
    There are further important measures to be taken in respect of income support. Child benefit should not be part of that. What is the justification for a cash child allowance? Looking at the family life cycle in social and economic policies, when people have children their taxable capacity is reduced and their needs increase. That is the justification for the allowance. It should not be a tax allowance that gives most help to people in the 40 per cent. tax hand, about the same help to those in the 20 per cent. or 25 per cent. band, and no help to those below the tax threshold. Would it be better to have a flat cash allowance? The answer is yes.
    My right hon. and noble Friend Lady Thatcher understood that, which is why in 1983 and after what I call the Lawson fallacy on child benefit, she made sure that the Chief Secretary to the Treasury and the Secretary of State for Social Security increased it. She understood, but we often forget. Every three or four years, it is worth making the argument again out in the open.
    If I had time to make a longer speech, I would talk about the effects of the Budget on trade. It is right, too, to encourage small business.
    We should ask when we will be willing to give up tax benefits at some stage or in some circumstances so that others—or people like ourselves in different circumstances—can gain more benefit either from tax expenditure, real benefits, or the chance of employment.

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    It is not a question of from whom we will take and to whom we will give. It is in each person's life cycle. When will they be willing to give up what they have, so that they and others can gain it when they need it?
    Matching needs and resources better requires a debate that goes beyond the scope of a Budget debate. I hope that is something that Labour's social justice commission will examine and that the Tory party will find a way of making that match. I hope that some of those issues will be considered across the Floor of the House, so that the Budget deficit will be reduced, people's well-being will be increased, and avoidable disadvantage, stress and handicap are minimised.
    8.27 pm
    Mr. Clive Betts: The Budget stands condemned on four grounds. It contains broken promises, offers no hope to the unemployed, is based on a Government act of faith that recovery will somehow occur, and provides no means of dealing with the British economy's long-term structural problems.
    We are told that, at the time of the 1992 general election, the Government had no plans to increase the scope of value added tax. Those are weasel words. The majority of people who voted for a Conservative Government did so in the firm belief that VAT would not be levied on goods or services such as domestic fuel during the lifetime of this Parliament. For the Government to claim now that they had no such plans in 1992 but that they might at some time during the next five years is dishonest.
    The Government claim that their promises were made sincerely in 1992. What of current Government commitments not to extend VAT to children's clothes, food or books? Are those commitments just as sincere as those made in 1992?
    The impact of the Budget measures was mentioned by several of my hon. Friends. We have not yet been given a figure by the Government, but they could still cushion the impact of their actions on people receiving income support and pensions. They cannot, however, protect the low-paid who are just above income support levels and for whom fuel expenditure represents pay a higher than average percentage of their income. Those same people must, on average, pay out a higher percentage of their incomes because of the national insurance increases. They, not the higher-paid, will suffer. The Government have offered those in low-paid employment a real double whammy.
    I personally welcome the changes in mortgage tax relief. I do not consider the mortgage tax relief scheme defensible; I have held that view for many years. But why did not the Government use the money to introduce a benefit scheme for low-income earners with mortgages—people who are not only struggling to make their mortgage payments now, but, in many thousands of cases, facing the prospect of repossession? The Government could have used the savings resulting from the change in the mortgage tax relief system to introduce benefits to assist those whose earnings place them just above income support level.
    What have the unemployed been offered? They have been offered no help and no hope. No help or hope has been offered to the 100-plus who are to lose their jobs at Whitbread in Sheffield, the 100-plus who will lose their
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    jobs at Trebor Bassett and the 100-plus who will lose their jobs at Avesta Sheffield. All those job losses have been announced in the last few weeks.
    What do we offer a 50-year-old ex-steel worker, made redundant up to 10 years ago, or a 25-year-old who has never had a job? Do we offer the possibility of one of 100,000 training places, when those people know, and we know, that there is no possibility of their getting a job at the end? That is not merely dishonest; it is immoral.
    The Government could have done so much. They could have released the capital receipts that are still locked up in local authority coffers; they could have presented sensible proposals for the development of a proper transport infrastructure, rather than the shambles and the constant delays of the channel tunnel link and the fiasco of the Jubilee line extension.
    When will the Government recognise that public investment must be in place before we can create a climate in which private investment can follow, instead of trying to cobble together deals that simply result in years of delay and no action on the ground? All that the Government appear to offer the unemployed is protection from the Labour party and the social chapter. That is a real bargain basement offer: "no pay or low pay" seems to be their policy.
    The whole Budget seems to have been motivated by faith—the belief that the recession will end, some time, somehow. In imposing VAT on fuel, the Government have admitted that they got it wrong: they thought that recovery was coming 12 months ago, but it did not materialise; hence the increase in the public sector borrowing requirement. Their economic approach is almost equivalent to the national health service abandoning medical science in favour of faith healing. Behind the facade of the "seven wise men" arguing away, we can almost see Treasury Ministers and their civil servants in a room in No. 11 Downing street—on their knees, eyes closed, holding their hands in front of them, willing the green shoots to appear. There seems to be no more substance than that to Government medium-term strategy.
    Every so often, a cry of joy will be heard as unemployment falls for a month—although every serious commentator recognises that that is merely a blip. Cries of delight will be heard when industrial production goes up in one month, but the fact that the far more important three-month average has not shifted will not be recognised. Retail sales have risen since Christmas, but, year on year, they are still down in real terms. Housing activity is increasing slightly, but the scale of the depression has been so great that that increase will not feed into the construction industry for a long time, and the Government are offering the industry no real assistance.
    The Government are willing recovery to occur, but what will happen if it does not? What will happen if it is delayed for another year—delayed until the tax increases begin to bite? Where in the Budget is the recognition that recovery is not certain, and that the timing is problematic? Where do we read of the consequences of the Government's getting it wrong, and—as they did 12 months ago—predicting a recovery that does not happen?
    Let us turn to the long-term problems. Where is Government policy in that regard? Since 1979, unemployment, manufacturing investment and the balance of payments have worsened. The Government's problem with the economy is not cyclical; it is a fundamental,

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    structural problem. The 1980s were a decade of private consumption and borrowing, which created personal debt. The Government should be turning the 1990s into a decade of investment in manufacturing and infrastructure, but there are no signs that they are doing so.
    The Government's dilemma—the PSBR is rising to record levels, while unemployment is doing the same—is a product of the real weakness of the British economy: the inherent failure of our manufacturing industry, its collapse in the 1980s, the loss of a third of manufacturing jobs and the dereliction and destruction of areas such as the lower Don valley in Sheffield, where 50,000 jobs were lost during that decade. The same fundamental problems have brought about our balance of payments crisis at the depth of the longest recession that the country has experienced since the war.
    The one thing for which the Government can claim some credit, in their terms, is getting inflation down; but we must ask whether they have solved even that problem. They have brought inflation down to below 4 per cent., but that was at the depth of a recession; they have never managed to achieve the same result at any of the peaks of economic activity since 1979, although each of those peaks has coincided with a higher level of unemployment than the previous one. That is the scale of the problem that the Government not only face—as we do—but have created, and for which they will not accept responsibility.
    The Budget does not recognise the existence of such problems. It does not attempt to solve the long-term difficulties of financing British industry, and the relationship between banks and manufacturing industry, which clearly is not working; it makes no attempt to deal with the long-term problems of financing and offering equity capital to small firms, and the skills gap that affects the whole of industry; and it does not try to stimulate research and development to secure long-term recovery. None of those issues is mentioned.
    On all counts, the Budget has failed. It has failed the whole nation with its broken promises. It has failed the unemployed by offering them nothing; it has failed to give a clear direction on medium-term strategy, offering faith and hope as a substitute; and it has failed to recognise the inherent structural failings of the economy, or to provide any policies to deal with those failings. It is a failed Budget from a failed Government.
    8.36 pm
    Mr. Anthony Steen: That was a merry speech.
    I do not know whether the 10-minute rule will apply to me, as I am the last Conservative Back Bencher who will speak this evening; hon. Members on both sides of the House may wish to hear a little more from the Conservative party, and I am happy to speak for a little longer. The 10-minute rule means that hon. Members cannot mention all the speeches that they have heard, although I know that they will be mentioned in the winding-up speeches. Some interesting speeches have been made—for instance, the speech of my hon. Friend the Member for Eltham (Mr. Bottomley), who always speaks so brilliantly that his tour de force must be read very carefully if the reader is to understand all the finer points. I am sure that the House will wish to return to that subject.
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    In the nine minutes available to me, I want to speak about the Budget's interesting proposals for small businesses. Unlike its predecessors, which have tended to introduce fiscal measures of one kind or another, this Budget recognises that the administrative arrangements for small businesses are often equally important. It is no good giving companies tax breaks if there are so many rules and regulations that they are prevented from being profitable. I welcome the introduction of self-assessment for income tax purposes, the fact that self-employed people will pay tax based on current and not preceding year' estimates, and the fact that companies that are not incorporated will not be required to have a statutory audit.
    The Budget, however, must be seen in the context of other initiatives to help small firms. The Government have abolished 5,000 business forms and 10,000 others. What did those forms do? How can the Government simply get rid of 5,000 forms? What were they all produced for, and what is the result of losing them? Why were they put there in the first place? What have we lost by taking them away? Will the number of civil servants and bureaucrats be reduced?
    Does bureacracy in this country increase in direct proportion to the number of rules and regulations that are abolished? Is there a new Parkinson's law whereby the more things we get rid of, the more staff employed increase? The Palace of Westminster is a good example. I have my office in one of the outbuildings, where a very expensive security system has been installed. The door opens only after a card has been inserted. Before this high security system was installed, there were no security guards. Now, with the system, there are two full-time security officers as well as a very expensive security system. There seem to be more and more opportunities to duplicate our staff as well as our technology.
    Mr. Patrick Cormack: And the doors often do not work.
    Mr. Steen: That is perfectly true, but that is another matter.
    Since 1957, the rate of introduction of Government rules and regulations has increased steadily. The trend has accelerated during the past six years. This most recent trend has been caused by the Government's practice of introducing new rules and regulations—statutory instruments—under ministerial powers, following primary enabling legislation. In 1992, the Government introduced 2,439 statutory instruments. It is not surprising that, in the same year, 24,424 companies became insolvent. It was not just the recession; it was the impact of the plethora of rules and regulations on enterprise. Many of the rules and regulations emanate from this place, as well as Europe.
    Each set of regulations develops a life force of its own. As it spins into orbit, it attracts lots of people around it. It is self-generating; it attracts more and more officials as it spins off into space. Officials will fight to the death to keep each regulation in place. Every time we introduce a regulation, either in this House or in Europe, we also introduce a new bureaucracy to service that regulation. Far too much stick and not enough carrot is given to companies to implement the rules and regulations.
    The Prime Minister has already said that he intends to do something about reversing that trend, but the buck starts and stops in Westminster. Just as central Government are trying to make local government more

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    cost effective, so we need to apply the same rules to ourselves. I wonder whether machinery exists in the House to deal with central Government Departments that are churning out rules and regulations. Some hon. Members may say that the advantage of the Mastricht debate is that it is preventing the Government from introducing more and more rules and regulations.
    I welcome both the Prime Minister's and the Government's intention, but we have to translate their belief into freeing up enterprise and reducing the amount of bureaucracy and the number of rules and regulations imposed on small businesses.
    What is the problem? By privatising companies, we have produced two organisations: first, the provider of the service; secondly, the regulator. That has led to a new scenario. Water authorities used to provide both water and water services. They also used to be the gamekeeper. Today, the job of water authorities is to provide clean water and to free the sea from pollution. The job of the National Rivers Authority—the gamekeeper—is to scrutinise the work of the water authorities and to prosecute them if they do not comply. It is rather like a man with the stick chasing a dog.
    The reason for the introduction of more and more rules and regulations and for their application with such ferocity and enthusiasm is because those two functions have been separated. We have not dealt with the effect of the introduction of the regulator.
    The Audit Commission is breathing down the necks of local authorities. It spends most of its time pressing local authorities to increase their standards of performance. Some standards incur the more rigorous application of statutory duties and regulatory enforcement. Consequently, enforcement officers are more zealous when faced with target enforcement standards. It is the classic mistake of using input rather than output measurement—an increase in efficiency but not effectiveness. In general, the Audit Commission adopts a regulatory approach. That is a fundamental error, as there are other ways of encouraging British management and industry to comply.
    The problem with negative enforcement is that it has resulted in a new approach that accepts accountability for compliance, with health, hygiene and safety standards, but oblivious to the current economic position. Rules and regulations shall be brought into force only when the nation can afford to do so.
    How are we now to proceed? First, there are 70,000 rules and regulations on the books. We cannot repeal many of them. Furthermore, all these officials are implementing the rules and regulations. They would not give up their jobs lightly.
    Secondly, we could starve the enforcement agencies, such as the National Rivers Authority or the local authorities so that they no longer had the money or the bureaucracy to enforce the regulations. The Chancellor of the Exchequer might find that approach attractive. He could save a lot of money by not providing resources to the enforcement agencies.
    Thirdly, we could slow down the enforcement of the rules and regulations. We ought not to be the first of all the European Community countries to enforce the regulations. We should not necessarily be among the slowest, such as Greece and Portugal, but we should slow down the pace of enforcement. That would be extremely helpful.
    Lastly, a new civil service culture is needed. That may be the result of the scrutiny team's recommendations. An
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    announcement was made earlier this month that a team would be set up, and 500 small firms would be asked to tell the Government what should be done about the regulations from which they suffer.
    Last year, red tape killed nearly 25,000 companies. Although I welcome the Prime Minister's initiative, I am concerned about how it will be translated into action. We shall be unable to compete with the rest of Europe so long as we smother business with rules and regulations which——
    Mr. Deputy Speaker: Order. The hon. Gentleman's time is up.
    8.46 pm
    Mr. Bill Etherington: I appreciate being called to speak in the debate, Mr. Deputy Speaker, having been absent for so much of it. However, I heard the President of the Board of Trade's speech this afternoon, and it was like a trip down memory lane. He referred to the dissatisfaction of the Conservatives with what they inherited when they took office in 1979. I am surprised that he did not go back to 1924 and castigate Ramsay Macdonald, or to 1945 and castigate Clement Attlee. What has to be realised, above all, is that the Government have been in power for so long that they cannot castigate anybody else for what has happened. They have been in power for over half a generation.
    My constituency is very depressed. The Budget has given no encouragement to many of my constituents. Nevertheless, I welcome three things. I welcome the fact that mortgage interest relief is to be reduced. I have long believed that property prices have been kept artificially high for many years because of mortgage interest relief. It would be a good thing if it were abolished altogether, although I realise that that will take time. I am also very pleased about the abolition of stamp duty on premises that are sold for less than £60,000. That will be very good for first-time buyers who are short of money.
    Most important of all, I am pleased not so much by what is in the Budget as by what was left out of it, although the Chancellor of the Exchequer made a playful reference to it. He told us that there is to be no imposition of VAT at this time on reading material. I very much welcome that announcement.
    We must view the Budget in the context of what has been happening in the past 14 years. It is an ironic coincidence that the Library issued a very good publication earlier this month. It could not have come at a better time. Research paper 92/93, entitled "The Burden of Taxation", points out that, since 1979, those who have been on above-average earnings have gained at the expense of those on below-average earnings. I recommend that Conservative Members read the document instead of trying to mislead the public by telling them otherwise. It is now possible for a person earning 150 per cent. of average earnings to pay a smaller proportion of his earnings in direct taxation than a person on average earnings.
    Every hon. Member is well aware that indirect taxation, such as VAT, bears more heavily on the poor. I wish to comment especially on the proposed imposition of VAT on domestic fuel at 8 per cent. next year and at 17·5 per cent. in 1995. Hon. Members, and especially Ministers, probably will not notice the increase in their fuel bills. It is fine for them to say that it is a good system, but they have clearly not considered the low-paid. I am not talking only

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    about poor pensioners. Many pensioners have small pensions in addition to their state pensions, which takes them above the income support level. They will be hit especially hard, but 12 million people live below the European decency threshold, and they will be hit even harder.
    It does not take much understanding to realise that many people whose incomes are not very high—perhaps both partners are having to work to give their children a reasonable standard of living—often live in premises that are not very well insulated. They do not always have a choice of fuel, and matters have not been helped by the fact that many councils have not been able to bring properties up to the required standard, because of a lack of cash. It is an indictment of the Government that they should consider a fuel tax when there is already so much fuel poverty. It is no exaggeration to say that, every year, people perish from hypothermia, largely because of the cost of fuel but also because many premises are not up to standard.
    I always remember a good comrade of mine saying many years ago that one can always judge a society by the way it treats its very old and very young. Just as many pensioners will suffer from this pernicious taxation, so many young people will also suffer. It does not bear thinking about.
    One of the most annoying aspects about the proposal is that, during the so-called boom years, many of those on above-average incomes did very well, and it seems only right and proper that, when the country runs into more stormy times, they should be expected to pay a little more, not less. Once again, the Government have shown just what sort of Government they are, how unfair and unjust, and how little respect they have for those who create the wealth, who are not necessarily those on high pay—indeed, I suggest, just the opposite.
    It must also be said that the fuel tax will affect charities. It is worth bearing in mind that, because of the failure of so many of the Government's social policies, more pressure is being put on charities. Charities will not be able to claim back the extra VAT that they will have to pay on fuel, and they will also suffer a loss of income tax relief on their investments.
    I may not know as much about finances as most Conservative Members, but I have been involved with charities. I know how they work, and I know that there often is a very thin line between them continuing to exist and having to wind up. I am very much afraid that the imposition of VAT will cause charities to suffer badly, especially those charities looking after old people, which will have to bear a disproportionate burden because of heating costs.
    There has been a tremendous amount of hypocrisy about the green effect of the proposal, and about our having to meet emission standards. If this country were sincere about meeting those standards, we would be spending money to ensure that all properties were properly insulated; we would be doing something about transferring freight and passengers from road to rail; and we would be investing in tram systems to take buses off the road. We would also be interested in combined heat and power schemes as an alternative to the seedy system of so-called competition in the electricity generation and
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    distribution industries, which, in addition to being monopolistic, have a vested interest against the efficient use of energy. Only when such measures are contemplated will I begin to believe that the Government are sincere in trying to meet their obligation to do something about emissions.
    8.55 pm
    Mr. Patrick Cormack: I did not expect to have the pleasure of participating in this debate, but I am glad to do so, if only briefly.
    I congratulate my right hon. Friend the Chancellor on an extremely innovative and thoughtful Budget. I am especially glad to be able to do that, as he is a very old friend of mine, and it is good to see him produce a Budget which will be something of a landmark Budget. He has been especially helpful to small businesses and, in spite of what the hon. Member for Sunderland, North (Mr. Etherington) said, he has done a great deal for charities, not only in this Budget but in a series of Budgets.
    I am delighted that my right hon. Friend has come into the Chamber. I wish to appeal to him on the subject that has occupied many of the headlines in the past few days—his understandable but controversial decision to impose value added tax on domestic fuel. I understand what prompted him to do it, and I appreciate that there must have been a great deal of mental wrestling in deciding where revenue was to be raised. Of course, many of us would have been up in arms had he put VAT on books and newspapers. Whatever he had decided to do, he would undoubtedly have been the target for some criticism.
    However, I ask my right hon. Friend to think very carefully in the year ahead. We have a year before any VAT is imposed on domestic fuel. It will first be imposed at 8 per cent., and will not reach its 17·5 per cent. level for two years. My right hon. Friend is well aware, as we all are, of the particular plight of the elderly. I worry very much about how many of them will be able to cope with a rate of 17·5 per cent. We have had assurances from the Prime Minister and others, for which we are grateful, that something will be done to compensate, but it has not been spelt out carefully or clearly enough. We want to know the full details as soon as possible.
    I am confident that something will be done adequately to compensate those who are on benefit, but I point out that many elderly people do not qualify for benefit—through their thrift and frugality they have been able to look after themselves, and they take great pride in that. It is on them that the burden will fall with especial and peculiar severity.
    I suggest to my right hon. Friend that there is a good solution. I have felt for a long time that there is a case for two-tier VAT. If my right hon. Friend puts 8 per cent. on domestic fuel next year, he should leave it at that. He should not raise the figure to 17·5 per cent. in the subsequent year. If the rate remains at 8 per cent., it will be far easier to cope with in terms of the increase in benefits. It will also be easier for those who do not have recourse to benefits to budget for the increase.
    My right hon. Friend could also set a useful precedent. I fully agree with him that it is a fundamental belief of our party that we should increase indirect rather than direct taxation. However, many people feel that 17·5 per cent., on whatever it is levied, is a high level of VAT. It is certainly a high level on fuel, one of the basic necessities of

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    life. I completely comprehend the green argument, and I was interested to receive from Friends of the Earth a paean of praise for the courage of my right hon. Friend——
    Mr. Patrick Nicholls: Surely not.
    Mr. Cormack: One can echo that to a degreee. Friends of the Earth are not always right.
    In congratulating my right hon. Friend on what: he has done and in thanking him for producing a far-reaching and innovative Budget, I say to him as a very old friend, "Please think again about VAT at 17·5 per cent. on domestic fuel, especially as it affects our elderly citizens."
    9 pm
    Ms Harriet Harman: I welcome the comments of the hon. Member for Staffordshire, South (Mr. Cormack). The way in which he, on behalf of his constituents, can get the Chancellor to think again about imposing VAT at 17·5 per cent. on gas and on electricity is to join us in the Lobby tonight and to vote against that proposal.
    This is a Budget of betrayal and of failure. It betrays the hope of the unemployed and it fails to set the economy on course for growth and investment. It puts up everyone's taxes to pay for the Tories' economic mistakes and it is unfair. Those who will pay most are those who can least afford it.
    The Tories' election promises on public services are now also threatened by spending cuts. The Tory manifesto promised that health spending would be increased year on year, that there would be more police on the beat, that there would be more nurseries and more help for students, and that pensions and child benefit levels would be protected. Yet it is to consider precisely those areas that the Chief Secretary is now to preside over a review of the Department of Health, of the Department for Education, of the Department of Social Security and of the Home Office. If the Tories can break their promises on taxation, how much easier they will find it to break their promises to defend a welfare state which few of their families use and which many of them despise.
    The Budget not only threatens vital services and fails to set the economy on course for jobs, for investment and for growth—it breaks the Tories' central election pledge to reduce taxes. The economy needed a Budget for jobs and for economic recovery. We should have had a Budget to break out of the vicious circle of unemployment, of waste and of decline. We should have had a Budget which forged a new cycle of skills, of productivity and of growth.
    In the past 14 years, manufacturing has grown by 50 per cent. in Japan and by 25 per cent. in America, but in Britain it has barely grown at all. We are falling behind on investment. The German industrial worker is backed by an average of £4,000 capital investment. The Japanese worker is backed by an average of £6,000. The British worker has only £2,500 capital investment behind him.
    We are also behind on skills. West Germany, Japan, Hong Kong, Singapore, Taiwan and South Korea have more of their young people at college and in further education than is the case in Britain. The competitive edge of an economy will be the skills of its people, so falling behind on skills and leaving people unemployed is not only a waste of people's individual talent and potential—it means that we shall fall further behind as economies compete in future.
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    We are also behind on research and development. Japan sees eight times as much of its profits ploughed back into research and development as we do. The fragile state of our manufacturing industry was revealed in the Sunday Times leak of the Department of Trade and Industry report, which the Government still refuse to publish—indeed, they still deny the facts that were clearly set out in it.
    Mr. Geoffrey Hoon: Does my hon. Friend agree that we get a lot of lectures from Conservative Members about the success of Japanese companies investing in the United Kingdom but that they rarely mention the fact that, threatened by recession, the Japanese Government have invested £40 billion to try to ensure that Japan remains competitive? Why are the British Government not trying to do the same?
    Ms Harman: I agree with my hon. Friend. Japan and the United States are investing and the EC wants to invest; the British Government alone, it seems, are blind to the lack of investment in our economy and try to tell us that everything is perfectly fine.
    Mr. Nicholls: As the hon. Lady applauds a Government investment of £40 billion, will she now tell us what she thinks the public sector borrowing requirement should be?
    Ms Harman: The high level of the PSBR is the result of high unemployment and a failure in our economy. What we would do is to bring down unemployment, introduce a proper strategy for industry and growth and bring down the PSBR. The PSBR is too high as a result of the failure of this Government's economic policy and particularly as a result of their allowing unemployment simply to grow.
    Mr. Peter Thurnham: The hon. Lady blames the Government for unemployment. Is it not a fact that every Labour Government who have ever been in power have left unemployment higher than when they came to power?
    Ms Harman: Unemployment has more than doubled since 1979. It increased by 61 per cent. between December 1990 and December 1992. We have the highest rate of increase in unemployment in the European Community.
    The Tories' economic judgment has been wrong throughout. They have been wrong about the fact of the economy going into recession. They have been wrong about the impact of the recession—particularly on our beleaguered manufacturing industry. They have been wrong about the length of the recession and they have been wrong about the depth of the recession. In 1989, the Prime Minister—then the Chancellor—said:
    "I do not believe that a recession is likely".
    In September 1990, in true King Canute style, he said:
    "We are not in recession".
    As soon as the Tories acknowledged that Britain was in recession, they began predicting the end of the recession. In December 1990, the Chancellor told the Select Committee on the Treasury and Civil Service that the recession would be
    "relatively short-lived and relatively shallow."
    Now, as unemployment remains at more than 3 million, with predictions in the Budget statement that 200,000 more people will lose their jobs by the end of this year, and when the prospect ahead is a yawning trade gap, we are told that we have had a five-star week for the economy.

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    The Government have repeatedly had to revise their figures on the economy as, time and again, predictions of growth have been too high and predictions of national debt too low. While the Chancellor has become famous as the star of the movie, "Honey, I Shrunk the Economy", the Chief Secretary to the Treasury is now breaking box office records with the sequel, "Honey, I Blew Up the PSBR".
    The human cost of unemployment is painfully high, with families and communities around the country blighted, but unemployment is also taking its toll on the public purse. It costs the taxpayer £9,000 per unemployed person per year in benefits paid out and lost tax revenue. The annual bill for keeping 3 million people who want to work unemployed is £270 billion a year. No wonder public finances are in a mess.
    While unemployment has risen, training programmes have been cut and the Budget offers extra help to only half the people who are expected to lose their jobs by the end of this year. The net new money that the Government have agreed for schemes to help the unemployed—schemes which were trumpeted before the Budget—simply has not materialised. The figure is only £125 million. Since 1987, the Government have cut £1·5 billion in real terms from spending on training and help for the unemployed. As unemployment has increased, the Government are hardly creeping back to the situation which existed before the cuts.
    Businesses have gone to the wall. There were 63,000 insolvencies this year, an increase of 31 per cent. since 1991. Against that background, the Department of Trade and Industry has suffered cuts. As my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) and my hon. Friend the Member for Wolverhampton, North-East (Mr. Purchase) explained, the Budget does nothing for business. In fact, it anticipates a fall in business investment this year. It anticipates that there will be £400 million less invested in business this year than was invested last year.
    The President of the Board of Trade referred to a survey by the Institute of Directors as optimistic; yet that survey shows that half its members plan no investment this year. We would not be in this situation if the Government had taken the action that Labour has urged. Unless there is increased investment in capacity, skills and technology, British industry simply cannot recapture the markets that have been lost at home and abroad.
    Mr. Nicholls: The hon. Lady talks about our losing markets at home. Will she bear in mind the fact that, as a result of the social chapter, we are actually gaining markets from overseas countries?
    Ms Harman: Countries in the rest of the European Community which believe that it is important to have high-skill, high-wage, high-tech economies are going ahead of us. There is no future for our economy if it is a low-wage, low-skill economy competing with under-developed countries.
    Unless British industry is competitive, the trade deficit will grow and there will be no hope of a sustainable reduction in the PSBR. Raising taxes without tackling
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    unemployment and industrial decline merely deals with the consequences of the economic problems we face. It does not deal with the causes.
    The Government have not suffered from a shortage of public money. They received £115 billion in revenue from North sea oil and £62 billion in privatisation receipts, but that has all been frittered away. If the Government are hemmed in now—as they are—it is not as a result of lack of public money in the past. Rather, it is the result of a complete absence of ideas for the future. While our competitors invested, the Tories gave tax handouts to the rich. They were also content to see more and more millions paid out in benefits for the growing dole queue which they believed was a price worth paying. They have broken their promises, increased taxes and failed on the economy.
    In this Budget, the Government have sought to remedy the soaring public debt by raising taxes. Public debt is soaring as a result of the Government's mismanagement of the economy. The high level of public borrowing is a consequence of their economic failure, not a cause of it. This is a Budget in which everyone else has to pay for the Tories' mistakes. However, they still have not learnt from those mistakes.
    As my hon. Friend the Member for Sheffield, Attercliffe (Mr. Betts) said, this is a Budget of yet more broken promises. Before the election, the Chancellor said:
    "We will not have to increase taxes."
    He went further and said:
    "I cannot see any circumstances in which that will be necessary."
    Before the election, the Prime Minister said:
    "We have no plans to increase value added tax."
    Indeed, he went further than that and said:
    "There will be no VAT increase."—[Official Report, 28 January 1992; Vol. 202, c. 808.]
    and he repeated:
    "We have no need and no plans to extend the scope of VAT."
    Dr. Liam Fox: As the hon. Lady finds it so unpleasant to raise taxes, will Labour now give a definite pledge to revoke the VAT—[Interruption.]
    Ms Harman: Could the hon. Gentleman repeat his question? His hon. Friends were shouting and I could not hear him.
    Dr. Fox: I am glad to give the hon. Lady more time to think about my question. We have had a lot of confusion from Labour Members in the past week about whether a Labour Government would revoke the VAT on fuels. Can the hon. Lady clear up the confusion and give the House and the country a clear answer—would a Labour Government revoke the imposition of VAT on fuels?
    Ms Harman: The question before the House tonight is whether those Conservative Members who promised their constituents that they would not increase VAT and extend its scope will vote against the VAT increase. During the election campaign the Prime Minister said:
    "We have no plans and no need to extend the scope of VAT."
    Labour Members will vote against the measure tonight to make the Government keep their election promises.
    The Prime Minister also said:
    "I have no plans to raise the top rate of tax or the level of national insurance contributions."

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    In the first Budget after the election, the Government have increased taxes and national insurance contributions and put VAT on gas and electricity. It is hard to overstate the cynicism and betrayal that that represents.
    The pledges on VAT and national insurance were not side issues: they were the centrepiece of the Conservative election campaign to cut taxes. It was put precisely by the President of the Board of Trade in a Conservative election release of 21 March 1992:
    "This election in the first week is about tax, in the second week is about tax and in the third week is about tax."
    Following the re-election of the Conservatives, we know that the first year is about tax, the second year is about tax and the third year is about tax.
    Mr. John Bowis: The hon. Lady and her party will vote against taxes, especially the tax on domestic fuels. Can she now tell us whether a Labour Government would repeal it?
    Ms Harman: I have made it absolutely clear that we shall be voting against the imposition of VAT on gas and domestic fuel. We shall not support the Government in breaking their promise—and if the hon. Gentleman had any conscience and sense of accountability to his constituents, neither would he. [Interruption.]
    Mr. Nicholls: On a point of order, Mr. Deputy Speaker. I cannot hear whether a Labour Government would repeal the imposition of VAT or not.
    Mr. Deputy Speaker: Order. The noise seems to be coming from both sides of the House.
    Ms Harman: If 11 Conservative Members voted against the measure, it would be defeated. I hope that that will happen tonight.
    The pledges were echoed in speeches and Tory political broadcasts nightly: "You can trust the Tories—they won't put up your taxes." No one can be in any doubt now—the Government have put up taxes and they can never be trusted again.
    Last week the hon. Member for Brigg and Cleethorpes (Mr. Brown) boasted that the Chancellor had sought his views. If ever we were in any doubt about the Chancellor's judgment, there is the evidence. The hon. Gentleman told us:
    "The only thing I asked my right hon. Friend"—
    the Chancellor—
    "to do was tax, tax hard, tax heavily and tax as soon as possible."—[Official Report, 17 March 1993; Vol. 221, c. 317.]
    That is not what he told his constituents when he asked for their votes less than a year ago. I shall give him the opportunity to remind the House what he told his constituents before I quote from the election special in the Evening Telegraph.
    Mr. Michael Brown: The hon. Lady should be aware that, since 1979, I have always told my constituents that, when it comes to a public sector borrowing requirement, we will have none of it.
    Ms Harman: Curiously enough, I find it difficult to reconcile that with what the hon. Gentleman said in the Grimsby Evening Telegraph in the election special headed "The Last Words". The hon. Member for Brigg and Cleethorpes, seeking election, said:
    "Only a Conservative Government can continue the process of empowering the people with lower taxation."
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    Not only have the Government broken their election promises, but they are hitting the poor hardest. When money is to be given away, the Tories give it to the richest. When money is to be taken, they take it back from the poorest. Chancellor Lawson gave £6 billion to the richest in 1988, and £6 billion is to be taken back in 1993 by the present Chancellor from everyone. The department of applied economics at Cambridge has calculated that all households will eventually be hit, but the full implementation of the measures over the next three years will cost the poorest tenth twice as much as the wealthiest tenth.
    Mr. Ian Bruce: When Labour presented its Budget for jobs—eight pages of A3—why were the only proposals for taxation a tax on water, a tax on gas, a tax on electricity and a tax on telephones? Why is Labour's so-called windfall tax, which would have hit both industry and the poor, good for Labour while the tax which has been introduced by the Conservatives, which will protect the poor, is somehow flawed?
    Ms Harman: That neatly illustrates the difference between Labour and the Government. We suggested using the accumulated profits. That would have had no impact on the ordinary consumer whereas the Government tax ordinary people, including pensioners and the low-paid, in order to protect the vested interests of their friends whom they put on the boards of the privatised utilities.
    Taken together, the Budget's proposals for 1p on national insurance contributions, 17·5 per cent. VAT on fuel, a real cut of 2·6 per cent. in tax-free allowances, the limiting of the married couple's allowance to relief at 20 per cent. and the reduction of mortgage tax relief to 20 per cent., impose a tax increase on all households. Most will lose about 2 per cent. of their income in extra tax under the measures in the Budget, but on average the 10 per cent. of households with the highest incomes will lose less than 1·5 per cent. of their income while those with the lowest 10 per cent. of income will lose twice that and 3 per cent. extra of their income will go in tax.
    The increase in tax will begin in April this year when 200,000 people who currently do not earn enough to pay tax start to pay it for the first time. Not only has the Chancellor increased taxes, but those least able to pay will pay most and those most able to pay will pay least. As my hon. Friend the Member for Pendle (Mr. Prentice) said, the 1p increase on national insurance will mean that half a million people who do not earn enough to pay income tax will have to pay an extra 1p in the pound.
    The Financial Secretary owned up on the ITN "Talking Points" programme on Wednesday when he explained to us why the richest must pay least. He said:
    "We mustn't kill the goose that lays the golden egg."
    That is the discredited trickle-down theory of economics. But while trying to protect the geese which at some future date may lay some golden eggs, the Chancellor has refused to answer the concern that the poorest will be hit by the increase in their fuel bills.
    Let us examine what Ministers have said about compensation for pensioners and people on low incomes. There has been Government confusion before breakfast, before lunch and before dinner. The next day we get up and the Government are in confusion again. On Tuesday the Chancellor said that he would take the VAT rise into account. On Wednesday the Chief Secretary said that it was all a matter of swings and roundabouts. On Thursday the junior Social Security Minister said that the rise was

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    nothing special and not out of the ordinary. By lunch on Thursday, the Social Security Minister said that extra help would be provided. On Sunday, the Chancellor ruled out full compensation as too expensive and too complicated.
    So what is the Government's position? We know that that they have to compensate people for the rise in retail prices. They must give us a commitment tonight that they will compensate pensioners and people on low incomes in full for the rise in value added tax. Pensioners and families on low incomes spend £1 in every £7 on fuel. The average bill is £12 per week, so for many people VAT will mean up to £2 more per week on their fuel bill. Will the Chancellor compensate them in full? Will he not just say that there are swings and roundabouts, but compensate in full? Will he not just dismiss it as nothing special, but compensate in full? Will he not just give extra help, but compensate in full?
    The Government went to the electorate with a commitment. They did not say that they had no plans to raise VAT; they said that they would not raise it. When they went to the electorate, they did not say that they might not raise VAT; they said that there were no circumstances in which they would raise it.
    Mr. Forman: Will the hon. Lady give way?
    Ms Harman: No, I have given way at least eight times and I shall not do so again.
    If Conservative Members vote with the Government this evening they, too, will be guilty of breaking their election promises and no one will trust them again. Having said that they would not put VAT on fuel, they did so. Having said that there will be compensation, they are refusing to say how much. How can people trust them? The Government expect the House to vote for tax measures that we know will hit the poorest, but they have given no details of the compensation scheme. I suppose that we are expected simply to take them on trust.
    Mr. Forman rose——
    Ms Harman: I shall not give way.
    Mr. Forman rose——
    Mr. Deputy Speaker: Order. The hon. Lady has made it clear that she is not giving way.
    Ms Harman: Last Wednesday, the Chief Secretary to the Treasury explained to the House how those promises came to be broken. He said that the Government had not intended to put up VAT, or to increase national insurance contributions. After the election, no one was more surprised than the Government to discover that the recession went from bad to worse—for reasons which were quite out of their control, of course. So the Government put VAT on gas and electricity and increased national insurance contributions, and the Chancellor told us that that was the plain truth. What are we to make of that?
    The Chancellor also blamed circumstances beyond his control for the state of the economy in an interview with The Independent on Sunday on 14 March, when he said:
    "what I think happened last year was that the situation deteriorated very much internationally".
    But the Treasury forecast for the economy cannot have been blown off course because in the 1992 Budget forecast just about the only prediction that the Government got
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    right-was about the world economy. Either their judgment about the economy was disastrously wrong, or they were practising the politics of deception, or they made those promises without bothering much whether they would be in a position to honour them.
    They used to say that George Washington could not tell a lie and that Richard Nixon could not tell the truth. Our Prime Minister cannot tell the difference. Under this Government, it is not merely the pound that has been devalued, but democracy itself.
    If the Government's economic judgment was so disastrously wrong, why should the British people ever trust them again? They stand condemned not only for an unforgivable lack of foresight, but because they did not have the wit to listen to people who were warning them about the true state of the economy. Did they engage in deception, or did they fail to understand what was happening in the economy? The answer probably lies somewhere in between the two. The Government have such contempt for the electorate that they did not care whether they would be in a position to stand by their promises, just so long as they got in again.
    There does not appear to be any sign of anguish on the Government Bench—no sign of regret for breaking their promises. The brows of the Chancellor and of the Chief Secretary remain unfurrowed. In fact, they have both been smirking their way through these debates and through radio and television studios. They think that they have pulled a fast one on the electorate and that they will be able to get away with it. It is the true sign of a party that has been in government too long when it sees the democratic process as nothing more than something to be manipulated to secure one more term of office. The British people will not be treated with such arrogance and contempt, and the party that did it will never stop paying the price.
    I suggest to Tory Members, particularly those on the Back Benches, that if they have a conscience, now is the time that they should examine it. Tory Members have a choice tonight: what we have before us is an election fraud, and they can either go along with it or reject it. They can either follow discredited Ministers through the Lobby, or they can keep the promises that they made to their constituents and vote with us against the Budget.
    9.30 pm
    The Chancellor of the Exchequer (Mr. Norman Lamont): This is the fourth day of the Budget debate. Inevitably, I have been unable to listen to all the speeches, but I have read the Hansard reports of all the speeches that have been made hitherto.
    Almost everyone has acknowledged that the Budget was framed against exceptionally difficult circumstances. That was the theme of the speeches made by my hon. Friends the Members for Aylesbury (Mr. Lidington) and for Staffordshire, Moorlands (Mr. Knox). I have had to make some very difficult decisions and face up to some very unpalatable choices. We know that the Labour party can never face up to difficult decisions.
    Above all, in framing my Budget, I believe that I had to do two things. First, I had to ensure that nothing should damage recovery this year. Secondly, I had to address the problem of mounting Government debt to ensure that the nation's finances are put on a sound footing for the future.

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    I have no doubt that, unless Government borrowing is kept under firm control, it will be the biggest threat to sustained recovery in the 1990s. That was the theme of the speeches of my hon. Friends the Members for Rutland and Melton (Mr. Duncan), for Brigg and Cleethorpes (Mr. Brown), and for Cirencester and Tewkesbury (Mr. Clifton-Brown), who made a powerful speech—one which his predecessor, Lord Ridley, whom we remember with affection, would have agreed strongly with and commended.
    Beyond those two specific objectives, I also wanted to show the country that the Government have a clear strategy for getting Britain back on the road to sound finance. As I said, that is the way in which to sustain recovery. That is the lead for which I believe the country was looking, and it was given in the Budget.
    I have spelt out the tax and revenue plans not just for one year, but for three. With public spending ceilings now firmly established for the years ahead, I have laid down a medium-term fiscal strategy to match our medium-term financial strategy. I have made it clear that the strategy should be legislated for as far as possible in this year's Finance Bill so that it should carry credibility with the markets.
    The result of my measures will be to reduce borrowing over the years by up to 1·5 per cent. of GDP and to cut the deficit by more than half in the next five years. Difficult decisions are involved, but those reductions represent a considerable step towards addressing the problem that must be addressed today.
    In the year ahead, I have been able to give extra help to industry, so strengthening the recovery in its early stages. The Budget contained a huge variety of measures to help business in the short-term. First, there are measures to help the self-employed and small businesses, which have played such a crucial role in the past in the British economy and which can, again, lead us out of recession in the 1990s.
    I doubt whether there has even been a Budget that has contained such a wide range of deregulatory measures that will sweep away so much of bureaucracy and red tape, which are extremely aggravating to, and time-consuming for, so many small businesses. I know from the speech of my hon. Friend the Member for South Hams (Mr. Steen) that that is of particular interest to him.
    There are proposals to lessen the burden of the statutory audit. I am also making far-reaching changes to the VAT penalty regime—moving from a regime of automatic penalties to one that is more discretionary. I know that those changes will relieve much of the burden and many of the anxieties felt by many small business men. The changes have been widely welcomed by the organisations for small businesses.
    I have proposed to introduce self-assessment for up to one third of all taxpayers. My right hon. Friend the Member for Old Bexley and Sidcup (Sir E. Heath) was worried that some people might find that difficult, but there is a choice. There is no compulsion over the matter. However, I believe that many people will find it an attractive option. It goes together with the drastic simplification of the taxation of the self-employed that I announced at the same time. Taken together, those proposals represent the most fundamental reform to the administration of tax since the pay-as-you-earn system was introduced in 1944.
    I announced proposals for extending and improving the loan guarantee system in a way to give an added incentive
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    to fixed-rate borrowing, of which there is too little in this country. Over future years, it could give stability and security for small businesses.
    Those measures add up to formidable package of help for small businesses. It was welcomed by my hon. Friends the Members for Cambridgeshire, South-West (Sir A. Grant), for Ribble Valley (Mr. Evans) and for Surrey, North-West (Sir M. Grylls), who rightly called it a five-star Budget for small business. One might have thought that the Opposition would welcome at least one of the measures, but they did not welcome any of them.
    I have introduced a range of measures to help larger British businesses. The first of those is a massive increase in the Export Credits Guarantee Department facilities for companies operating in the most important and fastest-growing markets around the world. As a result of what I announced on Budget day, British firms will be able to go out and compete knowing that they do so on equal terms with their competitors.
    Secondly, I introduced measures to deal with the admittedly highly technical problem of advance corporation tax. My hon. Friend the Member for Surrey, East (Mr. Ainsworth) said that he thought that he noticed some fluttering of the eyelids among hon. Members during that part of the Budget speech. That may be so, but, nevertheless, the proposals responded to great concern and were of great interest to some of the international businesses that operate in this country. The proposals will help to make Britain an even more attractive location for inward investment than it already is. I also took action over the uniform business rate to ensure that no business will face a real increase in rates this year. That will help 800,000 premises, many of them in the south, whose owners have given the move a warm welcome.
    Finally, I made announcements about some private infrastructure projects, including the channel tunnel rail link. Those announcements have been widely welcomed; they followed on from the policy changes that I announced in the autumn statement. As my right hon. Friend the Member for Guildford (Mr. Howell) said, they will enable this country to do what many other countries do: tap private savings in order to finance large infrastructure projects in cities and elsewhere.
    Those are substantial measures. Therefore, it is little surprise that, contrary to what the hon. Member for Peckham (Ms Harman) said, the Budget was warmly welcomed by organisations representing British industry and commerce. We heard a few quotations from Opposition Members who have tried to find the odd organisation here and there with critical views of the Budget. In a Budget that raised revenues by £6·5 billion and £10 billion, it would be surprising if somebody did not have something critical to say.
    The list of organisations that have given a warm welcome to the Budget include the Confederation of British Industry, the Association of British Chambers of Commerce, the Institute of Directors, the Society of Motor Manufacturers and Traders, the Council of Mortgage Lenders, the Forum of Private Business and the Federation of Small Businesses. The chairmen and chief executives of many individual companies went on record as welcoming the Budget. They included GKN, GEC, Coats Viyella, Abbey National and BP. They are some of the most successful companies in the country, and they know that this Budget is good for them and good for business.
    Mr. Stuart Bell: Will the right hon. Gentleman deal with a significant point that I have not heard mentioned so far? Value added tax is a tax on value added, obviously, for those who wish to buy goods. Why, then, did he use VAT on heating and fuel bills to hit poor people who need to use electricity anyway?
    Mr. Lamont: Much of this debate has centred on that very point—my decision to extend VAT to domestic fuel and power. I fully recognise the concern felt about the effect that these proposals will have on poorer households, particularly those of poorer pensioners. That is why I clearly stated in my Budget speech that we fully intend to give extra help to those on income-related benefits, over and above the automatic impact on pensions and other benefits through the higher retail prices index. I wholly understand the anxiety of some households, but we have clearly said that we will bring forward the uprating of income-related benefits so that the extra help that we provide will be available at the time that it is needed—before the increased fuel bills arrive next spring.
    Mr. Gordon Brown rose——
    Mr. Lamont: This party has an excellent record of helping the worst-off, not by keeping expensive, across-the-board subsidies, benefiting both rich and poor, but by doing what should be done in any modern welfare state: targeting the resources on the most needy and the worst off. That has been our priority. No Government have done more for poorer pensioners and families with children——
    Mr. Brown: Will the Chancellor accept that he said during the election campaign that there would be no circumstances in which a VAT increase would be imposed? Will he give us a straightforward answer to a simple question? Will he compensate pensioners and others on low income in full—yes or no?
    Mr. Lamont: I have explained exactly what we are doing, and I assure the House that it will be our intention to protect the poorest people in the country. [Interruption.] The hon. Gentleman can shout all he likes. We do not want to put poorer people in a position in which they cannot pay their fuel bills because of the changes. We have made it clear that we will adjust the income-related benefits. We have an excellent record on that, and since 1988 we have provided additional help for less well off pensioners and disabled people—help that will be worth about £700 million in real terms next year. We have continued to increase the income-related benefits even while average fuel charges have been falling, by more than 8 per cent. in real terms since 1986. There is still downward pressure on domestic electricity and gas bills.
    Because of these reductions, my proposal to put VAT on fuel will not necessarily mean that prices rise by anything like 17·5 per cent. over the next three years. Those on income support will also be able to keep the additions made to their benefits to reflect their liability to pay 20 per cent. of the community charge, even though they will not be required to make any contribution to the council tax. That alone is worth £2·80 to a married couple and £1·60 to a single person from next month. That shows our commitment to looking after those who are worst off.
    Mr. Gordon Brown: Why cannot the Chancellor give a straightforward answer to a simple question? Does he not
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    understand that it is because he fails to do so that no one in the country trusts him? Will he compensate pensioners and others on low incomes in full—yes or no?
    Mr. Lamont: I have answered the question. I will take no lectures from a party which, when in government, put up electricity bills by 30 per cent. in real terms. We know who the Minister at the Department of Energy was at the time. It was the Leader of the Opposition. That was what he did for poorer people then; what price his rhetoric now?
    Mr. John Smith: The Chancellor has been asked a very simple and clear question—will he compensate pensioners in full? Why cannot he say yes or no?
    Mr. Lamont: The right hon. and learned Gentleman, as always, cannot face up to the facts of his own record. I note that when he put forward his manifesto for the leadership of the Labour party, he even told us in his election address:
    "We should…consider the increased use of the fiscal system to promote environmental protection and conservation."
    According to the Opposition, the idea of VAT on fuel and power never crossed their minds; they never considered it. How strange it is then that, in their policy document "Looking to the Future", under the heading "Value Added Taxation", they say:
    "Zero rating on items such as food, fares, books and children's clothing should remain."
    But where, the country will want to know, was fuel and power—the zero rate that did not bark? I expect that the right hon. and learned Gentleman will tell us that it was a typing error. The trouble is that in the very next sentence the document says:
    "we will look at ways of…increasing taxes on environmentally damaging products."
    This Government went to the environmental conference in Rio, fought for a reasonable and achievable deal, and have taken steps to reach it. The Opposition have wrapped themselves in greenery and chanted incantations about global warming, yet they now oppose the very steps that we are taking to deal with that. They are the people whose word means absolutely nothing.
    Mr. Morgan: The Chancellor cannot have it both ways. At one point he told us that the reason for the imposition of VAT on domestic fuel was the unexpectedly high increase in public sector borrowing subsequent to the election, of which he was wholly unaware at the time of the election. What he has just said directly contradicts that: he now says that the Rio summit is the reason. If my memory serves me right, the Rio summit was held before the election. Which is it?
    Mr. Lamont: The hon. Gentleman is completely wrong; the Rio summit was in June last year.
    As always, the most important question asked in the debate was the one asked not by the Opposition, but by Conservative Members. It was the question posed by my right hon. Friends the Members for Shropshire, North (Mr. Biffen) and for Westmorland and Lonsdale (Mr. Jopling)—whether the action that I propose in the Budget is extensive enough and early enough to meet the objectives that I have set. That is the real question and it is precisely the most difficult and central matter on which I had to make a judgment.
    I very much took the view taken by my right hon. Friend the Member for Worthing (Sir T. Higgins) and my

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    hon. Friend the Member for Woodspring (Dr. Fox), that we had to take account of the fact that confidence had been knocked hard by the length of the recession and that large tax increases too early would undermine recovery. Therefore, in my opinion, it was right not to raise taxes this year, but to go for a neutral Budget which, as my hon. Friend the Member for Woodspring said, would increase taxation as economic growth gets fully under way. I believe that to be a reasonable and appropriate reaction to the position that we face.
    For those of us on the Conservative Benches, raising revenue is never a welcome task; it is something which we consider only when that is vital for the public finances. In this Budget, I had in mind two objectives in deciding how to raise revenue—first, that my particular tax measures should not hit particular sectors that would impede recovery; secondly, that the tax changes that I made should be sensible tax reforms in their own right. For that reason, I concentrated on tax measures that accord with the philosophy of this Government and of this party—that is, rather than increasing marginal tax rates, I concentrated on broadening the base of the tax system and on reducing the value of allowances.
    Above all, I reconfirmed in many of my changes—particularly the reduction to 20 per cent. of certain allowances—our commitment as a Government to getting the basic rate of income tax down to 20p in the pound eventually. That remains our target and our objective.
    As my hon. Friend the Member for Bridlington (Mr. Townend) pointed out, raising revenue is just one side. We must look additionally at public spending, which must also be expected to take part of the strain. We made a start on that process in last year's autumn statement. The settlement that we achieved then shows that the growth of public spending will be under control, because the growth in the new control total is set to be below the trend growth in the economy as a whole. The long-term review of public spending under my right hon. Friend the Chief Secretary is designed to address the problem.
    If we want to control public spending, we must continually re-examine each and every Department and function of government and question whether it is appropriate and necessary to continue with it today.
    This Budget is genuinely addressed to meeting the problems of the country. It is not something which Labour would ever understand because it is a Budget designed to do what is right—not to curry favour or popularity. It is a Budget designed to give the country hope for the future, by giving a clear lead.
    What has been Labour's reaction? In four days of debate, we have heard not one word of policy. The hon. Member for Dunfermline, East (Mr. Brown) seems to have made a conscious decision not to have a policy. He is the first shadow Chancellor to give an hour-long speech about the economy, as he did the other day, without ever mentioning monetary or fiscal policy.
    In all the hon. Gentleman's outpourings, sound bites, new approaches, fresh starts, agendas for the 1990s and new beginnings, he has not told us whether he thinks that Government borrowing is too high, too low or just right. The hon. Gentleman cannot tell us whether taxes are too high or too low. In four days of debate, the hon. Gentleman has not produced one constructive suggestion.
    Since the hon. Gentleman became shadow Chancellor he has, we are told, made two important speeches about the economy. One was about agriculture. It was an
    708
    interesting speech, but the hon. Gentleman is certainly the first would-be finance Minister to talk more about the suckler cow premium than about narrow money.
    What of the hon. Gentleman's right hon. and hon. Friends? The right hon. and learned Member for Monklands, East (Mr. Smith) had just one suggestion. Replying to my Budget statement, he said that I should abolish Budget purdah. That certainly would not affect him very much, because the right hon. and learned Gentleman does not have any policies to hide.
    All we heard from Labour in the debate was endless whining and harking back to the last general election. The right hon. and learned Member for Monklands, East is the last person who should complain about the general election. He did not do badly out of it. First, he lost the election for his party with his own tax proposals—then had himself made party leader as compensation.
    If Labour wants to talk about the last general election, let us talk about it—I am happy to do so. The Labour party, as always, needs to have its myths if it is to exist. We heard in the debate the myth that somehow Labour was cheated at the last general election. In 1992, as in 1979, the Conservative party was elected as the party of sound finance and of low taxation—particularly low direct taxation. In 1979 and in the two years thereafter, the needs of the times dictated a rise in taxes. That happened in 1979 and 1981, but once we had borrowing down, taxes and spending were steadily reduced as a percentage of gross domestic product.
    Mr. John Smith: Does the right hon. Gentleman remember saying, during a Channel 4 news broadcast—[Interruption.] I know that Conservative Members do not want to hear this. He said:
    "We will not have to increase taxes. I cannot see any circumstances in which that will be necessary."
    What meaning did the right hon. Gentleman wish to convey to his listeners then?
    Mr. Lamont: I have explained, and explained fully. I believe that not to have addressed the problem of the budget deficit would have been to run away from the most fundamental promise that we made to the British people.
    There is a real difference and distinction between the two parties, and it is one that cannot be fudged or obfuscated. In 1992—as was shown by the speeches of all Opposition Front Benchers—the Labour party was committed to massive increases in public spending, and high public spending means high taxes: the two go hand in hand. It is impossible to pretend otherwise; to seek to deny the connection is truly to deliberately deceive the British people.
    Opposition Members should listen to the hon. Member for Dagenham (Mr. Gould). He talks a lot more sense, especially after his lunches with my right hon. Friend the Chief Secretary. The other day, he said:
    "I think the Labour party ought to accept that we will always be likely to have a higher tax burden than our opponents".
    We know that, he knows that and so do the British people.
    If the Labour party wants to know why it lost the last general election, let me explain. It was for two reasons. First, there was the disastrous shadow Budget introduced by the Leader of the Opposition. This is the difference between the tax increases that he proposed, and the tax increases in this Budget: he proposed tax increases to expand public spending. He was trying to bribe one part of

    709
    the electorate with the other part's money. Moreover, he could not add up and discover that many people in the south earn more than £20,000 a year.
    Secondly, Labour lost the election because the shadow Budget was not the whole story; it was the beginning of Labour's potential tax hike. Labour's own spending programme amounted to massively more than those on the Opposition Front Bench ever admitted.
    Mr. Brian Wilson: Will the right hon. Gentleman give way?
    Mr. Lamont: No.
    I have always said that, as we move out of a phase of recession into recovery, there will be good figures and bad figures. One indicator, however, does not appear in the books: it can be seen only from the Conservative Benches. That indicator is the length of the faces of Opposition Treasury spokesmen. As the news gets better, those faces get longer—none more so than that of the hon. Member for Dunf
    ermline, East, who likes nothing more than a relentless diet of gloom and depression.
    What a miserable time the hon. Gentleman had last week. On Monday, there was the news that manufacturing output had risen by 0·8 per cent., to its highest level since August 1991. Then, on Wednesday, retail sales were shown to have been nearly 2 per cent. higher in the last three months than they were a year earlier. On Thursday, the hon. Gentleman's face grew longer and longer as unemployment actually fell. A few more weeks like that, and he will be positively suicidal.
    Opposition Members complain when we accuse them of talking Britain down. I shall set a simple test, in which I may have to involve my right hon. and learned Friend the Home Secretary. We shall launch a nationwide hunt over the next week: no stone will be left unturned, no avenue unexplored. We shall look everywhere. Nothing will stop us from finding the hon. Member for Dunfermline, East's press release welcoming Thursday's drop in unemployment.
    Of course, the hon. Gentleman has a long track record. On Wednesday, he told us—we know how much weight to place on it—
    "I make one Budget forecast—that, after the Budget, unemployment will rise this month".—[Official Report, 17 March; Vol. 221, c. 289.]
    True to form, the hon. Gentleman was wrong, as always.
    British business is well placed to succeed and expand in the rest of 1993. My Budget will keep Britain on track for recovery. It is good for exporters; it is good for jobs; it will ensure sound finance; it will bring taxes down. And at the next election we shall bring Labour down—to their fifth and final defeat.
    Question put:——
    The House divided: Ayes 306, Noes 279.

    Division No. 195]

    [10pm

    AYES

    Adley, Robert

    Arnold, Jacques (Gravesham)

    Ainsworth, Peter (East Surrey)

    Arnold, Sir Thomas (Hazel Grv)

    Aitken, Jonathan

    Ashby, David

    Alexander, Richard

    Atkins, Robert

    Alison, Rt Hon Michael (Selby)

    Atkinson, Peter (Hexham)

    Allason, Rupert (Torbay)

    Baker, Rt Hon K. (Mole Valley)

    Amess, David

    Baker, Nicholas (Dorset North)

    Ancram, Michael

    Baldry, Tony

    Arbuthnot, James

    Banks, Matthew (Southport)

    710

    Banks, Robert (Harrogate)

    Freeman, Roger

    Bates, Michael

    French, Douglas

    Batiste, Spencer

    Fry, Peter

    Bellingham, Henry

    Gale, Roger

    Bendall, Vivian

    Gallie, Phil

    Beresford, Sir Paul

    Gardiner, Sir George

    Biffen, Rt Hon John

    Garel-Jones, Rt Hon Tristan

    Blackburn, Dr John G.

    Garnier, Edward

    Bonsor, Sir Nicholas

    Gill, Christopher

    Booth, Hartley

    Gillan, Cheryl

    Boswell, Tim

    Goodlad, Rt Hon Alastair

    Bottomley, Peter (Eltham)

    Goodson-Wickes, Dr Charles

    Bottomley, Rt Hon Virginia

    Gorman, Mrs Teresa

    Bowden, Andrew

    Gorst, John

    Bowis, John

    Grant, Sir Anthony (Cambs SW)

    Boyson, Rt Hon Sir Rhodes

    Greenway, Harry (Ealing N)

    Brandreth, Gyles

    Greenway, John (Ryedale)

    Brazier, Julian

    Griffiths, Peter (Portsmouth, N)

    Bright, Graham

    Grylls, Sir Michael

    Brooke, Rt Hon Peter

    Gummer, Rt Hon John Selwyn

    Brown, M. (Brigg & Cl'thorpes)

    Hague, William

    Browning, Mrs. Angela

    Hamilton, Rt Hon Archie (Epsom)

    Bruce, Ian (S Dorset)

    Hamilton, Neil (Tatton)

    Budgen, Nicholas

    Hampson, Dr Keith

    Burns, Simon

    Hanley, Jeremy

    Burt, Alistair

    Hannam, Sir John

    Butcher, John

    Hargreaves, Andrew

    Butterfill, John

    Hawkins, Nick

    Carlisle, John (Luton North)

    Hawksley, Warren

    Carlisle, Kenneth (Lincoln)

    Hayes, Jerry

    Carrington, Matthew

    Heald, Oliver

    Carttiss, Michael

    Heath, Rt Hon Sir Edward

    Cash, William

    Heathcoat-Amory, David

    Churchill, Mr

    Hendry, Charles

    Clark, Dr Michael (Rochford)

    Heseltine, Rt Hon Michael

    Clarke, Rt Hon Kenneth (Ruclif)

    Higgins, Rt Hon Sir Terence L.

    Clifton-Brown, Geoffrey

    Hill, James (Southampton Test)

    Coe, Sebastian

    Hogg, Rt Hon Douglas (G'tham)

    Colvin, Michael

    Horam, John

    Congdon, David

    Hordern, Rt Hon Sir Peter

    Conway, Derek

    Howarth, Alan (Strat'rd-on-A)

    Coombs, Anthony (Wyre For'st)

    Howell, Rt Hon David (G'dford)

    Coombs, Simon (Swindon)

    Hughes Robert G. (Harrow W)

    Cope, Rt Hon Sir John

    Hunt, Rt Hon David (Wirral W)

    Cormack, Patrick

    Hunt, Sir John (Ravensbourne)

    Couchman, James

    Hunter, Andrew

    Cran, James

    Hurd, Rt Hon Douglas

    Currie, Mrs Edwina (S D'by'ire)

    Jack, Michael

    Curry, David (Skipton & Ripon)

    Jackson, Robert (Wantage)

    Davis, David (Boothferry)

    Jenkin, Bernard

    Day, Stephen

    Jessel, Toby

    Deva, Nirj Joseph

    Johnson Smith, Sir Geoffrey

    Devlin, Tim

    Jones, Gwilym (Cardiff N)

    Dickens, Geoffrey

    Jones, Robert B. (W Hertfdshr)

    Dorrell, Stephen

    Jopling, Rt Hon Michael

    Douglas-Hamilton, Lord James

    Kellett-Bowman, Dame Elaine

    Dover, Den

    Key, Robert

    Duncan, Alan

    Kilfedder, Sir James

    Duncan-Smith, Iain

    King, Rt Hon Tom

    Dunn, Bob

    Kirkhope, Timothy

    Durant, Sir Anthony

    Knapman, Roger

    Eggar, Tim

    Knight, Mrs Angela (Erewash)

    Elletson, Harold

    Knight, Greg (Derby N)

    Emery, Rt Hon Sir Peter

    Knight, Dame Jill (Bir'm E'st'n)

    Evans, David (Welwyn Hatfield)

    Knox, David

    Evans, Jonathan (Brecon)

    Kynoch, George (Kincardine)

    Evans, Nigel (Ribble Valley)

    Lait, Mrs Jacqui

    Evans, Roger (Monmouth)

    Lamont, Rt Hon Norman

    Evennett, David

    Lang, Rt Hon Ian

    Faber, David

    Lawrence, Sir Ivan

    Fabricant, Michael

    Legg, Barry

    Fenner, Dame Peggy

    Leigh, Edward

    Field, Barry (Isle of Wight)

    Lennox-Boyd, Mark

    Fishburn, Dudley

    Lester, Jim (Broxtowe)

    Forman, Nigel

    Lidington, David

    Forsyth, Michael (Stirling)

    Lilley, Rt Hon Peter

    Forth, Eric

    Lloyd, Peter (Fareham)

    Fowler, Rt Hon Sir Norman

    Lord, Michael

    Fox, Dr Liam (Woodspring)

    Luff, Peter

    Fox, Sir Marcus (Shipley)

    Lyell, Rt Hon Sir Nicholas

    711

    MacGregor, Rt Hon John

    Shepherd, Richard (Aldridge)

    MacKay, Andrew

    Skeet, Sir Trevor

    McLoughlin, Patrick

    Smith, Sir Dudley (Warwick)

    McNair-Wilson, Sir Patrick

    Smith, Tim (Beaconsfield)

    Maitland, Lady Olga

    Soames, Nicholas

    Major, Rt Hon John

    Speed, Sir Keith

    Malone, Gerald

    Spencer, Sir Derek

    Mans, Keith

    Spicer, Sir James (W Dorset)

    Marland, Paul

    Spicer, Michael (S Worcs)

    Marshall, John (Hendon S)

    Spink, Dr Robert

    Marshall, Sir Michael (Arundel)

    Spring, Richard

    Martin, David (Portsmouth S)

    Sproat, Iain

    Mates, Michael

    Squire, Robin (Hornchurch)

    Mawhinney, Dr Brian

    Stanley, Rt Hon Sir John

    Mayhew, Rt Hon Sir Patrick

    Steen, Anthony

    Mellor, Rt Hon David

    Stephen, Michael

    Merchant, Piers

    Stern, Michael

    Milligan, Stephen

    Stewart, Allan

    Mills, Iain

    Streeter, Gary

    Mitchell, Andrew (Gedling)

    Sumberg, David

    Mitchell, Sir David (Hants NW)

    Sweeney, Walter

    Moate, Sir Roger

    Sykes, John

    Monro, Sir Hector

    Tapsell, Sir Peter

    Montgomery, Sir Fergus

    Taylor, Ian (Esher)

    Moss, Malcolm

    Taylor, John M. (Solihull)

    Needham, Richard

    Taylor, Sir Teddy (Southend, E)

    Nelson, Anthony

    Temple-Morris, Peter

    Newton, Rt Hon Tony

    Thomason, Roy

    Nicholls, Patrick

    Thompson, Sir Donald (C'er V)

    Nicholson, David (Taunton)

    Thompson, Patrick (Norwich N)

    Nicholson, Emma (Devon West)

    Thornton, Sir Malcolm

    Norris, Steve

    Thurnham, Peter

    Onslow, Rt Hon Sir Cranley

    Townend, John (Bridlington)

    Oppenheim, Phillip

    Townsend, Cyril D. (Bexl'yh'th)

    Ottaway, Richard

    Tracey, Richard

    Page, Richard

    Tredinnick, David

    Paice, James

    Trotter, Neville

    Patnick, Irvine

    Twinn, Dr Ian

    Patten, Rt Hon John

    Vaughan, Sir Gerard

    Pattie, Rt Hon Sir Geoffrey

    Viggers, Peter

    Pawsey, James

    Waldegrave, Rt Hon William

    Peacock, Mrs Elizabeth

    Walden, George

    Pickles, Eric

    Walker, Bill (N Tayside)

    Porter, Barry (Wirral S)

    Waller, Gary

    Porter, David (Waveney)

    Ward, John

    Portillo, Rt Hon Michael

    Wardle, Charles (Bexhill)

    Powell, William (Corby)

    Waterson, Nigel

    Rathbone, Tim

    Watts, John

    Redwood, John

    Wells, Bowen

    Renton, Rt Hon Tim

    Wheeler, Rt Hon Sir John

    Richards, Rod

    Whitney, Ray

    Riddick, Graham

    Whittingdale, John

    Robathan, Andrew

    Widdecombe, Ann

    Roberts, Rt Hon Sir Wyn

    Wiggin, Sir Jerry

    Robertson, Raymond (Ab'd'n S)

    Wilkinson, John

    Robinson, Mark (Somerton)

    Willetts, David

    Rowe, Andrew (Mid Kent)

    Winterton, Mrs Ann (Congleton)

    Rumbold, Rt Hon Dame Angela

    Winterton, Nicholas (Macc'f'ld)

    Ryder, Rt Hon Richard

    Wolfson, Mark

    Sackville, Tom

    Wood, Timothy

    Sainsbury, Rt Hon Tim

    Yeo, Tim

    Scott, Rt Hon Nicholas

    Young, Sir George (Acton)

    Shaw, David (Dover)

    Shaw, Sir Giles (Pudsey)

    Tellers for the Ayes:

    Shephard, Rt Hon Gillian

    Mr. David Lightbown and

    Shepherd, Colin (Hereford)

    Mr. Sydney Chapman.

    NOES

    Abbott, Ms Diane

    Barnes, Harry

    Adams, Mrs Irene

    Barron, Kevin

    Ainger, Nick

    Battle, John

    Ainsworth, Robert (Cov'try NE)

    Bayley, Hugh

    Allen, Graham

    Beckett, Rt Hon Margaret

    Alton, David

    Beggs, Roy

    Anderson, Donald (Swansea E)

    Bell, Stuart

    Anderson, Ms Janet (Ros'dale)

    Benn, Rt Hon Tony

    Armstrong, Hilary

    Bennett, Andrew F.

    Ashdown, Rt Hon Paddy

    Benton, Joe

    Ashton, Joe

    Bermingham, Gerald

    Banks, Tony (Newham NW)

    Berry, Dr. Roger

    712

    Betts, Clive

    Gould, Bryan

    Blair, Tony

    Grant, Bernie (Tottenham)

    Blunkett, David

    Griffiths, Nigel (Edinburgh S)

    Boateng, Paul

    Griffiths, Win (Bridgend)

    Boyes, Roland

    Grocott, Bruce

    Bradley, Keith

    Gunnell, John

    Bray, Dr Jeremy

    Hain, Peter

    Brown, Gordon (Dunfermline E)

    Hall, Mike

    Brown, N. (N'c'tle upon Tyne E)

    Hanson, David

    Bruce, Malcolm (Gordon)

    Hardy, Peter

    Burden, Richard

    Harman, Ms Harriet

    Byers, Stephen

    Harvey, Nick

    Caborn, Richard

    Hattersley, Rt Hon Roy

    Callaghan, Jim

    Henderson, Doug

    Campbell, Mrs Anne (C'bridge)

    Heppell, John

    Campbell, Menzies (Fife NE)

    Hill, Keith (Streatham)

    Campbell-Savours, D. N.

    Hinchliffe, David

    Canavan, Dennis

    Hoey, Kate

    Cann, Jamie

    Hogg, Norman (Cumbernauld)

    Carlile, Alexander (Montgomry)

    Home Robertson, John

    Chisholm, Malcolm

    Hoon, Geoffrey

    Clapham, Michael

    Howarth, George (Knowsley N)

    Clark, Dr David (South Shields)

    Howells, Dr. Kim (Pontypridd)

    Clarke, Eric (Midlothian)

    Hoyle, Doug

    Clarke, Tom (Monklands W)

    Hughes, Kevin (Doncaster N)

    Clelland, David

    Hughes, Robert (Aberdeen N)

    Clwyd, Mrs Ann

    Hughes, Roy (Newport E)

    Cohen, Harry

    Hughes, Simon (Southwark)

    Connarty, Michael

    Hume, John

    Cook, Frank (Stockton N)

    Hutton, John

    Cook, Robin (Livingston)

    Illsley, Eric

    Corbett, Robin

    Ingram, Adam

    Corbyn, Jeremy

    Jackson, Glenda (H'stead)

    Corston, Ms Jean

    Jackson, Helen (Shef'ld, H)

    Cousins, Jim

    Jamieson, David

    Cryer, Bob

    Janner, Greville

    Cummings, John

    Johnston, Sir Russell

    Cunliffe, Lawrence

    Jones, Barry (Alyn and D'side)

    Cunningham, Jim (Covy SE)

    Jones, Ieuan Wyn (Ynys Môn)

    Cunningham, Rt Hon Dr John

    Jones, Jon Owen (Cardiff C)

    Dafis, Cynog

    Jones, Lynne (B'ham S O)

    Dalyell, Tam

    Jones, Martyn (Clwyd, SW)

    Darling, Alistair

    Jones, Nigel (Cheltenham)

    Davidson, Ian

    Kaufman, Rt Hon Gerald

    Davies, Bryan (Oldham C'tral)

    Keen, Alan

    Davies, Rt Hon Denzil (Llanelli)

    Kennedy, Charles (Ross,C&S)

    Davies, Ron (Caerphilly)

    Kennedy, Jane (Lpool Brdgn)

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

    Khabra, Piara S.

    Denham, John

    Kinnock, Rt Hon Neil (Islwyn)

    Dewar, Donald

    Kirkwood, Archy

    Dixon, Don

    Leighton, Ron

    Dobson, Frank

    Lestor, Joan (Eccles)

    Donohoe, Brian H.

    Lewis, Terry

    Dowd, Jim

    Litherland, Robert

    Dunwoody, Mrs Gwyneth

    Livingstone, Ken

    Eagle, Ms Angela

    Lloyd, Tony (Stretford)

    Eastham, Ken

    Llwyd, Elfyn

    Etherington, Bill

    Loyden, Eddie

    Evans, John (St Helens N)

    Lynne, Ms Liz

    Fatchett, Derek

    McAllion, John

    Field, Frank (Birkenhead)

    McAvoy, Thomas

    Fisher, Mark

    McCartney, Ian

    Flynn, Paul

    McCrea, Rev William

    Forsythe, Clifford (Antrim S)

    Macdonald, Calum

    Foster, Rt Hon Derek

    McFall, John

    Foster, Don (Bath)

    McKelvey, William

    Foulkes, George

    Mackinlay, Andrew

    Fraser, John

    McLeish, Henry

    Fyfe, Maria

    Maclennan, Robert

    Galbraith, Sam

    McMaster, Gordon

    Galloway, George

    McNamara, Kevin

    Gapes, Mike

    McWilliam, John

    Garrett, John

    Madden, Max

    George, Bruce

    Maginnis, Ken

    Gerrard, Neil

    Mahon, Alice

    Gilbert, Rt Hon Dr John

    Mandelson, Peter

    Godman, Dr Norman A.

    Marek, Dr John

    Godsiff, Roger

    Marshall, David (Shettleston)

    Golding, Mrs Llin

    Marshall, Jim (Leicester, S)

    Gordon, Mildred

    Martin, Michael J. (Springburn)

    713

    Martlew, Eric

    Ross, Ernie (Dundee W)

    Maxton, John

    Ross, William (E Londonderry)

    Meacher, Michael

    Rowlands, Ted

    Michael, Alun

    Ruddock, Joan

    Michie, Bill (Sheffield Heeley)

    Salmond, Alex

    Michie, Mrs Ray (Argyll Bute)

    Sedgemore, Brian

    Milburn, Alan

    Sheerman, Barry

    Miller, Andrew

    Sheldon, Rt Hon Robert

    Mitchell, Austin (Gt Grimsby)

    Shore, Rt Hon Peter

    Molyneaux, Rt Hon James

    Short, Clare

    Moonie, Dr Lewis

    Simpson, Alan

    Morgan, Rhodri

    Skinner, Dennis

    Morley, Elliot

    Smith, Andrew (Oxford E)

    Morris, Rt Hon A. (Wy'nshawe)

    Smith, C. (Isl'ton S & F'sbury)

    Morris, Estelle (B'ham Yardley)

    Smith, Rt Hon John (M'kl'ds E)

    Morris, Rt Hon J. (Aberavon)

    Smith, Llew (Blaenau Gwent)

    Mowlam, Marjorie

    Snape, Peter

    Mudie, George

    Soley, Clive

    Mullin, Chris

    Steinberg, Gerry

    Murphy, Paul

    Stevenson, George

    Oakes, Rt Hon Gordon

    Stott, Roger

    O'Brien, Michael (N W'kshire)

    Strang, Dr. Gavin

    O'Brien, William (Normanton)

    Straw, Jack

    O'Hara, Edward

    Taylor, Mrs Ann (Dewsbury)

    Olner, William

    Taylor, Matthew (Truro)

    Orme, Rt Hon Stanley

    Thompson, Jack (Wansbeck)

    Parry, Robert

    Trimble, David

    Pendry, Tom

    Turner, Dennis

    Pickthall, Colin

    Tyler, Paul

    Pike, Peter L.

    Vaz, Keith

    Pope, Greg

    Walker, Rt Hon Sir Harold

    Powell, Ray (Ogmore)

    Wallace, James

    Prentice, Ms Bridget (Lew'm E)

    Walley, Joan

    Prentice, Gordon (Pendle)

    Wardell, Gareth (Gower)

    Prescott, John

    Wareing, Robert N

    Primarolo, Dawn

    Watson, Mike

    Purchase, Ken

    Welsh, Andrew

    Quin, Ms Joyce

    Wicks, Malcolm

    Radice, Giles

    Williams, Rt Hon Alan (Sw'n W)

    Randall, Stuart

    Williams, Alan W (Carmarthen)

    Raynsford, Nick

    Wilson, Brian

    Redmond, Martin

    Winnick, David

    Reid, Dr John

    Worthington, Tony

    Robertson, George (Hamilton)

    Wray, Jimmy

    Robinson, Geoffrey (Co'try NW)

    Wright, Dr Tony

    Robinson, Peter (Belfast E)

    Roche, Mrs. Barbara

    Tellers for the Noes:

    Rogers, Allan

    Mr. Peter Kilfoyle and

    Rooker, Jeff

    Mr. Alan Meale.

    Rooney, Terry

    Question accordingly agreed to.
    Resolved,
    That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance; but this Resolution does not extend to the making of any amendment with respect to value added tax so as to provide—
    714

    (a) for zero-rating or exempting any supply, acquisition or importation;

    (b) for refunding any amount of tax;

    (c) for varying the rate of that tax otherwise than in relation to all supplies, acquisitions and importations; or

    (d) for relief other than relief applying to goods of whatever description or services of whatever description.

    Madam SPEAKER then proceeded, pursuant to paragraph (3) of Standing Order No. 50 (Ways and Means motions), to put forthwith the Questions necessary to dispose of the further motions.

    Budget Resolutions and Economic Situation

      2. BEER (RATE: EXISTING REGIME)
      Resolved,
      That, as from 6 o'clock in the evening of 16th March 1993, the rate of duty specified in section 36 of the Alcoholic Liquor Duties Act 1979 as that section has effect apart from section 7(1) of the Finance Act 1991 shall be increased from £1·108 per hectolitre for every degree by which the original gravity of beer exceeds 1000 degrees to £1·163 per hectolitre for every such degree.
      And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

      3. BEER (RATE: NEW REGIME)
      Resolved,
      That—

      (1) In section 36(1) of the Alcoholic Liquor Duties Act 1979, as substituted by section 7(1) of the Finance Act 1991, for "£10·60" there shall be substituted "£10·45".

      (2) This Resolution shall come into force on 1st June 1993.

      And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

      4. BEER (ABOLITION OF CERTAIN RELIEFS)
      Resolved,
      That provision may be made amending sections 42 and 45, and repealing section 43, of the Alcoholic Liquor Duties Act 1979.

      5. WINE AND MADE-WINE
      Resolved,
      That, as from 6 o'clock in the evening of 16th March 1993, for the Table of rates of duty in Schedule 1 to the Alcoholic Liquor Duties Act 1979 there shall be substituted the following Table—

    TABLE OF RATES OF DUTY ON WINE AND MADE-WINE
      PART I

        WINE OR MADE-WINE OF A STRENGTH NOT EXCEEDING 22 PER CENT.
        Description of wine or made-wine

        Rates of duty per hectolitre

        £

        Wine or made-wine of a strength not exceeding 2 per cent.

        13·23

        Wine or made-wine of a strength exceeding 2 per cent. but not exceeding 3 per cent.

        22·04

        Wine or made-wine of a strength exceeding 3 per cent. but not exceeding 4 per cent.

        30·86

        Wine or made-wine of a strength exceeding 4 per cent. but not exceeding 5 per cent.

        39·69

        Wine or made-wine of a strength exceeding and 5 per cent. but not exceeding 5·5

        48·50

        Wine or made-wine of a strength exceeding 5·5 per cent. but not exceeding 15 per cent. and not being sparkling

        132·26

        Sparkling wine or sparkling made-wine of a strength exceeding 5·5 per cent. but not exceeding 15 per cent.

        218·40

        Wine or made-wine of a strength exceeding 15 per cent. but not exceeding 22 per cent.

        220·43

    PART II

      WINE OR MADE-WINE OF A STRENGTH EXCEEDING 22 PER CENT.
      Description of wine or made-wine

      Rates of duty per litre of alcohol in the wine or made-wine

      218·40

      £

      Wine or made-wine of a strength exceeding 22 per cent.

      218·40

      19·81"

      And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

    6. MIXING OF WINE AND SPIRITS
    Resolved,
    That section 58 of the Alcoholic Liquor Duties Act 1979 may be amended.

    7. SPARKLING WINE OR MADE-WINE
    Resolved,
    That provisions may be substituted for paragraphs 1 and 2 of schedule 1 to the Alcoholic Liquor Duties Act 1979.

    8. CIDER
    Resolved,
    That, as from 6 o'clock in the evening of 16th March 1993, the rate of duty specified in section 62(l) of the Alcoholic Liquor Duties Act 1979 shall be increased from £21·32 per hectolitre to £22·39 per hectolitre.
    And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

    9. TOBACCO PRODUCTS (RATES)
    Resolved,
    That, as from 6 o'clock in the evening of 16th March 1993, for the Table in Schedule 1 to the Tobacco Products Duty Act 1979 there shall be substituted—

    "TABLE

    1. Cigarettes

    An amount equal to 20 per cent. of the retail price plus £48·75 per thousand cigarettes.

    2. Cigars

    £72·30 per kilogram.

    3. Hand-rolling tobacco

    £76·29 per kilogram

    4. Other smoking tobacco and chewing tobacco

    £31·93 per kilogram."

    And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

    10. HAND-ROLLING TOBACCO
    Resolved,
    That the definition of hand-rolling tobacco in the Tobacco Products Duty Act 1979 may be amended.

    11. HYDROCARBON OIL (RATES)
    Resolved,
    That, as from 6 o'clock in the evening of 16th March 1993, the Hydrocarbon Oil Duties Act 1979 shall have effect with the following amendments—

    717

    (1) In section 6(l) for "£0·2779" and "£0·2285" there shall be substituted "0.3058" and "£0-2514" respectively.

    (2) In section 11(1) for "£0·0095" and "£0·0135" there shall be substituted "£0·0105" and "£0·0149" respectively.

    (3) In section 13A(1) for "£0·0437" there shall be substituted "£0·0482".

    (4) In section 14(1) for "£0·0095" there shall be substituted "£0·0105".

    And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

    12. HYDROCARBON OIL DUTIES (MEASUREMENTS)
    Resolved,
    That provision may be made for the purposes of the Hydrocarbon Oil Duties Act 1979 as to the methods of ascertaining or determining—

    (a) the volume of any substance; and

    (b) the amount of any duty that has been paid, or of any rebate that has been allowed, in respect of any substance.

    13. HYDROCARBON OIL DUTIES (FUEL SUBSTITUTES)
    Resolved,
    That provision may be made for charging excise duty on—

    (a) mineral oils within the meaning of the Directive of the Council of the European Communities dated 19th October 1992 No. 92/81/EEC, as amended; and

    (b) substances which are set aside for use or used as fuel for engines, motors or other machinery or as additives or extenders in any such fuel.

    14. GAMING MACHINE LICENCE DUTY (RATES)
    Resolved,
    That—
    (1) The Tables set out in section 23(1) of the Betting and Gaming Duties Act 1981 shall be amended as follows—

    (a) in Table A for "£375" there shall be substituted "£450";

    (b) in Table B for "£375" there shall be substituted "£450" and for "£960" there shall be substituted "£1,150".

    (2) This Resolution applies in relation to licences for any period beginning on or after 1st May 1993.
    And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

    15. LOTTERY DUTY
    Resolved,
    That provisions may be made for and in connection with the imposition of a duty of exise on the taking of tickets or chances in lotteries.

    16. VEHICLES EXCISE DUTY (RATES: GENERAL)
    Resolved,
    That—

    (1) The Vehicles (Excise) Act 1971 shall be amended as follows.

    (2) In Schedule 1, in the Table set out in Part II—

    (a) in the second column of paragraph 2 for "30·00" there shall be substituted "35·00";

    (b) in the second column of paragraph 3 for "50·00" there shall be substituted "55·00";

    (c) in the second column of paragraph 5 for "50·00" there shall be substituted "55·00".

    (3) In Schedule 2, in the Table set out in Part II—

    (a) in the second column of the first entry for "110" there shall be substituted "125";

    718

    (b) in the second column of the second entry for "130" there shall be substituted "150".

    (4) In Schedule 3, in the Table set out in Part II—

    (a) in the second column of paragraph 1 for "30·00" there shall be substituted "35·00";

    (b) in the second column of paragraph 2 for "90·00" there shall be substituted "100·00";

    (c) in the second column of paragraph 4 for "75·00" there shall be substituted "85·00".

    (5) In Schedule 4, in paragraph 1(1) of Part I for "130" there shall be substituted "150".

    (6) In Schedule 4, in paragraph 6 of Part I—

    (a) in sub-paragraph (1) for "£75" there shall be substituted "£85";

    (b) in sub-paragraphs (2)(a), (2)(b) and (4) for "£90" (in each place) there shall be substituted "£100".

    (7) In Schedule 5, in the Table set out in Part II—

    (a) in the second column of paragraph I for "60·00" there shall be substituted "70·00";

    (b) in the second column of paragraph 2 for "110·00" there shall be substituted "125·00".

    (8) This Resolution shall apply in relation to licences taken out after 16th March 1993.

    And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

    17. VEHICLES EXCISE DUTY (EXCEPTIONAL LOADS: 1)
    Resolved,
    That—

    (1) The Vehicles (Excise) Act 1971 shall he amended as follows.

    (2) In paragraph 2 of Schedule 4A for "£3,250" there shall be substituted "£4,250".

    (3) This Resolution shall apply in relation to licences taken out after 16th March 1993.

    And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

    18. VEHICLES EXCISE DUTY (EXCEPTIONAL LOADS: 2)
    Resolved,
    That paragraph 2 of Schedule 4A to the Vehicles (Excise) Act 1971 may be amended in relation to licences taken out on or after a day appointed by the Secretary of State.

    19. VEHICLES EXCISE DUTY (OLD BICYCLES)
    Resolved,
    That—
    (1) The Vehicles (Excise) Act 1971 shall be amended as follows
    (2) In Schedule 1 for paragraph 2 there shall be substituted—
    "2. Where a bicycle the cylinder capacity of whose engine exceeds 150 cubic centimetres is one constructed before 1933 it shall be treated for the purposes of this Schedule as having an engine of cylinder capacity not exceeding 150 cubic centimetres."
    (3) In paragraph 4(a) of that Schedule for "2(a)" there shall be substituted "2".
    (4) This Resolution shall apply in relation to licences taken out after 16th March 1993.
    And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

    20. VEHICLES EXCISE DUTY (TRADE LICENCES)
    Resolved,
    That—

    (1) The Vehicles (Excise) Act 1971 shall be amended as follows.

    (2) In subsection (5) of section 16, including that subsection as set out in paragraph 12 of Part I of Schedule 7—

    719

    (a) for "£100" there shall be substituted "the rate mentioned in subsection (5A)(a) below", and

    (b) for "£20" there shall be substituted "the rate mentioned in subsection (5A)(b) below".

    (3) In that section the following subsection shall be inserted after subsection (5)—

    "(5A) The rates referred to in subsection (5) above are—

    (a) the annual rate applicable to a vehicle falling within paragraph 2 of Part II of Schedule 5 to this act in relation to a licence taken out when the trade licence is taken out;

    (b) the annual rate applicable to a vehicle falling within paragraph 3 of Part II of Schedule 1 to this act in relation to a licence taken out when the trade licence is taken out."

    (4) This Resolution shall apply in relation to licences taken out after 16th March 1993.
    And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

    21. VALUE ADDED TAX (FUEL AND POWER)
    Motion made, and Question put:—
    That provision may be made—

    (a) for supplies falling within Group 7 of Schedule 5 to the Value Added Tax Act 1983 to cease to be zero-rated, and

    (b) as to the rates at which tax is to be charged on those supplies and on the equivalent acquisitions and importations.

    The House divided: Ayes 303, Noes 278.

    Division No. 196]

    [10.15 pm

    AYES

    Adley, Robert

    Butcher, John

    Ainsworth, Peter (East Surrey)

    Butterfill, John

    Aitken, Jonathan

    Carlisle, John (Luton North)

    Alexander, Richard

    Carlisle, Kenneth (Lincoln)

    Allason, Rupert (Torbay)

    Carrington, Matthew

    Amess, David

    Carttiss, Michael

    Ancram, Michael

    Cash, William

    Arbuthnot, James

    Churchill, Mr

    Arnold, Jacques (Gravesham)

    Clark, Dr Michael (Rochford)

    Arnold, Sir Thomas (Hazel Grv)

    Clarke, Rt Hon Kenneth (Ruclif)

    Ashby, David

    Clifton-Brown, Geoffrey

    Atkins, Robert

    Coe, Sebastian

    Atkinson, Peter (Hexham)

    Colvin, Michael

    Baker, Rt Hon K. (Mole Valley)

    Congdon, David

    Baker, Nicholas (Dorset North)

    Conway, Derek

    Baldry, Tony

    Coombs, Anthony (Wyre For'st)

    Banks, Matthew (Southport)

    Coombs, Simon (Swindon)

    Banks, Robert (Harrogate)

    Cope, Rt Hon Sir John

    Bates, Michael

    Cormack, Patrick

    Batiste, Spencer

    Couchman, James

    Bellingham, Henry

    Cran, James

    Bendall, Vivian

    Currie, Mrs Edwina (S D'by'ire)

    Beresford, Sir Paul

    Curry, David (Skipton & Ripon)

    Biffen, Rt Hon John

    Davis, David (Boothferry)

    Blackburn, Dr John G.

    Day, Stephen

    Bonsor, Sir Nicholas

    Deva, Nirj Joseph

    Booth, Hartley

    Devlin, Tim

    Boswell, Tim

    Dickens, Geoffrey

    Bottomley, Peter (Eltham)

    Dorrell, Stephen

    Bottomley, Rt Hon Virginia

    Douglas-Hamilton, Lord James

    Bowden, Andrew

    Dover, Den

    Bowis, John

    Duncan, Alan

    Boyson, Rt Hon Sir Rhodes

    Duncan-Smith, Iain

    Brandreth, Gyles

    Dunn, Bob

    Brazier, Julian

    Durant, Sir Anthony

    Bright, Graham

    Eggar, Tim

    Brooke, Rt Hon Peter

    Elletson, Harold

    Brown, M. (Brigg & Cl'thorpes)

    Emery, Rt Hon Sir Peter

    Browning, Mrs. Angela

    Evans, David (Welwyn Hatfield)

    Bruce, Ian (S Dorset)

    Evans, Jonathan (Brecon)

    Budgen, Nicholas

    Evans, Nigel (Ribble Valley)

    Burns, Simon

    Evans, Roger (Monmouth)

    Burt, Alistair

    Evennett, David

    720

    Faber, David

    Legg, Barry

    Fabricant, Michael

    Leigh, Edward

    Fenner, Dame Peggy

    Lennox-Boyd, Mark

    Field, Barry (Isle of Wight)

    Lester, Jim (Broxtowe)

    Fishburn, Dudley

    Lidington, David

    Forman, Nigel

    Lightbown, David

    Forsyth, Michael (Stirling)

    Lilley, Rt Hon Peter

    Forth, Eric

    Lloyd, Peter (Fareham)

    Fowler, Rt Hon Sir Norman

    Lord, Michael

    Fox, Dr Liam (Woodspring)

    Luff, Peter

    Fox, Sir Marcus (Shipley)

    Lyell, Rt Hon Sir Nicholas

    Freeman, Roger

    MacGregor, Rt Hon John

    French, Douglas

    MacKay, Andrew

    Fry, Peter

    McLoughlin, Patrick

    Gale, Roger

    McNair-Wilson, Sir Patrick

    Gallie, Phil

    Maitland, Lady Olga

    Gardiner, Sir George

    Major, Rt Hon John

    Garel-Jones, Rt Hon Tristan

    Malone, Gerald

    Garnier, Edward

    Mans, Keith

    Gill, Christopher

    Marland, Paul

    Gillan, Cheryl

    Marshall, John (Hendon S)

    Goodlad, Rt Hon Alastair

    Marshall, Sir Michael (Arundel)

    Goodson-Wickes, Dr Charles

    Martin, David (Portsmouth S)

    Gorman, Mrs Teresa

    Mates, Michael

    Gorst, John

    Mawhinney, Dr Brian

    Grant, Sir Anthony (Cambs SW)

    Mayhew, Rt Hon Sir Patrick

    Greenway, Harry (Ealing N)

    Mellor, Rt Hon David

    Greenway, John (Ryedale)

    Merchant, Piers

    Griffiths, Peter (Portsmouth, N)

    Milligan, Stephen

    Grylls, Sir Michael

    Mills, Iain

    Gummer, Rt Hon John Selwyn

    Mitchell, Sir David (Hants NW)

    Hague, William

    Moate, Sir Roger

    Hamilton, Rt Hon Archie (Epsom)

    Monro, Sir Hector

    Hamilton, Neil (Tatton)

    Montgomery, Sir Fergus

    Hampson, Dr Keith

    Moss, Malcolm

    Hanley, Jeremy

    Needham, Richard

    Hannam, Sir John

    Nelson, Anthony

    Hargreaves, Andrew

    Newton, Rt Hon Tony

    Hawkins, Nick

    Nicholls, Patrick

    Hawksley, Warren

    Nicholson, David (Taunton)

    Hayes, Jerry

    Nicholson, Emma (Devon West)

    Heald, Oliver

    Norris, Steve

    Heath, Rt Hon Sir Edward

    Onslow, Rt Hon Sir Cranley

    Heathcoat-Amory, David

    Oppenheim, Phillip

    Hendry, Charles

    Ottaway, Richard

    Heseltine, Rt Hon Michael

    Page, Richard

    Higgins, Rt Hon Sir Terence L.

    Paice, James

    Hill, James (Southampton Test)

    Patnick, Irvine

    Hogg, Rt Hon Douglas (G'tham)

    Patten, Rt Hon John

    Horam, John

    Pattie, Rt Hon Sir Geoffrey

    Hordern, Rt Hon Sir Peter

    Pawsey, James

    Howarth, Alan (Strat'rd-on-A)

    Peacock, Mrs Elizabeth

    Howell, Rt Hon David (G'dford)

    Pickles, Eric

    Hughes Robert G. (Harrow W)

    Porter, Barry (Wirral S)

    Hunt, Rt Hon David (Wirral W)

    Porter, David (Waveney)

    Hunt, Sir John (Ravensbourne)

    Portillo, Rt Hon Michael

    Hunter, Andrew

    Rathbone, Tim

    Hurd, Rt Hon Douglas

    Redwood, John

    Jack, Michael

    Renton, Rt Hon Tim

    Jackson, Robert (Wantage)

    Richards, Rod

    Jenkin, Bernard

    Riddick, Graham

    Jessel, Toby

    Robathan, Andrew

    Johnson Smith, Sir Geoffrey

    Roberts, Rt Hon Sir Wyn

    Jones, Gwilym (Cardiff N)

    Robertson, Raymond (Ab'd'n S)

    Jones, Robert B. (W Hertfdshr)

    Robinson, Mark (Somerton)

    Jopling, Rt Hon Michael

    Rowe, Andrew (Mid Kent)

    Kellett-Bowman, Dame Elaine

    Rumbold, Rt Hon Dame Angela

    Key, Robert

    Ryder, Rt Hon Richard

    King, Rt Hon Tom

    Sackville, Tom

    Kirkhope, Timothy

    Sainsbury, Rt Hon Tim

    Knapman, Roger

    Scott, Rt Hon Nicholas

    Knight, Mrs Angela (Erewash)

    Shaw, David (Dover)

    Knight, Greg (Derby N)

    Shaw, Sir Giles (Pudsey)

    Knight, Dame Jill (Bir'm E'st'n)

    Shephard, Rt Hon Gillian

    Knox, David

    Shepherd, Colin (Hereford)

    Kynoch, George (Kincardine)

    Shepherd, Richard (Aldridge)

    Lait, Mrs Jacqui

    Skeet, Sir Trevor

    Lamont, Rt Hon Norman

    Smith, Sir Dudley (Warwick)

    Lang, Rt Hon Ian

    Smith, Tim (Beaconsfield)

    Lawrence, Sir Ivan

    Soames, Nicholas

    721

    Speed, Sir Keith

    Tredinnick, David

    Spencer, Sir Derek

    Trotter, Neville

    Spicer, Sir James (W Dorset)

    Twinn, Dr Ian

    Spicer, Michael (S Worcs)

    Vaughan, Sir Gerard

    Spink, Dr Robert

    Viggers, Peter

    Spring, Richard

    Waldegrave, Rt Hon William

    Sproat, Iain

    Walden, George

    Squire, Robin (Hornchurch)

    Walker, Bill (N Tayside)

    Stanley, Rt Hon Sir John

    Waller, Gary

    Steen, Anthony

    Ward, John

    Stephen, Michael

    Wardle, Charles (Bexhill)

    Stern, Michael

    Waterson, Nigel

    Stewart, Allan

    Watts, John

    Streeter, Gary

    Wells, Bowen

    Sumberg, David

    Wheeler, Rt Hon Sir John

    Sweeney, Walter

    Whitney, Ray

    Sykes, John

    Whittingdale, John

    Tapsell, Sir Peter

    Widdecombe, Ann

    Taylor, Ian (Esher)

    Wiggin, Sir Jerry

    Taylor, John M. (Solihull)

    Wilkinson, John

    Taylor, Sir Teddy (Southend, E)

    Willetts, David

    Temple-Morris, Peter

    Winterton, Mrs Ann (Congleton)

    Thomason, Roy

    Wolfson, Mark

    Thompson, Sir Donald (C'er V)

    Wood, Timothy

    Thompson, Patrick (Norwich N)

    Yeo, Tim

    Thornton, Sir Malcolm

    Young, Sir George (Acton)

    Thurnham, Peter

    Townend, John (Bridlington)

    Tellers for the Ayes:

    Townsend, Cyril D. (Bexl'yh'th)

    Mr. Sydney Chapman and

    Tracey, Richard

    Mr Andrew Mitchell.

    NOES

    Abbott, Ms Diane

    Clarke, Tom (Monklands W)

    Adams, Mrs Irene

    Clelland, David

    Ainger, Nick

    Clwyd, Mrs Ann

    Ainsworth, Robert (Cov'try NE)

    Cohen, Harry

    Allen, Graham

    Connarty, Michael

    Alton, David

    Cook, Frank (Stockton N)

    Anderson, Donald (Swansea E)

    Cook, Robin (Livingston)

    Anderson, Ms Janet (Ros'dale)

    Corbett, Robin

    Armstrong, Hilary

    Corbyn, Jeremy

    Ashdown, Rt Hon Paddy

    Corston, Ms Jean

    Ashton, Joe

    Cousins, Jim

    Banks, Tony (Newham NW)

    Cryer, Bob

    Barnes, Harry

    Cummings, John

    Barron, Kevin

    Cunliffe, Lawrence

    Battle, John

    Cunningham, Jim (Covy SE)

    Bayley, Hugh

    Cunningham, Rt Hon Dr John

    Beckett, Rt Hon Margaret

    Dafis, Cynog

    Beggs, Roy

    Dalyell, Tam

    Bell, Stuart

    Darling, Alistair

    Benn, Rt Hon Tony

    Davidson, Ian

    Bennett, Andrew F.

    Davies, Bryan (Oldham C'tral)

    Benton, Joe

    Davies, Rt Hon Denzil (Llanelli)

    Bermingham, Gerald

    Davies, Ron (Caerphilly)

    Berry, Dr. Roger

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

    Betts, Clive

    Denham, John

    Blair, Tony

    Dewar, Donald

    Blunkett, David

    Dixon, Don

    Boateng, Paul

    Dobson, Frank

    Boyes, Roland

    Donohoe, Brian H.

    Bradley, Keith

    Dowd, Jim

    Bray, Dr Jeremy

    Eagle, Ma Angela

    Brown, Gordon (Dunfermline E)

    Eastham, Ken

    Brown, N. (N'c'tle upon Tyne E)

    Etherington, Bill

    Bruce, Malcolm (Gordon)

    Evans, John (St Helens N)

    Burden, Richard

    Fatchett, Derek

    Byers, Stephen

    Field, Frank (Birkenhead)

    Caborn, Richard

    Fisher, Mark

    Callaghan, Jim

    Flynn, Paul

    Campbell, Mrs Anne (C'bridge)

    Forsythe, Clifford (Antrim S)

    Campbell, Menzies (Fife NE)

    Foster, Rt Hon Derek

    Campbell-Savours, D. N.

    Foster, Don (Bath)

    Canavan, Dennis

    Foulkes, George

    Cann, Jamie

    Fraser, John

    Carlile, Alexander (Montgomry)

    Fyfe, Maria

    Chisholm, Malcolm

    Galbraith, Sam

    Clapham, Michael

    Galloway, George

    Clark, Dr David (South Shields)

    Gapes, Mike

    Clarke, Eric (Midlothian)

    Garrett, John

    722

    George, Bruce

    Madden, Max

    Gerrard, Neil

    Maginnis, Ken

    Gilbert, Rt Hon Dr John

    Mahon, Alice

    Godman, Dr Norman A.

    Mandelson, Peter

    Godsiff, Roger

    Marek, Dr John

    Golding, Mrs Llin

    Marshall, David (Shettleston)

    Gordon, Mildred

    Marshall, Jim (Leicester, S)

    Gould, Bryan

    Martin, Michael J. (Springburn)

    Grant, Bernie (Tottenham)

    Martlew, Eric

    Griffiths, Nigel (Edinburgh S)

    Maxton, John

    Griffiths, Win (Bridgend)

    Meacher, Michael

    Grocott, Bruce

    Michael, Alun

    Gunnell, John

    Michie, Bill (Sheffield Heeley)

    Hain, Peter

    Michie, Mrs Ray (Argyll Bute)

    Hall, Mike

    Milburn, Alan

    Hanson, David

    Miller, Andrew

    Hardy, Peter

    Mitchell, Austin (Gt Grimsby)

    Harman, Ms Harriet

    Molyneaux, Rt Hon James

    Harvey, Nick

    Moonie, Dr Lewis

    Hattersley, Rt Hon Roy

    Morgan, Rhodri

    Henderson, Doug

    Morley, Elliot

    Heppell, John

    Morris, Rt Hon A. (Wy'nshawe)

    Hill, Keith (Streatham)

    Morris, Estelle (B'ham Yardley)

    Hinchliffe, David

    Morris, Rt Hon J. (Aberavon)

    Hoey, Kate

    Mowlam, Marjorie

    Hogg, Norman (Cumbernauld)

    Mudie, George

    Home Robertson, John

    Mullin, Chris

    Hoon, Geoffrey

    Murphy, Paul

    Howarth, George (Knowsley N)

    Oakes, Rt Hon Gordon

    Howells, Dr. Kim (Pontypridd)

    O'Brien, William (Normanton)

    Hoyle, Doug

    O'Hara, Edward

    Hughes, Kevin (Doncaster N)

    Olner, William

    Hughes, Robert (Aberdeen N)

    O'Neill, Martin

    Hughes, Roy (Newport E)

    Orme, Rt Hon Stanley

    Hughes, Simon (Southwark)

    Parry, Robert

    Hume, John

    Pendry, Tom

    Hutton, John

    Pickthall, Colin

    Illsley, Eric

    Pike, Peter L.

    Ingram, Adam

    Pope, Greg

    Jackson, Glenda (H'stead)

    Powell, Ray (Ogmore)

    Jackson, Helen (Shef'ld, H)

    Prentice, Ms Bridget (Lew'm E)

    Jamieson, David

    Prentice, Gordon (Pendle)

    Janner, Greville

    Prescott, John

    Johnston, Sir Russell

    Primarolo, Dawn

    Jones, Barry (Alyn and D'side)

    Purchase, Ken

    Jones, Ieuan Wyn (Ynys Mßn)

    Quin, Ms Joyce

    Jones, Jon Owen (Cardiff C)

    Radice, Giles

    Jones, Lynne (B'ham S O)

    Randall, Stuart

    Jones, Martyn (Clwyd, SW)

    Raynsford, Nick

    Jones, Nigel (Cheltenham)

    Redmond, Martin

    Kaufman, Rt Hon Gerald

    Reid, Dr John

    Keen, Alan

    Robertson, George (Hamilton)

    Kennedy, Charles (Ross,C&S)

    Robinson, Peter (Belfast E)

    Kennedy, Jane (Lpool Brdgn)

    Roche, Mrs. Barbara

    Khabra, Piara S.

    Rogers, Allan

    Kilfedder, Sir James

    Rooker, Jeff

    Kinnock, Rt Hon Neil (Islwyn)

    Rooney, Terry

    Kirkwood, Archy

    Ross, Ernie (Dundee W)

    Leighton, Ron

    Ross, William (E Londonderry)

    Lestor, Joan (Eccles)

    Rowlands, Ted

    Lewis, Terry

    Ruddock, Joan

    Litherland, Robert

    Salmond, Alex

    Livingstone, Ken

    Sedgemore, Brian

    Lloyd, Tony (Stretford)

    Sheerman, Barry

    Llwyd, Elfyn

    Sheldon, Rt Hon Robert

    Loyden, Eddie

    Shore, Rt Hon Peter

    Lynne, Ms Liz

    Short, Clare

    McAllion, John

    Simpson, Alan

    McAvoy, Thomas

    Skinner, Dennis

    McCartney, Ian

    Smith, Andrew (Oxford E)

    McCrea, Rev William

    Smith, C. (Isl'ton S & F'sbury)

    Macdonald, Calum

    Smith, Rt Hon John (M'kl'ds E)

    McFall, John

    Smith, Llew (Blaenau Gwent)

    McKelvey, William

    Snape, Peter

    Mackinlay, Andrew

    Soley, Clive

    McLeish, Henry

    Steinberg, Gerry

    Maclennan, Robert

    Stevenson, George

    McMaster, Gordon

    Stott, Roger

    McNamara, Kevin

    Strang, Dr. Gavin

    McWilliam, John

    Straw, Jack

    723

    Taylor, Mrs Ann (Dewsbury)

    Welsh, Andrew

    Taylor, Matthew (Truro)

    Wicks, Malcolm

    Thompson, Jack (Wansbeck)

    Williams, Rt Hon Alan (Sw'n W)

    Trimble, David

    Williams, Alan W (Carmarthen)

    Turner, Dennis

    Wilson, Brian

    Tyler, Paul

    Winnick, David

    Vaz, Keith

    Worthington, Tony

    Walker, Rt Hon Sir Harold

    Wray, Jimmy

    Wallace, James

    Wright, Dr Tony

    Walley, Joan

    Wardell, Gareth (Gower)

    Tellers for the Noes:

    Wareing, Robert N

    Mr. Alan Meale and

    Watson, Mike

    Mr. Peter Kilfoyle.

    Question accordingly agreed to.

    22. VALUE ADDED TAX (SUPPLIES OF GOLD ETC.)
    Resolved,
    That the Value Added Tax Act 1983 shall have effect in relation to supplies of goods which (disregarding section 5 of that Act) are made on or after 1st April 1993 with the insertion after section 37B of the following section—

    22. VALUE ADDED TAX (SUPPLIES OF GOLD ETC.)

      Customers to account for tax on supplies of gold etc.
      37C.—(1) Where any person makes a supply of gold to another person and that supply is a taxable supply but not a zero-rated supply, the supply shall be treated for the purposes of Schedule 1 to this Act—

      (a) as a taxable supply of that other person (as well as a taxable supply of the person who makes it); and

      (b) in so far as that other person is supplied in connection with the carrying on by him of any business, as a supply made by him in the course of furtherance of that business,

      but nothing in paragraph (b) above shall require any supply to be disregarded for the purposes of that Schedule on the grounds that it is a supply of capital assets of that other person's business.
      (2) Where a taxable person makes a supply of gold to a person who—

      (a) is himself a taxable person at the time when the supply is made; and

      (b) is supplied in connection with the carrying on by him of any business.

      it shall be for the person supplied, on the supplier's behalf, to account for and pay tax on the supply, and not for the supplier.
      (3) So much of this Act and of any other enactment or any subordinate legislation as has effect for the purposes of, or in connection with, the enforcement of any obligation to account for and pay value added tax shall apply for the purposes of this section in relation to any person who is required under subsection (2) above to account for and pay any tax as if that tax were tax on a supply made by him.
      (4) Section 5(1) to (5) above shall not apply for determining when any supply of gold is to be treated as taking place.
      (5) References in this section to a supply of gold are references to—

      (a) any supply of goods consisting in gold, including gold coins, or

      (b) any supply of goods containing gold where the consideration for the supply (apart from any tax) is, or is equivalent to, an amount which does not exceed, or exceeds by no more than a negligible amount, the open market value of the gold contained in the goods."

      And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

  23. VALUE ADDED TAX

    (PRECIOUS AND SEMI-PRECIOUS METALS AND STONES)
    Resolved,
    That provision may be made authorising the modification of the Value Added Tax Act 1983 in relation to supplies of
    724
    goods or services consisting in, or relating to, any precious or semi-precious metal or stones or anything containing any such metal or stones.

  24. VALUE ADDED TAX (FUEL FOR PRIVATE USE)
  Resolved,
  That—

  (1) Paragraph 3 of Schedule 6 to the Finance Act 1986 and the Table B set out after that paragraph shall not have effect in relation to any case where the prescribed accounting period begins after 5th April 1993.

  (2) Accordingly, that Schedule shall have effect in relation to any such case with the following amendments, namely—

  (a) in paragraph 5(1)(a), for the words from "cubic capacity" to "in question" there shall be substituted "vehicle specified in Table A above, that Table";

  (b) in paragraph 5(1)(b), for "cubic capacity specified in those Tables" and "the Table in question" there shall be substituted, respectively, "vehicle specified in that Table" and "that Table";

  (c) in paragraph 6(1), for the words from "Tables" onwards there shall be substituted "Table A above is the capacity of its engine as calculated for the purposes of the Vehicles (Excise) Act 1971"; and

  (d) in paragraph 6(2), for "Tables A and B" there shall be substituted "Table A".

  And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

  25. VALUE ADDED TAX

    (PERSONS BELONGING IN OTHER MEMBER STATES)
    Resolved,
    That provision may be made amending the Value Added Tax Act 1983 in relation to cases where goods are supplied by a person who does not have an establishment in the United Kingdom and is taxable in another member State.

  26. VALUE ADDED TAX (BAD DEBTS)
  Resolved,
  That—

  (1) In section 11(1)(c) of the Finance Act 1990 for "one year" there shall be substituted "six months".

  (2) This Resolution shall come into force on 1st April 1993 and shall apply in relation to supplies made on or after 1st April 1992.

  And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

  27. VALUE ADDED TAX (DEFAULT SURCHARGE)
  Resolved,
  That—

  (1) In section 19 of the Finance Act 1985, in subsection (5)—

  (a) at the end of paragraph (b) there shall be inserted "and", and

  (b) for paragraphs (c) and (d) there shall be substituted the following paragraph—

  "(c) in relation to each such period after the second, the specified percentage is 15 per cent."

  (2) This Resolution shall apply in relation to any liability to a surcharge arising on or after 1st April 1993.
  And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

  28. INCOME TAX (CHARGE AND RATES FOR 1993–94)
  Resolved,
  That—

  (1) Income tax shall be charged for the year 1993–94, and for that year—

  (a) the lower rate shall be 20 per cent.,

  (b) the basic rate shall be 25 per cent., and

  (c) the higher rate shall be 40 per cent.

  (2) For the year 1993–94 section 1(2) of the Income and Corporation Taxes Act 1988 shall apply as if—

  (a) the amount specified in paragraph (aa) were £2,500, and

  (b) the amount specified in paragraph (b) were £23,700; and accordingly section 1(4) of that Act shall not apply for the year 1993–94.

  (3) This Resolution shall not require any change to be made in the amounts deductible or repayable under section 203 of the Income and Corporation Taxes Act 1988 before 18th May 1993.

  And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

  29. INCOME TAX
  TABLE B

  Cars with an original market value up to £19,250 and not having a cylinder capacity

  Original market value of car

  Age of car at end of relevant year of assessment

  Under 4 years

  4 years or more

  Less than £6,000

  £2,310

  £1,580

  £6,000 or more but less than £8,500

  £2,990

  £2,030

  £8,500 or more but not more than £19,250

  £4,800

  £3,220

  TABLE C

  Cars with an original market value of more than £19,250

  Original market value of car

  Age of car at end of relevant year of assessment

  Under 4 years

  4 years or more

  More than £19,250 but not more than £29,000

  £6,210

  £4,180

  More than £29,000

  £10,040

  £6,660"

  (2) This Resolution shall not require any change to be made in the amounts deductible or repayable under section 203 of the Income and Corporation Taxes Act 1988 before 18th May 1993.
  And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

  29. INCOME TAX

    (PERSONAL AND MARRIED COUPLE'S ALLOWANCES)
    Resolved,
    That sections 257 and 257A of the Income and Corporation Taxes Act 1988 shall apply for the year 1993–94 as if the amounts specified in them were the same as the amounts specified in them as they apply for the year 1992–93, and accordingly section 257C(1) of that Act shall not apply for the year 1993–94.
    And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

    30. RELIEF FOR INTEREST (LIMIT FOR 1993–94)
    Resolved,
    That, for the year 1993–94, the qualifying maximum defined in section 367(5) of the Income and Corporation Taxes Act 1988 shall be £30,000.
    And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

    PART I

      TABLES OF FLAT RATE CASH EQUIVALENTS
      TABLE A

      Cars with an original market value up to £19,250 and having a cylinder capacity

      Cylinder capacity of car in cubic centimeters

      Age of car at end of relevant year of assessment

      Under 4 years

      4 years or more

      1,400 or less

      £2,310

      £1,580

      More than 1,400 but not more than 2,000

      £2,990

      £2,030

      More than 2,000

      £4,800

      £3,220

    31. EARNINGS CAP ETC. (INDEXATION)
    Resolved,
    That the figure £75,000 shall be deemed to be the figure found for the year 1993–94, for the purposes of section 590C of the Income and Corporation Taxes Act 1988, by virtue of section 590C(4) and (5).
    And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

    32. CHARITABLE DONATIONS

      (PAYROLL DEDUCTION SCHEMES)
      Resolved,
      That, for the year 1993–94 and subsequent years of assessment, section 202(7) of the Income and Corporation Taxes Act 1988 shall have effect with the substitution of "£900" for "£600".
      And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

    33. CORPORATION TAX

      (CHARGE AND RATE FOR FINANCIAL YEAR 1993)
      Resolved,
      That corporation tax shall be charged for the financial year 1993 at the rate of 33 per cent.

    34. CORPORATION TAX (SMALL COMPANIES: 1993)
    Resolved,
    That for the financial year 1993–

    (a) the small companies' rate shall be 25 per cent., and

    (b) the fraction mentioned in section 13(2) of the Income and Corporation Taxes Act 1988 shall be one fiftieth.

    35. BENEFITS IN KIND (CARS)
    Resolved,
    That—
    (1) For the year 1993–94, Schedule 6 to the Income and Corporation Taxes Act 1988 shall have effect with the substitution for Part I of the following—

36. BENEFITS IN KIND (CAR FUEL)
Resolved,
That—

"TABLE A

Cylinder capacity of car in cubic centimeters

Cash equivalent

1,400 or less

£600

More than 1,400 but not more than 2,000

£760

More than 2,000

£1,130

TABLE AB

Cylinder capacity of car in cubic centimeters

Cash equivalent

2,000 or less

£550

More than 2,000

£710

TABLE B

Original market value of car

Cash equivalent

Less than £6,000

£600

£6,000 or more but less than £8,500

£760

£8,500 or more

£1,130"

(1) For the year 1993–94, section 158 of the Income and Corporation Taxes Act 1988 shall have effect with the following amendments.
(2) For the Tables in subsection (2) there shall he substituted—
(3) In subsection (5) the words "or 3" shall be omitted.
(4) This Resolution shall not require any change to be made in the amounts deductible or repayable under section 203 of the Income and Corporation Taxes Act 1988 before 18th May 1993.
And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

37. BENEFITS IN KIND (VANS)
Resolved,
That provision may be made relating to vans available for private use.

38. INTEREST (CORPORATION TAX)
Resolved,
That provision may be made restricting interest allowable as a deduction in computing corporation tax.

39. INTEREST ETC. ON DEBTS BETWEEN ASSOCIATED COMPANIES
Resolved,
That provision may be made in relation to interest and other returns on debts owed (directly or indirectly) to companies resident in the United Kingdom by associated companies of theirs which are not so resident.

40. RELIEF ON INTEREST PAYMENTS
Resolved,
That—
(1) In section 355 of the Income and Corporation Taxes Act 1988, after subsection (1) there shall be inserted the following subsections—
"(1A) Where, in the case of any loan—

(a) the condition specified in subsection (1)(a) above would not (apart from this subsection) be fulfilled with respect to any land, caravan or house-boat by reason of its having ceased at any time to be used by a particular person as his only or main residence; and

(b) the borrower's intention at that time was to take steps, before the end of the period of 12 months after the day on which it ceased to be so used, with a view to the disposal of that land, caravan or house-boat,

that condition shall be treated in relation to interest on that loan as continuing to be fulfilled with respect to that land, caravan or house-boat (as well as with respect to any other land, caravan or house-boat with respect to which it is in fact fulfilled) from that time until the end of that period or (if sooner) the abandonment by the borrower of his intention to dispose of the land, caravan or house-boat in question.
(1B) Where—

(a) subsection (1A) above has effect in the case of any loan ('the first loan') so that the condition specified in subsection (1)(a) above is treated in relation to any person as fulfilled with respect to any land, caravan or house-boat, and

(b) there is another loan raised by the borrower to defray money to be applied as mentioned in section 354(1) with a view to the use of any other land, caravan or house-boat as the borrower's only or main residence,

interest on the other loan shall be treated as eligible for relief to the same extent (if any) as if no interest were payable on the first loan."
(2) In subsection (2) of that section, after "subsection (1)" there shall be inserted "or (1A)".
(3) In section 365 of that Act, after subsection (1) there shall be inserted the following subsections—
"(1A) Where, in the case of any loan—

(a) the condition specified in subsection (1)(d) above would not (apart from this subsection) be fulfilled
730
with respect to any land by reason of its having ceased at any time to be used by a particular person as his only or main residence; and

(b) the intention at that time of the person to whom the loan was made, or of each of the annuitants owning an estate or interest in that land, was to take steps, before the end of the period of 12 months after the day on which it ceased to be so used, with a view to the disposal of his estate or interest,

that condition shall be treated in relation to interest on that loan as continuing to be fulfilled with respect to the land from that time until the end of that period of (if sooner) the abandonment by that person or any of those annuitants of his intention to dispose of his estate or interest.
(1B) If it appears to the Board reasonable to do so, having regard to all the circumstances of a particular case, they may direct that in relation to that case subsection (1A) above shall have effect as if for the reference to 12 months there were substituted a reference to such longer period as meets the circumstances of that case."
(4) In consequence of paragraphs (1) to (3) of this Resolution, that Act shall have effect with the following consequential amendments—

(a) in section 354(1), for "to (6)" there shall be substituted "to (4)";

(b) sections 354(5) and (6), 356D(9), 357(4) and 371 shall cease to have effect;

(c) in section 370(1), for "371" there shall be substituted "372";

(d) in section 370(6), after paragraph (b) there shall be inserted—
"and section 355(1A) shall have effect as if after the word 'used' in paragraph (a) there were inserted the words 'wholly or to a substantial extent'.";

(e) in section 370(7), after paragraph (a) there shall be inserted the following paragraph—

"aa subsections (1A) and (1B) of that section shall have effect as if—

(i) after the word 'used' in paragraph (a) of subsection (IA) there were inserted the words 'wholly or partly';

(ii) for the words 'subsection (1)(a)', wherever they occur, there were substituted the words 'subsection (1)';

(iii) for the words 'land, caravan or house-boat', wherever they occur without being immediately preceded by the word 'other', there were substituted the word 'dwelling'; and

(iv) for the words 'other land, caravan or house-boat', wherever they occur, there were substituted the words 'land, caravan or house-boat'; and".

(5) This Resolution shall have effect in relation to payments of interest made on or after 16th March 1993 (whenever falling due).
(6) Where this Resolution applies by virtue of paragraph (5) of this Resolution in a case where the condition specified in section 355(1)(a) or 365(1)(d) of the Income and Corporation Taxes Act 1988 ceased to be fulfilled before 16th March 1993, the power of the Commissioners of Inland Revenue by virtue of this Resolution to extend the period specified in section 355(1A) or 365(1A) of that Act—

(a) shall be exercisable in any case in relation to that period irrespective of when that period began in that case; and

(b) in so far as it is exercisable in relation to the period specified in section 355(1A) of that Act where an equivalent period has been extended in any case under section 354(6) or 371(2) or (3) of that Act, shall be deemed to have been exercised so that

731
(subject to any further extensions) the period in question ends when that equivalent period would have ended.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

41. TAX CREDITS ETC.
Resolved,
That provision may be made as to tax credits in respect of distributions and as to the rate at which other amounts are treated as having borne tax.

42. FOREIGN DIVIDENDS
Resolved,
That, in relation to transactions effected on or after 6th April 1993, Schedule 3 to the Income and Corporation Taxes Act 1988 shall be amended as follows—
(1) In sub-paragraph (1) of paragraph 6A, for "basic rate" there shall be substituted "applicable rate".
(2) After sub-paragraph (2) of that paragraph there shall be inserted the following sub-paragraph—
"(2A) Payments of tax made on any person's behalf under this paragraph shall be treated as made for the purpose only of being applied in the discharge of that person's liability to tax charged (otherwise than by virtue of this paragraph) on the dividends or proceeds to which the payments relate."
(3) After sub-paragraph (3) of that paragraph there shall be inserted the following sub-paragraph—
"(4) For the purposes of sub-paragraph (1) above the applicable rate shall be—

(a) the lower rate, in the case of a foreign dividend which is neither interest nor any other annual payment which is made otherwise than by way of dividend; and

(b) the basic rate in any other case."

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

43. CHARGEABLE GAINS (ANNUAL EXEMPT AMOUNT)
Resolved,
That provision may be made as to the operation of section 3 of the Taxation of Chargeable Gains Act 1992 for the year 1993–94.47.

44. CHARGEABLE GAINS (PERSONAL EQUITY PLANS)
Resolved,
That provision may be made for the purposes of the Taxation of Chargeable Gains Act 1992 in relation to persons who subscribe to a personal equity plan by transferring or renouncing shares or rights to shares.

45. CHARGEABLE GAINS (DEBENTURES ISSUED IN EXCHANGE)
Resolved,
That provision may be made, for the purposes of the taxation of chargeable gains, in relation to debentures issued or treated as issued by one company in exchange for shares in or debentures of another company.

46. CHARGEABLE GAINS (DE-GROUPING)
Resolved,
That provision may be made amending section 179 of the Taxation of Chargeable Gains Act 1992.

47. CHARGEABLE GAINS (INSURANCE: TRANSFERS OF BUSINESS)
Resolved,
That provision (including provision having retrospective effect) may be made amending section 211 of the Taxation of Chargeable Gains Act 1992.

48. CHARGEABLE GAINS (UNIT TRUSTS AND OFFSHORE FUNDS OF INSURANCE COMPANIES)
Resolved,
That provision (including provision having retrospect effect) may be made amending the transitional provision made in connection with sections 212 and 213 of the Taxation of Chargeable Gains Act 1992.

49. CHARGEABLE GAINS (RESTRICTION ON SET OFF OF PRE-ENTRY LOSSES)
Resolved,
That provision may be made for restricting the allowable losses that may be taken into account in computing the total profits of a company which is or has been a member of a group of companies.

50. CHANGES IN THE OWNERSHIP OF COMPANIES
Resolved,
That section 245 of the Income and Corporation Taxes Act 1988 may be amended.

51. EXCHANGE GAINS AND LOSSES
Resolved,
That charges (including charges by reference to past events) may be imposed by—

(a) provisions about gains and losses accruing from fluctuations in exchange rates;

(b) provisions connected with provisions mentioned in paragraph (a) above.

52. PROFITS OR LOSSES (CURRENCY)
Resolved,
That provision may be made about currencies to be used in calculating profits and losses for corporation tax purposes.

53. NON-RESIDENTS
Resolved,
That provision may be made about trustees, companies and other persons not resident in the United Kingdom.

54. OVERSEAS LIFE INSURANCE COMPANIES
Resolved,
That provision (including provision having retrospective effect) may be made in relation to overseas life insurance companies.

55. LLOYD'S UNDERWRITERS
Resolved,
That provision (including provision having retrospective effect) may be made about Lloyd's underwriters.

56. AUTHORISED LLOYD'S UNDERWRITING AGENTS
Resolved,
That provision may be made about authorised Lloyd's underwriting agents.

57. EMPLOYERS' PENSION CONTRIBUTIONS
Resolved,
That provision may be made in relation to contributions by employers under approved retirement benefit schemes.

58. APPROVED SHARE OPTION SCHEMES
Resolved,
That provision may be made about approved share option schemes.

59. BUSINESS EXPANSION SCHEME (RESTRICTION ON RELIEF)
Resolved,
That provision may be made for restricting entitlement to relief under Chapter III of Part VII of the Income and Corporation Taxes Act 1988.

60. APPLICATION OF INCOME TAX ACTS TO PUBLIC OFFICES ETC.
Resolved,
That provision may be made amending section 829 of the Income and Corporation Taxes Act 1988.

61. CAPITAL ALLOWANCES
Resolved,
That provision (including provision having retrospective effect) may be made amending the Capital Allowances Act 1990.

62. PETROLEUM REVENUE TAX
Motion made, and Question put:—
That provision may be made reducing the rate of petroleum revenue tax to 50 per cent. and making other modifications of that tax.
The House divided: Ayes 304, Noes 40.

Division No. 197]

[10.28 pm

AYES

Adley, Robert

Brown, M. (Brigg & Cl'thorpes)

Ainsworth, Peter (East Surrey)

Browning, Mrs. Angela

Aitken, Jonathan

Bruce, Ian (S Dorset)

Alexander, Richard

Burns, Simon

Allason, Rupert (Torbay)

Burt, Alistair

Amess, David

Butterfill, John

Ancram, Michael

Carlisle, John (Luton North)

Arbuthnot, James

Carlisle, Kenneth (Lincoln)

Arnold, Jacques (Gravesham)

Carrington, Matthew

Arnold, Sir Thomas (Hazel Grv)

Carttiss, Michael

Ashby, David

Cash, William

Atkinson, Peter (Hexham)

Churchill, Mr

Baker, Rt Hon K. (Mole Valley)

Clark, Dr Michael (Rochford)

Baker, Nicholas (Dorset North)

Clarke, Rt Hon Kenneth (Ruclif)

Baldry, Tony

Clifton-Brown, Geoffrey

Banks, Matthew (Southport)

Coe, Sebastian

Banks, Robert (Harrogate)

Colvin, Michael

Bates, Michael

Congdon, David

Batiste, Spencer

Conway, Derek

Beggs, Roy

Coombs, Anthony (Wyre For'st)

Bellingham, Henry

Coombs, Simon (Swindon)

Bendall, Vivian

Cope, Rt Hon Sir John

Beresford, Sir Paul

Couchman, James

Biffen, Rt Hon John

Cran, James

Blackburn, Dr John G.

Currie, Mrs Edwina (S D'by'ire)

Bonsor, Sir Nicholas

Curry, David (Skipton & Ripon)

Booth, Hartley

Davis, David (Boothferry)

Boswell, Tim

Day, Stephen

Bottomley, Peter (Eltham)

Deva, Nirj Joseph

Bottomley, Rt Hon Virginia

Devlin, Tim

Bowden, Andrew

Dickens, Geoffrey

Bowis, John

Dorrell, Stephen

Boyson, Rt Hon Sir Rhodes

Douglas-Hamilton, Lord James

Brandreth, Gyles

Dover, Den

Brazier, Julian

Duncan, Alan

Bright, Graham

Duncan-Smith, Iain

Brooke, Rt Hon Peter

Dunn, Bob

734

Durant, Sir Anthony

Kirkhope, Timothy

Eggar, Tim

Knapman, Roger

Elletson, Harold

Knight, Mrs Angela (Erewash)

Emery, Rt Hon Sir Peter

Knight, Greg (Derby N)

Evans, David (Welwyn Hatfield)

Knight, Dame Jill (Bir'm E'st'n)

Evans, Jonathan (Brecon)

Knox, David

Evans, Nigel (Ribble Valley)

Kynoch, George (Kincardine)

Evans, Roger (Monmouth)

Lait, Mrs Jacqui

Evennett, David

Lamont, Rt Hon Norman

Faber, David

Lang, Rt Hon Ian

Fabricant, Michael

Lawrence, Sir Ivan

Fenner, Dame Peggy

Legg, Barry

Field, Barry (Isle of Wight)

Leigh, Edward

Fishburn, Dudley

Lennox-Boyd, Mark

Forman, Nigel

Lester, Jim (Broxtowe)

Forsyth, Michael (Stirling)

Lidington, David

Forsythe, Clifford (Antrim S)

Lightbown, David

Forth, Eric

Lilley, Rt Hon Peter

Fowler, Rt Hon Sir Norman

Lloyd, Peter (Fareham)

Fox, Dr Liam (Woodspring)

Lord, Michael

Fox, Sir Marcus (Shipley)

Luff, Peter

Freeman, Roger

Lyell, Rt Hon Sir Nicholas

French, Douglas

MacGregor, Rt Hon John

Fry, Peter

MacKay, Andrew

Gale, Roger

McLoughlin, Patrick

Gallie, Phil

McNair-Wilson, Sir Patrick

Gardiner, Sir George

Maginnis, Ken

Garel-Jones, Rt Hon Tristan

Maitland, Lady Olga

Garnier, Edward

Major, Rt Hon John

Gill, Christopher

Malone, Gerald

Gillan, Cheryl

Mans, Keith

Goodlad, Rt Hon Alastair

Marland, Paul

Goodson-Wickes, Dr Charles

Marshall, John (Hendon S)

Gorman, Mrs Teresa

Marshall, Sir Michael (Arundel)

Gorst, John

Martin, David (Portsmouth S)

Grant, Sir Anthony (Cambs SW)

Mates, Michael

Greenway, Harry (Ealing N)

Mawhinney, Dr Brian

Greenway, John (Ryedale)

Mellor, Rt Hon David

Griffiths, Peter (Portsmouth, N)

Merchant, Piers

Grylls, Sir Michael

Milligan, Stephen

Gummer, Rt Hon John Selwyn

Mills, Iain

Hague, William

Mitchell, Sir David (Hants NW)

Hamilton, Rt Hon Archie (Epsom)

Moate, Sir Roger

Hamilton, Neil (Tatton)

Molyneaux, Rt Hon James

Hampson, Dr Keith

Monro, Sir Hector

Hanley, Jeremy

Montgomery, Sir Fergus

Hannam, Sir John

Moss, Malcolm

Hargreaves, Andrew

Needham, Richard

Hawkins, Nick

Nelson, Anthony

Hawksley, Warren

Newton, Rt Hon Tony

Hayes, Jerry

Nicholls, Patrick

Heald, Oliver

Nicholson, David (Taunton)

Heath, Rt Hon Sir Edward

Nicholson, Emma (Devon West)

Heathcoat-Amory, David

Norris, Steve

Hendry, Charles

Onslow, Rt Hon Sir Cranley

Heseltine, Rt Hon Michael

Oppenheim, Phillip

Higgins, Rt Hon Sir Terence L.

Ottaway, Richard

Hill, James (Southampton Test)

Page, Richard

Hogg, Rt Hon Douglas (G'tham)

Paice, James

Horam, John

Patnick, Irvine

Hordern, Rt Hon Sir Peter

Patten, Rt Hon John

Howarth, Alan (Strat'rd-on-A)

Pattie, Rt Hon Sir Geoffrey

Howell, Rt Hon David (G'dford)

Pawsey, James

Hughes Robert G. (Harrow W)

Peacock, Mrs Elizabeth

Hunt, Rt Hon David (Wirral W)

Pickles, Eric

Hunt, Sir John (Ravensbourne)

Porter, David (Waveney)

Hunter, Andrew

Portillo, Rt Hon Michael

Hurd, Rt Hon Douglas

Powell, William (Corby)

Jack, Michael

Rathbone, Tim

Jackson, Robert (Wantage)

Redwood, John

Jenkin, Bernard

Renton, Rt Hon Tim

Jessel, Toby

Richards, Rod

Johnson Smith, Sir Geoffrey

Riddick, Graham

Jones, Gwilym (Cardiff N)

Robathan, Andrew

Jones, Robert B. (W Hertfdshr)

Roberts, Rt Hon Sir Wyn

Jopling, Rt Hon Michael

Robertson, Raymond (Ab'd'n S)

Kellett-Bowman, Dame Elaine

Robinson, Mark (Somerton)

Key, Robert

Ross, William (E Londonderry)

Kilfedder, Sir James

Rowe, Andrew (Mid Kent)

King, Rt Hon Tom

Rumbold, Rt Hon Dame Angela

735

Ryder, Rt Hon Richard

Thornton, Sir Malcolm

Sackville, Tom

Thurnham, Peter

Sainsbury, Rt Hon Tim

Townend, John (Bridlington)

Shaw, David (Dover)

Townsend, Cyril D. (Bexl'yh'th)

Shaw, Sir Giles (Pudsey)

Tracey, Richard

Shephard, Rt Hon Gillian

Tredinnick, David

Shepherd, Colin (Hereford)

Trimble, David

Shepherd, Richard (Aldridge)

Trotter, Neville

Skeet, Sir Trevor

Twinn, Dr Ian

Smith, Sir Dudley (Warwick)

Vaughan, Sir Gerard

Smith, Tim (Beaconsfield)

Viggers, Peter

Soames, Nicholas

Waldegrave, Rt Hon William

Speed, Sir Keith

Walden, George

Spencer, Sir Derek

Walker, Bill (N Tayside)

Spicer, Sir James (W Dorset)

Waller, Gary

Spicer, Michael (S Worcs)

Ward, John

Spink, Dr Robert

Wardle, Charles (Bexhill)

Spring, Richard

Waterson, Nigel

Sproat, Iain

Watts, John

Squire, Robin (Hornchurch)

Wells, Bowen

Stanley, Rt Hon Sir John

Wheeler, Rt Hon Sir John

Steen, Anthony

Whitney, Ray

Stephen, Michael

Whittingdale, John

Stern, Michael

Widdecombe, Ann

Stewart, Allan

Wiggin, Sir Jerry

Streeter, Gary

Wilkinson, John

Sumberg, David

Willetts, David

Sweeney, Walter

Winterton, Mrs Ann (Congleton)

Sykes, John

Winterton, Nicholas (Macc'f'ld)

Tapsell, Sir Peter

Wolfson, Mark

Taylor, Ian (Esher)

Wood, Timothy

Taylor, John M. (Solihull)

Yeo, Tim

Taylor, Sir Teddy (Southend, E)

Young, Sir George (Acton)

Temple-Morris, Peter

Thomason, Roy

Tellers for the Ayes:

Thompson, Sir Donald (C'er V)

Mr. Sydney Chapman and

Thompson, Patrick (Norwich N)

Mr. Andrew Mitchell.

NOES

Abbott, Ms Diane

Llwyd, Elfyn

Alton, David

Loyden, Eddie

Ashdown, Rt Hon Paddy

Lynne, Ms Liz

Barnes, Harry

McCrea, Rev William

Betts, Clive

Maclennan, Robert

Bruce, Malcolm (Gordon)

Madden, Max

Campbell, Menzies (Fife NE)

Marshall, David (Shettleston)

Canavan, Dennis

Martin, Michael J. (Springburn)

Carlile, Alexander (Montgomry)

Michie, Mrs Ray (Argyll Bute)

Connarty, Michael

Parry, Robert

Corbyn, Jeremy

Raynsford, Nick

Cryer, Bob

Robinson, Peter (Belfast E)

Dafis, Cynog

Rooker, Jeff

Foster, Don (Bath)

Salmond, Alex

Godman, Dr Norman A.

Skinner, Dennis

Harvey, Nick

Taylor, Matthew (Truro)

Hogg, Norman (Cumbernauld)

Tyler, Paul

Hughes, Simon (Southwark)

Wallace, James

Johnston, Sir Russell

Jones, Ieuan Wyn (Ynys Môn)

Tellers for the Noes:

Jones, Nigel (Cheltenham)

Mr. Archy Kirkwood and

Kennedy, Charles (Ross,C&S)

Mr. Andrew Welsh.

Question accordingly agreed to.

63. INHERITANCE TAX (INDEXATION)
Resolved,
That provision may be made—

(a) amending section 8 of the Inheritance Tax Act 1984;

(b) as to the operation of subsection (1) of that section as regards chargeable transfers made in the year beginning 6th April 1993.

64. STAMP DUTY (THRESHOLD)
Resolved,
That the following provisions shall have effect for the period beginning 23rd March 1993 and ending 31 days after the earliest of the dates mentioned in section 50(2) of the Finance Act 1973—
(1) Section 55 of the Finance Act 1963 and section 4 of the Finance Act (Northern Ireland) 1963 shall be amended as follows—

(a) in subsection (1) of each section for "£30,000" (in each place) there shall be substituted "£60,000";

(b) in subsection (2) of each section for "£300" there shall be substituted "£600".

(2) This Resolution applies to—

(a) instruments executed on or after 16th March 1993 and before 23rd March 1993 and not stamped before 23rd March 1993;

(b) instruments executed on or after 23rd March 1993.

(3) For the purposes of section 14(4) of the Stamp Act 1891 the law in force at the time of execution of an instrument falling within paragraph (2)(a) above shall be deemed to be that as varied in accordance with paragraph (1) above.
And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of section 50 of the Finance Act 1973.

65. STAMP DUTY (RIGHT TO ACQUIRE)
Resolved,
That provision may be made about stamp duty with regard to any case where there is an exercise of the right to acquire on rent to mortgage terms (in England and Wales) or to purchase by way of the rent to loan scheme (in Scotland).

66. RELIEF FROM TAX

  (INCIDENTAL AND CONSEQUENTIAL CHARGES)
  Resolved,
  That it is expedient to authorise any incidental or consequential charges to any duty or tax (including charges having retrospective effect) which may arise from provisions designed in general to afford relief from taxation.

PROCEDURE RESOLUTIONS

  PROCEDURE (MUTUAL RECOVERY AND DISCLOSURE OF INFORMATION)
  Resolved,
  That, notwithstanding anything to the contrary in the practice of the House relating to the matters which may be included in Finance Bills, any Finance Bill of the present Session may contain provision for implementing requirements' with respect to mutual recovery and the disclosure of information which are imposed in relation to excise duties by the Directive of the Council of the European Communities dated 14th December 1992 No. 92/108/EEC and the Directive of the Council dated 25th February 1992 No. 92/12/EEC.

  PROCEDURE (TRADING FUNDS)
  Resolved,
  That, notwithstanding anything to the contrary in the practice of the House relating to the matters which may be included in Finance Bills, any Finance Bill of the present Session may contain provision with respect to trading funds.

  PROCEDURE (FUTURE TAXATION)
  Resolved,
  That, notwithstanding anything to the contrary in the practice of the House relating to the matters which may be included in Finance Bills, any Finance Bill of the present Session may contain the following provisions taking effect in a future year—

  (a) provision for supplies falling within Group 7 of Schedule 5 to the Value Added Tax Act 1983 to cease to be

  737
  zero-rated and as to the rates at which tax is to be charged on those supplies and on the equivalent acquisitions and importations;

  (b) provision about cars available for private use;

  (c) provision about car fuel;

  (d) provision about the rate of advance corporation tax;

  (e) provision about indexation;

  (f) provision about Lloyd's underwriters.

FINANCE BILL [Money]
Queen's Recommendation havng been signified—
Resolved,
That, for the purposes of any Act of the present Session relating to finance, it is expedient to authorise—

(a) the payment out of money provided by Parliament of amounts which, by virtue of that Act, are payable in respect of distributions received by charities and persons to whom section 507 or 508 of the Income and Corporation Taxes Act 1988 applies;

(b) any increase in the sums payable out of money provided by Parliament which is attributable to any provision of that Act relating to trading funds;

(c) any increase in the sums payable into the Consolidated Fund which is attributable to any provision of that Act relating to trading funds;

(d) any increase in the sums payable out of or into the National Loans Fund which is attributable to any provision of that Act relating to functions of the National Debt Commissioners.

Bill ordered to be brought in upon the foregoing resolutions: And that the Chairman of Ways and Means, Mr. Chancellor of the Exchequer, Mr. Secretary Clarke, Mr. Secretary Heseltine, Mr. Secretary MacGregor, Mr. Secretary Howard, Mr. Secretary Lilley, Mrs. Secretary Shephard, Mr. Michael Portillo, Mr. Stephen Dorrell, Sir John Cope and Mr. Anthony Nelson do prepare and bring it in.

FINANCE BILL [Money]
  FINANCE (No. 2) BILL
  Mr. Stephen Dorrell accordingly presented a Bill to grant certain duties, to amend the law relating to the national debt and the public revenue, and to make further provision in connection with finance: And the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 167.]

Statutory Instruments, &c
Madam Speaker: With permission, I shall put together the motions relating to statutory instruments.
Motion made, and Question put forthwith pursuant to Standing Order No. 101(5) (Standing Committees on Statutory Instruments, &c.).

Statutory Instruments, &c
  PNEUMOCONIOSIS
  That the draft Pneumoconiosis etc. (Workers' Compensation) (Payment of Claims) (Amendment) Regulations 1993, which were laid before this House on 26th February, be approved.
  ASIAN DEVELOPMENT BANK
  That the draft Asian Development Bank (Fifth Replenishment of the Asian Development Fund and Second Regularized Replenishment of the Technical Assistance Special Fund) Order 1993, which was laid before this House on 1st March, be approved.
  INTERNATIONAL FINANCE CORPORATION
  That the draft International Finance Corporation (1991 General Capital Increase) Order 1993, which was laid before this House on 1st March, be approved.
  CHILD SUPPORT
  That the draft Child Support (Miscellaneous Amendments) Regulations 1993, which were laid before this House on 2nd March, be approved.
  CHILD BENEFIT
  That the draftChild Benefit and Social Security (Miscellaneous Amendments) Regulations 1993, which were laid before this House on 2nd March, be approved.

  CHESSINGTON COMPUTER CENTRE
  That the draft Chessington Computer Centre Trading Fund Order 1993, which was laid before this House on 2nd March, be approved.—[Mr. Wood.]
  Question agreed to.

EUROPEAN COMMUNITY DOCUMENTS
Motion made, and Question put forthwith pursuant to Standing Order No. 102(9) (European Standing Committees.).
EUROPEAN COMMUNITY DOCUMENTS

  SERBIA AND MONTENEGRO (TRADE SANCTIONS)
  That this House takes note of European Community Documents Nos. 7150/92, 7945/92, 8365/92, 8409/92, 10528/92 and 11236/92, relating to the imposition of trade sanctions against Serbia and Montenegro; and, while endorsing the Government's view that all steps necessary to ensure the effective implementation of sanctions against Serbia and Montenegro should he taken, believes that further action enforcing sanctions is needed.—[Mr. Wood.]
  Question agreed to.

Tin Mining Subsidence (Cornwall)
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Wood.]
10.41 pm
Mr. Sebastian Coe: I am grateful for the opportunity to raise in the House a pressing concern that has consistently effected my constituency and the rest of Cornwall—damage to property resulting from tin mining subsidence. I refer to all Cornwall because, in Gunnerslake, my hon. Friend the Member for Cornwall, South-East (Mr. Hicks) has been working hard for the past three months on behalf of three constituents who have suffered from such damage. My hon. Friend is, unfortunately, unable to be with us this evening.
Before informing hon. Members of the situation we face in Cornwall, I should like to outline briefly the history and significance of tin mining to that county.
Much of the tin mining was situated in the district of Kerrier. Its rich deposits of tin were exploited from the earliest times, and the urban area of Redruth grew up around the mines. By the 15th century, tin mining was emerging as a central and vital feature of the Cornish economy. Its importance was borne out by the power invested in the Stannary courts. As far back as 1305, Edward 1, through two different charters, one for Cornwall and one for Devon, outlined the privileges granted to tinners. That helped to create the situation described by the Cornish historian, Philip Payton, of tinners being
"a class of independent workers, living and working according to their own rules, answerable only to their kind, and jealous of their rights and privileges."
They were a little like hon. Members in this place.
As mining grew in importance in the Cornish economy, it began to command deep respect and status, and it was followed by other Cornish industries. That influence of immense importance went a long way towards moulding modern Cornwall's socio-economic fabric.
The industrial revolution and the arrival of steam engines helped to propel the tin industry into modern times, and Cornwall managed to command a near-monopoly of world production. That emphasises the uniqueness of Cornwall and the sharp difference between its economy and that of the rest of England which, in structure, remains the case today.
Scarcely a week goes by without a report in a local newspaper of someone suffering damage to property as a result of old tin mining works. Such subsidence causes various problems to property that is highlighted by searches, surveys and inspections. It dines not need the trained eye to notice the obvious cracks in structure and ceilings, but whose role is it to compensate for such devaluation of property? The standard answer is that, after any subsidence from mining, the owner of the surface has the right to bring legal action against whoever did the mining.
For coal, there is an alternative course of action, which is normally much easier and more suitable: to claim compensation work to make good property from British Coal. That option, or its equivalent, does not exist for tin mining. There are no special Acts, and there is no single state-owned operator that has taken on the assets and liabilities of previous operations.
740
Following the decline of the industry, mines were abandoned and, after selling marketable equipment, little tidying up was done. In many cases, tips, shafts and engine houses remained for long periods in a state much as when the mine was closed. Subsequently, some of the tips were worked over and the material reprocessed, and some engine houses were dismantled. More recently, mine waste has been quarried for landfill.
The expansion of the industry and increase in population in recent years has resulted in a shortage of suitable building land. Large parts of the district of Kerrier are unavailable for development, either to protect unexploited mineral reserves or because of environmental constraints. That means that there is considerable pressure to redevelop land left derelict as the result of mining activity. Planning policies at county and district levels reflect local concern about the extent and impact of derelict land. Those authorities are committed to bringing derelict land back into use.
It is usual when buying a property to find a provision that retains the mining rights for some other owner. Indeed, in most cases, mineral ownership is totally severed from the surface freehold. Most mines were abandoned a long time ago, and the ownership of the mining rights has disseminated and become uncertain over time. One may be able to trace part-owners—for example, someone owning 13/365ths—but no complete ownership due to the nature of the inheritance. Some 100 years ago, there may have been one or two owners, but not now.
Liability is almost impossible to work out, particularly as many of the mines, especially in Redruth, predate 1872 and were not required to be registered. Without the ability to trace an owner for liability, to whom could a household with a property damaged by subsidence go for compensation?
The only other alternative is to look to insurance companies. However, they are now refusing to provide cover for certain areas, and often refuse even to consider particular post codes. I am the first to defend the right of a commercial enterprise to choose its own custom, but the present practice does not help my constituents. The insurance companies could be considered to be inflexible by refusing to insure any house in a specific district. That displays a lack of understanding. Tin mines, unlike coal mines, are worked via vertical shafts, not horizontal ones. Therefore, one house may be affected, and a house two doors down may not be.
The issue of damages and who is liable is central to my concern. Halsbury's "Laws of England", volume 31, section 117, describes how damages are decided. I do not intend to detain the House with the legalese, nor do I wish to "do a Rumpole", but the process is clearly described. When subsidence occurs after the original owner has ceased to own the property, a later occupier is not generally liable for the subsidence. Due to the confiscatory nature of death duties in earlier times, the state acquired all the benefits of the land, but none of the liabilities.
I shall draw a comparison with the position relating to coal mining subsidence. In essence, the coal case is far easier and better controlled, partly because it is covered by specific legislation—most recently the Coal Mining Subsidence Act 1991. British Coal has to accept liability, no matter which coal mining concern originally caused the damage. Compensation is paid, or work to make good undertaken, provided only that the claim is made within six years of the damage becoming apparent.

741
If agreements cannot be reached, the claimants can appeal to the Lands Tribunal. Alternatively they can use the cheap arbitration scheme organised by British Coal, and run by the Chartered Institute of Arbitrators. This is a far more favourable position than that held by tin mining subsidence sufferers in my constituency.
In fact, the problems are much greater even than the law suggests, because of the difficulty in tracing the owner of the minerals, let alone the defunct company which did the mining. As I have already stated, the minerals owner is normally not the same person as the surface freeholder, and it is extremely difficult to discover who the mineral owner is. The Chamber of Mines has a confidential list of some owners, but even these will not normally allow their names to go to the householders threatening legal action. The Duchy of Cornwall is the largest minerals owner but also the most secretive: it has actually removed its records to London so as to make it virtually impossible for potential litigants to discover when the Duchy is liable.
It is also unlikely that a surveyor could be sued for failing to notify a householder. Solicitors organise searches for mine workings, but their reports would be worded so as to protect them from liability if subsidence later occurred.
Mr. Matthew Taylor: I think that the hon. Gentleman is aware that a constituent of mine died when a shaft opened up under her immediately outside her back door. The family has since campaigned hard to obtain all possible information on where the shafts are. Not only is it difficult to trace those who may have worked the mine or who may have the mineral rights, but the very existence of the problem is almost impossible to determine, given the history of this mining. Yet the council, which might be able to provide the information, is given no funding at all for gathering such information in what would be a major undertaking. I hope that the hon. Gentleman will impress that point on the Minister.
Mr. Coe: I welcome that intervention. A mining search, of course, is only as good as the records that are consulted—and as the interpretation put on them by the researcher. On the whole, the records are notoriously poor, but common sense dictates that local councils, through archives or local knowledge, must be aware of the situation of most of these mines, and must therefore be in a position to advise potential developers where they are located.
The position is very unsatisfactory, and might be made even worse by a court ruling two years ago that the National Trust, as surface freeholder, was liable to cap an uncapped mine shaft on land that it had recently bought. That might suggest that householders would in future be liable to cap mineshafts in similar circumstances.
I am not attempting to suggest a solution to this immense problem, but something must be done. The "polluter pays" principle simply cannot work in this case. Morally, compensation must be the order of the day. I hope that this debate will prompt the Minister to reconsider the situation.
10.53 pm
The Parliamentary Under-Secretary of State for the Environment (Mr. Tony Baldry): My hon. Friend the Member for Falmouth and Camborne (Mr. Coe) has set out thoroughly the problems facing parts of Redruth and the whole of Cornwall arising from historic tin mining. He has shown admirable concern for the plight of his constituents who are adversely affected. I congratulate him on raising this matter and on the clear way he has presented the issues. As he said, our hon. Friend the Member for Cornwall, South-East (Mr. Hicks) has also activley sought solutions to these problems.
Since problems of mining subsidence are not restricted to Cornwall, perhaps it would be helpful if I explained the Government's general approach to the problems of historic mining activity before looking at the situation in Cornwall.
Britain has a long history of mining for a wide variety of minerals. Apart from the coalfields, there are the metal mining fields of Devon and Cornwall, the Mendips, Wales, the Pennine uplands and the Lake district, and the salt mines of Cheshire. The old limestone mines of the black country have also become well known over the last 10 years or so and much of the building stone for Bath was provided by underground mining. Less well known are the sand and sandstone mines of west Yorkshire, Lancashire and Surrey, chalk mines throughout the south-east, including several in London, and other mines for iron ore and ironstone, potash, gypsum, anhydride, ball clay, fullers earth, fireclay, slate, chert and flint. There are examples in many of those areas of subsidence due to old mines causing damaging to property. Because reliable records are available only since the latter half of the 19th century, the first intimation of earlier mine workings has often been the occurrence of subsidence.
In support of the development of land use planning policy, we have carried out a number of mining-related research projects over the last 10 years or so. These have included specific area studies of limestone working in the black country, coal mining in south Wales, chalk and flint mining in Norwich and metal mining in Cornwall. Studies of the methods of treatment of disused mine shafts and of compiling and using information on mining were published in 1988.
The broad national picture was obtained during the "Review of mining instability in Great Britain", published in 1992. As well as regional and technical reports, that includes a case study report specifically on metalliferous mines in Kerrier, of which my hon. Friend is aware. That research has supported the development of advice in planning policy guidance note 14, "Development on unstable land", published in April 1990. This advises that, where development is proposed in areas which are known or suspected to be undermined, due account should be taken of the potential effects of subsidence on that development.
The responsibility for investigating a site to determine whether subsidence is likely to be a problem is that of the developer. However, local planning authorities are advised that they should regard the possibility of mining subsidence as a material planning consideration and take account of it at all stages of the planning process. Purchasers are also advised that they should make such inquiries as they consider necessary to satisfy themselves as to the stability of the land. It is recognised, however, that

743
searches are only as good as the information available—a point rightly made by my hon. Friend. For many mining areas, information, when it exists, is often not readily available.
More specific planning guidance on the treatment of disused mine openings and the availability of information on mined ground is currently being developed. I hope to be able to publish it later in the year. We shall continue to review the effectiveness of our policies in reducing the impact of subsidence and will consider the need for further guidance.
Mr. Matthew Taylor: The Minister has touched on a point that I raised earlier about the availability of information. As I said, a constituent of mine died, having had no information that there might be a problem. The local borough council—and, I believe, all other councils in Cornwall—has sought to gather information but, as the Minister will understand, it is an expensive process. In the review, will he consider the possibility of funding councils for part of the costs of gathering such information so that it can be made available to people?
Mr. Baldry: I shall come to that point when I discuss the historic position.
Whatever consideration is now given to new development—much of what I have said has related to new development—it is a fact of life that much of the development in this country preceded such considerations. Indeed, all the matters which are the cause of concern in Cornwall preceded them. Consequently, there are many areas where development has already taken place above old mine workings and thus may be at risk from subsidence. That is what happened in the case raised by the hon. Gentleman and in other places in Cornwall.
Derelict land grant funding has therefore been made available for the investigation and treatment of land liable to become derelict due to actual or apprehended subsidence due to abandoned underground mines. Land likely to be affected by subsidence cause by coal mining was excluded because it was already covered by the Coal Mining (Compensation for Subsidence) Acts. Derelict land grant funding for the stabilisation of underground mines is available in Cornwall. It is a precondition of that that local authorities will have to have some regard to where such mines might be if they are to have derelict land grant funding.
Financial help has been given to the treatment of tin mines in Cornwall. In 1988, we made it clear that derelict land grant would be available for the capping or back-filling of mine shafts, even where the work does not form part of a wider scheme for the reclamation of derelict land. Priority has been given to the treatment of mine shafts on land needed for development or redevelopment, or with a high degree of public access—such as open land next to a footpath. My hon. Friend will be aware that as a consequence of that initiative intensive shaft-capping programmes have been undertaken by both Kerrier and Carrick district councils—so we have invested substantial sums of money to help tackle that problem.
Our general approach to the problems of mining subsidence is thus to attempt to prevent the problems arising by proper consideration within the planning system, and by the use of derelict land grant funds to deal
744
with mine shafts and underground workings where there is a significant element of risk to public safety or where substantial existing development is at risk.
As the House will be aware, the Urban Regeneration Agency will—when it comes into full operation—subsume derelict land grant. As the consultation paper on the agency made clear, in constructing its unified grant regime, and issuing our guidance to the agency, we shall take account of the current priorities for derelict land grant. It will, of course, be for the agency to determine its initial work programme. In doing so, I am confident that it will take full account of existing derelict land grant programmes in Cornwall.
Despite all those measures, subsidence does happen, and I fully appreciate that it causes much distress to people and damage to property that is expensive to repair. As my hon. Friend made clear, apart from coal, there is no statutory compensation scheme and the liability under common law for any damage is that of the person who caused the damage. I fully acknowledge that, in the case of abandoned mines, there is a problem, in that the persons who caused the damage have largely long since disappeared, if they were ever known, and there may be no successors in title other than the surface landowner.
In practice, most household insurance policies cover subsidence, whatever the cause. There is thus a remedy to cover the costs of subsidence damage to property. However, the Government recognise that there can be problems and my hon. Friend argued the case for a publicly funded compensation scheme to cover such cases. Insurance policies normally cover damage to property, but a collapse in the garden or grounds which does not affect the property or cause loss of value due to the perception of subsidence risk may not be covered. The commercial judgment of insurance companies may also result in difficulties in obtaining insurance cover where properties have already been damaged by subsidence or where a threat of subsidence has been identified.
Such problems have arisen not just in Cornwall but in other areas affected by historic mining. The proposal for a publicly funded compensation scheme was carefully considered in 1987 in respect of limestone mines in the black country. It was concluded that the insurance industry already provided protection in respect of subsidence damage under normal household building insurance contracts, and it was felt inappropriate for central Government to fund any such scheme.
However, assurances were obtained from the major insurers providing household insurance and from the Building Societies Association that they would not discriminate against areas potentially at risk from limestone subsidence, provided that there was no evidence of existing damage to the property involved. That means that insurance risks and mortgage applications are considered on their merits. Subsidence cover is available at standard terms and conditions, subject to normal underwriting considerations.
My officials will certainly raise the issues mentioned by my hon. Friend with the Association of British Insurers as part of their continuing discussions on limestone and other mining subsidence, and I will ensure that they pay particular regard to the problems identified in Cornwall.
Within my hon. Friend's constituency have been found the richest deposits of tin and copper in the British Isles. The area contains some of the longest-lived and most famous mines of south-west England, as well as the sole

745
surviving tin mine at South Crofty. The area also has a long history of subsidence dating from the time of mining or shortly after abandonment. As my hon. Friend knows, that is continuing.
It must be said, however, that, considering the amount of mining that took place, the amount of subsidence is relatively limited. That is largely dues to the strength of the rock surrounding the workings and their narrowness and depth. My hon. Friend described the nature of tin workings, which is somewhat different from that of some other minerals. I fully realise, however, that that is not much compensation for the individuals whose properties have been affected.
An analysis of 74 subsidence events in Kerrier district between 1974 and 1990 formed part of the case study that I have already mentioned: it showed that shaft collapses are the most common type of subsidence event, constituting 41 of the 74. Although that is a significant number, it represents a small proportion of the 6,000-plus shafts estimated to be in Kerrier, and the 12,000-plus in Cornwall as a whole. Collapses of unstable shallow stope workings are much less frequent, although they can affect larger areas than shaft collapses. About one third of those subsidence events were on public highways or in open spaces, or near enough to such areas to present a danger to public safety. About one third involved damage to gardens and grounds of properties. Only nine of the 74 involved structural damage to buildings—that is, only nine out of some 12,000 shafts.
Other parts of Cornwall also suffer from shaft collapse and subsidence. The events at Gunnislake last summer were widely reported in the national press. Two houses have had to be demolished, and derelict land grant has been awarded to Caradon district council to treat the shafts and to counter the threat of subsidence damage to land beyond the confines of the individual properties.
My hon. Friend is also aware of the concern with which local authorities in Cornwall regard the problems of historic mining. The local planning authorities are diligent in their consideration of mining issues, which is based both on their own records and the advice of the mineral valuers. Both the county and district councils co-operated fully with my Department's research at Chacewater and St. Day in the mid-1980s. That study aimed to develop techniques to enable planners and developers better to take account of ground conditions in this and other metal-mining areas. The computerised database which resulted was transferred to the county council as a basis for extension to other parts of the county as and when the opportunity arose. I understand that it is used fairly intensively.
The local authorities have also carried out a number of land reclamation schemes, funded by derelict land grant, to enable derelict mining areas to be put to alternative use—providing, for instance, housing, industrial development or public open space. The treatment of mine shafts and
746
workings within the schemes, and the shaft capping programmes that I have already mentioned, have been funded where they represent value for money.
In Cornwall, as elsewhere, the costs involved need to be justified by a significant threat to the public and/or a large number of properties. Where only single properties are affected by collapse or the threat of subsidence, it has generally been regarded as a matter for the property owners or their insurers. Clearly, with limited derelict land grant funds available and many competing demands, it is not possible for every incident to be remedied from the public purse when alternatives are available in the insurance market. It would not be appropriate for the Government to act on all occasions as insurer of last resort.
My hon. Friend should also note that—even when derelict land grant has been paid for the treatment of shafts or mine workings—if properties have been damaged, compensation for the structures has been dealt with by the owners' insurers. If it has been necessary to acquire the land to enable the reclamation scheme to be carried out it has been acquired at derelict land value only.
Obviously, it would not be proper for me to comment on individual cases, but in correspondence my hon. Friend has explained a situation which is causing particular concern in Clinton road, Redruth, where a number of shallow workings close to the surface have suffered subsidence from time to time. I have not been approached by Kerrier district council for derelict land grant support either to investigate the problems in the area or to deal with individual collapses. If I were, I should consider the request with care. However, it will be clear from what I have already said that the treatment of collapses affecting individual properties is generally regarded as a matter for owners and their insurers. If there is a wider problem, the investigation and treatment of the shallow workings could be a possible candidate for derelict land grant funding. Should an application be received, I will ensure that it is carefully considered in the light of the availability of funds and competing demands.
We recognise the problem of historic mining, which affects my hon. Friend's constituents and other Cornwall constituencies. Although we do not consider that a publicly funded compensation scheme is justified, we are working actively to reduce the problems both nationally and in Cornwall by carrying out appropriate research, developing advice to enable the problems to be avoided where possible and making available derelict land grant funds to deal with the problems where the costs can be justified by the risk to public safety or to substantial existing development.
Obviously, I shall continue to keep the matter under review and to take a keen interest in the representatives made by my hon. Friend and other Cornwall Members.
Question put and agreed to.
Adjourned accordingly at nine minutes past Eleven o'clock.

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Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Sheffield.
The Lord Chancellor (Lord Mackay of Clashfern): My Lords, before the commencement of business, I take the opportunity to inform the House that, with the approval of' Her Majesty The Queen, I am to visit Malaysia on official business between Tuesday 30th March and Thursday 1st April. Accordingly, I trust that the House will agree to grant me leave of absence from Tuesday 30th March to Thursday 1st April.

Privatised Utilities: Pricing Policies
2.37 p.m.
Lord Molloy Lord Molloy asked Her Majesty's Government:
In the light of reported overcharging of customers by the privatised utilities, what action they are taking to compensate these customers, to penalise the offending companies and to prevent such overcharging from occurring in the future.
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Baroness Denton of Wakefield): My Lords, this is a matter for the utility companies, their regulators and customers. The utility regulators have statutory duties to protect the interests of customers. If there is evidence of a problem, I am sure that the regulators will wish to take note and discuss it with the companies with a view to resolving the issue urgently.
Lord Molloy: My Lords, I thank the noble Baroness for that reply and acknowledging that many of those utilities are striving very hard to improve their services, but is she aware that small businesses are being overcharged to the tune of £100 million a year
2
and that those excessive charges have been laid by British Telecom and the water, gas and electricity companies? Does the Minister agree that those matters should be looked into?
There is one other small matter. I refer to those who live alone, or who are crippled or old-age pensioners. Where their meter cannot be read they receive an estimated account which, needless to say, is well in excess of the true figure, although at the following reading the subscriber is compensated by the subsequent bill not being so heavy. However, is the Minister aware that the customer may have paid out quite a large amount of money which would have gained interest in the intervening period? Would it not be possible for meters to be read more regularly?
Baroness Denton of Wakefield: My Lords, it is the policy of all the utilities to read regularly meters which are inside houses. Should there be an estimate for someone who is in no position to read his own meter, I am sure that the local gas or electricity board will be very happy to help.
Lord Gainford: My Lords, has my noble friend the Minister any evidence of customers receiving bills showing excessive estimated amounts well beyond the readings? I ask that question because it happened to me. I received an estimated bill. I checked the reading, which turned out to be far less than the figure on the bill.
Baroness Denton of Wakefield: My Lords, until now I have no direct information as regards estimates. I am certain that the bill was corrected when it was drawn to the attention of the company concerned.
Lord Stoddart of Swindon: My Lords, does the Minister agree that the privatised fuel companies cannot have done anything so vicious and cruel as the Chancellor did last Tuesday when he raised the price of domestic fuels by 8 per cent. from next year and by 17.5 per cent the year after, which will cheat customers of £2,500 million? Can she give an explanation as to

3
why the Chancellor and the Prime Minister, who promised that there would be no such increase, have so quickly broken their promises?
Baroness Denton of Wakefield: My Lords, I find it difficult to relate the question asked by the noble Lord, Lord Stoddart of Swindon, to that on the Order Paper. The impact of VAT on those with the lowest incomes is recognised. The Chancellor has said that that will be taken into account when the social security benefits are uprated in April 1994.
Lord Peston: My Lords, I suppose that the relevance of my noble friend's question is that a 17.5 per cent. increase in fuel bills looks very large relative even to the overcharging of the privatised utilities. Does the noble Baroness agree that there are two concepts of overcharging here which we need to look at? The first is the tendency to get bills wrong, which is a new phenomenon. I do not remember this enormous tendency to get bills wrong before private ownership—certainly not on this scale.
Secondly, does the Minister agree that not only do the companies get the bills wrong but, now that they have been privatised, it is perfectly legal for them to put up their charges enormously anyway? In that connection, does the Minister agree that water is the most astounding example? Today I received my water bill which is absolutely staggering. One used to believe that water was cheap, but it now appears to be one of the dearest commodities.
Baroness Denton of Wakefield: My Lords, if noble Lords opposite wish to discuss VAT on domestic gas and electricity, I am sure that they will table a Question in due course. As regards overcharging, I point out that since privatisation British Telecom prices have fallen by 27 per cent. and that by the end of this month domestic gas prices will have fallen by 21 per cent. The noble Lord, Lord Peston, knows as well as I do that the need for infrastructure costs in the water industry is enormous.
Lord Kinnaird: My Lords, does my noble friend agree that one reason why water has become so expensive is that people waste it so?
Baroness Denton of Wakefield: My Lords, I agree with my noble friend that there is a great need to conserve the precious resource of water. The water boards are now looking at ways of doing that.
Lord Peston: My Lords, did the Minister intend to agree with her noble friend? That would imply that suddenly we have developed a greatly increased propensity to waste water. That is simply not believable. We may well waste water and we have been doing so all our lives.
Baroness Denton of Wakefield: My Lords, I was saying to my noble friend that water shortages are a problem in this country. The water utilities are looking at ways of ensuring that that problem can be dealt with.
Lord Marlesford: My Lords, will my noble friend underline the point that consumers of all these
4
industries are likely to receive a much better deal if there is vigorous regulation by the regulator rather than having their fate in the hands of a government who also own the industry?
Baroness Denton of Wakefield: My Lords, I am delighted to agree with my noble friend that competition is to the benefit of the consumer.
Lord Grimond: My Lords, will the Minister reconsider her answers to the noble Lord, Lord Peston? Whatever the expense involved in renewing pipes, and such things, by the water suppliers, water charges have increased beyond all reason. We are bombarded by statements that the water authorities now run racing on their reservoirs, and so forth. The public are fed up with the water charges. We should be grateful if the Minister could do something about them.
Baroness Denton of Wakefield: My Lords, charges are now regulated by an independent regulator, and that must be to the benefit of users.
Lord Molloy: My Lords, is the Minister aware that Ofgas, the gas industry watchdog, has claimed that complaints have nearly doubled during the past year? The Federation of Small Businesses and the National Consumer Council are adamant that the overcharging is getting out of hand. Is it possible for the Government to encourage both sides to get together to examine the matter so that the investigation satisfies all concerned?
Baroness Denton of Wakefield: My Lords, there are always individual cases that need to be examined and discussed by the two parties. However, overall charges have gone down. That is to the benefit of small and large companies. In a recent independent market research survey British Gas came out second only to Marks and Spencer for customer care.

Parole Board
2.45 p.m.
Lord Boyd-Carpenter Lord Boyd-Carpenter asked Her Majesty's Government:
What are the names and qualifications of the members of the Parole Board.
The Minister of State, Home Office (Earl Ferrers): My Lords, there are 85 members of the Parole Board. Their names and relevant experience are published in the board's annual report, a copy of which was placed in the Library of the House.
Lord Boyd-Carpenter: My Lords, I thank my noble friend for that comprehensive Answer. In the case of future appointments to the board, will the Government bear in mind the important duties which members of the board discharge in advising the Home Secretary in connection with the release of long-term prisoners? Will he secure that among those appointments are people with experience of the problems of law and order?
Earl Ferrers: My Lords, I agree with my noble friend that the Parole Board has important duties to discharge. By law, the board must consist of at least one of the following categories: members of the judiciary; psychiatrists; those who have experience of the supervision or after-care of discharged prisoners; and those who have made a study of the causes of delinquency or the treatment of offenders. Of course, lay members too can be appointed. My right honourable friend's remit is covered by my noble friend's Question.
Lord McIntosh of Haringey: My Lords, it was impressive to know that there are 85 members of the Parole Board. Is that enough? How many cases before the Parole Board were outstanding at the end of last year? Has that number been increasing over recent years?
Earl Ferrers: My Lords, the noble Lord asks whether the board has enough members. The membership has increased by 22 since January of last year. That is a fair increase. I cannot tell him how many outstanding cases there are.

Passport Applications from Post Offices
2.47 p.m.
Lord Skelmersdale Lord Skelmersdale asked Her Majesty's Government:
Why sub-postmasters are not permitted to hold stocks of passport application forms.
Baroness Denton of Wakefield: My Lords, under the terms of the Passport Agency's contract with Post Office Counters Ltd., post offices holding stocks of passport application forms also issue British visitors' passports. For security reasons, those facilities are limited to some 1,500 Crown and franchise post offices within Great Britain, together with a limited number of sub-post offices at ports and airports. An internal assessment of those arrangements in December 1992 by the Passport Agency concluded that the present arrangements adequately meet customer demand.
Lord Skelmersdale: My Lords, I thank my noble friend for that Answer, but I am amazed by it. Is she aware that if on any day you wander into the Passport Office in Petty France you have hardly to go through the door before you can pick up passport application forms from four racks? If security there is so lax, why is security given as a reason for not allowing them to be supplied by sub-post offices?
Baroness Denton of Wakefield: My Lords, I shall clarify my earlier Answer. The fact that the issuing of passport application forms is linked to British visitors' passports is a reason for the security considerations.
Lady Saltoun of Abernethy: My Lords, does the issuing of application forms have to be linked to the issuing of British visitors' passports? That does not seem to make much sense to me.
Baroness Denton of Wakefield: My Lords, I am pleased to tell the noble Lady that the review carried out in December 1992 looked at the security aspect,
6
the cost benefits involved and also the needs of the customer. Only 10 complaints on this matter have been received.
Lord Campbell of Alloway: My Lords, does my noble friend agree that her observations about security are wholly unacceptable and unintelligible? Does she further agree that there cannot be a viable issue of security on a form?
Baroness Denton of Wakefield: My Lords, I am pleased to assure my noble friend that I am not talking about security relating to the issue of forms. I am talking about the handling of British visitors' passports, in relation to which a high level of security and staff proficiency are required.
Lord Peston: My Lords, I find even that answer a little staggering. I had assumed that security would be the answer because I could not think of any rational answer, and when there is a shortage of rational answers "Security" is what civil servants put out. The noble Baroness used the expression "customer convenience". It would be most convenient if we did not have to have passports, but while we are stuck with them customer convenience must come first. Why one cannot simply go into a sub-post office and ask for a form makes no sense to any of us. As regards complaints, the old British attitude applies: you take it for granted that you cannot obtain a form and so you do not complain. Therefore, I do not believe that the data about complaints tell us anything at all. Will the Minister go back to whoever takes the decisions about such matters and say, "Can't you be a little more sensible and place forms where people will find it convenient to collect them"?
Noble Lords: Hear, hear!
Baroness Denton of Wakefield: My Lords, I hear the view of the House and of the noble Lord. But these are operational matters for the Passport Agency in its contractual arrangements with the Post Office. I have never noticed people being slow to complain. There is also the question of cost benefit, because this is taxpayers' money.
Lord Elton: My Lords, when my noble friend tells her right honourable friend of the outrage of this House over this extraordinary provision, will she kindly impress on him the great importance of post offices in English, Welsh and Scottish villages? Furthermore, will she point out that anything which tends to make their survival unlikely is against the interests of the British people and anything which within reasonable cost makes their survival more likely is in the interests of the British people?
Baroness Denton of Wakefield: My Lords, I hope that it will be possible to reassure my noble friend that our commitment to a nationwide network of post offices includes a rural network. We are well aware of the special importance which they have among the rural community and we most certainly value the work of sub-postmasters.
Viscount Caldecote: My Lords, in view of the importance which the Government attaches to the

7
work of sub-postmasters does my noble friend agree that it is highly desirable that sub-postmasters are allowed to carry out motor tax business?
Baroness Denton of Wakefield: My Lords, it may be seen that motor tax discs are a form of passport for motor cars, but they are outside the realms of this Question.
Lord Teviot: My Lords, is my noble friend aware that only three application forms are relevant to passports; they are those for adults, for children and for extensions to passports? Furthermore, is she aware that there are fewer Crown post offices in major towns because they have been made sub-post offices? Therefore, it is becoming inconvenient for people to go to Crown post offices to obtain passport application forms. Will my noble friend look at the matter again and let the House know the result in due course?
Baroness Denton of Wakefield: My Lords, I shall certainly look at the matter again. I wish to point out that facilities are not limited to Crown post offices but extend to franchise post offices and to some sub-post offices at ports and airports.
Lord McIntosh of Haringey: My Lords, the Minister appears still to rely on the security argument. Will she confirm that it is possible for an application to be accepted and considered even if it is made on a photocopy of the original form, which makes nonsense of the security argument?
Baroness Denton of Wakefield: My Lords, I am not talking about security in relation to forms. The issuing of British visitors' passports raises the security aspect.
Lord Morris: My Lords, does the Minister agree that the Question does not relate to the issuing of passports but is solely about application forms?
Baroness Denton of Wakefield: My Lords, as I explained in my original Answer, the Passport Agency has passport application forms linked to the issuing of British visitors' passports for operational needs.

Metropolitan Police Service: Retirement Age
2.55 p.m.
Lord Stallard Lord Stallard asked Her Majesty's Government:
Whether they intend to restrict the extension of service of staff employed by the Metropolitan Police service beyond the age of 60; and if so when they will implement such proposals, and how many staff will be affected.
Earl Ferrers: My Lords, members of the Metropolitan Police civil staff are employed by the commissioner. Extension of service beyond the contractual retirement age of 60 years, which is at the commissioner's discretion, will in future be granted only when there are managerial reasons for doing so. It is therefore difficult to say how many people will be
8
affected. The commissioner is engaged in consultations to determine when his proposals might best be implemented.
Lord Stallard: My Lords, I am grateful to the noble Earl for that Answer; but he must be aware that it justifies the Question that I have asked. Does he agree that there is an intention to vary the terms of employment of civil servants, security staff and the like beyond the age of 60 and that that will cause a great deal of hardship for many men and women at the wrong end of their working lives? Does the Minister recall a statement made by his right honourable friend Sir Norman Fowler in his capacity as Secretary of State for Employment? When he introduced the abolition of the pensioners' earnings rule, he spoke with some encouragement about how that would make a major contribution to the continued employment of the older workers and that it would encourage employers to continue to employ such people. Do not the Minister's remarks signify a direct contradiction to the policy statement made by Sir Norman Fowler?
Earl Ferrers: My Lords, no, I do not think so. The extensions of service have always been subject to the discretion of the commissioner. They have been dependent upon the person having satisfactory health, on his conduct being satisfactory and on the needs and efficiency of the Metropolitan Police service. The trouble is that individuals have largely chosen the dates of their own retirement, and the needs of the Metropolitan Police service have rarely been a deciding factor. The enforcing of the contractual retirement age will help to provide flexibility during a period of low staff turnover and to redeploy those whose jobs disappear. Therefore, it is to the benefit of those serving in the Metropolitan Police service.
Lord Jenkins of Putney: My Lords, is the Minister aware that if a similar rule were applied to the Members of this House, membership would be more than dissipated and that hardly anyone would be here except for a few noble Baronesses?
Earl Ferrers: My Lords, I agree that would be a tragedy, and it is why there are no proposals to introduce a retirement date for your Lordships.
Lord McIntosh of Haringey: My Lords, as one who will reach the age of 60 next month, I wish to ask the Minister a question. Have representations have been made to the Commissioner of the Metropolitan Police or to the Government against the proposed restriction of extended service?
Earl Ferrers: My Lords, perhaps I may first congratulate the noble Lord, Lord McIntosh, in anticipation of his 60th birthday. I express the hope that he will have a birthday party to rejoice in that, and that your Lordships will be invited. The noble Lord asked whether there have been consultations. The official side met with the trade union side on 15th March. They are aware of the position and it is hoped that agreement will be reached so that the implementation of the change can take effect from 1st April 1994.
Lord McIntosh of Haringey: My Lords, I did not ask whether there had been consultations because I had gathered that from an earlier answer. I asked what representations, if any, had been made against the proposed change.
Earl Ferrers: My Lords, I thought that I had given a clear answer—that consultations would be the avenue by which representations were made.

Business
2.59 p.m.
Lord Hesketh: My Lords, at a convenient moment after 3.30 p.m., my noble friend Lord Caithness will, with the leave of the House, repeat a Statement that is to be made in another place on the Channel Tunnel rail link.
I t may be for the convenience of the House to know that the Committee stage of the Housing and Urban Development Bill will be adjourned at about 7 p.m. for about one hour and that during this adjournment the Official Secrets Act 1989 (Prescription) (Amendment) Order 1993 will be taken.

Housing and Urban Development Bill
3 p.m.
The Parliamentary Under-Secretary of State, Department of the Environment (Lord Strathclyde): My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.
Moved, That the House do now again resolve itself into Committee.—(Lord Strathclyde.)
On Question, Motion agreed to.
House in Committee accordingly.
[The CHAIRMAN OF COMMITTEES in the Chair.]
Schedule 5 [Purchase price payable by nominee purchaser]:
Lord Gisborough Lord Gisborough moved Amendment No. 105C:
Page 180, line 13, leave out ("the freeholder's share of").
The noble Lord said: The purpose of the amendment is to ensure that the freeholder receives the full amount of the marriage value. I know that it has been said in another place that under paragraph 4 of Schedule 5 the freeholder may be able to receive up to 100 per cent. of the marriage value. However, there is a good argument that the freeholder should be entitled to that 100 per cent. in all cases.
An individual who is required to sell property to a public authority under a compulsory purchase order receives the full value of the property. The public body which exercises that power pays the full value of that property. It is most unusual to give a private individual or group of private individuals the right to compulsory purchase of another private individual's property. When such unusual powers are given to a group of people, it is important that they should be required to pay the full value of the property which they are acquiring. It would be quite wrong to enable
10
them to purchase for a lower price since the discount would provide an incentive to them to exercise their powers in order to make a profit.
The considerations in this case are quite different from those in which local authorities have been given a right to buy. It is open to government to offer rights to private citizens when acquiring property from a public authority. The individual's gain is at the expense of public funds, albeit local rather than central government funds. If the Government wish to provide an incentive to leasehold tenants to enfranchise their flats, that should be at the expense of public funds rather than at the expense of the landlord. Otherwise, we are talking about redistribution of wealth. That may be expected of a socialist administration but it is hardly to be expected of a Tory Government.
A landlord wishing to sell his property may well expect to receive less than the full value from the residential leaseholders as a result of open market negotiations. However, in such a negotiation a landlord who is not a willing seller would not accept a price based on less than the full marriage value. A landlord who is forced to sell as a result of compulsory leasehold enfranchisement should receive the same price. Also, once the landlord has had to sell, it is highly probable that he will have to pay capital gains tax. Having paid that, the value of the compensation received that is available for re-investment will be seriously and unfairly reduced. Therefore, without a 100 per cent. marriage value, he would suffer loss twice.
Finally, since the Budget last Tuesday, the position of charities has worsened dramatically. An argument in favour of enfranchisement under the terms of the Housing and Urban Development Bill was that charities would realise liquid assets from the sale of property and could then re-invest in equities and be none the worse off. After the Budget, they will be considerably worse off if they follow that course of action. Changes in the system of tax credit on share dividends were made and the tax rebate now given with dividends has been cut by one-fifth. The exact losses to be borne have yet to be calculated but any charity relying on income from a share portfolio will lose many thousands of pounds per annum.
Those changes are being phased in over a four-year transitional period for charities but it is difficult to see how, ultimately, they can be avoided. I beg to move.
Lord Boardman: Grouped with this amendment are my Amendments Nos. 108B and 111D. I do not propose to speak to them now. I wish to speak to them when they are reached in their numerical order.
Lord Campbell of Alloway: I support the amendment for the reasons which have been given. I shall support also Amendment No. 108B. The two amendments are not mutually exclusive or inconsistent but for the reasons that have been clearly given, I support the amendment.
Lord Carnock: I oppose the amendment and any amendment which would increase the freeholder's share of the marriage value. My objection turns on the

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increase in the percentage profit that such an amendment would give to the freeholder at the expense of the enfranchising leaseholder.
I shall illustrate my objection by reference to the figures in the Norfolk and Lloyd-Jones cases which were decided by the Lands Tribunal. Neither case was the subject of a judicial review. So far as I have been able to ascertain, no valuation case under the 1967 Act has come before the courts for review.
In the Norfolk case, the investment value of the freeholder's interest, which was the reversion to a lease at a ground rent with 59 years to run before expiry, was £1,000. The marriage value was £5,500 of which one-half was awarded to the freeholder. Therefore, the enfranchisement price was £3,750 representing a profit to the freeholder of 275 per cent. The value of the property unencumbered was £37,000. The value of the leaseholder's interest was £30,000 but he had to pay £3,750 for enfranchisement. Therefore, his contribution was £33,750. For that he received property worth £37,000. His profit was 9.8 per cent.
According to my calculations, the substitution of 75 per cent. for 50 per cent. as the freeholder's share of the marriage value would increase the enfranchisement price to £4,125. That would increase the freeholder's profit to 412 per cent. and reduce the leaseholder's profit to 8.4 per cent. If 100 per cent. of the marriage value was to be awarded to the freeholder, the freeholder's profit would be further increased and that of the leaseholder further diminished.
I repeat that exercise as regards Lloyd-Jones. The lease had 12 years to run before expiry. The value of the freeholder's interest was £84,257. The marriage value was £58,243, of which one-half was awarded to the freeholder. The enfranchisement price was rounded to £113,000. The freeholder's profit was 34 per cent. The leaseholder's interest was valued at £45,000, but he had to pay £113,000 for enfranchisement, making his total contribution £158,000 for a property worth £187,500. Therefore, his profit was 18.7 per cent. According to my calculation, if the freeholder were to have 75 per cent. instead of 50 per cent. it would increase the enfranchisement price to £127,939, increase the freeholders profit to 51.8 per cent. and reduce the leaseholders profit to 8.4 per cent. The freeholder's profit would be yet further increased if he were to receive 100 per cent. of the marriage value and the leaseholder's profit correspondingly reduced.
Norfolk and Lloyd-Jones were treated by the Lands Tribunal on very similar principles, but there were differences in the basic facts. In Norfolk, the lease had 59 years to run but in Lloyd-Jones it had only 12 years. In Norfolk the value of the leaseholder's interest greatly exceeded that of the freeholder, while in Lloyd-Jones the value of respective interests was reversed. In both cases the profit of the freeholder expressed in percentages greatly exceeded that of the leaseholder. Under the Bill, the profit of the leaseholder is modest, while that of the freeholder is very handsome indeed.
Under Amendment Nos. 105C and 110, the profit of the freeholder will be enhanced and that of the
12
leaseholder reduced. In neither Norfolk nor Lloyd-Jones did the leaseholder make any windfall profit. If there were any windfall profits they were those of the freeholder in both cases. I do not know what profits have been made where enfranchisement proceedings have been settled by negotiation as the results are not published. In view of the published figures, I cannot support either Amendment No. 105C or Amendment No. 110.
I should like to refer to paragraph 2(1)(b) of the fifth schedule to the Bill, which includes a provision for the sharing of the marriage value between the freeholder and any leaseholders with superior leases in proportion to the value of their respective interests in the property. I do not understand why that very simple provision does not include the enfranchising leaseholder. While in practice as a solicitor, I frequently used this method of dividing a trust fund between life tenants and reversioners. In many cases it proved to be entirely satisfactory to the beneficiaries.
Finally I should like to remind Members of the Committee that the learned authors of Woodfall on Landlord and Tenant have cast a doubt on the correctness of the decision of the Lands Tribunal to award 50 per cent. of the marriage value to the freeholder. I cannot improve upon the wording of Woodfall, so I shall quote from the fourth volume, paragraph 26.123:
"So far as marriage value is concerned, this is generally divided equally between landlord and tenant. An alternative view is that although in a freely negotiated bargain the ability of the vendor to bide his time may result in the 'marriage value' being divided fifty-fifty, the Act postulates a willing seller at the time the tenant serves his notice, and on such a sale it would seem that the sitting tenant could get the marriage value for himself by just one bid higher than the most optimistic of investment bidders would make".
3.15 p.m.
Lord Williams of Elvel: I agree with the noble Lord, Lord Carnock, in his opposition to the amendment. During the last stages of his intervention, he mentioned the decisions of the Lands Tribunal in the cases of Lloyd-Jones v. the Church Commissioners and the Norfolk case. In both those cases the tribunal accepted an even split of the marriage value. We think that that is right. That is something which the market would accept.
However, having said that, perhaps I may make a general point about the grouping of the amendments. We seem to be starting to waver quite a lot. I address my remarks to the Minister. If we are to get through the rest of Part I of the Bill today, it seems to the Opposition to be important that we stick to the groupings agreed. I fully accept that any Member of the Committee is able to speak to any amendment that he wishes in the order that appears on the Marshalled List but if that happens frequently I am afraid that we shall be unable to get to the end of Part I because there are just too many amendments to cover.
Lord Strathclyde: I should like to respond to that point. It is my understanding that in the grouping under discussion we are speaking to all the amendments listed in the groupings list apart from those which will be moved later by my noble friend

13
Lord Boardman. As the noble Lord, Lord Williams, said, that is the normal form that the Committee should take. However, it is up to any Member of the Committee to unbungle the groupings if he so chooses; otherwise, I hope that the grouping of amendments on the list is acceptable.
Lord Clark of Kempston: I could not disagree more with my noble friend Lord Carnock. If indeed a person holds an asset which he agreed in the past to let to someone else, then whoever takes on that lease knows the conditions and consequently the value of the freehold must remain with the freeholder. I believe that my noble friend has got the wrong end of the stick. I say that because my honourable friend Sir George Young said in Committee in another place on 19th November last that the valuation would be based on "normal market practice". What the Bill proposes is not normal market practice. First, the tenant can determine the timing of the sale and, secondly, it is not an open market price because there is only one person to whom the freehold can be transferred. Consequently, in talking about normal market practice my honourable friend Sir George Young has really shot himself in the foot. I say that because the rest of the Bill does not provide normal market practice.
I turn now to the question of a forced sale or, for that matter, any sale. My noble friend Lord Gisborough mentioned in his speech the situation where one has a compulsory purchase order which involves a forced sale. In such a case, so far as concerns the state, whoever owns the property gets the full value; it is not sharing at all. That is not analogous to the sale of council houses where a discount was given for the length of time. The council tenant did not have a lease. By and large, the council tenant was a statutory tenant. That is different from a normal landlord. In order to evict a statutory tenant a normal landlord has to go through a tremendous court procedure. But a local authority need not necessarily do so. Consequently, we are not comparing like with like so far as concerns discounts. Some council tenants are weekly tenants while others are monthly tenants.
For the life of me, I cannot see the fairness in saying, "This property today is worth 100 units, but tomorrow if the freehold is sold it is worth 120 units". I cannot see why the 20 units do not go to the person who owns it. The person who owns it is the freeholder and, in the hypothesis I have referred to, he should receive the 20 units. I cannot for the life of me see why it is necessary that the freeholder should share any proceeds with the tenant. That tenant signed an agreement with his eyes open. As my noble friend Lord Boardman has said on previous occasions—no doubt he will repeat it this afternoon—some of the tenants do not even live in the properties in question. They live abroad or the properties may be holiday homes. Many foreigners come to this country and they stay in flats so they do not have to stay in an hotel. There are also company flats. These tenants are not analogous to council tenants. These tenants will receive a windfall profit at the expense, not of the state but of the freeholder.
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The other unfairness in this situation is that the bottom line valuation will be assessed, or computed, when the property market is at its bottom. It is quite obvious that at the bottom of the property market valuations are much lower. The tenant can determine the timing of the sale. That is absolutely wrong and certainly goes against what I have always considered to be Conservative policy, which is that fairness is given to the person who owns an asset. If the state wishes to give a discount, for whatever reason, on council houses that is one thing, but under no circumstances should the state force a private individual to give away an asset and not receive its full value.
I know that my noble friend on the Front Bench has a difficult job. Up until now there have been few concessions on this Bill. My next point has been made by my noble friend Lord Gisborough. If this Bill, or a similar Bill, had been introduced by a Labour administration, the Conservative Party would have fought it tooth and nail. I hope my noble friend will feel obliged to accept this amendment. I wholeheartedly support it and I hope the Minister will give it consideration.
Baroness Gardner of Parkes: I wish to oppose the amendment. I have listened carefully to the speech that has just been made in favour of it. I cannot agree for a moment with the noble Lord, Lord Clark. He claims that the freeholder has the right to everything, but he then contradicts himself by saying that there is only one buyer and that is the person in the flat. It is because that person is in the flat that he has a right to a proportion of the marriage value.
As the noble Lord knows, vacant possession is an entirely different matter. If, as a freeholder, he offered his property on the open market with a sitting tenant, the sum he would receive would be vastly different to the sum he would receive if he offered the property with vacant possession. Therefore possession in itself is worth a great deal.
While a proposed marriage value of 50 per cent. does not favour the tenant, I believe it is far fairer to the freeholder than it is to the tenant. There are other clauses in the Bill that will make things difficult for the tenant. I do not intend to repeat the arguments that have been made in previous debates. The noble Lord, Lord Clark, has repeated some arguments that have been made on previous occasions. I do not wish to delay this matter. I oppose the amendment.
Lord Wolfson: I, too, oppose the amendment because it vitiates the purpose of the Bill, which itself is a logical extension of the 1967 Act and another milestone on the road to a property owning democracy. A number of points were made by my noble friend Lord Gisborough. First of all, he said that the Budget had affected the return on shares. That is perfectly true, but is there any reason why reinvestment should not take place in gilts or convertible bonds if one is concerned about inflation? Incidentally, the level of inflation has not prevented property prices from falling quite sharply.
The point has been made that the market is at its bottom. I am not sure how one can assert that.

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Reference has been made to the marriage value. It is normal commercial practice to have approximately a 50/50 split between the freeholder and the leaseholder. In many respects the residential leaseholder has not been able to negotiate freely in these matters. He has made a big input into the property and should participate in its marriage value. Investment income is more valuable in net terms than property income because it requires less money to be spent on the asset itself.
Reference has also been made to capital gains tax. If compensation were doubled, the same would occur with capital gains tax, although I agree that the net amount would be greater. Finally, I am not clear how the foreign and absentee tenants that have been mentioned acquired the properties in the first place. Were they let to them by the landlord, or sublet by other tenants? It would be interesting to know a little more about that.
Lord Peyton of Yeovil: I wish to comment briefly on the six amendments that stand in the name of my noble friend Lord Kindersley, who unfortunately cannot be present today. The purpose of those amendments is to sound one more note of complaint to the Government over the way in which they have handled the issue of charities. As I see it, the Government in their zeal to do something for tenants —that is to say, for all tenants regardless of merit, needs or deserts—have simply brushed charities on one side. The Government have shown little evidence of having thought at all deeply about their value to the community and the importance of the role they perform.
These amendments in part would place a heavy burden upon all tenants. I would not wish to press them for that very reason. That is my complaint about this Bill. The Government propose to do something for all tenants regardless of their deserts. I should like the Government to answer a question. Are they really satisfied that it is fair and right to give indiscriminately a considerable benefit to tenants who do not live in, perhaps never have lived in and have no intention of living in the property concerned? Are they satisfied that it is fair to do that at the expense of a charity whose earnings would be used to succor people in need? I wonder whether the Government have given serious thought to whether it is right so to injure a charity. I have asked my next question before without eliciting an answer from my noble friend. I do not know whether the Government ever consulted the Charity Commission as to whether this was a right and proper way to proceed.
We have already gone into the question of cathedral closes versus the Regent's Park Nash terraces. I cannot understand how it is right to take action to save one and jeopardise the other. The point has already been made about the effect of the Budget and about the disadvantages for charities and others holding shares following the Budget. That rather knocks a hole in some of the remarks my noble friend has been accustomed to make from the Front Bench as regards charities being fully compensated. I do not personally go along with that point.
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I ask my noble friend, on behalf of the Government, to take note of the disturbance and concern which charities feel at the way—I shall not use the word "mean" in this sentence —they have been treated, which indicates a lack of care and concern. I hope my noble friend will take this matter seriously as I wish to return to it on Report but not in terms of these amendments. As I have said, they would be objectionable to my mind in that they take an indiscriminate step against all tenants. I object to the Government doing that vis-à-vis all landlords, whoever they are. I hope that my noble friend will take that point to heart.
3.30 p.m.
Lord Hamilton of Dalzell: I thank my noble friend Lord Peyton for supporting the charities. In the absence of my noble friend Lord Kindersley I represent Smith's Charity. In his speech a fortnight ago my noble friend complained at the lack of consultation by the Government before the Bill was brought forward. I do not believe that they understand the concept of the marriage value. I am certain that the Conservative Party research department does not. I have with me a paper of a rather unusual colour for this side of the Chamber. It is produced by the Conservative Party research department, is entitled Housing and is dated March 1993. On page 7 it reads:
"The marriage value is the difference between the leasehold value and the freehold value of the property".
That is wrong. The marriage value is the freehold value less the value of the lease and the value of the reversion combined. That statement is wrong and misleading. I contend that a transaction between two parties belongs in equity to the freeholder in its entirety.
The marriage value is well named because it represents accurately what occurs in the free market. A freeholder wishes to cash in a freehold interest because he needs the money. The leaseholder wishes to sell his lease, providing the opportunity to do so. A proposal of marriage is made by the freeholder that the leasehold and freehold interest should be joined so that the freehold may be sold. To that end the freeholder is prepared to offer part of his equity as a marriage settlement. Once one party is given the right to enforce a union on the other it can no longer be defined as a marriage; it is more like a rape. I could have an interesting discussion with my noble friend Lord Strathclyde as to what he would have recommended the Sabine women to have given as a marriage settlement to their Roman abductors. There can be no marriage benefit where there is no marriage. Smith's Charity feels very strongly that value should not be taken away from its beneficiaries through the Bill.
The second point on which I believe it is important that the Minister should give an opinion, in order to avoid the possibility of litigation in the future, is the value to be placed on the option to buy which will be granted to a leaseholder by the Bill. The leaseholder is to be given an option to buy an asset at less than its free market price at any time during the term of the

17
lease. That may be a considerable number of years. In the commercial market such an option would be worth money. As time progresses the value of the leases sold in the market will begin to reflect that, eating into the marriage value. The first question a freeholder is likely to ask a valuer—and I believe that Smith's Charity will be asking this question—before considering the price of enfranchisement is: what is the value of the option which should be added to the price?
Lord Williams of Elvel: In my earlier intervention I did not comment on the amendments which have been tabled concerning charities. Perhaps I should make a brief comment. We have had this debate before, as the noble Lord, Lord Hamilton, pointed out.
Our view remains exactly what it was two weeks ago. There is no reason why charities should be excepted from the general rule unless part of their charitable work is to let out properties at low rents for charitable purposes. We stand by that.
To talk about Smith's Charity is hardly relevant to the general point at issue. As the noble Baroness, Lady Gardner of Parkes, said, Eton College and Harrow have large properties. As the noble and learned Lord, Lord Hailsham, will know, the battle of Waterloo was won not on Agar's Plough or Upper Club but at Elsworthy Road, NW3, which used to be the playing fields of Eton College.
We cannot go on like this. We have had this debate before and I hope very much that we shall bring it to a conclusion.
Lord Stewartby: Before my noble friend the Minister replies to the debate, as one who so far has found it just possible to support the Government against amendments of this kind, perhaps I may ask him to think very carefully about the point made by a number of my noble friends. I shall not repeat what my noble friend Lord Peyton said because he said it better than I could have done. There are a number of us who are prepared to accept one important principle in the Bill with which we are not very happy, namely the principle of leasehold enfranchisement. However, we are not at all happy about another principle which has crept into the Bill, which is that tenants should have a windfall gain at the expense of freeholders. I suspect that many of the amendments which have been tabled are different manifestations of that same anxiety.
A week ago the Committee considered amendments which were designed to deny enfranchisement if the tenant was not resident in this country. In that debate the point was frequently made that it was not right that such absentee tenants should be entitled to a windfall. That point, which has not been disputed, goes to the heart of the problem. It indicates that there is a windfall to tenants. Whereas I am reluctantly able to go along with the main purpose of the Bill because it was a manifesto commitment that there should be leasehold enfranchisement of this kind, most of the amendments which have been put forward to assist charities, pension funds and other freeholders reflect a fundamental unease among many of us that the terms of the proposals are simply not fair.
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If we are to accept the overriding principle of the Bill concerning enfranchisement we should not also have to swallow a very unattractive element which is embodied in the valuation arrangements. It is difficult to accept that at the same time there should be a transfer of value from freeholders such as charities and many others to tenants, some of whom, as was pointed out in last week's debate, are not necessarily at all deserving in that cause.
When he responds to the debate can my noble friend assure the Committee that the Government will think further about the basis of valuation? I hope that he will not merely dismiss many of the points which have been raised on behalf of charities and others. There are sincerely held anxieties that the purpose of the Bill has been distorted by the way in which the valuation arrangements have been framed.
Viscount Montgomery of Alamein: The temptation to follow my noble friend Lord Hamilton into the fields of Roman mythology is great but must be resisted in the interests of progress.
The question of the marriage value involves a matter of principle. I take issue with some of my noble friends because their amendments seek to benefit the freeholder at the expense of the leaseholder. As my noble friend Lady Gardner pointed out, the leaseholder has a large stake in the matter, which may well be much greater than that of the freeholder. In the case of new blocks of flats, the entire cost of construction has probably been paid by the leaseholders in the initial sale price. Therefore it is absurd to suggest that the leaseholder does not have a considerable stake in the issue. Therefore, the concept of the marriage value, which involves sharing the benefit, recognises the fact that the freeholder has art interest, namely in the freehold of the property. In other words, he has an interest in the land on which the property is constructed.
We have agreed the principle of enfranchisement, although one could be forgiven for believing that that was not the case in view of some of the speeches which have been made. We did so at Second Reading and it has been agreed in another place. The question is how that value should be divided. It seems to me that common sense should apply in that sometimes the marriage value may well be more than 50 per cent. and frequently considerably less than 50 per cent., depending on the circumstances which will vary from property to property and from estate to estate. I hope that my noble friend will vigorously resist the amendment.
Lord Coleraine: I wish to speak to the amendment: spoken to by my noble friend Lord Peyton and return to the amendment moved by my noble friend Lord Gisborough. We have heard from my noble friend Lord Hamilton of Dalzell that he is one of the trustees of Henry Smith's Charity; my noble friend Lord Kindersley is another. Smith's Charity does not act among the poor of London. It raises money and hands over millions of pounds every year to other charities to spend for their charitable purposes. The remainder of the money is accumulated year by year and invested in Stock Exchange investments and in the purchase of

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other freehold properties. It forms a treasure chest. There seems always to have been a large part of its income which is not used for charitable purposes but which one day may be so used.
Were there not other grounds for resisting the amendment, one could quite effectively point to that treasure chest and suggest that while it exists the charity has no claim to treat any particular freehold reversion as providing the funds for charitable donations. Were my noble friend Lord Peyton to press his amendment—he will not do so—the intention would clearly have been effectively to have rendered enfranchisement nugatory for most flat owners with charitable landowners. Under the amendments, a price would be fixed which bears no relation to reality and would make it quite inconceivable that any flat owner would wish to enfranchise. It would make no economic sense.
I have to venture the opinion which has been voiced before: that it is an attempt to re-run the argument that charities should be exempted from the provisions of the Bill altogether. My noble friend has not pointed to any precedent for charities being exempted or for their special treatment on compulsory purchases. I assume that he would have done so had he or his advisers been able to lay their hands on suitable precedents.
Lord Peyton of Yeovil: I refrained from doing so in the interests of brevity. My noble friend should practise what he preaches.
3.45 p.m.
Lord Coleraine: I am not aware what precept I have preached. I shall continue.
Any precedent of which I am aware is against the exemption of charities from compulsory purchase legislation. The Companies Act provisions, whereby a shareholder who has not accepted takeover terms is then bought up with the rest of the minority and receives what the accepting shareholders receive, do not apply to charities. I see no provision for such special treatment of charities, let alone a special price for charities, under the Leasehold Reform Act 1967.
I venture to suggest to my noble friend Lord Peyton that his is an unattractive proposal that he brings before us again today. We live in times when society at large has much to say about the ethical investment of charitable funds. Something could be said about that but I do not wish to embark upon the argument today. I hope that my noble friend will continue to resist such amendments in relation to the investments of charities.
My noble friend Lord Clark of Kempston raised points on the amendment moved by my noble friend Lord Gisborough. I have to say that he does not understand why in a compulsory purchase situation it is necessary to ride over the fact that the freeholder may be entitled to take all the marriage value in certain circumstances and why it is necessary that there should be an assumption of the willing purchaser.
Lord Clark of Kempston: I cannot quite understand what my noble friend says. He agrees with me that with a compulsory purchase order the value of the freehold should go entirely to the freeholder, but he considers that there is a difference in the provisions of the Bill. It involves compulsion on the freeholder at the behest of tenant to sell the freehold. It is analogous to compulsory purchase.
Lord Coleraine: It is because of such remarks that I seek to explain why the argument that my noble friend advances is incorrect. I shall come to it in due course.
The market in leasehold flats is an imperfect one. The term does not just waste away in a straight line until its value reaches zero. As must by now be well known, it reflects the almost universal need to raise a mortgage for flat purchase. A flat which with 80 years' lease may have almost the value of a freehold may be almost unsaleable 30 years later with 50 years of the term remaining. I do not refer to flats in Belgravia and Kensington, where the wealthy congregate and which are a law unto themselves in that respect, but to flats and blocks of flats in less affluent areas.
I am advised that there are not so many flats which have yet fallen into that danger area because it was mainly in the decades after the Second World War that it became usual to sell flats on long leases. The leases of most of those flats still have a while to run before they drop into that danger area, but in many cases the danger area is not far off. In some cases it already exists.
Let us take as an example a flat on a long lease of 99 years in 1950. It would now have about 46 years to run and already it has fallen into the danger area. But what happens when the lease of a flat reaches that point and the owner wishes to sell? He finds that he has to agree a premium for lease extension with his freeholder. The premium will almost invariably include almost the whole of the marriage value. Nevertheless, it is still just worth the flat owner's while to agree to pay it as ransom money to make his lease saleable once again. That process can be repeated more than once in the life of any flat lease and can be as frequent as every 30 or 40 years, depending on the length of the lease and of the lease extensions granted. If a flat owner were content to stay in his flat until the term expired, then the marriage value would have melted away. That rarely happens because flat owners move house fairly frequently.
It is in those ways that dealing in reversions can be so profitable. It is because of that that the law is now stepping in—if the Bill is enacted in a form that is workable—to intervene to help the disadvantaged party in what amounts overall to a monopolistic situation. I hear what noble Lords such as my noble friend Lord Dilhorne say. He is now present. At Second Reading, he said:
"It is an indisputable fact that the marriage value belongs entirely to the freeholder".—[Official Report, 23/2/93; col. 131.]
However, they overlook the fairness of the situation and the fact that the marriage value has been carved out of the flat owner's share of value.

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Let us put fairness to one side. That is not the end of the situation. Referring to marriage value, my noble friend Lord Dilhorne continued by stating:
"In a free market no one but the freeholder can give it or withhold it".
That is a patent fallacy. The flat owner is also needed for the giving or withholding of marriage value. There is a good case for saying that the marriage value belongs entirely to the flat owner, but I do not put it that way except on the limited ground of what is fair. It is an argument with which I do not wish to burden the Committee today.
The freeholder can manipulate the system in the "unfree" market for flats which exists in central London because in a hypothetical free market situation which compulsory purchase legislation necessarily requires marriage value has to be shared. That is why the claim of 100 per cent. of marriage value cannot be justified by the claim, and as my noble friend Lord Gisborough pleads, that in the real world of Belgravia and Kensington the reversionists are strong enough to demand and obtain 85 per cent. or more of marriage value. They claim to be able to do so again and again over the long-term scale on which they operate. It is like harvesting a forest. That fact, and the special situation of central London out of which it arises, has to be overlooked in any compulsory purchase legislation. The legislation has to include the assumption of the willing seller. It is simply no good suggesting that the seller is not willing. Such legislation is and always has been framed and interpreted on the basis of balance between the buyer, who may say, "But I am the only possible purchaser, and I will only pay a penny", and the vendor, who may say, "I do not wish to sell and you will have to pay me the moon".
It is in that context that legislation must assume the willingness of the seller. That is what the amendment denies and why I hope that my noble friend will advise that it be rejected. I am sure that my noble friend Lord Peyton will agree that I have spoken long enough and that I need not mention the other argument that it would be altogether disastrous—tending like no other amendment to the wrecking of the Bill—to include provisions tailored to maximise the profit of central London estates, investment landlords, when to do so will defeat the entirely reasonable social objectives of the Bill in relation to the many more flat owners outside central London whose landlords are not holding their reversions as long-term investments but who are holding them as stock-in-trade in dealing operations.
Lord Boardman: Before my noble friend sits down, I wonder whether he has taken account of Amendment No. 138 in the name of my noble friend on the Front Bench. If I may say so, it completely defeats the argument which my noble friend Lord Coleraine put forward on the renewal of leases.
Lord Monson: This seems a convenient moment to speak to my Amendment No. 110 which is grouped with the others and which is a little less radical than the amendment to which we are speaking, Amendment No. 105C. It merely provides that the
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minimum share of the marriage value to be received by the freeholder should be 75 per cent. rather than 50 per cent. I have with me some pages taken from a magazine which appeared shortly before Christmas, at a time when the Bill was still in Committee in another place and when, therefore, the final terms of the Bill were not known and prices in London did not reflect the expectation of enfranchisement on the specific terms contained in the Bill before us.
The pages contain advertisements for several flats at prices ranging from £295,000 to £475,000. Unlike the noble Lord, Lord Coleraine, I specifically cite flats in South Kensington, Chelsea and Belgravia because it is there that the greatest totally undeserved and unearned profits will be made if we do not agree to some amendment.
The specific flat which I have chosen to illustrate my case is located in Cadogan Square where £400,000 was sought for the remaining 31 years of the lease. That equates to a freehold vacant possession value of £760,000. On the assumption that the ground rent is a nominal £100 per annum and on the secondary assumption that there is no compensation to be paid for injurious affection, someone who bought the leasehold interest in the property before Christmas for £400,000 will have to pay £248,400 to enfranchise, assuming that the landlord receives 50 per cent. of the marriage value. That makes a total of £648,400 for a property whose vacant possession value is £760,000. In other words, it gives a profit of £111,600, or 17.2 per cent.
Surely that is too much by anyone's standards and particularly when we bear in mind that the Chancellor of the Exchequer announced in his Budget speech that foreigners who bought flats in London for secondary or tertiary residences would not pay income or capital gains tax if they used them while in this country, giving scope for an enormous amount of profit speculation without any tax whatever being paid to the Exchequer.
If the freeholder were to receive a minimum of 75 per cent. of the marriage value, the profit would be reduced to £55,800 on a total purchase price of £704,200, giving a profit of 7.92 per cent. That is not bad. It is perfectly acceptable and would leave something in hand. I do not object to that. I should have thought that the Committee would agree that it could be borne as it is not too excessive or gross. However, a profit of over 17 per cent. is far too much and should be resisted.
Lord Wolfson: Before the noble Lord sits down, has he taken into account in his calculations the amount spent on the property by the leaseholder in assessing the capital profit that he has enunciated?
Lord Monson: The example that I gave assumed that someone who had bought the property just before Christmas had spent nothing on it. I am talking about short-term speculation, not people who may have been in a flat for 15 or 20 years. That is another matter altogether.
Lord Hamilton of Dalzell: I wish to put on record how much I object to the remarks of my noble friend

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Lord Coleraine, who appears to impugn the integrity of Smith's Charity in accusing it of not distributing its income to the full, as it is required to do by the Charity Commissioners.
Baroness Hamwee: The right reverend Prelate the Bishop of St. Albans commented last week that the debate on charities appeared to be turning into a debate about Smith's versus the rest. I do not believe that any Member of the Committee would wish to impugn Smith's Charity but we have to bear in mind the requirements and positions of other charities and of leaseholders with which the Bill is intended to deal.
For the reasons given by the noble Baroness, Lady Gardner, and the noble Viscount, Lord Montgomery of Alamein, with regard to the amendment which would remove any interest in the marriage value from the leaseholder, I agree with the point which I may be paraphrasing but which strikes at the heart of the principle of enfranchisement.
With regard to charities, and without wishing to repeat the arguments that were made last week, it has occurred to me that no Members of the Committee—among whom I include myself—commented on the fact that many charities do not have that type of portfolio. Their investments, if they have any—and many charities struggle along without them —are in different assets.
I wonder whether it would be correct to suggest that a particular type of investment should attract a particular type of advantage. I should have thought that there might be an argument which would appeal to Members of the Committee opposite that the market should be allowed something of a free rein and that the existing provisions for tax benefits which apply to charities are the right way to assist all charities, rather than assisting charities which have a particular investment portfolio.
Lord Selsdon: I think this is perhaps the most important part of the Bill because it is about money or windfalls or profit. Up to now I have the feeling that it has been more about prejudice. I wonder whether, with a wicked sense of humour, if we had excluded from the Bill the great estates of London we would have had the same prejudice on the Benches this side of the Committee.
I recall that, as the noble Lord, Lord Williams, pointed out, basically we are not talking about London. I address my remarks more to outside London and the 60 per cent. first-time buyers and the problems that people had when they wished to buy a home and there were only leasehold flats available. Ultimately, at this stage we come down to what is a fair price. Members of the Committee have argued that in this case it is not the market price that the freeholder will receive. Other Members of the Committee will say that in many cases freeholders would find it impossible to sell their investment with a sitting tenant.
Somewhere between those two poles of what is on offer—100 per cent., 50 per cent.—must be the right amount. I should not dream of determining what that amount would be. If it were left to me, my preference
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would be that the freeholder should voluntarily seek to sit down with his tenants—as has happened on many occasions in the past—and negotiate a fair price. However, I assume that that is not possible within the terms and conditions of the Bill.
It is a question of what is a fair price to whom. Let us begin with the freeholder. In general, the freeholder will not necessarily be one of the great estates. In many cases, he will not even be British; he will be a foreign national sheltering behind an investment company set up for him by his advisers. In general, I believe that the freeholder will not pay tax, either through roll-over relief or some other perfectly legal and acceptable mechanism.
The leaseholder, on the other hand—if it is his permanent place of residence and he buys a longer lease and sells it —will not pay tax. If it is his secondary residence—and the law is already established for that—he will pay tax: 40 per cent. capital gains tax after the smaller amount.
In considering valuations, we should look at the net position. The freeholder will himself have legal fees. In general, if he is a big landowner, those legal costs will not be too high, whereas the individual leaseholder may have substantial legal costs with which he has to cope. Thus, when we come down to what the net figure is, in listening to noble Lords today I have certain worries. I tend to feel that the Government may, by accident or design, have it almost right. Some noble Lords say that the consideration is too much; others say that it is too little. Some others rightly point out that at the moment property prices are low and it is an unfair time to bring about such an initiative. Property prices may be low, but there is a desperate shortage of liquidity. However, the situation is open-ended; there will be an option to purchase for quite a long period of time.
The windfall profit may well go to a foreigner, to the freeholder or the leaseholder. In many cases, it is greater outside London. But even within London, there are many foreign investors who have come in, particularly in the past few years, and some have seen substantial losses because of the decline in their currency. I do not say that the Government have the balance right. I am not qualified to judge as I am not a professional in that area. But the professionals to whom I have spoken say that it is probably not far out.
4 p.m.
Lord Strathclyde: My noble friend Lord Gisborough introduced his amendment most succinctly, and I am grateful that he did so. In his opening remarks he said that the tenants should pay the full value. I hope that in the course of the next few minutes I shall demonstrate that that is exactly what they will do.
My noble friend Lord Selsdon was also right in saying that nobody agrees with the Government, and therefore we are probably right. Some Members of the Committee have said that tenants should pay more; others have said that they should pay less. The Government have chosen to seek a middle way which is fair to all parties. But I understand that the Committee still has great anxiety about the proposals.

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I shall try to respond to all the issues raised by the amendments tabled on valuation to show why we have arrived at the provisions in the Bill, and why we consider them to be fair.
It is clear that the issue of fair valuation is crucial to the whole debate on enfranchisement. It is important that the rights which we confer on leaseholders should be possible only at a fair price. Therefore, I hope that the Committee will permit me to explain how the valuation provisions in the Bill evolved, and why I consider them to be fair.
When the 1967 Act was passed by a Labour Government, the price which long leaseholders had to pay was very low. All they had to pay was the open market value of the freeholder's interest in the land, which would have been less than the price for which it could have been sold to a third party.
That was understandably very popular with the tenants. However, the Conservatives did not accept that the provisions were fair to both parties and we opposed it at the Second Reading of the Bill as unfair to the landlords. During the passing of the Labour 1974 Housing Act we successfully moved a change to the 1967 Act to cover medium value houses, newly brought in. That ensured that the price had to take into account the fact that the tenant had a special interest in buying, and so his bid for the freehold was likely to be higher than that of a third party. That proved more acceptable and has worked well for nearly 20 years. The basis for medium value houses reflects what actually happens in the open market and allows no statutory favouritism.
When we came to consider extending enfranchisement to the relatively few leaseholders of high value houses, and the three-quarters of a million or so long leaseholders of flats, it was clear that they should have to pay the market value of their landlords' interests. That follows the Conservative tradition of fairness to all parties.
We have provided that the price paid to the landlord should comprise the sum of three elements. The first is what a third party should pay for the landlord's interest as an investment. It reflects the value of the property to the landlord, subject as it is to the tenant's lease. The second element is marriage value, where we have provided that the landlord will receive at least half. The third element is compensation for any severance losses.
The first element—open market value—represents the price which the landlord could receive from a third party purchasing the property as an investment. It is fairer than the original valuation basis applied to low value houses by the 1967 Act, because it takes into account the value of the buildings as well as the land.
Many of the amendments put down today concern the second element, which is marriage value. Marriage value is the increase in value when the freehold and leasehold come under the same control. So for example, if the landlord's interest could be sold for, say, £20,000, and the value of a leasehold flat is £80,000, making £100,000 altogether, but either could sell the flat with a new lease for £150,000, then the marriage value would be £50,000. The marriage value does not exist unless one party—either the landlord or
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the tenant—can obtain vacant possession of the flat and grant a new lease. So it does not belong wholly to the landlord, or to the tenant. I suspect that that is the basis for what I felt was a misunderstanding by my noble friend Lord Clark.
In the open market marriage value is shared to ensure that a mutually acceptable bargain is struck. This reflects the mutual benefit of the landlord selling to the tenants and of the tenants buying. Landlords could not obtain all of the marriage value in the open market except in very exceptional circumstances. The Lands Tribunal, following that principle, has adopted the approach of sharing marriage value. The Royal Institution of Chartered Surveyors agrees that the Bill's proposals follow market practice. Their press notice of 9th February made clear that they did not consider that tenants will be able to make windfall profits and that such an interpretation was a misreading of the Bill. I hope that that deals with the anxiety expressed by my noble friend Lord Stewartby when he feared that windfall profits would be made. Any gain is shared.
My noble friend Lord Peyton, in his speech on charities, asked whether I realised the great anxiety felt with regard to charities. That point was echoed by my noble friend Lord Stewartby. As drafted, the amendments affecting charities would require tenants to pay 50 per cent. more than the market price for their property if their landlord is a charity. I appreciate that that is not my noble friend's intention. It is that the landlord should receive all of the marriage value. But I feel that that would be unfair. It cannot be right to discriminate against a tenant on the basis of his landlord, still less should organisations raising money by commercial means be allowed to exact a ransom from tenants simply because of use to which they put their income.
The principle remains the same, it would not be fair to allow a charity to receive more than other landlords. I have explained that marriage value is shared because that is what the open market provides. Our proposals are fair and they are fair to all parties, whatever the identity of the landlord or tenant.
Some of the amendments which the Committee has been asked to consider affect the division of marriage value. We have been presented with a number of options affecting that division. It has been suggested that the marriage value floor should be deleted, or raised to 75 per cent., or that the landlord should automatically receive all of the marriage value. I do not consider that any of those amendments are fair, or necessary. We have provided that the landlord should receive at least half the marriage value, as an equal division of marriage value is very common. This recognises that the parties have to reach an agreement or the marriage value is lost. By specifying 50 per cent., we hope to reduce the scope for argument, thereby making enfranchisement quicker and cheaper. Equally, it would not be fair to award all the marriage value to the landlord automatically. If the landlord were to sell to any other purchaser, then the extra value would not be released. Enfranchisement is maximising the possible gain which a landlord can receive from his asset. That is because the landlord

27
receives all his marriage value share at enfranchisement. If there were no enfranchisement, he would not receive any marriage value. If he were to receive any it would he spread over a number of years as and when individual tenants wished to extend their leases.
Perhaps I may respond to my noble friend Lord Gisborough. None of the provisions in the Bill prevents a landlord from receiving more than 50 per cent. of the marriage value. We have been careful to ensure that where the market would provide the landlord with more than 50 per cent., and he can produce evidence of that from actual sales, then that is what will happen. In some instances he may well receive considerably more than 50 per cent. For example, where the tenant's case is weaker because his lease is short and he will have difficulty selling it in the open market, he may be keen to buy and therefore the landlord will receive a larger share.
My noble friend Lord Clark said that the freeholder must receive the full freehold value of the property. The marriage value is not part of the freehold value; it is the extra created by enfranchisement and belongs to neither freeholder nor leaseholder.
The noble Lord, Lord Monson, spoke of profit on a flat. Enfranchisement is a collective right. A foreigner cannot simply buy a flat, enfranchise and then sell. He must organise two-thirds of the others in the block. That will take time and effort. In the Bill there is no prospect of easy killings for anybody.
We have had a full and useful debate on the subject of the proper valuation. I listened with great care to the points made by Members of the Committee. I believe strongly that the basis for valuation must be one which is fair both to tenants and to landlords and without discrimination as to the identity of either. By following the open market practice on valuation, we have sought to ensure that our valuation provisions are fair.
Compensation for the acquisition of private property has always been on the basis of the price paid to a willing seller, whether the purchaser is a private company, as in the building of the great railways in the last century, or the state, as in our own century with the building of roads. I said at the beginning that my noble friend Lord Gisborough said that tenants should pay full value. I hope that I have demonstrated that that will be the case. We have provided that the landlord will receive the full open market value of his asset. That, I believe, is fair. The amendments under consideration would change the valuation provisions to make them unfair. It is on that basis that I ask that they be withdrawn.
Lord Williams of Elvel: Before the noble Lord sits down, perhaps I may intervene. He referred to foreign leaseholders—a matter which has arisen from time to time in speeches from the Benches opposite. However, it is not only leaseholders who may be foreign; a large number of landlords are foreign also. The amendment of the noble Lord, Lord Gisborough, may therefore have the opposite effect to that he supposed. In fact, our information is that many of the worst cases of landlord misbehaviour are where a foreign landlord company is concerned.
Lord Gisborough: I thank my noble friend for his reply. However, it is irrelevant whether it is a foreigner or otherwise or a rich man or a poor man who is benefiting. That has nothing whatever to do with the point.
Much has been said about the fact that leaseholders always knew what they were getting into. But when they bought the lease they paid a sum which was equivalent or related to the rent that they would otherwise have paid over a number of years. As the number of years reduced, so the cost of the leasehold for them went down. As the noble Lord, Lord Monson, said, it will be possible for somebody, provided all the flats in the block are being enfranchised, to buy their leasehold and to sell it immediately as a freehold for a windfall gain. To my mind that is redistribution of wealth from one individual to another or from one charity to another. I find it politically confusing. On the one hand, the Conservatives are going Left-wing with this funny redistribution of wealth affair; while on the other hand we read in the press that the Socialists are busy going Right-wing in abolishing Clause 4. I am extremely confused.
There have been more speakers against the amendment than for it. The ones for it have either been quiet or are not here. I therefore beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Viscount Goschen: I believe that this may be a convenient moment at which to take the Statement. I beg to move that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

Channel Tunnel Rail Link
4.15 p.m.
The Minister of State, Department of Transport (The Earl of Caithness): My Lords, with the leave of the House, I shall now repeat a Statement made in another place by my right honourable friend the Secretary of State for Transport. The Statement is as follows:
"With permission, Madam Speaker, I should like to make a Statement about the proposed new railway line between the Channel Tunnel and London and about the Ashford international passenger station.
"I have today given the go-ahead for the Ashford international passenger station. I have given British Rail both a full approval and the funding it needs to carry out immediately all the track, signalling and platform works, totalling £30 million. In parallel, my department and British Rail will explore urgently with the private sector ways of involving its expertise and capital in the construction of the station buildings. The Government are fully committed to having the station completed as soon as possible so that Kent and other parts of the South East can gain the full benefits from the Channel Tunnel.

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"Turning to the Channel Tunnel rail link, the House will recall that my predecessor announced in October 1991 the route corridor preferred by the Government which approaches London from the east via Stratford and terminates at King's Cross; and he invited British Rail to refine the route. For that work British Rail formed a subsidiary, Union Railways, which draws on the skills of both the public and private sectors. Its work has been thorough and professional. Great effort has gone into achieving a route with proper environmental standards which largely follows existing transport corridors and at the same time reduces the costs substantially. As a result of this work, the line is now estimated to cost between £2 billion and £3 billion, considerably less than before, without any loss in the overall benefits, environmental or otherwise, of the route, and with some gain.
"The Union Railways report offers a series of options on the precise route and does not make recommendations between them. The Government have concluded that the route which should now be put to public consultation is as follows.
"Between the Channel Tunnel and Detling, north of Maidstone, the route would largely follow the previously safeguarded route. However, at Ashford the route would run to the north of the town, with a tunnel under the M.20 and then running parallel to the motorway. This route is environmentally superior to the former safeguarded route. It is also £85 million cheaper and it would have less impact on existing and potential development within the town.
"For the section of the route crossing the Medway valley, we prefer an option in the report which from the east would diverge from the M.20 corridor, passing through a 4 kilometre tunnel under Blue Bell Hill, before crossing the Medway alongside the existing M.2 bridge and following the corridor of the M.2 and A.2 on the surface. That is not the cheapest option but has substantial environmental advantages, at a modest additional cost.
"South of Gravesend there is provision for a connection to Waterloo. The main route would run along the Ebbsfleet Valley then tunnel under the Thames, to run alongside the existing London Tilbury and Southend railway from north of Purfleet to east of Barking. From there it would enter a tunnel to Stratford, where there remains an option for a station. That route overcomes a number of the engineering and environmental difficulties associated with the more southerly route published in 1991.
"West of Stratford there are two options. One option is for a tunnel all the way to the proposed King's Cross low level station. The alternative is for a tunnel from Stratford to a point on the North London Line railway west of Dalston Kingsland station, then continuing alongside the North London Line by reinstating the original four-track alignment within the existing railway boundaries, before finally swinging south over railway lands into St. Pancras station.
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"The tunnel route to King's Cross has significantly more impact on property settlement and noise levels than the route via the North London Line, which is important from the environmental point of view. The St. Pancras option also appears to be less expensive than the King's Cross low level proposal and that is important in terms of practical feasibility, in relation both to public expenditure and private capital. As my right honourable friend the Chancellor of the Exchequer announced in his Budget speech, the Government's preference is for the St. Pancras option. We recognise that before we come to a final view further work will be needed on the environmental, planning, regeneration, safety and engineering aspects of the proposal and on exploring the options for developing the Thameslink services. I have asked Union Railways to carry this forward as a matter of urgency.
"The new railway will bring great benefits. It will reduce journey times for international passengers, compared with what will be available in the early years following the opening of the Channel Tunnel, by at least 33 minutes, and by more in the commuter peaks, to 2 hours 27 minutes from London to Paris and 2 hours 7 minutes to Brussels. The railway will transform commuting from many parts of Kent, with a large increase in capacity, enhanced reliability and dramatic reductions in journey times. Construction of the railway will create about 15,000 jobs. The railway will also contribute substantially to the regeneration of the East Thames corridor and more widely. The Union Railways report also sets out ideas for related rail projects which could stimulate further regeneration.
"The Government consider that the benefits of this project are such that it should now go forward as a joint venture between the public and private sectors. The Government are prepared in principle to provide substantial public sector support in recognition of the domestic transport benefits from the new line.
"The next stage is to consult on the proposals. I want the consultation to be thorough and well informed. It will be led by Union Railways, and I should like it to be completed by mid-October. Only then will we take the final decisions on the route, and I shall then safeguard it. In the meantime, I am releasing the safeguarding from the two sections of route which have been superseded by that which I have just announced. The Union Railways report and the independent review of Union Railways undertaken by my advisers, Samuel Montagu and W.S. Atkins, are available in the Vote Office.
"In parallel with the public consultation, my department, with Samuel Montagu and Union Railways, will be discussing with the private sector their participation in a joint venture. Our aim is to find a way of taking the project forward which offers the private sector a proper return on its investment and secures value for money to the taxpayer. Union Railways will be made into a

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separate, initially government owned, company once the relevant powers have been granted under the Railways Bill now before the House; and we intend that in due course the project will be transferred to the private sector.
"Following safeguarding, the project will proceed by hybrid Bill. Provided that we press ahead quickly, it should be possible for the railway to be completed by around the turn of the decade.
"The time has come to end the uncertainty. Our decision to give the go ahead to the new railway will enable us to secure the benefits which it will bring for international travellers, for Kent and Essex commuters, and for regeneration in the East Thames corridor. This will be a massive undertaking. The preferred route I have proposed today is environmentally sensitive, realistic and financially feasible as a joint venture".
My Lords, that concludes the Statement.
4.24 p.m.
Lord Clinton-Davis: My Lords, the House will be grateful to the Minister for having repeated in this House the Statement made by his right honourable friend. I am most grateful for the slight delay that was afforded in reiterating the Statement here to enable me to attend the funeral of the late Lord Underhill.
Is it not absolutely remarkable that, five years after the decision was made to build a dedicated high-speed Channel Tunnel route from London, the Government are still not in a position to ensure that it will be constructed? Is this not in marked contrast to the situation on the other side of the Channel, where the French high-speed train will be ready to go as soon as the tunnel is opened, hopefully towards the end of this year or the beginning of next?
In this country we have no specially constructed track—not one metre has been laid; no major terminus has been prepared; there are no links to the rest of the national network; no British rolling stock has been produced. That has been very largely because the Government have been hopelessly hampered by their ideological baggage, insisting that until now there should be no public financial support. That has compounded the delay and uncertainty. It has led directly to the blight which affects so many thousands of people and the loss which marks the Government's handling of the situation.
Would the Minister indicate what is the cost of the work that has actually been thrown away, carried out and no longer required? What compensation is to be given to those who are suffering from blight as a result of the Government's changed views about the scheme? How many times did the Government change their mind about the route?
Does the Minister now accept that there is no prospect of the high-speed rail link being financed by the private sector alone without government finance and/or guarantees? Is it not a fact that the 1991 east London scheme announced by Mr. Rifkind, the previous Secretary of State, changing the previous southern route was to be based on 38 kilometres of tunnels, including tunnelling under Boxley Valley, and
32
now this route will cut through at least one, and probably more, site of special scientific interest? Did not the eastern route offer major regenerative opportunities for east London and north Kent; and what is the effect of this route as far as that is concerned?
Turning to St. Pancras, on what basis and studies was St. Pancras chosen? What effect is there to be in terms of delays for passenger through-journeys to the North, which is one of the important aspects of the King's Cross route? And what effect is all this going to have on other schemes such as the west coast main line and its vital modernisation, and the cross-rail project which is now being abandoned?
As far as the environment is concerned, the Government repeatedly claim in the Statement that this route is superior environmentally to the previous safeguarded route. What caused them to change their minds when they were lauding the environmental benefits of the previous route? We all know that the Government are very much more concerned about cost saving than the environmental benefits. Is the environmental impact assessment to be published, and is it in accord with the requirements of the European Community to which the Government have acceded? Even now we have to await a Statement in October on the engineering survey concerning St. Pancras and on the availability of private sector finance.
There is a report in today's newspaper, which I would invite the Minister to confirm or deny, saying that the Government are seeking support from European Community funding, from the European Investment Bank or the European Investment Fund. Is it not a fact that this aspect of funding was shunned by this Government for years—I speak first hand about that—and has this not led directly to a loss of invaluable time?
What effects will all this have on Hackney? About 10,000 people will be affected by the scheme in properties which run alongside the North London Line and which are now threatened. Are they to be compensated, and on what basis? Did the Government have consultations with them before this announcement was made?
This is a saga of incompetence unmatched even by this hapless Government, and the lesson is that if, instead of listening only to their own dogma and to themselves, they had listened to others, including the Opposition, this vital project for Britain of a Channel link would have been well advanced by now.
Lord Ezra: My Lords, I too should like to thank the noble Earl for repeating the Statement. I have three points to put, some of which coincide with what the noble Lord, Lord Clinton-Davis, has just said.
First, I too am very disturbed that it should have taken so long for a preferred route to have been identified on which consultation and legislative debate still have to take place and for which the money still has to be gathered from the private sector and, as we now understand, to some extent from government and possibly also from the Community. In the meantime, on the other side of the Channel, as the noble Lord, Lord Clinton-Davis, pointed out, they have pretty

33
well completed their work and will certainly be ready with a high-speed connection by the time the Channel Tunnel begins to operate.
What I find particularly puzzling is that British Rail, presumably with the tacit agreement of government, should have embarked on so many studies which now have proved abortive. It appears that while British Rail was doing its studies—for example, in connection with King's Cross—the Government were working on a completely separate study based on another station. That strikes me as very surprising. If the Government were going to do this study anyway, why did they leave British Rail to waste its time and taxpayers' money doing its studies? Perhaps the noble Earl will explain how these various studies are undertaken and whether British Rail was aware of what the Government were doing and vice versa.
My second point concerns the validity that we can now expect of the timetable proposed. For how long will this consultation effectively take place, because those who will now be affected will complain very strenuously? Is enough time being allowed for that? Then we have the question of hybrid legislation, which will take a very long time. There is also the question of the private sector deciding whether and to what extent it will contribute. It may well want to see how the traffic develops for a year or so once the tunnel is completed before it makes its assessment. Therefore, it is at the very least optimistic to expect that all this, including the construction time, can be completed by the end of the century.
Thirdly, the Government have now come forward with a project which will cost markedly less than the previous one, yet they tell us that environmentally it is just as good. However, the cost of the original project—the £4.5 billion project—was largely incurred because of environmental measures. It follows that if £2 billion has been saved in some way, some of these costly environmental measures must have been eliminated. Will the noble Earl kindly indicate how it can be claimed that this much cheaper scheme is as environmentally attractive as the others?
The Earl of Caithness: My Lords, I am grateful to both noble Lords for what they have had to say. In their comments they covered many of the same points. Both noble Lords started by saying that the project has taken a long time to date. Yes, it has taken a long time, but I do not think there are many places in the country that are as densely populated as parts of Kent, with all the environmental considerations and the geological difficulties which do not appertain on the other side of the Channel that need to be examined. I know that both noble Lords would be the first to criticise the Government if they had not spent time looking at the matter in detail. We hope that some of the blight that has been caused can be eased quite substantially and that rapid progress can now be made towards finalising discussion on this matter with a view to a hybrid Bill:
The noble Lord, Lord Clinton-Davis, said that there were no major termini built in this country. I would only refer him to the enormous amount of work that has been undertaken at Waterloo, which will be
34
open very soon. The noble Lord went on to ask about the cost of the work that has had to be thrown away. Whenever one looks into a major project—this is a mammoth project: perhaps the largest engineering project this century—there are bound to be options that need to be looked at. I would not say that that work was wasted. I would say that it was part of the correct exercise in assessing what is the right project for this country, at the right price, with the right protection for the environment. I can confirm to both noble Lords that there will be public finance in this project. It will be a joint venture with a view to being an entirely private venture in due course.
I would say to the noble Lord that there are major regeneration opportunities as a result of the work that has been carried out. That is fully explained in the document which I am sure he will read with great care. So far as concerns passengers going on through journeys to the North and Midlands, it does not make any odds whether it is King's Cross or St. Pancras. We are both extremely conscious of the need to get passengers to the North and the Midlands. Whether they go to King's Cross or St. Pancras will not make any difference at all. We are particularly anxious that they should be able to speed on their way and get easy access to the Continent.
The noble Lord paid the Government a great tribute when he said that we are concerned with cost savings. Of course we are. When one is talking about taxpayers' money, that is absolutely right. I am happy to stand condemned of that. It is something that splits the two parties.
I would say to the noble Lord, Lord Ezra, that when the work was initially carried out on the eastern approach the opportunity for St. Pancras was not available. It presents some environmental benefits as set out in the report, and the extra relaxation on the type of gradients that might be permitted allows those environmental benefits and allows St. Pancras to be taken into account. We anticipate that the consultation period will be about six months. We hope that the next report will be ready by mid-October.
Finally, the noble Lord, Lord Clinton-Davis, said that 10,000 people would have their properties affected by the line. I do not know where the noble Lord gets that figure from because we are not taking property from 10,000 people. Only about 11 properties along the whole route will need to be demolished. That is a remarkable tribute to the work of Union Railways. I would remind both noble Lords that three-quarters of the route will either be in tunnel or following existing transport links.
4.36 p.m.
Lord Boyd-Carpenter: My Lords, can my noble friend say what is the total expenditure from public funds which would be acceptable to Her Majesty's Government if difficulties arose in obtaining private funding? Have the Government some figure beyond which, if things went badly, they would not go? Can he also say over which particular years that expenditure would be spread?
The Earl of Caithness: My Lords, it is too early to give my noble friend an answer on that. There is substantial interest from the private sector in this project but it is obviously something that needs to be worked out in conjunction with the private sector. Therefore, I cannot give him the answers which he requires. So far as concerns expenditure, the immediate expenditure for Ashford station—£30 million—has been approved; £12 million in the current year and £18 million in the following year. As to future amounts of public money, it is too early to say.
Lord Henderson of Brompton: My Lords, I thank the noble Earl for making the Statement. Can he explain what he means when he says that,
"the time has come to end the uncertainty"?
Does he really mean that? Is there going to be no more uncertainty, for instance, for the residents and businessmen of the King's Cross area, whose homes and businesses have been blighted for at least five years? From listening to the Statement it looks as if the engineering survey will not be completed until October. The implication of that is that these wretched people will have to wait another six months or so. I should like to know categorically that their blight is lifted. They should not have to wait one second longer. It has been an intolerable delay for them. I am asking the noble Earl to say, in view of what seemed to me to be a categoric statement from the Chancellor of the Exchequer last week and from what the noble Earl said today, except for the one sentence about the engineering survey, that they will be told that their misery is over.
That also implies—the noble Earl did not say a word about the King's Cross Railway Bill—that the King's Cross Railway Bill is a dead duck. Clearly, he cannot make the statement which the long-suffering Select Committee said he would have to make if the project was to go forward. The Select Committee stated that,
"the Government statements presented to us indicated a clear commitment to the project".
Thus far have the Government misled the Select Committee. The Select Committee further stated that the Government should no longer proceed with the Bill unless it was clear that the Minister was able to make a statement of intent during the Third Reading of the Bill. Clearly, the Minister is not in a position to make that statement of intent. Therefore, may we please have his authority to assume that the King's Cross Railway Bill is dead?
The Earl of Caithness: My Lords, referring to the first comment of the noble Lord, Lord Henderson, I am unable to give him the satisfaction that he requires. As he will have heard from the Statement, further work is to be carried out on St. Pancras by Union Railways. It is very much the Government's preferred option that that should be the terminus. The blight suffered by certain people around King's Cross has unfortunately gone on for a lot longer than five years. That is why I say to the noble Lord that we must seek an urgent end to it so that the worry and concern that
36
is felt is reduced to the absolute minimum. Referring to the noble Lord's second point about the King's Cross Bill, that is a question for the promoters.
Lord Williams of Mostyn: My Lords, I revert to the question asked by the noble Lord, Lord Boyd-Carpenter. The question is one of great importance. The noble Lord asked whether the Minister would indicate the maximum anticipated tolerable public expenditure. The Minister's reply—which I believe the noble Lord, Lord Boyd-Carpenter, and I both agree was unsatisfactory—was that it was too early to say. I ask the Minister to tell us when that conclusion is likely to be arrived at?
The Earl of Caithness: My Lords, it is too early to say. I cannot give the noble Lord a firm date as to when I can answer that question.
Lord Aldington: My Lords, is my noble friend aware of the pleasure that will be given to the whole of East Kent and certainly all around Ashford by the decision of his right honourable friend on the international passenger station in Ashford? Is he further aware that, despite the further delay that is bound to take place between now and the end of the consultation period, there will be a feeling of relief that at last we are getting to the point of decision?
Perhaps the Minister will give a little further thought to the proposed new route to the north of Ashford. That is a departure from the route that has been safeguarded and on the basis of which everyone has been making plans. Will he assure me that consultation on the route will be real consultation, even though he rather astonishes me by saying that he has withdrawn the safeguarding from the only other alternative route? That makes it look as if consultation is no consultation. Will he bear in mind in the search for new routes round a populous area that, while the very difficult environmental situation in the whole of Kent but particularly round Ashford is understood, when he moves routes like this he upsets a whole series of other people? He will find, as I have found in making enquiries, that some people have moved from where the old route was to where the new route is going to be. That is not the way to satisfy environmental sensitivities. Does he realise that in tackling the consultation process and the sensitive feelings of the people who live in that part of the world?
The Earl of Caithness: My Lords, I am pleased to be able to make my noble friend happy with the announcement about Ashford station. I believe that the last time we debated transport issues my noble friend was not as happy as he is today. I welcome his comments with regard to that. I can confirm to my noble friend that consultation will mean consultation. If one looks at a route and believes after a rigorous search that one has found a better and more environmentally friendly one so far as Ashford is concerned, it is understood that some people who might have thought they would not be affected will be concerned. But I am sure that my noble friend will

37
agree with me that one must not shrink from making decisions if one believes them to be right. The consultation period is precisely to hear those voices.
4.45 p.m.
Lord Howie of Troon: My Lords, is the Minister aware that the decision to shift the terminus from King's Cross to St. Pancras will be received with a great deal of regret? Does he recall that the proposed terminus at King's Cross was a fully integrated interchange under which the international station at low level would have been combined with the Thameslink station, giving ready access to the mainline station above and to the London Transport tube station? It seems that this is not the case at St. Pancras, or will he tell us how St. Pancras can be changed to make it as convenient an interchange as King's Cross would have been?
I turn to the route as a whole. The Minister may recall that when Brunel was building the Great Western Railway in the 1830s he was specifically asked whether he would provide the cheapest route. He replied that he would provide not the cheapest but the best route. Is the Minister aware that in this case the Government seem to have chosen the cheapest route rather than the best one? Will he tell us how long this country has to put up with second-best cheap solutions instead of what is desirable?
The Earl of Caithness: My Lords, I say to the noble Lord, Lord Howie of Troon, that the decision to move from King's Cross to St. Pancras has been widely welcomed in some quarters. Indeed, locally, some people feel that it will be a much better option. However, I take note of what he says. Union Railways will be carrying out further work. Given the noble Lord's expertise in engineering, I am surprised that he did not pay a fuller compliment to Union Railways upon the work they have done. They have followed Brunet's edict. I cannot recall the days of Brunel, although the noble Lord suggests that I may be able to. The route we have put forward is exactly the type of route that Brunel would have put forward. I can say to the noble Lord with absolute confidence that it is not the cheapest route; it is the best route.
Lord Shepherd: My Lords, the Minister referred to a hybrid Bill. Will this be a hybrid Bill that will be introduced by a promoter under the normal conventions or will it be a government Bill? Clearly, a hybrid Bill will take a very long time to pass through both Houses of Parliament. Have the Government given any thought to how long it will take for that Bill to pass through Parliament before any contracts can be made or implementation commenced? Has the Minister any idea how long it will take to get that legislation through the two Houses of Parliament?
The Earl of Caithness: My Lords, as I understand it the hybrid Bill will be a government Bill, although there may be other promoters along with the Government, as has been the case in the past. As to the time required to take a hybrid Bill through both
38
Houses of Parliament, that is something I shall leave to the business managers. It would be wrong of me to guess.
Lord Shepherd: My Lords, the Minister misunderstands my point. It has nothing to do with the business managers. Under the hybrid Bill procedure, those who have petitions to make have the power and opportunity to make them. In that respect the process has nothing to do with the business managers. I ask the Minister a very simple question. If one proceeds by way of the hybrid Bill procedure, how long do the Government perceive it will take to get that legislation through, which must be done before they can proceed to build the railway?
The Earl of Caithness: My Lords, I fully take the point made by the noble Lord, Lord Shepherd, about the hybrid Bill procedure, but, considering that it will be a government Bill, there is every reason for the business managers to be involved. I believe it would be wrong for me to comment on how long it will take.
Lord Brabazon of Tara: My Lords, I wonder whether my noble friend can help me. I had understood that following the Transport and Works Act this type of scheme would in future be taken forward by public inquiry and no longer by Private or hybrid Bill procedure. Why are the Government not using the public inquiry procedures under the Transport and Works Act?
The Earl of Caithness: My Lords, considerable thought has been given to that point. However, given that this is the largest engineering project this century, the Government felt it right to take it through the hybrid Bill procedure.
Lord Howell: My Lords, perhaps I may direct the Minister's attention to the great conurbations of the West Midlands, the North-West and West Scotland. Where are these great manufacturing industries and populous areas going to fit into the Channel Tunnel line? Does the Minister's Statement mean that there will be no linking up with the direct route through the Channel Tunnel, which will cause great dismay, especially having regard to the fact that we are all now talking about the importance of manufacturing industry? Does he agree that it is therefore absolutely vital to give it a boost and to ensure that those areas link directly into Europe? As regards passengers, although I noted what the Minister said, will he take note of the fact that from the West Midlands and the North West there are no railway lines to either St. Pancras or King's Cross? Therefore it is very important for passengers as well as manufacturing industry that we link in to the Channel Tunnel line so that we can go directly to the Continent.
The Earl of Caithness: My Lords, the noble Lord is right but only to a point. I believe that he missed out the North East. There are some very important industrial areas in North-East Scotland and North-East England which the noble Lord would wish to include, and I support him on that. That is why I said in my first response to the noble Lords, Lord Clinton-Davis and Lord Ezra, that we had taken

39
particular cognisance of the needs of the Midlands, the North and Scotland. That is why provision will be there for through trains, but they will go to London first.
Lord Annan: My Lords, does the Minister agree that an inquiry should be set up into expediting schemes of this kind? My mind goes back to the proposal for a fourth London airport in about 1960 and for which the preferred place was Stansted. There were then many inquiries into the matter, costing millions of pounds. Various other schemes were proposed and rejected. There was then to be no fourth London airport. Finally, the fourth London airport was sited at Stansted. We are notorious in this country for being unable to come to conclusions on matters of this kind. We do not bear good comparison with France. It is true of course that the authorities in France have no regard at all for public opinion in the areas affected. Nevertheless, though we consult, does the noble Earl not agree that we do so in a haphazard manner? Will the noble Earl please ask his colleagues whether this is not the time to set up a commission to look into this whole matter? The delays are really intolerable.
The Earl of Caithness: My Lords, the noble Lord raises a point which has been a matter of fierce debate for some years. I shall certainly pass on to my right honourable friend what the noble Lord has said.
Earl Peel: My Lords, my noble friend has quite rightly made reference to the important environmental points which have been taken into account. In terms of SSSIs and NNRs, can my noble friend tell the House how the proposed route compares with the old one and how many such sites are likely to be affected?
The Earl of Caithness: My Lords, as there is to be a further consultation, at the moment I cannot give my noble friend an exact figure. It is very difficult to thread a route such as this through somewhere like Kent, given the important environmental criteria which cover that county, without impinging upon some aspect of Areas of Outstanding Natural Beauty and SSSIs. The whole point is that considerable time and effort have been spent by those responsible, along with the 12 environmental consultants, in finding ways to keep that to an absolute minimum.
Lord Ewing of Kirkford: My Lords, when the noble Earl tells the House that he does not know what will be the Government's financial commitment to the project, is he saying that he is going to talk to the private sector about its investment and intends to say that he does not know how much the Government are prepared to put into this project? That is an astonishing position for the Minister to find himself in today. Can he say what rate of return he regards as being fair from the private sector? As regards the North East of Scotland, is the Minister aware that I am very touched by his concern for that area? Does that mean that sometime this week the Government
40
are going to release resources in order to finance the electrification of the line between Edinburgh and Aberdeen?
The Earl of Caithness: My Lords, that is an ingenious second question, to which the noble Lord would not expect me to give an answer such as he would like to get from me. As regards the noble Lord's first point, there is a six-month consultation period. There are to be discussions with the private sector. Once the costs have been firmed up, then I am sure that one will be able to progress the matter, which is of concern.
Baroness Hamwee: My Lords, can the Minister give the House further reassurances about the position of Stratford? He said that the option would be kept for a station to be put there. But does he not agree that it is vital that it should be more than a station? Should it not be the hub of development and a catalyst for the regeneration of the area? Can the Minister comment on the position of Waterloo? After a multi-million pound investment in a new terminal there, is there to be only a slow route for part of the way? Is it not a fact that Waterloo will turn into something of a white elephant in not providing the facility for a fast route to the Continent which we all understood it was to do?
The Earl of Caithness: My Lords, as regards Waterloo, there will be a link from south of Gravesend to form a connection to Waterloo. So there will still be facilities for the fast train service. I am afraid that I have forgotten the noble Baroness's first point.
Noble Lords: Stratford!
The Earl of Caithness: My Lords, I can give confirmation as to the one station at Ashford. I take the noble Baroness's point about freight. That will have to be a matter for the promoters. Because the gauge of the line is designed to take the same traffic as Continental traffic, there are enormous opportunities.

Housing and Urban Development Bill
4.56 p.m.
House again in Committee on Schedule 5.
[Amendments Nos. 106 and 107 not moved.]
Viscount Goschen Viscount Goschen moved Amendment No. 107A:
Page 180, line 17, leave out from first ("the") to ("a") in line 19 and insert ("amount arrived at in accordance with sub-paragraph (1) is").
On Question, amendment agreed to.
Lord Coleraine Lord Coleraine moved Amendment No. 108:
Page 180, line 44, at end insert:
("() on the assumption that neither the nominee purchaser nor any tenant will or would seek to buy the freehold or extensions to leases in the future.")
The noble Lord said: This is a probing amendment. I hope that my noble friend the Minister will be able to allay some fears which have been expressed to me by several professional colleagues as to the actual effect of the words in brackets in lines 25 and 26 on page 180 of the Bill:
"(with neither the nominee purchaser nor any participating tenant buying or seeking to buy)".
Those words form part of the formula for valuing what the Bill refers to as "the freeholder's interest"; one of the two components of the price which the flat owners will have to pay for the freehold.
The words have a history which starts with the Leasehold Reform Act 1967 as amended in 1969. The words did not appear in the 1967 Act. The formula in Section 9(1) of that Act was the price which the property would realise if sold on the open market by a willing seller. It was apparently the intention of the then Labour Government that the enfranchising house lessee should not be treated as "in the market" for his house in order to keep the price down.
In 1969 in the cases of Custins v. Hearts of Oak Benefit Society and Haw v. Peek, the Lands Tribunal decided that the possibility, or the likelihood even, that the tenant would bid had also to be taken into account. The then government took immediate steps to reverse the position. Section 82 of the Housing Act 1969 provided that the valuation had to be on the basis of a willing seller as before, but with the following words in brackets added,
"(with the tenant and members of his family who reside in the house not buying or seeking to buy)".
That effectively removed from the purchase price any uplift caused by the tenants wanting to buy the house. What it did not appear to do—here is one point at which the problem seen by the valuers advising me and such organisations as the Leasehold Reform Co-ordinating Committee arises—is to prevent the purchase price being uplifted by the additional amount which a property dealer would pay because he thought that there would come a time in the future when the leaseholder would want to buy the freehold. I call that additional amount "hope value".
I should like to define one other term that I use and that is "pure investment value". I use that phrase to describe the value or price which represents the sum of, first, the present value of the freehold interest with vacant possession deferred until the end of the lease; and, secondly, the present value of the flow of rents over the unexpired years of the lease.
Hope value, as I have said, is what a dealer would pay in addition to pure investment value in the hope of effecting a subsequent sale to a lessee. Such advice as I have received affirms that the price to be paid under the 1967 Act, as amended by the 1969 Act, is the pure investment value, and hope value is disregarded. Nevertheless, what has been represented to me is that the wording of the 1967 Act, as amended by the 1969 Act, suggests that although the possibility of a bid from the tenant cannot be added to the pure investment value of a house, the pure investment value is, nevertheless, to be uplifted by the hope value in fixing the price payable under Section 9(1) of that Act.
I hope that my noble friend, with all the resources and expertise at his disposal, can explain which view of the matter is correct in the case of a valuation under Section 9(1) of the 1967 Act, as words similar to those used then are used in the Bill, and I assume that the words in the Bill will have the same effect in that respect. I beg to move.
5 p.m.
Lord Williams of Elvel: This seems to be a clarification that is necessary. I look forward to hearing what the Minister has to say I imagine that the noble Lord, Lord Coleraine, was speaking also to Amendment No. 148C which tracks the same wording but in a different place in the Bill. However, I notice that we have Amendment No. 170A in the group. It is an amendment in the name of the noble Lord, Lord Boardman. I do not know whether he assents to that grouping, or whether he wishes to dissociate himself from it.
Lord Boardman: I spoke to that amendment with an earlier one which the Government have conceded and which will come up to be decided upon shortly.
Lord Strathclyde: As I understand them, the amendments would delete any element of hope value from the landlord's interest. When we discussed the amendments tabled by my noble friend Lord Boardman we addressed the issue of hope value. That is the extra amount, over and above the basic price, which a purchaser will pay now because he may be able to sell later to a sitting tenant at a price which includes a share of marriage value. The Committee then agreed to accept the amendments which required the disclosure of side agreements, to ensure that a realistic element of hope value could be taken into account in the valuation of a landlord's interest.
These amendments, though, would preclude any element of hope value from being taken into account when the landlord's interest is valued. That cannot be right. It is a normal part of valuation practice to take into account the future potential for the granting of new leases or other interests. This hope value is a legitimate part of the price to be paid for a freehold. It would be very unfair to landlords and would not reflect the operation of the open market to exclude that element.
I understand that my noble friend Lord Coleraine is anxious that there may be an element of double counting for the flats of participating tenants. I assure my noble friend that we have specifically ensured that there is no element of double counting. Schedule 5 excludes the nominee purchaser and the participating tenants from the market for the purposes of valuation. Marriage value, but not hope value, will be payable for the flats of participating tenants and hope value will be payable for the flats of non-participating tenants. I hope that with that assurance my noble friend will withdraw the amendment.
Lord Coleraine: I was pleased to receive my noble friend's assurance and to learn that hope value is excluded by the words in brackets to which I referred initially. I should like to confirm that I was speaking also to the amendments to which the noble Lord, Lord Williams, referred. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Principal Deputy Chairman of Committees (Lord Boston of Faversham): I call now Amendment No. 108ZA in the name of the noble Lord, Lord Coleraine.
Lord Boardman: I wonder whether Amendment No. 108B, which I removed from the previous group, should come before Amendment No. 108ZA.
The Deputy Chairman of Committees: I shall be calling that amendment shortly. Amendment No. 108ZA comes next.
Lord Coleraine Lord Coleraine moved Amendment No. 108ZA:
Page 181, line 17, leave out ("date of the passing of this Act") and insert ("22nd October 1992").
The noble Lord said: Sub-paragraph 5 of paragraph 3 of the schedule contains anti-avoidance measures. It provides:
"The value of the freeholder's interest in the specified premises shall not be increased by reason of—
(a) any transaction which—

(i) is entered into on or after the date of this Act … and

(ii) involves the creation or transfer of an interest superior to … any interest held by a qualifying tenant of a flat contained in the specified premises".

The amendment was recommended to me by the Law Society before my noble friend had moved amendments to remove a large part of the difficulty which might arise out of negative values. The case in mind when the amendment was tabled was that a superior lease, granted out of freehold in reversion to existing leases, might create negative value by manipulation of the rents charged, and that negative value would not be reflected in the price paid to the owner of that interest. It would have the effect of increasing the value of the freehold.
I understand that the amendments in this respect which are in the course of being moved into the Bill will remove that problem, but it is relevant to comment that Amendment No. 108A, which is to be moved shortly, seems still to suggest that there is room for the avoidance provisions which are contained in sub-paragraph (5). It is well known that the operation of the 1967 Act was crept over by hordes of accountants and lawyers trying to find ways of getting round it. One of the ways they found was the creation of intervening leases between the freeholder and the house owner on the spot.
It may well be that the amendments which are now coming into the Bill will remove that problem, but it is not clear that the Government consider that that is necessarily the case. If it is not necessarily the case, then the avoidance provisions should not date from the passing of the Bill but from when the Bill was first introduced in the other place. The purpose of the amendment is to bring forward the date from which the avoidance provisions will work to 22nd October 1992. I beg to move.
Lord Williams of Elvel: I imagine that the situation is slightly analogous to that of the Budget: that measures are announced and people then start working out how to obviate them. By the time those measures come into effect, a coach and horses have
44
been driven through them. I have a certain sympathy with the point being made by the noble Lord, Lord Coleraine.
The Lord Advocate (Lord Rodger of Earlsferry): I too have sympathy with the fears that lie behind the amendment. The amendment seeks to introduce a retrospective element into the Bill in that it would take back the anti-avoidance provisions to the start of the Bill's passage which was not announced at that time. During that period people may have entered into valid and proper transactions which, if this provision were now inserted into the Bill, would be caught and upset by it.
Such a provision would be justified only if one had reason to believe that there was a great evil which would be remedied in that way. Whereas it would be rash for me or anyone else to say that no scheme could be devised which would get round the provisions of the Bill, nonetheless, the major problem which we feel could arise is one that has been covered by the provisions which are at present being moved into the Bill by the series of amendments to which I spoke at the end of the last Sitting of the Committee.
We are therefore satisfied that the anti-avoidance provisions are now in a proper form and there is no need to take them back to what they were at the beginning of the passage of the Bill. In that situation I ask my noble friend to withdraw the amendment.
Baroness Gardner of Parkes: I rise to ask for clarification. My noble friend Lord Coleraine suggested that people might intervene in the situation. Does that mean that where people who have the tenancy of flats are subject to a head lessee they will have some degree of difficulty? As I came into the Chamber today I was stopped by a Peer who is in a Crown property and who, it is understood, will not be able to acquire the freehold. The property is subject to a head lease which is held by someone entirely different. I wish to ask what that Peer's position will be. If my noble friend does not have the answer today, I should be grateful to receive it at a later date.
Lord Rodger of Earlsferry: I am not sure that my answer will entirely satisfy my noble friend. The amendments which are being made to the Bill are designed to deal with a problem which may arise as the result of the creation of intermediate interests between the freehold and the existing qualifying tenant. The result would have been to increase the amount which the qualifying tenant would have to pay. The creation of those artificial interests between the two would be likely to cause problems. In order that the whole scheme should work forwards, in any enfranchisement it will be necessary for the qualifying tenants to purchase the intermediate interests which lie between the qualifying tenancies and the freehold. If they did not do so they would not be able to deal with the whole situation.
Baroness Gardner of Parkes: In cases where one will not be able to acquire the freehold, but there is a head lessee—for example, in the Regent's Park area—will one be able to acquire the head lease?
Lord Rodger of Earlsferry: In so far as there lies anything between the qualifying tenant and the freehold it will he possible for the qualifying tenant to purchase that.
Lord Coleraine: I was grateful to hear that my noble and learned friend does not anticipate any avoidance difficulties now that the new provisions will come into effect. Recently, various suggestions have been made to me about how unscrupulous freeholders might seek to evade those provisions. I have not studied them carefully to see whether they will hold water and I should like to do so between now and Report. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Viscount Goschen Viscount Goschen moved Amendment No. 108A:
Page 181, line 24, at end insert:
("(6) Sub-paragraph (5) shall not have the effect of preventing an increase in value of the freeholder's interest in the specified premises in a case where the increase is attributable to any such leasehold interest with a negative value as is mentioned in paragraph I4(2).").
On Question, amendment agreed to.
[Amendment No. 108AA not moved.]
5.15 p.m.
Lord Boardman Lord Boardman moved Amendment No. 108B:
Page 181, line 33, after ("seller") insert ("assuming that the freeholder will receive the whole of that proportion of the marriage value attributable to the increase in value of the new interests and existing leasehold interests of those participating tenants who do not occupy a flat in the specified premises as their principal residence").
The noble Lord said: I apologise for the alphabetical inaccuracy with which the amendment has been called. In moving the amendment I shall speak also to Amendment No. 111D. The noble Lord, Lord Williams, asked why I had withdrawn the amendment from the first group. I did so because I anticipated, accurately as it has turned out, that my noble friend on the Front Bench would put that group of amendments in the grey area while my amendment lies clearly in black and white areas. The black area is the way in which the Bill is now drafted. With great respect to the draftsman, and taking account of all the complexities which he has tried to incorporate in the Bill, it is hardly surprising that there are certain black areas, and this is one of them. That black area was created by the unfairness. As regards the white area, I hope that my amendment will be successful in including in the Bill a fairness which my noble and learned friend will wish to achieve and which will commend itself to noble Lords opposite.
In speaking to the first amendment this afternoon my noble friend Lord Strathclyde said that in arriving at the method of valuation the Government had sought the middle way. He referred to the gain that would arise upon enfranchisement and said that it would be shared. That may be right in the case of a resident leaseholder; there are a variety of views on whether that should be the case. However, that cannot be right in the case of-a non-resident leaseholder. Like the freeholder, he is an investor. He has purchased an interest in a property in which he is not living and is looking for a return in either revenue or capital gains, just as a freeholder is looking for a long-term return
46
on his investment. They are both investors. If one is compulsorily bound by statute to sell his share in that investment to another investor—wrong as many of us may consider that to be—the least which can be expected is that the freeholder who is forced to sell his share will obtain the full value for that share. To do otherwise amounts to the non-resident leaseholder acquiring the property on the cheap. It is a form of confiscation at a discount which, as I hope is clear to all Members of the Committee, would be unfair.
The amendment seeks to provide that a freeholder must receive 100 per cent. of the marriage value from a participating leaseholder who is a non-resident. That is a fair proposition. There is no reason for the middle way to be found between those two or for any sharing of the gain or profit to be made. I hope that my noble and learned friend will agree to that simple and fair point. I beg to move.
Lord Williams of Elvel: The noble Lord, Lord Boardman, has tabled two interesting amendments. The problem I have is that he introduces again the question of principal residence. I find that a difficult concept and perhaps I may illustrate why. On Second Reading I declared my interest as a leaseholder under the terms of the Bill. However, according to the decision of the council tax people, my principal residence is a freehold in mid-Wales. I happen to have the leasehold of a property in London in which I spend a great deal of time but in terms of the council tax, Brecon and Radnor and not Kensington and Chelsea, is my principal residence. Therefore, I should be disqualified.
That does not bother me in the least. I use it as an example of the difficulty of defining principal residence. It is even more difficult to define main residence. If the noble Lord will enlighten me on how one makes the distinction and makes it water tight I might feel sympathy for the amendment. As it is, I find it difficult.
Lord Boardman: I understand the difficulty of defining principal residence. It may well be that it is a matter we must look at again at a later stage. The point I am making is that non-residents —that is, the people who are purely investors in the property—should not be entitled to a bonus by compulsory acquisition.
The Earl of Onslow: The exercise is extremely simple; the Inland Revenue does it every day of the week in respect of principal houses. It is -well-known fact and is easy to define.
Lord Gisborough: I support what was said by my noble friend Lord Onslow and I support the amendment. As regards capital gain, the Inland Revenue makes one declare one's main house of residence, as it does in respect of estate duty. There is no difficulty in that regard and I see no reason why a declaration should not be made in this case.
Lord Clark of Kempston: I support my noble friend Lord Boardman. Once again, we are back to the position of giving to an investor a windfall profit which should really belong to the freeholder.

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As regards "principal residence", I agree with my noble friend Lord Gisborough that there is no difficulty about that for capital gains tax purposes. One can opt for one's principal residence. As my noble friend said, principal residence causes no difficulty with regard to estate duties and inheritance tax.
I return to the main thrust of the amendment. It is completely unfair that a windfall profit should be enjoyed by somebody who does not live in this country and for whom the property is merely an investment. I do not believe that the Bill intends to help investors. My right honourable friend Sir George Young said during the passage of the Bill that this provision aims to augment, assist and encourage home ownership. I asked my noble friend on the Front Bench whether this Bill extends home ownership and he said that it does not. Therefore, there seems to be a difference of opinion.
I believe that this Bill aims to help people who live in leasehold flats to acquire the freehold. Whether or not we agree with that is immaterial. However, the Bill does not intend that people who use a flat merely as an investment should receive a windfall profit.
Lord Williams of Elvel: The noble Lord, Lord Clark, said that it is easy to establish "principal residence". However, the assumption in the amendment must be that the landlord would receive the whole of what is described as the windfall profit in the event of the property not being a principal residence.
Secondly, we are not talking only about foreign leaseholders. The noble Lord should be worried about foreign landlords.
The Earl of Onslow: Let us take the case of my friend, the Californian millionaire. If the amendment in the name of my noble friend Lord Boardman is not agreed to, he will be made richer than he is at present. My noble friend Lady Gardner of Parkes groans, but that is a fact. The freehold of the property is owned by the BP pension fund. The millionaire will gain a lot of money. My noble friend Lady Gardner thinks that that is a good thing; I do not. Unless the amendment is passed, that will happen.
Earl Peel: The noble Lord, Lord Williams of Elvel, gave his own case as an example. In London he has a leasehold property which he will be able to enfranchise if the Bill is enacted. In Wales he has a freehold property. If the property in Wales were a leasehold property also, does he believe it to be right that he should be able to enfranchise both properties?
Lord Williams of Elvel: I am not trying to argue ad personam. I am using my case as a general principle on the amendment. It would be quite wrong for every noble Lord to explain his own personal circumstances.
Baroness Gardner of Parkes: I reacted in that way to the remarks of my noble friend Lord Onslow because we have heard before about this Californian. It is important to realise that it is no good arguing a particular case. We must look at the generalities of the issue. The Bill aims to make it possible for people living in flats to enfranchise their homes. We have
48
discussed the 100 per cent. marriage value and we have agreed that that should not be accepted. We are discussing the situation in which some flats in a block are owned by foreigners or by companies. One can think of the recent fuss that there has been about someone here who runs his own private company into which moneys are paid. Even in this country many people live in company-owned properties because they are advised by their tax advisers to do so. Because you happen to live in a block where a certain number of flats are company-owned, you may be excluded from enfranchisement. I believe that to be wrong. The residential qualification is artificial. This Bill aims to give people the right to buy leaseholds. Therefore, I oppose the amendment.
Lord Monson: Is the noble Baroness saying that the end justifies the means, however dubious the means?
Baroness Gardner of Parkes: No. I do not accept all this talk of windfall profits. I believe that enfranchisement will be a vastly expensive process. As I have said before, at the end of the day people who wish to enfranchise will be disappointed when they learn how much it will cost them.
Lord Coleraine: I declare the interest which I have declared on a previous occasion in that my London leasehold flat is not my sole residence. It seems to me that we should look at the message that amendments in favour of the residency test give to the world. This kind of amendment is saying to the international business community who house their executives here that they are not wanted.
The Earl of Onslow: Rubbish!
Lord Coleraine: It says to the Hong Kong businessman that we do not want him in London. It overlooks the fact that if the Hong Kong businessman is not living in the flat, he is probably doing us a favour by letting it on a short lease to people who need to live there. If the amendment is taken seriously, what will become of London, which was once a proud commercial centre and the capital of the world?
Lord Boardman: Is my noble friend suggesting that these businessmen from Hong Kong and elsewhere did not know the terms of the contract which they entered into?
Lord Coleraine: I am not again entering into discussions as to the sanctity of contract with my noble friend or anyone else in this Chamber. I am saying that this amendment is a sorry and petty pinprick. Its ancestor is a provision in the openly anti-property Leasehold Reform Act 1967. Its other precedents are reliefs in taxing statutes, which are altogether irrelevant to the rights which go with the ownership of property.
Lord Hamilton of Dalzell: Does my noble friend not agree that for residents from Hong Kong and elsewhere, their flats in London are their principal residence?
Lord Coleraine: I would not know whether it is their principal residence. They may be army officers serving abroad. It may or may not be their principal residence.
Viscount Montgomery of Alamein: My noble friend Lord Coleraine makes a very good point. The question of principal residence is a red herring. To disqualify people from enfranchising because the property is not their principal residence is to make a special exception. These people are not only army officers; they are also diplomats, clerics and other people who are encouraged to move around the world. There seems to he no reason why they should be disqualified from participating in the provisions of the Bill. There is no need to return to the principle of the Bill because that has been agreed. We are trying to make the Bill work. It seems to me that this series of amendments would have the reverse effect. They would be extremely unfortunate and give the wrong message.
The Earl of Onslow: For people posted abroad—diplomats and so on—the property still counts as their principal residence. Therefore, that argument does not wash either.
Baroness Hamwee: I understand very well the assessment of a principal place of residence for capital gains tax purposes. I believe that the noble Lord, Lord Boardman, is asking us to interpret the words of the amendment as referring to non-residents. Perhaps he will comment on a situation, which is not uncommon, where parents who have a son or daughter attending college away from their home town purchase a property for occupation by that son or daughter, perhaps with other college students, as the most efficient and economic way of housing the son or daughter for the period of the course. In that situation, would not the residence fall within the noble Lord's exception?
Lord Boardman: I have used exactly the same words as those used in Amendment No. 138. I hope that they will not be complained about. The amendment aims to prevent non-residents from picking up a windfall profit. I believe that that is wrong and unfair and I hope that my noble friend will agree that that is so.
Lord Strathclyde: I do not wish to go back into the arguments, or the discussion, that we had earlier in Committee this afternoon. My noble friend introduced the amendment by saying that it was a black and white issue. It may well have been so when he started. However, having had the debate, I believe that it is far from being a black and white issue. It comes down to a central question of why the landlord should receive more than the market value just because some of the long leaseholders are temporarily abroad or have bought the flat as a retirement home or a home for their children, or because it is owned by a family trust or indeed by the noble Lord, Lord Williams of Elvel. I do not regard the latter as an investor; but clearly his flat in London may not be his primary residence.
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Those participating tenants who were resident may have to find a larger sum to meet their agreed share of the cost. I must emphasise the fact that those leaseholders who have bought their properties as an investment and who perhaps live permanently abroad cannot make speculative profits by enfranchisement; they will have paid the full market price for their investment. Of course, enfranchisement is a collective action. They are dependent on other long leaseholders wishing to enfranchise.
As I said earlier, the Bill does not prevent a landlord receiving a higher price for the flats of non-resident leaseholders if he can prove that that is what would have happened in the open market. There may well be a case for the landlord to make to the Leasehold Valuation Tribunal that where the purchaser is a non-resident, a company or a foreign company he should get more than 50 per cent. That could be a perfectly legitimate case to make.
However, I am not entirely convinced by the remarks of my noble friend Lord Boardman. In response to the noble Lord, Lord Williams, he admitted that there could be some tightening up in the matter. If my noble friend does not press the amendment, I look forward to seeing what tightening up he has in mind.
The Earl of Kinnoull: If my noble friend is correct in saying that the valuation court could interpret such a situation by saying that because the tenant is not resident then that is a case for increasing the marriage value for the owner, would it not be more reasonable for the court to say that such a provision should have been put in the Bill?
Lord Strathclyde: The reason that such a provision has not been put in the Bill in those exact terms is because we have decided that the landlord should receive a minimum of 50 per cent. There may be many other instances for example, where the lease is short—where the landlord may receive 75 per cent. or even 80 per cent. However, that provision has not been put in the Bill and therefore nor should this one be included.
Lord Hamilton of Dalzell: When I spoke previously I asked my noble friend Lord Strathclyde whether he thought that, in order to avoid litigation in the future, the option to buy should carry any money. In the commercial world, the option to buy a property some time in the future carries money. I thought that he would be enthusiastic to answer my question. However, I notice that he has not done so. Perhaps he would be kind enough to do so now.
Lord Strathclyde: Surely there can be no official answer to that question. It will depend on the prevailing market conditions. If someone is prepared to pay extra because he believes that he may receive a benefit at some time in the future as he will be able to enfranchise, that is entirely a matter for him.
Lord Boardman: I am somewhat disappointed with my noble friend's response. As I understand it, while he said that he would perhaps look again at my definition of "principal residence", he is not prepared

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to accept the principle that I put forward; namely, that there is no reason why a non-resident leaseholder should gain any part of the marriage value. I should like to point out to my noble friend Lady Gardner of Parkes that she was quite wrong in her definition of leasehold enfranchisement. It does not apply in the cases she mentioned. On reflection, I believe that she will find that to be correct.
As my noble friend is unable to accept the principle that the freeholder should receive 100 per cent. of the marriage value, I feel that I must test the opinion of the Committee.
5.35 p.m.
On Question, Whether the said amendment (No.108B) shall be agreed to?
Their Lordships divided: Contents, 77; Not-Contents, 141.

Division No. 1

CONTENTS

Aberdare, L.

Kimball, L. [Teller.]

Aldington, L.

Kinnoull, E.

Attlee, E.

Knutsford, V.

Banbury of Southam, L.

Layton, L.

Belhaven and Stenton, L.

Lindsay, E.

Birdwood, L.

Mancroft, L.

Bledisloe, V.

Masham of Ilton, B.

Boardman, L. [ Teller.]

Middleton, L.

Brabazon of Tara, L.

Monson, L.

Broadbridge, L.

Montagu of Beaulieu, L.

Campbell of Alloway, L.

Moran, L.

Clanwilliam, E.

Mottistone, L.

Clark of Kempston, L.

Mowbray and Stourton, L.

Craig of Radley, L.

Murton of Lindisfarne, L.

Cullen of Ashbourne, L.

Norfolk, D.

Dacre of Glanton, L.

Onslow, E.

Davidson, V.

Orr-Ewing, L.

Derwent, L.

Pearson of Rannoch, L.

Dilhorne, V.

Peel, E.

Eden of Winton, L.

Peyton of Yeovil, L.

Elton, L.

Portsmouth, E.

Erne, E.

Quinton, L.

Fairhaven, L.

Rankeillour, L.

Forester, L.

Renwick, L.

Fraser of Kilmorack, L.

Romney, E.

Gainsborough, E.

Salisbury, M.

Geddes, L.

Saltoun of Abernethy, Ly.

Gisborough, L.

Strange, B.

Gridley, L.

Sudeley, L.

Hamilton of Dalzell, L.

Swinfen, L.

Hampden, V.

Swinton, E.

Harrowby, E.

Terrington, L.

Head, V.

Thurlow, L.

Hertford, M.

Vaux of Harrowden, L.

Holderness, L.

Verulam, E.

Hood, V.

Vivian, L.

Hothfield, L.

Westbury, L.

Hylton-Foster, B.

Wynford, L.

Johnston of Rockport, L.

NOT-CONTENTS

Acton, L.

Birk, B.

Addington, L.

Blatch, B.

Alexander of Tunis, E.

Blyth, L.

Alexander of Weedon, L.

Bonham-Carter, L.

Ardwick, L.

Borthwick, L.

Arran, E.

Boston of Faversham, L.

Ashley of Stoke, L.

Boyd-Carpenter, L.

Astor of Hever, L.

Braine of Wheatley, L.

Auckland, L.

Brougham and Vaux, L.

Barber, L.

Bruce of Donington, L.

Barnett, L.

Butterworth, L.

Beaumont of Whitley, L.

Caithness, E.

Bessborough, E.

Carmichael of Kelvingrove, L.

52

Carnegy of Lour, B.

McColl of Dulwich, L.

Carnock, L.

McIntosh of Haringey, L.

Cawley, L.

Mackay of Ardbrecknish, L.

Chalker of Wallasey. B.

Mackay of Clashfern, L. [Lord Chancellor.]

Chelmsford, V.

Chilver, L.

Mackie of Benshie, L.

Clinton-Davis, L.

McNair, L.

Cocks of Hartcliffe, L.

Marlesford, L.

Coleraine, L.

Mason of Barnsley, L.

Craigavon. V.

Merrivale, L.

Crickhowell, L.

Mersey. V.

Cumberlege, B.

Milverton, L.

Dean of Beswick, L.

Mishcon, L.

Denton of Wakefield, B.

Monk Bretton, L.

Dormand of Easington, L.

Montgomery of Alamein, V.

Elles, B.

Morris of Castle Morris, L.

Elliot of Harwood, B.

Mountevans, L.

Elliott of Morpeth, L.

Nicol, B.

Ewing of Kirkford, L.

Norrie, L.

Falkland, V.

Ogmore, L.

Fitt, L.

Orkney, E.

Fraser of Carmyllie, L.

Pitt of Hampstead, L.

Galpern, L.

Plant of Highfield, L.

Gardner of Parkes, B.

Plummer of St. Marylebone, L.

Geraint, L.

Ponsonby of Shulbrede, L.

Gilmour of Craigmillar, L.

Prys-Davies, L.

Glenamara, L.

Radnor, E.

Goschen, V.

Rea, L.

Graham of Edmonton, L.

Redesdale, L.

Gray of Contin, L.

Richard, L.

Greenway, L.

Rodger of Earlsferry, L.

Hampton, L.

Saint Albans, D.

Hamwee, B.

St. Davids, V.

Harmsworth, L.

Seear, B.

Hayhoe, L.

Sefton of Garston, L.

Henderson of Brompton, L.

Selsdon. L.

Henley, L.

Shackleton, L.

Hesketh, L. [Teller.]

Shannon, E.

Hives, L.

Sharples, B.

Hollis of Heigham, B.

Shaughnessy, L.

HolmPatrick, L.

Skelmersdale, L.

Hooper, B.

Stewartby, L.

Hooson, L.

Strabolgi, L.

Howe, E.

Strathclyde, L.

Howell, L.

Strathmore and Kinghorne, E. [Teller.]

Howie of Troon, L.

Jay of Paddington, B.

Taylor of Blackburn, L.

Jeger, B.

Thomas of Gwydir, L.

Jenkins of Putney, L.

Torrington, V.

Judd, L.

Trumpington, B.

Killearn, L.

Turner of Camden, B.

Knollys, V.

Ullswater, V.

Lauderdale, E.

Wakeham, L. [Lord Privy Seal.]

Lindsey and Abingdon, E.

Lockwood, B.

Wharton, B.

Long, V.

White, B.

Longford, E.

Williams of Elvel, L.

Lucas of Chilworth, L.

Wise, L.

Lyell, L.

Young of Dartington, L.

Resolved in the negative, and amendment disagreed to accordingly.
5.43 p.m.
The Deputy Chairman of Committees (Baroness Lockwood): I now call Amendment No. 109. I should point out that if this amendment is carried, I cannot call Amendment No. 110.
Lord Coleraine Lord Coleraine moved Amendment No. 109:
Page 181, line 33, leave out from ("seller") to end of line 35.
The noble Lord said: I say at once that from the point of view of flat owners this is one of the most important amendments that is likely to be made to the Bill. However, it is not one that I am likely to press this afternoon. On various occasions in debate earlier this afternoon it has been bruited about that on the one

53
hand freeholders are asking for their price to be jacked-up while on the other hand flat owners are asking for the price that the Bill provides to be reduced. That is not in any sense a fair analysis of the situation. I have not heard freeholders ask for anything less than the formula which the Government have said again and again will determine the price, and that is what the market would provide.
Paragraph 4(1) (b) provides, not altogether consistently with what went before, that the marriage value will be shared as the market would share it on a sale by a willing seller and then, with an almost total lack of internal consistency, that the freeholder will always take at least 50 per cent. of marriage value. I have to ask my noble friend what kind of marriage value that constitutes. The Minister gave an answer of a sort on Second Reading when he said:
"We have provided that landlords shall receive at least half of this additional value".—[Official Report, 23/2/93; col. 174.]
He meant the marriage value. A little later in the same column of Hansard he stated:
"I believe that this is a fair basis for valuation. It reflects how the market works in practice where it has been usual to give 50 per cent. to the landlord, following the Lloyd-Jones v. the Church Commissioners case. That reflected market evidence submitted by the landlords. I believe strongly that the provisions in the Bill are therefore fair. They follow normal market practice and allow a landlord to maximise his asset".
That was a most extraordinary statement. The Lloyd-Jones decision was that of the Lands Tribunal, consisting of one man, an experienced surveyor and member of the Lands Tribunal. So far as I am aware, it has never been challenged or upheld in a court of law, nor does the decision purport to be more than a decision on the facts of the case. It does not purport to establish any general principle. Indeed my noble friend Lord Carnock in an earlier debate has already pointed out that the learned editors of Woodfall on Landlord and Tenant doubt whether the decision was rightly reached.
If it is the case that many, if not most, cases have, since Lloyd-Jones, been settled on the basis of an equal sharing of the marriage value, that is a reflection of the well documented ability of the large freehold estates to deploy colossally expensive teams of lawyers and valuers to fight the few cases where the lessees have not agreed to settle with their reversioners. It is also a reflection of the fact that evidence of comparables from an actual open market has been lacking and tribunals have insisted on taking settlements under the 1967 Act as evidence of open market price, which they are plainly not.
If the market is to decide, the market should decide. Either the market would always award a landlord 50 per cent. at least of the marriage value, in which case the sub-paragraph is otiose; or it would not, in which case the sub-paragraph consists of weasel words which should be omitted. What evidence can my noble friend the Minister produce to show that in market conditions the freeholder always receives a minimum of 50 per cent. of marriage value? What evidence has he that this applies on sales of blocks of flats? What advice has he received on this, and on the authority of the Norfolk and Lloyd-Jones decisions, as establishing
54
legal principles of general application? Will he tell the Committee that or, if not, will he publish the answers to those questions? I beg to move.
Lord Williams of Elvel: As the noble Lord, Lord Coleraine, says, this is an extremely important amendment, whichever way one looks at it. I have a certain sympathy with the noble Lord, Lord Coleraine. I am particularly conscious of those leaseholders who live outside London—as I have said before, and as the noble Lord, Lord Selsdon, has said, that is three-quarters of all leaseholders—and particularly those who are first-time buyers and who are of the social classes C1 and C2 where their bargaining power may not be as strong as that of landlords. In that sense they are protected by what is in the Bill. On the other hand the amendment would offer to a strong bargainer the possibility of obtaining more by negotiation and by using the market as a proper criterion.
I am in two minds about the matter. I do not wholeheartedly support the noble Lord, Lord Coleraine, but I understand and have some sympathy for his case. On the whole I would prefer to keep the Bill as drafted rather than go along with the noble Lord. However, I believe that the Minister owes the noble Lord an explanation of the Government's policy on the matter.
Lord Carnock: I should like to support my noble friend Lord Coleraine and this amendment. It seems to me that in setting a floor of 50 per cent. for the marriage value there is an infringement of open market practice. One is also opening up a different method of valuation for flats as against houses because, as I understand it, there is no 50 per cent. floor in the 1967 Act.
Lord Strathclyde: I had hoped that at this stage of the Committee proceedings we might all feel that we had discussed valuations to such an extent that we could have skipped the amendment. However, as my noble friend Lord Coleraine put the matter, I understand that I have to do some more explaining.
We intend our proposals to be fair and to follow open market practice. Until now the Committee has agreed that our valuation provisions are fair. My noble friend Lord Coleraine now proposes that we delete the 50 per cent. marriage value floor. I do not consider that that is necessary. As I have explained, we have provided that floor because an equal sharing of marriage value is very common. The equal division of marriage value recognises that the parties have to reach agreement or the marriage value will be lost. By specifying that the landlord should receive a minimum of 50 per cent. we hope to reduce the scope for argument, thereby making enfranchisement quicker and cheaper.
My noble friend Lord Coleraine asked where I got my figures. The 50 per cent. floor is a recognition of how the market works in practice. It is in the interests of all parties that there should be a base for normal valuations so that enfranchisement can be as simple as possible. I find it surprising that my noble friend Lord Coleraine should seek to take away that aspect of

55
valuation since it allows the Government to argue that valuation is determined on a fair basis. I hope that in the light of my explanation my noble friend will withdraw his amendment.
Lord Coleraine: Nothing in what my noble friend said leads me to suppose that valuation is on a fair basis in relation to this particular paragraph. I hope that when the noble Lord, Lord Williams of Elvel, reads the debate in Hansard he will see that the amendment is fair and will appeal to the lessees to whom he referred.
My noble friend the Minister said that in many cases the Lands Tribunal or the LVT will decide that an equal sharing is right. So be it. In many cases an equal sharing is appropriate and what the market would find. However, the fact that my noble friend said that in many cases that is what would result is no reason for making it a universal rule and imposing a floor on what the landlord would receive.
My noble friend kindly said that in the interests of speed and cheapness he thought that my amendment was unnecessary. It would speed matters up considerably if this short-cut were taken and the rights of flat owners were pushed to one side. As to cheapness, it is the flat owners who will have to pay. I believe that it should be left to them to decide whether obtaining a fair price is an expense they would wish to incur. In many cases they would not wish to do so but they must always have the right to choose. There must be a fair price in the Bill.
As I said, this matter has only just begun to run and I am sure that we shall return to it at a later stage. In the meantime I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Monson Lord Monson moved Amendment No. 110:
Page 181, line 34, leave out ("50") and insert ("75").
The noble Lord said: I am sorry to disappoint the noble Lord, Lord Strathclyde, in his hope that we have spoken enough about valuation. I do not intend to repeat the points I made when we discussed the matter earlier this afternoon before the Statement was repeated. However, I should like to take issue with the noble Lord's assertion that no windfall profits will accrue to landlords if this amendment or something very like it is not adopted.
In cases where the freeholder receives as little as 50 per cent. of the marriage value—and I fully accept that in some cases the freeholder will receive more—he is certain to be in a position to make windfall profits. That cannot be avoided, unless his legal costs are so high that they would absorb all the windfall profits or unless he has to pay substantial additional sums by way of compensation for injurious affection.
Some Members of the Committee or members of the public may think that where there is a rich freeholder and a modestly well-off leaseholder the fact that the latter receives a windfall profit is no more than rough justice: the Robin Hood analogy. However, where there is a relatively poor freeholder, whether a direct or indirect freeholder like a beneficiary of a charitable trust, combined with a rich leaseholder, the Robin Hood analogy does not apply. There are rich
56
leaseholders. If one pays £300,000 for the lease of a small flat in South Kensington or £805,000 for the lease of a large flat in The Avenue, St. John's Wood —as an advertisement I have with me indicates—then clearly one is not exactly destitute.
A number of Members of the Committee have privately indicated to me that they very much support the principle of the amendment. However, in view of the result of the last Division and the confusion which arises from having 12 amendments in the first grouping, of which six are substantive, which makes it difficult to absorb all the arguments, I do not intend to press the matter this afternoon. I intend to beg leave to withdraw the amendment but to return to the matter at Report stage, possibly with a slightly modified amendment which would make it more acceptable to the Government.
Lord Strathclyde: I shall surprise the noble Lord, Lord Monson, by saying that I very much understand the concern which he raised in proposing the amendment. The noble Lord is concerned that a group of tenants could attempt to keep the cost of enfranchisement down by having only the minimum number of participating tenants. That could be achieved by having only a minimum number of participating tenants, with the other tenants having side agreements to join in at a later stage.
Lord Monson: The noble Lord is answering Amendment No. 111.
Lord Strathclyde: The noble Lord, Lord Monson, is quite correct. Therefore, I take back what I have just said, and the noble Lord will not be surprised to hear, since we have already had this discussion, that 75 per cent. is no more acceptable as a floor now than it was an hour ago when we discussed the matter previously.
The case of the noble Lord, Lord Monson, is based on the assumption that the freeholder somehow has a right to a greater share of the marriage value. The noble Lord rests his case on the fact that the valuations we are putting forward are unfair and do not reflect market share or, if they do, the noble Lord feels that the landlord should receive more.
I have not yet heard a convincing case as to why we should be unfair to the tenant and the tenant should pay more than the prevailing market value. That is why the Government have chosen a figure of 50 per cent.
In all the debates on valuation I have made the case that in some instances there is no reason why the landlord should receive more than 50 per cent. I believe it is that argument which the noble Lord needs to consider.
Perhaps I may repeat this again. We put a great deal of thought into the valuation proposals before we brought them forward in the Bill. The Royal Institute of Chartered Surveyors agreed that our proposals were fair. We believe that they are fair. We believe that they are based on market practice on a fair valuation. I am not convinced that we can go any further.
6 p.m.
Lord Monson: I am grateful to the noble Lord for his reply. Obviously I have not convinced him. I hope to be able to do so next time around. For the moment, beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Monson Lord Monson moved Amendment No. 111:
Page 181, line 41, leave out ("participating") and insert ("qualifying").
The noble Lord said: We finally reach the amendment to which the noble Lord began to reply.
It is a much more significant amendment than it appears to be, and is rather technical. I hope that the Committee will bear with me.
The amendment is designed to ensure that the marriage value is assessed for all the long leaseholds in the block which would qualify for enfranchisement. Schedule 5, paragraph 4(2) (a) adopts a far less favourable basis for defining the marriage value than the document, Enfranchisement of Long Leasehold Flats: the Government's Revised Proposals, issued in March 1992. The Bill confines the calculation to those flats associated with participating tenants rather than qualifying tenants. As drafted, the provision is an incentive for leaseholders to abuse the system by arranging for a bare two-thirds of the qualifying tenants to sign the initial notice. That will reduce the marriage value to a minimum. As soon as enfranchisement is complete, it will allow other qualifying tenants to purchase shares in a new property company at a price which will reflect the low marriage value paid by the enfranchisees rather than the significantly higher marriage value which would have been payable if all the qualifying tenants had participated in the purchase.
Such arrangements between leaseholders will enable them effectively to deprive the landlord of a substantial part of the marriage value. A speculator could abuse the provision. He could persuade two-thirds of the long leaseholders to appoint him as their nominee purchaser to enfranchise the freehold of the block. I do not believe that that is desirable. I beg to move the amendment.
Lord Gisborough: I support the amendment. If it proves impossible to revert to the definition of marriage value in the 1992 document, the Bill should be amended to allow a landlord to require the nominee purchaser to grant him at the time of enfranchisement a long lease over any flat with a qualifying tenant who has decided not to participate in enfranchisement. If the leaseholder in question subsequently wishes to participate in the enfranchisement, provision should be made with him at that stage to pay to his former landlord an amount equal to the enhanced marriage value resulting from the merging of his leasehold with that of the flats belonging to the participating tenants.
Lord Strathclyde: This of course is the amendment as regards which I have some sympathy with the noble Lord, Lord Monson. He is concerned that a group of tenants could attempt to keep the cost of enfranchisement down by having only the minimum number of participating tenants, with the other
58
tenants having side agreements to join at a later stage. It is precisely that proposal that we discussed last week on Amendment No. 76A, proposed by my noble friend Lord Boardman, which the Government accepted in principle. Indeed they accepted the amendment.
The Committee accepted that all side agreements should be disclosed so that "hope value" could be taken into account when the landlord's interest was valued. That "hope value" is the sum which a landlord would receive in the open market on the expectation that non-participating tenants would receive new leases or other interests after enfranchisement.
The proposal that marriage value should be payable for the flats of non-participating tenants is not fair. No marriage value is in fact released for those flats as they are not being brought under the same control as the freehold. Non-participating tenants will have a new freeholder but will retain their current lease interest.
Earlier in Committee we accepted an amendment that will ensure that landlords will receive the full value of their interest even where tenants join in at a later stage. This will be done by providing that the hope value for those interests can be taken into account. Therefore the amendment is unnecessary because it is a matter with which we have already dealt.
I hope that that deals with the point raised by my noble friend Lord Gisborough. If it does not, I shall write to him.
Lord Monson: I am grateful to the noble Lord, Lord Strathclyde, for his explanation. On his assurance that Amendment No. 76A, in the name of the noble Lord, Lord Boardman, to which the Government agreed and for which we are grateful, achieves broadly the objectives of the amendment, I am happy to beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Viscount Goschen Viscount Goschen moved Amendment No. 111A:
Page 181, line 50 at end insert ("and its value when acquired by the nominee purchaser").
On Question, amendment agreed to.
Viscount Goschen Viscount Goschen moved Amendment No. 111B:
Page 182, line I. leave out ("it") and insert ("the value of the interest").
On Question, amendment agreed to.
Viscount Goschen Viscount Goschen moved Amendment No. 111C:
Page 182, line 3, at end insert:
("(4) Accordingly, in so determining the value of an interest when acquired by the nominee purchaser—

(a) the same assumptions shall be made under paragraph 3(1) (or, as the case may be, under paragraph 3(1) as applied by paragraph 7(1)) as are to be made under that provision in determining the value of the interest when held by the person from whom it is to be acquired by the nominee purchaser; and

(b) any merger or other circumstances affecting the interest on its acquisition by the nominee purchaser shall be disregarded.").

On Question, amendment agreed to.
[Amendments Nos. 111D to 114 not moved.]
Viscount Goschen Viscount Goschen moved Amendment No. 114A:

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Page 182, line 42, leave out from ("Where") to ("a") in line 44 and insert ("in the case of any intermediate leasehold interest the amount arrived at in accordance with sub-paragraph (1) (b) is").
On Question, amendment agreed to.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 115:
Page 183, line 36, leave out ("-") and insert ("+").
The noble Lord said: This is a probing amendment. I have tried to work out what the formula means in real money, bearing in mind paragraph 6(3) of Schedule 5. I have found myself unable to work it out. Perhaps the Minister will explain it to a simple-minded non-arithmetician. If he cannot do so, perhaps he will write to me. I beg to move.
Lord Strathclyde: With the agreement of the Committee, perhaps the easiest method would be for me to write to the noble Lord, and put a copy in the Library, because the matter is complicated. I have the explanation with me but I suspect that reading it rather than hearing it might make more sense.
Lord Williams of Elvel: I am grateful to the noble Lord. It would certainly make more sense, certainly to me, and to other noble Lords. It is a complex matter. All the variations that I have put in seem to result in zero. No doubt the noble Lord will explain the matter in the letter that he will write. In the light of his assurance, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 116 and 117 not moved.]
Viscount Goschen Viscount Goschen moved Amendments Nos. 117A to 117D:
Page 185, line 5, leave out from ("Where") to ("a") in line 7 and insert ("in the case of any interest the amount arrived at in accordance with sub-paragraph (1) or (2) is").
Page 185, line 22, at end insert:
("() In its application in accordance with sub-paragraph (1) or (2) above, paragraph 3(6) shall have effect as if the reference to paragraph 14(2) were a reference to paragraph 18(2).").
Page 185, line 26, leave out ("and (3)") and insert ("to (4)").
Page 186, line 8, at end insert:
Calculation of marriage value
15.—(1) Where (as determined in accordance with paragraph 4(3) and (4)) the value of any interest—

(a) when held by the person from whom it is to be acquired by the nominee purchaser, or

(b) when acquired by the nominee purchaser,

is a negative amount, then for the purposes of paragraph 4(2) the value of the interest when so held or acquired shall be nil.
(2) Where sub-paragraph (1) above applies to any intermediate leasehold interest whose value when held or acquired as mentioned in paragraph (a) or (b) of that sub-paragraph is a negative amount, paragraph 14(2) to (4) shall apply for determining for the purposes of paragraph 4(2) the value when so held or acquired of other interests in the specified premises, as if—

(a) any reference to paragraph 14(1) were a reference to sub-paragraph (1) above; and

(b) any reference to the relevant purposes were, as respects any interest, a reference to the purposes of paragraph 4(2) as it applies to the interest when so held or acquired.

(3) References in paragraph 16 or 17 to paragraph 14(2) or (3) do not extend to that provision as it applies in accordance with sub-paragraph (2) above.
Apportionment of marriage value
16.—(1) Where paragraph 14(1) applies to an interest, the value of the interest for the purposes of paragraph 9(2) shall be nil, unless sub-paragraph (2) below applies.
(2) In a case where paragraph 14(1) applies to the freeholder's interest in the specified premises and to every intermediate leasehold interest—

(a) sub-paragraph (1) above shall not apply for the purposes of paragraph 9(2); and

(b) any division falling to be made on the proportional basis referred to in paragraph 9(2) shall be so made in such a way as to secure that the greater the negativity of an interest's value the smaller the share in respect of the interest.

(3) In a case where—

(a) paragraph 14(2) operates to reduce the value of any such superior interest as is there mentioned ("the superior interest"), and

(b) after the operation of that provision there remains any interest whose value for the relevant purposes is a positive amount,

the value of the superior interest for the purposes of paragraph 9(2) shall be the value which (in accordance with paragraph 14(2)) it has for the relevant purposes.
(4) In a case where—

(a) paragraph 14(2) operates to reduce the value of any such superior interest as is there mentioned ("the superior interest"), but

61

(b) after the operation of that provision there remains no such interest as is mentioned in sub-paragraph (3) (b) above.

the value of the superior interest for the purposes of paragraph 9(2) shall be the value which it has for the relevant purposes apart from paragraph 14(2).
Adjustment of compensation
17.—(1) Where—

(a) paragraph 14(2) operates to reduce the value of any such superior interest as is there mentioned ("the superior interest"), and

(b) apart from this paragraph any amount of compensation is payable under paragraph 8 to the owner of any relevant inferior interest in respect of that interest,

there shall be payable to the owner of the superior interest so much of the amount of compensation as is equal to the amount of the reduction or, if less than that amount, the whole of the amount of compensation.
(2) Where—

(a) paragraph 14(2) operates to reduce the value of two or more such superior interests as are there mentioned ("the superior interests"), and

(b) apart from this paragraph any amount of compensation is payable under paragraph 8 to the owner of any relevant inferior interest in respect of that interest,

sub-paragraph (1) shall apply in the first instance as if the reference to the owner of the superior interest were to the owner of such of the superior interests as is furthest from the negative interest, and then, as respects any remaining amount of compensation, as if that reference were to the owner of such of the superior interests as is next furthest from the negative interest, and so on.
(3) In sub-paragraph (1) or (2) "relevant inferior interest", in relation to any interest whose value is reduced as mentioned in that sub-paragraph ("the superior interest"), means—

(a) the negative interest on account of which any such reduction is made, or

(b) any other interest intermediate between that negative interest and the superior interest;

but sub-paragraph (1) shall apply in the first instance in relation to any amount of compensation payable to the owner of that negative interest, and then, for the purpose of offsetting (so far as possible) any reduction remaining to be offset in accordance with sub-paragraph (1) or (2), in relation to any amount of compensation payable to the owner of the interest immediately superior to that negative interest, and so on in order of proximity to it.
(4) To the extent that an amount of compensation is payable to the owner of any interest by virtue of this paragraph—

(a) paragraph 2(1) (c) or 6(1) (b) (ii) shall have effect as if it were an amount of compensation payable to him, as owner of that interest, in accordance with paragraph 5 or 8, as the case may be; and

(b) the person who would otherwise have been entitled to it in accordance with paragraph 8 shall accordingly not be so entitled.

(5) In a case where paragraph 14(2) applies separately in relation to two or more negative interests in accordance with paragraph 14(3), the preceding provisions of this paragraph shall similarly apply separately in relation to the reductions made on account of each of those interests, and shall so apply—

(a) according to the order determined by paragraph 14(3) (a); and

(b) with there being taken into account any reduction in the amount of compensation payable to any person under paragraph 8 which results from the prior application of the preceding provisions of this paragraph.

Housing and Urban Development Bill

  PART V VALUATION ETC. OF INTERESTS IN SPECIFIED PREMISES WITH NEGATIVE VALUES
  Valuation of freehold and intermediate leasehold interests
  14.—(1) Where—

  (a) the value of the freeholder's interest in the specified premises (as determined in accordance with paragraph 3), or

  (b) the value of any intermediate leasehold interest (as determined in accordance with paragraph 7),

  is a negative amount, the value of the interest for the relevant purposes shall be nil.
  (2) Where sub-paragraph (1) applies to any intermediate leasehold interest whose value is a negative amount ("the negative interest"), then for the relevant purposes any interests in the specified premises superior to the negative interest and having a positive value shall be reduced in value—

  (a) beginning with the interest which is immediately superior to the negative interest and continuing (if necessary) with any such other superior interests in order of proximity to the negative interest;

  (b) until the aggregate amount of the reduction is equal to the negative amount in question; and

  60

  (c) without reducing the value of any interest to less than nil.

  (3) In a case where sub-paragraph (1) applies to two or more intermediate leasehold interests whose values are negative amounts, sub-paragraph (2) shall apply separately in relation to each of those interests—

  (a) beginning with the interest which is inferior to every other of those interests and then in order of proximity to that interest; and

  (b) with any reduction in the value of any interest for the relevant purposes by virtue of any prior application of sub-paragraph (2) being taken into account.

  (4) For the purposes of sub-paragraph (2) an interest has a positive value if (apart from that sub-paragraph) its value for the relevant purposes is a positive amount.
  (5) In this Part of this Schedule "the relevant purposes"—

  (a) as respects the freeholder's interest in the specified premises, means the purposes of paragraph 2(1) (a); and

  (b) as respects any intermediate leasehold interest, means the purposes of paragraph 6(1) (b) (i).

PART VI VALUATION ETC. OF OTHER INTERESTS WITH NEGATIVE VALUES
Valuation of freehold and leasehold interests
18.—(l) Where—

(a) the value of any freehold interest (as determined in accordance with paragraph 11(1)), or

(b) the value of any leasehold interest (as determined in accordance with paragraph 11(2)),

is a negative amount, the value of the interest for the relevant purposes shall be nil.
(2) Where, in the case of any property, sub-paragraph (1) applies to any leasehold interest in the property whose value is a negative amount ("the negative interest"), then for the relevant purposes any interests in the property superior to the negative interest and having a positive value shall, if they are interests which are to be acquired by the nominee purchaser, be reduced in value—

(a) beginning with the interest which is nearest to the negative interest and continuing (if necessary) with any such other superior interests in order of proximity to the negative interest;

(b) until the aggregate amount of the reduction is equal to the negative amount in question; and

(c) without reducing the value of any interest to less than nil.

(3) In a case where sub-paragraph (1) applies to two or more leasehold interests in any property whose values are negative amounts, sub-paragraph (2) shall apply separately in relation to each of those interests—

(a) beginning with the interest which is inferior to every other of those interests and then in order of proximity to that interest; and

(b) with any reduction in the value of any interest for the relevant purposes by virtue of any prior application of sub-paragraph (2) being taken into account.

(4) For the purposes of sub-paragraph (2) an interest has a positive value if (apart from that sub-paragraph) its value for the relevant purposes is a positive amount.
(5) In this Part of this Schedule "the relevant purposes"—

(a) as respects any freehold interest, means the purposes of paragraph 10(1) (a); and

(b) as respects any leasehold interest, means the purposes of paragraph 10(2) (a).

Calculation of marriage value
19.—(1) Where (as determined in accordance with paragraph 4(3) and (4)) the value of any interest—

(a) when held by the person from whom it is to be acquired by the nominee purchaser, or

(b) when acquired by the nominee purchaser,

is a negative amount, then for the purposes of paragraph 4(2) the value of the interest when so held or acquired shall be nil.
(2) Where, in the case of any property, sub-paragraph (1) above applies to any leasehold interest in the property whose value when held or acquired as mentioned in paragraph (a) or (b) of that sub-paragraph is a negative amount, paragraph 18(2) to (4) shall apply for determining for the purposes of paragraph 4(2) the value when so held or acquired of other interests in the property, as if—

(a) any reference to paragraph 18(1) were a reference to sub-paragraph (1) above; and

(b) any reference to the relevant purposes were, as respects any interest, a reference to the purposes of paragraph 4(2) as it applies to the interest when so held or acquired.

(3) In this paragraph any reference to any provision of paragraph 4 is a reference to that provision as it applies in accordance with paragraph 12(1).
(4) References in paragraph 20 or 21 to paragraph 18(2) or (3) do not extend to that provision as it applies in accordance with sub-paragraph (2) above.
Apportionment of marriage value
20.—(1) Where paragraph 18(1) applies to arty interest in any property to which paragraph 12(1) applies, the value of the interest for the purposes of paragraph 12(2) shall he nil, unless sub-paragraph (2) below applies.
(2) Where, in the case of any property, paragraph 18(1) applies to every interest which is to be acquired by the nominee purchaser—

63

(a) sub-paragraph (1) above shall not apply for the purposes of paragraph 12(2); and

(b) any division falling to be made on the proportional basis referred to in paragraph 12(2) shall be so made in such a way as to secure that the greater the negativity of an interest's value the smaller the share in respect of the interest.

(3) Where in the case of any property—

(a) paragraph 18(2) operates to reduce the value of any such superior interest as is there mentioned ("the superior interest"), and

(b) after the operation of that provision there remains any interest which is to be acquired by the nominee purchaser and whose value for the relevant purposes is a positive amount,

the value of the superior interest for the purposes of paragraph 12(2) shall be the value which (in accordance with paragraph 18(2)) it has for the relevant purposes.
(4) Where in the case of any property—

(a) paragraph 18(2) operates to reduce the value of any such superior interest as is there mentioned ("the superior interest"), but

(b) after the operation of that provision there remains no such interest as is mentioned in sub-paragraph (3) (b) above,

the value of the superior interest for the purposes of paragraph 12(2) shall be the value which it has for the relevant purposes apart from paragraph 18(2).
Adjustment of compensation
21.—(1) Where in the case of any property—

(a) paragraph 18(2) operates to reduce the value of any such superior interest as is there mentioned ("the superior interest"), and

(b) apart from this paragraph any amount of compensation is payable by virtue of paragraph 13 to the owner of any relevant inferior interest in respect of that interest,

there shall be payable to the owner of the superior interest so much of the amount of compensation as is equal to the amount of the reduction or, if less than that amount, the whole of the amount of compensation.
(2) Where in the case of any property—

(a) paragraph 18(2) operates to reduce the value of two or more such superior interests as are there mentioned ("the superior interests"), and

(b) apart from this paragraph any amount of compensation is payable by virtue of paragraph 13 to the owner of any relevant inferior interest in respect of that interest,

sub-paragraph (1) shall apply in the first instance as if the reference to the owner of the superior interest were to the owner of such of the superior interests as is furthest from the negative interest, and then, as respects any remaining amount of compensation, as if that reference were to the owner of such of the superior interests as is next furthest from the negative interest, and so on.
(3) In sub-paragraph (1) or (2) "relevant inferior interest", in relation to any interest whose value is reduced as mentioned in that sub-paragraph ("the superior interest"), means—

(a) the negative interest on account of which any such reduction is made, or

(b) any other interest in the property in question which is to be acquired by the nominee purchaser and is intermediate between that negative interest and the superior interest;

but sub-paragraph (1) shall apply in the first instance in relation to any amount of compensation payable to the owner of that negative interest, and then, for the purpose of offsetting (so far as possible) any reduction remaining to be offset in accordance with sub-paragraph (1) or (2), in relation to any amount of compensation payable to the owner of such interest falling within paragraph (b) above as is nearest to that negative interest, and so on in order of proximity to it.
(4) To the extent that an amount of compensation is payable to the owner of any interest by virtue of this paragraph—
64

(a) paragraph 10(1) (c) or (as the case may be) paragraph 10(2) (b) shall have effect as if it were an amount of compensation payable to him, as owner of that interest, in accordance with paragraph 13; and

(b) the person who would otherwise have been entitled to it in accordance with paragraph 13 shall accordingly not be so entitled.

(5) In a case where paragraph 18(2) applies separately in relation to two or more negative interests in accordance with paragraph 18(3), the preceding provisions of this paragraph shall similarly apply separately in relation to the reductions made on account of each of those interests, and shall so apply—

(a) according to the order determined by paragraph 18(3) (a); and

(b) with there being taken into account any reduction in the amount of compensation payable to any person by virtue of paragraph 13 which results from the prior application of the preceding provisions of this paragraph.").

On Question, amendments agreed to.
On Question, Whether Schedule 5, as amended, shall be agreed to?
Lord Gisborough: The Government's 1992 document said that the purchase price should include sums to compensate for injurious affection. The document explains that this term means damage to potential value from which the freeholder might have benefited if a sale had not been forced. Paragraph 5 of Schedule 5 is, I understand, intended to provide for this element of the purchase price. However, the drafting of the paragraph is obscure and it makes no mention of compensation to reflect compulsory purchase.
I feel that that principle should be clearly stated so as to give proper guidance to a leasehold valuation tribunal when assessing the price to be paid for the freehold. I should be grateful if the Minister would comment on the clarity of that paragraph.
Lord Strathclyde: Perhaps I may explain what we are trying to do in Schedule 5 and how it sets out our proposals for fair valuation. The price payable by the nominee purchaser for the premises is the sum of the value of the present interests of the landlords on valuation day, at least half the marriage value and any compensation due.
The first element assumes a nominee purchaser, that participating tenants are not in the market and that the seller is willing to sell. The assumption is made that the interest which is to be acquired will be subject to existing leases, rights and burdens and any new rights to be created on enfranchisement, and assuming that the tenants have no rights in enfranchisement or lease extension under the Act.
The conveyance terms are assumed to be those provided for in Schedule 6. Improvements made by the participating tenants at their own expense are disregarded. These assumptions ensure that the valuation is fair. Furthermore, on the points raised by my noble friend Lord Gisborough, I believe that this is well understood by the tribunals and therefore the problem does not arise.
Lord Gisborough: I thank my noble friend.
Schedule 5, as amended, agreed to.
6.15 p.m.
Clause 29 [Costs of enfranchisement]:
[Amendment No. 118 not moved.]
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 119:
Page 38, line 27, leave out subsection (7).
The noble Lord said: This amendment stands in my name and that of my noble friend Lady Hollis. Under the Bill, the costs of enfranchisement with which Clause 29 deals are to be paid by those who wish to enfranchise, but subsection (7) makes all those who will potentially bear the costs liable for the costs of everyone. In other words, there is joint and several liability.
In the case where one leaseholder, or maybe two or three, default on the costs or for one reason or another cannot pay and go bankrupt, the costs then fall, as I understand it, on the other leaseholders who are enfranchising. That seems to me to be rather harsh, or at least it seems to argue an enormous faith on behalf of those enfranchising leaseholders in the honesty and probity of their fellow leaseholders. That is not always the case either in London or elsewhere.
I understand that someone must pay the money, but it seems to me to be somewhat unfair that all are jointly and severally liable. Thus, if out of 10 leaseholders enfranchising, nine go bust, the one has to pay the full cost.
This is, of course, a probing amendment. It is not designed to change the Bill. But I seek the Government's explanation of what seems to me to be rather a harsh measure. I beg to move.
Lord Selsdon: The noble Lord, Lord Williams, has raised the question of costs and it is quite a worrying matter with the complexity of the situations that may arise. I was asking how much it would cost, almost to express it as a percentage of the total value. If we consider a flat which is on a reasonably long leasehold, it seems to me that the cost of enfranchisement might be as high as 2½ or 3 per cent. of the value of that leasehold interest. It could be a much higher proportion, therefore, of the consideration paid to the freeholder. However, people are entering this with a reasonably open mind. They know that there are costs which will have to be borne. There will be a certain unfairness. We hope that the tenants will speak for themselves, but I do not think that the costs can possibly fall on the freeholder. It is a difficult matter and I believe that this is a good probing amendment.
Lord Rodger of Earlsferry: The position is, as the noble Lord said, that under Clause 29(7) provision is made for joint and several liability on those who are liable for the cost under Clause 29 or elsewhere in the Bill.
Members of the Committee will notice that we are dealing here with the liability for costs incurred by the reversioner or any other relevant landlord. It seems to us that at the end of the day—and, as I understand it, there is no dispute about this on the part of the noble Lord—someone must bear the costs. After all, they have been incurred and are recoverable only to the extent that they are reasonable. The costs must be
66
recovered and this provision seems to us to be the only proper way of dealing with the matter. It would not be right that a landlord should have difficulty in selecting some person against whom he should have the right to recover costs. It appears to us that those who are participating in the venture should be liable at the end of the day jointly and severally for the reasonable costs incurred by the landlord.
That may mean that people entering such a venture will have to select with care those with whom they participate. When they are considering whether to participate at all, they must consider the whole picture. We have stressed from the outset that this is not a venture which is to be entered into lightly. One has to consider, before embarking on the enterprise, the whole nature and undertakings which are being entered into when the considerable process of enfranchisement takes place. It is an aspect of that that at the end of the day, in so far as those participating are liable for the costs of the reversioner, it is a joint and several liability.
Lord Williams of Elvel: I am grateful to the noble and learned Lord, so far as he went, which was simply to repeat the clause in the Bill and explain that that is the Government's view. However, it does not seem to me to answer the point that I raised. I agree that there is no dispute about recovery of the reversioner's cost. It clearly has to be recovered and must be recovered from the enfranchisers. I agree with that. However, as the noble Lord, Lord Selsdon, rightly remarked, the costs could be extremely high.
If we take a block of 20 or 30 flats—and there are many blocks of that nature—the freeholder will have to have extensive legal advice, possibly extensive valuing advice, accounting advice, tax advice, all kinds of advice. Those costs could be quite prohibitive. In a block of flats of, say, 20 leaseholders who are qualifying tenants and get the two-thirds majority, in order to engage in enfranchisement each and every one of those potential enfranchisers would have to investigate the financial status of his colleagues. I would not enfranchise along with the noble and learned Lord the Lord Advocate if we lived in the same block of fiats unless I were sure that he could pay the bill at the end. That would be an extremely difficult and tricky operation. I do not quite understand how it would work in practice. That is the point I am trying to make.
I accept that there may be no other solution—other than some insurance scheme that might meet the bill —but the Government need to bear that matter clearly in mind. A problem of cost should not be a barrier to enfranchisement.
Lord Rodger of Earlsferry: I cannot add very much. I believe that the noble Lord accepts that reasonable costs must be recoverable. It is very difficult to see how one could select from those embarking upon the exercise of enfranchisement those who would bear the costs and those who would not. At the end of the day, I respectfully submit that the correct way to proceed is as proposed in the Bill.

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Having said that, I accept that there may be practical difficulties facing those who embark upon that course. But those are among the matters which people will have to take into account when they do so.
Lord Williams of Elvel: With respect, the onus could be laid on the reversioner to claim against all enfranchisers by simply leaving out the words "jointly and", leaving it as several liability rather than a joint and several liability.
Lord Rodger of Earlsferry: If one simply had several liability, that would lead to the reversioner having the greatest difficulty in recovering his costs. It does not seem fair that the reversioner in that situation should have to go around trying to recover a portion here and a portion there. One has to bear in mind that this enterprise is set in train by the qualifying tenants and set in train, in one sense, against the reversioner. In that situation it would not be right that the reversioner should have laid upon him the burden of somehow or other building up the entire recovery of the cost. We believe that this is the correct way to proceed.
Lord Williams of Elvel: I do not believe that we shall get much further with the argument. The Government take that view. I merely set out the problems. I accept that the reversioner has to be able to reclaim his costs and reclaim them quite easily. But I warn the Government that it will be a serious barrier to enfranchisement, particularly of larger blocks of flats. In my view, it will work against the Government's policy.
Baroness Hamwee: Before the noble Lord sits down, I wonder whether the Minister can help us as to the position of the nominee purchaser. We have been talking as if we were dealing only between the reversioner and the enfranchising leaseholders. As I read the provision, the nominee purchaser has a position and may be a body corporate.
Lord Rodger of Earlsferry: That is correct, as one sees under Clause 29(1) in that situation,
"the nominee purchaser shall be liable".
It may indeed be a corporation of some sort. In that situation again a problem could arise; for example, of the corporate body not having any assets. It is precisely that sort of situation where it would be important for the reversioner to be able to go against other persons were that to be appropriate.
Lord Williams of Elvel: I was regarding the nominee purchaser as being transparent. Clearly the noble Baroness is right when she says that it could be a limited company. But if there were a joint and several guarantee, as is required under the clause, then the company itself would become transparent. As I said, I do not think that we can get much further on the matter, but I wanted to point out to the noble and learned Lord that that might militate against enfranchisement. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Earl of Lytton The Earl of Lytton moved Amendment No. 119A:
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Page 38, line 29, at end insert:

("(8) At any time after receipt of the initial notice the reversioner may, by notice in writing given to the nominee purchaser, require the nominee purchaser to deposit with the reversioner, or a person nominated by him in the notice as his agent or as stakeholder, a sum equal to £100 multiplied by the number of participating tenants by whom the initial notice is given, on account of the price payable for the freehold of the specified premises and any other sums payable by the nominee purchaser in accordance with the provisions of this Act; and the nominee purchaser shall, within 14 days of the giving of the notice, pay the sum demanded to the reversioner or person nominated by him.

(9) The Secretary of State may by order amend subsection (8) above by substituting for the amount of £100 or for such other amount for the time being specified there such other amount as is specified in the order.

(10) The deposit payable under subsection (8) above shall be returned to the nominee purchaser if the initial notice ceases to have effect by virtue of section 20(4) or 27(4).").

The noble Earl said: This is a probing amendment. I hope that it may provide some further insight into the matter that we have just discussed. It is intended to provide a situation similar to that under the Leasehold Reform Act, whereby the enfranchising tenant can be required by the landlord to pay a deposit on account of expenses. The point behind that must be clearly understood; namely, it is an attempt to make sure that the freeholder is not left out of pocket in a manner which would make it difficult for him to recover his expenses.
One would hope that freeholders will not attempt to work the levers in order to add to the expense of enfranchising tenants. It is probably safe to say that those landlords who have always conducted themselves with a degree of probity will play the game by the rules of propriety and those who are not so inclined will not. The Bill may be intended to catch those in the latter rather than in the former category.
I realise that the amendment is defective in that it does not specify that repayment of the sums would be made "less deductions" on account of the freeholder's expenses. That is one reason why it can only be a probing amendment. It seems to me wrong that the landlord (the freeholder) should be exposed to a difficulty of recovering costs under this Bill which is not on all fours with the Leasehold Reform Act 1967. I believe that that requires some further explanation from me.
The costs which a landlord can recover from the enfranchising tenant under the 1967 Act are set out in Section 9(4) of that Act. The equivalent can be found in Clause 29(1) of this Bill. The difference is that under Section 22(2) of the 1967 Act and the regulations made under it, a deposit of three times the annual ground rent, or £25, whichever is the greater, can be demanded by the landlord. Although on some ground rents, I admit, that might produce an exceptionally high figure, in many cases it would not, having regard to the likely cost of legal expenses alone.
Under the Bill, if participating tenants withdraw after putting the landlord to expense, that freehold landlord can recover the expense only by way of an ordinary action in the county court. He would certainly not be able to recover the amount due under

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a service charge—because it would be an improper item in service charges—or by threatening forfeiture. That problem needs to be addressed.
It is certainly not my intention that the measure in my amendment should be any sort of up-front penalty to prevent enfranchisement proceeding. The Committee will note from the wording of the amendment that there is provision for the Secretary of State to make alteration to the figure in question. But that can only apply nationally under the terms of the Bill. I agree that it would not sift out hard cases. It seems to me right that where compulsion is used against a freeholder, he should at least be given some sort of security—perhaps by the tenants placing a sum on deposit with a solicitor—to cover those costs. That would to some extent meet the point made by the noble Lord, Lord Williams of Elvel, about the ability of people to pay and the question of joint and several liability. At least there would then be a fund which would enable some of the disbursements—though almost certainly riot all—to be defrayed. I beg to move.
Lord Rodger of Earlsferry: Like the previous amendment, Amendment No. 119A raises an interesting issue. As I understand it, the amendment would allow the reversioner to require a deposit from the nominee purchaser towards the purchase price of the freehold and other costs. It is to be paid within 14 days but is to be returned if the initial notice ceases to have effect, either because the landlord has obtained a court order preventing the tenants from enfranchising on redevelopment or because an acquiring party has served a notice to treat.
As the noble Earl said, to some extent the requirement has a precedent in the 1967 legislation, although the provisions there are slightly different. Under the 1967 Act this is the only deposit which was required to be paid, whereas under this legislation there would be a requirement to pay a deposit on exchange of contracts. There is therefore that difference.
I am sympathetic to the principle of a preliminary deposit —not so much as a deterrent to those about to embark upon the process of enfranchisement, but rather for the reasons explained by the noble Earl. However, the form of the amendment is not one that we can accept. I therefore ask the noble Earl to withdraw it on our undertaking that we shall give further consideration to the question of deposits, in particular how the matter can best be taken forward in the context of the Bill. On that basis, I ask the noble Earl to withdraw the amendment.
The Earl of Lytton: It would be entirely churlish of me not to withdraw the amendment on the basis that the noble and learned Lord will give the matter further consideration. I welcome some input into the matter. I am grateful to him for taking on board the basic principle I was trying to put forward. On that basis, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 29 agreed to.
6.30 p.m.
Clause 30 [Conveyance to nominee purchaser]:
The Earl of Lytton The Earl of Lytton moved Amendment No. 120:
Page 38, line 38, at end insert:
("() Before any conveyance to a nominee purchaser can be executed proof must be supplied that a majority of qualifying tenants continue to support the exercise of their right to collective enfranchisement.").
The noble Earl said: Amendment No. 120 is intended to ensure that as the enfranchisement process proceeds, at a subsequent point—not simply at the initial point when the notice is served on the freeholder —there remains a majority of qualifying tenants to continue to support the exercise of the right to collective enfranchisement.
At Second Reading and earlier in Committee I said that my anxiety has always been that a majority of tenants would trigger the enfranchisement process, but that there was no guarantee that as time proceeded all those tenants would remain in the game. The number could be whittled away by all manner of things—the prospect of the expense, the time lag and other factors.
It is possible—I shall be grateful if the Minister will comment on the point specifically—that at the end of the day when it comes to exchanging contracts, there may be only one tenant dealing with the matter for the other enfranchising tenants; nobody else would be supporting it. It does not seem right that one person can acquire by default in that manner.
The fault seems to be that in assessing the right to enfranchise, a snapshot approach is taken. With regard to the support from the tenants in the building, one is looking at the situation at a single moment in time. The Minister may say that if there is wastage over time, if negotiations are protracted and drawn out, people may fall by the wayside. It is certainly not my intention in moving the amendment to try to make that more rather than less likely.
But another matter arises. I refer to the possibility of the misappropriation of the freehold. I am anxious about that and it may be that the case with which I was personally involved is unique in the country. It is unlikely, but possible. The situation could arise where there were seven tenants in a block of 10 flats and they initially indicated that they wished to enfranchise. However, all but one had second thoughts and withdrew and only one was left to proceed. That tenant could decide to vest the matter in a mariner convenient to him and which suited his commercial purposes rather than the purposes of the other occupiers in the building.
It is the failure of the Bill to bond together the enfranchisement process and the continuation of the occupation of the building that causes me anxiety. That is the reason I tabled the amendment. I wished to ensure that there was a further test before the conveyance to the nominee purchaser could be executed. There must be further proof to show that it is supported by the majority. If nothing else, it would ensure that the majority were aware of what was happening. The legislation would contain an insistence that the matter be referred back to them should they later not support the application.
It is a rather complicated point. I hope that I have explained it satisfactorily. I beg to move.
Baroness Gardner of Parkes: I should like to ask a question on the amendment. I believe it ties in with what the Minister said he would take away and reconsider. What is the financial position if the situation reaches the stage where only one person is interested and considerable costs have been incurred? Provisions must be made to look at what happens to the money that various people have paid out.
Lord Rodger of Earlsferry: Taken as a whole, the amendment is inconsistent with what is the desired aim running as a theme through the Bill—that is, that the procedure for enfranchisement should run as quickly as possible once it has been initiated by the Section 11 notice of claim. Once the reversioner has been satisfied that the qualifying criteria were met, or once that has been dealt with by the tribunal, from that moment onwards the participating tenants do not need to prove that they have sufficient numbers.
The effect of the amendment would be to increase the scope for delay and for uncertainty. It could lead to an increase in costs especially if one were to have a situation where the landlord disputed, for example, that the numbers necessary were available, or whether the information supplied was correct. There may be room for confusion. That could only lead to further delay. In that situation, the amendment would not help the position of the tenants. It would lead to confusion.
The noble Earl asks whether it is possible that the stage could be reached where there was only one participating tenant. Under the strict theory of the Bill, that is correct. But I would imagine that given that the cost to an individual tenant is likely to increase as the numbers participating decline—at the end of the day they have to buy out the whole asset —one would not expect an individual to wish to continue if he or she could not afford it. So there is in some sense an economic check, but taking the whole situation we believe that this kind of amendment would cause more trouble than it would bring benefit. The procedure which we have adopted is that of checking at one stage only. In that situation I would ask that the amendment be withdrawn.
A noble Lord: Can my noble friend explain whether, having initiated serving the notice under Section 11 by the nominee tenant, there is a time limit? Is the freeholder then left in limbo? Supposing it is necessary for the freeholder to sell his interest at that point, how is he going to ensure that his own interests are not damaged by an unnecessary delay? But there may be a time limit in the Bill which I have not seen.
Lord Rodger of Earlsferry: There are many time limits scattered throughout the Bill, and there is machinery at various stages for ensuring that the next stage is taken. To that extent, there is machinery to advance the process.
The Earl of Lytton: I am grateful to the noble and learned Lord for his response. This is a probing
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amendment, and clearly I understand his point that it is defective and it would not be helpful in terms of the long-term benefits that are intended under the Bill for this sort of provision to be included. But I think the Minister must understand that I have reservations about how the Bill is going to work in practice. I also have reservations about the lack of tying in between the occupation of the building and its ultimate ownership.
I was not particularly heartened by the comment the Minister made when the Committee last sat. I understood him to refer to a form of serial enfranchisement where this would continue and if you did not like the situation you would do it again. That would be difficult and complicated. I hope that I misunderstood him on that occasion. I should not like to think that we would allow a Bill through the House which produced effects of that sort. But, subject to the reservation that I may come back to this at a future date, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
On Question, Whether Clause 30 shall stand part of the Bill?
Lord Williams of Elvel: Before we leave Clause 30, I wonder whether I may ask the noble and learned Lord one or two questions about the rather shadowy figure of the nominee purchaser. I am sorry that I have not given notice of this matter. Perhaps I should have raised it earlier in the Bill under Clause 13, but I am a little concerned.
There is a lot in the Bill about the nominee purchaser. We are not quite sure what he or she is, whether he or she is to be a person, a corporation, a resident corporation or a foreign corporation, or what legal liabilities the nominee purchaser has. What are the possibilities of the nominee purchaser defaulting? What happens if the nominee purchaser runs off to Brazil with the money? There are many questions about this shadowy character or corporation which are not answered in the Bill.
I wonder whether the noble and learned Lord could give thought to this and not necessarily answer me now but perhaps write to me, or at a later stage in the Bill give me the benefit of the Government's view about a whole range of questions about the liabilities of the nominee purchaser that seem to be unclear in the Bill as drafted at present.
Lord Rodger of Earlsferry: A fairly formidable agenda has been given. The general principle that lies behind the Bill is not to specify what the characteristics of the nominee purchaser should be: this is to allow the tenants to choose the form of nominee purchaser which may best suit their particular circumstances. It may suit them best to have a company; or it may be better to have an individual or more than one individual. The way in which the liability would be shared out among those would largely depend on the particular circumstances chosen by the participating tenants.
That having been said, there are other points which the noble Lord raised which perhaps I may come back to either in writing to the noble Lord or at a later stage.
6.45 p.m.
Lord Williams of Elvel: I am most grateful to the noble and learned Lord. I am sure that he understands the problems that vex me at present. The nominee purchaser is going to have to sign a contract, which requires all sorts of conditions including solvency and the ability to meet the terms of the contract, and he must not be negligent. There are all sorts of considerations which the noble and learned Lord understands much better than I do. I should be most grateful if he could write to me on these matters at a later stage.
Clause 30 agreed to.
Schedule 6 [Conveyance to nominee purchaser on enfranchisement]:
Schedule 6 agreed to.
Clause 31 [Discharge of existing mortgages on transfer to nominee purchaser]:
Clause 31 agreed to.
Schedule 7 [Discharge of mortgages etc.: supplementary provisions]:
Schedule 7 agreed to.
Clause 32 [Nominee purchaser required to grant leases back to former freeholder in certain circumstances]:
Clause 32 agreed to.
Schedule 8 [Grant of leases back to former freeholder]:
[Amendment No. 124 not moved.]
The Earl of Lytton The Earl of Lytton moved Amendment No. 124A:
Page 192, line 5, leave out from ("is") to end of line 6 and insert ("immediately before the appropriate time a flat let to—

(a) a person who is not a qualifying tenant; or

(b) a qualifying tenant who is not a participating tenant.").

The noble Earl said: This amendment seeks to extend the freeholder's right to lease back flats which are occupied by qualified tenants who do not wish to participate. I would explain straight away that this is a probing amendment.
Currently the Bill provides that a landlord whose property is enfranchised has a right to lease back certain units in a block which are ineligible for enfranchisement, that is, those let for commercial or short-term residential uses. This amendment would serve to widen the leaseback provisions to include flats which are eligible for enfranchisement but where the tenant does not choose to enfranchise.
This amendment would prevent qualifying tenants who do not wish to participate and who exclude their flats from a marriage value calculation when the purchase price is determined, thus depressing the sum paid to the freeholder, subsequently obtaining a new lease from the new freeholders, the enfranchising tenants, at some sort of discount.
This has been partly covered by the Government's acceptance of the disclosure of side agreements, but I am advised that this would not be entirely effective in practical terms, particularly where new leases are granted some time after the original freeholder ceased to have an interest in the property. So I feel that this
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is an important safeguard, and I would welcome the comments of the Minister on the amendment. I beg to move.
Lord Williams of Elvel: I am glad that the noble Earl said that this was a probing amendment, because it is one which, had it not been a probing amendment, we would not have wished the Government to accept. It appears to be intended to enable the freeholder to retain a leasehold interest in relation to any flats occupied by qualifying tenants who are not participating tenants. We oppose it on those grounds alone.
However, it also seems to us to have the effect of leaving the position of flats which are not occupied by tenants at all—that is, flats occupied by licensees or vacant flats —completely indeterminate. For that reason as well, we would wish to oppose the amendment.
Lord Strathclyde: The noble Lord, Lord Williams of Elvel, is quite right in what he says. However, given that this is a probing amendment, perhaps I may explain what it is that we are doing here.
The voluntary leaseback provisions encompass those units or flats which are not let to qualifying tenants, including rented flats and commercial units such as shops and offices. These are likely to be a significant source of income to the landlord and it is right that he should have the right to take a leaseback of them if he wishes to do so. Thus the voluntary leaseback provisions are primarily for the benefit of those landlords who derive income from certain non-qualifying units and flats and wish to continue to do so. We have, however, deliberately excluded flats let to qualifying but non-participating tenants from the voluntary leaseback provisions.
In Clause 2 we have stipulated that the participating tenants must acquire every leasehold interest which is superior to that of a qualifying tenant. Our intention is that there should be no immediate leasehold interest between residential long leasehold flats held by qualifying tenants and the freehold owned by the long lease purchaser of the participating tenants. To allow intermediate leases to remain or to create new ones via the leaseback provisions would make any future negotiations between a new freeholder and a qualifying tenant wishing to obtain a share of a freehold somewhat pointless. The leaseback landlord would still be able to exert management control and refuse to extend the lease. That is not what we wish to see. A qualifying tenant may have bought or inherited the lease of a flat where the previous tenant had decided not to participate in enfranchisement. The new freeholder, the nominee purchaser, may be quite willing to have a qualifying tenant on board, but the intermediate leaseback would mean that a share of the freehold would be of little worth to the qualifying tenant and he would not be able to claim the right to a renewed lease under Chapter II of the Bill.
I hope that that explains our position to the noble Earl. The amendment, even though it is probing, quite

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clearly runs counter to the policy aims in this part of the Bill. Therefore, I hope that my explanation gives the noble Earl some succour.
The Earl of Lytton: I cannot admit to it having given me any particular succour but the reply comes as absolutely no surprise. It has given me some further insight into the way in which the noble Lord views this matter. I certainly to not intend to pursue the amendment at this juncture. On that basis, I beg leave to withdraw it.
Amendment, by leave, withdrawn.
Lord Coleraine Lord Coleraine moved Amendment No. 125:
Page 192, line 10, at end insert:
("(4) This paragraph does not apply to a flat or other unit unless the freeholder shall have specified that flat or unit in reply to a leaseback notice served on him in accordance with section (leaseback notices) above.").
The noble Lord said: I spoke to this amendment in an earlier grouping. My reason for moving it formally today is to give my noble friend the chance to amplify or expand on the reply which he gave me at that time. The idea behind the grouping was to bring forward the date on which reversioners had to specify the properties that they would require leasebacks on. This was to enable flat owners to avoid the need to make expensive financial provisions to purchase the reversions to Rent Act properties which the reversion is going to want to keep in any case. In replying to the amendment on 15th March my noble friend said:
"The current provisions are that, once an initial notice is given to the landlord, he will be required to indicate which units he wishes to lease back".
Before withdrawing my amendment I asked:
"Did I understand my noble friend correctly? Was I wrong in thinking that leaseback provisions could be brought into effect by the reversioner at or shortly before the time of completion? Does he say that those provisions can be flushed out of the reversioner with the counter notice? I note that my noble friend nods his head; he is saying that".—[Official Report, 15/3/93; col. 1279.]
What can be obtained with the counter notice is a statement by the reversioner of the units which he wishes to lease back. In order to reach the stage at which he is finally committed to lease back the properties, one has to look to Part III of Schedule 8. Paragraph 5 states that,
"this paragraph applies to any unit contained in the specified premises which is not immediately before the appropriate time a flat let to a person who is a qualifying tenant of it".
The relevant words in that short extract are "the appropriate time". The paragraph then goes on:
"the nominee purchaser shall, if the freeholder by notice requires him to do so, grant to the freeholder a lease of the unit".
The words "the appropriate time" are defined in paragraph 1 of the schedule as the time when the freehold of the specified premises is acquired by the nominee purchaser. I take that to mean the date of completion or, at the earliest, the date of a contract. Certainly, that would be after a valuation has taken place. The effect of the provisions is that the freeholder can stipulate that the nominee purchaser shall grant leasebacks at the very last stages of the proceedings, long after the valuation has taken place, and not at the earlier time of the serving of the counter notice to
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which my noble friend referred. This should be looked at further and I wait to hear what my noble friend has to say. I beg to move.
Lord Strathclyde: As my noble friend explained, this amendment was previously grouped with Amendment No. 51. The amendment was withdrawn and without it this amendment no longer makes sense. However, I have some sympathy with the concerns of my noble friend. Clause 18 provides that the reversioner should specify in his counter notice any flats or units which he wishes to lease back. I acknowledge that it is possible that between the counter notice stage and the execution of the conveyance, flats which were let to qualifying tenants may cease to be so let, perhaps because the qualifying tenant was precluded from participating due to forfeiture proceedings which were later completed. In such cases the landlord may decide that he wishes to lease back those flats and give notice to the tenants to that effect before the conveyance to the nominee purchaser is executed. We think that it would be wrong if this were to be disallowed, for the former freeholder would be unable to lease back a vacant flat. I acknowledge, however, that the last-minute leaseback request could cause inconvenience for the tenants.
There is, however, another possibility which gives us more concern. A flat which is rack-rented at the time of the counter notice could be subsequently let on a long lease to a qualifying tenant. In Clause 2 we have provided that all intermediate interests which are superior to that of a qualifying tenant shall be acquired in addition to the freehold. We do not wish there to be leasehold interests superior to that of a qualifying, but not necessarily participating, tenant. If that were to be the case, it would prove an obstacle to any subsequent election to participate by the tenant under Clause 12(3) or, indeed, to any future negotiations between the qualifying tenant and the new freeholder, the nominee purchaser. So to permit a leaseback of such a flat would run counter to our aims. We wish to consider this last point further, but I hope that my noble friend will withdraw the amendment.
Lord Coleraine: I am very glad to have my noble friend's sympathy. I shall await with interest the result of his deliberations. I am not at all sure that he is fully apprised of the difficulties that could affect intending enfranchisees if the reversioner wants to take back a leaseback on all the properties which previously he has indicated that he did not. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 126:
Page 192, line 29, leave out from ("provisions") to end of line 32 and insert ("is agreed to by the nominee purchaser and the freeholder with the approval of a leasehold valuation tribunal.").
The noble Lord said: The purpose of this amendment is to ensure that the procedure for approving the terms of a lease under Part III of Schedule 8 is the same as the procedure under Part II.
It appears to be somewhat different. Where a flat in a block is occupied by a secure tenant or, if the landlord is a housing association, an assured tenant, Clause 32 and Schedule 8 require that on enfranchisement the former freeholder gets a 999-year lease on the flat and the tenant continues to enjoy nearly the same rights as before. Where the flat is not occupied by a qualifying tenant—that is, it is empty or is occupied by a licensee —the former freeholder may insist on a 999-year lease on the same terms as in the previous case but the lease must conform with Part IV of the schedule unless with mandatory leaseback landlord and nominee purchaser agree with the approval of the leasehold valuation tribunal. In the second case either the landlord or the nominee purchaser may apply to the leasehold valuation tribunal which may approve of a departure from Part IV.
The two cases are rather different. The reason is unclear. The object of the amendment is to make sure that local authorities are not put into the difficult position of having to assent to what is effectively the arbitration of the leasehold valuation tribunal, whereas in the case of a qualifying tenant arbitration does not come into it; it simply authorises it. Those representing local authorities feel quite strongly about it. They should like the wording in the schedule to be similar, both where it is the qualifying tenant and where it is not. I beg to move.
The Deputy Chairman of Committees (Lord Hayter): I have to point out that if this amendment is agreed to I cannot call the next one because of pre-emption.
Lord Strathclyde: hope I have understood what is being proposed by the noble Lord, Lord Williams of Elvel. At the outset I was surprised that the noble Lord had tabled the amendment. What it appears to do is increase the scope for delay by requiring the approval of a leasehold valuation tribunal for something that can be settled by mutual agreement. The current arrangements for departures from prescribed terms on voluntary leaseback seem to me to be entirely appropriate in this instance. They allow for negotiation and co-operation between the parties rather than seek an imposed settlement.
If the noble Lord is worried that a departure made only by the mutual agreement of the parties may have an onerous effect on the interests of the sub-tenants, I can assure him that that is not the case. The terms of a voluntary leaseback will alter the terms of their existing leases and that particular problem does not arise. Having said that, I hope the noble Lord, Lord Williams of Elvel, will feel I have fully explained that aspect.
Furthermore, it seems odd that the noble Lord, Lord Williams, voices a concern about mandatory leaseback in Part II on this amendment which deals with voluntary leaseback in Part IV. Under this particular part, the aim is to protect secure tenants. I hope that with that explanation the noble Lord will feel able to withdraw his amendment.
Lord Williams of Elvel: I realise that this is a complex amendment and it is difficult to understand.
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I am not sure that the Minister has quite understood what we are driving at. I think the best thing for me to do is to leave it there. Between now and Report stage we shall have made our point quite clear so that the Government can understand what we are asking for. I agree that it is a technical question; but it is something about which local authorities feel quite strongly. In the circumstances, I believe it is right for me to withdraw the amendment.
Amendment, by leave, withdrawn.
Viscount Goschen: I beg to move that the House do now resume. In moving this Motion, perhaps I may suggest that the Committee stage begin again at ten minutes before eight o'clock.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

Official Secrets Act 1989 (Prescription) (Amendment) Order 1993
7.5 p.m.
Baroness Denton of Wakefield Baroness Denton of Wakefield rose to move, Thai the draft order laid before the House on 17th February be approved [21st Report from the Joint Committee].
The noble Baroness said: My Lords, the draft order has been considered by the Joint Committee on Statutory Instruments and the Second Standing Committee on Statutory Instruments. The order is made by my right honourable friend the Secretary of State for the Home Department under the Official Secrets Act 1989. Under that Act, persons who are not Crown servants can be treated as such by virtue of a prescription order. The draft order prescribes the staff and board members of Urenco (Capenhurst) Limited. Essentially, this is a technical measure. For commercial reasons, British Nuclear Fuels plc will shortly be transferring some staff at its Capenhurst enrichment site from its employment to that of a new subsidiary, Urenco (Capenhurst) Limited. As BNFL staff, those people are currently prescribed by an earlier prescription order. This order is needed to ensure that they remain prescribed after the transfer.
I emphasise that this order will not increase the effective scope of prescription. When the order conies into effect not one single person will be prescribed who is not already prescribed. The staff and board of BNFL among others were prescribed by the Official Secrets Act 1989 (Prescription) Order 1990. During parliamentary consideration of that order the proposal to prescribe these people was never questioned. The work at Capenhurst remains classified for proper reasons of national security. I beg to move.
Moved, That the draft order laid before the House on 17th February be approved. [21st Report from the Joint Committee.]—(Baroness Denton of Wakefield).
Lord Graham of Edmonton: My Lords, we on this side of the House fully appreciate the sensitive nature of the broad issues that we are discussing. Therefore, there is nothing that I wish to say that in any way seeks

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to dislodge that joint understanding. However, perhaps the Minister can satisfy me that in all that has been clone there has been full consultation with the appropriate trade unions, and that the impact of the transfer does not diminish any of their rights. I have in mind TUPE 81, which is a prevalent feature in discussions these days about how the rights of employees are affected. I realise that this matter may not be analogous with the broad subject covered by that—that is, people who cease to be in Crown service and go into a privatised company. If the Minister can tell the House that the employees affected are satisfied that the rights they have hitherto enjoyed are not diminished, it will certainly assist me.
Baroness Denton of Wakefield: My Lords, I am pleased to reassure the noble Lord, Lord Graham of Edmonton, that the unions have been fully consulted by BNFL. I understand that they accepted the need for BNFL to take these steps in order to remain competitive in the enrichment business. The transfer has been discussed in TUPE terms with the unions.
On Question, Motion agreed to.
Viscount St. Davids: My Lords, I beg to move that the House do now adjourn during pleasure until 10 minutes before eight o'clock.
Moved accordingly, and, on Question, Motion agreed to.
[The Sitting was suspended from 7.9 to 7.50 p.m.]

Housing and Urban Development Bill
House again in Committee on Schedule 8.
Lord Coleraine Lord Coleraine moved Amendment No. 127:
Page 192, line 31, leave out ("authorised") and insert ("directed").
The noble Lord said: In moving this amendment perhaps I may also speak to Amendment No. 128 which is consequential on it. These amendments seek to improve the provisions of Schedule 8 to the Bill as regards the contents of leases to be granted to freeholders under the leaseback provisions of the Bill. Paragraph 7 of Schedule 8 to the Bill provides that a lease,
"shall conform with the provisions of Part IV".
When we look at that we see a number of provisions mentioned. In that connection perhaps we may look at the paragraph which is headed "Covenants by lessee" which provides:
"The lease shall include a covenant by the lessee to ensure that the interior of the demised premises is kept in good repair (including decorative repair)".
Any lease which is to be granted under a leaseback is going to need rather more provisions than by way of a lessee's covenant. For example, it is going to require covenants as to user, assignment and sub-letting. As regards paragraph 7 of the schedule, the lease has to conform with the provisions of Part IV:
"except to the extent that any departure from those provisions—
(b) is authorised by a leasehold valuation tribunal on an application made by either of those persons".
I cannot find in the Bill any way in which sensible provisions can be included in conveyances by the leasehold valuation tribunal except under the words
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which I have just quoted. It seems to me that the word "authorised" is not sufficient. I believe that the word should not be "authorised" but "directed" so that the leasehold valuation tribunal can direct the provisions to go into the conveyance. That is the effect of my amendments. I beg to move.
Lord Rodger of Earlsferry: The leasehold valuation tribunal will only in practice have to become involved in such matters where the parties cannot agree. If there is a dispute, against that background it seems appropriate that the leasehold valuation tribunal should direct that departure from the provisions of Part IV should be made rather than as presently drafted. Therefore, we propose to accept the amendment subject to the agreement of the Committee.
On Question, amendment agreed to.
Lord Coleraine Lord Coleraine moved Amendment No. 128:
Page 192, line 33, leave out ("authorise") and insert ("direct").
The noble Lord said: I beg to move this amendment.
Lord Rodger of Earlsferry: I also accept that amendment.
On Question, amendment agreed to.
Lord Coleraine Lord Coleraine moved Amendment No. 129:
Page 192, line 36, leave out sub-paragraph (3).
The noble Lord said: In moving this amendment, I speak also to Amendments Nos. 130 to 132. All these amendments relate to the same subject, which is the content of paragraph 7(3) of the schedule. The sub-paragraph states:
"In determining whether any such departure is reasonable in the circumstances, the tribunal shall have particular regard to the interests of any person who will be the tenant of the flat or other unit in question under a lease inferior to the lease to be granted to the freeholder".
The point with which I find difficulty in this sub-paragraph is the word "particular". Amendment No. 130 would have the effect of deleting that word. I have difficulty with it because there are so many matters to which the tribunal should have regard that it is invidious to direct it to have particular regard to the interests of any person who will be the tenant of the flat or any other unit,
"under a lease inferior to the lease to be granted to the freeholder",
unless it is required to look to other matters such as the interests of,
"the tenants of other flats and units in the building, and to the use and character of the building, and of the neighbourhood".
That is the subject of Amendment No. 132. If the tribunal is to look to the interests of the lessee, it should also look to the interests of the nominee purchaser and the freeholder.
This is basically a probing amendment. I hope that my noble friend will find it possible to respond positively to the thoughts which I am putting before the Committee this evening. I beg to move.
Deputy Chairman of Committees: I understand that if this amendment is agreed to, I cannot call Amendments Nos. 130 to 132.
Lord Williams of Elvel: We are not entirely happy with the amendments of the noble Lord, Lord Coleraine. They seem to undermine the force of paragraph 7(3) that a leasehold valuation tribunal should have primary regard to the interests of the tenant in any flat which is the subject of leaseback under Part III of the schedule.
It seems to us that the primary regard is the very important thing as regards paragraph 7(3). To remove the word "particular" from the schedule would weaken the force of the sub-paragraph itself.
Lord Coleraine: I believe that removing the word "particular" would not have any effect in weakening the importance that regard should be had for the interests of the lessee. It would enable regard to be had for other considerations which are in themselves extremely important and which otherwise might not be considered with sufficient care by a leasehold valuation tribunal which was directed to refer to a particular matter. There is always this difficulty with documents: the word "particular" always causes problems. I do not believe that the interests which are already protected by sub-paragraph (3) would be damaged by making some amendment along the lines which my amendments suggest.
Lord Williams of Elvel: I certainly take note of the noble Lord's meaning, but I disagree with it.
Lord Rodger of Earlsferry: As the Committee perceives, in the case where the former freeholder is taking a voluntary leaseback of a unit or flat which is not let to a qualifying tenant, there may be both tenants and sub-tenants whose rights immediately before the relevant time must be taken into account. For example, the tenants and sub-tenants of the former freeholder may have rights over the use of the common parts or other facilities, or their tenancy agreements may include references to duties and responsibilities for repair and maintenance. It is therefore important that where there is to be a departure from the provisions of Part IV the effect on the rights of those tenants is known and considered.
Sub-paragraph (3) is not drafted so as to exclude or in any way diminish consideration of the position of the other persons involved in the transaction. Their interests are taken care of by sub-paragraph (2); but, as the noble Lord, Lord Williams, has said, it seems appropriate in those circumstances that particular care should be given to examining the position of the sub-tenants. It is for that reason that that word is included. I do not believe that in practice it will cause any "particular"—if I may use that word—difficulty. As the noble Lord said, it has been used in other circumstances. If I had to arbitrate between my noble friend and the noble Lord, I would favour the position of 'the noble Lord, Lord Williams, on that matter. In that case, I ask my noble friend to consider withdrawing the amendment.
8 p.m.
Lord Coleraine: I shall consider carefully all that my noble and learned friend has said. In the circumstances, I beg leave to withdraw the amendment.
Amendment, my leave, withdrawn.
Lord Coleraine Lord Coleraine had given notice of his intention to move Amendment No. 130:
Page 192, line 37, leave out ("particular").
The noble Lord said: This is a probing amendment on a matter which has interested some people. I merely ask my noble friend to explain why leasebacks are to be for terms of 999 years as against 90 years, which relates to the terms of lease extensions, when in the normal way one would have expected—
Lord Williams of Elvel: I apologise for interrupting the noble Lord. The Deputy Chairman in fact called Amendment No. 130. I understand that the noble Lord might wish not to move that amendment.
[Amendment No. 130 not moved.]
[Amendments Nos. 131 and 132 not moved.]
[Amendment No. 133 had been withdrawn from the Marshalled List.]
Lord Coleraine Lord Coleraine moved Amendment No. 134:
Page 192, line 46, leave out ("999") and insert ("90").
The noble Lord said: This is a simple probing amendment. I wish to inquire of my noble friend why the term granted under leaseback is to be 999 years; rather than 90 years. I beg to move.
Viscount Goschen: By far the most important of the express terms of a leaseback are that the lease should be for 999 years and that it should he at a peppercorn rent. We think it is important that the former freeholder should have the right to acquire art interest which is as near as possible to the freehold interest which he formerly enjoyed. The provisions do not though prevent the grant of a shorter term if the parties are in agreement or if it is directed by a leasehold valuation tribunal that a departure from the express terms should be made.
The amendment would not preclude the creation of a longer leaseback—perhaps for a term of 999 years. As I have just mentioned, that can be done either by the mutual agreement of the parties or by the direction of a leasehold valuation tribunal. It does, however, remove the former freeholder's right to a 999-year lease, and unless he could reach an agreement with the nominee purchaser, he would have to apply to the leasehold valuation tribunal, thus causing delay to the process of enfranchisement.
The important point is that a 90-year lease is worth significantly less than a 999-year lease. The effect of reducing the length of the term to 90 years would be to increase the cost to the tenants of purchasing the freehold, including the parts to be leased back. In some cases it could put beyond them the cost of enfranchisement as landlords might refuse to take a leaseback on such terms.
I hope that I have reassured my noble friend that it is right that the express term should be 999 years. He will be aware that either party may request a shorter

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term if they wish, although in the case of mandatory leaseback both parties must agree to a shorter term. In those circumstances, I hope that my noble friend will withdraw the amendment.
Lord Williams of Elvel: Is not it also true to say that it would deprive secure tenants occupying any flat in a block which had collectively enfranchised from exercising the right to buy since the local authority's or housing association's interest would not be sufficient to permit the grant of the 125-year lease required under the right-to-buy provisions?
Viscount Goschen: That is basically right, yes.
Lord Coleraine: I am grateful to my noble friend for his reply. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 8, as amended, agreed to.
Clause 33 agreed to.
The Earl of Lytton The Earl of Lytton moved Amendment No. 135:
After Clause 33, insert the following new clause:
("Managing Trustees
.—(1) Where the right to collective enfranchisement is exercised in relation to any premises to which this chapter applies there shall also be acquired on behalf of the qualifying tenants the interest of any managing trustees.
(2) Compensation for the loss of their interest shall be paid to the managing trustees by the nominee purchaser.
(3) Any dispute about the compensation payable shall be referred to the Leasehold Valuation Tribunal for determination.").
The noble Earl said: I speak also to Amendment No. 136, because the amendments relate to similar, although not identical, factors. These are probing amendments. I wrote to the Minister in connection with my concerns, which I expressed on Second Reading, that the right of appeal to the Lands Tribunal was not on the face of the Bill. He kindly replied and explained that the provisions were to be found in housing legislation. I am a little doubtful as to the adequacy of that provision. Those who are interested in the operation of the Bill should be able to find the provisions in the Bill itself.
Lord Rodger of Earlsferry: I am reluctant to interrupt the noble Earl, but I thought that the Deputy Chairman mentioned Amendment No. 135. Unless I am mistaken, the noble Earl is speaking to Amendment No. 136A.
The Earl of Lytton: The noble and learned Lord is correct and I apologise to the Committee. Amendments Nos. 135 and 136 relate to managing trustees and managing companies which are responsible for the management but are not bodies which themselves have an interest in the freehold.
As matters stand, those bodies would not be enfranchised under the provisions of the Bill. That is an oversight, because one of the main causes of discord among occupiers of blocks of flats in particular is their inability to control the management of the building. There should be a provision whereby, on enfranchisement, the interests of managing trustees and managing companies are brought within the auspices of control by the tenants in that building. So
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the two amendments set out to cover situations whereby the bodies which are not possessed of enfranchisable rights—in other words, they do not have an interest in property—are, nonetheless, brought within the ambit of the Bill and therefore under the control of the enfranchising tenants. I beg to move.
Baroness Hamwee: While I take the point made by the noble Lord about dealing with the position of managing trustees, both amendments raise the question of compensation for their loss of interest. That is an interesting concept to introduce, because I should have thought that managing trustees, by definition, existed to manage and have responsibilities. The remuneration they receive is for carrying out those responsibilities. It is not as if they have an interest in the property which needs to be compensated. Perhaps I have misunderstood the amendment.
The Earl of Lytton: Perhaps I may explain, as I understand it—this is something that was brought to my attention by the working party of the Royal Institution of Chartered Surveyors, which has been following the Bill closely and has given it considerable scrutiny—many members of the working party were aware of situations where the management, as opposed to the freehold ownership, was a separately constituted body. Presumably that body must balance its books in some way and perhaps it has obligations towards its organisation or contractual matters. I am not sure how widespread the situation is but I know that the members of the working party were unanimous in their view that the issue should be addressed and was a proper item for rectification in the Bill. The words:
"compensation for the loss of their interest"
relate to a commercial interest and not an interest in property. It would be compensation for the disruption of that interest due to the cessation of that management company or management trust being involved in the management of that building. That is as I understand the matter. I beg to move.
Lord Strathclyde: The noble Earl's new clauses would require the nominee purchaser to acquire the interests of any managing trustees and managing companies whether or not they are party to the relevant leases. The Bill provides that only those intermediate interests which are superior to those of qualifying tenants must be acquired in addition to the freehold. Leasehold interests in common areas or appurtenant property may also be acquired.
The role of managing trustees or management companies is likely to be such that they will have a contractual arrangement with the freeholder. Since a contract for services is not an interest in land it will not be subject to acquisition by the nominee purchaser. Of course if the managing trustees are doing a good job the enfranchising tenants may wish to continue the relationship with them.
If they are not and the tenants do not wish to continue the association, there are two likely outcomes. One is that the freeholder and managing trustees will have ensured that the contract between

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them provides for the termination of the contract in the event that enfranchisement occurs. If, however, that is not the case the second outcome is that the contract will be frustrated, which means that it is discharged from further performance. Subject to any specific provision in the contract payments made "up front" are recoverable, but where there has been part performance of the contract the party supplying the goods or services is entitled to compensation for such as have been supplied to date.
In situations where the managing trustees or company are a party to the leases of the qualifying tenants they will have to agree to any variation of those lease terms if the tenants no longer wish to use their services.
One final situation springs to mind; it is that where the managing trustees or company has a head lease of the common parts, as is often the case. In such circumstances the participating tenants have the right to acquire that lease but they do not have to do so. Clearly, if the lease is not acquired the managing trustees or company will continue unaffected in their role. If the participating tenants do acquire the lease of the common parts the managing trustees or company will be compensated in the same way as any other relevant landlord.
We consider the amendments to be inappropriate and, in certain circumstances, unnecessary. However, I recognise that the noble Earl said they were probing. The Bill provides for the interests of managing trustees and companies to be acquired in certain cases. In other cases the contractual nature of their interest or the performance of their role, whether as party to the leases or otherwise, will determine the effect of enfranchisement. I do not think the tenants should be required to acquire such interests. I hope the noble Earl will withdraw the amendments.
The Earl of Lytton: I thank the Minister for his reply. He has a point in saying that the wording of the amendment would insist on the interests of managing trustees and managing companies being acquired. Clearly it is not right that there should be an added burden on franchising tenants. On the other hand, I remain anxious that written into leases in any particular development may be an obligation to pay contributions towards managing trustees and managing companies. I understand that although the freehold may be acquired the inferior leases will remain in place but with a different freeholder. That appears to create a hiatus where the management company remains without portfolio because it exists in isolation. I shall consider the matter further but in the meantime I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 136 not moved.]
Schedule 9 agreed to.
Clause 34 agreed to.
8.15 p.m.
The Earl of Lytton The Earl of Lytton moved Amendment No. 136A:
After Clause 34, insert the following new clause:
("Right of appeal to Lands Tribunal
.—Where any matter under this Chapter fails to be determined by the Leasehold Valuation Tribunal there shall be a right of appeal to the Lands Tribunal.").
The noble Earl said: I tried to speak to Amendment No. 136A earlier but in an inappropriate place. I shall speak also to Amendment No. 148A. The Minister kindly wrote to me stating that it was unnecessary for there to be on the face of the Bill a right of appeal to the Lands Tribunal. In looking at the Bill I considered that the matter should be self-contained and it should not be necessary for someone interested in the procedures to look through Housing Acts. I shall endeavour to offer an olive branch to the Minister and say that, if he undertakes to point out in guidelines sent to tenants that there will be a right of appeal from the Leasehold Valuation Tribunal to the Lands Tribunal, I shall be entirely satisfied. I beg to move.
Lord Rodger of Earlsferry: The noble Earl recognised the fact that the position is covered by the provisions in Clause 81(10). There one finds reference to the Housing Act 1980, which provides the appeal machinery. We believe that those interested in the jurisdiction of the Leasehold Valuation Tribunal can find within the four corners of the Bill guidance as to the appeal provisions.
I note the point which the noble Earl made. I am not sure whether it is intended to issue guidance but if guidance is issued on an official basis I note the noble Earl's point that the matter may be appropriate for inclusion.
The Earl of Lytton: I thank the noble and learned Lord for that reply. On that basis, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Deputy Chairman of Committees: If Amendment No. 137 is agreed to, I cannot call Amendments Nos. 140 and 148.
Clause 35 [Right of qualifying tenant of flat to acquire new lease]:
Lord Strabolgi Lord Strabolgi moved Amendment No. 137:
Page 42, line 3, leave out from ("flat") to end of line 7.
The noble Lord said: This is an all-party amendment to remedy a serious omission in the Bill as it seeks to make lease extensions an option for all flat owners, regardless of their block's eligibility for enfranchisement. As drafted, the Bill gives flat owners whose properties are ineligible for enfranchisement under Chapter I of the Bill the right to extend their leases at market value for a further 90 years. Leaseholders in properties which are eligible who fail to enfranchise because they cannot convince sufficient numbers of their neighbours to support the hid will not have a statutory right to extend their leases. That mutual exclusivity must be removed if the legislation is to work in practice, otherwise a second market in second-class flats, unable to enfranchise but with diminishing leases, looks sure to develop.
As the Bill now stands, all flat owners in blocks eligible for enfranchisement but unable to raise the two-thirds majority necessary for the bid will be left without any benefit from the legislation. In addition to

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continuing to suffer from any management problems—and this was alluded to by the noble Earl, Lord Lytton, on a previous amendment —they are bound to see their flats suffer from a fall in value relative to similar blocks which have either enfranchised or, if not eligible to do so, have taken up the option to extend their leases. Their predicament may well be compounded by new tensions between those leaseholders who were willing and able to enfranchise and those who have frustrated the bid by deciding against participation.
The Government claim that, if flat owners had the choice, some who would otherwise have supported enfranchisement would opt for a renewed lease instead, possibly in sufficient numbers to block the necessary two-thirds majority needed for enfranchisement. However, the Consumers' Association conducted a recent survey of long leasehold flat owners. It showed that half the respondents were interested in buying their share of the freehold, whereas only one in 10 said that they would pay the same—I wonder whether the Minister on the Front Bench will listen to what I am saying because this is an important survey carried out by the Consumers' Association—for a lease extension.
Clearly, the option to purchase the freehold and so gain control of management and the power to grant extended leases is much more popular. Surely the reason for that is evident. As the Consumers' Association survey and postbag of complaints showed, the main problem of the long leasehold system is not so much selling properties which have dwindling leases as bad management. That is one of the reasons why the Government have put forward this Bill, which in many ways is extremely good.
The survey revealed a relatively high proportion of first time buyers and pensioners within the leasehold flat owner population. They are likely to have limited financial resources. In any block eligible for enfranchisement, the number of those opposing the bid will be inflated by those who simply cannot afford it. Thus, the block may fail to realise the necessary two-thirds majority and all the flat owners will be left without any benefit from the legislation.
Their problems will not be lessened by seeing comparable blocks which have enfranchised or which have been able to extend their leases experience a relative rise in value. Of course, there are many other long leaseholders occupying flats who are foreigners, here only for a short time, who may not be interested in buying the freehold but would be interested in extending their leases.
Many long leaseholders would therefore be left without any benefit at all from the legislation. That is different from what we were led to believe at the time of the election. I certainly gained the impression from the Government that, if long leaseholders could not enfranchise, they would be able to extend their leases. That appeared in many election manifestos.
Unless that defect is put right, a long leaseholder holding a lease with only 30 years or fewer to run will be in a difficult position. He cannot sell the lease as prospective buyers will be unable to obtain a
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mortgage. The Government claim that, when the original lease lapses, the leaseholder will have the right to a continuing statutory tenancy. Indeed, the noble Lord, Lord Strathclyde, said that on 15th March at col. 1243. However, that protection—this is not generally known and it is very important—will last only until 1999, which is not very far ahead, as the law was changed a couple of years ago.
At present, security of tenure is guaranteed by Part I of the Landlord and Tenant Act 1954 to certain residential tenants at the expiry of long tenancies. However, Part I is to be replaced after 15th January 1999 by Section 186 and Schedule 10 to the Local Government and Housing Act 1989. That means that long leases coming to an end between 1st April 1990 and 15th January 1999 will be changed from 16th January 1999 to assured tenancies under the 1989 Act.
I suggest that the difference is important as it means that tenants, as former long leaseholders, will lose the protection of the 1954 Act and fair rents. The only assurance in a so-called tenancy is that it gives the landlord the assurance that he may ask for any rent he may like to. Long leaseholders whose leases are diminishing will be in an extremely difficult position. They cannot extend the leases under the Bill. They cannot sell the remaining portion if it is too short for a mortgage. Against their wishes, they will become so-called assured tenants in a few years. They will be at the mercy of their landlords.
That is an unsatisfactory state of affairs. Unless something is done, the Government are laying up a great deal of difficulty for themselves by the end of the century. I beg to move.
Lord Coleraine: I support the amendment so cogently moved by the noble Lord, Lord Strabolgi. I support it briefly because my views on the matter are well known to the Committee. I believe that I may have been the first to bring this to Members' attention on Second Reading.
I consider that the mutual exclusivity between the right to collective enfranchisement and the right to a long leasehold is a serious flaw in the Bill, most particularly because it deprives the lessees who are satisfied with the existing management of their building of the right to the benefits of the Bill which they would wish to enjoy under their existing management.
Again and again during the early stages of the Bill I have endeavoured to point out places where the mutual exclusivity makes a nonsense of the provision being discussed. Again and again it seemed to me that we should do better to consider the Bill in the light of some entirely different provisions relating to leasehold extensions. I hope that, before we have finished our discussions this evening, my noble friend will make a statement which will enable us to feel that the pleas that we have made have been listened to.
The Earl of Lytton: I support the amendment moved so eloquently by the noble Lord, Lord Strabolgi, and supported by the noble Lord, Lord Coleraine. I agree with everything that they said.
It seems to me that two principles are at stake in this Bill: the first is that tenants should not be held to

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ransom by lease extensions; the second is the right to manage. Those can be achieved without insisting on tenants going through the fiery hoop of enfranchisement, particularly where it is clear that it will be a tortuous, expensive and long-winded process. I support this automatic alternative right to a lease extension. It still leaves me with the problem of how to deal with a tenant's right to manage, but I hope that we may deal with that later on in our discussions on the Bill.
I strongly support the amendment. It is entirely right and proper, for the reasons which the noble Lord, Lord Coleraine, mentioned, that there should not be a particular category of tenant who falls between entitlement to enfranchisement and entitlement to a lease extension. It seems to me quite wrong that that should be allowed to happen.
Baroness Hollis of Heigham: I shall speak also to Amendment No. 140, standing in my name and that of my noble friend Lord Williams. That is a fall-back position from Amendment No. 137.
The Bill encourages enfranchisement, reducing leasehold as a form of tenure, but there are limitations on eligibility. We believe that some of those are reasonably sensible; for example, the 21 year rule. We believe that some are unnecessary; for example, the low rent rule. We believe that some need qualification; for example, the resident landlord provision and the 10 per cent. threshold on commercial property. Because of those limitations, it is calculated that about only 40 per cent. or thereabouts of present long leaseholders will be eligible to enfranchise. Of that 40 per cent., the number able to muster the necessary two-thirds majority vote will of course be even fewer. Therefore, if the Government wish to pursue the aim of their Bill—that is, to reduce leasehold as a form of tenure—I hope that they will give full support to the amendments.
As the noble Earl, Lord Lytton, said, throughout the debates we have recognised the double problem—the problem of the bad landlord and of the diminishing lease. Enfranchisement clearly deals with both of them. But because a wide number of leaseholders are debarred from enfranchisement, the Government have offered statutory extension which will deal with one of those two problems—the diminishing value of the lease. Presumably leaseholders will have access either to the 1987 Act or possibly to some provisions in subsequent amendments which will be moved later that will allow the right to management.
The Bill seeks throughout—and, in our view, rightly—to privilege enfranchisement as a way to overcome the problems of leasehold with the problems of the diminishing asset and those of the bad landlord. For those who legally cannot enfranchise there is the right of extension. So far so good. Moreover, so far those clauses have passed with the support of this Chamber, and especially with the support of these Benches, without which, I remind noble Lords on the Government Front Bench, the Bill might well have been wrecked by now. I am sure that the Government accept that fact and that it is something they bear constantly in mind.
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But along with the low-rent test, one of our strongest objections is to this part of the Bill. If you can enfranchise you must; but you can extend only if you are legally disqualified from enfranchisement. If you can enfranchise you must; but if you can and do not do so, you are not able to extend. In another place the Government refused to let leaseholders choose which of those two tracks they wished to pursue. They feared that if people could extend they would and, as a result, they would not enfranchise. Therefore, they feared that people would be picked off, would not therefore be able to muster the two-thirds vote and enfranchisement would not follow.
We understand the Government's thinking on the matter, but we believe it to be wrong and profoundly damaging in its consequences. My noble friend Lord Strabolgi has already quoted consumer research findings which reveal that over half would prefer to enfranchise if they could but that only one in 10 would seek to extend. Why is that? It is partly because of the British pressure—obsession, if you like—for owner occupation. But extension helps only with the problem of a diminishing asset. But as only 3 per cent. of leases are for less than 60 years, and given the fact that most conversions to leasehold tenure occurred in the past decade, that appears not to be the most salient problem in people's minds. What people are most concerned about are bad landlords. That is why they prefer the route of enfranchisement to that of extension. Further, given that there is little cost difference, I believe that they are obviously correct.
There is little evidence to suggest that if people can enfranchise they would prefer instead to extend. If that is right then the whole basis of the Government's case is flawed. Instead, we will find blocks of flat where, although people can qualify for enfranchisement, and where many of them might wish to, they will not be able to reach the necessary two-thirds majority; but under the Bill they will not be able to extend because the Government fear that if they can, they will not enfranchise.
What sort of people are we talking about? Let us take, for example, a block of 12 flats. Bearing in mind the average stay of flat-holders of, say, six years, one or two of the people in the block may be in the process of buying or selling and simply not want the bother, the hassle or the financial commitment when they are already worried about the financial implications of buying and selling. Another couple of occupants may well be elderly and not want the hassle or the expense involved. Another one or two residents may have financial problems; for example, one of them may be unemployed or another couple may be in the process of seeing their marriage perhaps on the rocks and may not be able to see where the future lies for them. That means the six remaining qualifying tenants cannot enfranchise in the foreseeable future. But because they can enfranchise but do not acquire the necessary two-thirds majority, they cannot extend. As a result they are stranded with no way forward.
What are those people supposed to do? Short of winkling out the elderly, employing the unemployed or acting as marriage guidance counsellors to those who are facing a marriage breakdown, they are stuck.

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That is the difficulty with the twin-track theme which underlies the Bill. If you come to a dead end down one track, the Government give you no way to go back and then go down another track, which is what most of us do when we face dead ends. Amendment No. 137 gives a choice to individual leaseholders of which track to pursue from the very beginning.
The fall-back amendment tabled in my name and that of my noble friend Lord Williams (Amendment No. 140) would still privilege enfranchisement, which is what the Government seek to do. However, if it is clear from the demographic, social and financial profile of the block that enfranchisement is not realisable in the reasonable future, then those individual leaseholders should have the right of extension. Our amendment suggests that that may take place after two years, five years or any period which makes reasonable sense. After all, if such individuals do extend, it does nothing to inhibit enfranchisement at a later stage.
But, in all fairness, there is a real problem here and one which the Government are failing to address. They must find a way for those who cannot enfranchise (even though they are legally qualified to do so) to protect their financial and property interests. I hope the Government will indicate in their response that they are moving in that direction.
8.30 p.m.
Lord Boardman: I find it somewhat surprising that on all sides of the Committee there seems to be a complete forgetfulness of the fact that parties to a leasehold contract have entered into a contract and that, whatever the contract may have been, it is one which they entered into. When they did so they paid their money, took advice and decided what term they were buying—for example, how long it would last—and what they had to set up in the way of amortisation, and so on. Yet we have heard from the noble Lord, Lord Strabolgi, and others that we should forget the very commitment that they took on and entirely forget the fact that they agreed to take on a lease for 30 years, 50 years or 90 years for so much with provisions. It is said that we should have sympathy with them for having made the wrong decision and, as they have made that wrong decision, we should now agree to compensate them and allow them to make good by giving them the opportunity to extend their leasehold, buy it, or whatever it may be. Never mind the poor freeholder on the other side of the contract. We can forget him. He has just got to do what we tell him to do. I find that suggestion quite remarkable.
The noble Lord, Lord Strabolgi, referred to these people being left without any remedy. When such people entered into the contract, did they enter into it thinking they would have a remedy when it reached the last 30 years? Did they think that some kind government would come to their rescue and say they could have a new lease? Alternatively, did they say, as most sensible people did, "No, we are entering into this; we realise that we shall have to set something aside and that we must make provisions"? They were
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not left without any remedy; they were left in exactly the same situation as they were in when they first contracted.
The noble Lord also referred to bad management. I know that there are many complaints about it. I have tabled Amendment No. 168B which I hope will deal with that subject. I understand the complaints about bad management service agreements. But that has absolutely nothing to do with this clause. I believe my noble friend has tabled Amendment No. 138 which specifies flat owners to whom the clause should apply. I very much welcome it and I hope that I shall have the opportunity of supporting him on that matter. It is primarily a matter for the resident leaseholders.
I believe that one Member of the Committee referred to the Conservative electoral pledges. I believe that it was the noble Lord, Lord Strabolgi. Yes, I believe that the Conservative Government should fully, wholly and exclusively comply with the pledges that they made in the manifesto. As my noble friend knows, I may or may not agree with all of them. However, once they are made, I feel bound by them.
I believe that the noble Baroness, Lady Hollis, said that only 40 per cent. of the people we are discussing will be entitled to enfranchise. Did that 40 per cent., or the 60 per cent. who cannot enfranchise believe they would be bailed out by a kindly government when they entered into the agreement? I know we have a kindly Government but I hope they are not as kind as all that. I sincerely hope those people did not believe they would be bailed out when the time came. This amendment, to use the words of the noble Baroness, is flawed. I hope my noble friend will reject it.
Lord Williams of Elvel: Before the noble Lord sits down, I hope I may ask him a question. Does he recall that those who entered into a closed shop agreement signed a contract, and that contract was overridden by statute law introduced by government and passed by Parliament? In that case statute law was overridden in exactly the same way as contract law is being overridden in this case. Friendly employers were bailed out —I use that expression if that is the expression the noble Lord likes—by a friendly government. I do not believe the noble Lord has many legs to stand on.
Lord Boardman: I have avoided repeating my Second Reading speech as comments have been made about that. The only justification for any government bringing about the breach of a contract is if there is a greater public interest in so doing. I shall not enter into a debate with the noble Lord, Lord Williams, as to whether there was a greater public interest in the case he mentioned. But certainly there can be no public interest here in the context of this matter.
Lord Coleraine: We are not talking about a breach of contract here. To grant a lease extension is not to breach an existing contract; it is to create new rights on top of the contract when it comes to an end.
Lord Boardman: I am afraid I cannot agree with my noble friend on that. To say that when a contract that

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is made comes to an end the other party to it must be compelled to renew it on terms which are laid down in statute must constitute a breach of contract.
Lord Monson: I entirely agree with what the noble Lord, Lord Boardman, has just said. Of course it is an interference with the right of contract to tell someone they must renew a contract, whether they wish to or not, when the contract has originally been freely entered into. The noble Lord, Lord Strabolgi, based his argument on the assumption that in every case the leaseholder is an individual of relatively modest means who is short of cash and is therefore dependent upon a mortgage and is anxious to stay in the property for evermore. The noble Lord claims that for that and other reasons the leaseholder is anxious and indeed desperate to extend his lease at all costs. That may be so in many cases and perhaps even in most cases. However, there exist other leaseholders who knowingly and willingly buy a lease of short or medium length for two reasons: first, because it is cheaper to buy than a freehold and they have no need of a freehold and, secondly, it is cheaper than paying rack-rent on a similar property. If one buys the property with cash, one is not dependent upon a mortgage. Those people have no wish and no need to extend the contract. They entered into the arrangement quite voluntarily. I am talking now not only about people in those parts of London where mainly only leasehold properties are available but also about people in the country where leasehold properties are relatively rare.
As I pointed out on Second Reading, there are individuals—I know directly of one case and I have heard at second hand of many others—who inherit a large house, possibly in London but more probably in the country, and who cannot afford to maintain it, perhaps because the property is too large for present day living. Accordingly they convert it into a number of flats. They live in one of the flats and sell the others on a lease of medium length—let us say 50 years—in the hope that eventually the family fortunes may revive and in 50 years' time the property will revert to a grandson or granddaughter who will then be in a position to recreate the house into one undivided unit as it was originally.
If this amendment referred only to large, purpose-built blocks owned by individuals who are basically freeholders for purely financial reasons and who have no emotional affinity or historical sympathy for the property in question, there might be something to be said for it. However, the amendment does not confine itself to large purpose-built blocks. It extends to possibly relatively small houses that are converted into five or six flats. For that reason I think it is extremely unfair on the kind of freeholders about whom I have just been speaking. I could not support the amendment as it stands.
8.45 p.m.
Lord Carnock: I wish to support this amendment and to adopt the arguments which have been deployed before the Committee in support of the amendment. I wish to say a few words about the suggestion that
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sacred contracts are being set aside. In the field of real property, contracts very often create tenures. That is the case with long leaseholds.
In the history of our real property law there are many examples of tenures being either abolished or radically changed. I have only to refer to the copyhold tenure which affected vast quantities of land in England and the rights of the lords of the manor. That disappeared through Lord Birkenhead's legislation. I refer to the abolition of the military tenures in 1660 which brought our law from the medieval period into the modern period. I refer—this is a slightly different line of argument—to the abolition of tithes which took place over a period of 130 years from about 1836 to 1966. That caused great upheavals in private rights as it was not only the Church that owned tithes. Lay ministers were also involved. I remind the Committee of the changes that took place in Ireland with the land laws. Finally, I refer to the enclosure Acts which created great changes in our commons and the extinguishment of the rights of commoners. As I see it, there is nothing that departs from precedent in making a change in our leasehold system.
Baroness Hamwee: The Committee will be grateful for that historical perspective which, I suspect, is not one that is included in the Government's brief. That helps us put what we are doing into perspective and it is most helpful. In re-opening the question of sanctity of contract—I thought we had decided that matter at an earlier stage of the Bill—I, for one, fail to see the logic of applying different arguments to tenants who happen to live in a building where the process of enfranchisement goes forward, to those who fall within subsection (2) (b) of Clause 35 who are simply disqualified, not by virtue of anything that is personal to them or anything that they would have known about when they entered into the contract but because the right to collective enfranchisement is not exercisable with respect to the particular building or the particular part of the building because of the actions or non-actions of other people. The noble Baroness, Lady Hollis, has referred to that matter.
I understand the Government's reluctance to allow what perhaps 1 may call a pick-and-mix approach to enfranchisement and lease extension from the very start. I am conscious of the need to address the problem of the bad landlord. Not every landlord is a bad landlord but there are enough for us to be worried about their tenants. Therefore I think it is right to give priority to enfranchisement rather than to extension. For that reason I support Amendment No. 140 to which my name has been added. I do not think it is right to disfranchise certain leaseholders altogether from any remedy. However, I suspect the noble Lord, Lord Boardman, will tell me there is no wrong to be remedied.
The Government must fulfil what was generally understood to be a promise to deal with the question of bad landlords. They must look at this whole issue. They are doing so through the Bill. By and large the issue is being tackled in the right way through this Bill. It would be wrong to leave a group of people without

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any way forward as a consequence of the circumstances or the decisions not of themselves but of other people.
Baroness Gardner of Parkes: In spite of the statements made that more people would prefer to enfranchise than to extend their leases I am not convinced by that argument. I believe that a great many people would be very happy to deal directly with the freeholder and arrange a new lease. That is one of the reasons why the Government do not wish to give them both options. The Government fear that such people will not be sufficiently keen on enfranchising if they can be sure of a new lease.
Therefore, I should like to put forward a novel suggestion for the Government to consider: those people who would be entitled to a longer lease, having failed to achieve enfranchisement, should be able to extend their lease only if they had voted for enfranchisement. That would ensure that the Government's first choice of enfranchisement would be met. That suggestion would cover the people who wish to enfranchise but cannot obtain a majority. Those are the people for whom I feel most sympathy. They will have been prevented from enfranchising by others in the same block because of their inability to achieve the majority they require.
That is just a thought for the Government to consider. I do not believe that it conflicts with the Government's wish for enfranchisement to be the first choice. It would not apply to those who are ineligible, because they fall within a different category. If the block cannot be enfranchised there is an automatic entitlement to a long lease.
I am a little concerned by the next amendment which is to be moved by my noble friend on the Front Bench because that removes everyone but residents. Therefore, the noble Lord, Lord Strabolgi, may not have realised when he spoke on that point that, if the next amendment is passed, what he said about companies being able to obtain extensions would not be correct. There will be a strict residential qualification if that amendment is accepted. I appreciate that we are not speaking to that amendment but the two issues appear to be linked.
I have great sympathy with the people who wish to enfranchise and cannot do so. I ask the Government to give some thought to that suggestion.
Lord Selsdon: It seems that on these amendments there are on these Benches fewer rumblings from the shires. I ask myself why. I can see the purpose of the amendment. It is a perfectly fair one. It is well thought out and justified. However, I should like to consider the matter from the point of view of a good landlord.
If I am right a good landlord owning many properties, particularly listed buildings, actively seeks to encourage his tenants to extend their leasehold interest as the lease comes to an end. Here there is a difference between good landlords and bad landlords and between those who think of future redevelopment rights and capital gain and those who are genuine landlords looking for good tenants, preferably without intermediaries.
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If the amendment is passed it will undoubtedly help those who find, for one reason or another, that they are unable to enfranchise. However, we have not said anything about the large number of people who may not wish to enfranchise but wish only for a longer lease. They may be perfectly happy with their existing landlord, who manages the block well and provides gardens. Here I am thinking more of London and of the great estates.
Some people say that the purpose of the Bill is to differentiate between good and bad landlords. A good landlord is also from time to time a canny landlord. He may not whinge too much, although I have detected a large amount of whingeing in this Chamber in recent weeks. A good landlord has to find good tenants in order to maintain his livelihood. He looks for good tenants. The best tenant of all is the existing tenant who has behaved well and wishes to continue to live in the property.
The amendment is about freedom of choice as well as about extending rights. My noble friend on the Front Bench now has the habit, after a good dinner —which he may not have had tonight—of making concessions to all sides of the committee. I ask him when he replies not to say that he will consult with noble friends but, as a true Scot, to accept the amendment. In that case I shall support him on Amendment No. 138.
Lord Strathclyde: The noble Lords have moved their amendment on the grounds that it is unfair to tenants if they do not all have an individual right to buy a new lease on their flat. It is claimed that leaseholders in enfranchisable blocks will somehow become second-class citizens if they do not collectively buy the freehold.
It is quite true that the amendment would give individual leaseholders a choice, but the arguments miss the point. Part I of this Bill concerns a concept. We seek to reform residential leasehold tenure by delivering enfranchisement, and the purpose of the Bill is to guide owners of flats down that route. We aim to allow flat owners to take collective control of their property and manage it to suit themselves, not a remote commercial landlord. Enfranchisement is a worthwhile goal, and almost all noble Lords who have spoken in this debate today agree with us. Nothing else would change the landlord.
It is unfortunate that collective enfranchisement cannot be a universal right. Some exceptions have to be made, for reasons that we debated extensively when we considered various amendments which sought to extend or curtail the eligibility criteria. To help those leaseholders whose flats regrettably cannot be enfranchised, we decided to allow them to relieve the burden of declining lease value and saleability by constructing a mechanism to allow leases to be renewed for longer periods. Otherwise they would derive no benefit whatsoever from the Bill.
Those who are seeking to change the Bill here appear to be backing away from the principle of promoting collective enfranchisement. It seems that they want lease renewal for all as the central plank of

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this Bill, with enfranchisement as the default option. That is not sound policy. It is vital to these reforms that leaseholders actually control their property.
Amendment No. 140 is a variation on the theme. It offers an additional right to lease renewal where the building is eligible for collective enfranchisement where at least two years have elapsed since Chapter I was brought into force and no claim to enfranchise collectively has been made. I am sure that the effect would be the same: collective enfranchisement would be less likely. The waverers and doubters would merely procrastinate for two years, obstructing and thwarting those in the block who want to proceed but cannot, either because they are short of the last few crucial numbers to give the mandate to start the process, or perhaps because the cost to the remaining participating tenants would become too great.
The argument that individual tenants in an enfranchisable block will be disadvantaged if a buy-out does not take place is spurious. The remedy of enfranchisement is always open. It is not time-limited. If one attempt is not made, or fails, there is nothing to stop the interested tenants trying again. As Robert the Bruce's spider taught us, if you do not succeed at first, try, try and try again.
Baroness Hollis of Heigham: Wait for the Maastricht Bill and my noble friend Lord Bruce of Donington!
Lord Strathclyde: Indeed.
The flexibility of the procedures under Chapter I permits all kinds of different arrangements to be tried to get a successful collective enfranchisement under way. The noble Baroness, Lady Hamwee, understood that very well. She said that the principle of the Bill concerned enfranchisement. The amendments weaken that. They reduce the ability of tenants to end their leasehold tenancy and enfranchise.
It has come as something of a surprise to me to hear so many Members of the Committee who over the past few weeks have urged the Government to enfranchise come forward with amendments which would not enfranchise but would allow leaseholders to continue the tenure of leasehold.
I am faced with a confusing issue. Members of the Committee opposite and some of my Back-Benchers believe that we should go for leasehold extension. In a powerful speech, my noble friend Lord Boardman said that we should not accept the amendment. I suspect that on this occasion he is probably right.
9 p.m.
Baroness Hamwee: The Minister states that the Bill is about enfranchisement. Why do we have a section on lease extension? Why are the rights of enfranchisement not much wider? Why are they as constrained as they are in the first section of the Bill?
Lord Strathclyde: There is a clear answer to that. I am sorry if I have not explained previously to the Committee why we have introduced leasehold extension.
Throughout the Bill we have sought to encourage a collective enfranchisement. But we accept that some
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tenants for a variety of reasons may not qualify for enfranchisement. In order to help those who cannot be part of the enfranchisement, we have offered them the opportunity to extend their leases. They lose nothing by not being able to enfranchise. We wish to encourage those who cannot extend their leases to enfranchise.
Baroness Hamwee: They cannot enfranchise because of the rules set out in the Bill. I refer to the two-thirds rule, and so on. If one accepts that certain thresholds have to be overcome, if they cannot be overcome, then trying, trying and trying again is not likely to solve the problem. I shall not prolong the debate. I do not believe that the Minister has answered the question regarding choice. Some people are disqualified and they will never have the choice.
Lord Strathclyde: Perhaps I may deal with that point. The majority is of course two-thirds of two-thirds. In an earlier debate it was demonstrated that one could enfranchise a block with as little as 44 per cent. of the tenants. I accept that argument. However, if we continue to lower the thresholds then we create a democratic deficit which I believe would lose us support about the intentions of the Bill. I do not believe that the two-thirds of two-thirds is a wrong figure. I believe that it is a most appropriate figure. We wish to encourage people collectively to enfranchise. If they are not eligible to do so, it is right that they should have leasehold extension. Otherwise, we should leave the matter as it is.
Baroness Hollis of Heigham: In his reply the Minister has not honestly and fully addressed the queries raised from this side of the Chamber. Perhaps we did not put the arguments powerfully enough. We emphasised clearly that we supported the principle of seeking to privilege enfranchisement. We did not seek a pick-and-mix solution. We sought to privilege enfranchisement. We did not in any sense challenge the need for two-thirds majority because we accepted the statistics that the noble Lord cited. We are at one with the Minister in that if tenants cannot exercise a collective right to enfranchise, they should be offered an individual right to extend. Under the provisions of the Bill at present one cannot enfranchise because of such matters as the 10 per cent. rule, the low rent rule and so on.
We ask the Minister to state that there is another hurdle: that one cannot achieve the requisite majority. It is simply unfair that the rights of individuals to enfranchise should depend on the temporary lottery of others' willingness to exercise those same rights. What right is it when it depends on the lottery of others being willing to exercise that right? That is why we urge that if the collective right to enfranchise cannot be exercised, one should have recourse to an individual right to extend. Otherwise, people are left stranded.
Lord Boardman: Before my noble friend replies, perhaps I may intervene. Has the noble Baroness understood the issue? In order rightly to fix a base below which it would be totally uneconomic and impractical to enfranchise—the figure for practical

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purposes is fixed at 41 per cent.—at present the Bill provides that those who are unable to enfranchise because the figure has dropped below that 41 per cent. have the bonus issue (as I call it) of being able to extend their lease. That is an extremely generous and proper course to take. It means that where it is impossible to attain the minimum number needed to enfranchise, people should not be entirely excluded but will have the opportunity to extend the lease, which in many cases I believe is a much more valuable opportunity.
That is what the Bill provides. The amendment destroys the provision. For that reason, I oppose the amendment.
Lord Strathclyde: The noble Baroness, Lady Hollis, made some interesting observations. However, I should like to put one question to her. First, does she believe that if the amendment were passed fewer people would seek to enfranchise their blocks because it would be easier to extend their leases than to go through the process of enfranchising their blocks? Secondly, is that situation desirable if the whole purpose of the Bill is to enable greater enfranchisement?
We are discussing an important amendment. If the amendment were agreed, it could change substantially our initial intentions in the Bill. My noble friend Lady Gardner of Parkes made what she called a novel suggestion. It was novel. It may have some merit. We have three proposals before us. The noble Lord, Lord Strabolgi, proposed that leasehold extension should be automatic. The noble Baroness, Lady Hollis, proposed that leasehold extension should become automatic after two years. We now have the suggestion of my noble friend Lady Gardner of Parkes that leasehold extension should apply only to those who have tried to enfranchise—they have had a positive attitude towards it—but because they have failed the two-thirds test they would be unable to do so.
Having heard the debate, I wonder whether it is appropriate for us to seek to decide the best way to go forward by a Division, and whether perhaps I should agree to consider some of the proposals that have been put and decide which is the correct one.
Baroness Hollis of Heigham: The question was put directly to me by the Minister, and I shall not take up the Committee's time for very long. He asked whether I believed that if Amendments Nos. 137 and 140 were passed, it would reduce the number of people seeking enfranchisement. The answer to that is no, provided that we can trust the pledge of the noble and learned Lord the Lord Chancellor, as I am sure we can, to introduce commonhold. Enfranchisement is a necessary precondition for commonhold and commonhold is an attractive form of tenure widely held around the world. Given the right to commonhold, of course people will prefer to enfranchise where they can. However, where they can legally but in fact cannot, we should not deny them the individual right to extend.
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Subsequently, they can still go on to enfranchisement and to commonhold when the snapshot of their block has changed.
Lord Coleraine: The point the noble Baroness makes is a good one about commonhold. Surely, the position is that the Lord Chancellor's department has made it quite clear that collective enfranchisement is not viewed as a way to commonhold, so the point falls by the way. With commonhold, as I understand the Government's proposals, one has to have the unanimous consent of long leaseholders. One will never get that; collective enfranchisement will not go that way. We shall finish with a dead-end, with people in collective enfranchisement situations who may like to have commonhold but cannot get it.
Lord Selsdon: I appear to be marginally confused, but I am not sure why. I believe it has something to do with spiders. I once had to write a fable in the style of La Fontaine called L'Araignée et l'Encrier. Instead of that, I believe we have a case of "Incy Wincy Spider". I hope that the sun will come out and we shall understand. I am not sure whether, if we are asked to divide by my noble friend on the Front Benches, we have a free vote.
Lord Strabolgi: I am grateful to all noble Lords who have taken part in the debate. I do not wish to go into the question of the third group, but they are in a difficult position. I do not wish to elaborate on that because my noble friend Lady Hollis most ably described their plight.
I should like to comment on the remarks of the noble Lord, Lord Boardman, about the sanctity of contracts. Of course, contracts are sacred, that we can agree. However, there is a particular situation with flats in the large cities, especially in the centre of London. The leaseholders were not always willing buyers; they were forced to buy the leases by landlords, many of them bad, in the 1950s, when there was no security of tenure. One or two property speculators realised that they could make a large sum of money quickly by buying freeholds, by forcing the tenants who were living happily as renting tenants, to buy long leases. Then the landlords would recoup what they lost in rent by levying service charges. Those charges increased all the time and were used to refurbish other flats. They were used to build penthouses on top of the properties so that the speculators could borrow more money from the banks. Then they went bankrupt—one passed into the language, Mr. Rachman and his Alsatians—and has now entered the dictionary. Another became one of the largest bankrupts of all time and entered the Guinness Book of Records.
It has been a very unsatisfactory situation. When the speculators went bankrupt, the receivers took over and all they were interested in was obtaining the largest amount of money they could for the creditors. The flats were then sold off to foreign investors who had very little interest in them and who operated through managing agents, many of whom were unpleasant people.

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Thus I do not think that one could say that it is always a case of a willing buyer in that situation. Of course, there are good landlords; I live on the Grosvenor Estates and am a member of the residents' association. Grosvenor Estates are very good landlords indeed. However, it has not been so in the field of flats, where people have had a wretched time. They now see their leases coming to an end, they have 20 years less. What will they do? They cannot sell because they cannot raise the mortgage; they cannot leave the property. What will their heirs do? It is an unsatisfactory situation.
The noble Lord, Lord Strathclyde, told me that he would take the amendment away and think about it. I was not quite sure whether that was what he meant, but he nods his head so I am reassured. I hope that between now and the next stage of the Bill the Government will come back with something. They have done a great deal in the Bill; I support it; it is a valid attempt to come to grips with the whole system of leasehold tenancies in this country. I hope, therefore, that the Government will go a little further and that we shall have something at the next stage of the Bill. In the meantime, I thank all Members of the Committee who took part in the debate and beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Strathclyde Lord Strathclyde moved Amendment No. 138:
Page 42, line 3, at end insert:
("(aa) the tenant has occupied the flat as his only or principal home—

(i) for the last three years, or

(ii) for periods amounting to three years in the last ten years,

whether or not he has used it also for other purposes; and").
The noble Lord said: We now come to an interesting amendment. I am pleased to move Amendment No. 138 on behalf of the Government and wish also to speak to Amendments Nos. 141 to 146. Amendment No. 138 modifies Chapter II—which deals with the right of qualifying tenants of flats in buildings which are not eligible for collective enfranchisement—to include a test of residence.
We debated at length last week the matter of a residence test in relation to collective enfranchisement. It was the decision of the Committee that there should not be one. Therefore I do not propose to take up valuable time by going over the arguments again. But we accept that the arguments which swayed the Committee against a test for collective enfranchisement are less compelling for individual lease renewal in unenfranchiseable blocks, and I have referred already, during Second Reading, to the statement of my right honourable friend the Secretary of State in another place about that. He said that the Government would amend the Bill to add such a residency test for the purposes of the grant of a new lease. That is the subject of these amendments.
Our amendment follows the principle of the 1967 Act test applied to individual tenants of houses. The qualifying tenant who claims a new lease must be able to show that the flat is or has been his only or main home. In the case of joint tenancies, at least one of the tenants must satisfy the test, while occupation by a
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company or other artificial person will not count Residence must include either the last three years or periods totalling at least three years within the last 10 years. This second option is designed to allow people who may, for example, have gone abroad to work for a few years to qualify. As long as the tenant uses or has used the flat as his home, it does not matter whether he also uses it for other purposes. Nor does it matter whether he uses only a part of it to live in.
The amendment disapplies those subsections of Clause 5 which act to prevent head lessees taking advantage of the new rights. These are intended to stop one commercial investor taking property from another. But those provisions are now relevant only for collective enfranchisement, because with a residence test we no longer need them for lease renewal.
I should just like to mention that I am considering whether I may need to move supplementary amendments at a later stage. These would, if they prove necessary, clarify the position where a tenant qualifies in respect of more than one flat in a block and require the tenant to give details of his residence in his notice claiming a new lease. I believe that this amendment and those grouped with it are sensible and will be perceived to be fair and simple to operate. I hope that they are welcomed by the whole Committee. I beg to move.
9.15 p.m.
Baroness Hollis of Heigham: On this side of the Committee we are rather unhappy about Amendment No. 138. I wonder whether I can push the Minister a little further on the matter of his comparative treatment of leaseholders who seek to enfranchise and those who seek to extend. So far as I know, I have no financial interest. I am a leaseholder under the Crown Estates.
As I understand the matter, the Government on the one hand insist, when we talk about enfranchisement, that non-resident leaseholders cannot only enfranchise but can take up to 50 per cent. of the marriage value. I refer to the beginning of today's debate. We supported the noble Lord on this side of the Chamber. For those who do not qualify for enfranchisement; perhaps simply because they fall foul of the 10 per cent. commercial property rule or because their landlord has set a ground rent £5 above the low rent formula, the flat has to be their principal residence for them to seek to extend. Therefore, by definition, everyone who needs a second home for business purposes—including perhaps many Members in this Chamber and of the other House—would be excluded from extending his lease, though not excluded from enfranchising it. I do not understand that. Such tenants or leaseholders may have no quarrel with their landlord's management, yet having bought a lease for entirely legitimate business purposes, they face a declining asset which they cannot protect as others do.
I believe it is somewhat less than even-handed to allow not just the right to enfranchise but also the profit from marriage value to possible foreign non-residents (under Amendment No. 111D) but not

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a right of extension to UK citizens whose work requires them to have a second home which they occupy for four days a week. Why should those for whom it is not their principal residence have the greater right of enfranchisement but not the lesser right of extension? Perhaps the noble Lord will explain it to me.
Lord Boardman: I welcome the amendment. It is very much in line with one which, as my noble friend knows, I have tried to apply in a rather wider field, but I shall not go over that ground. I must say that I am somewhat surprised that the noble Baroness, Lady Hollis, refers to the marriage value. Earlier this evening I moved an amendment to distinguish between resident and absentee tenants. So far as I am aware, the noble Baroness voted against my amendment. Therefore she seems to have made a rather sudden reversal.
Baroness Hollis of Heigham: I made it clear that we supported the Government on a previous amendment and therefore we are baffled as to why they would not extend the same right to those seeking to extend their leases. Perhaps my voice was not sufficiently audible to the noble Lord. I apologise.
Lord Boardman: I am very sorry if I misapplied what the noble Baroness has said or done. I support the amendment. I believe that the benefit which results from either enfranchisement or potential leasehold should be limited to those for whom the Government has a public interest; namely, those who are resident in the flats concerned—long leaseholders of flats. For that reason it is right that the amendment should be accepted and I strongly support it.
Baroness Gardner of Parkes: Perhaps I can ask my noble friend to repeat something he said earlier. I hope that he is listening or he will not know to what I am referring.
He said something in regard to people who occupied more than one flat. I know of blocks of flats where one flat is not big enough and people therefore occupy two or three. What is the situation then? The amendment merely says, "the flat".
Lord Peyton of Yeovil: I should like to take the opportunity—there have not been too many opportunities—of supporting the Government. The amendment is admirable and when it comes from a converted sinner it is all the more welcome. I can hardly find adequate words to praise my noble friend.
When I first looked through the amendment I did not look at the name at the top, and I concluded immediately that my noble friend Lord Boardman had been conducting himself with his usual sagacity when tabling the amendment. One can imagine my astonishment therefore when my eye went to the top and I found the name of my noble friend. It is extremely welcome.
Viscount Montgomery of Alamein: Perhaps my noble friend can clarify a point for me. I have been surprised by the approach of certain Members of the Committee. The amendment appears to be a
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restriction of what was contained in a previous amendment. Although my noble friend agreed, after a lengthy debate, to take away the previous amendment and consider it, he is now proposing something which merely seems to be a restricted form of what was proposed in a previous amendment.
Lord Selsdon: I should like to discuss foreigners because I am confused about residence and domicile. There have been instances within the EC where someone would say, "If I have only one residence in that country, that is my principal place of residence".
Perhaps my noble friend can help me with regard to the proposed report of the Law Commission or legislation which may come before your Lordships called Domicile—The New Regime. If my interpretation is correct, it may mean that a foreigner in this country who has a residence, even if it is not his principal place of residence, may be deemed to be domiciled in the United Kingdom, in which case it becomes his principal place of residence unless he can prove beyond reasonable doubt that he is domiciled elsewhere.
The situation may not arise this year, but I understand that it may arise next year. Matters of confusion occur as to when is a resident not a resident, particularly if he is a foreigner? The situation may arise when a foreigner may claim to be a resident. I believe that anyone who pays tax in this country should be entitled to residency, but not otherwise.
Viscount Dilhorne: Perhaps I can help my noble friend on the Front Bench, which is unusual for me in connection with this Bill. The Inland Revenue has tried. I cannot be exact, but around eight years ago it went to the extent of tabling a Bill about domicile and residence. It found that it would not work. I am interested to learn from my noble friend that the idea is not dead, but only moribund and that they are trying to resurrect the impossible. I urge the Minister to wait and see what comes out of the traps in the dog race before committing himself to anything that the Revenue may consider doing—that is, until it is in print.
Lord Harmar-Nicholls: I should like to know when my noble friend tabled the amendment. I too was surprised to discover that it was in his name on behalf of the Government, particularly in view of the reaction we received when an earlier amendment was moved and lost by my noble friend Lord Boardman. I hope that when we reach the Report stage of the Bill, the spirit behind Amendment No. 138 will be reflected in the further amendments that I have no doubt will be tabled by my noble friend.
Lord Coleraine: We all know that Amendment No. 138 is the result of a deal reached in another place between the Government and the big estates. That aside, I support the thoughts of the noble Baroness, Lady Hollis, for the reasons I gave when discussing the amendment moved earlier by my noble friend Lord Boardman. The amendment is unsatisfactory, particularly because it creates entirely anomalous

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rights as between non-resident lessees who have the right to lease extension and those who have the right to collective enfranchisement.
Baroness Hamwee: I should simply like to put on record my anxiety about the amendment, for the reasons given by the noble Lord, Lord Coleraine, including the introductory words which he used which explained the reason for it.
Lord Strathclyde: We were galloping so quickly through this that it came as much as a surprise to me as to noble Lords that we reached this amendment.
Noble Lords have accused the Government of being inconsistent in our approach on a residency test. I understand why some noble Lords should take that line; but there are two important points here. First, there is the precedent of the 1967 Act which had a residency test in it. Secondly, in all the debates that we have had on residency, the reason why the Government have not accepted a residency clause for the sake of enfranchisement has not been a matter of principle but of practicability—that if there is a collective right and tenants are excluded from taking that collective right because they are non-residents, the ability of collective enfranchisement to have any force at all and any chance of success is reduced. That is why we have included it for what is not a collective right but an individual right.
I hope that explains to my noble friend Lord Montgomery, who has supported the Government extremely well over the course of the past few days in Committee, why we have done this. I can say to my noble friend Lord Harmar-Nicholls that the amendment was present when the original Marshalled List was published some weeks ago, so it should have come as no surprise, and it did not come as a surprise to my noble friend Lord Peyton. The only surprise was that the Government were actually moving it.
My noble friend Lord Selsdon made a very good comparison with tax law and the potential problems of domicility. I can confirm that residence is a matter of fact ultimately to be decided by the courts. There are extremely good precedents in law as to what makes somebody resident. As I said in originally moving this amendment, residence must include either the last three years or periods totalling at least three years within the last 10 years.
I can confirm to my noble friend Lord Dilhorne that there is no necessary connection with tax law here or on domicility. Residence is purely a matter of fact. I hope I have not confused the Committee as to what our intentions are on the Bill and on these amendments, and that the Committee will now approve the amendments.
On Question, Amendment No. 138 agreed to.
[Amendment No. 139 had been withdrawn from the Marshalled List.]
[Amendment No. 140 not moved.]
[Amendment No. 140A not moved.]
Lord Strathclyde Lord Strathclyde moved Amendments Nos. 141 to 144
Page 42, line 8, leave out ("Subject to subsections (4) and (5) below,").
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Page 42, line 10, at end insert ("(with the omission of subsections (5) and (6))").
Page 42, line 17, leave out subsections (4) and (5).
Page 42, line 33, at end insert:

("(5A) For the purposes of subsection (2) (aa) above—

(a) any reference to the tenant's flat includes a reference to part of it; and

(b) it is immaterial whether at any particular time the tenant's occupation was in right of the lease by virtue of which he is a qualifying tenant or in right of some other lease or otherwise;

but any occupation by a company or other artificial person, or (where the tenant is a corporation sole) by the corporator, shall not be regarded as occupation for the purposes of that provision.

(5B) In the case of a lease held by joint tenants—

(a) the condition in subsection (2) (aa) need only be satisfied with respect to one of the joint tenants; and

(b) subsection (5A) shall apply accordingly (the reference to the lease by virtue of which the tenant is a qualifying tenant being read for this purpose as a reference to the lease by virtue of which the joint tenants are a qualifying tenant).").

On Question, amendments agreed to.
Clause 35, as amended, agreed to.
Clause 36 agreed to.
Schedule 10 agreed to.
Clause 37 agreed to.
Clause 38 [Notice by qualifying tenant of claim to exercise right]:
[Amendment No. 145 not moved.]
Clause 38 agreed to.
Schedule 11 agreed to.
Clauses 39 and 40 agreed to.
Clause 41 [Landlord's counter-notice]:
9.30 p.m.
Lord Strathclyde Lord Strathclyde moved Amendment No. 146:
Page 47, line 7, after ("35(2) (a)") insert (", (aa)").
On Question, amendment agreed to.
Clause 41, as amended, agreed to.
Clauses 42 to 45 agreed to.
Clause 46 [Applications where landlord cannot be found]:
[Amendments Nos. 147 and 148 not moved.]
Clause 46 agreed to.
Clause 47 agreed to.
[Amendment No. 148A not moved.]
Clauses 48 and 49 agreed to.
Clause 50 [Effect on tenant's notice of giving of initial notice under Chapter I]:
Lord Coleraine Lord Coleraine moved Amendment No. 148B:
Page 54, line 42, leave out paragraph (c).
The noble Lord said: This amendment is intended to clarify inconsistencies which appear to exist in the Bill in the area of mutual exclusivity between the right of collective enfranchisement and the right to extension of lease. I would make it quite clear to the Committee that this is in no sense a re-run of a discussion we had a few minutes ago.
The rule to which the Government have been sticking is that, while collective enfranchisement is possible, there should be no lease extension allowed. After a collective enfranchisement has taken place it will remain possible in theory, however unlikely in practice, for qualifying tenants who stayed out of enfranchisement to persuade some or all of those who

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enfranchise to carry out a further enfranchisement operation. For this reason the outsiders will have lost their right to lease extensions even though the enfranchisement has taken place. My point today is a very small one and it is a concern mentioned to me by the Law Society working party on the Bill. It is that circumstances within a block of flats may change over time and a block which after a collective enfranchisement remains technically enfranchisable may cease to be enfranchisable. In those circumstances the conditions in which lease extensions are available would again be present. Paragraph (c) of Clause 50(1) would nevertheless preclude lease extensions taking place. I do not believe that this was the intention of Parliamentary Counsel. There appears to be no good reason for the paragraph to remain in the Bill. The amendment would delete it. I beg to move.
Lord Rodger of Earlsferry: I am grateful to my noble friend for bringing this matter to the attention of the Committee. It does indeed appear that paragraph (c) is superfluous in this situation. However, I am advised that it would be necessary also to make a change in paragraph (b). In that situation, if my noble friend will withdraw his amendment on this occasion, I shall take the matter away and return with an appropriate amendment at the next stage.
Lord Coleraine: On the understanding that my noble and learned friend will do that, I see no reason why I should not withdraw the amendment. I beg leave to do so.
Amendment, by leave, withdrawn.
Clause 50 agreed to.
Clauses 51 and 52 agreed to.
Schedule 12 [Premium and other amounts payable by tenant on grant of new lease]:
[Amendments Nos. 148C and 148CA not moved.]
Schedule 12 agreed to.
Clause 53 [Terms on which new lease is to be granted]:
The Earl of Lindsay The Earl of Lindsay moved Amendment No. 148D:
Page 57, line 22, at end insert:
("() The lease shall provide for—

(a) the tenant to be liable for the remedy of any inherent defects; and

(b) for the landlord to be able to recover from the tenant any costs incurred in the remedy of any such inherent defects;

and in this section "inherent defects" shall mean any structural defect which has arisen because of the use of construction methods which are now considered to be inadequate but which could reasonably have been considered adequate by reference to the standard of construction methods prevailing at the time the work was executed.").
The noble Earl said: The purpose of this amendment is to transfer liability for remedying inherent defects in a building from the landlord to the leaseholders where leaseholders exercise their right in accordance with the Bill to extend their leases. Inherent defects should not be confused with latent or hidden defects. The correction of an inherent defect may appear to be a repair. In reality it is an
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improvement made necessary by construction techniques which are now outmoded but which were acceptable at the time the work in question was executed.
An example of an inherent defect would be a basement constructed without a damp-proof course—an established building method in the last century but one that quite clearly is no longer acceptable. Installing a damp-proof course in such a building would not involve replacing an existing defective damp-proof course, which would be a repair; it would be the installation of something that did not previously exist and thus would be an improvement.
I have used the example of basements requiring damp-proof courses because of the number of basements now used as habitable rooms, contrary to their original purpose. Under normal circumstances, improvements are the liability of the landlord. Hence, the landlord of a block of flats would arrange letting policies in a manner that would enable inherent defects to be tackled efficiently and cost effectively. For example, such a letting policy could involve the landlord granting leases of varying lengths so that groups of leases fell in at the same time, thus enabling the work to be carried out while the flats in question were vacant. Alternatively, on the grant of a new lease the landlord may agree that the leaseholder shall carry out the works, the cost to the leaseholder being reflected in a lower premium or rent. Either way, the works can be undertaken when the building is empty or under the landlord's control. Under the provisions of the Bill no such opportunities arise. The lease extension provisions of the Bill allow qualifying leaseholders individually and at a time completely of their own choosing to extend leases by 90 years plus the outstanding period of the old leases. Moreover, Clause 55 gives leaseholders rights to further renewal. The provisions put lessees almost in the position of freeholders and deny landlords the ability to set leasing policies which enable works to remedy inherent defects to be executed on a cost-effective and co-ordinated basis.
Given that the landlord will be unable to control the cost and timing of the correction of inherent defects once leases have been extended under the provisions of the Bill, and that the considerable consequential costs of rehousing or working around leaseholders will fall on the landlords, it is only reasonable that the liability for such work should pass to the leaseholders. I stress that this amendment is specific to inherent defects and does not seek to absolve landlords from any other obligations.
Lord Rodger of Earlsferry: As the opening words make clear, the general principle behind Clause 53 that prescribes the terms on which a new lease is to be granted is that the new lease should essentially be on the same terms as the existing one. As my noble friend has explained, the effect of this amendment is to require that all new leases should make the tenant liable for any inherent defects and for the landlord to recover the cost of putting such defects right. Some may consider that this amendment is unfair to tenants; others may look at it as being unfair to landlords. Tenants will have purchased their flats in a block with

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or without inherent defects—defects of which they may or may not have been aware and which may or may not have been reflected in the price paid. If they enter into a lease that makes them liable—and I understand that most leases even on new properties do not—that will have an effect on the price they pay. In such circumstances the freeholder will be able to include similar terms in the new lease.
Where the tenants are not liable and the freeholder may not necessarily be responsible under the terms of the existing leases there may well be a problem. It is difficult to assess the effect of including such provision on the value of a new lease, especially where there is no known inherent defect, but the inclusion of such a liability as a covenant in the lease will have an effect and may deter potential purchasers or significantly depress the purchase price. Where there is a known defect, the effect on the value of the lease may be greater than the cost of works to put that defect right. I realise that at present many landlords will deal with this problem when they receive a request for a lease extension or a new lease and that that is granted only on condition that the inherent defect is dealt with. That deals only with voluntary lease extensions, not the exercise of statutory rights granted under the Leasehold Reform Act or under this Bill. That is where the problem arises.
I believe there is a much wider problem concerning responsibility for the state and condition of property, and that has been tackled to some extent by the consultation paper of the Law Commission on this issue.
As I say, the issue is difficult. I am prepared to take away this amendment and consider it in some detail; but If cannot go further than that. I cannot make any promises to the Committee, but with the promise that I shall take the amendment away and consider it—and no further than that —I ask my noble friend to withdraw his amendment.
The Earl of Lindsay: I thank my noble and learned friend for the consideration which he is going to bring to the amendment. I beg leave to withdraw it.
Amendment, by leave, withdrawn.
Clause 53 agreed to.
Clauses 54 to 57 agreed to.
Schedule 13 agreed to.
Clause 58 [Interpretation of Chapter II]:
Viscount Goschen Viscount Goschen moved Amendment No. 149:
Page 62, line 39, after ("landlord"") insert (", in relation to such a claim,").
The noble Viscount said: This is purely a technical, drafting amendment which I am sure is necessary for clarification. I beg to move.
On Question, amendment agreed to.
Clause 58, as amended, agreed to.
Clause 59 [Extension of right to enfranchise to houses whose value or rent exceeds applicable limit]:
[Amendments Nos. 150 and 151 not moved.]
The Deputy Chairman of Committees (Lord Skelmersdale): If Amendment No. 152 is agreed to, I cannot call Amendment No. 153.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 152:
Page 63, leave out lines 25 to 31.
The noble Lord said: In moving this amendment, it may be for the convenience of the Committee if speak also to Amendments Nos. 155A, 156, 157 and 157A. We come now to a different chapter of the Bill which is Chapter 3, Part 1.I draw the attention of the Committee to the title which is,
"Enfranchisement under Leasehold Reform Act 1967"
We have to consider the amendments to that Act which the Government are introducing under this Bill. The Leasehold Reform Act 1967 was in itself an extremely important piece of legislation. For the first time it enabled people who were excluded from realising the real benefit of their holdings as leaseholders, to realise that benefit and to both enfranchise and, under some circumstances, to extend their leases.
The problem with that Act is not only that it has been in existence for quite a long time (nearly 25 years or so) but also that I do not believe that anyone appreciated that leaseholds would become so important in flats as opposed to houses. I believe that the growth in the leaseholds in flats has been very substantial since the passing of that Act.
In so far as they go, we welcome the amendments that the Government are bringing forward to that Act. Clause 59 amends it to assist leaseholders of houses, who could not benefit from the rights under the 1967 Act, to enfranchise or extend their leases. The rateable values of their houses exceeded the limits imposed by that Act. Clause 59 enables them to enfranchise.
Similarly, leaseholders with ground rents that exceed the low-rent definition of the 1967 Act are entitled to enfranchise provided that their ground rent falls within the low-rent provisions at present in the Bill. I said on Second Reading that we supported the Government generally in their programme of leasehold reform; but we should like to extend the scope. I should again this evening like to try to extend the scope of the amendments to the Leasehold Reform Act 1967, because we have two objections to what the Government are doing.
The first objection relates to the low-rent provisions. We have been through the low-rent provisions on the enfranchisement of flats, and we now come to the low-rent provisions on the enfranchisement of houses. We have already made clear to the Committee our anxiety about the low-rent provisions for flats. The same anxiety is evident when we come to look at houses. Evidence has been accumulating over the years, especially from the Leasehold Enfranchisement Association, that there is no logical reason for the low-rent test, and that the way it operates is, in many ways, inequitable. We are sad to see the low-rent test appearing yet again in the same form as we saw it in the chapter which dealt with the low-rent test for flats, which we discussed the other day. We recognise that the Committee went against us on that issue; nevertheless, we believe that it is important that the Committee considers the low-rent test for houses equally seriously.
Our second objection, which is almost equally important, is the Bill's failure, as at present drafted, to extend the right to a renewal of the lease to leaseholders in houses debarred by the value limits or by the low-rent limits in the 1967 Act. That seems to create something of an anomaly with the proposal that we have just been discussing for an extension of leases for flats. The Bill gives the leaseholders of flats the right to acquire the freehold collectively, as we have discussed, or, if that does not apply, to extend their leases. We have argued about who may or who may not be eligible to do that; but, nevertheless, that is a clear provision. However, the Government do not appear to be consistent in offering the same rights to those who have leases on houses. I ask the Minister why that inconsistency exists. Is there not a case for amending the Bill in a way which will remove that inconsistency?
Various Members of the Committee have put forward different suggestions of how the matters I have discussed in general terms might be dealt with. I am sure that Members of the Committee who have tabled amendments in the grouping to which I am speaking will be discussing their own versions. I shall be rather more general about the matter and look at Amendment No. 155A, tabled by the noble Lord, Lord Coleraine, or our amendment, Amendment No. 156 which is supported also by the noble Baronesses, Lady Gardner of Parkes and Lady Hamwee, the point being that the low-rent test no longer has any relevance for houses any more than it has any relevance for flats. That is the nub of the argument.
I should like the Committee to consider our two objections: first, the low-rent test which we do not like and which we should like removed; and, secondly, that the inconsistency between what happens to leaseholders of houses and leaseholders of flats so far as concerns the extension of leases is removed from the Bill once and for all. I beg to move.
Viscount Torrington: I too am aware that my noble friend Lord Strathclyde gave a dusty, if courteous, rebuttal to the proposals to remove the low-rent test from Clause 7 as it applied to flats. In daring to go over what is already old ground—except that there is the slight difference that we are dealing with houses rather than flats—I am emboldened by the preamble to the Bill. It states:
"Chapter III amends the Leasehold Reform Act 1967 by removing rateable value and other value limits and thereby extends the right to acquire the freehold".
Clearly, those tests are not removed from the Bill. If the Government truly intend that the preamble should foreshadow what is in the Bill, the low-rent test in Clause 61 has absolutely no place in the Bill—certainly not in its present form. If that is not what the Government intend, the preamble should read:
"extends the right to one or two more houses".
I accept that my noble friend was referring to flats when he gave his spirited defence of the low-rent test. But to suggest that a house on, say, a 99-year lease, with a ground rent of £1,001 per year, is
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unenfranchiseable when an identical house with the same lease period but with a ground rent of £999 is enfranchiseable is to split hairs beyond credibility.
When I spoke to the amendments to Clause 7 I probably failed, with my somewhat inarticulate presentation, to make the point that a low-rent test to distinguish between leaseholds and rack-rentals on the so far not publicly-proven contention that leases longer than 21 years exist with rack-rentals is an unnecessarily blunt instrument. The vast majority of leasehold agreements make themselves perfectly explicit as to whether they represent long leaseholds or rack-rent tenancies. In virtually no case would there be any serious dispute between the landlord and the leaseholder or tenant as to the tenancy or the tenure thereby established.
In the few really grey cases a judge could decide, but I frankly doubt whether that would give rise to the wide use of legal time and court-room capacity. Furthermore, many leases make it plain that the ground rent is not a rack-rent since they define reviewable ground rents as being a particular percentage of an actual rack-rent. As I said last week, the ground rent defined as 10 per cent. of a rack-rent cannot by definition be a rack-rent. For something to be 10 per cent. of itself is a mathematical impossibility unless it is either zero or infinity.
I accept that somewhere perhaps in the recesses of the offices of one of the great London estates there may exist one or even two leases on which a judge could not opine. That is fine; for those eventualities let us keep the low-rent test. My amendment simply qualifies the low-rent test so that it applies only where the lease is not clear as to whether it is a rack-rental or a tenancy.
I expect that my noble friend's answer will be as dusty as that which he gave the other night. However, I ask him to look again at the matter and at the other amendments because I do not believe in equity that the test has any part in the Bill.
Baroness Gardner of Parkes: I support the generality of the amendments. I wish to speak also to Amendments Nos. 156 and 157A. The low-rent test is far less appropriate for houses than for flats. I was not in the Chamber on the afternoon of the debate about low rents for the flats. Therefore, I do not know what arguments were rehearsed other than those I have read in Hansard. I believe that as regards houses there is a clear differentiation between a ground rent and any other type of rent. Indeed, in the case of houses I understand that most of the rack-rents are clearly determined by the courts. A house which is being rented, furnished or unfurnished on a short rental, is quite different.
Tenants have had advantage taken of them in terms of the ground rent of houses. Years ago landlords suffered because they granted 99-year leases. I knew of a case in which the ground rent was £10 per year and it was collected in quarterly instalments. That became quite ridiculous even in terms of collection costs. Therefore, when landlords had the opportunity to renew leases, they suddenly greatly increased them and the cost of leases increased every 20 years by quite a sizeable amount.

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However, I find it unacceptable that the ground rents on many large estates are determined to be a percentage of the freehold value. Many tenants entered into leases on that basis before the property boom of 1988–89. They did not appreciate that they were signing a blank cheque for their landlords because the ground rent increased out of all proportion. That was an injustice to the tenants concerned.
It should be appreciated that that is not the situation in every case. However, the enfranchisement of houses should be related strictly to the length of the lease. I read in Hansard that it is intended to throw out the rateable value as a qualification. I thought that that was great. However, as I read on I thought that it seemed that as many restrictions would be reinstated as had been taken away. That is not satisfactory.
My Amendment No. 157A makes an increase from £1,000 to £2,000. It is quite clear that there must have been discussions between the Government and the landlords of the larger estates as regards the figure which should be chosen. It is too much of a coincidence that so many ground rents are now set at £1,001. For that reason, I chose the figure of £2,000, which would show that the Government are not in collusion with anyone as regards ground rents. I support all of these amendments and in particular my amendment which proposes the abolition of the low-rent test.
Lord Coleraine: I speak to Amendment No. 155A which provides that:
"In section 4(1) of the Leasehold Reform Act 1967, after 'April 1963' there shall he inserted 'or after the coming into force of the Housing and Urban Development Act 1993".
I support all that the noble Lord, Lord Williams, and other Members of the Committee have said about the applicability of the low-rent test to houses. I do not believe that it is applicable. This amendment is a distant fallback from those amendments. However, I should like to mention it now because I want to look forward to what happens after the passing of this legislation.
When I first moved an amendment to abolish the low-rent test late in the evening on the first day of our Committee stage discussions, I asked what would be the future position. It seems to me that, as the Bill stands, in the future £20 per week will count as a rack-rent. Leases in central London which are let for £20 per week will escape the net.
I asked whether it was not possible in the future to abolish the low-rent test altogether because the Government are committed to working towards the eventual withering away of the long leasehold system in relation to residential flats. I thought about that. I took on board the Minister's argument, which was the principle argument on which he found it unacceptable to allow the abolition of the low-rent test; namely, that he felt that it was inequitable to allow enfranchisement to apply in cases where at the time that the lease was granted it was not made abundantly clear that the value had passed and the lessee was effectively the owner.
I do not for one moment accept that that is something which should govern the question of
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whether one has a low-rent test. But, for the sake of argument, I have brought forward an amendment today which satisfies all the requirements of the Government as I understand them. It would provide that, as from the passing of the Bill, the test which lessees wishing to enfranchise would have to pass—or, rather, the way in which the freeholder would avoid the right of the lessee to enfranchisement—would be to show that the rent payable at the beginning of the term was more than two-thirds of the rental value. I think that that proposal is one to which I may expect my noble friend to respond positively.
10 p.m.
Baroness Hamwee: I should like to support the amendments, which seek to abolish the low-rent test for houses. During the debate with regard to the test last week, I referred to the example of a leaseholder of a house whose ground rent is deemed to be £1 more than two-thirds of the rateable value; in other words, he can never fall within the low-rent test because of the way in which his lease has been drawn. Of course, that is only one of quite a number of examples which I have heard of during the course of the Bill. I am shocked—that is not a term that I would use lightly—to hear how the provisions of leases have been manipulated so that the low-rent test does not apply.
We now have a splendid opportunity not only to learn from experience but actually to put right what I think is quite a wrong; that is, the manipulation of the rules. Although I speak against my own profession, the ability of lawyers to continue to find ways to get around the rules cannot be a good thing; indeed, the fewer rules there are the better. The noble Baroness, Lady Gardner of Parkes, referred to the long-lease test. As a matter of common sense, I think that that is entirely sufficient. A period of 21 years is a well-understood period. We are giving work to my profession which I do not seek—I see that some Members of the Committee are smiling at what I say—but, more importantly, we are providing opportunities to avoid the real objective of the legislation.
Lord Monson: It is almost 26 years since the passing of the iniquitous 1967 Leasehold Reform Act, with its appallingly confiscatory provisions. Not only did the Conservative Opposition, and indeed the independents, find the provisions confiscatory, but even certain Members of the then Labour Cabinet were uneasy, as the Crossman diaries later revealed.
Any amendment which has the incidental effect of extending the powers to confiscate is therefore to be deplored. If the low-rent test is widened, a parallel amendment needs to be introduced to bring the compensation into line with the compensation that people would obtain under the main provisions of this Bill. I do not believe that there is any such power in the amendment and I do not think that Chapter III includes any such provision. Therefore, I oppose the amendments.
Lord Strathclyde: We have had a good discussion on the question of the low-rent test for houses. Of course, it is a debate that we have already had in respect of flats. Some of the amendments proposed

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would increase the effect of the test, whereas others would weaken it. The Bill extends the right to enfranchisement to high-value houses and to houses let on leases which fail the existing 1967 Act low-rent test but which would meet the new test to be applied to flats. Amendment No. 152, tabled in the name of the noble Lord, Lord Williams, would remove that right from the houses which fail the existing low-rent test, keeping them unenfranchisable.
Long leaseholders of low-value houses have been able to enfranchise since 1967, and those of medium-value houses since 1974. High-value houses are presently excluded from enfranchisement, as are houses whose ground rent was originally low but has risen because of rent review clauses over a period of time, and consequently fails the 1967 Act test. Although the leases of such houses could have enfranchised when they were granted, the right was not exercised then, and the subsequent increases in rent have made them ineligible. By offering the rent test as applied to flats, which takes the rent payable when the lease was granted, as an alternative to houses which fail the existing 1967 Act test, the Bill enfranchises them. I believe it would be most unfair to continue to exclude them.
I turn now to Amendment No. 155A of my noble friend Lord Coleraine, which, by interfering with the existing test for houses, would also unfairly exclude a certain group of leaseholders from enfranchisement. This has separate legs for leases granted before and after 1st April 1990. There is a proviso to the effect that a lease granted between the end of August 1939 and the beginning of April 1963 which meets the relevant test would nevertheless be treated as not being a tenancy at a low rent if, at the start of the tenancy, the rent exceeded two-thirds of the letting value. This proviso was intended to exclude from enfranchisement tenancies which were originally let at a rack rent, but which, because of inflation in rents between the date when the tenancy was granted and the "appropriate day", which for the purposes of the 1967 Act is 23rd March 1965, would have become low-rent tenancies, as defined.
The amendment would apply the same proviso to leases granted after the commencement of this Bill. It would affect tenancies on which the ground rent is less than £1,000 in Greater London or £250 elsewhere, and which are therefore already low. Nevertheless, if their ground rent exceeds two-thirds of the letting value, they would be excluded from enfranchisement.
Given the purpose of the proviso, it is difficult to see why my noble friend Lord Coleraine considers its use appropriate for leases granted after commencement of the Act. It would clearly be unfair and illogical to exclude new leases by using a proviso designed for a particular economic situation years ago.
I turn now to Amendment No. 156, which would remove from the Leasehold Reform Act 1967 the low rent test for houses, the value limits and the residency requirement. In short, it would extend the right to enfranchisement and to lease extension to any house let on a long lease. We have previously heard the arguments for this radical step in relation to flats.
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Exactly the same arguments are appropriate for houses and I do not propose to take up the Committee's valuable time in going through them again.
Amendment No. 157 of my noble friend Lord Torrington would create yet another rent test for houses. His intention appears to be that, where the rent does not exceed the letting value of the house, then the lease is to be classed as a lease at a low rent.
The effect of the optional test added by this amendment is twofold. First, it uses letting values instead of rateable values for all houses; and secondly, it has a threshold of the whole of the letting value rather than two-thirds.
I acknowledge that letting values (that is, market rentals) are used for pre-1963 leases in the Leasehold Reform Act 1967 and have been adopted for such leases in the Bill under discussion today. The reason for their inclusion in the 1967 Act was to take account of the delay in a rating revaluation after the Second World War. This meant that after the war the incompatibility of genuine ground rents and any test based on pre-war rateable values was sufficient to justify the use of letting or rental values instead. As all residential rents were statutorily controlled at that time, there was a single market in rents which made the test effective and simple to apply.
This approach would not work with leases granted since the introduction of enfranchisement for houses and the deregulation of rents in the letting market because of the gulf that exists between regulated rents and market rents. There is now a big difference between market rents and the fair rents of the remaining regulated sector, and the use of letting values would not help to establish the extent of the transfer of ownership between lessor and lessee.
The second effect of the amendment is that it adds an optional test with a threshold of the whole of the letting value rather than two-thirds. The thresholds used in our alternative low rent test for houses are long established and underpinned by statute. In most statutes a low rent is an annual rent of less than two-thirds of the rateable value of the property demised by the lease. For leases granted before 1963, two-thirds of the letting value may be taken instead.
Amendment No. 157A of my noble friend Lady Gardner would interfere with the additional low rent test for houses which the Bill would add to the Leasehold Reform Act 1967. It would affect leases entered into since April 1990 by raising the annual rent threshold for such leases in Greater London from £1,000 to £2,000. I cannot agree that it would be appropriate to accept the amendment, just as I could not accept the amendment when we discussed flats.
Having explained the position vis-à-vis houses, and in the light of the discussion last week on flats, I know that it will be a disappointment to some of my noble friends and Members of the Committee opposite that we are not adjusting the low rent test. I believe that it is appropriate that we have a low rent test. It has withstood the test of time. It is firmly established in our current legislation and I hope that the amendments will be withdrawn.
Lord Williams of Elvel: I am grateful for the Minister's response to the amendments. I am grateful to Members of the Committee who have outlined the different solutions which have been proposed. I am wholly unpersuaded by the noble Lord's reply. I am totally persuaded by the remark of the noble Baroness, Lady Gardner of Parkes, that this is a stitch-up between the Government and major landlords. I understand that, because the noble Lord, Lord Strathclyde, has been sandbagged so many times from behind that it is at least conceivable that he will try to do a deal in order to stop another sandbag hitting the back of his neck.
This issue will not go away. The low rent provision is inappropriate for houses. It is an issue to which we shall return at a later stage. The Government should not feel that we have used our full firepower on the issue as yet. I beg leave to withdraw the amendment.
Lord Coleraine: Before the noble Lord decides what to do with his amendment, as we are dealing with amendments within the grouping and the Minister replied to an amendment of mine, I should like to press him a little further on the subject. I do not want to move away from the grouping system and move my amendment later.
As I understood it, my noble friend said that in certain circumstances the regime I proposed for after the passing of the Bill might be damaging to lessees because two thirds of letting value might be less than £1,000 a year. That can be solved perfectly well by introducing two heads to the provision so that the low rent test is satisfied either if it is less than £1,000 a year or if the rent is less than two thirds of letting value.
I shall ask my noble friend a question and his answer will be illuminating. He has told the Committee, in effect, that rent of £20 a week in central London at the start of a lease is what distinguishes a lease in which the value does not pass from a lease where the value does pass to the lessee and where the lessee effectively becomes the owner. Why does my noble friend feel that that is the appropriate cut-off rather than two thirds of letting value?
Lord Strathclyde: Surely the problem that unites all of the low rent tests is that having drawn a line some people will be on the wrong side of it. I can understand why my noble friend feels as he does. However, the tests have existed for many years. People have worked out their affairs in relation to those particular tests. We believe that it would be wrong to change them now. In respect of my noble friend's amendment it would clearly be unfair and illogical to exclude new leases by using a proviso designed for a particular economic situation which originated years ago.
In relation to the point that my noble friend made on the level of the rent, we do not say that a rent above, say, £20 a week is a market rent. That is exactly the debate which we had last week in relation to flats. We do say that it is not necessarily a ground rent and for that reason fails the test.
Lord Coleraine: Does my noble friend recollect that rateable values are no longer part of the formula? It is no good his saying that we are using a formula which
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has been used successfully for many years in the past. We are now using an entirely new test. For how long does he say that the £20 a week cut-off point has existed and has been applied in legislation? Why does he not treat this as a point at which to start afresh? That is what I ask him to do. The precedents of rateable values in the past have no relevance whatever today.
10.15 p.m.
Lord Monson: Before the noble Lord, Lord Coleraine, sits down, perhaps I may ask this question. Does he agree that some landlords who may not have access to capital are quite prepared to charge less than the rack rent, perhaps half the rack rent, in return for the tenant agreeing to carry out repairs and improvements on the assumption that the tenant has access to capital? There is nothing wrong with that. It would make his suggested cut-off point of two-thirds rather difficult.
Lord Coleraine: That often happens, and landlords become subject to enfranchisement as a result.
Lord Strathclyde: The answer to the question posed by my noble friend is that the £1,000 applies to the post-1990 leases, not to the rateable values. Therefore £20 is not relevant to the rateable values.
Lord Williams of Elvel: I was so baffled by the Minister's last sentence, that I simply did not understand what it meant. No doubt we shall return to the issue at a later stage. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 153 to 155 not moved.]
Clause 59 agreed to.
Clause 60 agreed to.
[Amendments Nos. 155A and 156 not moved.]
Clause 61 [Additional "low rent" test]:
[Amendments Nos. 157 and 157A not moved.]
Clause 61 agreed to.
Clause 62 [Price payable by tenant on enfranchisement by virtue of section 59 or 60]:
Lord Strathclyde Lord Strathclyde moved Amendment No. 158:
Page 65, line 17, leave out from ("shall") to end of line 18 and insert ("be determined in accordance with subsection (1A) above; but—

(a) in any such case section 9A below has effect for determining whether any additional amount is payable by way of-compensation under that section; and

(b) in a case where the provision (or one of the provisions) by virtue of which the right to acquire the freehold arises is section 1A(1) above, subsection (1A) above shall apply with the omission of the assumption set out in paragraph (b) of that subsection."").

The noble Lord said: I beg to move Amendment No. 158.
The Chairman of Committees having put the amendment to the Committee, perhaps I may be a little more specific. I had thought that it was an amendment that had already been grouped with others. However, I discover that I have not explained to the Committee what the amendments provide. Therefore, in moving Amendment No. 158, I shall also speak to Amendments Nos. 159 and 161.
The amendments are as a result of the fulfilment of the Secretary of State's commitment in another place that we would provide for severance compensation for the landlords of high value houses newly enfranchised by the Bill. The amendments also disapply to high value houses the assumption in the valuation calculations that there is security of tenure at the end of a lease.
Anxiety was raised in another place that we had not provided severance for houses. Severance—it is part of what is known as injurious affection—is a precise valuation term which quantifies in money the loss of redevelopment potential or any other loss of value on land in the landlord's ownership which he is to retain after the enfranchisement of other properties.
Severance was not given under the 1967 Act as it was not considered that the loss of low value houses would have an impact on the landlord's other property. We have, however, provided severance in the case of flats because a development or estate of flats may well contain several blocks. In that situation, the loss of one block from a landlord's portfolio may prevent him from developing the land between the blocks. It has been impressed upon us that loss in the value of a landlord's other property could also occur where high value houses are enfranchised. Such a case could be where a dower house or other associated property is enfranchised from a country estate. That can create a doughnut effect of a property being an island in a different ownership and control. We accept that there could be a real case for compensation in such situations and no doubt the Committee will wish to consider the point.
The next amendment and others would provide for severance for all houses. This was not provided for by Parliament in 1967 and I should be worried about the impact on lower value houses which were already enfranchisable. The addition of severance to the price could add considerably to the cost of enfranchising such property or could be used by the landlord to deter enfranchisement.
I am also not convinced that there is a need to provide severance for houses which are already enfranchisable. Many of those eligible have already been enfranchised and the landlord's property has been broken up so that there will be no possibility of future damage to other property.
The group of amendments we are now considering will ensure that possible compensation for injurious affection can be taken into account for all high value houses in the same way as has been provided for flats. I must emphasise that this is a provision which will cover the specific case of damage to other property interests.
The other amendment which we put forward disapplies an assumption in the valuation provisions in the 1967 Act so far as it relates to high value houses. The assumption is that a tenant will have security of tenure at the end of the lease. This is not true of the tenants of high value houses and the assumption would artificially depress the value of a landlord's interest. The amendment will ensure that a proper
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valuation can be made. It will affect neither a tenant's security of tenure where he has this right nor the valuation where the right exists.
I apologise for my earlier indiscretion in not moving the amendment. These amendments fulfil commitments and ensure that landlords can receive the proper value of their assets. I commend them to the Committee.
Lord Peyton of Yeovil: This is one of those happier moments for me when I can say something nice to my noble friend. I always try to do so and wish to do so very much. Here he has fulfilled a pledge which is welcome to some of us. I say with some sympathy that my noble friend has had to endure what the noble Lord, Lord Williams, referred to as the "sandbags" behind him. Personally I lay no claim to any sandbag owned by a landlord or anyone else. I do not carry anything as heavy as that.
My noble friend has also had to endure the sympathy of the noble Lord, Lord Williams, and perhaps at greater length the support of his noble friend Lord Coleraine. I am sure that he will be able to tell his right honourable friend the Secretary of State that he has had to carry the burden and heat of the day, whereas his right honourable friend had an easy, quiet passage in taking the Bill through the other place with a well behaved and docile majority behind him. My noble friend must be very envious of that.
I warmly support the amendments and wish briefly to speak to my own amendments which follow. They are designed to remedy what I am sure is an unintentional gap in the Government's thinking. As I understand it—and my noble friend went too quickly for me to follow every detail of what he said—the Government have now amended the Bill so that the owners or the landlords of premises enfranchised under this Bill will be compensated for injurious affection. I see that my noble friend nods, so I am all right so far.
However, I am surprised—and this is not retrospective—that where damage or injurious affection occurs as a result of enfranchisement in the future under either the 1967 Act or the 1974 Act, no compensation is provided. I am sure that that is an unintended gap in the Government's thinking, and my amendments have been drafted to put it right. I do not need to continue at length, but I look forward to hearing my noble friend say that, even if he does not accept the precise drafting of my amendments—and I in no way wish to retain it—he will be kind enough to remedy the gap and support the proposal. Then I shall be only too glad to add to the compliments which I have already paid him.
Lord Middleton: I certainly welcome the government amendments. I join my noble friend Lord Peyton in saying that any rapture arising from the Government's exceptions of compensation for injurious affection for house owners has to be modified. As my noble friend said, the government amendments do not go far enough. It must be inconsistent to limit the right to compensation for injurious affection to freeholders of 1993 houses. Amendments Nos. 158A, 159A and 161A in the name

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of my noble friend Lord Peyton and myself would apply the same right to compensation to 1967 and 1974 houses, but not in retrospect. That must be the only fair way to do it.
Lord Williams of Elvel: Perhaps I may speak to Amendments Nos. 158, 159 and 161, which are the amendments that the Minister spoke to. That was the grouping that was decided. The Minister quite rightly
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said that those amendments picked up undertakings made in a long debate in another place and we have no particular objection to them. They add a fairly substantial piece to the Bill. It is a pity that we should have to discuss them at such a late hour. Nevertheless, I do not intend to oppose the amendments. I think that they go far enough.
On Question amendment agreed to.
10.25 p.m.
Lord Peyton of Yeovil Lord Peyton of Yeovil moved Amendment No. 158A:
Page 65, line 17, leave out from ("shall") to end of line 18 and insert:
("be determined in accordance with subsection (1A) above; but in a case where the provision (or one of the provisions) by virtue of which the right to acquire the freehold arises in section 1A(1) above, subsection (1A) above shall apply with the omission of the assumption set out in paragraph (b) of that subsection.").
The noble Lord said: I have already spoken to this amendment. I beg to move.
Lord Williams of Elvel: I have looked briefly at the amendments in the name of the noble Lord, Lord Peyton, the noble Earl, Lord Lytton, and the noble Lords, Lord Monson and Lord Middleton; namely, Amendment No. 158A which was moved and Amendments Nos. 159A, 160 and 161A grouped with it. I am not persuaded that the amendments are either necessary or desirable. But I wait to hear what the Minister has to say about them.
Lord Monson: I too support the series of amendments. They make the provisions of the 1967 Act fractionally less confiscatory and unfair so far as the future is concerned—though they do nothing to remedy the past. When I use words like "confiscatory" and "unfair" I do not think that I exaggerate. I guess that at least 90 per cent. of those present in the Committee would readily agree that the provisions of the 1967 Act were unfair. The amendments are not retrospective any more than the Bill as a whole is retrospective or agricultural tenancy legislation is retrospective, or even, in certain respects, the Budget. So I think that we can knock that one on the head in advance. The amendments are modest. They do not ask for very much. They are reasonable, and I hope that the Government will accept them.
10.30 p.m.
Lord Strathclyde: I am glad to receive the welcome of my noble friend Lord Peyton in respect of the government amendments we have just discussed; it is so much easier being on his side than being against him. It would be a delight if we could continue in that manner.
However, my noble friend asks me to do something which is extremely difficult; that is, to extend the provisions for injurious affection for pre-1993 enfranchiseable houses. I would be concerned about the possible impact on lower value houses which are already enfranchiseable. The addition of severance could considerably add to the cost of enfranchising such property.
I am not at all convinced either that it would be right to impose new obligations on those who already have the right to enfranchise. The Committee has already decided on the issue of the low rent test that it would not be right to affect existing arrangements —that was supported by my noble friend Lord Peyton —by changing the threshold of that test. Equally, I do not consider that it would be right to affect
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arrangements for the valuation of lower value houses which have existed for 25 years. Tenants of those houses and their landlords are aware of the valuation basis on which enfranchisement can be achieved; indeed, many lower value houses will have been enfranchised and the estates broken up so that there is no possibility of future damage to property, and injurious affection does not arise.
I do not consider that the price payable for those with existing rights to enfranchise should be changed, and I wonder whether, on reflection, my noble friend will agree with me on that point.
Lord Monson: Before the noble Lord sits down, perhaps he can answer this. If the terms of compensation under the 1967 Act are unfair —I think it was generally agreed by the Conservatives at the time and still agreed by them now—why not do something even now to improve it fractionally? If a Conservative Government had introduced a measure which Labour had thought was unfair, would Labour have had any hesitation in rectifying it once they came to power? Of course not.
The Earl of Kinnoull: At this late hour we are in fact talking of compensation, not of existing arrangements as to whether a property qualifies, which is the low rent or the short lease. Compensation was a matter which the Minister's right honourable friend at Second Reading particularly stressed was unfair in the 1967 Act. I must admit that those of us who practise have always recognised that fact. It cannot be going too far to include the amendments of my noble friend Lord Peyton. I hope that the Minister will reconsider and look again, before the next stage of the Bill, at what is a fairly small addition to the compensation provisions. It is very fair in practice.
Lord Middleton: I believe that my noble friend said that extending compensation to lower value property would add to the cost. But if there is an equitable case for compensation for severance, then in fairness it must apply right across the board. One cannot pick and choose houses by reference to their rateable value and say that some are entitled to severance payments and others not, however good their case for recoupment of lost value.
Lord Peyton of Yeovil: I listened carefully to what was said by my noble friend and I do not want to repeat myself. As I see it, the position boils down to this. In introducing these extremely welcome amendments, following a promise made by the Minister's right honourable friend in another place, the Government have admitted that they made a mistake; that there is something wrong. What is wrong applies with equal force to what is contained in the 1967 and 1974 Acts. Nobody is suggesting that anything that has been done under either of those Acts should be undone or affected in any way. It is simply that in the future where enfranchisement under any Act affects injuriously other property of the landlord there should be compensation.
My noble friend, on behalf of his right honourable friend, has laid down a principle which he ought now to follow. I feel extremely uneasy about what he said.

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I shall be content to withdraw the amendment if he will agree to take a further look at it and discuss it with his right honourable friend. His right honourable friend found himself faced with an argument to which he did not know the answer. The Secretary of State needs no tribute from me as to his eloquence or skills as a lawyer and an advocate.
Lord Strathclyde: I have difficulty in giving my noble friend comfort on this matter. We said that the 1967 valuation was unfair, and we stand by that. The 1974 valuation was probably all right. The amendment asks us to go back to those houses which are currently enfranchiseable but for one reason or another have not been enfranchised. I am not convinced, and I do not believe that my noble friend has made the case, that because those houses were not enfranchised we should now change the law on injurious affection against those houses.
There is a further point. Surely it is the lowest value houses which are the least likely to involve severance. Where severance is most important is in high value houses; it is on that that we have given it. Perhaps my noble friend should be grateful—if I can use that word —that the Government have seen that it is right to introduce injurious affection at this stage, and perhaps to press the amendment further would not be right.
Lord Peyton of Yeovil: I listened to what my noble friend said. I will also read with considerable care what has been said and consider it with some of my noble friends. On the basis that I shall certainly wish to return to the matter on report, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Strathclyde Lord Strathclyde moved Amendment No. 159:
Page 65, line 20, at end insert:
("(3) After section 9 of that Act there shall be inserted—
"Compensation payable in cases where right to enfranchisement arises by virtue of section 1A or 1B.
9A.—(1) If, in a case where the right to acquire the freehold of a house and premises arises by virtue of any one or more of the provisions of sections 1A and 1B above, the landlord will suffer any loss or damage to which this section applies, there shall be payable to him such amount as is reasonable to compensate him for that loss or damage.
(2) This section applies to—

(a) any diminution in value of any interest of the landlord in other property resulting from the acquisition of his interest in the house and premises; and

(b) any other loss or damage which results therefrom to the extent that it is referable to his ownership of any interest in other property.

(3) Without prejudice to the generality of paragraph (b) of subsection (2) above, the kinds of loss falling within that paragraph include loss of development value in relation to the house and premises to the extent that it is referable as mentioned in that paragraph.
(4) In subsection (3) above "development value", in relation to the house and premises, means any increase in the value of the landlord's interest in the house and premises which is attributable to the possibility of demolishing, reconstructing, or carrying out substantial works of construction on, the whole or a substantial part of the house and premises.
(5) In relation to any case falling within subsection (1) above—
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(a) any reference (however expressed)—

(i) in section 8 or 9(3) or (5) above, or

(ii) in any of the following provisions of this Act,

to the price payable under section 9 above shall be construed as including a reference to any amount payable to the landlord under this section; and

(b) for the purpose of determining any such separate price as is mentioned in paragraph 7(1) (b) of Schedule 1 to this Act, this section shall accordingly apply (with any necessary modifications) to each of the superior interests in question."").

On Question, amendment agreed to.
[Amendment No. 159A not moved.]
On Question, Whether Clause 62, as amended, shall stand part of the Bill?
Lord Monson: Before we leave Clause 62 perhaps I may ask the noble Lord, Lord Strathclyde, whether he could - for those of us who are not lawyers, surveyors or valuers—explain the effect of Clause 62 in conjunction with Schedule 14. How does this alter the compensation measurement? Perhaps he would prefer me to wait until we reach Schedule 14.
Lord Strathclyde: The noble Lord asks about Clause 62. This clause amends Section 9 of the Leasehold Reform Act 1967 and provides that the special valuation basis which was inserted for properties brought into the scope of the 196'7 Act by the 1974 Housing Act should apply to all houses newly enfranchised under this Bill. The clause states that Schedule 14 will reproduce Section 9 of the Leasehold Reform Act 1967 as amended.
Conservative opposition to the 1967 Act was based on the valuation terms which we did not consider gave fair compensation to landlords. It was therefore the Conservatives who tabled the amendments in 1974 which ensured that the special valuation basis was inserted into the 1967 Act. This basis reflects the true market value of the property. It is this valuation which would be applied to houses newly enfranchiseable under the Bill. The clause is necessary to ensure that all houses enfranchised by this Bill are acquired using the special valuation basis in the 1967 Act. It is, of course, designed to remove confusion, and I am sorry if any has been caused. I beg to move.
Lord Monson: I am most grateful to the noble Lord for that extremely helpful and welcome answer.
Clause 62, as amended, agreed to.
Lord Middleton Lord Middleton moved Amendment No. 159B:
After Clause 62, insert the following new clause:
("Charitable Housing
—After section 1(3) (b) of the Leasehold Reform Act 1967 there shall be inserted—
"(c) it is let to him by a charitable housing trust which is a housing trust within the meaning of the Housing Act 1985 and which is a charity within the meaning of the Charities Act 1960 and the house and premises form part of the housing accommodation provided by it in the pursuit of its charitable purposes.").
The noble Lord said: The amendment would provide the same treatment in respect of houses managed for charitable purposes by charitable housing trusts as already exists under the Bill in respect of flats. It does not protect charities holding

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houses as an investment. The amendment would be useful in filling a gap in housing provision in rural areas in particular. It would allow an owner to transfer to a charity land for local needs housing to be let on long leases. Leases could then be made available to local people who did not wish to enter a shared ownership scheme through a housing association or who did not want to take up low cost rented housing needed by others but who still could not afford to buy at the prices on the open market distorted by demand from outsiders. Land owners could not provide such housing under the Bill as it is drafted as it could not be maintained for local needs. In any case, no owner would grant a long lease knowing that the property would be likely to be enfranchised at some point. I very much hope that the Government may see some merit in the amendment. I beg to move.
Lord Williams of Elvel: Generally speaking, this looks like an unexceptionable clause and I should like to hear the Minister's views on it. I have one difficulty which perhaps the noble Lord, Lord Middleton, can clear up. The final line of the amendment states:
"provided by it in the pursuit of its charitable purposes".
Is the purpose of that to demonstrate that the housing accommodation is at a rent lower than the market rent —at what might be described as a charitable rent—and therefore is in pursuit of charitable purposes? Is that the idea? If it is, it seems to be a desirable amendment. If it is not the idea, it is not a desirable amendment.
Lord Middleton: That is not the idea. The idea is that the provision of housing for local needs for charitable purposes can be continued into the future without having the danger of being enfranchised.
Lord Williams of Elvel: Then "charitable" does not mean at a rent lower than the market rent. It could be rack-rented property.
Lord Strathclyde: Perhaps I may come in at this point because I understand the confusion that is in the mind of the noble Lord, Lord Williams of Elvel. I have some sympathy with what I understand is the purpose of the amendment.
As we have already heard in regard to Clause 3, charities will not be exempted from the Bill. However, as I explained then, long leaseholders of charitable housing trusts will not be qualifying tenants of their flats where they form part of the housing accommodation provided in pursuit of the landlord's charitable purposes. There is no exemption for charitable housing trusts in the Leasehold Reform Act 1967. The effect of this amendment would be to exclude all leaseholders of houses from the provisions of the 1967 Act where their landlord is a charitable housing trust and the accommodation is provided in pursuit of the trust's charitable purposes. The definition of charitable housing trust contained in the amendment is the same as in the Bill.
I have some sympathy with what is being said as to extending the exemption in the Bill to the Leasehold Reform Act. However, it would not be right or proper for us to take away rights of enfranchisement that
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already exist and from those leaseholders who are already entitled to them under the 1967 Act. The purpose of the Bill is to extend the right of leasehold enfranchisement. I have some sympathy with the purpose of the amendment. I am conscious that it would appear to be an anomaly to exempt charitable housing trusts from the provisions of the Bill and not from the provisions of the 1967 Act. Therefore, what I should like to suggest to my noble friend is that I take the amendment away with a view to tabling an amendment at a later stage that would apply the charitable housing trust exemption to those leaseholders who will be brought within the scope of that Act for the first time by the provisions of the Bill and to leases entered into after the coming into force of the Bill. The amendment will not apply to existing leaseholders who already have the right to enfranchise under the 1967 Act.
I hope that what I propose will meet with the support of the noble Lord, Lord Williams, and I hope that it goes far enough for my noble friend Lord Middleton to recognise that this is a sensible way forward.
10.45 p.m.
Lord Middleton: I am most grateful to my noble friend. With the assurance he has given, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No.160 not moved.]
The Earl of Lytton The Earl of Lytton moved Amendment No.160A:
After Clause 62, insert the following new clause:
("Purchase price
For subsections (I) to (2) of section 9 of the Leasehold Reform Act 1967 there shall be substituted the following—
"(1) The price payable (or a house and premises on a conveyance under section 8 above shall be the amount which would be payable for the house and premises pursuant to Schedule 5 to the Housing and Urban Development Act 1993 upon the assumption that the house and premises are specified premises and the valuation date for the purposes of the Schedule is the date when notice is given by the person acquiring of his desire to have the freehold".").
The noble Earl said: The purpose behind the amendment is to enable the houses enfranchised under the extension of the Leasehold Reform Act 1967 to be valued on an identical basis as flats. We have already discussed this matter with reference to the 50 per cent. of marriage value criteria. The intention is that the amendment should be substantially the same as one tabled in another place. The Minister's right honourable friend gave an assurance that he would bring forward an amendment but I note that the Government have not yet done so. It seems to me to be anomalous that there should be differential treatment in this particular instance. Therefore, I beg to move the amendment.
Lord Strathclyde: We have already debated at some length the valuation provisions in the Bill. The valuation provisions in Schedule 5 are similar to those in the 1967 Act for medium and high-value houses, which take into account the tenant's special interest in purchasing. The only material difference between the

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two valuation bases is the provision of severance compensation that your Lordships have already debated.
The 1967 Act provisions do not specifically identify marriage value as a separate element, although it is an element taken into account. The market in most cases provides that this element is divided. This recognises that the parties have to reach an agreement or the additional value will be lost. We specified the minimum 50 per cent. split in Schedule 5 in the hope that this would reduce the scope for argument, thereby making enfranchisement quicker and the costs lower. As the 1967 Act valuation for medium and high-value houses provides for open market value, where the landlord will normally receive half the marriage value, this is what the valuation will award to him.
Although I have sympathy for this amendment as it makes explicit the fairness of our valuation provisions, I am not sure that it is necessary. The marriage value is shared by the market and the 1981 Lloyd-Jones v. Church Commissioners case confirmed that this was the division that the Lands Tribunal had adopted.
I have two anxieties about the amendment. The first is that it would extend the valuation base to all houses. Parliament made the decision in 1974 not to take away from the leaseholders of low value houses rights to enfranchise under the original valuation basis, and this remains our policy. I am also concerned about the possible impact on the price of lower value houses. Therefore I am not sure that it is necessary to import the provisions of Schedule 5 into the 1967 Act. Nor could it simply be achieved by accepting the amendment. Schedule 5 has been specifically drafted to provide for flats and will be a nonsense in its present form if it is applied to houses. It is important that enfranchisement should be carried out at a fair price and should be seen to be fair. These are the elements of the valuation both in the 1967 Act for high and medium-value houses and in the current provisions for flats. It is not necessary to import Schedule 5 into the 1967 Act to achieve this. I do not consider that it would be right to affect the tenants of those houses who have existing rights to enfranchise, nor do I consider that it would be right to extend the compensation that such tenants should pay. I hope that the noble Earl can withdraw his amendment.
The Earl of Lytton: I thank the Minister for his considered reply. This was intended to be only a probing amendment, particularly in view of the lateness of the hour. I am more convinced by the thrust of the argument that it is not necessary than by the Minister's other arguments, but I will look at the matter again. On the basis that at a later stage of the Bill I may come back to the point, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 14 [Section 9 of the Leasehold Reform Act 1967, as amended]:
Lord Strathclyde Lord Strathclyde moved Amendment No. 161:
Page 214, line 9, leave out from ("shall") to end of line 10 and insert ("be determined in accordance with subsection (1A) above; but—
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(a) in any such case section 9A below has effect for determining whether any additional amount is payable by way of compensation under that section; and

(b) in a case where the provision (or one of the provisions) by virtue of which the right to acquire the freehold arises is section 1A(1) above, subsection (1A) above shall apply with the omission of the assumption set out in paragraph (b) of that subsection.").

On Question, amendment agreed to.
[Amendment No. 161A not moved.]
Schedule 14, as amended, agreed to.
Clause 63 [Estate management schemes]:
Lord Peyton of Yeovil Lord Peyton of Yeovil moved Amendment No. 161AA:
Page 66, line 2, leave out ("may") and insert ("shall").
The noble Lord said: At this hour of the night I believe that the subject of estate management is not one to embark on. I say to my noble friend that I shall be content to speak very briefly to the reasons why have tabled a scatter of amendments on the Marshalled List on the subject of estate management. My attention was caught by the note in the Bill about Chapter IV where it airily says:
"Chapter IV provides that landlords may apply to a Leasehold Valuation Tribunal for the approval of estate management schemes. Such schemes may be approved if the tribunal considers",
and so forth. I wonder why anybody should bother. A landlord who has lost or seen a great deal of his property enfranchised in a certain area, particularly where there is high amenity value and quality, may well ask himself why he should be bothered. He has no effective sanction other than to take to court a purchaser of a property who is unwilling to do whatever is required to comply with the general principles of the management of the estate. Why should he go to the expense and trouble of taking him to court with the very uncertain consequences which flow from such an action? I have yet to be convinced that the Government have given any serious thought to estate management. If they have not, they should do so now. Ministers may be tempted to say that estate management has worked perfectly well in other places. I have heard Dulwich mentioned.
I believe that there have been cases where those who have accepted responsibility in the past for estate management have come to the conclusion, in the light of experience, that the game is simply not worth the candle. Since I believe the matter to be of some importance and that failure to honour the principles of good estate management could be a disaster for many of our towns and cities, I hope that my noble friend will not just dismiss this matter lightly, but he will say that, on behalf of the Government, he is prepared to take the amendment away and give some serious thought whether the provisions of the Bill are adequate. I am of the opinion—I am ready to be convinced otherwise—that as things stand the Government have taken too much for granted. I beg to move.
Baroness Hollis of Heigham: In this respect, if not all others, I am sure that the noble Lord, Lord Peyton, is correct. There are many holes in the arrangements proposed on the face of the Bill for estate management

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agreements. We have a whole sequence of amendments, some of which are to be moved by the noble Earl, Lord Lindsay. They seek to plug those gaps. On our side we shall be speaking more substantively to Amendments Nos. 163 and 164. At this stage, I should like to echo the anxieties expressed by the noble Lord.
Lord Strathclyde: I am delighted that my noble friend should have such anxieties about estate management schemes. He is quite correct in saying that these are very important provisions in the Bill. It is important that we get them right. The lateness of the hour should not preclude the discussions which we have on them. I am very grateful to the noble Baroness for saying that she hopes to make some substantive points. Indeed, the noble Baroness, my noble friend Lord Lindsay and I have already held discussions on the Bill. I do not think for one minute that this part of the Bill has been drafted perfectly. I shall be bringing forward—
Lord Peyton of Yeovil: Did my noble friend say that the Bill has or has not been drafted perfectly? That is important.
Lord Strathclyde: What I said, as I hope the record will show, is that this part of the Bill has not been drafted entirely to my satisfaction. I shall be bringing forward some amendments on Report to deal with some of the issues which will undoubtedly be raised during our discussions on the next few amendments.
We want estate management schemes that are workable, and acceptable to tenants and to landlords and their interests, so the experience and knowledge of my noble friends and noble Lords opposite will be invaluable. There is one further point I can make to my noble friend: in 1967 just over 200 landlords applied for estate management schemes. They thought it was worthwhile. I understand that generally speaking those schemes have worked well. We want local planning authorities and English Heritage to have the ability to apply to manage schemes in conservation areas. Those amendments will be useful when we bring them forward. I accept that there are complicated matters involved here, and I, speaking on behalf of the Government, am keen to ensure that the schemes will be workable.
Lord Peyton of Yeovil: I am not sure that I understood my noble friend correctly. Is he accepting my generous suggestion that he should have another look at this matter? If he is, I shall not move all the detailed amendments that I have put down. I put them down to ensure that there would be a discussion on this matter during which I would have an opportunity to sound my anxiety and alarm at the position under the Bill. I was deeply gratified to enjoy—I do not always find myself in this position—the support of the noble Baroness, Lady Hollis. That has made my evening.
I have now to ensure that I have understood my noble friend correctly. If he wants me to continue discussions on the detailed amendments, all well and good, I am content to do so. I am content with the astonishing admission by my noble friend, because
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Ministers are seldom so candid even at this hour of the night, that a whole section of the Bill has not been well drafted. Amen, amen! Hear, hear! I agree. Will my noble friend tell me how he would like to proceed from now on? He can be sure of my co-operation.
Lord Strathclyde: If my noble friend is asking for a meeting at which we can discuss some of the issues, then I am delighted to offer him that invitation and to extend it to anyone else who wants to join us.
Lord Peyton of Yeovil: On that basis, I can only beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Strathclyde Lord Strathclyde moved Amendment No. 161B:
Page 66, line 7, leave out ("work for the maintenance or repair or) and insert ("works of maintenance, repair, renewal or replacement in relation to").
The noble Lord said: This amendment and Amendment No. 161C are necessary to make it clear that where estate management schemes empower a landlord to carry out work for the repair or maintenance of property in which the tenants have acquired the landlord's interest or impose such obligations for repair and maintenance upon a tenant, such work can also include works of renewal or replacement. If the covenants contained in the leases provide for renewal or replacement of certain standards, then it is only right that an estate management scheme in respect of the same properties should make similar provisions. I beg to move.
Baroness Hollis of Heigham: We support the amendment.
On Question, amendment agreed to.
Lord Strathclyde Lord Strathclyde moved Amendment No. 161C:
Page 66, line 16, leave out ("maintenance or repair of the property or of") and insert ("the carrying out of works of maintenance, repair, renewal or replacement in relation to the property or").
On Question, amendment agreed to.
11 p.m.
The Earl of Lindsay The Earl of Lindsay moved Amendment No. 161D:
Page 66, line 17, after ("others"), insert ("including gardens and other planted areas.").
The noble Earl said: In moving the amendment, I shall speak also to Amendment No. 161J. The amendment is tabled to confirm that enfranchising tenants pay an equitable proportion of the costs of those amenities held freehold by the landlord which form no part of the enfranchisable property but which are for the benefit of all neighbouring tenants, whether or not they choose to use those amenities.
My noble friend the Minister drew my attention to Clause 63(3) (c), which provides that the landlord running the estate management scheme can impose obligations in respect of:
"property used or enjoyed by them in common with others".
The amendment is therefore in the nature of a confirming amendment. I have had support for it from outside the Chamber but it would be useful for everyone in the Committee to hear it. I wish to clarify the fact that the provision also enables landlords to levy contributions from those people who could enjoy the amenities but choose not to.
Amendment No. 161J is a probing amendment and relates to an issue which has not received nearly enough attention. It is the problem which can develop when a landlord decides that he wishes to dispose of his freehold amenity assets which have formed part of an enfranchisable area and which have been a fundamental part of the terms of enfranchisement. Such amenities—and I include crescent or square gardens and other planted and common areas—may have been enveloped into estate management schemes of which the landlord has never been part. However, if the landlord decides that he can no longer afford or justify the holding or maintaining of that asset, there must be some clear method by which he can rid himself of the freehold of the asset.
It is probably impossible to predict whether capital values will be involved; there could simply be a notional value. On the other hand, it may be that the asset is of such extraordinary significance in a strategic part of central London or somewhere on the south coast that its potential value is huge. It may be free of all planning constraints so it may have an immediate value. However, it may also be an amenity which is being enjoyed within an enfranchised area. Therefore, complications could arise when the landlord feels that he has to sell.
Another factor is that often all such amenity assets, especially those relating to gardens and crescents, have notable residual costs. Not many leasehold estates have never suffered some form of residual loss at the end of each financial year on their planted areas. That is a burden which potential recipients of the freehold title may take into account and decide that they do not wish to be given a freehold title by the landlord.
I also point to the experience of those in Dulwich. As a result of the extent of enfranchisement, Dulwich, which has been a successful Section 19 estate management scheme, is suffering from a dilemma which has been presented to it by its charitable status. Because it has lost so much of its freehold ownership, it can no longer justify the costs and resources needed to run the freehold assets. Therefore, Dulwich is obliged to rid itself of some of the open ground and land. This is a relevant point because we have discussed other charitable bodies which will be affected by the Bill. It may be that they will be obliged rid themselves of some of their very strategic amenity assets because of their charitable status.
Lastly, when the landlord decides that the asset must be removed from his own portfolio, the person who takes on the title, whether by a notional £1 purchase or whatever it may be, must be identifiable. It may be that the beneficiaries using the asset are very clearly defined and, therefore, they are the obvious recipients. It may be that the obvious recipients are totally unwilling to take on the responsibility, or they may be willing but unable to do so because of the costs involved. It may be that it is an asset which does not have one cohesive group of beneficiaries. Therefore, should the landlord he parting with the freehold, there is no obvious recipient of that freehold.
I stress to Members of the Committee that this is a probing amendment. This matter needs to be given more thought before we return to it. I beg to move.
Baroness Hollis of Heigham: We believe that these are sensible amendments. It is clearly the case that in certain heritage areas there will be common space which is crucial to the amenity and architectural and historical quality of the area which needs protection but which will not necessarily be transferred as part of the curtilage of the flats which are being enfranchised. Therefore, we need fail-safe arrangements to ensure that those public assets which, in a way, belong to all of us, are properly maintained. We believe that these amendments go some way towards achieving that.
Lord Strathclyde: Amendment No 161D is a drafting amendment. I have no quarrel with its intention or effect, but it is unnecessary and I shall demonstrate that. Amendment No. 161J is a probing amendment and I shall discuss that more fully.
The first amendment is unnecessary because Clause 63 already quite clearly provides that an estate management scheme can include obligations relating to works of maintenance or repair, and now (following the acceptance of Amendments Nos. 1618 and 161C) works of renewal or replacement, in respect of the property itself or other property used or enjoyed by the enfranchising leaseholders in common with others.
This could include common parking areas, communal gardens, patios, other planted areas, tennis courts, etc. The list is endless. Including a reference to the use of gardens and other planted areas would merely include just two examples of the type of common facility in respect of which a scheme might include obligations, and indeed the inclusion of such a specific reference might raise a doubt as to the extent of the other common areas that the provision applies to.
Of course, where the tenants enjoy the:
"use of gardens and other planted areas",
then an estate management scheme will be able to make provision for their maintenance.
Subsection (4) already provides that estate management schemes may include provision for allowing the landlord to transfer all or any of the powers that will be conferred on him by the scheme to a local authority or other body, including a body constituted for that purpose.
I should make it clear that, although Clause 63 enables estate management schemes to provide for the management of gardens or other amenity areas used in common, it does not enable such schemes to dictate how a landlord's interest in certain property should be disposed of; and nor should it.
I appreciate that the point about which my noble friend Lord Lindsay is most concerned is that a scheme should provide for the disposal of gardens and other areas used in common where the landlord may have disposed of all his other interests by way of enfranchisement and no longer wishes to retain the freehold.
An estate management scheme is intended to provide for the management of certain areas of property that are likely to become enfranchiseable under this Bill and to pass on duties previously contained in leases and make them enforceable against those occupying or with an interest in those

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enfranchised properties. It is concerned with regulating redevelopment, use or appearance of property but does not, and should not, dictate how people with an interest in properties affected by the scheme should dispose of their interests.
An estate management scheme should not be affected by the disposal of areas used in common, whether they be gardens or not. The leaseholders on an estate will still be subject to the covenants in their leases and those enfranchised properties covered by the scheme will still be subject to the obligations and benefits of the scheme irrespective of who the freehold owner of the area used in common is.
The new freehold owner will also still be subject to the estate management scheme. I remind my noble friend that the scheme must include provision for identifying who is responsible for managing the scheme as landlord at any one time.
I appreciate that it may be desirable for those persons occupying or with an interest in properties subject to an estate management scheme perhaps to be offered any areas used in common, particularly where they may be contemplating forming a body to take over such a scheme but it would be for them to reach an agreement with the freeholder. I do not think that the scheme should go as far as to dictate how and when such areas should be disposed of by the landlord. My noble friend said his amendment was a probing one. I hope that I have explained the intention of the section.
The Earl of Lindsay: I thank my noble friend for the length and depth of his answer. Certainly I shall read what he said more carefully tomorrow and give this subject some more thought. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
11.15 p.m.
The Earl of Lindsay The Earl of Lindsay moved Amendment No. 161E:
Page 66, line 19, leave out ("paragraph") and insert ("paragraphs (a) or").
The noble Earl said: This is an important amendment which seeks to clarify the costs relating to the duties of an estate management scheme as set out in Clause 63(3) (a). Clause 63(3) (a) states that an estate management scheme may provide,
"for regulating the redevelopment, use or appearance of property in which tenants have acquired the landlord's interest".
The amendment seeks to ascertain that these costs are properly recoverable. Clause 63(3) (c) sets out what costs can specifically be recovered. It mentions the duties outlined in paragraphs (b) and (c) but it fails to mention the duties outlined in paragraph (a). This matter is especially relevant because of the extent to which Section 19 estate management schemes have suffered from their comparative inability to recover those costs.
It is in everyone's interests that estate management schemes are made to be as successful as possible. The more successful they are, the longer they will run. If they are in a sense going to constitute privatised local authorities and they will be used to enforce covenants
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and regulations on everything from building regulations in use to car parking, aerials, pets and noise, it is valuable that they perform this function as efficiently as possible. It not only benefits the local residents but it takes some of the pressure off local authorities and other hard pressed organisations such as English Heritage.
It must be made quite clear to anyone applying for an estate management scheme and anyone running an estate management scheme that the considerable costs involved in acting as a local authority are fully and properly recoverable. As I have mentioned, it is the track record of Section 19s that makes this matter so important. My noble friend mentioned that some 200 applications were made for Section 19s and many have been successful. Dulwich has been mentioned in debating this Bill on previous occasions. Even successful Section 19s, and most especially Dulwich, have suffered from one uncontrollable and fairly irrecoverable cost. If two enfranchised freeholders fall out over some covenant or some practice, then the estate manager has to step in. Apart from the hours he may have to devote to the problem, he may have to initiate court action. Therefore, there are considerable internal and external costs. Dulwich and other Section 19 schemes have found it difficult to recover such costs retrospectively. In performing such a role managers often have to step in unrequested, which also generates costs and considerable unpopularity.
I acknowledge that Chapter IV of the Bill is more promising than Section 19 of the 1967 Act. One of the critical errors in relation to Section 19 was that costs relating to redevelopment, use or appearance were not included. I am nervous that once again they will not be included. I believe from the spirit of the concessions that they probably will be included, but as the Bill is presently drafted there is considerable doubt as to how effectively the matter is covered.
I shall also speak to Amendment No. 161F, which deals with costs of unusual proportions which can arise in the management of estates. The amendment proposes that there should be an ability for an estate management scheme to include provision for an accumulation or sinking fund aimed at meeting periodic investment of a large but anticipated nature. That would be done with the approval and blessing of the leasehold valuation tribunal.
It seems proper that short-term tenants should not escape long-term costs. In the same way it seems equitable that long-term costs should not suddenly fall like a thunderbolt on one or two years' service charges.
The first of the two principal beneficiaries of the amendment would be the fabric of an estate and the services of that estate. If the estate is within a conservation area there may be certain heritable attributes which can only be repaired using certain materials and craftsmanship. Although such renewal may occur only every 25, 50 or 75 years the costs will be disproportionately large. Even in an estate which falls outside conservation area legislation there might, for example, be a cobbled mews. It would be nice if the residents, through the estate management scheme,

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were able to afford to recobble the mews when that part of the fabric declined rather than being able to afford only a cheap replacement.
The second beneficiaries of an accumulating fund would be the tenants and residents themselves. I know from experience in the management company which I run for myself and other freeholders in North Kensington that when a large bill suddenly arrives for a repair there is universal disappointment. If there is any way of avoiding it everyone does their utmost either to delay the repair or ignore the fact that it needs to be carried out. If one ignores maintenance because the cost is frightening, slowly but surely the capital value of the area, including one's own freehold house, declines. If there is no accumulation fund but that bill must be met, it is unfortunate for those who are on the point of selling their house. Often the buyer discovers that an extraordinarily large service charge is just around the corner for recobbling, re-tarmacking or refencing a garden, as the case may be.
I maintain that both the fabric of estates under estate management schemes and the residents of the estates will benefit from some form of accumulation fund.
Thee details of the collection and operation of such a fund through an estate management scheme operator need to be clarified. It must be held in an interest-earning account and it needs to be held in trust or on behalf of the residents for that specified purpose. Therefore if the estate management scheme operator changes at any time, the fund remains protected and secure. I beg to move.
Lord Strathclyde: I have some sympathy with what my noble friend says. I am prepared to consider the amendments with a view to deciding whether the estate management provisions in the Bill can be improved in the way that the amendments intend.
The Earl of Lindsay: I thank my noble friend. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 161F to 161J not moved.]
Clause 63, as amended, agreed to.
Clause 64 [Approval by leasehold valuation tribunal of estate management scheme]:
[Amendment 161K not moved.]
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 162:
Page 67, line 24, leave out ("may") and insert ("shall").
The noble Baroness said: I shall be brief since a similar amendment is on the Marshalled List in the name of the noble Lord, Lord Peyton. I believe that the Government may he minded to consider the amendment sympathetically.
The amendment provides that when considering whether to approve an estate management scheme, a leasehold valuation tribunal not only should take into consideration the benefit to the area, the tenants, and so on, but, as the Bill now provides, may have regard to its historical character, its architectural character and its heritage. The amendment provides that those considerations must be borne in mind, not merely that
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they may be borne in mind, by the leasehold valuation tribunal in determining whether to approve an estate management scheme. I beg to move.
The Chairman of Committees: I have to inform the Committee that if the amendment is agreed to, I shall be unable to call Amendment No. 162ZA, as a similar inspiration seems to have struck the noble Lord, Lord Peyton.
Lord Boardman: I have the pleasure 10 agree entirely with the noble Baroness. It is a very sensible amendment. I hope my noble friend will agree to it.
Lord Strathclyde: In a rare meeting, of minds, my noble friend Lord Peyton and the noble Baroness, Lady Hollis, put down exactly the same amendment. I am delighted to accept one of them. Which one is entirely up to the noble Baroness.
On Question, amendment agreed to.
[Amendment No. 162ZB not moved.]
The Earl of Lindsay The Earl of Lindsay moved Amendment No. 162ZC:
Page 68, line 29, leave out from ("scheme") to end of line 40.
The noble Earl said: The amendment queries the wisdom of compelling leasehold valuation tribunals to make the existence of an estate management scheme a factor in determining the price at which enfranchisement takes place.
As the Bill is drafted, it may be possible that a very comprehensive estate management scheme, with all the charges and obligations that go with it, could serve to penalise the landlord when calculations of enfranchisement are being worked out in front of a leasehold valuation tribunal. There is a danger under the provisions of the clauses that the tenant could successfully argue to the tribunal that the extent to which the scheme reaches into his otherwise freehold life depresses the value of that freehold. For instance, many estate management schemes might simply pick up roughly where the lease conditions left off. However, in many circumstances it might he a good idea if the estate management scheme went further than the original leases. Landlords applying for estate management schemes should be able to do so without feeling compelled to protect their own interests at future negotiations over enfranchisement values, in front of the tribunal.
It is also theoretically conceivable—and I bring this up because this is a querying amendment—that tenants may well want to keep an area where capital values are modest while they are applying for enfranchisement. They may only want some wonderful uplift to result from the estate management scheme after they have been to the tribunal and negotiated a slightly lower enfranchisement price. I should welcome it if my noble friend would explain the purpose and wisdom of the two paragraphs.
The final question I leave with my noble friend is this. If it takes up to two years to apply and obtain an estate management scheme, and if someone applies to enfranchise their leasehold prior to the institution of

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the estate management scheme, does the tribunal take a pot shot at guessing what it may be or does it ignore that altogether? I beg to move.
Lord Strathclyde: The Committee has heard that the effect of this amendment is to delete parts of subsection (11) so that where an estate management scheme has been approved and registered as a local land charge, the price payable on enfranchisement would not be affected by the existence of such a scheme. Where an estate management scheme has been approved and it is registered as a local land charge, then its existence cannot be denied.
The point is whether its existence and the obligations, rights and benefits it bestows should have any effect on the price payable under any subsequent enfranchisement. It is a matter of argument as to whether, in the circumstances of a particular scheme, the scheme is likely to affect the price payable on enfranchisement and whether it is likely to push the price up or down. Much will depend on the details of the scheme and the obligations and benefits it bestows.
What I can say to my noble friend, in asking him to withdraw his amendment, is that where estate management schemes are to be promoted by local authorities or English Heritage, in default of the landlord promoting such a scheme, then, when we bring forward our amendments at a later stage, we shall ensure that the landlord does not benefit from the existence of such a scheme. The landlord would have had two years within which to promote his own estate management scheme and having failed to get one approved should not benefit from the effect of one promoted by someone else. We shall provide that the price payable on enfranchisement will not take into account the effect of such a scheme. I ask my noble friend to withdraw his amendment.
The Earl of Lindsay: Will my noble friend repeat the last sentence which I missed? It seems to be pertinent.
Lord Strathclyde: I apologise. I said that we would provide that the price payable on enfranchisement would not take into account the effect of such a scheme.
The Earl of Lindsay: I think I understand my noble friend and am grateful for his reply. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 64, as amended, agreed to.
Clause 65 [Applications by two or more landlords, or by representative body]:
Viscount Goschen Viscount Goschen moved Amendment No. 162A:
Page 69, line 27, after ("scheme") insert ("under section 64").
The noble Viscount said: In moving Amendment No. 162A, I refer to Amendments Nos. 163A and 164A. These are all technical drafting amendments to clarify the meaning of Clauses 65 and 66. I beg to move.
On Question, amendment agreed to.
[Amendment No. 162B not moved.]
11.30 p.m.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 163:
Page 69, line 32, at end insert:
("(3A) Where it appears to a leasehold valuation tribunal that, in respect of an estate management scheme approved under section 64 above, the landlord for the time being has ceased to exercise all or any of the powers and rights conferred by the scheme on the landlord for the time being, the leasehold valuation tribunal shall, on an application made by a representative body within the meaning of this section, transfer such of these powers and rights as are the subject of the application to this representative body.").
The noble Baroness said: I wish to move Amendment No. 163 and speak to Amendment No. 164. I regret that we come to these amendments, as with the others we have discussed, so late in the evening as I believe that they are exceedingly important.
We have had a series of amendments, including these, which seek to bridge the right of the individual leaseholder to enfranchise on the one hand and the right of all of us to ensure that the heritage core of our conservation areas, which are held in trust for us all, are properly guarded and cared for.
We on this side do not believe that flat dwellers, just because they are flat dwellers, should be exempt from enfranchisement. Indeed, we challenged the amendments in the name of the noble Lord, Lord Cavendish, on an earlier day of the Committee stage, and we challenge the notion that heritage areas should be exempt because we believe that ownership is often a better guarantee that property will be kept in proper repair, than under a leaseholder with a declining asset in a sharply diminishing lease. All the evidence of the 1967 Act shows that such property is well maintained, and why not? People choose to live in heritage property very often because they have an affection for old buildings.
However, the point has been made several times that we accept that enfranchisement of flats is different from that of houses, simply because it is collective. Therefore, the interaction of one owner with another is much more marked. It would require collective agreements over and beyond, for example, a simple decision to paint frontages cream because if the creams are of different shades or are painted in different years, the result, as I said at Second Reading, is the effect of cassata ice cream.
What powers now exist to protect our heritage areas under the Bill as unamended? Individual listed buildings, which may represent between 10 per cent. and 25 per cent. of a conservation area, are obviously guarded by the listed building procedure, which controls facades, alterations and the like. The problem —it was a problem that we debated fully when we discussed the Planning and Local Government Bill some two years ago—was the lack of adequate controls for the rest of a conservation area over and beyond those associated with listed buildings, because permitted development rights presume in favour of the owner's wishes and idiosyncrasies in conservation areas. In the light of that, the Historic Towns Forum, with which I have been associated, has monitored the effect over the past few years. It is exceedingly worried

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about the increasing neglect of the heritage aspects of our conservation areas, as we see windows replaced by 1960s contemporary UPVC; doors replaced with Eldorado mahogany sunspray doors; brick walls replaced with Dallas ranch fencing; concreted front gardens; and the demolition of architectural detailing —all of it permitted now within conservation areas which are part of our heritage.
Article 4 directions which would overturn such permitted development rights mean that local authorities may have to pay compensation accordingly. That is impossible, even where the DoE is willing to grant Article 4 directions. It is notoriously reluctant to do so, despite commitments in the 1990 Act.
Hence, because conservation area protection at the moment is inadequate, and because much of our heritage area is made up of buildings other than listed buildings, we need additional protection for such core areas for those properties not listed. Hence, the Bill rightly and sensibly provides for estate management agreements—effectively, interlocking covenants sought by the landlord to be approved by the leasehold valuation tribunal. In so far as the Bill comes from the other place, it is full of holes, as the noble Lord, Lord Peyton, asserted and as the Minister cheerfully admitted—-the Minister is always cheerful —and incidentally that is a good reason for this Chamber to exercise its revising function if it is minded to revise.
What have we seen? We have seen that on the face of the Bill as presently constituted there is no power to permit anyone other than the landlord to set up an estate management agreement. If enfranchised, many landlords, especially if they retain their commercial interest, may do so. But for others there may well be a diminishing personal and financial interest, especially in the course of a generation, and they may walk away. That is why we welcome the Government's proposal to return at Report stage with an amendment permitting the setting up of EMAs by local authorities or English Heritage.
But one key gap—a second gap—is a power to vary under the 1967 Act so that such estate management agreements applying to houses should be able to go in future to the leasehold valuation tribunal rather than to the High Court. Again, we understand that such a proposal will come forward at Report stage, and obviously it is to be supported.
We also need to broaden the considerations that the valuation tribunal must bring to bear on the declaration of an EMA. That is why I was delighted that the Minister and Members of the Committee felt able to accept Amendment No. 162. We also need to strengthen the scope and range of the powers which the landlord can deploy within an EMA to ensure that the area is properly protected. That is why we welcomed and supported Amendments Nos. 161B, 16 IC and 161D. We also need powers, as the noble Earl, Lord Lindsay, drew to our attention, to protect the open spaces that do not form part of a curtilage.
All those are issues which should have been discussed more thoroughly in another place and brought forward with government sponsorship at an early stage. Without them, EMAs are riddled with
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holes. Above all—and this is the significance of Amendments Nos. 163 and 164—the biggest gap is the absence of an ability to ensure that, once estate management agreements are in place, they can be enforced. At the moment there is no way of doing so on the face of the Bill. There is nothing to enforce them; nothing to police them; nothing to make them stick. What is the point of having them?
Let us say that in good faith a landlord sets up an EMA. After a few years there may be a sharply diminished interest; perhaps he has sold adjacent commercial interest or perhaps there is a new heir to the property and the new heir finds the task of being a property manager fairly thankless. If the enfranchised leaseholders wish to, they can go to the leasehold valuation tribunal to vary the EMA; they can take it over themselves or, alongside the landlord, can request the local authority to do so.
But what happens if a landlord neglects to enforce an estate management agreement after a few years and the tenants or leaseholders collude with that neglect? After all, it saves them money. What then? What powers has anybody under the Bill as presently constituted to make that EMA stick? There must be default powers for local authorities and for English Heritage where the landlord is indifferent and leaseholders are acquiescent.
Obviously under the amendment local authorities would do so only where they could persuade the leasehold valuation tribunal that it was reasonable that they should intervene; in other words, where it was clear that an EMA had been neglected but there had been a substantial failure to enforce it. Given the pressure on local authority resources, it is not likely that they are going to intervene just for the sake of it; they will do so only where they see a cherished heritage area within a conservation area becoming run-down and at risk.
Local authorities clearly do have skills for the role. Many are not only running dozens of conservation areas but caring for their own listed buildings, and English Heritage has its way of caring for many of the English Heritage properties as well. In any case, their role has been well recognised by the DoE in its own prospective amendment, that where the landlord does not, the local authority may set up an EMA or its own. I would have thought that it would have been an appropriate step, even before that, to ensure that EMAs, once set up, could be enforced, and that is a gap which the amendment seeks to remedy if the Committee agrees.
To be properly effective, we shall need a subsequent amendment—which I hope the Government will bring forth, otherwise we shall—that all estate management agreements coming through the leasehold valuation tribunal should also be notified, with their terms, to the local authority in its capacity as a planning authority. In that way, it can ensure that it too can keep an eye on the enforcement of the EMAs.
I hope that the Government will take on all the: amendments. They are all of a piece. They fit together to make a reality of an estate management agreement which, while protecting the leaseholders rights, protects for all of us our heritage interests. If the

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Government do not; if we have a landlord-sponsored EMA which cannot be made to stick because neither landlord nor leaseholders have any interest in making it stick—because we have no default powers within local government—then heritage areas will remain highly vulnerable. I am sure that none of us in this Chamber wishes for that. I beg to move.
Lord Strathclyde: I have some sympathy with the amendments. I understand and accept the reasons for giving local authorities and English Heritage reserve powers. However, it is not a simple matter of references in the Act to a representative body to include reference to a local authority or English Heritage.
We are not convinced that such powers should be given to all local authorities in all circumstances. We are minded to give default powers to local planning authorities and English Heritage, but only in respect of designated conservation areas. We feel that local authorities and English Heritage should become involved only where there is a general interest or desirability in preserving and enhancing the character of an area given the limited resources that are likely to be available to it, and in effect that means limiting its involvement to conservation areas.
Every local planning authority has the power to designate conservation areas and English Heritage has the power to do so in Greater London. However, I do not consider that its involvement need necessarily be restricted to conservation areas it has itself designated. This raises various other questions as to whether the promoting authority should consult with the designating authority, whether there should be joint applications, whether schemes can straddle local authority boundaries, and so on. The noble Baroness touched on some of those.
As far as enabling local authorities or a representative body to take over an existing scheme where the landlord has ceased to exercise his powers or rights, I draw the Committee's attention to Clause 63(4) (b) which clearly states that estate management schemes may include provision for the transfer of powers to a local authority or other body. This need not necessarily be a representative body of the tenants.
Where an estate management scheme does not include provisions for transfer but later on it becomes desirable to include such provisions, they can be varied. Clause 63(2) requires that all schemes must include provision for terminating or varying the provisions of the scheme if a change of circumstances makes it appropriate. Variations will of course need to be done as required under Clause 63 by or with the approval of a leasehold valuation tribunal.
We have been considering all of these issues. As I mentioned earlier, we had hoped to have tabled an amendment for Committee stage. However, given the amount of work that is involved, it has not been possible to do so, but I promise to take this amendment away to consider it and will table something at a later stage. I hope that on the basis of that the noble Baroness will withdraw her amendment.
The Earl of Lindsay: Before the noble Baroness answers, I should like to say that I think it is important that some sort of back-up system operates both in designated areas and areas of strategic importance, as my noble friend said, and also in other areas. It occurs to me that the leasehold valuation tribunals may themselves care to check on progress, as it were, especially at mid-point in an estate management scheme, depending upon the length the award has been for.
Outside this Chamber my noble friend gave an indication that, depending upon the areas for which they were considering schemes, the leasehold valuation tribunals would have assessors who are experienced in heritage matters and surveyors who have experience of heritage properties. It may be that the LVT itself is a body that could be used when the alarm bells ring, without local residents having to support it. I can say from my personal experience that poor management is highly popular with residents, and therefore it is necessary to have some sort of safeguard.
Baroness Hamwee: Before the noble Baroness responds, the Minister has given welcome assurances about looking at this part of the Bill, and he uses the usual formula "At a later stage". It would be helpful to the Committee if we could have an assurance that that will be at the next stage. Otherwise we shall be in some difficulty. I see the Minister nods and agrees to that.
Baroness Hollis of Heigham: I am delighted that the amendments have received the support around the Committee that they have. It is entirely reasonable that estate management agreements should have default powers only in so far as they are within conservation areas. I think that is a perfectly reasonable narrowing of the amendment, if that is what the Minister has in mind. I look forward to seeing what the Government propose to table at Report stage. In the light of that, I am happy to withdraw the amendment.
Amendment, by leave, withdrawn.
Viscount Goschen Viscount Goschen moved Amendment No.163A:
Page 69, line 33, leave out ("the generality of").
On Question, amendment agreed to.
[Amendment No.164 not moved.]
Clause 65, as amended, agreed to.
Clause 66 [Effect of application for approval on claim to acquire freehold]:
Viscount Goschen Viscount Goschen moved Amendment No.164A:
Page 70, line 4, leave out ("provisions") and insert ("sections").
On Question, amendment agreed to.
Clause 66, as amended, agreed to.
Clause 67 [Variation of existing schemes]:
11.45 p.m.
Viscount Goschen Viscount Goschen moved Amendment No. 164B:
Page 71, line 41, at end insert ("within the area of the scheme").
The noble Viscount said: This is a drafting amendment. It is intended to make it perfectly clear

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that the variation of existing estate management schemes for the purpose of extending the scheme to properties that will now become enfranchiseable under the provisions of the Bill can apply only where those properties are located within the geographical area of the existing scheme. I beg to move.
On Question, amendment agreed to.
Clause 67, as amended, agreed to.
Clauses 68 and 69 agreed to.
Clause 70 [Management audits]:
The Earl of Lytton The Earl of Lytton moved Amendment No. 165:
Page 74, line 30, after ("acting") insert:
("(aa) he is a qualified surveyor belonging to the Royal Institution of Chartered Surveyors or the Incorporated Society of Valuers and Auctioneers and is not disqualified from acting,").
The noble Earl said: In moving this amendment I must declare an interest as a Fellow of the Royal Institution of Chartered Surveyors. The purpose of the amendment is to insert a new paragraph dealing with further considerations as to the nature of a person who is qualified for appointment for the purposes of a management audit.
At the moment the Bill reads:
"in accordance with subsections (2) to (6) of section 28 of the 1985 Act (meaning of 'qualified accountant') he has the necessary qualification and is not disqualified from acting".
The amendment would insert a new paragraph as follows:
"he is a qualified surveyor belonging to the Royal Institution of Chartered Surveyors or the Incorporated Society of Valuers and Auctioneers and is not disqualified from acting".
It may be that the juxtaposition of the clauses looks a little disingenuous in that it might appear that it is intended to mean that this qualified accountant has to be both an accountant and a member of the two bodies that I have referred to. That is not intended, whatever the effect might be.
The type of management audit envisaged in Clause 70 is one that surveyors and valuers are very well qualified to carry out. Many of them have considerable experience in dealing with these matters. I find it a little surprising that they are not referred to specifically in this clause. Moreover, it would be difficult to see how accountants as such could carry out the tasks allotted to them under the proposals in the Bill without drawing on the skills of qualified surveyors. It may well be that that is why the Bill reads:
"The auditor may appoint such persons to assist him in carrying out the audit as he thinks fit".
The Royal Institution of Chartered Surveyors advises me that it has discussed this aspect with the Institute of Chartered Accountants. The ICA has expressed no objection to the inclusion of provision for a qualified surveyor to act, if necessary, as the lead audit person. It may be that the Minister will feel that the term "qualified accountant" covers all kinds of professional men. I would prefer to see a more specific reference on the face of the Bill. I beg to move.
Lord Strathclyde: We have required that the auditor which the tenants appoint to undertake the audit on their behalf must be a qualified accountant. We consider that art accountant would be more
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familiar with the conduct of financial audits and will have a better understanding of the documents concerned.
We have recognised, however, that: an accountant may not necessarily have sufficient experience and knowledge to enable him to assess the condition of the property and the necessity and appropriateness of any works which have been carried out. That is why we have provided that the auditor may appoint persons to assist him in carrying out the audit. We had in mind that this might be a surveyor, particularly where there is to be an inspection of the property. He may also require legal assistance where the terms of the leases are in doubt.
We think it would be inappropriate for the auditor to be a surveyor. Most of the audit will centre on the accounts and receipts which relate to the service charge expenditure. That is the domain of an accountant. Where the audit extends beyond those documents and whether the work has actually been carried out, further professional advice and assistance may be required and in such cases the auditor may appoint someone to assist him, if he sees fit.
I cannot therefore see that the appointment of a surveyor in the first instance would be advantageous to the tenants. I hope that the noble Earl will withdraw the amendment.
The Earl of Lytton: I thank the Minister for his reply, but it is my understanding that surveyors and valuers accept responsibility for the entire preparation and audit of management accounts and therefore are well qualified.
Another point that arises out of the Minister's response is that if his logic is to be followed it means that two or possibly three people have to deal with the matter where one will do. Chartered surveyors, qualified and experienced in the matter of property management, clearly understand a large part of the legal and financial parameters that surround what they have to do, particularly in the light of the 1987 legislation.
I reserve my position on this matter but will consider carefully what the Minister has said. In the meantime, I beg to leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 70 agreed to.
Clauses 71 and 72 agreed to.
Clause 73 [Procedure following giving of notice under section 72]:
Viscount Goschen Viscount Goschen moved Amendments Nos. 166 to 168:
Page 76, line 31, leave out from ("any") to end of line 11 and insert ("document falling within section 71(2) (a) (ii) any facilities specified in relation to it under subsection (3) (c) (ii) of section 72;").
Page 77, line 12, after ("notice") insert ("under section 71").
Page 77, line 32, after ("notice") insert ("under section 71").
The noble Viscount said: These are drafting amendments. Amendment No. 166 is intended to clarify the meaning of subsection (1) (a) of Clause 73. Current drafting does not make clear that the auditor will be able to inspect all the documents that support

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the summary of costs supplied by the landlord in connection with the service charge. Amendments Nos.167 and 168 are minor drafting amendments. Their purpose is to clarify the references in subsections (4) and (7) to the giving of a notice as mentioned in subsection (3).
On Question, amendments agreed to.
Clause 73, as amended, agreed to.
Clauses 74 to 76 agreed to.
Clause 77 [Amendment of Part III of Landlord and Tenant Act 1987]:
Baroness Hamwee Baroness Hamwee moved Amendment No.168A:
Page 79, line 44, at end insert:
("(2A) In section 26 (qualifying tenants)—
(a) for subsection (1) there shall be substituted—
"(1) A person is a qualifying tenant for the purposes of Part I of this Act (tenants' rights of first refusal)." and
(b) subsections (2), (3) and (4) shall be omitted.").
The noble Baroness said: This is only a probing amendment. I apologise for the fact that it does not make the best bedtime reading. Part III of the Landlord and Tenant Act 1987 (the subject of Clause 77) enables qualifying tenants of flats contained in premises covered by Part III to acquire their landlord's interest in the premises without his consent. They can make an application to the court for an acquisition order. This right applies where the landlord has failed to discharge his obligations relating to repair, maintenance and so on and where the appointment of a manager is not an adequate remedy and the problem has still not been solved.
Generally speaking, the premises which fall within the definition of relevant premises for collective enfranchisement will also qualify under Part III of the 1987 Act. Premises excluded from collective enfranchisement are likewise generally excluded from the 1987 Act. Part I of the 1987 Act gives qualifying tenants of the relevant premises the right of first refusal when the landlord decides to dispose of his interest in the dwelling. The definition of premises for Part I is the same as the definition of premises for Part III but the definition of qualifying tenants is different. A person is a qualifying tenant for Part I if he holds any tenancy other than an assured shorthold business or service tenancy.
With that necessary bit of background, the specific purpose of the amendment is that it seeks to substitute in Part III of the 1987 Act the definition of qualifying tenant which is used in Part I. That will have the effect of giving holders of tenancies that are not long leaseholds at low rent the right to participate in this form of acquisition of the landlord's interest and not merely a right of first refusal when the landlord decides to dispose of the property. This will have the effect of extending the right of compulsory acquisition to long leaseholders whose leases are not at a low rent and to leaseholders with interests of less than 20 years.
I have tabled this amendment to ask the Government to explain the difference between the rights given under Parts I and III of the 1987 Act. On the face of it, there seems no good reason why tenants who have the right of first refusal should not also have
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the right of compulsory acquisition. They are at the mercy of landlords who fail to discharge their obligations in the same way as long leaseholders. I beg to move.
Lord Strathclyde: The noble Baroness has put the arguments for the amendment most eloquently; but I believe that she has ignored the fundamental difference between the two rights. One, the right of first refusal, arises only where the landlord wishes to sell. The other, compulsory acquisition, is initiated by the tenants, irrespective of whether the landlord wishes to sell or not, and is dependent on the fault of the landlord in his management of the property or the fulfilment of his obligations.
We think it right that those who exercise the right to compulsory acquisition should be those who have a substantial, long-term interest in the property: the long leaseholders. A qualifying tenant under the right of first refusal may also be a tenant who is renting the property or one who is a short leaseholder.
The similarities between compulsory acquisition and collective enfranchisement are clear, despite the former arising only where bad management or breach of obligations is proven. Perhaps that is the underlying purpose behind this amendment. If compulsory acquisition were to be extended to the private rented sector, there would be renewed cries from Members of the Committee for the same to be done for collective enfranchisement. And I have to acknowledge that our arguments against this would be diminished by such an event.
The Government have a fundamental objection to extending compulsory acquisition rights to the private rented sector. Renting tenants, as the noble Baroness knows, have their own remedies for breach of obligations in other legislation. We cannot therefore agree to this amendment.
Baroness Hamwee: At this time of night I have no wish to set off cries from anyone. I shall read the Minister's reply. In the meantime I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 77 agreed to.
Lord Boardman Lord Boardman moved Amendment No. 168B:
After Clause 77, insert the following new clause:
("Tenants' right to manage
.—(1) Subject to subsection (2), this section shall confer upon the tenants of fiats in premises falling within section 3(1) the right to appoint a manager to carry out such functions in connection with the management of those premises as the leasehold valuation tribunal shall think fit.
(2) The right to appoint a manager under this section shall only be exercisable where notice of appointment has been given to the freeholder of the premises by not less than half of the tenants of flats in those premises each of whom is a qualifying tenant as defined in section 5.
(3) The leasehold valuation tribunal shall upon application by a manager appointed in accordance with subsection (2) grant an order making provision for such matters relating to the exercise by the manager of his functions and such matters as are incidental or ancillary thereto as the leasehold valuation tribunal thinks fit.
(4) Without prejudice to the generality of the powers of the leasehold valuation tribunal provided in subsection (3) an order under this section may provide—

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(a) for rights and liabilities arising under contracts to which the manager is not a party to become rights and liabilities of the manager;

(b) for the manager to be entitled to prosecute claims in respect of causes for action (whether contractual or tortious) accruing before or after the date of his appointment;

(c) for remuneration to be paid to the manager by the freeholder or by the tenants of the premises in respect of which the order is made or by all or any of those persons;

(d) for the manager's functions to be exercisable by him either during a specified period or without limit of time.").

The noble Lord said: I too shall take this amendment briefly although it is one which can have a major impact on many thousands of leaseholders. Throughout the debate in Committee we have had many comments and criticisms made on the style of management and the bad management of management services which have been suffered by leaseholders. Obviously, we do not hear about the praise because people are not inclined to ventilate it although I imagine that it is many times greater than that of the complaints. There can be no doubt that complaints have been numerous and they are the ones which we most hear.
I gather that the Joseph Rowntree Foundation research undertaken last year into complaints coming from leaseholders found that the majority of them were made because of maintenance and not the cost of management or tenure. We have heard in debates in Committee that complaints have come from freehold occupiers where they have set up something on a voluntary basis. That is nothing to do with this Bill. The complaints have been numerous, but they have been as regards management rather than tenure and they have been most formidable.
The purpose of this clause is to try to deal with that point. It provides that for any qualifying block where there are two-thirds of long leaseholds, then a simple majority of those leaseholders can decide to take over the management of the building. They are given control over their own homes. In this case there is no main residence qualification which Members of the Committee will know I have referred to on a number of occasions. Here it is a simple majority of long leaseholders in a qualifying block who wish to take over the management. This amendment gives the means by which they can do so.
I believe that this will overcome a very large number of problems and many of the difficulties which have been referred to earlier in the debate and which we may be able to return to on Report. I hope that my noble friend will feel that this is a helpful amendment. It is meant to help leaseholders who have that problem. I hope that he will find that it is one which commends itself to him. I beg to move.
Midnight
Viscount Dilhorne: I support the amendment to a degree only. It is a good amendment. It places the responsibility for maintaining the property upon the person who will enjoy it (the tenant); but there is nothing especially novel in the scheme. I do not agree with some of the small print of the amendment, but that can be changed. As my noble friend said, the
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purpose is to enable the tenant to run his own property. That is something that happens regularly in France. There is an annual meeting of all the tenants at which they nominate the person who is to manage the property, and they decree, or agree, what should be done. It does away with having to go to leasehold valuation panels, and all the cumbersome procedures contained in the earlier clause. I support the amendment, because it follows an idea I had some years ago when the commonhold provisions were introduced, having experienced it in France in practice. I commend the amendment to my noble friend the Minister.
Lord Williams of Elvel: I support the amendment:, which fills an important gap. I shall not go over all the arguments that the noble Lord, Lord Boardman, used. I hope that the Government will pay attention to them and see some way of incorporating the proposal in the Bill. It seems to us generally to be a desirable objective. I hope that the Government share that view.
Baroness Hamwee: I support the amendment. It does not need to be said, but I shall say it because I have been having so many "spats" with the noble Lord, Lord Boardman, that I should like to take the opportunity of agreeing with him.
Lord Monson: Perhaps I may first express the view that it is the greatest of pities that we have to discuss important amendments like this one and the next in the small hours of Tuesday morning with, perhaps, a baker's dozen of Members of the Committee in the Chamber. We have made such good ground that one might have thought that we could have adjourned after Clause 77, but there it is.
I welcome the principle behind the amendment; but I must point out to the noble Lord, Lord Boardman, that in my experience self-management does not always equate with good management, any more than self-government of a country equates with good government. There are many reasons for that, but I suppose the main one is that a large number of independent-minded leaseholders find it difficult to agree on almost anything, whether it be the painting of the communal parts, the repair of the roof or anything else. Moreover, it is frequently difficult to get people to pay their due share of the insurance of the fabric of the building, maintenance charges and so forth. It sometimes needs a firm outside hand to extract from people what they should pay. As I said, the intention of the amendment is excellent, but I suspect that in practice the effect of the amendment, if accepted, would not be as beneficial in every case, as the noble Lord supposes.
Lord Strathclyde: There is a great deal of merit and attraction in the amendment. My noble friend Lord Boardman has succeeded in uniting all sides of the Committee. I accept that he has tried to be constructive. I have put a great deal of thought into the amendment to see how it would work. I have some problems with the practicalities of it. I hope that he will be able to explain why he believes that it will work.

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My worry is that as it is the landlord who is ultimately responsible for the satisfactory management of the block, it seems essential and fair that the choice and instruction of the managing agent should remain with him, because it would be inappropriate to give leaseholders the right to their landlord's role without their having purchased the freehold. It would present practical difficulties if the tenant wished to take action against the landlord, who continues to be responsible for the management of the block as whole.
I wish to give my noble friend an example. What would happen in the case where the tenants had instructed the manager not to do essential repairs—which was what they wanted—but later when the building began to disintegrate they decided to sue the landlord for breach of covenant? My noble friend Lord Dilhorne said that that is what happens in France. Of course, in France tenants have the freehold so they meet once a year to decide on who the managing agents should be. If this were a freehold situation I should have no problem at all.
The right to manage could lead to an increase in tension between landlords and their tenants if they change the managing agent frequently. It would also give rise to disputes between the landlord and the managing agent chosen by the tenants but responsible to the landlord. I am not aware of any evidence to suggest that transferring only a part of the landlord's responsibility would necessarily lead to better standards of management.
I have real worries that we could be creating a great conflict of interest in the property and I cannot believe that that will help anyone. The practical way for leaseholders of flats to take over the duties and responsibilities of their landlords is for them to take over the ownership and thus the control of the building for themselves. That is what collective enfranchisement achieves.
I recognise that my noble friend brought forward the amendment in a constructive spirit. It would be churlish to deny that it has been welcomed on all sides of the Committee. However, I hope that he can help me with those issues. If he cannot do so now perhaps he would like to think about them before Report.
Lord Boardman: I welcome my noble friend's commendation of the principle behind the amendment. I should like to reflect on how we can best deal with the problems which may arise. I was puzzled by his reference to the conflicts of interest which the provision would create, bearing in mind the massive number of conflicts of interest which will be created by carrying out the provisions of the Bill. It will enable 41 per cent. of the freeholders to buy the block, leaving nearly 60 per cent. without the ownership rights. Those conflicts worry me far more than any conflict which will arise under the management scheme.
I shall read with care what my noble friend said and I hope that we can produce something which will overcome his reservations. I believe that the provision could provide a real solution to many of the problems which worry leaseholders throughout that tenure. I shall come back on Report but in the meantime I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 78 [Approval by Secretary of State of codes of management practice]:
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 169:
Page 81, line 4, at end insert:

("(6A) A failure on the part of any relevant person to comply with a code of practice for the time being approved under this section (insofar as it relates to the carrying out of management functions with respect to residential property) shall entitle the tenants of such property—

(a) to serve a notice on the relevant person requiring him to attend a meeting to account to the tenants for his failure so to comply;

(b) in default of such attendance by the relevant person, or if the tenants are not satisfied with the account given by the relevant person, to serve a notice on the landlord to the effect that:

(i) they do not wish the relevant person to continue to carry out the management functions for the premises;

(ii) (if applicable) requiring the landlord to terminate the contract under which the relevant person is retained at the end of the contractual term;

(iii) requiring the landlord to appoint as the relevant person a person nominated by the tenants on such terms as may be agreed between the landlord and the tenants as reasonable in the circumstances.

(6B) Any dispute arising under subsection (6A) above shall be referred for determination to the Leasehold Valuation Tribunal.").

The noble Lord said: The amendment is a variant on the theme which we have been discussing and need not repeat all the arguments. It is probably more consistent with the Bill than the blanket clause moved by the noble Lord, Lord Boardman, although I find that amendment very attractive.
I accept that there are problems with the drafting of my amendment and that tenants should be replaced by a recognised tenants' association as required by the Landlord and Tenant Act 1985. I also recognise that management contracts should not last longer than a year, otherwise one cannot change them. Nevertheless, it is one way of moving within the spirit of the Bill and in the direction indicated by the noble Lord. The tenants would not be responsible for management but any dispute under subsection (6) (a) would be referred for determination to the Leasehold Valuation Tribunal. That is not dissimilar from the referral to the court under Section 24 of the Landlord and Tenant Act 1987. The problem is that nowadays it is difficult to gain access to a court; it takes a long time. Therefore, I should have thought that the leasehold valuation tribunal was the right body to do that. As the noble Lord, Lord Monson, said, it is an extremely important matter. I beg to move.
Lord Monson: I support the amendment. The main catalyst for Part I of the Bill is the bad landlord or, more precisely, the bad freeholder. Most of us would agree that only a minority of freeholders fall into that undesirable category, and yet the blunderbuss effect of Part I peppers them all, whether they be good or bad. By building upon the 1987 Act—it is not quite as effective as it was originally thought to be—as this amendment does, the bad landlord is targeted. If you can deal with him, there is no need for the more

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controversial aspects of the rest of Part I. That is the path that I should have liked the Government to have taken from the outset. However, the amendment goes some way towards achieving the desirable effect of strengthening the 1987 Act.
Lord Rodger of Earlsferry: The noble Lord, Lord Williams, has mentioned certain problems with regard to the drafting of the amendment. Without dwelling upon that, I should say that the drafting suggests that the noble Lord, or whoever drafted the amendment, had in mind that the relevant person would be somebody who could be asked to attend a meeting. That might be so, but if Members of the Committee look at the provisions of subsection (8) (a) it will be apparent that "relevant person" is more widely drawn than that. For example, it would be wide enough to cover a tenants' management company, a superior landlord or another management company. Therefore, it is not necessarily apt to suggest that this should be a person who could be called along in all cases. For example, that would not apply as regards a management company.
It is fair to notice also that Clause 78(4) gives the Secretary of State the power to approve one or more codes of practice which are designed to promote desirable practice. He has power to approve parts of codes or to modify them and so on. It is obvious also that the codes may apply to private and publicly-owned properties—in other words, to public landlords, to blocks of flats, to hostels, to houses or to any other type of residential property. It is wide in its scope of tenure because it is clear from Clause 78(9) that it can apply to leases proper and also to licences. Therefore those codes of practice are extremely wide ranging. It does not appear to us that it would be appropriate in that situation for the kind of sanction which is envisaged here, even if it could be made to be practicable, given that they are extremely wide-ranging codes.
Another important matter as regards the codes is that it will be apparent from Clause 78(7) that the nature of the codes as envisaged is that they are the same type as those with which we are familiar; for example, the Highway Code or in industrial relations the codes on picketing and so on. It is envisaged that the code will have evidential status. A breach of the code would not give rise to liability in itself.
The amendment which is put down here would tend rather to change the status of the code and would, in our submission, change it in a way which would make it inconsistent with what is envisaged in the Bill as it stands. I understand that the amendment does not seek to make the code legally binding in the normal way: that is, it does not seek to lead to a direction of a court. However, it suggests that it should appear before the leasehold valuation tribunal. We consider that may not be an appropriate forum for settling disputes of this kind between landlords and their tenants, and certainly it is not a role which has been put before that body in the past. We consider that the code may be appropriate in the context of other remedies and it may help to strengthen these other remedies which are available under the 1987 Act. However, we believe this particular way of dealing
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with the matter is inappropriate. In those circumstances I hope the noble Lord will withdraw the amendment.
12.15 a.m.
Lord Williams of Elvel: I am grateful to the noble and learned Lord for his response. This is not the time of night to discuss in detail what he has said. What is in the Bill is not good enough and we shall have to return to this matter on Report. I hope the Government will provide something rather better than the provision they have in the Bill at the moment, because codes of practice—whether or not of Highway Code status—without any sanctions will simply be ignored. We do not want that to happen. However, I shall read what the noble and learned Lord has said. As I have said, I have no doubt that we shall return to this whole matter at the next stage of the Bill. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 78 agreed to.
Clause 79 [Jurisdiction of leasehold valuation tribunals in relation to enfranchisement etc. of Crown land]:
Lord Rodger of Earlsferry Lord Rodger of Earlsferry moved Amendments Nos. 169A and 170:
Page 82, leave out lines 24 to 28.
Page 82, line 30, leave out ("be in such form, and contain such particulars,") and insert ("comply with such requirements (if any) as to the form of, or the particulars to be contained in, any such application").
The noble and learned Lord said: In moving these amendments I shall speak also to Amendments Nos. 170A to 172. These are all technical amendments which deal with procedure and forms. They are intended to make the drafting of the Bill clearer. I shall speak also to Amendments Nos. 199 to 203, which are similarly technical amendments dealing with it be drafting of the Bill.
On Question, amendments agreed to.
Clause 79, as amended, agreed to.
Clause 80 agreed to.
Clause 81 [Jurisdiction of leasehold valuation tribunals]:
[Amendment No. 170A not moved.]
Lord Rodger of Earlsferry Lord Rodger of Earlsferry moved Amendments Nos. 171 and 172:
Page 84, leave out lines 17 and 18.
Page 84, line 24, leave out ("be in such form, and contain such particulars,") and insert ("comply with such requirements (if any) as to the form of, or the particulars to be contained in, any such application").
On Question, amendments agreed to.
[Amendment No. 173 not moved.]
Clause 81, as amended, agreed to.
Clause 82 agreed to.
Clause 83 [Agreements excluding or modifying rights of tenant under Chapter I or II]:
Viscount Goschen Viscount Goschen moved Amendments Nos. 174 to 176:
Page 85, line 25, leave out ("Schedule 13") and insert ("section 57").
Page 85, line 46, leave out ("Schedule 13") and insert ("section 57").

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Page 86, line 37, leave out ("32 of the Charities Act 1992") and insert ("36 of the Charities Act 1993").
The noble Viscount said: These are drafting amendments. I beg to move.
On Question, amendments agreed to.
Clause 83, as amended, agreed to.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 176ZA:
After Clause 83, insert the following new clause:
("Protection of occupants who are mentally handicapped or mentally ill
. Any provision in any lease or sublease of any residential flat which prohibits the lessee or sub-lessee from providing accommodation therein for a person who is mentally handicapped or mentally ill, shall be unenforceable, unless the behaviour of that person infringes the right of occupants of other flats in the same building to quiet enjoyment thereof.").
The noble Lord said: In the absence of the noble Lords, Lord Renton and Lord Rix, I move this amendment, which I believe is self-explanatory. I do not think I need go into it in any detail. The two noble Lords would have liked to be present but unfortunately at this late hour they cannot. I beg to move.
Lord Strathclyde: I am grateful that the noble Lord, Lord Williams, has moved this amendment in the absence of the noble Lord, Lord Rix, and my noble friend Lord Renton. I know that both of them were keen to speak to the amendment. However, my noble friend Lord Renton unfortunately was not feeling well and could not stay at this late hour. The noble Lord, Lord Williams, said in moving the amendment that it was self-evident. I sympathise entirely with the sentiment behind this amendment. People should not be prevented from being lessees of flats simply because they are mentally handicapped or mentally ill. That would be discriminatory and is clearly wrong.
I do not feel that the Committee is the appropriate place for such a discussion, or that the Housing and Urban Development Bill is an appropriate measure for the inclusion of provisions to prohibit discriminatory covenants. Part I of the Bill is concerned with enabling long leaseholders of flats to purchase their freehold, not with the provisions of covenants in individual leases. The proper place to prohibit such discriminatory covenants, whether imposed in leases or on freeholds, would be in a separate discrimination Bill.
On that basis, I hope that my noble friend and the noble Lord, Lord Rix, will read carefully in Hansard
156
what I have said and will understand that I have every sympathy with their intention. I have no evidence that there is a problem. If the noble Lords have any evidence, I should very much like to see it. I hope that in their absence the noble Lord, Lord Williams, can withdraw the amendment.
Lord Williams of Elvel: I am grateful to the noble Lord. There is a chapter in every Bill called "Miscellaneous". There has been such a chapter in almost every Bill that I can remember. It is a sweeping up chapter. I should have thought that instead of having a separate Bill this provision could easily appear under "Miscellaneous". I hope very much that the noble Lord will give some thought to that suggestion.
Lord Strathclyde: My point was not that it was out of order for the amendment to be tabled, nor that it would be out of order for it to appear in the Bill. My point was that this is a serious issue and not one which is appropriate merely for inclusion in a Bill of this type. It is an issue which needs to be considered in the light of a general Bill aimed at non-discrimination, which is something that we can all support. I believe that that is the best way of dealing with such issues rather than addressing them in individual Bills. That is the point that I tried to make, and I hope that the noble Lord accepts it.
Lord Williams of Elvel: I accept that. The only problem is that we have a Bill in front of us; but if we have to wait for a non-discrimination Bill, we may have to wait for years and years. That is why the noble Lords, Lord Renton and Lord Rix, put down the amendment. However, I have no doubt that they will read carefully what the Minister said and that they will wish to return to the matter. I beg leave to withdraw the amendment.
Amendment, by leave; withdrawn.
Clauses 84 to 92 agreed to.
Viscount Goschen: I beg to move that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

Midland Metro (No. 3) Bill
Committed to an Unopposed Bill Committee.
House adjourned at twenty-three minutes past midnight.

  PRISON SERVICE WAREHOUSING AND DISTRIBUTION
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