Sitting of 14 January 1997

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

    Stanmore Park RAF Base
    Mr. Dykes: To ask the Secretary of State for Defence if he will make a statement on the voluntary redundancy and early retirement statistics of civilian and military personnel at Stanmore Park RAF base. [8970]
    The Minister of State for the Armed Forces (Mr. Nicholas Soames): The majority of civilian staff to be affected by the closure of RAF Stanmore Park in April this year have been found alternative employment and every effort is being made to find posts for the remainder. By April, 35 Royal Air Force personnel will have left on voluntary redundancy and a further 13 will have been granted premature voluntary release.
    Mr. Dykes: I thank my hon. Friend for that reply, and I also thank his Department and the Royal Air Force for the positive, thoughtful and careful way in which the programme has been handled. I congratulate him on being able to keep the pledge that there would not be other than a small number of redundancies. Is he now confident that everybody will be either deployed with satisfactory packages to enable them to have a breathing space to find alternative employment or re-employed in military or civil posts elsewhere?
    Mr. Soames: I am grateful to my hon. Friend, and I note the care and attention that he has taken on his constituents' behalf on the occasions that he has lobbied me here and at the Ministry of Defence. I can give him the assurance that he seeks, but there may be a requirement for two employees—one industrial and one non-industrial—to leave on redundancy or early retirement terms by April 1997. However, all possible efforts will be made to identify alternative employment for them.

    Armed Services (Rapid Deployment)
    Mr. David Shaw: To ask the Secretary of State for Defence what assessment he has made of the state of readiness of the armed services for rapid deployment. [8972]
    The Secretary of State for Defence (Mr. Michael Portillo): It is our policy to be prepared for rapid
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    deployment. We have created a permanent joint headquarters and joint rapid deployment force and placed orders for appropriate ships and aircraft.
    Mr. Shaw: Does not my right hon. Friend's reply demonstrate that the Government have continually developed our armed forces, and have made sure that they have the modern weapons that they need and are developing in a way that meets the requirements of the new commitments that, sadly, we must take on from time to time?
    Mr. Portillo: My hon. Friend is quite right. I am pleased that we have been able to adapt our forces to the modern world, and we are now able to devote about 40 per cent. of the total defence budget to buying the equipment that our forces need. Having the best weaponry, intelligence and command and control of the modern battlefield is essential, and having rapidly deployable forces means that we have an important extra element of deterrence so that we can show resolve quickly when an international crisis may be about to erupt.
    Mr. Menzies Campbell: Does the Secretary of State agree that the readiness for rapid deployment depends upon adequate funding for the armed services? Yesterday, a national newspaper that is normally sympathetic to the Government called for a defence review and revealed that, in spite of promises to the contrary, there will be a 3 per cent. cut in defence expenditure in real terms next year. How will that assist rapid deployment?
    Mr. Portillo: I am surprised at the hon. and learned Gentleman, who is a member of the Select Committee on Defence, as I explained all this in great detail to the Select Committee a day or two after the Budget. I made it perfectly clear then that, in the present year, the extra £380 million that is being spent has been carried forward from previous years. We have been granted £244 million for this present year for extra costs in Bosnia, and those two figures together come to about 3 per cent. of the defence budget. Of course more money is being spent this year than the plans for next year, but next year's spending will not turn out to be just the planned amount because we shall again be spending money on Bosnia. In reciting what The Daily Telegraph has said, the hon. and learned Gentleman is trying to compare apples and pears, and one cannot compare outcome with plan.
    Mr. Key: I congratulate my right hon. Friend on the readiness for rapid deployment of Britain's forces. May I invite him to consider the contribution made not only by the Defence Evaluation and Research Agency but by the thousands of civilian industrial workers throughout the country, including those at Boscombe Down, for example, which I visited only last week? I was told that they had never had as much work as they have now, with more than 40 different projects at that one establishment.
    Mr. Portillo: DERA makes an outstanding contribution. My hon. Friend raises a broader point that is well worth emphasising: we often pay tribute, as we should, to our armed forces, but they are able to do what they do only because of the tremendous back-up from civil servants centrally in London, in the complex of

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    establishments throughout the country and deployed abroad. It is a combined military and civilian effort and I pay tribute to both sides with great pleasure.
    Mr. Barry Jones: Does the right hon. Gentleman agree that the future large aircraft project would assist deployment of our troops overseas? What talks has he had with British Aerospace on the matter and can he tell us whether the French and Germans are prepared to come in and guarantee the project?
    Mr. Portillo: All three countries—including ourselves—have expressed great interest in the future large aircraft. We certainly have a need for future heavy lift capability that has not yet been met in our plans. At present, the Germans and the French have been unable to identify any funding in their programme for the aircraft, and I have no more news about that. I have no doubt, however, that we shall need aircraft beyond the C130J that we have already ordered, and our interest in the project is well known to the House.
    Mr. Brazier: Does my right hon. Friend agree that our rapid deployment capability, and indeed our wider military capabilities, are heavily dependent on the armed forces having a breathing space of stability? Does he further agree that the threat of a full-scale defence review is the last thing that they need to settle down?
    Mr. Portillo: Yes, the idea of a defence review will be extremely depressing and discouraging for our armed forces. I was, frankly, surprised to see the idea endorsed in The Daily Telegraph. It would have an extremely deleterious effect on our armed forces. We have completely changed the orientation of our forces because the cold war has come to an end and we have redirected forces and developed a rapid deployment capability. There is absolutely no need for a defence review and everyone in the House knows why the Opposition advocate one: they want to cut defence and they do not have the courage to come out and say it. We know that many on their Back Benches long to cut defence, but we shall deny them the opportunity so to do.

    Ministerial Responsibilities
    Mr. Gunnell: To ask the Secretary of State for Defence which Minister is responsible for manpower levels in his Department. [8973]
    Mr. Soames: My right hon. Friend the Secretary of State for Defence has overall responsibility for all defence matters.
    Mr. Gunnell: I understood that the Minister had specific responsibility for manpower. Does he take personal responsibility for the fact that, because he has cut the armed forces by a third, manpower in the Army is 5,000 short? Is that any way to run the defence of the country?
    Mr. Soames: I answered the question in that manner because of my natural deference and modesty. It is indeed true that I am responsible to my right hon. Friend for manpower levels. It is also true, as the hon. Gentleman says, that we have difficulties in recruiting. The reasons are well known by the House and have been rehearsed on many
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    occasions. The hon. Gentleman must not paint too dim a picture; it is a difficult situation but we are making real progress. Army recruiting this year stands at 86 per cent. of its target so far, the figure for the Royal Air Force is 95 per cent. and the Royal Marines have recruited 100 per cent. of the target for officers and 87 per cent. for marines.
    The picture is much improved, but the House should not be deceived for one minute into believing that the matter can be resolved easily or overnight. We live in a competitive and difficult environment and we have to work extremely hard to get the excellent young men and women whom we need.
    Mr. Wilkinson: Is it not reassuring that my hon. Friend does not shrink from taking his personal responsibilities in these matters? He is no shrinking violet in any sense or form. On the recruitment figures, is it not thoroughly encouraging that recruiting should be so relatively high at a time when unemployment nationally is continuing to drop? It is essential that Her Majesty's forces can continue to attract high-quality manpower and the Government are taking a range of measures to do just that.
    Mr. Soames: I am grateful to my hon. Friend. He is right and, as he and I said, we live in a competitive world in which a lot of other people are after the same high quality of young men and young women that we seek to attract into our armed forces. We have to make it an attractive career, which it is. They should come in, because they will find good comradeship, wonderful training, great opportunities, adventure and excitement. They will find that they can undertake no more satisfying career. The Duke of Wellington's regiment, the King's regiment, the Green Howards, the Light Dragoons and the Second Royal Tank regiment are all over strength. The problem is not found throughout the Army, but in certain specified and difficult areas and we are doing our best to ensure that those matters are dealt with expeditiously in the Army and the other two services.
    Dr. David Clark: Can the Minister explain how, having spent £1,500 million on redundancy payments in recent years, Army recruitment last year was 25 per cent. under target and we have a shortfall of between 5,000 and 6,000 soldiers? Can he let us into his little secret?
    Mr. Soames: This from an hon. Gentleman who, in an interview with the New Statesman and Society decided, on defence diversification, that the Thompson sonar could be used in fish farms. This is the man who asks me about the running of defence. He knows perfectly well that, having been through "Options for Change", the Army regretfully and sadly shed a large number of people to maintain the level of experience and age profile that it needs. To be able to fight—to do its business—it needs to recruit a constant stream of young people all the time. That is what we are doing. For the hon. Gentleman to portray this as some sort of mismanagement is ridiculous, dishonest and ignorant.

    Defence Exports
    Mr. Congdon: To ask the Secretary of State for Defence what measures his Department takes to assist British firms to win defence exports. [8975]
    The Minister of State for Defence Procurement (Mr. James Arbuthnot): My Department's defence export services organisation exists to provide British defence exporters with the strongest possible Government support, within the framework of our defence, security and foreign policies.
    Mr. Congdon: Does my hon. Friend agree that if foreign countries wish to bid for our defence exports, they should ensure that their markets are equally open to our exports? Does he also agree that Hunting Aviation does a good job in maintaining engines for the Ministry of Defence and should, therefore, be given equal access to the Canadian market?
    Mr. Arbuthnot: I will accept both of my hon. Friend's questions. Protectionism is extremely bad for the defence industry worldwide. We need a two-way street in the defence exports and imports of the United States, Canada and other countries. I also agree that Hunting Aviation's work for the Ministry of Defence is first class. We are evaluating a competition for T56 Aero engines. We have not yet reached a decision on that, but I entirely agree that we need a two-way street in exports and imports of defence industry work.
    Mrs. Anne Campbell: When does the Minister expect to award the maintenance contracts for the RAF Tristar fleet, since that is one of the contracts that will have an enormous impact on the ability of Marshalls in my constituency to continue its exports of defence equipment?
    Mr. Arbuthnot: Shortly.
    Mrs. Peacock: Can my hon. Friend tell the House the value of our defence exports for the year 1995–96?
    Mr. Arbuthnot: In 1994, we took something like 14 per cent of the world export share. In 1995, it was nearly 20 per cent. In 1996, we expect it to be up on that and, in 1997, we know that it will be significantly higher even than that. Exports were worth something like £5 billion in the last year and that is because Government policies have helped British industry to become lean and competitive. We produce excellent equipment at a very good price for overseas markets, as well as for the defence of the country.
    Mr. Spellar: Does the Minister accept that exports need a solid domestic base? Does he think that our exports have been helped by the appalling delay and shambles in the Bowman project? Can he tell us how he got into such a mess and, more important, how he intends to get out of it?
    Mr. Arbuthnot: Not only exports but the entire defence of the country need a solid defence base. That does not need a strategic defence review, with all the uncertainty that the Labour party would inject into our armed forces and defence industry. Bowman is an extremely important competition for the country. It is an interesting competition because it is constantly chasing a technology that is evolving so rapidly that it must not be allowed to become obsolete before it goes into service. We shall evaluate industry's new proposals to produce a
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    single consortium, and we expect to make a decision on that round about March. We intend to get the Bowman equipment into service by 2002, and we intend to make sure that there is as much competition as possible so that the project will achieve good value for money for the British taxpayer.
    Mr. Garnier: Does my hon. Friend accept that, for my constituency, one of the most important elements of the defence exports business is a company called King Trailers Ltd., which manufacturers trailers for military and civilian purposes? The company has endeavoured over the past few years to export trailers to foreign Ministries of Defence. It has had some encouragement from my hon. Friend's Department, but it needs all the encouragement that it can get. Will he visit the company in the next few months and give it the support that it deserves?
    Mr. Arbuthnot: I not only accept but know that, because my hon. and learned Friend has raised the subject of the company with me on several occasions. I will happily accept his invitation to visit, but if I may, I would rather do so after the election, if I continue in this job.

    Armed Forces (Manpower)
    Mr. Jack Thompson: To ask the Secretary of State for Defence for how many consecutive months up to the most recent month for which figures are available there has been a shortfall in each of the armed forces' manpower. [8976]
    Mr. Soames: Up to 1 November 1996—the latest figures available—the naval service has had a manpower shortfall for four consecutive months, the Army for 16 months, and the RAF has been undermanned for 12 consecutive months.
    Mr. Thompson: In view of the Minister's previous answers to questions on this matter, has he read the Defence Committee report, which argues that the legacy of undermanning in the Army will affect the Army's efficiency for many years to come? How do our allies in NATO react to such undermanning, given our NATO responsibilities? Is that not an example of ministerial mismanagement and incompetence in defence matters?
    Mr. Soames: I know that the hon. Gentleman is one of the poor figures who are snaffled in the Tea Room by the hon. Member for South Shields (Dr. Clark) and given a question to table. He could not possibly mean that question.
    Mr. Foulkes: Withdraw.
    Mr. Soames: No, I will not withdraw.
    The French have recently announced that they will not only rejoin NATO, but intend to model their armed forces on the British Army. Is that a symbol of our incompetence? All the time we hear that socialist whining and whingeing. The British forces have swept to victory in the Gulf, in northern and southern Iraq, in Angola, Rwanda, Kuwait and the former Yugoslavia, and still the Opposition ask whether our forces are capable of doing

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    the job. Recruiting is a difficult matter. We have serious problems and we are under strength, but we are dealing with it.
    Sir Jim Spicer: My hon. Friend will know that, for many years, the Junior Leaders regiments provided not only quality but quantity to our armed forces. Can he inform the House when a final decision will be made to reinstate them?
    Mr. Soames: I am grateful to my hon. Friend for raising that issue. He knows better than most that the supreme quality of the non-commissioned officers in the British Army and the other two services depends largely on the extraordinarily successful Junior Leaders regiments. Everyone regrets that they no longer exist. I am happy to inform my hon. Friend that my right hon. Friend the Secretary of State will arrive at a decision about the timing of the new arrangements for Junior Leaders shortly.
    Dr. Reid: In wishing you, Madam Speaker, and the Minister a happy new year, I must say how deeply Opposition Members regret press reports that the Minister will not be able to defend his record on those issues during the general election campaign because Tory central office has banned him from appearing on television as he is too much of a toff. The Opposition deprecate the politics of envy. Will the Minister defend his record now as he will not be able to do so during the election campaign? Will he confirm that the Government have cut our force levels by one third, have spent £1,500 million doing so, and have ended up short in every service? Is it not true that our forces are under strength and over stretched and that the general election is long overdue?
    Mr. Soames: Before reciprocating the hon. Gentleman's new year wishes, I draw your attention, Madam Speaker, to an advertisement that appeared in an impertinent magazine entitled Defence News. It is signed by the hon. Gentleman, who described himself as Minister for the shadow armed forces. In view of those strictures, perhaps you should have a word with the editor of Defence News, Madam Speaker.
    The hon. Gentleman's portrayal of the armed forces is a travesty. Everyone knows that we have the best armed forces in the world, although they are over stretched, very busy and have manpower problems. It is a volunteer service and we cannot compel people to join, but we are lucky in that those personnel we have are the best in the world. The hon. Gentleman does them no service by portraying them as he does.

    Defence Contracts
    Sir John Cope: To ask the Secretary of State for Defence how many British jobs are sustained by his Department's defence contracts; and if he will make a statement. [8977]
    Mr. Arbuthnot: We estimate that in 1994–95—the latest year for which figures are available—my Department's contracts for equipment and other goods and services sustained some 270,000 jobs in the United Kingdom. We estimate that a further 90,000 United Kingdom jobs depended on defence exports.
    Sir John Cope: My hon. Friend has just agreed that the defence base, and hence MOD contracts, is a necessary
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    pre-condition for arms exports. In providing the figures for those whose jobs are sustained by arms exports, will he bear it in mind that, in the last defence estimates debate, 21 Labour Members of Parliament called for a total ban on British arms exports?
    Mr. Arbuthnot: I will indeed. An interesting letter has been received from the right hon. Member for Yeovil (Mr. Ashdown), who attacked the possibility of selling Westland Lynx helicopters to Indonesia. If he is prepared to do that to his constituency, I dread to think what he would do to the country.
    Mr. Madden: As both India and Pakistan have nuclear capability and the long and unresolved conflict between the two countries over Kashmir makes the region one of the most exceptionally dangerous in the world, how does the Minister justify British sales to India of Hawk 100 aircraft, which clearly could, and probably will, be used to suppress the popular insurrection by the people of Kashmir in pursuit of their right to self-determination?
    Mr. Arbuthnot: Article 51 of the United Nations charter gives every country the right to defend itself. We have very close relations with India and, fortunately, also with Pakistan. We shall do everything that we can to preserve the stability of those regions. We shall not try to undermine our defence industry—unlike the hon. Gentleman, who would clearly like to undermine it by preventing exports to countries that have been friendly to the United Kingdom for many years. I suggest that he has a word with his Front Bench about that, but unfortunately I fear that he represents the views of many Labour Members.
    Mr. Mans: Does my hon. Friend agree that one way not to sustain jobs in the defence industry would be to carry out a defence review, which would delay procurement of much-needed weapons systems? Does he further agree that it is particularly worrying to workers in the defence industry in Lancashire that the Labour party has made no commitment whatever to exclude the Eurofighter project from its defence review, which means that it could be cancelled, or at the least the Royal Air Force would not get the number that it wants?
    Mr. Arbuthnot: My hon. Friend puts his finger on a point of huge importance. The instability of a strategic defence review would undermine the certainty of our negotiations in the Eurofighter project and would be damaging not only to this country but to the entire European defence industry. If the Labour party were able to bring in a strategic defence review, that would undermine not only this country's defence industry but the aims of Europe to bring its industry together and to be able to compete properly to the world market. My hon. Friend makes an extremely important point.
    Mr. Grocott: Is the Minister aware of the announcement made last Friday of 270 redundancies at GKN Defence in my constituency? That is 270 out of a total work force of 700. Those are skilled people who have given years of service to the defence needs of the country. Does he recall his letter to me of 13 December, in which he turned down a suggestion from GKN that it provide 87 armoured vehicles? If that contract had gone

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    ahead, it would have secured a number of important defence jobs. I do not expect an instant reply, but in the light of the redundancies that have occurred, I ask him to reconsider that decision, because he must appreciate that, if those skills are lost, they will be difficult, if not impossible, to replace.
    Mr. Arbuthnot: I understand the points that the hon. Gentleman made and I considered the decision very carefully indeed because of those points. Obviously, we regret hugely any loss of defence jobs or other jobs, but it is true of any company that, in the long term, it has to match the number of its employees to its order books. The Warrior system that GKN proposed to us for early purchase has been hugely successful not only in this country but in Bosnia, the Gulf, Kuwait and around the world, but in the long term we decided that our requirement was not sufficiently well established to enable us to accept its very interesting and in many ways attractive proposal. GKN is an extremely successful company. We have seen recently an order from Qatar for Piranha vehicles. We know that there are plenty of prospects for other Warrior vehicles throughout the world, so let us not attempt in any way to undermine the possibility of GKN winning many other orders elsewhere.
    Sir Anthony Grant: When coming to what I hope will be an early decision on the Tristar contract, will my hon. Friend bear in mind what I have repeatedly told him: that what is at risk is not merely jobs in Cambridgeshire but, for the nation, the remarkable expertise of the Marshalls company, which has been built up over many years?
    Mr. Arbuthnot: My hon. Friend has, on many occasions, raised this competition with me. I shall certainly bear in mind the points that he makes when I come to a decision, which will be very soon.
    Mr. Murphy: Contrary to what the hon. Member for Wyre (Mr. Mans) just said, does the Minister accept that it is the firm intention of the Labour Government to be elected later this year to be absolutely committed to Eurofighter? Secondly, instead of talking about Yeovil, will the Minister reflect on what my hon. Friend the Member for The Wrekin (Mr. Grocott) said: that nearly 300 highly skilled and well-paid jobs have been lost in my hon. Friend's constituency? Is the Minister telling the House that it is too late to stop this cruel blow to Shropshire, to the company and to a dedicated work force?
    Mr. Arbuthnot: No, I am saying that a strategic defence review—the point with which the hon. Gentleman started—would undermine the stability of our defence industry. In addition, it would undermine our credibility in international negotiations over matters such as the multirole armoured vehicle, the Horizon frigate and crucially, at this important stage of the project, the Eurofighter. How can we have a strategic defence review—unless the hon. Gentleman is saying that he would exclude the Eurofighter from it, which would make it pretty meaningless—and continue to negotiate sensibly with countries that are partners in the Eurofighter project? The answer is that there cannot be such a review on that basis.
    Mr. Atkins: Does my hon. Friend recognise the importance to jobs in Lancashire of British Aerospace,
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    Leyland Trucks, Rolls-Royce, Royal Ordnance and many other firms? Does he also recognise the enormous effort that is made by Lancashire Conservative Members to represent and fight for the interests of those companies? Is he aware that the electorate in Lancashire do not take kindly to Johnnies-come-lately jumping on bandwagons at short notice? My constituents still remember TSR2.
    Mr. Arbuthnot: I acknowledge with gratitude and admiration the work that is done by Lancashire Conservative Members. When I was last in my right hon. Friend's constituency, he drew my attention to a number of competitions involving the defence industry. By contrast, he drew my attention to the approach of the hon. Member for Preston (Mrs. Wise) to the export of Hawk aircraft to Indonesia. My right hon. Friend is completely right. The Labour party wishes to be all things to all men. It wishes in some areas to encourage exports, but in reality it knows that it wants to destroy the British defence industry.

    NATO
    Mr. John Evans: To ask the Secretary of State for Defence if he will make a statement on the future expansion of NATO. [8978]
    Mr. Portillo: It has been agreed that a NATO summit in July should invite one or more countries to begin accession negotiations.
    Mr. Evans: Does the Secretary of State agree that if countries such as Poland, Hungary and the Czech Republic are to be welcomed into NATO, it should, if possible, be with the agreement of Russia? Long-term peace and stability throughout Europe cannot be guaranteed without the long-term support of the Russians.
    Mr. Portillo: It is not the Government's policy that Russia should have a veto over NATO membership. I very much hope that that is the Labour party's policy. NATO will take its decisions in July at the NATO summit. I hope that it may be possible at the same time for a charter to be signed between Russia and NATO. Let it be perfectly clear that the question of new NATO members is for NATO and for the sovereignty of nations making applications.
    Mr. Viggers: Does my right hon. Friend agree that the expansion of NATO is the most important political and military issue to be faced by European countries for many years? Does he further agree that we are able to take a full and reasonable part in discussions because of the strength and stability of our armed forces, which the Government have brought about?
    The Labour party is suggesting a fundamental review of defence. How often in my right hon. Friend's experience—in his time at the Treasury as well as at the Ministry of Defence—has a fundamental review led to an expansion of expenditure, and how often has it led to cuts?
    Mr. Portillo: Under Labour, a review always means cuts. Some of my hon. Friends have recalled some of the most outstanding examples of cuts made by Labour. We can play a vital role in NATO because our forces are

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    respected and because their capabilities are well understood. I would shudder for the influence and status of the United Kingdom if a Labour Government were able to implement a defence review and cut our defences.
    Mr. Gapes: Does the Secretary of State welcome NATO's recent statement that there is no question of placing short-range nuclear weapons on the territory of any central and eastern European country that may join NATO? Will he make it clear that the Government have no intention of doing that, and thereby help to reassure the Russians that the expansion of NATO is not directed against them?
    Mr. Portillo: The expansion of NATO is not directed against anyone. NATO is a defensive alliance. It is made up of countries that are democracies and that have no expansionist pretensions. There is no need whatsoever for NATO to alter its nuclear posture if it takes in new members.

    Nuclear Capability
    Mr. David Evans: To ask the Secretary of State for Defence what plans he has to increase Britain's nuclear capability. [8980]
    Mr. Portillo: The Royal Navy's Trident force provides the effective and credible deterrent that Britain needs.
    Mr. Evans: I thank the Secretary of State for his reply, disappointing though it was. Is he aware that the Ukraine has more nuclear warheads than Great Britain and France put together, and that any madman can buy them if he so wishes? Is he further aware that the Minister of State for the Armed Forces served in the 11th Hussars 25 years ago as an officer fighting for Queen and country, whereas the right hon. Member for Sedgefield (Mr. Blair) and 12 of his Front-Bench cronies grubbed around Greenham Common in their CND tee-shirts with their legs and arms in the air ready to give away the defence of the realm? Is that what they would do if they were negotiating on Europe?
    Mr. Portillo: I recently refreshed my memory of the 1983 election address of the right hon. Member for Sedgefield (Mr. Blair). It is perfectly clear that, at that time, the Leader of the Opposition favoured the removal of our nuclear weapons. He believed in neither nuclear weapons nor cruise missiles. I do not believe that the British people will be willing to entrust the defence of this country to someone who has changed his mind and has been so wrong on such a fundamental issue of national interest.
    Mr. Cohen: Have not the hon. Member for Welwyn Hatfield (Mr. Evans) and the Minister, in his first reply, given the game away? The Tories favour increasing the number of nuclear weapons and closing hospitals.
    Mr. Portillo: I salute the hon. Gentleman because, unlike his Front-Bench colleagues, he has never changed his mind. He has remained absolutely true to his underlying principles. He is unreformed and unconverted, and I believe in his sincerity. I wish that I could believe in the sincerity of his Front-Bench colleagues.

    Overseas Service
    Mr. Duncan Smith: To ask the Secretary of State for Defence how many service men who were not serving as part of a NATO commitment were serving overseas on 1 January 1986, 1990 and 1997. [8981]
    Mr. Soames: The numbers of service personnel serving overseas other than as part of a NATO commitment on 1 January 1986 and 1990 were 25,575 and 21,650 respectively. The latest available comparable figure, for 1 June 1996, is 15,733.
    Mr. Duncan Smith: Given the various changes to our defence policy in the past few years, does my hon. Friend agree that those figures should be underlined and presented to the Treasury as a sign of our total commitment? Will he now persuade our right hon. Friend the Secretary of State to write to the hon. Member for South Shields (Dr. Clark) and ask him to say, as a signal service to the nation, which of those commitments he would cut to fit in with Labour party policy of cutting overall defence expenditure?
    Mr. Soames: I am grateful to my hon. Friend for referring to a question that, like so much of Labour policy, remains hopelessly unanswered, vapid and up in the air. The obligations and commitments of the United Kingdom's armed forces reflect our historical links and obligations, our status as one of the world's great trading nations and our position as a permanent member of the United Nations Security Council. He may like to know that a royal naval deployment, Ocean Wave, left Portsmouth yesterday led by the aircraft carrier HMS Illustrious and 20 other ships. It will be deployed through the far east and the Pacific rim to show that Britain still has extraordinary interest, influence and capability in that part of the world.

    No-fly Zone (Northern Iraq)
    Mr. Campbell-Savours: To ask the Secretary of State for Defence when he next intends to visit northern Iraq to discuss the operation of the northern no-fly zone. [8982]
    Mr. Portillo: I have no plans to visit northern Iraq.
    Mr. Campbell-Savours: Is it not true to say that the Iraqi opposition forces have been led by the western powers into attacking Saddam Hussein's forces, under the umbrella of the no-fly zone, and, having done so, have promptly been dropped by John Major and President Clinton? Is that not the truth? The British Government—and, at the same time, the American Government—received the benefit of the war in Iraq. Why do we not now face up to our responsibilities to the people of northern Iraq, who are suffering incredible miseries?
    Mr. Portillo: The hon. Gentleman ought to be truly ashamed of himself, and particularly of his attack on my right hon. Friend the Prime Minister. My right hon. Friend led international opinion in forming the safe havens for the Kurdish people. The Royal Air Force has participated in flights over northern and southern Iraq over the past five years, and we have made a major contribution to

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    ensuring that Saddam Hussein is not able to continue his policy of massacring the Kurdish people. We have also provided the Kurdish people with some £90 million of aid. It is truly deplorable for the hon. Gentleman to attack my right hon. Friend the Prime Minister.

  PRIME MINISTER

    Engagements
    Mr. Ainger: To ask the Prime Minister if he will list his official engagements for Tuesday 14 January. [9000]
    The Deputy Prime Minister (Mr. Michael Heseltine): I have been asked to reply.
    My right hon. Friend the Prime Minister is returning from an official visit to India, Pakistan and Bangladesh.
    Mr. Ainger: Has the Deputy Prime Minister seen the results of a survey conducted by the Health Visitors Association showing that 2 million British children are malnourished, that one third of health visitors are dealing with childhood tuberculosis and that rickets has returned to plague hundreds of British children? Does the right hon. Gentleman agree with the association that those appalling effects on health are a direct result of family poverty and deprivation, and does he agree with me that any Government who are able to recreate the social conditions of the 19th century at the end of the 20th do not deserve to serve into the 21st?
    The Deputy Prime Minister: The last occasion on which we saw some of the social conditions of the 19th century was in 1979, when the winter of discontent characterised the activities of the last Labour Government. The survey to which the hon. Gentleman refers has been drawn to my attention and I reject its findings.
    Mr. Richards: Has my right hon. Friend seen today's edition of the Western Mail? Its front page states that the water and electricity giant Hyder is to move into the gas supply market, which would reduce prices by some £40 a year for the consumer. Does he agree that, if there were a windfall tax, Welsh consumers would be robbed of price cuts, and Labour's policies would yet again end in tears?
    The Deputy Prime Minister: My hon. Friend is absolutely right to point to the dangers of imposing a windfall tax on the people of Wales. He would, however, also be right to point to the dangers for a large number of people—pensioners and employees—who would suffer from the punitive effects of such a tax; although it must be said that, according to recent evidence, no such tax could be effectively levied. That leaves the question, "Where is the money coming from to fund Labour's extravagant expenditure plans?"
    Mrs. Ann Taylor: Does the Prime Minister accept the verdict of the British Medical Association that the health service is facing its worst crisis for 10 years?
    The Deputy Prime Minister: It is difficult for the hon. Lady to suggest, when we have just announced £1.6 billion extra expenditure, that there is a crisis in the
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    health service. The fact is that 25,000 patients a day are being treated in the health service. Nothing does more damage to the morale of those who work in it, and provide excellent service, than the endless sniping of the Labour party, which is obviously oblivious to the fact that for most of its life the health service has been safe in the hands of Tory Governments.
    Mrs. Taylor: Does the Deputy Prime Minister not realise that the picture that he paints bears little resemblance to the everyday experiences of ordinary families in Britain? His complacency is an insult to the families of women in Leeds and London who died in the past few days because intensive care beds were not available. Can he not understand that his failure to give a serious answer to serious questions proves beyond doubt that the health service is not safe in Tory hands?
    The Deputy Prime Minister: As we are spending £724 for every man, woman and child in Britain, perhaps the hon. Lady will explain how things were better when it was only £444 in 1978–79, but there is a serious point behind what the hon. Lady raises: the need to provide intensive care beds. That is why, in December, we set up a national register for intensive care beds so that, by a single call, doctors can find out where they are—[Interruption.] I would have thought that the Labour party would be interested in the health service. As the Labour party and the whole House will know, the demand for hospital beds can literally double in a day and if the Labour party is suggesting that, in every hospital, we should keep beds empty all the time for fear that there may be an emergency, it is important that it should say that so that we can understand the lost opportunities for a large number of patients who rely on those beds.
    Mrs. Taylor: Surely everyone in Britain has the right to expect the national health service to be able to provide emergency, life-saving treatment when it is necessary. Is not the problem with what the Deputy Prime Minister says about figures and money the basic fact that the Government have created 20,000 more administrators and lost 50,000 nurses? If the right hon. Gentleman will not accept the expert opinion of the British Medical Association, and if he wants a second opinion on the state of the health service, why not consult the people who really matter—the electorate—and the sooner the better?
    The Deputy Prime Minister: If the hon. Lady were a little more realistic with the figures that she quoted, she would have to point out that there are now 55,000 more qualified nurses and midwives than there were when the Labour party was last responsible for the health service and that waiting times are down. About 200,000 people were waiting more than 12 months in 1990—80,000 of them were doing so for more than two years—but today around 15,000 patients are waiting more than 12 months and only a couple of dozen are waiting more than 18 months.
    Dame Elaine Kellett—Bowman: Would my right hon. Friend have been prepared to answer questions from the right hon. Member for Kingston upon Hull, East (Mr. Prescott) if his friends had not been so terrified of what he might say that they bundled him off to Hong Kong?
    The Deputy Prime Minister: The right hon. Gentleman was courteous enough to ring me to explain

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    that he could not be in the House this afternoon. I am not exactly sure why, but, given what the Leader of the Labour party said on Sunday, it occurs to me that the right hon. Member for Kingston upon Hull, East (Mr. Prescott) may have gone looking for a job.
    Mr. Ieuan Wyn Jones: To ask the Prime Minister if he will list his official engagements for Tuesday 14 January. [9001]
    The Deputy Prime Minister: I have been asked to reply.
    I refer the hon. Gentleman to the reply I gave some moments ago.
    Mr. Jones: Is the Deputy Prime Minister aware of the low morale in the teaching profession as a result of changes in the rules on the early retirement scheme and of the poor settlement that local authorities had in Wales this year? Is he aware, for example, that hundreds of teachers in Wales are applying for early retirement and that 1,000 others face redundancy as a result of local authority cuts? Are those the education policies that the Government will be pursuing in Wales in election year? If so, they are in for a rough ride. The right hon. Gentleman can restore morale by extending the consultation period on the teachers' pension plan and by giving local education authorities more money so that they can at least maintain existing services.
    The Deputy Prime Minister: My right hon. Friend the Secretary of State for Education and Employment has made it absolutely plain why she is changing the rules of the early retirement programme. I do not know which world the hon. Gentleman is living in, but he must be aware that the Government have provided an extra £875 million for schools, colleges and universities next year. How he can talk about a crisis, I fail to understand.
    Mr. Dunn: Is my right hon. Friend aware that local government in Manchester, Liverpool, Lambeth and Islington is inefficient and incompetent and that those authorities are run by the people who wish to run the country? Run the country? The Labour party could not run a bath.
    The Deputy Prime Minister: Every time Labour spokesmen tell us what they would like to do to improve education standards I wonder why they do not talk to Labour councillors who run local education authorities and tell them to improve the appalling record over which they preside.
    Mr. Hoyle: To ask the Prime Minister if he will list his official engagements for Tuesday 14 January. [9002]
    The Deputy Prime Minister: I have been asked to reply.
    I refer the hon. Gentleman to the reply I gave some moments ago.
    Mr. Hoyle: Is the Deputy Prime Minister aware that on 6 March 1996 the Secretary of State for Health gave an assurance that he would keep a close eye on intensive
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    care capacity? Despite that assurance, a lack of intensive care beds in Warrington hospital means that operations are being cancelled and patients are being transferred to hospitals as far away as Leeds. That is happening not just in Warrington but throughout the north-west. Because of the Government's folly, the number of bureaucrats has increased threefold at the expense of beds for patients. What does the Deputy Prime Minister, the most important person in the country at the moment, intend to do about that?
    The Deputy Prime Minister: I share the hon. Gentleman's concern about the provision of emergency beds. Health service administrators, who, as I said, cope with 25,000 patients a day, do a remarkable job in extraordinarily difficult and unpredictable circumstances. If one asks our hospital administrators to keep beds empty in anticipation of emergency admissions, one must explain to those who do not get the advantages of those beds why they are empty. Labour would be the first to complain if it could show that beds were empty because we had said that we had to keep them empty in case of emergency admissions.
    Mr. Marlow: The Government have obviously been studying the so-called windfall tax. I wonder how it would work if a company, having been floated, was then taken over—
    Madam Speaker: Order. The hon. Gentleman must put a question on a matter for which the Government have responsibility. If he does that, I will listen to him. If he does not, I shall call another hon. Member. Questions must be on Government accountability.
    Mr. Marlow: If my right hon. Friend were looking for advice on how to run our schools, would he take it from a party that has been running local education authorities that have produced the most appalling results in the country?
    The Deputy Prime Minister: My hon. Friend is absolutely right to point to the difference between the rhetoric and the performance of Labour local education authorities. I have no doubt that there is a chilling relationship between their incompetence in education management and the incompetence that has led to the production of an unworkable scheme called the windfall tax.
    Mr. Cummings: To ask the Prime Minister if he will list his official engagements for Tuesday 14 January. [9003]
    The Deputy Prime Minister: I have been asked to reply.
    I refer the hon. Gentleman to the reply I gave some moments ago.
    Mr. Cummings: I thank the Deputy Prime Minister for that answer. Is he aware of a recent case in which a seriously ill child of 20 months was driven from Sunderland to Edinburgh—120 miles—because of a lack of intensive care beds in Sunderland district general hospital's paediatric unit? Will he assure my constituents, who use Sunderland district general hospital, that such

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    incidents will not occur again, and will he ask his right hon. Friend the Secretary of State for Health to make a statement on the great distress in the health service?
    The Deputy Prime Minister: I am not familiar with the individual constituency case to which the hon. Gentleman draws attention. I share the concern that he quite rightly feels on behalf of his constituent. However, I have answered the specific question, and I will ensure that my right hon. Friend the Secretary of State for Health is aware of the problems.
    Mr. Fabricant: Is my right hon. Friend aware that some of my poorer constituents in Lichfield can send their children to private schools because of the assisted places scheme? Will he please confirm that the Government have no plans to abolish the scheme, because without it those parents could not afford to send their children to private schools?
    The Deputy Prime Minister: I can assure my hon. Friend that we will not only maintain but expand the assisted places scheme. We believe in diversity of choice in education and in widening opportunities, which is why we have introduced legislation with precisely that purpose in mind. As I understand it, to exercise choice in the Labour party, one must either be the leader of that party or the hon. Member for Peckham (Ms Harman).
    Mr. Beith: Does the Deputy Prime Minister realise the seriousness of the crisis in the health service and the depth
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    of concern among all who work in it and all who depend on it? Will he take positive action by using his authority to end ward closures, while an evaluation is conducted of how much reserve capacity the health service needs? Everyone in the service agrees that it must have some reserve capacity.
    The Deputy Prime Minister: Substantial capacity is available to deal with emergency cases; otherwise the very difficult cases—such as that to which the hon. Member for Easington (Mr. Cummings) drew attention—would be much more numerous. The House should salute the energy and devotion of those who work in the health service, who cope with those cases, day and night, with immense skill, care and attention.

  DELEGATED LEGISLATION
  Motion made, and Question put forthwith, pursuant to Standing Order No. 101(4) (Standing Committees on Delegated Legislation),
  That the Education (Assisted Places) (Scotland) Amendment Regulations 1996 (S.I., 1996, No. 1808), the Cosmetic Products (Safety) Regulations 1996 (S.I., 1996, No. 2925), and the Joint Consultative Committees Order 1996 (S.I., 1996, No. 2820) be referred to a Standing Committee on Delegated Legislation.—[Mr. Ottaway.]
  Question agreed to.

Bull Bars (Prohibition)
3.32 pm
Mr. Paul Flynn: I beg to move,
That leave be given to bring in a Bill to provide for the prohibition of the use on roads of motor vehicles fitted with bull bars; and for related purposes.
This Bill is before the House today because of a defect in our democratic processes and because the will of the House was not enacted last March, when a Bill in a similar form was introduced. On that occasion, powerful and persuasive speeches were made by hon. Members on both sides of the House, and the will of Parliament was expressed in the support that more than 250 hon. Members gave to that Bill. The issue, as it is about safety, should not be a party political matter, and most of the people in the United Kingdom support the cause.
Bull bars originally came from Australia, where they were used to protect vehicles from kangaroos and were known as "roo bars". They were introduced into the United Kingdom with the growth in the fashion for driving four-by-four vehicles. They were fitted on the front of such vehicles. They perform no useful purpose except for farmers, and for ram-raiders they are the favourite type of vehicle. Because of their shape and nature and because they are made of metal, the bars concentrate and multiply the force of a collision, often at the level of a child's head or vital organs. We know of a long, sad litany of casualties who have died because of this macho fashion. There is no sensible reason to clutter the front of a car in that way.
The greatest single improvement in road safety, which saved hundreds or possibly thousands of lives, was the move away from vehicles that were designed for aesthetic purposes and that were current for the first part of the century. Cars were designed to look marvellous and smart and had many sharp structures and badges. We realised that those were deadly in accidents at high speeds. They damaged not only those who were hit, but those sitting in the cars and the cars that were hit. The improvement led to cars of a different shape, which meant that if somebody was hit, they were deflected away from the front of the car and the crumple zone took most of the force. The force of the collision was soaked up by the vehicle, not by the person who was hit. All that was reversed by bull bars which, sadly, became very popular—about 500,000 of them are in use.
When the matter was raised in the House, there was a welcome reaction from hon. Members, and we know that our car parks in the House have long been bull bar-free zones. There was a welcome reaction from many people with four by fours who, realising the additional danger, took them off. There was a highly disreputable campaign by the bull bar manufacturing industry to persuade the owners of light vans to use them on the front of their vehicles. Those vans have a mid-engine and no bonnet in front. The campaign played on the fears that those vans were inherently dangerous. The vehicle manufacturers strongly deny that there is any special danger. Indeed, if they are dangerous, they should not be allowed on our roads.
The recent report by the Transport Road Laboratory shows that the fitting of such bull bars to those vans is likely, in many cases, to add to the danger to not only those who are hit and to other vehicles, but to those
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occupying the van on which the bar is fitted. There is no safety to be gained from the bars. We are now seeing a trend towards their fitting on some saloon cars.
There have been tragic accidents as a result of the bars and I shall mention just two of them. An incident that I found very moving involved Helen Baggs from Melksham in Wiltshire. She was 10 on the last day of school and was excitedly rushing home with her sister, Elizabeth. She ran into the path of a bull-barred four by four and was hit. She did not die immediately, but lived for 10 days. The injury caused by the bull bar was at the level of her lungs. The bracket of the bar broke in the accident and it is clear that the child was injured because of the multiplication of the force caused by the bar. We know what happens when someone is hit by a bar; imagine that bar with the weight of a four by four behind it. The theory is that those bars will kill a child if it is hit on a vital area, even if the vehicle is travelling at only 12 mph.
Helen's mother has been campaigning with great dignity and restraint in a non-emotional way, but with great effectiveness. She is one of the prime campaigners against bull bars.
Today I received a letter about another case involving a 10-year-old child who was struck a glancing blow. As a result, he is permanently disabled and will be in a poor state of health for the rest of his life.
We have heard of new evidence from the TRL that has been widely misunderstood. The report said that no one can be sure how many people have been killed by bull bars. Evidence was collected in 1974, but it was ineffective, because, while one police authority reported 126 bull bar accidents, a neighbouring authority reported none. Strangely, that neighbouring authority had bull bars on its police cars. In some areas, such as Oxford, there were even bull bars on ambulances. They have now been removed. I understand that in Woking there is an ice cream van with bull bars.
The TRL said:
"Bull bars pose additional risks, particularly to pedestrians, but also to occupants of vehicles hit by them, and even in some cases to the occupants of the vehicles fitted with them."
The TRL points out that European legislation is being passed at the moment.
Last time we discussed the measure, it was not passed, in spite of the will of the House. The Bill was not thrown out, but talked out in a way that does not reflect well on our democracy. The will of the House should have been heeded. One of the more plausible reasons given for not passing it was that it did not fit in with European legislation. The Bill has now been redrafted in collaboration with the European Union Transport Commissioner, to ensure that it fits in with European legislation. European rules will ban bull bars on new vehicles. It is up to us, as a national Parliament, to ensure that they are banned on existing vehicles.
According to the TRL report, the estimated cost—a minor factor—is £5.5 million. It says that enacting the Bill
"would save 11 per cent. of fatalities and 26 per cent. of seriously injured casualties to pedestrians hit by these cars."
Enormous savings of life can be made. It is not the only safety measure that we need to enact—there are many—but it is important not to allow the spread of an inherently dangerous fashion accessory that has no useful purpose.
In conclusion, I shall read what the parents of a 10-year-old boy wrote in a letter that I received yesterday:

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"Fourteen months ago, our child was fit, healthy and sports-mad. He is now lucky to be alive and left with a permanent disability. He has no confidence, is unable to swim properly and will never play any racket sports again. This is just to mention a few of his problems. Isn't this and every child's life more important than a fashion accessory?"
Question put and agreed to.
Bill ordered to be brought in by Mr. Paul Flynn, Mr. Jon Owen Jones, Mr. Richard Spring, Ms Jean Corston, Mr. Michael Fabricant, Mr. Andrew F. Bennett, Mr. John Home Robertson, Mr. Nick Ainger, Mr. Andrew Miller and Mr. David Hanson.

Bull Bars (Prohibition)
  BULL BARS (PROHIBITION)
  Mr. Paul Flynn accordingly presented a Bill to provide for the prohibition of the use on roads of motor vehicles fitted with bull bars; and for related purposes: And the same was read the First time; and ordered to be read a Second time upon Friday 28 February, and to be printed [Bill 68].

Points of Order
3.43 pm
Mr. D. N. Campbell-Savours: On a point of order, Madam Speaker. I am sorry to raise the issue again, but you will recall that yesterday I raised a point of order on whether Ministers had told you that they intended to come to the House to be questioned on insider dealing in the shares of the Go Ahead Group—a company that has bid for the franchise of the north-east rail network. In the light of that point of order and the intervention of my hon. Friend the Member for York (Mr. Bayley), have Ministers told you whether they intend to make a statement to the House? Some of us believe that Ministers should be questioned and want to know why that company remains in the bidding procedure, with announcements due to be made later this week.
Madam Speaker: No Ministers have indicated to me that they are seeking to make a statement today on that issue or any other.
Mr. David Shaw: On a point of order, Madam Speaker. You will have seen that, according to certain press reports during the past week, the Labour party has recruited a man called Andrew Sholl from Australia to dig for dirt on Conservative candidates. He used to be employed by the National Media Liaison Service—a group in Australia known as "the animals". This person has also been involved in a quite serious financial scandal in Australia, which was called "the sandwich-shop affair". Indeed, he was forced to help the Minister for whom he worked in Australia to resign from office as a result. Should not my right hon. and learned Friend the Home Secretary make a statement on how the Labour party is allowed to import such low-life people from Australia?
Madam Speaker: Who the Conservative party or the Labour party employs is certainly not my concern. I have far too much to do here and much more important things than that to worry about.
Mr. Gerald Bermingham: On a point of order, Madam Speaker. You will recall that, last night, Government business terminated at 10 o'clock because of the failure of their managers to move the 10 o'clock business motion. As a result, the Home Secretary has—naturally—deemed it wise to criticise all hon. Members for not wanting to carry the Bill through, thus denying protection to citizens of this country. Should he not be brought before the House and asked to apologise to hon. Members, as his own party's actions led to the cessation of business?
Madam Speaker: The procedures last night were properly carried out. I was in the Chair to see that they were conducted correctly.

Orders of the Day

  Finance Bill
  [Relevant document: The Third Report from the Treasury Committee of Session 1996–97 on The 1996 Budget (HC 129-I & II).]
  Order for Second Reading read.
  Madam Speaker: I have selected the amendment standing in the name of the Leader of the Opposition.
  3.45 pm
  The Chief Secretary to the Treasury (Mr. William Waldegrave): I beg to move, That the Bill be now read a Second time.
  In his four Budgets, my right hon. and learned Friend the Chancellor of the Exchequer has put Britain firmly on course for a sustained period of rising prosperity and falling unemployment. The United Kingdom's economy is in far better shape both in absolute terms and in relation to our neighbours than it has been for many years. We are enjoying a more favourable combination of strong growth, low inflation, falling unemployment, strong export performance and low mortgage rates than we have seen for a generation. The Budget and the Finance Bill will maintain that performance. I should like to remind the House of what has been achieved.
  The economy has been growing continuously since 1992 and has grown more strongly overall than in any other major European country—outpacing France and Germany for the past four years. We are set to outpace those two countries again, I am glad to say, for the next two years, which will bring the gap in gross domestic product per head that opened up in the 1960s and 1970s between France and the UK down from 8.5 per cent. to 6 per cent., and between Germany and the UK down from 11.5 per cent. to 8.5 per cent. If we can continue that performance, the gap will be closed once and for all. Incidentally, if such performance comes about, as most forecasters think it will, it will be the first time since the second world war that we shall have outpaced those two countries for six consecutive years.
  Claimant unemployment has fallen from a peak of 10.6 per cent. of the work force at the end of 1992 to 6.9 per cent., and is at its lowest for almost six years. That reminds us of the forecasting skill of the right hon. Member for Dunfermline, East (Mr. Brown), who famously said in 1993:
  "unemployment will rise this month, next month and for many months afterwards."—[Official Report, 17 March 1993; Vol. 221, c. 289.]
  It went down from that day onwards.
  Mr. Dennis Skinner: It is about time that we put the unemployment figures in the correct perspective. Is the right hon. Gentleman aware that, on 17 November, the Murdoch Tory newspaper, the News of the World, said that the Government's figure for unemployment, which then stood at 2 million, was totally bogus and that the real figure was at least 4.1 million? That was said in the editorial of a Tory paper and has been proved time and again in almost every constituency where surveys have taken place, including mine, where a
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  house-to-house survey of the number of people out of work as opposed to the number claiming unemployment benefit revealed unemployment of about 50 per cent. in three Bolsover wards. The reason why the Government are able to produce bogus figures is that they do not count people on jobseeker's allowance; they keep them out of the figures, yet such people are genuinely trying to get work. The 31-time fiddled figures represent what the Government stand for. They will fiddle anything in order to try to get re-elected.
  Mr. Waldegrave: The weakness of the hon. Gentleman's argument is that whichever measure one takes—the labour force survey or the work force in employment survey—all the internationally agreed surveys show that Britain's performance has been better than in other comparable countries. I do not accept that we have fiddled the figures, but if all the countries in western Europe have fiddled the figures, our performance is still better than theirs. I doubt that if the Labour party by any misfortune came to power, it would change the figures and add on 2 million or 3 million, or whatever the hon. Gentleman claims has been knocked off. I suspect that that would not happen.
  Mr. David Winnick rose—
  Mr. Robert Sheldon rose—
  Mr. Waldegrave: No, I have dealt with the point and I shall proceed.
  Inflation has been below 4 per cent. now for four years and we are set to meet our underlying target of 2.5 per cent. or lower. Those figures represent the achievement of the British people, given the right framework of stable and responsible policies. They show that Britain continues to win more jobs and has higher living standards and, if we stick to the policies that we have, we shall continue to do so.
  Mr. Winnick: If all is so rosy in the garden and if everything is as fine as the Chief Secretary is painting it, why are the Government the most unpopular since the end of the war and why is it that the Government are so terrified of moving the writ for the Wirral, South by-election? Why are the people not appreciative of what the Chief Secretary has told us?
  Mr. Waldegrave: The hon. Gentleman must await the day and he will find that the British people will respond to the facts. I am not saying that everything in the garden is perfect. It would be foolish of any Minister to stand here and say that, but the policies followed by the Government are leading us in the right direction in the crucial sectors of long-term growth, low inflation and jobs. Governments on the continent of Europe who respond to the same arguments as the Labour party about minimum wages and social contracts and chapters have systematically higher unemployment. The issue is one of comparisons between real policies in the real world, and the hon. Gentleman's party is on the wrong side of the argument.
  It is not only members of the Government who say what I am saying. It is also the view of the Organisation for Economic Co-operation and Development, which I

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  know the hon. Member for Walsall, North (Mr. Winnick) respects. In the OECD's Economic Outlook, published last month, it said:
  "The prospects for achieving sustained output growth and low inflation are the best in 30 years."
  That is also the view of the International Monetary Fund, which has described Britain's economic performance as "enviable".
  Our success derives from the supply-side reforms of which British firms and employers have taken advantage, but which were opposed by the Opposition in every critical respect. The Leader of the Opposition may now campaign up and down the country by saying that the greatest achievement—of modern times, as far as I can make out—was Lady Thatcher's trade union reforms and that he wishes to imitate her success in other areas, but he and all his hon. Friends opposed those reforms root and branch. The House discussed one of the Leader of the Opposition's damascene conversions on defence earlier and that is yet another one.
  Mr. Sheldon: The Chief Secretary will be aware that the trade-weighted exchange rate has risen from 83 to 96—an increase of about 15 per cent. Clearly, that has had a great effect on import prices and has helped to keep inflation much lower than it would otherwise be. The ordinary method of computing the effect is to apply the four to one rule—for every 4 per cent. increase in import prices, inflation increases by 1 per cent. and the reverse is true when import prices fall. What is the Chief Secretary's estimate of what inflation would have been if the exchange rate had not increased? Does he agree that the retail prices index would have been somewhere between 2.5 per cent. and 4 per cent. had not the Government had the advantage of the rise in the exchange rate?
  Mr. Waldegrave: The right hon. Gentleman's question is complex and has a lot of conditionals. Inflation was down before the exchange rate rose, and the policies of my right hon. and learned Friend the Chancellor had inflation under control before then. There are some, such as the right hon. Gentleman, who say that the proportion is about four to one, but there are others who doubt that. Those matters are part of the equation that my right hon. and learned Friend must take into account when he considers the overall balance of the economy and interest rates.
  It is because of our determination to counter the threat of inflation and the resolute approach to the public finances that we have adopted in this and previous Budgets that we have such a satisfactory set of background conditions. In fact, Britain's strong economic performance is obvious to everyone—except, allegedly, to Opposition Members. As a matter of fact, I suspect that it is pretty obvious to them as well. The proof of that is that they do not have an alternative set of economic analyses or policies to offer, which makes me suspect that, in their heart of hearts, they recognise that the underlying basis of policy is about right. I doubt that a single Opposition Member believes in his or her heart of hearts that if Mr. Kinnock had been elected in 1992, unemployment
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  would now be below 7 per cent. and falling, inflation would be on target for 2.5 per cent. and Britain would be in the fifth year of non-inflationary growth.
  Mr. D. N. Campbell-Savours: Will the Chief Secretary give way on that matter?
  Mr. Waldegrave: The hon. Gentleman always says, "on that matter", and then goes off in quite another direction, but I cannot do other than give way to his charm.
  Mr. Campbell-Savours: I wish to ask about the 1992 election and the prospectus that the Government put before the British people. I was reading an interesting document this morning—the supplement to the Red Book for that period. It shows that the Government were projecting for this financial year a public sector borrowing requirement of £7 billion, when in fact the PSBR for this year will be £26.7 billion. In other words, they are £20 billion adrift from the prospectus that they put before the British people at the previous general election. How can they possibly have any credibility next time, when their figures have been so blatantly wrong?
  Mr. Waldegrave: It is no secret that there was a recession of far greater depth than was predicted by the Government or by the Opposition. The hon. Gentleman's credibility problem is that he went into the previous election loyally fighting for an economic programme that was put forward by the present Transport Commissioner in Europe and the late John Smith. It was a completely clear policy and, as far as we know, was different from what is now being proposed by Labour. Labour put forward a coherent policy, and the hon. Gentleman supported it. There is no coherent policy now, so he is unable to say exactly what he supports—as are his Front-Bench colleagues.
  The Budget that my right hon. and learned Friend the Chancellor proposed on 26 November and which the Finance Bill accompanies was a Budget not just for the next few months, but for the next five years. It was a Budget for lasting prosperity, combining sustained economic growth with low inflation, so that living standards go on rising year after year. The measures announced by the Chancellor address several objectives. They enable people to keep more of what they earn. They finance high-quality public services—spending more on the services that people care most about, including the health service. At Prime Minister's Question Time, we heard again Labour's technique, which is to raise anxieties about health. But Labour has not even matched our spending pledge on health, let alone committed any more money. That is the technique that it uses right across the board, day in, day out, and it is fundamentally disreputable.
  Mr. Denis MacShane: Does the Chief Secretary recognise the real anxiety of every exporting company in Britain about the astronomic growth in the value of the pound sterling? In my constituency, that growth has led to British Steel—a successful company—laying off people and to Guest and Chrimes laying off 70 only last week. In addition, every manufacturing and

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  exporting company in my constituency is reporting a loss of orders. Is there a single policy that will stabilise sterling, or are we on a permanent Tory yo-yo?
  Mr. Waldegrave: I think that it was the hon. Gentleman who intervened at an early stage in my speech in this very debate last year—it may have been the economic debate just before Christmas—to criticise the Government because the pound was then going down. If Labour has an exchange rate target or policy, it will be the first that it has had. The hon. Gentleman is at least an honest believer in joining a single European currency. He has a policy, but his right hon. and hon. Friends on the Front Bench do not necessarily agree with it—or rather, on Tuesdays and Thursdays they do, but on Wednesdays and Fridays they do not.
  Mr. Michael Stephen: Day after day, we hear Opposition Members demanding more and more spending on public services and complaining about increased taxes, but if one does not borrow and one does not increase taxes for all the public expenditure, how does one fund it? Would the Labour party have done it by printing money, and what would the consequences have been?
  Mr. Waldegrave: As Aneurin Bevan said, we do not need to look in the crystal ball when we can read the book. The Labour party taxed higher, borrowed more and ended up with a combination of higher taxes, broken pledges, higher borrowing and chaos in the country. That is what happens under Labour Governments.
  The Bill will protect the ordinary taxpayer by taking further significant steps in the fight against social security fraud, tax evasion, smuggling and other fraud. It also closes some further tax loopholes. In a different direction, it levels the playing field for ordinary taxpayers by phasing out some special reliefs and allowances. They may be convenient and popular for those who enjoy them, but they are often unfair to those who do not, and in our view it is better to have low tax rates, as we do for business and personal taxes in this country, and to diminish special allowances.
  Mr. John Greenway: My right hon. Friend mentioned measures to close loopholes. Will he confirm that the proposal for a 17.5 per cent. rate of insurance premium tax is directed only at abuse and that it is not intended to apply to policies that are genuinely arranged and transacted by insurance companies?
  Mr. Waldegrave: As my hon. Friend may know, the abuse that is targeted is that of the profit margin being put on the insurance policy, which had a lower rate of tax, and, allegedly, lower prices being offered for the associated goods; that seemed to be merely a way of avoiding tax. There is no intention of getting into the territory about which my hon. Friend warns. Those matters will no doubt be discussed in detail in Committee.
  Mr. Alistair Darling: On that point, can the Chief Secretary give us an assurance that
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  he intends to serve on the Committee? As I understand it, all Chief Secretaries have done so for many years. Will he be with us this time?
  Mr. Waldegrave: That will depend on the Committee of Selection. The hon. Gentleman must wait and see. I am deeply touched that he thinks that no Committee can proceed properly without me. That is a flattering judgment and, as always, I am most grateful to the hon. Gentleman for his support.
  The Bill maintains a responsible fiscal position by keeping firm control of public spending and reinforcing the downward path of borrowing. It tightens fiscal policy, reducing the public sector borrowing requirement by nearly £2 billion in 1997–98 and by considerably more in later years. Compared with previous plans, the Budget measures take £750 million off tax and £2 billion off spending, and the measures to reduce tax leakage, blocking loopholes and boosting the fight against fraud, should contribute another £500 million.
  Mr. Stephen Timms: Will the Chief Secretary give way on that point?
  Mr. Waldegrave: No, I must proceed.
  By 1999–2000, the Budget measures are expected to reduce the PSBR by more than £5 billion. Under this Government, the national debt has been lower as a share of national income than in any year under the previous Labour Government. The Leader of the Opposition has a particularly silly argument that my right hon. Friend the Prime Minister has doubled the national debt since 1990. Why 1990–91? Because that was the year when the national debt was lower than at any time since the second world war.
  The United Kingdom has one of the lowest overall debt burdens of the big countries in the European Union, whereas in 1979 it had one of the highest. If Labour had stayed in power and continued to borrow, as it is reasonable to assume would have been the case, at the same average annual rate, the national debt would be almost exactly twice what it is, at about 90 per cent. of gross domestic product.
  Part of the Labour party's current campaign is to try to argue that the public finances are in a dire state. We know perfectly well why that is so. It is not because the finances are genuinely in a dire state, and the figures that I have given prove that. Even without appealing to our extremely strong position in relation to funded pensions, thanks to action taken by the Government over the years, we know why Labour Members make that argument: if they came to power, they would want an alibi for the tax rises that followed. They would say, "The books have shown all sorts of mysterious things and we have to put taxes up." That is what the Opposition are preparing the ground for, but we intend not to give them the opportunity to use that alibi, by keeping them firmly on the Benches on which they now sit.
  The Finance Bill, which implements the Budget tax measures, is central to its aims. It starts with a clause that will, I think, receive support from both sides. I see no members of the Scottish National party with us temporarily, but I am sure that even they would welcome the clause. Last year, my right hon. and learned Friend the Chancellor cut whisky duty for the first time for

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  100 years. He has not waited 100 years to do it again, but has cut it again this year. That measure is important for two reasons. The industry is huge at home, but the measure is also a clear signal to overseas tax authorities not to discriminate against Scotch whisky, which is one of the problems that that industry has had to face. For the second year, we have also been able to freeze the duties on wine and beer. Those changes will help to alleviate the legitimate concerns of the drinks industry over cross-border shopping and smuggling.
  The Bill contains a number of significant measures to protect the tax base. It is important that people pay the amount of tax that Parliament intended them to pay, that reliefs are not subverted and that people do not find over-ingenious ways of reducing their tax liabilities. The Government have long held that a successful tax system is one with low rates and a broad base, so we can cut tax rates only if that base is sound. Part III of the Bill introduces a further package of powerful measures to block value added tax loopholes.
  I expect that Labour will claim, with its usual Morton's fork argument, that, first, all those measures are its idea—I see that the hon. Member for Edinburgh, Central (Mr. Darling) nods—and, secondly, they are all new Tory taxes. Labour sticks up silly posters saying that all these loophole closures are new taxes, but also claims that they were Labour's idea in the first place.
  The complete, formidable package of VAT anti-avoidance measures will yield more than £700 million in the first year and protect a further £1.6 billion from attack by avoidance schemes.
  Mr. Peter Brooke: Since the publication of the Bill, has there been adequate opportunity for the Treasury to meet representatives of the property industry who, while sharing the Government's views about wishing to stamp out abuse, feel that perhaps they are not going about it as effectively as they could?
  Mr. Waldegrave: I am grateful to my right hon. Friend and am aware of the issues raised by a number of property developers. I think that the Financial Secretary to the Treasury has already met some groups—I take this opportunity to congratulate him on his Privy councillorship. It was one or other of my colleagues. I am led to understand that the Exchequer Secretary has met groups to talk about the matter. We shall certainly listen closely to the points raised.
  The Bill also contains measures to protect the income tax and corporation tax base. Schedule 11 makes a number of changes to the tax treatment of finance leasing arrangements. Leasing can be a sensible way for people to employ the assets that they need in their businesses—this is relevant to the point made by my right hon. Friend the Member for City of London and Westminster, South (Mr. Brooke)—but in some cases finance lessors have found a way of turning rental incomes into a capital payment for tax purposes and the Bill will prevent that.
  In other arrangements, the rental payments are concentrated towards the end of the lease period, thus reducing the tax take. In both cases, the Finance Bill will bring the tax treatment of leasing more closely into line with the treatment in commercial accounts. The Bill will bring in the new rules that apply where companies buy
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  back their own shares, or pay certain special dividends. Where companies found a way of routing such payments into the hands of tax-exempt institutions, the Exchequer was adding a sizeable subsidy in the form of payable tax credits. Schedule 7 puts a stop to those payments from the Exchequer.
  As my right hon. and learned Friend the Chancellor said in his Budget statement, the Government will not tolerate tax abuse. These measures and a number of others like them, which together will yield more than £1 billion a year, are ample proof that we are serious in the battle against tax avoidance. In addition, we are making extra resources available to the revenue departments to counter tax evasion and avoidance and to ensure that everyone pays the proper amount of tax.
  As I said, a successful tax system is one that operates across a broad base. The Finance Bill therefore removes or reduces certain reliefs and I shall pick out two. First, clause 62 provides for the phasing out of the tax relief for profit-related pay. The relief was introduced by my right hon.—now noble—Friend Lord Lawson in 1987 explicitly, as he said at the time, as a temporary measure designed to encourage firms to set up PRP schemes. It has been an outstanding success. Around a quarter of private sector employees are now in PRP schemes. PRP has become successfully established as part of the United Kingdom's business pay policy.
  The time to phase out the tax relief over a period of years has therefore arrived, but it is important to remember that we are simply removing the tax relief. Firms can and should still relate pay to profits and can therefore continue to reap the rewards, including greater pay flexibility, increased employee involvement and higher productivity. I hope that many firms will continue to do so.
  Secondly, schedule 13 reduces the rate of writing down allowances on long-life assets from 25 per cent. to 6 per cent. a year. The tax system treats investment generously, but 25 per cent. a year is too generous for assets with lives over 25 years. The new regime is a logical extension of the 1984 corporation tax reforms brought in by Lord Lawson. By bringing the tax treatment more closely into line with accounting treatment, we are ensuring that tax considerations enter as little as possible into companies' investment decisions.
  Mr. John Butterfill: Does my right hon. Friend think that it is reasonable and appropriate for the regime that applies to aircraft to be different from that which applies to trains and ships? Are they not all now in fairly open competition for transport purposes, and is there not, therefore, an element of discrimination against the aircraft industry in my right hon. Friend's proposal?
  Mr. Waldegrave: I am aware of the representations that have been made by many in the aircraft industry. Once again, we shall take careful note of the legitimate point that my hon. Friend raises. It will doubtless be discussed further, and we shall listen to the arguments.
  All the proposed measures will significantly expand the tax base and allow us to continue to reduce tax rates. The Bill takes another significant step towards our goal of a 20p basic rate of income tax. We believe that low direct taxes are the most effective way to encourage enterprise

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  and hard work. Under the previous Labour Government, as we know, the basic rate of income tax was 33 per cent., and the higher rates rose to 83 per cent. on earnings and 98 per cent. on what Labour was pleased to call unearned income. Those were the punitive marginal tax rates that people suffered under Labour. Labour's taxes hit those who worked and those who took entrepreneurial risk.
  Since we came to power, we have repeatedly cut the basic rate of tax towards our 20 per cent. goal. In 1979, the rate was 33 per cent. From 6 April, clause 55 ensures that it will be fully 10p lower, at 23 per cent., the lowest basic standard rate of tax for almost 60 years. For more than a quarter of taxpayers—more than 7 million people—the rate of tax is already 20 per cent.
  Once again, the Opposition's attitude is something of an enigma. They seek to defeat the Bill, so presumably they seek to defeat those income tax cuts. If, having listened to our arguments, the House carries the Bill, the Opposition will abstain, as they did last year, on the income tax cuts. It is all muddle and confusion. I suspect that the Opposition hope that they will not win the main argument, because they do not want to vote against income tax cuts, but they are not brave enough to say so, nor are they brave enough to criticise the tax cuts in the amendment that they have tabled. It is a muddle, as usual.
  As my right hon. and learned Friend said in his Budget statement, we could have reduced the basic rate of income tax by 2p, thanks to the tough stance that we have taken on spending in the measures that I described to protect and expand the tax base. However, it is also important to maintain the real value of allowances. Clause 56 goes further than that. It increases the lower rate band by twice and the personal allowances by three and a half times more than required by statutory indexation. As a result, all income tax payers will pay less income tax—on average, £150 a year less. We do not know whether the Opposition are in favour of that or against it. Again, their attitude is a mystery wrapped in an enigma.
  It is not just individuals and families who benefit from the measures in the Bill. Unincorporated businesses and small companies will also feel the benefit of lower income tax and corporation tax. The Government recognise that small businesses are crucial to the success of the economy. That is why clause 74 and schedule 8 help small companies to raise finance through relaxations to the venture capital trust and enterprise investment schemes. It is also why we are freezing business rates for small properties this year.
  We may have found an area where Labour agrees with us—or has a policy—as there are two differences between its rather platitudinous amendment this year and last year's amendment. This year, the amendment contains a split infinitive and omits criticism of the Government regarding small businesses. Therefore, the Opposition presumably acknowledge that we have taken the right steps on small business. They would be wise to do so, as the Forum of Private Business called this Budget
  "The best of the decade."
  We have also made another significant down payment on our commitment to abolishing inheritance tax. Clause 91 raises the threshold by £15,000—£10,000 more than is required by statutory indexation. Combined with the big increase in the threshold last year, it amounts to a rise of almost 40 per cent. in two years.
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  The Finance Bill crowns five years of economic achievement. Since our re-election in 1992, we have seen nearly five years of uninterrupted growth with unprecedented low rates of inflation. Under this Budget, a family on average earnings will have more than £20 a week extra to spend next year after tax and inflation than before the previous election. The last Labour Government could manage only a puny £1 a week.
  The Finance Bill takes forward an unquestionably coherent and successful strategy for the British economy. That is in marked contrast with the Opposition, who still refuse to come clean about the central issues of economic policy. The Opposition do not have the courage to criticise tax cuts in their amendment, but they will vote against them. If the Bill is carried, they will abstain.
  Opposition Members complain about so-called tax loopholes, but they refuse to say what they are. Will they continue to support pension funds, reinvestment relief or exemption from inheritance tax for family businesses or art of national importance? The Opposition continually hint that closing loopholes will bring huge tax savings, but they will not specify what those loopholes are. Meanwhile, we have shown that we are tough on real avoidance and evasion. When we take steps to modernise the tax system by closing loopholes or ending relief, Labour erects feeble posters calling them Tory tax rises.
  Ms Jean Corston: The Minister said that an average family will be better off by £20 a week. We both attended a conference at the council house in Bristol last week, when we heard that an average family in Bristol will see four or five times that sum swallowed by council tax increases imposed by the Government.
  Mr. Waldegrave: We see the same technique in action. Last week, the Leader of the Opposition addressed the issue of local government grants and said:
  "You may have heard Frank Dobson say a couple of nights ago to local government, 'You have to work within the existing spending limits.' We could not be clearer about this".
  The hon. Lady and her hon. Friend on the Front Bench, the Member for Bristol, South (Ms Primarolo), went to Bristol council to talk about the "dreadful" grant settlement, but in the same week the Leader of the Opposition said that there would be no more money for local government. That illustrates the basic incoherence and dishonesty of that line of argument.
  The fact is that, on such matters, Her Majesty's loyal Opposition should be called "Her Majesty's loyal abstainers". They have no view on all the big issues. When it comes to tax, they sit on their hands and abstain. They are terrified of saying anything that might be construed as an acceptance that they would have to raise taxes to pay for the £30 billion in spending pledges that they have scattered around the Lobbies. However, they do not withdraw those pledges.
  The only tax measure to which Labour is prepared to admit is a punitive tax on successful companies owned by millions of private shareholders, pension funds and employees: the so-called windfall tax. If Labour could make it work, it would hit consumers, shareholders and employees. It would produce only a one-off payment and could not be used to meet the huge continuing spending commitments that Labour has attached to it.
  Last week, the Leader of the Opposition claimed that Labour's plans would mean no tax increases. However, at the same time, he promised that Labour would do more

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  for education, health, welfare, local government—you name it. It was vintage new Labour. On Wednesday, the Leader of the Opposition told local government:
  "You have to work within the existing spending limits"
  but on Monday he was nodding and winking to the education lobby about higher spending.
  As always, the right hon. Gentleman is trying to be all things to all men and women. It is the usual nod towards the media and the City; the usual wink to the spending lobby. He promises more computers, more literacy summer schools and smaller class sizes, but no new money. The problem is that that simply is not credible. Either Labour's education policy—the same goes for all its other policies—is just another series of empty Acts of Parliament with no money, or it is a hidden agenda for more spend. Labour hopes that one audience, in the Bristol council house, will believe one version, and the other audience, in the Daily Mail, another.
  The fact is that the Government have been able to make substantial increases in spending on education and health because we have been prepared to make difficult decisions, making cuts in lower-priority programmes. Labour has shown no capacity to make such decisions, except for one. The only genuine cut that it has announced is the mean-minded decision to axe the assisted places scheme, which will not even pay for the reduction in class sizes, which will threaten many ancient schools, for example in Bristol, and which will widen the divide between public and private provision in education. That is typical of its approach.
  Sir Wyn Roberts: Would my right hon. Friend care to remind the House that the last time there was a real cut in health service spending was when Labour was in government, and after the International Monetary Fund had intervened?
  Mr. Waldegrave: My right hon. Friend is right. There has been only one year in which real spending in the health service has been cut, and that was under the previous Labour Government, in the year to which my right hon. Friend refers.
  The Labour party is caught in a trap of its own making. On the one hand it promises all manner of vaguely specified changes for this country; on the other it claims that there will be no tax increases and no losers, except for a few fat cats. If the Labour party were to come to power, it would have no mandate for anything, and the ensuing drift and confusion would put at risk all that the British people have achieved in the 1980s and 1990s.
  The choice before the House and the country is pretty simple. Labour has no policies beyond the cosmetic, no views on economic management beyond the platitudinous and ungrammatical verbiage of its amendment, no sense of direction and no sense of priorities. There is, of course, nothing wrong with wanting office in a democratic system. That is an honourable ambition. But to want only office, with no philosophy or ideas about what to do with it, is not enough.
  Conservatives know what we want for Britain. We want to continue our battle to make Britain a competitive, low-spending economy and thereby get unemployment down. We want to continue the clear and responsible economic policy that my right hon. and learned Friend the Chancellor has carried through with such success. We want
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  to continue the real growth in living standards for our people. The Bill, as part of our outstandingly successful economic policy, will continue to deliver those things.
  Once again Labour stands for muddle and abstention, for soundbites, not real policy. We stand for steady and responsible economic management. I have no hesitation in commending the Bill to the House.
  4.23 pm
  Mr. Alistair Darling: I beg to move, To leave out from "That" to the end of the Question, and to add instead thereof:
  "this House declines to give a Second Reading to the Finance Bill because it fails to adequately address the needs of the country, namely high levels of investment and employment, providing opportunities for all, economic stability and a long-term commitment to low inflation; in particular it does not provide for a new welfare to work strategy which will tackle the scandal of youth and long-term unemployment, nor new measures to improve the skills level of the country; and further fails to provide for effective action to close tax loopholes, to adequately reform the Private Finance Initiative or address the causes of the increasing tax burden and as a consequence fails to equip the country for the future."
  The only interesting thing that we have heard this afternoon is the fact that the Chief Secretary will probably not serve on the Finance Bill Committee. I understand that he may be the first victim of the Government's loss of their majority. He does not want to be on the Committee. He would rather be somewhere else, perhaps in the Wirral or perhaps nursing his constituency of Bristol, West. It would seem very strange if the Chief Secretary to the Treasury were not in the Committee to take his Bill through the House. One might have thought that he would have sufficient confidence and commitment to turn up to take his Bill through the House.
  Mr. Waldegrave: This is the Second Reading of the Finance Bill. Will the hon. Gentleman say why his right hon. Friend the Member for Dunfermline, East (Mr. Brown) is unable to attend?
  Mr. Darling: I was speaking to my right hon. Friend only half an hour ago. He is at this moment watching our performance on the television in his office. He is quite happy that we should deal with these matters. If the Chief Secretary wants to hear more, why does not he agree to sit on the Finance Bill Committee for the next few weeks?
  In his speech this afternoon, the Chief Secretary has invited us to forget the fact—[Interruption.] My right hon. Friend the shadow Chancellor has arrived. That is yet another example of how a new Labour promise will be delivered.
  The Chief Secretary has invited us to believe that, somehow, we should judge the Government on a snapshot of what is happening in the country, to forget the past, to forget the ominous signs of the future. He is inviting us to forget the fact that the Conservatives have been in power since 1979. The Finance Bill gives us the opportunity to judge the Government's record over the past 18 years and since the last election. The coming election, as with all elections, will turn on the questions of trust and credibility. That is how the Government will be judged. People remember full well—
  Mr. Rod Richards: Will the hon. Gentleman give way?
  Mr. Darling: I shall certainly give way to the hon. Gentleman on matters of trust. He will remember that at

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  the last election he, along with other Conservative Members, promised that a Conservative Government would cut taxes year on year and would not increase value added tax. Yet the incoming Conservative Government deliberately broke those promises. The Bill reflects the continuing saga of broken promises. We have had 22 tax rises since 1992. We have had VAT imposed on gas and electricity. National insurance contributions have increased. These increases are why the Conservative party is in so much difficulty.
  No one trusts the Conservatives on tax or on the economy. Indeed, the Bill introduces seven further tax rises. Despite what the Chief Secretary had to say, and despite what he says generally about cutting taxes, the Bill, when enacted, will lead to the implementation of more new taxes. The penny off income tax and other such measures are more than offset by increases in indirect taxes. The Red Book shows that in the next financial year about £350 million more will be raised in taxation.
  Mr. Richards rose—
  Mr. Darling: I shall give way to the hon. Gentleman if he tells us why he stood on a manifesto at the last election that promised to reduce tax year on year and not to increase VAT, and when returned to the House voted to increase taxes. Will he tell us why he did that?
  Mr. Richards: The hon. Gentleman would have a windfall tax. The right hon. Member for Sedgefield (Mr. Blair) said at the weekend that he had taken legal advice on the propriety of introducing such a tax. That suggests that the Leader of the Opposition must have given counsel specific details of the proposed tax. Will the hon. Gentleman tell the House when he and his right hon. Friend will make those details known in public?
  Mr. Darling: As the hon. Gentleman will not answer questions about his broken promises on tax, he might be better advised asking Aims of Industry and the right hon. Member for Peterborough (Dr. Mawhinney), the Chairman of the Conservative party, to publish the legal advice that they were spreading about in newspapers over the weekend.
  It is interesting that one of the lawyers who apparently wrote that legal opinion telephoned the Daily Mail to express his concern that his and his fellow lawyers' opinions were being distorted by Aims of Industry and the Conservative party. If the Conservative party is to rely on such a bogus opinion, it is no wonder that people do not trust it. What we saw at the weekend was not a legal challenge but a political challenge. I understand why the Conservatives are taking that course. Their paymasters—some of the fat cats whom they have been protecting for many years—are increasingly fed up and frustrated at the inability of the Tory party to make any impact on the proposed windfall tax. It is no wonder that they summoned the chairman of the Tory party, gave him a dressing down and asked him why he was not doing more to try to advance his cause. The Conservative party will not be able to advance its cause if—
  Mr. Richards rose—
  Mr. Darling: I shall not give way. The point has been adequately and completely answered.
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  Conservative Members might do well to sit in a period of quiet humility and to listen, given the record of the hon. Member for Clwyd, North-West (Mr. Richards). Let them reflect on what the Finance Bill will do. It contains seven further tax rises. Council tax is due to increase by £4 billion. Insurance premium tax will be increased from 2.5 to 4 per cent. Air transport tax will be doubled. Tax relief on profit-related pay will be abolished. All that is equivalent to 8p on the basic rate of income tax for someone on average earnings. Prescription charges will be increased, as will fuel duties and tobacco duties.
  Since the last election, despite what the Conservative party promised, taxes have increased. The typical family is paying £2000 more in tax than it was at the last election.
  Mr. Waldegrave: Will the hon. Gentleman give way?
  Mr. Darling: I shall give way to the Chief Secretary, but I want him to answer this central question: why should anyone believe what the Conservative party has to say about tax this time round when it made the same promises to reduce taxes in 1992 and then broke them? Why should anyone believe the Conservative party? Let the Chief Secretary answer that question.
  Mr. Waldegrave: The hon. Gentleman is doing what Labour Members always do. He is parading a list of proposals that it is popular with certain groups to oppose. He said that it is a disgrace that we are abolishing profit-related pay, and that that is a new tax. If he were sitting on this side of the House and were introducing a Finance Bill, would he reintroduce the old system of PRP? Or is he saying to people who are lobbying for the maintenance of the allowance that he is on their side, but is not giving them a pledge to do anything about it? I suspect that the latter is his position.
  Mr. Darling: The right hon. Gentleman must realise that anything said in the House is recorded in Hansard and is widely available throughout the world. The idea that anyone would say something in this House and hope that it would not be picked up somewhere else is nonsense.
  My right hon. Friends and I have no hesitation in making it clear that we are not promising that if we are returned to power after the next election we will restore everything that the Conservatives have abolished in the past 18 years.
  Mr. Waldegrave: Will the hon. Gentleman give way?
  Mr. Darling: I shall give way in a moment.
  We have different priorities: we believe that there is much that the Government should be doing—for example, in education and in encouraging people at work—that they are not doing. It has never been our position that we will undo everything that the Conservative Government have done and rectify every broken promise.
  Mr. Waldegrave rose—
  Mr. Darling: I shall give way in a moment, if the right hon. Gentleman can contain himself. If he sits and contents himself for a few moments, I shall make it clear that the state of the public finances and the Government's

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  conduct of economic affairs are such that people know that the damage that they have done in many areas cannot immediately be remedied. It is not as if any Government who come into office discover that there are no difficulties and no obstacles to putting right the matters that they would like to address. The right hon. Gentleman's point is nonsense, and he still has not answered the central charge.
  Mr. Waldegrave rose—
  Mr. Darling: I promise the right hon. Gentleman that I shall give way in a moment. I enjoy a good debate, and we have several hours to discuss these issues. He still has not dealt with the central point. At the last election he and his colleagues promised that they would reduce taxes year on year. They said that they had no plans to extend the rate or scope of VAT and no plans to increase national insurance. They broke those promises, so why should people believe them again?
  Mr. Waldegrave: We are making some headway. The hon. Gentleman said clearly that he will go on attacking us for abolishing PRP, but he will not restore it. That is an exact summary of Labour's methods in general.
  Mr. Darling: I shall carry on exposing the fact that the Conservative party broke the promises that it made at the last election. It broke its pledge on profit-related pay, and as a result 3 million people will be worse off. We are entitled to attack the Conservative party on that, just as the right hon. Gentleman and his right hon. and hon. Friends are entitled to criticise our policies.
  The Financial Secretary to the Treasury (Mr. Michael Jack): What is the hon. Gentleman's view on profit-related pay?
  Mr. Darling: I am happy to refer the hon. Gentleman to the numerous remarks that I have made on PRP. We have always supported the principle of ensuring that people working in any organisation or any factory have a stake in the enterprise that employs them. That is why we support the extension of employee share ownership and the principle behind the profit-related pay scheme.
  Two years ago, when I first spoke about this matter, I expressed concern about the fact that the scheme was being abused and that the cost was rising uncontrollably. At that time, Conservative Members ridiculed our concern and suggested that we were irresponsible to express it. Conservative Members cannot get away from the fact that they tolerated abuses of the system for far too long, which is why they were eventually forced to scrap the scheme. It was not scrapped because it was a temporary scheme, as the right hon. Gentleman said, but because the Conservative party had so operated it that it could no longer afford to continue it in its present form. The Government have not told us whether they still believe in the principle or will come up with an alternative proposal. We shall wait and see.
  There is one piece of good news—we should all be thankful that the Bill is shorter than last year's: it contains only 111 clauses. Much detail will have to be attended to in Committee. It is worth noting, however, that since 1979 there have been 4,596 pages of new legislation in Finance Bills, more than half of which have been produced during
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  the current Parliament. Taxpayers, particularly business taxpayers, want stability; they do not want constant change.
  Let me place it on record that I welcome the news that the work of the tax law review committee—of which I was a member, although I have now resigned—will be continued by a committee chaired by Lord Howe, but containing a widespread membership. I hope that that committee will be able to further the process of simplifying tax legislation; I think that hon. Members on both sides of the House would welcome that.
  Every Second Reading of a Finance Bill must take place against a background of the performance of the economy. Today, the Chief Secretary gave us a familiar litany of claims that the Tories make. Let us examine them, for they do not bear close examination.
  The right hon. Gentleman said that his was the party that was delivering lower taxes. Well, his sense of humour has certainly not deserted him. Although one particular rate of one particular tax fell by one penny, what the Government gave with one hand they took away with the other. As we see in paragraph 16 of the Treasury Committee report, published last night, Mr. Andrew Dilnot of the Institute for Fiscal Studies said:
  "There is very little difference between the direct impact in this year's Budget and last year's Budget … the gains rise with income".
  It is interesting to note in the same paragraph that Professor Tim Congdon, who is no great friend of the Labour party, raised a "wider issue", saying that
  "the main problem with the tax system was to be found at the low end of the income scale where people could face 100 per cent. marginal tax rates because of the interaction of the social security system and the tax system."
  That problem, he said, could not be tackled by simply "tinkering at the margins".
  So there we have it. The Chief Secretary tells us that this is a tax-cutting Budget, but the people and the House know that that is not the case. According to the Government's own Red Book, in 1979 the proportion of gross domestic product that went on tax was 35.5 per cent.; in the coming financial year, it will be 36.25 per cent. The Government's claims about tax, just like their claims about everything else, simply do not stand up.
  The Chief Secretary tells us that we have the best prospects for a generation. What is the Conservatives' time scale? Is it today, this month or this year? What sort of generation have they in mind? When we examine their record over the past 18 years, we find that Britain has fallen from 13th to 18th in the world prosperity league, and there are already signs of cracks in the recovery: there is the threat of higher inflation.
  Paragraphs 13 and 14 of the Treasury Committee's report say that the Government's claims in that regard lack credibility. It is worth noting that the report of the Committee, which still contains a Tory majority, is the most grudging "MOT" that I have ever seen in respect of a Finance Bill. The doubts felt by that majority, and indeed by the whole party, are spread throughout the report. It will be interesting to hear whether what is said by the hon. Member for Carshalton and Wallington (Mr. Forman)—who usually takes a refreshingly honest view of these matters—will bear that out. Tory Members

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  do have doubts about the whole credibility and basis of the stance that the Government are taking on the Finance Bill.
  Mr. Nigel Forman: The hon. Gentleman is right to say that we paid attention to inflation in the Select Committee report, but the amendment that stands in his name also refers to
  "a long-term commitment to low inflation".
  What does that mean to the Labour party, in precise terms?
  Mr. Darling: It means precisely what it says. We believe that it is essential for the country to maintain low inflation, something that has not been possible over the past 20, 30 or 40 years. If there is a political consensus on that, I think that it will be welcomed by most people outside carrying on their day-to-day business, such as pensioners and those on low incomes. But the point that I am making—one of the points that comes across from the Select Committee report—is that there is some doubt about whether that is likely to happen under the present Government's policy. We have seen higher interest rates, and there is the threat of more to come. Despite what the Chief Secretary said, there have been higher mortgage rates: they have already been announced, at the end of last year and the beginning of this year. People want stability.
  Mr. Nicholas Budgen: Will the hon. Gentleman give way?
  Mr. Darling: No, I must make some progress. I will certainly give way to the hon. Gentleman later.
  The idea that this is the only country in Europe with low inflation is simply not true. We are 11th out of 15 in the European inflation league. Only Greece, Italy, Portugal and Spain are behind us. It is a perfectly legitimate point to make because we are always being told that Britain is the enterprise centre of Europe. Indeed, in its report presented last night, the Select Committee expressed concern about the output gap.
  The Chancellor forecasts that inflation will fall from 3 per cent. to 2.5 per cent. Is that credible when, in each of the past few years, the Government's forecast has not been met? The Bank of England is still expressing doubts and concerns, yet we are asked to believe the Chancellor. His whole strategy depends on inflation being down to 2.5 per cent. or less. His costings depend on it. Having regard to his record, can we believe him on that?
  As I said, if we consider long-term interest rates, which are a good indicator of international expectations, we find that UK long-term interest rates are higher than those of any other OECD country. Surely that should tell the Government something. It tells us that not only in Britain and in the Labour party, but in the markets, people do not believe the Government or trust them on inflation because they know that the Government have delivered two of the worst recessions since the war, which has hit home owners, businesses and all taxpayers alike. It is essential that we deal with that fundamental weakness in our economy and the causes of the long-term inflation, and
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  that the long-term culture and long-term outlook is achieved not just in business—which all of us keep calling for—but by politicians and Chancellors.
  Mr. Budgen: The hon. Gentleman talks about the need for stability in interest rates, so will he explain whether the Labour party is against any increase in interest rates between now and, say, 1 May?
  Mr. Darling: We have always made it clear that the appropriate action must be taken to ensure stability. The hon. Gentleman might want to direct that question to the Chancellor to find out what he has to say on the matter.
  The Chief Secretary told us that unemployment was coming down and of course the number of people entitled to claim benefit is falling. We certainly welcome people leaving benefit and going into work. People know of course that there have been 32 changes to the way in which the Government calculate unemployment. We know that one in three people who disappear from the register disappear completely. There are 1 million fewer jobs since the Prime Minister took office in 1990. It is no wonder that people do not feel good about the economy. Nor do they believe his claim that living standards are up.
  There have been tax rises. In 1994 and 1995–96, living standards fell, as the Chief Secretary had to admit last year. Of course, when living standards fall, it is always someone else's fault, yet when people's circumstances begin to improve, through their own hard work and efforts, the Tories try to claim credit for it. The fact is that in Britain we have an overlay of job insecurity, which is causing immense social and economic problems. The Secretary of State for Trade and Industry may say that job insecurity is "a state of mind", but it is a reality for millions of people and a problem for all of us.
  The Chief Secretary says that we have a fast growth rate. The average growth rate since 1979 has been the slowest of the G7 countries and slower than that of any other major European country. Over that period, the annual growth rate was only 1.9 per cent. Under the last Labour Government, it was just over 2 per cent. Far from being the enterprise capital of Europe, Britain is ninth in the European prosperity league.
  There is an interesting statistic on inward investment. In 1995, 60 per cent. of inward investment was in the form of takeovers of UK companies and, in the same year, a fifth of the total was accounted for by the fact that two privatised utilities had been taken over by American companies, so when the Government tell us that this is the capital of inward investment, we must consider those figures closely. In doing so, we realise that, to a large extent, they are due to the fact that there has been much takeover activity because the Government sold off the assets at knockdown prices.
  Like other Tory tax Bills, this Bill is about tax raising. The Government's credibility depends on the central promise that they broke. It is worth reflecting—because those promises will be made again and again—what the Prime Minister told the Los Angeles Times about a year after he won the election. He said:
  "I said the day after we won the election, with a number of people around me, 'within the next 12 months the Government will be the most unpopular we have seen for a long time'".
  Why did he say that on that Friday, the day after the election? The same Government had told the rest of Britain that, if people voted Conservative in 1992,

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  the recovery would begin on the Friday. On the same day as the Conservatives were telling the people that the recovery would begin, the Prime Minister in private was telling his Conservative party cronies that they would be the most unpopular Government in a long time. That is an example of a Prime Minister who is condemned by his own words. Why should we believe him this time when he said that in 1992?
  In 1992, the Prime Minister told us:
  "The signs are already there: better retail sales figures; encouraging signs for the motor industry; and positive evidence from the CBI … All that is needed is the confidence which will come with the re-election of a strong Conservative government. Britain's economy is now poised to bounce back."
  That is what he is saying in 1997, but we know the truth of what happened in 1992: he said one thing in public and another in private, which is exactly what will happen this time.
  Mr. Den Dover: Will the hon. Gentleman give way?
  Mr. Darling: I will for the last time.
  Mr. Dover: Does the hon. Gentleman accept the official statistics, which show that growth in the economy started in the third quarter of 1992, showing that the Prime Minister was absolutely right? The recovery started almost immediately after the general election.
  Mr. Darling: The reason why the Prime Minister said that the Government were going to be unpopular was that he knew full well that they had made promises that they could not have kept. Here are some of them. On 22 March 1992, he said:
  "The difference between the parties on tax is clear, the Conservative Party would cut direct taxes."
  The proportion of people paying indirect taxes has gone up. He said the next day:
  "We do not see any need to increase the tax burden."
  The tax burden has gone up. The Chief Secretary had to admit to me in a parliamentary answer that since 1992–93 direct tax had gone up. He has also had to admit that indirect tax—taxes on spending—has gone up, so there we have it: under the Tories, there is more tax on income, more tax on spending and more tax in total. There have been 22 Tory tax rises. No wonder no one believes them at all.
  It is the same with VAT. The Chancellor may say that he has no recollection of having made a promise, but the Prime Minister did. He said that he had
  "no plans to increase value added tax."—[Official Report, 28 January 1992; Vol. 202, c. 808.]
  He said that there would be no VAT increase and that the Conservatives had
  "no plans and no need to extend the scope of VAT",
  yet he broke that promise. That has also happened with insurance premium tax, airport tax and other taxes. They have gone up under the Conservative party.
  There is a clear pattern as we approach the Tory party's bid to win a fifth term. Not only is tax going up on income, but it is shifting to more and more taxes on spending—they are both going up. There is a clear
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  strategy to pay for reductions of one particular tax—the basic rate of income tax. Indirect and hidden taxes will go up.
  Lord Howe said in his first Budget in 1979, when he doubled VAT—despite having promised not to do so—that that was his strategy. The present Chancellor said:
  "The Government's clear policy has always been to shift the burden of taxation, over time, from income to spending."—[Official Report, 30 November 1993; Vol. 233, c. 938.]
  The Chief Secretary said in his interview with Mr. Dimbleby on 1 December last year:
  "what we're saying, and it's true"—
  so it must be—
  "is that our first priority, as we can return overall to … a position where we can begin to look again at tax cuts, is to relieve the pressure on income tax. There's no secret that the Conservatives, right back to 1979, have always said, 'We prefer to take tax off, direct taxation off income tax and to put it—if you have to have it—on indirect … all other taxes'".
  There we have it. The Conservative strategy is to increase taxes such as VAT. We are entitled to ask: where are they going next? What will they do to win a fifth term? Is VAT going to go on food or clothes? They said last time that VAT would not go on gas and electricity, yet they broke that promise.
  It is the same with national insurance. The Prime Minister said:
  "National Insurance is a tax on talent"
  so he put it up. The former Tory party chairman, Chris Patten, perhaps the next leader of the Tory party, said:
  "Raising National Insurance contributions would be a back-door stealth tax."
  The Leader of the House said that national insurance
  "is, in fact, simply a disguised tax."
  Perhaps that was an expression of hope, but whatever the Conservatives say on tax, people do not believe them. Nor do they believe their promises on spending, whether on the health service, on education or on borrowing. In each case, the Conservatives break their promises.
  On borrowing, the Chief Secretary asked why we pick 1990. He may like to forget this, but that was when the Prime Minister was elected to office by the Conservative party. Despite what the Chief Secretary said, the national debt has doubled.
  Mr. Barry Legg: Will the hon. Gentleman give way?
  Mr. Darling: No.
  It is no wonder that the Select Committee and others have expressed so much concern about the foundations that the Government invite us to believe are sound. Investment is growing more slowly in this recovery than in any recovery this century. People lack the education and skills that they need and we are 42nd in the world skills league. One in five families are without work, a higher proportion than in Germany, France or the United States, and our national and individual wealth continues to fall.
  We need a platform of stability that is based on tough rules on spending and borrowing. We need a programme that will help to get the young unemployed and the long-term unemployed back to work. We must increase

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  our education standards and opportunities, encourage longer-term business investment and reduce the barriers that face people who leave benefit and enter work.
  Our amendment and our published policy set out our approach, which is economic stability, a commitment to low inflation and sound public finances. People want stability and they look to the Government whom they elect to act on their behalf to ensure the right conditions for high investment. People want the Government to provide an education service that will benefit everyone and not just the few. They want people to be equipped with the new skills and training that they will need in future because in a world in which capital is increasingly mobile, our skills and training will mark Britain as a place to invest.
  People want a Government who are prepared to overhaul and modernise the welfare state and bring about conditions that will increase investment in our infrastructure and end the scandal and waste of long-term unemployment. They want a Government who will prepare the country for the future and end the economic and political drift of the past few years. They want a Government with strong leadership and a clear sense of purpose and direction who will deliver on their promises. That is what people will get with a new Labour Government.
  4.51 pm
  Mr. David Willetts: I welcome this opportunity to support the Bill from the Back Benches. I congratulate my right hon. and learned Friend the Chancellor and the Treasury team on their overall Budget judgment. The Budget has delivered not just the fifth year of a growth rate that exceeds that of Germany and France, but the prospect of continuing to improve on that performance. We can carry on beating the over-regulated, over-taxed and over-subsidised economies of the continent.
  Despite what the Opposition say, our sound control of public finances has enabled us to hold down taxation. The figures in the Red Book are clear: the proportion of GDP paid in taxes in 1991–92 was 36.25 per cent. and it will be the same in 1997–98. The proportion of family income in tax and national insurance contributions was 20.7 per cent. in 1991–92 and it will be the same in 1997–98. Meanwhile, we have lowered the basic tax rate, reduced tax on savings and taken many families out of tax altogether.
  Mr. MacShane: The hon. Gentleman is in want of a little information. Is he aware that in France a family with two children has to earn about £15,000 a year before it starts to pay tax? That is why family stability in that country is stronger than in our family-unfriendly country. On what income does a United Kingdom family with two children start to pay tax?
  Mr. Willetts: I shall return to the subject of family taxation if time permits. I should like to deal with the underlying control of public expenditure which enables us to hold down taxation and deliver the economic conditions that are described in the Red Book. Low taxes and continuing growth can be achieved only by holding down public expenditure.
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  During my brief period as Paymaster General, I discovered that one of the responsibilities of the post is signing the cheques. Such responsibilities for actually disbursing public expenditure still fall by statute on the Paymaster General. I understand that his signature appears on about 17 million cheques a year. People used to come to me in my constituency or at parties and say, "Thank you for the cheque." The average Opposition Front-Bench Member imagines that that is what being a Minister is all about, or at least it is what he or she thinks it should be about—signing cheques and handing them over in the hope that they will be warmly welcomed. In reality, a Government can deliver the low taxation that we now enjoy and our current rate of growth only by prudent public expenditure control.
  At Prime Minister's Question Time today, we saw how Labour approaches the issue of public expenditure control. In the health service and in education, Labour assumes that the solution to every problem is more public expenditure. We have costed Labour's public expenditure pledges at more than £30 billion. When we published that figure, Labour immediately produced what it called a rapid rebuttal and denied the 89 public expenditure pledges that we had identified, not from dog-eared Labour documents but from specific statements by the Leader of the Opposition and the shadow Chancellor.
  In its rapid rebuttal, Labour said most of the time that its public expenditure pledges would be met from existing resources. That may be rapid, but it is not a rebuttal. People cannot say that they will give sabbaticals to teachers for a term every 10 years but that there is no need to worry because it will be financed from existing resources. That is not a responsible approach to the control of public finances and, without such an approach, there will be no prospect of continuing to deliver low taxation and sustained economic growth.
  Mr. Darling: People follow our proceedings, and it must be put on the record that the document produced by the Conservative party about alleged spending commitments was utter rubbish. Each of the allegations made against us was refuted. The hon. Gentleman is an honourable man. He and I have had many conversations and we disagree on some issues. I do not want to be rude to him, but I caution him against repeating things that he must know to be untrue.
  Mr. Willetts: The hon. Gentleman knows that many of these so-called rebuttals by the Labour party consisted of assuring us that the expensive spending pledges—I gave a specific example—could be met from existing resources. I invite the hon. Gentleman and his fellow Opposition Treasury team members to explain how they seriously imagine that the expenditure pledges that they have put before the electorate in the past few years could be met from existing resources.
  Dame Elaine Kellett-Bowman: Does my hon. Friend recall that Labour spelled out precisely how it would pay for one pledge? It said that school classes of 30 would be paid for by abolishing assisted places. That would give one teacher per seven schools.
  Mr. Willetts: My hon. Friend is correct.
  I should like to deal with some of the specific measures in the Bill which I welcome. The first of those is the approach to environmental taxes. In an earlier Budget,

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  there was an imaginative approach to the problem of landfill sites which, as we all know, are often the bane of neighbourhoods because of the pollution they generate. In this Budget, the imaginative measures on vehicle excise duty and the taxation of hydrocarbons will mean that the particulates which are emitted, especially from diesel engines, will be reduced by a further 10 per cent. That is a good example of exactly how we can use the power of the tax system to deliver policy objectives that I am sure are shared throughout the House.
  The second welcome measure in the Bill is an apparently obscure item on the depreciation of long-life assets. The philosophy on which the proposal rests is that, whenever possible, we should try to align the rules of the tax system with the accounting rules under which companies describe their financial affairs. As we all know, the 25 per cent. capital allowance in corporation tax for some investment is much more generous than the rate of depreciation that accountants, in preparing companies' accounts, would regard as appropriate for some particularly long-lived assets. I therefore welcome the proposal to reduce capital allowances on long-life assets from 25 to 6 per cent.
  The measure has one interesting side effect. Some of the companies that will be paying the higher rate of corporation tax, because they have a particularly large number of such long-life assets, are utilities. In the past, some of the utilities have benefited from a clear distortion in the corporation tax regime, because they were allowed to depreciate their assets for corporation tax purposes at a much better rate than any sensible accountant would have expected them to depreciate in the accounts.
  Mr. Sheldon: The hon. Gentleman is right: an argument can be made for ensuring that tax rates follow true rates of depreciation. I believe that there should be some incentive to invest. However, even on the basis of tax rates following the true rates of depreciation, does he not understand that the 25 per cent. rate on many items of machinery and, particularly, of plant does not provide such an incentive? Few articles of plant and machinery are worth 75 per cent. of the price after the first year and, in some cases, 25 per cent. represents the commission that a salesman might receive. Therefore, true depreciation is much greater than the depreciation allowed by tax.
  Mr. Willetts: That is a very interesting point. However, in his initial remarks, the right hon. Gentleman seemed to accept that, on his argument, although a 25 per cent. rate sometimes was too low, on other occasions it might be too high. I hope that I may interpret his remarks as a guarded welcome for the proposal to reduce the rate from 25 to 6 per cent., although I accept that he believes that there are arguments for increasing the 25 per cent. rate.
  Mr. Sheldon: I must apologise, as I did not get my point across. I believe that there should be an investment incentive on certain types of plant and machinery, and that the tax depreciation should be greater than the actual depreciation.
  Mr. Willetts: The right hon. Gentleman and I will have to agree to differ on that point, because I think the 1984 corporation tax reforms, which attempted to introduce a set of capital allowances in corporation tax that were closer to normal accounting conventions, made a lot of
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  sense. The old regime of providing very generous allowances and then a very high rate of corporation tax was much inferior to our current regime of a lower rate of corporation tax and more sensible allowances.
  The proposal to move down to 6 per cent. for long-life assets makes a lot of sense, and will ensure that some of the utilities that benefited in the past from a distortion in the corporation tax regime will in future pay more corporation tax. That approach to taxation of the utilities is in striking contrast to the Labour party's proposals for a windfall tax, which lacks any such logic.
  I should briefly review some of the arguments that Labour has made in favour of a windfall tax and contrast them with the proposals in our Finance Bill. One of the arguments made in favour of the tax is that, whatever problems there may be with retrospective legislation, Conservative Members must still take responsibility for the retrospective measures in the 1981 Budget—the so-called "bank tax". I served in the Treasury in 1981 when that tax was formulated and was involved in many of the fraught meetings with representatives of the banking industry, who came along vigorously to complain about that tax. I still have scars on the back which were inflicted at some of those meetings, when those representatives vehemently expressed their opposition to our proposals in that Budget.
  The 1981 bank tax is very different from the Labour party's proposals for a windfall tax. The first difference is that we were clear on the basis on which a tax should be levied. It was a tax on the non-interest-bearing sterling deposits held by all banks in the United Kingdom, and there was no attempt to discriminate between banks on the basis of their status—whether they were foreign or domestic—their circumstances, or their history. The measure was based on agreed and published banking statistics showing the non-interest-bearing deposits held by the banks.
  There was a genuine windfall element in that tax because interest rates had risen so high—at one point, they reached 17 per cent. Banks were taking in deposits on which they were paying no interest and were earning interest, sometimes of more than 20 per cent., on the loans that those deposits financed. We formulated a clear, simple measure specifying that the tax on banks should collect 2.5 per cent. of the value of those sterling deposits. The measure was clear and precise, it was introduced at the same time as the banks were making excess profits, and it was based on agreed statistics that had long been prepared and published before by the Bank of England.
  I can do no better than quote from the Institute for Fiscal Studies, which has examined the possible analogies between our bank tax and Labour's proposed windfall tax. It states:
  "The special tax on bank deposits had the merits of being applied to a well-defined set of firms and of being charged on a tax base that was coherently related to the reasons given for introducing the tax. It also had the advantage of being introduced at around the same time as the banks were earning these windfall profits, and not several years later.
  In contrast, it is not at all clear which privatised firm will be liable to the windfall levy, or what basis would be used to decide how much each firm would be charged."
  There is a clear difference between the approach in our 1981 Budget, although many Conservative Members regretted the element of retrospection, and Labour's extraordinary proposals, many years after the event, for a windfall tax on the utilities.

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  Labour needs to answer some pertinent and essential questions about the tax, such as how much it is supposed to raise. Will it be £3 billion, £5 billion or £10 billion? Which companies will pay it? Will it be, as the Leader of the Opposition said, "privatised monopoly utilities"? That is what Alastair Campbell—who is presumably the most authoritative spokesman available on Labour policy on these matters—said in his notorious letter to The Independent. Or will it be, as the shadow Chancellor said, "privatised utilities"—deleting the "monopoly" word? British Telecom, BAA or the electricity generators would find themselves taxed under the proposals that the shadow Chancellor wants to introduce, but apparently would not be taxed under the proposals supported by Labour's chief spin doctor and the leader of the Opposition.
  Mr. MacShane: I am grateful to the hon. Gentleman for giving way once again. He is making incredibly heavy weather of this matter. I have no doubt that when, in a few weeks or months, my hon. Friends are sitting on the Government Benches, they will provide answers to the detailed questions he has asked. May I ask him whether he is against the principle of a windfall tax?
  Mr. Willetts: I am certainly against the principle of a windfall tax on the utilities, and I have explained why that case is very different from the windfall tax on banks which we introduced in 1981.
  Those are important questions to which leading firms in our country are entitled to know the answers, and they are questions that any serious political party about to put its prospectus before the electorate should be expected to answer. The windfall tax is the core of Labour's tax strategy, and it is the pot of gold that Labour says will enable it to finance all the public expenditure pledges that it has made to the electorate. Will corporation tax be taken into account in calculating liability for the windfall tax on the utilities? When we introduced the bank tax, we deliberately decided to set it completely independently of corporation tax. No corporation tax payments were relevant to the liability for bank tax. Will the same apply with this tax? That question is particularly relevant to British Telecom.
  How would Labour handle the question of state aid? What about those firms in the same business that were never nationalised—
  Mr. Andrew Miller rose—
  Mr. Willetts: I am sorry; I shall make a bit more progress.
  What about those firms that were nationalised and, therefore, never privatised, such as some private water companies, for example, which presumably would not pay the tax? Under agreed European Commission rules, they would be regarded as beneficiaries of a negative state aid. A discretionary tax would be borne by some of their competitors in their industry but not by them. What has Labour done about the response to that problem from the European Commission? We know that, because French companies own some of those utilities, the French Government are extremely unhappy about the proposal.
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  We have been told how close the Labour party is to President Clinton's Democrats. When talking to its friends in President Clinton's Administration, does Labour just swap notes on what its focus groups say or does its friends raise the worries about the proposal felt by American businesses that have bought into the British utilities? We know that in America they are particularly unhappy with anything to do with retrospectivity. There are rumours that the first thing that would happen in the event of a trade war, which the tax would unleash, is that the American authorities would block the British Telecom merger with MCI to form the new firm, Concert. Does the Labour party believe that that would happen? How would it be handled?
  We have heard from the leader of the Labour party that it believes that it is important for all of us to do our homework. If that is so important, will Labour's Treasury team do its homework on this proposal? We are all entitled to know the answers to those practical questions.
  Mr. Miller: If the hon. Gentleman wants to make so much about Labour's tax on the utilities and is drawing a comparison with the 1981 tax on the banks, perhaps he would be kind enough to tell the House where a reference to that tax appears in the 1979 Conservative manifesto—which clause and which paragraph?
  Mr. Willetts: Although there was no reference in the 1979 manifesto, there was a clear reference in the 1980 Budget. The then Chancellor, now Lord Howe, made it clear in his 1980 Budget that he was considering the possibility before it was introduced in 1981; so the possibility of a bank tax was publicly ventilated and the pros and cons were set out in the 1980 Budget speech.
  We know what the Labour party says when pressed on these practical questions about tax. I have the Labour party's briefing document, which says:
  "We have made no public comment on the nature of the levy, its expected yield or the distribution of the levy and have no plans to do so until we have consulted the regulators in government."
  The Labour party's defence is that these are difficult issues which have to be discussed with the regulators. If that is the Labour party's line, how can it explain what appears on the following page of that same briefing document? When confronting the question about legal obstacles to the tax in the European Court of Justice and the European Court of Human Rights, the document says:
  "Our investigations have confirmed that there are no financial, technical or legal obstacles to the introduction of the tax."
  How can the Labour party know so much about the tax that it can assure us that it will not encounter any legal obstacles, yet, at the same time, know so little that it needs to consult the regulators and will not answer any of our questions until then?
  Mr. Butterfill: Does my hon. Friend agree that the principle of the proposed tax undermines the position of the regulators in their judgment about the policies that will need to be pursued in the future? The regulators must make economic judgments about the profitability of the companies concerned and the public interest, but the tax would undermine those judgments.
  Mr. Willetts: My hon. Friend is right. The tax involves a fundamental transformation of the way in which we

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  have regulated the utilities. Our deliberate decision when we set up the regulatory regime was not to make the mistake that had been made in America, where they have rate of return regulation. We wanted to regulate prices; if a company could do well and improve its performance, it could make better profits as a result. The proposed tax is about shifting to rate of return regulation. In the long run, that will bring back all the old inefficiencies, the gold plating, the unjustified expenditure and the excessive expenses that the American regime has inflicted on America. Sadly, if the Labour party took office, it would be the end of the basis on which the utilities have been regulated so far. There would be a reversal of our fundamental decision not to go down the American line. I do not want to detain the House for too long. The one thing that has been noticeable during my remarks about the windfall tax is that there has been no attempt by Opposition Members to answer any of the practical questions about how the tax would work.
  Labour Members say that they need to raise this unspecified sum to finance an ambitious training programme to get the long-term unemployed back to work. That brings us to another element of the Budget, because it raises some important questions about how we think that we can bring down unemployment in this country. Since there are more than 4 million unemployed in Germany, more than 3 million unemployed in France and less than 2 million unemployed in this country, one might think that this Conservative Government know something about the right policies for bringing down unemployment.
  I must tell Opposition Members that training for the unemployed is much exaggerated as a way of getting people back to work. Of course training is a good thing, and we need training so that people can earn high incomes on the basis of their skills. However, the best training is done in-house by an employer for a known employee so that that employee can increase his contribution to the firm's output.
  Sadly, training schemes aimed at the unemployed can have the opposite result to the one intended. Unfortunately, there is evidence to show that, when training is oversold and unemployed people are told that it will transform their job prospects, they end up expecting higher pay than they will be able to command in the labour market. In an experiment in America, one group of unemployed people was offered no training and a second group was offered training. Subsequently, the group that did not receive the training did better at finding work. The training had, to use the language of economics, increased the reserve wage of the unemployed people by more than it had increased their value.
  We need a flexible labour market that helps people into work and provides on-the-job training. If we have succeeded in creating such an economy, we should see that, once people find work, they will enjoy significant increases in their living standards and their pay.
  Sir Ralph Howell: I am interested in my hon. Friend's argument. Will he explain why the Government's excellent scheme on workstart, which is in line with what my hon. Friend is suggesting, has not been introduced nationally? That is crying out to be done.
  Mr. Willetts: My hon. Friend has a distinguished record of proposals in this area. Project work, which is very much
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  modelled on my hon. Friend's thinking, is being expanded this year to cover 100,000 people. However, in this aspect of policy we have learnt that it is better to experiment and run pilot schemes to find out what works rather than rush too soon to a national scheme.
  A labour market that works—ours does work and that is why we have such low unemployment levels—would be one in which we would expect people to find their jobs and then, as a result of training in work, to boost their income.
  An OECD study on income mobility found that, across the whole of the OECD, upward mobility among young people was greatest in Britain, where 62 per cent. of under-25s moved up at least one income band—during the period of the study, which was 1986 to 1991. In America—we are often told how terrible things are there—54 per cent. managed to increase their incomes and in Sweden, the type of country which the Labour party likes to copy, only 39 per cent. of young Swedes managed to move to a higher income band in that period. In other words, our policies help people into work and enable them to enjoy higher incomes once they are in work.
  Alongside the measures on environmental taxation, long-life assets and the elimination over time of the tax distortion of profit-related pay schemes, there are other tax measures not in the Budget to which I hope that we can look forward in future Budgets delivered by the current Treasury team. I particularly hope for further reform of capital taxation.
  Capital gains tax is a classic bad tax. It is imposed at a high rate on a narrow base. Many people have complained about the effect of the 40 per cent. capital gains tax rate on incentives for investors. Following that pressure, over the past few years ingenious new allowances and exemptions have been created. I do not like a tax levied at 40 per cent. with so many allowances and exemptions that only those who have planned their affairs badly pay that rate. That is not a good tax; it is exactly how a tax should not be structured.
  Even if Treasury prudence means that it will be some time before capital gains tax can finally be abolished, I hope that, in the interim, we can have a more broadly based tax levied at a lower rate. There are some useful proposals in the Budget on the reform of capital taxation. I hope that we can make further progress on that in our fifth term.
  5.21 pm
  Mr. Robert Sheldon: The hon. Member for Havant (Mr. Willetts) spent more time on the Finance Bill that my right hon. Friends will introduce than on that before us today. He made heavy weather of the windfall levy on the utilities. I accept the need for the kind of consultation that he had with the banking community when the banking levy was introduced, but that is a matter for a Government. No Opposition, however much advantage they may have in experience or understanding, can copy the work that is essential for a Government. The necessary consultation with the utilities and other interested parties will obviously be an essential part of the work of my hon. Friends when they form the Government. I look forward to the Finance Bill and the debates that will follow, when we shall find out how successful my hon. Friends have been in meeting some of the obvious comments that are bound to be made as a result of their initiative.

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  My first thought on receiving the Finance Bill was that it was in one volume only. It is still too large, but it is more manageable than those that we have received in the past. There has been an inflation of expectation with Finance Bills and I am grateful for this year's reduction.
  In Somerset House, there was-there may still be—a room in which all the Finance Bills and related regulations are set out on shelves. Until the middle years of the last century, one volume covered several years. The pace of change increased to annual volumes, then to several volumes for a year, then to whole shelves for each year. I fear to think how much space they now take.
  Hand in hand with the inflation of the tax system has gone the army of accountants, tax advisers and all those who service that mighty engine of Government revenue. At some time the expansion will have to level out, but I fear that we may have to wait some time. Meanwhile, we are awaiting with great expectation, but some uncertainty, the simplification that this Government—like all others—talk about but fail to deliver.
  When the combined tax and revenue Budget was introduced, the argument was that we would be able to relate taxes to expenditures and decide on the priorities. However, the Government overlooked the fact that to do that one would need to assess the priorities between taxes and spending and make decisions accordingly. More expenditure would mean more tax and less tax would mean less expenditure. Ideally, one might even have envisaged reducing a certain item of expenditure to provide a specific tax reduction, or increasing an item of expenditure and accepting a specific tax increase.
  One can, of course, argue that all that is impracticable outside the Treasury, which alone has the means of producing the large range of options. Without the ability to trade certain items of expenditure against tax, we have a combination of little value. In fact, the new system is a disadvantage. It is not working. It jams up the legislative process and distorts what was a sensible division of the parliamentary year. We are not getting that trade-off between expenditure and taxation. We are making similar speeches to those that we used to make. In the old Budget debates it was always possible to urge certain expenditure decisions. The root of the matter is that, given the inability to increase taxes—only the Government can undertake that—the position does not make for greater parliamentary control of the decision-making process.
  We could well consider returning to a spring Budget, with the Finance Bill reaching the statute book by July. One certain advantage is that debates on the economy could be spread over a wider period. It is unacceptable that, after speaking in the debate on the Queen's Speech in October and the Budget debate in November, the Chancellor makes no further speech until July, six or seven months later.
  Mr. Forman: I am following the right hon. Gentleman's argument. I remember similar points being made by my right hon. Friend the Member for Worthing (Sir T. Higgins), with whom the right hon. Gentleman agrees on this issue. However, he should remember that it is always open to Opposition parties to use one of their supply days to debate the economy. It has been noticeable in recent years, when the economy has been doing well
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  under the management of my right hon. and learned Friend the Chancellor, that Opposition parties have not taken the opportunities available to them to debate the economy. They know how strong our position is.
  Mr. Sheldon: I am talking about the formal arrangements for managing such matters. That is the essential issue. Of course Opposition days can fill in the gaps, but there is no formal arrangement for a debate between those in October, November and December and those in July. I believe that there should be. I hope that that will be considered in due course.
  Several commentators have argued that my right hon. Friend the Member for Dunfermline, East (Mr. Brown) will receive a splendid inheritance. That assumption is behind the speeches that we have heard and are yet to hear. The argument is that there will be low inflation, reasonable growth, a reducing budget deficit and low taxation. The reality is that those commentators have got it all wrong. We have an artificially low level of inflation because of the rising value of the pound. I know that Governments facing an election have a partiality for an over-valued exchange rate. That has always been so, because a high exchange rate makes for a lower retail prices index. Cheaper imports feed into the RPI. The standard rule of thumb that I used in my days at the Treasury was that each 1 per cent. change in the exchange rate resulted in a 0.25 per cent. change in the RPI. I was encouraged to hear that that calculation is still roughly correct.
  Mr. Legg: I am interested in the right hon. Gentleman's argument. Why did that relationship not work when we left the exchange rate mechanism? The pound then floated downwards. Imports rose in value, but inflation fell.
  Mr. Sheldon: There are long-term effects of such matters. It sometimes takes a long time for import prices to feed in. There is no question but that if the value of the pound is increased, imports become cheaper. Given equal conditions, such cheaper import prices will eventually feed into the RPI. There may of course be other short-term considerations, and the pressures of competition are one among them, but the general rule still applies. One can argue about the precise nature, but that is the broad direction of movement.
  In the past 12 months, the trade-weighted exchange rate has risen from 83.5 per cent. on 2 January last year to 96.1 per cent. today—an increase of about 15 per cent. On the basis of the calculation by Goldman Sachs International Ltd., inflation has been dampened by about 2 per cent. So, the 2.5 per cent. target for inflation has been met only by endangering our manufacturing industry. If we accept the Goldman Sachs argument, the level of inflation today would be about 4.5 per cent. Nobody can doubt that the increase in the value of the pound has meant that the level of inflation today is much less than it would otherwise have been.
  Mr. Butterfill: The right hon. Gentleman suggests that damage to export industries is an inevitable consequence of a rising exchange rate, yet that is not borne out by the examples of many other countries. If that were ultimately true, how does the right hon. Gentleman explain the success of the Japanese and German economies and their

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  exports? Do not successful economies throughout the world generally tend to have appreciating exchange rates? They are successful and remain so because they hold down their cost base, are innovative and have flexible labour markets.
  Mr. Sheldon: If the hon. Gentleman will forgive me, he has got it a little wrong. The strength of such countries' industries brings about an increase in the level of currency. Here, the increase in the value of the pound is motivated not by the strength of industry but by the level of interest rates, to which I shall refer.
  The target on which the Government have prided themselves above all others has been obtained purely temporarily and is having serious economic consequences. It is damaging our exporters and, of course, our home industry, because it is easier for people to bring in goods from abroad and compete with our industrial manufacturers to their disadvantage. There were enormous such difficulties in the 1960s when so many goods were brought in from outside this country, damaging especially manufacturers' white goods and affecting them for the whole of the 1970s and 1980s, and even now. The question is what would the RPI have been if sterling had remained at the level of 12 months ago? One can take one's choice, but Goldman Sachs' projection is probably about right.
  The current overvaluation of sterling has serious dangers for our manufacturing industry, because its exports may be priced out of the market and competition in home markets may be increased. After all, manufacturing industry was saved only because of black Wednesday, which cost us billions of pounds but produced a realistic exchange rate. It was that which enabled the economy to emerge from the savage recession.
  The Government are storing up trouble for the future. The only way in which our economy can really improve in the long term is through our manufacturing industry. Meanwhile, there is the benefit of the "J"-curve effect. The initial effects of devaluing are disadvantageous, as the exporter is committed to a lower value of sterling for his goods and services. With an upward movement of sterling, the invoice value to the exporter for current deliveries will be increased—but at the expense of future orders. So, for a very short time, the Chancellor of the Exchequer will find the balance of trade beneficial, but in that way he is bequeathing to my right hon. Friend the Member for Dunfermline, East an unwelcome legacy. Unfortunately, that is not all.
  My right hon. Friend the Member for Dunfermline, East may find that the level of the economy is unsustainable. Apart from the increase in house prices, which is always reflected inadequately in the RPI—the level of house prices and its effect on inflationary expectation is much greater than anything that shows up in the RPI—I do not believe that we are seeing anything like a boom. We are however seeing a recovery that may not be sustained. After all, that is the reason why the Governor of the Bank of England will want a greater increase in interest rates than the Chancellor of the Exchequer is likely to find acceptable.
  Even all that does not complete the problems that my right hon. Friend the Member for Dunfermline, East will inherit. There are the problems of public sector pay, too.
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  It has held down for so long that the pressure is likely to continue to mount. My right hon. Friend will also lose the financial benefits of further privatisation. Several billions of pounds a year of family silver sales are not easily replaced. In all 18 years of office, the Government have missed the opportunity to get from industry the investment and the exports that could have produced lasting economic success. Ian Gilmour put it extremely well when he pointed out that we once had such a great opportunity, but failed to make use of it. Indeed, the opportunity was forgone to the disadvantage to the country as a whole.
  It is the credit of my right hon. and hon. Friends that they have seized on the only lasting solution to our problems: investment and education—investment in industry and investment in people. The Government's 18 years might have been regarded as a little less than disastrous if they had undertaken such measures. After all, they had more than £100 million of North sea oil revenue, let alone the balance of payments advantages that flowed from it, as well as privatisation receipts. They had a unique, once-and-for-all opportunity to invest in education and industry, but threw it away. Now, in much poorer circumstances, we have to find the means to undertake the task of rebuilding this country's real wealth, our industry and the skills of our people.
  I see that once again the question of company taxation is being examined. I believe that it was a fundamental mistake to change from the classical to the imputation system of taxation. The encouragement to pay dividends means that that main source of investment—the retention of earnings—is not available in the same way as the classical system allowed. Reluctantly, some years ago I came to the view that such fundamental changes in company taxation would have to be forgone. One cannot keep changing the system year after year or even decade after decade. We have lived with the present system for more than 20 years and witnessed the disadvantages of it, especially for investment. If we are to look at the matter again, it might be worth considering the arguments that were put forward at the time that the system was introduced. In any event, the level of capital allowances in the Bill does not provide the incentives to invest that we should be offering.
  The increase in the rate of insurance premium tax came as no surprise. I always expected that the Chancellor of the Exchequer would follow the sound principle of first getting the structure right. I have seen the introduction of a number of taxes where revenue was the first consideration and sacrifices of structure were made. Much the best way of proceeding is to get the structure right first and the revenue later. I would be interested to hear the views of the Chancellor's predecessor but two, Lord Lawson, on the matter. He prided himself again and again on the abolition of taxes. Any comments that he makes on the insurance premium tax as well as the air passenger duty will be worth reading.
  I cannot be as sanguine about self-assessment as the Government. I must confess that I have not had many inquiries from constituents on the matter, but those that I have received show a lack of comprehension about what it all means. I know that the Inland Revenue has provided much information and advertisements. I must however warn the Government that, despite all their efforts, they must be prepared for a certain level of confusion that might surprise them. I know that, as in the United States,

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  there will be much work for tax accountants and advisers, but such a system of help will take some time to come into effect and the cost to individual taxpayers will be considerable—in fact, much larger than many taxpayers will expect. Payment by September in each year may be subject to some slippage and I hope that the Inland Revenue will use its discretion in applying any penalties, especially in the first year. It should not be too heavy at the beginning, but give people time to adjust so that eventually they come to understand the problems involved in self-assessment.
  In the words of the amendment tabled by my right hon. and hon. Friends, the Finance Bill fails to equip the country for the future. That is the real indictment of the Government that I hope to see put right in the first years of a Labour Administration.
  5.39 pm
  Mr. Quentin Davies: It is a great pleasure to follow the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), who is a distinguished Member of the House and who has a long record of taking an interest in financial matters. His speeches are always thoughtful and considered, but I did not expect such a remarkable and revealing speech as we heard today. After the classic attempt, which is now typical of new Labour, by the hon. Member for Edinburgh, Central (Mr. Darling) to try to evade every question that was put to him and to avoid any commitment about the Labour party's policies if ever it came to power, the right hon. Gentleman let the cat out of the bag. I hope that his speech will be read thoroughly and carefully—and people should read between the lines of the speech—by everybody who will cast a vote at a general election some time in the next few months.
  The right hon. Member for Ashton-under-Lyne is not only a living symbol of the continuity between the modern Labour party and that of the Wilsonian era, of inflation over 20 per cent., of the British disease and of the IMF bailing us out, but he made it clear today that exactly the same policies so disastrously practised in the 1960s and 1970s still lie at the heart of Labour thinking. We heard the same nostalgia for devaluation—in fact, the right hon. Gentleman delivered almost a panegyric to devaluation, so he has learnt nothing from the 1970s. It is clear that the Labour party's exchange rate policy would once again be one of secular devaluation to compensate for the productivity failure of the economy as a Labour Government began to run down the supply-side reforms that we have introduced in the past 15 years.
  The right hon. Member for Ashton-under-Lyne also said—not subtly enough to deceive anybody in the House or outside—that public sector pay had been rather neglected in the past few years. What does that mean? That means that the Labour party when it comes to power will give a bonanza to the public sector trade unions which support it and continue to finance it. Now we know about another source of extravagance, fiscal irresponsibility and inflation if ever we have a Labour Government.
  The right hon. Member for Ashton-under-Lyne also said that privatisation was a great mistake. I distinctly heard him say that the Government should have invested
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  more, so the Labour party still believes that it is the job of Governments to invest. The Labour party still secretly believes that Governments should make resource allocation decisions and determine how savings are mobilised and where they are invested. We know now what will happen to the British economy if we have a socialist Government in power in a few months.
  The right hon. Member for Ashton-under-Lyne also said that he did not like the tax imputation system and that it provided too great an incentive for companies to distribute their profits. What does that mean, en clair? It means that he and the Labour party want to place disincentives on companies to distribute their profits. The Labour party wishes to force companies to retain profits and it still opposes the whole concept of capital mobility. It does not believe that we should have efficient financial markets that channel cash from cash-generating industries and allow it to be mobilised in other sectors of the economy and by other firms. It believes not in mobility but—as socialism always does—in a rigidified economy in which capital is stored in the firms that generate the capital instead of being distributed around the economy.
  I also heard the right hon. Member for Ashton-under-Lyne make a remark about capital allowances, to which the same principle applies. He wants to create incentives for companies to invest in fixed assets and that shows that the Labour party still has the traditional socialist obsession with fixed assets and capital. It cannot distinguish between investment in general and the purchase of plant and machinery in particular. That obsession goes back to the very origins of the socialist party and we have heard the same rhetoric for the whole of this century from Opposition Members. They believe that Governments should somehow distort capital flows.
  We heard an interesting speech from the right hon. Member for Ashton-under-Lyne and I hope it will be not only read but kept by everybody until the moment when we have to take an electoral decision. What a contrast there is between that vision of socialism drawn from the past that was presented to us with such commendable frankness—or relative frankness, by the Labour party's present standards—and the picture of the actual British economy at the beginning of 1997. What a contrast there is also between those policies to which the Labour party is clearly still wedded and the policies reflected in the Budget and the Finance Bill before us.
  The Budget is one in a series of sound, sensible and historically productive Budgets. In the past few years, we have steadily reduced Government borrowing. The Budget will go further towards reducing the public sector borrowing requirement. It will go further towards reducing the ratio of Government debt to gross domestic product and, at the same time, it will reduce direct taxes. It is a considerable achievement to hit all three objectives at the same time.
  Mr. MacShane: Would the cherry on the cake that the hon. Gentleman is describing be Britain's entry into economic and monetary union as soon as possible?
  Mr. Jack: Stirrer.
  Mr. Davies: I have not yet got on to monetary policy, but I should delighted to pursue that matter in another context. My views on EMU are well known. Clearly,

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  if there is a opportunity to create a sound and sustainable zone of monetary stability in the European single market, and if there is an chance to achieve the resulting stability gains, the lowered costs of capital and the benefits for trade, we would be crazy to pass up such an opportunity. Whether such an opportunity will present itself we have yet to see and we will take a decision in the light of circumstances at the time.
  Mr. MacShane: We will take the decision.
  Mr. Davies: I can tell from the hon. Gentleman's reaction that he does not disagree with the logic of my response. I understand also why the hon. Gentleman wanted to deflect me from the original course of my speech. I was making some irrefutable remarks about the qualities of the Budget before us. If we reduce Government borrowing, we reduce the pressure on interest rates and inflationary expectations in the economy. If we reduce the ratio of public debt to GDP, we reduce the pre-emption of resources in the economy by the Government sector and allow a greater proportion of national wealth to be allocated by the productive sector of the economy. Moreover, reducing direct taxes increases the incentives for people to return to work, to train, to take overtime opportunities, to invest, to take risks and to build up businesses. Doing all that year after year creates a sound basis for a modern economy, and that is exactly what has happened.
  At no time during the lifetime of any hon. Member in the Chamber—or during the entire century—have we enjoyed, as we have now enjoyed, nearly five years of continuous growth. Growth started again after the recession in the spring of 1992, so within a month or two there will have been five years of continuous growth, falling unemployment and increasing numbers of hours worked in the economy. At the same time, we have falling inflation and no balance of payments crisis. When Labour has been in power, we have scarcely enjoyed a couple of years of continued growth. Labour Governments did not achieve that very often, but they then ran straight into the bumpers of inflationary pressures and a major balance of payments crisis.
  Why have we not had a balance of payments crisis during the past few years? Is that not the rather revealing dog that has not barked in the night? Why has increasing demand been satisfied from domestic sources, or—to the extent that we have increased imports in a world that is rightly becoming increasingly commercially interdependent—why have we been able to increase our exports by an equivalent or even greater rate? It can only be explained by a simple phenomenon—one which the Labour party does not want to recognise. There has been a genuine supply-side revolution in this country.
  We have improved productivity and become more innovative. Management has become more professional and the work force has become more realistic, and has got away from the terrible influence of trade unionism, which was systematically opposed—and remains opposed, so far as it retains any influence—to productivity increases and to innovation. The supply-side revolution has been a direct result of the Government's policies of sound money. We have not subsidised firms—either directly through subsidies of the kind advocated by the right hon. Member for Ashton-under-Lyne or indirectly through devaluation—and we have carried through our complementary policies of privatisation and tax reforms.
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  Does this extremely encouraging picture mean that I will simply sit down without saying that there are any problems or challenges on the horizon? No, it does not. Anybody who looks carefully at the Red Book can see that there are one or two challenges. I believe that they can and will be met by the Government in the next Parliament. One of the challenges—or disappointments, if you like—that is perhaps most striking to any reader of the Red Book is the fact that after five years of continuous growth, social security spending continues to rise. That is clearly worrying. The rate of acceleration of social security expenditure has been modulated, but one might have supposed that after the creation of so much prosperity, the dependency ratio would fall and social security expenditure would reflect that. That has not happened.
  I fear that it will be necessary sooner or later—I hope that it will be sooner—to take a radical look at the whole social security system. I very much believe that my hon. Friend the Member for North Norfolk (Sir R. Howell) is right and that there are a number of moves that need to be made and decisions that cannot be postponed indefinitely. The social security system is, sadly, full of anomalies and unfairness of all kinds, but above all it is filled with perversities. The greatest perversity is that it contributes to the problems with which it is designed to deal—unemployment, poverty and dependency. That is not good enough, and we cannot and should not continue to accept it; not only because a lot of public money is involved—although that is, of course, an important factor—but because of the profound social implications of increasing and allowing to increase the dependency ratio in our society.
  We must look at how the social security system might he altered so as to reduce the disincentive to work and the incentive to become a dependant that is inherent in any social security system. One proposal that has been often promoted is to merge the benefits and taxation systems. That is superficially appealing, because it would mean that we would be withdrawing benefits as people went back to work at the marginal rate of taxation—20 per cent. or 23 per cent. at present—rather than at rates which are penally high. These effective rates of taxation approach 100 per cent. in many cases and—in some particularly anomalous cases—more than 100 per cent. However, that solution would be expensive and extremely complicated, not least because the benefits system is based on weekly assessments and the taxation system is based on annual assessments of income.
  A much better way is that indicated by my hon. Friend the Member for North Norfolk: to introduce a greater element of what is popularly known as workfare. One of the great problems at present is that if one receives income support one is expected to do nothing other than possibly take work or training that occupy a very small proportion of the hours in the week. In other words, one finds oneself condemned to compulsory leisure, and that makes no sense at all. It would be far more desirable if someone who becomes unemployed—it is always a disaster in a person's life, although one hopes it is only temporary—used that leisure to take a full-time training or education course. Or he could try to find his way back into employment, perhaps by offering himself to an employer for free for a while to see whether or not he can work his way into a job. However, those options are excluded by the availability to work rule.

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  It is an obvious anomaly that when there is socially useful work to do people are being paid to do nothing, and if a person has the prospect of returning to work full time for an amount of money which, on a net basis, is not much greater than his benefit, the rewards of returning to work can be derisively small. An unskilled person may have the prospect of receiving a relatively low income if he goes back to work. Those living on benefit—including housing benefit—of between £100 and £150 a week might have the prospect of receiving £200 a week from full-time work. With deductions, we may be asking them to give up their leisure for £20 or £30 a week. Quite reasonably and rationally, many people will say that their leisure is worth more than £20 or £30 a week. Which of us in the Chamber would not say that our leisure was worth more than that? Therefore, quite rationally, people will decide to remain on benefit if they can. Such anomalies must be removed. Workfare experiments—which have shown some interesting results in a number of states in the United States and elsewhere—should be looked at urgently with a view to introducing them in this country.
  The other great challenge to which I want to draw attention—and which again stares out of the Red Book—relates to health and education, and particularly health. Health and education, as I think we all know, are positive goods and demand for them tends to increase with income. If people's incomes rise, they tend to wish, naturally, to spend a greater proportion of those incomes on education and health—as well as on other positive services such as tourism and financial services, and they spend a lesser proportion of their rising incomes on goods such as bread.
  There is an additional problem with health because of the rapid innovations in technology, which are extremely expensive, so the cost of providing health care at the current level of technology rises much faster than the rate of general inflation—far faster, I would submit, than the gross domestic product deflator that is used in the Red Book to convert nominal spending projections into real ones.
  There is a fundamental contradiction, over time, between the Government's correct and laudable desire to bring down public spending as a proportion of gross domestic product—of national income—and the fact that we are committed to providing, within public expenditure, services the cost of which as a proportion of national income is almost certain to rise. That anomaly will need to be addressed in the next Parliament, and I have no doubt that a Conservative Government will do that.
  It is absolutely clear that such challenges can be satisfactorily faced only by an economy with a sound basis, which is competitive in the modern world and offers the prospect of rising national income—an economy in the hands of a political party with sane economic policies and some understanding of what it takes to provide the framework for economic progress. Nothing could be more disastrous than a return to the policies so eloquently set out by the right hon. Member for Ashton-under-Lyne.
  6.1 pm
  Mr. Malcolm Bruce: As the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) said, the Bill deserves one cheer for being shorter than previous
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  Finance Bills. That is a move in the right direction, although a Bill of 111 clauses, 17 schedules and 219 pages is hardly abridged, and from the consultations that I have had, I understand that it is pretty inaccessible in parts, even to experts.
  My constituents have pointed out some of the effects that the Budget will have on them. The cut in spirits duty was welcome, although it merely reversed the damage of two years before. I represent a constituency that contains, on its current boundaries, three distilleries, two of which are closed, and on its new boundaries nine more distilleries, so the state of the Scotch whisky industry is of genuine concern to me.
  The industry is a major exporter and an important employer of skilled men—it is mostly men—in rural areas where alternative employment does not exist, and it has experienced serious difficulties. Those involved welcome the fact that the Chancellor has acknowledged the serious damage that he did when he put 50p on a bottle of whisky two years ago. I hope that he will be able to go further and eliminate the anomaly whereby spirits are taxed much more heavily than wine. I have always regarded it as odd that we tax our home-produced spirits much more heavily than the predominantly imported wines, even as a matter of trading policy. That is remarkable discrimination against home production.
  Education is an extremely live topic in my constituency. The Government have acknowledged that the tax changes will mean that local authorities face further squeezes. We have all had representations to that effect. In Scotland, education at school level is delivered almost entirely by local education authorities, despite the best endeavours of the Scottish Office Education and Industry Department to persuade schools to opt out.
  It is no good for Ministers to say that they are in favour of nursery education and then to create a local government settlement that has made it impossible for us to continue to expand nursery education in the past year, despite the fact that under Liberal Democrat leadership we have substantially increased provision over the past 10 years.
  The introduction of nursery vouchers has exacerbated the problem and actively penalises local authorities that have taken the greatest lead in expanding nursery education in the past few years. I shall certainly make representations against that discrimination against local authorities that have been pursuing a policy that the Government claim to support, while in fact they divert money to the expansion of private nurseries at the expense of nurseries that are already provided by the local authority.
  The hon. Member for Stamford and Spalding (Mr. Davies) made much of the anomalies in our attempts to get people back to work and of the difficulties in the benefit system. The Liberal Democrats proposed a low-income benefit that would remove some of the anomalies and help people to get back to work by enabling them to take benefit with them and not to lose benefit if the job turned out to be only temporary. At the moment, there is a clear disincentive for people who are offered short-term jobs and are not prepared to take the risk of being off benefit altogether if the job does not last for more than a few weeks.
  The Government may take the view that the general fall in unemployment is a justification for a substantial cut in funding for the administration of the various

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  unemployment benefits and jobseeking initiatives. That would be unfair. A successful job club in my constituency, in an area where, contrary to the national trend, unemployment has increased, has now been told by the Employment Service's area manager that it will be either closed or substantially cut, in spite of its handling more people and having more success in finding them work than many comparable job clubs.
  The argument is that there will be a saving, because people will be encouraged to claim money to seek jobs from their homes. As an additional service for people who are unable or unwilling to travel to a centre, that would be a welcome development, but as a substitute for the support and advice and access to telephones and newspapers that are available in a job club it is in no way an improvement; it is a cost-cutting measure that will work against the Government's true interests, because at the precise moment when jobseeker's allowance is requiring more people actively to seek work to qualify for benefit, the Government are cutting the very service that people would use in those circumstances. The Government should at least take account of local circumstances, which they clearly have not done with the job club in Huntly.
  Transport and the roads budget are also matters for concern. In rural areas, public transport is limited and the potential for further development is virtually non-existent, so the ownership of private cars is a necessity rather than a luxury, yet the Government have pursued policies that have unfairly discriminated against people living in the rural parts of constituencies such as mine.
  The Government have increased fuel tax without any corresponding measure to switch from a tax on use to a tax on ownership. They could, as we proposed, have reduced vehicle excise duty on high-efficiency cars—perhaps those under 1500 cc with catalytic converters—to a nominal amount of £10 or £20, which would have meant that people paid the extra tax only when they used the fuel rather than paying high tax simply for the privilege of owning a car that is essential for getting about. I continue to commend that notion to the Government.
  It is nothing to do with the macro-management of the economy but a blatant matter of choice that the Government have decided to invest substantial sums in motorways in central and southern Scotland which were not justified on their own traffic criteria, and have cut the promised bypass and road improvements in my constituency, despite the fact that we have had the greatest population increase and growth in traffic of any part of the United Kingdom, and certainly of any part of Scotland.
  Understandably, people are extremely angry that, a week before the Budget, the Scottish Office managed to launch a public consultation on a major road improvement on the A92 between Aberdeen and Ellon in my constituency, only to announce a week after the Budget that it would not proceed. The only consolation, although the reply that I have received from the Minister is confusing, is that it would appear that he is prepared to continue the consultation about the route, while saying that there is no firm date on which money will be made available for the upgrading that has been long promised and many times postponed. That is regrettable.
  Having identified matters that affect my part of the country, although they clearly similarly affect many others, I must deal with the general thrust of Government
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  policy. No doubt we will deal with the details of the Bill in Committee, but I give Ministers notice of one or two details that will be dealt with there and to which I hope they will give some consideration.
  The first is the taxation of insurance, which has already been mentioned. I am sure that the Minister will be well aware that the proposal to tax some insurance policies at 4 per cent. and others at 17.5 per cent. is creating an anomaly that many people, particularly small travel agents, regard as unfair and discriminatory, especially as Customs and Excise accepts that there is no widespread tax avoidance by travel agents. If someone buys a holiday from a travel agent and buys an insurance policy at the same time, as would be likely because the two are related, they will pay 17.5 per cent. tax on the premium but only 4 per cent. on the policy from the insurance broker next door. If consumers are wise, they will find a way of doing that and insurance brokers will no doubt take advantage.
  Many small travel agencies, which have legitimately sold insurance as part of a holiday package and have not been trying to profiteer, will be discriminated against and will lose a significant and valuable part of their business. The Government should consider whether that is fair and whether it was their firm intention.
  I welcome the Government's decision to bring into line the three-year rule on back payment and collection of VAT. There is no argument on the principle, but I suggest that those areas of the public sector in which unjust enrichment does not apply be exempted. As I understand it, some public sector organisations, particularly trusts and organisations in the health service and in other sectors, have been relying on this rule and may now find their hopes of recovering tax in that way removed. Again, I ask the Government to consider that matter during the passage of the Bill.
  The central issue in the debate is what the Budget and the Finance Bill do. There was an extraordinary exercise in the week after the Budget. Apparently, the Chancellor of the Exchequer and the Financial Secretary each said the opposite of the other. Indeed, in spite of repeated questioning from me in the Treasury Select Committee, the Chancellor would neither admit nor deny that the net effect of all the tax changes next year will be to increase the overall level of taxation, yet that appears in black and white in the Red Book. Page 12 makes it absolutely clear that, according to Government calculations, the Budget's tax and national insurance measures will reduce taxes by £735 million, but the previously announced excise duty increases, which take effect in the same tax year, amount to £1,085 million.
  Three figures are given in the Red Book—I shall take the median—and it is recognised that the Budget will increase council taxes throughout the country by about £800 million. The net effect is that people will pay tax to the tune of £1,050 million more in the current year than they did last year, which is equivalent to £41 per taxpayer. Those facts are in the Government's own book, yet the Chancellor of the Exchequer is not prepared to admit that taxes will go up next year. It seems extraordinary that he should present the information in such clear-cut terms, but then deny that that is what his publication states.
  The other issue that is worth drawing to the attention of the House, for those hon. Members who have not yet read the Select Committee report, although the issues have not merely been raised there, is that one or two measures

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  in the Budget are effectively, as the report describes them, "a sleight of hand"—an attempt to make the figures look good without delivering any significant improvement in the budgeting.
  Ministers make two contradictory speeches. Depending on the audience, they say that they are eye-wateringly tough on bringing public expenditure under control, or—to the party conference and Mr. Dimbleby—that they have increased spending on the health service, education, local authorities and anything else one cares to mention more than any previous Government. That makes the average citizen understand that there is some confusion within the Government about exactly what is happening. The Government are finding ways to massage the presentation of the figures—for example, by presenting the sale of Ministry of Defence houses as a negative spend whereas it is just a sale, a capital receipt. It is just one more tranche of the sale of the family silver. The sale of the student loan book is in exactly the same category, as is the reduction in the reserve account. We all accept that reserve accounts can reduce as one gets closer to them because the uncertainty is reduced, but the scale of the reduction is nevertheless such that it is arguable that the reserve account is not now enough to cover any unexpected contingencies that might arise.
  In the circumstances, those measures amount to giving the impression of a tight spending round without applying the pain where it really matters, and evidence to the Select Committee reinforced that. It is presenting the figures in a different way.
  Incidentally, the total figure is almost exactly what the French Government managed to secure by a similar mechanism from their telecommunications pensions measures. The British Government are doing exactly the same as the French Government to try to make the public sector borrowing requirement meet the Maastricht criteria.
  Mr. Butterfill: I was interested that the hon. Gentleman said that the Government should apply the pain where it really matters to bring public expenditure down. It is fascinating to hear a Liberal Democrat say that there are areas in which he would reduce public expenditure. Perhaps he could tell us one or two of them.
  Mr. Bruce: We have already identified certain areas. On the Government's own admission, last year they spent nearly £1 billion on consultancies to achieve virtually no economic benefit. There are a number of such examples where the Government's priorities are simply different from ours. It is not fair to say that there is no room for saving—there is.
  Mr. Waldegrave: I want to correct a point that I may have misheard. There are plenty of good reasons for selling the student loan book—it transfers risk and is a sensible thing to do. It does not affect the general Government financial deficit, which is the criterion of concern in the Maastricht criteria, and so is of no relevance to that. In its origin, nature and motivation, it is completely different from what the French have done. It will affect the public sector borrowing requirement but does not affect the European measure, which is different.
  Mr. Bruce: I can only draw the Chief Secretary's attention to the evidence in the Select Committee report,
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  which he might wish to read, from Andrew Dilnot of the Institute for Fiscal Studies, who suggested that the sale of the student loan book was comparable to the France Telecom mechanism. Perhaps the Chief Secretary should take issue with the Institute for Fiscal Studies.
  Mr. Legg: We raised the matter with Treasury officials when we took evidence from them after Mr. Dilnot's comments. Their evidence supports what the Chief Secretary has just said.
  Mr. Bruce: Treasury officials and Treasury Ministers are happily singing from the same hymn sheet, but that does not preclude others from taking a different view. The matter is open to interpretation. Whether or not the Government are applying the same mechanism as has been applied in France, they are using the sale of capital assets to justify current expenditure. That is simply living off the family silver.
  Mr. Waldegrave: The matter is not one of interpretation. It is a clear matter of definition, where the rights and wrongs are easily ascertainable. The student loan book does not affect the Maastricht criteria. That is not why the measure was taken, and even if it had been taken for the purposes of Maastricht, it would have failed.
  Mr. Bruce: The student loan book does not affect the Maastricht criteria, but the MOD sale might. The point is incidental, but, as a number of commentators have pointed out, the Government's practice effectively presents the figures in a better light than they would otherwise appear.
  The Select Committee report refers to the change in the policy of assuming a flat rate of unemployment, on which the cost of unemployment can be calculated. The Select Committee did not find that unreasonable, but commented that the timing was interesting, as it allowed the Government to relax the straitjacket slightly. It is odd that they are prepared to forecast unemployment changes, for example, but not exchange rate changes.
  We need clarification of the circumstances that this year enabled the Treasury to make that change, which it has resisted every year previously. Did the Government need room to manoeuvre this year, in advance of a general election? No Government would ever put increased unemployment forecasts into their Red Book, as that would be an admission that their economic policies were failing.
  The House will know that in our submission we stated that Government borrowing is a matter of concern and must be brought down. We need a disciplined approach. On the basis of the utterances, there is agreement among all parties that that is a problem. That explains why economic discipline is a term of art that financial spokesmen of all parties use.
  We could do more. For several reasons we should introduce proposals to make our central bank independent.
  Mr. Jack: Perhaps the hon. Gentleman can help me. His party, unlike the Labour party, has tried to be specific about its economic proposals. He expressed his concern about the level of borrowing and spending. In his disciplined world, what percentage of GDP would he find an acceptable level of borrowing and spending?
  Mr. Bruce: I will not answer that. The Government have got themselves into a fantasy arena. The Chancellor

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  of the Exchequer speaks of bringing the level down below 40 per cent. and aiming to get it below 35 per cent., whereas the Red Book shows the level rising to 43, 44 and 45 per cent. The Government use a soundbite term of art, but there is no evidence of any policy, firm proposals or timetable behind it. I do not see why the Government should challenge other parties when they have no concrete proposals of their own but merely a pious, tight-lipped explanation of their aims.
  There is consensus that significant variations in tax from about 40 per cent. do not carry much support. Over the cycle, however, there are occasions when taxes may have to go up, and there may be occasions when they have to go down. If we are to consider getting taxes down to 35, 33 or 32 per cent., we need far more detailed information about what that means in terms of sustainable economic growth, if that it how it is to be financed, or in terms of further privatisation of public service provision.
  Does the Tory party want to ensure that people are forced to buy more private insurance for unemployment, health care and long-term care in their old age? I suspect that that is what the Government mean, so they should be more honest about it. Instead of telling us about the wonderful benefits of reducing taxes, they should explain the painful consequences of what people may have to buy. It is a legitimate subject for debate, but we need the whole story, not just an isolated focus on one percentage figure, divorced from the philosophical change in the way that services are to be provided.
  We need to get borrowing under control. The time is becoming ripe for establishing an independent central bank as a means of helping to bring borrowing down, not least because it would help to reduce interest rates, which would have wider benefits.
  I welcome the fact that in yesterday's Financial Times the Labour party indicated that it was moving in that direction. As a precondition, however, Labour wants the Governor of the Bank of England to insist publicly on an election-losing increase in the interest rate, which suggests that the ability to stand back and not to interfere is not built into Labour's thinking. That is not the role of an independent central bank.
  On interest rates, the Government may be on the horns of a dilemma, as the national interest and the Conservative party interest clash. The market may resolve the dilemma for them if they insist on staying in office until May.
  I have pressed Treasury officials and Ministers, including the Chief Secretary, on the GDP deflator. There is a lack of confidence that the Government's inflation forecasts are achievable. Most commentators regard the forecasts as optimistic. A GDP deflator of only 2 per cent. does not sit comfortably with that scenario. Treasury officials say that there is nothing to worry about because if the GDP deflator turns out to be wrong it will be offset by the consequential benefit in increased revenues above forecast.
  Experience of the past two years tells us that there is no direct correlation, and developments could go in the wrong direction. That could make public commitments such as the funding of the health service difficult to achieve. The Government should put their intentions on record.
  Windfall benefits of more than £11 billion will come through from the building societies and insurance companies. That will clearly have a potential effect on
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  consumer spending and could have an inflationary effect. The Government calculation is that for various reasons, as a result of the lack of consumer confidence, much of that money will be saved, so it can be taken out of the reckoning. If they are right, that may be a good thing, but if people decide to spend the money, that could upset the inflation calculations.
  The Chancellor has recognised that his room to manoeuvre is limited. He deserves credit, which I have given him on numerous occasions, for resisting the more strident calls for an expansionary or give-away Budget that might have created the climate for an election-winning boom, but would inevitably have led to an enormous crash later. The markets have made their position so clear that if the Chancellor had tried that, he would have had to cut and run quickly, before the markets caught up with him.
  We need a thorough rethink of how we can bring borrowing under control, ensure that inflation is kept in the box, sustain growth without stoking up inflation again, and invest in education and public services at acceptable levels of taxation—the Financial Secretary dealt with only one aspect of that in his intervention. I have no doubt that those matters will be debated in the next Parliament.
  The Government should be given credit for not having rushed off in a different direction, but they should not imply that they have the answers. Many questions remain that I suspect the main parties will not address until after the general election. In the circumstances, it is a cautious Budget from a defeated Government who know that they do not have much time left.
  6.29 pm
  Mr. John Butterfill: The hon. Member for Gordon (Mr. Bruce) made a fascinating speech setting out the Liberal Democrats' economic policies. I was particularly interested in his response to my question about the Liberal Democrats' big ideas for reducing public expenditure in the areas that "really matter"—as the hon. Gentleman put it. The only idea that I could adduce was that the Liberals would reduce the number of consultants employed by Government as they do not represent adequate value for money.
  No doubt the Liberal Democrats would forgo independent advice and instead rely on their in-house advisers: the teams in the county halls who provide wonderful advice about reducing expenditure in local government. If that is the big Liberal idea for controlling the economy, the party should make more of it throughout the country. Once again, we have seen the Liberal Democrats talk tough about holding down public expenditure. The reality is that, when they are in power in town or county halls up and down the country, they are the biggest spenders of all. They must live down that reputation before anyone will take them seriously in a general election.
  The Finance Bill enacts the creditable Budget proposals that the Chancellor set out a few months ago. It is a measure of the Budget's quality that it proved such a disappointment to the Opposition parties. They claimed that it would be the great giveaway Budget—a bribe to the electorate—that would demonstrate the Government's cynicism. They claimed that we would offer anything in order to be re-elected. However, as the hon. Gentleman pointed out, the Budget contains modest fiscal tightening

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  measures—hardly an election giveaway—involving sensible reforms to public expenditure, taxation and distribution of the tax burden.
  I welcome the changes to income tax. My right hon. and learned Friend the Chancellor has forgone the chance of making the headlines by announcing a massive reduction in the standard rate of income tax. He has chosen instead to widen the tax bands and raise thresholds, thereby ensuring that many poorer people are removed from the tax system and that many more are in the 20 per cent. band. That was the correct thing to do, as it provided help where it was most needed. It is often a difficult decision to take, as the benefits are not perceived by the general population until they receive their pay packets some time later. The Budget will have no real effect on people until after the next general election, so the Chancellor took a courageous—but correct—decision.
  The benefits that will accrue to small businesses up and down the country have led the Forum of Private Business to describe the Budget as the best in 10 years for small business. I was particularly pleased about the business rate relief. Mr. Deputy Speaker, you will remember that my amendment to local government finance legislation provided transitional relief to small business. Further relief for those businesses, which were hard hit by the recession and revaluation, is very welcome.
  I also welcome the thrust of the Bill in closing several taxation loopholes. We have progressively closed them over the years, but fertile minds continually find new ones. Therefore, it is correct that each year we ensure that people are paying appropriate rates of tax.
  My right hon. Friend the Chief Secretary expressed a wish to abolish allowances and said that he preferred lower rates of tax. I seek confirmation that his attack on allowances will not affect the married person's allowance. It is extremely important for tax arrangements to recognise the importance of marriage. The tax advantages accruing to married people have been eroded over the years and I should prefer to see the differentials reinstated rather than eroded further. I am interested to hear my right hon. Friend's thoughts on the matter in the context of the next Conservative Budget.
  I have some specific questions about the clampdown on avoidance procedures. The changes in value added tax in so far as they relate to property investment concern the whole industry—not just property companies. The British Property Federation, which represents many institutional investors, pension funds and insurance companies, is concerned about the impact of the proposed changes. I hope that the arrangements will be flexible, so that we do not disadvantage the whole system of investment.
  I must declare an interest in the debate as an adviser to the British Insurance and Investment Brokers Association. I was rather disappointed with the Government's decision to hike up insurance premium tax so soon after declaring that they would not do so. Insurance is a valuable asset to society and, if we make it too expensive, we may expose the Government to risks. People may fail to insure and thereby become a charge on the public purse. We must strike a balance between raising revenue through IPT and ensuring that there is no claim on the benefit system when people fail to insure.
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  I am concerned about the attack on inclusive sales. The insurance profession may benefit if people are forced to buy insurance from a broker rather than from a travel agent—unless the broker is advising the agent. However, unless we are dealing only with insurance policies that must be bought, I am worried that we may be tilting at a windmill that does not exist. For example, with some holidays, it is compulsory to purchase the insurance policy that accompanies them. In those circumstances, we could argue that the price of the holiday is being deflated by inflating the cost of the insurance. It is perfectly legitimate to attack that practice. However, when there is no compulsory link between insurance and the product being sold—when it is purely optional—the proposal represents a shift away from the Conservative doctrine of individual freedom of choice. If people choose to buy ridiculously expensive insurance, that is their decision—so long as they are not forced to do so. I urge the Government to re-examine the issue.
  I received an encouraging response from my right hon. Friend to my intervention on capital allowances. There is real concern that the airlines will be disadvantaged compared with sea and rail transport. If one couples those provisions with the proposal to double air passenger duty, the combined discrimination against the airlines—and the consequent knock-on effect on the aircraft industry and the industries that supply it—is quite worrying. I ask my right hon. Friend to consider the possibility of at least having a regime for airlines that is no worse than that for shipping and trains.
  I know that my hon. Friend the Member for Havant (Mr. Willetts) made this point, but it is important. The level of capital taxes in this country is a direct disincentive to invest.
  There has been a welcome increase in the threshold for inheritance tax. Some Labour Members do not think that we should do that. The problem with inheritance tax is that it is not paid by the really rich. The super-rich with their multinational empires never pay it. Some of the "luvvies" and some of the billionaires who support the Labour party today do not pay it, because their money is offshore, and no doubt they will keep it there.
  The people who pay inheritance tax are the modestly well-off: the middle classes, the people who cannot afford the expensive schemes to take their money offshore, the people who have built up small businesses and want to hand them on, the people who have helped to create wealth within our society. It is to them that we need to look, because the concept of passing modest wealth from one generation to another is one to which we should all aspire and not be consumed by the politics of envy. I hope that we shall do more on that.
  I was particularly disappointed that there was nothing in the Finance Bill on capital gains tax, because it seems absolutely mad that someone who has spent 10 years building up a business and who then sells it will pay the same marginal rate of tax as a speculator who makes an overnight gain on the international currency markets. That does not seem to make any sense. It does not encourage people to risk their money and to invest. [Interruption.]
  I am encouraged by noises that appear to be coming from Opposition Members, saying that they may do something about that, because although it would be difficult to abolish capital gains tax without the risk of people switching income into capital gains in the way that

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  we had in the past, there is a real case for a much lower rate of capital gains tax for people who invest for the long term in real, productive enterprise. I very much hope that before long we shall see a Budget that does that.
  6.42 pm
  Mr. Jeff Ennis: Thank you, Mr. Deputy Speaker, for allowing me to make my maiden speech so early in the debate.
  I am conscious of the traditions of the House and that when one makes a maiden speech, one usually refers to one's predecessors. On this occasion, it is a great privilege and a pleasure to refer to my very good friend, Mr. Terry Patchett.
  Terry was a very honest and sincere man, a true man of the people. I know that he had the respect of hon. Members on both sides of the House. I knew Terry for a very long time. It goes without saying that he felt far more comfortable at his home in Darfield, with Glenys, his wife, and his family, and in Barnsley, East in general than he did down here in the House. However, that fact did not affect his performance as a first-class constituency Member of Parliament for Barnsley, East.
  I am aware from my recent personal involvement in the by-election that Terry was held in the highest esteem and with fond affection by almost all his constituents. He will be very sadly missed, both in the House and in his constituency. I say his constituency because until recently Terry was the only Member of Parliament Barnsley, East ever had, as the constituency of Barnsley, East came into being only in the 1983 general election, the year that Terry entered the House for the first time. I am sure that all our thoughts are with Glenys and Terry's family.
  As someone who has lived in the Barnsley, East constituency all my life, I feel extremely proud and honoured to be its new Member of Parliament. Despite the low turnout for the by-election, with it being so close to Christmas, the result was a resounding success for new Labour and, indeed, a ringing endorsement for the leadership of the Labour party. It certainly emphasises the fact that, in my opinion, new Labour commands solid support in Barnsley, East, a constituency that is and always will be proud to be described as a traditional Labour heartland.
  Just to emphasise the success of my by-election, my majority rose from 63 per cent. of the votes cast in 1992 to a majority of 68 per cent. this time. The Tory vote disintegrated and was almost halved, from 14.2 per cent. of the votes cast in 1992 to 7.3 per cent. this time. In my opinion, that result underlines the melting away of traditional Tory voters, as a direct consequence of the failure of the present Government to implement the tax cuts that they promised in their 1992 manifesto, which have so far failed to materialise.
  As I said, I am proud to say that I was born and bred in the constituency. Both my wife and I were born in Grimethorpe and we both come from traditional mining family backgrounds. Both my grandfathers and my father were miners. My grandad Ennis retired from Grimethorpe pit when he was in his early 40s, with 100 per cent. pneumoconiosis. My grandad McQueen, who was an early political role model of mine, was also a miner at Grimethorpe colliery as well as being the National Union of Mineworkers treasurer at Grimethorpe and a councillor with the old Hemsworth rural district council until his untimely death at the age of 56 from lung cancer.
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  My grandmother was the youngest of 22 children. My dad was the oldest of 10. My wife, Margaret, also comes from a big family, so the House will probably see why I have been elected to represent Barnsley—because I am related to almost everyone in my area. I think that hon. Members will see that it is not just the aristocracy of this country who come from large families.
  I have deliberately mentioned my family background to emphasise the point that Barnsley, East has always been associated with the coal mining industry, an industry that has created communities throughout the country with a strong and powerful community spirit, with a sense of caring and sharing. The people of Barnsley, East are the salt of the earth, who deserve the best, which is something that the current Government have failed to deliver in this year's and past years' Budgets.
  I am proud to say that I have represented my area on Barnsley council since 1980, and in 1980 Barnsley was awash with pits, such as Grimethorpe, Houghton Main, Hickleton, Goldthorpe, Highgate and Darfield Main, to name but a few, providing almost 30,000 jobs to the local economy.
  Constituencies such as Barnsley, East have contributed significantly to the national wealth since well before the industrial revolution. Now there are no pits left at all in Barnsley, East, thanks to the Government's pit closure programme. I know that this country will rue the day that the Government—who will never be forgiven—closed down pits such as Grimethorpe, which in its last six weeks of full-time production in 1992 made more than £250,000 in profit. More than 60 million tonnes of known, workable coal deposits are entombed below Grimethorpe for ever.
  A study carried out by the policy and research centre at Sheffield business school in 1992, before Grimethorpe closed, revealed that if Grimethorpe and Houghton Main collieries closed, the cost to the British economy would be £330 million over 10 years, but if they remained open, they would make a profit of £48 million in that period.
  Where was the economic sense and financial prudency in allowing those profitable pits to close? No wonder one of the main themes for my election campaign, "Brassed off with the Tories", was so successful. There is no doubt that the nation is brassed off with the Tories. I strongly recommend all hon. Members to see the recently released and much acclaimed film "Brassed Off", which was filmed primarily around Grimethorpe, with the co-operation and assistance of the world-famous Grimethorpe colliery band. The film captures the spirit of the times during the pit closure programme of 1992. It is also a fitting epitaph to what the Government have done to the mining industry and mining communities.
  I turn my attention briefly to the Finance Bill. Once again, we have a classic example of the Government giving a little with one hand and taking away a great deal with the other. One example of what the Government are taking away is to be seen in the form of indirect taxes such as 13p on a gallon of petrol, an increase in taxation that took effect immediately, while the 1p reduction in the standard rate of income tax will not take effect until April.
  As usual with the Government, we are seeing a transfer from direct to indirect taxation, especially in the form of VAT. That has the effect of transferring the burden of taxation from the very rich to the very poor in our society. It is a pity that the Government refused to accept the Opposition's proposal to reduce VAT on fuel from 8 to 5 per cent.

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  The Budget will have an impact on schools. It is a subject that is close to my heart, because I spent more than 20 years in the teaching profession. The Government have claimed that 3.4 per cent. more money will be available for schools. They are, however, increasing their contribution to local authority spending by only about 1.5 per cent. At least the Government have had the decency to admit that their cuts in support for local authority services over the next three years will force council tax payers to cough up another £4 billion, which is the equivalent of £200 for each household. That will have to be paid to meet the differential.
  Once again, local councils will have to increase council taxes to replace cuts in Government grants. They will be able to increase school budgets only if greater cuts are made in other key services such as social services, libraries, refuse collection and the like.
  The Government continue to refuse to fund teacher pay awards when Ministers agree that they should be granted. Increased pupil numbers are not covered by extra finance. Since 1992–93, standard spending assessments per pupil, in real terms, have fallen across all age ranges, with secondary spending falling by 9 per cent. The number of primary pupils in classes of over 30 has increased by 40 per cent. in the past four years to 1.3 million.
  The SSA formula is supposed to distribute Government resources on the basis of need. I have referred to the annihilation of coal mining—the main industry—in Barnsley, East. It has had a devastating effect on the socio-economic fabric of my constituency. Under the Government's SSA formula for next year, Barnsley will receive £691 per head of population while Tory-controlled Westminster will receive £1,272. That means that Westminster will receive 184 per cent. more grant per head of population than Barnsley, to provide the same level of education resource.
  That cannot be right. I am sure that the good people of Westminster have not had to endure many of the economic hardships that my constituents have experienced, and certainly not to the tune of a 184 per cent. differential per head of population.
  In conclusion, Barnsley, East is still coming to terms with the complete destruction of its traditional industrial base. I pledge myself to do my very best to work hard for the economic and social regeneration of the communities that make up Barnsley, East. I thank the House for giving me such a good hearing.
  6.54 pm
  Mr. Barry Legg: I congratulate the hon. Member for Barnsley, East (Mr. Ennis) on his maiden speech. Delivering a maiden speech is always a great ordeal, and I think that the hon. Gentleman coped with it admirably. I am sure that he has been much encouraged by the high turn-out of his colleagues to support him. I am sure also that hon. Members on both sides of the House fully endorse his remarks about his predecessor, Terry Patchett, a man who was held in high esteem in this place. The hon. Gentleman has told us about Terry Patchett's local reputation.
  The hon. Gentleman's speech was brief and to the point. He will be well advised to remember that for the remainder of his parliamentary career. His speech
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  displayed considerable wit, and if he speaks with the same degree of wit in subsequent speeches I am sure that he will maintain the interest of his colleagues.
  This is probably the last general economic debate that we shall have in this Parliament. During our proceedings so far we have dealt with a number of general economic matters and contentions. I shall begin by welcoming some of the detailed provisions of the Bill. I am especially pleased that the amendments that I suggested in Committee last year in respect of charities are contained in clause 65. I am grateful to Treasury Ministers for taking up my suggestions and in so doing easing the tax burden on charities.
  In taking evidence on the Budget and producing a report as a member of the Select Committee on the Treasury, I was conscious that we now have a much more manageable and sustainable financial position. However, the hon. Members for Edinburgh, Central (Mr. Darling) and for Gordon (Mr. Bruce) argued today that the level of national debt is too high. The hon. Member for Edinburgh, Central derided this Administration's record on the level of national debt.
  There is only one sensible way to evaluate the national debt, and that is in terms of its proportion to the nation's wealth. If the hon. Gentleman had read the Red Book—especially table 4.3—he would know that net public sector debt as a percentage of gross domestic product is running at about 45.5 per cent. If he had bothered to study economic records for this century he would have learnt that no Labour Government have ever managed to reduce national debt to that level as a proportion of GDP. We have a sustainable level of debt, and one that reflects the prudent financial management that we have experienced in recent years.
  The report of the Select Committee on the Treasury contained some criticisms relating only to matters of detail. The hon. Member for Gordon referred to the GDP deflator, which has been set at 2 per cent. for future years. The balance of opinion within the Select Committee was that the deflator might be on the low side. We are talking, however, about much more sustainable figures. We are considering possibly a 2 or 3 per cent. rate of inflation in future. If the projection of a 2 per cent. GDP deflator is wrong and it turns out to be 3 per cent., the magnitude of error is quite small. We would be talking about an extra £3 billion of public expenditure. Our finances are now much more manageable.
  As a whole, the Select Committee agreed with the fiscal stance of the Treasury and my right hon. and learned Friend the Chancellor of the Exchequer. Most commentators have applauded that stance. As for the report of the wise men before the Budget, four out of six stated that the Chancellor should take a neutral fiscal stance, and that is what he did. There is not much scope for criticising the Chancellor on that front.
  The Treasury Select Committee was concerned that present conditions may require monetary policy to be tightened. The Chancellor has told the House that he wants to stay ahead of the game on monetary policy: he has a good record of making the right judgments on monetary policy. The Chancellor will meet the Governor of the Bank of England tomorrow. Some hon. Members are concerned that he should make an upward move in interest rates.

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  The Chancellor may be considering an increase in interest rates in the order of magnitude of 0.25 per cent. to 0.5 per cent. That clearly shows the difference between the present economic conditions and those of the past 30 years.
  Mr. Malcolm Bruce: The hon. Gentleman makes a fair point, but does he accept that we should compare ourselves with our trading partners? Long-term interest rates on government bonds in the United Kingdom are higher than those in any other country in the European Union, with the sole exception of Greece. Our inflation figure is the third worst in the European Union. Although there has been a considerable improvement compared with the past, we must be more disciplined to reach even the EU average, never mind to be at the top end.
  Mr. Legg: I am grateful to the hon. Gentleman for his comments. We have the potential to achieve a much lower peak in the interest rate cycle than at any time in the past 30 years. Previous peaks in our interest rate cycle have been anything from 12 per cent. to 17 per cent. This Administration has made tremendous strides to get inflation and monetary policy well under control. The markets show that the peak of the present inflation cycle may require an interest rate of only 7 per cent. That is a considerable achievement, and it enables British business and industry to plan for the future.
  There is currently a great deal of distortion in the marketplace on long-term interest rates. The reductions in long-term interest rates in some European Union countries—for example, Spain and Italy—suggest a false market in government bonds based on speculation that those countries will join the single currency and will have lower, long-term interest rates. I do not believe that those countries will be allowed to join the euro, but if they were to do so, the long-term interest rate of the euro would move up to the higher levels experienced in the Mediterranean countries. As long-term interest rates have come down in Italy and Spain, they have gone up in Germany with the prospect of monetary union between countries that do not have the same stable economic background. That is the other side of the picture.
  The Government have done well on monetary policy, and the peak of the interest rate cycle looks as if it will be much lower than in recent memory. That is all to the good of the British economy.
  Hon. Members may have seen The Guardian last week, which unusually listed some Conservative achievements on its front page. It pointed out that since 1992 unemployment has fallen from 2.7 million to 1.9 million, interest rates have come down from 10.5 per cent. to 6 per cent., inflation has come down from 3.7 per cent. to 2.7 per cent. and hospital waiting lists of over one year have come down from 155,000 to 15,000. There is an awful lot of good news on the economy, and that reflects the Government's achievements. Even The Guardian is prepared to put such good news on its front page.
  There is a growing appreciation of the Government's soundly based economic policies. The main reason why we will not detect such a strong feel-good factor as in previous years is the changing relationships in the housing market. In 1988, the ratio of mortgage debt to the value of housing stock was 20 per cent. Today, that ratio is 34 per cent. Most people will not immediately experience the feel-good factor that they may have experienced in the
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  late 1980s. However, the economy as a whole is now much more soundly based, and wealth in the broadest sense has extended more widely.
  Mr. Miller: Given the figures that the hon. Gentleman has just cited, does he accept that there is greater pressure on housing association and local authority stock? Does he also accept that the Government have done very little—nothing, in fact—to assist that sector?
  Mr. Legg: I do not agree with the hon. Gentleman's comments.
  Mr. Miller: They are the Library's figures.
  Mr. Legg: I do not agree with the comment about housing associations. Housing association development has been strong in my constituency and across the country, not only because of the public money that the Government have put into it, but because of the greater freedom that they have given housing associations to borrow on the markets. The hon. Gentleman's argument is not valid.
  I shall return to the wider comments that I was making about the structure of wealth in this country. House values are tangible to individuals, but one of our problems is that wider wealth is not so tangible. Most people's pension assets—which will provide for them in their old age—have considerably increased in value in the past three or four years. Most of those assets are not transparent to the people who will benefit from them. Occupational pension schemes have done very well, and people have the prospect of much more wealth behind their pension entitlements and a much more prosperous old age. Many forms of institutional investment lack transparency, so individuals are not fully aware of the appreciation in their wealth.
  My hon. Friend the Member for Havant (Mr. Willetts) advocated reforming capital gains tax. Hon. Members will probably recall that I tabled a series of amendments to last year's Finance Bill to achieve that. This is an important matter, because in the next Parliament we must extend the concept of a property-owning democracy into other asset categories. We should not only consider institutional investments and investments that are not transparent, but encourage people to build up investments in their own name and have a wide stock of wealth behind them. That will be one of the priorities for the next Parliament. I hope that the simplification of capital taxes advocated by my hon. Friends the Members for Havant and for Bournemouth, East (Mr. Atkinson) will be high on the Government's agenda.
  My hon. Friend the Member for Havant made a number of interesting and important points about windfall taxes. It behoves the Opposition to spell out what they mean by a windfall tax, as the consequences are so considerable. What is the gross amount of revenue that they believe they can raise, and what will be the consequences for the businesses involved?
  The Labour party is talking about windfall taxes—which will come back, one way or another, to the consumer—while most people are experiencing windfall gains. We have liberalised the financial system, one of the consequences of which is that many building societies have converted to public limited companies. I welcome

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  that. Individuals are benefiting from that liberalisation: they are now feeling the effect of the extra wealth that has been created. There are windfall gains under the Conservatives, and windfall taxes under Labour.
  Mr. Michael Clapham: The hon. Gentleman talks of windfall gains. Is he aware that, in the four years since 1992, 87,740 jobs have been lost in the utilities alone? Does he consider that a gain? Does he agree that a windfall tax provides a way of creating the jobs that the utilities have neglected to create, and makes possible a process similar to that taking place in America, where utilities work with Government to create jobs?
  Mr. Legg: The hon. Gentleman has hit on an important factor. The Labour party criticises the fact that the utilities have increased their profits, but the reason why they have been able to increase their profits is that, like all the industries that were formerly in the public sector, they were chronically inefficiently run as nationalised concerns. The state runs businesses badly; the privatised companies now secure a reasonable return on their capital, because they have become efficient.
  If the Labour party does want to reverse the current policy and return those companies to the public sector—if it believes that state ownership creates jobs and wealth—I shall be interested to hear the winding-up speech from the Opposition Front Bench, but I do not think that Labour will go that far. I think that Opposition Front Benchers realise that, once again, Conservative policies have been successful, and that privatisation has been a great success for this country.
  In debates of this kind, we normally talk a great deal about macro-economic policies, GDP deflators and growth rates of 3.5 per cent. We hear a good deal of technical jargon. Let me give a few instances of what big numbers and macro-economic policies mean at local level. In the past two and a half years, an extra 8,737 jobs have been created in Milton Keynes. That is a net increase over that period. The number of people employed in Milton Keynes has risen from just over 90,000 to just under 99,000. Those are not low-quality jobs, as Opposition Members would sometimes try to make us believe; they are high-quality jobs in technology, computers and electronics—jobs that are providing good standards of living for people in Milton Keynes.
  The Labour party also likes to try to paint a picture of industrial decline. Again, the local picture does not support that. Since the last general election, the total amount of factory and warehouse space in Milton Keynes has increased by more than 2.2 million sq ft. Our manufacturing capacity has expanded significantly, and our retail outlets are now doing the same. An investment programme in our city centre will run to £100 million. Since the last election, the private sector in Milton Keynes has invested over £1 billion.
  That is what Conservative policies mean at local level. They mean more prosperity, more jobs and more choice, and people will not willingly put such a future at risk. Only one party really believes in genuine choice and quality, and that is the Conservative party. I hope that, in the coming months, my colleagues will be able to put
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  across the message about what has been achieved—how successful the country's economy now is compared with those of many continental countries, the hard-won success that has been brought about by British people and the fact that they should not unnecessarily put that at risk.
  7.14 pm
  Mr. David Trimble: When the Chancellor of the Exchequer announced the Budget, my colleagues and I gave it a general welcome—basically because, in that Budget as in the Bill, the Chancellor had been restrained in his tax cuts. We were glad that he had not given in to the urgings of some of his colleagues for radical, deep cuts. Some of my own colleagues, indeed, doubted that there was a case for any tax cuts in the current economic circumstances.
  Furthermore, at the time of the Budget the Chancellor boasted that he had significantly tightened the Government's fiscal stance. Subsequent examination has shown that the picture is not quite as clear cut as it appeared then, but we agreed with what appeared to be the judgment: that a tightening of the fiscal stance was necessary at that point. We still consider that necessary, in fact, because of the prospect of undesirable upward pressures on inflation. The object must be to try to restrain any such pressures.
  As the hon. Member for Milton Keynes, South-West (Mr. Legg) suggested, we can choose whether to deal with that situation by means of monetary policy or by other means. The hon. Gentleman's speech foreshadowed interest rate increases, but the problem with such increases is that they penalise industry. One of the reasons why we have found the Chancellor's conduct in office in the past few years so attractive is the fact that he has resisted regular pressures for increased rates from the Bank of England. From the point of view of industry, that is very commendable. We do not want interest rate increases, because of the burden that they would place on industry.
  That is not to say that we want inflationary pressures to result in inflation. The alternative to interest rate increases is a reduction in the borrowing requirement, either through expenditure cuts or through increases on the revenue side, and, on balance, that is the course that we would have favoured. It would have been much better for industry to tighten fiscal policy in order to avoid any need for interest rate increases. We applaud the Chancellor's restrained and responsible approach, but we think that, if anything, he should have taken it more wholeheartedly, to avoid that danger.
  Mr. Legg: I am interested in what the hon. Gentleman is saying. He does not want monetary policy to be tightened. Can he tell us the size of the fiscal adjustment to the public sector borrowing requirement that he thinks would be necessary to off-set any tightening of monetary policy?
  Mr. Trimble: I would be delighted if I were in a position to do so, but I frankly acknowledge that I am not. There is no point in my producing figures from the top of my head—far too much of that goes on here—so I shall not give way to the temptation with which I have been presented.
  The implication behind the hon. Gentleman's question, however, is that it would be uncomfortable to follow the course that I have suggested. In some respects it would

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  be, but I do not think that we should shy away from it for that reason. We must think of the long term. We want low inflation, and we also want our industries to be healthy, especially exporting industries.
  That brings me to my next worry about the present economic situation—the steep increase in the value of sterling that has taken place in recent months. That has been mentioned during the debate, but there has been a significant increase in the value of sterling compared with other currencies. That appears already to be affecting industry. It is bound to affect it significantly. I have been told by business men in my constituency and elsewhere of the impact that the value increase is having on their businesses. Saying that they have been forced out of certain export markets is perhaps pitching it a little too high, but, even in recent months, they have faced significant difficulties with regard to some export markets.
  Therefore, the economic prospects are not terribly good in terms of the likely news in the next few months. We are threatened with interest rate increases. Some of our industries will face difficulties, particularly with regard to exports. That will affect payments and so on, so the position is not encouraging, particularly because, as I have said, it appears on closer examination that the tightening of the fiscal stance is not as good as it appeared at first sight.
  I notice in particular that, in paragraph 17 of its report, the Treasury Committee welcomes
  "the Chancellor's determination in keeping downward pressure on the PSBR … However … part of the offset to the tax cuts comes from increased revenues from measures designed to secure the tax base and the effectiveness of these is very uncertain … we reserve judgment on whether the means chosen will actually succeed."
  I agree with that.
  In any event, as the Select Committee goes on to observe,
  "the target year for the deficit to return to zero has been pushed forward by another year",
  so on closer examination it is not quite as virtuous or as rosy a picture as it first appeared. None the less, we acknowledge that the Chancellor has endeavoured to act responsibly.
  Like some other hon. Members who have spoken, we regret that there will not be a further opportunity to revisit the issue of value added tax on domestic fuel and heating. As hon. Members will know, some of my colleagues supported the attempt at an earlier stage to pave the way for another vote on VAT on fuel. That has not succeeded, so we do not have the opportunity to raise the issue at present, which is a pity because we feel that that measure was ill-advised. I understand that it is not now possible to return VAT on domestic fuel to zero, but, in so far as VAT on fuel can be reduced, the opportunity should have been taken.
  We feel somewhat uncertain about the provision on travel insurance, which has been referred to. Again, we should consider that matter more closely. If there is significant tax evasion, the measure may be advisable, but, on the surface, it appears to penalise travel agents.
  There is some uncertainty about that measure's merits, but I have no doubt about the lack of merit in the proposal to double air passenger duty. That proposal is most ill-advised. The hon. Member for Bournemouth, West (Mr. Butterfill) talked about the need to have equality as
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  between the tax position of airline travel and that of rail travel and so on. That is a fair point, but, from the point of view of Members representing constituencies in Northern Ireland, the obvious point is that, effectively, we have no choice with regard to travel.
  Mr. John D. Taylor: There are no trains.
  Mr. Trimble: No trains run between Belfast and London. It might be a good idea if some did. It would certainly involve significant works and public expenditure, and the construction would generate much employment in certain regions in Scotland and Northern Ireland. We might learn from the lessons of other tunnels that have been constructed, but, realistically, all such travel must be by air.
  Obviously, therefore, hon. Members will realise that a doubling of the air passenger tax has a significant impact on us. The Government may have thought that the tax simply creams a little off the holiday market, that people who go away on holiday will not mind paying an extra £5 or £10—or whatever it happens to be—and that they are so happy to go on holiday that they will not bother about the duty. Perhaps that lay behind the Government's thinking, but many people must travel within the United Kingdom by air and much of that travel is outside the holiday period and is connected with business. Like all taxes, it comes back to their effect on businesses.
  This tax, particularly because of its discriminatory effect on Northern Ireland, should be opposed. According to the motion on the Order Paper, we will not have the opportunity, I am sorry to say, to debate that particular clause on the Floor of the House, or at least the Committee stage will not be taken on the Floor of the House. None the less, we shall see what opportunity there is to oppose the air passenger duty and we will do so. That should be done not just because of the special reasons in Northern Ireland, but for more general reasons.
  Incidentally, I note that one of the amendments that was not selected—that in the name of the members of the Scottish National party—referred to the air passenger duty and to VAT on fuel, but, for some reason, went on to conclude that the Budget was particularly anti-Scottish. The argument that the Budget might be anti-Ulster is stronger than the argument that it is anti-Scottish, but we do not take such narrow nationalist views on the matter. Our objection to the air passenger duty is more general.
  One other matter of local interest relates to corporation tax. It is pressed on us regularly at home by business men and people in Government agencies that are concerned with the attraction of inward investment. The matter is raised with us because the corporation tax rate in the Republic of Ireland is 10 per cent. Consequently, it has an effect, so we are told, on the attraction of inward investment to Northern Ireland.
  We are told that people who are engaged in investment and in creating new businesses have, in some cases, gone to the Republic of Ireland to take advantage of the 10 per cent. corporation tax, rather than located in Northern Ireland or elsewhere. Business men and Government servants involved in the attraction of inward investment urge us to press on the Government the need for a 10 per cent. corporation tax in Northern Ireland.
  I am not minded to do so because I recognise the strong arguments for maintaining uniform rates through the United Kingdom. Having uniform tax rates was the

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  cornerstone of the argument of Sir James Craig, the Prime Minister of Northern Ireland in the 1920s, who said that, in return for paying the same tax rates as the rest of kingdom, we were entitled to the same rates of benefit and public expenditure as the rest of the kingdom—an argument which, at that time, the Treasury was reluctant and slow to accept but did accept. We recognise therefore that uniformity of tax rates is essential to maintain uniformity of public expenditure and benefit rates. Opposition Members who represent Scottish constituencies and who try to disconnect tax and benefits might like to consider that point.
  We are not minded, therefore, to argue for a 10 per cent. corporation tax rate. In any event, if there were special treatment for Northern Ireland, the same arguments would apply to other objective 1 areas, such as Merseyside and the western islands, but it should be recognised that there is competition for inward investment, and that Northern Ireland and, to a lesser extent, Wales and Scotland are in competition with the Republic of Ireland, so that consideration should be given to the effect of the Republic of Ireland's competitive advantage. That could result in us considering the possibility of reducing the UK corporation tax rate generally or it may be possible to raise the issue elsewhere through Europe, in a way that would benefit us. I hope that the Treasury will consider doing that.
  Some of the income tax reductions were in the main rate and some were in allowances. I agree with the comment, reported in paragraph 16 of the Treasury Committee's report, by Professor Congdon who said:
  "the main problem with the tax system was to be found at the low end of the income scale where people could face 100 per cent. marginal tax rates because of the interaction of the social security system and the tax system."
  That is the so-called poverty trap. That problem is more acute in Northern Ireland than elsewhere. In percentage terms, more people in the Province are caught in the poverty trap than elsewhere. One of the reasons for that is the comparatively lower wages in the public sector where wages generally are 10 to 15 per cent. lower in Northern Ireland than in the rest of the United Kingdom. Benefits, although nominally the same, are higher for some people in Northern Ireland, especially for those with large families. That means that more people are caught in the poverty trap.
  One of the ways to ease that trap is to raise allowances significantly by introducing tax at higher incomes. I appreciate that in raising basic allowances the Government have gone further than they were obliged to go, but they should have gone even further. They should not have bothered reducing the basic rate of tax but should have put the benefit towards increasing allowances. That would have helped people at that end of the tax system.
  I should like to deal with two other matters from a local angle. Increased revenue is expected to accrue from measures to cut fraud, especially social security fraud. That is a necessary approach and I hope that it is successful to the extent of the Government's hopes.
  One of the interesting aspects of the introduction of the jobseeker's allowance was that it resulted in a decline in the number of people claiming benefit. Interestingly, in Northern Ireland that decline was not even. Figures are
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  available only for travel-to-work areas and while there was a general percentage reduction in the number of people claiming benefit in Northern Ireland as a whole, in some travel-to-work areas the reduction doubled. The travel-to-work areas so affected are Newry and Strabane. That is not surprising because those areas are on the border and there is an opportunity, which no doubt many people have taken over the years, to work in one jurisdiction and claim benefit in another. It is two-way traffic. One effect of the introduction of the jobseeker's allowance was a sharp reduction in the number of people claiming benefit in Newry and Strabane, and that is a clear sign of what could be done by these anti-fraud measures.
  The Financial Secretary spoke about provision for rates on businesses. In his Budget speech, the Chancellor spoke specifically about the Government's recent provision to reduce the rates on village shops. That is an interesting measure but it does not apply to Northern Ireland and I hope that that will be rectified. It is quite inappropriate that a measure which gives rate relief to people in Great Britain should be deliberately withheld from the people of Northern Ireland. That is a fundamental mistake. The excuse that has been proffered is that there is a different structure of local government in Northern Ireland. The Province is already penalised through having no effective local government and it is doubly unfair, the Government having deliberately withheld from us a decent system of local government, that they should use its absence as an argument for withholding the rates benefit that has been granted elsewhere in Great Britain. The injustice—it is not an exaggeration to use that term—ought to be remedied and I hope that it will be.
  The Government claim that while holding down public expenditure they have managed to find extra money for education and health. We heard much in debate on the Budget and on the Bill about that additional expenditure. Unfortunately, those who speak about that do not finish the sentence because they should refer to the extra money for education and health in England. It certainly does not apply in Northern Ireland, nor do I think that it applies in Scotland and Wales. That matter should be reconsidered.
  There has not been a general increase in the money for schools in Northern Ireland, which are supposed to operate on what is called level funding. But it is not level because of discriminatory expenditure. There is increased expenditure in the maintained sector and cuts in the controlled sector. The terminology is relevant only in Northern Ireland. The controlled sector consists of state schools while those in the maintained sector are private church schools. Expenditure on state schools is reducing.
  An acquaintance who is the headmaster of a primary school in my constituency told me that for this educational year he has an increase in enrolment of 20 and has been advised by the education authority that he must reduce the number of teachers by one. That is because of cuts in what is nominally level funding but in reality is not. The same general picture applies to health. There are increases in health expenditure in England but not in Northern Ireland. There is no general increase there and, given the pressures, the net effect is a reduction with consequent closures, including the recent closure of a hospital in my constituency. Such matters closely affect us.
  One other inappropriate expenditure measure in Northern Ireland is the reduction in the action for community employment, or ACE programme. That scheme was targeted particularly at the long-term

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  unemployed and reductions are particularly inappropriate and will undermine the continued existence of a range of valuable community programmes. The private finance initiative is a significant source of capital but in Northern Ireland the amount of PFI money is extremely low. The Red Book gives a projection of some £20 million for 1997–98, trebling, it is hoped, to £60 million in 1998–99. But I think that I am right in saying that so far only one PFI project has been mooted in Northern Ireland. The Select Committee report refers to the sluggishness of the programme. If it is sluggish in England it is virtually immobile in Northern Ireland.
  Mr. Barry Jones: It is moribund.
  Mr. Trimble: The hon. Gentleman says that it is moribund, but that is not quite the right term because it implies that it once had some vigour which it has lost. The measure has not managed to move significantly in Northern Ireland but the projected public capital spending from it is £20 million in the next financial year and £60 million in the following year.
  Mr. Roy Beggs: Does my hon. Friend agree that the £20 million projected for the PFI represents no more than two, or at most three, small projects and is quite insignificant?
  Mr. Trimble: I take my hon. Friend's point. The Select Committee report states that conventional capital expenditure is being reduced because of plans for the PFI without the compensating PFI investment necessarily materialising. Hon. Members will appreciate that I have added a few words to that extract from the report to adapt it to the circumstances, but it shows one of the problems. PFI investment has been so sluggish in coming forward that it may not materialise, and ordinary capital expenditure plans have been curtailed because such investment is expected—resulting in what is sometimes called a "double-whammy".
  As I said, the Government are proud of their economic record. We concede that, in many respects, the Chancellor has been more responsible than we had expected. However, the success of the Government's policies, certainly over the past few years, has flowed not from the Government's original chosen policies but from policies that were thrust upon them, five years ago, after they were forced to leave the exchange rate mechanism. The Government's original policies, prior to leaving the ERM, were bad. I recall that the Prime Minister, who was then Chancellor of the Exchequer, took us into the exchange rate mechanism at the wrong rate.
  Although the Government have been much more sensible since 1992, many of us are concerned that some of those in the Government again want to place our economic policy within a European straitjacket. We believe that a single currency would be bad for the United Kingdom and, therefore, we hope that the United Kingdom will not join it. However, we also think that a single currency will be bad for Europe, even for the countries that join it. We will, therefore, be affected by a single currency, even if we are outside it, because of the damage that it will do to the European economy. Even if we stay out of it, our economy will suffer from it. That is why—like many hon. Members, not all of whom are
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  Opposition Members—we wish that the Government had a clearer policy on the issue and were more effective in persuading our European partners not to take that route.
  Although we have some disagreements and doubts about the Budget, which can be pursued in Committee and elsewhere, we welcome the basic approach to formulating the Budget. It would therefore not be right to vote against the Finance Bill's Second Reading.
  7.41 pm
  Mr. Douglas French: I add my congratulations to those already given to the hon. Member for Barnsley, East (Mr. Ennis) on his maiden speech. Getting a laugh from the House on a maiden speech is a rare achievement, and I felt that he did extremely well.
  The hon. Gentleman's speech, however, was not quite as riveting as that made earlier in the debate by the right hon. Member for Ashton-under-Lyne (Mr. Sheldon). I have always recognised the right hon. Gentleman's long experience in the House, particularly his great experience in financial and fiscal policy. Nevertheless, like my hon. Friend the Member for Stamford and Spalding (Mr. Davies), I found his speech extremely interesting, if not somewhat alarming, because of the specific recipe that he advocated. The right hon. Gentleman, to give him credit, has for many years been consistent in those views, although it is rather surprising now to hear him advocate the merits of an apparently deliberate weakening of the exchange rate. One can only speculate whether that represents official Opposition policy or whether he is in a minority within his party.
  I should like to link those comments with those made on capital taxation by my hon. Friend the Member for Milton Keynes, South-West (Mr. Legg). When my hon. Friend made the arguments—with which I very much agree—for a reduction in the burden of capital taxation, and particularly for a revision of capital gains tax, little enthusiasm was detectable on the faces of Opposition Members. I think that it is reasonable to assume that, were they to form the next Government, some modification of capital taxation and particularly of capital gains tax would not be very high on their agenda.
  Earlier in this debate, my hon. Friend the Member for Bournemouth, West (Mr. Butterfill) made a similar point on capital taxation, which elicited from Opposition Members a response best described as a jeer. Therefore, we have the combination, as two building blocks of Opposition financial policy, of a deliberate weakening of the currency and an apparently clear determination to continue a stringent capital tax regime. Those are hardly two good ingredients to sustain the very strong economic recovery achieved by the Government.
  I fully support the Budget judgment made by my right hon. and learned Friend the Chancellor. It was a correct combination of measures to sustain the firm recovery that we need to keep inflation down, increase new job opportunities and reduce the percentage of gross domestic product devoted to Government expenditure. That combination of measures is highly likely to continue to deliver the good economic progress that we have been experiencing. I have no reservations about the Budget judgment itself.
  A good Budget requires a good Finance Bill to go with it, and by "good" I mean one that is technically polished. This Bill will, of course, be more polished technically

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  after it has gone through its Committee stage. As with any Finance Bill, there may be rough edges that must be smoothed over, so that we can put solid, reliable and accurate legislation on to the statute book. Just as this Bill contains proposals that refine the rough edges of previous Finance Bills, future Finance Bills will undoubtedly revisit some of the issues dealt with by this Bill. Every Finance Bill is the same: each includes revision of previous measures and attempts to tackle new matters that are thought to require introduction or change.
  The common characteristic of all Finance Bills—certainly in the past 20 years—is that they have been more complex than is desirable. The complexity is often borne of a desire to achieve, particularly in fiscal measures, as much fairness as possible and to recognise special cases; a need to make a particular concession for one specific interest group; the Treasury's desire for some symmetry in proposals; or a desire to make special provision in anticipation of a theoretical situation which may arise but, in practice, often does not.
  A good example of the point that I am trying to make is provided by value added tax. When VAT was introduced 25 or so years ago, it was acclaimed as a very simple tax; the principle of VAT is very simple. In reality, however, the practice has proved to be extremely complicated. I think that my hon. Friend the Member for Havant (Mr. Willetts) referred to the 1980 and 1981 Budgets. I, too, cast my mind back to those Budgets, and recall that professional advisers and politicians were wrestling with some of the early difficulties with VAT. Some of those difficulties involved very technical matters, and some were so technical that it is astonishing to think of the time devoted to them.
  A classic example of the difficulties was in the application of VAT to Jaffa cakes. Today, at a distance, that may sound like a ridiculous and trite example, but at the time it exercised minds. Should a Jaffa cake be zero or standard rated? It all depended on whether it was regarded as food, which would make it zero rated, or as a chocolate, sweet confection, which would make it a snack food and standard rated. There was a similar experience with peanuts, depending on whether they were salted, roasted or plain. Their VAT treatment depended on the category to which they belonged.
  For many years, we had debates on VAT demarcation lines in the construction industry. When was an alteration to be considered as new work, and when was it maintenance? We had similar problems with landing dues on small aircraft and with children's clothes. All those are very technical matters. I would argue that they are far too detailed and technical to justify the time spent on them in the past.
  In more recent Finance Bills, I have seen the seeds of the same complexity. My plea is that when dealing with new Finance Bills, particularly those that introduce new fiscal measures, strenuous efforts should be made to ensure that we do not build in more complexity than is necessary to ensure a reasonable degree of fairness. There will be occasions when it would be more desirable to accept a degree of rough justice on a particular measure rather than make it so complicated that those who are required to comply with it simply cannot understand on which side of the line they fall.
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  I had hoped that the current Bill would show the results of the quest for simplification which I know my right hon. and learned Friend the Chancellor, my hon. Friend the Financial Secretary and the other Treasury Ministers would, in theory, all like to see. However, I fear that some measures in the Bill are much more complicated than they should be.
  Early in the debate, my right hon. Friend the Member for City of London and Westminster, South (Mr. Brooke) referred to the proposals for VAT on property. I think that all hon. Members know that there has been a significant lobby in respect of the proposal to curtail what is known as the option to tax. The property industry can make a good case—it is doing so—on the adverse effects of withdrawal of that option. An equally strong case can be made on the grounds that that proposal is unnecessarily complicated and, in practice, will be extremely difficult to implement. It can also be argued that it is not well targeted.
  It has to be accepted that there have been examples of exploitation of arrangements whereby a landlord of a commercial property can opt to charge VAT on a letting. However, generally, that exploitation has not been by the landlords themselves. It has tended to be by financial institutions that are not delivering VAT-subject services and goods, sometimes aided and abetted by intermediate associated property companies.
  Enormous practical difficulties are posed by introducing a measure that requires an assessment to be made of whether the VAT-able supplies of a particular tenant are greater or less than 80 per cent. of his total supplies. The property company doing the developing—the development may take two, three or four years, depending on the size—cannot reasonably be expected to take a view on what is likely to be the VAT position of the tenant who eventually occupies the property. That is what will determine the method of disposal by the property company and will be the way in which the property company strikes the profit that it hopes to secure from the transaction.
  I cannot think of another example where the status of the tenant determines what view the property developer should take on the likely proceeds from the development. It implies that, once a tenant has occupied the property, the landlord will have to monitor any change in the tenant's VAT position. Perhaps the Minister can tell me whether that will be necessary. If it is necessary, it presents a complexity that we could do without.
  I have no doubt that within Customs and Excise there are many people working on this matter, but if such a measure goes forward, we will need to have regimes relating to the VAT position of buildings that are let to different tenants and to sub-tenants.
  The solution proposed is not well targeted on those who currently exploit the loophole. It hits the wrong category. I urge Treasury Ministers to re-examine this subject. This is not intended as a plea on behalf of the property industry, which is well able to make its own pleas, but it is a plea for simplicity. We should not introduce complexities that will absorb an enormous amount of time to get it right. A company may feel that it has got it right and then find that its interpretation is not shared by Customs and Excise and is, therefore, unacceptable.
  I find some common ground between that point and the proposals for the refund of overpaid VAT. I was pleased when Treasury Ministers decided to equalise to three

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  years the capacity to go back for reclaims and to refund overpayments. Three years is a reasonable period. However, there have been many complaints from those who feel, quite legitimately, that imposing that new time limit from 18 July last year represents an element of retrospection. I know that retrospection can attach to it a large number of different interpretations and I expect that I shall be told that that is not genuine retrospection. In spite of that, I see it as retrospection, and those who complain about it have a legitimate point. I urge Treasury Ministers to look at that matter again.
  Unjust enrichment is a subject that has been raised outside the House on many occasions, but I do not think that it has been mentioned in the debate other than in passing. I believe that when it is not possible for the supplier of goods or services to make a repayment to the original customer—perhaps when VAT has been charged when it should not have been—there are no grounds for the VAT to be returned. It is unjust enrichment for the supplier of the goods and services to sit on the returned money and not pass it on to the person against whom he charged it.
  Also on VAT overpayment, a distinction has to be made between correcting errors when the wrong amount has been paid and a deliberate recalculation. Recalculations can often occur as a result of the different schemes relating to retailers. When it becomes obvious that an alternative retail scheme would be more beneficial, it is perfectly legitimate for retailers to recalculate over a period. That is quite different from correcting an error and we should make certain that the two are not confused.
  There is another category from which I have heard a great deal—sports clubs and opticians. I have no idea why they fall into the same category, but in the representations that I have received they are grouped together. This matter also relates to an element of retrospection: those VAT payers are saying that, before last July, they had been advised by their individual customs officers—this covers a wide geographical area—that there was no time limit for putting in claims because matters had to be resolved in relation to European legislation and United Kingdom case law. They did not therefore go ahead with claims, and the now applied date of 18 July intervened, excluding them from exercising the opportunity that they might have taken, but for the advice that they were given. That is an unsatisfactory situation that I hope Treasury Ministers can address to the satisfaction of VAT payers and Customs and Excise.
  I have some reservations about the VAT disaggregation proposals, dealing with what is seen to be the artificial splitting of a business to ensure that as many parts as possible do not reach the VAT threshold. As I understand the proposals, Customs and Excise will no longer have to show that the reason for the splitting of a business was to avoid the VAT registration threshold. If customs announces that that is its interpretation, there is no opportunity for appeal. That is not satisfactory and needs attention.
  I agree with some of the remarks made earlier about insurance premium tax and the comments of my hon. Friend the Member for Bournemouth, West. The insurance industry will obviously dislike such a tax. It is an increase on the industry's costs and insurance companies realise that it is likely to rise. It is a thoroughly unwelcome burden.
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  The tax is likely to prove impractical when applied to warranties. Hon. Members have already mentioned attempts to increase artificially the cost of a warranty, which has so far attracted the 2.5 per cent. insurance premium tax, and decrease the cost of the product, which is subject to VAT at 17.5 per cent., thereby making the global figure more competitive.
  My hon. Friend the Member for Bournemouth, West said that he did not think that happened very often. I take a different view—I think that it happens a great deal. It certainly happens in the sale of domestic electrical appliances and computers. The practice amounts to evasion, which ought not to go on.
  The proposed solution is that the lot should be subject to 17.5 per cent. That would create an unfair distinction between those who buy a warranty in the same purchase as the equipment and those who buy it separately. That would clearly create great difficulties. There can hardly be a precedent for the level of tax on a product varying according to where it is bought.
  Experts will be working on how to overcome those difficulties. I can envisage a television salesman, for example, saying, "I can't sell you the warranty, but if you go around the corner, there's a little booth in the same shop just to sell insurance. If you go there you can get it with insurance premium tax at 4 per cent. instead of paying the full amount." That cannot be practical. What about salesmen recommending that customers go to the shop next door or recommending such and such an outlet for the best deal on insurance? The proposals are thoroughly unsatisfactory and have to be rethought.
  A similar argument applies to travel insurance. It cannot be right that the man who sells the travel service must apply 17.5 per cent. to the accompanying insurance while someone selling insurance separately does not have to do so. That would encourage direct selling of travel insurance, to the detriment of the industry.
  That view was strongly put to me by my constituent Mr. Millard of Starline Travel, Clarence street, Gloucester. In a letter to me, he urges a reconsideration of the Government's position. He says:
  "If the Government is not prepared to reconsider its position, it should at least allow the industry to compete fairly with the insurance sector by taxing all travel insurance at the same rate regardless of by whom it is sold."
  That must be a sound principle. Varying the rate of tax applied according to where the product is bought will lead to problems similar to the VAT demarcation problems which I mentioned at the outset, with the issue being debated for years and a satisfactory solution never being found. That must be resisted.
  8.5 pm
  Mr. Barry Jones: I am glad to follow the informed speech of the hon. Member for the great city of Gloucester (Mr. French), particularly in view of his generous remarks about my hon. Friend the Member for Barnsley, East (Mr. Ennis) and his maiden speech. My hon. Friend paid a nice tribute to Terry Patchett, whom we all miss. His speech was humorous. It was a strong speech, a caring speech and an informed speech. I appreciated his remarks about education and health. He brings a great deal of experience to this place and will be a member of this honourable House for many years.

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  I heard the Chief Secretary to the Treasury refer to the national health service. Last week I visited the district general hospital in Wrexham that serves my constituents. It is a good hospital and has received the honour of a charter mark. However, when I visited that excellent and successful hospital, I found it stretched to the limit of its human and financial resources. The dedicated staff were coping with intense pressure. During the week, that great hospital had to abandon its programme of operations to cope with the massive influx of those who had fallen prey to the epidemic of influenza, or whatever it is, in north-east Wales. I do not recognise the picture of the national health service given by the Chief Secretary.
  I am more than glad to support the amendment tabled by Her Majesty's Opposition, because there is insufficient investment and employment and the Government have no strategy to tackle long-term unemployment or the scandal of widespread youth unemployment. The latter is connected to drugs-related crime. Many pensioners in my constituency are afraid of burglaries and are scandalised by vandalism and graffiti. Their fears are the consequence of widespread youth unemployment. There is certainly a connection. There is no strategy in the Bill with regard to those evils. I therefore believe that the policy of the Shadow Chancellor, my right hon. Friend the Member for Dunfermline, East (Mr. Brown), to train 250,000 young people is very good. His policies will bring some hope to Wales and the community that I represent on industrial Deeside.
  I had hoped that the Finance Bill would include a reduction in fuel bills as a result of a cut in value added tax, a boost to energy conservation and the release of moneys from the sale of council houses so that funding for repairs and modernisation of houses could be made available. I make my views known following assessment of the terrible impact that the recent very severe arctic weather, especially the wind chill, had on tenants. The strong wind that blew and blew for several weeks made houses very cold.
  In my constituency, far too many homes still have rotting windows, draughty doors and rooms without radiators or any form of central heating. I want to speak up for tenants in such houses for they have experienced severe conditions as a consequence of the frighteningly cold weather that gripped our country for weeks. The House should consider the consequences for young families of those freezing temperatures. It became an ordeal. It was a misery for them and pointed to unhappiness and the onset of ill health.
  The severe weather impacted greatly on the domestic budgets of people who do not earn a large wage or are on benefits. One example from my constituency surgery that comes to mind is of a young mother whose four-week old baby had been born, I believe, nine weeks prematurely. The home in which she sheltered with her husband and baby during the terrifyingly cold weather had no radiators; there was but a gas fire. Consequently, that young family, with the responsibility for that young child, decided in the end to decamp, leave the house and take shelter in the young mother's mother's home five miles away. They simply locked up their house and went to a warmer one because their home had not been modernised; it did not have modern window frames or the modicum of central heating that it deserved.
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  The second example that I would cite is of a very old council house that is tenanted by a respectable man, aged 60, who has been an exemplary tenant for 40 years. He came to my surgery to tell me of his family's distress in the arctic weather owing to window and door frames simply failing to keep out the cold. As an unskilled council worker on a low wage, he had very little spare money to cope with the demands on his heating budget.
  A number of my constituents have told me that during the very cold weather they had icicles near windows and mould grew on walls. They told me of their need for coal at £6.50 a bag and that their wages and benefits were insufficient. The consequence was that many families—tens of thousands across Wales and many hundreds in my constituency—were at a very severe disadvantage during that arctic spell. I wish that the Finance Bill had included measures pointing to some relief for such people. Pensioners who came to see me told me that they needed cold weather payments urgently and that they have to wait too long for the extra relief. They asked me to request urgent payments rather than relatively laggardly ones.
  I emphasise the fact that when there is no insulation, fuel taxes are high and modernisation schemes falter due to the lack of Government policy, young families suffer. I ask the House to consider the dilemma faced by many young mothers who have asthmatic or bronchitic young children. Such youngsters cannot be put to bed in freezing cold bedrooms that have no radiators. The House should consider the predicament of such young families and the consequential effect on the health of the children who live in such homes. Many young mothers and fathers and others were at their wits end during the frighteningly cold arctic spell, and the House should consider how it can attempt to prevent such unhappiness recurring. Clearly, such arctic weather could return.
  Although no Government can be blamed for arctic weather, the present Government must accept blame for the destruction of the energy conservation programme. Such destruction has been their policy; that is where they have cut. They must face the fact that they have implemented a major hike in fuel bills by imposing tax. Despite that, they still stubbornly refuse to release more receipts from council house sales. Our local authorities are anxious for the release of such receipts so that money can be made available for new building and modernisation.
  If such policies were implemented and the Government were to relent, there would be an increase in the happiness and the warmth of tenants whose predicament I have described. There would also be more work, as those who are unemployed could be the very people to repair and modernise the homes in which so many families still live. We should move to end the distress of families such as those who live in my constituency.
  For poorer people, the savage, continuous and brutal arctic weather made life a misery, destroyed domestic budgets and pre-empted all household expenditure. Keeping warm was a constant and expensive struggle. Not keeping warm destroyed morale and health. Children suffered, school budgets suffered, yet the Finance Bill for certain contains nothing that might prevent such miserable happenings from recurring. Deficiencies and omissions in Government policy put pressure on our vulnerable families during the terrible cold weather.

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  The House should realise that the arctic weather could return. I am anxious that families such as those whom I have described do not suffer such misery and indignity again. The Finance Bill is riddled with inconsistencies and is highly deficient.
  8.18 pm
  Mr. Nicholas Budgen: The hon. Member for Alyn and Deeside (Mr. Jones) is, of course, entirely justified in this general debate in referring to what he believes to be a grave omission from the Finance Bill.
  I wish to start by saying how much I enjoyed the maiden speech of the hon. Member for Barnsley, East (Mr. Ennis). I enjoyed his wit, his attachment to his constituency and his elegant and amusing reference to his many relatives. The House warmed to him and much enjoyed his speech, which was delivered with great self-confidence. Let us hope that we hear him many times in such good form.
  We crawl over every minute detail of the Finance Bill—indeed, my hon. Friend the Member for Gloucester (Mr. French) did some minute crawling when he gave us the details of the Bill's effect on individual citizens, and it was proper for him to do so. The Finance Bill and the Budget are tremendously important to people who are affected by it, especially, as my hon. Friend pointed out, to those who are not sure whether they fall on one side or the other of a line. It is entirely right that the House of Commons should spend much time trying to ensure that the details of the legislation are, at least, no worse than usual. We recognise that most legislation does not have entirely the desired effect. It is often rough and ready and sometimes creates injustices, but we try to do something with it.
  It is strange and ironic, however, that when we have finished talking about all the details, the Budget is usually fairly insignificant in its effect on the general health of the economy. Wise men argue about whether the Budget will be mildly contractionary, will put a bit more money into the economy or will be broadly neutral. We can all argue about how the figures have been fiddled and make clever points about whether the fiddling is worse this year than it was last year or whether this year the clever people in the Treasury have used words slightly differently to enable them to put favourable assumptions into the Budget. Such debates are all very clever and interesting, but the Budget does not have an enormous general effect on the economy.
  That fact brings me to the only point that I wish to make in what I fear may be an embarrassingly short speech. Monetary policy is far more important in its overall effect on the economy than are the minutiae of fiscal policy. Why does the average citizen now feel more comfortable in his job and about being able to sell his house or look for another job, and why has negative equity diminished so much? It is not because we have had three or four clever Budgets in the past three or four years: it is because of the relaxation of monetary policy.
  Page 47 of the Red Book shows the extraordinary way in which monetary growth slumped dramatically between 1990 and 1992, how monetary growth was minimal in the six or nine months before we came out of the exchange rate mechanism and how this country was squeezed dramatically and dreadfully in an over-tight monetary
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  policy before we finally burst free from the exchange rate mechanism. For all the talk about how clever Budgets have been in recent years, they have nothing to do with the improvement in the economy.
  What has happened—chart 3.24 in the Red Book shows this—is that, after a gross and excessive squeeze, there has been a progressive relaxation of monetary policy. That is why house prices are now going up 10 or 15 per cent.; why the ripple effect is moving from London into the outer suburbs and the shire counties; why people are able to borrow against their houses for their small businesses or whatever else they want to do; and why economic activity, employment and consumer demand are generally increasing.
  It is curious that while we properly crawl over every detail of the incidence of taxation, we do not often discuss monetary policy. Monetary policy can be conducted and changed without any control by the House of Commons. It is extraordinary that there can be a cumulative rise in interest rates from, let us say, 7 per cent. up to 15 per cent. without any specific control or inquiry by the House. Therefore, when we consider the Labour party's proposals for taxation and for increased public expenditure, we are surely entitled to suggest that those proposals are weapons of relatively small effect. What is important is how the Labour party will manage monetary policy, because that will be the unknown residual.
  Mr. Tony Marlow: It will be controlled by Frankfurt.
  Mr. Budgen: I will come to that subject as I am nearly as preoccupied by it as my hon. Friend is. I will make the domestic point first.
  The Labour party says that it will not raise taxation generally and that it will be able to stick to that. I think that will be difficult. Clever young men in Tory central office have added up the commitments made by Labour for increased expenditure and they amount to £30 billion a year. Before any Labour Member starts complaining, I may say that I do not pretend to understand what new Labour is about other than trying to be an alternative Tory Administration with different people.
  I imagine that some people from old Labour have not been weeded out, even if they are now allowed only to deliver leaflets. There must be some people from the old Labour party who believed in high public expenditure on, for example, fuel conservation schemes, as suggested by the hon. Member for Alyn and Deeside, but such initiatives cost money. It is probable that the people who have fought so long and hard for the Labour victory that they hope for at the next general election would want higher public expenditure. That would mean a public sector borrowing requirement of £40 billion to £50 billion, which would have to be financed somehow. The extra financial pressure would give rise to higher interest rates than would apply if we had a lower public sector borrowing requirement. It is extraordinary, but no one from the Labour party has explained its attitude to interest rates, monetary policy and the Bank of England.
  One of the best things that the Government have done—if I may, for a moment, deeply admire the Government—is to introduce a new relationship between the Governor of the Bank of England and the Chancellor of the Exchequer. It is an extremely good system by

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  which the constructive tension between those two high functionaries is made public so that the markets may exercise their discipline if they take a view that differs from that of the Chancellor or the Governor. The ultimate responsibility remains with the Chancellor of the Exchequer, and that is important. Some of my hon. Friends say that the Chancellor has done well to resist interest rate rises, but no one can tell yet and we shall not know for a couple of years. The Chancellor may be right; the Governor of the Bank may be right. It is much too early to congratulate either side in this struggle.
  Yesterday's Financial Times—with, I am sure, a good deal of guidance from the Labour party—reported that Labour is to introduce a new monetary policy committee that, it seems, will be more or less independent of the Chancellor of the Exchequer. It would be entirely wrong under our constitution to allow any monetary policy committee to have complete operational independence from politicians. We in this House of Commons have little enough control over monetary policy anyway, and we do not debate it enough. It is half-adequately discussed in the Treasury Select Committee, but it is wholly inadequately discussed in the Chamber. The most important weapon of economic management being controlled by a monetary policy committee that is not held responsible by the Chancellor and for which the Chancellor is not responsible either to the Cabinet or to the House of Commons is, I suggest, a constitutional monstrosity.
  It is no good Labour saying that it wants the committee because it wants to move part of the way towards a single currency in Europe, and therefore wants to be able to say that it is in favour of an independent central bank for domestic reasons as well as for what I would call European reasons. It is the essence of the way in which we control the economy that the Chancellor takes decisions on monetary policy, and these cannot be shuffled off to a new committee.
  Although the story may or may not be true, a handout from the Tory party suggests that the committee will have union leaders and stakeholders on it. Let us assume, for the sake of argument, that that is completely untrue. It does not really matter in principle who is on the monetary committee, but for it to exercise unsupervised control over interest rates in some independent role is, I repeat, a constitutional monstrosity. It is made worse by the fact that the committee will be given completely inconsistent and conflicting instructions, as it will be told to control inflation and to have growth targets. This is nonsense.
  The economy is not perfect, but it is very satisfactory and that is a result of the freedom that we obtained after 16 September 1992 and of the proper and necessary relaxation of monetary policy since then. That was a result of properly exercised political decisions by successive Chancellors of the Exchequer. These decisions cannot be shuffled off to a new-style monetary committee or to an independent European central bank. If Labour thinks that it can shuffle off those important decisions over our most important weapon of economic management, it is deeply wrong and it will come to learn that it has made a terrible mistake.
  8.34 pm
  Mr. Andrew Miller: I want to pick up a theme that was started by my hon. Friend the Member for Barnsley, East (Mr. Ennis) in an
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  extremely interesting and witty maiden speech. I also wish to respond to some of the critics, including the hon. Member for Wolverhampton, South-West (Mr. Budgen), who have asked about the difference between new Labour and old Labour. My hon. Friend the Member for Barnsley, East made it clear that he represents the Labour heartlands, and he reflected the views of those heartlands extremely well. He will be here representing the good folk of Barnsley, East for a long time to come.
  My hon. Friend the Member for Barnsley, East introduced the theme of the buck-passing Budget, and referred to education. My hon. Friend the Member for Alyn and Deeside (Mr. Jones) then referred to housing, and that is an area on which I wish to concentrate. It is a pity that the hon. Member for Milton Keynes, South-West (Mr. Legg) has just left his place, because we had an exchange earlier in which he developed an interesting theme and then chose to ignore the facts. That seems to be prevalent among Conservative Members.
  In my constituency, there are currently 4,500 families on the local authority housing waiting list, of whom I estimate that between 1,200 and 1,500 are in dire need of housing because of overcrowding or deteriorating accommodation. Ten years ago, that same local authority could on average house a couple with one child in one month. That same couple could now wait four years. A number of major factors have influenced the housing stock in that local authority, all of which are outside its control and most of which are in the control of the Government. This is a buck-passing Budget par excellence.
  Library research paper 108 of 15 November 1996 contains an interesting table that shows the number of housing starts from 1975 to 1995. It is interesting that in only one year of the Government's tenure have they managed to surpass the number of total housing starts—the combination of private sector, housing association and local authority starts—achieved by Labour in 1979. In other years, the data show that the Government have come nowhere near the figures achieved by Labour. Overall starts in 1995 were 26 per cent. below the 1979 level, and the 1994 figure was 16 per cent. lower than 1979.
  Local authorities started only 1,000 dwellings in 1995, which is a mere 0.6 per cent. of the total. In that year, housing association starts fell by 22 per cent. and private starts by 15 per cent. The hon. Member for Milton Keynes, South-West made it clear that housing debt had risen. That in turn put pressure on the providers of low-cost housing, which means that the Government have once again passed one of their responsibilities on to local authorities and housing associations while savaging their available capital.
  The effect spins off to a wide range of other services, and pressure is put on the health service—the correlation between poor housing and poor health is well understood—on social services and, through housing benefit, on the social security budget. As a direct result of the Government's policy of passing the buck, a string of budgets is affected.
  We in the Labour party have made it clear that we intend to address some of those issues. Even in some of the smaller areas of local authority responsibility, cuts knock on into youth service provision, for example, and cause problems for—
  Mr. Deputy Speaker (Mr. Michael Morris): Order. The hon. Gentleman should relate his remarks to the Finance Bill.
  Mr. Miller: I am within one sentence of a point relating to several clauses in the Bill.
  There is a close relationship between the burden borne by local authorities and the Government's taxation policy, which is well established in the Bill. The Government said that if we elected them on Thursday, the recovery would begin on Friday, but the Library research paper setting out the trend of public sector borrowing requirement as a percentage of gross domestic product shows that in the run-up to the 1992 election, it was on a steeply rising curve, and it is therefore my contention that they knew that their assertion was an impossibility. There has been continual manipulation of the data and we know that the Government's figures have been totally and utterly inaccurate.
  The Chief Secretary was challenged about whether he would serve on the Committee and seemed to indicate dissent. I hope to see him campaigning in Wirral, South, where I shall be spending some time in the next few weeks, and telling people about the facts that I have described, especially in relation to housing in all its aspects.
  We heard earlier a comparison of the tax imposed by the Government on the banking sector in 1981 and Labour's proposed windfall tax on the utilities. I said in an earlier intervention that there was nothing about that banking tax in the Conservatives' 1979 manifesto, which could virtually have been written on a postage stamp, yet the Government considered it acceptable to introduce it in a Finance Bill—in 1980, as I recall.
  We have been challenged several times on the details of the proposed windfall tax. Quite properly, my right hon. and hon. Friends will introduce it in the very next Finance Bill to come before the House, and that will be sooner rather than later.
  Mr. Marlow: The windfall tax is an interesting concept. The hon. Gentleman is probably well aware of the fact that companies were privatised and people bought shares. Some of those companies were subsequently taken over at a higher price; that is what happens with shares and share ownership. The hon. Gentleman might say that the increase in value was a windfall and that the shareholder should be taxed on it, but the reality is that those shares now belong to somebody else and were bought at the full market price. The second owner paid the full market price for the shares and there is therefore no windfall. Is it the intention of the Labour party to tax such shareholders?
  Mr. Miller: The hon. Gentleman makes an interesting point. Our policy has been known for several years, so prices have been discounted to take into account that possibility—or, rather, probability or certainty. The hon. Gentleman should logically apply his theory to the tax on the banking sector that I mentioned earlier, but of course he will not do that, because he happily acquiesced in it in the early 1980s as an acceptable way for the then Chancellor to raise revenue.
  The notion that changing the threshold in inheritance tax is perfectly fair and proper and is to the advantage of the vast majority of people is another example of buck
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  passing. It is absolute hypocrisy for the Government to make that assertion while at the same time forcing elderly people in residential homes to sell their houses to pay for such a buck-passing exercise.
  There is a powerful argument for periodically changing the thresholds and it is reasonable to say that, if people have received a large tax relief on the cost of a mortgage, some of the money should subsequently be returned to the state, if the state is paying for their care, but it is absolutely inhuman to take it when people are, in many cases, literally on their death beds and to put such enormous pressure on couples.
  Surely it would be right to push all that nonsense out of the social security arena and to deal with the matter through inheritance tax. I appreciate that that does not give the immediate tax flow, but there is a logical relationship. The Government's attitude is once again of passing the buck in terms of budgetary responsibility.
  I have a detailed and varied interest in hydrocarbon taxes—an interesting concept, developed over a number of years—which extends from my constituency responsibilities. On the one hand we have Vauxhall Motors, which is part of the General Motors Corporation and is a highly successful motor manufacturer. Ellesmere Port is the home of the Astra and the V6 engine, 95 per cent. of which are exported to continental Europe. Also, the constituency contains a large petrochemical complex that includes Associated Octel, which somewhat controversially manufactures tetraethyl lead—the anti-knock compound for petrol. Again, that company is a £200 million export earner for this country.
  The combination has made me consider hydrocarbon taxes carefully. While I appreciate that the Government's move on low-sulphur diesel is well intentioned and I do not deny that a huge problem is associated with diesel particulates, which has to be dealt with, I plead with the Government and my colleagues who will be taking over responsibility in the not too distant future to undertake a serious scientific review of the changing information available to us. Before long, we shall certainly have to penalise users of high-sulphur diesels by raising duties in relative terms, perhaps bringing them closer to those on petroleum.
  In years gone by, it was generally accepted on both sides of the House that, because of the additional mileages that vehicles would run on diesel, it was more logical to assist the diesel user. Without wanting to be drawn into the argument about penalising the transport industry, I believe that in terms of the purely environmental considerations it is high time that we had a wide-ranging review of the scientific evidence, some of which is highly controversial and which is still changing very fast.
  I have heard a detailed presentation by one fuel manufacturer expressing one point of view in an all-party committee of the House, the major petrol companies expressing another and companies such as Associated Octel yet another. A lot of weighty scientific evidence ought to be evaluated before we commit ourselves to associating a permanent pattern with the fuels. That we should use the differential as a means of encouraging people to use the right vehicles is an area of common ground and I would encourage colleagues to consider carefully some of the more recently published evidence and to press for a wide-ranging review of it.

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  Finally, as colleagues want to speak, I must return to my original theme. This has been a disappointing, buck-passing Budget and I look forward to having the opportunity of talking about it, not only on the streets of Wirral, South, but during the forthcoming general election.
  8.53 pm
  Mr. Stephen Timms: I begin by adding my congratulations to those that have already been expressed to my hon. Friend the Member for Barnsley, East (Mr. Ennis) on his speech. It is not long since I was in his position after a by-election. I enjoyed his speech and the film "Brassed Off".
  At this late stage in the debate I will confine my remarks to three areas: first, the increase in duty on fuel contained in clause 6 of the Bill; secondly. the time limit for reclaiming overpaid value added tax, in clause 47; and, lastly, the wider impact of the Bill and Government policy on investment.
  The Chancellor announced an increase of 3p a litre in fuel duty in his Budget speech, which took effect on the evening of that day and is documented in the Bill. Apparently, that is all quite straightforward, just like every other measure in the Budget—except that it is not. The Chancellor tells us that the overall effect of the Budget and the Bill on taxation—the Chief Secretary to the Treasury repeated it in his opening speech—is a reduction of £735 million. It turns out, however, that that widely quoted figure completely ignores the 3p increase in fuel duty and also the increase in tobacco duties. The 3p on fuel and the associated increases in other fuel duties alone raise an extra £850 million—a fact to which the hon. Member for Gordon (Mr. Bruce) referred—and singly more than cancel out the overall reduction claimed by the Chancellor and the Chief Secretary. If fuel and tobacco duties are taken into account, that claimed £735 million reduction becomes a £350 million increase in the level of taxation.
  So, how can the Chancellor ignore those two items when making his statement? His reasoning was that it was announced a few years ago that fuel duty would increase by 5 per cent. a year in real terms and tobacco duty by 3 per cent. a year, which means that they do not count in assessing this Budget. That is preposterous—it is "Alice in Wonderland". The fact that the increase was announced a few years ago does not mean that it did not happen. In fact, it was the most visible change of all those announced in the Budget, because it appeared immediately on illuminated signs on petrol forecourts the length and breadth of the country. Petrol prices went up by 3p within a couple of hours of the Chancellor announcing it. Of course, it was part of the Budget. If the Chancellor had omitted it from the Budget speech, the 3p increase on fuel would not have been imposed. If it was not in the Bill, it would not have happened. There is no inexorable process by which, because an announcement was made a few years ago, fuel duty rises. It happened only because the Chancellor decided this year that it should. It is part of the Budget.
  I am not arguing against the 3p hike in fuel duty, but merely asking that the Government tell us the truth about what they are doing. It is no wonder that the Tories are
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  not trusted on tax. Why not tell us the truth? Why go to such trouble to hide it? Come clean. Tell us the truth that taxes are going up with the Bill, as the small print in the Red Book makes plain, and let us have no more dissembling. Dissembling along those lines does the Government no good. It may be too late for this Government to learn that honesty and frankness are in their long-term interest, but the next Government must heed that lesson. It is part of the change that the country wants in the way that the nation's economy is run.
  When it was announced in 1993 that fuel duty would be increased by 5 per cent. a year, the relief on fuel duty for local bus operators was frozen. It has not increased since 1993. As a result, the price paid per litre for fuel used in local bus services has doubled since 1993. That plainly undermines the stated objective of the annual increase in fuel duty, which is to discourage people from using their own cars.
  The system for applying for relief works fine. Bus operators apply for it and it is paid back, but if the relief continues to be frozen at the 1993 level, the economics of public transport by buses will be seriously undermined. As the Confederation of British Road Passenger Transport UK says, it is a new tax on bus transport and on people who travel by bus.
  In its submission to the Treasury, the confederation proposed various ways in which the problem could be addressed. For example, there is red diesel, which is used in agriculture and for maritime purposes, and on which there is no duty. Alternatively, the Government could announce that they do not propose to increase the level of duty payable by local bus operators in future, and that this year's increase was the last. I urge the Minister to announce that.
  On the repayment of overpaid VAT, widespread concern has been expressed about clauses 44 to 49 which deal with VAT. The provision, which sets a three-year time limit for claims for VAT refunds, has alarmed many small and large businesses. There are four principal concerns about the provision. First, it is retrospective law, which is unfair. Secondly, it greatly increases the chance of businesses being unable to claim back tax that has been overpaid through no fault of theirs. Thirdly, there is a real prospect of the new provision being successfully challenged under British and European law. Fourthly, it does nothing to tackle those who deliberately try to defraud the commissioners, but concentrates on those who co-operate honestly.
  We shall discuss the matter in detail in Committee, but it is worth drawing the attention of the House to the opinion obtained by Deloitte and Touche from Professor Waelbroeck and his colleagues on the position in European law. He states:
  "Case law has established that the limitation period must correspond to the periods normally applicable for similar claims under UK law viz. direct taxes which usually attract six year periods."
  In other words, introducing a different period—three years for indirect taxes, as opposed to six years for direct taxes—is challengeable. There is a growing view that it will swiftly be challenged if the Government press ahead with their proposal. The issue has been raised with me by Tate and Lyle in my area and by several small companies as well.
  As the amendment tabled by my right hon. and hon. Friends points out, the most serious failure in the Bill is the failure to address the downward spiral in investment.

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  Figures released by the Government to my hon. Friend the Member for Darlington (Mr. Milburn) on 11 December 1996 show just how low investment has fallen since 1979, and it is still falling. The figures give the average ratios of investment to GDP since 1979 for all the G7 and EU countries. Britain is in 18th position out of 18—lower than every one of our European and G7 counterparts.
  Even more disturbing is what has happened over the past two years. Our position in the league has not changed: we are still 18th, but in those two years, as global economic recovery has allowed many countries to improve their ratio of investment to GDP, ours has slumped further, from 17.4 per cent to 17.1 per cent., pushing us even further behind our competitors.
  That failure is the key to our long-term economic failure. The relatively large proportion of investment that we have attracted from outside Europe cannot make up for our failure to invest in ourselves. The Government are part of that failure. Table 5.4 in the Red Book shows publicly sponsored investment falling from £21 billion last year to £20.8 billion this year and £20.5 billion next year.
  Those figures are bad enough, but they do not tell the whole story. They are based on estimates for the private finance initiative, which include not only signed deals and agreed deals, but every other vaguely feasible PFI project that the unit in the Treasury has been able to come up with. They are departmental wish lists. That is the basis for the PFI figures in the Red Book. If we consider the investment expected from PFI projects that have been signed, publicly sponsored investment looks set to fall every year until the turn of the century.
  The Treasury Select Committee recognised that in its report on the 1996 Budget, as the hon. Member for Upper Bann (Mr. Trimble) mentioned. The report points out that sluggish growth of PFI expenditure means a reduction in conventional capital expenditure without compensating PFI investment materialising. The private finance initiative is not delivering and that failure is contributing to a wider failure in the economy on investment.
  The PFI is a square peg that is being pushed into too many round holes. Despite the announcement the day before the Budget that, at long last, a major hospital contract under PFI had been signed, it turned out that the finance was not agreed. There is still no financial deal for any of the major hospitals due to be built under the private finance initiative. The National Health Service (Residual Liabilities) Act 1996, which was rushed through Parliament last summer, was supposed to solve the problem but did not. The Secretary of State has promised to write letters of guarantee for individual PFI deals on health, but that has not solved the problem either. There are serious difficulties in other areas also.
  We should narrow the scope of the private finance initiative—being much clearer about its intended use—and scrap the insistence that everything must undergo PFI assessment, however inappropriate it may be. At present, public sector agencies and private sector contractors and financial sources are sent on endless wild goose chases, in many cases becoming increasingly frustrated by the amount of time that is wasted. The PFI is not delivering because the Government have not yet devised a credible account of how private finance can support public services. That must be done.
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  The Government must start to recognise the limits of the PFI. They are trying to use the initiative to cover up the way in which investment is being choked out of the British economy. That approach will leave a gaping hole in investment which the Bill does nothing to address and which the next Government must fill.
  9.6 pm
  Mr. Tony Marlow: The Prime Minister has said that he has three themes for the election: first, Europe, renegotiation and how we can regain control over our affairs; secondly, devolution and how we can ensure that the United Kingdom remains united when the Opposition would split us asunder; and, thirdly, taxation, which is the subject of today's debate. The Prime Minister and the Conservative party agree that taxation levels would be higher under a Labour Government than under a Conservative Government. I shall explain why.
  My hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) described new Labour as the Conservative party in drag, trying to be more conservative than the Conservatives. The reality is that, first, if it is a Conservative party in drag, it is an inexperienced Conservative party in drag and it will make a hell of a lot of mistakes. Secondly, there are many unreconstituted, unreformed old socialists in the Labour party whose taxation motto is: tax until the pips squeak.
  The Conservative Government have reluctantly increased taxes from time to time, but in our hearts we want low levels of taxation because we know that is how the economy works best. The money belongs to the people, not to Parliament or to the Government. According to Opposition psychology, the money belongs to the Government, who will let the people have some every so often. The instinct of a Labour Government—even under new Labour—is for higher taxation levels.
  We all want to care for our elderly and infirm and to provide good standards of education. There is no argument about that and there is little argument about how it will be achieved. Under a Labour Government, there will be pressure to increase public expenditure. That pressure will be applied by Labour constituents, the paymasters and clients of the Labour party and by the trade unions which have influence with the Labour party. Whatever the intentions of the new Labour leaders, that pressure will force them to do more. We have a duty to ensure that public money is spent efficiently. That means that there have to be reforms, as there have been in the past 17 years of government. We have had privatisations. Many industries, institutions and establishments that used to be a large financial burden on the taxpayer have now been reformed, and we get more product for less payment by the taxpayer. No Labour Government could or would reform the institutions that still require to be reformed.
  We heard from the Labour Front Bench a great new initiative on education: to give back all the powers to local authorities, and to do everything that the National Union of Teachers wants. More and better education is not achieved by feeding the appetites of the producer groups. It is not achieved by looking after the clients, bosses and managers of the Labour party. If there is a Labour Government, one will get less for more money. Therefore, there will be more taxation and probably even more expenditure, which means more borrowing. The sad fact is that whatever is said at the moment by Opposition Front Benchers, whatever their good intentions, they will not be able to deliver.

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  The Labour party has a sauce in tabling its amendment. Labour wants higher investment. If there are high levels of taxation and expenditure and high levels of Government borrowing, there will be high interest rates. Will that encourage people to invest?
  The hon. Member for Newham, North-East (Mr. Timms) had some concocted figures. His sounded like a research assistant-type speech, as though he had looked it up in a book and that it had been decided this way, that he had this table and that table. He said that Britain is 18th out of 18 in terms of investment. Does anybody really believe from the results, from the strength of the British economy at the moment, that we are 18th out of 18 in terms of investment?
  The vast majority of European investment outside other European countries is in the United Kingdom. The vast majority of German investment is in the United Kingdom. The vast majority of Japanese investment in Europe is in the United Kingdom. The vast majority of United States investment in Europe is in the United Kingdom.
  Labour talks about investment, but it has to be effective investment. Perhaps other countries are spending more, but they are not getting the results. We are. We have the strongest economy in Europe. We have the highest growth rates in Europe. We have the best increases in productivity in Europe. Labour criticises investment, but we are getting the results. What is Labour criticising?
  Then Labour Members have the gall, the audacity, the cheek, to complain about the Conservative Government's employment record, yet they are the people who would embrace the social chapter. They are the people who want the 48-hour week. They are on their knees for the 48-hour week. They are the people who talk about a minimum wage. They would hamstring our economy. What will that do to employment?
  Mr. Legg: Hear, hear.
  Mr. Marlow: I am grateful to my hon. Friend for his support.
  Labour Members talk about the scandal of youth and long-term unemployment. The way to overcome that is through good education, good skills and a strong economy. For every three who went into higher education when we came into Government there are now eight. Our economy is the strongest in Europe. We are creating and generating jobs that would be destroyed and thrown away if we were to lose the election and be replaced by a Labour Government.
  Then we heard the complaint about the increasing tax burden. The Labour party is complaining about the Conservative Government increasing the tax burden. Is that not the pot calling the kettle black? The Labour party lives for increasing the tax burden. What does it have in mind? It has a brand new tax worked out, or half worked out, possibly worked out—hardly thought about at all. I understand that it will not be introduced because it will be illegal. If it is not illegal, at least it will be challenged in court. It will take two years before the Labour party can discover whether it is legal, so it will not be able to raise the money.
  The Labour party will not have the money to carry out all its promises, so it will have to raise the tax in other ways. Supposing Labour were allowed to introduce the
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  windfall tax—there would be additional taxes on top of the taxes that it would have to raise because it is a Labour party rather than a Conservative party, because there would be a Labour Government rather than a Conservative Government—what would be its effect? The money has to come from somewhere. I do not know whether I have an interest to declare, but I have shares in privatised utilities, as, I expect, do many of my hon. Friends, and probably Opposition Members. Which companies will be taxed? Perhaps the water authorities will be taxed. Will British Gas be taxed? Will British Gas suddenly be subjected to an entirely different level of regulation? Will the dividends of the shareholders in British Gas be halved, or cut even further than that? Will the electricity companies be taxed which have been taken over and bought at full market price? Were not the shares sold at full market price in the first place?
  Was it not the main objective of the Labour party to ensure that flotations did not succeed? Did it not do all that it could to depress share prices when utilities were sold and floated to the public? If undertakings were sold too cheaply given the uncertainty that existed at the time, which meant that prices had to be realistic to encourage people to buy, we know the guilty party. It was the Labour party which chose to put the frighteners on people who wished to buy the shares. If money has been lost to the Exchequer—money that could have been gained by the Exchequer—we know where the fault lies.
  The Labour party now has the gall to talk about a windfall tax. From whom will it get the money? Will it get it from shareholders—perhaps? What else will happen? What will happen to the price of the output of the services that are provided by utilities? What will happen to those who are employed in these undertakings? Their jobs will be put on the line again. Who will the Labour party help by means of an illegal tax that it will not be allowed to introduce? Let us know more about what a Labour Government will do. Let the Labour party not tell us that we are the party that is increasing taxation when it has an illicit, bogus, inefficient and ridiculous tax up its sleeve.
  The state of the Labour party worries me, and it should worry the country. If the public are ill advised, misled and duped, and if they are bored with the Conservative party and naive enough to seek to have a change, I can only say that it will all end in tears.
  9.16 pm
  Ms Dawn Primarolo: Given the speech by the hon. Member for Northampton, North (Mr. Marlow) I am not sure whether he is the secret weapon for the Government in the next general election campaign or whether he is the Labour party's secret weapon in bringing down the Government. The hon. Gentleman is fervently anti-Europe and spends his time criticising the Government. He called for the Prime Minister's resignation in the House. He has the nerve to talk about inconsistency yet he sings the praises of the very Government who he is doing so much good work to assist in bringing down.
  Even when the hon. Gentleman was struggling to sing the Government's praises he had to admit that they had increased taxes. Apparently in their heart of hearts they did not want to do that, but they did. That will make interesting reading in the hon. Gentleman's election

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  address at the next general election, whenever it is called. "In my heart of hearts", it will read: "I meant to tell you the truth but unfortunately the wicked Government of whom I hoped to be a member apparently do not seem able to tell the truth."
  The Government say that they want to reduce taxes. They campaigned on that policy and then increased taxes, both indirect taxes and direct, as the wicked lies in the Red Book demonstrate and as the report of the Select Committee on the Treasury confirmed, the Committee having considered the details of the 1996 Budget. This is the world turned upside down. Perhaps we might now return to what is in the Bill and the propositions advanced by the Government.
  I understand that it is in order to congratulate the Financial Secretary—it will be the only time that I do so this evening—on being appointed a Privy Councillor in the new year's honours. I am happy that he is now a right hon. Gentleman, and I hope that that means that he will tell us the truth in his reply to the debate.
  The Chief Secretary to the Treasury was rather coy at the beginning of the debate when my hon. Friend the Member for Edinburgh, Central (Mr. Darling) asked him whether he will be a member of the Finance Bill Committee. You, Mr. Deputy Speaker, would have expected, as we did, that he would confirm that he will take responsibility for the Finance Bill and will be on the Committee that will enable the Government's tax-raising proposals to be enacted. Unfortunately, he could not tell us whether he will be on the Committee: he told us to wait and see. We are not sure whether he will not be on the Committee because he is defending his marginal seat in Bristol, or because he does not want to take responsibility for the Bill.
  The argument that the Chief Secretary tried to advance presented a selective picture of the Government's so-called achievements. He referred to the measures in the Bill, especially the significant action to protect the tax base. He said that the Government would not tolerate tax abuse. We are pleased to hear that: hon. Members on both sides of the House unanimously agree with that and do not support tax abuse. He said that the Government will now make available extra resources to deal with tax abuse. That is a bit rich, given that they cut them in the first place.
  We are entitled to judge the Government on their entire record, and not just on the selective picture that they want to paint so as to create a happier image for the electorate. They are not prepared to face the electorate, because they are terrified that people will see through the smokescreens and illusions.
  We are familiar with the litany of claims that the Government always trot out. They tell us that we have low inflation, falling unemployment and stable, long-term growth. The Chief Secretary said that we have the best prospects for a generation. I wondered what generation he was talking about. Was he talking about the 14 million people—4 million of whom are children—who live in poverty? That is almost three times as many as in 1979. Perhaps he was talking about the poorest 10 per cent., whose weekly income the Government have cut since 1979, while at the same time the incomes of the richest have increased. Perhaps he was talking about the generation that would eventually benefit from the Government's so-called great theory of trickle down.
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  Apparently, the rich will spend so much money that even the poor will benefit. That could be many generations from now.
  Mr. Marlow: Given the hon. Lady's remarks, do I take it that it is her intention that the incomes of the bottom 10 per cent. should increase, and that a Labour Government would provide the money? Would they get the money from the people whom she referred to as the rich? If not, from where would she get the money?
  Ms Primarolo: The Labour Government, who will be elected quite soon, will narrow the inequalities in wealth by providing people with work. One in five households have no one in work, and 62 per cent. of families have only one person working. The children of those families have lost out under this Tory Government. Those people, 9.1 million of them—the number has doubled since the present Government were elected—are the people who will benefit from the stable, sustainable growth in the economy over which the Labour Government will preside.
  Mr. Butterfill: I am fascinated to learn that the hon. Lady is going to prove that a Labour Government—if that ever comes to pass—will provide such people with work, but what will they be doing? Will they be working for her leader's office, along with all the others?
  Ms Primarolo: That was unworthy of the hon. Gentleman, who has made some interesting and important points this evening, as he often does in debates on Finance Bills. I hope that we shall have his company again, but he knows full well that, by using a number of mechanisms, the Labour Government will ensure that work is created for those whom we shall represent.
  The Government tell us that they have done wonders in regard to investment. Apparently, they have presided over spectacular investment in the economy. That is why so many people are unemployed: it appears that the investment has not been in them. In 1978–79, the then Labour Government's gross capital spending accounted for 3.8 per cent. of gross domestic product; this year, the Government's spending is expected to be no more than 2.5 per cent. of GDP.
  As my hon. Friends have pointed out, we need to build on our best resources. We need to invest in our manufacturing, and in our people's skills. That is the way in which to establish a secure future. The Government, however, want none of that; they want to play around with fears of job insecurity, pressurising people in the workplace to fear for their jobs and forcing them to work for low wages. They tell us that that will make us the enterprise centre of Europe, but it is difficult to see how.
  The hon. Member for Havant (Mr. Willetts)—but I am not sure that I can call him an honourable Member. The Member for Havant—
  Mr. Deputy Speaker: Order. The hon. Lady should know that all Members elected to the House are honourable.
  Ms Primarolo: Thank you, Mr. Deputy Speaker. I am grateful for that correction. I am sure that, when the hon. Member for Havant was telling us that the Government had not increased taxes and that we were wrong in our

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  assertion, he was not "dissembling" in regard to the facts in the Red Book. What he said certainly was not based on an exchange of notes, and it certainly was not based on the sophistry in which the Chief Secretary apparently engages.
  As always, my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) made a speech that hon. Members on both sides of the House found thoughtful and challenging. He made clear the importance of monitoring, and of a proper structure in the House to ensure that tax and expenditure plans could be properly assessed. There was no substitute for proper parliamentary scrutiny. He went on to knock down the Government's allegations that, somehow, a splendid inheritance existed, and reminded us again that the danger to our manufacturing base was acute.
  The hon. Member for Stamford and Spalding (Mr. Davies) made his usual well-informed, pro-Europe speech. Unfortunately the hon. Member for Havant did not stay to hear it, probably because they had already exchanged notes.
  My hon. Friend the Member for Barnsley, East (Mr. Ennis) has been widely complimented by hon. Members on both sides of the House for the good humour and ability of his maiden speech. I think in particular of his comments about Terry Patchett, a well-respected, sincere and honourable man in the House, who was not always at ease with House procedures, but who was an excellent constituency Member of Parliament, defending mining communities. I look forward to hearing my hon. Friend the Member for Barnsley, East continue that tradition in future debates, which he clearly has this evening.
  The hon. Member for Upper Bann (Mr. Trimble) made some points about anti-avoidance measures, which I hope he will allow me to pick up later. The hon. Member for Gloucester (Mr. French) made some detailed scrutiny points about that section of the Bill. Other hon. Friends have ensured that we have had a thorough investigation and exposure of the Government's plans.
  Treasury press statements tell us that the Treasury is to invest and to "spend to save". They say:
  "£800 million will be spent by a number of departments over the next three years to save an estimated £6.7 billion."
  In particular, there will be work in Customs and Excise to pursue the continuing problems of failing VAT receipts.
  On page 69 of the Red Book, there is an attempt to explain the missing VAT receipts, which will interest all hon. Members as that revenue is not reaching its true destination: the Treasury. In a debate on 3 December, at column 854, the hon. Member for Fulham (Mr. Carrington) specifically referred to the table and its unconvincing explanation, and the evidence to the Treasury Select Committee, which shows that, of the £6 billion that is missing, Customs and Excise officials can explain only why up to a maximum of £2.5 billion is missing. They still do not know where the rest is.
  It seems that there is increased consumer spending, but there is a shift in the connection with the tax—the tax is not being collected quickly enough. The desire to find that money seems to be based more on shadow boxing than on a proper assessment of where the revenue has gone.
  We were promised that the Treasury had undertaken a thorough review and that we would be informed where the money was going—whether it was missing because of
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  avoidance, inefficiency, growth in the shadow economy, a fundamental problem with the tax base or, as the hon. Member for Fulham suggested, a cyclical problem. No such report is being made available.
  The Government's problem is that, in pursuing anti-avoidance measures, they are in danger of creating more opportunities for avoidance to take place. The whole nature of avoidance is that we do not know where the money is because, if we did, we would have the legislation to ensure that that was not exploited.
  Without a proper assessment of where that almost £3.5 billion has gone, the dangers mentioned by the hon. Member for Gloucester about the inefficiencies of the system are likely to cause greater problems. Clause 37 is the second attempt to deal with the abuse of lease and leaseback arrangements. A statutory instrument on that in 1994 seems to have been totally inaccurate and did not properly target the issue. There is also a problem about clause 31 on the aggregation of businesses.
  I shall not state what the Chief Secretary said I would, that the ideas in this section of the Bill were ours. Columns 694–96 of the Committee Hansards of 9 and 14 March 1995 show that we warned the Government that if they persisted in cuts imposed by a fundamental expenditure review on the Inland Revenue and especially on Customs and Excise there would not be enough properly trained staff to ensure that revenue was collected. The then Paymaster General, the right hon. Member for Wells (Mr. Heathcoat-Amory), said:
  "Customs and Excise can maintain—indeed, improve—its output, even with fewer staff."—[Official Report, Standing Committee D, 14 March 1995; c. 699.]
  In our debates on the Bill we have discovered that that is not the case but that we need more staff who will be charged with the responsibility of finding the revenue. That is another example of the Government's sheer incompetence.
  A Government who cannot even defend their own tax base and who do not understand that they need the staff to protect that base must realise that they are in serious trouble. They cannot create jobs or give people security or address the problem of the decline in our manufacturing base. They cannot even run the departments that are central to the structure of government—those that collect the taxes. The Government have the cheek to tell us that we are inconsistent. They should stop bickering with us in the House and put their record to the electorate. We shall also put ours and I am confident that when the challenge comes the electorate will choose a Labour Government for security, jobs, investment and hope for the future of their families and their grandchildren.
  9.37 pm
  The Financial Secretary to the Treasury (Mr. Michael Jack): I thank the hon. Member for Bristol, South (Ms Primarolo) for her kind remarks about my being made a Privy Councillor. She was right when she said that that would be the only nice thing that she would say about the Government. The debate has confirmed that Labour can only criticise, has no serious constructive ideas and is not prepared in the fierce heat of debate in the Chamber to put any of their policies or ideas to the test. That shows that the Opposition are frightened to expose their thoughts to public view and debate.
  This useful debate has enabled us to cover the principal themes of the Budget and the Bill. We have demonstrated that we have clear aims for the economy and the tax

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  system and that we are achieving them. The principal Budget themes with which the debate and the Finance Bill deal are about sustaining an economy that is regarded by international commentators and by our commercial rivals as a Rolls-Royce economy. My right hon. and learned Friend the Chancellor recently returned from Japan with news of the envy with which the British economy and our performance are viewed from the other side of the world.
  The debate has also touched on the matter of keeping public borrowing on a firmly downward trend. However, the theme of living standards has been the common denominator in all the talk of tax and criticism of the Budget that we have heard from Opposition Members. In this debate, no hon. Member has successfully challenged our assertion that, in this Budget, we have achieved rising living standards—which will continue to rise, year after year. This Budget brings the basic rate of income tax to its lowest level for 60 years, increases personal allowances, freezes wine and beer duty and cuts spirits duty for the second consecutive year—a point made by the hon. Member for Gordon (Mr. Bruce) in his remarks on the benefits realised by the whisky industry. The hon. Member for Bristol, South mentioned, although in rather carping terms, that we have introduced further measures to secure the tax base by closing loopholes and ending reliefs that we now believe are inappropriate.
  Most importantly, the Budget demonstrates the continuation of our tax-cutting agenda, in which our clearly stated aim is to achieve a basic income tax rate of 20p for all, while not taking any risks with the economy. Tax cuts and rising incomes mean that a family on average earnings will be £20 a week better off next year than at the time of the most recent general election. Prudent management of the public finances backs up that agenda, because we have achieved decreasing borrowing with an overall tax burden that is no higher than at the time of that election. It is a Budget, and now a Finance Bill, that is built for lasting prosperity.
  Mr. MacShane: Will the Financial Secretary confirm that the burden of taxation is higher now than in 1992?
  Mr. Jack: I can confirm that the burden of taxation in the next financial year will be no greater than it was at the beginning of the most recent general election. The hon. Gentleman—who claims to be an economic literate—fails to understand that further figures in the Red Book demonstrate the simple proposition that as people earn more, they pay more tax.
  I should now like to reply to the speeches made by my right hon. and hon. Friends in this debate. In the telling speech of my hon. Friend the Member for Havant (Mr. Willetts), he rightly drew our attention to the Labour party's £30 billion of spending pledges. The hon. Member for Edinburgh, Central (Mr. Darling) seemed to wriggle very hard when he said that Labour's pledges were not pledges but something else—perhaps an eternal wish list. However, some people who claim to be supporters of the Opposition see matters rather differently. On the matter
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  of Labour's pledge on teacher's sabbaticals, for example, Doug McAvoy said:
  "Well I think it's been a commitment of David Blunkett's for some time and he sees it as a means by which teachers can be updated, they can be retrained and reinvigorated into the job."
  Ms Primarolo: Will the Minister give way?
  Mr. Jack: Not at this point; I am making an important point about the matter of a pledge. The point underpins the argument made by my hon. Friend the Member for Havant, and it makes it very clear to the House and the public that, despite what the Opposition say, one would have to pay a £30 billion bill to meet the pledges of the Labour party.
  Ms Primarolo: On the issue of pledges, could the Financial Secretary explain to us why, on page 88 of the Red Book, under "Total taxes and NICs", it states that, for 1992–93, the total take was 34¼ per cent., but that, for 1997–98, it will be 36¼ per cent.? Is that not a rise?
  Mr. Jack: It is remarkable that, as soon as we hit home with the cost of a Labour Government, Labour Members change their line of attack.
  Ms Primarolo: Answer the question.
  Mr. Jack: I will deal with the point. As the hon. Lady said, I pointed out a moment ago, as have all my right hon. and hon. Friends, that as people earn more, the amount of tax taken in the economy increases.
  Ms Primarolo rose—
  Mr. Jack: I will not give way on that point because I want to make some progress.
  The percentage of tax burden in this financial year will be the same as it was in the year of the last general election.
  We have seen the way in which the Opposition reacted to the points on public expenditure raised by my hon. Friend the Member for Havant. If that causes them so many problems, let me turn to another point raised in the debate by my hon. Friend the Member for Havant—the windfall tax.
  None of what the Opposition said gave us any insight into how much people will pay, who will pay and how the tax will be levied. On the central question of the legal opinion obtained by the organisation Aims for Industry we got no satisfaction from the Opposition. They did not tell us about the basis on which they say that the tax could be sustained. The Opposition may not have had a chance to see that advice, although it is in the public domain. I will do a deal with the right hon. Member for Dunfermline, East (Mr. Brown) and his hon. Friends. For greater accuracy I have obtained a copy of the advice and I am prepared to make it available to them with the proviso that they make public the advice in which they put so much confidence. If they do not make that advice available, we will know that it is wanting, that the tax will be non-existent and that there will be a considerable hole in Labour's finances.
  My hon. Friend the Member for Havant went on to tell us about the strengths of the British economy and he was absolutely right. All we heard from the Opposition were

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  carping and negative comments about the performance of the British economy. I want to pick one example of an article in the Financial Times. The—
  Mr. Alex Salmond: On a point of order, Mr. Deputy Speaker. Is it appropriate for a Minister to refer to a document that he says he will make conditionally available and not put in the Library of the House as is the normal procedure?
  Mr. Deputy Speaker: That is a matter for debate.
  Mr. Jack: I am prepared to make it available to the hon. Member for Banff and Buchan (Mr. Salmond). I was trying to elicit some facts from the Opposition for the benefit of the House, but they have remained totally silent. We can draw our own conclusions from that.
  The Bosch-Siemens company made clear its view on the competitiveness and excellence of the British economy when it pointed out that it was the company's wish to increase the purchases of white goods from this country because of our
  "low wage costs and flexible working record."
  That is a simple testament to the excellence of the supply-side reforms that the Government have introduced, our tax policies, the competitiveness of the British economy and the high regard in which we are held by the rest of Europe. The Finance Bill delivers more of that.
  My hon. Friend the Member for Stamford and Spalding (Mr. Davies) unmasked the true spirit of the Labour party. He pointed out that it is a party of taxers which still believes in devaluation and can see nothing but state investment. He made those points tellingly. I can tell him that we have contained the growth in social security, to which he also referred, to a level that we can afford. One of the themes that underpins this Finance Bill and the Budget is the control of our public finances.
  My hon. Friend the Member for Milton Keynes, South-West (Mr. Legg) made some telling points about the real economy about which we have heard so little from the Opposition. I was delighted that he welcomed that part of the Bill which enacts his suggestion from last year's consideration on the subject of charities and their receipts from their trading enterprises. I am glad that we have been able to incorporate that into the Bill. I was also grateful for his support on borrowing and inflation.
  My hon. Friend the Member for Bournemouth, West (Mr. Butterfill) made some important points about small businesses. I was grateful to him for pointing out why this was the best Budget for small businesses for a decade. He was entirely right.
  I should like to take up my hon. Friend's point about long-life assets and the aircraft industry. We consider that case to be different from the need to encourage the burgeoning railway industry and we recognise some of the real problems for commercial shipping. I cannot offer my hon. Friend the comfort that he sought, but I am grateful to him for making that point.
  My right hon. Friend the Member for City of London and Westminster, South (Mr. Brooke) and my hon. Friend the Member for Gloucester (Mr. French), as well as my hon. Friend the Member for Bournemouth, West, raised
  222
  concerns about value added tax and property. I confirm that Customs and Excise has already had several meetings with interested parties on that point. My hon. Friend the Exchequer Secretary will have further meetings on that next week. I also congratulate my hon. Friend the Member for Gloucester on his detailed analysis of the Bill. We shall study carefully his comments on several issues relating to VAT.
  My hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) made a characteristic speech, drawing the attention of the House to important aspects of monetary policy, pointing out that the Opposition's monetary committee-type proposals were not worth the paper that they were printed on. My hon. Friend the Member for Northampton, North (Mr. Marlow) reminded us clearly that at the heart of every Labour Member is a desire to raise taxes and spend more. As the Bill confirms, we Conservatives are intuitively tax cutters.[Interruption.] Labour Members may laugh, but while they have chastised the Conservatives for what they call 22 tax increases, I remind the House of the 25 tax decreases, among others, that we have made.
  In dealing with the contributions from Opposition Members, I pay public tribute to the hon. Member for Barnsley, East (Mr. Ennis), who made his maiden speech in what I believe will be a characteristically direct fashion. He talked about the traditions and needs of his community in Barnsley and rightly paid tribute to our former colleague, Terry Patchett. When the hon. Gentleman talked about the Grimethorpe band, one could almost hear it playing in the background. We now know the secret of his success, which was to keep it in the family. However, there is a clear message from the Budget and the Finance Bill that I want him to take back to all the members of his family and all his new constituents: a family on average earnings will be £370 better off this year as a result of the Budget. That is an incorruptible message coming out of our considerations.
  I remember thanking the hon. Member for Gordon for his contribution on the reductions that we have made to spirit duty. I remind him, too, of the rising living standards to which I have attested.
  The hon. Member for Upper Bann (Mr. Trimble) made some important points about the Northern Ireland economy and I shall certainly draw to the attention of my right hon. and learned Friend the Secretary of State for Northern Ireland some of the local points that he made, particularly about education. We shall give careful consideration to his comments on the air passenger duty and the insurance premium tax. I shall also look into some of his concerns about the private finance initiative because, as he knows, I went to Belfast specifically to encourage developments in that respect. I am grateful to him for mentioning that point.
  The shadow Chief Secretary spoke in support of the Opposition amendment. At no point in that speech did we hear any rebuttal of the central point at the heart of the Finance Bill: the increase in this country's living standards. Living standards have not just increased this year. Let us look at the Government's record. Since the last general election, the average family on average earnings is £100 a week better off in real terms as a result of the Government's stewardship of the economy.
  The right hon. Member for Dunfermline, East needs to refresh his memory about some of the 25 tax decreases. Personal allowances rose by £240 in the 1995 Budget and

  223
  the basic limit was raised by £1,200. In the 1996 Budget, the basic rate of income tax was cut to 23p. I could go on. We have fulfilled our pledges to resume a downward path concerning taxation.
  The right hon. Member for Dunfermline, East started out by trying to criticise the Government over matters connected with the council tax, insurance premium tax, airport duty and profit-related pay, but shied right away from telling the House the truth about his party's real policy. In debates on the Finance Bill, he must come clean with the House of Commons and the wider public instead of just criticising and tell us about his alternatives ideas. It is easy to criticise but much more difficult to be constructive.
  I remind the right hon. Member for Dunfermline, East that the total net wealth of the personal sector has doubled in real terms and net financial wealth has risen almost fourfold in real terms since 1979. I remind the hon. Member for Bristol, South that research by the independent Institute of Fiscal Studies shows that the spending of the poorest 10th of households, to which she referred, has increased by 14 per cent. since 1979. That rebuts some of the claims that she made.
  On investing in skills, the Bill contains some important measures that deal with training. One in three school leavers go on to university in this country—one of the highest rates in Europe. Last year, business spent £10.5 billion on training, and 95 per cent. of businesses forecast that they will increase or maintain the present amount spent on training. That would not be possible if we were not able through our stewardship of the economy to have competitive industry.
  If Opposition Members want to know the facts about the support that we are giving people to get back to work, I urge them to look at the 46th edition of "The UK at Work: Key Facts," which lists programme after programme designed to get people back to work. Such programmes have returned 768,000 people to the labour force over the past four years. That figure is from the labour force survey.
  The hon. Member for Edinburgh, Central mentioned profit-related pay. Perhaps I might refresh his memory on what his right hon. Friend the Member for Sedgefield (Mr. Blair) said—[Interruption.]
  Madam Speaker: Order. The House must come to order. I cannot hear the Minister.
  Mr. Jack: The right hon. Member for Sedgefield said:
  "We intend to vote against the general principle of profit-related pay".—[Official Report, 14 July 1987; Vol. 119, c. 981.]
  The hon. Member for Edinburgh, Central had better re-examine very carefully what he said to the House earlier in the light of what his now leader said in 1987.
  The amendment that the Opposition ask the House to support can have been produced only on a bad Sunday in Islington over an equally bad bottle of wine. It bears no relation to this country's economy, which is now the fastest growing major economy in western Europe. That growth is
  "set to continue next year and the year after."
  Those are not my words; they are the words of the Organisation for Economic Co-operation and Development.
  The Labour party does not see the reality of rising growth, falling inflation, reduced unemployment, tight control over public spending and an economy that has
  224
  been well managed. Our public finances are in excellent order. Whole economy investment is forecast to go up by 6 per cent. We remain the number one site for inward investment in Europe and people are showing great confidence in our economy. The Finance Bill, with the work that it will do to secure the tax base, is a proper basis on which to go forward and to put to the British people the proposition that the Government have the measure of the British economy and will continue to deliver rising living standards and that the Labour party presents a threat to that picture.
  Question put, That the amendment be made:—
  The House divided: Ayes 287, Noes 322.

  Division No. 37]

  [9.59 pm

  AYES

  Abbott, Ms Diane

  Cook, Robin (Livingston)

  Adams, Mrs Irene

  Corbett, Robin

  Ainger, Nick

  Corbyn, Jeremy

  Ainsworth, Robert (Cov'try NE)

  Corston, Ms Jean

  Allen, Graham

  Cousins, Jim

  Alton, David

  Cox, Tom

  Anderson, Donald (Swansea E)

  Cummings, John

  Anderson, Ms Janet (Ros'dale)

  Cunliffe, Lawrence

  Armstrong, Ms Hilary

  Cunningham, Jim (Cov'try SE)

  Ashdown, Paddy

  Dafis, Cynog

  Ashton, Joseph

  Dalyell, Tam

  Austin-Walker, John

  Darling, Alistair

  Barnes, Harry

  Davidson, Ian

  Barron, Kevin

  Davies, Bryan (Oldham C)

  Battle, John

  Davies, Chris (Littleborough)

  Bayley, Hugh

  Davies, Ron (Caerphilly)

  Beckett, Mrs Margaret

  Davis, Terry (B'ham Hodge H)

  Beith, A J

  Denham, John

  Bell, Stuart

  Dewar, Donald

  Benn, Tony

  Dixon, Don

  Bennett, Andrew F

  Dobson, Frank

  Benton, Joe

  Donohoe, Brian H

  Bermingham, Gerald

  Dowd, Jim

  Berry, Roger

  Dunwoody, Mrs Gwyneth

  Betts, Clive

  Eagle, Ms Angela

  Blair, Tony

  Eastham, Ken

  Blunkett, David

  Ennis, Jeff

  Boateng, Paul

  Etherington, Bill

  Bradley, Keith

  Evans, John (St Helens N)

  Bray, Dr Jeremy

  Ewing, Mrs Margaret

  Brown, Gordon (Dunfermline E)

  Fatchett, Derek

  Brown, Nicholas (Newcastle E)

  Faulds, Andrew

  Bruce, Malcolm (Gordon)

  Field, Frank (Birkenhead)

  Burden, Richard

  Fisher, Mark

  Byers, Stephen

  Flynn, Paul

  Caborn, Richard

  Foster, Derek

  Callaghan, Jim

  Foster, Don (Bath)

  Campbell, Mrs Anne (C'bridge)

  Foulkes, George

  Campbell, Menzies (Fife NE)

  Fraser, John

  Campbell, Ronnie (Blyth V)

  Fyfe, Mrs Maria

  Campbell-Savours, D N

  Galbraith, Sam

  Canavan, Dennis

  Gapes, Mike

  Cann, Jamie

  Garrett, John

  Chidgey, David

  George, Bruce

  Chisholm, Malcolm

  Gerrard, Neil

  Church, Ms Judith

  Gilbert, DrJohn

  Clapham, Michael

  Godman, Dr Norman A

  Clark, Dr David (S Shields)

  Godsiff, Roger

  Clarke, Eric (Midlothian)

  Golding, Mrs Llin

  Clarke, Tom (Monklands W)

  Gordon, Ms Mildred

  Clelland, David

  Grant, Bernie (Tottenham)

  Clwyd, Mrs Ann

  Griffiths, Nigel (Edinburgh S)

  Coffey, Ms Ann

  Griffiths, Win (Bridgend)

  Cohen, Harry

  Grocott, Bruce

  Connarty, Michael

  Gunnell, John

  Cook, Frank (Stockton N)

  Hain, Peter

  225

  Hall, Mike

  Meacher, Michael

  Hanson, David

  Meale, Alan

  Hardy, Peter

  Michael, Alun

  Harman, Ms Harriet

  Michie, Bill (Shef'ld Heeley)

  Harvey, Nick

  Michie, Mrs Ray (Argyll Bute)

  Hattersley, Roy

  Milburn, Alan

  Henderson, Doug

  Miller, Andrew

  Heppell, John

  Mitchell, Austin (Gt Grimsby)

  Hill, Keith (Streatham)

  Moonie, Dr Lewis

  Hinchliffe, David

  Morgan, Rhodri

  Hodge, Ms Margaret

  Morley, Elliot

  Hoey, Kate

  Morris, Ms Estelle (B'ham Yardley)

  Hogg, Norman (Cumbernauld)

  Morris, John (Aberavon)

  Home Robertson, John

  Mudie, George

  Hood, Jimmy

  Mullin, Chris

  Hoon, Geoffrey

  Murphy, Paul

  Howarth, Alan (Stratf'd-on-A)

  Nicholson, Miss Emma (W Devon)

  Howarth, George (Knowsley N)

  Oakes, Gordon

  Howells, Dr Kim

  O'Brien, Mike (N Warks)

  Hoyle, Doug

  O'Brien, William (Normanton)

  Hughes, Kevin (Doncaster N)

  O'Hara, Edward

  Hughes, Robert (Ab'd'n N)

  Olner, Bill

  Hughes, Roy (Newport E)

  O'Neill, Martin

  Hughes, Simon (Southwark)

  Orme, Stanley

  Hutton, John

  Pearson, Ian

  Ingram, Adam

  Pendry, Tom

  Jackson, Ms Glenda (Hampst'd)

  Pickthall, Colin

  Jackson, Mrs Helen (Hillsborough)

  Pike, Peter L

  Jamieson, David

  Pope, Greg

  Janner, Greville

  Powell, Sir Raymond (Ogmore)

  Jenkins, Brian D (SE Staffs)

  Prentice, Mrs B (Lewisham E)

  Johnston, Sir Russell

  Prentice, Gordon (Pendle)

  Jones, Barry (Alyn & D'side)

  Primarolo, Ms Dawn

  Jones, leuan Wyn (Ynys Môn)

  Purchase, Ken

  Jones, Dr L (B'ham Selly Oak)

  Quin, Ms Joyce

  Jones, Martyn (Clwyd SW)

  Radice, Giles

  Jones, Nigel (Cheltenham)

  Randall, Stuart

  Jowell, Ms Tessa

  Raynsford, Nick

  Kaufman, Gerald

  Reid, Dr John

  Keen, Alan

  Rendel, David

  Kennedy, Charles (Ross C & S)

  Robertson, George (Hamilton)

  Kennedy, Mrs Jane (Broadgreen)

  Robinson, Geoffrey (Cov'try NW)

  Khabra, Piara S

  Roche, Mrs Barbara

  Kilfoyle, Peter

  Rogers, Allan

  Kirkwood, Archy

  Rooker, Jeff

  Lestor, Miss Joan (Eccles)

  Rooney, Terry

  Lewis, Terry

  Ross, Ernie (Dundee W)

  Liddell, Mrs Helen

  Rowlands, Ted

  Litherland, Robert

  Ruddock, Ms Joan

  Livingstone, Ken

  Salmond, Alex

  Lloyd, Tony (Stretf'd)

  Sedgemore, Brian

  Llwyd, Elfyn

  Sheerman, Barry

  Loyden, Eddie

  Sheldon, Robert

  Lynne, Ms Liz

  Shore, Peter

  McAllion, John

  Simpson, Alan

  McAvoy, Thomas

  Skinner, Dennis

  McCartney, Ian (Makerf'ld)

  Smith, Andrew (Oxford E)

  Macdonald, Calum

  Smith, Chris (Islington S)

  McFall, John

  Smith, Llew (Blaenau Gwent)

  McKelvey, William

  Snape, Peter

  Mackinlay, Andrew

  Soley, Clive

  McLeish, Henry

  Spearing, Nigel

  Maclennan, Robert

  Spellar, John

  McNamara, Kevin

  Squire, Ms R (Dunfermline W)

  MacShane, Denis

  Steel, Sir David

  McWilliam, John

  Steinberg, Gerry

  Madden, Max

  Stevenson, George

  Maddock, Mrs Diana

  Stott, Roger

  Mahon, Mrs Alice

  Strang, Dr Gavin

  Mandelson, Peter

  Straw, Jack

  Marek, Dr John

  Sutcliffe, Gerry

  Marshall, David (Shettleston)

  Taylor, Mrs Ann (Dewsbury)

  Marshall, Jim (Leicester S)

  Taylor, Matthew (Truro)

  Martin, Michael J (Springburn)

  Thompson, Jack (Wansbeck)

  Martlew, Eric

  Thumham, Peter

  Maxton, John

  Timms, Stephen

  226

  Tipping, Paddy

  Wigley, Dafydd

  Touhig, Don

  Williams, Alan (Swansea W)

  Trickett, Jon

  Williams, Alan W (Carmarthen)

  Tyler, Paul

  Wilson, Brian

  Vaz, Keith

  Winnick, David

  Wise, Mrs Audrey

  Walker, Sir Harold

  Worthington, Tony

  Wallace,James

  Wray, Jimmy

  Walley, Ms Joan

  Wright, Dr Tony

  Wardell, Gareth (Gower)

  Young, David (Bolton SE)

  Wareing, Robert N

  Watson, Mike

  Tellers for the Ayes:

  Welsh, Andrew

  Mr. Jon Owen Jones and

  Wicks, Malcolm

  Mr. Dennis Turner.

  NOES

  Ainsworth, Peter (E Surrey)

  Coe, Sebastian

  Aitken, Jonathan

  Colvin, Michael

  Alexander, Richard

  Congdon, David

  Alison, Michael (Selby)

  Conway, Derek

  Allason, Rupert (Torbay)

  Coombs, Anthony (Wyre F)

  Amess, David

  Coombs, Simon (Swindon)

  Ancram, Michael

  Cope, Sir John

  Arbuthnot, James

  Cormack, Sir Patrick

  Arnold, Jacques (Gravesham)

  Couchman, James

  Arnold, Sir Thomas (Hazel G)

  Cran, James

  Ashby, David

  Currie, Mrs Edwina

  Aspinwall, Jack

  Curry, David

  Atkins, Robert

  Davies, Quentin (Stamf'd)

  Atkinson, David (Bour'mth E)

  Davis, David (Boothferry)

  Atkinson, Peter (Hexham)

  Day, Stephen

  Baker, Kenneth (Mole V)

  Deva, Nirj Joseph

  Baker, Sir Nicholas (N Dorset)

  Devlin, Tim

  Baldry, Tony

  Dicks, Terry

  Banks, Matthew (Southport)

  Dorrell, Stephen

  Banks, Robert (Harrogate)

  Douglas-Hamilton, Lord James

  Bates, Michael

  Dover, Den

  Batiste, Spencer

  Duncan, Alan

  Beggs, Roy

  Duncan Smith, Iain

  Bellingham, Henry

  Dunn, Bob

  Bendall, Vivian

  Durant, Sir Anthony

  Beresford, Sir Paul

  Dykes, Hugh

  Biffen, John

  Eggar, Tim

  Body, Sir Richard

  Elletson, Harold

  Bonsor, Sir Nicholas

  Emery, Sir Peter

  Booth, Hartley

  Evans, David (Welwyn Hatf'ld)

  Boswell, Tim

  Evans, Jonathan (Brecon)

  Bottomley, Peter (Eltham)

  Evans, Nigel (Ribble V)

  Bottomley, Mrs Virginia

  Evans, Roger (Monmouth)

  Bowden, Sir Andrew

  Evennett, David

  Bowis, John

  Faber, David

  Boyson, Sir Rhodes

  Fabricant, Michael

  Brazier, Julian

  Fenner, Dame Peggy

  Bright, Sir Graham

  Field, Barry (Isle of Wight)

  Brooke, Peter

  Fishburn, Dudley

  Brown, Michael (Brigg Cl'thorpes)

  Forman, Nigel

  Browning, Mrs Angela

  Forsyth, Michael (Stirling)

  Bruce, Ian (S Dorset)

  Forsythe, Clifford (S Antrim)

  Budgen, Nicholas

  Forth, Eric

  Burns, Simon

  Fowler, Sir Norman

  Burt, Alistair

  Fox, Dr Liam (Woodspring)

  Butcher, John

  Fox, Sir Marcus (Shipley)

  Butler, Peter

  Freeman, Roger

  Butterfill, John

  French, Douglas

  Carlisle, John (Luton N)

  Fry, Sir Peter

  Carlisle, Sir Kenneth (Linc'n)

  Gale, Roger

  Carrington, Matthew

  Gallie, Phil

  Carttiss, Michael

  Gardiner, Sir George

  Cash, William

  Garel-Jones, Tristan

  Channon, Paul

  Garnier, Edward

  Chapman, Sir Sydney

  Gill, Christopher

  Churchill, Mr

  Gillan, Mrs Cheryl

  Clappison, James

  Goodlad, Alastair

  Clark, Dr Michael (Rochf'd)

  Goodson-Wickes, Dr Charles

  Clarke, Kenneth (Rushcliffe)

  Gorman, Mrs Teresa

  Clifton-Brown, Geoffrey

  Gorst, Sir John

  227

  Grant, Sir Anthony (SW Cambs)

  Malone, Gerald

  Greenway, Harry (Ealing N)

  Mans, Keith

  Greenway, John (Ryedale)

  Marland, Paul

  Griffiths, Peter (Portsmouth N)

  Marlow, Tony

  Gummer, John

  Marshall, John (Hendon S)

  Hague, William

  Marshall, Sir Michael (Arundel)

  Hamilton, Sir Archibald

  Martin, David (Portsmouth S)

  Hamilton, Neil (Tatton)

  Mawhinney, Dr Brian

  Hampson, Dr Keith

  Mayhew, Sir Patrick

  Hanley, Jeremy

  Mellor, David

  Hannam, Sir John

  Merchant, Piers

  Hargreaves, Andrew

  Mitchell, Andrew (Gedling)

  Harris, David

  Mitchell, Sir David (NW Hants)

  Haselhurst, Sir Alan

  Moate, Sir Roger

  Hawkins, Nick

  Molyneaux, Sir James

  Hawksley, Warren

  Monro, Sir Hector

  Hayes, Jerry

  Montgomery, Sir Fergus

  Heald, Oliver

  Moss, Malcolm

  Heath, Sir Edward

  Needham, Richard

  Heathcoat-Amory, David

  Nelson, Anthony

  Hendry, Charles

  Neubert, Sir Michael

  Heseltine, Michael

  Newton, Tony

  Hicks, Sir Robert

  Nicholls, Patrick

  Higgins, Sir Terence

  Nicholson, David (Taunton)

  Hill, Sir James (Southampton Test)

  Norris, Steve

  Hogg, Douglas (Grantham)

  Onslow, Sir Cranley

  Horam, John

  Oppenheim, Phillip

  Hordern, Sir Peter

  Ottaway, Richard

  Howard, Michael

  Page, Richard

  Howell, David (Guildf'd)

  Paice, James

  Howell, Sir Ralph (N Norfolk)

  Patnick, Sir Irvine

  Hughes, Robert G (Harrow W)

  Patten, John

  Hunt, David (Wirral W)

  Pattie, Sir Geoffrey

  Hunt, Sir John (Ravensb'ne)

  Pawsey, James

  Hunter, Andrew

  Peacock, Mrs Elizabeth

  Hurd, Douglas

  Pickles, Eric

  Jack, Michael

  Porter, David

  Jackson, Robert (Wantage)

  Portillo, Michael

  Jenkin, Bernard (Colchester N)

  Powell, William (Corby)

  Jessel, Toby

  Rathbone, Tim

  Johnson Smith, Sir Geoffrey

  Redwood, John

  Jones, Gwilym (Cardiff N)

  Renton, Tim

  Jones, Robert B (W Herts)

  Richards, Rod

  Jopling, Michael

  Riddick, Graham

  Kellett-Bowman, Dame Elaine

  Rifkind, Malcolm

  Key, Robert

  Robathan, Andrew

  King, Tom

  Roberts, Sir Wyn

  Kirkhope, Timothy

  Robertson, Raymond S (Ab'd'n S)

  Knapman, Roger

  Robinson, Mark (Somerton)

  Knight, Mrs Angela (Erewash)

  Roe, Mrs Marion

  Knight, Greg (Derby N)

  Rowe, Andrew

  Knight, Dame Jill (Edgbaston)

  Rumbold, Dame Angela

  Knox, Sir David

  Ryder, Richard

  Kynoch, George

  Sackville, Tom

  Lait, Mrs Jacqui

  Sainsbury, Sir Timothy

  Lamont, Norman

  Scott, Sir Nicholas

  Lang, Ian

  Shaw, David (Dover)

  Lawrence, Sir Ivan

  Shaw, Sir Giles (Pudsey)

  Legg, Barry

  Shephard, Mrs Gillian

  Leigh, Edward

  Shepherd, Sir Colin (Heref'd)

  Lennox-Boyd, Sir Mark

  Shepherd, Richard (Aldridge)

  Lester, Sir Jim (Broxtowe)

  Shersby, Sir Michael

  Lidington, David

  Sims, Sir Roger

  Lilley, Peter

  Skeet, Sir Trevor

  Lloyd, Sir Peter (Fareham)

  Smith, Sir Dudley (Warwick)

  Lord, Michael

  Smith, Tim (Beaconsf'ld)

  Luff, Peter

  Smyth, Rev Martin (Belfast S)

  Lyell, Sir Nicholas

  Soames, Nicholas

  MacGregor, John

  Speed, Sir Keith

  MacKay, Andrew

  Spencer, Sir Derek

  Maclean, David

  Spicer, Sir Jim (W Dorset)

  McLoughlin, Patrick

  Spicer, Sir Michael (S Worcs)

  McNair-Wilson, Sir Patrick

  Spink, Dr Robert

  Madel, Sir David

  Spring, Richard

  Maitland, Lady Olga

  Sproat, Iain

  Major, John

  Squire, Robin (Hornchurch)

  228

  Stanley, Sir John

  Viggers, Peter

  Steen, Anthony

  Waldegrave, William

  Stephen, Michael

  Walden, George

  Stern, Michael

  Walker, Bill (N Tayside)

  Stewart, Allan

  Waller, Gary

  Streeter, Gary

  Ward, John

  Sumberg, David

  Wardle, Charles (Bexhill)

  Sweeney, Walter

  Waterson, Nigel

  Sykes, John

  Watts, John

  Tapsell, Sir Peter

  Wells, Bowen

  Taylor, Ian (Esher)

  Wheeler, Sir John

  Taylor, John M (Solihull)

  Whitney, Sir Raymond

  Taylor, Sir Teddy

  Whittingdale, John

  Temple-Morris, Peter

  Widdecombe, Miss Ann

  Thomason, Roy

  Wiggin, Sir Jerry

  Thompson, Sir Donald (Calder V)

  Wilkinson, John

  Thompson, Patrick (Norwich N)

  Willetts, David

  Thornton, Sir Malcolm

  Wilshire, David

  Townend, John (Bridlington)

  Winterton, Mrs Ann (Congleton)

  Townsend, Sir Cyril (Bexl'yh'th)

  Winterton, Nicholas (Macclesf'ld)

  Tracey, Richard

  Wolfson, Mark

  Tredinnick, David

  Yeo, Tim

  Trend, Michael

  Young, Sir George

  Trimble, David

  Trotter, Neville

  Tellers for the Noes:

  Twinn, Dr Ian

  Mr. Timothy Wood and

  Vaughan, Sir Gerard

  Mr. Gyles Brandreth.

  Question accordingly negatived.
  Main Question put forthwith, pursuant to Standing Order No. 60 (Amendment on Second or Third Reading):—
  The House divided: Ayes 314, Noes 30.

  Division No. 38]

  [10.16 pm

  AYES

  Ainsworth, Peter (E Surrey)

  Brown, Michael (Brigg Cl'thorpes)

  Aitken, Jonathan

  Browning, Mrs Angela

  Alexander, Richard

  Bruce, Ian (S Dorset)

  Alison, Michael (Selby)

  Budgen, Nicholas

  Allason, Rupert (Torbay)

  Burns, Simon

  Amess, David

  Burt, Alistair

  Ancram, Michael

  Butcher, John

  Arbuthnot, James

  Butler, Peter

  Arnold, Jacques (Gravesham)

  Butterfill, John

  Arnold, Sir Thomas (Hazel G)

  Carlisle, John (Luton N)

  Ashby, David

  Carlisle, Sir Kenneth (Linc'n)

  Aspinwall, Jack

  Carrington, Matthew

  Atkins, Robert

  Carttiss, Michael

  Atkinson, David (Bour'mth E)

  Cash, William

  Atkinson, Peter (Hexham)

  Channon, Paul

  Baker, Kenneth (Mole V)

  Chapman, Sir Sydney

  Baker, Sir Nicholas (N Dorset)

  Churchill, Mr

  Baldry, Tony

  Clappison, James

  Banks, Matthew (Southport)

  Clark, Dr Michael (Rochf'd)

  Banks, Robert (Harrogate)

  Clarke, Kenneth (Rushcliffe)

  Bates, Michael

  Clifton-Brown, Geoffrey

  Batiste, Spencer

  Coe, Sebastian

  Bellingham, Henry

  Colvin, Michael

  Bendall, Vivian

  Congdon, David

  Beresford, Sir Paul

  Conway, Derek

  Biffen, John

  Coombs, Anthony (Wyre F)

  Body, Sir Richard

  Coombs, Simon (Swindon)

  Bonsor, Sir Nicholas

  Cope, Sir John

  Booth, Hartley

  Couchman, James

  Boswell, Tim

  Cran, James

  Bottomley, Peter (Eltham)

  Currie, Mrs Edwina

  Bottomley, Mrs Virginia

  Curry, David

  Bowden, Sir Andrew

  Davies, Quentin (Stamf'd)

  Bowis, John

  Davis, David (Boothferry)

  Boyson, Sir Rhodes

  Day, Stephen

  Brazier, Julian

  Deva, Nirj Joseph

  Bright, Sir Graham

  Devlin, Tim

  Brooke, Peter

  Dorrell, Stephen

  229

  Douglas-Hamilton, Lord James

  Jack, Michael

  Dover, Den

  Jackson, Robert (Wantage)

  Duncan, Alan

  Jenkin, Bernard (Colchester N)

  Duncan Smith, Iain

  Jessel, Toby

  Dunn, Bob

  Johnson Smith, Sir Geoffrey

  Durant, Sir Anthony

  Jones, Gwilym (Cardiff N)

  Dykes, Hugh

  Jones, Robert B (W Herts)

  Eggar, Tim

  Jopling, Michael

  Elletson, Harold

  Kellett-Bowman, Dame Elaine

  Emery, Sir Peter

  Key, Robert

  Evans, David (Welwyn Hatf'ld)

  King, Tom

  Evans, Jonathan (Brecon)

  Kirkhope, Timothy

  Evans, Nigel (Ribble V)

  Knapman, Roger

  Evans, Roger (Monmouth)

  Knight, Mrs Angela (Erewash)

  Evennett, David

  Knight, Greg (Derby N)

  Faber, David

  Knight, Dame Jill (Edgbaston)

  Fabricant, Michael

  Knox, Sir David

  Fenner, Dame Peggy

  Kynoch, George

  Field, Barry (Isle of Wight)

  Lait, Mrs Jacqui

  Fishburn, Dudley

  Lamont, Norman

  Forman, Nigel

  Lang, Ian

  Forsyth, Michael (Stirling)

  Lawrence, Sir Ivan

  Forth, Eric

  Legg, Barry

  Fowler, Sir Norman

  Leigh, Edward

  Fox, Dr Liam (Woodspring)

  Lennox-Boyd, Sir Mark

  Fox, Sir Marcus (Shipley)

  Lester, Sir Jim (Broxtowe)

  Freeman, Roger

  Lidington, David

  French, Douglas

  Lilley, Peter

  Fry, Sir Peter

  Lloyd, Sir Peter (Fareham)

  Gale, Roger

  Lord, Michael

  Gallie, Phil

  Luff, Peter

  Gardiner, Sir George

  Lyell, Sir Nicholas

  Garel-jones, Tristan

  MacGregor, John

  Garnier, Edward

  MacKay, Andrew

  Gill, Christopher

  Maclean, David

  Gillan, Mrs Cheryl

  McLoughlin, Patrick

  Goodlad, Alastair

  McNair-Wilson, Sir Patrick

  Goodson-Wickes, Dr Charles

  Madel, Sir David

  Gorman, Mrs Teresa

  Maitland, Lady Olga

  Gorst, Sir John

  Major, John

  Grant, Sir Anthony (SW Cambs)

  Malone, Gerald

  Greenway, Harry (Ealing N)

  Mans, Keith

  Greenway, John (Ryedale)

  Marland, Paul

  Griffiths, Peter (Portsmouth N)

  Marlow, Tony

  Gummer, John

  Marshall, John (Hendon S)

  Hague, William

  Marshall, Sir Michael (Arundel)

  Hamilton, Sir Archibald

  Martin, David (Portsmouth S)

  Hamilton, Neil (Tatton)

  Mawhinney, Dr Brian

  Hampson, Dr Keith

  Mayhew, Sir Patrick

  Hanley, Jeremy

  Mellor, David

  Hannam, Sir John

  Merchant, Piers

  Hargreaves, Andrew

  Mitchell, Andrew (Gedling)

  Harris, David

  Mitchell, Sir David (NW Hants)

  Haselhurst, Sir Alan

  Moate, Sir Roger

  Hawkins, Nick

  Monro, Sir Hector

  Hawksley, Warren

  Montgomery, Sir Fergus

  Hayes, Jerry

  Moss, Malcolm

  Heald, Oliver

  Needham, Richard

  Heath, Sir Edward

  Nelson, Anthony

  Heathcoat-Amory, David

  Neubert, Sir Michael

  Hendry, Charles

  Newton, Tony

  Heseltine, Michael

  Nicholls, Patrick

  Hicks, Sir Robert

  Nicholson, David (Taunton)

  Higgins, Sir Terence

  Norris, Steve

  Hill, Sir James (Southampton Test)

  Onslow, Sir Cranley

  Hogg, Douglas (Grantham)

  Oppenheim, Phillip

  Horam, John

  Ottaway, Richard

  Hordern, Sir Peter

  Page, Richard

  Howard, Michael

  Paice, James

  Howell, David (Guildf'd)

  Patnick, Sir Irvine

  Howell, Sir Ralph (N Norfolk)

  Patten, John

  Hughes, Robert G (Harrow W)

  Pattie, Sir Geoffrey

  Hunt, David (Wirral W)

  Pawsey, James

  Hunt, Sir John (Ravensb'ne)

  Peacock, Mrs Elizabeth

  Hunter, Andrew

  Pickles, Eric

  Hurd, Douglas

  Porter, David

  230

  Portillo, Michael

  Sweeney, Walter

  Powell, William (Corby)

  Sykes, John

  Rathbone, Tim

  Tapsell, Sir Peter

  Redwood, John

  Taylor, Ian (Esher)

  Renton, Tim

  Taylor, John M (Solihull)

  Richards, Rod

  Taylor, Sir Teddy

  Riddick, Graham

  Temple-Morris, Peter

  Rifkind, Malcolm

  Thomason, Roy

  Robathan, Andrew

  Thompson, Sir Donald (Calder V)

  Roberts, Sir Wyn

  Thompson, Patrick (Norwich N)

  Robertson, Raymond S (Ab'd'n S)

  Thornton, Sir Malcolm

  Robinson, Mark (Somerton)

  Townend, John (Bridlington)

  Roe, Mrs Marion

  Townsend, Sir Cyril (Bexl'yh'th)

  Rowe, Andrew

  Tracey, Richard

  Rumbold, Dame Angela

  Tredinnick, David

  Ryder, Richard

  Trend, Michael

  Sackville, Tom

  Trotter, Neville

  Sainsbury, Sir Timothy

  Twinn, Dr Ian

  Scott, Sir Nicholas

  Vaughan, Sir Gerard

  Shaw, David (Dover)

  Viggers, Peter

  Shaw, Sir Giles (Pudsey)

  Waldegrave, William

  Shephard, Mrs Gillian

  Walden, George

  Shepherd, Sir Colin (Heref'd)

  Walker, Bill (N Tayside)

  Shepherd, Richard (Aldridge)

  Waller, Gary

  Shersby, Sir Michael

  Ward, John

  Sims, Sir Roger

  Wardle, Charles (Bexhill)

  Skeet, Sir Trevor

  Waterson, Nigel

  Smith, Sir Dudley (Warwick)

  Watts, John

  Smith, Tim (Beaconsf'ld)

  Wheeler, Sir John

  Soames, Nicholas

  Whitney, Sir Raymond

  Speed, Sir Keith

  Whittingdale, John

  Spencer, Sir Derek

  Widdecombe, Miss Ann

  Spicer, Sir Jim (W Dorset)

  Wiggin, Sir Jerry

  Spicer, Sir Michael (S Worcs)

  Wilkinson, John

  Spink, Dr Robert

  Willetts, David

  Spring, Richard

  Wilshire, David

  Sproat, Iain

  Winterton, Mrs Ann (Congleton)

  Squire, Robin (Hornchurch)

  Winterton, Nicholas (Macclesf'ld)

  Stanley, Sir John

  Wolfson, Mark

  Steen, Anthony

  Yeo, Tim

  Stephen, Michael

  Young, Sir George

  Stern, Michael

  Stewart, Allan

  Tellers for the Ayes:

  Streeter, Gary

  Mr. Timothy Wood and

  Sumberg, David

  Mr. Gyles Brandreth.

  NOES

  Alton, David

  Lynne, Ms Liz

  Ashdown, Paddy

  Maclennan, Robert

  Beith, A J

  Maddock, Mrs Diana

  Bruce, Malcolm (Gordon)

  Michie, Mrs Ray (Argyll Bute)

  Campbell, Menzies (Fife NE)

  Nicholson, Miss Emma (W Devon)

  Canavan, Dennis

  Rendel, David

  Chidgey, David

  Salmond, Alex

  Davies, Chris (Littleborough)

  Skinner, Dennis

  Ewing, Mrs Margaret

  Taylor, Matthew (Truro)

  Foster, Don (Bath)

  Thurnham, Peter

  Harvey, Nick

  Tyler, Paul

  Hughes, Simon (Southwark)

  Wallace, James

  Johnston, Sir Russell

  Wigley, Dafydd

  Jones, Nigel (Cheltenham)

  Kennedy, Charles (Ross C & S)

  Tellers for the Noes:

  Kirkwood, Archy

  Mr. Andrew Welsh and

  Llwyd, Elfyn

  Mr. Cynog Dafis.

  Question accordingly agreed to.
  Bill read a Second time.
  Motion made, and Question put, pursuant to Standing Order No. 61 (Committal of Bills),
  That—

  (1) Clauses 40, 62, 68, 82 and 92 and Schedules 7 and 13 be committed to a Committee of the whole House;

  231

  (2) the remainder of the Bill be committed to a Standing Committee; and

  (3) when the provisions of the Bill considered, respectively, by the Committee of the whole House and by the Standing Committee have been reported to the House, the Bill be proceeded with as if the Bill had been reported as a whole to the House from the Standing Committee.—[Mr. Jack.]

  Question agreed to.
  Committee tomorrow.

Business of the House
10.31 pm
The Lord President of the Council and Leader of the House of Commons (Mr. Tony Newton): With permission, Madam Speaker, I should like to make a short business statement.
Following discussions through the usual channels, the business for tomorrow afternoon will now be as follows:
Conclusion of remaining stages of the Crime (Sentences) Bill.
The business previously announced for tomorrow will be taken on a later occasion.
I shall, of course, make an announcement of forthcoming business, as usual, on Thursday.
Mrs. Ann Taylor: I thank the Leader of the House for that announcement. Some of us on the Opposition Benches are somewhat surprised that the Bill could not be completed last night, but we shall endeavour to ensure that it reaches the statute book at the earliest possible time, although, of course, it is the responsibility of every Member of the House to scrutinise legislation as fully as is necessary.
Mr. Newton: I merely express surprise at the hon. Lady's surprise.
Mr. Andrew Miller: Has the Leader of the House, recognising the importance of the change of business tomorrow, had the opportunity to raise with the Secretary of State for Health the questions that have been asked about cuts in acute services?
Madam Speaker: Order. This is a narrow business statement.

Business of the House

  EUROPEAN COMMUNITY DOCUMENTS
  Madam Speaker: With permission, I shall put together the motions relating to European Community documents.
  Motion made, and Question put forthwith, pursuant to Standing Order No. 102(9) (European Standing Committees),

  EUROPEAN COMMUNITY DOCUMENTS
    THE INFORMATION SOCIETY: PRIORITIES AND IMPLICATIONS
    That this House takes note of European Community Document Nos. 9795/96 ADDI relating to Commission Communications on The Information Society: from Corfu to Dublin—the new emerging priorities and The Implications of the Information Society for European Union Policies—Preparing the Next Steps, and 9795/96 ADD2, the Commission Green Paper, Living and Working in the Information Society: People First; shares the Commission's assessment of the importance of the development of the Information Society; welcomes the Commission's recognition that the development of new technologies provides substantial opportunities for new employment; and endorses the Government's view that the Information Society should be allowed to develop flexibly and without unnecessary and potentially burdensome legislation, believing that Government has a positive role in providing vision, direction and leadership to unlock the full potential of the Information Society.

    DEVELOPMENT OF THE SOCIAL DIALOGUE
    That this House takes note of European Community Document No. 10305/96, relating to the development of the social dialogue at Community level; supports the Government's view that the dialogue must remain a voluntary process which does not in any way bind those who do not participate; and considers that the provisions in the Agreement on Social Policy which give the social dialogue a role in the legislative process for other Member States would be entirely inappropriate for the United Kingdom.[Mr. Wells.]
    Question agreed to.

    SCOTTISH GRAND COMMITTEE
    Motion made, and Question put forthwith, pursuant to Standing Order No. 94H (Scottish Grand Committee (Sittings)),
    That the Order of the House [6th November] shall be amended in paragraph (5), by leaving out the word 'Scotland' and inserting the words 'the Victoria Hall, Selkirk'.—[Mr. Wells.]
    Question agreed to.

    Local Government Finance (Buckinghamshire)
    Motion made, and Question proposed, That this House do now adjourn. —[Mr. Wells.]
    10.33 pm
    Mr. David Lidington: I am grateful for this opportunity to raise the subject of the local government settlement, as it affects Buckinghamshire county council, for the financial year 1997–98. I welcome in particular the fact that my hon. Friend the Member for Chesham and Amersham (Mrs. Gillan) is in her place. She is, within the inevitable limitations imposed by her ministerial duties, assiduous in representing the interests of her constituents and the wider interests of the county to the appropriate authorities.
    Buckinghamshire county council is an efficient and well-run local authority. It now faces difficult decisions about priorities, which are in large part the result of the creation of a separate unitary authority for the new city of Milton Keynes. The county council's record is a good one which combines good public services with prudent financial management. In terms of services, examination results in Buckinghamshire's schools are consistently among the best in the country. No fewer than nine schools in the county are figured in the chief inspector's published list of 200 which he singled out as the schools representing the best practice in the nation.
    As for social services, the number of home care hours provided by the county council has risen by a fifth over the past three years. The county has established a close partnership with the voluntary sector. For example, the Buckingham association for the blind and the Royal National Institute for Deaf People provide services for visually and hearing impaired people on behalf of the county's social services. The county museum at Aylesbury was named as the national heritage museum of the year in 1996.
    As one would expect, the county council has concentrated its expenditure on key services. Spending on schools over the past three financial years has risen from £148.8 million in 1994–95 to an estimated £155 million in the current financial year. Spending on social services follows a comparable pattern, increasing from £68 million in 1994–95 to an estimated £80 million in the present financial year.
    Such a record requires rigorous attention to priorities. Buckingham has found £4 million of efficiency savings in the current year and identified an additional £4 million for the next financial year, partly through contracting out services to the private sector. Its aim is to cut administration and management more than will be made necessary in any event as a consequence of local government reform and the establishment of a separate unitary authority in Milton Keynes.
    To take one department by way of example, a social services management review has cut £400,000 from administration costs over a full financial year. The library service secures no less than a fifth of its budget through income generation.
    The county council has struck a sensible balance between the interests of the service user and those of the council tax payer. The council tax level in

    235
    Buckinghamshire is less than that of every neighbouring authority. For example, the council tax for a band D home is £464.21, whereas in neighbouring Oxfordshire, controlled by the Labour party, the comparable council tax is £510.45. Buckinghamshire, through prudent housekeeping, has managed to retain money for balances and reserves when many other more profligate authorities have found themselves with extremely shallow pockets.
    The proposed local government reform will have a severe impact on this well-run authority. The same good principles that I have described will, of course, govern the setting of next year's budget. There is no denying, however, that reform of the local government structure will make life significantly more difficult for my constituents and those, for example, of my hon. Friend the Member for Beaconsfield (Mr. Smith), who I am pleased to see in his place and who represents areas in mid Bucks and south Bucks.
    Milton Keynes has about 29 per cent. of the population of Buckinghamshire at present, but on the provisional figures from the Department of the Environment it is being awarded 34 per cent. of the standard spending assessment and 37 per cent. of support from central Government via business rates and revenue support grant. Those simple facts knock a hole in the county council's finances.
    Those of us who represent areas outside Milton Keynes must acknowledge that there is huge support within that city—it extends across party political boundaries—for its own city government with a unitary council. We accept, too, that Ministers cannot pick and choose their favourite local authorities. They must apply the same distribution formula to every local authority in the country. Under that formula, Milton Keynes benefits because it is poorer than the rest of Buckinghamshire. There are more children in Milton Keynes than elsewhere in the county and more single parents. Therefore, in terms of needs factors identified in the distribution formula, it receives a disproportionately large share of the available money. In the rest of the county, that is seen as rough justice for Buckinghamshire, which has pursued a prudent financial course for many years.
    If the county council spent to its cap next year without using balances, it would mean a council tax increase of 12.5 per cent. If Milton Keynes did the same, it would mean a council tax cut of 7 per cent. It is true that the provisional settlement will allow the continuing Buckinghamshire county council to spend more in 1997–98 than in the current year. Having talked to the council's leadership, I know that its priorities will again be schools and social services. The county is looking hard at how to use its balances to improve the situation, and at how to cut back on lower priorities to save money for key services.
    Despite those principles, the council will have to make tough decisions, especially as rising school rolls and a growing number of elderly people place additional demands on service provision. I should add in passing that for Buckinghamshire, as for many other local authorities, an increase in teachers' pay, following the review body's decision, of much more than the rate of inflation would cause grave difficulties in planning the budget for the forthcoming financial year.
    Sensible people realise that the Government have no secret crock of gold from which to dispense extra largesse on demand. In 1997–98, the Government intend to pay out
    236
    to local councils more than £35 billion via the business rate income and revenue support grant. That sum is roughly equal to the entire budget of the national health service, and it is about one and a half times what we spent on defence. I accept that we cannot isolate local government spending from overall decisions about public finances.
    To increase central Government support for local councils by only 1 per cent. would, by my reckoning, cost more than £350 million. To set that in context, it is about the same as the cost of 10 new hospital building schemes, such as those presently planned for the South Buckinghamshire NHS trust and for Stoke Mandeville hospital. Unless the distribution formula is changed, there is no guarantee that Buckinghamshire will receive its fair share of any overall increase in spending next year or in subsequent years.
    I hope that my right hon. Friend—sorry, I am jumping the gun—I hope that my hon. Friend the Minister, before making his final decision, will consider carefully the division of money between Milton Keynes and the continuing county council in Buckinghamshire. On a specific and detailed point, I hope that he will impress on his colleagues in the Department for Education and Employment the case for including in the calculations the four schools that provide for more than 600 pupils, because those figures have somehow gone missing from the Department's official listing. In the absence of that data, the SSA calculation for Buckinghamshire assumed that there were no pupils at those schools. Getting that calculation right will be worth £1.5 million to the county council.
    I hope that my hon. Friend will encourage the shadow unitary authority in Milton Keynes to work with Buckinghamshire county council to dispose of surplus land and other capital assets as quickly as possible, so that some of the proceeds from such sales can be used to fund services in the forthcoming financial year. Until the change of heart that was signalled in the past week or two, Milton Keynes had proved reluctant to act in that respect, and any persuasive powers that my hon. Friend can bring to bear will be most welcome.
    In the medium term, I ask Environment Ministers to reconsider the composition of the SSA formula—I accept that it is too late for these points to be considered in the context of the 1997–98 financial year.
    Two factors in particular deserve attention. The first is sparsity. Not only Buckinghamshire but other continuing counties affected by the creation of new unitary authorities have been hit in the provisional calculations by the weight given in the distribution formula to urban needs rather than factors specific to rural areas, and giving more weight to that sparsity factor would be one way of addressing the disparity.
    Perhaps even more important is the need for the Government to implement the recommendations of Professor Elliot's independent inquiry into the area costs adjustment, which the Department commissioned. Had those proposals been in force, Buckinghamshire county council would have had an extra £7.5 million in 1997–98, which is equivalent to about 2.6 per cent. of the county's budget. Implementation of the report would also have benefited the Thames Valley police authority and Aylesbury Vale, Wycombe and Chiltern district councils, all of which provide services in my constituency.
    I hope that, with his characteristic robustness, my hon. Friend the Minister will not allow himself and his colleagues to be seduced by the blandishments of the

    237
    Labour and Liberal councillors who dominate the local authority associations, but will take the Elliot report—which the Government commissioned—off the back burner and press ahead with its implementation as soon as possible. I look forward to his reply, and hope that he will find ways to support a council that provides excellent value for money.
    10.46 pm
    Mr. Tim Smith: I am grateful to my hon. Friend the Member for Aylesbury (Mr. Lidington) for allowing me to say a few words in the important debate that he has secured.
    I felt that, in the context of a pretty tough spending round, we had a very fair settlement in Buckinghamshire, particularly in regard to education. I think that we all attach the highest importance to the education budget. As my hon. Friend said, we have an extremely well-managed county council, and as long as it ensures that as much money as possible is pushed down to the schools, I believe that there will be sufficient cash for those schools to run effectively during the next financial year.
    I congratulate my hon. Friend on obtaining the debate.
    10.47 pm
    The Parliamentary Under-Secretary of State for the Environment (Sir Paul Beresford): I congratulate my hon. Friends the Members for Aylesbury (Mr. Lidington) and for Beaconsfield (Mr. Smith) on their contributions to the debate. I shall reply to my hon. Friend the Member for Beaconsfield first, as that is simplest. I thank him for his recognition of the efforts that have been made. On the basis of past evenings, I waited for a "but", but it did not come, which was bound to be rather pleasant.
    I think that we all recognise that Buckinghamshire—with a Conservative county council—has a well-established reputation for tight and effective budgeting. In setting its budget it has taken an even-handed approach, responding to the priorities highlighted most frequently by its electorate and favouring education and social services. Spending has been well targeted, and services have been delivered effectively and efficiently.
    I recognise the challenge that the county faces as it approaches reorganisation. Milton Keynes's move to unitary status later this year, and the disaggregation of the county's budget that that has necessitated, have brought their own difficulties. Recently—this, I think, is accepted by my hon. Friend the Member for Aylesbury—it has been a credit to both authorities that they have been able to reach a considerable measure of agreement on disaggregation. They are proceeding with encouragement from some of my right hon. and hon. Friends in the Department.
    The authorities are, I think, recognising that the time has come when they must act, and do so by agreement, because if they do not we will have to step in and have a say. It is much better if the matter is sorted out simply and straightforwardly between them, and that is happening. I am sure that Buckinghamshire will continue to meet the challenges of reorganisation in the same constructive manner.
    238
    My hon. Friend raises a point about some of the data. If he could imagine the volume of data that has to be gone through for each local authority and for all the standard spending assessment needs and calculations, he would recognise that, occasionally, the data are a little awry. We will consider not only his points and those of both local authorities in their representations to the Department, but, in particular, the data anomalies.
    My hon. Friend recognises the need to control public expenditure. Local government accounts for about a quarter of general government expenditure and authorities must play their part. That was spelt out to them when it was explained that the public, in effect, expect lower expenditure, lower taxation and lower council taxation but better services. The phrase, "More and better for less" has been used.
    We have responded to frequent requests from local authority associations that they should be allowed to raise a greater proportion of their expenditure locally. However, the moment we offer them that opportunity, they scream, as the Labour Front-Bench team has, that that moves taxation from central to local government. The setting of it is, however, largely down to local authorities and they have the opportunity to reduce expenditure if they are willing—many are.
    Although this is a tight settlement, we have ensured that the authorities will again be able to concentrate their increases in education, personal social services, the fire service and the police. Every year, there are shifts and changes. This year, as was mentioned, the review of the area cost adjustment, and research on the effects of sparsity and density of population on the costs of local authorities were again considered. Research was carried out by the Department of Health into social services for children and residential social services for the elderly. All research and the review of the area cost adjustment were discussed fully with individual authorities and the local authority associations.
    On the sparsity factor, we finally came to a decision that was accepted fairly well by both local authority associations and the Government side of the discussion. If my hon. Friend's authority wishes to continue that discussion, I hope that it will move to do so because I am certainly willing to listen.
    On the area cost adjustment, the only unanimous thing on which the local authority associations agreed was to disagree. That happened across the local associations and it is the same in the House, so we have accepted that the position is difficult and that we must consider it. We are conducting a review and we will consult and discuss further on the matter.
    We need to accept—there is good reason for this—that forward-thinking authorities such as Buckinghamshire county council will continue not only to deliver the best value for money to their local residents and council tax payers, but to look for new and better ways of providing services and reducing expenditure. In particular they will accept that disaggregation offers a chance to move forward towards the millennium, with a Conservative council showing us the way throughout Britain.
    Question put and agreed to.
    Adjourned accordingly at eight minutes to Eleven o'clock.

DUCHY OF LANCASTER

  Civil Service Management Functions
  Dr. Goodson-Wickes
  To ask the Chancellor of the Duchy of Lancaster what delegations were made in 1996 under the Civil Service (Management Functions) Act 1992; to whom those delegations were made; and what were the main conditions attached to them. [11011]

  Mr. Freeman
  Since the last report to Parliament,Official Report, 11 January 1996, columns 285–86, Ministers and statutory office holders in charge of Departments1 have been given delegated authority—from 1 April 1996—under the Civil Service (Management Functions) Act 1992 to:

  (a) prescribe the qualifications (so far as they relate to age, knowledge, ability, professional attainment, aptitude and potential) for the appointment of home civil servants (with the exception of the Fast Stream Development Programme) in their respective departments; and

  (b) determine in respect of home civil servants in their respective departments the number and grading of posts outside the Senior Civil Service and the terms and conditions of employment in so far as they relate to the following:

  i. classification of staff, with the exception of the Senior Civil Service;

  ii. remuneration and allowances, with the exception of the Senior Civil Service;

  iii. allowances for the Senior Civil Service in respect of service overseas;

  iv. expenses;

  v. holidays, hours of work and attendance;

  vi. part-time and other working arrangements;

  vii. performance and promotion;

  viii. retirement age and redundancy;

  ix. re-deployment of staff within and between departments.

  In some cases, for staff appointed by statutory office holders, the Minister for the Civil Service was statutorily required to give consent to terms and conditions of service. For such staff, delegation has been effected by waiving that requirement, subject to the conditions attached to delegation.

  The delegation was subject to the condition that recipients comply with the provisions of the civil service management code as amended from time to time. Copies of the civil service management code are available in the Libraries of both Houses. All previous delegations and authorisations made under the Civil Service (Management Functions) Act 1992 were revoked with effect from 1 April 1996.

  Similar authorisations were also made to the Health and Safety Executive and the Advisory, Conciliation and Arbitration Service (other than in respect of qualifications
  188
  for the appointment of staff where they already had such powers). These came into effect on 1 June and 11 June 1996 respectively and were also subject to the condition that they comply with the provisions of the civil service management code as amended from time to time. These authorisations replaced all previous authorisations made to HSE and ACAS under the Civil Service (Management Functions) Act 1992, which were revoked with effect from 1 June and 11 June respectively.

  1 The statutory office holders are:

  Commissioners of Inland Revenue

  Head of the Registry of Friendly Societies, being the Chief Registrar of Friendly Societies and the First Commissioner of the Building Societies Commission

  Chief Charity Commissioner

  Commissioners of Customs and Excise

  Crown Estate Commissioners

  Director General of Electricity Supply

  Director General of Fair Trading

  Director General of Gas Supply

  Director General of National Lottery

  Director of National Savings

  Director of Passenger Rail Franchising

  Director General of Telecommunications

  Director General of Water Services

  Director General of Public Prosecutions

  Director of The Serious Fraud Office Government Actuary

  Her Majesty's Chief Inspector of Schools in England

  Her Majesty's Chief Inspector of Schools in Wales

  International Rail Regulator

  Public Works Loan Commissioners

  Parliamentary Commissioner for Administration and Health Service Commissioners

  Rail Regulator

  Registrar General for Scotland.

  Government Information
  Dr. Goodson-Wickes
  To ask the Chancellor of the Duchy of Lancaster what progress has been made in the revision of the code of practice on access to Government information. [11012]

  Mr. Freeman
  The revised code of practice on access to Government information and its associated guidance on interpretation have today been published. The changes made to both documents include a number which result from recommendations made in recent reports by the Public Service Committee and the Select Committee on the Parliamentary Commissioner for Administration. I am grateful to both Committees for their helpful contributions and believe that the revised code and guidance are improved as a result.

  I have also today published the revised "Departmental Evidence and Response to Select Committees" which now includes the code of practice on access to Government information as the clear, recognised minimum standard for providing information to Parliament in evidence given to Select Committees.

  In so far as the requirements of these documents differ from those in their earlier versions, Government Departments have been asked to ensure implementation from 1 February.
  189
  These revised documents represent a further development of this Government's policy of openness.

  I am placing copies of all three documents in the Library of the House. In addition, I have already recently placed in the Library draft versions of all these documents highlighting the changes between the original and revised documents.

  HOME DEPARTMENT

    Pools Industry
    Mr. Elletson
    To ask the Secretary of State for the Home Department if he will make a statement on the outcome of the consultation on further deregulation of the pools industry. [11055]

    Mr. Kirkhope
    On 16 August last, I issued a consultation paper with proposals for further deregulation of the pools industry. The consultation period ended on 31 October 1996.

    I have carefully considered the views expressed in response to our consultation document and am now in a position to report our conclusions and the way forward.

    As a first step, I laid yesterday the draft Deregulation (Football Pools) Order to facilitate midweek football pools competitions. The order removes the requirement that football pools competitions retailed through premises must be based on forecasts of matches played on weekends and public holidays. The draft order is now subject to the scrutiny of the Deregulation Committees in both Houses.

    I also yesterday relaxed the rules on rollover of prizes in pool competitions. When rollover was first introduced in November 1994, rollover in the pools had to follow rollover in the national lottery. This restriction has now been removed. Rollover will now be subject only to the requirement that the top prize must not be rolled more than three weeks in succession and subject to an overall annual limit of nine rollovers in each series of pool competitions. I have placed a copy of the direction in the Library.

    In addition, I am considering proposals to allow the payment of football pools winnings in retail outlets and plan to bring forward a further deregulation order as soon as possible.

    I have also reached conclusions on the wider proposals contained in the consultation document. The following proposals were put forward for consideration:
    relaxation of the restrictions on the types of sporting events for which pools competitions can be retailed through shops and other premises; and, as a consequence, reduction of the minimum age for participation in all pools competitions from 18 to 16 (16 is already the minimum age for participation in football pools competitions);
    removal of the restrictions on the timing of those events;
    allow payment of small pools winning in all premises;
    remove the requirement for promoters to notify their weekly profits and expenses percentage in advance to the local authority accountant.

    Concerns were expressed by the bookmakers, the racing bodies and a range of organisations at the impact of allowing unlimited competitions on horseracing and
    190
    sporting events to be retailed through premises, particularly if this were to include payment of winnings in public houses. It was considered this could change the pools into a harder form of gambling with frequent opportunities to participate and chase losses.

    I have taken careful account of these views in deciding the extent to which further deregulation is appropriate.

    I have decided that it would not be appropriate to bring forward a measure to allow the retailing of pool competitions on horseraces in premises. In addition, competitions on events other than football should not be allowed in liquor licensed premises or clubs.

    Any further proposals to allow retailing of competitions on other sporting events would require further consultation with interested parties.

    I have discussed the way forward with the pools companies and interested parties and I am satisfied that this package of measures will help the industry to compete without undermining the regulatory framework or changing the nature of the pools as a soft form of gambling.

  ENVIRONMENT

    Holiday Caravan Parks
    Sir Robert Hicks
    To ask the Secretary of State for the Environment if he will introduce planning policy guidance notes to encourage the development of the holiday caravan park industry. [10468]

    Sir Paul Beresford
    PPG21 already provides guidance on the improvement and extension of holiday caravan parks, together with more general guidance about the location and development of tourist accommodation and facilities.

    Sir Robert Hicks
    To ask the Secretary of State for the Environment (1) what assessment he has made of the extent to which local authorities are(a) extending the season for holiday caravan parks and (b) removing the distinction between touring caravans and tents in response to planning policy guidance 21; [10467]

    (2) what assessment he has made of the implementation of PPG21 by local authorities in respect of allowing improvements of, and extensions to, holiday caravan parks. [10466]

    Sir Paul Beresford
    I am aware of concerns expressed by the British Holiday Homes and Parks Association, put to me in a recent meeting. I am currently considering these.

    Sir Robert Hicks
    To ask the Secretary of State for the Environment if he will promote the provision of necessary staff residential accommodation within holiday caravan parks in planning policy guidance. [10469]

    Sir Paul Beresford
    Development proposals for on-site residential accommodation for site managers are considered within the framework of Government policy as set out in planning policy guidance notes. PPG7—"The Countryside and the Rural Economy"—restricts the provision of new dwellings in the open countryside in order to protect the rural landscapes and the character of
    191
    the countryside but does provide scope for local planning authorities to grant permission for dwellings in exceptional circumstances for rural activities other than agriculture and forestry.

    Private Finance Initiative
    Mr. Allason
    To ask the Secretary of State for the Environment if the transitional funding allocated to future unitary local authorities includes the cost of staff dedicated to supporting and researching PFI projects. [10408]

    Sir Paul Beresford
    Staff supporting and researching PFI are not unique to future unitary local authorities and all sensible authorities will be giving serious consideration to PFI possibilities. The cost of staff dedicated to supporting and researching PFI projects is treated as an on-going cost and not eligible for transitional funding under the local government reorganisation costs scheme. Through the scheme, resources are made available to meet the one-off indirect costs of reorganisation.

    Wild Mushrooms
    Mr. Dafis
    To ask the Secretary of State for the Environment what assessment he has made of the existing law on the picking of wild mushrooms for financial reward. [9116]

    Mr. Clappison
    Wild mushrooms are not currently shown to be adversely affected by picking. We are therefore content that the current level of legislative protection is adequate.

    Road Signs (Corporate Logos)
    Mr. Dafis
    To ask the Secretary of State for the Environment what is his policy on the display of commercial corporate logos on road signs. [9117]

    Sir Paul Beresford
    Whether or not to allow advertising on street signs in their areas is a matter for individual local authorities to decide. For road traffic signs, my right hon. Friend the Secretary of State for Transport has no plans to allow corporate commercial logos.

    Waste Water Treatment Directive
    Mr. Dafis
    To ask the Secretary of State for the Environment if the United Kingdom Government will meet the deadlines set by the EU urban waste water treatment directive for actions to be taken by(a) 1998, (b) 2000 and (c) 2005. [9118]

    Mr. Clappison
    The article 17 report to the European Commission on the implementation programme for the urban waste water treatment directive prepared in November 1994 gave no reason to think that the deadlines in the directive will not be met. An updated report is to be prepared shortly. The directive provides for the Commission to grant a limited extension of time in certain circumstances, but no application has yet been made by the UK.

    Algal Bloom
    Mr. Dafis
    To ask the Secretary of State for the Environment if he will review the areas designated as
    192
    high natural dispersion areas to take account of recent reports of algal bloom problems off the United Kingdom coast. [9119]

    Mr. Clappison
    The Environment Agency is currently reviewing the areas designated as high natural dispersion areas under the Urban Waste Water Treatment (England and Wales) Regulations 1994 (SI 1994 No. 2841) and is expected to make recommendations to the Secretary of State in the summer.

    Town and Country Planning
    Lady Olga Maitland
    To ask the Secretary of State for the Environment what plans he has to improve the town and country planning system. [11190]

    Mr. Gummer
    I am publishing today two consultation papers setting out proposals for changes to existing procedures to make the planning system more efficient and effective. Copies have been placed in the Library. First, I propose to restructure the procedures under which local authorities prepare and adopt district-wide local and unitary development plans including:the adoption of more statutory time limits;
    revised consultation and deposit arrangements;
    the replacement of the right for objections to be heard at an inquiry with a right for objections to be considered (initially by written representation);
    replacing the inquiry, in whole or in part, with an examination in public process;
    reducing the scope for the authority to ignore the Inspector's recommendations; and simplified adoption procedures.

    Secondly, with regard to appeals against the refusal of planning permission and call-in by the Secretary of State, I propose:
    that the Secretary of State should decide the method by which appeals are determined, instead of the parties;
    to streamline the written representations procedure;
    to introduce a negotiation/mediation process to resolve disputes;
    a new procedure for cases to be called in for a particular aspect of a development to be considered, without having to examine the entire proposal; and
    the costs regime to be refined to deter tactical delays.

    It is taking too long for local authorities to get district-wide local plans and UDPs in place. Last March, consultation papers were issued on minor improvements to the procedures. These changes are now being implemented. However, I also indicated that I was prepared to consider further changes if these were wanted by users of the system. Discussions were held with a broad range of organisations—representative of developers, conservation groups, local authorities and professional bodies. The consensus was in support of the plan-led system, which is delivering greater certainty for developers and local people. However, most felt that further changes are required to improve efficiency. A report, which summarises the ideas put forward, is also being published today, alongside the consultation paper.

    The need for reform of the procedures is underlined by the most recent figures for progress in the adoption of plans. When the preparation of these plans was made mandatory in 1991 it was agreed with the local authorities to adopt a target to achieve "substantially complete"
    193
    coverage by the end of 1996. The monitoring return of the position in September indicates that only 43 per cent. of plans will have achieved the target, although it is anticipated that the bulk of the rest will be completed in the next two years. Figures for the overall position and a list of all local authorities, showing the stage reached in their plan preparation, are being made available today. Copies have been placed in the Library. In some cases there are legitimate reasons why plan preparation has been delayed. However, it is for the individual authorities to explain their position.

    Some of the changes proposed in the consultation paper would require primary legislation. In the meantime, I urge local authorities whose plans are not yet in place to give this matter a higher priority. I am also considering whether further measures might be taken to encourage the more rapid adoption of plans. These include the revocation of out of date plans and clarification, in the forthcoming revised planning policy guidance 1, that there are only very limited circumstances in which it is appropriate to refuse planing permission on grounds of prematurity in relation to the emerging plan.

    I am also concerned about the time it is taking to deal with appeals against the refusal of planning permission. While a number of improvements have been made to the planning appeals procedures, with 80 per cent. of cases now being dealt with by written representations and a further 12 per cent. by informal hearing, there are a number of other options for change which deserve the fullest consideration. The consultation paper sets out proposals which seek to increase the effectiveness of the system whilst maintaining the balance between the rights of the individual and the wider interests of the community. Meanwhile, more planning inspector—PINS—resources will be made available for handling appeals. At present, PINS aim to provide an inspector for local plans inquiries within 26 weeks in 100 per cent. of cases. However, some local authorities withdraw at a late stage. In future, the PINS target will be 80 per cent. to allow for slippage. This will release experienced staff to handle appeals without inhibiting progress on local plans.

  NATIONAL HERITAGE

    Historic Royal Palaces Agency
    Dr. John Cunningham
    To ask the Secretary of State for National Heritage what meetings her Department has held regarding proposals to privatise the Historic Royal Palaces agency. [10532]

    Mrs. Virginia Bottomley
    None. The royal palaces are owned by the sovereign in right of the Crown. The Government have no plans to change this position. Discussions have been held, and will continue, on whether there are options, other than agency status, which could offer improvements for the management of the historic royal palaces.

    Sportsmark
    Dame Jill Knight
    To ask the Secretary of State for National Heritage if she will make a statement on progress on the Government's sportsmark and sportsmark gold award scheme. [10961]
    194
    Mr. Sproat
    The sportsmark and sportsmark gold award scheme was launched in secondary schools in October 1996. The scheme recognises schools which provide a quality physical education and sports programme. It is a key element of the Government's strategy, as set out in the sports policy statement, "Sport: Raising the Game", to put sport back at the heart of weekly life in all schools. The sportsmark gold award recognises those schools which show exceptional achievement, highly innovative schemes or outstanding progress in meeting their sporting aims.

    The closing date for applications for the sportsmark and sportsmark gold awards was 13 December 1996 and 604 applications have been received by the English Sports Council. Of that number, 471 are for the sportsmark award and 133 for the sportsmark gold award. The assessment of these applications is now underway, and the first awards will be announced in April.

    Primary schools are currently being consulted on a similar scheme which we aim to launch in October with the first awards being made in April 1998.

  AGRICULTURE, FISHERIES AND FOOD

    EU Fisheries Council
    Mr. Porter
    To ask the Minister of Agriculture, Fisheries and Food what was the outcome of the Fisheries Council held in Brussels on 19 and 20 December. [11025]

    Mr. Baldry
    I represented the United Kingdom at the meeting of the Fisheries Council in Brussels on 19 and 20 December, together with my hon Friend the Under-Secretary of State for Scotland and my noble Friend the Under-Secretary of State for Northern Ireland.

    The Council agreed by qualified majority, with Belgium and Sweden voting against, the total allowable catches and quotas to apply in 1997 in Community waters. The agreement fulfilled the Government's objective of securing the best possible deal for British fishermen consistent with the scientific advice and the conservation of stocks for the future. In the final package the total UK quotas agreed for the stocks of most importance to our fishermen were some 23,000 tonnes higher in cod equivalent terms than the quotas being discussed at the start of the negotiations. This increase is worth approximately £16 million to the industry and leaves our total quotas in cod equivalent terms for these stocks just one half of 1 per cent. below the 1996 level.

    I invoked the Hague preference on all the stocks where it was necessary to do so. Quota swaps were agreed immediately after the Council to mitigate the impact arising from use of the Hague preference by the Republic of Ireland, in particular on stocks of importance to the Northern Ireland industry.

    The Council agreed unanimously to access and quota arrangements for 1997 with neighbouring non-member states. The United Kingdom has large cod and haddock quotas at north Norway and these were increased by 16 per cent. and 13 per cent. respectively. We have retained our quotas in Faroese, Greenland and Iceland waters at the same levels as in 1996. The Council also agreed unanimously to the allocation of the Community's 1997 quotas in the waters covered by the North-West
    195
    Atlantic Fisheries Organisation, together with technical conservation and control measures applicable to those waters, and to the allocation of the Community's 1979 redfish quota in the waters covered by the North Atlantic Fisheries Commission, together with management measures for those waters.

    The Council continued its discussion of objectives for the next series of multi-annual guidance programmes—MAGP IV. I reiterated the need for the quota hopper problem to be resolved before I could contemplate any further reductions in the capacity or effort of the UK fleet. Other member states continued to have substantive concerns on various aspects of the proposals, though there was a broad consensus that the Presidency compromise tabled in November remained the most promising basis for progress. The Council concluded that further work should be pursued as a matter of urgency with a view to reaching decisions by 30 April 1997.

    The Council agreed by qualified majority, with Denmark, Netherlands, Spain and Sweden voting against, a presidency compromise on the introduction of satellite monitoring arrangements. These will apply from 30 June 1998 for particularly sensitive fisheries, for example industrial fisheries, and from 1 January 2000 for other vessels of over 24 m overall length. All vessels which operate exclusively within 12 miles of the coast and those which never spend more than 24 hours at sea will be exempt. Where there is a reciprocal access agreement with third countries, satellite monitoring will apply only to Community vessels fishing in those third country waters if the third countries' vessels carry satellite monitoring equipment in Community waters. There was also agreement that concerns about skippers' liability in the event of genuine equipment failures will be addressed in the detailed implementing rules and that the Council and Commission will explore ways of reducing the regulatory burden on the fishing industry, with a Commission report to be submitted by 31 March 1997. The compromise met all the UK's main negotiating objectives and will usefully reinforce existing control measures to ensure compliance with rules intended to conserve fish stocks.

    The Council welcomed the progress that had been made in removing many of the problems from the Commission's proposal for new technical conservation measures but noted that further detailed work was necessary before the proposal would be ready for agreement. So far as industrial fisheries are concerned, I called for the introduction of a precautionary TAC for sandeels in the North sea and I proposed that a new research programme into the effects of the sandeel fishery off the east coast of Scotland be used to monitor the effects of the fishery on sandeels and other fauna so that any necessary remedial action can be considered urgently.

    The Commission introduced its report on the operation of the CFP over the last three years and issues to be addressed for the future. The Council welcomed the report as contributing to the debate leading up to the review of the Common fisheries policy in 2002.

    The Council agreed by qualified majority, with Denmark voting against, a 10,000 tonne increase in the 1996 autonomous tariff quota for cod imported for salting and drying.
    196
    My hon. Friend the Under-Secretary of State for Scotland reminded the Council of the problems of the salmon market, including the extended period of low prices, the prospects for continuing weakness in the early months of 1997 and the loss of jobs now being experienced. He pressed the Commissioner to reconsider her earlier decision not to introduce a further set of minimum import prices for salmon. The Commissioner, however, said that she still saw no case for minimum import prices, on the basis that the continental market showed no sign of instability, that minimum import prices had proved effective earlier in 1996 and that she was unwilling to intervene while investigations were proceeding into the industry's complaints about dumping and unfair subsidies.

    Live Animal Transport (West Sussex Meeting)
    Mr. Morley
    To ask the Minister of Agriculture, Fisheries and Food what recommendations resulted from the meeting in March 1995 between Dr. Venturini, Ministry officials and officials from West Sussex county council. [8878]

    Mrs Browning
    [holding answer 13 December 1966]: None. However, a meeting earlier in March between Ministry officials and the French authorities led to arrangements being put in hand to ensure that the number of calves on each voyage did not exceed the capacity of the lairage in the port of Dieppe.

    Live Animal Imports
    Mr. Morley
    To ask the Minister of Agriculture, Fisheries and Food how many consignments of sheep were imported into the United Kingdom (i) in November and (ii) in December to date; how many sheep were included in each consignment; what was the place of departure on the continent for each consignment; and what was the total time for each journey. [9661]

    Mrs. Browning
    [holding answer on 17 December 1996]: No consignments of sheep were imported from the continent during November. In December two consignments were imported through Dover and 2 and 5 December. They originated from points of departure in south eastern France, and travelled via a lairage in Belgium. These consignments contained 299 and 285 animals respectively. We have no information on the total time for these journeys.

  ATTORNEY-GENERAL

    Public Interest Immunity
    Mr. McNamara
    To ask the Attorney-General, pursuant to his oral statement on 18 December,Official Report, columns 949–50, if he will indicate how the law relating to PII certificates in Great Britain will differ from that in Northern Ireland. [10821]

    The Attorney-General
    The law on public interest immunity has been developed by the courts in each of the jurisdictions of the United Kingdom. This will continue to be the case in both civil and criminal proceedings,
    197
    including proceedings in coroners' courts. Practice differs as between the different jurisdictions but in all cases where public interest immunity is claimed, the final decision on disclosure is taken by the court, which will order documents to be disclosed where the public interest in the administration of justice in the proceedings requires it.

  PRIME MINISTER

    Engagements
    Mr. Harry Greenway
    To ask the Prime if he will list his official engagements for 14 January. [9230]

    Sir Peter Tapsell
    To ask the Prime Minister if he will list his official engagements for Tuesday 14 January. [9228]

    The Deputy Prime Minister
    I have been asked to reply.

    My right hon. Friend the Prime Minister is returning from an official visit to India, Pakistan and Bangladesh.

  TRADE AND INDUSTRY

    Staff
    Mr. Hain
    To ask the President of the Board of Trade how many(a) permanent and (b) non-permanent staff there have been in (i) his Department and (ii) executive agencies of his Department in each year since 1992. [9631]

    Mr. John M. Taylor
    Details of the numbers of permanent and casual staff employed by the Department and its agencies are available from the staff numbers table, pages 120 and 121, of the Department's expenditure plans report, Cm 3205, a copy of which is available in the Library of the House. The staff numbers for the Insolvency Service executive agency are not shown separately in the report but are included with the numbers for the gross control area of the Department.

    The information for the Insolvency Service is as follows:

    Year

    CS FTEs

    Casuals

    1990–91

    1,439

    25

    1991–92

    1,509

    79

    1992–93

    1,551

    160

    1993–94

    1,614

    229

    1994–95

    1,573

    289

    1995–96

    1,413

    176

    Mid-Kent Water
    Mr. Matthew Taylor
    To ask the President of the Board of Trade when he expects to make a decision on the proposed takeover of Mid Kent Water by General Utilities and SAUR Water Services. [9952]
    198
    Mr. Harvey
    To ask the President of the Board of Trade when he plans to make a decision on the takeover proposal for Mid Kent Water by General Utilities and SAUR Water Services. [10344]

    Mr. John M. Taylor
    My right hon. Friend the President of the Board of Trade is currently considering the Monopolies and Mergers Commission's report. It will be published as quickly as practicable.

    Child Labour
    Mr. Parry
    To ask the President of the Board of Trade if he will make a statement about the recent meeting of the World Trade Organisation with particular reference to child labour. [10302]

    Mr. Nelson
    The recent World Trade Organisation ministerial conference in Singapore agreed that the International Labour Organisation was the competent body set up to deal with internationally recognised core labour standards, including those related to child labour. Ministers agreed that economic growth and development fostered by trade and further trade liberalisation contributed to the promotion of these standards.

    Research Councils (Equal Initiative)
    Mr. Ingram
    To ask the President of the Board of Trade what has been the impact of the equal initiative on the overall research council budgets. [9888]

    Mr. Ian Taylor
    [holding answer 13 January 1997]: The equal initiative has had no impact on the overall Research Council budgets, but it is influencing councils' prioritisation. Government funding for research is to support excellence and to refocus and reorientate effort into areas relevant to the well-being of the nation in order to get the best value for every pound invested. Foresight is an important input into the councils' priority setting and equal is an excellent example of Foresight in action. Examples of projects supported that are relevant to equal include: research into ways of detecting and preventing Alzheimer's disease, the influence of diet on health, medical engineering, robotics, and research into the design and utility of technologies for maintaining personal independence.

    Mr. Ingram
    To ask the President of the Board of Trade if he will place in the Library copies of the instructions from the Office of Science and Technology to the research councils on the implementation of the equal initiative. [9887]

    Mr. Taylor
    [holding answer 13 January 1996]: No specific instructions have been issued to the research councils on the implementation of the equal initiative. However, equal is an integration of a very large number of individual priorities identified by the technology foresight sector panels. Research councils already support a number of activities relevant to the equal initiative and we are in the process of developing a more well-defined research agenda involving the research councils, other Government Departments, charities and industry. I addressed a seminar on 25 November 1996 which contributed to refining this process.

    Energy Consumption
    Mr. Meacher
    To ask the President of the Board of Trade how much energy was consumed in generating each unit of gross domestic product, on a standard basis, in 1980, 1990 and 1996 in(a) the UK, (b) Germany, (c) France, (d) Italy, (e) the United States of America, (f) Japan and (g) Sweden. [10759]

    Mr. Page
    [holding answer 13 January 1997]: The available figures for total primary energy supply per unit of gross domestic product are as follows:

    Total primary energy supply/gross domestic product1

    (tonnes oil equivalent/thousand 1990 US dollars)

    1980

    1990

    1995

    UK

    0.27

    0.22

    0.21

    Germany

    0.27

    0.22

    0.19

    France

    0.20

    0.19

    0.19

    Italy

    0.16

    0.14

    0.14

    USA

    0.43

    0.35

    0.33

    Japan

    0.18

    0.15

    0.16

    Sweden

    0.22

    0.21

    0.22

    1 Source: International Energy Agency.

    Consultants
    Mr. Milburn
    To ask the President of the Board of Trade if he will list the actions his Department has taken on each of the recommendations contained in the Cabinet Office report "The Government's Use of External Consultants". [10183]

    Mr. John M. Taylor
    [holding answer 13 January 1997]: My Department has implemented 28 of the 34 recommendations in the Cabinet Office report, "The Government's Use of External Consultants".

    Recommendations 14 and 15 were rejected on the grounds that business opportunities for small and medium-sized enterprises would be reduced.

    It was not possible to implement recommendation 10, 21 and 34 due to a decision to replace the proposed national consultancy database with regional lists serving the needs of local industry.

    Action on recommendation 19 was for the Treasury.

    I have asked the chief executives of the Patent Office and the Radiocommunications Agency to reply separately to the question, as they have produced independent action plans.

    Letter from Jim Norton to Mr. Alan Milburn, dated 14 January 1997:
    I am writing to you in response to your Parliamentary Question to the President of the Board of Trade about actions taken on the recommendations contained in the Cabinet Office report. The Government's Use of External Consultants. This letter relates to the action taken by the Radiocommunications Agency.
    The Agency has implemented most of the recommendations of this report (where they were not already part of RA policy) in line with its policy of shadowing DTI policy on procurement, including the use of consultants. Two recommendations were rejected, numbers 14 and 15, which related to limiting the numbers of firms invited to tender, on the grounds that these would reduce effective competition, possibly excluding small and medium enterprises, and introducing excessive bureaucratic procedures. In addition a number of the action points stemming from the recommendations were for Treasury or DTI to take forward.
    200
    Letter from P. R. S. Hartnack to Mr. Alan Milburn, dated 14 January 1997:
    I am replying for the Patent Office to your Parliamentary Question to the President of the Board of Trade about the Cabinet Office's recommendations on the use of consultants.
    The Patent Office reconsidered its approach to the use of external consultants in response to the Cabinet Office report. It found that in practice it already followed the recommendations either through its close observation of the guidance in the Department of Trade and Industry Procurement Manual or through the mechanisms it had in place for the preparation of its Corporate Plan and Estimates. To reinforce the message of the Report the main recommendations were incorporated in a statement of the Patent Office's strategic approach to the use of external consultants which was circulated to senior managers across the Office. The Patent Office has its own Procurement Section which is staffed by trained officers and which oversees and advises on all procurement activities including the use of external consultants.

    Trade and the Environment
    Mr. Dafis
    To ask the President of the Board of Trade if he will make a statement on the discussions at the World Trade Organisation meeting in Singapore on the relationship between trade and the environment. [10796]

    Mr. Nelson
    [holding answer 13 January 1997]: There was no substantive discussion at the World Trade Organisation ministerial conference in Singapore on the relationship between trade and the environment. In the conference declaration, Ministers reaffirmed the importance of the work of the Trade and Environment Committee and confirmed that it should be established on a permanent basis to carry that work forward.

    Arms Sales
    Mr. Fatchett
    To ask the President of the Board of Trade if he will set out the procedures followed by his Department to ensure that the subsequent use of defence equipment is consistent with the Government's policy on arms sales and with export licences. [9988]

    Mr. Nelson
    [holding answer 13 January 1997]: My Department does not operate as a matter of routine any procedures to check the actual end use of defence equipment exported from the UK under licence. Any information received by my Department that gave reason to believe that exported goods had gone to an end-use for which a licence would not have been issued, would be passed to the commissioners of HM Customs and Excise, who are responsible for enforcement of export controls. It would then be for the Commissioners of HM Customs and Excise to determine on the basis of the information available what, if any, further investigation was appropriate.

  FOREIGN AND COMMONWEALTH AFFAIRS

    Chartered Aircraft
    Mr. Andrew Smith
    To ask the Secretary of State for Foreign and Commonwealth Affairs what aircraft he has chartered in each of the last 12 months; which airlines he has chartered them from; and what was the(a) purpose, (b) destination and (c) cost in each case. [9869]
    201
    Sir Nicholas Bonsor
    The following aircraft have been chartered in the last 12 months by the Department on the Secretary of State's behalf.

    Dale

    Airline company

    Destination/Purpose

    Cost £

    28 May to 2 June

    Bilateral visit to USA (Washington) Canada (Ottawa, Toronto) and Iceland (Reykjavik) and attendance at NAC/NACC Meeting Germany (Berlin)

    Air London Falcon 900B Intercontinental Executive Jet LHR/Edinburgh Washington/Ottawa/ Toronto/Reykjavik/RAF Northolt/Berlin LHR

    98,860

    1 to 3 July

    Bilateral visit to Saudi Arabia (Riyadh, Jeddah) Jordan (Amman)

    Air London Boeing 727 100 series LHR/Jeddah/Aquaba/LHR

    109,570

    Hong Kong
    Mr. Garnier
    To ask the Secretary of State for Foreign and Commonwealth Affairs what arrangements have been made for the transfer of outstanding business from the Judicial Committee of the Privy Council to the Hong Kong Special Administrative Region Court of Final Appeal on 1 July 1997. [11006]

    Mr. Hanley
    The jurisdiction of the Judicial Committee of the Privy Council will automatically lapse with Britain's administration of Hong Kong as from 1 July 1997.

    The Judicial Committee will make every effort to ensure that outstanding Hong Kong business is dealt with before 1 July. It is nevertheless clear that there will come a point after which it will become unlikely for practical purposes that the committee will be able to accept new business with a reasonable expectation of being able to dispose of it before the handover. That point is likely to be 1 March. Hong Kong's court of final appeal ordinance provides that any appeal in respect of which the Judicial Committee of the Privy Council or the Hong Kong Court of Appeal has granted conditional, final or special leave to appeal to the committee and the appeal has not finally been disposed of on or before 30 June 1997 shall proceed in the court of final appeal.

  TREASURY

    Publicity
    Mr. Donohoe
    To ask the Chancellor of the Exchequer what promotional and public information campaigns his Department is(a) currently running and (b) planning to run during the next six months; and for each campaign (i) how much it will cost (1) in total and (2) to his Department, (ii) what agencies or bodies are undertaking the work and (iii) what is its planned duration. [7417]

    Mrs. Angela Knight
    The Treasury is not currently running, or planning to run, any such promotional and public information campaigns.

    Mr. Donohoe
    To ask the Chancellor of the Exchequer how much his Department has spent on promotional or public information campaigns in each of the last five
    202
    years; and how much he estimates will be spent on these campaigns during the (i) current and (ii) next financial year. [7546]

    Mrs. Knight
    The Treasury has not run promotional or public information campaigns in the last five years except in the sale of shares of BT2, BT3 and GENCO2. The costs of these campaigns are as follows: BT2 (1991) £14.7 million, BT3 (1993) £12 million and GENCO2 (1995) £8 million. These campaigns have now concluded.

    Manufactured Imports
    Mr. Milburn
    To ask the Chancellor of the Exchequer for each year since 1979 what proportion of United Kingdom demand for manufactured goods was met through imports. [7828]

    Mrs. Angela Knight
    [holding answer 6 December 1996]: The information requested falls within the responsibility of the chief executive of the Office for National Statistics. I have asked him to arrange for a reply to be given.

    Letter from Tim Holt to Mr. Alan Milburn, dated 14 January 1997:
    The Chancellor of the Exchequer has asked me to reply as the Director of the Office for National Statistics to your recent question on what proportion of United Kingdom demand for manufactured goods was met through imports, for each year since 1979.
    The table below shows the import penetration ratios for the years 1979 to 1995, with the exception of the years 1989 to 1992 where figures are not available. Latest revised data are shown together with the Standard Industrial Classification (SIC) on which data are based. From 1993 data were collected according to a SIC 1992 classification which changed the definition of manufacturing. The 1993–1995 data have been grouped to a SIC(80) basis to produce a series which is broadly comparable over the period.

    Year

    SIC

    Percentage

    1979

    1980

    26.9

    1980

    1980

    26.2

    1981

    1980

    27.8

    1982

    1980

    29.0

    1983

    1980

    31.1

    1984

    1980

    33.4

    1985

    1980

    34.3

    1986

    1980

    34.3

    1987

    1980

    35.2

    1988

    1980

    35.6

    1993

    1992

    43.0

    1994

    1992

    47.0

    1995

    1992

    45.0

    Staff
    Mr. Hain
    To ask the Chancellor of the Exchequer how many(a) permanent and (b) non-permanent staff there have been in (i) his Department and (ii) executive agencies of his Department in each year since 1992. [9628]

    Mrs. Angela Knight
    [holding answer 18 December 1996]: The information requested is contained in civil service staff in post summary tables, copies of which are available in the Library.

    Unemployment
    Mr. Frank Field
    To ask the Chancellor of the Exchequer, pursuant to the answer to the hon. Member for
    203
    Dagenham (Ms Church) of 25 November, Official Report, column 72, on the number of people in Great Britain who have experienced at least one spell of unemployment since 1992, if he will list (a) how many have had more than one spell of unemployment, (b) how many are still unemployed and (c) how many are currently in work. [9667]

    Mrs. Angela Knight
    [holding answer 18th December 1996]: The information requested falls within the responsibility of the chief executive of the Office for National Statistics. I have asked him to arrange for a reply to be given.

    Letter from Tim Holt to Mr Frank Field, dated 14 January 1997:
    The Chancellor of the Exchequer has asked me to reply as the Director of the Office for National Statistics to your recent question on how many claimants have experienced at least one spell of unemployment in Great Britain since 1992, and of these claimants how many have experienced more than one spell of unemployment, how many are still unemployed and how many have found work.
    Since 1 January 1992, an estimated 10,451,600 claimants in Great Britain have experienced at least one spell of claimant unemployment and of these claimants 5,090,260 have experienced more than one spell. As at 14 November 1996, 1,775,250 claimants in Great Britain were claiming unemployment-related benefits although only about a half of these would have been unemployed for more than three months. These figures exclude clerically operated claims which numbered 23,000 in November 1996.
    Information on the destinations of leavers from the claimant count is only available from January 1995 and is therefore not available for the period requested. However, in November 1996 an estimated 68 per cent. of claimants with a known destination left the claimant count because they had found work.

    Tax Evasion
    Mr. Milburn
    To ask the Chancellor of the Exchequer how many full-time equivalents staff were employed by(a) Inland Revenue and (b) HM Customs and Excise on tax evasion investigations in each year from 1990–91. [9984]

    Mr. Jack
    [holding answer 13 January 1997]: Approximate figures as shown in the table.

    Year

    Inland Revenue

    Customs and Excise

    1990–91

    3,200

    560

    1991–92

    3,400

    570

    1992–93

    3,500

    590

    1993–94

    3,800

    630

    1994–95

    4,400

    730

    1995–96

    4,300

    730

    The basis on which the Inland Revenue figures were compiled changed from 1994–95 so as to include staff engaged on all employer compliance work.

    Mr. Milburn
    To ask the Chancellor of the Exchequer how many cases of evasion of payments of taxes administered by HM Customs and Excise have been discovered in each year since 1990; and what has been the yield. [9985]

    Mr. Oppenheim
    [holding answer 13 January 1997]: The following table shows the number of cases involving evasion of value added tax in each year since 1990. The figures represent the number of criminal cases reported to
    204
    headquarters for consideration of criminal proceedings, plus the number of cases in which civil evasion penalties were imposed, together with the estimated tax evaded.

    Fiscal year

    Total number of criminal and civil cases

    Tax arrears £ million

    1990–91

    1,070

    37.7

    1991–92

    1,178

    34.2

    1992–93

    1,135

    40.2

    1993–94

    1,048

    55.6

    1994–95

    931

    92.8

    1995–96

    989

    51.0

    In addition to the tax arrears, penalties in excess of £10 million were levied each year.

    There have been no reported cases of evasion of insurance premium tax or the new landfill tax.

    Value Added Tax
    Ms Armstrong
    To ask the Chancellor of the Exchequer if he will estimate the increase in tax revenue resulting from the increase in the standard rate of value added tax from 15 per cent. to 17.5 per cent. in each year from 1991–92 to 1999–2000. [10700]

    Mr. Oppenheim
    [holding answer 13 January 1997]: The estimated increase in net VAT receipts in each year is as follows:

    £ billion

    1991–92

    4.3

    1992–93

    5.3

    1993–94

    5.6

    1994–95

    5.9

    1995–96

    6.0

    1996–97

    6.6

    1997–98

    7.1

    1998–99

    8

    1999–2000

    8

    These estimates derive from an arithmetical calculation of the relevant share of VAT receipts and make no allowance for any changes in spending patterns resulting from the change in the standard rate of VAT.

    Information Technology
    Mr. Matthew Banks
    To ask the Chancellor of the Exchequer what arrangements have been made in the United Kingdom to appoint a national supervisory authority to monitor the data protection provisions of the convention concerning the use of information technology for customs purposes that was agreed at the Cannes European Council in June 1995. [11024]
    205
    Mr. Oppenheim
    With her agreement, the Government are appointing the Data Protection Registrar to be the designated national supervisory authority within the United Kingdom for the purposes of the convention concerning the use of information technology for customs purposes.

  OVERSEAS DEVELOPMENT ADMINISTRATION

    Indonesia
    Mrs. Clwyd
    To ask the Secretary of State for Foreign and Commonwealth Affairs (1) if he will place in the Library the legal advice referred to in paragraph 31, page 9 of the National Audit Office report, "Aid to Indonesia", which satisfied the Government that all the projects referred to were within the terms of the Overseas Development and Co-operation Act 1980; [10716]

    (2) if he will place in the Library a copy of the legal advice received by his Department in relation to the regional physical planning programme for transmigration, the national overview of land resources and the regional physical map improvement and training projects in Indonesia to the effect that (a) the projects were not unlawful under the terms of the Overseas Development and Co-operation Act 1980 and (b) the projects were not unlawful under international law. [10720]

    Dr. Liam Fox
    I will write to the hon. Member.

    Mrs. Clwyd
    To ask the Secretary of State for Foreign and Commonwealth Affairs what United Kingdom goods were purchased by the Indonesian authorities in relation to the national police management training project. [10705]

    Dr. Fox
    Goods purchased in connection with the project were limited to training materials, such as books, and were funded by the ODA from the project budget.

    Mrs. Clwyd
    To ask the Secretary of State for Foreign and Commonwealth Affairs, pursuant to paragraph 36 of the National Audit Office report, "Aid to Indonesia", if he will place in the Library the legal advice to the effect that he does not recognise the primacy of international law. [10713]

    Dr. Fox
    The reference in paragraph 36 of the report to non-recognition of the primacy of international law was incorrectly attributed to legal advice given to the Overseas Development Administration. No such advice was given. Unfortunately, this was overlooked when the draft text was checked for factual accuracy.

    Mrs. Clwyd
    To ask the Secretary of State for Foreign and Commonwealth Affairs if he will place in the Library copies of(a) the project completion reports in relation to (i) the radio studios rehabilitation project and (ii) the regional physical map improvement and training project in Indonesia and (b) the project monitoring reports in relation to the regional physical map improvement and training project in Indonesia. [10710]

    Dr. Fox
    Copies of the project completion reports for the radio studios rehabilitation and regional physical map improvement projects were placed in the Libraries of both
    206
    Houses in November and October 1995 respectively. I will write to the hon. Member about the request for disclosure of internal project monitoring reports.

    Mrs. Clwyd
    To ask the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement about the developmental benefits of the radio studios rehabilitation project in Indonesia; what assessment he has made of the independence of Radio Republic Indonesia from the Indonesian Government; and what proportion of the output of Radio Republic Indonesia is educational. [10718]

    Dr. Fox
    The developmental benefits of the project were seen to be the improvement of broadcasting standards and the enhancement of a primary means of communication and education, particularly for rural communities, in a country whose population is very widely dispersed.

    The benefits of the project were not considered to be dependent upon the status of Radio Republic Indonesia, which is a state-owned corporation reporting to the directorate general of radio, television and film in the Ministry of Information.

    The most recent data—March 1996—indicate that educational programmes account for 17 per cent. of broadcasting time, with news and information and culture and entertainment account for 25 and 43 per cent. respectively. Specific target groups include schools, farmers and women. There is also an open university service.

    Mrs. Clwyd
    To ask the Secretary of State for Foreign and Commonwealth Affairs if he will place in the Library copies of the project monitoring reports in relation to the police management training projects in Indonesia. [10704]

    Dr. Fox
    I will write to the hon. Member.

    Mrs. Clwyd
    To ask the Secretary of State for Foreign and Commonwealth Affairs if he will place in the Library(a) the evidence available to his Department on the observance of human rights in Indonesia, referred to in the National Audit Office report, "Aid to Indonesia," which prompted his Department to decide to continue to provide aid to Indonesia, (b) the advice given by the embassy in Jakarta, referred to in the report, relating to the human rights situation in Indonesia and (c) a copy of the project memorandum agreed with Indonesia. [10714]

    Dr. Fox
    The Overseas Development Administration receives continuing information and advice from the embassy in Jakarta, from the diplomatic wing of the Foreign and Commonwealth Office and from external sources about the human rights situation in Indonesia. I will write to the hon. Member about the request for disclosure of internal correspondence.

    Subject to the agreement of the Indonesian Government, which is being sought, I will place in the Library copies of the project memoranda relating to the national police management training project.

    Mr. Clwyd
    To ask the Secretary of State for Foreign and Commonwealth Affairs for what reasons his Department excluded(a) references to human rights from the project memorandum agreed with Indonesia regarding the national police management training project and
    207
    (b) human rights issues in the proposed training programme; and at what level within his Department that decision was taken. [10753]

    Dr. Fox
    Although human rights issues were not referred to specifically in the project memorandum or included in the training programme, one of the wider objectives of the project was to promote the concept of a community-based approach to policing, as practised in the United Kingdom, which emphasises the need for police and community to work together and respect for the rights of the individual.

    Approval for the project was given by the head of the Overseas Development Administration's eastern Asia department, prior approval in principle having been obtained from Ministers.

    Mrs. Clwyd
    To ask the Secretary of State for Foreign and Commonwealth Affairs for what reasons his Department decided not to support the third phase of the national police management training project in Indonesia. [10712]

    Dr. Fox
    When the case for a further phase of assistance was considered in mid-1994, the view was taken, in view of the substantial assistance already provided to the police, that a one-year extension of the second phase, to 31 March 1996, would be sufficient to consolidate the assistance already provided and to secure the anticipated benefits of the project.

    Mrs. Clwyd
    To ask the Secretary of State for Foreign and Commonwealth Affairs if he will place in the Library copies of the audience surveys used by his Department to appraise and evaluate the shortwave radio transmitters project and the radio studios rehabilitation project in Indonesia. [10721]

    Dr. Fox
    None was conducted. The appraisals concentrated on technical competencies, broadcasting standards, programme content and the likely size and types of audience. Given the diverse and widely-dispersed nature of radio audiences, it is unlikely that worthwhile audience surveys could have been conducted in the time available for appraisal.

    Mrs. Clwyd
    To ask the Secretary of State for Foreign and Commonwealth Affairs on what dates his Department decided to(a) change the emphasis of phase 1 of the national police management training project in Indonesia from the training at Bramshill police college to in-country training in Indonesia, (b) let the contract for in-country training to a consultancy firm comprising former Bramshill staff; and what was the name of the consultancy firm. [10706]

    Dr. Fox
    The change of approach to delivery of police management training was explored at a meeting of officials in November 1985. The decision to proceed with a programme of in-country training was taken in August 1986 and a contract was awarded, initially to Bramshill staff college, in June 1987. A new contract was awarded in 1989 to consultants Johnston and Ladd International when one of the two consultants, both of whom had been closely involved in the development of the Bramshill programme, retired from the police service.

    Mrs. Clwyd
    To ask the Secretary of State for Foreign and Commonwealth Affairs, pursuant to the National Audit Office report, "Aid to Indonesia", what are the
    208
    strategic plans produced by the Indonesian police forces internal consultancy unit developed under the national police management training project; and if the 45 regional commanders expected to implement the plans include the regional commander for East Timor. [10711]

    Dr. Fox
    The strategic plans have been produced by the Indonesian police authorities on the basis of training provided under the national police management training project. The plans deal with levels of service to the public and with development of standards required to achieve them. It is not certain whether plans have yet been produced for all of the 45 regional commands, including the command covering East Timor, but we understand that the intention is to do so.

    Crown Agents
    Mrs. Clwyd
    To ask the Secretary of State for Foreign and Commonwealth Affairs if he will name each person seconded to the Crown Agents in each year since 1979 indicating the company involved. [10669]

    Dr. Liam Fox
    For particular projects, Crown Agents make use of staff seconded from Government Departments such as HM Customs and Excise and, less often, from firms in the private sector. However, I am advised by the Crown Agents that information is not available in a form to answer the hon. Lady's general question. If there is a specific question about particular projects or firms, the Crown Agents will do their best to answer it.

    Mrs. Clwyd
    To ask the Secretary of State for Foreign and Commonwealth Affairs which performance targets the managing director of the Crown Agents met in 1995; what performance related bonus he received; and what factors underlay the payment or non-payment of performance-related pay. [10668]

    Dr. Fox
    In 1995, the managing director of the Crown Agents was eligible for a performance-related salary bonus based on criteria related to levels of profitability, cost control and the ratio of costs to fee income for the year. In the event, no bonus was payable for 1995; the main factor underlying this was a lower than budgeted profit.

    Mrs. Clwyd
    To ask the Secretary of State for Foreign and Commonwealth Affairs who represents the Crown Agents in(a) Iran, (b) the Gulf States and (c) Oman; what criteria were used in their selection; and what services they offer. [10670]

    Dr. Fox
    The Crown Agents' local agents in the countries named are listed in its report and accounts for 1995, copies of which are in the Library. The Crown Agents have since also appointed Transgulf Shipping as an agent in the United Arab Emirates. The representative services provided include inspection, shipping, freight forwarding, cargo handling and courier services in relation to Crown Agents' services in the region. The firms concerned were selected by Crown Agents on the basis of their capabilities in the relevant services.

    Street Children
    Mr. Donald Anderson
    To ask the Secretary of State for Foreign and Commonwealth Affairs if he will give a progress report on actions taken since the oral answer of
    209
    the then Minister, the right hon. Member for Banbury (Mr. Baldry), 27 February 1995, Official Report, column 689, on financial support over a five-year period to the consortium of non-governmental organisations working on behalf of street children in developing countries. [10500]

    Mr. Alison
    To ask the Secretary of State for Foreign and Commonwealth Affairs what progress has been made in implementing the plans announced on 27 February 1995, to provide Government funding over a period of five years for the non-governmental organisations' consortium on street children. [10701]

    Dr. Liam Fox
    The statement to which the hon. Member for Swansea, East (Mr. Anderson) refers was an unfortunate error. The director of the Consortium for Street Children UK has already been informed of this. We cannot make multi-year commitments, nor can we provide the consortium with core support. However, we remain happy to consider specific project proposals. Since February 1995 we have provided a total of £46,700.

  TRANSPORT

    Bus Subsidies
    Mr. Hinchliffe
    To ask the Secretary of State for Transport what estimate he has made of the total subsidy provided by passenger transport authorities to private bus operators in(a) England and (b) West Yorkshire in the last year for which figures are available. [10258]

    Mr. Watts
    The provisional estimate for 1995–96 of subsidy of local bus services by passenger transport authorities in England, excluding the cost of concessionary fares schemes, is £105 million. The statistics collected do not distinguish between support given to services run by private operators and those run by the relatively small number of operators which remain in the public sector. The figures for 1995–96 for West Yorkshire is approximately £22 million.

  SCOTLAND

    Skye Bridge Toll
    Mr. Charles Kennedy
    To ask the Secretary of State for Scotland what assessment he has made of the advantages of using Portree sheriff court for the purposes of hearing Skye bridge toll non-payment cases; and if he will make a statement. [10840]

    Lord James Douglas-Hamilton: The prosecution of offences is a matter for my noble and learned friend the Lord Advocate. Persons charged with the non-payment of tolls on the Skye bridge commit an offence within the jurisdiction of Dingwall sheriff court. These offences are therefore prosecuted in that court. Section 4 of the Criminal Procedure (Scotland) Act 1995 provides that where an offence is alleged to have been committed in one district in a sheriffdom, it is competent to try that offence in a sheriff court in any other district in that sheriffdom.
    210
    The Lord Advocate informs me that there are no plans to try non-payment offences in Portree sheriff court or any other sheriff court in the sheriffdom of Grampian, Highland and Islands other than Dingwall sheriff court. The procurator fiscal at Dingwall and regional procurator fiscal at Aberdeen are keeping the matter under review, and, if it were considered that the efficient administration of justice would be better served by prosecuting some of these cases in any other court or courts in the sheriffdom in addition to Dingwall sheriff court then the regional procurator fiscal would discuss this possibility with the procurators fiscal in the other districts and with the sheriff principal.

    Mr. Kennedy
    To ask the Secretary of State for Scotland (1) if he will estimate the additional cost per week of extending sitting days at Dingwall sheriff court from three to five for the purposes of accommodating the extra demands of Skye bridge toll non-payment cases; and if he will make a statement; [10842]

    (2) what estimate he has made of the impact upon progress on other court cases of the Skye bridge toll non-payment hearings at Dingwall sheriff court; and if he will make a statement. [10843]

    Lord James Douglas-Hamilton: The marginal cost of providing additional sitting days at Dingwall sheriff court is expenditure on temporary shrieval assistance, amounting to some £600 for two additional sitting days. At present, there has been no appreciable impact on progress of other business at the court. The position will be kept under review by the regional procurator fiscal and regional sheriff clerk in consultation with the sheriff principal.

    Scottish Office Pensions Agency
    Mr. Stewart
    To ask the Secretary of State for Scotland if he will make a statement about the forthcoming prior options review of the Scottish Office Pensions Agency [11026]

    Mr. Michael Forsyth
    In accordance with the Government's policy on periodic reviews of executive agencies my Department will commence this month a thorough review of the Scottish Office Pensions Agency. The remit for this review will be as follows:To carry out prior options review of the Scottish Office Pensions Agency in accordance with Cabinet Office—OPS—guidance and the agreed timetable, by

    (a) re-examining the status options considered before the agency was created, in the light of experience and of any changes in internal or external circumstances;

    (b) testing rigorously whether the agency function is required at all, and the scope for privatising, contracting out (which could include market testing), transferring functions to another body, continuation of agency status or returning the functions to the Scottish Office;

    (c) consulting widely amongst the key players in the agency (management and staff), the Scottish Office, HM Treasury and the Cabinet Office, as well as customers and other interested bodies and other suppliers of similar services;

    (d) assessing each option in terms of practicability and value for money; and

    (e) making recommendations accordingly to the Secretary of State for Scotland.

    211
    In order to help ensure that all options are considered fully, comments from interested parties will be welcome. Comments should be sent by 17 February 1997 to the following address. The results of the review will be published in the early summer.

    J. S. B. Martin

    The Scottish Office Education and Industry Department

    Room 3B-02

    Victoria Quay

    Edinburgh

    EH6 6QQ.

    Judicial Training
    Mr. Stewart
    To ask the Secretary of State for Scotland if he will make a statement on the organisation of training for the judiciary. [11027]

    Mr. Michael Forsyth
    I have decided to establish a judicial studies committee to promote training for the judiciary both in the supreme court and in the sheriff court. The right hon. Lord Ross, who has recently retired as Lord Justice Clerk, has agreed to chair this committee which will comprise members from:

    The supreme courts

    sheriffs principal

    Sheriffs' Association

    Temporary Sheriffs' Association

    Scottish courts administration

    together with a lay person or persons with experience in training techniques.

    The committee will be supported by a director of judicial studies who will be a serving sheriff undertaking this work on a part-time basis. The remit of the director will be to initiate and promote appropriate developments under the supervision of the judicial studies committee.

    The committee will be able to build on the foundation of induction and other training already provided by the Sheriffs' Association. But the speed and scale of change in many areas of the law in recent years, the increasing impact of information technology, and the greater emphasis across the professions on continuing development for their members all point to the need for more sustained and co-ordinated effort in the training field. In the past, there has been little or no formal training for supreme court judges, and the new committee will also consider their needs, which in some respect will be the same as those of the shrieval bench.

    I believe that, by focusing effort in this way, the knowledge base and practical skills of the Scottish judiciary will, over time, be significantly enhanced, in ways which will both benefit court users and enhance public confidence in the justice system.

    These proposals derive in part from work undertaken by a group established in 1994 under the chairmanship of the right hon. Lord Cameron of Lochbroom, for whose contribution I am most grateful.

    I am consulting the Lord Advocate, the Lord President of the Court of Session, the sheriffs principal and the sheriffs' associations about the membership of the committee with a view to it starting work as soon as possible.
    212

    Research Institutes
    Mr. Ingram
    To ask the Secretary of State for Scotland (1) how much has been spent to date on the prior options review of the Scottish Crop Research Institute; and from which budget these sums were paid; [10010]

    (2) how much has been spent to date on the prior options review of the Macaulay Land Use Research Institute; and from which budget these sums were paid; [10018]

    (3) how much has been spent to date on the prior options review of the Rowett Research Institute; and from which budget these sums were paid; [10078]

    (4) how much has been spent to date on the prior options review of the Hannah Research Institute; and from which budget these sums were paid; [10114]

    (5) how much has been spent to date on the prior options review of the Scottish Agricultural Science Agency; and from which budget these sums were paid. [10014]

    Mr. Raymond S. Robertson
    [holding answer 13 January 1997]: Work on the prior options reviews of the five Scottish agricultural and biological research institutes and of the Scottish Agricultural Science Agency was undertaken mainly by Scottish Office staff. The cost to my Department of each review was approximately £20,000. This excludes the cost of other Government Department and research council input on the interdepartmental steering committees which oversaw the reviews of the institutes and of other public sector research establishments in the same groupings.

    Mr. Ingram
    To ask the Secretary of State for Scotland (1) how many(a) United Kingdom, (b) European and (c) international committees include employees of the Scottish Crop Research Institute as representatives of United Kingdom interests; and how many of these employees are leading the United Kingdom team on their committee; [10012]

    (2) how many (a) United Kingdom, (b) European and (c) international committees include employees of the Macaulay Land Use Research Institute as representatives of United Kingdom interests; and how many of these employees are leading the United Kingdom team on their committee; [10020]

    (3) how many (a) United Kingdom, (b) European and (c) international committees include employees of the Hannah Research Agency as representatives of United Kingdom interests; and how many of these employees are leading the United Kingdom team on their committee; [10116]

    (4) how many (a) United Kingdom, (b) European and (c) international committees include employees of the Rowett Research Institute as representatives of United Kingdom interests; and how many of these employees are leading the United Kingdom team on their committee; [10080]

    (5) how many (a) United Kingdom, (b) European and (c) international committees include employees of the Moredun Research Agency as representatives of United Kingdom interests; and how many of these employees are leading the United Kingdom team on their committee. [10120]
    213
    Mr. Robertson
    [holding answer 13 January 1997]: Based on records provided by the Scottish agricultural and biological research institutes—SABRIs—the number of committees on which employees of the SABRIs represent UK interests is set out in the table. The records do not identify which employees are leading the respective UK teams.

    Organisation

    United Kingdom

    European

    International

    Scottish Crop Research

    Institute

    2

    3

    14

    Macaulay Land Use

    Research Institute

    7

    3

    8

    Hannah Research

    Institute

    1

    1

    1

    Rowett Research

    Institute

    7

    2

    9

    Moredun Research

    Institute

    2

    0

    1

    Mr. Ingram
    To ask the Secretary of State for Scotland how many(a) United Kingdom, (b) European and (c) international committees include employees of the Scottish Agricultural Science Agency as representatives of United Kingdom interests; and how many of these employees are leading the United Kingdom team on their committee. [10016]

    Mr. Robertson
    [holding answer 13 January 1997]: The information is as follows:

    United Kingdom

    European

    International

    Representative

    18

    13

    5

    Leader

    —

    2

    3

    Mr. Ingram
    To ask the Secretary of State for Scotland how many(a) United Kingdom, (b) European and (c) international committees include employees of the Fisheries Research Services as representatives of United Kingdom interests; and how many of these employees are leading the United Kingdom team on their committee. [10024]

    Mr. Robertson
    [holding answer 13 January 1997]: The information is as follows:

    United Kingdom

    European

    International

    Representative

    35

    6

    73

    Leader

    —

    2

    35

    Mr. Ingram
    To ask the Secretary of State for Scotland (1) what estimate he has made of the future costs of the prior options review of the Scottish Crop Research Institute; and from which budget these sums will be paid; [10011]

    (2) what estimate he has made of the future costs for the prior options review of the Macaulay Land Use Research Institute; and from which budget these sums will be paid; [10019]
    214
    (3) what estimate he has made of the future costs of the prior options review of the Hannah Research Institute; and from which budget these sums will be paid; [10115]

    (4) what estimate he has made of the future costs of the prior options review of the Rowett Research Institute; and from which budget these sums were paid; [10079]

    (5) what estimate he has made of the future costs of the prior options review of the Moredun Research Institute; and from which budget these sums will be paid; [10119]

    (6) what estimate he has made of the future costs of the prior options review of the Scottish Agricultural Science Agency; and from which budget these sums will be paid. [10015]

    Mr. Robertson
    [holding answer 13 January 1997]: Prior options reviews of the five Scottish agricultural and biological research institutes and of the Scottish Agricultural Science Agency have been completed. The Government are considering the follow-up to the reviews, but at this stage no future costs have been identified.

    Mr. Ingram
    To ask the Secretary of State for Scotland (1) how many(a) United Kingdom, (b) European and (c) international committees are chaired by employees of the Scottish Crop Research Institute; [10013]

    (2) how many (a) United Kingdom, (b) European and (c) international committees are chaired by employees of the Macaulay Land Use Research Institute; [10021]

    (3) how many (a) United Kingdom, (b) European and (c) international committees are chaired by employees of the Hannah Research Agency; [10117]

    (4) how many (a) United Kingdom, (b) European and (c) international committees are chaired by employees of the Rowett Research Institute; [10081]

    (5) how many (a) United Kingdom, (b) European and (c) international committees are chaired by employees of the Moredun Research Agency. [10121]

    Mr. Robertson
    [holding answer 13 January 1997]: Based on records provided by the Scottish agricultural and biological research institutes the information is set out in the table.

    Organisation

    United Kingdom

    European

    International

    Scottish Crop Research Institute

    2

    1

    3

    Macaulay Land Use Research Institute

    0

    0

    1

    Hannah Research Institute

    0

    0

    0

    Rowett Research Institute

    4

    2

    1

    Moredun Research Institute

    1

    0

    0

    Mr. Ingram
    To ask the Secretary of State for Scotland how many(a) United Kingdom, (b) European and (c) international committees are chaired by employees of the Scottish Agricultural Science Agency. [10017]

    Mr. Robertson
    [holding answer 13 January 1997]: The information is as follows:

    United Kingdom: 3

    European: 1

    International: 1

    215
    Mr. Ingram
    To ask the Secretary of State for Scotland how many(a) United Kingdom, (b) European and (c) international committees are chaired by employees of Fisheries Research Services. [10025]

    Mr. Robertson
    [holding answer 13 January 1997]: The information is as follows:

    United Kingdom: 5

    European:—

    International: 11

    Consultants
    Mr. Milburn
    To ask the Secretary of State for Scotland what estimate he has made of the amount spent on external consultants by his Department's non-departmental public bodies in each of the last five years. [10186]

    Lord James Douglas-Hamilton
    [holding answer 13 January 1997]: I have made no such estimate; this is a matter for the bodies themselves.

    Mr. Milburn
    To ask the Secretary of State for Scotland if he will list the actions his Department has taken on each of the recommendations contained in the Cabinet Office report, "The Government's Use of External Consultants". [10187]

    Lord James Douglas Hamilton
    [holding answer 13 January 1997]: The Scottish Office has implemented an action plan to meet all the recommendations in the report. A copy is available on request.

    Yester House and Yester Chapel
    Mr. Home Robertson
    To ask the Secretary of State for Scotland what grants have been made from public funds for the repair and maintenance of Yester house and Yester chapel; what public access conditions apply to those grants; and what steps he is taking to ensure that those conditions are fulfilled. [10299]

    Lord James Douglas-Hamilton
    [holding answer 13 January 1997]: Between 1977 and 1982 grant of £203,690 was awarded under the historic buildings repair grant scheme in respect of Yester house. The condition of grant giving a public right of access to Yester house ceased to have effect following a change of ownership in 1986.

    Between 1990 and 1995 grant of £161,700 under the same scheme was awarded for repairs to Yester chapel. This building, although in the grounds of Yester house, is in entirely separate ownership. A condition of the grant to the chapel's trustees was that there should be public access by appointment. It is for the chapel's trustees in the first instance to ensure that all conditions under which they accepted grant are fulfilled.

    Royal Victoria Infirmary NHS Trust
    Mr. Chisholm
    To ask the Secretary of State for Scotland if he will list for the Royal Victoria Infirmary NHS trust staffing levels on(a) 1 April 1993, (b) 1 April 1994, (c) 1 April 1995, (d) 1 April 1996 and (e) 30 November 1996 for (i) building engineering and maintenance, (ii) ground maintenance, (iii) capital project management, (iv) catering, (v) cleaning, (vi) fire detection and control equipment, (vii) laundry,
    216
    (viii) medical and industrial gases, (ix) portering, (x) telecommunications management, (xi) transport and (xii) waste management. [10703]

    Lord James Douglas-Hamilton
    [holding answer 13 January 1997]: The information requested is not available centrally. I have asked the chief executive of Victoria Infirmary NHS Trust in Glasgow, who is in a position to provide the detailed figures requested, to reply to the hon. Gentleman direct.

  SOCIAL SECURITY

    Benefit Fraud
    Mr. Battle
    To ask the Secretary of State for Social Security what information on the savings accruing to public funds from his Department's anti-fraud measures was collected between his predecessor's statement of 6 May 1981,Official Report, column 79, and 1986–87. [8085]

    Mr. Heald
    The information is not readily available and could be obtained only at disproportionate cost.

    Benefit Claimants
    Mr. Kevin Hughes
    To ask the Secretary of State for Social Security what has been the number of new benefits claimants in each month since April 1992. [9031]

    Mr. Burt
    The available information has been placed in the Library.

    Disability Living Allowance
    Ms Hodge
    To ask the Secretary of State for Social Security (1) if he will estimate the cost to his Department's budget of awarding the mobility component of the disability living allowance to those aged over 65 years; [9600]

    (2) how many people he estimates would be able to claim the mobility component of the disability living allowance if it were awarded to those over 65 years. [9597]

    Mr. Andrew Mitchell
    It is estimated that an extra 2.3 million people would receive the mobility component of disability living allowance if it were to be awarded to disabled people over the age of 65, at an estimated additional cost of £3.9 billion for 1996–97.Notes:

    1. Estimates are for the full year 1996–97 and are in 1996–97 prices.

    2. Figures are based on disability living allowance (DLA) caseload statistics and the disability survey 1985 and are rounded to the nearest 100,000 people and £0.1 billion.

    3. All figures are subject to error.

    4. Estimates do not take into account changes to the payment of the DLA mobility component to people in hospital which took effect in July 1996, or the effect on other social security benefits.

    Ms Hodge
    To ask the Secretary of State for Social Security how many claimants there are in the current year and there were in each of the previous four years for(a) disability living allowance and (b) attendance allowance. [9598]
    217
    Mr. Mitchell
    The information is in the table:

    Recipients for disability living allowance and attendance allowance

    (Thousands)

    Year

    Disability living allowance1,2

    Attendance Allowance

    1992

    31,019

    4,51,059

    1993

    1,248

    4,5890

    1994

    1,400

    4,5962

    1995

    1,589

    4,51,046

    1996

    1,768

    1,21,194

    Source:

    Analytical Services Division.

    Notes:

    1 Based on 5 per cent. data.

    2 Figures relate to 31 August.

    3 Disability living allowance was introduced in April 1992 for people under age 65. The 1992 figure includes beneficiaries who transferred to disability living allowance in April 1992 from mobility allowance and attendance allowance.

    4 Figures based on a 100 per cent. count of statistical records adjusted to reflect the extent to which they overstate the number of live cases.

    5 Figures as at 31 March 1996.

    Ms Hodge
    To ask the Secretary of State for Social Security what was the total cost to his Department in awarding the mobility component of the disability living allowance for(a) last year and (b) each of the previous years since its introduction. [9596]

    Mr. Mitchell
    The information is set out in the table:

    £ million

    Year

    1992–93

    1993–94

    1994–95

    1995–96

    Higher rate mobility component

    1,167

    1,547

    1,679

    1,977

    Lower rate mobility component

    52

    108

    137

    183

    Total mobility component

    1,219

    1,655

    1,816

    2,160

    Source:

    The 1995–96 figure is based on disability living allowance (DLA) expenditure in the appropriation accounts published this month. The breakdown for the earlier three years conforms with total DLA expenditure shown in the departmental report 1996.

    Note:

    All figures are estimated.

    Attendance Allowances
    Ms Hodge
    To ask the Secretary of State for Social Security what has been the total cost to his Department for paying attendance allowance in the current year and in each of the previous four years. [9599]

    Mr. Andrew Mitchell
    The information is set out in the table:

    Total expenditure of attendance allowance

    Year

    £ million

    1992–931

    1,553

    1993–941

    1,795

    1994–951

    1,963

    218

    Total expenditure of attendance allowance

    Year

    £ million

    1995–962

    2,218

    1996–973

    2,421

    Notes:

    1 Source: March 1996 social security departmental report and earlier equivalents.

    2 Source: 1995–96 appropriation accounts, vote 1.

    3 Estimated expenditure, may change prior to the publication of the March 1997 departmental report.

    4 Figures are rounded to the nearest million.

    Ministerial Visits
    Mr. Donohoe
    To ask the Secretary of State for Social Security if he will list for each of the Ministers in his Department how many official ministerial visits they have undertaken since 1 January; and how many of these have been abroad. [9388]

    Mr. Burt
    The information is set out in the table:

    Number of domestic ministerial visits

    Number of ministerial visits abroad

    Peter Lilley

    13

    2

    Alistair Burt

    84

    1

    The Lord MacKay of Ardbrecknish

    15

    1

    Andrew Mitchell

    12

    2

    Roger Evans

    19

    0

    Oliver Heald

    31

    0

    Housing Benefit
    Mr. Nigel Jones
    To ask the Secretary of State for Social Security what methodology his Department is using to monitor the effects of the housing benefit changes for single people implemented on 7 October; what initial report he has received; and if he will make a statement. [9417]

    Mr. Roger Evans
    The Department has asked a representative sample of local authorities to provide it with data specifically related to claims made by single claimants under the age of 25 years, on a quarterly basis. Information relating to the October to December quarter will be processed and analysed when received, and will be published in the usual way. This data together with data from other sources, for example, the rent officers statistics, will be used to assess the impact of the changes.

    Incapacity Benefit
    Mr. Thurnham
    To ask the Secretary of State for Social Security if he will meet the chief executive of the Benefits Agency to discuss the time taken to assess the incapacity benefit claim by Mrs. Jean Cavanagh of 71 Thorns road, Astley Bridge, Bolton; and if he will make a statement. [9750]

    Mr. Burt
    My right hon. Friend the Secretary of State has no plans to meet the chief executive of the Benefits Agency. He is aware of the delays that have occurred in this case and the chief executive will write to the hon. Gentleman separately.
    219
    I can now confirm that a decision has been made and that Mrs. Cavanagh has been advised of that decision.

    Child Support
    Ms Lynne
    To ask the Secretary of State for Social Security what is the target time for handling departure applications from the time of the initial inquiry to the revised maintenance level being implemented; and what proportion of departure applications he estimates will meet this target in 1997. [9953]

    Mr. Andrew Mitchell
    Consideration is being given to the nature and value of target times for activity on departures in the light of live running of the new scheme.

    Mr. Simon Coombs
    To ask the Secretary of State for Social Security if he will extend the provision enabling child support liability orders to be entered on the register of county court judgments. [10960]

    Mr. Mitchell
    Since 20 May 1996, the Child Support Agency has had the power to enter liability orders made in magistrates courts in the register of county court judgments. To date, only new orders have been entered. From today however, the agency will also be able to enter liability orders made before 20 May. Those absent parents affected by the change will be given an opportunity to reach an agreement to repay arrears of child support before the liability order is registered.

    Overseas Pensions
    Mr. Winnick
    To ask the Secretary of State for Social Security in what circumstances his Department acts on behalf of those individuals living in the United Kingdom who are known to have served in Nazi armies in respect of overseas pensions; and if he will make a statement. [9954]

    Mr. Heald
    The Department of Social Security will act for any citizen from any member state of the European economic area in accordance with the law. This includes application of EC regulations on social security for migrant workers—regulations 1408/71 and 572/72—where the person concerned has been insured in two or more states of the European economic area. The scope of these regulations includes contributory old-age, survivors and invalidity pensions. It does not, however, extend to war pensions.

    Jobseeker's Allowance
    Mr. Hinchliffe
    To ask the Secretary of State for Social Security if a person unable to claim incapacity benefit as a result of the all-work test will be able to claim the jobseeker's allowance for the first 13 weeks without pursuing employment opportunities away from their recognised past employment; and if he will make a statement. [10257]

    Mr. Roger Evans
    A person claiming jobseeker's allowance after being found capable of work under the all-work test is subject to the same conditions of entitlement as other jobseekers. A person may restrict his availability to his usual occupation for a "permitted period" of up to 13 weeks. Whether he has a usual occupation is a question of fact which may have to be determined by an independent adjudication officer. If he is no longer capable of carrying out that previous
    220
    occupation, this is likely to have a bearing on whether he is regarded as having a usual occupation for jobseeker's allowance.

    Someone who has physical or mental difficulties can restrict his availability in any way, provided that his restrictions are reasonable in the light of those difficulties.

  HEALTH

    Dental Services
    Mr. Gordon Prentice
    To ask the Secretary of State for Health, pursuant to his answer of 6 December,Official Report, columns 820–21, on the largest annual NHS payments to dentists, in which town is the dental practice listed in each of the years given. [9075]

    Mr. Malone
    In 1995–96 the highest earning dentist practices were listed in Norfolk and Essex. In 1991–92, 1992–93, 1993–94 and 1994–95 the highest earning dentists' practices were listed in London.

    Practice Nurses
    Mr. Simon Hughes
    To ask the Secretary of State for Health how many general medical services practice nurses there were(a) in each family health services authority and (b) in each region in each year from 1985 to 1996. [9767]

    Mr. Malone
    The available information will be placed in the Library.

    I regret that my previous reply on 15 July 1996 at column 391 for Bolton family health services authority in 1995 was incorrect in respect of practice nurse data. I am placing the correct information in the Library.

    NHS Trusts
    Mr. Bayley
    To ask the Secretary of State for Health, pursuant to his answer of 25 November,Official Report, column 114, how many and what percentage of national health service trusts in England failed at the end of the 1995–96 financial year (a) to break even, (b) to achieve their target rate of return on relevant net assets, (c) to stay within their external financing limit and (d) to meet one or more of these targets. [10805]

    Mr. Horam
    The information requested has been placed in the Library.

    Chlorofluorocarbons
    Mr. Gordon Prentice
    To ask the Secretary of State for Health when he plans to introduce measures to phase out the use of CFCs in aerosols for medical use. [10410]

    Mr. Clappison
    I have been asked to reply.

    CFCs may continue to be produced for use in the manufacture of metered dose inhalers—MDIs—under essential use exemption under the Montreal protocol, and EC regulation 3093/94 by which the protocol is implemented in the EU. Decision VIII/8 bis of the eighth meeting of the parties to the Montreal protocol in November 1996 noted that a transition is occurring from
    221
    the use of CFC-based MDIs to non-CFC treatments for asthma and chronic obstructive pulmonary diseases, and encouraged developed countries to take measures to ensure a smooth and efficient transition, and protect the health and safety of patients. The Government have accordingly begun to prepare a transition strategy which will assist the orderly phase-out of CFCs in the application as suitable non-CFC-based treatments become available.

  DEFENCE

    Equipment Contracts (Gloucestershire)
    2. Mr. Clifton-Brown: To ask the Secretary of State for Defence if he will make a statement on the impact on jobs in Gloucestershire as a consequence of defence contracts awarded in each of the past five years. [8971]
    Mr. Arbuthnot
    We do not maintain estimates of defence-related jobs on a county basis. However, the south-west as a whole is one of the two regions with the highest proportion of those in work whose jobs are directly related to my Department's equipment contracts.

    Cadet Forces
    13. Sir Colin Shepherd: To ask the Secretary of State for Defence if he will make a statement on the role of the services cadet forces. [8983]
    Mr. Soames
    The cadet forces continue to play a vital role in the nation's voluntary youth movement.

    Helicopters (Unauthorised Use)
    Mr. Gordon Prentice
    To ask the Secretary of State for Defence what steps he is taking to prevent the unauthorised use of helicopters by naval personnel. [8984]

    Mr. Soames
    I am not aware of any cases of unauthorised use of helicopters by naval personnel. All flights by Royal Navy aircraft are governed by strict authorising procedures.

    Departmental Land Disposal (Hampshire)
    Mr. Hunter
    To ask the Secretary of State for Defence what representations he has recently(a) received from and (b) made to Hampshire county council regarding the disposal of land in Hampshire that is surplus to his Department's requirements. [8985]

    Mr. Soames
    My Department maintains close liaison with Hampshire county council and other local authorities in the county on matters concerning the defence estate. Regular meetings are held, at which both general and particular issues, including the disposal of surplus sites, are discussed.

    Anglo-American Defence Arrangements
    Mr. Evennett
    To ask the Secretary of State for Defence when he last met the US Secretary for Defence to discuss Anglo-American defence arrangements; and if he will make a statement. [8986]
    222
    Mr. Portillo
    I meet Dr. Perry on a regular basis; we last met during the meetings of NATO Defence Ministers in Brussels on 17 and 18 December. I look forward to working closely with his successor, Senator Cohen, when he takes up his appointment.

    Departmental Budget
    Mr. Brian David Jenkins
    To ask the Secretary of State for Defence if he will calculate the change in his Department's budget as a percentage of gross domestic product between April 1990 and April 1997 under current plans. [8987]

    Mr. Terry Davis
    To ask the Secretary of State for Defence if he will estimate the change in his Department's budget as a percentage of gross domestic product between April 1990 and April 1997 under current plans. [8974]

    Mr. Soames
    Under our latest spending plans and forecasts of GDP, the defence budget will account for approximately 2.8 per cent. in 1997–98, compared with 4 per cent. in 1990–91.

    Eurofighter
    Mr. Merchant
    To ask the Secretary of State for Defence what discussions he has had on progress on Eurofighter with his German counterpart. [8988]

    Mr. Arbuthnot
    My right hon. Friend the Secretary of State for Defence met his German opposite number in November, when Herr Ruhe confirmed that Germany expected to make a decision on the production investment and production phases of Eurofighter early in 1997. I met my German opposite number most recently on 5 December 1996, when he reaffirmed Germany's commitment to the programme.

    Racial Harassment
    Mrs. Fyfe
    To ask the Secretary of State for Defence how many cases of racial harassment have been reported in each of the armed services; and of these how many have resulted in disciplinary action being taken in the last year for which figures are available. [8989]

    Mr. Soames
    A total of 38 cases of alleged racial harassment in the Army were reported between 1992 and 6 December 1996, the last date for which figures are available. Of these, 25 were found to be unsubstantiated, and seven are still under investigation. Of the six cases substantiated, four have resulted in disciplinary action being taken.

    In the corresponding period, the Royal Air Force has dealt with seven cases of alleged racial harassment. Of these, four were found to be unsubstantiated and one was withdrawn. Disciplinary action was taken in the other two cases.

    The naval service has kept records of such cases for the last 12 months. In this time, five cases have been raised. Of these, one has been found to be unsubstantiated, another is under investigation and one involved disciplinary action. A further case was resolved without
    223
    resort to disciplinary action. The remaining case relates to incidents in 1991–92, and is subject to a claim for damages at the High Court.

    Racial abuse or discrimination is not tolerated in the armed forces. All complaints about racial discrimination are investigated and, where appropriate, action is taken against the offenders.

    West Indies Guard Ship
    Mr. Luff
    To ask the Secretary of State for Defence what tasks are performed by the West Indies guard ship and its accompanying Royal Fleet Auxiliary vessel; and if he will make a statement. [8990]

    Mr. Soames
    The West Indies guard ship and her accompanying Royal Fleet Auxiliary tanker provide support to our dependent territories and other UK interests in the region. They carry out a broad range of tasks, including disaster relief, support for international operations, goodwill visits, and training for Caribbean forces. They also make a significant contribution to the international fight against drug trafficking.

    Overseas Service
    Mr. Bernard Jenkin
    To ask the Secretary of State for Defence in how many countries overseas United Kingdom armed forces are currently serving; and if he will make a statement on the global role of the United Kingdom armed forces. [8991]

    Mr. Soames
    British service personnel are currently providing a UK military presence either on operations or at permanent bases in 18 countries outside the United Kingdom.

    Our armed forces are deployed around the globe to protect the interests of the United Kingdom and our dependent territories; to contribute to operations under international auspices, in particular those of NATO, the United Nations and the Organisation for Security and Co-operation in Europe; and to promote and sustain international peace and stability.

    Royal Navy (Upgrades)
    Dr. Spink
    To ask the Secretary of State for Defence what upgrades are planned in Royal Navy fighting capabilities. [8992]

    Mr. Arbuthnot
    To maintain the Royal Navy as one of the world's most modern, able fighting forces, the capabilities afforded by its equipment are kept under regular review. A number of key projects are planned to enter service during the next decade, including six further type 23 frigates; two further Trident class SSBNs—strategic submarine ballistic nuclear; seven further single role minehunters; the landing platform helicopter, HMS Ocean; the two landing platform docks (replacement), HMS Albion and HMS Bulwark; the EH101 Merlin anti-submarine warfare helicopter; the batch 2 Trafalgar class submarine to succeed the Swiftsure class; the Tomahawk land attack missile; and the common new
    224
    generation frigate, which will replace the air defence capabilities of our type 42 destroyers. In addition, improvements are planned to a range of weapons and equipment fitted to RN submarines and surface ships to ensure that they maintain their operational capability into the next century.

    Organophosphate Pesticides
    Mr. Ainger
    To ask the Secretary of State for Defence if the current instructions given to Her Majesty's forces about the care of organophosphate pesticides have changed since January 1991; and if he will make a statement. [8993]

    Mr. Soames
    Instructions regarding the storage and use of organophosphate pesticides are included on the safety data sheets for pesticides which accompany every delivery of service stock. The instructions have therefore changed since 1991 in line with changes in the inventory of the UK armed forces.

    Mr. Llew Smith
    To ask the Secretary of State for Defence if he will list each of the toxic delousing powders or sprays used by British forces during Operation Granby indicating in each case(a) on whom and in what form it was used and (b) if it was licensed for use in the United Kingdom. [10641]

    Mr. Soames
    [holding answer 13 January 1997]: I refer the hon. Member to paragraphs 2.C.8 and 3.E.10 to 3.E.17 of the report of the organophosphate pesticide investigation team D/OPPIT/3 dated 6 December 1996, a copy of which is in the Library of the House.

    Ex-Service Affairs Unit
    Mr. Pope
    To ask the Secretary of State for Defence what representations he has received in connection with the Royal British Legion campaign to establish an ex-service affairs unit. [8994]

    Mr. Soames
    My Department has recently received a number of letters expressing support for the Royal British Legion's campaign for the establishment of an ex-service affairs unit. Replies have been sent to all these letters, explaining that the Government continue to believe that provision for former service men and women is best integrated with that for the population as a whole.

    Hong Kong
    Sir Fergus Montgomery
    To ask the Secretary of State for Defence if he will make a statement on the impact of the withdrawal from Hong Kong on the role of the Royal Navy. [8995]

    Mr. Soames
    The UK's wider interest in security in the region will not diminish when the sovereignty of Hong Kong is transferred to China on 30 June. The Royal Navy will continue to deploy to the far east, as it has done traditionally. In addition to our continuing commitment to the five powers defence arrangements, we shall continue our programme of bilateral defence contracts with our friends in the region.

    Defence Industry (Employment)
    Mr. Hoyle
    To ask the Secretary of State for Defence what is his Department's estimate of the number of(a) direct and (b) indirect jobs in the United Kingdom defence industry; and what was this number in 1990. [8996]

    Mr. George
    To ask the Secretary of State for Defence what is his Department's estimate of the number of(a) direct and (b) indirect jobs in the United Kingdom defence industry; and what was the number in 1990. [8999]

    Mr. Arbuthnot
    Estimates of UK employment dependent both directly and indirectly on defence expenditure and equipment exports in recent years appear in table 1.10 of "UK Defence Statistics 1996", a copy of which is in the Library of the House.

    Peacekeeping
    Mr. Peter Atkinson
    To ask the Secretary of State for Defence what assessment he has made of the advantages of earmarking troops solely for peacekeeping tasks. [8997]

    Mr. Soames
    Requests for British personnel to participate in peacekeeping are considered case by case in the light of other commitments. Contributions to peacekeeping operations can potentially be drawn from any part of the armed forces, subject to availability. We believe that this approach is preferable to earmarking personnel or formations. The inherent uncertainty of where and how operations will arise makes it very difficult to determine in advance which capabilities will be required. This results in the risk of a mismatch between requirements and earmarked forces. The United Nation's standby force arrangements, which identify capabilities in a large number of member states, provide a more practical and flexible method of identifying forces.

    Ministerial Responsibilities
    Mr. Olner
    To ask the Secretary of State for Defence which Minister is responsible for recruitment to the armed forces. [8998]

    Mr. Soames
    My right hon. Friend the Secretary of State for Defence has overall responsibility for all defence matters.

    Executive Agencies
    Mr. Sheerman
    To ask the Secretary of State for Defence what steps he is taking to encourage senior service personnel to co-operate fully with Government executive agencies. [8979]

    Mr. Soames
    Senior officers in Her Majesty's forces are expected at all times to co-operate fully with Government executive agencies.

    Gulf War Syndrome
    Mr. Llew Smith
    To ask the Secretary of State for Defence if he will place in the Library a copy of the letter sent to invite Gulf war veterans who believe themselves to be suffering from illness originating from their service in the Gulf to present themselves for examination. [9673]
    226
    Mr. Soames
    Gulf veterans who inquire about attending the medical assessment programme are sent a factsheet giving information about the programme, how to register, and travel and accommodation arrangements. In addition, since the wider use of organophosphate pesticides came to light, we have written to a number of veterans who have previously attended the programme, and who exhibit a range of symptoms which may relate to OP pesticide exposure, inviting them to return for further assessment. Copies of this letter and the factsheet have been placed in the Library of the House.

    Relocation Assistance
    Mr. Key
    To ask the Secretary of State for Defence if he will list, by name, the companies that provide domestic furniture and personal effects removal services for armed forces personnel and the areas to which their contracts apply, including overseas moves, family moves under the service contract system and moves of single personnel. [9783]

    Mr. Soames
    This is a matter for the chief executive of the Defence Transport and Movements Executive. I have asked the chief executive to write to the hon. Member.

    Letter from M. G. R. Hodson to Mr. Robert Key, dated 14 January 1997:
    I am replying to your Question to the Secretary of State for Defence, which asks for the names of the companies which provide removal services for Armed Forces Personnel, as this matter falls within my area of responsibility as Chief Executive of the Defence Transport and Movements Executive Agency.
    The annexe gives details of those companies concerned. Please see my remarks in the answer to your other Question on removal contracts, regarding single personnel.
    The following companies provide overseas removal services on a tri-Service basis, for families and single personnel to and from the areas specified:

    Area 1. (Berkshire, Buckinghamshire, Hampshire, Kent, Oxfordshire, East Sussex, Bedfordshire, Essex, Hertfordshire, London, Surrey, West Sussex)

    Pickfords

    Bournes

    F and N

    Whites and Co.

    R and Y Tyres

    Baxters

    Area 2. (Cornwall, Dorset, Somerset/Avon, Devon, Gloucester, Wiltshire)

    Pickfords

    F and N

    Whites and Co.

    Cantay

    Area 3. (Cambridgeshire, Leicestershire, Nottinghamshire, North Hampshire, Derbyshire, Lincolnshire, Norfolk, Suffolk)

    F and N

    Pickfords

    Pearsons Ltd.

    Whites and Co.

    Kidds

    R and Y Tyres

    227
    Area 4. (Cheshire, Dyfed, South Glamorgan, Gwent, Hereford, Powys, Staffordshire, Worcester, Clwyd, Mid Glamorgan, West Glamorgan, Gwynedd, West Midlands, Shropshire, Warwickshire)

    F and N

    Fleet

    Whites and Co.

    Pearsons Ltd.

    Area 5. (Cleveland, Durham, Lancashire, Merseyside, Tyne and Wear, South Yorkshire, Cumbria, Humberside, Greater Manchester, Northumberland, North Yorkshire, West Yorkshire)

    Selles

    Pickfords

    Pearsons Ltd.

    F and N

    Kidds

    Whites and Co.

    Area 6. (Scotland)

    Pickfords

    Pearsons Ltd.

    Whites and Co.

    Area 7. (Northern Ireland)

    Whittles Movers

    Area 8. (Belgium, Germany, Netherlands)

    Whites and Co.

    Stubbs

    Pearsons Ltd.

    F and N

    Castles

    RRT

    Hendricks

    Rest of World

    Norway—White and Co.

    Italy—Pickfords

    Portugal/Spain—Gauntlett Removals

    Canada—AMJ Campbell

    USA—Ambassador Relocations

    Cyprus—Orbit Removals

    France—Baxters Removals

    Denmark—Bournes Removals

    Hong Kong—Allied Pickfords

    Hong Kong—TCI

    Hong Kong—Baltrans

    Hong Kong—Fourwinds

    Eastern Europe—Allied Pickfords

    The following companies provide internal UK removal services for the army, and for families only, to and from the headquarter areas specified:

    HQ London

    Alton International

    HR Shipping Services

    Britannia Movers International

    HQ Scotland

    County Removals

    Britannia Movers International

    HQ 2 division

    Britannia Movers International

    The Pantechnicon Group

    Pearsons Ltd.

    228

    Whittle Movers

    County Removals

    W. Southerington and Son

    HR Shipping Services

    HQ 3 division

    Britannia Movers International

    HR Shipping Services

    The Pantechnicon Group

    Whites and Co.

    Whittlers Movers

    M. J. Christopher and Son

    F. R. Hackworthy and Sons

    HQ 4 division

    Alton International

    Baxters International

    Britannia Movers International

    HR Shipping Services

    The Pantechnicon Group

    Pickfords

    Whites and Co.

    Whittlers Movers

    Hoults

    Doree Bonner International

    HQ 5 division

    Britannia Movers International

    The Pantechnicon Group

    Premier Removals

    White and Co.

    HQ Northern Ireland

    Whittle Movers

    The following companies provide internal removal services for RAF and RN families to and from the areas specified:

    Area 1 (South East)

    Alton International

    Baxters International

    HR Shipping Services

    Pickfords

    Whittles Movers

    Area 2 (Wales and South West)

    M. J. Christophers and Son

    F. R. Hackworthy and Sons

    HR Shipping Services

    The Pantechnicon Group

    Area 3 (North)

    County Removals

    W. Southerington and Sons

    Whites and Co.

    Area 4 (Scotland)

    County Removals

    Ian Reid Removals Ltd.

    White and Co.

    Mr. Key
    To ask the Secretary of State for Defence if he will list the total value of current contracts, by area, in respect of assistance to Army personnel who are posted from one location to another, broken down into overseas moves, family moves and single personnel moves. [9781]
    229
    Mr. Soames
    This is a matter for the chief executive of the Defence Transport and Movements Executive. I have asked the chief executive to write to the hon. Member.

    Letter from M. G. R. Hodson to Mr. Robert Key, dated 14 January 1997:
    I am replying to your Question to the Secretary of State for Defence, which asks for the value in respect of assistance to army personnel who are posted, as this matter falls within my area of responsibility as Chief Executive of the Defence Transport and Movements Executive Agency.
    The management information that is produced does not enable me to provide you with the details in exactly the categories you require. I have, therefore, broken down what information we do have, as far as is possible, but we are limited in what detail we can provide.
    For overseas moves of army personnel, both families and single, between the UK and some 80 countries worldwide, the total value of the current contracts is approximately £17 million per annum.
    For families moves for army personnel within the UK, the total value of the contracts is some £7 million per annum.
    For internal UK, the movement of the personal effects of single personnel takes place outside the main Unaccompanied Baggage arrangements. Their effects are moved by both in-house Service transport and commercial transportation as if they were normal Army freight. The management information is not available to distinguish such moves or their cost from the movement of other types of freight.

    Mr. Key
    To ask the Secretary of State for Defence what arrangements he makes to assist Royal Navy and Royal Air Force personnel with removal costs when they are posted from one location to another. [9782]

    Mr. Soames
    When married RN and RAF personnel—and in the UK only, single personnel who meet certain conditions—are posted in the UK or to/from specified countries in north-west Europe, arrangements can be made to remove their furniture and effects at public expense where the circumstances of the move qualify. The removals are effected by a service which is based on the efficient use of removals companies contractually engaged by MOD via competitive tender. Service personnel should not need to meet any of the costs.

    Range Facilities
    Dr. John Cunnignham
    To ask the Secretary of State for Defence what has been(a) the income and (b) the operating costs of the Eskmeals range in each of the last five financial years. [10155]

    Mr. Arbuthnot
    This is a matter for the Chief Executive of the Defence Evaluation and Research Agency. I have asked the chief executive to write to the hon. Member.

    Letter from John Chisholm to Dr. John Cunningham, dated 14 January 1997:
    I have been asked to reply to your question about the income and operating costs of the Defence Evaluation and Research Agency (DERA) range at Eskmeals in each of the last five financial years, since as Chief Executive of DERA this is a matter for which I am responsible.
    The income and operating costs of the Eskmeals range in 1995/96, together with the latest forecast for the current year is given in the
    230
    Table below. Information on a comparable basis prior to the inclusion of Eskmeals in the Trading Agency in 1995 is not available.

    £000

    1995–96

    1996–97 forecast

    Income

    5,365

    4,355

    Operating costs

    (8,450)

    (5,504)

    Over/(under) recovery

    (3,085)

    (1,149)

    1. Operating costs for 1995–96 include exceptional costs of £987,000.

    2. Eskmeals budgeted for a loss of £ 1.329 million in 1995–96.

    I hope this is helpful.

    Dr. Cunningham
    To ask the Secretary of State for Defence for how many days in each of the last five years the ranges at(a) Eskmeals and (b) Shoeburyness have been used for testing purposes. [10154]

    Mr. Arbuthnot
    This is a matter for the chief executive of the Defence Evaluation and Research Agency. I have asked the chief executive to write to the hon. Member.

    Letter from John Chisholm to Dr. John Cunningham, dated 14 January 1997:
    I have been asked to reply to your question about the number of days in each of the last five years the Defence Evaluation and Research Agency (DERA) ranges at Shoeburyness and Eskmeals have been used for testing, since as Chief Executive of DERA this is a matter for which I am responsible.
    The ranges at both Eskmeals and Shoeburyness have been in continuous use for testing purposes over the last five years. Each has a number of firing points or batteries and other test facilities and trials typically involve several days of preparation. The number of days in which firing took place somewhere on the ranges is as follows:

    Days

    Eskmeals

    1992

    237

    1993

    241

    1994

    206

    1995

    215

    1996

    228

    Shoeburyness

    1992

    240

    1993

    243

    1994

    245

    1995

    246

    1996

    225

    I hope this is helpful.

    Dr. Cunningham
    To ask the Secretary of State for Defence (1) what is the projected income of the Eskmeals range in the current year and for the next three years; [10156]

    (2) what is the projected income of the Shoeburyness range in (a) the current year and (b) the next three years. [10157]

    Mr. Arbuthnot
    This is a matter for the chief executive of the Defence Evaluation and Research Agency. I have asked the chief executive to write to the hon. Member.
    231
    Letter from John Chisholm to Dr. John Cunningham, dated 14 January 1997:
    I have been asked to reply to your questions about the projected income of the Defence Evaluation and Research Agency (DERA) ranges at Eskmeals and Shoeburyness, since as Chief Executive of DERA this is a matter for which I am responsible. I will reply to both questions in this letter.
    The projected income of the Eskmeals range for the current financial year is £4.4 million and that of the Shoeburyness range is £18.4 million. The budget for 1997/98 has still to be finalised and projections by range for future years are not available. The latest planning figure for total income across all of the DTEO Land Ranges (including Eskmeals, Kirkcudbright, Pendine and Shoeburyness) for each of the next three years is as follows:

    1997/98: £29 million

    1998/99: £27 million

    1999/00: £22 million.

    The equivalent figure for the current year is £32 million (against a budget of £44 million).
    I hope this is helpful.

    Dr. Cunningham
    To ask the Secretary of State for Defence what was(a) the income and (b) the operating costs of the Shoeburyness range in each of the last five financial years. [10144]

    Mr. Arbuthnot
    This is a matter for the chief executive of the Defence Evaluation and Research Agency. I have asked the chief executive to write to the hon. Member.

    Letter from John Chisholm to Dr. John Cunningham, dated 14 January 1997:
    I have been asked to reply to your question about the income and operating costs of the Defence Evaluation and Research Agency (DERA) range at Shoeburyness in each of the last five financial years, since as Chief Executive of DERA this is a matter for which I am responsible.
    The income and operating costs of the Shoeburyness range in 1995/96, together with the latest forecast for the current year is given in the Table below. Information on a comparable basis prior to the inclusion of Shoeburyness in the Trading Agency in 1995 is not available.

    £000s

    1995–96

    1996–97 forecast

    Income

    25,603

    18,447

    Operating costs

    (26,108)

    (22,582)

    Over/under recovery

    (505)

    (4,135)

    I hope this is helpful.

    Nuclear Submarines
    Mr. Cohen
    To ask the Secretary of State for Defence if he will make a statement on the arrangements for decommissioning nuclear submarines; and if he will make a statement. [9866]

    Mr. Arbuthnot
    This is a matter for the chief executive of the Ships Support Agency. I have asked the chief executive to write to the hon. Member.

    Letter from R. V. Babington to Mr. Harry Cohen, dated 14 January' 1997:
    I am replying to your question to the Secretary of State for Defence about the arrangements for decommissiong nuclear submarines as this matter falls within my area of responsibility as Chief Executive of the Ships Support Agency.232 When a nuclear powered submarine is decommissioned it is defuelled and any non-essential or re-usable equipment is removed. This leaves only a residual amount of intermediate and low level waste within the vessel. The hull is then stored afloat at the location where it was decommissioned pending final disposal of the low level waste to BNFL Drigg, and the intermediate level waste to the deep repository to be developed by NIREX.

  Ex-service Personnel
  Mr. Menzies Campbell
  To ask the Secretary of State for Defence what studies his Department has conducted into the time taken for service men and women leaving the armed forces to obtain employment; and if he will make a statement. [10452]

  Mr. Soames
  My Department has conducted a post-exit survey of service leavers since 1992 designed to evaluate the effectiveness of its resettlement services. The survey includes data on the employment status of respondents three months after discharge. Previously a copy of the then current survey was placed in the Library of the House, 12 May 1994,Official Report, column 200. Three thousand five hundred returns to date indicate that 81 per cent. of service leavers are employed or otherwise engaged in their chosen activity within three months of leaving. Other service studies support these statistics. In the longer term, York university's centre for defence economics study into the "Transition from Service to Civilian Employment", financed in part by my Department, is providing a research base tracking service leavers through initial returns upon discharge and subsequently at the six months and two year points.

  Mr. Campbell
  To ask the Secretary of State for Defence what help his Department offers to ex-service men and women looking for employment after leaving the armed forces; and if he will make a statement. [10443]

  Mr. Soames
  Resettlement advice is available to all service personnel throughout their service. A comprehensive programme of career and specialist briefings, training courses and elements of outplacement is also available to eligible personnel during their final two years. Training may be undertaken either in-house—two main resettlement centres and nine regional centres—or externally. External training, for which a grant is available, may be through commercial providers or educational/training institutions. Service leavers may also undertake familiarisation attachments or spend time with companies to gain work experience or on-the-job training. A separate marketing campaign promotes the personal qualities and skills of service leavers who, in their last six months of service, may register with the services employment network which provides practical help with job finding; and, after discharge, can remain on the register for 12 months. The two service charities, the Officers Association and the Regular Forces Employment Association, which are grant funded by my Department, also play a major role in job finding support for service leavers up to normal retirement age.

  Meniere's Disease (Compensation)
  Mr. William O'Brien
  To ask the Secretary of State for Defence if he will make a statement on his policy in respect of payment of compensation to ex-service men who are identified as suffering from Meniere's disease; how many claims have been made in the last 12 months; and how many were successful. [10145]
  233
  Mr. Soames
  My Department's policy on paying compensation to ex-service men who have Meniere's disease is no different from that which applies if a claim is received in respect of any other illness. Former Ministry of Defence employees are entitled to, and receive, compensation if the Ministry of Defence is legally liable for their illness or vicariously liable for any medical negligence. Information on the number of claims for hearing loss specifically relating to Meniere's disease made in the last 12 months, and how many were successful, could be provided only at disproportionate cost.

  Naval Vessel Tendering
  Mr. Davidson
  To ask the Secretary of State for Defence what is the Government's policy in respect of ensuring competition in tendering for large naval vessels among United Kingdom shipyards. [10647]

  Mr. Arbuthnot
  The Government remain committed to their policy of achieving best value for money for the defence budget, and aims to meet UK requirements through competition and open procurement from the UK shipbuilding industry. We believe that scope for competition exists for large naval vessels.

  Project Horizon
  Mr. Spellar
  To ask the Secretary of State for Defence if he will make a statement on current progress on Project Horizon. [10872]

  Mr. Arbuthnot
  The next major milestone will be the start of the detailed design and construction of one first-of-class ship for each of the three nations involved in its production. This is currently planned to start in mid-1998, with agreed in-service dates of 2004. These dates do, however, depend on concluding a number of international contractual negotiations, including those on the ships' principal anti-air missile system.

  Royal Navy (Alcohol)
  Mr. Harry Greenway
  To ask the Secretary of State for Defence if he will make a statement on the occasions on which(a) rum and (b) other alcohol is provided free to members of the Royal Navy. [9229]

  Mr. Soames
  The issue of alcohol at public expense to members of the Royal Navy is governed by regulations and occurs when:

  (1) the order 'Splice the Main Brace' is given by Her Majesty The Queen or members of the Royal Family, or by the Admiralty Board, on special occasions of celebration or national rejoicing; or

  (2) in very exceptional circumstances such as occasions of particularly arduous service or exposure, with the approval of a senior commander and, usually, of a Medical Officer.

  Consultants
  Mr. Milburn
  To ask the Secretary of State for Defence what estimates he has made of the amount spent on external consultants by his Department's non-departmental public bodies in each of the last five years. [10168]
  234
  Mr. Arbuthnot
  [holding answer 13 January 1997]: Over the last five years, the total amount spent on external consultants by my Department's non-departmental public bodies, as listed in "Public Bodies", was as follows:

  Financial year

  Total amount spent £

  1991–92

  9,000

  1992–93

  1,200

  1993–94

  29,340

  1994–95

  33,120

  1995–96

  34,706

  RAF Stanmore Park
  Mr. Dykes
  To ask the Secretary of State for Defence if he will make a statement on his latest estimates of(a) civilian redundancies and (b) military early retirement numbers at RAF Stanmore Park. [10533]

  Mr. Soames
  The majority of MOD civilian staff affected by the closure of RAF Stanmore Park on 1 April 1997 have been found alternative employment and every effort is being made to find posts for the remainder. It is possible that one civilian may have to leave on redundancy terms by April 1997. There are a further three civilian posts which are required until October 1998. Negotiations are proceeding to see if the occupants of these three posts can be transferred to service posts which are being civilianised. By April 1997, a total of 13 Royal Air Force personnel serving at RAF Stanmore Park are expected to have left the service on premature voluntary retirement during the current financial year.

NORTHERN IRELAND

  Cancer Services
  Dr. Hendron
  To ask the Secretary of State for Northern Ireland what measures he has taken to recruit additional consultant oncologists and support staff. [9752]

  Mr. Moss
  It is for health and social services boards, working closely with trusts, to identify and recruit the additional consultant oncologists and support staff needed to improve cancer services.

  Dr. Hendron
  To ask the Secretary of State for Northern Ireland what plans he has to provide additional funding for the recruitment of additional consultant oncologists. [9753]

  Mr. Moss
  It is for helath and social services boards, working closely with trusts, to identify the funding required for the recruitment of additional consultant oncologists. I will consider sympathetically any proposals from the boards for additional funds to pump-prime the development of cancer services.

  Dr. Hendron
  To ask the Secretary of State for Northern Ireland what is the planned time scale for the option appraisal exercise which is to examine future delivery of cancer services. [9754]

  Mr. Moss
  The option appraisal is expected to get under way shortly and is likely to take at least six months.
  235
  Dr. Hendron
  To ask the Secretary of State for Northern Ireland who will represent Green Park Healthcare trust on the option appraisal exercise for the future delivery of cancer services. [9755]

  Mr. Moss
  The Green Park Healthcare trust will determine the two people whom it wishes to represent it on the project board that will be established to control the option appraisal process.

  Dr. Hendron
  To ask the Secretary of State for Northern Ireland what are the terms of reference of the group conducting the option appraisal exercise for the future delivery of cancer services. [9756]

  Year

  Ringworm

  Mange

  Cryptosporidia

  Trichinella

  Omagh

  Stormont

  Omagh

  Stormont

  Omagh

  Stormont

  Omagh

  Stormont

  1992

  12

  4

  2

  5

  53

  84

  n/a

  21,227

  1993

  17

  4

  3

  7

  47

  88

  n/a

  8,397

  1994

  20

  3

  3

  10

  124

  112

  n/a

  1,113

  1995

  12

  2

  1

  0

  112

  60

  n/a

  32

  1996

  10

  n/a

  0

  n/a

  149

  n/a

  n/a

  n/a

  Year

  Enzootic abortion

  Orf

  Campylobacter

  Omagh

  Stormont

  Omagh

  Stormont

  Omagh

  Stormont

  1992

  1

  0

  3

  0

  22

  95

  1993

  15

  33

  n/a

  0

  18

  138

  1994

  46

  28

  3

  3

  52

  1n/a

  1995

  68

  2101

  2

  2

  39

  243

  1996

  71

  57

  0

  0

  17

  361

  1 Provisional figure.

  2 Includes a number of survey samples.

  n/a = not available.

  The above table shows the most common positive diagnoses of the more common zoonotic conditions 1992–96. A number of less frequent conditions e.g. anthrax, psittacosis, brucellosis have been omitted. In most cases there have been only single occurrences during the period.

  Year

  Louping ill

  Salmonellae

  Leptospirae1

  M. bovis

  Omagh

  Stormont

  Omagh

  Stormont

  Omagh

  Stormont

  Omagh

  Stormont

  1992

  n/a

  3

  109

  369

  146

  254

  n/a

  1,798

  1993

  n/a

  2

  92

  204

  143

  236

  n/a

  2,300

  1994

  n/a

  2

  145

  700

  137

  262

  229

  1,688

  1995

  n/a

  3

  300

  2753

  136

  248

  890

  1,547

  1996

  n/a

  1

  386

  1,201

  136

  273

  809

  1,477

  1 Fluorescent antibody tests carried out at Stormont.

  2 Provisional figure includes diagnostic and statutory samples.

  n/a = not available.

  M. johnei

  Listeria

  Toxoplasmosis

  Year

  Omagh

  Stormont

  Omagh

  Stormont

  Omagh

  Stormont

  1992

  23

  24

  4

  18

  25

  68

  1993

  21

  16

  5

  20

  18

  41

  1994

  14

  7

  15

  26

  16

  1n/a

  1995

  16

  9

  32

  160

  60

  300

  1996

  16

  1

  32

  160

  32

  445

  1 = Provisional figure.

  n/a = not available.

  The tables show the most common positive diagnoses of the more common zoonotic conditions 1992–96. A number of less frequent conditions e.g. anthrax, psittacosis, brucellosis have been omitted. In most cases there have been only single occurrences during the period.
  236
  Mr. Moss
  The terms of reference for the option appraisal exercise have not yet been finalised.

  Zoonotic Diseases
  Mr. John D. Taylor
  To ask the Secretary of State for Northern Ireland how many zoonotic disease conditions were reported in each of the past five years at the veterinary laboratories at(a) Omagh and (b)Stormont. [10837]

  Mr. Ancram
  The information requested is provided in the table, which lists the zoonotic disease conditions reported at the veterinary sciences division's Omagh and Stormont laboratories in each of the years requested.

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

Lord Hutton
The Right Honourable Sir James Brian Edward Hutton, Lord Chief Justice of Northern Ireland, having been appointed a Lord of Appeal in Ordinary and created Baron Hutton, of Bresagh in the County of Down, for life—Was, in his robes, introduced between the Lord Lloyd of Berwick and the Lord Steyn.
Lord Hankey Lord Hankey—Sat first in Parliament after the death of his father.

Lord Hutton

  Drinking and Driving: Breath Tests
  2.47 p.m.
  Lord Campbell of Croy Lord Campbell of Croy asked Her Majesty's Government:
  What conclusions they have reached from the results of campaigns in England, Scotland and Wales to reduce drinking and driving over the period of Christmas and the New Year.
  The Parliamentary Under-Secretary of State, Department of Transport (Viscount Goschen): My Lords, in Scotland the police conducted a record 134,000 tests, which resulted in 1,155 drivers failing or refusing to take a breath test, less than 1 per cent., the lowest percentage ever recorded. In England and Wales the police did not publish the number of tests carried out during the campaign period but 5,209 drivers failed or refused to take a test. That was an increase on the previous year but it may largely be the result of an increase in the number of tests. It is too early to draw any firm conclusions about the effectiveness of the campaigns over the holiday period. But it is clear that there is a hard core of people who are choosing to ignore the drink/drive message.
  Lord Campbell of Croy: My Lords, I am grateful to my noble friend for his reply, with such information as he has been able to supply. Did he notice that the first results announced gave the impression that the situation was worse than a year earlier, but that later it was discovered that many more drivers had been tested this time so that the percentage of drivers under the limit was, if anything, an improvement? Is it intended in future not to disclose the total of numbers tested, as appears to have happened in England and Wales in some cases this year, or was it simply in this case a lapse in numeracy?
  Viscount Goschen: My Lords, I agree with my noble friend that it is important to put the number of people who failed a test or failed to take part in a test in
  96
  perspective in terms of the number of people who were tested. It is clear that because the police did not provide that total figure it has been more difficult to extrapolate those results. Discussions will be going on between my department and the Association of Chief Police Officers with a view to making better comparisons in future.
  Lord Clinton-Davis: My Lords, in order to deal more effectively with the hard core to whom the Minister referred, is it not time to take a rather tougher stance in relation to drink-driving? Would it not be appropriate to take into account very strongly indeed the views of the AA, the BMA and the Association of Chief Police Officers that the legal limit for drink-driving should be reduced?
  Viscount Goschen: My Lords, that is one theory. However, on the other hand, in the past 10 years or so there has been considerable success in reducing the amount of people who drink-drive and in changing the culture. This has been done through hard enforcement, getting the message across with the use of advertising campaigns and so on. The number of fatalities has fallen very dramatically indeed. Overall, the campaigns have been a great success. There does not seem to be evidence that a reduction in the level of alcohol permissible would have a particular effect on the overall trend in terms of the number of people who drink-drive.
  Lord Clinton-Davis: My Lords, is the Minister against the recommendation of the AA, the BMA and the Association of Chief Police Officers?
  Viscount Goschen: My Lords, the present limit is the level at which for most drivers the chance of being involved in an accident starts to rise sharply. We believe that the priority is to enforce the law at the present limit. It is a limit that people readily understand. We believe that the important thing is to make sure that people do not exceed that limit and do not drink-drive and therefore cause accidents.
  Lord Strathcarron: My Lords, does my noble friend agree that it may be that more accidents are caused by people who cannot see properly, particularly at night, than by drivers who are over the limit? As being over the limit is not considered respectable but not being able to see properly is respectable, does my noble friend agree that no government have ever done anything about this important safety aspect? So far as I am concerned, whether I am run over by a drunken driver or someone who cannot see properly, the result will be exactly the same.
  Viscount Goschen: My Lords, it is vital that every effort is taken to ensure that accidents do not happen whatever the cause. But drink driving is a particular cause and it can be easily identified. Something can and has been done about it. The results of the campaigns that we have run have been very impressive indeed. However, from this evidence it appears that there is more work to be done. We shall not slacken in our

  97
  efforts to get the message across. My noble friend is quite right in that it is extremely important that people have proper vision in order to drive safely on the roads.
  Lord Skelmersdale: My Lords, has any research been done into the ages of the people tested? It is my very limited experience that young people of my children's age simply do not touch drink when they are driving.
  Viscount Goschen: My Lords, I am very pleased to hear of my noble friend's experience. I believe that there has been some evidence to suggest that certain elements among younger people have failed to take the message on board. That is why we have targeted in the past our campaigns at younger drivers to get over the message that drinking and driving is dangerous and can lead to death or to people being scarred for life.
  Lord Avebury: My Lords, do the Government agree that the level of driving skill is impaired by the consumption of alcohol in amounts smaller than that sufficient to put somebody over the limit? If that is the case, are there not still people being killed or severely injured on the roads in consequence of people drinking amounts of alcohol which are considered to be safe?
  Viscount Goschen: My Lords, I am sure that there will always be debate about the amount of alcohol that should represent the legal limit. However, I have said that even with the limit staying as it is and with people comprehending that limit of 80 milligrams, there has been considerable success. We believe that the priority lies in educating people and pushing hard on enforcement.
  Lord Monson: My Lords, does the Minister agree that recent research in the United States, and latterly in Britain, seems to indicate that far more traffic accidents are caused by sober drivers who have had an inadequate amount of sleep and who doze off at the wheel, than by drivers who are over the limit to some degree? Does he further agree that there appears to be a conspiracy of silence on that? What do the Government propose to do about it?
  Viscount Goschen: My Lords, I do not believe that there has been a conspiracy of silence. If the noble Lord has travelled along motorways, he will have occasionally seen signs informing people that tiredness kills and that they should take a break from driving. It is an extremely important message to get across. The fact is that some people are still acting irresponsibly and drinking over the limit. We aim to apply the maximum pressure on such people to stop this behaviour.
  Lord Geddes: My Lords, is it a statistically proven fact that there is more drink driving over the Christmas-New Year period or is it merely the fact that the police are more vigilant over that period?
  Viscount Goschen: My Lords, I am sure it is the fact that there is more drinking over the Christmas and the New Year period per se. Therefore, it has been our policy to make sure over that particular time that we run an advertising campaign which is hard hitting and that the police take forward their enforcement duties even more vigorously during that time. It has been effective and we shall continue to concentrate our efforts over that particular period.
  Lord Campbell of Croy: My Lords, can my noble friend attribute any particular reason for the reduction and improvement in the figures for Scotland, as he has indicated? They have shown a considerable improvement, but from my own experience over the past three weeks I saw no reduction in the level of celebrations over Christmas and the New Year in Scotland.
  Viscount Goschen: My Lords, we are very pleased that the percentage has fallen and we shall continue to encourage that. We shall not put any less effort into our campaigns, and we aim to learn from the Scottish experience.

  Gurkhas: Accompanied Service in UK
  2.56 p.m.
  Lord Boyd-Carpenter Lord Boyd-Carpenter asked Her Majesty's Government:
  Whether they will reconsider their decision not to provide accommodation for the families of Gurkha soldiers posted to the United Kingdom.
  The Parliamentary Under-Secretary of State, Ministry of Defence (Earl Howe): My Lords, no such decision has been made. As I made clear to the House on 1lth December, the Ministry of Defence is currently conducting a wide-ranging review of Gurkha terms and conditions of service. The question of married accompanied service for Gurkhas in the United Kingdom is one of the issues being studied. We hope to be able to announce the results of the review to Parliament shortly.
  Lord Boyd-Carpenter: My Lords, when my noble friend says that no such decision has been reached, that means that there has been no decision to provide accommodation for the families of Gurkha soldiers. Is there any reason whatever why Gurkhas posted to this country should not receive the same treatment for their families as those who are born in this country?
  Earl Howe: My Lords, I am grateful to my noble friend for his observations. As I said in our short debate last month, I believe that accompanied married service for Gurkhas is a legitimate aspiration for the brigade. However, this cannot be looked at in isolation because there are implications for healthcare, education, benefits and so forth. These matters have to be addressed in the

  99
  round and the Government are doing just that. I believe that, for the sake of Gurkha families, we must get the package right.
  Viscount Slim: My Lords, can the Minister give some time span when a decision, one way or the other, will come from Her Majesty's Government? Is he not aware that this problem has been around for some time? Surely Her Majesty's Government can make a decision pretty quickly on this subject, despite the need to liaise with other ministries.
  Earl Howe: My Lords, the Government are addressing the question with suitable urgency. As I said, a decision will be announced shortly. I expect that to be within four weeks or so. I am sure that the noble Viscount will understand that the withdrawal from Hong Kong marks an important change in the way that the Gurkhas have been posted. It is effectively a shift in the centre of gravity for the brigade from the Far East to the United Kingdom, which brings with it all kinds of important questions which have to be addressed.
  Lord Harding of Petherton: My Lords, the Government seem to have taken a very long time, but when they do decide will my noble friend confirm that Gurkha soldiers will be allowed only one accompanied tour during their service engagement, as has been the case in the past, I understand, unless they are a Queen's Gurkha officer? If that is the case, does the Minister believe that this is a shabby way to treat soldiers who are serving this country alongside our own Armed Forces?
  Earl Howe: My Lords, with great respect to my noble friend, he is leaping ahead a little. Once the Government make their announcement, they can be judged on the content of that announcement. Currently, Gurkhas have no entitlement to accompanied service in the UK, principally because it has never been an issue in the past. Only a small proportion of Gurkha service has been spent in the UK; the majority has been spent in the Far East, where accompanied service has been widely available. This is a new situation and I humbly suggest to my noble friend that he should await the Government's announcement and comment on that.
  Lord Dean of Beswick: My Lords, is the Minister aware that it is not only Gurkhas and their families who appear to be getting a rather poor deal from this Government with regard to the provision of housing? Is the Minister aware that a press report during the Christmas Recess showed that the proportion of former servicemen sleeping rough because they have nowhere to live could be as high as one in four? If that is the situation, is it not disgraceful that any government should have allowed it to develop?
  Earl Howe: My Lords, with great respect to the noble Lord, I think that that point falls outside the scope of the Question. There is no evidence whatsoever that there is an unduly high proportion of ex-servicemen homeless on the streets.
  Lord Harris of Greenwich: My Lords, when the Government eventually reach a conclusion on this matter, will the announcement be made by means of an oral Statement in this House and not by way of a Written Answer?
  Earl Howe: My Lords, I am grateful to the noble Lord for that question. If there is a wish, expressed through the usual channels, for a Statement to be made, I am sure that that will be taken into account.
  Lord Wyatt of Weeford: My Lords, how can the noble Earl behave as though there were any doubt about the proper course of action with regard to the Gurkhas? How can there be any such doubt when the Gurkhas have served us so well and so faithfully for so long? Everybody knows what the answer ought to be, so why cannot the Government give it now?
  Earl Howe: My Lords, for the simple reason that, as I have stated, there are wide implications for a number of departments, not simply for the Ministry of Defence. The Gurkhas are an integral part of the British Army. They will remain so for the foreseeable future. Their contribution is valuable and is highly regarded. I believe that that should send the appropriate signal to your Lordships that the Government's intentions are in the right place.
  Earl Russell: My Lords, I appreciate the noble Earl's point that homelessness is outside his brief, but before he repeats the statement that there is no evidence of exceptional homelessness among ex-servicemen, may I ask him to look at last year's report by Crisis on homelessness last Christmas?
  Earl Howe: My Lords, I shall do so gladly and, if I have reason to correct anything that I have said, I shall, of course, write to the noble Earl.
  Lord Williams of Elvel: My Lords, is the noble Earl aware that we welcome his statement that the Gurkhas are an integral part of the British Armed Forces and that they should therefore be treated as an integral part of the British Armed Forces and in exactly the same way as other parts of the Armed Forces? I hope that the noble Earl accepts that interpretation of his statement. Is the noble Earl further aware that when we last had an exchange on this matter he promised us the result of the review before Christmas—he was referring to last Christmas—but that Christmas has come and gone? To repeat the point made by the noble Viscount, Lord Slim, that this is a matter of urgency, will the noble Earl say that, given that there was no result before Christmas, we shall at least have something before Easter?
  Earl Howe: My Lords, if the noble Earl reads the Hansard report of that previous debate, he will see that I undertook to make an announcement shortly after Christmas. I believe that we shall be able to do that and I have indicated that it should happen within four weeks.

  Income Support: Direct Payments
  3.3 p.m.
  Earl Russell Earl Russell asked Her Majesty's Government:
  Whether they have any plans to alter the system of direct payment deductions from income support and, if so, which resource implications for other departments they will consider when costing such a proposal.
  The Minister of State, Department of Social Security (Lord Mackay of Ardbrecknish): My Lords, on 19th July 1996, the Secretary of State for Social Security announced a review of income support direct payments for fuel and water. As part of the review, officials consulted over 50 groups including the industry regulators, utility companies, consumer groups, and relevant other government departments. Ministers have now received a report and will consider carefully all the comments made before reaching any conclusions about the future of the scheme.
  Earl Russell: My Lords, I thank the Minister for saying that he has reached no conclusions. Before he reaches conclusions may I ask him which cost implications for other departments he intends to take into account?
  Lord Mackay of Ardbrecknish: My Lords, as I said, we have consulted our colleagues in other departments. Ministers have also had an opportunity to comment and we shall be taking what they said into account. I am not prepared to go further and to divulge what they said to us. Ministers in the Department of Social Security have still to meet to consider the issue.
  Baroness Hollis of Heigham: My Lords, the third of a million or so people who make direct payments for fuel or water do so because they have difficulty meeting their bills. The Government estimate that if these changes go ahead the Government will save £18 million. What estimate have the Government made of the number of people who will face disconnection of their water and fuel?
  Lord Mackay of Ardbrecknish: My Lords, the interrelationship between the existence of direct payments and disconnection is one of the factors we shall be taking into account. However, newly on the scene are different methods of payment to the utilities. There are, for example, weekly and monthly payment facilities at post offices and pre-payment meters. A new system of payment is coming on-stream called "pay point". We have to consider all of those factors when looking at the additional burden which direct payment undoubtedly causes the Department of Social Security. Although we are in no doubt of the importance of direct payment for some of our customers, especially those who get into considerable debt and may be cut off, a considerable number of people on direct payment use it to pay for current consumption because they do not have any outstanding debt.
  Lord Skelmersdale: My Lords, my noble friend the Minister gave a list of consultees on the issue. Was that
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  list inclusive or exclusive? I have particularly in mind the need on occasions such as this to consult the Social Security Advisory Committee.
  Lord Mackay of Ardbrecknish: My Lords, at this stage I do not think that the Social Security Advisory Committee would be consulted. My recollection is that the regulations governing how we deal with the Social Security Advisory Committee state that we should consult it once we have draft proposals. If we decide to make proposals that require regulation, obviously we shall consult the Social Security Advisory Committee as we are obliged to do.
  Baroness Hollis of Heigham: My Lords, will the Minister confirm that the Government's own research in 1994 stated that far from the scheme being cut it should be expanded; otherwise disconnections would mount?
  Lord Mackay of Ardbrecknish: My Lords, an interesting point when considering disconnections is that, contrary to many of the stories run by the Opposition at the time of privatisation, the number of disconnections since the privatisation of gas, electricity and water has fallen dramatically as the privatised companies have taken sensible steps to enable people who have difficulty paying their bills to find ways of doing so. It is to the companies' great credit that disconnections in, for example, the electricity industry had by 1995 decreased to only 838 for the whole of that year. The noble Baroness should take that point into account. I shall not go further because, as I said, Ministers have still to meet to decide what steps to take regarding such payments.
  Lord Stailard: My Lords, referring back to the original Question, can the Minister say which departments were consulted?
  Lord Mackay of Ardbrecknish: My Lords, I am happy to tell the noble Lord that we consulted the Department of Health, the Department of Trade and Industry and the Department of the Environment. From recollection, I think that we also consulted the Scottish and Welsh Offices and probably—but I am not sure— the Northern Ireland Office.

  Railtrack: Investment
  3.8 p.m.
  Lord Clinton-Davis Lord Clinton-Davis asked Her Majesty's Government:
  Whether they are satisfied with the investment made by Railtrack in the maintenance and improvement of the rail network since April 1994.
  Viscount Goschen: My Lords, prior to its stock market flotation in May last year, Railtrack operated under the constraints of public funding. Since privatisation the company has increased spending on the rail network. In the first six months of this financial year, over £100 million more was spent on

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  infrastructure investment than in the same period last year. I understand that Railtrack intends to increase that level of spending and will publish a detailed statement of its expenditure plans next month.
  Lord Clinton-Davis: My Lords, does the Minister agree with the regulator, Mr. John Swift, that the underspend on maintenance and investment by Railtrack of £709 million—money which, after all, has been provided by the taxpayer—is totally unacceptable? Further, is it not a fact that that underspend contributes very substantially to the profits that have been declared by Railtrack thus far?
  Viscount Goschen: My Lords, I understand that the regulator has commented on the level of Railtrack's investment this year. It must be remembered that the company has existed in the private sector for only nine months. It has put forward very bold expenditure plans for investment in the rail network and is committed to implementing them. It has not been able so far to put into place the systems to deliver that targeted level of investment. It will publish its report which the regulator will see. The company intends firmly to meets its investment targets. I repeat that in the first six months it has spent £100 million more than in the previous year, which is an increase of about 25 per cent.
  Lord Clark of Kempston: My Lords, does my noble friend agree that an investment by the new company, Railtrack, of over £100 million augers very well for the future, given that further investment by Railtrack will not affect the public sector borrowing requirement and any inhibitions on the PSBR will disappear? Does he agree that criticism of privatisation comes ill from spokesmen opposite in view of the fact that in this country privatisation has been a great success and is copied worldwide?
  Viscount Goschen: My Lords, my noble friend is absolutely right about the success of privatisation, which even the parties opposite acknowledge these days, in stark contrast to their views when these privatisations took place. Railtrack has announced very bold investment plans. Indeed, it intends to invest £8 billion in the network over the next five years. It is working hard to put that investment in place and set up systems that did not exist when Railtrack was in the public sector to ensure that that spend occurs. It will be publishing its detailed plans.
  Lord Cledwyn of Penrhos: My Lords, Railtrack may have spent the sum of money to which the noble Viscount has referred, but it has not been spent in Wales. Is the Minister aware that yesterday I sought to catch the 8.58 train from Holyhead to Euston and the engine broke down and the service was late and uncomfortable? Is he also aware that the Welsh people are very tolerant and patient in these matters but that the situation will be different if he does not do something about this matter?
  Viscount Goschen: My Lords, I have personal experience of the tolerance of Welsh people—and very
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  great it is too. The accusations (if I may so describe them) that the noble Lord makes are addressed to the wrong body. Railtrack is the organisation that owns, maintains and runs the track. It has greatly improved its operational performance since privatisation, and it has invested money. Some of that investment will have taken place in Wales.
  Lord Bridges: My Lords, I should like to ask the Minister a particular question of which he has knowledge. A few weeks ago I wrote to him to ask what plans were being made to improve the performance of the rail connection between the port of Felixstowe and the rest of the country so as to reduce the number of containers and freight consignments travelling by road. I am grateful to him for his reply, which in general is not unsympathetic and points to certain possibilities of which I am aware. However, why does the Minister's letter omit any reference to the broader statements of policy which the Government have made about the need to transfer traffic from road to rail for environmental reasons? A number of important statements have been made on this subject in the past, for example in the significant paper on the subject of sustainable development, but the noble Viscount makes no reference to these aspects of government policy in his reply. Surely, it is wrong to omit any consideration of those matters also. Is the noble Viscount guilty not so much of forgetting Goschen but of Goschen forgetting in this case?
  Viscount Goschen: My Lords, it is very difficult to discuss the text of a letter at the Dispatch Box. I am more than happy to place the correspondence in the Library of the House, if that is the wish of noble Lord. The noble Lord asked me specific questions and I attempted to respond to those questions with direct answers. As luck would have it, I have with me a copy of the letter. My eye is drawn to a section where I describe the freight facilities grant scheme, which is to do with the environmental benefits of transferring freight to the railways or inland waterways. Under that scheme an application for grant for capital facilities can be made to the Government in just the circumstances that the noble Lord describes.
  Lord Marlesford: My Lords, does my noble friend at least admit that in the case of Felixstowe this is a major problem? Our biggest container port is linked with the rest of the rail network by a single track which uses the 19th century token system of signalling. Of the 1 million containers that go to and leave the port of Felixstowe each year by land only 17 per cent, are carried by rail. Does the Minister recognise that that represents a failure over several decades to make adequate provision for part of the transport infrastructure of this country? Are the Government going to do something about it and not just say it is up to Railtrack?
  Viscount Goschen: My Lords, I do not agree with my noble friend that there has been a failure in this direction. I understand that Freightliners, which is the company that is responsible for moving containers on

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  the line to which my noble friend has referred, recently broke the all-time record for the number of containers moved through Felixstowe in a single day. I understand that currently Freightliners operates 18 trains every day and Railtrack believes that there is sufficient capacity for at least two further trains per day. In view of that, I cannot possibly agree with my noble friend. Certainly, in the first instance it is for Railtrack as the owner and operator of the line to decide where its investment priorities lie.
  Lord Clinton-Davis: My Lords, will the Minister answer my initial Question? Does he agree with the strictures of the regulator, Mr. John Swift, that the underspend by Railtrack is totally unacceptable—yes or no?
  Viscount Goschen: My Lords, these are the views of an independent regulator which are directed to an independent commercial company. The Government have put the regulator in place to do exactly that. It is not for me to express an opinion on whether or not I agree with the regulator. He is doing his job, and shortly he will receive the detailed plans of Railtrack as to how it intends to spend these record amounts of money on the railway. This is what we see emerging from privatisation. There is an increased amount of money being put into the railway. This year 25 per cent, more has been spent on the infrastructure than last year. By any standards that is a considerable improvement.

  Business of the House: Debate,15th January
  3.18 p.m.
  The Lord Privy Seal (Viscount Cranborne): My Lords, I beg to move the Motion standing in my name on the Order Paper.
  Moved, That the debate on the Motion in the name of the Lord Williams of Elvel set down for tomorrow shall be limited to five hours.—(Viscount Cranborne.)
  On Question, Motion agreed to.

  House of Lords' Offices: Select Committee Report
  The Chairman of Committees (Lord Boston of Faversham): My Lords, I beg to move that the First Report from the Select Committee on House of Lords Offices be agreed to. In doing so I must apologise to your Lordships for a mistake in the report. In paragraph 3 reference is made to paragraph 7. There is no paragraph 7. The reference should be to paragraph 6. With that correction, I beg to move.
  Moved, That the First Report from the Select Committee be agreed to (HL Paper 24).—(The Chairman of Committees.)
  Following is the report referred to:
  Lord Cocks of Hartcliffe Lord Cocks of Hartcliffe rose to move, as an amendment to the above Motion, at end to insert ("but refers the matter of the Enhanced Message Service (paragraph 3) back to the Select Committee").
  The noble Lord said: My Lords, I beg to move the amendment standing in my name on the Order Paper. I promise not to detain the House for very long. Over the years I have from time to time raised points on Offices reports only to be told that the matter has already been decided in another report. On examining Hansard, I usually find that such reports have gone through on the nod. In the present case, paragraph 3, which deals with the message service, is sufficiently important to use this expedient to draw the matter to your Lordships' attention.
  Over the years I have very much appreciated the service provided by the Doorkeepers and Attendants in delivering messages. I have nothing but admiration for them. Paragraph 3 of the report deals with an enhanced message service. That is not how ordinary people talk to one another. When I saw the phrase "enhanced message service" I thought it had the smell of consultants about it.
  Yesterday I had a meeting with Black Rod. He was, as usual, extremely helpful. He confirmed that the proposal is based upon a consultant's report. Not only did he confirm it; he was kind enough to furnish me with a copy of the report. It weighs 3 lbs. or, I am told, in the new parlance, 1.3 kg. I tried to go through it last night. It is extremely complicated and far reaching, and driven, I believe, by the House of Commons, the Members of which are increasingly becoming professional politicians. The requirements of this House will not always coincide with those of the Commons.
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  All I am asking the Lord Chairman to do is to confirm to the House that we will have further opportunities to consider, as a House, the development of this service before things go too far down the line and we find that it is beyond recall and that the whole atmosphere of the House is being damaged. I beg to move.
  Moved, as an amendment to the above Motion, at end to insert ("but refers the matter of the Enhanced Message Service (paragraph 3) back to the Select Committee").—(Lord Cocks of Hartcliffe.)
  Lord Mackie of Benshie: My Lords, will the Lord Chairman tell us the cost of the report as well as its weight?
  Lord Ashbourne: My Lords, I was saddened by the decision to exclude the Princess of Wales from Prayers in this Chamber. The decision reflects a lack of generosity of spirit which is not usual in your Lordships' House. It involves practically no time and certainly no money. The House should have an opportunity to air its view on that important matter. I should like to see it adjusted now.
  Lord Monkswell: My Lords, we all owe my noble friend Lord Cocks of Hartcliffe a debt of gratitude for introducing this topic. Can the Lord Chairman say that a copy of the report referred to will be placed in the Library so that other Members of your Lordships' House are able to have sight of it?
  The Chairman of Committees: My Lords, with your Lordships' permission, and for the convenience of the House, I can perhaps deal with the various points that have been raised at one time, although, strictly speaking, as your Lordships will be aware, I should be out of order in doing so because strictly we are dealing only with matters arising on the amendment moved by the noble Lord, Lord Cocks of Hartcliffe. I turn to that first.
  The purpose of the proposal is to improve—I prefer, as does the noble Lord, Lord Cocks, a word such as that to the word "enhance"—the service which should be provided to your Lordships and through your Lordships to the country as a whole. I endorse completely what the noble Lord, Lord Cocks, said about the great helpfulness of our Doorkeepers, Attendants and other staff.
  In answer to the principal point raised by the noble Lord, Lord Cocks, I can confirm that there will be a further opportunity for your Lordships to consider these matters. They are in their early stages. There are further detailed plans to be considered. They will be considered, as were the initial proposals, in turn by the Administration and Works Sub-Committee and the Offices Committee of your Lordships' House. Once they have had an opportunity to deal with these matters, they will come again before your Lordships, so there will be ample opportunity further to consider the detailed proposals and to consider whether we want any of them, none of them, or all of them.
  I draw attention to paragraph 3 of the report which refers to consultation with your Lordships. Perhaps I may add to that by saying that there will be a

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  presentation to members of the sub-committee and the Offices Committee on the 28th of this month as part of the preparation for considering the detailed matters further.
  On the point raised by the noble Lord, Lord Mackie, I am afraid that I do not have the cost with me. If I can obtain it, I shall let the noble Lord know outside the Chamber. The noble Lord, Lord Monkswell, asked for a copy of the consultant's report to be placed in the Library of the House. That is a matter which, as already indicated, stems from consideration by another place as well as your Lordships' House. So I am not sure whether I can give a categorical answer at the moment. I shall look into it and let the noble Lord, Lord Monkswell, know. If it is possible to provide a copy in the Library I shall do so.
  With your Lordships' leave, as it does not arise out of this report, let alone the amendment, perhaps I may refer to the point raised by the noble Lord, Lord Ashbourne. The Administration and Works Sub-Committee and the Offices Committee of your Lordships' House gave thorough consideration to the matter that the noble Lord has raised. We had the benefit of submissions from the noble Lord, Lord Stallard, and the noble Baroness, Lady Macleod of Borve, which we greatly appreciated. However, we decided to make no recommendation for any change to your Lordships; hence there is no reference to it in the report.
  Lord Avebury: My Lords, perhaps I may express some concern that the noble Lord was unable to reply to my noble friend Lord Mackie. We should bear in mind that when any Bill appears before your Lordships there is a financial and explanatory memorandum, and we know what the cost is estimated to be by the Government. Now, apparently, the noble Lord cannot tell us how much we have already spent on the consultant's report. From the fact that he did not mention it, I presume that he is unable to give the figure for the cost of the appointment of the project manager, to which we are being asked to agree, let alone the proportion of that cost that is to be borne by your Lordships' House. We should be told that before we agree to the report. After all, the bulk of the messages are received by Members of another place and only a few, relatively speaking, by Members of this House where I find the service perfectly satisfactory.
  No complaint can be made about the excellent service that your Lordships receive from the Attendants and the Doorkeepers. There is no apparent need for any enhancement, let alone improvement, of the service with which we are already provided. So we are being asked
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  to agree to pay part of the salary of a project manager— the amount of which is not specified—for reasons which do not seem to be very strong.
  Lady Saltoun of Abernethy: My Lords, before the Lord Chairman of Committees replies, may I ask him whether ordinary, common Back-Bench Peers will be able to make representations to the project manager?
  The Chairman of Committees: My Lords, with the leave of your Lordships, on the last point, there is no doubt that it will be possible for representations to be made or to be forwarded, and I undertake to do so on behalf of any of your Lordships who wish that to be done. With your Lordships' leave, on the matter raised by the noble Lord, Lord Avebury—I am grateful for the assistance and the details with which I have been provided to enable me to give this answer—no cost arises this year. That is the reason why no cost is mentioned. However, there will be cost implications in due course and an indication of those will be given in Answer to a Written Question which has been tabled by the noble Lord, Lord Cocks of Hartcliffe. I hope that that explanation is in some way helpful. The only other point that I would make in answer to the noble Lord, Lord Avebury, is that, however inadequate, I made an endeavour to give an answer to the question asked by the noble Lord, Lord Mackie.
  Lord Cocks of Hartcliffe: My Lords, I am grateful to the Chairman of Committees for his assurances that the House will be able to oversee the progress of the matter. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  On Question, Motion agreed to.

  House of Lords' Offices: Select Committee Report
    1. Appointment of Sub-Committees
    The Committee appointed the following Sub-Committees and Panel-
    1. Appointment of Sub-Committees

      Finance and Staff Sub-Committee
      L. Boston of Faversham (Chairman),
      V. Cranborne,
      B. Gould of Potternewton,
      L. Harris of Greenwich,
      E. Northesk,
      L. Peston,
      L. Renfrew of Kaimsthorn,
      L. Richard,
      L. Rodgers of Quarry Bank,
      B. Seccombe,
      L. Weatherill,
      with the Clerk of the Parliaments.

      Administration and Works Sub-Committee
      V. Allenby of Megiddo,
      L. Boston of Faversham (Chairman),
      E. Gowrie,
      L. Graham of Edmonton,
      L. Harris of Greenwich,
      L. McColl of Dulwich,
      L. Peston,
      L. Renfrew of Kaimsthorn,
      B. Serota,
      L. Strathclyde,
      V. Tenby,
      L. Weatherill,
      with the Clerk of the Parliaments and the Gentleman Usher of the Black Rod.

      Library and Computers Sub-Committee
      L. Brougham and Vaux,
      L. Freyberg,
      L. Holderness,
      B. Lockwood,
      L. Lucas,
      L. McIntosh of Haringey,
      L. Mustill,
      B. Nicol,
      L. Renfrew of Kaimsthorn (Chairman),
      L. St. John of Bletso,
      with the Clerk of the Parliaments.

      Refreshment Sub-Committee
      E. Arran,
      L. Chesham,
      L. Colwyn,
      B. David,
      L. Graham of Edmonton,
      L. Harris of Greenwich,
      L. Howell,
      L. Lawrence,
      L. Mackie of Benshie,
      L. Palmer,
      L. Peston (Chairman),
      with the Clerk of the Parliaments.

      Advisory Panel on Works of Art
      L. Armstrong of Ilminster,
      L. Chorley,
      L. Crathorne,
      L. Donoughue,
      V. Falkland,
      E. Gowrie (Chairman),
      B. Hilton of Eggardon,
      L. Hindlip,
      L. Palmer,
      B. Trumpington,
      with the Clerk of the Parliaments.

    2. Smoking in the Writing Room
    The Committee considered a request to redesignate the Writing Room as a non-smoking room. The Committee decided that no changes should be made at present, but agreed that the House's policy on smoking should be, in the longer term, to reduce the number of smoking areas relative to non-smoking areas.
    3. Enhanced Message Service
    The Committee approved outline proposals for an enhanced message service within the parliamentary estate. A Project Manager will be appointed (see paragraph 7 below) to oversee the introduction, after full consultation with members and relevant committees of both Houses, of a new service which will offer a variety of systems for taking and passing on messages, to supplement the present system provided by the Attendants and Doorkeepers.
    4. Yeoman Usher's apartment
    The Committee was informed that the Yeoman Usher's accommodation in the House of Lords was being converted to offices for peers; it approved the purchase of alternative accommodation outside the Palace of Westminster.
    5. Salaries of the Chairman and Principal Deputy Chairman of Committees
    The Committee approved revised salaries for the Chairman and Deputy Chairman of Committees with effect from 24th July 1996.
    6. Staff of the House
    The Committee took note of the appointment of Dr. D.A. Rolt as a Temporary Clerk, and of the proposed appointment of two additional waiting staff in the Refreshment Department. The Committee agreed the appointment of a Project Manager of the proposed message service, on a shared basis with the House of Commons.

Welfare of Broiler Chickens Bill [H.L.]
3.30 p.m.
Report received.

Social Security (Recovery of Benefits) Bill [H.L.]
3.31 p.m.
Report received.
Clause 2 [Compensation payments to which this Act applies]:
Earl Russell Earl Russell moved Amendment No. 1:
Page 2, line 5, at end insert ("which satisfies the provisions of section 12(3) of this Act").
The noble Earl said: My Lords, I shall speak also to Amendments Nos. 10 and 11, which are grouped with Amendment No. 1 and cover related matters.
We discussed the matter at some length in Committee. Since then I have been attempting to obtain legal advice from a number of quarters. Some of it has reached me within the past hour and some within the past 15 minutes. As I might have expected, I find that

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the legal advice has led me to the view that the matter is a great deal more complicated than any of us conceived at the last stage of the Bill. In the light of that fact, I wish to begin by asking the Minister to explain the words upon which the amendment purchases in Clause 12(3). It provides that the medical appeal tribunal:
"must take into account any decision of a court relating to the same, or any similar, issue".
It is those words which created a certain anxiety in my mind and that of the noble Baroness, Lady Hollis, about whether the provision might belong to the same legal family as clauses which appear in other statutes excluding the jurisdiction of the courts.
Obviously, with a medical appeal tribunal the matter is slightly more complex. That is why I wish to begin by asking the Minister to explain the words "take into account". What is the legal meaning of those words? Have they been used in previous legislation? Is there any judicial authority on how they are construed? Are they words as weak as the proverbial "have regard to" in a statute, which means that one can look at something and then ignore it totally, or must the words be given considerable weight?
I turn to the issue of "issue estoppel", of which I believe none of us was aware when we debated the matter in Committee. Issue estoppel is a common law principle under which if a particular issue has been determined in other proceedings it cannot be reviewed again. I apologise for not having given the Minister notice, but I wish to ask him questions which 15 minutes ago I was not aware I intended to ask. How has the issue of issue estoppel normally been treated in the past in proceedings in medical appeal tribunals? Was it past practice that there was an area of specialist medical expertise in which that doctrine was not applied rigorously? Is the practice of issue estoppel to be changed by operation of the Bill, or will it remain exactly as it was previously?
Perhaps I may assist the Minister by pointing out that issue estoppel is the principle which says that although one can try a case one cannot try a particular issue which arises in the case because it has been tried previously. Therefore, some issues which arise in a case may be tried but a particular issue may not. It is, of course, an issue which arises regularly at medical appeal tribunals. The tribunals may look at the medical evidence without wanting to open up the legal issues behind it on which they are inevitably likely to be somewhat less competent than the courts.
Your Lordships will see that this clause takes us into rather difficult and treacherous waters. That means it is of considerable importance to know exactly what is being attempted. If the clause were to restrict further the jurisdiction of the courts I am sure that the Minister will understand why I view it with misgivings. If, in fact, it were not to change matters very much that might be altogether another matter.
With those preliminary observations, and with apologies for having thrown a lot of spanners which have just been thrown at me, I beg to move.
Baroness Hollis of Heigham: My Lords, I rise to support Amendments Nos. 1 and 10 and to speak to Amendment No. 11. We are trying to ensure that the medical appeal tribunal is bound by the finding of the court on the same issue and should take into account the decisions of the court on a similar issue. It matters because without such an amendment two courts—that is, one court and one quasi court—could arrive at different decisions on the same issue. We are trying to ensure that they reach the same decision.
As we said in Committee, a typical case might involve a pre-existing condition, such as a back condition. As the Bill stands the court, which will make the preliminary decision, may well have the experience and guidance of consultants. However, the medical appeal tribunal may be guided only by its doctors, who could be local GPs. Yet the medical appeal tribunal could effectively overrule the court on the basis of weaker and less expert professional judgment. The amendment would stop that happening. I support the noble Earl in saying that, so far as we are aware, there is no other area of law where the decision of one court or surrogate court is not binding on another after findings of fact on the same issue.
We tabled the amendment in Committee when the Minister said that he rejected it because he wanted the option of the medical appeal tribunal being able to arrive at a different decision, not for reasons of equity, justice or consistency but so that the department could recover benefits which the court would not otherwise have allowed it to recover. We thought that that was a statement of very doubtful public probity. When the Minister voiced the argument, we, and I suspect the Minister, were not convinced of its rectitude. Therefore, we have brought the amendment back, first, because, substantively, we believe that the medical appeal tribunal and the courts should respond to the same issue in the same way in order that claimants know where they stand; and, secondly, because in Committee the Minister gave as his reason for rejecting it not grounds of equity, justice or the law but simply that he would have more weapons which the courts of the land would not otherwise have given him with which to recover benefit.
Lord Mackay of Ardbrecknish: My Lords, the amendment deals with Clause 2, but, as I suspected, it has been tabled simply in order to bring Amendments Nos. 10 and 11 into our proceedings earlier than might otherwise have been the case. I do not believe that there is any serious intention to change Clause 2. Just in case there is any such intention, I should say a few words about the effect of Amendment No. 1. Clause 2 of the Bill provides for the compensation payments to which the reformed recovery scheme will apply. The intention is that the provisions of the Bill should apply to all compensation payments made on or after the date that the new scheme comes into force. The exception to that rule will be payments made in pursuance of a court

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order or agreement made before the date of coming into force. That exception will allow settlement to take place under the terms of the present scheme up until the date that the reformed scheme comes into force.
Amendment No. 1 appears to be an attempt to limit the exceptions that are made to this clause; that is, to limit the types of case which may settle under the terms of the present scheme. The wording of the amendment suggests that the exceptions should only be payments made in pursuance of court orders or agreements made before that day which satisfy the provisions of Section 12(3) of the Act.
I would have found this amendment extremely puzzling had it not dawned on me quite quickly that it was simply a device to ensure that the major issue is debated rather earlier in our proceedings for some reason which, despite burning the midnight oil, I could not for the life of me work out. But it is a puzzling amendment. Clause 12(3) of the Bill relates to the decision-making process for tribunals. It makes it clear that they must take into account any decision of a court relating to the same and similar issues arising in connection with the accident, injury or disease. It does not set out any provisions which court orders or agreements must satisfy. Further, it is in any case difficult to see how any orders made before the date of implementation could possibly satisfy any provisions contained in Clause 12, which will not come into effect until the implementation date. That might mean that no exceptions could be made, even where both victim and compensator had agreed to settle under the terms of the present scheme. I do not believe that that was the noble Earl's intention in putting forward this amendment. I believe that his purpose was to draw into our earlier proceedings Amendments Nos. 10 and 11.
I shall now deal with those amendments. The purpose of Amendment No. 10 is to bind an appeal tribunal to a decision of a court where that decision relates to the same question in respect of the accident, injury or disease. On the face of it, it appears that a lower authority would have the right to reach a decision different from that made by a higher authority. The noble Earl and the noble Baroness wish to tie a tribunal entirely and completely to the decision made in the other court.
Baroness Hollis of Heigham: My Lords, only in the same case should it be taken into account or where it is a similar case.
Lord Mackay of Ardbrecknish: My Lords, I believe that the noble Baroness really means "issue" rather than "case"—the same or similar issues. The noble Baroness's amendment introduces "similar issues", whereas the noble Earl's amendment deals only with "same issues". I shall deal with both of those in turn.
I listened carefully, as I always do, to the debate in Committee. I considered very carefully what had been said. I discussed those matters with my officials and legal advisers and I discovered, as the noble Earl has
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done, that this is perhaps a rather more complex business than we all considered or thought in Committee.
The noble Earl has raised with me the question of estoppel and how that affects the Bill as it stands. The estoppel principle does not apply because of another legal principle. That other legal principle, which in my halting Latin I shall attempt to explain to your Lordships, is that of res inter alios acta alteri nocere non debet, which is usually abbreviated to res inter alios acta. One or two of your Lordships may require a translation and I am happy to try to explain what it means. It can be translated as: a matter carried out between others ought not to harm another person. It means that a person who was not a party to earlier legal proceedings and therefore did not have the opportunity to give his own evidence or to cross-examine witnesses should not be bound by the decision of the court in later proceedings to which he is a party.
I have attempted to put it more simply and more mathematically by saying that, if a case takes place between A and B, the decisions in that case cannot bind a case between A and C or B and C. In this case, A and B are the victim and the compensator and C the Secretary of State. Therefore, it follows that if an appeal tribunal were bound to follow the decision of the court, the res inter alios acta principle would be compromised. The Secretary of State would not have been heard by the court and any evidence he presented to the appeal tribunal could not affect the decision taken by the court. This means that the Secretary of State would be denied the opportunity to comment on matters of direct interest both to him and to the taxpayer.
The Secretary of State cannot join in proceedings between plaintiff and defendant and it would not be appropriate to change the law to allow him to do so because, quite rightly, the benefit recovery process is not invoked until liability has been established and compensation awarded. If the Secretary of State were given the right to be heard, the department and the court would be embarking on a course of action which could later prove pointless if negligence was not proved. Furthermore, additional costs would have been incurred to no good effect.
I should re-emphasise that Clause 12 of the Bill as drafted does not provide a licence for appeal tribunals to ignore decisions of the courts. Subsection (3) provides that the tribunal must take into account any such decision which relates to the same or any similar issue arising in connection with the accident, injury or disease. If the tribunal does decide in favour of the Secretary of State, it will have to justify that decision. Furthermore, as I made clear in Committee when discussing a similar amendment, it is also important to remember that the decision of a medical appeal tribunal can be the subject of an appeal to a social security commissioner, with leave and on a point of law. If the appeal tribunal has reached a decision which could be seen as novel or unusual, it is entirely possible that leave would be granted. I should add that if the appeal tribunal were to refuse leave, it may be sought direct from the commissioner.

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The noble Earl asked me about the words "must take into account", which is the phrase in the Bill. That phrase means simply that the tribunals must evaluate evidence and they must give it due weight. As I have explained, if it is felt that they have not done so, there are procedures in place for appeals against that.
The noble Baroness, Lady Hollis, suggested that the evidence to the tribunal may be weaker than the evidence to the previous court. If that evidence were weaker, as I have said and as the Bill provides, the tribunal must take into account what was decided by the other court. Frankly, one would therefore expect the tribunal to give the appropriate weight to the heavier evidence; that is, the evidence given at the other court. That is the position and I hope that I have answered the points raised about the word "must".
I have explained also why it would be undesirable for a medical appeal tribunal to be bound by the decision of a court on the same issue. The effect of Amendment No. 11 would be to go further and bind a medical appeal tribunal not just to the same decision but to a similar issue as well.
Amendment No. 11 would increase the number of cases going before an appeal tribunal in which the Secretary of State's evidence would have no effect on matters of direct interest to him. Furthermore, in rendering ineffective the Secretary of State's evidence in cases similar to that decided by the court, it could also generate considerable argument over whether the issue in question was similar to that decided by the court or not. One might have two different sets of argument. I believe that that would prove a fertile ground for disputes and increase the number of benefit recovery decisions reaching a commissioner. I believe that continuing the existing arrangements in this area is the right approach. The arrangements strike the right balance. Fewer than 100 recovery of benefit appeals are heard in any given year. Many of them are indeed complex cases and frequently involve court decisions.
A typical situation where the appeal tribunal will differ from the courts is one in which compensation has been awarded on the basis that the court decided that the effect of a particular injury should no longer exist after a certain length of time but where the victim, nevertheless, continues to claim benefit in respect of such effects for some time beyond that date. In such a situation the tribunal may decide that the period during which recoverable benefits have been paid is as specified in the certificate from the Secretary of State and not the period for which compensation has been awarded.
As I indicated, not many cases are involved but they are often complex and unusual. However, they do involve this important legal principle which I am advised takes the lead—I am not sure whether "precedent" is the right word; indeed, I am always cautious when I start using semi-legal phraseology— over the principle which the noble Earl posed to me. As I explained, that principle is that if, in the case of this particular issue, the plaintiff and the defendant are in court, the Secretary of State is not there, has no right to be there and no locus.
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However, if a decision is reached at that point and it is subsequently decided to go to an appeal tribunal regarding what is on the certificate, then, in that case, the Secretary of State is a party and it would be the Secretary of State and "A" or the Secretary of State and "B" who would be involved. That is the point of the legal principle which says that that case, which is not the same as the original one because it is not between the same two parties, does not have to take into account or have to abide by the decisions of the other court. With that explanation of what I accept is a legal point, I hope that your Lordships will see the justice of my cause and that the amendment will be withdrawn.
Lord McCarthy: My Lords, before the Minister sits down I would like to raise one further point. The noble Lord introduced the principle of what I might call "third party immunity". However, if I follow the Minister correctly, all the examples put forward have been drawn from this field. My noble friend Lady Hollis asked the Minister whether he could give other examples. Surely such a principle ought to be operating in tax law, in health and safety matters, and so on. If that is the case, can the Minister give further examples?
Lord Mackay of Ardbrecknish: My Lords, it does operate. Indeed, I discussed a similar matter with my officials this morning. As I said, I am always reluctant to get too closely involved in such cases. However, we discussed an interesting criminal case in which the Crown could prosecute and where, perhaps, the case does not go any further or where a not guilty verdict is reached but where the person involved could then sue the person who was the accused. That could actually become a civil case where another decision could be made.
There is another similar case, the details of which I do not have with me. It took place in the late 1940s and was subsequently superseded by a change in statute law to allow for a different circumstance to apply. However, I can assure the noble Lord, Lord McCarthy, that the maxim of res inter alios acta is one of very great duration. It appears in both Roman and canon law and was indeed invoked in common law as early as the reign of Edward II. It prevails to this day as an important point of principle. The noble Baroness may laugh at that if she wishes, but, as I understand it, the importance of English common law is that it does have a very long and distinguished history. We must therefore be careful before we turn it over. However, the Secretary of State, who has some interest as, indeed, does the taxpayer, in such issues, is not a party to the original decision between the defendant and the plaintiff. Therefore, as I said, he has no locus to be there and I do not believe that either I or your Lordships would want him to be there because it would complicate the issue. This could be a subsequent decision which may be made in a dispute between one of the parties and the Secretary of State. In that case, this common law principle is the one which I believe we should abide by.
Earl Russell: My Lords, I must apologise to the Minister for the quality of my paving. I regret to say

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that it is the sort of paving that I have come to find familiar since the period of Conservative Government began. It is the usual principle: there is no such thing as a free tax cut. But paving it is, however crazed it may be; and, as paving, the Minister justly recognised it.
I thank the Minister for a particularly lucid exposition of an extremely complex problem. Whether or not it is a complete exposition is a question which I believe is worthy of further thought. The principle of res inter alios acta is of course vital. It links with the principle that one may not have a judgment against one when unheard. The two principles are in fact logically connected, but I do not believe that the application of that principle is quite as simple as the Minister suggested.
We are dealing here with a medical appeal tribunal. The Minister is right to say that in the previous damages case, with which we are dealing as regards the recovery of benefit, the Secretary of State will not have been a party. So the Secretary of State may benefit from the principle of res inter alios acta. That is exactly as the Minister expounded it, and I go with him all the way in that respect. But, in a case before the medical appeal tribunal, we have an issue between the claimant and the Secretary of State to which the compensator is not a party, even though the amount of damages that the compensator may have to pay to cover recoupment of benefit may be very materially altered by the finding of that tribunal. Therefore, after the conclusion of the medical appeal tribunal, will not the compensator be able to claim the principle of res inter alios acta and take the matter on a stage further? Has not the Minister set up a merry-go-round from which there is no coming off?
Lord Mackay of Ardbrecknish: My Lords, perhaps I may interrupt in order to assist the noble Earl. The compensator can in fact be a party to the appeal.
Earl Russell: My Lords, I hoped that I would hear that answer; indeed, I am very glad that I have. I thank the Minister warmly. However, there are one or two other related problems. In criminal and civil cases different standards of proof apply. Where there is a criminal injury involved that may be relevant and it might lead to different verdicts. Where we have a court judgment that someone is entitled to benefit because of an injury over a certain period of time and the person remains unfit to work, that person is still entitled to benefit if he is physically unfit to work even if that is no longer ruled to be the consequence of the accident. If one is injured and the injury is then capped by the effect of ageing, one may remain unfit. I am sure that the Minister has not forgotten all the debate about hearing and war pensions which is the same principle. So there is a further complication involved. I am not satisfied that we have got it right, but we may do better with it outside the Chamber than within it. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
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Clause 3 ["The relevant period"]:
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 2:
Page 2, line 11, at end insert ("or the disease in question was first diagnosed").
The noble Baroness said: My Lords, in moving the amendment I shall speak also to Amendment No. 3. As the Bill stands, the rules governing the recoupment of benefit if one suffers from injury are treated differently from those regarding people who are suffering from a disease. In Committee we tried to persuade the Minister that, so far as concerns benefit recoupment, disease and injury should be treated in the same way; in other words, from when the disease was first diagnosed or the injury occurred and not from when the first claim was made on benefit.
Although I believe that the Minister raised an eyebrow at the time, we argued in Committee that it was not difficult to treat disease in that way because the GP's initial diagnosis is a perfectly sensible method of dating from when the clock begins to tick. The Government did not accept our amendment, although the Minister was kind enough to follow it up with an explanatory letter. However, I have to say that the Minister's efforts of explanation persuaded neither our advisers nor myself. Indeed, I suspect that they may not have entirely persuaded the Minister. So we now revisit the topic.
The heart of the issue is that the Government are drawing a distinction between disease and injury which the more one examines it the less clear it becomes. On Second Reading, the noble Earl, Lord Russell, asked whether radiation poisoning was a disease or an injury because the heading under which it falls affects how one's benefit recoupment comes into play.
At Committee stage I talked about gluteraldhyde, a sterilising chemical, exposure to which can cause severe asthma type disease. We have considered this matter further and discovered a whole array of other such incidents. We would like the Minister to give us a steer as to whether these count as diseases or injuries. For example, there is a whole array of diseases which can be caused by a one-off exposure to a hazard, or a short series of distinct exposures to hazards. In the case of HIV or hepatitis A and B, these blood-borne diseases can be caught from a one-off exposure. Particularly at risk are those involved in the medical profession, for example a nurse or a dentist. Is that a disease or an injury?
Weil's disease can be contracted by a single exposure to contaminated water. At risk are those in the water industry, including sewerage workers, as the disease is spread by rats. Is that a disease or an injury? Dermatitis can be caused by exposure to a variety of sensitising agents. It can certainly be caused by working with certain oils in machinery after a short time. Is that a disease or an injury?
The psychiatric illness of post-traumatic stress disorder by definition can be caused only by a "trigger" event, a one-off psychologically damaging experience such as, alas, the King's Cross fire, the Zeebrugge ferry disaster, or the Hillsborough football disaster. Is that a disease or an injury?
Platinum allergy can be suffered by workers in the precious metal industry. A one-off exposure can cause lifetime sensitisation to platinum. Is that a disease or an injury? In the agricultural industry, one bite from a sheep tick can cause permanent illness. Legionnaire's disease can be contracted from infected water, or from airborne bacteria in faulty air conditioning. Recently in this House we have had many discussions on organo-phosphate poisoning and the effect it has had on our troops, possibly as a result of a one-off exposure. The consequence was a disease.
No doubt we could go on and on, but I hope that I have produced enough evidence to show that the distinction the Minister seeks to draw in the law between disease and injury does not in practice hold for a large swathe of cases which will come within the framework of this Bill. It would, therefore, be fairer to administer, as well as fairer for the claimant, if disease and injury were treated in the same way; that is, when the disease is first diagnosed the clock begins to tick in much the same way as when an injury first occurs. I beg to move.
Earl Russell: My Lords, the noble Baroness has said almost everything I intended to say. I shall not gild her lily. I shall merely ask the Minister whether the Government introduced this clause as a form of subsidy to the legal profession.
4 p.m.
Lord Mackay of Ardbrecknish: My Lords, I am not sure whether I shall attempt to answer the noble Earl's point. I sometimes think that all the laws we pass in this House, good, bad or indifferent, have as their underlying raison d'être that they will act as a benefit to the legal profession. I very much doubt whether this one will be any different from all the others. However, on a more serious note, Clause 3 defines the period during which benefits, paid in consequence of an accident, injury or disease for which compensation is claimed, may be recovered.
Subsection (2) of the clause provides for the relevant period in cases of accident or injury, and subsection (3) provides for the relevant period in cases of disease. In cases of disease, unless a settlement is reached beforehand, the relevant period ends five years after the day on which the claimant first claims a listed benefit in consequence of the disease. In accident cases, the period runs from the day of the accident. In virtually all accident cases the benefit will run from the date of the accident, for obvious reasons.
We discussed amendments very similar to those now proposed at Committee stage. These amendments would change the relevant period in disease cases so that—as the noble Baroness explained—it would be counted not from the date of claim but from the date of diagnosis of the disease. A series of arguments has been put forward in Committee and again today in favour of amending the scheme in this way. I remain unconvinced by those arguments. I hope I have explained to your Lordships why that is so.
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First, there is the argument that it can be difficult to distinguish in certain cases between what is an accident and what is a disease. The noble Baroness gave a number of examples. She referred, for example, to cases of exposure to toxic chemicals. I believe she over-estimated the number of incidents as she became carried away with the different kinds of examples she thought up. I am sure that even the noble Baroness would appreciate that the cases she listed form a small portion of the total number of claims. I accept that there may be some occasions when it is difficult to decide whether certain cases constitute accidents or diseases, but they are rare. The argument of the noble Baroness is that recovery in accident and disease cases should be treated in as equitable a way as possible, so that the difficulty of distinguishing between accidents and diseases should not adversely affect the amount of benefits recovered to the detriment of the victim. I do not dispute that either. However, I believe that we already have such an equitable arrangement in place, and that the changes proposed in these amendments to the period of recovery would worsen the position rather than improve it.
If the noble Baroness did not agree that the position we have outlined in the Bill is equitable, and the Opposition were interested in equity, they would propose an amendment that in both accident and disease cases the period of recovery should run from the first date of claim for benefit; in other words, tie in the position for accidents with that for diseases. That would be equitable. However, the Opposition have not chosen to do that.
Under the definitions used in the present scheme for both accident and disease cases, the benefits recovered are only those claimed in consequence of the same injury for which compensation is also claimed. That is something we must bear in mind. Perhaps I should have mentioned it in the previous discussion. The medical tribunal could only consider benefits claimed as a consequence of the accident or disease. However, in the majority of cases, compensation will be payable for the same period in which benefits have been paid. The definitions for the period of recovery the department uses are an attempt to capture only the benefits which may overlap with compensation. We have absolutely no intention of going any further than that. Using the date of diagnosis could produce inequities whether the diagnosis takes place before or after the date of claim for a recoverable benefit.
If the date of diagnosis was used to determine the relevant period in disease cases it would result in the following effect. Consider two cases where benefit was still in payment after five years. In a case where the date of diagnosis preceded the date of claim, the relevant period for recovery of benefits would include a period during which no benefit had been paid at all. This would produce disparity of treatment with an accident case where the claim for benefit will ordinarily have been made very soon after the accident occurred. In such cases the relevant period would not end until benefits had been in payment for a full five years. This disparity does not exist under the current scheme, nor will it exist under the scheme I propose.
On the other hand, in cases where the date of diagnosis took place after the date of claim for a relevant benefit, double compensation would result. This is because the

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department would not be able to recover benefits paid for a period for which compensation would normally have been claimed. The Select Committee made it clear that the prevention of double compensation is the reason for the existence of the policy of benefit recovery.
As your Lordships know, the central premise of the reformed scheme is that compensation may only be reduced on account of benefits paid in respect of the same need. Therefore benefit recovery should not result in anything more than the prevention of double compensation. I believe that the amendment would infringe that basic principle of the scheme.
Those principles apply equally to both accident and disease cases. I do not see that changing the definition for the period of recovery in disease cases could do anything other than create a gap between the treatment of accident and disease cases—preventing double compensation in the first case and allowing double compensation in the latter. I therefore believe that the amendments should be rejected.
Baroness Hollis of Heigham: My Lords, I am disappointed by the Minister's reply. I accept that most of the cases that will be considered for recoupment of benefit are likely to be disease cases and that, therefore, the overlap is a small proportion. However, it is a quite significant and substantial proportion of the injury cases. The Minister has not addressed the issue as to what happens when one is dealing with some of the examples that I gave—I referred to HIV cases, and so on—where, because it is difficult to label them as either disease or injury, the appropriate method of recoupment involved is unclear. Does the Minister wish to help us? What guidance will his department give to, say, medical appeal tribunal doctors?
Lord Mackay of Ardbrecknish: My Lords, this is Report stage. With the leave of your Lordships I shall respond briefly to the noble Baroness. As I think I have indicated on a number of occasions, it is difficult on the Floor of the House in theoretical cases to try to put oneself in the position of the people who will have to decide these issues—the compensator, the plaintiff and perhaps ultimately the courts. It is quite hard, and wrong, for Ministers at the Dispatch Box to make judgment on these issues. They are matters for the parties involved and ultimately the courts.
Baroness Hollis of Heigham: My Lords, if that is not a fudge, I do not know what is. The Minister says that he does not know and he will get rid of the issues by calling them theoretical. They are not. I cited to the Minister well testified test cases many of which are familiar to noble Lords from their own experiences. Those cases do not fall tidily into the category of injury or disease on which the Minister's case rests.
The Minister has set up a parallel path system. What happens to those clusters of examples—I gave a quite substantial number of injury cases—which do not fall tidily into either category and therefore confound his parallel path? What will happen to people in those cases? I imagine that lawyers will try
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to argue that it is either a disease or an injury according to whichever produces the most advantageous situation as regards benefit compensation recovery. That seems to me an undesirable position in which to leave the law. I believe that the Minister wishes again to intervene.
Lord Mackay of Ardbrecknish: My Lords, I believe that the noble Baroness pursues a total red herring which her amendments do not address. The question as to whether it is an injury or a disease is unanswered by her amendment also, if she states that it is unanswered by the Bill. There is no definition. She attempts to put, as she believes, some equity between the two. I have suggested to your Lordships, I believe successfully, that the noble Baroness would be putting inequity between the two. If she really wants equity between the two, she will run both from the date at which benefit starts. That would put equity between the two and would make the situation perfectly clear.
I believe that we have a reasonably equitable position. The questions posed by the noble Baroness are not addressed in her amendments.
Baroness Hollis of Heigham: My Lords, my amendments do not seek to make a distinction between disease and injury. If the amendments are accepted, there is no need to make that distinction between an injury and a disease because they will be treated in the same way. That is what I seek. If the Minister persists in seeking to make a distinction between injury and disease he has to answer my question: how does he label those categories? If he accepts my amendment, he does not have to go down that perilous path because injury and disease will be treated in the same way.
The Minister responds by asking why we do not date them both from the same date. The Minister wishes to intervene again.
Lord Mackay of Ardbrecknish: My Lords, the noble Baroness tempts me into a Committee stage, as she does frequently. If she does not want that, I shall resist doing so for the remainder of the day. Perhaps I may say this to her again at the risk of repeating the arguments. She is making a more significant difference. I believe that what I am doing is equitable. The key point is when the benefit starts. In injury cases the benefits will by and large start when the injury occurs or shortly thereafter. Disease can be diagnosed years before or indeed after benefit starts. In both cases the noble Baroness's amendment would be inequitable because either no compensation would be recovered or there would be a double compensation payment. Neither would be fair and equitable. If the noble Baroness wishes to pursue her argument, the only fair and equitable provision is for both to start on benefit being paid.
Baroness Hollis of Heigham: My Lords, I am unpersuaded by the Minister's reply. I wish to test the opinion of the House.
4.15 p.m.
On Question, Whether the said amendment (No. 2) shall be agreed to?
Their Lordships divided: Contents, 90; Not-Contents, 147.

Division No. 1

CONTENTS

Acton, L.

McIntosh of Haringey, L.

Addington, L.

Mackie of Benshie, L.

Allen of Abbeydale, L.

McNair, L.

Archer of Sandwell, L.

McNally, L.

Ashley of Stoke, L.

Mar and Kellie, E.

Beaumont of Whitley, L.

Marsh, L.

Borrie, L.

Mason of Bamsley, L.

Brooks of Tremorfa, L.

Merlyn-Rees, L.

Bruce of Donington, L.

Meston, L.

Callaghan of Cardiff, L.

Milner of Leeds, L.

Carmichael of Kelvingrove, L.

Monkswell, L.

Carter, L.

Morris of Castle Morris, L.

Cocks of Hartcliffe, L.

Murray of Epping Forest, L.

Craig of Radley, L.

Nicol, B.

Currie of Marylebone, L.

Peston, L.

David, B.

Plant of Highfield, L.

Dean of Thornton-le-Fylde, B.

Ramsay of Cartvale, B.

Desai, L.

Redesdale, L.

Donoughue, L.

Richard, L.

Dormand of Easington, L.

Rochester, L.

Dubs, L.

Russell, E. [Teller.]

Ezra, L.

Sainsbury, L.

Falkland, V.

Serota, B.

Farrington of Ribbleton, B.

Sewel, L.

Gallacher, L.

Simon, V.

Geraint, L.

Smith of Gilmorehill, B.

Gladwin of Clee, L.

Stallard, L.

Glenamara, L.

Stoddart of Swindon, L.

Graham of Edmonton, L. [Teller.]

Strabolgi, L.

Harris of Greenwich, L.

Symons of Vemham Dean, B.

Haskel, L.

Taveme, L.

Henderson of Brompton, L.

Taylor of Blackburn, L.

Hilton of Eggardon, B.

Taylor of Gryfe, L.

Hollis of Heigham, B.

Thomas of Walliswood, B.

Hooson, L.

Thomson of Monifieth, L.

Howie of Troon, L.

Thurso, V.

Hughes, L.

Tope, L.

Jay of Paddington, B.

Tordoff, L.

Jeger, B.

Turner of Camden, B.

Jenkins of Hillhead, L.

Wamock, B.

Jenkins of Putney, L.

Whitty, L.

Kilbracken, L.

Wigoder,L.

Kirkhill, L.

Williams of Elvel, L.

Lovell-Davis, L.

Williams of Mostyn, L.

McCarthy, L.

Winston, L.

NOT-CONTENTS

Addison, V.

Cadman, L.

Ailsa, M.

Campbell of Alloway, L.

Aldington, L.

Campbell of Croy, L.

Alexander of Tunis, E.

Camegy of Lour, B.

Allenby of Megiddo, V.

Chalker of Wallasey, B.

Anelay of St. Johns, B.

Charteris of Amisfield, L.

Arran, E.

Chesham, L. [Teller.]

Ashboume, L.

Chorley, L.

Astor of Hever, L.

Clanwilliam, E.

Belhaven and Stenton, L.

Clark of Kempston, L.

Berners, B.

Cochrane of Cults, L.

Blatch, B.

Courtown, E.

Boyd-Carpenter, L.

Cranbome, V. [Lord Privy Seal.]

Brabazon of Tara, L.

Crickhowell, L.

Braine of Wheatley, L.

Cuckney, L.

Brookeborough, V.

Cumberlege, B.

Bruntisfield, L.

Davidson, V.

Butterworth, L.

Dean of Harptree, L.

Byford, B.

Denbigh, E.

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Denham, L.

Monk Bretton, L.

Denman, L.

Montgomery of Alamein, V.

Dixon-Smith, L.

Munster, E.

Donegall, M.

Murton of Lindisfame, L.

Downshire, M.

Nelson, E.

Elles, B.

Noel-Buxton, L.

Elliott of Morpeth, L.

Northesk, E.

Elton, L.

Orkney, E.

Eme, E.

Orr-Ewing, L.

Exmouth, V.

Oxfuird, V.

Ferrers, E.

Park of Monmouth, B.

Flather, B.

Pearson of Rannoch, L.

Fraser of Carmyllie, L.

Pender, L.

Gainford, L.

Perry of Southwark, B.

Geddes, L.

Pilkington of Oxenford, L.

Glentoran, L.

Platt of Writtle, B.

Goschen, V.

Pym, L.

Gray of Contin, L.

Quinton, L.

Greenway, L.

Rawlinson of Ewell, L.

Harding of Petherton, L.

Reay, L.

Harlech, L.

Renfrew of Kaimsthorn, L.

Harmar-Nicholls, L.

Renton, L.

Harris of Peckham, L.

Romney, E.

Hayhoe, L.

Rotherwick, L.

Henley, L.

St. Davids, V.

Holderness, L.

St. John of Fawsley, L.

Home, E.

Saltoun of Abemethy, Ly.

Hothfield, L.

Sanderson of Bowden, L.

Howe, E.

Sandford, L.

Ilchester, E.

Seccombe, B.

IlChester, E.

Sharples, B.

Inchyra, L.

Shaw ofNorthstead, L.

Inglewood, L.

Shrewsbury, E.

Ironside, L.

Simon of Glaisdale, L.

Johnston of Rockport, L.

Skelmeredale, L.

Kimball, L.

Soulsby of Swaffham Prior, L.

Kintore, E.

Spens, L.

Knollys, V.

Stanley of Alderley, L.

Lane of Horsell, L.

Stodart of Leaston, L.

Lauderdale, E.

Strange, B.

Leigh, L.

Strathcarron, L.

Luidsay, E.

Strathclyde, L. [Telle r.]

Liverpool, E.

Sudeley, L.

Long, V.

Swansea, L.

Lucas, L.

Swinfen, L.

Luke, L.

Taylor of Warwick, L.

Lyell, L.

Teviot, L.

McConnell, L.

Thomas of Gwydir, L.

Mackay of Ardbrecknish, L.

Trefgame, L.

Mackay of Drumadoon, L.

Trumpington, B.

Malmesbury, E.

Vivian, L.

Marlesford, L.

Wade of Chorlton, L.

Mersey, V.

Wilcox, B.

Miller of Hendon, B.

Wilson of Tillyom, L.

Milverton, L.

Wise, L.

On Question, Motion agreed to.

4.25 p.m.
[Amendment No. 3 not moved.]
Clause 4 [Applications for certificates of recoverable benefits]:
Lord Mackay of Ardbrecknish Lord Mackay of Ardbrecknish moved Amendment
No. 4:
Page 2, line 39, at end insert—
("() The compensator may apply for fresh certificates from time to time.").
The noble Lord said: My Lords, in moving this amendment, perhaps I may also speak to Amendment No. 5. Clause 4 relates to applications for and the issue of certificates of recoverable benefit. Amendments Nos. 4 and 5 will change the wording of subsection (5) of Clause 4 to remove any doubts surrounding the

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Secretary of State's obligation to issue a certificate on request. Amendment No. 4 inserts a new subsection into Clause 4 to make it clear that,
"The compensator may apply for fresh certificates from time to time".
Amendment No. 5 removes from subsection (5) the statement that the Secretary of State may issue a fresh certificate,
"on an application by the person who applied for the previous certificate",
which, in the light of Amendment No. 4, is no longer required.
The amendments are intended to meet the concern raised by the noble Baroness, Lady Turner, at Committee stage that in this context the word "may" could have led to some uncertainty about the requirement placed on the Secretary of State to issue certificates as set out in subsection (2) of Clause 4.I hope that the noble Baroness will see that the amendments offer a positive response to her concern, and I am sure that the House will support them.
Lord McCarthy: My Lords, we thank the Minister for agreeing to this change. It is an improvement to the Bill.
On Question, amendment agreed to.
Lord Mackay of Ardbrecknish Lord Mackay of Ardbrecknish moved Amendment
No. 5:
Page 2, line 41, leave out from ("certificate") to ("being") in line 1 on page 3 and insert ("without an application for one").
The noble Lord said: My Lords, I spoke to this amendment with Amendment No. 4.I beg to move.
Lord McCarthy Lord McCarthy moved Amendment No. 6:
Page 3, leave out lines 8 and 9 and insert ("and the fresh certificate shall replace any existing certificate in force").
The noble Lord said: My Lords, we hope that the Minister will agree with us on this occasion too. Clause 4 deals with the rules for the compensator to obtain a certificate. In particular it deals with the situation where the compensator applies for a fresh certificate when the old certificate is still in force.
As we have stated, what we have against the Bill as it stands is that the Secretary of State is bound to issue a new certificate within a prescribed period. We do not like the way that that is spelt out on the face of the Bill; namely, the prescribed period and, secondly, the period stated for a situation where he fails to prescribe. In the second circumstance we do not have a prescribed period; however, the Bill goes on to say that the second situation will apply in the four weeks beginning on the day after the certificate lapses. We feel that that will lead to what we previously termed the problem of hiatus in that there can be four weeks in which there is no valid certificate and therefore no settlement. We therefore wish to amend the Bill so that the relevant part of the text reads,
"the period of four weeks",
and,
"the fresh certificate shall replace any existing certificate in force".
We consider that that will do away with the hiatus and enable there to be a settlement at any point. I beg to move.
Lord Mackay of Ardbrecknish: My Lords, under the present scheme no application for a fresh certificate may be made until the existing certificate ceases to be in force. Clause 4 of the Bill has already been amended to allow for replacement certificates to be requested before the expiry of existing certificates. The noble Lord, Lord McCarthy, indicated his agreement to this and I believe it is an improvement on the present position.
The amendment we are discussing would go further. It would require the compensation recovery unit to issue replacement certificates before the existing certificates had expired. Once the replacement had been issued it would revoke the certificate already in force.
I have some sympathy with the concerns expressed about the difficulties which can arise through a gap between two certificates. I fully appreciate that, but although the amendment may appear logical and desirable, it could create some potential problems which I wish to set out.
One difficulty that might arise is that if we change the procedure there could be a lack of clarity about the amount of benefits to be repaid if two certificates were in existence at the same time covering the same period. The noble Lord's amendment seeks to deal with the difficulty by making the second certificate take legal precedence over the first. However, that would not solve the problem where the negotiating parties had not received the subsequent certificate but had decided in the meantime to settle on the basis of the previous one. That could happen quite easily where a compensator was requesting certificates at set intervals. A subsequent certificate could be in the post while settlement was being reached on the basis of the earlier certificate. In such a situation the settlement might need to be reopened to reflect the contents of the later certificate. That would present particular problems in a case where an award was made by a court in the light of what turned out to be an invalid certificate, although plainly the problem would not be confined to cases that had reached court. So the creation of overlapping certificates would cause difficulties.
Where difficulties would arise through a gap between certificates, which is the problem the noble Lord, Lord McCarthy, wishes to address—I do not believe that he is concerned about the overlapping point—I can assure the House that the compensation recovery unit already operates a "fastpath" procedure. It will make every effort to provide certificates urgently where there is a genuine need for one. That has on occasion included faxing certificates to courts where necessary so that victims and defendants have the correct documents to hand. I emphasise, as I did in Committee—and I do not believe I heard anyone dispute it—that there is general satisfaction with the service provided by the compensation recovery unit. That is certainly the impression that was conveyed to the Social Security Select Committee in another place during its inquiry into the existing scheme. If we have administrative

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arrangements that work well, it seems unnecessary to encumber the statute book with excessive detail on how those arrangements should operate, especially when problems could arise in some cases with overlapping certificates, a newly issued certificate being already on its way when a case was being settled on the basis of the old certificate.
I understand the problem and I do not wish to be too unhelpful. I would be prepared to ensure that all practitioners in the field were consulted, as they frequently are, on whether there are any operational improvements they would like to see which could reduce gaps in certificates still further. As I indicated, all the evidence I have is that the "fastpath" procedure prevents gaps occurring and we do not need any statutory provision.
I hope that the noble Lord, Lord McCarthy, will feel that my response has been constructive on the question of gaps. In the light of my explanation and the assurance that if, in all the discussions we have and will continue to have with the practitioners, any problems occur we will try to ensure that we deal with them administratively, I hope that the noble Lord will withdraw his amendment.
Lord McCarthy: My Lords, I thank the Minister. There is still Third Reading for us to persuade him further, as we did just now. I do not know who the people are who apply for new certificates but do not know that negotiations are going on. As I understand it, in the model the claimant or the claimant's representative and the compensator's representative are negotiating. Someone applies for a new certificate, whoever it is, but the people negotiating do not know, so they reach a settlement. Then, when they go home, they say, "It's no good, there's a new certificate." I should have thought that they would know perfectly well that there would be a new certificate. Anyway, if they forgot they could always take it into account and renegotiate the settlement. I can see no difficulty. However, no doubt we can return to the matter at Third Reading. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
4.30 p.m.
Clause 6 [Liability to pay Secretary of State amount of benefits]:
Baroness Turner of Camden Baroness Turner of Camden moved Amendment
No. 7:
Page 3, line 44, at end insert—
("() Subsection (2) shall not apply to an interim payment or payments paid before the final settlement of the claim which is, or where more than one interim payment has been made are in total, below an amount or amounts specified in regulations made pursuant to this subsection.").
The noble Baroness said: My Lords, I am raising again, as I did in Committee, the whole issue of interim payments. As I said then, it can be quite a difficult issue. Often in the case of personal injury it is not possible to make an accurate assessment of future disability immediately, perhaps for some time until the condition
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has settled down. In such circumstances, it is quite usual for those representing the injured employee, in the case of industrial injury, to attempt to negotiate an interim payment. Of course, that is beneficial and normally to the advantage of the injured person.
It has become the practice, however, for insurers to require the interim payment to be allocated to special rather than general damages. Interest rates on special damages are higher than for general damages. Thus, by making an interim payment allocated to special damages, the insurer can potentially save money on the final settlement. The original recoupment provisions added the complication that any interim payment had not only to deal with the needs of the accident victim but also any recoupment incurred to date. That meant that an interim payment might have to be applied for in a much larger sum than might otherwise have been the case.
In smaller cases, as was explained in Committee, this would not have been much of a problem because under the old system which the present Bill seeks to replace there was a small payments limit of £2,500. There seems to be general agreement that the limit should go because it has been capable of manipulation in settlements in a way that was not originally intended. However, I still think that that leaves us with the problem of interim payments.
The Minister's response last time round was that it would be up to the victim's representatives to negotiate a payment with the provisions of Clause 8 in mind. He said that he appreciated that they would perhaps rather not have to negotiate an interim payment with recovery in mind, but he did not see any alternative if the taxpayer is properly to be protected.
While we understand that argument, we are nevertheless concerned to protect the interests of the person who has had the accident. It may well have occurred through no fault of the victim. Indeed, that is probably the case in situations in which compensation is being paid under an employers' liability policy. We have thought seriously about the problem again. The amendment has been drafted carefully, as last time, to allow the Minister to introduce regulations after appropriate consultations which would specify the amount below which recovery could not be triggered. I had the clear impression last time that the Minister, while not accepting our amendment, nevertheless acknowledged that there was a problem. I hope, therefore, that in the intervening period since the Committee stage, he has been able to look at the matter again and that this time he will be more favourably disposed towards our amendment. I beg to move.
Earl Russell: My Lords, one of the crucial points behind the amendment is that general and special damages pay interest at a different rate. Therefore, the amount to be recovered under them will be different. The key point to which we shall return on the next amendment is that, to agree to a settlement, the claimant needs to know what he is actually getting. The

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amendment is vital to achieving that end. If it is not achieved, the amount of litigation will increase in a most unwelcome way to all parties concerned.
Lord Mackay of Ardbrecknish: My Lords, as the noble Baroness, Lady Turner, explained, the amendment would exempt interim payments from benefit recovery where the total fell below a prescribed limit. As she indicated, we had a debate on an identical amendment at Committee stage. I had rather hoped that I had persuaded her that the situation should be left as it is in the Bill. However, it has been suggested again that the amendment is necessary to protect interim payments provided to victims to meet their immediate needs.
The principle behind all this is that compensation may only be reduced in respect of benefits already paid to the victim in respect of the same needs and that, of course, also applies to recovery made from interim payments. So an interim payment with no direct parallel within the social security system, such as a payment towards the cost of an operation, could not be made the subject of a reduction. I was sympathetic on that point and happy to give that clear assurance. Reductions can only be made where the victim received public funds to meet the same need for which compensation is claimed. For example, if a victim is offered an interim payment in respect of income lost because of his injury, that payment would be reduced in respect of benefits already paid during the same period to meet the same need. I cannot see anything objectionable about that. The victim will have received benefits since the injury. If he requires any further payment for past earning loss, the compensator will need to make payments covering both sums, and that seems only right and proper.
It was suggested that insurers allocate interim payments to special damages which are paid in respect of pecuniary loss rather than general damages, which include those for pain and suffering, because of the preferential interest rates attached to those damages. I do not approve of attempts to avoid costs by disguising the true reason for making a payment. If such manipulation is taking place, it would be better to address the issue directly rather than change the benefit recovery process in order to mitigate the problem. Indeed, my noble and learned clansman the Lord Chancellor agreed to consider the issues involved.
If we turn to the amendment as proposed, our experience of the way in which the small payments limit has been manipulated under the present scheme—I do not believe there is any disagreement between us on that issue—suggests that public funds would be put at risk if we introduced a similar limit and applied that to interim payments. Of course, it would theoretically be possible to introduce a limit at such a low level that manipulation became almost impossible. However, that would make an interim payment made within such a limit all but valueless to the victim.
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We should not repeat the problem of the small payments limit that we have in the existing scheme, and which we are attempting to get away from, by putting a small payments limit on any interim payment; that would be a mistake. Equally, it is right that when the two parties are considering any interim payment and where that interim payment has anything to do with income loss—if it is not to do with income loss, if it concerns pain and suffering or is for a specific purpose for which no benefit has been paid, the repayment of benefit does not come into it—it is right that the two parties take into account the fact that benefit recovery may take place as well. When they come to an agreement about an interim payment in those circumstances, they can take that into account and the compensator can pay whatever it is to the compensation recovery unit and still pay to the plaintiff whatever sum of money the plaintiff was seeking for his income loss other than the benefit that he has been paid.
I hope that I have explained the issue to the noble Baroness and managed to assure her that under the new legislation there will be no question of any payment made of an interim nature—for example, for an operation or for pain and suffering—being drawn back in benefit recovery. It will only be where the payments being made are to do with income loss. Both parties will be well aware of that potential drawing down of the money and will therefore adjust the interim payment accordingly.
Baroness Turner of Camden: My Lords, I thank the Minister for that response, though I am not entirely convinced by it. What bothers me is that, as a result of the new legislation, there may be some impetus not to negotiate interim payments at all. That would be a pity because in many instances interim payments are of great value to the injured employee and we would not want to do anything which would inhibit such arrangements.
Moreover, although there is concern about special and general damages, I suspect that insurers do not regard it as manipulation to allocate money to specials; they regard it as legitimate, probably with a view to reducing the interest burden. I suspect we shall still see that happening with the new arrangements.
I note that the Minister says that it is only intended to deal with income loss. He is again concerned with the possibility that there may be double compensation. I do not share those concerns. When we discussed this matter originally I expressed the view that the whole argument in relation to double compensation was one that could be rather unfair to the individual who had been injured, and that is still my position. However, I do not intend to press the issue to a vote at this stage. I shall think about it again between now and Third Reading.
I am not altogether satisfied with what we have been told this afternoon. It presents some problems, particularly for people who have to represent those individuals who have been injured at work. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 8 [Reduction of compensation payment]:
4.45 p.m.
Lord McCarthy Lord McCarthy moved Amendment No. 8:
Page 5, line 25, at end insert—
("() A person who makes an offer of a compensation payment (whether by payment into court or otherwise) shall state whether that compensation payment has been calculated in accordance with this section and, if so, the amount allowed in the offer for each head of compensation listed in column 1 of Schedule 2 and the amount of each recoverable benefit which has been deducted from each of those heads of compensation.").
The noble Lord said: My Lords, we return to a subject that we have debated throughout the passage of the Bill. In moving Amendment No. 8 I shall speak also to Amendment No. 9, in which the noble Earl, Lord Russell, is trying to do the same as many others have tried to do with different forms of words at different stages. We have not yet made much ground.
It may help if I say in simple terms what we take to be the central issue; that is, that in this area there should be equal rights for the compensator and the victim. Every right of access and information flow which goes to one should go to the other. Knowledge is power. It is not right and it is not seen to be right if one of the parties to a dispute of this kind has more access to information in a preferential way than the other party. That is our belief.
The second cause we are trying to advance is that it is better to settle matters in knowledge than in ignorance. On the whole, people will obtain more justice and be more satisfied with that justice if they have all the facts before them when the decision is made and they resolve what they want to do. We have tried in successive amendments to embody those two principles but the Government have not accepted them. This amendment seeks to break down the compensation into various headings so that the parties know how much compensation is for pain and how much for suffering. In particular, we want them to know how much they will have to pay back in terms of benefits received.
The noble Viscount, Lord Chelmsford, told us that in the real world people do not want those things. They would rather act in ignorance; they go in for aggregates and in that way avoid court settlements. Perhaps they do; but it is not right that the victims should not have access to the information if they want it and if they want to break that practice. The Minister said that that is the way the real world works.
The Minister wrote to me. I thank him for the letter and want to say a word about it. The Minister did three things in that letter: first, he made an admission; secondly, he offered us some comfort; and, thirdly, he gave us a warning. None of those things leads us to feel that we should not press the amendment. The Minister admitted in the letter that there may be a conflict of interest; indeed, he said that in Committee. It might be explicable that the Association of British Insurers favoured ignorance and non-specification and that the Association of Personal Injury Lawyers and their clients favoured knowledge, information and specificity because it was felt that they would do better, and there was a conflict of interest. But we say that if there is a conflict of interest, the law should hold the balance. I do not find that argument convincing.
The letter then offered a comfort. It said that it does not matter because those who negotiate can always negotiate over a net sum. Even if they do not know, they can reach an agreement that they will bear any unusually large recovery which takes away from the net sum. Yes, they can, but we do not know that they will. We have no proof that they will. If we do not give the victim the same information as the compensator gets, he or she will be under some premium to do it that way and to agree that that is the way it should be done.
Finally, the Minister offered us a warning. That warning is probably the best argument he has. He said that if we do it in this way there will not be settlements and that if we do it this way everything will come to court. The trouble with that argument is that we have no evidence that that will be the case. We think it is equally likely— indeed, more likely—that if people have all the evidence and know the circumstances they will be more willing to settle out of court than to go to court. I beg to move.
Earl Russell: My Lords, it is arguable that this may be the most important amendment to the Bill. Indeed, I am inclined to suspect that the Bill may be totally inoperable if we do not accept something along these lines. The key question is whether people will be prepared to settle out of court. It is common ground among every quarter of the House that, where possible, we would like to keep down the amount of litigation. In Committee the Minister gave us a good deal of talk about the real world. But the real world is mutable. When in another place it was decided that the width between the two Front Benches should be two sword lengths, that was, when it was done, entirely in the real world. But the real world has moved on and now there are other considerations which influence the placing of Front Benches.
In the real world, as it has hitherto been, the Minister argued that if you could accept a global sum it did not desperately matter how that sum was made up. That was true hitherto. It will not be true in the future because under the Bill certain heads of damages will be liable to recoupment while certain others will not be liable to recoupment. Until you know whether the sum you are being offered comes under heads subject to recoupment, you simply cannot calculate how much you will get.
Perhaps I may take a case which appears to me to be strictly on all fours with what the Bill is proposing. Let me assume that I am invited to give a lecture at the University of Sheffield. I am offered a fee plus travelling expenses. I am told that the two together will amount to £200. Because I have to return after the last train, I have to drive. Those of your Lordships who have been Members of another place know that there is more than one way to calculate car expenses. Let us assume that I charge expenses at the rate that I usually do, which is lOp per mile. In that case the expenses will come to £36. I shall end up with a very limited amount of expenses and paying a considerable sum in tax.
Then suppose that I am getting expenses at the rate at which, until recently, Members in another place received it for medium sized cars—47.2p per mile. In that case I shall end up with a large amount of expenses, which of course will not be liable to tax, and a very

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much smaller amount of taxable income. I shall end up pocketing something closer to £190 rather than something closer to £130.
It is of some interest to me—I must declare an interest in the literal sense—which of those things I might be being offered. I find it hard to believe that a claimant is really very different. If you are offered an out of court settlement, you do not want to know a whole lot of theoretical things. I have never been particularly interested in my gross income. I want to know what I am actually going to get in my pay packet. Similarly, I think a claimant wants to know what he will actually get in his settlement. If he is not going to know that, I do not see why he should settle.
The Minister suggests that the claimant should simply telephone and get the figure. If he is that fly, perhaps it is all right. But not everyone in the real world—more sides of the House than one can talk about the real world—actually is that fly. The Minister said:
"The concern of victims at the moment and the one which we are addressing in the Bill is that benefit recovery can eat into pain and suffering. If the victim sees that all his award will be removed because of benefit recovery and nothing has been allowed for pain and suffering he will not agree to the deal".—[Official Report, 10/12/96; cols. 991–2.]
The Minister could not have put my point better.
The Earl of Clanwilliam: My Lords, the noble Lord, Lord McCarthy, mentioned my noble friend Lord Chelmsford, who, unfortunately, cannot be present here today and has asked me to say a few words on his behalf. We are talking about the real world. Noble Lords opposite seem to think that claimants make their claims personally and do not make them through solicitors. In point of fact, a small claim may be readily agreed, and there is no problem. However, in larger cases there are the general costs and added to those are the special costs, including payment for suffering and loss of amenity. In such cases there will be much higher value awards, and a whole mass of additional, peripheral claims are made to maximise the claim by the solicitor on behalf of the claimants. The claimant does not make those claims. It is done by the solicitor.
For instance, loss of amenity can cover everything from a gardener's wages to holidays in the sun. The amendment would allow an unlimited range of additions which could open up a whole can of worms of new complaints, involving enormous time and expense on the part of solicitors. These matters are in the hands of solicitors. It is they who have the reins in their hands. They will be expected to maximise the claim item by subjective item if the opportunity is offered to them. That is the real world. The amendment will cause unnecessary delay. That is not in the claimant's interest and may tend to confuse the issue. Further delay will be inevitable. I emphasise that that is not in the plaintiff's interests and is contrary to the principles promoted by the noble and learned Lord, Lord Woolf. If it so happened that heads of damages could be agreed at the outset, there would implicitly be co-operation between the parties. No problems would arise and a quick
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settlement would ensue. However, the amendment would open up a can of worms and would delay matters interminably.
Lord Mackay of Ardbrecknish: My Lords, as your Lordships will recall, these amendments were discussed at some length in Committee. I expressed the view then—and it remains my opinion—that the effect of either of the amendments would be to allow benefit recovery to affect the settlement process to an unacceptable degree. We cannot allow the tail to wag the dog.
Earl Russell: My Lords, can the Minister explain why that is unacceptable? He puzzles me very greatly.
Lord Mackay of Ardbrecknish: My Lords, I shall indicate at least one reason why it is unacceptable if the noble Earl wishes me to do so now. It may be unacceptable to the plaintiff to allow the settlement to drag out. He may be quite keen to get to the end point and get his money. Furthermore, as it so happens, if it drags out and benefit is in payment, the potential amount of benefit recovery will be increased. Therefore, the sooner a conclusion can be reached the better it is for the plaintiff and the better it is for the compensator— for exactly the same reason of benefit recovery. As long as the clock is ticking and is moving on, benefit is being paid which potentially can be recovered. If the case is settled, that is an end of the matter so far as concerns any further benefit recovery. So I believe that it is in the interests of the plaintiff and of the compensator to come to a speedy solution.
Your Lordships may recall that I mentioned at Committee stage that over 90 per cent. of compensation settlements are made out of court. A settlement is offered representing compensation for all losses suffered. What may be included in that figure is loss of earnings, cost of care, pain, suffering and so on, and they are not separately identifiable. That is what actually happens, but whether that is the real world or not that is the situation.
As I have explained, negotiating parties may never agree on the amounts of compensation that they believe would be appropriate in respect of each of these elements. Nonetheless, they may be able to agree a global sum in settlement of the claim. That is the situation under the present scheme. Although the benefit recovery arrangements will change, the Association of British Insurers firmly believes that victims and compensators will still, in most cases, wish to negotiate a global settlement without the necessity to agree on its constituent parts. I see no reason to doubt its word. Indeed, as my noble friend Lord Clanwilliam has just outlined, that is the argument put very firmly by the practitioners in the field and by the Association of British Insurers. It is also the argument that was put very firmly by my noble friend Lord Chelmsford at Committee stage from his experience in this particular area.
I do not have any reason to doubt the word of the people involved that the position will still be as it is currently and that in most cases global sums will be

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negotiated in out of court settlements. Unless the noble Earl is keen—and he did not seem to be at the beginning of our discussion—to have a "benefit for lawyers" operation here, he should perhaps agree that the quicker the settlements are made and the fewer that go to court the better it will be for the general public, the taxpayer, plaintiff and compensator, but perhaps not for the lawyer.
5 p.m.
Earl Russell: My Lords, can the Minister accept that it is common ground between us that the sooner settlements are made the better? The point at issue is the quickest way to a settlement. Our contention is that settlements are not easily reached if they are never in the interests of the claimants.
Lord Mackay of Ardbrecknish: My Lords, a settlement will not be reached if the claimant does not believe that it is in his interest and he is not happy with the settlement being offered. But, as I have suggested, over 90 per cent. of cases are resolved out of court. The Association of British Insurers and my noble friends Lord Clanwilliam and Lord Chelmsford have claimed that that is how the system works. As I tried to explain in the letter that I sent to the noble Baroness, referred to by the noble Lord, Lord McCarthy, if the process remains broadly as it is now, in a case where benefit falls to be recovered we fully expect that the sum agreed with the victim will usually be net of compensation. For example, if £B of benefit were due to be repaid the compensator might offer the victim a further £C in compensation. The victim would get the £C in compensation, but the compensator's liability would in fact be £B plus £C. That is how we believe these settlements will be negotiated, and all the advice that we have received suggests that that will happen.
Of course, in future it will be possible for the victim and the compensator to assess the amount of compensation they believe should be paid in respect of the losses that the victim has sustained and the amount of any reduction in respect of benefit recovery. In the circumstances that we are talking about, neither side will know what calculation the other side has made in order to arrive at the estimate and how they have built up their own negotiating position. That is usually the case where the figure for compensation is negotiated between two parties whether or not benefit has been paid. Nonetheless, we believe that when both parties are satisfied that the offer on the table conforms with their own estimate, then they will settle, just as happens under the present scheme. We certainly do not believe that we should say, "No, you cannot do that. The compensator must spell out the heads of damages that make up this global figure that is being offered".
If a victim is not content with the global figure offered by the compensator or suspects that the protection of compensation for pain and suffering under the benefit recovery rules has not been taken into account, then there are options open to him. If he were unsure about the reason for the discrepancy he could ask the compensator about the reason for it, producing supplementary evidence to support his position.
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Ultimately, the case could go to court, but that is no different from the present position where a multiplicity of factors can result in that outcome.
Court awards of compensation will specify any elements which may be reduced in respect of repaid benefits. Any reduction of such compensation may only take place in accordance with the rules as set out in the legislation. However, if the compensator's offer closely matched the victim's own expectations, there would be no reason for him to complain and the case should be capable of being settled.
Finally, it has been suggested that if the compensator were required to reveal his calculations to the victim it would expedite settlements. Victims' representatives may believe this, but the Association of British Insurers suggests the reverse—that the additional procedure would delay settlements. I at least understand that because one can believe that one can agree the total sum, but when the way in which it is split up is seen, the victim may say, "I don't agree with that and we shall have a fight over it". It obscures the fact that they are reasonably satisfied with the total sum and are prepared to accept it.
I return to a point that I made to the noble Earl earlier. Since the period for benefit recovery runs to the date of settlement, any delay would be likely to increase the amount of benefit recoverable and might therefore result in a further reduction in the amount of compensation payable to the victim. I do not believe that that is a desirable outcome. Indeed, in an intervention the noble Earl indicated that we are at one in wanting settlements to be made as speedily as possible.
I believe that there is a serious difference between us and partly, I believe, because we are listening to different sets of outside advisers who are giving us different advice. I am content to stand by the views of the Association of British Insurers that we shall continue to see most of the cases being dealt with in out of court settlements if we proceed along the lines that the Bill outlines. That will enable a compensator to make an offer without having to break it up. I am not sure whether I have persuaded the parties opposite of the lightness of my case. If I have not and they pursue the matter to a Division, I hope that my noble friends will support me.
Lord McCarthy: My Lords, I am glad that the Minister spoke at some length because he made it more and more clear as he spoke that he was representing to us the position of the Association of British Insurers. As I understand it, that is also the view of the noble Earl, Lord Clanwilliam. That is the advice which is received and it is the advice that the Minister takes. But it is not the advice that we get. We have been told that the victims' solicitors need to know the breakdown so that they can advise their clients what to do.
The Earl of Clanwilliam: My Lords, surely, it is the claimant's solicitor who is making the excessive claims which are going to extend the process interminably.
Lord McCarthy: My Lords, that is a natural attitude for an insurer to take and I quite see that. But the

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claimant may say that if he has not got someone making as many claims as he can, he will be done by the insurer's solicitors. That is what it is all about. The claimants' solicitors are saying to us that they need to have a breakdown and that it is not irrelevant but extremely relevant to have that. For example, they need to know the level of the benefits deducted and whether those benefits are legitimate. They also wish to know whether the Ministry has deducted the proper figures. They need to test these matters. They say to us that the modern trend in litigation, whatever may happen with insurers, is to have the cards on the table. It is up to the plaintiff. If he feels that the claim is dragging out because his solicitor is listing all these irrelevant matters, it is up to him or her to say, "I want a settlement."
It is bizarre that the Minister paints a picture of such strange people who only want the settlement and are not interested in the details. According to the Minister, only their solicitors are interested in the details and all they want is the settlement. Suddenly, however, when they are told the details, they go mad. They do not say, "I just want an overall figure"; they say, "How much am I getting for this and how much for that?" According to the Minister, we have to keep such information away from such weak-minded people because, if they were told such information, they would go to their solicitors and say, "Keep it up for another six months". That is totally bizarre. It is unlikely and implausible, but that is what the Minister believes because he takes advice from the Association of British Insurers. We may have to come back to this on Third Reading—
Baroness Hollis of Heigham: We shall!
Lord McCarthy: My Lords, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 9 not moved.]
Clause 12 [Reference of questions to medical appeal tribunal]:
[Amendments Nos. 10 and 11 not moved.]
Lord Mackay of Ardbrecknish Lord Mackay of Ardbrecknish moved Amendment No. 12:
After Clause 21, insert the following new clause—
LIABILITY OF INSURERS
(".—(1) If a compensation payment is made in a case where—

(a) a person is liable to any extent in respect of the accident, injury or disease, and

(b) the liability is covered to any extent by a policy of insurance,
the policy is also to be treated as covering any liability of that person under section 6.

(2) Liability imposed on the insurer by subsection (1) cannot be excluded or restricted.
(3) For that purpose excluding or restricting liability includes—

(a) making the liability or its enforcement subject to restrictive or onerous conditions,

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(b) excluding or restricting any right or remedy in respect of the liability, or subjecting a person to any prejudice in consequence of his pursuing any such right or remedy, or

(c) excluding or restricting rules of evidence or procedure.

(4) Regulations may in prescribed cases limit the amount of the liability imposed on the insurer by subsection (1).
(5) This section applies to policies of insurance issued before (as well as those issued after) its coming into force.
(6) References in this section to policies of insurance and their issue include references to contracts of insurance and their making.").
The noble Lord said: My Lords, as noble Lords may recall, I explained at Second Reading of this Bill that, if necessary, I would later bring forward amendments to put it beyond doubt that policies of insurance cover the liability to repay benefit. The amendment I am now proposing introduces a new clause into the Bill dealing with insurers' liabilities under contract.
Although we had identified the possible need for this clause at a much earlier stage of the Bill, it relates to an area of law which is inherently complex. It has been necessary to consult other government departments to ensure that their regulations were taken into account before finalising the clause.
I now turn to the detail of the clause itself. Subsection (1) provides that insurance policies giving cover against injuries to third parties shall also be taken to cover the liability to repay recoverable benefits set out in Clause 6 of the Bill.
Subsections (2) and (3) put it beyond doubt that the liability of an insurer to repay benefits cannot be circumscribed or restricted.
Subsection (4) is designed to deal with the situation where an upper limit on the insurer's liability to pay compensation in the event of injury has been agreed and reached. It enables the Secretary of State to restrict the amount of benefit the insurer has to repay in such circumstances. Because the upper limits which apply in personal injury policies are usually very high, such situations are likely to arise extremely rarely. However, where such a limit is reached, and the insurer is not liable to pay the whole of any compensation due, it would not be appropriate for him to be held responsible for the repayment of the whole of the benefits recoverable. However, we still intend to seek full repayment of benefits from the compensator in all other circumstances. It will be necessary to devise workable rules for restricting liability to repay benefits in such a scenario in consultation with interested parties. The inclusion of this regulation-making power gives us the flexibility to carry out that consultation before the new scheme comes into effect.
For the avoidance of any doubt, I should make it clear that, where the liability of the insurer for the full amount of the recoverable benefits has been reduced by virtue of the operation of regulations made under subsection (4) of the new clause, the provisions of Clause 8 of the Bill will be operated on the basis of that reduced liability in order to calculate the appropriate net compensation payment to the victim.
Subsection (5) makes it clear that the new liability to repay recoverable benefits applies to policies contracted both before and after the point of implementation of the reformed scheme.
Subsection (6) deals with the fact that an insurance contract underlies an insurance policy—thus putting the clause on a correct legal basis. I commend the amendment to your Lordships. I beg to move.
Schedule 1 [Compensation payments]:
Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 13:
Page 17, line 27, at end insert—
(". Any payment made—

(a) in consequence of an action under the Fatal Accidents Act 1976; or

(b) in circumstances where, had an action been brought, it would have been brought under that Act.

. Any payment made to or for the injured person in respect of a liability arising by virtue of section 1 of the Damages (Scotland) Act 1976.
. Without prejudice to section 6(4) of the Vaccine Damage Payments Act 1979 (which provides for the deduction of any such payment in the assessment of any award of damages), any payment made under that Act to or for the injured person.
. Any award of compensation made to or for the injured person by the Criminal Injuries Compensation Board or Criminal Injuries Compensation Authority under the Criminal Injuries Compensation Act 1995.
. Any payment made out of property held for the purpose of the charitable trust called the Macfarlane Trust and established partly out of funds provided by the Secretary of State to the Haemophilia Society for the relief of poverty or distress among those suffering from haemophilia.
. Any compensation payment made by British Coal in accordance with the NCB Pneumoconiosis Compensation Scheme set out in the schedule to an agreement made on 13th September 1974 between the National Coal Board, the National Union of Mineworkers, the National Association of Colliery Overmen, Deputies and Shot-firers and the British Association of Colliery Management.
. Any payment made to or for the injured person in respect of sensorineural hearing loss where the loss is less than 50db in one or both ears.
. Any contractual amount paid to the injured person by his employer in respect of a day of incapacity for work.
. Any payment made by the Macfarlane (Special Payments) Trust established on 29th January 1990 partly out of funds provided by the Secretary of State for the benefit of certain persons suffering from haemophilia.
. Any payment made by the Macfarlane (Special Payments) (No. 2) Trust established on 3rd May 1991 partly out of funds provided by the Secretary of State for the benefit of certain persons suffering from haemophilia and other beneficiaries.
. Any payment made under the National Health Service (Injury Benefits) Regulations 1974 or the National Health Service (Scotland) (Injury Benefits) Regulations 1974;
. Any payment made to or for the injured person to compensate him for the cost of medical treatment and incidental expenses for medication and travel for medical treatment.
. Any payment made to or for the injured person to compensate him for damage to property including (but not limited to) damage to or loss of a motor vehicle and expenses incidental to such damage or loss, damage to or loss of clothing or jewellery and damage to or loss of physical aids used by the injured person.").
The noble Baroness said: My Lords, the amendment is designed to write into the Bill the exemptions to recoupment which exist in the present legislation. The
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Minister confirmed in Committee that it was not part of the Government's intention to change the existing exemptions in any way. As will be seen from the list in the amendment, the exemptions are important, covering as they do benefits to haemophiliacs, payments made under the Fatal Accidents Act, and payments to victims of pneumoconiosis, which often affects miners for the rest of their lives once it has been contracted.
I do not want to repeat all the arguments that were advanced in Committee, and the reason we return to the amendment is that the Minister told us then that his departmental lawyers were considering the matter carefully to see, apparently, whether it was necessary to include the list in the Bill. We believe that the list should be included. This Bill deals with the recovery of social benefits. If there are to be exemptions to recovery, it is clearly better that they should be set out in the same piece of legislation. We should therefore like to know what the Minister's lawyers have had to say about this for the sake of clarity. As I said in Committee we believe that the list should be included. I beg to move.
5.15 p.m.
Lord Mackay of Ardbrecknish: My Lords, as your Lordships know, the payments which are exempt from the benefit recovery scheme are set out in Schedule 1 to the Bill. The schedule also contains a power to exempt other types of payment.
The amendment proposed by the noble Baroness would put on the face of the Bill payments which appear as exempt in the present scheme under either primary or secondary legislation, as the noble Baroness has explained. On the previous occasion when we discussed this issue I emphasised the Government's intention that payments which are exempt in the current scheme should remain exempt under the new arrangements.
As the noble Baroness pointed out, the list of exempted payments in Schedule 1 to the Bill does not mirror those currently contained in the Social Security Administration Act because we are confident that the payments which have not been included could not be caught by the provisions of the Bill. I repeat that we are confident of that and I hope that that reassures the noble Baroness.
Perhaps I may give one or two examples. Compensation paid in consequence of the Vaccine Damage Payments Act 1979 or the Criminal Injuries Compensation Act 1995 is paid in consequence of the Secretary of State's statutory duty to make such payments. It is not paid because the Secretary of State is himself liable for the injuries sustained by the victim. When it comes to payments currently listed in regulations as exempt from recovery which could be caught by the Bill, use will be made of the power given in paragraph 8 of Schedule 1 to ensure that they remain exempt when the new scheme takes effect.
I hope that that explanation and the examples given with regard to the Vaccine Damage Payments Act and the Criminal Injuries Compensation Act will reassure the noble Baroness about exactly why our lawyers are confident that the advice that they gave me last time is correct. That is why I have restated the position as

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firmly as I have to the noble Baroness. I hope that my explanation has persuaded the noble Baroness that there is nothing sinister in shortening the list of exempted payments currently contained in the Social Security Administration Act and that the fears which the noble Baroness quite understandably brings to this issue are without any justification. I hope that she will feel able to withdraw the amendment.
Earl Russell: My Lords, I thank the Minister for those remarks, but wonder whether I may attempt to clarify them a little further. I am always a little anxious when I hear the words, "The Government are confident" because they always seem to indicate that the Government are quite certain what they think but cannot quite tell us why they think it. Perhaps, therefore, I may relieve my misgivings by probing a little further about why the departmental lawyers are confident.
I see the seeds of two possible answers and I should like to know on which of those the Minister is relying. One possible answer is that the Minister is relying on Schedule 1 (8) and that the payments were exempted by regulation under the heading, "Any prescribed payment". That is a familiar principle of the Cambyses laws—that the Secretary of State may do whatever he likes. I dare say that it may be a complete reassurance for the Minister for this Government for the remainder of this Parliament. To avoid making any personal reference to any party, I say that that cannot be a convincing assurance on behalf of the Government after next. Nobody can know what they might be going to prescribe. If that is all that the Minister is relying on, I fully accept his sincerity, but I do not accept the legal force of what he says. It is not sufficient.
Alternatively, he may be relying on the fact that the Acts containing these payments are not specified in the repealing schedule and therefore cannot be altered except by primary legislation. As I understand it, this is not a Henry VIII provision in the schedule. Am I right in thinking that the words "Any prescribed payment" cannot apply to any payment not specified in a statute and that he cannot alter a statute by means of this regulation? If he gave that answer I would be a little more reassured than I am merely by the invocation of the regulation-making power. That may be of material assistance to me, and I shall be very interested to hear what the Minister has to say about it.
Lord Mackay of Ardbrecknish: My Lords, I believe that if the noble Earl checks in Hansard he will see that I picked out two of the Acts which the noble Baroness, Lady Turner, had listed: the Vaccine Damage Payments Act and the Criminal Injuries Compensation Act. I explained why they could not be caught by the provisions of this Bill. They are not paid because the Secretary of State is himself liable for the injuries sustained by the victim. It is for that reason that they cannot be caught, and the department's lawyers are very clear in that view. The only other payments that are exempted by primary legislation governing the operation of the present scheme which have not been carried forward are payments made under the Fatal
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Accidents Act 1976 and the Damages (Scotland) Act 1976. Such payments are made to a close relative of a deceased person as a consequence of bereavement. The provisions of Clause 1 of the Bill do not permit the recovery of benefits paid in respect of a deceased person from the payment of compensation made to a surviving relative. It follows, as I am sure the noble Earl understands, that there is no need to exempt such payments specifically either on the face of the Bill or in regulations. I hope that that provides a little help in this difficult issue.
Baroness Turner of Camden: My Lords, I thank the Minister for his response to this amendment and his assurance, which he has repeated this afternoon, that the Government do not intend to remove any of the protections or exemptions that already exist, which is very important. I note his comment about the various pieces of legislation referred to in my amendment. I also note his comment that the Government are confident, and their lawyers have advised them, that they do not have to do anything on the lines of the amendment tabled this afternoon. It is not my intention to press this matter to a vote this afternoon. I shall look carefully at the assurances given by the Minister that are now on record in response to the issues raised in Committee. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.

Home Energy Rating Surveys Bill [H.L.]
5.23 p.m.
Lord Ezra: My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, That the House do now resolve itself into Committee.—(Lord Ezra.)
On Question, Motion agreed to.
House in Committee accordingly.
[The DEPUTY CHAIRMAN OF COMMITTEES (Baroness Nicol) in the Chair.]
Clause 1 [Home energy rating survey]:
Lord Ezra Lord Ezra moved Amendment No. 1:
Page 1, line 8, after ("mortgage,") insert ("offer to").
The noble Lord said: In moving Amendment No. 1 I shall speak also to Amendments Nos. 3 to 5. The object of these amendments is to meet some of the points raised by the noble Baroness, Lady Miller of Hendon, at Second Reading of the Bill on 5th December. The noble Baroness then stated that, while the Government had some sympathy with the aims of the Bill—which were to promote the use of energy ratings for domestic residences to lead to the more efficient use of energy—they had reservations about the method proposed. In particular, the noble Baroness pointed out that an obligation to provide an energy rating survey with every mortgage loan could lead to much unnecessary work and expense, as some borrowers might not be interested in such a survey and

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in other cases it might be a newly-built residence which would have a relatively high energy rating survey already under the buildings regulations.
I consider that this is a valid point. It is for that reason that I have tabled Amendment No. 1. The amendment would oblige mortgage lenders only to offer to make an energy rating survey. Amendment No. 5 states that the obligation to offer an energy rating survey shall not apply to any residential accommodation on which a mortgage lender has reasonable grounds for believing that an energy rating survey has been made within the past three years. That would eliminate all new buildings. Three years is regarded by the professional firms who are engaged in making energy rating surveys as the minimum period that should be allowed to elapse after each survey. Following the period of three years circumstances may well have changed to justify a revised survey.
Amendment No. 4 provides that a mortgage lender shall take reasonable steps to explain the benefits of such a survey to intending borrowers so that they are aware of the situation. Amendment No. 3 is simply a drafting amendment which follows upon Amendment No. 1.
I believe that with these modifications the Bill will help to promote the much more widespread use of energy rating surveys, to which I understand the Government are committed. One must bear in mind that some half million mortgage loans are made each year. In my view, this is a much more effective way of spreading the use of home energy rating surveys than leaving it to individuals.
During Second Reading the noble Baroness pointed out that one of the conclusions from the trials recently carried out with selected mortgage lenders was that,
"once house buyers are given information about what they can do to improve the energy efficiency performance of their homes, the majority of them—over 80 per cent.—welcomed the energy efficiency information provided and indicated that they would be likely to take action in the next two years".—[Official Report, 5/12/96; col. 845].
I regard that as very relevant to the proposals in the Bill.
Furthermore, it should be remembered that in 1994 the Environment Committee in another place recommended that the Government consider a mandatory scheme for home energy labels (as they were then described). This Bill does not go as far as that. It simply makes it mandatory for mortgage lenders to offer borrowers the opportunity of having an energy rating survey when the loan is being arranged. As was pointed out at Second Reading, that should be much less costly than for an individual home owner independently to arrange for such a survey to be carried out. The largest firm that provides valuation services to mortgage lenders, Countrywide Surveyors—which I mentioned at Second Reading—could provide an energy survey for £15 compared with up to £150 for an independent survey.
I trust that with the modifications now introduced the Government will be able to support not only the intentions of the Bill—I understand that they do—but also its detailed provisions. I beg to move.
Lord Graham of Edmonton: We on these Benches echo our sincere appreciation to the noble Lord, Lord Ezra, for giving us a canter round a very familiar course. I recall the sympathy of the Minister on the last occasion with the broad thrust of the Bill. There cannot be very many who object to a measure that is designed to make the running of a home more efficient and cost effective. Unless the Minister is able to tell us of a considerable cost that may fall upon the state, what we are after is sympathy and direction from the Government so that those who have it in their gift to put a bit more flesh on the bones will be encouraged to do so.
There is no doubt that the costs of heating and making heating systems more efficient to ensure that money is not wasted are becoming higher and higher.
The noble Lord, Lord Ezra, drew my attention to the fact that something which tells you what is wrong and how it can be put right may cost the consumer as little as £15. I, of course, accept his figures. So we should not look a gift horse in the mouth.
We are all conscious of the parliamentary timescale and all the other pressures. The Bill needs to leave this place as soon as possible to have any chance of support in another place. I hope that the Minister will recognise the genuine effort that the noble Lord, Lord Ezra, has made since Second Reading to make the Bill more acceptable, not just to the Government but to those outside this place. I think the phrase to be used about heating is that we give this proposal a warm reception.
5.30 p.m.
Lord Cochrane of Cults: I welcome the clarification and explanations given by the noble Lord, Lord Ezra, of this admirable Bill, which, looked at in the historic context, deals with a subject which is now as important to housing as drains were 150 years ago. For that reason, the clarifications and amendments which do much to improve the drafting of the Bill deserve every support.
Baroness Miller of Hendon: Amendment No. 1 is an important change which takes away the requirement for mortgage lenders to carry out a SAP rating and provide one for every prospective mortgagor. It would have the welcome effect of reducing the burden on mortgage lenders by requiring them only to make an offer of a SAP home energy rating report. I understand, though, that the Council of Mortgage Lenders has indicated that it would still resist such a proposal.
Amendment No. 3, as the noble Lord, Lord Ezra, said, is consequential upon Amendment No. 1. Amendment No. 4 would place an obligation on mortgage lenders actively to promote the offer of a SAP rating and advice. I understand that some mortgage lenders are likely to view this as an unnecessary burden, and even though it is unlikely to be an arduous one an unwilling lender is less likely to explore the options to provide the most effective rating and advice services than it would have done if it had initiated a voluntary scheme.

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The Government are active in a wide range of programmes to improve energy efficiency. We agree that it is important to promote energy efficiency but we still have reservations about the Bill and hope that the lenders can be encouraged to become much more involved in voluntary schemes.
We were delighted to hear recently of the initiative by NatWest Home Loans to pilot a SAP rating and energy advice service. That is just the kind of approach which the Government think is likely to be more effective than prescription and legislation. We will be keeping in close touch with developments.
Amendment No. 5 would avoid duplicate ratings being issued on, for example, the same new dwelling where the building regulations for England and Wales already require the house builder to provide a SAP rating as part of the compliance procedures. It would also take into account the changes in SAP ratings which derive from energy price changes and home improvements. To that extent it would be a helpful amendment. However, it would not avoid the possibility of different mortgage lenders obtaining ratings on the same property for their prospective mortgagors. That risk is particularly relevant to the existing stock, to which the majority of mortgage valuations relate.
The noble Lord, Lord Ezra, who, I know, has done a great deal of work, might therefore wish to reconsider whether Amendment No. 5 entirely meets the objectives he intends.
Lord Ezra: I thank the noble Lords, Lord Graham of Edmonton and Lord Cochrane of Cults, for their kind support for these amendments and for the Bill as it now stands. I was pleased to learn from the noble Baroness that she, too, felt that the amendments were helpful although she thought that Amendment No. 5 might go further. Nonetheless, she reported that the Council of Mortgage Lenders is still opposed even to these moderate and limited proposals. I am sorry to hear that. Building societies and other mortgage lenders have done a great deal to serve the community. They have an opportunity here to serve it even more. Although there have been some voluntary initiatives, as the noble Baroness said, they have been very limited.
The opportunity to give these rating surveys to 100,000, 200,000 or even 300,000 purchasers of properties who would be interested—they will have asked for the surveys to be made—is an opportunity not to be missed. Having shown their great interest in promoting energy rating surveys, having put them forward and worked them out, and the Environment Select Committee of another place having recommended a mandatory scheme, I am sorry that the Government should still be swayed by what I find largely inexplicable reservations on the part of the mortgage lenders. The noble Baroness did not give any reasons for their taking that view. It is merely that they apparently do not want to be bothered. I am sorry to hear that. It does not demonstrate the spirit which they should show to the community. I hope that the Bill can
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expeditiously complete its remaining stages in this place and that time will be found for it to go through another place.
Lord Ezra Lord Ezra moved Amendment No. 2:
Page 1, line 9, leave out ("house") and insert ("residential accommodation").
The noble Lord said: With this amendment I shall speak also to Amendment No. 6. This is purely a drafting amendment to change the word "house" to "residential accommodation" in order to widen the provision's scope. I trust that the Committee will agree these drafting amendments. I beg to move.
Lord Ezra Lord Ezra moved Amendments Nos. 3 to 6:
Page 1, line 11, leave out ("every") and insert ("the").
Page 1, line 11, at end insert—
("() A mortgage lender shall take reasonable steps to explain the benefits of and to promote the offer to carry out an energy rating survey pursuant to subsection (1) above.").
Page 1, line 13, at end insert—
("() This section shall not apply to any residential accommodation on which a mortgage lender has reasonable grounds for believing that an energy rating survey has been made within the last three years.").
Page 1, line 27, at end insert ("and "residential accommodation" has the same meaning as in the Home Energy Conservation Act 1995.").
Clause 1, as amended, agreed to.
Remaining clauses agreed to.
House resumed: Bill reported with amendments.

Takeover Bids: ECC Report
5.40 p.m.
Lord Hoffmann Lord Hoffmann rose to move, That this House takes note of the Report of the European Communities Committee on Takeover Bids (13th Report, Session 1995-96, HL Paper 100).
The noble and learned Lord said: My Lords, the report which I draw to the attention of the House concerns a matter of great importance to the City of London. The economic and legal conditions which exist in the United Kingdom are, on the whole, favourable to takeover bids. Shares in publicly listed companies tend to be fairly widely held. The law encourages transparency in share ownership. It discourages devices by which management sometimes tries to entrench itself. It regards the possibility of a takeover bid as a healthy market discipline. In those respects, the United Kingdom differs from almost all other member states of the European Union, which on the whole tend to be far more protective of the established management. The result is that the annual number of takeover bids for companies listed in the United Kingdom greatly exceeds those in all the other member states put together.
The fact that we have so many takeovers means that it is essential to have an effective system of regulation which will protect the interests of shareholders and ensure the integrity of the London securities market. A contested takeover is a battle fought for very high stakes and with every incentive to the parties on both sides to go to the limit in trying to win. Nothing would be more destructive of London's high reputation as a securities market than to allow unscrupulous bidders or defenders to be able to gain an advantage at the expense of ordinary shareholders.
For that purpose, London has evolved a remarkable system of self-regulation. The Takeover Panel, which was established in 1968, is an entirely voluntary body on which are represented all the bodies interested in the London securities market, whether as investors, as companies whose shares are traded there or as professionals. The panel is responsible for both the drafting and enforcement of the City code on takeovers and mergers. It is there to offer advice to parties involved in takeovers, it decides disputes and it imposes discipline. But—and this is perhaps the most remarkable feature of the London system—the panel has no legal status whatever. It exists simply because it is voluntarily accepted as a regulator by the London market. The ultimate sanction which it can impose is exclusion from that market; it can direct to its members that they should not deal with someone who has refused to accept the panel's authority. Since the panel's inception under the chairmanship, first, of Lord Shawcross, then the noble Lord, Lord Alexander of Weedon, and now Sir David Calcutt, it has gained very considerable experience and respect.
The fact that the panel operates outside the law gives it considerable advantages. It is not bound by the letter. It can interpret its own code according to its spirit and general principles. It can act swiftly and decisively. In a fast-moving takeover struggle those are very important matters. It also means that, unlike the position in the United States where takeover regulation is governed by the rules of law, there is very little scope for tactical litigation. By tactical litigation I mean legal proceedings which can have an effect merely by creating uncertainty and delay, irrespective of how the case is ultimately decided. Unfortunately, that is a feature of takeovers in the United States. There has been a suggestion that Americans are naturally more litigious, and that explanation has also been extended towards Australians. But I very much doubt whether national temperament makes much difference. What matters is that a lot of money is involved, and any businessman playing for high stakes who is told by his lawyers that he has nothing to lose and possibly something to gain by issuing a writ is going to go ahead and do so.
The draft directive which is the subject of the Select Committee's report springs from the entirely laudable desire on the part of the Commission to give other member states so far as possible the benefit of the system that they see operating in London. The representatives of the Commission who gave evidence to the committee were unstinting in their praise of the London Takeover Panel. In principle, it is not unreasonable to take the view that if similar rules were
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applied to takeover bids in all member states, that would encourage capital movements between the states of the Union.
Unfortunately, the position is rather more complicated. For one thing, the other member states did not want to be told to adopt the London principles. For example, one of the most important rules applied by the panel for the protection of shareholders is the mandatory bid. If someone has acquired more than 30 per cent. of the shares in a listed company, which is treated as moving control to him, the City code requires that he should make an offer for all the remaining shares at the highest price that he has paid during the past 12 months. That enables the other shareholders to decide that they will get out rather than stay under the new regime.
The Germans, for one, wanted none of that. They have their own complicated rules which they regard as sufficient in the economic culture of Germany for the protection of minority shareholders. So the Commission's first attempt at a draft in 1989 was regarded by other member states as being over-prescriptive and has since been watered down. Now it has come back with a very milk and water version which does no more than state some general principles about fairness to shareholders and, on the whole, leaves their implementation to the member states. To the satisfaction of the Germans, the mandatory bid, for example, has been dropped and member states can choose whatever they believe to be fair to minority shareholders in the circumstances of a change in control.
The result of those changes in the nature of the directive is that, in the opinion of the Select Committee, the directive is not likely to have much positive effect on improving the possibility of capital movements within the Community. The nature of the directive was such that it was not likely to produce much uniformity in the rules for takeover bids; so much was left to the choice of member states. But perhaps more important, the main reason why there is stickiness in the movement of capital between member states is not the difference in the takeover rules of those states but the structural institutional differences between them. It is because of the way in which, for example, shares in Germany are held by banks as compared to the way in which shares are held in this country. Those are the kind of issues which make the difference and they are not addressed by the draft directive at all.
On the other hand, from the point of view of the London system, the great change which the directive would bring about is that at least to some extent takeover control would have to become a matter of law. It would have to adhere to the principles laid down in the directive, and the interpretation of those principles and the question of whether our system complied with them would in the end be a matter for the European Court. The view of those who gave evidence to us and the view which was shared by the committee is that that is bound to increase the chances of tactical litigation and to destroy what is seen as one of the great advantages of the London system.
We had evidence from the Financial Law Panel. That is chaired by my noble and learned friend Lord Donaldson of Lymington. My noble and learned friend

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was sitting in the Court of Appeal when, in the leading case on the matter, he laid down the extent to which the courts would exercise any control over the activities of the Takeover Panel. My noble and learned friend takes the view, which is a very likely outcome, that English courts would, even if a new regime were instituted in compliance with the directive, endeavour as far as possible to leave the panel operating exactly as it is. I dare say that that is a result which an English court would strive to reach. But that does not take into account, first, the possibility that the way in which it is formulated to comply with the directive may not permit it; and, secondly and perhaps more importantly, that there is always the question of the European Court being the ultimate decision maker as to whether our rules comply with the directive.
Therefore, one has to balance, on the one hand, the advantages which are seen to be gained not only for this country but for the Community as a whole by such uniformity as the director will produce against the possible disadvantages which we see to our own system. It appeared to the committee that there was virtually nothing to be put in the balance on the positive side and the possibility of detriment on the negative side. For those reasons, the committee recommended that Her Majesty's Government should make whatever efforts they could in order to persuade other member states that the directive should not be adopted.
The present position, as I understand it, is that the matter is before the European Parliament for report but nothing yet has emerged and the matter is going rather slowly. I am not familiar with the rather Byzantine way that negotiations in the European Parliament seem to proceed in these matters, but I have the impression that that is a situation in which the other member states have very little to gain or lose one way or the other by the adoption of this directive. For example, the Germans indicated that they were extremely satisfied with it because it required them to do nothing at all.
The Irish legislature has decided that it will institute its own system of takeover control. Until now, it has allowed the London panel to regulate takeovers on the Irish market. That system of control will be statutory. I can quite understand why it will be statutory because with such a small market, the great sanction of the London panel—namely, being excluded from the facilities of the market—simply would not operate. It is only because we have the largest capital market in the Community that we are able to operate a system in the way in which we do.
Therefore, it seems to us that for London there is nothing to be gained and quite a lot to be lost. It would be ironic and tragic if the well-meaning efforts of the Commission to extend to others the benefits of the system which it sees operating in this country end only in damaging a system which it professes to admire. I beg to move.
Moved, That this House takes note of the Report of the European Communities Committee on Takeover Bids (13th Report, Session 1995-96, HL Paper 100).— (Lord Hoffmann.)
5.54 p.m.
Lord Haskel: My Lords, I read this report with great interest and I congratulate the committee on its work. But I must say that after reading the report, I was left with some concerns. Perhaps my concerns are shared partly by the committee but the report does not make that entirely clear.
My first concern is that the report seems to be written from the point of view of the City. The takeover code smoothly, efficiently and fairly facilitates the process of takeover but is it in the interests of our overall economy that takeovers should be quick and easy?
My second concern is that although the Takeover Panel is fine for London and suits the London share market, circumstances are different in other European financial centres. Bearing in mind those differences, is our system suitable for them?
I agree with the committee that it is obviously important that we have an efficient system by which companies are bought and sold. The noble and learned Lord, Lord Hoffmann, explained that in the Takeover Panel we have a system which ensures fair treatment for all shareholders, reasonable openness and transparency and a predictable timetable. There is the assurance that firms are not in play indefinitely so that their business suffers.
Looked at from the point of view of the City, that is absolutely right. But those outside the City have additional concerns. A system which is too easy attracts speculative bids. A quick takeover system requires short-term money only. Speed and efficiency are not the only considerations. The right balance is needed between making takeovers easy and fair and having enough sand in the system to encourage only serious bids and perhaps more agreed bids which is the practice in the rest of Europe.
I am sure that we can all think of examples of unnecessary and frivolous takeovers financed by short-term money which bring no benefit to anybody except those earning fees and commissions. We can also think of takeovers facilitated by the panel where the target company is left with such huge debts because of the short-term money that the business is unable to develop.
That brings me to my concern about contested bids. The reason that things are different in London from elsewhere is that, as the noble and learned Lord, Lord Hoffmann, told us, we have far more contested bids here. I believe that that is because on the Continent there are many major shareholders who are active in corporate governance. As a result, when mergers and takeovers are necessary, they are agreed between the parties. That is why, if we are to ask Europe to accept our code, there are changes which should be made to make it more acceptable to European circumstances.
First, there is obviously a conflict of interest where a company's advisers buy shares in that company during a bid. That is probably unnecessary during an agreed bid but in a contested bid it that can give rise to sharp practice and should be stopped. Secondly, advisers' fees

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should be disclosed. Again, that is an important factor during contested bids because the fees are often vastly inflated as a reward for success.
Another element which should make the takeover code more acceptable to European companies is the requirement to inform employees. Technically, employees in the UK have rights to information but those are sometimes overruled by Stock Exchange regulations which are designed to prevent insider trading. A way must be found to inform employees or their representatives of what is going on during a takeover.
I agree that the directive as drafted is perhaps too prescriptive for the UK. Here, statements such as "the board of an offeree company is to act in the interests of the company as a whole" are meaningless. In most European countries the directors have that responsibility in any event by virtue of company law. But under the European tradition, statements such as that are important as they lay down the principles to which law-abiding company directors try to keep. Perhaps we need to learn from each other.
I agree with the committee that there are advantages in a voluntary code. But a voluntary code has problems which need to be addressed. The difficulty with a voluntary code is that the sanctions are not necessarily on the quoted companies which are taking over or being taken over. They may be offshore and can ignore the code. As the noble and learned Lord, Lord Hoffmann, told us, the sanctions are on the financial institutions trading in London and on the individual shareholders. The threat of suspending an institution from the market is a sufficient sanction to make it toe the line. However, I cannot think of any recent suspension. It is more difficult to bring pressure to bear on the quoted company. The only sanction is to suspend its share quotations, but that only punishes individual shareholders who are in fact the innocent party whom we are trying to protect. Is that reasonable? Are they not entitled to some protection in law?
However, business must have something that works and, broadly, I think that our Takeover Panel works reasonably well. But I do not think that that means that we should impose it on everyone else. Indeed, I question the need to harmonise detailed takeover rules. Certainly there is a clear case for harmonising some basic principles such as the protection of minority shareholders and the creation of false markets. But different jurisdictions can take care of that in their own way. Takeover bids are a small part of the overall business picture, and how well a jurisdiction manages takeover bids is but one factor which a company takes into consideration when deciding where to raise capital and have its shares quoted.
Why should there not be competition between different regimes? Part of that competition will be the rules and the efficiency with which they operate. It is the service provided which will attract customers, plus the liquidity, the sources of capital, the variety of instruments, the underwriting and the protection of shareholders both large and small. In all these things London should do very well. However, London's charges are very high and a jurisdiction elsewhere in, say, Edinburgh or Amsterdam may provide the same service much more cheaply. Why should that not happen?
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It seems to me a logical extension of the activities of different parts of the Community to encourage investment in their own region by having local regimes. Those jurisdictions will have the advantage of local knowledge and local contacts and a deeper understanding of local businesses. Trading is now virtually screen based and paperless which should assist regional jurisdictions to develop.
The noble and learned Lord, Lord Hoffmann, mentioned Germany. The need for different jurisdictions may become apparent with the privatisation of Deutsche Telecom. It means that, for the first time, many people in Germany will become small shareholders and realise the need for the protection that they require as minority shareholders. On the other hand, trading in London is dominated by the big institutions. In fact, they could virtually do without an exchange. They can, and often do, trade among themselves because they have sufficient critical mass and liquidity to do so.
I see from press reports that proposals for a compulsory European directive are to be put forward to the Legal Affairs Committee on 27th and 28th January. Although we have in Britain developed a mature, efficient, transparent and effective system of dealing with takeover bids, I hope that the Minister will suggest some modifications to the code which will make contested bids more transparent and that he will be flexible enough to realise that "shareholder value" and financial engineering are not the only criteria and that there are disadvantages to voluntary codes.
Of course, it is important to move towards completing the single market, as this directive attempts to do, but I hope that the Minister will argue that the details of takeovers can be left to member states.
6.3 p.m.
Lord Bridges: My Lords, in speaking in this debate I should make it clear at the outset that I do so as an individual and not as a member of the Select Committee which prepared the report. I speak rather as someone who happens to have had several encounters with the takeover and merger of companies, both as an official of the Government dealing with international economic matters in the past and, more recently, as a non-executive director of companies which were the target of hostile bids.
The general point that I seek to make is that there is, or I think should be, a close relationship between the policy and law relating to mergers on the one hand and, on the other, competition policy. That is not the case in this country, as is correctly observed in the first paragraph of the report which we are debating.
The report also makes clear that we do not have much law on the takeover of companies. What we do have is an umpire, presiding over the Takeover Panel, operating from the Stock Exchange building, whose activities are governed by a set of informal rules. Indeed, I have heard it said—although I do not know with what truth—that one of the purposes of the establishment of the panel in the first instance was to exclude the operation of law from this area so far as possible, and to enable bids for companies to be handled in a clear, speedy and

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straightforward manner. The procedures are certainly operated informally, on the basis of the experience, honesty and common sense of the investment banking community of London which makes its living out of bids and mergers. By contrast, we do have a statute governing competition policy, in the Restrictive Trade Practices Act 1976 and a statutory body in the Monopolies and Mergers Commission which advises the Secretary of State, who takes the final decisions on such matters.
I believe that it is instructive to look for a moment at what other countries do. There are two important industrialised countries which have coherent systems in this area: the United States and Germany. The American system is based on statute law, supervised by the Anti-Trust Division of the Department of Justice. It covers both domestic economic activity and, in the well-known American constitutional phrase:
"The Foreign commerce of the United States".
This phrase is broadly interpreted by the Department of Justice and the American courts. Prima facie, any concentration of economic activity which leads to domination of a particular market sector (interpreted as a 30 per cent. share of the market sector in question), requires investigation. Private interests damaged by such domination may sue for damages, with penalties up to three times the level of the damage suffered. These provisions of American law have in the past caused difficulties for other states, including our own, and led to the Protection of Trading Interests Act 1980, recently invoked for quite different reasons in defence of our commercial interests threatened by the Helms-Burton law.
The point that I seek to make here is that the American practice does have the merit of looking at all aspects of competition policy, and that it does so on the basis of statute law available to all who seek a remedy from the abuse of the market. In particular, it enables recourse to the courts to determine the delineation and definition of the market sector to ensure that this has been accurately determined. I believe that that is a crucial point in disputes about competition policy. I personally prefer a procedure which is readily subject to judicial review, rather than determination by a Minister for political reasons.
The German position is similar to the American; and, indeed, derives from it. Germany has in the Bundeskartellamt an official agency which acts to defend the economy from monopolies and anti-competitive practices generally. It is relevant that the Bundeskartellamt, and the Bundesbank, are the fruits of American policy in the era of the Allied High Commission for Germany, in the years leading up to the establishment of the Federal German Republic.
The European Commission has not yet decided what definitive form its competition policy should take. Germany would like to see a European body, like the Kartellamt, presumably located within the Commission and operating under its auspices. There is some opposition to this idea, and we in this country are not enthusiastic about it. We point to the success of our
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informal arrangements with the Takeover Panel in the City, and we are reluctant to transfer power on monopolies from the Department of Trade to the Commission. So instead, Commission initiatives are intended to enlarge their competence in this area gradually, perhaps by specifying a level of turnover of a combined enterprise following a merger which would require prior scrutiny. British Governments have not been supportive of such proposals in the past.
I suggest that we need to take a wider view and should try to look at mergers and competition policy together, rather than separate them deliberately as we do at present. We should also be a little more self-critical. In spite of what the Minister's brief might say, not everything in our garden is lovely. The informal rules of the Takeover Panel may work reasonably well for much of the time, but the system is not always fair. A sharp predator can sometimes outwit the gentlemen on the panel, and shareholders in the target company cannot rely on law to defend their rights and interests; the law may be silent, slow or even ineffective. I refer to an example based on experience. A company watching the transfer of its shares on its register may well suspect that a concert party is privily building up a stake. So the company secretary is invited to send off a raft of letters using the provisions of the Companies Act requiring disclosure of the beneficial owner. The concert party may well be successful in delaying the reply of such letters beyond the crucial phases of the financial battle, for example by registering shares in the name of nominee holdings in branches of foreign banks effectively outside the reach of our jurisdiction. This is an area where we have a law, but it may be readily circumvented.
Also, we must bear in mind—this is a rather more controversial observation—the powers in the hands of the Minister in charge of the Department of Trade at any given time in taking decisions on the advice tendered by the Director of Fair Trading or by the Monopolies and Mergers Commission. I am sure I shall defer to the advice of the noble Lord, Lord Borrie, who speaks on these matters with much greater authority than I, but it is at least questionable whether political control in the last phase of a competition policy case is always in the interests of the national economy.
I hope these remarks will illustrate that the Commission's proposals discussed in the report are only one phase in a longer story with a wider setting. It may be of interest to mention one current case. This concerns the future of the platinum mining interests owned by the British company Lonrho, which intends to sell them to a South African company, the Anglo-American Corporation. The consequence would be that the latter company would control, I believe, as much as 30 per cent. of the world's supply of platinum. As this material is now used extensively in Europe and elsewhere as the essential ingredient in controlling car exhausts, it is not surprising that Commissioner van Miert wishes to investigate the consequences of this merger. It seems to me that he is justified in looking into this matter which recognises the point I made at the outset; namely, the essential link between mergers and

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competition policy. I hope that the Government will be even-handed in regarding the Commission's attitude on this particular matter.
In the longer term I hope that European policy may be encouraged to develop gradually on the basis of common principles—the approach it has adopted in this draft directive—and that this aspect, at least, of what it has proposed to us may be given a cautious welcome.
6.13 p.m.
Lord Stoddart of Swindon: My Lords, I wish first to congratulate the noble and learned Lord, Lord Hoffmann, not only upon his thorough introduction of the report tonight but also upon the expertise he brought to Sub-Committee E's inquiry and the skill with which he guided it. I think it is the first investigation conducted by Sub-Committee E that I have sat through as a full member. Having heard all the evidence, I believe that the Sub-Committee, and indeed the Select Committee, reached the one possible conclusion in the light of that evidence.
What I wondered was why on earth the Commission felt the need to bring forward any directive at all in the first place. As far as I could see, there was no real demand from any country for a directive on takeover bids, certainly not from this country. As far as I could see, no serious problems had arisen or had been reported from any other country. We also discovered that the great majority of takeovers took place in the United Kingdom. In any event we were expert in the matter and the problem, if any existed at all, was bound to exist in this country because most takeover activity—more than in all the other member states put together—occurs in the United Kingdom.
As the noble and learned Lord, Lord Hoffmann, said, the Commission praised the British system and said it was a marvellous system and such a good system that it wished to impose it on every other member state in the Community. That was flattering. Good old Britain has something we can boast about and that we can impose on other people. But of course there was a flaw because if that was done through this proposed directive, the British system, which is non-statutory at present, would become statutory and could therefore become subject to litigation in British courts and, ultimately, the European Court of Justice.
Therefore the British system, which has worked well for over 25 years, will, under this directive, be altered in a way that could destroy it. Neither I nor the committee thought that was a good thing. For no reason at all, except, as far as I can see—I speak only for myself on this matter—the insane drive towards harmonisation, our system of dealing with takeovers will be under extreme threat. Because of that drive towards harmonisation, we are in danger of destroying something which has worked well over a long period of time. Will this directive be the end of the matter—that is the question we must ask ourselves—or will it be built upon? Is there more to come?
During the questioning of the Commission witnesses I referred to possible trade union interest in the matter. I have been a trade unionist all my life and therefore
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I was almost bound to refer to that matter. The witnesses seemed a little coy about my questions but I now understand that MEPs are already set to graft onto the draft directive before us legally enforceable rights for employees which might well destroy the takeover ethos in the United Kingdom, as well as the system of control. I have not examined that point and therefore I do not know whether or not it would be a good thing. What I seek to indicate is that the directive which we have before us may not be the end of the matter.
According to the committee, the directive is not a good one and was not a good idea in the first place. Therefore we should be extremely careful. Under the circumstances we must ask whether the proposed directive is merely a cloak for some more far-reaching policy to be revealed later, a case once again of European Union creeping competence. If the matter were to be decided by unanimity, it might not matter so much. I understand that the Government gave evidence to the effect that they are against the directive. But unfortunately the matter will be decided not by unanimity but by qualified majority. Whether or not we have a directive depends not on what the Government, Parliament or the Opposition think but on whether the Government can muster a blocking minority of 26 votes in the Council. If they cannot, then it does not matter what the Government believe, what the Select Committee recommends, or whether the House accepts the recommendation. The Commons could declare that it was unanimously opposed to it but it would make no difference. The directive would have to be implemented. The Government could refuse to put a Bill before Parliament; and indeed I would recommend that course to them. Whether they will accept that recommendation is another matter. If they put such a Bill forward, Parliament could reject it. But then we should be taken to the European Court of Justice, which would then tell Parliament that it was in breach of Community law, impose a fine, and insist on the legislation being enacted.
That is the nonsensical and completely unacceptable and undemocratic state of affairs which exists in this country at present. When we see things of this sort, I wonder how much longer people will put up with them. What on earth is the use of electing MPs who are told what they cannot do or must do by a supranational junta over which they have no control and indeed cannot sack?
My views on the European Union are well known. But the Select Committee and Sub-committee E on which I have the honour and privilege to serve have examined the problem of takeovers and the directive very thoroughly. The committee has brought forward an excellent report and recommendation which I sincerely hope that the Government will take seriously. I hope that they will accept that recommendation and will fight for it.
6.22 p.m.
Baroness Turner of Camden: My Lords, I welcome the opportunity to participate in the debate on the report by the Select Committee on the European Communities.

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It is a very comprehensive report and makes reference to previous attempts at a directive—attempts which apparently failed to find an acceptable formula.
As has been said, the original draft did not give sufficient protection to minority shareholders, among other things. However, it is clear that the present draft has attempted to take full account of UK practice and procedures of which the Commission apparently approves, as we have heard tonight. But it would seem that the committee still does not view the present draft with favour and does not think that the proposals in regard to the protection of minority shareholders are adequate. It has a number of other criticisms which have been made today. It does not favour a directive at all, preferring to rely on present UK practice.
I am not happy about the draft directive for other reasons—reasons which only the TUC seems to have emphasised among those who gave evidence to the committee. However, I believe that there is a good basis and a reason for having a directive. I believe very strongly that the interests of employees should have some attention when mergers and takeovers are under consideration. It is true that the present UK code makes reference to such interests but, as we know, the code is not legally enforceable.
I am reminded of the fact that when I first came to your Lordships' House some 10 years' ago I attempted to introduce a Private Member's Bill entitled the Takeovers and Mergers Employee Protection Bill. The Bill made no progress, although a number of noble Lords, including the noble and learned Lord, Lord Denning, spoke in favour of it. I was prompted by the fact that 1986 had been a record year for takeovers. Indeed, there had been reference to what was described as "merger mania". The livelihoods of about 500,000 employees had been bound up in such deals. My intention at the time was not to raise the whole matter of mergers and takeovers—sometimes they may have been beneficial but at other times not—but to try to ensure that there was some protection for those involved.
I drew attention to the fact that in many other EU countries there was at least some provision for consultative rights of employees and their unions. My Bill provided for the consideration of other factors rather than simply that of competitive advantage. It wrote in a requirement to consider the interests of employees. As indicated in the current report, the TUPE regulations, introduced in 1981, do not give very much by way of protection for employees in takeover and merger situations in the UK. It is true that some time after 1987 merger and takeover activity seemed to diminish. However, more recently there has been a revival of such activity. In 1987 it was largely manufacturing, retailing and food and drink industries that were affected. Now we are seeing a great deal of activity in the financial services industries.
Last year there were several major mergers including one which was aimed at creating an insurance giant capable of competing effectively with major players in the EU. However, the first the employees heard of this major development was an announcement on the radio
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at breakfast time, accompanied by the kind of statement that has become almost obligatory when any merger or takeover is announced—the loss of about 5,000 jobs. One can imagine the effect that that had on the employees who heard it.
When the unions concern raised the matter sharply with management, they were told that Stock Exchange rules prevented disclosure. My noble friend Lord Haskel made reference to that. I have examined the rules and, frankly, I do not read them in that way. The company involved must of course be satisfied that the recipients of advance information will not deal in the company's securities before the relevant information has been made available to the public. But I cannot see that some consultation with the representatives of employees is ruled out. I have had discussions with senior management in the company concerned and it is clear that it sincerely believes that Stock Exchange rules prevented it from having any prior consultation with the employees or their representatives. However, if a directive made it clear that there should be appropriate advance consultation, this would presumably override the Stock Exchange rules.
The TUC complained that the 1989 directive contained no provision for effective procedures for informing and consulting employees. The present draft is even weaker. There seems to be no reference to employees at all, it apparently being thought sufficient to leave their rights on consultation and information to individual member states' arrangements. I do not believe that this is acceptable or sufficient. As I indicated, employees are deeply affected by mergers and takeovers. Whole lives can be disrupted. We have already seen how changes in the labour market resulting in greater insecurity have had an unfortunate spin-off into society generally. These are serious considerations and should not be overlooked in a directive concerned with an issue as important as takeover bids which can have cross-border implications.
The TUC has already drawn attention to the European works councils directive which gives legal rights to information and consultation for employees in countries which have signed up to the social chapter. Increasingly, companies in the UK which trade across the EU have realised that irrespective of the UK opt-out they cannot stand aside and must therefore apply the works council directive to employees in the UK since they are having to do so for employees elsewhere in the EU.
In the circumstances I am disappointed that the report of the committee pays relatively little attention to the position of employees in takeover situations although I note that my noble friend Lord Stoddart raised the issue on a number of occasions during sessions when the committee took oral evidence.
6.29 p.m.
Lord Spens: My Lords, it is a pleasure to talk about a subject that has been my living for the past 30 years or so. Last weekend I did a quick run through my books to see how many takeovers I had been involved in. The number was a staggering 370 plus, mostly for very large companies, sometimes for very small ones. Sometimes

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I was on the receiving end, but mostly I was on the hostile or bidder's end. During those 370 takeover bids I went in front of a full panel some 30 times and in front of a panel executive probably over 100 times. In the early 1970s I was responsible for drafting some of the takeover code. I have changed the takeover code; I have worked with people who developed the takeover code in its history. I therefore know a considerable amount about it.
Bearing in mind how little the noble Lord, Lord Bridges, said, I would point out that the objective of the Takeover Panel has very little to do with the equality of shareholders. It has absolutely everything to do with keeping the money out of the lawyers' hands and in the hands of the City institutions. Last year's fees alone amounted to £1.1 billion for the banks and institutions. One takeover bid, to quote from memory, namely the Granada-Forte bid, cost £200 million in fees. That is what the Takeover Panel is about: protecting that money.
The panel's strengths come from two accidents. One is a structural accident in that, in most cases, overseas countries do not have registered shares—most of their shares are bearer shares. If you do not know who your shareholders are, it is almost impossible to protect them. In this country virtually every share is registered; therefore control can be exercised. The second point is that, today, the panel operates on the basis of what in real terms may be termed "hidden precedent". Up until "Big Bang", the Takeover Panel was supported by patrician partnerships in the City which made sure that it worked. When Big Bang came along, people felt that that would be the end of the Takeover Panel because the big battalions, the large American, German and Swiss banks, could run rings round it simply through muscle. But it had developed its doctrine of hidden precedent. Over the years it had made many rulings that had not been divulged to the general public. As time went on, that approach became stronger and stronger. Nowadays, a takeover cannot take place without consultation with the Takeover Panel on virtually every aspect and every day of your life in that business. It gives it enormous strength if you do not know what the goalposts are through which you are trying to shoot the ball.
Perhaps I may illustrate my first point about the role of the Takeover Panel and the purpose for which it was set up. My example concerns a Takeover Panel meeting which took place in the summer of 1985, when Big Bang had just occurred and we could see how it happened. It was the takeover of Arthur Bell and Sons, the Scottish whisky company, by a company called Guinness. There was nothing unusual about it, except that it was the second largest hostile takeover ever to have taken place. What was unusual was that the merchant bank involved, Morgan Grenfell, was, or so Arthur Bell thought, adviser to Arthur Bell. One day the company woke up to find on its doorstep the hostile bid from a merchant bank which, up until that morning, the company had thought was acting on its behalf.
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I told the company that there were two alternatives: it could go to law to sort the matter out, or it could go to the Takeover Panel. The company listened to my advice; and I was leant on considerably by the Takeover Panel. Eventually it went to the Takeover Panel. It was arguably the worst decision that I have ever made in my life.
What happened in the Takeover Panel was this. Once the arguments had been put forward and it became clear that on one side of the fence was £6 million in fees to underwriters, which was likely to be repeated in a second offer (£12 million in total) and on the other side a mere £20,000 of annual fees from Bells to Morgan Grenfell, the decision was taken that Morgan Grenfell would be allowed to stay in its position as adviser to Guinness.
That decision was announced in front of Ernest Saunders by Sir Jasper Hollom, the deputy governor of the Bank of England (it was given that sort of weight) and was arguably the reason why Ernest Saunders thought that he could walk on water. He won that battle so convincingly that I do not believe there is any argument that from then onwards he believed he could go on to do what he did in Distillers. In fact, as we now know, that was practised in Bells. He won the takeover bid. Despite my repeated visits, the panel would do nothing about his indemnities, etc. It bears out what I said: the Takeover Panel is all about fees and very little about anything else. It happens to be expedient to make sure that, on the whole, shareholders are kept quiet and happy.
I also have considerable experience, not surprisingly given what I just said, in how the Takeover Panel is interpreted by the criminal law. The Guinness-Distillers battle ended up in the courts. It was largely the breach of the takeover code, leading to a false market, which formed the basis of the trials for all the defendants.
In the first Guinness trial, in which I was not involved, the trial judge ruled that the Takeover Panel code was for interpretation by the trial judge not for interpretation by the jury or by experts. That was a very surprising ruling. It enabled him to go on to rule on what was meant by "acting in concert". That was a very important part of the Guinness trials.
The judge ruled as follows: anyone who receives the success fee, whether disclosed or undisclosed, is deemed to be acting in concert with either the bidder or the offeree and must therefore disclose his share transactions. It was an astonishing ruling. By that ruling the judge put all those core underwriters who had success fees on the outcome of the bid into concert, which the Takeover Panel had been designed to exclude.
The law of the land today, as I understand it, is that anyone acting in concert who fails to disclose his transactions effectively creates a criminal offence. As underwriters move more and more under pressure from this Government into reducing their fees and increasing the success element of those fees, it is clear that most underwriters should by law disclose all their transactions. Of course that does not happen—the City is more sensible—but it is the law at present.

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The second point that had to be made in order to bring about the convictions was the rule that the "false market" definition in the Stock Exchange rule book was wrong. The Stock Exchange definition is very easy. It is:
"A 'false market' is defined as a market in which a movement of the price of a share is brought about or sought to be brought about by contrived factors, whether by the operation of buyers and sellers acting in collaboration with each other or otherwise, calculated to create a movement of price which is not justified by assets, earnings or prospects".
That is the only definition that exists of a false market, apart from the 1987 definition from the Financial Services Act which is equally bad. It is the only definition which people such as Anthony Parnes, who was sent to gaol, had to go on. This is how the judge dealt with it. On day 91 of the first Guinness trial, he said:
"If it [the definition] stopped after the third line, it would seem to me to be quite a good definition. The whole seven lines seem to me to be rather a bad definition".
He went on:
"Well, I have been circumspect, and it seems to me to be, as a definition of a false market, a nonsense".
That is the existing and present definition. It is still in the Stock Exchange rule book. Yet a trial judge has ruled that it is nonsense. He went on to rule that a false market is indeed something else.
In the second trial we thought that we would challenge that decision by an interlocutory appeal. That can be done in cases of serious fraud. We went to the Court of Appeal Criminal Division. That was a foolish thing to do because four men were already in gaol, three were in gaol at the time of the interlocutory appeal. If the ruling had gone in our favour then the whole of the first trial would have been a sham. The Deputy Lord Chief Justice, Lord Justice Watkins VC, ruled as follows:
"As to the present case, our view is that the Code sufficiently resembles legislation as to be likewise regarded as demanding construction of its provisions by a judge. Moreover, the Code is a consensual agreement between affected parties with penal consequences".
So far as I can see, the judge effectively put the rules of cricket, the Football Association and the rules of virtually every club where penalties are attached to the breaking of rules into the position of having to be interpreted by a judge. We cannot do that. However, once the takeover code rules get onto the statute book in any form, they will be interpreted by a judge far outside the market. Before we go down that route, we should think carefully because that is not what it is all about.
A parallel exists with English law which people do not talk about. It is the European Convention on Human Rights. That is not included in our law but it comes up time and time again. We need to include it in some form or another, or at least accept that it exists. Not surprisingly, the decision of the European Court of Human Rights on the DTI transcripts regarding Mr. Ernest Saunders has had its result and the first Guinness trial was declared to be unfair.
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That case also went to the Court of Appeal in a case brought by my co-defendant. The judge, the same Lord Justice Watkins, said:
"The present case is, as we have said, concerned with extremely astute, professional men who have been advised at one time or another by very experienced City solicitors. There was, in our judgment, sound reason for admitting the so-called confessions having regard to the relevant legislation which Parliament has deliberately enacted, albeit that that may appear to tend towards unfairness especially when set against the relevant proceedings in the 1984 Act".
Lord Justice Watkins was talking about the Police and Criminal Evidence Act 1984, under which the matters would have been excluded, as they would have been excluded under Section 2 of the Criminal Justice Act 1987. But if the transcripts were DTI transcripts, they could be entered.
That is the problem we have when senior judges become involved in the interpretation of commercial transactions on a daily basis. At the moment the Stock Exchange rule book has not been altered to reflect what I think is the law—that the rule book is nonsense and that the stock market operates on a basis for which the goal posts may well one day, if the matter goes to a criminal court, be found to be different from the rules with which the market has been living. I believe that we should leave the Takeover Panel. It has been stunningly successful.
6.43 p.m.
Lord Borrie: My Lords, this report was published last July. I was not then a member of the appropriate sub-committee of the Select Committee on the European Communities, therefore it is entirely proper for me to congratulate not only the noble and learned chairman but also all the members on the excellence, clarity and thoroughness of the report.
I began to get to know the work of the City Takeover Panel some 20 years ago when I became Director General of Fair Trading. We had a close working relationship because the panel and the Office of Fair Trading had then and have today complementary roles in relation to both friendly and hostile bids for United Kingdom companies. The Office of Fair Trading is concerned to advise Ministers, after due inquiry, whether a bid should be referred to the Monopolies and Mergers Commission for a more thorough inquiry. It would ascertain whether the bid, if successful, would adversely affect competition or the public interest in some other way.
The panel, however, is concerned with fairness between shareholders, with transparency and information to be provided to shareholders and with the maintenance of orderly markets in the shares of the companies involved. In other words, the panel is concerned not with whether takeovers and mergers are a good thing, either in general or in particular, but simply with the mechanics, the ways and means.
Important though they are, the OFT and the panel do two separate jobs. With respect to the noble Lord, Lord Bridges, who spoke earlier, I think that those jobs are separate. For reasons that I wish to develop, I do not believe that it would be a good idea if they were brought

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together in one body on a statutory basis. At present, the Office of Fair Trading and the panel are entirely different constitutionally because the Office of Fair Trading is a creature of statute and, as the noble and learned Lord, Lord Hoffmann, said, the panel is an entirely voluntary and self-regulatory body, created by the City's financial institutions. In the graphic words of the noble and learned Lord, Lord Donaldson of Lymington, when he was sitting in a judicial capacity in the leading case to which the noble and learned Lord, Lord Hoffmann, referred—the Datafin case—the panel performs its vital functions,
"without visible means of legal support".
On the face of it, looking at such matters, many of us may think that self-regulation suggests a soft option. One often believes that because it seems to be a device or protection against outside involvement. State regulation, with stronger penalties and sanctions, is perceived as more effective. But it seems to me sensible in this field, as in others, to be pragmatic. When we have a body which has been operating for nearly 30 years, as in the case of the City Takeover Panel and its code, we ought to consider whether the two function in a way which has been effective and successful. As the Select Committee report indicates, they have performed extremely effectively, expeditiously and decisively in individual cases, so that the management of companies is not left in a state of limbo and uncertainty for any length of time. That would be undesirable for the customers and for the company and, I say to noble Lords who spoke earlier, to the employees of the companies concerned. It is not desirable that there should be uncertainty for any period.
There are three reasons why the Takeover Panel and its code have been successful. The first is the strength and authority of its successive chairmen and directors general. Secondly, the effectiveness of its rulings has been underpinned by a widely based membership who provide the financial services in the City. The third reason is the flexibility and freedom from judicial intervention, at any rate during the course of the bid. Perhaps I may say a little more about each of those.
As the noble and learned Lord, Lord Hoffmann, mentioned, Lord Shawcross was chairman of the panel for some 10 years during the 1970s. Those who came before him were as much in awe of him as the Nazi leaders who had to face his cross-examination at Nuremberg some years earlier. Among later chairmen have been the noble Lord, Lord Alexander of Weedon, and the present chairman, Sir David Calcutt. They have maintained that authority and respect which was created in the early years. It has not been mentioned so far this evening but most valuable is that the directors general who have the more day-to-day executive responsibility have been men and, in one case, a woman from merchant banks, usually for two years at a time. They were people with current experience in the tactics and manoeuvrings of takeover battles or, in the phrase used in an editorial in the Financial Times today,
"the frequently poisonous sport of bids and deals".
That is the way the newspaper chose to put it this morning.
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As to the effectiveness of panel rulings, it is essentially based on ostracism by City institutions of those who disobey. Since the Financial Services Act 1986, panel rulings have become legally effective because the Securities and Investments Board has imposed a "cold shoulder" rule whereby any authorised provider of financial services is barred from acting for anyone who does not comply with the takeover code.
The third reason for the success of the panel over nearly 30 years is its flexibility and freedom from judicial intervention. The code has been amended many times. The noble Lord, Lord Spens, mentioned that he had had a hand in that. But, in any case, the panel is more concerned with the spirit of the code than the letter, and can freely relax the full requirements of the code.
The panel's rulings are that much more effective and certain because, since the Court of Appeal's decision in the Datafin case 10 years ago, the courts will not interfere during the course of a takeover bid. The Court of Appeal accepted that the panel is subject to judicial review but, recognising the risks, the inconvenience and the undesirability of tactical litigation, it ruled that contemporary decisions of the panel should be effective and any court order against the panel should apply only to future cases coming before it.
In the recent case, about which some of your Lordships may have read, of the bid by the US company Cal Energy for Northern Electric, the panel's decisions to allow the purchase by Northern Electric's advisers of shares in the company, but then to extend the closing date for the bid, were highly controversial. My noble friend Lord Haskel is worried about the first aspect of that part of the ruling. But the speed of the panel's decision-making and of the operation of its internal appeal mechanism ensured a minimum period of uncertainty. If litigation in the courts had been feasible, a few days of uncertainty would have turned into weeks, if not months. And as the noble and learned Lord, Lord Hoffman, said, a principal objection of the Select Committee to the EU's proposals to put the panel and its code on to a statutory footing is that it carries the risk of increased litigation.
In the 1980s, litigation in the course of a contested takeover bid became quite common. It was not litigation which affected the Takeover Panel, but there were several occasions when the Office of Fair Trading, the Monopolies and Mergers Commission and the Secretary of State for Trade and Industry, all acting under statutory powers, were the subject of applications for judicial review. As judicial review was developing at that time, it is hardly surprising because, in a keenly fought battle for a company, an application for judicial review was simply another battlefield on which it seemed worth while to fight. I recall that none of the applications actually succeeded. They had little merit, particularly because of the very wide discretion given to the statutory bodies concerned. Admittedly, I might be biased in that view, but they could create a good deal of delay and uncertainty as to the outcome of the bid. That was highly undesirable.

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It surely cannot be doubted that, if the non-statutory self-regulatory system currently run by the City Takeover Panel is replaced by a system in which the panel owes its authority to statute, litigation on a whole range of grounds would be a tactic worth pursuing, not only in the UK courts but also, on reference from the UK courts to the European Court of Justice in Luxembourg.
Article 4(5) of the directive enables the courts of a member state to continue not to intervene during the course of a takeover bid. However, it also says that any injured party must enjoy "adequate remedies" and the Select Committee is rightly anxious that it is not at all clear whether the remedy of an appeal and the remedy of compensation are alternative options that a member state may provide.
I am, in any case, anxious that Article 4(5) would not effectively ensure no judicial intervention during the course of the bid. I say that because the Court of Appeal in Datafin placed much stress on the panel presently combining the roles of legislator, interpreter of its own rules and investigator of alleged breaches. In those circumstances, there was little scope for a court to say that rules had been made that were ultra vires or that the panel had misconstrued the rules. A court may take a different attitude, even during the course of a bid, if rules for takeovers are put on a statutory footing and they become legal rules; and if, for example, an argument is raised that a rule is incompatible with a provision in the directive. Indeed, a UK court may feel obliged to refer the matter to the European Court of Justice for a final view.
The conclusion of the Select Committee's report is that,
"The UK has an effective and efficient system for the regulation of takeovers. That should not be put at risk without substantial and clearly identifiable benefits. We do not believe that the Commission has made out its case".
It could not be put more clearly than that.
6.56 p.m.
Viscount Chandos: My Lords, I join other noble Lords in thanking the noble and learned Lord, Lord Hoffmann, for his interesting and penetrating introduction to the debate today and for his chairmanship of the sub-committee that produced the report. The noble and learned Lord retired from the board of an arts organisation shortly before I was invited to join it a year or two ago. Just the other day it was suggested by Mr. David Mellor that it was an arts organisation whose board had eyes larger than its brains. I suspect that if the noble and learned Lord had remained a member of that board, then even Mr. Mellor would not have had the temerity to suggest that.
I should declare an interest as a director of a small investment banking firm regulated by the Securities and Futures Authority and an occasional practitioner of the art of takeovers. I regard myself very much as a general practitioner rather than a specialist or even a professor of medicine in this field and I rely often on the advice of my colleagues and other professional advisers.
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I am struck by the fact that many of the people I regard as specialists, even professors of medicine, in this field are, like myself, hereditary Members of your Lordships' House. I regret that there are not more of them from the Benches opposite available tonight to give us the benefit of their wisdom and experience and to support the arguments advanced by the Front Bench of the Government that the hereditary component in this House is a useful and constructive part of it.
Like my noble friend Lord Haskel, I came away from reading the report—notwithstanding my admiration for the noble and learned Lord, the chairman—a little uneasy with the tone of smugness on the part of the UK institutions that gave evidence about the workings of the system. Of course, the equity markets in the United Kingdom are significantly larger and more highly developed than those of the other European countries. It is not surprising therefore that the development of the Takeover Panel since its establishment in 1968 and the evolution of a sophisticated and wide-ranging code of rules should have occurred in this country a decade or two in advance, in many cases, of the practice in other European countries. However, we should be careful to guard against complacency, in the way that my noble friend Lord Haskel described so clearly. One sentence in particular of the brief provided by the Takeover Panel might surprise any layman. It states:
"In particular, it is vital that in the interests of shareholders our flexibility in applying or disapplying rules and principles must be preserved without risk of challenge in the courts".
In declaring my interest as a practitioner, I could perhaps have declared my interest that I am not a lawyer. While very often I regret that, I find it helpful when I feel, as I do, that the evils of litigation and the law are sometimes overstated. I feel at least that I do not have an interest in that respect.
Over the past few years, since the enactment of the Financial Services Act, the question marks about the appropriateness of a fundamentally self-regulatory, or at least semi self-regulatory, system of financial regulation have grown. The Takeover Panel, notwithstanding some of my comments, currently represents the best continuing example of financial self-regulation. Like other noble Lords, I am loath to do anything that would jeopardise that position. On the other hand, I still do not believe that the evidence presented to the committee and some of the conclusions of the committee necessarily prove that the balance of cost and benefit of accepting a directive of the kind proposed by the European Commission, amended in the way a number of noble Lords have suggested today, would seriously jeopardise the workings of the Takeover Panel as it operates at the moment.
For instance, I found the evidence of the Financial Law Panel very striking. Of all the bodies that gave evidence, it was the one that was most cogent and positive in support of the proposed directive. There are

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two useful quotations from its evidence. In paragraph 8 the panel suggests:
"The question is not whether the matters dealt with in the Directive are capable of being dealt with at a domestic level. Clearly, they are. The issue is whether it is more efficient to address the questions at Community level, as part of the move to create a consistent and open market".
It goes on to say in a subsequent paragraph:
"Nevertheless, we believe that the adoption of a common statement of principles applicable to takeover procedures throughout the European Union, which emphasises aspects consistent with, and already enshrined in, UK practice is a development to be welcomed".
The question has to be the relative costs and benefits of having the proposed directive apply as an umbrella over the operations of the Takeover Panel in the United Kingdom. I was struck that many of the critics of the directive appeared unable to decide whether they dislike the directive because it seems likely to interfere with the principles of subsidiarity and the national regulation of takeovers or because it does not achieve any significant harmonisation across the different member states of the European Union. At the heart of the potential costs regularly comes up the question of tactical litigation. I listened with interest to my noble friend Lord Borrie on that subject and remain unconvinced that the view of the Financial Law Panel, which clearly differs from that of the Takeover Panel itself, is wrong. It seems to me that the cultural and other differences between the United Kingdom and other countries such as the US are at least as much factors in determining the incidence of tactical litigation in such matters.
In thinking about the benefits that might be achieved through the introduction of the directive I was struck again by evidence given by the Institutional Fund Managers' Association, which reads as follows:
"With our eyes open, we have chosen to invest nearly 10 per cent, of our customers' pension assets in countries where the writ of the UK Takeover Code does not run. But we also have invested more than half of their investments in the UK, where it does. We are very loath to allow any interference with a system we know works well, just for the sake of European harmony. If individual European countries wish to introduce their own codes, statutory or voluntary, so be it".
I do not agree with that conclusion, but I believe that the potential benefits are clear to see.
We are used to being caught unawares by a financial crisis or scandal. We are used to believing that the self-regulatory system in the UK is the best possible protection and waking up the following morning to find that there has been another major problem. As investment by institutions and individuals increases in the European equity markets, there has to be a very strong case for being willing to trade off a degree of the apparent autonomy of the UK Takeover Panel in exchange for our contribution to a European initiative to achieve minimum standards throughout Europe.
Reading the evidence, therefore, and trying to weigh the quality in some cases and not just the quantity, I still cannot but help feel surprised that the Select Committee's report felt the issue was quite so black and white. The proposed directive is clearly not perfect but I believe that there is a stronger case for the involvement of the European Commission in creating a framework for
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European takeover regulation. I feel also that fashionable Euro-scepticism may have been a factor in influencing the tone and weight of some of the evidence, although I am sure it did not affect the deliberations of the committee.
7.8 p.m.
Lord Pearson of Rannoch: My Lords, I join other noble Lords in congratulating the noble and learned Lord, Lord Hoffmann, and his committee on this excellent report and on the lucidity with which he introduced it this evening. I was interested to hear the noble and learned Lord say that the Germans do not mind this directive because they do not feel they need to do anything. I could not help wondering when he said that whether perhaps there was another reason for German acquiescence in this directive, which might be that much of the business which is at the moment handled by the City of London might, I suppose, find its way to Frankfurt and other German cities if the directive comes into being.
I wish to take issue with only two inferences in this excellent report. These are, first, that the draft directive does not meet the Edinburgh guidelines on subsidiarity; and, secondly, that those guidelines might in some way protect us from this draft directive. Your Lordships will remember that at the time of our debates on the Maastricht Treaty in 1993, a number of us felt that Article 3b of that treaty, which is the subsidiarity clause, was unlikely to meet the Government's aim of preventing the further erosion of our sovereignty to Brussels and the Luxembourg court. The Government, on the other hand, held out subsidiarity as the shining shield against such erosion and the Benches opposite largely agreed. Since the report appears to share this vision, I fear that it is worth repeating for the record what Article 3b actually says and how the Edinburgh guidelines do not appear to modify its frightening disadvantages. I apologise for the Eurospeak, but here it is:
"The Community shall act within the limits of the powers conferred upon it by this Treaty and of the objectives assigned to it therein. In areas which do not fall within its exclusive competence, the Community shall take action, in accordance with the principle of subsidiarity, only if and insofar as the objectives of the proposed action cannot be sufficiently achieved by the Member States and can therefore, by reason of the scale or effects of proposed action, be better achieved by the Community. Any action by the Community shall not go beyond what is necessary to achieve the objectives of this Treaty".
Noble Lords will be relieved to hear that that is the end of the quote.
But the key phrase always was, and still is,
"in areas which do not fall within its exclusive competence".
That begs the obvious question: who decides what those areas are? Those of us who continue to regard subsidiarity as a sham have always believed that the answer must be that the Community itself decides, being the Commission, the Council and ultimately the court of so-called justice in Luxembourg. I say "so-called" because we do not regard it as a proper court of justice but rather as the engine of the Treaty of Rome committed to that ever-closer union of the peoples of Europe which the treaty requires.

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But this report says that the directive falls foul of the Edinburgh guidelines on subsidiarity rather than of the article itself. But I am not sure that those guidelines can help us much either. I quote from Clause 1.4 of the basic principles of the guidelines, which state as follows:
"The principle of subsidiarity does not relate to, and cannot call into question, the powers conferred on the European Community by the treaty as interpreted by the court. It provides a guide as to how those powers are to be exercised at the Community level including any application of Article 235. The application of the principle should respect the general provisions of the Maastricht Treaty including the maintaining in full of the acquis communautaire and it shall not affect the primacy of Community law".
Noble Lords will recall that the acquis communautaire is the mechanism in the treaty whereby when the Community has acquired a power or area of sovereignty, it never lets it go.
If we then go on to the second paragraph of the guidelines, which is under the heading, "Should the Community Act?", the answer is very simple:
"This paragraph does not apply to matters falling within the Community's exclusive competence".
So that brings us back to the difficulty of deciding who decides the competence.
My first question to my noble friend on the Front Bench is whether the Government still believe that subsidiarity can save us from this sort of damaging directive from Brussels. My second question echoes a question put by the noble Lord, Lord Stoddart of Swindon, this evening. That is, if subsidiarity cannot save us—and I have to submit that it cannot—how do we expect to fare under the eventual qualified majority vote to which this directive is presumably subject? As your Lordships will recall, there are 87 such votes among the 15 member nations: 62 votes are required to carry a motion and 26 to block one. The United Kingdom has 10 votes. So is my noble friend confident that we shall be able to get 16 other votes to support us against this directive and, if so, from which nations will those votes come?
In many ways this debate has been reminiscent of our debate on 14th December on the impending destruction of the United Kingdom art market by two European directives. Indeed, my noble and learned friend Lord Fraser of Carmyllie has again drawn the short straw to answer for the Government this evening. I fear that he did not answer my similar questions then as to how the Government propose to escape from the terms of the Treaty of Rome to which I have referred. I wonder whether he will be able to give us the answer tonight. If he cannot, does he not agree that it is time to start thinking of revising the terms of that treaty itself?
7.15 p.m.
Lord Peston: My Lords, I shall leave certain of those questions to the noble and learned Lord the Minister. I am not foolhardy enough or paid enough to get into those areas of discourse. I thank the noble and learned Lord, Lord Hoffmann, for introducing the debate and I congratulate him both on the report and the quality of his introduction. It is a fascinating report, full of the
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most interesting material. It is very much a lawyer's report. I note that there are seven lawyers among the 11 members of the committee. I hope that I may be forgiven if I say that many of the technicalities are beyond me and I am not qualified to comment on them. But I cannot resist noting, somewhat cynically perhaps, that the lawyers take the view that they do not want a statutory foundation for the Takeover Panel. They throw up their hands in horror at the possibility of judicial intervention in these matters. That is something well worth reflecting on.
I turn specifically to the main report. I agree with many of its conclusions. I say immediately that I can see little in favour of this particular directive, but I disagree with your Lordships' sub-committee in two ways. It is not as clear to me as it is to its members that there should not be a directive at all. Some of my reasons for criticising the directive are different from theirs.
I am somewhat following my noble friend Lord Haskel. I do not doubt that we need an efficient system of takeovers and takeover regulations. I also agree that the threat of takeovers may be an incentive to efficiency, but I must emphasise the word "may".
If we look at comparative economic efficiency, comparing UK firms with those in Europe, the United States and Japan, it cannot be demonstrated that there is a positive correlation between the ease of takeovers or the extent of takeover activity and productivity and productivity growth. Incidentally, that is not a matter that the committee looked at even remotely or on which it took any evidence. I did not have time to look at the matter in detail but my own judgment is that there is a negative correlation for a country like ours which is not at the forefront of productivity, efficiency and economic growth. To put it mildly, it is at least worth considering that our concern with matters like takeovers and similar matters which the City is interested in may be deleterious to our economic welfare rather than the reverse. I put it to your Lordships that we should think about that.
There are some logical points that need to be made. The Takeover Panel, the Commission, your Lordships' sub-committee, and also my noble friend Lord Borrie, believe that it is possible logically to separate shareholder questions and the behaviour of securities' markets from effects on the public interest, notably competition. I have to say that that is not at all clear to me.
If one accepts, as I do, that the ultimate test of any economic policy is its impact on the real economy, notably the welfare of consumers, and if one also accepts, as I do, that most takeovers fail that test, speeding up the ability to accomplish takeovers is not prima facie a good thing, as my noble friend Lord Haskel pointed out. But most of those who gave evidence, and your Lordships' committee itself, regard speed as good and slowing down as bad. Therefore, they must believe as a general case that takeovers are themselves intrinsically good and they cannot duck that question logically even though the report tries to do precisely that.

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The same point applies to discussion on litigation and all related matters, as shown in paragraphs 84 and 123 of the report. The ability to go more easily to law may discourage takeover activity, but since no one has demonstrated that such discouragement is deleterious to the real economy one has to say, "So what?"
The second problem concerns our old friend, the correct unit for subsidiarity. That was raised by my old friend, my noble friend Lord Stoddart of Swindon, and by the noble Lord, Lord Pearson of Rannoch. Central to the Treaty of Rome and to subsequent legislation is the single market and the ending of artificial and arbitrary restrictions on pan-European trade. Those people who use the old cliche and say that they are "Eurosceptics" say that what they want is free trade in a free trade area. However, that implies that just as there have to be special arguments to justify limitations on what can be bought and sold across the Community—mostly, such arguments are not valid—the same applies to the purchase and sale of shares and, above all, to the purchase and sale of whole companies. Therefore, if you believe in the free trade area approach, there is prima facie an argument for doing it in the same way throughout the Community, which is quite the reverse of what some people who occasionally criticise the Community want to argue when it suits them.
Being slightly more philosophical and looking again at the whole subject—this is not something that I want to dwell on for too long—why is the nation state, in this case the United Kingdom, the relevant unit for subsidiarity? If subsidiarity is such a good thing, why do we not have a different takeover panel for each of the English regions, and one for Scotland and one for Wales? There is a very good answer to that question; namely, that such a degree of sub-division would be economically inefficient in which case it follows that it needs to be demonstrated that the nation state is the correct degree of sub-division. It is completely beyond me how one could demonstrate that even remotely—
Lord Pearson of Rannoch: My Lords, my
point was that at the moment the application of subsidiarity in takeovers and everything else is decided by the British Government. In following the European interpretation of "subsidiarity" this directive intends to make it subject to the government in Brussels.
Lord Peston: My Lords, I was not really dealing with that point although I understand what the noble Lord is saying. I am simply asking him to reflect on the more general question of what the relevant unit for subsidiarity ought to be prima facie if he believes in the free trade area. Of course, the noble Lord may not believe in that either, but I do not see how he can go quite that far.
In other words, there is a prima facie case for uniformity here if you believe in the single market. Following what the noble and learned Lord, Lord Hoffmann, said, I would have thought that it is on political grounds that the Commission does not press that point. Having had its fingers burnt once, it is now willing to accept national procedural differences. However, as far as I can see from the evidence, it is
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hoped that the outcome will be much the same. I must emphasise the word "hope" although I cannot see any grounds for such hope. Paragraph 33 of the report is vital in this regard, as is the report made by the FLP in paragraph 34.
However, that does not cause me to disagree even to one degree with the view of the DTI that this directive as formulated does not deal with the problem. The one thing that the directive does not yield is uniformity. Indeed, if we were to go ahead with the directive, in my judgment it would increase differences and distort markets by applying in practice different regulatory regimes. Therefore, I strongly agree with the comments made by the Law Society, as quoted in paragraphs 61 and 63.
That leads me to a third question. Let us assume that we have a strong and effective regime encouraging competition. I look at my noble friend Lord Borrie when I say that we should "assume" that we have that. I assume that that question ought to precede the takeover question in the form in which it is now being discussed. Naive though I may be in saying this, we should have an effective regime encouraging competition—and I assume that that would take precedence over the takeover question. It follows that the principles set out in paragraph 26 are broadly acceptable, but that will not stop interested parties nitpicking, as is reported in paragraphs 70 to 75. However, those are points of detail.
The validity of those principles depends on their applicability across the European Union. With separate national approaches within the framework of the directive, one has to ask: if we were to go ahead— I repeat that I hope that we do not—who will monitor the principles and see that they are applied in practice? That does not seem to have emerged from the Commission's evidence or from that from anybody else. Again I ask—this is relevant to what the noble Lord, Lord Pearson of Rannoch, said—if the directive were to be introduced by qualified majority voting, would that represent a sustainable position? My judgment is that it would not. Therefore, I think that the noble Lord is right in saying that if it goes ahead it must be interpreted as simply an interim stage to complete uniformity with a statutory foundation. I do not see how there could be a half-way house. Therefore, I agree entirely with the sub-committee in paragraph 98 where it states that essentially the directive falls between two stools. It produces neither uniformity nor a sustainable separate position.
I must say a few words on the position of employees to follow what was said by my noble friend Lady Turner of Camden. Clearly, the TUC is right to express concern. Perhaps I may put it this way. Either a takeover limits competition and does nothing else, in which case it should not be facilitated, or it limits competition but also generates efficiency gains, in which case it is worth considering. Efficiency gains mean in the first place and overwhelmingly a reduction in employment. It is theoretically just about possible that demand could expand sufficiently to offset that but, in practice, that occurs only rarely, if at all. I can think of hardly any examples. Therefore, my conclusion, along with my

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noble friend, is that there should be an obligation to inform and consult employees as early as possible. I disagree with the Law Society's evidence that this is not the place to raise the matter.
Perhaps I should say also that I regard the opinion of the DTI, as quoted in paragraph 79, as wishy-washy. I should have liked your Lordships' sub-committee to have expressed a stronger opinion on that, but I am happy with the last sentence of paragraph 119, with which I shall burden your Lordships. It states:
"The importance of employees being informed and consulted should be expressly recognised by appropriate reference in the preamble to the Directive".
Finally, I am doubtful about the directive, but I am not convinced that there is no problem. After all, paragraph 84 of the report refers to real obstacles to takeovers in other member states. I have already referred to the DTI's evidence on that. Therefore, I do not see how your Lordships' sub-committee can reach the conclusion that it does in paragraph 96 on what it calls "soft harmonisation". Equally, I do not see why it is so optimistic about market forces leading to the appropriate outcome.
In summary, there are a number of problems to be solved. Although this directive is full of flaws and I hope that it will die, I do not believe that Her Majesty's Government's task can be solely to try to maintain the status quo complacently, as my noble friend Lord Chandos said. We need to find some allies. We need to find a way to produce a better directive or a better European approach.
7.28 p.m.
The Minister of State, Department of Trade and Industry (Lord Fraser of Carmyllie): My Lords, we are grateful to the noble and learned Lord, Lord Hoffmann, and his sub-committee for preparing such a detailed and thorough report. It is obvious that considerable time and effort have been expended and I am particularly grateful to the noble and learned Lord for having set out so lucidly the sub-committee's views on the proposed directive. I am now pleased to have the opportunity to outline the Government's response.
In an interesting set of observations on both competition and merger policy, the noble Lord, Lord Bridges, sought to draw the two matters together. I agree with the noble Lord, Lord Borrie, that those matters can reasonably be separated. I disagree with the noble Lord, Lord Peston, for the same reason. It is not a matter of whether takeovers are good or bad. If a bid is allowed to proceed, it seems to me that it must be in everyone's interest that it should go forward quickly and be efficiently and effectively overseen. I certainly do not agree with the noble Lord, Lord Haskel, that we want somehow to slow down the process by putting, to adopt the noble Lord's phrase, sand in the system when the particular sand that would be put into the system by the operation of this directive would allow for an excessive degree of tactical litigation. Other than lawyers, who may wish to secure their fees, I do not believe that there is anyone who considers that to be a desirable way forward.
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It will come as no surprise when I say that the Government endorse the views of the committee. Like the committee, the Government are opposed to the directive and will strive to achieve the committee's principal recommendations that it should not be adopted and that the position of the Takeover Panel and the City code should be protected. The Government's principal concern is the same as the Committee's; namely, the effect that adoption of the directive would have on the UK's present non-statutory system of takeovers. The Government believe that one of the strengths of the UK's present system of takeover regulation is that it offers speed and certainty of decision making. The panel's decisions are in principle subject to judicial review. But the scope for tactical litigation whose sole purpose is to hold up a bid and thereby make it lapse is extremely limited.
The Government believe that an efficient system of takeover regulation is in the interest of UK companies and investors and of the wider economy. Once a bid is launched it is in the interests of all concerned that it should be determined swiftly. Whatever the merits of a bid, it is in no one's interest that it should become the subject of lengthy litigation. The adoption of the directive would necessarily entail a change in the legal status of takeover regulation in the United Kingdom. The panel as a regulatory authority would be placed on a statutory footing and the City code would have to be consistent with the directive. While it is difficult to predict what impact such a change would have, there is a realistic prospect that it would put at risk the advantages of our present system. In particular, it might become easier for parties to challenge decisions through the courts and to engage in tactical litigation.
The noble Viscount, Lord Chandos, expressed doubt about the risk of such resort to tactical litigation. Quite fairly, he pointed to the evidence of the Financial Law Panel. I invite him to look also at the rather briefer evidence which was submitted by Professor Len Sealy of the University of Cambridge. He indicated that, based on Australian and United States experience, there was not just a risk of tactical litigation inter partes but also that the regulatory authority might well be drawn into that litigation. I accept that Article 4.5 seeks to limit the scope for litigation. However, the Government share the committee's view that this article does not sufficiently safeguard the position.
As the noble and learned Lord, Lord Hoffmann, pointed out, the curious paradox is that this directive is allegedly in large part modelled on the City code. Commission officials themselves acknowledged in their evidence to the committee that our system provided the model for the directive and they had no desire to change our present system of regulation. It is ironic that the directive may inadvertently destroy the foundation on which that system is based and from which it derives much of its strength; that is, its non-statutory nature, its ability to resolve disputes without recourse to litigation and its flexibility to react to new or changing circumstances.
I should say something about those articles of the directive with which the Government are particularly unhappy and which they consider are in need of

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amendment. I do not intend to mention each and every change that the Government believe needs to be made, but simply the principal ones. I believe that these reflect the concerns of the committee. First, I refer to Articles 3 and 10, which deal with the protection of minority shareholders and mandatory bids.
The City code includes a mandatory bid requirement. Where someone acquires a specified proportion of a company's shares, he is obliged to offer to buy all the remaining shares in the company. Under the City code, the price offered for the shares must not be less than the price paid for shares acquired during the previous year. The Government regard this as the best means of safeguarding minority shareholder interests in the event of a takeover. A mandatory bid requirement ensures that all shareholders have the opportunity to share in any premium paid by the bidder for control of the company. It also allows shareholders to quit the company if they so wish because of the new owners. The proposed directive does not include a mandatory bid requirement as such. It allows member states to choose between a mandatory bid requirement and measures which "offer other appropriate and at least equivalent means in order to protect the minority shareholders of that company". It is not clear to the Government—it would also appear from paragraph 116 of the report that it is not clear to the Select Committee—or indeed any organisation that has been consulted, what would constitute equivalent protection to a mandatory bid.
The directive also allows for partial mandatory bids. As a consequence, a bidder might be required to buy only a proportion of the remaining shares rather than all of them. This would have the extremely unfortunate consequence of leaving an even smaller minority of shareholders within the company. It is difficult to see what protection such an arrangement would afford these shareholders.
I have already mentioned Article 4.5 and its attempt to deal with the problem of tactical litigation. We acknowledge the Commission's attempt to anticipate UK objections by stipulating that courts need not as a consequence of the directive change their stance of not intervening during the course of a bid. But the Government are concerned that the wording would not be effective in preventing parties from bypassing or challenging the panel's procedures and seeking judicial review by the courts. I believe that that concern was also reflected by the noble Lord, Lord Borrie.
There is a further problem with this article. It requires that injured parties must enjoy adequate remedies. This can be through an appeals procedure operated through the supervisory authority or through the right to take proceedings before the courts to claim compensation. The wording of Article 4.5 needs to be amended to make clear that the two options of an appeals procedure or compensation are genuine alternatives and that a member state may adopt one of these two options. We would opt for the appeals procedure route. Compensation is most unlikely to provide an appropriate remedy. Actual or potential breaches are likely to be best remedied by prompt action of the supervisory authority during a bid.
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Article 5.1 also causes problems. This article sets out a number of general principles with which the more detailed regulatory requirements must comply. On the face of it, this is an approach similar to that of the City code. But if the principles are set out in a directive and subsequently implemented by statute there must be doubt as to whether the supervisory authorities can continue to apply the principles of flexibility or approach those principles in a purposive fashion as they can at present. I believe that the noble Lords, Lord Spens and Lord Borrie, considered it desirable that such flexibility should be maintained. The position would instead be that the principles in the directive would be subject to interpretation not only by the domestic courts but also by the European Court of Justice. The resulting case law could constrain the Takeover Panel's interpretation of the City code.
Article 8 seeks to constrain frustrating action by companies which are the subject of a bid. We agree with the committee that it could be interpreted in a number of ways and needs to be amended if it is to be effective in preventing boards from shielding themselves from takeovers without the informed consent of their shareholders.
I have concentrated on our main concerns about the drafting of the directive. I have not mentioned all our concerns on drafting or our other objections. For example, we agree with the committee's conclusion that the directive does not meet the criteria for subsidiarity— I hope that my noble friend Lord Pearson will allow me to say it—set out in the guidelines adopted at the European Council in Edinburgh in 1992. Our position on this matter is fully stated in the memorandum responding to the committee's report, which is available in the Library. I do not propose to detain your Lordships with that now. However, I thought that there was a particularly telling point within the committee's report at paragraph 95. The noble Lord, Lord Peston, thinks that one day we must go to some uniform set of procedures across Europe, and it seems to me that the observation here is particularly telling, where:
"The Commission could not point to any transnational problems which the Directive would in practice help to solve".
If it could not point to any particular circumstance in practice where this directive would be of value, nothing could more clearly indicate that the principle of subsidiarity should apply in relation to this type of control.
Lord Peston: My Lords, I noted that, and I was extremely impressed by it. What puzzled me, and the reason I did not press it any further, was his own department's evidence which said that it was concerned essentially about restrictions on possible bidders in this country engaged in cross-European purchases of firms elsewhere in the market; in other words, what puzzles me—the Minister might like to reflect upon it—is that the Commission could not point to any transnational problems but his department was bellyaching like mad about precisely that matter. I thought that I would leave well alone for the moment, but it is not a minor point. My view is that the halfway house position is unacceptable. I can go for complete subsidiarity or

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complete uniformity. So I do not believe that there is a great deal between us, or certainly in this case not between me and the committee. It is the middle position of the directive which, I agree with everyone, is impossible.
Lord Fraser of Carmyllie: My Lords, there are some real problems, which my department is right to point out, if the directive is adopted. Not least, as I was pointing out—I was trying to deal with matters as briefly as possible earlier—if case law should develop, for example (that would be case law coming from the ECJ) it might come up in relation to all manner of takeovers and issues in other countries which would, in turn, necessarily have to be reflected in the way the Takeover Panel's activities were governed in the UK. I do not consider that there is in any sense a contradiction between what is included in that passage by the committee and what my department has indicated.
I shall pass now to the consultation exercise undertaken by the DTI. We consulted a wide range of interests. The overwhelming view of those who responded was that the adoption of the directive would be a retrograde step. The reasons cited were, almost without exception, the ones which both the committee and the Government have identified.
We have also received a number of letters from major companies listed on the Stock Exchange. Those companies would be subject to the directive's requirements if it were adopted. Without exception, all were opposed to the directive and have asked that the Government should oppose its adoption in negotiations in Brussels.
The noble Baroness, Lady Turner, referred to the protection of employees in takeovers. The noble Lord, Lord Peston, thought our response to that was wishy-washy. Advanced consultation with employees before a bid was announced would provide opportunities for insider dealing. The noble Lord, Lord Haskel, said that there must be a way to get round that. With the greatest of respect, I do not believe that there is such an opportunity. For that reason, we agree with the committee that it would not be feasible to require consultation in advance of information being made publicly available. Of course we understand why the noble Baroness would like to see such consultation, but there is another set of interests here. We just do not see any compatibility in achieving the two.
I should say a few words about future discussions on the directive. At present the directive is being considered by the Legal Affairs and Citizens' Rights Committee of the European Parliament. It may be on the dates to which the noble Lord, Lord Haskel, referred, but I am not sure. In any event, it will have to make its recommendations which will then have to be considered by the full parliament. So far as I am aware no date has been set for that debate. There have as yet been no discussions over the draft directive in the Council. None has been scheduled so far by the present Dutch presidency.
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My noble friend Lord Pearson chided me for failing to respond to him when we last discussed a similar draft directive of which I disapproved before Christmas. At present, in looking to our future action we cannot be sure how other member states will react until negotiations in Brussels commence. It is too soon to judge whether we can muster a blocking minority. I regard the subsidiarity point as being one of such general application that even if there are other countries which are not particularly concerned one way or another about this directive, they should be concerned about the subsidiarity point. We shall voice our fundamental concerns on the effect of the directive and the limited justification for the proposal, but we shall also seek— that is why I have taken some time to spell it out—in negotiations to obtain changes to the text which would minimise the effect on our takeover regime were it to be introduced. We shall try to ensure also that the weaknesses in the text are put right.
In conclusion, I should say that there is almost unanimous opposition to the directive from business, from those who advise on takeover bids, and from the regulators. Those concerns have been explored in detail and subjected to rigorous analysis by the committee chaired by the noble and learned Lord. The committee has come out clearly against the directive. For the reasons I have given, the Government share that view, and we shall continue to argue the case against the directive as vigorously as we can.
7.47 p.m.
Lord Hoffmann: My Lords, I am most grateful to noble Lords for the thoughtful contributions that have been made to the debate, as I am sure are the members of the committee who took part in the preparation of the report. My noble friend Lord Chandos commented upon the thinness of attendance on the Benches opposite, so I should say that I know that there are noble Lords who would have wished to contribute to the debate but they were attending a memorial service for a late Member of this House and were unable to be present here.
A number of noble Lords raised questions which are of great importance in connection with takeovers but which go beyond the scope of the system of regulation with which we are here concerned. My noble friend Lord Haskel said that the report did not deal with whether takeovers were a good thing. My noble friend Lord Peston returned to the same theme. He said that if one were concerned with making the machinery of takeovers work better, it followed that one was in favour of takeovers. He said that one could not duck that question. I do not propose to duck it. I shall meet the matter head on.
The system of regulation takes as given the legal structure and the economic structures of this country, which are, as I said, encouraging to takeovers. That may be a good thing; it may be a bad thing. If it is thought to be a bad thing on competition grounds, the answer is to strengthen the competition laws. If it is thought to be insufficiently protective of the rights of employees— something I perfectly understand—the answer is to take precautions that the takeover shall not go through unless the rights of employees have been properly safeguarded.

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But it is arbitrary and eccentric to discourage takeovers, if you think they are a bad thing, by encouraging tactical litigation and creating unfairness to shareholders. That is the matter with which this system of regulation is concerned, and that is all it is concerned with.
Likewise, the question of competition policy: we are dealing here with a self-regulatory system. It is wholly inappropriate for competition policy to be the subject matter of a self-regulatory system. Competition policy represents the economic policy of the state, to be enforced by the state. It is not a matter to be enforced by gentlemen who have been brought together for self-regulation in the City of London.
Likewise, the question of employees: the position of employees on a takeover is serious and important. When the Acquired Rights Directive was being discussed by the Select Committee strong arguments were put forward that the rights given to employees when there is a takeover of a business—the right to be consulted and the right to have their jobs carried forward as against the new employer—should also be extended to a case in which there is a change of control in the shareholding by means of a takeover bid. From an economic point of view, if you are the employee of a company which has been taken over it does not make a great deal of difference whether what has been taken over are the assets and undertaking or the shares. That is the appropriate place in which to deal with the protection of employees on that matter. If that is going to be done, that is where it should be done. It is not a matter to be introduced into a system of self-regulation by the City.
I do not propose to pursue the noble Lord, Lord Pearson of Rannoch, into the arcane doctrine of subsidiarity. It is sufficient that he appears to regard the directive as being inappropriate, as does the committee, and I propose to leave it at that. It may be surprising to noble Lords to hear that when I practised as a lawyer I regarded it as part of my duty to keep my clients out
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of the courts. That is the objective which the Takeover Panel has sought to pursue over the years and, though I am a lawyer, it remains a wholly laudable one.
Finally, I thank the Minister for what appears to be the close agreement between the views of his department and those of the committee. That is an unusual position for the committee to find itself in. I conclude by wishing him every strength in the endeavours of his department to resist the implementation of this directive.
City of Westminster Bill [H.L.]
Girobank Plc (Transfer) Bill [H.L.]
Hailsham Cattle Market Bill [H.L.]
Lloyds TSB Bill [H.L.]

London Local Authorities Bill [H.L.]
Presented and read a first time.

King's College London Bill [H.L.]
The Chairman of Committees acquainted the House that, pursuant to the resolution of Thursday 19th December, the Bill had been deposited in the Office of the Clerk of the Parliaments together with the declaration of the agent; the Bill was presented, read a first time, passed through all its remaining stages pro forma and sent to the Commons.
House adjourned at eight minutes before eight o'clock.

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