Sitting of 22 January 1997

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

Intensive Care
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Peter Ainsworth.]
9.34 am
Mr. George Mudie: I should like to express my thanks and the thanks of thousands of my constituents to you, Madam Speaker, for allowing this debate to take place. The people of Leeds were shocked and angered by the death of my constituent, Mrs. Edna Harrison, and it is a tribute to your sensitivity to hon. Members' constituency problems that you have so quickly permitted the subject to be debated.
I also wish to pay tribute to my local evening paper. The current Secretary of State for Health, his predecessor, now the Secretary of State for National Heritage, and the Minister here today, the Under-Secretary of State for Health, the hon. Member for Orpington (Mr. Horam), are aware that, over a substantial period, the Yorkshire Evening Post has kept the issue of bed shortages in the public domain. As the Minister knows, health provision is largely run by political placemen in the health authorities, who do not see it as being their duty to acquaint the public with the details of local health matters. The public are largely kept in the dark about the true state of the service. That intensive care bed shortages are a matter of public knowledge and concern in Leeds is a sign of how consistently the Yorkshire Evening Post has raised the issue and it deserves the thanks of the people of Leeds for performing that service.
The Minister will be aware that Mrs. Edna Harrison collapsed in her back garden on a quiet Sunday morning two weeks ago. The ambulance arrived at her home and she was rushed to her local hospital, less than one mile away from her terraced home in east Leeds. That hospital is the 1,500-bed St. James's hospital, famed as "Jimmy's" in the Yorkshire Television documentary that has run for some years. It is reputed to be one of the largest, if not the largest, teaching hospitals in western Europe. Despite all that, no intensive care bed could be found for Mrs. Harrison and, four hours later, she was admitted to a Hull hospital over 60 miles from Leeds where, sadly, she died later that week.
Mrs. Harrison's husband and family have shown great dignity and have expressed nothing but praise for the medical staff at both hospitals. I spent some time with Mr. Harrison on Saturday, discussing his wife's sad death. He continues to show great dignity, but he and his family want to know why the long journey to Hull was necessary and why Mrs. Harrison could not have been treated in her local hospital, thereby minimising the
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danger of travel. The Minister will accept—as does the working party report to which I shall refer later and which the Minister mentioned in his statement of 6 March—that, for an intensive care patient, travelling is always dangerous. The danger can be minimised, but it should be avoided where possible.
Mr. Harrison and his family would have wanted the danger of travel minimised and they would have wanted Mrs. Harrison to be where they and their friends could have an opportunity to visit her, albeit sadly for the last time before she died. They and I accept the conventional wisdom in various statements by Ministers and health officials about the high cost of intensive care beds and the need not to leave them lying empty. Mrs. Harrison may just have been unlucky as she needed treatment at a time of peak demand, and perhaps it was inconceivable and even unreasonable to expect such a scarce and expensive bed to be available locally.
Time will tell, and that individual case is not the reason for this debate. It may have been a factor, but I have asked for a local inquiry into Mrs. Harrison's death, and Healthcare, the local authority and the St. James's trust—the hospital involved—are conducting one. I am far from happy with the initial details sent to me by the authority, which seems unnecessarily defensive about the whole matter. A fuller and more objective report will no doubt follow.
After our discussion on Saturday, the family and I intend, unless the report is acceptable, to raise a number of other matters. Those include the sheer inconvenience of a family having to travel 60 miles to see a seriously ill mother; the impracticality of the husband finding himself in Hull with no money and being told that he must find his own accommodation and his own way back; and the sadness and distress of the son driving 60 miles having been told that, when he arrived, his mother would be dead. All that, when that family live almost in the shadow of the biggest teaching hospital in western Europe. Those practical problems were compounded by the shabbiness of the accommodation for families staying on the premises because the patient is expected to die, and the fact that other family members and friends could not join in the grieving process as the death occurred 60 miles away in the middle of the week and it was impossible to get the time to leave work and go there.
The family have rightly raised a number of matters that will be referred to the ombudsman. I am sure that, somehow, we shall have the circumstances surrounding Edna Harrison's death properly examined. I was pleased to see that the Minister, in a public statement, expressed his sorrow about it and his determination to ensure that the facts were thoroughly looked at and any lessons learned.
Mr. John Gunnell: Does my hon. Friend know whether an inquiry was made as to whether a bed was available at Leeds general infirmary, which is only two to three miles from Mrs. Harrison's home? I understand that there is a system whereby the nearest bed can be obtained, and perhaps that was in Hull. It seems incredible, however, that with two such large hospitals within such a short distance of that lady's home, she could be found accommodation in neither. Clearly, the travel problems that my hon. Friend describes would not have been the same had she been able to go to Leeds general infirmary.
Mr. Mudie: I thank my hon. Friend for that intervention. He is aware that, although I shall primarily discuss east Leeds, for which St. James's is the local hospital, all Leeds Members and, because of the regional significance of both hospitals, all Yorkshire Members, know the pressure that is consistently put on intensive care beds at both LGI and Leeds general hospital.
Mr. William O'Brien: I am advised that there are intensive care beds at Dewsbury hospital, but because there is no money to finance their introduction, they are left idle and without function. That should be dealt with also in the Yorkshire region.
Mr. Mudie: My hon. Friend makes a valid point. Both my hon. Friends remind me of a pertinent fact that deserves examination by the Minister: the two beds that were even nearer but were not even considered. They were at Killingbeck hospital, which has been the subject of an Adjournment debate between two hon. Members present today. Killingbeck hospital is due to close next year and it will be terrible if those beds are not brought into operation simply because of that fact. The explanation is that the beds are ring-fenced for cardiac cases, so no one thought to include them on the register or even inquire whether they were empty. A rumour is going round Leeds that they were empty and available, and they are even nearer to Mrs. Harrison's home than St. James's hospital, so that matter deserves investigation. It would be criminal if bureaucratic ring fencing, however good the reasons for it, excluded Mrs. Harrison from prompt treatment at a hospital that was so close to her home.
Mr. David Hinchliffe: I have just come down from my office having done a local radio programme involving Mrs. Harrison's brother-in-law. He wanted to make it absolutely clear that the care that she was offered by doctors and nurses was the best in the circumstances, but that the system was wrong, which is the point that my hon. Friend is making. Has he looked at how beds are managed in the Northern and Yorkshire region, in the light of the Government's abolition of the regional health authority? In the past five years, our region has lost more hospital beds—27 per cent.—than anywhere else. The regional health authority's role in planning care was important for the likes of Mrs. Harrison. I should be interested in my hon. Friend's thoughts on that point.
Mr. Mudie: My hon. Friend makes an important point. The cuts in hospital beds in Yorkshire have been savage. Only last week, my hon. Friend drew the House's attention to an unhappy case and the circumstances surrounding it, at Pinderfields hospital in his constituency. Yorkshire's grave health funding problems and the underlying problem of a lack of intensive care beds become an issue when they culminate in individual cases such as this. Although Mrs. Harrison's death prompted me to raise this matter, the real issue is the fact that the local hospitals' inability to admit her when she desperately needed intensive care treatment was not an isolated incident. Such an incident was predicted, but, as with other events in Leeds, elsewhere in Yorkshire, Warrington and Newcastle, the House was told that it would not happen, as Ministers had listened, learned and taken steps as a result of similar incidents last winter.
I primarily make the case on behalf of my community for an examination of the situation and prompt action in my local hospital. There has been an increase arising from the
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March statement—one adult intensive care bed and one paediatric intensive care bed—but at the risk of seeming ungracious and ungrateful, I emphasise that we desperately need more. Whatever the situation elsewhere, Yorkshire and the north-west seem to have problems, as explained so well yesterday by my hon. Friend the Member for Warrington, South (Mr. Hall). When a senior figure in the national health service refuses a Member of Parliament a document on the matter, that must make alarm bells ring throughout the service, if not in the House.
I shall let my colleagues make the case for their areas. Apart from the common problem of growing debts and underfunding, the matter should be judged in the light of local circumstances. I am content for the situation in Leeds to be judged on its merits.
The House may not need reminding of last winter. We in Yorkshire witnessed a number of horrifying incidents, culminating in the death of a young child who had been driven through a snowstorm from Manchester. We witnessed the spectacle of a retired policeman being touted round a dozen hospitals in Yorkshire before being flown 60 miles to Scarborough, where he died before he could be admitted. We heard senior, well-respected consultants in Leeds speak of a crisis.
I want to get across to the Minister a point that the Secretary of State seems not to take on board, especially in respect of Leeds and Yorkshire: throughout the year, the two city hospitals in Leeds regularly—not just seasonally—turn away patients. Yesterday I was at St. James's hospital and saw the book of refusals, in which there was not a blank page. Certainly the situation gets worse in winter, but the two consultants responsible for managing intensive care beds at the two major hospitals in Leeds have consistently said that it is not a seasonal problem. It may be exacerbated seasonally, but it is a regular problem. They made that statement last winter, when once again they had to turn away seriously ill patients because they had no spare intensive care beds.
So serious was the position in Yorkshire and elsewhere that after last winter the Secretary of State was obliged to make a statement in the House in March. Last week, sadly, he refused to do so when similar incidents were being reported this winter. On 6 March he stated:
"I told the House earlier this year that I would undertake to ensure that we learn the proper lessons from the general pressure on the emergency services this winter. I shall set out to the House this afternoon the steps that I am taking to ensure that that happens."—[Official Report, 6 March 1996; Vol. 273, c. 356.]
In three brief paragraphs, he dealt with the intensive care beds crisis. He relied largely on the report of a professional working group that examined best practice in the use of intensive care, to which I shall return. With his Commons performance on 6 March, the Secretary of State drew a line in the sand. He accepted that there were lessons to be learned from last winter, he outlined his solutions and the inference was clear: this winter, we would not expect a rerun of the unhappy experiences of last winter.
Sadly, we continue to experience problems in Leeds and Yorkshire. I have raised the tragic case of Mrs. Harrison. The week that she died, Dr. Mark Bellamy of St. James's hospital commented:
"We are sailing extremely close to the wind and sooner or later we are going to come unstuck."

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The same week, the following examples occurred: a Leeds patient faced a possible trip to Birmingham or London; Leeds patients were sent to Grimsby, more than 80 miles away; patients were sent from Airedale to Stoke; Bradford patients were sent to Doncaster; and Newcastle patients were sent 100 miles to Edinburgh. In the week that Mrs. Harrison of Leeds died in Hull, a 71-year-old male pensioner was sent from Hull to Leeds for an intensive care bed and died a few days later. Those patients were not sent to a particular centre of excellence because of their specific complaints—they were shipped around because of bed shortages.
A Leeds consultant and British Medical Association representative commented after the death of Mrs. Harrison:
"There are many more incidents which are not reported in the media. The fact that it is going on is very worrying."
A Leeds consultant, Dr. Mark Darowski, was quoted as saying:
"Mr. Dorrell has not learnt the lessons of last winter."
Dr. Andrew Cohen, the St. James's intensive care manager with whom I spent some time yesterday, said:
"Resources are stretched to the absolute limit. The strain has been caused by the increase of illness we always see in winter and the only way we are going to avoid this sort of problem is if there is an increase in intensive care beds. There is a chronic shortage across the region and the country as a whole."
Dr. Andrew Bodenham, intensive care manager at Leeds general infirmary, stated:
"We are just playing musical chairs all the time."
I do not think that he meant to be humorous when speaking about seriously ill people.
It is accepted that last winter there was a shortage of intensive care beds. The Minister took steps in good faith to overcome it, but the signs are that the problems continue. As it is a matter of life and death, the Secretary of State should act urgently. Yesterday, during the health debate, he attacked my hon. Friend the Member for Islington, South and Finsbury (Mr. Smith), claiming that all that my hon. Friend did was
"to parade a few individual cases that are supported by incomplete facts, to make a half-researched charge about the Government's record, wave a shroud, repeat the mantra that Labour will abolish the internal market and base metal will be transformed into gold."—[Official Report, 21 January 1997; Vol. 288, c. 755–56.]
I have not waved any shrouds. Without getting angry, I have tried to express the anger felt in Leeds. I have not used political comments. I have used comments from doctors who have the unhappy task of deciding who is to have an intensive care bed and who is to go on the dangerous search for a bed elsewhere.
I hope that the Minister will consider the following points. First, he underestimates the regular demand for intensive care beds in cities such as Leeds. The consultant at St. James's hospital is a sober, responsible, committed person who weekly faces the task of turning away seriously ill people.
I thank the Minister for the two additional beds that were made available after the March statement. However, the ward has 13 beds, but 18 bays. I do not understand why it seems to be impossible for health officials to sit with the consultant responsible for the service, examine the records, determine the true level of demand and make provision accordingly. It seems that Ministry officials would prefer not to ask the question, because they do not want to know the answer. They fear that the reply may not suit them.
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I understand the cost implications, but if that is the reason for the failure to ask questions when lives are at stake, that is unacceptable. As part of the discussions arising from the Minister's March statement, Andrew Cohen made a number of requests. Apart from the additional one paediatric and one adult intensive care bed, nothing else has arrived.
The Minister should understand and make allowances for the effect on demand when intensive care beds are located in a hospital with many regional facilities. I am told that my constituents in east Leeds gain from having so many specialties or centres of excellence at St. James's hospital. However, the Minister knows that those specialties make regular demands on intensive care beds. When someone such as Mrs. Harrison collapses, she must compete for a bed with patients who have been moved to intensive care from other departments within the hospital. Dr. Cohen must decide whether to stop an operation or deal with the inevitable emergency that will result from denying new patients intensive care beds. He advocates separating dedicated intensive care beds from general intensive care beds at Leeds general infirmary and St. James's hospital, and that proposal should be considered.
What is happening with the trust and health authority regarding the provision of high-dependency beds? The Minister appreciates the vital role that those bodies play, both physically and financially, in providing a valuable safety net. However, the health authority and the trust have taken no action to increase the number of high-dependency beds at St. James's hospital—in fact, all eight high-dependency beds are dedicated to the other specialties. In March, the Secretary of State and the professional working group said that such beds play a vital part in health strategy. When patients are admitted to hospital, staff usually determine the availability of intensive care beds with a view to moving patients to a high-dependency unit. That is not possible at St. James's hospital and we must ask why.
The Secretary of State requested discussion, consensus and transparency between intensive care beds, high-dependency beds and the other specialties, but nothing has happened. The trust and health authority have used the Government's money to provide only two extra beds. Is the Minister aware of that fact? Is he monitoring the situation? If so, what is he doing about it; and, if not, why not, as it was a vital part of the 6 March statement?
Does the Minister agree that there is something slightly obscene about forcing seriously ill patients to criss-cross the country in search of intensive care beds? I accept that, if patients require specialty treatment that is available only in Birmingham, it is common sense to transfer them to that hospital. However, seriously ill patients should not be expected to criss-cross the country in search of treatment. Surely specified geographical areas, such as west Yorkshire and south Yorkshire, could combine and squeeze out enough money to provide an agreed safety net, so that we do not see ghoulish transfers of seriously ill patients to hospitals 60, 80 or 100 miles away. It is acceptable for my constituents to travel to Bradford, but not to Bridlington.
I am three years older than the health service, so I have not known anything else—in a way, it is responsible for me, although I have worn better than it has. No hon. Members catch my eye when I say that, but like others of my generation, I know about the pre-health service

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conditions. Mr. Deputy Speaker, you come from a mining community and you will understand what I am about to say. Why do we cherish and love the health service? Why do those who know nothing else protect it instinctively? It is because our dads and grandads have told us what happened before the NHS was established. You will know more about it than I do, Mr. Deputy Speaker, as you have a long history in the mining industry, and mining communities established many health schemes.
We cherish the national health service because, before it existed, doctors would visit their patients at home. They would ask, "Where is the patient and what is wrong?" The next question would be, "Do you have insurance and can you pay?" Millions of people who could not pay invariably did not receive treatment. The health service introduced free treatment at the point of service that was available when needed. That is why we cherish the health service. The NHS should be there for anyone who requires its services—it may be a matter of life and death. Unfortunately, in the past few years, people have complained that—for whatever reason—the health service was not there when they needed it. That is why Mr. Harrison is aggrieved and why I was prompted to seek this Adjournment debate.
Mr. William O'Brien: My hon. Friend makes a very good point. We should remind the Minister that many hospitals in Yorkshire—such as Castleford, Normanton and District hospital and others in Hemsworth and south Kirkby—were built using contributions from miners who had small wages, but who knew the value of health care. I am pleased that my hon. Friend has expressed a sentimental view. It would be wrong not to highlight the fact that those hospitals have closed or are now in private hands. That is the disaster that affects mining communities: hospitals built with miners' contributions can no longer serve the people. I am pleased that my hon. Friend has drawn attention to that important issue.
Mr. Mudie: My hon. Friend makes a good point.
I ask the Minister to consider the quiet points that I have made. I understand that individual cases will always cause concern, but there are too many serious incidents at present and that is totally unacceptable.
10.7 am
Mrs. Bridget Prentice: I congratulate my hon. Friend the Member for Leeds, East (Mr. Mudie) on securing this Adjournment debate and on the way in which he has expressed his feelings about the health service and his constituents. I hope that his comments will be well received by the Minister. My hon. Friend did not engage in tub thumping, but adopted a measured view of what is occurring in the health service. I hope that the Minister will respond in kind.
Hon. Members wish to debate the intensive care beds situation because there is a real crisis in the health service. We do not wish to panic people: this is what our constituents are telling us. It is tragic that we must debate the same subject every winter because the internal market is not working properly. My hon. Friend
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mentioned the statement made by the Secretary of State on 6 March 1996—almost a year ago—in which, referring to the winter before last, he said:
"This winter has seen those emergency services put under considerable strain."
He added:
"I have … charged the chief executive of the NHS with a specific responsibility of reporting to me at the end of June and again at the end of September on the plans being made by each health authority for emergency services in its area."—[Official Report, 6 March 1996; Vol. 273, c. 356.]
Nevertheless, we hear that in Yorkshire, in London, in the north-west, in the north-east and everywhere else people are experiencing exactly the same problems this winter, if not worse, as they experienced last winter. I hope that the Minister, in his response, will take into account the fact that we believe that what the Secretary of State said on 6 March last year has come to nothing. Indeed, difficulties in our health service seem to be a great deal worse.
I shall mention only two issues. First, I shall talk about my local hospital at Lewisham. Secondly, I shall refer to one of my constituents. I make no apology for raising a constituent's case. I do not believe that individual cases are isolated. Surely they are examples of what is happening throughout the service. I agree with my hon. Friend that many incidents are not commented upon in the media. Indeed, he quoted a doctor to that effect. The cases that we can raise in the House, or which are raised in the media, are only the tip of the iceberg. That is the problem. We are able only by individual cases to draw Ministers' attention to what is happening throughout the service.
Lewisham hospital is a general hospital serving the people of Lewisham, although it is part of the Lambeth, Lewisham and Southwark health authority. Early in December 1996, it was necessary to cancel all non-elective, non-urgent surgery cases. It is ironic that the health authority felt that it could not fund any more such cases. Why was that? That situation was reached because Lewisham was doing even better than had been predicted. The hospital was seeing more people, treating them and doing all the things that the Secretary of State constantly tells us is happening.
So successful was Lewisham, however, that it ran out of funding and could no longer proceed. As a result, people who had dates to go into hospital to be treated were told at the beginning of December, "We can no longer admit you because additional funding is not available." Indeed, that funding will not be available until after the end of March this year.
With my hon. Friends the Members for Lewisham, West (Mr. Dowd) and for Lewisham, Deptford (Ms Ruddock), I have spoken to the health authority and to a Minister. I am not convinced, however, that Ministers are aware of the depth of the crisis. People in Lewisham, particularly, have been waiting for four months and more for admission—over and above the time that they waited to get their date for treatment in the first place. There will be more suffering, people's needs will become greater and costs will increase. As my hon. Friend said, costs will inevitably increase if people are not treated at the time of need.
I shall now move on to the specific case of one of my constituents, Mrs. Queenie Harrild. The case has had a media profile because Mrs. Harrild's family wants to

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ensure that what happened to her will not happen to anyone else. I pay tribute to the family's courage at a time of bereavement in being able to speak up for others when Mrs. Harrild died. She died because she had to wait five times to have a heart bypass operation. The operation was cancelled on every occasion. I shall go into the case in some detail.
Queenie Harrild was 69. She had been retired for only about four years. Like anyone at that age, she deserved to have a long and fruitful retirement with her husband. She had a bypass operation seven years ago. During the last few months, however, she had been suffering chest pains. She was admitted to Guy's hospital on 13 December.
On 16 December, she was told that she would be transferred to St. Thomas's hospital the next day. She was packed and ready to go. Her husband was at the hospital with her comforting her, giving her support and ready to go with her in the ambulance to St. Thomas's. Late that afternoon, however, she was told that the ambulance had not turned up and that she would be going to St. Thomas's the following day.
On 18 December, Queenie was packed and ready to go again. Again the ambulance did not turn up. This time, she was told that there were no beds available at St. Thomas's and that she was to be discharged, yet the family was told that her name was at the top of the list for the operation at St. Thomas's.
On 21 December, she was told, again, that she was to be transferred to St. Thomas's the following day to be operated on on the Monday. Late on Sunday afternoon, she was told, yet again, that she would not be transferred because no one had told the ward at St. Thomas's that she would be arriving.
On 23 December, Queenie was bathed twice. She went without food in preparation for the operation at Guy's. She was told that she would be sent to St. Thomas's some time that afternoon to be operated upon the following day. Again, later that afternoon, the operation was cancelled.
That process went on until 3 January. In between times, Mrs. Harrild was told that she would be discharged and sent home. She was then told that she would be sent to Lewisham hospital. These instructions went back and forth. She was prepared for an operation on four occasions with a pre-med. She went without food so as to be ready for an operation, only to be told that it had been cancelled. It was cancelled because an intensive care bed was not available. On five occasions there were planned operations. On five occasions her consultant said, "You will have your operation tomorrow."
Mrs. Harrild died on Saturday 4 January, three weeks after she had been accepted into hospital. Of her last 48 hours, 34 were spent without food or drink because she believed that she was to have her operation. At one point she was told that it would be performed privately. It appears that the doctors realised the emergency that they were facing, but that did not happen either.
Mrs. Harrild's family feel—I think that they have some cause to feel—that they lost their mother because the doctors involved had to make a choice between one patient and another, and determine who would be given the spare intensive care bed. It is not the role of doctors to play God, and no doctor wants to do so. It is outrageous that they are forced to make such choices.
The consultant at Guy's who was caring for my constituent said that heart surgery at the trust had been severely affected "for several months". That being so,
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Mrs. Harrild's case is not an isolated incident at Guy's. There has been a crisis for some time. The consultant said that heart surgery had been severely affected "for several months" because intensive care beds were permanently full. Dr. Bob Knight said:
"This was a disaster for Mrs Harrild and a terrible tragedy for her family, made worse by the feeling that if things had been dealt with in some other way she would still be here."
Dr. Knight is absolutely right. It is a terrible tragedy for Mrs. Harrild's family, but it is one that they could come to terms with if they had any confidence that the Government will ensure that what happened to Mrs. Harrild will not happen to other people. That is why I am participating in the debate today. I want to hear from the Minister that the Secretary of State's speech of 6 March 1996 was not just warm words, but had some significance, that it meant that something will happen about intensive care beds, and that the crisis that we suffered last winter, and are suffering again this winter, will not happen a third time.
Mr. Hugh Bayley: I do not know whether my hon. Friend has seen a press release that the Department of Health put out on 24 December showing that £500,000 was spent on purchasing additional intensive care beds in the South Thames region. It lists the extra beds by authority, but not one additional pound of expenditure has been allocated to Lambeth, Lewisham and Southwark, my hon. Friend's health authority. Will she press the Minister specifically on why the allocation is as shown in the press release and why her inner-city health authority, which faces problems that were so graphically described to the House, was excluded from the additional allocations?
Mrs. Prentice: I am grateful to my hon. Friend for raising that point. He described very succinctly the problem in funding for Lambeth, Lewisham and Southwark. As there has been a crisis right across that health authority for some time, I hope that the Minister will make a specific response.
I repeat once again that I hope that the Minister can assure us that the case of Mrs. Harrild, like that of the constituent of my hon. Friend the Member for Leeds, East, will not be repeated; that he will not say that these are isolated incidents; that he will recognise that they are symptoms of the deepening crisis in the health service; and that he will commit the Government to doing something quickly to resolve it.
10.21 am
Mr. Simon Hughes: I shall follow on from exactly where the hon. Member for Lewisham, East (Mrs. Prentice) left off. She and I have spoken. I have also spoken to a third colleague who, coincidentally, reflects, because of the party membership of each of us, the fact that this concern is not a party issue. All Members of Parliament have a duty to ensure that the health service works. The hon. Lady told the story of her constituent, Queenie Harrild. Queenie's son and his wife are represented by the right hon. Member for Old Bexley and Sidcup (Sir E. Heath), and the hospital Queenie died in is in my constituency.
Like the hon. Members for Leeds, East (Mr. Mudie) and for Lewisham, East and me, who have participated in the debate, other hon. Members also wanted a debate on

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intensive care facilities, because in spite of the efforts that the Minister and the Government have made in the past year, which I recognise, we are clearly not providing sufficient intensive care beds.
The White Paper "The National Health Service: A Service with Ambitions", which came out in November, set out the four principles on which the Government believe the NHS should be run. It should be
"universal in its reach, available to anyone who wishes to use it; high-quality; … available on the basis of clinical need"
and
"responsive, a service which is sensitive to the needs and wishes of patients and carers."
By definition, that means that, in both emergency services and intensive care services, the facility has to be where it is needed and when it is needed.
The announcement that the Secretary of State made last year, to which colleagues have referred, which was the starting point of the last chapter of this debate, was very clear. He said:
"Decisions about the resourcing of intensive care cannot be subsumed into general arrangements for other areas."
We have to look at intensive care—and with it goes high-dependency beds and other extra care beds—but we have to look at it separately. When considering resources, beds and their availability, as the hon. Member for York (Mr. Bayley) implied in his intervention, we have to look at this category of service on its own.
I should like to know, either this morning or by answer later, whether the Minister can now update the figures that show where all the additional beds have been allocated. I ask because, in addition to the announcement made just before Christmas, the Secretary of State, in yesterday's debate on the national health service, said that he had announced the distribution of some of the money— £4 million—just after Christmas to bring forward to this financial year the expansion of intensive care planned originally for next year. He said
"it would be used to deliver almost 100 extra adult intensive and high-dependency beds in the last quarter of this financial year."— [Official Report, 21 January 1997; Vol. 288, c. 761.]
Apparently, there are to be a further 100 beds between 1 January and 31 March. We need to know not just where they are but which are intensive care beds and which are high-dependency beds.
Mr. Mudie: When we ask the cost of an intensive care bed, we are always told that it is in the region of £500,000 but, amazingly, the Secretary of State seems to have announced £4 million for 100 intensive care or high-dependency beds. Is that funding to last up to the start of the new financial year? Will the Minister assure the House that the full year's funding in the next financial year is available in the health service budget?
Mr. Hughes: That is another very good point to which we need to know the answer. Of course intensive care beds cost more than high-dependency beds; that is why we need to see the breakdown by area and type.
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The third special report of the Select Committee on the Parliamentary Commissioner for Administration, published on 16 October 1996, made it clear that
"one of the prime duties of the NHS Executive is to ensure that Parliament is not … deprived of information by which it can judge the overall performance of the Health Service."
Parliament, and representatives of people like the family mentioned by the hon. Member for Leeds, East, and the Harrild family, need information regularly.
The Royal College of Nursing tells us that there are two reasons why there is a problem. First, there is a shortage of intensive care nurses. I should like the Minister to respond to that. It cites the example that the Royal Sussex county hospital had 11 vacancies out of an establishment of 65, and that Manchester has to recruit intensive care nurses from abroad. Secondly, the RCN says that the guidelines that set the establishment of intensive care beds are too strict. The British Medical Association, in its recent review of the winter crisis, confirmed that the shortage of intensive care beds was a national, not a localised, problem.
After the initial speeches in the debate last night, I went to Guy's hospital, because, coincidentally, the community health council meeting was also taking place. The first item on the agenda was the case of Queenie Harrild, and David and Pauline Harrild, her son and daughter-in-law, were there. The meeting accurately highlighted the questions that I want the Minister to answer.
At the meeting last night, answering questions was the consultant in charge of intensive care at Guy's, Dr. Richard Beale, who is clearly a man of huge sympathy. He told us the story of how the beds at the hospital that he manages are always under pressure; how staff are being reduced to danger levels to be able to take people in; and how they are having to juggle, as the hon. Member for Lewisham, East rightly said, between people who are brought into hospital to wait, and people who suddenly overtake them because they are emergency cases who will otherwise die, almost in the next minute or two.
At the end of the meeting last night, Pauline Harrild said that her mother-in-law was in Guy's "waiting to be saved", but she was not saved. We want to know whether we will have a health service that has sufficient intensive care beds to ensure that a bed is available for people who are identified as needing an operation that requires an intensive care bed. We have, I am told, fewer intensive care beds per head of population than all similar comparable countries. If that is true, we clearly need more. That does not mean that there should not be high-dependency and other beds to which people requiring intensive care can be released, but we must face the hard fact that more intensive care provision is needed.
The consultant was clear about the fact that our area in south-east London—the Lambeth, Southwark and Lewisham health authority area, containing Guy's and St. Thomas's trust—needs more beds. If it had had more beds, people such as Queenie Harrild would have been treated. There is no escaping the simple resource implication: more beds are needed, and more staff are needed to look after them.
It seems to me that our ultimate aim should be to distinguish between emergency and elective or planned admissions, otherwise someone like Mrs. Harrild will always be overtaken by another patient who is,

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for example, suddenly downstairs in the accident and emergency department. We must ensure that there is planning so that we do not experience such crises. That planning must be national, regional and local, and must be done accountably and democratically. Unless we have such a system, we shall regularly fail our constituents and the public as a whole.
As for now, we plainly do not have enough intensive care beds. That is clear to many hon. Members on both sides of the House. Let me tell the Minister that, if there is one thing that must continue to be given priority by the Government in this financial quarter and in the remaining time of this Parliament, it is that we act in a way that ensures that the deaths that have been reported to the House today have not been in vain.
10.31 am
Mr. Doug Hoyle: First, let me pay tribute to Warrington hospital, of which we are all proud. It has a dedicated staff, an efficient chief executive and a chairman who takes a deep interest in what goes on there.
Warrington has a population of 200,000, which is growing year by year. The hospital, however, must also serve the surrounding region, which brings the total number to 350,000. At present, there are only three intensive care beds for all those people. It is impossible for the hospital to manage with so few beds. As a result, patients have had to be transferred, and one of those patients—a Mr. Pitcher—unfortunately died during the process. The coroner took the unusual step of being highly critical of the fact that that gentleman had been subjected to a 30-mile journey.
The shortage of beds worries not only Warrington hospital and trust, but the purchasers, North Cheshire health authority. The problem is finance. We had an extremely constructive meeting with the authority on Monday, following which we understand that one extra intensive care bed is to be provided. That is good news, which is welcomed not only by my hon. Friend the Member for Warrington, South (Mr. Hall) and me, but by the people of Warrington.
As we have heard this morning, however, the crisis affects not only Warrington or, indeed, the north-west region, but the whole country. I invite the Minister to deny the fact—which has been reported to me—that three weeks ago there was not a bed to spare in the whole of England, and that if more admissions had been necessary, patients would have had to go to Glasgow.
I particularly want to draw attention to the strange story of what happened when my hon. Friend the Member for Warrington, South asked the north-west regional office for copies of the reports prepared for the Secretary of State, which have been mentioned by my hon. Friend the Member for Lewisham, East (Mrs. Prentice). They were sent to the chief executive, Alan Langlands, but they were for the attention of the Secretary of State. Having applied to the regional office, my hon. Friend was given a copy of the report on emergency care. I have a copy here. When he asked for a copy of a similar report on intensive care, however—it had been submitted to Alan Langlands—my hon. Friend's request was refused.
How can Members of Parliament do their job if they are not given all the information that they need in order to present their case? Surely this should not be allowed. Will the Minister answer these questions: why was that
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report suppressed, who made the decision to suppress it, and will it now be released? It seems to me that, in relation to intensive care, there must be a horrible smell at the bottom of the NHS garden. Will the Minister now come clean? Will he tell us that we can have the report on intensive care, and will he explain why my hon. Friend the Member for Warrington, South was not allowed to see it?
Mr. Mike Hall: I thank my hon. Friend for raising this issue. I believe that the document has been published, but that the region did not want to release it to me in time for yesterday's debate. It is a cover-up, and the Minister should first apologise and then give a commitment that the report will be placed in the Library. Then we shall all be able to see for ourselves whether that intensive care report submitted to Alan Langlands and the Secretary of State does indeed show that there is a problem in our region.
Mr. Hoyle: I hope that not only that report, but similar reports from every other region, will be released to the Members of Parliament who need to see them. Otherwise, it will be impossible for us to be well informed and to do the job that our constituents sent us here to do. That shows above all else that there must be a crisis in intensive care throughout England and Wales.
10.37 am
Mr. Kevin Barron: I congratulate my hon. Friend the Member for Leeds, East (Mr. Mudie) on securing a timely debate on an important issue. I thank him for the measured way in which he spoke of a distressing incident involving the death of one of his constituents, whose family obviously took it very hard. I hope that we do not hear more of the accusations of shroud waving that we heard in yesterday's debate. We are all here to represent people and, I hope, the national health service itself. If attention is drawn to the deficiencies in the service, that should not be interpreted as shroud waving. We should be engaging in an honest and earnest debate about the problems in the NHS.
That brings me to what was said yesterday, and what was said today by my hon. Friend the Member for Warrington, North (Mr. Hoyle), about the report on the Warrington intensive care unit that has allegedly been published in the north-west. If that report has indeed been published, it should be available to hon. Members, and also to the public in the north-west, who pay taxes and use the NHS. I hope that, if it has been suppressed internally, the Minister will sort the matter out.
I am sure that hon. Members on both sides of the House have noted the growing concern about what is described as the "winter crisis" in the health service, which has appeared to increase daily. Across the country, intensive care bed capacity has been stretched to the limit because of seasonal upturns in emergency demand. It is clear that there are simply not enough intensive care beds to cope with what most of us would consider to be reasonable demand for this time of year.
Clinicians are unable to perform other surgery in hospitals because intensive care beds are full. Operations are being cancelled, and waiting times are increasing because of insufficient spare capacity in the system to cope with sudden fluctuations in demand for emergency

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care. So the debate is about not one problem but three. First, lack of intensive care beds strains hospitals' ability to cope with emergencies. Secondly, use of general hospital beds for emergency cases results in cancellation of routine work. Thirdly, postponing treatment for cases sometimes referred to as "non-urgent" leads, by default, to those cases worsening and turning into emergency cases. The shortage of intensive care beds aggravates all those problems.
The build-up of pressure in the NHS was entirely predictable, because no one should be surprised that winter comes between January and March or that winter increases demand on our health service. The situation is similar to the annual need to grit roads after snowfall, when everyone seems to be caught out and gritting lorries are not ready to deal with the crisis. This year, we should have been ready for increased winter demand on the NHS, as the problem has been flagged up year after year. I see that the Minister is smiling at the analogy, but the problem has caught us out again.
Every year, hard-working doctors and nurses battle against the odds to do their jobs in a winter crisis. On Monday, I was at a district general hospital in north-east England, and people there told me about how staff had voluntarily worked on new year's day because of staff illness and other problems. They had to keep the hospital going, and it was wonderful to see their dedication. Ultimately, however, I can only wonder why, time after time, the same crisis sneaks up on us.
I do not think that the Government's solution to the intensive care bed crisis—as reported in the press at Christmas, although we could detect the crisis developing well before Christmas—is sufficient. I am bothered because the NHS chief executive has
"ordered all casualty and intensive care units to stay open in the run-up to polling day".
That policy was reported after seven London casualty departments had been forced to close for some time during the previous six weeks. Within days of the announcement of the new NHS policy, however, trusts were being forced to defy the order because of a severe lack of intensive care beds and an upsurge in medical emergencies.
Since the new year, there have been numerous problems inside the NHS. Two Surrey hospitals have closed their doors to emergency cases. Two Lancashire consultants announced that they were quitting because of a desperate shortage of hospital beds. The Royal Gwent hospital was accepting only medical emergency cases, and the list goes on. On the situation in London, my hon. Friend the Member for Lewisham, East (Mrs. Prentice) told us that, because of the current winter crisis, all non-urgent surgery has been cancelled in the Lewisham hospital. Patients at St. George's hospital—21 of them at one point—have had to spend nights on trollies. Such an environment is unacceptable to people who work and care for patients in our hospitals, to the British public—who pay taxes to fund the NHS—and to patients and their families, who are under enough stress when a family member is admitted to hospital.
Drawing on 20 years' experience, a consultant at St. George's A and E department said:
"I don't think I have ever seen such a terrible state of affairs."
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Such quotes come not from shroud wavers but from those who work every day in our health service to care for people who need care. The head of A and E at the Royal Edinburgh hospital said:
"the whole acute hospital service is stretched beyond its ability to cope."
A senior manager at Edgware general hospital said that the situation was "horrendous". Even the head of the emergency bed service, which is supposed to co-ordinate provision for intensive care places, said that now there was "no room for manoeuvre". The service reported that it was "frantically busy" dealing with shortages in intensive care places.
My hon. Friend the Member for Lewisham, East spoke in detail about the sad death from a heart attack at the beginning of this month of a 69-year-old London woman. A hospital spokesman had said that
"an increase in medical emergencies had put the hospital's intensive care beds under pressure over the New Year."
The very next day, a 70-year-old man who had been seriously ill with liver failure was transferred 90 miles, from Birmingham to Sheffield, because no intensive care bed was available locally. He died soon after, and a spokesperson at the Sheffield hospital said:
"He was in a desperate condition. The transfer would not have been good for him."
I wonder what families think when they hear such statements from a hospital to which their relative has been sent, but such service now seems to be acceptable. In some cases, people who are in desperate need of intensive care can be put into ambulances and transported more than 100 miles to receive care. The situation in our national health service, despite what has been done over the past 12 months, is not acceptable.
In his speech, my hon. Friend the Member for Leeds, East went into some detail about a patient being taken from Leeds to Hull. As he said, another patient was transported in the other direction, when a man was taken from Hull to Leeds, where a bed was available. That man died also. Last week, a spokesman for Guy's hospital inadvertently provided the best summation of the Tory crisis. He said:
"Every time we thought an intensive care bed was about to become free, an emergency patient arrived. There was no possibility of transferring"—
a sick patient—
"to another hospital because everyone else is in the same situation."
Such circumstances demonstrate that we have major problems in our NHS.
As everyone knows, since the internal market was introduced into the NHS, five years ago, we have lost 25 per cent. of NHS beds. That reduction does not help. A fortnight ago, Dr. Sandy Macara, chairman of the British Medical Association, said that the crisis faced by the NHS has occurred because
"There just aren't enough beds, including emergency care, available to deal with what ought to be a predictable and predicted peak demand, and that's because of the way that the internal market works and just not having enough money in the system."
The intensive care bed crisis in the NHS is also a cash crisis. As we now know, so that trusts can continue to operate, the Government will allow trusts, by the end of this financial year, to spend £150 million that should be spent in the following financial year. The Government are

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effectively deferring NHS cuts until future years. It is unacceptable for Ministers to tell the House that, year on year, more money is going into the health service, because we know that that is not the case. Ministers should ask health service practitioners about efficiency cuts in the NHS. If they were to do so, they would discover that efficiency drives have led to the increased bed loss. Real problems in our NHS will be stored up for the future if we do not tackle the issues head on.
My hon. Friend the Member for Leeds, East said that St. James's university hospital, in Leeds, was able to set up two extra intensive care beds—although there are still empty bays on the ward. We cannot run away from the fact that one of the problems facing the intensive care service is the lack of nurses available to staff beds, even when the beds are available. No one can question the fact that that problem exists. I have here a Royal College of Nursing brief for today's debate, which states that the Royal Sussex county hospital has 11 vacancies out of an establishment of 65. I have no doubt that is a major problem across the country.
I conclude with a quotation from a study that the Department of Health commissioned from the London School of Hygiene and Tropical Medicine. The report stated:
"The main reasons for patient refusal is lack of ICU facilities; either the unit is full and no bed available, or beds are physically available but there are insufficient staff to provide adequate nursing".
Something is wrong. It is to the Government's credit that millions of pounds have been put into the service but there is still a problem with intensive care beds. Whatever has been done in the past 12 months is clearly not enough to cater for the needs of our constituents. I hope that the Minister will reply to some of the issues in the time available to him.
10.50 am
The Parliamentary Under-Secretary of State for Health (Mr. John Horam): It seems a long time, Mr. Deputy Speaker, since you and I were in the House debating health matters earlier this morning. It is as if you and I were nailed to our seats—the Opposition will undoubtedly say that that is a penance.
I congratulate the hon. Member for Leeds, East (Mr. Mudie) on securing a debate on such an important subject. I appreciate the bipartisan, or non-political, spirit with which he approached the subject, and I should like to respond in a similar fashion. I think it was the hon. Member for Southwark and Bermondsey (Mr. Hughes) who said that it was the duty of us all to make the national health service work, and I assure him and the House that that is certainly the wish of Ministers.
I hope that the hon. Members for Lewisham, East (Mrs. Prentice), for Southwark and Bermondsey and for Warrington, North (Mr. Hoyle) as well as my old sparring partner the hon. Member for Rother Valley (Mr. Barron) will not mind if I concentrate, at least in the first instance, on the specific points made by the hon. Member for Leeds, East, to whom we are grateful for initiating the debate.
The Gentleman spoke graphically of the circumstances surrounding Mrs. Harrison's sudden illness. Those events are of course a matter of great sorrow, and I should like
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to express my sympathy and condolences to her family. The hon. Gentleman asked specifically what action was being taken by the health authority in the aftermath of those events although, as his remarks made clear, he will be aware of some of what is happening.
The hon. Gentleman will be aware that the authority plans further work on intensive care, and that work can be classified under three main headings. First, it aims to complete a thorough review—which, as the hon. Gentleman knows, is already under way—into the facts surrounding Mrs. Harrison's transfer from St. James's hospital to the Hull Royal infirmary. Secondly, it aims to ensure that arrangements are in place to guarantee that every possibility of a bed in Leeds has been fully explored before a transfer to an intensive care unit outside the city is considered. Thirdly, the health authority will convene a meeting with intensive care clinicians to consider with them the protocols and procedures within which intensive care services in Leeds operate.
The hon. Member for Leeds, East raised another important point about which we have corresponded—the situation at Killingbeck. We are in fact discussing a separate matter in relation to that hospital, but I shall say a little about intensive care beds there as he raised the matter today. As he knows, there are seven cardiac intensive care beds at Killingbeck hospital, which are dedicated for the use of cardiac patients and support the highly complex specialist services which Killingbeck and the Leeds general hospital provide. It is because of the specialist nature of these beds and the specialised training of the staff involved that they are not made available for general intensive care use. Their availability is therefore not reported.
It is not correct to say that those beds are ring-fenced financially; because of their specialist nature, they are not generally available. I hope that the hon. Gentleman will accept that. In view of the circumstances, however, the health authority has agreed to review, with the local trust, whether, in certain situations, those and other cardiac intensive care unit beds should be made available to provide general intensive care for local people. I must stress that the use of those cardiac beds for general intensive care would require very careful selection of cases—for example, infectious medical cases such as patients suffering meningitis would not be suitable for treatment in a unit containing cardiac surgery patients. The idea is being considered, but I hope that the hon. Gentleman understands that the matter must be handled with great care.
The hon. Gentleman also mentioned the general expansion plans for ICU beds in the Leeds area, a matter that we have discussed before. He knows of, and acknowledged, the investment of an extra £1 million in Leeds this year to fund one extra bed at Leeds general hospital and one at St. James's. That has been followed by the commitment of an additional £127,000 and a West Yorkshire-wide bid for a further £325,000 for intensive care. That significant investment builds on a general increase in intensive care beds in Leeds in recent years. For example, the number of paediatric ICU beds at the University of Leeds teaching hospital trebled between 1992 and 1996, and beds for adults increased from seven

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to 10 between 1993 and 1996. An average occupancy rate of 85 per cent. at St. James's ICU suggests that there are sufficient beds for most eventualities.
Mr. Hinchliffe: I have listened carefully to what the Minister said, but I think that he will accept from what he has heard this morning that there is a particular problem in the northern and Yorkshire region of the NHS. We have lost more beds in the past five years than any other region—27 per cent. of our beds have disappeared. That loss has a knock-on effect on intensive care provision in a wider area.
Mr. Horam: There is clearly a connection between the number of beds in absolute terms and the use of intensive care beds. Indeed, the hon. Member for Rother Valley commented on that. Nevertheless, in this particular instance I am talking about the provision of intensive care beds in the Leeds area and more generally. As the hon. Member for Wakefield (Mr. Hinchliffe) knows, there is a major new development at the Leeds general infirmary. The cost is £72 million, and phase I will come into operation this year. That offers the opportunity to look again at the balance of intensive care and high-dependency beds in the hospital to ensure that there is more flexibility to provide intensive care at peak periods.
Mr. Bayley: A number of the paediatric intensive care beds in Leeds are specialist beds related to heart surgery, burns or other clinical disciplines and are not available, or appropriate, for general use. Will the Minister separate the figures for those specialist beds as it would be wrong to count them with general paediatric intensive care beds?
Mr. Horam: I take the point. Paediatric intensive care beds should be considered separately from general
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intensive care beds, although my information is that the intensive care beds I am talking about are for general, not specialist, use. The specialist beds that I was talking about are at Killingbeck.
I also take the point raised by the hon. Member for Wakefield. It is important to consider the matter not on a Leeds basis, or indeed a York basis, but on a regional basis.
Mr. Hoyle: The debate has been initiated by my hon. Friend the Member for Leeds, East so it is important that the Minister deals with the points that he raised, but I hope that he will leave himself time to say why the report was not given to my hon. Friend the Member for Warrington, South which, as I said earlier, prevented him from having all the information that he needed for yesterday's debate.
Mr. Horam: I should like to look into that. I shall write to the hon. Member for Normanton (Mr. O'Brien), who raised the point today and in yesterday's debate, and to the hon. Member for Warrington, North.
As a result of the additional regional funding that we have provided for adult intensive care and high dependency care this year—the £4 million that we were talking about—an extra five intensive care beds and six high dependency beds are being opened in the Northern and Yorkshire region. More will be opened in the region in the next financial year as a result of the extra £5 million that we have earmarked for adult intensive care and high dependency beds, to be matched by £15 million from the growth money provided by local authorities. A stream of new provision is under way.
In the little time that we have left, I should like to point out to the hon. Member for Lewisham, East, who commented adversely on the plans made for this winter by my hon. Friend—
Mr. Deputy Speaker (Sir Geoffrey Lofthouse): Order.

St. Helena
11 am
Mr. Mark Wolfson: Its isolation, its history and its position—a tiny dot in the south Atlantic—make St. Helena a romantic and beguiling place. It does not disappoint. From the island's first appearance as a misty bump on the horizon until the Royal Mail ship St. Helena drops anchor under the towering cliffs flanking Jamestown harbour, and when visitors leap ashore up the same steps as Napoleon used, the sense of history is everywhere.
Fascinating as that is, I requested this debate to address the present-day issues of St. Helena and the Saints who live there. My colleagues and I are grateful for the speed with which the debate was granted by Madam Speaker.
The hon. Member for Monklands, West (Mr. Clarke), who is in his place, Lord Beaumont and I visited St. Helena with the Commonwealth Parliamentary Association. Those who know St. Helena will not be surprised to hear that we were given a warm and friendly welcome. Arrangements for the visit were well structured—we had an opportunity to meet many islanders at a large reception at Government house, and we had well-organised briefing papers and discussions. We all felt that the way in which the visit was put together was a credit to the island's Government, staff and elected councillors, and made best use of our time, which was short because of the shipping schedule.
Despite being on the island for only two and a half days before the ship left for Cape Town, we were able to get a clear picture of the problems facing St. Helena. I regret not having been able to lean over gateposts for a chat and meet people in the street. I should also have liked the opportunity to see more of that beautiful and interesting island, but that would have required a longer visit, which would not have been easy for the CPA to fund or organise.
The four key issues that came up over and again were: citizenship; communications—or lack of them—with the island; the commitment of the United Kingdom Government and Parliament to St. Helena; and the constitution. I shall deal with those four Cs in turn.
The first issue is citizenship. Many hon. Members—but by no means all, as I have found from talking to some—will be aware that full British citizenship and the right to live and work in the United Kingdom were removed from the Saints in 1981, and they regard that as a serious and continuing injustice. Citizenship is the key and burning issue for them.
The restoration of the right for Saints to live and work in the UK, quite apart from citizenship, would have many beneficial effects on the island: it would benefit the island economy, because money would be remitted to families still there; the opportunity to work in the wider world in the UK would motivate the islanders further to make progress at school and afterwards; and—this is a key factor in moving forward the development plan for the island—it would bring back outside experience and expertise to St. Helena, particularly from those who might have had entrepreneurial experience in the United Kingdom. Unless the island benefits from such experience, the strategic plan, on which the Government's policy hinges, is unlikely to be effective.
Those two issues of citizenship and development are linked. All those from the House who visited St. Helena believed that, after the handover of Hong Kong later this
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year, Parliament should again address the issue of citizenship in the interests of justice and practical economics. I am not having withdrawal symptoms about my decision not to stand for Parliament again, but I shall regret no longer being here to advance these arguments—particularly that on citizenship—in the interests of St. Helena.
My second point is about communications. Almost every other place in the world is becoming more accessible and more closely tied to the rest of the world by better air transport links and improved roads. St. Helena, in contrast, has become more isolated in recent years. In the days of sailing ships, 1,000 ships a year called at St. Helena. Until the 1970s, many of the Union Castle vessels sailing between the United Kingdom and Cape Town called there, giving St. Helena a ship probably every two weeks. They were not the fastest Union Castle liners, but the second category, which carried cargo and passengers.
Since the 1970s, the island's only link with the outside world has been the Royal Mail ship St. Helena. It is correctly called the Royal Mail ship, because it carries the mail, which cannot get there any other way. The standard of service on the ship—the way in which it is run, the food provided and the sociability of the crew in looking after their passengers—is excellent. The ship is also a major employer. It has some UK officers, although some are Saints, and all the crew come from St. Helena. It is run by the Curnow line and is an excellent ship, providing a good service.
Mr. David Harris: I am most grateful to my hon. Friend for mentioning not only RMS St. Helena but Curnow Shipping, which operates from Porthleven in my constituency. Does he accept that, over the years, the company has shown absolute dedication to not only the running of the ship but the whole cause of St. Helena and the House's responsibility to face up to its problems, which he is promoting in this debate?
Mr. Wolfson: I am grateful to my hon. Friend and I entirely agree with his points. The company deserves congratulations.
The ship attracts a large element of subsidy, without which it could not run between Cardiff, Ascension, St. Helena and Cape Town. The shipping line is endeavouring to promote greater use of the ship as a cruise attraction. Indeed, several people who were on board during our visit had used it many times. One individual, a Brit living in South Africa, of great age and character, had journeyed on the ship about 14 times, which is a pretty good recommendation.
Sir Russell Johnston: How big is the ship, how many passengers can it accommodate and what contribution would it make to the development of tourism?
Mr. Wolfson: The ship can carry about 140 passengers, but some of that accommodation, which is fairly basic, has to be kept available for the shuttle between Ascension and St. Helena to allow the Saints who work in Ascension and on the Falkland Islands to book places on board the ship as part of their working life. There is therefore always the problem of striking a

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balance between the extent to which the ship can be promoted for straight cruise tourism and the need for it to service St. Helena. My hon. Friend the Member for St. Ives (Mr. Harris) made the point about Curnow's dedication in trying to hit such a balance effectively.
There is no air strip on St. Helena, which remains a major issue for the Saints. Much investment would be required to build an air strip, and, once built, not only would the running of the airport need Government funding, but any of the airlines that have already considered the prospect would require the St. Helena Government to guarantee a certain number of bookings, so a further subsidy would have to be provided. Britain and our taxpayers would therefore face the problem of continuing subsidies for the future.
In my view, the better chance of progress is through the development of a proper breakwater, which would provide a sheltered harbour for St. Helena, and through improvement of the wharfage facilities, which would be of direct assistance to the fishing proposals—to which I shall come in a moment—and would allow passengers on cruise liners to land more easily. At the moment, a liner cannot go alongside. Even RMS St. Helena has to anchor offshore, and passengers and freight have to be taken ashore in launches and lighters. In bad weather, if they get off the liner at all, passengers have to go down to the lighter in a cage and land on the exciting and slightly hazardous steps, which, as I said, Napoleon used when he landed there.
One of the difficulties is that the cruise liners and the shipping lines become vulnerable under insurance arrangements if any injury or loss occurs to passengers. The captains of the liners are therefore even more cautious than they used to be in allowing their passengers to disembark: it is at the captain's command whether landing happens or not. We know that many liners call at St. Helena with the intention of putting a cruise party ashore for a whole day—which would bring very effective income to the island—but due to the swell cannot do so. Major improvements to the wharfage are therefore absolutely vital. Some such improvements are taken care of in the island's development plan, but I suggest that the British Government look further than the development plan if St. Helena is ultimately to be able better to stand on its own economic feet.
I turn to the UK's commitment to St. Helena, the Government and this Parliament. We cannot doubt that St. Helena is a residual responsibility from the days of the empire. The ancestors of those who live there were employees of the British East India Company. Those who live there now, like their ancestors, do so on the understanding that they are British. They know no other citizenship and belong to no other country. They are a special case.
I referred to the strategic plan for the island, which is entitled "The St. Helena strategic review 1996 to 2001". It is the key policy and development plan for the island produced by the Overseas Development Administration. I should like to refer to a few of its key points. It is endeavouring to provide a way forward for the St. Helena Government, elected representatives and Government employees to produce and implement a strategy for economic growth and greater self-sustainability. The British taxpayers' total subsidy
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to St. Helena during the period of the plan is about £9 million a year, and covers the ship subsidy and the island itself.
Interestingly enough, only last week the hon. Member for York (Mr. Bayley), in a ten-minute Bill, questioned whether ODA money was best spent on work that does not address the poorest in the world. He cited St. Helena as a country that would not be regarded as being among the poorest. He was not in any way suggesting that it does not have problems or does not need aid. He was making the point that, under the ODA budget, such issues need to be considered, and I think that they are bound to be in future. Making such points in the House increases the importance of the development plan to St. Helena's ability better to stand on its own feet—it will never entirely do so; it would not be realistic to expect that.
The plan identifies tourism, import substitution—especially in agriculture and fishing—some basic manufacturing service industries and construction arising from the contracting-out of capital investment projects as key elements. The plan seemed sensible to all of us who visited the island. I shall make two points about it. First, ODA funding needs to be stable during the implementation of the plan—it is important that the House keeps a close eye on that—and, secondly and most important, the elected representatives on the Legislative Council and the Executive Council in St. Helena should take ownership of the plan. It has not been imposed on them; it was drawn up as a result of intensive discussions on the island. The Government in St. Helena must accept responsibility for implementing the plan. We all know that plans are splendid things, but making them work is what really matters.
When the Foreign Office considers appointing anybody from Britain to the Government of the island, it is important that it chooses people who have a real understanding of commercialism and the importance of commercial activity to the island. A glossy brochure aimed at encouraging investment in St. Helena, which was published before the governor took office, showed a complete lack of understanding of reality. When we explored whether the legal infrastructure or the financial arrangements to encourage such inward investment existed in St. Helena, it was made plain to us that they did not. There was nothing to encourage a company to come to the island, and there has been a lack of understanding by the Foreign Office of the importance of putting the commercial elements together if the ODA plan is to work. In many other areas, the Foreign Office has taken up with both hands the challenge of making our embassies and high commissions more relevant to commerce. They need to do the same in St. Helena.
I wish to refer to tourism, which came top of the agenda in the development plan. Those of us who travelled to St. Helena had to fly, courtesy of the RAF, from Brize Norton via Ascension island, and it was our view that Ascension needs to be brought into the tourism and commercial picture with St. Helena. At present, the Bahamas treaty—a 40-year-old treaty between Britain and the United States—prevents Ascension from having any use but a military one. That will not do if fishing is to develop effectively, let alone tourism. We believe that there is scope for the development of tourism on Ascension, which has the right climate and beaches. St. Helena has no beach and a wetter climate than many people appreciate. These factors must be dealt with, but

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they cannot be dealt with unless the Government address the problem of the 40-year-old Bahamas treaty, which needs a major review. The strategic and defence issues that existed at the time of the treaty have now changed dramatically, so there is every reason to tackle the problem.
There is good news on the fishing front. Argos St. Helena—a company that has developed fishery activities with great success in the Falklands—has a ship called the Argos St. Helena that currently spends half the year fishing off South Georgia. The weather prevents it from fishing there during the other six months. The company, in negotiation with the St. Helena Government—and with, I am glad to say, a fair wind from the Foreign Office—has now established itself, but has registered in Jersey because of the difficulty of registering a company in St. Helena. That makes my point about the lack of a legal framework. The ship will fish from St. Helena, and the company, with the St. Helena Government, will develop a cannery on the island. Commitments have been made by the British Government to improve the cranage at Rupert's bay, where the cannery will be established, and those must be kept.
I had a positive and interesting meeting with Mr. Thompson, the chief executive of the company. He is an experienced man who has made a significant contribution to the development of fishing in the Falklands. He made the point that increased fishing activity around St. Helena would enable the St. Helena Government to go further in providing a fishing zone around the island. At present, such a zone cannot be policed effectively, but other fishing vessels with proper licences can do a good job in chasing away and reporting on those vessels that may be fishing in the area without a licence or adequate permission. My point about Ascension fits in here. Given that the fish move at different times of the year, the need to be able to fish from Ascension for part of the year and to have fishing vessels based there is important. It is crucial that the job opportunities for Saints that exist on Ascension and, through the Ministry of Defence, in the Falklands are maintained. Those are the only job outlets other than work on the island, which is scarce.
Mr. Hugh Bayley: I congratulate the hon. Gentleman on securing this important debate, and I share his view that, for historical reasons, we have an obligation to St. Helena. My concern in last week's debate related to the fact that the ODA has to weigh our historical responsibility for St. Helena against its responsibility for development in much poorer countries in the third world. Does the hon. Gentleman share my view that it might be better to ask a part of Government other than the ODA—possibly the Foreign Office itself—to take responsibility for dependent territories, in the same way as the Foreign Office takes direct responsibility for other institutions, such as the BBC World Service or the British Council?
Mr. Wolfson: That suggestion is worth considering and, happily, it leads me to my final constitutional point.
If ever there was a case of he who pays the piper calls the tune, it is the ODA and its role in St. Helena. Since the ODA pays for almost everything, our overriding perception was that the ODA experts second-guess practically every policy decision on the island. That is done with the best intentions and because the work involves the use of public money. My taxpayers in
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Sevenoaks—and those of the hon. Member for York—would expect that public money to be accounted for. However, we found that an ODA expert would give a view and, on some occasions, it was almost a case of the umpire umpiring the umpire. That works directly against the development of the democratic process in St. Helena.
It is sometimes difficult for the Foreign Office team to refer everything to the ODA, whose decisions will most directly affect the island. I am not criticising all the work and the commitment of the ODA to the life and prosperity of St. Helena, as it is vital. But we must encourage those who are politically elected in St. Helena—where there are no political parties—to take real responsibility for the decisions affecting the government of the island.
When there are no political parties, it is difficult for policies to develop and be put through. The policy is developed in the strategic plan, and the Members of LegCo need to feel responsible and must have it demonstrated to them that they have the responsibility for decision making on implementation.
All members of the St. Helena all-party group are extremely grateful for the opportunity to participate in this debate. I apologise on behalf of its chairman, my hon. Friend the Member for Romsey and Waterside (Mr. Colvin), who is committed to attending the Defence Select Committee; otherwise he would be here.
St. Helena will remain in my mind for many years to come. I shall continue to follow its fortunes with interest, admiration and warm regard.
11.30 am
Dr. John Marek: I congratulate the hon. Member for Sevenoaks (Mr. Wolfson) on securing the debate, which is timely because the Commonwealth Parliamentary Association recently sent a delegation to the island, of which he, my hon. Friend the Member for Monklands, West (Mr. Clarke) and Lord Beaumont were members.
It is a pity that the CPA can send a delegation to St. Helena only once every 12 or 13 years; I was a member of the previous delegation in 1984. St. Helena is probably our only dependent territory receiving budgetary aid, and it is extremely isolated. What I have to say will not all be good news.
The hon. Member for Sevenoaks made several important points and I agree entirely with all but one. I hope that the Minister listened carefully. Citizenship is perhaps the most important point. The St. Helenians feel isolated and betrayed by the removal of citizenship, and that must be reconsidered either by the Government or by successor Governments. The matter will not go away, and a settlement must be reached as soon as possible.
I also agree with the hon. Gentleman about Overseas Development Administration officials umpiring the umpire. They have a nice time looking at St. Helena and gathering some information and then they second-guess any decisions that are to be made on the island. One of the Members of the Legislative Council, the honourable John Newman MLC, sent me a fax referring to the recent visit by ODA officials. The fax said:
"It is felt that there was insufficient time given to meetings with the Elected Members and that the majority of consultation was undertaken by expatriate officials which consisted of the Chief Secretary, Financial Secretary, Economist and Chief Auditor with no St. Helenian officials included. I raised this matter with the Chief Secretary and my point was noted."

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That shows us in a nutshell what is wrong in St. Helena. I am not attacking ODA officials, who have integrity and try to do their best for St. Helena, but somehow or other the Saints are not included in the discussions, consultations or decisions.
Another important matter is the ability to take advantage of any commercial decisions. The Atlantic Mammoth project is supposed to be a lottery based on the Internet, although I do not know whether it will, or deserves to, get off the ground. It may be, as the hon. Member for Sevenoaks said, that the financial facilities do not exist on St. Helena to allow the project to go ahead. Nevertheless, the elected Members of LegCo are not consulted, their views are not taken into consideration and their questions are not properly answered.
I received a fax from LegCo, and I suspect that other hon. Members received it, too. It said:
"We, the elected members of the Legislative Council of St. Helena do hereby request that permission, co-operation and assistance be given to the Government of St. Helena by HMG to enable it to increase external revenue by any legal means, and by so doing reduce the amount of Financial Aid given to us by the ODA."
That is signed first by Bill Drabble, and by nine other Members; that is the large majority of the elected Members of the Legislative Council.
What is going on in St. Helena? Is the Legislative Council treated as being of no importance? I hope not. I hope that the Governor and the officials who are sent from the Foreign Office to St. Helena by Her Majesty's Government take elected Members of the Legislative Council seriously. If a proposal is made, it should be considered seriously, and if it truly cannot be put into operation, a proper explanation should be given.
If that was all that was wrong with St. Helena, it would not be much of a problem; but there is more. A programme of improvements needs to be implemented. We must consider whether an airport can be built. My views are mixed, but I think that we could investigate the possibility of a mainland African company flying an aircraft one day a week to St. Helena and back from a coastal town on mainland Africa and using that aircraft on other business for the other six days. It would be reasonably easy to build an airport on the island.
Tourism development is important. Other matters that interest St. Helenians and should be addressed include an integrated port management, development of fisheries, better cargo handling equipment, wharf improvements, a wind turbine, water development, a second 1 MW generator, better electricity distribution, expansion of the bulk fuel installation, better water catchment and drainage; and the social issues, including care of the elderly, waste disposal, housing and all the matters that will inevitably crop up in any civilised society. Those matters are talked about, but nothing much happens.
I want to make a crucial point about the government of St. Helena. I am told that the Governor, in an interview on board MS Explorer, which visited the island, said that he found St. Helena "boring and tedious", and that that comment was broadcast to islanders over the radio. That cannot be right. If the Governor can say such a thing, why is he the Governor? I asked a parliamentary question about that, but the Minister of course glossed over it.
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We need some honesty about what is going on. It is said by the St. Helenians that the Governor spends much more of his time away from the island than other Governors. Worse is to come. The police used to be given free transport between their home and the police station, and they were suddenly told, with no consultation or negotiations, that that concession was being withdrawn and that in future they would have between £30 and £50 docked from their monthly pay of about £300. They took the Governor to court. The Chief Justice had arrived, but unfortunately had to leave on the ship before the case could be concluded, because the Government did not produce the files that he needed to determine the case. I am told that the island's Attorney-General said that the case had had to be postponed because of the way in which they were deliberately misled. That is not good. There should not be such Government duplicity with civil proceedings on the island.
On 27 October, there was a 200-strong protest march of teachers and nurses led by elected councillors of LegCo. They wanted to petition the Governor because they had been given only a week's notice that fares on school buses would rise by between £9 and £20 a month. There had been no consultation, negotiation or explanation; they were told by diktat. While many matters on St. Helena are the responsibility of the Government, power is vested in the Governor, not LegCo. Hon. Members must understand that all important powers are kept by the Governor, who is nominated by the Foreign and Commonwealth Office in Whitehall and sent to the island.
The Governor would not meet the protesters. I am told that he watched from Solomon's office in Main street and sent the Chief Secretary, Mr. John Perrott, to deal with the deputation. The Governor had previously been manhandled during another demonstration, which is unheard of in St. Helena, which is a civilised place. The last thing that would occur to people there would be to go on a demonstration, let alone manhandle the Governor. I understand that it was simply a case of someone getting hold of his tie, but even so, matters are not right.
The Foreign Office should review the government of St. Helena. A new constitution has been prepared, partly by the Commonwealth Parliamentary Association international secretariat. We must also review whether expatriate officials have empathy, as the hon. Member for Sevenoaks put it, with the people of St. Helena. I do not think that they do.
Finally, there is the case of Mrs. Brenda Cairns-Wicks. She had been a teacher in St. Helena for six years and was an unestablished civil servant. We dispensed with all that 20 or 30 years ago. She became pregnant. Normally, when a teacher becomes pregnant, she gets 14 weeks' leave or whatever, but not a bit of it. The rules and regulations in St. Helena had not been updated and she was required to resign. After her confinement, she would have to apply for another job, if one were available. I brought the matter to the Minister's attention. He is an honourable man and I like him, but it is to his shame that he has done nothing about the matter. She was forced to resign. The rules were changed a week after she resigned, so that others who become pregnant will not face the same appalling situation. Nothing could be done after she had resigned, because her job had already been filled.

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It does not reflect well on the Government and shames the Minister. No competent Governor would have allowed it to happen.
The Minister of State, Foreign and Commonwealth Office (Sir Nicholas Bonsor): I do not want to bring this into my closing remarks, so I should like to deal with it immediately. I very much regret what happened to Mrs. Cairns-Wicks, but by the time the matter had been brought to our attention, her job had been filled. She has been told that she can reapply for any future vacancy, but I believe that she is living on Ascension and has no intention of taking up that offer. The Government regret that she suffered from a failure of the law that we rectified as soon as we found it.
Dr. Marek: I am pleased to hear that. The case should never have happened. I hope that if Mrs. Cairns-Wicks applies for another job, she will be given every consideration.
My time is nearly up, but there are other matters that the Government should consider. The ODA has been trying to do its best, but it could change its views on certain issues. The constitution needs upgrading. Above all, when we appoint expatriate officials, we must ensure that they have empathy with the islanders. It is not enough for them simply to be the man or woman from Whitehall sent to rule the island. To some extent, once they arrive, they are the representatives of the island in Whitehall. In the past few years, I fear that that dimension has been slightly missing.
11.45 am
Sir David Mitchell: I speak as secretary of the all-party group on St. Helena and dependencies. I congratulate my hon. Friend the Member for Sevenoaks (Mr. Wolfson) on securing the debate. St. Helena is a British dependent territory; its culture is British and its only language is English. There are fewer than 6,000 people on the island. Those people are our responsibility and it is right that we should debate them in Parliament.
I concur with much of what was said by the hon. Member for Wrexham (Dr. Marek). The House will have sympathy for Saints, as St. Helenians are called. They are almost marooned on an island 700 miles from Ascension and six days' steaming from Cape Town. Inevitably and necessarily, its economy depends on financial support from Britain of between £6 million and £8 million a year. That is a large sum and the Government naturally want to restrain it. However, I shall show that Government policy militates against success in that respect.
Government policy is to persuade the islanders to move towards standing on their own feet. The unhealthy 75 per cent. of jobs in Government employment is being reduced. That is all very well, but as there are only a small number of private sector jobs on the island, the policy has pushed up unemployment to 17 per cent. The Government have responded by advocating self-help, but that is where the British Government have to open doors to enable it to become a realistic opportunity.
There are several matters on which the Government should act. The first is employment opportunities. I know that I am not the only hon. Member who did not realise when we passed the British Nationality Act 1981 that we
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were closing off the route for St. Helenians to come to work in the UK. I recognise that this is not the appropriate time to press for St. Helena to join Gibraltar and the Falklands in having a general right to seek employment in UK. That should not be done until the Hong Kong issue is out of the way. I should be surprised if the Minister and candidates of all parties at the general election were not approached by Saints in their prospective constituencies and asked for a commitment on that after the election and after the Hong Kong problem is out of the way.
Meanwhile, there are three steps that the Government could take without creating a precedent or other problems, and I urge them on the Minister. First, we could restore the pre-1994 domestic work scheme, under which some 50 permits for Saints to work in the United Kingdom were issued. Secondly, that scheme was replaced by a training and work experience scheme, but it ends at age 35. It would be practical and useful to extend it to 40 or 45. That scheme provides only temporary access to the United Kingdom and only 30 people in St. Helena are currently able to take it up. Making it easier should increase numbers and help tackle unemployment on the island.
Thirdly, general work permits for entry to the United Kingdom from anywhere in the world are issued in respect of specialist skills not available in the UK. Only one Saint has been able to qualify under that scheme. The Government should relax the severe criteria to enable more Saints to qualify and should perhaps place a limit on the number of years that someone can be here—say, seven years. So my first message to my hon. Friend the Minister is that self-help needs opportunity. I urge him to create that opportunity, in a way that will cost him no money and which will help the economy of the island and perhaps make it possible in a minor way to reduce the Government's commitment.
Tourism is a swift route to job creation in any economy, but its development requires an improvement in communications. The only regular access on and off the island is RMS St. Helena. I praise the recent change in its sailing schedules. It now operates more frequently to Cape Town and Ascension island and less frequently on the long, slow journey to the United Kingdom. If tourism is to prosper, we need quicker and easier access from Europe. There is a way in which that can be achieved. The Royal Air Force currently provides a military service to Ascension island as a staging post on the way to the Falklands. We need the Government to put the service personnel flights out to commercial tender and allow tourists to be carried as far as Ascension, with its superb, untarnished beaches. That would reduce from 15 days to four the travel time from Europe to St. Helena and give a tremendous boost to the tourist trade. Self-help needs that opportunity.
As commercial flights to Ascension island are clearly the key, I recently raised the possibility with my right hon. Friend the Secretary of State for Defence. He noted what I said and agreed to come back to me in due course. I look forward, as I am sure many on the island do, to hearing what he can say on that score.
So far, so good, but I have to say that the islanders must be encouraged to create the accommodation and services on the island that modern-day tourists expect. In the past, there has been far too much licensing and far too many restrictions—undoubtedly designed to protect the fragile market of existing providers—but the island needs

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to be more open and welcoming to competition, which is, after all, the customer's best friend and the best way to raise the standard of tourist facilities.
Before I leave tourism, I have to say that it is not helped when cruise liners visit the island and are unable to land their passengers because there is no mole or decent-sized jetty. Last year, five major tourist vessels were unable to land a single passenger. Indeed, a cruise ship called earlier this month and could not land tourists. That represented a serious loss of potential revenue to the island. So if self-help is to succeed for tourism and local industry, the Government must put in that essential piece of infrastructure.
I illustrate the point in relation to the local tuna fishing industry. The island's boats and its fishing industry have been held back by strict quotas—my hon. Friend the Minister will know about this. The limits are not for conservation reasons, as one might have thought, but are because of the lack of processing capacity for fish when it has been landed. Happily, as a result of the help and encouragement of my hon. Friend the Minister, the Foreign and Commonwealth Office and the island's Government, Argus Helena Ltd. will open a new processing plant, probably in September this year, and the restrictions will then go. It will then be possible for St. Helenians themselves to build up their fishing industry. However, once the tuna has been landed, gutted and frozen, it needs safe anchorage for dispatch to markets in Japan and Italy. I praise the FCO and the Government for the encouragement that they have given, but a quay, jetty or protective mole is needed. Self-help needs a bit of investment.
I have a question for my hon. Friend the Minister about an inward investment proposal, which would provide some 50 jobs. It has already been referred to by the hon. Member for Wrexham, who, like me, no doubt received a fax from a Swedish company, Swegame, which wants to set up an international lottery, using the world wide web and the Internet. The Internet is spreading like wildfire, as my hon. Friend the Minister will know. It is an immense growth industry. An international lottery on the Internet can expect explosive growth. I understand that the Government are minded to refuse consent. I have also received the fax that the hon. Member for Wrexham received, signed by 21 Members of LegCo. I will not quote it because the hon. Gentleman has done so already. My hon. Friend the Minister should explain the Government's attitude and assure us that he will take into account the views of LegCo. If something is a legal and proper international operation—whatever his reservations, I should like to hear them—and if Gibraltar is allowed to have such an operation and there is nothing to stop it there, why should not St. Helenians be allowed to do so?
I sum up by saying that St. Helena is a responsibility of the House. The Government are right to move the economy of the island to self-help, but if that is to succeed, there must be opportunity. Opportunity requires, first, more access to the United Kingdom for employment, secondly a jetty, mole or quay for safe landing and unloading and, thirdly, the relaxation of restrictions on tourist flights to Ascension island and thence on to St. Helena. I hope that my hon. Friend the Minister will be able to give assurances on all those points.
11.55 am
Sir Russell Johnston: I shall follow up some of the points that the hon. Member for North-West Hampshire (Sir D. Mitchell) made, in a constructive speech. It was a pleasure to listen to the speech of the hon. Member for Sevenoaks (Mr. Wolfson). I congratulate him, as others have done, on raising the situation in St. Helena. His descriptions were as fascinating as his arguments were persuasive. Unlike him, I have not visited the island—the isolation and the time required have prevented me—but I have visited the Falkland Islands. As a result, and because I have been for a long time associated with the Falkland Isles parliamentary group, I have gained a reasonable amount of knowledge over the years of the islands of the south Atlantic. My noble Friend Lord Beaumont has told me about the visit which the hon. Gentleman described. I should like to make only a short speech, so I will follow the structure that the hon. Member for Sevenoaks chose.
We have had a pretty bad record in recent years on the citizenship question. Several hon. Members have referred to Hong Kong. The treatment there of the ethnic minority is potentially a scandal. With respect to the hon. Member for North-West Hampshire, I do not see why St. Helena has to be put in a box until Hong Kong is sorted out. We are talking about fewer than 6,000 people, not a great flood of immigrants. As the hon. Member for Sevenoaks said, those people had British citizenship until 1981 and know of no other loyalty. I should have thought that we had a responsibility to them.
As for communications, I am sure that the hon. Member for Sevenoaks is right about the airstrip. Several hon. Members and my hon. Friend the Member for Wrexham (Dr. Marek) said that it was possible. I should like to know how much it would cost, if the Minister is able to say roughly.
Sir David Mitchell: I know that time is short, but there is a problem. If some potential tourist traffic is creamed off on to air landing, the viability of RMS St. Helena will be reduced and the demand for subsidy of its operation will be increased.
Sir Russell Johnston: That is a fair point. Of course, if resources are limited and the number of people using the transport mode is limited, one may have to decide between one and the other. I agree with the hon. Gentleman. Certainly, everyone seems to be saying that the improvement of landing facilities is of pre-eminent importance. It was bad to hear the hon. Member for North-West Hampshire say that five cruise ships visited the island and had to go away without landing one tourist. That must have represented a large loss of potential income.
On the Government's commitment and the constitution, the hon. Member for North-West Hampshire was talking about self-help and saying that the Government should do this and that, but it is difficult for Governments who are pledged, as an article of faith, to non-intervention where possible to be terribly good at self-starting all those things.
We are talking about regional development on an island in the south Atlantic. Everyone has been careful to say that they know that Overseas Development Administration officials are well intentioned and so forth.

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There has been a "but" at the end of the sentence, however. I suppose it comes back to the fact that unless one motivates people to motivate themselves one will not succeed through some sort of paternalistic activity, as the hon. Member for North-West Hampshire said.
I want the Minister briefly to say something about medical services. I presume that any airstrip would have short lift-off capacity. I do not know what the hospital facilities are. If someone is in a severe medical condition on St. Helena, what does one do?
Courtesy of the questions asked by the hon. Member for Salisbury (Mr. Key) in March, I have been thinking about education. The information in the answers to the questions is pretty awful. The hon. Gentleman asked:
"how many (a) female and (b) males normally resident in St. Helena had commenced higher education courses (i) on the island and (ii) overseas".—[Official Report, 25 March 1996; Vol. 274, c. 417.]
A list was provided in the answer. Last year, out of the population of just under 6,000—that would perhaps mean 1,500 to 2,000 young people—there were two males and five females. In 1994–95, the previous year, it was one male and nine females. If the community is not educated—through no fault of its own—it will not be a progressive community and that is the plain fact of the matter.
Most things have been said about development. Unemployment of 18 per cent. in a small community is obviously bad and there is a concentration on tourism and fishing. Obviously, St. Helena is a fascinating place and it attracts spasmodic attention because of it. Books on Napoleon are produced every so often, for instance. However, we have a debt to the place and we have a responsibility that we are not fulfilling as we should.
As I have said before—no one agrees, but I will say it again—I have long admired the French system of dealing with their remaining dependent territories. St. Pierre and Miquelon, the two islands off the Canadian coast, are not as isolated as St. Helena, but they have a smaller population—2,500 to 3,000, I think—and they are well treated and backed by the French, as are Martinique, Guadeloupe and all the other French territories. Through France, they also have access to European Union funding. That is a good solution for our remaining dependent territories and not one that should be dismissed simply by saying, "We do not do that—the French do."
I found the speech of the hon. Member for Wrexham (Dr. Marek) very concerning, not least because, as anyone who knows him realises, he is not given to sensation and exaggeration. He said,
"Something is not right on the island."
Sadly, that seems to be true. I hope that when the Minister replies, he will at least tell us that the Government are aware of those shortcomings and of the needs and will respond.
Again, I congratulate the hon. Member for Sevenoaks, who has been the means of our having an interesting morning's debate.
12.4 pm
Mr. Tony Lloyd: On these occasions, it is customary to pay tribute to the initiator of the debate and I do so with more sincerity than usual this morning, as the hon. Member for Sevenoaks (Mr. Wolfson) has done some service to the people of St. Helena and to the House by raising this matter.
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To pick up on the remarks of the hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston), there can be no doubt that our commitment—whether that of this Government or of a future Labour Government—to the island and its dependent territories is legal and historical, but it is also a moral commitment and we cannot avoid that. The question, therefore, is how we discharge that commitment, rather than whether it exists; I think that all hon. Members would take that view.
I must own up to my relative ignorance about St. Helena. Possibly the hon. Member for Inverness, Nairn and Lochaber, the Minister and I are the only ones present who have not had detailed exposure to the islands and their people. I must thank my hon. Friend the Member for Monklands, West (Mr. Clarke), who attended the recent Commonwealth Parliamentary Association visit and took the trouble to tell me of his observations and to pass on those of the hon. Member for Sevenoaks, whose written comments and his speech this morning were interesting and important.
I do not want to make a partisan or party-political point, but some of the responses of the Foreign and Commonwealth Office when island issues have been raised have smacked of complacency. That might be an unfair charge, but I wanted to put it on the record and the Minister can deal with it in whatever way he chooses.
An article on St. Helena appeared in The Sunday Telegraph after the invasion of the governor's office and the assault, albeit a minor assault, upon his person. The issue is serious and the Minister's answer in Hansard tended to play it down considerably, playing down the underlying and clear unhappiness of the people on the island. In the article, the governor is quoted as saying that although "dumbstruck" by the events he also found them understandable. He said:
"The islanders are fearful of their future. They worry about what will happen to them—and their anger was taken out not at me personally but at the institution I represent."
The House and the Government have to accept that collectively we are the institution against which that anger was vented. That is important. We have to take seriously the uncertainties and fears of people on the islands.
To an extent I am repeating remarks that have already been made this morning, but if we recognise that two thirds of the jobs on the island depend directly on British Government subvention—the hon. Member for North-West Hampshire (Sir D. Mitchell) said that it was 75 per cent., I think—that the direct bilateral aid budget is more than £8 million but was £11.7 million at the beginning of the decade and that that decrease has paralleled an increase in unemployment from a little under 8 per cent. to the present 17.5 per cent., we must also accept that the worries and fears of the islanders are legitimate. While we are not talking of a third world economy, nevertheless it is not an economy in which people are individually or collectively well off.
While I took considerable comfort in the comments about the progress of the fishing industry, which is clearly to be welcomed, that industry is a relatively modest employer. Even if we envisage great change, it will probably still remain a modest employer for some time to come. The hon. Member for Salisbury (Mr. Key) asked a question about the number of businesses since 1984 that had taken advantage of the taxation breaks available on the island. The answer shows that in the two years for

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which figures are available, one cabinet maker and one coffee producer had done so. Business formation at that rate will not resolve the problems.
That brings us to the issue of what the islanders want, what the ODA wants, and what the Foreign Office wants. We recognise that economic development will depend on significant input from Britain—however we engage the private sector, the commitment of the public sector will be needed. Will the Minister comment on the strategic review and the country policy plan which either has arrived or is due arrive on his desk this month? We need to know what are the implications for bilateral aid. The need for consistency of aid has already been emphasised; people need an element of certainty in order to operate successfully. That is a legitimate demand, to which I add my voice.
Will the Minister comment on what is known about likely future flows of inward investment? It is clear that inward investment of some sort will be needed—whatever self-help can do, there is neither the level of capital nor the potential for formation of capital on the island to make the necessary investment without outside intervention. What estimates have been made of the potential for investment? In addition, will the Minister comment on what assessment has been made of the viability and growth of traditional industries such as fishing, which has already been mentioned, agriculture and forestry? They have some potential, but one would not want to overestimate their likely impact.
The industry that all hon. Members who have spoken today have mentioned is tourism. When I returned from the Falklands recently and passed through Ascension island, I was lobbied during my brief sojourn on the issue of tourism and on the need to examine both the viability of tourism on Ascension in the interests of Saints who have given many years of service to Britain and to the British Crown, and the possibility of having a two-centre approach. The hon. Member for Sevenoaks mentioned that his report to the Commonwealth Parliamentary Association referred to the opportunity to link the futures of Ascension and St. Helena in a little tourism matrix, as a unique niche form of tourism.
That would depend on transportation links and hon. Members have said that there is a trade-off to be made between the potential arising from air links being opened up and the impact—possibly damaging—on the existing sea route. There must be a strong case—indeed, the Minister may confirm that it is already being done—for carrying out a serious feasibility study into the linkage between the different transportation systems and the development of a tourism industry that could allow the islanders, in a guided way, to exploit the island's resources.
I want to pick up one of the points raised by my hon. Friend the Member for North-West Hampshire. It seems ridiculous that, not only potential, but real demand for tourism is being turned away because of the lack of facilities that would probably require only a relatively modest investment. I urge the Minister to take that matter seriously as part of his consideration of developments that could be achieved in the short term.
In my remarks on the economy of the island, I hope that I have demonstrated that the commitment of any Government of this country to the island must be genuine.
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I shall now return to the four Cs raised by the hon. Member for Sevenoaks. I have already touched on communication in my comments on transportation links, but there is another aspect to that. I am aware that the island currently receives Cable News Network, courtesy of Cable and Wireless. It might be out of the question, but in view of my personal enthusiasm for the service I want to ask the Minister about the role of the BBC World Service, both radio and television. St. Helena is not only an English-speaking community, but a British community. From my visits to South America, I know of the demand that Britain should have a presence there and that BBC television should be made available. I should have thought that the possibility of extending the BBC service to St. Helena at reasonable cost to the islanders should at least be considered.
All that I can say in respect of citizenship is that I recognise that from the bishops commission—now the citizenship commission—onward there have been demands for citizenship and that will continue. There is no easy answer that I can offer on behalf of a future Labour Government and I shall not pretend otherwise, because that would be dishonest. I shall listen with interest to the Minister's comments.
On the issue of constitutional arrangements, I was concerned by the comments of the hon. Member for Sevenoaks on the legal framework—whether it was adequate and whether it could change quickly enough to respond to the needs of the islanders. That might have an impact on constitutional matters, for example, whether the constitutional settlement is such that the pace of legal change can be rapid enough to respond to the need to welcome business investment.
My hon. Friend the Member for Wrexham (Dr. Marek) has a detailed knowledge of these matters and I was interested in his remarks about the case of the school teacher. I accept and understand the Minister's explanation, but hon. Members must ask themselves whether issues should have to be raised with a Minister in Britain when they might be resolvable at local level. I am sure that the case raised by my hon. Friend would have been resolved in everybody's interests at local level had the local authorities had the necessary powers. That case calls into question whether the current constitutional settlement is one that we would want to promote in the modern world.
We are not talking about a colonial regime of times gone by, but about people who should be given the maximum encouragement to help themselves. That self-help should extend not only to economic matters, but to issues such as local control and self-government where that is appropriate. I ask the Minister to tell us about the various constitutional reviews that have taken place, including the CPA review, and where they fit into the framework. I urge him to consider carefully whether the time has now come for a proper examination of the island's legal capacity and of the potential for local control.
This has been an important debate, because it forces hon. Members—especially me in my capacity as a Labour party spokesmen and as an individual Member of Parliament—to recognise that issues of concern are outstanding and that they are the responsibility of the House of Commons. We cannot duck that responsibility. The relationship between St. Helena and Britain cannot

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and will not be dissolved—our commitment exists and we have to examine how we can honour that commitment as we move into the 21st century.
12.17 pm
The Minister of State, Foreign and Commonwealth Office (Sir Nicholas Bonsor): I add my thanks to those already expressed to my hon. Friend the Member for Sevenoaks (Mr. Wolfson) for raising this issue. I welcome the opportunity to set out the Government's position, to explain some of the issues raised by hon. Members today and to state clearly the way in which we propose to deal with the problems in St. Helena.
I agree with my hon. Friend that the state of St. Helena's economy is precarious and that it requires our closest attention. I assure the House that it is getting that attention. The diplomatic and aid wings of the Foreign and Commonwealth Office are keenly focused on the need for positive and real change. I assure the hon. Member for Stretford (Mr. Lloyd) that there is no question of complacency on the part of the Government—we are addressing these important issues vigorously.
Everyone who has the welfare of St. Helena at heart agrees that the status quo is not an option. The problem, as we have known for some time, is that economic and social pressures, when allied to aid dependency, can only lead to a downward spiral of economic stagnation. As with all the remaining dependent territories, we care very much about the welfare of St. Helenians and share wholeheartedly their desire for a better and more prosperous future. Our task, along with that of the St. Helena Government, is to shape that desire and turn it into reality.
Our continuing commitment to the island is evidenced by our aid support, which, as my hon. Friend the Member for Sevenoaks and others mentioned, is more than £8 million a year. That equates to some £1,500 per head of population and is the highest per capita package of UK aid in the world. It is testimony to the seriousness with which the Government take their responsibilities towards the island and shows the importance that we attach to it.
However, we and the "Saints" themselves want to see a reduced dependency on aid, not only because of the burden on the UK taxpayer under the present circumstances, but because we want a self-sufficient, confident and economically viable St. Helena. Neither we nor the Saints want the island held back by financial dependence on the United Kingdom. We want the island to develop. We are committed to a process of change. To paraphrase the St. Helena Government's stated vision for the future, we want economic development to lead to a prosperous future for the island.
Private sector development and public sector reform are the keys to the island's future. To begin that process, we are negotiating an important three-year country policy plan with the St. Helena Government. The basis for the agreement was the St. Helena Government's strategic review, which was completed last year. The document results from a great deal of hard work by the St. Helena Government and the governor, and we congratulate the team on its efforts. The strategic review provides a comprehensive approach to St. Helena's economic and social development.
The country policy plan will set out action plans for each sector. A specific plan will encourage inward investment and private sector development. We shall help
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with this in every way we can. The plan will also highlight how the Government can either transfer activity to the private sector or deliver services more efficiently through the public sector.
There has been a degree of concern on the island about the Government's public sector reform programme and its social consequences and that has led to some of the matters that have been mentioned, particularly by the hon. Member for Wrexham (Dr. Marek). I appreciate that there have been difficulties between the governor and some of the inhabitants of St. Helena, and I have no doubt that the governor is trying hard to deal with the exceptionally difficult circumstances which the state of the economy in St. Helena has imposed on him. It is not easy for reform programmes to be put in place without a certain amount of short-term hardship and discontent, but I hope that those circumstances can be resolved and that, as the policy plan is put into effect, we shall improve St. Helena's economy and get over the problems that have been mentioned in the House today.
For our part, the plan would commit the ODA to a substantial aid package spread over the next three years, which would give the St. Helena Government more responsibility for their own affairs. They could divert savings from within the budgetary aid element of that framework to other priority areas of Government expenditure. Thus, they would maintain firm control on their own expenditure programme and be able to prioritise accordingly in a way which hitherto they have been unable to do. I hope that that will reassure my hon. Friend the Member for Sevenoaks, who raised the question of the inability of the St. Helena Government, particularly LegCo and ExCo, to play a full part in handling the economy. As we move forward with our plan, those difficulties will be resolved.
St. Helena's isolation proved useful in Napoleonic times and at other times in the past, but in today's world it is a major drawback. It is approximately 1,200 miles from the nearest continental land mass and it takes five days by ship to Cape Town. Physical isolation means that the cost of St. Helena's products when they are exported are high, which is obviously a substantial brake on the island's potential for economic development of the export market. Isolation also deters potential investors from spending their valuable time getting to and from the island to explore ideas for development. We need to find ways around this. I accept the points made today about the need to develop a wharf and to examine air services and I assure the House that the Government are looking closely at those issues.
The RMS St. Helena provides a vital link between the island and the outside world. It is a modern, well equipped ship funded by the ODA and it serves St. Helena and her people well, and long may she continue to do so. As the hon. Member for Stretford said, neither he nor I have had an opportunity of getting to St. Helena, unfortunately. I believe that those who have travelled on RMS St. Helena have found her comfortable and have been extremely well looked after. She should be an asset not only as a means of communication for Saints but to encourage tourism, and I hope that many more people will use the opportunity. As the House knows, we have altered the ship's schedule so that long-haul journeys have been reduced and short-haul local journeys increased. I hope that that will enhance both those opportunities. We shall

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continue to seek the best balance in the schedule between the island's transport needs and the need to make the ship commercially viable.
Several hon. Members touched on the possibility of providing an airport on the island. We continue to keep that under review, but I shall not hide from the House the fact that such a project would be extremely expensive and currently difficult to justify. One problem would be to find a commercial air service able to run a viable route to the island. Another problem is the enormous expense of building a modern airport that conforms with Civil Aviation Authority rules. The distance from Cape Town means that we would need fairly large long-haul aircraft to make the journey. Moreover, the difficulties of providing an airport on St. Helena are great but we are looking at that problem and I hope that we can find ways around it in due course.
Inward investment is absolutely vital if the island is to prosper. It will breathe new life into the economy. The current cash flow is tiny and the existing private sector is saturated with small service industries. We need new productive investment, encouraged by the St. Helena Development Agency. We also plan a new business forum in London whereby we hope to encourage investment and focus the attention of people in this country on the opportunities that St. Helena offers.
As has already been said, the fishing company, Argos, is leading the way and I welcome the investment that it has put into the island. It is extremely good news as it will create some 40 jobs, which represents about 10 per cent. of the island's unemployment rate. It is worth noting that we do not need extensive investment to deal with the unemployment problem. About 450 people, representing 18 per cent. of the island's work force, are involved. That should not present insuperable problems so long as we and the St. Helena Government work together, as we shall.
Unfortunately, I have very little time with which to deal with the many points that have been raised, so I intend to take some of the more important ones. I mentioned the difficulties that the governor has had on the island. I assure the hon. Member for Wrexham that the ODA consults strongly with the island. Of course, the islanders are sometimes disappointed that the ODA does not accept
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their plans but the reason is that the ODA does not think that those plans are viable, and the islanders' well-being is the primary reason for any decision that has been made.
I take the opportunity, while touching on inward investment, to commend the work of Mrs. Essex, who is listening to this debate today. She will return to the island in May and has done a phenomenally good job as its representative in this country. I wish her well and hope that her labours will bear fruit.
Hon. Members mentioned constitutional change. There again, we now have the CPA plan at which the St. Helena Government are looking closely. Her Majesty's Government will look with great sympathy at any proposals put by the islanders for constitutional change. It is in our interests as well as those of the islanders that those matters should be satisfactorily sorted out so that the balance of responsibility reflects the reality of the day.
My hon. Friend the Member for North-West Hampshire (Sir D. Mitchell) raised a series of important points. He asked about the training and work experience scheme in this country. I assure him that the scheme is unlimited in terms of the numbers which we would take and it therefore offers great opportunities to St. Helenians to get the necessary work opportunity to stimulate investment so that their expertise can be used on the island.
Sir David Mitchell: Will my hon. Friend give way?
Sir Nicholas Bonsor: No, I do not have time.
I accept my hon. Friend's point about the age limit of 35. My officials are looking into that and I hope that we shall find ways to raise it. I accept that it would be useful if slightly older people could be included in the scheme.
With regard to the wharf, detailed proposals are being put forward to build a breakwater and to improve the anchorage at St. Helena so that we can get the tourists in on the cruise ships and make sure that ships can be loaded and unloaded, whatever the weather.
Finally, on Swegame, we are not prepared to allow an Internet lottery. It takes place on Gibraltar without the consent of the Government or the Governor of Gibraltar. We are investigating how that happened. We cannot yet resolve the difficulty of regulating an Internet lottery, but we hope to do so in the future.

House Condition Survey (Energy Reports)
12.30 pm
Dr. Lynne Jones: Last week the Birmingham Evening Mail published a letter from Mr. Thornton of Weoley Castle, who is a war veteran in his seventies. He stated:
"At the time of writing, the temperature in the kitchen is 42 deg F"—
that is about 5.5 deg C—
"and in the bedroom it is 34 deg F"—
about 1 deg C above freezing.
As the Minister knows, such conditions do not meet even the minimum Government standards for safeguarding health. Sadly, Mr. Thornton's conditions are not an isolated case, as is amply demonstrated by the house condition survey report. I commend the Government for commissioning the detailed work in that hefty document. It has been a long time coming—the survey took place in 1991–92. Although the report states that there has been little change in the situation since then, a new survey is to be undertaken.
It has taken several years for the report to be published. Its publication was originally planned for the summer. I do not know why it was not ready then; the Government were probably aiming for it to be published in the recess. In the event, it was published two days after the Budget and, unfortunately, received little publicity. No one seems to have seen the Department of the Environment press release on the subject. I am pleased that this Adjournment debate allows me to give the Government the opportunity to discuss such an important report.
In 1983, the Conservatives promised to make Britain the best housed nation in Europe. The contents of the survey show how badly they have failed in that aim. The report is an indictment of almost 20 years of Conservative government. It shows that one in five dwellings in the social housing sector, two in five in the private rented sector, and even one in 10 in the owner-occupied sector have energy ratings that show them to be grossly inefficient. On the Government's standard assessment procedure scale, which goes from one to 100—100 being the most energy efficient—those are the proportions of types of homes that are less than 20 per cent. energy efficient. Although I gave the proportion of only one in 10 homes in the owner-occupied sector, that represents 1.3 million dwellings, which is the largest number of dwellings in any sector that are grossly inefficient.
The report states that when the temperature is 4 deg C, which is above the temperature that triggers cold weather payments to people on low incomes, 50 per cent. of owner-occupied housing, 62 per cent. of council and social housing in the housing association sector and 95 per cent. of private rented housing fails to achieve even the minimum standards to safeguard health as laid down by the Government. More than one in three households would need to spend more than 10 per cent. of their income on fuel to achieve the more comfortable standard heating regime. By that standard, more than 60 per cent. of lone pensioners underspend on heating. No wonder in the first two weeks of this year the Government's Office for National Statistics reported 10,000 excess deaths. Mr. Thornton is, indeed, not an isolated case.
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The report states that, despite the mild weather in 1991–92, only 25 per cent. of the homes surveyed fully met the standard regime for temperature, and only 70 per cent. conformed with the minimum regime. It is reckoned that, to achieve the 30 per cent. energy efficiency savings laid down in the Home Energy Conservation Act 1995, expenditure of £80 billion will be required. The Government have accepted that target.
The Department of the Environment circular on the 1995 Act issued in early 1996 states that the Secretary of State takes the view that improving the energy efficiency of residential accommodation is important because of the environmental impact of energy use in the domestic sector—estimated to be responsible for more than 25 per cent. of emissions of the main greenhouse gas, carbon dioxide—and because of the desirability of ensuring that every household has access to affordable warmth. I am sure that all hon. Members support that aim, but the report shows how far we are from achieving it.
The guidance notes go on to say that the Secretary of State takes the view that an overall improvement in energy efficiency of 30 per cent. in residential accommodation covered by the Act in England alone is to be regarded as significant, and gives advice accordingly.
The report states that £25 billion to £80 billion is needed to meet that target. It also states that one in five homes cannot be improved to current building regulation standards, and recommends that they should be replaced with new homes. That would mean a massive increase in the house-building programme, in line with the building programme that occurred after the war.
I am sure that the Minister will say that the report tells us that most households are satisfied with their heating systems—only 13 per cent. are not. It is difficult to square that with the objective findings that show the appalling state of our housing stock in terms of energy efficiency.
In case study 4, which deals with a family of owner-occupiers who bought their low-rise flat from the local authority, the family stated in the questionnaire that they were fairly satisfied with their heating system, which was a rather old central heating system. The report notes, however, that at the start of the interview the family voluntarily identified heating as something that they were unhappy about. There seems to be a problem with the collection of the statistics. Nevertheless, I congratulate the Government on the report, which shows how much work needs to be done to bring our housing stock up to scratch.
What have the Government done to bring about such a sorry state of affairs? When I first became involved in politics as a councillor in Birmingham, we had a housing investment programme of £75 million a year. I have checked with Birmingham council, and the housing investment programme allocation for next year is £28 million. One must take into account the difference in prices between the 1979–80 figure of £75 million and the 1997 figure of £28 million, which demonstrates the enormous reduction in investment not just in the council housing sector but in housing associations.
In its 1992 election manifesto, the Conservative party claimed that it was spending £2 billion a year on the housing association sector. That expenditure was reduced to about £650 million in this year's Budget—a massive cut that exemplifies the Government's failure to honour their pledge to the country in 1992. It is just another in a series of broken Tory promises.

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Reduced investment leads to all sorts of misery. I know from my surgeries the appalling conditions in which many of my constituents are living. Only 5 per cent. of council-owned stock in Birmingham has energy ratings that meet current building regulation standards of 70 per cent. energy efficiency. Some 15,000 homes are below the national average of 35 per cent. energy efficiency—which is itself too low and needs attention. It is reckoned that it will cost £1.3 billion to raise council housing in Birmingham to modern standards—and, as I have said, the council's housing investment allocation this year is only £28 million. That illustrates the Government's sorry record in this area, particularly their failure to honour their manifesto commitments.
The Government's energy efficiency programme also comprises the home energy efficiency scheme. The Chancellor increased spending on the scheme to £100 million in his 1994 Budget Statement—a mere drop in the ocean in view of the scale of the problem. However, the Government could not maintain even that level of spending and, despite promises from the Chancellor and two other Ministers to maintain it for three years, in November 1995 it was cut to £75 million. That caused many redundancies in firms operating home energy efficiency programmes. Expenditure has not increased this year, and remains at £75 million. We should contrast that figure with the £60 million in assistance provided to those on low incomes through the cold weather payments scheme.
We must invest in our housing stock. There are many ways to do it, but the Government are failing in that task. Although £80 billion sounds like a lot of money, the same sort of sum was spent on Trident. We cannot bring that money back, but it would be good if, as we approach the 21st century, the Government—hopefully, there will be a new Government after the election—would give a commitment to tackle the problem and make Britain the best housed nation in Europe. It is not an insuperable problem: it could be done. The Government recently announced their intention to spend £15 billion on the Eurofighter aircraft. Those aircraft were conceived during the cold war and are now unnecessary. That money could be used to improve the energy efficiency of our housing stock, which would have a favourable impact on global warming and do more to ensure global stability than military spending of that nature. Perhaps that funding could be targeted.
I am pleased that my right hon. Friend the shadow Chancellor has committed the next Labour Government—who I am sure will soon be in office—to a programme of energy efficiency funded by the windfall levy on public utilities. It is most appropriate to spend the excess profits of the gas and electricity industries on a programme to improve energy efficiency, reduce fuel consumption and make people more comfortable.
The debate gives the Government an opportunity to announce their plans for the future. They have failed to tackle the housing problem in their 18 years in office—I wonder what commitments they will make in their next manifesto. The Government must pull their socks up if they are to perform at a level anything like that needed to make Britain the best housed country in Europe—an aim that we must all share as we approach the millennium.
12.44 pm
The Parliamentary Under-Secretary of State for the Environment (Mr. James Clappison): I welcome this opportunity to debate the important subject of home energy efficiency. It will probably be no surprise to the hon. Member for Birmingham, Selly Oak (Dr. Jones) to learn that I do not agree with the conclusions that she has drawn from our report. I do not believe that any objective interpretation of that report supports her conclusions. Nevertheless, I welcome the opportunity to debate its important findings.
In the words of the hon. Lady, this is a very hefty report. It is the most comprehensive and detailed review of the energy efficiency of the housing stock yet published, and it represents a very careful analysis by the Building Research Establishment of a formidable body of survey data. As the hon. Lady said, we published the report in November last year. I assure her that there was no delay in releasing the information, and results were published as they became available. Early findings were published in the main report of the English house condition survey 1993 and further results were published in 1995 in the Department of the Environment's guide on energy efficiency in council housing.
The hon. Lady selected some figures from the report and placed her own interpretation on them. I do not deny that some households have faced difficulties, especially during the extremely cold weather that we have experienced in the past few weeks, but her selective use of the report's evidence fails to do justice to the subject and does not put the figures into proper perspective.
The starting point for the debate should be the fact that this country's housing stock is relatively old. That brings some advantages: many people value the style, space and arrangement of older houses, but they were constructed when fuel was cheap and when the technology of energy conservation was not well developed. The price we pay is a housing stock that is energy inefficient but which can be—and, crucially, is being—improved. Although the houses are technically inefficient, the survey shows clearly that the great majority of households—some 87 per cent.—are satisfied with their heating. Although we know that elderly householders face particular difficulties, the survey shows that more than 90 per cent. of householders over 60 years of age are satisfied with their heating.
I am especially encouraged by the fact that the figures have improved continually. A similar survey carried out in 1986 found that only 80 per cent. of householders were satisfied with their heating. That is some measure of the improvements that have been made since then. Successive reports of the English house condition survey have shown that great strides have been made in home heating standards in recent years. In 1971, only one in three homes had central heating. By 1991, the proportion of homes with central heating had risen to more than four in five and ownership of homes with central heating continues to grow.
Moreover, in 1971, nearly one in four households still heated their homes with coal fires. By 1991, that proportion had dropped to fewer than one in 15. Nearly 80 per cent. of households now enjoy the convenience and increased efficiency of gas-fired heating. Similarly, the standard of insulation has improved dramatically in the past 20 years. The number of homes with insulated lofts

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has more than doubled from 42 per cent. to 90 per cent. The percentage with insulated cavity walls has increased tenfold in the same period and the proportion of homes with double-glazed windows has increased sevenfold.
Most households have derived the benefits of those improvements in increased comfort and, as a result of those improvements and the increasing use of domestic appliances, energy consumption has remained at broadly the same level. Without those improvements in insulation and in the efficiency of heating and other appliances, it is estimated that fuel consumption could have risen by 50 per cent. The switch from coal to gas has produced a significant reduction in carbon dioxide emissions and made a contribution to the substantial progress that we have achieved in meeting our climate change commitments under the climate change convention.
Our homes are generally much warmer than they were 20 years ago. That has direct benefits in comfort and health. Although housing conditions are not the sole cause of excess winter deaths, the fact remains that the number of such deaths has halved since the early 1970s. It is not unreasonable to assume that that is in part a reflection of improvements in the way in which homes are heated. Nevertheless, we recognise that while homes remain energy inefficient, some households will continue to face particular difficulties. That is why cold weather payments are made available to those who are most vulnerable in periods of cold weather. So far this winter, more than 5 million payments have been made, totalling £43 million.
We fully accept, as the report shows, that there remains a good deal to be done. The Government are pledged further to improve energy efficiency as part of our commitment to sustainable developments and to containing United Kingdom carbon dioxide emissions, taking into account resource and economic considerations.
The domestic sector is responsible for nearly 30 per cent. of carbon dioxide emissions. We have taken many initiatives to improve the energy efficiency of domestic dwellings. With the aim of increasing the energy efficiency of new housing and reducing carbon dioxide emissions, the Government amended part L of the building regulations dealing with the conservation of fuel and power in 1990, and again in 1994. The 1994 amendment extended the provision for energy conservation to the conversion of existing buildings. New homes are now highly energy efficient.
As the energy report shows, however, there are many vulnerable households living in older property that find it difficult to heat their homes adequately. The largest single programme in the Government's energy efficiency programme is targeted on those households. The home energy efficiency scheme provides grants for basic home insulation and advice for householders who receive an income-related benefit, a disability allowance or who are aged 60 or over. The budget is about £73 million in 1996ߝ97, equivalent to about 400,000 grants.
Dr. Lynne Jones: Will the Minister explain why the Government did not honour their commitment to spend £100 million for three years after 1994–95?
Mr. Clappison: As the hon. Lady may know, that is linked to changes in the application of value added tax on domestic fuel. We have maintained our commitment to a
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substantial programme to help the households that I have described with home energy efficiency. The hon. Lady will be pleased to know that we have recently announced a 3 per cent. increase in the budget for 1997–98, to take spending up to £75 million.
The scheme is popular and well regarded, and has already helped more than 2 million households—10 per cent. of the stock—since it was set up in its present form in 1991. That represents 2 million low-income and disabled households which have been able significantly to increase their comfort levels and keep themselves warm. The environmental benefits of the scheme are, rightly, secondary to its social benefits. Even so, they are not negligible, as the measures are long lasting and will, over time, contribute significantly to reduced carbon dioxide emissions.
My hon. Friend the Minister with responsibility for energy efficiency recently announced significant changes to the home energy efficiency scheme to make it even better. From later this year we shall be introducing new measures, such as cavity wall insulation and heating control upgrades, in addition to the basic measures of loft insulation, draught proofing and pipe and tank lagging.
Home energy efficiency schemes will continue to provide a high-quality programme of improvements to the housing stock. In recent years, the scheme has been supported by other programmes of improvements, especially those promoted by the Energy Saving Trust in partnership with the electricity regulator and the regional electricity companies under the general title of standards of performance. We have recently announced further Government support for the Energy Saving Trust. About £71.5 million will be available to the trust from 1996 to the year 2000 to promote the efficient use of energy, an increase of £21.5 million on previous public expenditure plans for the years 1996 to 1999.
The Government have fully recognised the role that local authorities can play. Under the Home Energy Conservation Act 1995, which came into force in England in April 1996, local authorities are required to prepare and publish reports on the energy efficiency of all the residential accommodation in their areas. The reports must identify practical and cost-effective measures that will significantly improve the energy efficiency of those dwellings.
The Government have played a full part in ensuring that the aims represented by the Act can be achieved. We have issued guidance, prepared with the full co-operation of local authority associations and other bodies with an interest in energy efficiency, which has stipulated that a "significant improvement" will not be less than 30 per cent. Detailed assistance with the preparation of the report has been provided, including free software to help authorities to assess the housing stock in their areas.
As a further part of the framework supporting implementation of the Act, revised guidance to local authorities on developing and implementing effective energy efficiency strategies for all housing in their areas is in preparation. This will update and supersede the well received guidance that the Department first issued in 1993 on energy efficiency in council housing.
The result of the Home Energy Conservation Act will be a 10 to 15-year programme to bring about a comprehensive improvement to the housing stock. For the

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first time, statutory authorities have been given a duty to take energy efficiency seriously, and we have made it clear that we expect to see results.
The Act extends local authorities' sphere of influence into the private sector. It recognises the unique position of local authorities to bring a strategic oversight to energy issues. The great majority of homes are in private ownership, and that means that the responsibility for taking necessary action must rest with owner-occupiers and landlords. Local authorities, however, are well placed to encourage that action through information, advice, education and publicity, and the Act lays great emphasis on that. It also provides an opportunity for partnerships with a wide range of other agencies.
In addition to the activities to which I have referred, through the Home Energy Conservation Act, energy efficiency has also been achieved through the new estates renewal challenge fund competition. A total of £174 million was allocated in June 1996 under the first round of the scheme to 11 authorities to facilitate transfers of poor quality local authority housing to registered social landlords. Estates renewal challenge fund money is going towards essential improvements to the stock, which are necessary in many instances to bring homes up to modern standards and to make a transfer viable.
A number of round 1 schemes include measures such as new double glazing, roof insulation and insulation through the cladding of tower blocks. These and other such improvements will greatly improve the energy efficiency of the homes concerned. That will in turn improve the living standards of tenants, save them money in meeting heating bills and assist in making the estates attractive investments for the private sector. These are part of the wide range of activities that we are undertaking. There is also the work that we are doing through private sector renewals and the home improvements agencies, all of which is bearing fruit.
I hope that I have set out the positive measures that we are taking to improve existing stock. As I said at the outset, the starting point for the debate is the fact that much of our housing is relatively elderly.
I listened carefully to the hon. Lady's arguments. By implication—I noted this in passing—there was a strong and pronounced plea from the hon. Lady for additional
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public spending, including public spending on house building. She referred to the targets that have been set by the shadow Chancellor, but she knows that the activities that are to be funded through moneys raised through the windfall tax do not extend to house building.
Dr. Jones: Will the Minister give way?
Mr. Clappison: I shall not give way again.
The hon. Lady should know that we are meeting our target on social housing. It seems that she is making a plea for considerable increases in public spending in that area, as well as a diversion of expenditure from defence. It is not clear whether she wants a diversion of public expenditure or additional expenditure. The hon. Lady is nodding, which leads me to think that she is in favour of additional public expenditure. These are matters of interest. She made the charge that we have not spent sufficiently on social housing. She will know that we have set a target of 60,000 social housing properties below market rent, and we are achieving that without the additional spending and building that she seems to favour, which was a very pronounced feature of her speech. I hope that that fact will not be lost.
We have already achieved a great deal through a range of programmes and public spending and are bringing about a pattern of improvement that is—
Dr. Jones: On a point of order, Mr. Deputy Speaker.
Mr. Deputy Speaker (Mr. Michael Morris): I hope that it is a matter for the Chair.
Dr. Jones: The Minister is attempting to prevent me from making a contribution and from responding—
Mr. Deputy Speaker: Order. The hon. Lady knows that that has absolutely nothing to do with the Chair.
Mr. Clappison: I have given way to the hon. Lady once already.
I conclude by saying that we have done a great deal, and the objective interpretation of the report is one of improvements—
Mr. Deputy Speaker: Order. We must now move to the next debate.

US-UK Air Service Agreement
1 pm
Sir Peter Fry: I am honoured that my right hon. Friend the Secretary of State will reply to my humble debate. It shows the significance and importance of the subject that I am raising.
The talks between Her Majesty's Government and the United States Government on changes to the bilateral air agreement between our two countries are of the greatest significance for civil aviation in this country. The move towards an open skies policy between us means not only that a new era has begun but probably that our Government will have to play the highest card left in their hands—control of access to Heathrow airport. Therefore it is surprising that this appears to be the first time that the negotiation has been debated on the Floor of the House, and then, alas, for only half an hour. I know that other hon. Members are anxious to take part.
The inevitable background to the talks and the proposed alliance between British Airways and American Airlines is the proposal that 168 slots at Heathrow will be transferred. This transfer is presumed to quieten concerns over the possible dangers to competition arising from the alliance.
Let me make it clear that I do not in any way endorse the view of the European Commission that the issue is its responsibility. A Commission that has allowed and condoned massive handouts to national airlines in France, Spain, Italy and Greece, to mention just a few, has no right to expect confidence in its ability to enforce fair competition.
In addition, I do not raise the issue to attack British Airways. I am well aware of its great success since privatisation. However, some considerations lead me to ask whether all the facets of the issue are being properly examined.
First, if confirmed by the bilateral talks, is the British Airways-American Airlines deal really in the best interests of the consumer? At the moment, the two airlines have a 100 per cent. monopoly of 13 transatlantic routes, and 80 per cent. of other routes, particularly the important ones—London-New York, London-Boston and London-Chicago.
Many of the slots that are supposed to be released will be only on a temporary lease and will not, in the eyes of many other airlines, really provide powerful enough competition, especially as they would have to be divided between seven competing airlines wanting to run new services from Heathrow, at least two of which are British. Such a monopoly on so many routes is not healthy. As we have seen over the years in Europe, we know to our cost that many fares are still too high. It is clear that at least three carriers are needed on each route to ensure adequate competition.
There is a further concern that British Airways, having given up some slots, could switch the use of other slots that it currently holds. There is a worry in some regions of the country that that could affect regional services, so they will require some guarantee or reassurance on that point.
If the intention is to strengthen competition, how can British Airways suggest that it sells its slots at about £3 million a time? That would amount to approximately
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£500 million for British Airways. I have never understood how any airline can claim to own something for which it has not paid, and which is of value solely because of Government action, for example licensing services into Heathrow.
As a member of the Select Committee on Transport, I asked the former Secretary of State for Transport, my right hon. and learned Friend who is now Foreign Secretary, what his views were. His response was similar to the remarks that he made to the American Chamber of Commerce on 24 July 1991. He said:
"No airline has a legal right to a landing or take-off slot. Rather, airlines have permission, and this must be subject to the public interest … People, rather than airlines, come first. The government will decide aviation policy on the basis of what is best for the travelling public, and if this conflicts with the interests of any individual airline, the former will take priority."
He concluded by saying:
"British Airways has benefited over the years from the competition it has received from smaller British airlines. The government will continue to seek to extend the opportunities for all British airlines in Europe, in the United States and right around the world."
Will my right hon. Friend tell the House whether Her Majesty's Government's policy on this point has altered? If so, when and why? If an airline sells only some of its slots and continues to use others, keeping the payments that are made for them, it has extra resources available to fight competitors.
My third question is whether Her Majesty's Government should make an agreement with the United States soley on the basis of the British Airways-American Airlines alliance. Many will argue that there are other considerations, such as the need not just to consider the consumer but to benefit other British airlines that also wish to use Heathrow more—British Midland would like to develop new European routes and says that it needs more slots to do so, and Virgin Atlantic also wishes to increase its intercontinental services—let alone meeting the need to make room for new services from new competitors.
Is there not a danger that if US negotiators feel that our overriding concern is to cement the British Airways-American Airlines deal they will not offer us much else in the negotiations? There are those who fear that a one-sided open skies policy would allow the United States to enjoy extra freedom rights beyond the United Kingdom to Europe and further afield, while British airlines, including British Airways, would gain no greater access to the US domestic market, which is by far the largest in the world with nearly half of all aircraft movements.
The possibility of giving away entry control at Heathrow has led others to ask for more meaningful access in the United States for all UK carriers that want it. The question of cabotage should surely be on the agenda for the intergovernmental talks.
I say to my right hon. Friend that I fully understand why the Government want to help British Airways in its competition with the biggest of the world's airlines, all of which are based in the United States. I suggest to my right hon. Friend that we should never forget that other United Kingdom airlines exist, and they deserve encouragement. I refer to his predecessor's speech from which I quoted.
At this moment we should recall the treatment of Laker Airways, which competitors froze out of the market, and where compensation was paid only long after the airline

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ceased to fly. I hope that my right hon. Friend will agree that that episode was not the happiest memory in the history of British civil aviation.
My fourth question relates to the ownership of airlines. We know that current United States law forbids foreign ownership or control of a United States airline. That means that, unless the law is changed, British Airways—or any other British airline—can never take over any American airline. Certainly, BA cannot take over American Airlines. Can my right hon. Friend tell the House of any similar legal device that would prevent American Airlines, or any other foreign airline, from taking over BA? In view of what has happened in the public utilities, I suspect not. Moreover, I understand that between 20 and 25 per cent. of BA shares are already in the hands of American investors.
My fifth question relates to the Government's intention regarding the treaty negotiations, and the apparent advantages and disadvantages to be gained or lost from any change. In an attempt to obtain information, I tabled a question to the Secretary of State—Question 5657—in November. I asked
"what information he has asked the CAA to provide concerning benefits to the United Kingdom that would arise from the proposed British Airways-American Airlines alliance; and what factors underlie changes from the previous practice in respect of consultation with the CAA."
A junior Minister replied:
"It is for the competition authorities to analyse the proposed British Airways-American Airlines alliance. I understand that the CAA has contributed to the analysis carried out by the Office of Fair Trading."—[Official Report, 29 November 1996; Vol. 286, c. 420–21.]
Not surprisingly, that reply did not entirely satisfy me, and shortly before the Christmas recess I tabled another question. I asked the Secretary of State whether his officials had discussed with the CAA
"the issue of commissioning a balance of benefits study in relation to the renegotiation of the US-UK Air Service Agreement (Bermuda II); and what assessment he has made of the adequacy of the analysis in relation to the bilateral talks."
The same junior Minister replied:
"Officials regularly discuss UK-US aviation matters with the Civil Aviation Authority, and such discussions have included the feasibility of an overarching 'balance of benefits' study of liberalising UK-US air services. We decided not to instruct the CAA to undertake such an analysis; the number of variables which would need to be taken into account, and assumptions which would have to be made, would make it impossible to model results which could be treated with any confidence. I am however satisfied that UK negotiators are fully briefed for the current series of bilateral talks."—[Official Report, 13 January 1997; Vol. 288, c. 111–12.]
I find that reply remarkable. I have been given to understand that, in the past year or so, the Department itself has requested the CAA to undertake an analysis of the benefits or disbenefits of a European-US open skies agreement. That is clearly much more complicated than the UK-US bilateral. I have also been informed that the CAA has been prepared to produce such an analysis for the present situation. I feel that I must ask my right hon. Friend to explain why the Department abandoned the chance to obtain a balance-of-payments study.
Furthermore, if no such study or analysis can be conducted, will it not be more difficult for the House and all interested parties to judge how successful or otherwise
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the negotiations turn out to be? Even our own negotiators would surely have been assisted by an analysis. It could even be asked how my right hon. Friend himself can be sure that any agreement is in the best interests of the United Kingdom's airlines and consumers.
I realise that I have asked my right hon. Friend a number of questions that he may not have time to answer fully today, but I believe that they need to be answered, and I hope that he will assure me that answers will be forthcoming.
Let me repeat that I have great admiration for British Airways and its achievements. Some critics, however, feel that it has somehow managed to "sew up" the Department of Transport on the question of the bilateral, and I think that such suspicions will only be confirmed by cagey departmental replies to the questions being raised. According to some newspapers, the chief executive of British Airways has also "sewn up" the Labour party in exchange for his advice to the Leader of the Opposition. I sincerely hope that neither statement is true, but, if either were true, it would not reflect well on the civil aviation policies of either of the main political parties, both of which are now supposed to believe in competition and value for the consumer.
Mr. Brian H. Donohoe: Will the hon. Gentleman give way?
Sir Peter Fry: I am sorry; I have only a short time left.
I believe that the guiding principles of our civil aviation industry should be fairer competition, less monopoly, greater opportunities for British airlines in foreign markets—including the United States—enabling new services and airlines to come into being, and the long-term consideration of the interests of the consumer. No one will be more delighted than me if my right hon. Friend can assure me that he agrees, and that those are the very principles that will be kept in mind during the current negotiations with the United States. I await his reply with interest, but, as I have said, I accept that he may have to expand on it at a later date.
1.15 pm
The Secretary of State for Transport (Sir George Young): I am grateful to my hon. Friend the Member for Wellingborough (Sir P. Fry) for raising what he rightly described as a very important subject, and bringing his insight and experience of civil aviation matters to our debate. If I do not manage to deal with all his questions, I will indeed write to him and be as helpful as I can.
Let me make two points clear at the outset. The first relates to the position being taken by the United Kingdom in its current negotiations with the United States, which will resume in Washington on 4 February. I hope that the House will understand that it would not be appropriate for me to go into details of the UK's negotiating position here: it would make life much harder for the Department of Transport negotiators if their US counterparts were able to formulate a position based on their reading of Hansard.
We have adopted a robust negotiating posture in the negotiations—so robust, indeed, that the Americans withdrew from them last August. We are beholden to no particular sectional interest in the United Kingdom. Let me respond to the point raised by my hon. Friend at the end of his speech by expressing the hope that the

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UK Government will be able to reach a liberalising deal with the US, to the benefit of consumers, UK business and airlines generally; but I have no quarrel with his broad description of our overall objectives.
Mr. Donohoe: Will not the whole process of the bilateral discussions be improved and strengthened, given that the Governments of both countries have perhaps been dragging their feet in terms of the proposed alliance between British Airways and American Airlines? Will not attention be focused on the process in a way that it may not have been so far? That is why we have been negotiating, or attempting to negotiate, for so long.
Sir George Young: I think that I agree with the hon. Gentleman. My own view is that it is in everyone's interest for a liberalising agreement to be reached between the UK and the US, involving more competition, more services, more innovation and more competitive tariffs, but there are difficulties that need to be resolved before we can arrive at that point.
The second qualification that I need to make clear at the outset relates to the proposed alliance between British Airways and American Airlines. The Director General of Fair Trading is currently considering responses to his examination of the proposed alliance under the merger provisions of the Fair Trading Act 1973 and article 85 of the treaty of Rome. My hon. Friend will understand that, because of the formal position of my right hon. Friend the President of the Board of Trade, it would not be appropriate for me to comment on specific competition or consumer aspects of the proposed alliance. My hon. Friend dwelt on those aspects in some detail. I will, however, draw what he said to my right hon. Friend's attention, and see whether he can respond on issues for which he has ministerial responsibility.
It may help if I set out the current position on UK-US air services. Aviation relations between the UK and the US are governed by the Bermuda II agreement, signed in 1977, which has subsequently been amended on many occasions. As it stands now, the arrangement allows full access by US airlines to all airports in the United Kingdom except for Gatwick and Heathrow, which means that there are no restrictions on carriers mounting transatlantic services to airports such as Birmingham, Glasgow, Manchester and Stansted.
Capacity and designation restrictions apply at Heathrow and Gatwick airports. On the routes operated, rules specify the number of airlines which may operate and the capacity that each side may operate in relation to the other. Only a limited number of routes can be operated from Heathrow—to 12 specified destinations—which are restricted to two carriers from each side: British Airways and Virgin Atlantic Airways, for the UK; and American Airlines and United Airlines, for the US.
Bermuda II is a balanced agreement, providing UK and US airlines with broadly equivalent opportunities. Over the years, market share has typically been split 50:50, although recently the split has been 60:40 in the UK's favour—which is due partly to the capacity UK carriers provide the market by using larger aircraft and to the high quality of service provided by British Airways and Virgin. Anyone who has travelled across the Atlantic on either of those carriers does not need me to point out that they lead the world in the product they offer.
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Since Bermuda II was signed, the market has grown threefold, and the consumer has been well served in choice of destination and competitive fares. It is a UK success story. One in every four passengers travelling between Europe and the US travels with BA or Virgin, and many passengers from continental Europe choose to fly over London with a UK carrier rather than with a carrier based in their own country.
I shall now deal with the point made by the hon. Member for Cunninghame, South (Mr. Donohoe) in his intervention. The Government are committed to liberalising the air service relationship between the UK and the US. We believe that the consumer is best served in an open and fair market, in which carriers can choose which services to operate. By allowing competition from both established and new entrant carriers, such a liberalised arrangement leads to increased choice, better service and lower fares.
The UK has long been in the forefront of pushing for liberalisation. Our experience of liberal markets has shown that more carriers come on to routes, fares become more competitive, service standards rise and everyone benefits—such as other businesses, the travelling public and, not least, the airlines themselves.
In 1993, the then Secretary of State for Transport, my right hon. Friend the Member for South Norfolk (Mr. MacGregor), and his US counterpart, the then Transportation Secretary, Federico Pena, made a public commitment to liberalisation of the UK-US market. The Government believe that liberalisation of that market must be based on a balance of opportunity for carriers of both sides. Crucial to that goal is the ability of UK airlines to obtain fair access to international travellers originating in or travelling to the large US domestic market, without which UK carriers would suffer a competitive handicap.
Nearly one third of all passengers start or end their journey in the US behind a gateway point. The Government believe that access to US "beyond gateway" traffic is important, and that one of the best ways of achieving such access is through alliances between UK and US carriers. That view has been taken by other Governments and airlines in Europe, where in recent years there have been a number of transatlantic alliances.
Recent attempts to liberalise the UK-US aviation agreement have not been entirely successful. After the 1993 commitment by the UK and the US to liberalise arrangements within a year, the UK proposed a phased liberalisation approach, built around British Airways's plans for further investment in USAir. The US broke off those negotiations in December 1993.
In 1995, both sides resumed a phased approach to negotiations, and, in June 1995, a limited deal was reached. The deal allowed a second US airline on the Chicago-Heathrow route and increased services by BA to Philadelphia; agreed expanded code-sharing opportunities for both sides; agreed some limited access to US Government traffic—known as "Fly America"—through BA's arrangement with USAir; and, perhaps most significantly, agreed regional liberalisation, enabling any number of US and UK airlines to operate from any point in the US to anywhere in the UK, apart from Heathrow and Gatwick.
The 1995 deal was followed by an immediate resumption of negotiations on further limited and balanced access to Heathrow and Gatwick, cargo services,

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charters and pricing, and some additional limited access to "Fly America" traffic was allowed. In October 1995, however, the US again broke off negotiations.
Since the 1995 breakdown in negotiations, the US-Europe market has developed. Several large alliances have been created, such as those between United Airlines, Lufthansa and SAS, covering the German and Scandinavian markets; Delta, Swissair, Austrian and Sabena, covering the Austrian, Belgian and Swiss markets; and KLM and NorthWest, covering the Dutch market. The US authorities have given anti-trust immunity to each of those alliances, enabling them to co-operate in such areas as routes and pricing, and to build large multinational networks.
We believe that the UK-US aviation market should not be viewed in isolation, but in the context of the overall European-US aviation market. The UK is strong in that market, as 40 per cent. of the US-Europe market travels to or from the UK. The next biggest share is held by Germany, which has 18 per cent. Heathrow is the pre-eminent international gateway for travelling to the US, and many passengers choose to do so via other points in Europe and beyond. Gatwick is increasingly important in that market, and regional airports, including Manchester, have benefited from recent liberalisation.
We are doing well, but strong competition is developing from the other European alliances and airports—such as Frankfurt, Charles de Gaulle and Schipol—which are challenging our pre-eminence. It would not be in the UK's interest to lose our strong position in that market. The alliances developed between other European and US airlines—some of which are very large—represent a competitive challenge to the UK's strong position, and undoubtedly they were formed, in part, to challenge our position. UK airlines can be expected to wish to make similar arrangements so that they can continue to compete strongly.
The Government believe that the proposed BA-AA alliance could provide the basis for liberalising arrangements with the US, provided that the competition authorities are satisfied with the alliance. In its report of 30 July 1996, the Transport Select Committee supported our position. It stated:
"We would not wish the UK to 'miss the boat' in these developments and believe the alliance between British Airways and American Airlines could be a means of ensuring that the United Kingdom continues to be a major player in the world air transport industry to the great benefit of the UK economy."
Formal negotiations with the US are under way—they will reconvene on 4 February 1997—and will be without prejudice to investigations by the relevant competition authorities. As I said, I cannot comment on specific competition or consumer aspects of the proposed alliance, but I should like to make one point clear. The Government firmly believe that the UK competition authorities possess the necessary powers to investigate and, if appropriate, to approve the proposed alliance. The UK's credentials on general airline competition speak for themselves. No member state in the Community has more consistently
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and actively been in favour of open competition on equal terms within the single European aviation market than the UK.
Control of aviation state aid is one sphere in which the Commission undeniably has responsibility to ensure free and fair competition. Over the years, however, the equivalent of many billions of pounds have been poured with the Commission's full approval into state-owned national carriers by some of our European partners. My hon. Friend the Member for Wellingborough mentioned that matter in his speech, and I should like to give the House some examples of aid packages authorised by the Commission. In 1993, the Commission authorised about £165 million to be paid, over three years, to Aer Lingus. In 1994, it authorised about £700 million to be paid, over three years, to the Portuguese airline TAP. In 1994, it authorised about £1 billion to be paid, over three years, to Olympic Airways. Again in 1994, it authorised about £2.4 billion to be paid, over three years, to Air France.
More recently, in 1996, the Commission authorised Iberia Airlines to receive about £460 million, with the possibility this year of receiving another £100 million. In addition to that distressing catalogue of single market distortions, the Italian Government have recently asked permission to inject about £1.2 billion into Alitalia. The Commission is investigating the matter.
In contrast, UK carriers have received not a penny of assistance from the UK Government. They have had to compete by funding their investment out of their own resources, knowing that they would go to the wall if they failed to keep pace with their subsidised competitors. I am proud that BA, Virgin, British Midland and so many other UK carriers have risen so successfully to that challenge. They are still disadvantaged, however, by the failure to get to grips with state aid elsewhere in Europe.
My hon. Friend asked one or two specific questions that I shall now answer. The Department has not asked the Civil Aviation Authority to undertake a balance and benefits study for the precise reason that he gave. I shall make inquiries about earlier studies into matters European and write to him.
There are restrictions that would prevent AA from taking over British Airways. European Union law requires effective ownership and control of an airline to be in the hands of EU nationals, so at least 51 per cent. of BA has to be in EU ownership.
Towards the end of his remarks, my hon. Friend mentioned the negotiations. I can confirm that the following issues are part of the current discussions: liberalised market access for transatlantic traffic, including the lifting of designation, access and capacity restrictions at Heathrow and Gatwick; a liberal pricing regime; a dispute resolution framework involving an independent panel to ensure swift action against any abuse of market power; rights beyond services between the UK and United States; access to the United States internal market—
Mr. Deputy Speaker (Mr. Michael Morris): Order. We must now move on.

Unemployment and Poverty (Cornwall)
1.30 pm
Mr. Matthew Taylor: Cornwall is a poor county and has several of the country's worst unemployment blackspots. In fact, Cornwall is as poor as any region in Europe, our unemployment rate is as high as that of rural Portugal, and incomes and wealth per head are as low as those of the Aegean islands. This poverty is made worse by high costs: housing is expensive, public transport is scarce and, to top it all, we pay the highest electricity and water bills in the country.
Since 1 January, we have been hit by a series of blows: the loss of more than 300 jobs at the St. Ivel factory at St. Erth; the fact that 300 or more jobs are to go in St. Austell's china clay industry; the loss of the air link to Heathrow, which is vital for local businesses; and the news that the A30 improvements at Goss Moor have hit another Government delay.
Officially, however, the south-west region stretches westwards from Cornwall to include the far more affluent counties of Gloucestershire and Wiltshire. As a result, according to the Government's official statistics, Cornwall is simply a small part of the country's third richest region. This merging of Cornwall with a group of far more affluent counties has served to disguise its high levels of poverty and unemployment. Even taking Cornwall and Devon together as a mini south-west region leaves the impression that Cornwall is better off than it really is. It is therefore worth spending a few minutes on hard facts.
Let us start with unemployment. Seasonally adjusted figures for the entire south-west region released earlier this month showed an unemployment rate of only 5.5 per cent., the second lowest in the country after East Anglia and lower than the national average. However, the level of unemployment in our county is more than 25 per cent. higher than the national average. Unemployment in Cornwall actually rose last month, and the county continues to have several of the country's top 10 worst unemployment areas. Already this year, more than 700 jobs have gone or are to go. They have been lost as a result of long-term changes in the local economy and they are unlikely to come back.
For me, however, the key figures relate to the long-term trends for Cornwall compared with the rest of the United Kingdom. Suffice to say that economic reports for the county in the early 1970s, which I have read, talk of the problems of over-employment, with a shortage of workers to fill available jobs. Now, on current figures, our unemployment rate is 25 per cent. higher than the national average, and the gap has widened under this Government.
In December 1981, on the narrow based definition of unemployment—the only definition of unemployment at the time—the national unemployment rate was 12 per cent. In Cornwall it was 16.6 per cent., just over 38 per cent. higher than the national average. As economies fluctuate, those figures will vary, but the differential should not change for the worse—indeed, we would hope to improve it. But, in December 1996, the gap had widened from 38 to 54 per cent. higher than the national average on the equivalent figures. The current figure of 25 per cent. is based on a different calculation of unemployment.
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The problems are not confined to people out of work. Those in work in Cornwall can expect to take home far less than the national average wage. Average male weekly full-time earnings in Cornwall are now under 80 per cent. of the national average, and the gap has been widening. In other words, wages in Cornwall are falling ever further behind the national average, despite bills in Cornwall going up more quickly than the national average. Female workers do not fare much better—they are earning just over 80 per cent. of the woman's national average wage. The gap between average female full-time weekly earnings in Cornwall and the national average is wider now than at any time in the past 15 years—indeed, it is twice what is was in 1981.
High unemployment and low wages combine to give Cornwall an average disposable income as low as anywhere in the UK. In 1993, the latest year for which figures are available, the national average gross domestic product per head was £9,263—taking into account everyone in the country, working or not. In Cornwall, it averaged £6,596, only a fraction more than 70 per cent. of the national average.
Costs, however, are high in Cornwall—that applies to housing, getting around and bills. The best-known example is water. Since privatisation, water prices for domestic customers in England and Wales have risen by an average of 39 per cent. in real terms. In the region served by South West Water, however, the rise has been much higher. Since privatisation, average water bills have risen by more than 100 per cent. and are easily the highest in the UK. Local incomes do not reflect that fact, and neither pensions nor benefits are adjusted to allow for it.
The problem is the same in housing. The difference between average incomes and average house prices is, I am told, the highest in the country. This makes the actual poverty far worse in practice because people cannot afford the bills in the way they might be able to elsewhere in the country on the same income.
I hope that there is therefore no doubt of the high level of need in the county. That level of need implies an equally high level of help from the Government, but, time and again, Cornwall does not get the fair deal that I believe it deserves.
Cornwall's councils are still funded by an average of £100 less per person compared with the rest of England. The gap is even greater if we look further afield—the two Coopers and Lybrand reports commissioned by the West Country Development Corporation make it clear that the county does not get the help that similar areas, often facing fewer problems, get—for example, Scotland and Wales. The west country tourist board received only around £400,000 from the Government last year for the whole of the south-west, whereas Scotland received £16.9 million and Wales £14.78 million.
Mr. Paul Tyler: My hon. Friend may have seen the figures that Ministers produced for me this morning on the level of Government investment in the promotion and development of tourism in England generally. It now stands, in real terms, at one third of the commitment that existed even in 1979 whereas in Wales, Scotland and Northern Ireland it has increased by 50 per cent. in real terms. It has increased to the ridiculously low level of 10p per head in England—and, of course, in this context, that includes Cornwall.
Mr. Taylor: My hon. Friend reinforces what I am saying.
Statistically, as Cornwall is lumped together with its wealthier neighbour Devon or with the wider, even more prosperous south-west region, the county does not get the help it could and should get from Brussels. The county's poverty entitles it to the highest level of European grant funding but it gets only a lower level because it is linked statistically with wealthier Devon. Equally, British Government funds have been axed this week as the Rural Development Commission announced that cuts have forced it to close its business support programme.
Today's announcement by the Cornish company St. Merryn Meat that its next major development of 700 jobs will be in Wales not Cornwall illustrates the problem. The company emphasises the good road links to Wales, yet we still struggle to get the A30 completed. The Welsh Development Agency gave it 20 acres of land—we do not even have a development agency.
What does Cornwall need to build jobs, increase wages and create prosperity? How do we overcome the problems of high and rising unemployment, and of increasing poverty against a background of rising incomes in the rest of the UK? Let me set out what might be seen as a manifesto for Cornwall, containing eight key policies to put our problems right. Perhaps I should say at the start that most of them are already supported by most people in Cornwall, irrespective of political party. They are mainly issues on which all Members of Parliament and councillors have fought together, but we need national Government support. So far, the Government have not been persuaded. I hope that whichever party is in government after the general election, we can persuade it to act.
First, we must have a commitment to maintain the air link to Heathrow. It is a vital lifeline for business people in Cornwall, providing frequent global links that allow easy access to worldwide markets, as the Secretary of State for Transport said in the previous debate. The loss of that air route would be catastrophic for many businesses in Cornwall and would make the area even less attractive to inward investors, who often regard access to Heathrow as essential. English China Clay International, for example, has told me in the past that a number of its operations based in Cornwall for its international work could not be operated without the air link to Heathrow. That is not the only business that could consider relocating some operations out of the area if the air link were axed. I have received many letters on the issue, as have other Cornish Members of Parliament.
Gatwick is not a viable alternative. A connection to Gatwick has been tried in the past and proved unviable. Gatwick does not have the same range, let alone frequency, of international flight connections as Heathrow. The Secretary of State has already admitted that he has the power to ring-fence the landing slots at Heathrow for us. So far he has refused to use it. It is time that he did so.
Secondly, a date must be set for starting improvements to the A30 at Goss Moor. After halting the design work more than a year ago, late last year the Government announced that it was to restart—a widely welcomed announcement. The county council had a contract to do
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this, which it was half way through when the Government previously stopped it. The county council could start again immediately, but the Government are now insisting that the work is re-tendered, so nothing will happen until well after the general election, probably not until 1998. The lack of an efficient road link to the rest of the country is hurting local business and hurting the surrounding villages, into which all the tall, heavy lorries from west Cornwall have to be diverted, because they cannot drive down the main road through the county.
Thirdly, the Millennium Commission has an important proposal for a university for Cornwall before it. The plan has widespread, cross-party support and should be actively supported by the Government. Expanding higher education opportunities in Cornwall would be good for business and good for jobs, stopping the considerable brain drain of the best of Cornwall's young talent out of the county, to which they rarely return.
A similar proposal was a Liberal Democrat manifesto commitment at the last election. This time, I hope that all parties will be able to unite around that promise, on the back of Millennium Commission support. A university for Cornwall would give a much-needed economic, as well as intellectual, boost to the county. The campus would generate hundreds of new jobs and would bring an estimated £20 million a year into the local economy.
Fourthly, we need a commitment to the Eden project, which is also before the Millennium Commission. It is a hugely exciting project that would be a vital boost to visitors to Cornwall, creating much-needed jobs in the St. Austell area, which has been hard hit by the loss of another 300 jobs in the clay industry—losses that can only worsen, as they have over the past 20 years. Once access problems are overcome to protect local residents—I am sure that they can be—the project will become a symbol of optimism for the county and could be a genuine boost to jobs, cutting unemployment and giving the kind of investment in the county that will bring other economic gains.
The fifth vital commitment for Cornwall is that the Government—any Government—should back Cornwall county council's bid to be classified separately from Devon for European funding. Treating the two counties as one area has masked the true extent of Cornwall's relative economic disadvantage. The Government are reviewing the situation. I hope that they will agree that Cornwall deserves a separate NUTS 2 classification, as it is called—I do not think that the name represents a particular view on Europe, it is just the name that it has been saddled with. That classification would give Cornwall the highest rate of European economic support—the so-called objective 1 status, granted in this country only to Merseyside and the Scottish Highlands. That would also reduce the problem of finding matching funding in such a poor area, lack of which is currently holding up many projects that could otherwise go forward.
Sixthly, any new Government must review the funding that Cornwall receives. With fewer police, less for schools, less for development and less for local services, Cornwall has failed to get a fair deal over many years. The two Coopers and Lybrand reports proved that, but still no real action is being taken.
The seventh vital issue is a review of the system of water and electricity charging. The current system leaves us with the highest bills in the United Kingdom, hitting

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businesses and people alike. Liberal Democrats have already outlined how we believe that that could be tackled. Ours is not the only possible solution, but a solution is needed.
The final, and most important, commitment must be the creation of a Cornwall development agency. The advantages that such an agency, if properly funded, can bring to an area are clear. The successful records of similar agencies in Scotland and south Wales confirm their potential, but they must be backed by adequate Government funding. A Cornwall development agency could draw on local expertise to back local small businesses, as well as the larger employers in the area. It could be a one-stop shop, providing advice and financial support for businesses in the county. Drawing together funds already held by the training and enterprise council, the Department of Trade and Industry, central Government and Europe, it would have real financial clout. It is important to remember that it would not be an extra, but would replace many of the existing agencies.
Decisions could be made locally and fast by people based locally, fully in touch with the problems and needs of the community. Their jobs would depend on bringing investment that far west. Anyone in such a job based further east can justify their job by developments further east, which are easier to bring in. Few developments come to our side of the Tamar.
We are not suggesting breaking links across the border. Cornwall has shown, through the joint office in Europe, that we can build links, working with others, but the agency must concentrate on success in Cornwall. Its work must be based on local knowledge and activity, backed by existing funding. That funding is currently so widely spread between so many organisations that many of them can do little more than print letter heads and fund their bureaucracy before they run out of money, which means that much of it is wasted.
The issue is too important to Cornwall for simple party politics. As I have said, most of the ideas have cross-party support in the county, but not, sadly, at national level, which is what counts for getting the go-ahead. That is why the Liberal Democrats commissioned an independent group of leading Cornish businesses and development experts to draw up a report on how an agency could be set up and how it would work. That report is to be published next Monday and I hope that every party will take it seriously. Whoever wins the general election, the new Ministers will find the report on their desks, with Cornwall demanding action.
People in the county want the chance to show what we can do. We know that we can make a real success of our economy—the talent is there—but this manifesto for Cornwall can be achieved only by Government action, because the power for each decision lies in London, not Truro. If the answer is yes, poverty and high unemployment can become things of the past in Cornwall.
1.47 pm
The Minister of State, Department for Education and Employment (Mr. Eric Forth): I congratulate the hon. Member for Truro (Mr. Taylor) on obtaining this Adjournment debate. The issues that he has raised are obviously important for his constituency and the surrounding area.
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As the hon. Gentleman knows, last week we announced another large fall in United Kingdom unemployment and a strong rise in the number of people in jobs. That good news applies to all regions, including the south-west, which has the second lowest seasonally adjusted unemployment rate in the country, at 5.5 per cent. As the hon. Gentleman acknowledged, unemployment in the south-west has been falling over the past six months by an average of around 3,500 people a month. The national and regional picture is positive.
However, I accept that unemployment is still too high. I fully accept that more needs to be done in Cornwall in particular, where unemployment regrettably rose last month, against the trend. However, the current unadjusted unemployment rate for Cornwall of 8.8 per cent. compares favourably with the figures of 10.2 per cent. in December 1995, 14.5 per cent. in December 1992 and a peak of 15.5 per cent. in January 1986.
The hon. Gentleman referred to recent redundancies in Cornwall and in his constituency. Of course, the recent announcements from English China Clay International at St. Austell. and St. Ivel at St. Erth, did not make for the best of starts to the new year for those affected by them. We always regret job losses and want to do everything possible to help. Programmes such as training for work, work trials, jobfinder's grants, and so on, are in place to come to the rescue of people who unfortunately find themselves out of work—particularly if it is for a long period. The English China Clay International and St. Ivel rationalisations will be treated as major redundancies, which means that the normal eligibility conditions for the Employment Service and training and enterprise council programmes will be waived. That is a very important consideration for the individuals involved.
With help from the Employment Service and Devon and Cornwall training and enterprise council, there is good reason to believe that people affected can expect—directly or after retraining or other supportߞto find other work in the foreseeable future. I understand that, with regard to the proposed closure of the St. Erth factory, new jobs will be generated at other St. Ivel and Unigate processing plants in the region and redundant workers from St. Erth will be given priority for those jobs.
I hope that the hon. Gentleman will acknowledge that the recent news on jobs in Cornwall has certainly not been all bad. As a result of the Inland Revenue at St. Austell winning its bid to house the self-assessment inquiries and stores section, 300 to 400 telephonist jobs are being created over the next couple of months. He will be aware that a number of new retail jobs can be expected as the new Treliske retail park nears completion. He must also be aware of the £4.8 million six-year CHEERS project, led by Restormel borough council and funded under the single regeneration budget, which is aimed at building and providing housing refurbishment and redevelopment to strengthen community involvement, improve employment and raise skill levels.
I make such comments not of course unaware of the pain and problems caused by unemployment to those affected, their families, and, indeed, across a much wider area, but I do not think that the prospects are quite as gloomy as the hon. Gentleman appeared to suggest. We know that not all people who are made redundant become unemployed and that most spells of unemployment tendߞmercifully—to be short. Of those people who do become

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unemployed, a quarter leave unemployment in one month, half in three months and two thirds in six months. Those are well-established trends.
However, we need to face the fact that the sort of job rationalisations to which the hon. Gentleman has referred are part of the process of a dynamic and changing economy—indeed a changing region, as he pointed out. It is not for the Government to interfere with or second-guess commercial decisions made by companies. If we were to try in some way to force companies to keep unprofitable sites open, we would inevitably add intolerable burdens to those already on business and risk destroying jobs in the long term, as our partners on the continental mainland have discovered very much to their cost.
We have to recognise that some jobs will be lost and others created, and that the pace of it will vary from time to time in different regions of the country. I should point out that it is to our great credit as a nation that the traditionally large disparities in unemployment between regions have largely been evened out. The extent to which we have succeeded as a nation in ensuring that, by and large, people up and down the United Kingdom have broadly the same opportunity to work is quite remarkable—a startlingly different picture from that even 10 years ago and certainly 15 or 20 years ago. We should be happy and optimistic about that. We must face the fact that people cannot expect to have the same job throughout their working life, and in doing so we must try to ensure that, whether by education, training or different kinds of support, we can help people to make the adjustments that inevitably arise from such changes.
The hon. Gentleman said much about economic assistance to Cornwall and implied—indeed I think said—that Cornwall was not somehow getting its fair share of Government funding. The problems that Cornwall faces are widely recognised in a number of different ways. That is why so much of the county has assisted area status and is eligible for regional selective assistance. Indeed, I understand that nearly £5 million-worth of regional selective assistance grants have already been offered in 1996–97 to companies in Cornwall, generating more than £31.5 million of investment and creating or safeguarding more than 600 jobs.
A number of other sources of assistance include funding to help develop the local economy under objective 5b of the European Community's structural funds. The private-sector led £8 million Bodmin business park, currently under construction, is an excellent example of how that funding is providing opportunities for business and new jobs in Cornwall. Local partners can apply for challenge funds under the single regeneration budget, and there is the new local competitiveness challenge fund, which was announced in October, under which local partnerships can bid for support for programmes to improve the competitiveness of local businesses.
I gather that there has been some misunderstanding locally over the fact that the Rural Development Commission's rural business support fund for rural development areas has become part of the local competitiveness challenge fund, as was alleged in a local newspaper. RDC money has certainly not somehow been cut and therefore become no longer available to rural
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areas. On the contrary, money formerly available from the RDC is part of the local competitiveness challenge, ring-fenced for rural areas—although that certainly does not prevent rural areas from bidding for further money that is available from the total pot for local competitiveness challenge.
Mr. Matthew Taylor rose—
Mr. Forth: I cannot give way to the hon. Gentleman because I am going to try to answer all his points in the very little remaining time.
The hon. Gentleman will be aware that, in April, my right hon. Friend the Prime Minister appointed my right hon. Friend the Minister for Local Government, Housing and Urban Regeneration as Minister with special responsibility for the south-west, focusing particularly on Devon and Cornwall. He was given responsibility for co-ordinating Government policy towards the region and for taking forward a "new deal" for the area. That was in recognition of the distinct identity and needs of the region and is a clear demonstration of the Government's support for the south-west.
Since taking up his appointment, my right hon. Friend the Minister has been able to deliver on many of the key strategic issues identified by the West Country development corporation as crucial to the region's economic development. Such issues have included improving vital communications to the far south-west by, for example, securing the restart of work on the dualling of the A30 between Bodmin and Indian Queens and securing £650,000 of European Union money for a feasibility study to speed up train services between Bristol and Plymouth.
My right hon. Friend the Minister has taken a close interest in tourism—a key part of Cornwall's economy—and announced in November a pioneering project funded by South West Water to regenerate Newquay and other seaside towns. A Government-funded strategic study of tourism in the region is also under way, which will provide the region's tourist industry with the best possible analysis of where growth opportunities exist. I would therefore urge the hon. Gentleman to keep in touch with my right hon. Friend in the weeks and months ahead. I shall of course bring the hon. Gentleman's points to his attention.
I might add that I am aware of the perception that the west country generally gets a raw deal compared with, for example, Wales and Scotland, to which the hon. Gentleman referred, when it comes to big inward investment decisions backed by Government funding. Part of the problem is the lack of very large sites for major developments. None the less, my right hon. Friend the Minister has secured progress on the Broadmoor farm site near Saltash by removing the Highways Agency direction to refuse planning permission, thereby paving the way for serious negotiations between developers and the local council. He has also secured early progress on the disposal of Seaton barracks—a prime inward investment site which, although in Plymouth, offers the potential to provide many additional jobs to Plymouth and the surrounding area. In addition, he has announced English Partnership's £5 million factories first initiative, which will provide a stock of readily available units of more than 10,000 sq ft in Devon and Cornwall.

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I know, too, that Devon and Cornwall Development International is working hard with the local authorities to attract inward investment. There have already been some notable successes—such as that regarding the United States company Harman International in Redruth—which have been backed by regional selective assistance funds.
The hon. Gentleman mentioned the low pay earned by his constituents. Low pay is of course a relative term. There will inevitably always be some people whose pay is lower than others. The fact is that real earnings have increased at all levels since 1979 and real take-home pay for the bottom 10 per cent. of full-time workers is 14 per cent. higher for a single person than in 1979. More important, low pay does not necessarily mean low household income because household income comes from a number of sources. A family may have more than one wage earner or receive earnings plus state benefits. Even the European Community has recognised that, in the UK, unlike in most EC countries, low pay is a relatively minor cause of low living standards. Here in the UK, the single main cause of low income is not having a job. The best way of helping the lower paid is surely through the creation of the right conditions for a growing economy and the removing of barriers to employment.
The most effective way of raising the living standards and prospects of unemployed people of working age is to help them to get to work. We set up a comprehensive range of measures to help people to provide a better standard of living for themselves through work. The new
938
jobseeker's allowance, for example, helps people to plan the most effective route back to work and creates a better framework of advice and support for the jobseeker.
We provide help through the benefits system to ease the transition from unemployment to work through such measures as family credit and the back-to-work bonus. The Government are currently piloting earnings top-up—an in-work benefit for single people and couples without dependent children—which makes working more worth while and widens the range of potential jobs for unemployed people. From April, the new child maintenance bonus will provide a bonus of up to £1,000 for people with care who leave benefit for work and who were receiving child maintenance while on income support or the jobseeker's allowance.
I hope that the hon. Gentleman will therefore accept that the Government recognise the difficulties that Cornwall faces and are responding to them—perhaps not quite in the way in which he has suggested, but in a way that will be more effective in the short, medium and long term. I hope that he and the local community recognise and support the important work that my right hon. Friend the Minister is undertaking, and that all local agencies, like those in London, will do everything possible to respond to the problems that he has drawn to the House's attention.
It being Two o'clock, the motion for the Adjournment of the House lapsed, without Question put.
Sitting suspended, pursuant to Standing Order No. 10 (Wednesday sittings), till half-past Two o'clock.

Oral Answers to Questions
  TRADE AND INDUSTRY

    Mid Kent Water Company
    Dame Peggy Fenner: To ask the President of the Board of Trade when he expects to make a decision on the Monopolies and Mergers Commission report on the bid for Mid Kent Water by General Utilities and Saur Water Services. [10587]
    Sir Roger Moate: To ask the President of the Board of Trade when he expects to announce his decision on the takeover proposed for Mid Kent Water by General Utilities and Saur Water Services. [10595]
    The Minister for Competition and Consumer Affairs (Mr. John M. Taylor): My right hon. Friend the President of the Board of Trade announced his decision to block the proposed bid for Mid Kent Holdings plc by General Utilities plc and Saur Water Services plc on 21 January. That decision was in line with the recommendation in the Monopolies and Mergers Commission report which he published on the same day, and the advice of the Director General of Fair Trading and the views of the Director General of Water Services.
    Dame Peggy Fenner: I thank my hon. Friend for that prompt reply, and I welcome the decision. In view of the fact that, collectively, the two companies have a 38 per cent. holding in Mid Kent, may I ask my hon. Friend what reassurances he can give to the company that that situation will not happen all over again?
    Mr. Taylor: My right hon. Friend the President of the Board of Trade has made it clear that the proposed bid by General Utilities and Saur for Mid Kent will be blocked and that undertakings will be sought by the Director General of Fair Trading from both companies. Those undertakings will be intended to ensure that those aspects of the proposed merger that the MMC identified as operating against the public interest are effectively prevented now and in the future.
    Sir Roger Moate: I, too, congratulate the Secretary of State on a decision that will be warmly welcomed in much of Kent, and is clearly in the best interests of Kent and competition policy generally. Does my hon. Friend accept that that situation has arisen because rival companies have pooled their shareholdings to undermine previous undertakings? In the absence of the compulsory divestment of shares—which my right hon. Friend the Secretary of State is not seeking—how can we be sure that the situation will not arise again? Can my hon. Friend ensure that the undertakings will prevent the bid from being repeated or, indeed, being repeatable?
    Mr. Taylor: The honest and candid answer to my hon. Friend must be vigilance on his part, and on the part of my right hon. and hon. Friends who represent constituencies in Kent and of the Director General of Fair Trading. If he or his constituents suspect that something that they do not want is about to occur, they must tell the Director General of Fair Trading straight away.

    Electricity Industry
    Mr. Hanson: To ask the President of the Board of Trade what representations he has received regarding takeovers and mergers in the electricity industry. [10588]
    The President of the Board of Trade and Secretary of State for Trade and Industry (Mr. Ian Lang): In the past six months, I have received some 80 representations regarding takeovers and mergers in the electricity industry. In addition, the Director General of Fair Trading has noted some 100 representations when advising me.
    Mr. Hanson: Given that 50 per cent. of UK electricity companies are owned by foreign-based companies, does the Secretary of State feel that the Government have helped to defend the interests of British consumers by allowing the companies to be purchased? Is he aware that it is illegal for non-US citizens to buy shares in such companies in the United States?
    Mr. Lang: First, I have had assurances from the American Secretary of Commerce, Mr. Mickey Kantor, that British companies can invest in electricity companies in the United States; and, secondly, the question of ownership does not affect the interests of the consumers. What matters to consumers is that the company is efficiently and competitively run. When the Labour party was last in power, electricity prices rose repeatedly by substantial amounts, but since privatisation, prices for both domestic and industrial consumers have fallen.
    Mr. Couchman: Are there lessons to be learnt about hostile and predatory bids as referred to by my hon. Friend and neighbour the Member for Medway (Dame P. Fenner)? Does my right hon. Friend feel that those lessons might suggest that such actions, which are so detrimental to both companies and their customers, should be examined as a matter of urgency?
    Mr. Lang: Of course I will take careful note of what my hon. Friend says and consider it, but what delivers the best results to consumers is a free and open marketplace in which competition is the yardstick by which the Government decide whether it is necessary to intervene in a merger or takeover bid. I have measured my responsibilities against that criterion of competition, and it is notable that, in almost all the decisions that have been taken, the Director General of Fair Trading, the Director General of Electricity Supply and I have been of one mind.

    Boeing-McDonnell Douglas Merger
    Mr. Pike: To ask the President of the Board of Trade what assessment his Department has made of the implications of the Boeing-MDD merger for the British aerospace industry. [10589]
    The Minister for Industry (Mr. Greg Knight): The proposed merger would be of great significance to our aerospace industry, which competes with Boeing and McDonnell Douglas, mainly through participation in the airbus consortium, but also works with them, notably in supplying equipment. The proposal is being considered by the United States competition authorities, and may also be

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    considered by the European Commission. My Department is currently examining the implications with United Kingdom industry.
    Mr. Pike: Does the Minister recognise that the merger will be a dominant feature in the aerospace industry for both civil and military aircraft and that the Government must ensure that the airbus consortium and our aerospace industry as a whole are able to compete, so that a monopoly is not created? Aerospace is crucial to Lancashire and to the country and we must ensure that it can survive.
    Mr. Knight: The hon. Gentleman has had a long interest in the matter, and of course I take note of, and will bear in mind, what he says. The European Commission has not yet been notified by Boeing; when it is, we expect to play a part in the consultations and discussions, and we shall take account of what UK industry has to say. Indeed, if the Consortium of Lancashire Aerospace, with which I know that the hon. Gentleman is associated, wants to make any representations, I shall be delighted to hear from it.
    Sir John Cope: This announcement, together with Boeing's cancellation of its work on its very large aircraft, makes it important that the Government should back our aerospace industry, and especially Airbus Industrie, with its plans for the stretch A340 and a large aircraft. Launch aid—or more properly launch loans—is extremely important to those two projects, and the recent announcements from America make it essential for the Government to back them.
    Mr. Knight: I hear what my right hon. Friend says; he is right. I have every confidence in the British aerospace industry. To recap for the benefit of the House, since 1979 we have given about £1.25 billion in launch aid to help the industry and we shall certainly continue to consider projects that are brought to our attention, including projects involving research and development under CARAD—the civil aviation research and development programme.
    Mr. Barry Jones: Does the Minister appreciate the fact that 2,300 of my constituents have a strong interest in the response of the Government and of Airbus Industrie to the merger to which he has referred? What chances do my constituents, who make the wings for airbus, have of making the wings of the new jumbo jet that Airbus Industrie has planned?
    Mr. Knight: That must be a matter for Airbus Industrie. We have been in the forefront of trying to persuade the consortium to convert to a company—in effect, a limited company—so that it is better able to compete with Boeing. It has been doing well and it needs to continue improving; we shall give every encouragement to ensure that that happens.
    Mr. Atkins: Has my right hon. Friend considered the implications of the proposals of the right hon. Member for Dunfermline, East (Mr. Brown) for the military and civil projects of the British aerospace industry, which the
    942
    Government have supported through thick and thin? They would be prejudiced, if not terminated, if there were a Labour Government.
    Mr. Knight: My right hon. Friend makes a valid point. If Britain had the misfortune to elect a Government whose spending proposals exceeded the taxation that they imposed, where would they get the money? Perhaps they would get it by cancelling projects such as Eurofighter.

    Regional Policy
    Dr. Moonie: To ask the President of the Board of Trade if he will make a statement on the significance of the European Commission's first cohesion report for the regional policy of the United Kingdom. [10590]
    Ms Quin: To ask the President of the Board of Trade if he will make a statement on the impact of the European Commission's first cohesion report on regional policy in the United Kingdom. [10597]
    Mr. Greg Knight: As I informed the hon. Member for Wolverhampton, South-East (Mr. Turner) on 4 December, Official Report, column 696, the European Commission's cohesion report shows that the UK is one of the few EU countries where regional unemployment differences have decreased. It also shows that, since 1989, there has been a narrowing of relative gross domestic product per capita between UK regions.
    Dr. Moonie: How does the Minister explain the fact that, according to the report, the gap between the richest and poorest regions in the UK has widened over the past 10 years? Does that not betray the abject failure of his regional policy?
    Mr. Knight: I suggest that the hon. Gentleman rereads the report because it deals not with wealth and poverty but with differences in wealth. [HON. MEMBERS: "Oh!"] There is a difference, which I shall explain. If the UK experienced growth in every region but some regions grew slightly faster than others, it would be a matter for comment in the report. That has happened in many UK regions. The report is an interesting discussion document, but it ends in 1993 and does not take account of the recovery since then.
    Ms Quin: Contrary to what the Minister says, the report also shows that the gap between rich and poor has widened and that the number of people living below the poverty line has increased. Given that the report fits in well with reports from the Institute for Fiscal Studies, the Joseph Rowntree Foundation and others, will the Minister not dismiss the report but admit that there is an urgent problem that must be tackled?
    Mr. Knight: I am not dismissing the report, which is a useful discussion document. I simply do not draw the same conclusions as do some Opposition Members. The report also shows that, in 1983, eight UK regions were among the 25 EU regions with the highest unemployment levels. By 1993, there was none, such has been our success in creating employment. The report also reveals that the long-term unemployed have shared in the UK recovery: the number is down by 500,000 since its peak in 1986.
    Sir Michael Neubert: What effect would it have on regions in England, especially northern England,

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    if employees in companies in the Scottish region were subject to additional personal taxation? Would not a tartan tax provide an unfortunate and unfair inducement to investment in England?
    Mr. Knight: My hon. Friend makes a good point. The tartan tax would have an effect similar to that of a minimum wage. It would mean that the most vulnerable people in work would be sacked.
    Mr. Wilkinson: When considering the long-term implications of the report, will my hon. Friend bear in mind that the United Kingdom has, in comparison with many continental countries, done exceedingly well? If the momentum to greater prosperity in Britain is to be maintained, there is no point in the UK continuing to provide more and more taxpayers' money for a fund that, if successful, will lead to jobs being transferred from Britain to other parts of the Union.
    Mr. Knight: I hear what my hon. Friend says. It is important that, across Europe, the British idea of reducing state aid is applied. That policy must continue. Once temporary problems have been sorted out, it is our policy to ensure that state aid in EU member states is reduced, and eventually eliminated. That is the way to secure long-term jobs that are based on the productivity, success and competitiveness of private companies.
    Mr. Wigley: Is the Minister aware that the gross domestic product per head in Wales has dropped from 92 per cent. of the European Union average 15 years ago to only 83 per cent. now? We were overtaken last year by the Irish Republic, which in the past 12 months has accelerated ahead to the extent that it now has a GDP per head 9.3 per cent. greater than Wales yet the Irish Republic is receiving all the benefits of the cohesion funds. Can the Minister ensure that the benefits from the European Union come to areas such as Wales which have a need in terms of GDP per head when the fund is renegotiated in 1999?
    Mr. Knight: Wales has done well in the recent past, but one of the problems that the cohesion report identifies is what happens to aid to EU member states when circumstances change. The report mentions Ireland as an example of where perhaps in the present circumstances a country should not receive the aid that it has received in the past. That is something that we shall want to see clearly dealt with in future discussions.
    Mr. Batiste: Can my right hon. Friend confirm that youth unemployment in Britain is about two thirds of the European average? Is that not the most powerful reason for rejecting the job-killing social chapter so beloved of the Labour party? With its inflexibilities, the social chapter does so much to damage the prospects of the least well-off and most vulnerable in society.
    Mr. Knight: My hon. Friend is right. Youth unemployment in the United Kingdom is only two thirds of the EU average. We need to do more, but the figures show that the number of 16 to 18-year-olds in education and training in the United Kingdom continues to rise. That is good news.
    Mr. Harvey: What steps do the Government take to monitor where regional selective assistance and other
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    Government regional aid goes? How confident is the Minister that, since the redrawing of the assisted areas maps, the Government's effort in the regions is going where it is wanted, unlike the sort of measures to which he has referred in his answers?
    Mr. Knight: The hon. Gentleman makes a fair point. We have a network of monitoring committees which assess the value of schemes which can apply for structural funds. From time to time, the Department asks for reports back on how the schemes have been implemented. That dialogue must continue so that we can ensure that we are getting value for money, and that structural funds go to the areas of greatest need.
    Mr. John Marshall: Does the report make the point that, while in the 1970s unemployment in Scotland was much higher than in other parts of the United Kingdom, that is no longer the case? Is that not the most effective form of regional policy, which the hon. Member for Kirkcaldy (Dr. Moonie) should have had the grace to welcome?
    Mr. Knight: That is indeed the case. The report reveals that the United Kingdom has more of its working-age population in work than any other large EU country. In the United Kingdom, the proportion is more than 68 per cent. In France, it is only 60 per cent. and in Germany, it is only 65 per cent.
    Mr. Hoon: The EU Commission's cohesion report highlights Britain's relatively poor national and regional economic performance over the longer term in comparison with other EU member states. Does the Minister agree with the report of the Commission on Public Policy and British Business that that is the result of
    "a disproportionately high number of underperforming British companies—underinvestment—insufficient high quality training and education—unsteady government policy"?
    If the Minister, like the Deputy Prime Minister, cannot bring himself to agree with the conclusions of that independent report produced by some of Britain's most distinguished business leaders, does he agree with his Government's third competitiveness White Paper, which concludes that
    "The same factors mean that Britain has a much larger proportion of poor company performance than France, Germany or Italy"?
    Mr. Knight: I certainly do not agree with the conclusions of the socialist think tank report. Employment is the key issue which runs through every page of the cohesion report. What is clear from the report is that here in the United Kingdom we are winning on the employment front. We are winning on youth employment, employment for women and getting the long-term unemployed back to work. That is what matters.

    Inward Investment
    Mr. Hawkins: To ask the President of the Board of Trade how many jobs have been created and safeguarded as a result of inward investment since (a) 1979 and (b) 1992. [10592]
    Mr. Lang: Since 1979, the Invest in Britain Bureau has recorded more than 853,000 jobs associated with inward

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    investment decisions, of which over 352,000 relate to the period since 1992. The United Kingdom is still the number one location in the European Union for investment from Japan, the United States and Korea. That is an enviable record, which the Government are determined to maintain in the face of increased competition from our European partners.
    Mr. Hawkins: I thank my right hon. Friend for that answer. Does he agree that, in the years leading up to 1979 under the last Labour Government, the received wisdom of every international commentator was that Britain was the sick man of Europe, and we were down at the bottom of the league tables with Turkey? Is it not the case that the Government's policies have transformed the position and attracted vastly more inward investment and that, in particular, manufacturing industry and the motor trade throughout the country, including Vauxhall in the north-west, have done tremendously well? Will my right hon. Friend confirm that he will continue to pursue those policies?
    Mr. Lang: My hon. Friend is right. Because we have helped the United Kingdom's economy to become more competitive and rejected the social chapter and the other burdens that the Labour party and the European Union would impose on us, we have, in the words of Mr. Jacques Delors, turned the United Kingdom into a "paradise for inward investment". My hon. Friend mentioned the motor industry and I am sure that he welcomes yesterday's announcement by Nissan, which will create some 3,500 jobs, and the recent announcements by Ford-Jaguar, Vauxhall, Rover-BMW and Toyota. Like so many other manufacturing industries in this country, the motor industry is now buoyant and successful because of the Government's policies.
    Mr. Sheerman: The Secretary of State surely knows that we are all in favour of inward investment, but the Government use it as a fig leaf to cover the nakedness of their policy on indigenous investment. The Government's investment record is rotten and rates poorly against those of all our major competitors. The Government use inward investment as a cheap shot—almost as cheap as the antics of the Deputy Prime Minister yesterday.
    Mr. Lang: The hon. Gentleman is talking nonsense. He should reflect on the fact that, while unemployment has been rising throughout the European Union for the past few years, it has been falling in the United Kingdom, and that the UK is attracting more than 30 per cent. of all the inward investment into the European Union and more than 40 per cent. of all the American and Japanese investment into the EU. That is a judgment from the world on the competitiveness, efficiency and success of the British economy as a good place to manufacture and invest.
    Mr. Dunn: Does the Minister agree that we will use every opportunity to attract inward investment, including the refusal to introduce a windfall tax? Will he take the opportunity to condemn the insider dealings of Robert Ayling, who appears to have struck a deal with the Labour party to his own benefit, at the same time earning himself £750,000 a year for bowing and scraping to the Leader of the Opposition?
    Mr. Lang: I agree with my hon. Friend that the windfall tax would penalise consumers of essential
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    utilities, would be arbitrary in its impact and would be unfair on investors and consumers of essential utilities in this country. It is a policy to which the Labour party is committed as part of its high-spend, high-tax approach to the running of this country.
    Mr. John D. Taylor: The Government's record in attracting inward investment to the United Kingdom has been remarkably successful in recent years and most people recognise that, but will the Secretary of State bear in mind that one negative factor could damage us in the years ahead—the imbalance between corporation tax levels in the United Kingdom and those of some of our competitor nations?
    Mr. Lang: I am surprised to hear the right hon. Gentleman say that, because our corporate taxes are among the lowest in Europe. When we came into office, the corporation tax rate was 52p in the pound, and 42p in the pound for small businesses. Those rates have been dramatically reduced. The corporate tax rate for small businesses is now 23p in the pound and that is one of the reasons why so many businesses have taken root—there are now over I million more than there were, including those in Northern Ireland.
    Sir David Madel: Does my right hon. Friend agree that more jobs will be created and safeguarded as long as we keep interest rates low and stop the pound becoming overvalued? Will he ask the Governor of the Bank of England to pay exceptional attention to the views of industry on what our interest rates should be?
    Mr. Lang: I am sure that my right hon. and learned Friend the Chancellor will take note of my hon. Friend's point. However, I am sure that my hon. Friend will also reflect on the fact that the capacity of Governments to influence exchange rates is extremely limited. The present exchange rate is a reflection of the strength and growth of the British economy and it helps us to fight inflation. The improved productivity and competitiveness of our economy enables us to continue to manufacture and export at present levels.
    Dr. Howells: Do the figures on inward investment include the purchase of privatised utilities by American and French companies? Do those purchases actually create jobs, given the massive hurdles that those British firms are forced to climb over before being allowed a share of the American and French utility markets? Why have the Government displayed such indolence and half-heartedness in fighting to win for British business fairness in competition and equality of access to the hugely protected markets of France and Germany?
    Mr. Lang: The hon. Gentleman seems to be completely unaware of the dramatic successes that privatised industries are having in worldwide markets. When I was in India the week before last, representatives of British Telecom were with me and they secured a £60 million deal. The same is true in other industries: for example, the water industry has people on overseas missions all over the world, winning business for this country.
    Investment involving the purchase of British companies is also inward investment that brings new assets and new money into the country, creates new jobs, invests in new

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    machinery and new technology and helps to contribute to the remarkable growth in output, exports and employment that we have secured in the past few years.

    Government Policy (North-West England)
    Mr. Thurnham: To ask the President of the Board of Trade what recent representations he has received about the impact of Government policies on businesses in the north-west; and if he will make a statement. [10594]
    Mr. John M. Taylor: Ministers at the Department of Trade and Industry regularly receive representations about the impact of Government policies on businesses, including those in the north-west. I look forward to hearing more views from north-west business people when I visit Bolton early next month.
    Mr. Thurnham: When the Minister visits Bolton town hall in 12 days' time, I hope that he will enjoy a good helping of Bolton's excellent black pudding with his breakfast. Will he welcome the proposal to set up a national museum of food in Bolton, which is famous not only for its black puddings but for its excellent bakeries?
    Mr. Taylor: The hon. Gentleman may like to know that, only this morning, I had the menu for that breakfast altered to ensure that it will include black pudding. To set up a museum of food in Bolton is a splendid idea and I wish it well.
    Mr. Dover: Is the Minister aware that the effect of Government policies on the north-west and on Lancashire in particular has been to bring about an enormous increase in the number of small businesses there? In my own patch, there are 6,000 and that number is rising every month. Over the past 14 years, that has helped to bring down unemployment from 11 per cent. to only 4.5 per cent.
    Mr. Taylor: My hon. Friend is right. The north-west has experienced a net increase of 35,000 jobs in two years and regional selective assistance of £31 million has, by itself, created 6,500 jobs. The north-west has excellent communications, high value-added, high investment and tremendous tourist potential.
    Mr. O'Hara: The Minister will be aware that the Ford Motor Company has announced plans to shed 1,300 jobs at the factory at Halewood in my constituency in order to concentrate production of the new Ford Escort in Spain and Germany. Can he explain how it makes sense to export 1,300 jobs from my constituency to Germany and Spain in order to produce for import into this country the car that is the second-best seller in this country, that sells more here than in any other market and that costs £500 to £1,000 less to produce here than on the continent? Will he meet a deputation comprising my colleagues and me to talk about this serious matter?
    Mr. Taylor: Those decisions are made by the Ford Motor Company and they are based on its commercial judgment. Ford is taking those measures to improve the plant's competitiveness with the aim of securing its long-term future. The Government are committed to assisting Halewood to meet Ford's competitiveness agenda.
    Dame Elaine Kellett-Bowman: Is my hon. Friend aware that Government policies have greatly increased
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    prosperity in my constituency, not least in Garstang? Unfortunately, in contrast, Labour-controlled Wyre borough council's vicious policy of imposing parking charges in Garstang, where hitherto parking was free, will ruin the economy.
    Mr. Taylor: My hon. Friend is probably best placed to put pressure on that local authority, but she may like to let me have more details on the matter. In the meantime, I know that she will give it a hard time.
    Mrs. Roche: How can the Minister be so complacent, given that small businesses in the north-west will be faced with the catastrophic effects of the closure of Ford in Halewood? According to the Department's figures, there are one in 20 fewer VAT-registered small businesses in the Wirral than there were in 1992. Does not that show why businesses in the north-west and elsewhere are saying that enough is enough with this failing Government?
    Mr. Taylor: That is as absurd a question as one is likely to hear. Small businesses thrive in the north-west because of its competitiveness. The hon. Lady mentions Halewood, about which my right hon. Friend the Minister for Industry said he would receive a delegation. Ford is not closing the plant, but is making adjustments in the light of its judgment. We shall assist in securing Halewood's long-term future.
    Mr. Nigel Evans: Does my hon. Friend agree that the Labour party ignores all the good news in the north-west? He mentioned the 35,000 jobs that have been created over the past two years, but, as a result of inward investment since 1985, 17,334 jobs have been either created or safeguarded. One important industry is the aerospace industry—not just British Aerospace but the Consortium for Lancashire Aerospace, which comprises more than 130 smaller companies with a turnover of more than £4 billion. It would damage those industries and jobs in the north-west greatly if the Labour party were elected and slashed defence expenditure, bearing in mind the fact that it would have to get the money from somewhere.
    Mr. Taylor: Like my hon. Friend, whose remarks I endorse, I do not understand why the Labour party always wants to sell the north-west down the river. I presume that Labour Members would take the same attitude if they were in government. I want them to know that the north-west has high morale. Lancashire, Cumbria, Cheshire and Merseyside are wonderful counties and they are all in good heart—much better heart than I see on the Opposition Benches.

    Research and Development
    Mrs. Clwyd: To ask the President of the Board of Trade what has been the percentage change in total Government spending on research and development since 1985. [10596]
    The Minister for Science and Technology (Mr. Ian Taylor): Estimated Government expenditure on research and development in 1996–97 is 36 per cent. higher than the cash expenditure in 1985–86.
    Mrs. Clwyd: The Minister was unable to answer the question that I asked. The answer is that there has been a

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    decrease of 16.5 per cent. since 1985. Is it any wonder that, because of cuts in Government-funded research and development, we have fallen from 13th to 18th place in the world prosperity league?
    Mr. Taylor: The hon. Lady forgot to ask the question that she obviously wanted to ask because she did not put the words "in real terms" in her question. There has been a real-terms cut in total Government R and D mainly because of cuts in the defence industry, which I have not heard many Opposition voices oppose. She therefore should not try to be too clever on that account. The science base is at the heart of Britain's efforts to be competitive in the long term, and expenditure on it under this Government has risen by 15 per cent. in real terms during that period.
    Mr. Bernard Jenkin: Would it not be more significant to ask what our gross R and D spending is as a proportion of gross domestic product? Is it not broadly in line with our European competitors? Is it not typical of the Opposition that they ask about Government R and D spending as though that will solve all our problems, whereas it is private sector investment that creates jobs?
    Mr. Taylor: It is axiomatic that the Government aim to invest in research and development and thereby to stimulate industrial investment. Industrial investment in the United Kingdom still has further to go, although in recent years there has been a year-on-year increase. I have never denied that my message to industry is that it should invest more intensively in R and D. The Government's record is extremely good and compares favourably with Government expenditure in countries such as Japan and the United States. I intend to ensure that the UK research base is the finest, as we believe it to be. That will come about through the schemes that we are delivering to bring the science base and industry closer together.

    Public Sector Research Establishments
    Mrs. Anne Campbell: To ask the President of the Board of Trade if he will make a statement on the progress of the Government's prior options reviews of public sector research establishments. [10598]
    Mr. Ian Taylor: The Government are considering the prior options review reports. We are determined to achieve the greatest possible benefit from the substantial resources devoted to public sector research establishments. We expect to make further announcements about outstanding decisions in the near future.
    Mrs. Campbell: Has the Minister read the comments of the Select Committee on Science and Technology, which described the scale and conduct of the reviews as profoundly unsatisfactory? Is he aware of the disruption that has been caused? Does he plan to make a further announcement before the general election?
    Mr. Taylor: I always treat with great respect the views of the Science and Technology Committee and always look forward to appearing before it. There have been misunderstandings about the objectives of the prior options reviews. As the Government consider that £690 million of expenditure on R and D through the
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    research departments should be undertaken efficiently, prior options are clearly important. However, we are nearing the end of the process in the current round, and in the very near future—certainly before the general election—I expect to make an announcement concerning those institutes on which we have not yet made any public statement. I draw attention to the announcements that are already on record. Some of the research departments have stayed in the public sector, some have undergone management adjustments and some have been moved into the private sector.
    Mr. Patrick Thompson: Will my hon. Friend pay tribute to the people working in the public sector research laboratories in Norwich? Will he confirm that the Ministry of Agriculture's Central Science Laboratory will stay in Norwich? It would be very good news if it did. Bearing in mind what my hon. Friend has just said, how much longer will people in Norwich who are working in the other research laboratories have to wait for final decisions affecting their future?
    Mr. Taylor: I am delighted to say that on 9 December my right hon. and learned Friend the Minister of Agriculture, Fisheries and Food announced the future of the Central Science Laboratory as an agency with various management tasks ahead of it. The new facilities in York are of great importance—I shall be visiting the York region this weekend—but I am pleased to say that the excellent work on food science will remain in Norwich. I intend to make other announcements as soon as possible.
    Mr. Ingram: One of the central questions that the Minister must answer is what cost-benefit analysis he is using to justify the Government's continued obsession with the privatisation of large swathes of the nation's public sector research establishments. Have not millions of pounds from a hard-pressed science budget been wasted, and thousands of scientists demoralised in pursuit of the Government's flawed policy? The Government should provide encouragement and support for the PSREs, not uncertainty and continuing confusion about their future.
    Mr. Taylor: I do not recognise that situation. A review process is not always enjoyable, but some of the research establishments report that the review has given them a more tightly defined mission statement, and they welcome the opportunities that have emerged from the prior options process. I challenge the hon. Gentleman, who has forlorn hopes of his party one day occupying the Government Benches. His question shows that he is not prepared for that transition. If £690 million is to be spent on research establishments, it is the duty of any Minister for Science and Technology to ensure that the money is spent efficiently. We are doing that. We have found new ways of delivering quality in science. I am certain that, as a responsible Minister, I had to undertake that process.

    Manufacturing Investment
    Mr. Lewis: To ask the President of the Board of Trade what has been the change in the level of manufacturing investment in the past 12 months. [10599]
    The Minister for Trade (Mr. Anthony Nelson): The figures for the past 12 months will not be available until

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    those for the last quarter of 1996 are published next month. However, the conditions for investment are extremely favourable and the Confederation of British Industry expects manufacturing investment to grow by 8 per cent. this year and next year.
    Mr. Lewis: When will the Minister accept that the Government's record on manufacturing investment is abysmal? Even the Secretary of State admitted not long ago that the Thatcher Government had a poor industrial investment record. Why is that situation unchanged?
    Mr. Nelson: Like other Opposition Members, the hon. Gentleman never knowingly misses an opportunity to talk Britain down. Business investment grew by 5 per cent. last year and whole economy investment is six times higher than under Labour. Instead of decrying our excellent performance on the manufacturing front, he would do better to celebrate some of the excellent investment in manufacturing industry in his constituency. For example, Omega Engineering recently established a 250,000 sq ft European manufacturing plant in his constituency. Is that not better news than his question suggests?
    Mr. Jacques Arnold: Is not the CBI's forecast of an 8 per cent. increase in manufacturing investment this year and next year one of the best results to be found in the European Union? What does my hon. Friend think would happen if industry were hit by windfall and other corporate taxes, as proposed by the Opposition this year?
    Mr. Nelson: Yes. The performance of industry—particularly of manufacturing industry—would be severely prejudiced by such factors. My hon. Friend is right to draw attention to the CBI's studies in that respect. In the past 24 hours, its quarterly survey has confirmed that confidence in manufacturing industry has risen and that output is up. The number of jobs in manufacturing industry has increased by 130,000 in the past three years. That is good news on the manufacturing front, and it reflects the success of Conservative policies in government.
    Mr. Corbett: I welcome the increased investment in the manufacturing sector and the forecast that that will continue, but can the Minister predict when manufacturing investment will return to its 1979 level?
    Mr. Nelson: The important statistic is the investment in business as a whole. Those who produce computer games or sell computer software services will find that the distinction between the two in terms of employment and investment is becoming increasingly artificial. Whole business economic investment is growing substantially. Our output and exports are at record levels. International confidence, as reflected in investment, is also at a record level. That speaks well of the performance of our industry and of Government policies in action.
    Mr. Ian Bruce: Has my hon. Friend assessed the effect on jobs of taking £10 billion from the publicly owned utilities, which invest in manufactured goods from British industry? How many jobs would be lost if £10 billion were removed from their investment and devoted to £10 billion-worth of make-work schemes, such as those offered by the socialists opposite?
    Mr. Nelson: The Opposition have not accounted for any significant losses in employment resulting from their
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    plans, which would wreak havoc with investment, activity, profitability and the future of many utility companies. They have led the way with investment in recent years. Let us not forget that, during the difficult years of the recession, those utilities maintained high investment and employment. The price of their success is the prospect of a Labour Government introducing a swingeing tax thereon. That would be disastrous for their prospects, for consumer prices and, most of all, for the many people employed in those industries.
    Mrs. Beckett: Is it not true that just over a year ago in the Budget the Government predicted a 10 per cent. increase in manufacturing investment this year, whereas the most recent figures show a decline of 16 per cent. for the same quarter? The Government claimed that an increase would be an indicator of success, but they have said nothing about the decline. Will the Minister confirm that the most recent figures for this quarter compared with the last show a decline not only in manufacturing investment, but in business investment and in whole economy investment? The Minister cited the CBI's prediction for manufacturing investment, but the Government have not predicted what will happen to manufacturing investment. Can the Minister make such a prediction today? Does it not appear that, according to the latest information—whether it be on investment, output, which is static or which is going down, or the forecast export levels in the CBI survey—we are reaping the rewards of this Government's utter neglect of manufacturing over many years?
    Mr. Nelson: No. The right hon. Lady is wrong on just about every count. She should update her briefing before she reads it out. She did not refer—[Interruption.] Perhaps the right hon. Lady will give me a chance to reply to her question. The CBI quarterly survey became available yesterday. She may not always believe what the Government say, but she should not deride what the CBI says. It states:
    "Manufacturers' optimism grew for the third consecutive quarter. Manufacturing output growth is expected to accelerate over the next four months."
    The predictions are that it will rise by 8 per cent. this year and next year. Average unit costs and prices have fallen. For the past year, manufacturing output has risen significantly. That is one reflection of the huge improvements in productivity that have taken place within that sector, which have been fuelled by inward investment. It is a great success story for Britain and Conservative policies. The Labour party should not and must not deride it.

    Scientific Research
    Mr. Bayley: To ask the President of the Board of Trade if he will make a statement about the implications of the Budget for Government-funded scientific research. [10600]
    Mr. Ian Taylor: The Government's commitment to research and the science and engineering base remains as strong as ever, with total Government funding of science and technology being sustained in 1997–98.

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    As my right hon. and learned Friend the Chancellor of the Exchequer said in his Budget statement,
    "our universities and colleges make an important contribution to the economy … We want to ensure that the British science research base remains the best in the world, which it certainly is at the moment."—[Official Report, 26 November 1996; Vol. 286, c. 159.]
    Mr. Bayley: May I welcome the Minister's earlier expression of support for the Ministry of Agriculture, Fisheries and Food's Central Science Laboratory in York? Does he join me in recognising the importance to the economy of such public sector science and the additional 750 private sector bioscience jobs in the York area? Will he explain why the Government present an improvement in the science budget when the figures published after this year's Budget, compared with those published after last year's Budget, show that the Government will invest £25 million less in science over four years than they were planning previously?
    Mr. Taylor: I am happy to endorse the hon. Gentleman's comments about the Central Science Laboratory and about the work that it undertakes. There was never any question about the excellence of that work. The prior options review was designed to ascertain how best to maintain that excellence in terms of basic research, and how the laboratory could connect with the private community that the hon. Gentleman mentioned in the biotechnology industries. That case-by-case analysis has been the hallmark of our prior options survey.
    There is a cash increase in the science budget as a whole, year on year, compared with the lower inflation figures that were originally taken into account. The overall settlement of the public expenditure survey round shows the importance that science has within the total package of Government expenditure.
    I draw attention to the extra £100 million that my right hon. Friend the Secretary of State for Education and Employment has found, including an extra £20 million for equipment. Again, it is important to strike a balance, and the settlement meets some of the comments made by the Committee of Vice-Chancellors and Principals.
    Science in this country is doing extremely well. Researchers are doing a brilliant job in so many of the areas identified in the foresight programme. The year of engineering success was officially launched today; we should all take pride in talking up the work of the science community.

    Manufacturing Industry
    Sir David Knox: To ask the President of the Board of Trade when he next expects to meet the President of the Confederation of British Industry to discuss the manufacturing sector. [10601]
    Mr. Lang: My ministerial colleagues and I regularly met the Confederation of British Industry to discuss a range of issues. In 1997, the CBI expects manufacturing output to grow by 3.5 per cent. and manufacturing investment to grow by 8 per cent.
    Sir David Knox: Does my right hon. Friend agree that reasonably stable exchange rates are particularly
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    important for the manufacturing sector? Is he concerned about the effects of the recent rise in the value of the pound on manufacturing industry?
    Mr. Lang: The rise in the pound is clearly a reflection of the world's perception of the strength of our economy and currency. A strong currency reduces input costs for manufacturing industry when importing from abroad. Manufacturing is now at an all-time high. It has increased by 9 per cent. since the recovery began. Given the high quality of productivity and the prospects for order books, I believe that the capacity exists to maintain that level.
    Mr. Pearson: Is the Minister aware of the widespread concern and dismay among trade associations about the Governments's proposals to turn the trade fairs and missions budget into a competition, at the behest of the Deputy Prime Minister? Does the Minister realise that that will prevent necessary long-term planning and will jeopardise future success? Why does he not tell the Deputy Prime Minister to get the tanks off his lawn?
    Mr. Lang: It is the policy of the Government, to which the hon. Gentleman referred, to which all Ministers subscribe. It is important to use Government funds as efficiently and cost-effectively as possible. The broad thrust of our policies—creating challenge schemes, getting the best value for the taxpayer—has been welcomed by industry, and that is reflected in its success in using the resources that we provide.
    Mr. Harry Greenway: Does my right hon. Friend recall that, in 1979, it took five men to produce a tonne of steel in this country compared with one man in Japan? Production output per man in the two countries is now equal, if not better in this country. Is that not a matter for great congratulation and a complete condemnation of a Labour Government and socialism?
    Mr. Lang: My hon. Friend is absolutely right to draw attention to the success of the steel industry, which is partly the result of privatisation and the release from the shackles of state ownership to which the Labour party subjected it. That success in productivity applies right across the manufacturing sector. Manufacturing productivity has risen by 80 per cent. since the Conservative Government came to power. We have largely closed the productivity gap with Germany and France, which widened under the last Labour Government. Whereas the Organisation for Economic Co-operation and Development table put the United Kingdom in 14th place in productivity growth under the last Labour Government, we are now top of the table.
    Mr. Campbell-Savours: Will the President of the Board of Trade join me in drawing the attention of the Confederation of British Industry and the international business community to the fact that west Cumbria has hundreds of thousands of square feet of modern industrial space waiting to be occupied by industries that we want to grow and make successful? We have a flexible, able and capable work force who want to work, and a development agency equipped to put together effective packages to help industries to come to our area. Will he help us now in this major effort to bring jobs to my under-employed community?
    Mr. Lang: I welcome the hon. Gentleman's endorsement of the success of Conservative policies,

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    which have delivered precisely the qualities to which he drew attention. I am sure that his reference to the available manufacturing space in Cumbria will have been noted, and as the manufacturing sector is expanding—it is up by 130,000 jobs in the past three years, which was never experienced under a Labour Government—the potential of Cumbria will no doubt come to the attention of expanding manufacturers before long.

    Retail Sales
    Mr. Amess: To ask the President of the Board of Trade if he will make a statement on recent trends in retail sales. [10602]
    Mr. John M. Taylor: There has generally been good growth in retail sales in recent months compared with the similar period in 1995. The latest official statistics show sales volumes 3.5 per cent. higher than a year ago.
    Mr. Amess: Is my hon. Friend aware that many retailers in Basildon, Leigh-on-Sea and Southend are reporting an upturn in trade, in spite of it having been a very difficult time for them? Does he share their anxiety that the threatened imposition of the social chapter, the minimum wage and new taxation policies advocated by the Opposition might damage the recovery?
    Mr. Taylor: I have a message for the voters of Basildon, Leigh-on-Sea and Southend: they are right to be anxious. I am anxious—my hon. Friend is right to be anxious—that nothing so dreadful should happen to these good people that they should be burdened with a Labour Government.
    Mr. Sutcliffe: As we are talking about retail trends, is the Minister aware of the problem affecting mail order companies? Has he made representations to the Treasury on the problems that the industry faces and the huge effect that they could have on the jobs and services that it provides? Will he make representations to his colleagues in the Treasury to ensure that the VAT argument is sorted out?
    Mr. Taylor: I am aware of the problems—as they are perceived to be—to which the hon. Gentleman refers, but he is right to identify them as matters for the Treasury. I would not be offended if he made his own direct representations.
    Mrs. Peacock: How much of the increase in retail sales was funded with cash, and how much was funded on credit?
    Mr. Taylor: I do not have the figures with me, but I believe that all the evidence suggests that increasing use is being made of credit facilities—not least, of course, of credit cards.

    Trade (Thames Valley)
    Mr. Rendel: To ask the President of the Board of Trade what plans he has to improve trade between Thames Valley businesses and the rest of Europe. [10603]
    Mr. Nelson: A dedicated export team has been set up at business link Thames Valley. An export development
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    counsellor has been appointed and will take up his position in February, and there will be a Thames Valley export forum later this year.
    Mr. Rendel: Is the Minister aware of research carried out recently by Bath university—not least on behalf of the Thames Valley economic partnership—which suggests that 60 per cent. of Thames Valley businesses are now trading with Europe, and that half those businesses find that their greatest problem is exchange rate fluctuation? What measures is the Minister taking to ensure that the number and extent of such fluctuations that his Government's economic incompetence has caused will be reduced in the future?
    Mr. Nelson: I am aware of the report. The hon. Gentleman is right to say that there are numerous exporting companies—some 3,000, in fact—in the Thames Valley area. Half those companies are exporting to Europe, and are doing extremely well. Their success is reflected in the fact that a considerable number of American technology companies have set up in Newbury and Bracknell in particular, all as a result of Government policies. The hon. Gentleman laughs, but that is a fact. It is happening in his own constituency.
    As for the future, the macro-economic stability of our economy is the surest guarantee that our export performance will continue, that the competitiveness of British goods and services abroad will continue to increase and that the substantial confidence in this country's capabilities—not least in the Thames Valley—that is demonstrated by investment from abroad will be maintained. All that is a good-news story.
    Mr. Lidington: Does my hon. Friend agree that the trading competitiveness of small and medium enterprises throughout the Thames Valley would be gravely damaged if the minimum wage and social chapter were introduced, as advocated by the hon. Member for Newbury (Mr. Rendel) and his party? Is it not true that Liberal Democrat policies would mean longer dole queues in Newbury and throughout the Thames Valley region?
    Mr. Nelson: My hon. Friend is right: the Liberal Democrats never knowingly undertax either. Whether through tax or through regulation, they would certainly propound policies that would damage the export prospects of numerous businesses, particularly small businesses. Many small businesses cannot afford to export at long distance, and tend to go to our doorstep markets in Europe. They would be the most severely affected by such policies. The hon. Member for Newbury nods in support; I hope that his constituents will understand the employment and investment implications that would be involved if those policies were ever pursued.

    Power Supply Interruptions
    Mr. Tipping: To ask the President of the Board of Trade what assessment he has made of the risk of interruptions to electricity and gas supplies in winter 1997. [10605]
    Mr. Nelson: There is sufficient electricity generating capacity and gas supply to meet foreseeable demand,

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    but my Department keeps the situation under review in consultation with the Office of Electricity Regulation, the Electricity Pool and the Office of Gas Supply.
    Mr. Tipping: Will the Minister agree to look again at the issue of interruptible gas contracts? Can it be right that combined cycle gas turbine stations depend on such contracts, and will receive extra payments when they use alternative fuel?
    Will the Minister also comment on the fact that hospitals have left themselves in an exposed position by depending on such contracts? That clearly gives cause for concern. What steps will the Minister take to try to resolve the difficulties?
    Mr. Nelson: Although it is principally a matter for the parties, the Government properly take an interest in it. We were particularly interested in the report produced by Ofgas in December, which concluded that supply interruptions were most unlikely for customers on firm contracts. As the hon. Gentleman will know, the network code ensures continuity of supply in extreme weather. Every indication has shown that the code is working well,
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    but the Government are not complacent about any of those matters—particularly the contracts to which he refers—and will keep them carefully under review.
    Mr. Nigel Griffiths: Does the Minister think that contracts for 250 hospitals should be interruptible? Hospital staff—such as those in Melrose this morning, at the Borders General hospital—have told me that they have only a 10-day supply of oil left to power their back-up generators, whereas British Gas has advised them that interruptible contracts allow hospitals to be cut off for 45 days. There are 250 other hospitals in the same position.
    Mr. Nelson: The hon. Gentleman is most irresponsible if he is an alarmist on such matters.
    Mr. Griffiths: How dare the Minister.
    Mr. Nelson: I dare because the hon. Gentleman is irresponsible. He does not mention the fact that there have not been such interruptions, or that there are perfectly satisfactory and substantial back-up fuel supplies. He also does not state that such contracts offer distinct cost advantages to those who must be careful with how much they spend from the public purse. He peddles fears—which are not founded on reality—on matters of real concern to patients of the health care services.

Royal Yacht
3.30 pm
The Secretary of State for Defence (Mr. Michael Portillo): With permission, Madam Speaker, I should like to make a statement on the royal yacht.
Britannia has just left Portsmouth for her last voyage around the globe. Since the royal yacht was commissioned 43 years ago, she has travelled more than 1 million miles and undertaken almost 700 royal visits overseas—serving both as a royal residence and as a setting for official entertainment by Her Majesty. The royal yacht has also played an important part in national events, such as the silver jubilee and the anniversary of D-day and of VJ-day. She will be at the ceremonies marking the end of British sovereignty over Hong Kong.
Britannia has also lent her prestige to the promotion of British exports worldwide and the attraction of inward investment to Britain, and she has hosted numerous commercial events. The benefits that Britannia has brought to the British economy are invaluable.
It was therefore with great sadness that we announced, in 1994, that Britannia would be decommissioned this year. Although a beautifully maintained ship, she is old. She is increasingly difficult to maintain, and a major refit would be required to convert her to modern sea-going standards.
The decision stands to decommission Britannia. However, the Government have decided to commission a new purpose-built royal yacht, and have so informed Her Majesty the Queen. We have taken the decision because we believe that a royal yacht is an important national asset, which projects a prestigious image of Britain, adding powerfully to official occasions and assisting greatly in promoting British economic interests. Her Majesty the Queen has made it clear that she expects such a role to be the primary purpose of the new yacht. Moreover, the new yacht will at times provide Her Majesty with a suitable residence overseas, thus contributing to the impact of her visits and enabling her to represent our nation in an appropriate setting.
The vessel will be a symbol of the Crown, of the kingdom and of its maritime traditions. It will be designed to exhibit an enduring level of style, elegance and dignity appropriate to that role, and should act as a showcase for Britain's design and engineering skills. Her Majesty the Queen and the Duke of Edinburgh will be consulted on the design.
The Ministry of Defence will procure the new royal yacht. After a study to enable us to draw up a formal specification and a competition, a contract will be placed with a British shipyard. She will be crewed by the Royal Navy and fly the white ensign. The Queen will contribute to the furnishings and fittings of the state rooms and the royal apartments, drawing some items from Britannia.
We have considered carefully what would be appropriate for Britannia after decommissioning. The Government do not believe that it is appropriate to sell her to a new owner for private use. She will not put to sea again, but we are interested in proposals for a suitably prestigious use for Britannia in the public interest in the United Kingdom. Such a scheme would need to take account of the plan to transfer royal fittings to the new yacht. Any proposals for Britannia would need to
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guarantee that the yacht would be kept in excellent condition. If that cannot be assured, it would be better to see her scrapped than to see her deteriorate.
That leaves the matter of paying for the new yacht. The running costs should not be much more than half those of Britannia. They will be accounted for by the Ministry of Defence. For the capital cost of about £60 million, we have received many interesting proposals for private funding. The Government are grateful for them all, but we believe that a new royal yacht—a symbol of the nation's pride—should be funded not by sponsorship or subscription, but by the nation. The capital cost will be met from public funds in the reserve.
Britain can look forward to a new royal yacht in the new century. I trust that she will enter service in time for Her Majesty's golden jubilee in 2002.
Dr. David Clark: I thank the Secretary of State for bringing the House this news, but we are disappointed that there has been no discussion whatever with the Opposition on the matter. As you know, Madam Speaker, it has been the convention that policy regarding Her Majesty is an all-party matter. Why was the Secretary of State not prepared to discuss the issue with the Opposition?
We, too, appreciate how valuable the Royal Yacht Britannia has been over the past 43 years. We recognise that she epitomises all the best traditions and the excellence of the British maritime industry from shipbuilding to ship repairing and, indeed, the manning and crewing of the vessel. She has epitomised the excellence of British craftsmanship and we wish her well in her final voyage.
The Secretary of State said that Britannia is to be decommissioned when she comes back from Hong Kong. Could he perhaps give us some information about what will fill the gap between the end of this year and the commissioning of the new royal yacht that he envisages in about three years' time? Will he also give us an idea of when he hopes to issue the tender and when he anticipates the contracts being signed?
Why has the Secretary of State rejected in such a cavalier manner the injection of private capital—[Laughter.] I have been told over the past few years that the partnership of private and public capital is the most efficient way of conducting public business. I recall being told by the Secretary of State that the best way of providing accommodation for our service families was by the injection of private capital. If it was good enough for the accommodation of our service families, why has he not considered it for the royal yacht?
As I understand it, the Secretary of State has announced that the royal yacht will be financed from existing public expenditure. He has admitted that the project has been under consideration for more than two and a half years, so why were the figures not included in the Budget? Will he also confirm that the £60 million to come out of the reserve will not be available for emergencies in the years ahead?
Mr. Portillo: The hon. Gentleman will forgive me if I miss a point or two. Part of his statement was drowned by laughter and I was not able to pick up every point, but I shall try to do my best.

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After Britannia returns from Hong Kong, she will still have a programme running to the end of the year, probably within British territorial waters. After the end of 1997 and until the new ship enters service in 2001 or 2002, there will be a gap, with no royal yacht on the seas. That will not be as long a gap as the 14 or 15 years between the end of the Victoria and Albert and the commissioning of Britannia.
The hon. Gentleman asked why we had rejected out of hand the idea of using private capital. We did not reject it out of hand; we considered it carefully, but we did not believe it appropriate. [HON. MEMBERS: "Why?"] If Labour Members had not learnt their capitalist lines like parrots, they would understand that some uses of private finance are appropriate and some are not. A royal yacht to support Her Majesty and this nation in our economic and export efforts is not an appropriate use of private money. I am very grateful to all those who stepped forward with suggestions for using private money, but it is not appropriate.
Dr. John Reid: Why?
Mr. Portillo: If the hon. Gentleman does not realise why, he has simply learnt his lines and spouts them and no longer thinks—if he ever did. [Interruption.]
Madam Speaker: Order. I shall be calling hon. Members to put questions. Wait for it.
Mr. Portillo: The hon. Member for South Shields (Dr. Clark) asked how long it would take to build the yacht and when contracts would be let. I have told him that it should be in service in 2001 or 2002. It will take about two and a half years to build and the period up to the beginning of building will be taken up by deciding on the specification and by the competition.
The hon. Gentleman also asked why we did not discuss the matter with the Opposition. I do not regard today's statement as a constitutional one. I regard the yacht as an important aid to Her Majesty and to this country's economic interests, but not as a constitutional matter. I have come to the House and made a clear statement at the earliest opportunity. I should like to contrast that with the announcement of the previous royal yacht, when a Labour Government, during the 1951 general election campaign, issued a press notice from the Admiralty announcing that there would be a new royal yacht. In comparison, I have made a clean breast of my proposals to the House. The hon. Gentleman ought to study his history better before making such imputations against the Government.
Mr. Douglas Hurd: Is it not characteristic that new Labour should have announced its conversion to private finance on the wrong occasion? May I congratulate the Secretary of State on the Government's decision, including the decision on finance, which seems to me entirely right? I accept entirely what my right hon. Friend says about the usefulness to British finance and industry of Britannia and her successor, but at the heart of the issue, is there not the deeper point that a royal yacht is the best way of enabling the sovereign of our country to remind us—and, indeed, the world—of the links between these islands and the sea, which are fundamental to our past and our present?
Mr. Portillo: Indeed. My right hon. Friend is absolutely right. We are a maritime nation, a nation of
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traders, global thinkers and global doers. The royal yacht will help to emphasise all that and enable us to extend the hand of friendship and connection to our many allies and friends around the world. I am so pleased to have my right hon. Friend's support—not least for the funding, which is wholly appropriate to the dignity of the monarchy and the vessel that will support them in it.
Mr. Menzies Campbell: I fear that the Secretary of State might be embarrassed by the amount of congratulation on his conversion to the virtues of public funding for such a matter. Does he share my disappointment that the hon. Member for South Shields (Dr. Clark), for whom I have the greatest respect, did not seem able to match his commitment? Is not the virtue of what the Secretary of State has proposed the fact that the vessel can assist Britain's economic and trade interests and provide dignified and often secure accommodation for the royal family while they fulfil their duties abroad? In view of the fact that the yacht's running costs are to be met from the defence budget, is it envisaged that the vessel should have any role in time of war?
Mr. Portillo: On the last point, it is not envisaged that the vessel should have any role in time of war. I cannot of course predict the future, but it is not expected that she will double as a hospital ship, for example, as was the plan with Britannia. The hon. and learned Gentleman is absolutely right that the vessel is secure accommodation for Her Majesty. She will be escorted and protected by the Royal Navy. It is an admirable way in which to protect our economic interests and to underline our ties with the Commonwealth. The Commonwealth values the vessel as well as our own country.
Given all those advantages and the vessel's versatility, it is indeed disappointing that Her Majesty's loyal Opposition were not able to say today that they support it and would continue the project were they elected.
Mr. Barry Field: May I thank my right hon. Friend for today's decision? It will mean much rejoicing in the Isle of Wight. Will he forgive me for mentioning pounds, shillings and pence? As the new royal yacht will play a bigger role in promoting Great Britain plc than Britannia, may I remind my right hon. Friend that the arrival of Britannia in Cowes week every year makes a substantial contribution to the Isle of Wight's economy? I would hope that I could hang on his words and that, perhaps, Britannia will sail on in UK waters beyond 1997. That would make a big difference to us on the island. Her arrival is very much treasured every year by my constituents.
Mr. Portillo: My hon. Friend has been a notable and strong advocate of the replacement of the royal yacht and I can understand its impact on the Isle of Wight, as on all of us. However, I want this statement to be entirely straightforward and without ambiguity. We do not intend that Britannia should run on beyond the end of 1997. I do not want to mislead my hon. Friend on that; I want to make it perfectly clear that there will be a new royal yacht in 2001 or 2002.
Mr. Alan Williams: It is hard to conceive of who has been more ill advised,

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the Government in offering the matter to the palace in an attempt to bring it into the political game, or the palace in making the mistake of accepting it.
Dame Elaine Kellett-Bowman: Unworthy!
Mr. Williams: I am allowed to make my point. Is it not a fact that, over the next three years, there will be unprecedented cuts in social services? I cannot understand a sense of priority that diverts £60 million more away from such services. Halving the running costs will still cost £10,000 a day. If the royal yacht is a symbol, it is one of extravagance and irrelevance.
Mr. Portillo: I found the right hon. Gentleman's comments ungenerous, inaccurate and wrong. It is entirely the Government's decision as to whether there is a royal yacht, and although we have informed Her Majesty, Her Majesty did not request this. Her Majesty's assent is not required in that sense. Her Majesty is pleased with the decision, but it is not a matter for her. Any blame to be attached should be attached to the Government only. The right hon. Gentleman is not right to bring Her Majesty's name into the matter, as he sought to do.
This is public expenditure and we are entitled to talk the language of priorities and proportion. The social security budget is £90,000 million a year. We are talking about spending £60 million for a yacht that will last about 30 years—a capital cost of £2 million a year. I am sure that one after another, hon. Gentlemen and hon. Ladies will rise in the Chamber to pay tribute to the many ways in which this vessel will contribute to our nation economically, but also to the way in which it will contribute to our prestige, status and pride. I know that I have lost the right hon. Member for Swansea, West (Mr. Williams) now, because he does not understand those three words.
Mr. Peter Viggers: Nowhere will my right hon. Friend's statement be more welcome than in Gosport, with its Navy connections and loyal traditions. May I ask further about the future of Britannia? Her home port has been Portsmouth and she has been berthed in Portsmouth harbour for many years. Nowhere would her future be more secure and more applauded than in Portsmouth harbour, as a centrepiece of the exciting millennium project there. Will my right hon. Friend confirm that that suggestion will be given full consideration?
Mr. Portillo: Certainly it would be given consideration. I was in Portsmouth recently on HMS Victory, and I am aware of the marvellous heritage of the city and of the ships berthed there, which represent some of the maritime history of this nation. However, I must repeat the conditions that I made clear during my statement. The proposal must take account of the fact that at least some of the fittings will have been stripped out from Britannia. The yacht must have a prestigious use; it must be in the public interest; it must be in the United Kingdom; and we need a sponsor who can guarantee the excellence of her condition. I stress again that it would be distressing for all of us to see Britannia deteriorate—we would rather see her scrapped than deteriorate.
Mr. Peter Shore: The present Britannia has made a valuable contribution to
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Britain's presence overseas, both diplomatically and commercially, and I have no doubt that the Government have made a good decision in ensuring that we have a worthy successor. May I particularly congratulate the Government on their conversion to the use of selective public sector purchase? May I ask the Secretary of State to give the assurance that the yacht will be built in a British shipyard? Will he make it absolutely clear that on no account will he allow the European Commission to insist upon open competition among European shipyards? Will he give a pledge that, even if Mr. van Miert refers him to the European Court of Justice, he will not allow the Commission to interfere and to get away with it?
Mr. Portillo: I am grateful to the right hon. Gentleman for the generous way in which he welcomed the statement. The yacht will be built in a British shipyard—for security reasons, the yacht should be built here. In any case, this will be a royal yacht and it is appropriate that it should be built in a British shipyard. If there were any challenge to that decision, I would defend it every inch of the way.
Mr. David Martin: I welcome my right hon. Friend's statement about the existing royal yacht and its replacement, and I particularly welcome the fact that the yacht will continue to be crewed by the Royal Navy. Will he confirm that I will have his personal support for the proposal that the new royal yacht should be home based at Portsmouth, as the existing yacht has been for so many years?
Mr. Portillo: My hon. Friend has been generous in his welcome for the statement, and he has been a great advocate for today's decision—as many others who have spoken today have been. I ask him by all means to open his campaign today, but not to press me for a final decision on that—although I understand perfectly the strength of his claim.
Ms Rachel Squire: I certainly welcome a statement that will bring work to Britain's hard-pressed shipyards, which have suffered so severely from the cuts in the Government's defence expenditure. I should welcome the return of the Royal Yacht Britannia to the Clyde, where she was constructed so skilfully and ably many years ago. However, the Secretary of State should give the House more details on why it was decided to use public money for the capital costs of Britannia.
Mr. Portillo: On the last point, I repeat that it was because we thought that it was appropriate to the dignity of the monarchy. On the earlier points, if the hon. Lady is concerned about our hard-pressed shipyards, I would remind her that those at Barrow would not be building a fourth Trident boat if it were not for the fact that there was a Conservative victory at the previous general election.
I remind the hon. Lady that it is the pledge of her Government—[HON. MEMBERS: "Aha."]—of her party if it were in government, to have a defence review. The hon. Member for South Shields has said clearly that it would be a review with painful consequences. If her party were to win the general election, she would discover soon enough what those painful consequences were, because they would be visited on her constituents by the cuts that would be made by a Labour party in power.

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When the shadow Chancellor was asked directly by Jim Naughtie on the "Today" programme yesterday whether he would have to cut defence in order to fund everything else within unchanged public spending ceilings, he simply refused to answer. He dare not answer the question, because it is clear that defence is the place from which any other spending increases would be funded. Defence under Labour would be a soft touch for any Chancellor.
Sir Patrick Cormack: May I thank and congratulate my right hon. Friend most warmly? Does he, however, accept that Britannia is part of this country's maritime heritage and that it would be as appropriate to maintain it at public expense, either as part of the complex at Portsmouth or at Greenwich, as to pay for the new yacht? Will he think carefully about that and about keeping Britannia in service until the new yacht is ready?
Mr. Portillo: I am glad that the statement pleased my hon. Friend, but it is a statement with firm edges. We do not intend to keep Britannia in service beyond the end of 1997, and we do not believe that it would be a suitable use of public funds overall to keep it as some kind of museum. Others may wish to make proposals for a public interest use of the yacht, and I dare say that those people could apply for funding in the usual way—to the national lottery, for example—but we do not intend to launch a Government initiative to keep Britannia in any particular form. The challenge to those who would come forward is clear: suggest a use that is prestigious and suitable and by all means apply for the funding that is available; but any proposal must keep Britannia in excellent condition.
Mr. Dennis Skinner: Why did the Secretary of State, in responding to my right hon. Friend the Member for Swansea, West (Mr. Williams), have to turn to insolence, pomposity and arrogance, knowing that out there in Britain, probably 30 or 40 per cent. of the people—it may be more—do not agree with the monarchy? Those views should be expressed in the House. The Prime Minister, on being elected, talked about a classless society.
Is it not right that some of us should say that £60 million should not be spent on a yacht for the royal family when it could be spent on kids who are being lined up in hospital and kicked out; on people who are waiting in corridors on trolleys; on schoolchildren who do not have pencils or even classrooms, in some cases; on pensioners, who are being robbed blind; or on the 4 million people who do not have a job? Surely there is a case to be made that the yacht should not be built. There is a language of priorities that says that we should not spend any more money on this aristocracy, which has been pushing its own self-destruct button for the past decade.
Mr. Portillo: There is a language of priorities and there is a language of proportion. The hon. Gentleman has no sense of proportion. He equates the billions of pounds that we put into the health service and social security with a few million pounds that will be spent on this project over several years and which is, in any case, economically justified. There is more to it than economics. There is national esteem and pride, which he does not share or even understand. Some might think that he was arrogant
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in pontificating with such self-satisfaction and certainty about the views of 30 or 40 per cent. of the population. I criticised the right hon. Member for Swansea, West not for his views but because he blamed Her Majesty for a decision that was not hers.
Sir Keith Speed: Does my right hon. Friend accept that the all-party maritime group, which I chair, welcomes this decision, for which we have campaigned for more than two years? The new yacht should not only be built in Britain, but contain the finest British marine technology, to show the rest of the world that we still lead in maritime affairs.
Mr. Portillo: Speaking from his position and with his background, my hon. Friend's approval is especially welcome. I emphasised in my statement that the ship will provide a showcase for British skills, engineering and design. That, too, will be of great benefit to our nation.
Mr. Andrew Faulds: May I assure the right hon. Gentleman that most people throughout the country will warmly welcome this statement? Does he accept from me that most people throughout this country very much appreciate the services rendered by Her Majesty the Queen and Prince Charles to Britain? Does he not agree with me that the Carlton TV programme was a load of unutterable rubbish and totally unrepresentative of British public feeling? [Interruption.] I will be heard. Does he not finally agree that very few people in this country want to see a series of political presidents?
Mr. Portillo: If I may add to that, very few people in this country want to see a brave Labour Member who speaks up for the monarchy being barracked by his colleagues in the way that the hon. Gentleman was. I appreciate his remarks. Apart from their feelings about the monarchy, many people will look forward to the 400 or 500 jobs that I estimate will be created by the contract. As was said by the hon. Member for Dunfermline, West (Ms Squire), who has left the Chamber, the shipyards will welcome the work.
Sir Hector Monro: Does my right hon. Friend accept that, with the exception of a few Opposition Members, the nation will warmly applaud the Government's decision? Her Majesty the Queen and other members of the royal family will be able to visit the Commonwealth and other nations in a royal yacht that is fit to show the fine maritime heritage of this country. Could he say a little more about the design of the yacht? May I hazard the thought that, after free competition, and bearing it in mind that Britannia was built on the Clyde, the new royal yacht might also be built there?
Mr. Portillo: Certainly. the Clyde would be a candidate, but there must be a competition and a specification. In welcoming my right hon. Friend's remarks, I must make it clear that the new yacht's specification will be different from that of Britannia. In those days, the designers envisaged that the royal family would travel long distances on board. Today, they travel by air and use the yacht as a residence. Modern technology will allow lower running costs and a smaller crew. There will be substantial differences, but some important things will stay the same. The yacht must be

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prestigious. It must carry status. It must have royal apartments and state rooms that are suitable. It must create a great impression when people visit it, as something special, something remarkable, and something uniquely British.
Rev. Martin Smyth: May I, on behalf of not only my party but well over 1 million people in Northern Ireland, warmly welcome the statement? Even 77 years after the Republic separated from the kingdom, there are those in the Republic who still have royal yacht clubs and other titles because they, too, are royalists. May I express the hope that when the time comes for the competition, Harland will be one of the bidders, maintaining a tremendous tradition? As a Belfast Member, I hope that there will be those with the vision to bring Britannia to the new Lagan waterfront, which is making Belfast boom. Amidst all the cringing, it is encouraging to realise, when people think that we are bankrupt, that the £90 million is coming from the reserve.
Mr. Portillo: It is £60 million. I welcome what the hon. Gentleman says. I know that the decision will be welcome to his constituents and to, I think, the vast majority in the Province. He rightly points out that it will be welcome north and south of the border in the island of Ireland. I am pleased that he reminded us of that. I thank him for the two bids, one in respect of Britannia and the other in respect of the new yacht. They have been carefully noted. Again, I recognise that those claims could be very strong.
Mr. Michael Colvin: Does my right hon. Friend agree that many of our people, including some living in the constituencies of Opposition Members who poured scorn on the decision, owe their jobs in part to the £2 billion of trade that the royal yacht has won overseas during the time that she has been operating as our national flagship? Does he further agree that in future the Britannia replacement should be called our national flagship, because that is what she is, rather than a yacht, which conjures up visions of junketing around the Mediterranean? If my right hon. Friend is thinking in terms of berthing her, she should be berthed in London as our national flagship, where most people can see her, rather than being tucked away in Portsmouth.
As my right hon. Friend is canvassing opinion on laying up the old Britannia, rather than confining his market to the United Kingdom, will he bear in mind the dependent territories? The rundown of his Department's expenditure in Gibraltar has led to that dependent territory having to switch its emphasis to creating an offshore finance centre, which is precisely the sort of economy that the royal yacht has hitherto been used to promote. Perhaps if he is looking for a fitting final resting place for Britannia, Gibraltar should be the place for her to berth. That would be welcome and it would give just the right message to Spain.
Mr. Portillo: I am tempted to call, "Any more bids?" I heard very well what my hon. Friend said, but I reiterate what I said in the statement—that we shall be looking for a use of public interest in the United Kingdom, and that stands. I cannot accept that anything that was in
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Portsmouth would be tucked away. I understand the promotion of the case for London. It is not within my authority by any means to propose that the royal yacht should be called anything other than the royal yacht. That is a contentious suggestion.
My hon. Friend is right to recall how much the royal yacht does for the promotion of trade and how much good it can do for the dependent territories. However, I do not want the yacht to be seen simply as a commercial transaction, simply in pounds and pence. It also involves questions of our feeling about ourselves as a nation, and that matters, too.
Miss Kate Hoey: I warmly welcome the announcement to replace Britannia. Anyone who has seen the thousands of people who flock to see Britannia anywhere in the world—I particularly look back to the pictures from South Africa last year—must know the importance not only to the economy but to the whole image. Given the announcement last week of £500 million—a large amount—to be spent from the millennium fund in Greenwich, which is a project that we can support, although there are certainly some queries about the amount, why has the Secretary of State not considered taking £60 million from that fund, so that the money comes from public money, but money that has been paid for by people through the national lottery?
Mr. Portillo: The answer is simple. The legislation governing the national lottery does not allow us to use it as a substitute for proper public spending, and that is an important rule. This is a burden that properly falls on the nation and the taxpayer. While it would have been possible to think about private finance, it is not possible to use the national lottery for that purpose.
I very much welcome what the hon. Lady said and I am hoping that, given the pressure this afternoon from at least some Labour Members, by the end of the statement we might hear from the Labour Front-Bench team that it has decided that it wants to back the Government's action and to confirm that, in the unlikely event that Labour was elected, it would maintain the pledge that we have made today. Although it is clear that the Labour party is badly split on the issue and that the old republican guard is here in strength, none the less many hon. Members such as the hon. Lady would welcome such a commitment.
Mr. John Wilkinson: In congratulating my right hon. Friend on his admirable decision, which was announced in the most felicitous language, may I be practical and ask that the specification include a helicopter deck? Secondly, could the ship's company of the Royal Navy, who take a great pride in fulfilling that most important role for the duration of their tour, from time to time include distinguished members of the Royal Naval Reserve, who would enormously appreciate the honour of serving on board?
Mr. Portillo: I can accept my hon. Friend's first suggestion straight away. Of course, a helicopter deck should be part of a modern ship. The possibility of arriving and leaving by helicopter and, indeed, of evacuating by helicopter in an emergency, should be part of the design. My hon. Friend's second suggestion is extremely important, and I should like to consider it. I mentioned state rooms and, of course, there must be

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provision for a band to play on board, because that is an important part of the image, prestige and projection associated with the royal yacht.
Mr. Gordon Prentice: Given that the public are paying for the yacht, will they be able to visit it when the Queen is not in residence, which will be most of the time? Has the Secretary of State given any thought to a dual use—what about using it to take disadvantaged children from our inner cities to a foreign destination for a holiday?
Mr. Portillo: I must make it clear to the hon. Gentleman that we have never considered financing the yacht out of swaps, as I believe he used to do in his early days. The royal yacht attracts many people, all over the world. I would not propose making any great changes in the usage of recent years. No doubt the way in which the yacht is used will evolve over time, but it is important that it should be there principally for the promotion of Britain and of her economic interests abroad.
Mr. Bill Walker: Does my right hon. Friend understand that the Scottish people will be delighted at the proposal to replace the Royal Yacht Britannia? They will hope that it will be based on the Clyde after it ceases to be operational. Secondly, they will hope that the Clyde will have the opportunity to build the new ship, just as we built Britannia. We should also like my right hon. Friend to note that the Scottish national party has called for a bicycling monarchy, and there would be no prospect of a new Britannia being built on the Clyde with such a monarchy.
Mr. Portillo: Let me assure my hon. Friend that no part of the specification will include room for bicycles. During my hon. Friend's remarks, I heard my right hon. Friend the Secretary of State for Scotland say, "Hear, hear." I am sure that he was doing that clearly within the bounds of collective responsibility, but none the less my hon. Friend was well heard on the Front Bench.
Mr. John Home Robertson: I welcome the statement, although I have some suspicions about the motivation that may lie behind its timing. Will the Secretary of State say a little more about what he regards as being appropriate or not appropriate in respect of total or partial private financing? Why is it not appropriate to have any private financing for the royal yacht, given that he recently decided that it was entirely appropriate to sell all the married quarters of all our soldiers, sailors and airmen in England and Wales to Nomura, a Japanese bank?
Mr. Portillo: I do not think that it is the duty of the state to own houses, but I do think that it is the duty of the state to support the monarchy.
Mr. Robert Key: May I congratulate my right hon. Friend on his personal commitment to this project over the past two and a half years and on winning the arguments that must have occurred in the Cabinet? Given that the new royal yacht can be built in only one location, can he give an undertaking that there will be a proper symbolism in its construction and fitting out of the fact that it represents the United Kingdom of Great Britain
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and Northern Ireland? Can he remind the House of any conventions that might exist on what the royal yacht should be called? Have the Government given any consideration to that matter and has Her Majesty expressed an opinion?
Mr. Portillo: We do not yet know the name of the yacht. Undoubtedly, that question will be considered and many suggestions will be made; Her Majesty will certainly be consulted. My hon. Friend, who also fought hard for this decision, makes an excellent point that the yacht must be representative of the United Kingdom of Great Britain and Northern Ireland. Her Majesty the Queen is the Queen of the United Kingdom and her yacht should reflect that.
Mr. Paul Flynn: Was the Secretary of State in the House on Friday, when we witnessed another spending decision? A Bill on the wind chill factor, which was presented by one of my hon. Friends, sought to provide £60 million to give essential life-saving help to poor pensioners. The question that the country will ask about Government priorities is why the Government do not have £60 million to give to poor pensioners, but do have it to allow one family to travel in a billionaire life style.
Mr. Portillo: Yes, but the cold weather payments scheme was invented by the Conservative Government—it did not exist when the Labour party was last in office. Time and again, it has been improved in its generosity and extent. The Labour party did not make those payments. When the hon. Gentleman blathers on, as he has just done, let him admit all that the Government have done in providing a social security budget of £90,000 million. Let him then go away and talk the language of comparisons and proportion, about £60 million over 30 years for a royal yacht.
Sir Cyril Townsend: While regretting the lack of forward planning some years ago, despite prodding from Conservative Members, which means that inevitably there will be a delay, I warmly welcome this sensible decision. Does my right hon. Friend agree that the offers of financial support from commercial and City organisations that were put to the royal yacht parliamentary group and others are a signal of how much interest is felt in such sectors for the concept of a royal yacht? Does he further agree that having a royal yacht is a tried and tested formula and a good way of presenting the latest in British technology and expertise?
Mr. Portillo: First, I congratulate my hon. Friend on his recent knighthood—this is my first opportunity to do so. He is right to say that tremendous interest was shown in the matter, and the interest expressed by the business community tells us a lot about what is happening in the general community and about the spirit in this nation. I entirely reject the remarks of the hon. Member for Bolsover (Mr. Skinner) in that respect. The yacht is tried and tested; the nation has benefited from it; it has helped our sovereign in her work; and I believe that almost the whole House will warmly welcome today's announcement.
Mr. William O'Brien: May I support the introduction of a vessel that will be unique to the United

971
Kingdom as an aid for the royal family? It has been suggested in the past, however, that the royal vessel could be used as a training ship when Her Majesty was not using it. There is also the question of the royal family's future. We are told that the royal family will have to use passenger trains and that no extra provision will be made for special aircraft. The Secretary of State says that it is important that the royal family should have a vessel financed from public funds, but that it is not important for the royal family to have their own train. What is the difference?
The nation will be confused about why we are taking this stand today when, in the recent past, the royal family have been told that they should use public transport. Why could not the royal yacht be financed by private sector money, given that the Government say that the royal family want to be involved with the private sector and move away from dependency on the state? Why have the Government changed their stance on that issue?
Mr. Portillo: First, I remind the hon. Gentleman of what I have already said several times: this decision was for the Government, not the royal family. The Government believe that it is for the nation to finance something that so closely touches the monarchy's dignity. I can continue to repeat that all afternoon if the hon. Gentleman likes, but it remains our firm position.
The hon. Gentleman asked why we did not choose the training ship design, which was an imaginative idea. We took the view that the vessel's primary purpose is to combine use by the monarchy with promotion of Britain abroad and of our economic interests. To confuse that primary purpose with something quite different, which
972
would be difficult to make compatible, seemed to make the matter too complicated and likely to fail in its primary purpose.
As Secretary of State for Defence, I am responsible for announcing this decision, which has been taken by the Cabinet. We have taken that decision because of all the reasons that I have given about how the yacht helps to project Britain and the monarchy abroad. Those reasons stand on their own legs and are self-explanatory.
Dame Elaine Kellett-Bowman: May I assure my right hon. Friend that nowhere will the Government's decision to build another royal yacht be more happily received than in Lancaster, with its special relationship with Her Majesty in her style as Duke of Lancaster?
Mr. Portillo: I am most grateful to my hon. Friend. The connection between Lancaster and Her Majesty is clear and well known. I am relieved that, to the best of my knowledge, Lancaster has no shipyard, so I do not have to chalk up another bid.
Several hon. Members rose—
Madam Speaker: Thank you very much.

BILL PRESENTED
  GOVERNMENT COMMUNICATIONS HEADQUARTERS (RESTORATION OF TRADE UNION RIGHTS)
  Mr. David Winnick presented a Bill to provide for persons employed at the Government Communications Headquarters to have the right to belong to an independent trade union of their choice; and for connected purposes: And the same was read the First time; and ordered to be read a Second time upon Thursday 1 May, and to be printed [Bill 76].

Building Societies (Distributions)
4.22 pm
Mr. Douglas French: I beg to move,
That leave be given to bring in a Bill to amend the law in respect of distribution of assets on the take-over or conversion of a building society.
The Bill's aim is to remove a serious injustice being done to tens of thousands of building society customers by the way in which building societies choose to allocate shares as they abandon mutual status and convert to public companies. The House will be aware of recent announcements by the Halifax, the Alliance and Leicester and the Woolwich building societies, each setting out a slightly different methodology, and of the preparations being made for flotation by the Northern Rock.
Under section 100 of the Building Societies Act 1986, building societies have considerable discretion as to who may qualify for shares and to what extent. The Act is more prescriptive when it comes to cash bonuses arising from the takeover of a building society but the same injustice arises and the Bill covers both circumstances.
The broad principle adopted, with variations, by the societies is that the first-named person on the account is the member, and members may qualify once only as saver and as borrower, irrespective of the number of accounts held.
The problem arises with joint accounts and trustee accounts, where the trustee is the first name on the account and the underlying beneficiary is the second or subsequent name. In some cases the trust is a formal relationship, as between a solicitor and a client. In most cases, it is an informal relationship where, in order to help an elderly, disabled or handicapped person who cannot look after his or her own account, a relative or carer becomes the trustee with the responsibility to sign the account.
If the carer as trustee has only one account, he or she will have a fiduciary duty to ensure that the beneficiary receives the share allocation. If the carer as trustee is the first-named person and has more than one account, even though those accounts may be entirely unconnected, only one share allocation will be made.
The problem is most acute in cases of multiple trusteeship. The matron of a nursing home, for example, may have been asked to look after the accounts of, say, 20 elderly patients. She will find that there will be only one allocation of shares to be divided up between all the patients. The same applies to the warden of a hospice, the manager of an old people's home, or a solicitor or accountant who is a trustee for a number of clients. Charities, associations and youth clubs can all be placed at a disadvantage.
Under the terms of the Halifax conversion, some recognition is given to the aggregate balance of the accounts, but no such provision is made by the Alliance and Leicester.
Sometimes anomalous situations arise from a detail as elementary as the design of the form completed by the customers when opening their building society accounts. That applies particularly to accounts opened for children. Some of those accounts are adversely affected, but others are not.
974
Unfortunately, second-named account holders cannot risk taking the obvious step of changing the order of names on their account in anticipation of future flotations. If they do that, they may break the continuity of the account and render it ineligible anyway.
To tackle the problem, my Bill requires building societies to recognise the legitimate entitlement of underlying beneficiaries to receive the same allocation of shares as every other customer, where it can be shown that they would have been the first-named account holder and qualified in their own right, but for the presence of a trustee. The Bill requires converting and merging building societies to establish a reserve or suspense account charged against assets, from which to meet legitimate claims from underlying beneficiaries of trustee accounts.
No onus at all is placed upon the societies to track down those who may be eligible. That would be an impossible task and a daunting prospect, and may well explain why societies have been unwilling to face up to the problem, of which they have been only too well aware.
Instead, the Bill requires societies in the course of normal notification to their members to tell them that claims within the specific definition will be considered, and that claimants should submit details of their circumstances and allow time for the society to satisfy itself that the criteria have been met. The society can then make a payment of equivalent value out of the fund set aside for the purpose. It will not cost the society anything extra. The society will, after all, only be returning to its mutual members the fruits of mutuality.
The most significant although not the only category of people to benefit from the Bill will be the disabled, the handicapped, the sick, the elderly and those who, through misfortune, are unable to look after themselves. That is why leading charities, such as Mencap, SENSE, and the Royal National Institute for the Blind, are strong supporters of the Bill.
One must ask how the building societies could have felt comfortable producing a share distribution formula that they knew was likely to exclude those most needing to benefit. We might also ask why at least one society, with expensive advice at its disposal, should have told its members that they were constrained by legislation from addressing the problem. In fact, nothing in current legislation prevents converting building societies from including in their share distributions the second-named account holder or beneficiary in circumstances where they would have qualified if they had been named first.
For share distributions, my Bill requires building societies to do what the law already permits them to do. For bonus distributions, my Bill amends the 1986 Act to make it possible and then requires building societies to act. Such a procedure will prevent building societies from attracting a great deal of unwelcome and unnecessary criticism of the type that so marred the Lloyds bank takeover of the Cheltenham and Gloucester. It will help to preserve the high esteem in which the building society movement has been held for so long but which has been severely tested in recent times.
The procedure outlined in my Bill could have been adopted voluntarily by the Woolwich, the Halifax and the Alliance and Leicester. With the benefit of hindsight, I am sure they would now acknowledge that they underestimated the public's strong belief in fair play. Fortunately, the Alliance and Leicester is showing clear

975
signs of a change of heart, but the Halifax still perceives technical obstacles. Even though those societies have already sent out their conversion documents, I hope that—within the constraints of company law—they will make every effort to find a formula that enables them to follow the requirements of my Bill.
There is an opportunity for a go-ahead society to blaze a trail and set an example of best practice. I hope very much that that will happen. However, once the Bill is passed, societies that convert or merge in future will have no choice: they will have to recognise the rights of underlying beneficiaries, and a massive injustice will have been corrected. I commend the Bill to the House.
Question put and agreed to.
Bill ordered to be brought in by Mr. Douglas French, Sir Andrew Bowden, Mr. John Butterfill, Mr. David Evennett, Mr. John Greenway, Sir John Hannam, Mr. Hartley Booth, Mr. David Hunt, Mr. Peter Luff, Sir Geoffrey Pattie, Mr. James Pawsey and Mr. Michael Stephen.

Building Societies (Distributions)
  BUILDING SOCIETIES (DISTRIBUTIONS)
  Mr. Douglas French accordingly presented a Bill to amend the law in respect of distribution of assets on the take-over or conversion of a building society: And the same was read the First time; and ordered to be read a Second time upon Friday 14 February, and to be printed [Bill 77].
Orders of the Day

  Finance Bill
  (Clauses Nos. 40, 62, 68, 82 and 92 and Schedules Nos. 7 and 13.)
  Considered in Committee.
  [MR. MICHAEL MORRIS in the Chair]
  Ordered,
  That the Order in which proceedings in Committee of the Whole House on the Finance Bill are to be taken shall be Clause 82, Schedule 13, Clause 62, Clause 92, Clause 40, Clause 68, Schedule 7.—[Mr. Wells.]
  4.35 pm
  Mr. Alistair Darling: On a point of order, Mr. Morris. I understand that it would be convenient and appropriate to discuss schedule 13 while debating whether clause 82 should stand part of the Bill. The clause is short and the meat of the argument is to be found within the schedule. The amendment refers to the schedule. I would not anticipate two separate debates.
  The Chairman of Ways and Means (Mr. Michael Morris): The Chair is happy to accede to that request, as long as all parties are agreed that that course should be followed. It seems that there is no disagreement. That being so, we shall take schedule 13 with clause 82.

  Finance Bill
    Clause 82

      WRITING-DOWN ALLOWANCES ON LONG-LIFE ASSETS
      Question proposed, That the clause stand part of the Bill.
      The Chairman: With this it will be convenient to take the following: Schedule 13—Capital Allowances on Long-Life Assets.
      Amendment No. 3, in schedule 13, page 188, line 18, at end add—
      11. The Treasury shall produce a report each year which—

      (a) describes the response of companies to the withdrawal of fiscal support for investment in long—life assets made effective by this Schedule, and

      (b) assesses the costs of operating the provisions of this Schedule and whether they are generating test cases before the Commissioners and the Courts.'.

      Mr. Darling: The clause and the attached schedule, according to the Chancellor of the Exchequer in his Budget speech, are designed to ensure that the writing-down allowances that various Finance Acts provide for should be brought into line with normal accountancy practice. I think that, as a matter of principle, no one would argue with that. We have no objection in principle to the clause, but we would like to take the opportunity to raise a number of matters that arise from the operation of the clause and the attached schedule, and at the same time try to elicit from the Minister further clarification of what the Government intend.
      The Committee will see, when examining the amendment, that it is intended, if agreed to, to allow the Government to bring forward, in effect, a report on the effect of the workings of the clause and the schedule. Whenever Parliament provides for allowances, or restricts

      977
      or curtails allowances, it is important to be sure about the effect of what is proposed. There are many occasions when proposals are brought before the House of Commons and passed into law which turn out a year or two later not to have the intended consequence.
      Perhaps it would be convenient to dispose of the principle of allowances, a principle on which I think there is broad agreement on both sides of the Chamber. The principle is that allowances should be designed to assist and encourage investment. They should be carefully worded so that they achieve the specific aim that lies behind them. They should not be allowed to distort investment decisions. Equally, the cost of the allowance should not be disproportionate to the gain. That has happened in the past. The Government's objective is to stop the cost of the allowance becoming disproportionate to the benefit gained. That is something that would generally be supported. Allowances should be in place to assist and encourage the investment process. At the same time, they should be fair. That is a point to which I shall return shortly.
      Mr. Tim Smith: It is my recollection that not so long ago the Opposition argued for enhanced capital allowances—indeed, a possible return to 100 per cent. first-year allowances. I certainly remember that in 1984, when we moved to a lower rate of income tax and lower capital allowances, there was opposition from the Labour party. Is it now the Opposition's policy to pursue what I would consider to be a more sensible approach, which is to follow accounting depreciation?
      Mr. Darling: I suppose it was predictable that the hon. Gentleman would not be able to resist departing from a serious matter to make rather a silly point. If he cares to write, I shall look into what happened in 1984. I was not a Member of this place at the time and I do not remember what happened that year.
      Successive Governments have accepted that capital allowances can be justified provided that there is a relationship between the cost of the allowance and the gain. That is the intention, which we want to support. It has always been the position that the Government of the day must review the working of allowances to ensure that they are cost effective and are achieving what was intended initially. Successive Governments have supported that principle.
      It is clear that the level and rate of allowances will vary from time to time. I repeat, however, what I said at the outset of my remarks. I do not know whether the hon. Member for Beaconsfield (Mr. Smith) was listening at the time. I said that there is much to be said for ensuring that allowances do not distort investment decisions, and that there should in general be an alignment between what is normal accounting practice, normal business practice and the provisions of the appropriate Finance Act. There is no difference between us on that. Having established that principle—we do not need to waste time arguing the point—I shall deal with a number of points, some of which may interest the hon. Member for Beaconsfield, who tabled amendment No. 11, because he is on to the same point.
      What immediately strikes anyone reading this provision is that although the intention is that the law will follow established accounting practice, that does not,
      978
      I understand, happen. Let me give an example. The aeroplane manufacturing industry has drawn the Government's attention, and certainly our attention, to the fact that although aircraft are an asset and are capable of lasting more than 25 years, and therefore are caught by the provisions of the Bill, many operators in the United Kingdom do not use their aircraft for anything like 25 years; they sell them after 15 years. Therefore, they believe that they are discriminated against. Perhaps they have a point.
      I can understand the Government's view that lines have to be drawn somewhere, but considering that railway rolling stock is exempt, I just wonder what the Government's rationale is. Although aeroplanes are caught by the provisions of the Bill, it is arguable that a great deal of an aeroplane that is still flying 25 years after its original manufacture may not be 25 years old, because parts will have been replaced during its working life. The same cannot be said of a railway carriage, a large part of which is the same railway carriage as left the workshop many years earlier.
      Perhaps there is something of which we are not aware that has led the Government to exempt railways but to include aeroplanes. It will be interesting to hear from the Financial Secretary the Government's thinking on that point. If there is a rational explanation, I am sure that we will all accept it. Aeroplane manufacturers are concerned that they will be discriminated against. Perhaps I should return to one or two of those points later. It would be helpful to know why railways have been exempted.
      I understand why ships have been exempted, because every year in Committee and in the proceedings relating to the Finance Bill we debate shipbuilding, and hon. Members on both sides of the House have been sympathetic to the plight of British shipbuilders. It will be interesting, however, to know why the Government want to exempt railways. Some people have unkindly suggested that it is a favour to those who have acquired the privatised railways, that they need these incentives to make ends meet, or perhaps they were promised this during the privatisation process. We are not all cynical, however, and it may be wrong to suggest such things, but it is difficult to see why so many other people have been included whereas railways have been exempted.
      I notice in the explanatory memorandum that the Government issue to all members of the Committee that the rules will apply, in the words of the memorandum,
      "only to companies that invest heavily in long life assets."
      The memorandum does not, obviously, have the force of law, but what Ministers say can be of help in interpreting what Parliament means, which brings me to my second point.
      In regard to what is said in the memorandum, the terms and language of schedule 13 are vague. I understand that of necessity it may not be possible to have the precise language that one might like, but bearing in mind the fact that investment decisions may well turn on the allowances that are available, it would be helpful if the Minister could say what he believes the words "invest heavily" actually mean. Presumably an aircraft manufacturer, for example, will almost exclusively invest in assets that have a long life. What do we say to someone who makes the components of an aircraft that might or might not last 25 years? I do not know. Some parts may well last that long; others will not. That is clearly of some importance.

      979
      The same is true of the oil industry. It has been put to me by people involved in the oil industry that many of the decisions as to whether to invest in a new field are highly marginal. There are many considerations, of which capital allowances are only one, but it could be the critical factor. Some of the plant that is required will last more than 25 years; some will not. It will be helpful—I cannot find this in the schedule—to know in precise terms what the Government have in mind, and the definition of the assets that are to be caught.
      Apparently, there is a further problem. Under the Bill, the test of the lifetime of an asset is whether it is capable of lasting for more than 25 years. I understand that it is normal business practice to write down plant according to the lifetime anticipated by the user or owner of the asset. Let us take the example of an aeroplane again. An aeroplane may be intended to operate for 15 or 20 years; the asset is then sold to someone else, who may use it for five or six years, and subsequently sold again and again, being used for progressively shorter periods. As the Bill stands, it is possible that people in possession of assets that are capable of being used for more than 25 years will find that, through no fault of their own, they will not receive the full allowances.
      4.45 pm
      In view of what I said at the beginning of my speech, I should point out that I am not arguing that allowances should be granted indiscriminately when they may not always be justified; but there seems to be an anomaly in both the scope and the definition of the clause and schedule. Although the stated intention is to align accounting practice with the practice of the law, many individuals will find that their practice still bears no relation to the new law. We should not enact a measure that would distort decisions.
      Aeroplanes are, by definition, very mobile. Unlike power stations or water pipelines, they do not have to be in this country. It has been said—although such threats should always be taken with a pinch of salt—that some operators might decamp and set up abroad in order to avoid these provisions and, in a global economy, we must of course be very aware of the tax competition issues that may arise.
      I dare say that the Minister will have an answer to all those points, but it would help the Committee—and, perhaps more important, those who will have to put the measures into practice—to know what the Government intend, and how they propose to deal with the anomalies to which I have referred.
      Some operators and owners, such as the utilities, have assets which, on any view, are likely to last for more than 25 years. In the case of others, such as the telecommunications industry, it is a moot point: there could be considerable argument about how long modern telecommunications equipment is supposed to last. Those who listened to the "Today" programme this morning will have heard an argument about the erection of telecommunications beacons in a park in Yorkshire. It was argued that they would last only another five years, but they are clearly capable of lasting for 25 or 30 years.
      A theme that has recurred during debates on Finance Bills over the past few years is the desire not just to simplify the body of tax law, but to pass legislation that
      980
      has some degree of clarity; but clarity is sadly lacking in clause 82. It is possible that the Government introduced the clause and schedule simply on cost grounds, but, if that is the case, let us hear it: let us not pretend that there was some other motive. If, on the other hand, the intention was to align accountancy practice with the practice of the law on allowances, will the Minister explain the apparent anomalies—as between railways and aeroplanes, for example—and will he explain what the taxpayer is supposed to do when he has an asset which he has no intention of operating, for any purpose, for anything like 25 years, although the law assumes that it will last for longer than that? That leads to a question that specifically concerns aeroplanes. What are people supposed to do when an asset that may be in the sky 25 years after its frame took to the airways is not the same asset as was originally built? I am sure that other Committee members wish to speak to clause 82 and to amendment No. 3. It would be helpful, however, if the Financial Secretary would explain what the Government have in mind with their provisions.
      Mr. Martin O'Neill: I listened very carefully to the remarks made by my hon. Friend the Member for Edinburgh, Central (Mr. Darling). Unsurprisingly, he dwelt on the example of aircraft, which is a good example for the reasons that he gave—its mobility and the possibilities of life extension and, although it will still be an aeroplane, of changing almost all its features. The latter feature of aeroplanes may be an argument against applying these provisions to them; I am unsure on that point. It is clear, however, that what is good for trains should be good for aeroplanes. Anyone who has travelled on the west coast main line will know that the life of those assets is considerably longer than 25 years. The railways provide some obvious examples for this debate.
      It is always strange when Ministers suggest that legislation will be clarified by a comparatively modest amendment which, upon examination, only adds to the confusion. That is why we should like to have an annual report. If the Government's notional majority were to prevail and clause 82 were retained, it should be incumbent on the Government and on successive Governments to report on changes in the law. It is therefore desirable that we should receive an annual report on developments. Such a report would be to the advantage of the House, to potential investors and, not least, to the accounting profession.
      My hon. Friend the Member for Edinburgh, Central mentioned the utilities and the oil industry; he also mentioned this morning's very interesting radio report about beacons for mobile telephones. We should also like to know the status of assets in the cable industry—which is busy digging up our country's roads and destroying trees. Asset life in that part of the telecommunications industry might be of considerable length, and I hope that it is. I do not want my street dug up again, and—given cable operators' tendency to drill holes through any wall they encounter—my wife does not want them anywhere near our house again.
      In the utilities and telecommunications sectors, the burgeoning cable industry is entitled to receive some indication of how assets will be treated so that it can determine whether the provisions might frustrate

      981
      development of exciting new technology. Interaction between home, office and shop, for example, could revolutionise the way in which we live and work.
      My hon. Friend the Member for Edinburgh, Central also mentioned the oil industry. I am sure that he will recall that, some years ago, in Scotland, we attended a seminar hosted by a major oil company at which we heard a debate on investment intentions between senior executives of that company. It was clear that executives from the company's American headquarters were mesmerised by the "upstream" and "downstream" arguments on a proposed tax change. The headquarters executives were not interested in the somewhat refined debate on the relative importance of the Government's then proposed tax changes, and their patience was fairly short. If they had thought that tax advantages in the North sea were considerably less than those in south-east Asia or in Australia, they would have been quite happy to move their investment programme to a location that was more cost effective on tax. It is therefore important that the Minister gives an idea of the impact not only on the oil industry but on the petrochemical industry—the downstream industry in which the UK has assets.
      I have a constituency interest in that many of my constituents work at the Grangemouth complex, which is on the edge of my constituency. It is one of the major facilities for harnessing and taking advantage of the products of the North sea oil industry. The investment programmes there are of considerable significance, and I do not think that the industry would wish to be disadvantaged by the changes that appear to be in train and which would be available to some industries and not others.
      By the same token, we should consider the effect on power stations. Although this is not important at the moment, because the level of power station construction is not quite what it was in the early 1980s, it is clear that, come the end of this century and the beginning of the next—the date might coincide with 2010—a number of new plants will have to be constructed because the life of the existing ones will have been pretty well exhausted. New plants will have to be brought on line. If there is not to be a beneficial tax regime for companies that invest in this sphere, we might face a shortfall in generating capacity.
      The construction of power stations involves petrochemicals and electricity generation. Even allowing for the new technologies involved in the generation of electricity, the construction of power stations is a major source of employment. The construction of the kit used in power stations is also a source of employment. It would be dangerous for the Government to highlight one industry—the railway industry—but discount the possible impact of those changes on others.
      I am anxious for the Government to make their position clear. We are not happy with the vagueness of
      "investing heavily in long-life assets".
      It could be open to all kinds of abuse and misinterpretation. It is therefore essential that the House has the opportunity to review at regular intervals the impact of the proposed changes. The best way to do that would be with an annual report.
      The amendment is therefore sensible, easily operable and one from which the House, the accounting profession and industry would benefit. I see no reason why the Minister should not accept it. If he can tell us what
      "investing heavily in long-life assets"
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      means with a degree of clarity and concision uncharacteristic of Ministers on most issues, we shall be pleasantly surprised and perhaps reassured. If we do not get that reassurance, I hope that the amendment is accepted. It has considerable merit and would certainly go some way to reassure the people on whom this country depends for employment and wealth creation.
      Mr. Tim Smith: I take the view that, as far as possible, the taxable profit of a business should, for the purpose of corporation tax, be as near as possible to the reported profit that appears in the accounts. Of course, it is not possible to achieve that in practice for very good reasons. In practice, one takes the reported profit in the accounts, adds the depreciation and then deducts the capital allowances to which the company is entitled. However, as far as possible the capital allowances should be roughly the amount of the depreciation that appears in the accounts. Clause 82 and schedule 13 take the capital allowances system a step further down that road.
      For that reason, the proposed reform is sensible, but we should recognise that it is a reform that can be made only in an era of low inflation. The hon. Member for Edinburgh, Central (Mr. Darling) took exception to my question about the history of this matter, but it is significant that, 20 years ago, we could not have had the system that we have today. In fact, 20 years ago, when the rate of corporation tax was 52 per cent. and inflation fluctuated between 15 per cent. and 25 per cent., not only did we have to have 100 per cent. first year allowances for all capital investment, we had to have something for stock relief, recognising the fact that replacing stock costs a lot of extra cash in a high inflation era.
      At that time, it was not good enough just to look at the reported profits of a company; the cash flow also had to be examined. In the 1970s, plenty of profitable companies had negative cash flow because of the effects of inflation on the need to maintain fixed capital and working capital.
      5 pm
      The 1984 reform was important because it reduced the standard rate of corporation tax significantly, and reduced capital allowances. That was a welcome change, because it removed distortions from the system. As has rightly been said, having capital allowances significantly higher than the accounting depreciation introduces distortions into the system, which result in commercial decisions being taken for tax reasons rather than for good business reasons. I am glad that we have reached a stage at which the total capital allowances available to a business will be roughly equivalent to the accounting depreciation that appears in the accounts.
      I should like to mention one or two issues that arise from the schedule. The first relates to aircraft, which the hon. Members for Edinburgh, Central and for Clackmannan (Mr. O'Neill) have mentioned. There are exceptions in the schedule for trains and ships. The best way to deal with aircraft seems to be to make an exception for them, too.
      The determining factor in deciding how much depreciation will be charged in the accounts is not how long one owner expects to use an asset—so it is not open to an airline that expects to use an aircraft for 15 years to decide to depreciate it at 6 per cent. over 15 years—but the expected useful life of the asset, regardless of how

      983
      long the current owner expects to use it. That is the problem for airlines. Although an airline may expect to use an asset for only 15 years, the life of an average aircraft these days may well be 25, 30 or even 35 years. United Kingdom airlines tend to buy new aircraft. A new 747, for example, might be owned by British Airways for 15 years and then be sold—probably abroad, although that is not particularly significant—to another operator, who operates it for another 10 or 15 years.
      The problem needs to be tackled, and I hope that my hon. Friend the Financial Secretary to the Treasury will be able to do so. I do not understand why the Inland Revenue favours a reducing balance method. Why do we have 6 per cent. on a reducing balance? Would it not be more straightforward to allow 4 per cent. on a straight line basis over 25 years, and at the end of 25 years the asset could be written off? That is straightforward.
      The Confederation of British Industry observes in its representations on the schedule that, at the end of 25 years, there is a substantial unrelieved cost. At the start, there is 6 per cent. relief, but that is 6 per cent. on the reducing balance. The CBI points out that, at the end of 25 years, a 6 per cent. reducing balance allowance leaves approximately 20 per cent. of the value unrelieved, whereas accounting depreciation over the same period would have written off the expenditure fully. I do not know how much longer it would take after 25 years at 6 per cent. on the balance for the expenditure to be written off completely. It could easily be another 15 years. It would be simpler to have a straight line basis of capital allowances. I wonder whether my hon. Friend the Financial Secretary could comment on that.
      Another important detail relating to the transitional arrangements has been drawn to my attention. Proposed new paragraph 38H of schedule 13, at the top of page 187, provides:
      "This Chapter does not apply—
      (a)to any expenditure incurred before 26th November 1996"—
      Budget day—
      "or
      (b) to any expenditure incurred before 1st January 2001 in pursuance of a contract entered into before 26th November 1996."
      That sounds straightforward, but it has been pointed out to me that some large capital projects—the provisions are directed principally towards such projects—such as the construction of a large power station might be organised as a series of contracts. There might be five or six. Although the project would be agreed, the contracts might not all be signed at the start. On 26 November 1996, it is possible that a company might have agreed a project with a construction company but contracted only for the first or second stages. Will my hon. Friend the Financial Secretary consider whether that is a genuine point of practical concern? I do not know. I have raised it with him because it has been raised with me.
      Mr. O'Neill: I am interested in the hon. Gentleman's point. There is another aspect to that problem. A power station can be built with different generating sets added over time. To get the show running and to generate some income, as well as electricity, the first set is put in and
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      then funded out of the next one, which may come several years later. A continuing programme of expansion can be carried out under the umbrella of the original contract.
      Mr. Smith: If it was clear that there was one contract and everything was carried out under that umbrella, there would not be a problem, as I understand the schedule. However, if there was something less than a contract—a commitment that was not contractually binding under which the project would not be viable if the whole undertaking was not proceeded with—there may he a problem. I do not know, but I hope that my hon. Friend will consider that.
      Cable has been mentioned. I wrote to my hon. Friend the Financial Secretary in December about a problem that is of particular concern to Cable and Wireless, although it may be a problem for all cable companies. I shall not go into the detail, but I hope that my hon. Friend will be able to respond to that.
      Having said all that, I think that the changes proposed in the schedule are sensible. They can be made only in a low inflation environment, but it is sensible to try to have the profit for the purposes of corporation tax as near as possible to the reported profit in a company's accounts. For that reason, I welcome the proposals.
      Mr. Ian Pearson: The schedule adds a further eight and a half pages to the Capital Allowances Act 1990. No doubt it will also add substantially in due course to the voluminous case law on the issue.
      It is clear from its size that the measure is not business-friendly. Capital allowances are complicated and present significant difficulties for small and medium-sized businesses in fathoming what allowances they can use for tax purposes.
      The issue is of concern to many tax practitioners. In their book, "Practical Capital Allowances", Peter Newbold and Martin Wilson write about some of the practical difficulties. They say:
      "It is common practice to speak of 'preparing' a capital allowances claim. This pre-supposes that particular types of assets qualify automatically for particular types of allowances, and that a claim consists of no more than assembling and presenting self-evident facts.
      In the 1990s, the process is much more complicated. Both tax law and building design have moved on to a new plane of complexity, and the 'grey areas' have grown—the facts are often less evident than they once were.…
      A claim for capital allowances must be 'developed' before it can be developed and it must be 'planned'. This clearly involves a good deal of work, and the question is often asked whether the cost (in both time and money) is justified."
      That is a very real concern for a number of United Kingdom businesses, especially small and medium-sized ones in the west midlands.
      Mr. Tim Smith: Does the hon. Gentleman agree that the exemption in the schedule for any business that spends less than £100,000 in one year on capital investment means that it is unlikely to apply to all small businesses and many medium-sized businesses?
      Mr. Pearson: No, I do not agree. The £100,000 limit will not exempt a significant number of medium-sized businesses—certainly companies that are still small but

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      operate in a group structure. If the hon. Gentleman looks at the schedule, he will find that it places very severe restrictions on companies that operate group structures.
      I would accept the principle behind the clause and the schedule if it really brought the tax treatment of long-life assets more closely in line with normal accountancy practice. The hon. Member for Beaconsfield (Mr. Smith) welcomed it, and like him I want taxable profit more closely to approximate accounting profit. In the same speech, however, he rightly made the point when referring to the CBI's submission, that, at the end of a 25-year period, as a result of the reducing balance system proposed in the schedule, about 20 to 21 per cent. of the value of the assets will not be relieved from tax. That does not seem to be getting close to mirroring tax treatment with accounting profit. The Government must be honest and give the real reason for the schedule. If it is a clever tax wheeze to raise £1 billion in two financial years, they ought to come clean and say so.
      Mr. Darling: Following the point made by the hon. Member for Beaconsfield (Mr. Smith), I am prompted to ask my hon. Friend to look at section 38C of schedule 13, where he will see that there is a further problem concerning the £100,000 figure. Although it would catch a contract that spanned several accounting periods and treats them as being one accounting period, what would happen if concerns so arranged their affairs to have a series of separate contracts? In speaking in support of the amendment, my hon. Friend will know that we do not want to reach a point where we are creating a very healthy living for lawyers who argue such matters. Some certainty would be very helpful. Although I appreciate why the Government are trying to be helpful in exempting small firms, they could unwittingly be creating a gravy train for lawyers.
      Mr. Pearson: I thank my hon. Friend for his comments, which are not only valid but have independent support. Andrew Dilnot of the Institute of Fiscal Studies said when questioned by the Treasury Committee on the issue of capital allowances and long-life assets that the provision would indeed create a gravy train for tax lawyers and accountants. He was far from convinced that the projected yields of £325 million in 1998–99 and £675 million in 1999–2000 would be achieved. We should listen to what he says. Tax lawyers and accountants are already gearing up to offer companies advice on how they should organise their tax affairs. Some of the utilities with which I have discussed the issue certainly feel that there are ways around the system and that it will not affect their businesses to any substantial degree.
      5.15 pm
      I turn to some of the detail of schedule 13, which raises fundamental issues that require scrutiny. It is unfortunate that, since this is the first clause and schedule to be discussed in Committee, it will not receive the level of detailed analysis that it deserves if we are to make good law in the area. I draw the Committee's attention to section 38A(2)(a) and (b), which revolve around who determines whether assets will have an economic life of at least 25 years and what we mean by a "useful economic life".
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      It seems clear that individuals and—probably—partnerships will decide themselves whether assets are caught by the legislation because, with the coming self-assessment regime, it will be up to them to determine such tax matters. Similarly, tax lawyers and accountants will advise companies, and undoubtedly some very interesting discussions will be held between companies and their firms of auditors as to how tax treatment of certain assets should be determined and accounted for.
      The point is well made by the Institute of Directors in some of the concerns that it has been expressing about the Budget. It says that consultation with industry and tax advisers on how the rule can be implemented is desperately required. I very much endorse that. I will be interested to hear what plans the Financial Secretary to the Treasury has to consult those who will be affected by the legislation and whether further consideration should be given on Report to some of the problems that are likely to be associated with it.
      Another key point to make about the section is that, although many major manufacturing companies will not keep assets for 25 years, they are nevertheless likely to be caught by the legislation because it may well be deemed that the asset has a "useful economic life" of 25 years. The most recent Government research that I have seen shows that the average age of plant and machinery in the United Kingdom is about 11 years.
      Some of our leading manufacturers certainly have very clear investment programmes. I cite GKN plc as an example. It will clearly make significant capital investments in plant and machinery but will be upgrading and disposing of it well within a 25-year period. How will the section take account of obsolescence so that a machine that could last for 50 years can be replaced by a more advanced one within 15 or 20 years? What happens if everybody agrees in good faith that an asset will last for 30 years, but it lasts for only 20 years? Would the taxpayer be compensated for the loss of cash flow as a result of having only 6 per cent. allowances during this period?
      Section 38A(4) and (5) deal with expenditure incurred on long-life assets in relation to composite assets, and state that apportionments should be "just and reasonable." This is peculiarly ill-defined, and it has some important knock-on consequences. Section 66 of the Capital Allowances Act refers to building alterations and states—in summary—that where a person carrying out trade incurs capital expenditure on alterations, it counts as plant and machinery. A company installing a major new manufacturing cell—which would be counted as plant and machinery, but may have a useful economic life of less than 25 years—may have to make substantial alterations to a building to install that cell. Those alterations would then be caught by the new regulations. At present, building alterations can qualify for the 25 per cent. writing-down allowances, but they will not in future. Companies that are likely to make alterations when investing in plant and machinery will be disadvantaged as a result of this part of the Bill.
      Section 38B provides exemptions for dwelling houses, retail shops, showrooms, hotels and offices. I accept the point about dwelling houses, but it is not immediately obvious why it is right and fair to exempt retail shops, showrooms and hotels—or, indeed, offices. A number of large hotel groups and companies are making major investments in long-life assets, such as offices, and these

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      will not be caught by the legislation. But a manufacturing company investing in plant and machinery to create wealth in the United Kingdom will be hit by the legislation. That does not seem to be a fair basis in law.
      Section 38B(3) is welcome, as it provides exemptions to the shipbuilding industry. However, it is not immediately obvious why shipbuilding should be exempted, but dry docks—where ships go to be refurbished—are to be classified as long-life assets and caught by the Bill. If we intend to do something to help the shipbuilding industry—we have had discussions during debates on previous Finance Bills on the need to support shipbuilding—it is slightly anomalous that dry docks will not be relieved in the way that the shipbuilding industry is. In case law, I cite Inland Revenue Commissioners v. Barclay Curle and Co. as holding that dry docks are plant and machinery. Grain silos are also classed as plant and machinery and they will be similarly affected by the new legislation—even though they are used for the purposes of loading and unloading ships. We need clarification.
      We also need details on the subject of investment in sports grounds. Section 70 of the Capital Allowances Act 1990 provides that investment in safety in sports grounds can be treated as plant, but there is no exemption in the legislation for such investment. In future, such investment is likely to get relief at the 6 per cent. rate rather than at the current 25 per cent. rate. Is that what the Government intend? Are they aware of the problem? Will they do something about it?
      I also wish to highlight the potential problems in relation to the private finance initiative, and I will be very interested to hear the Minister's response. A number of PFI contracts for the hospital sector—which are being signed rather belatedly—are from major companies that will invest in long-life assets, and certainly in assets with an expected useful life of more than 25 years. Before this Budget there was an understanding that they would get capital allowances at the 25 per cent. rate. It seems to me—there is nothing in the schedule to suggest otherwise—that PFI projects in the health service could be damaged by the change in tax treatment proposed by the legislation. We need urgent clarification on this.
      Perhaps the Minister will talk to his civil servants and respond in writing to the next few points that I wish to raise. Section 38C(3)(b) and (4)(b) of schedule 13 talk about expenditure incurred by an individual being subject to the relevant limit, which is set at £100,000. Section 38C(3)(b) says that this is subject to the individual devoting
      "substantially the whole of his time in that chargeable period to the carrying on of that trade and profession".
      What happens if the individual—or partnership—does not devote
      "substantially the whole of his time in that chargeable period to the carrying on of that trade and profession"?
      Section 38C(5)(a) talks about excluding expenditure
      "on the provision of a share in machinery or plant".
      Why will expenditure on such shares be excluded? We could be talking about a 50 per cent. share of a £20 million capital investment. That does not seem to me to be obvious.
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      Finally, I wish to highlight the point that I made at the start of my speech in relation to groups of companies and associated companies. It seems to me that the legislation will affect company decisions about whether businesses should be part of groupings or not.
      That could happen, because the legislation states that the £100,000 limit should be divided by the number of companies in the group, so for four businesses in a small group the maximum capital allowance in any one-year period would be £25,000. If that is so, it is fundamental, because small companies operating in group structures could be caught by the legislation. Will the Minister clarify whether my reading is correct and respond on whether that seems fair?
      5.30 pm
      I am slightly concerned about the cliff edge of the de minimis limit, in that long-life expenditure of £100,000 will result in allowances of £25,000, but £100,001 will produce an allowance of only £6,000. Many companies will be concerned about contract values around the margin if they are considering investments of about £100,000, and that could have some serious tax consequences.
      We need some clear answers about the real purpose of the clause and of the schedule to which the amendment refers. If it is to bring tax treatment more closely in line with normal accountancy practices, there are, as the hon. Member for Beaconsfield said, better ways of doing that than using a reducing balance method that leaves 20 to 21 per cent. of the asset value unrelieved after a 25-year period; if the real reason is that it is a nice little earner for the Treasury and a good tax wheeze, why does not the Minister say so?
      The Financial Secretary to the Treasury (Mr. Michael Jack): Many probing points have been made, and I want to say at the outset how much I welcome the opening comments of the hon. Member for Edinburgh, Central (Mr. Darling). I was grateful for his remarks on the broad principles underlying the measure. He went to the heart of the matter when he rightly said that capital allowances should not be allowed to distort investment. I believe that he said that in the context of the previous reforms, and he certainly attached his remarks to the reform before us today.
      One of the underlying themes of the debate has been, why we are doing this? The hon. Member for Dudley, West (Mr. Pearson) asked a moment ago whether it was a wizard wheeze to raise lots of money, and my hon. Friend the Member for Beaconsfield (Mr. Smith) suggested that it might be a timely reform to bring into line with accounting principles the way in which tax allowances treat long-life assets. It is very much that principle that has driven us in our considerations on the measure.
      The current economic circumstances make it more propitious to advance that line of argument. It is important to refresh the Committee's memory about the rate of corporation tax. While we have been the Government, the mainstream rate has decreased from 52 per cent. to 35 per cent., and the small companies rate from 33 per cent. to 23 per cent.
      For all those who express doubt or indeed dissent about aspects of the measure, however detailed, the acid test to which we return is whether enacting this reform in

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      addition to our previous reforms to the tax allowance system allows us to sustain, and indeed—for small and medium-sized companies—to improve the corporation tax regime, to the extent that, by my assessment, we have the most generous small companies corporation tax regime and the most competitive mainstream corporation tax rate of the major economies.
      When business people were asked where they prefer the balance to lie between allowances and a lower rate of corporation tax, by and large they preferred the lower tax. The measure allows us to sustain that position. There is no hiding from the fact that money will be raised, as that will clearly happen if we reduce an allowance—in this case to bring it, as far as the tax system is concerned, into conjunction with the accounting principles involved—and we make no apology for that result, because the corollary is a further improvement in the small companies corporation tax rate.
      I hope that I have dealt with the points made by several hon. Members. The hon. Member for Edinburgh, Central said that whatever we did should be fair and should assist and encourage. I share that view: the tax regime on companies should be fair and it should assist and encourage investment. Everyone participating in the debate has expressed a genuine wish to remove distortion by virtue of tax allowances. As my hon. Friend the Member for Beaconsfield said, that is what the reform has done. On those points, I believe that the probing questions of the hon. Member for Edinburgh, Central have been answered.
      The juxtaposition of aircraft and railways was mentioned, and there was some comment on ships, the oil industry and the cable industry. I shall try to deal in detail with the points raised on those issues. I was grateful for the supportive comments of the hon. Member for Edinburgh, Central, who acknowledged that it was appropriate to exclude shipping in this context. He has long experience in that area, and clearly recalls the changes that were made in response to representations from the shipping industry: in the previous Finance Bill we made changes in the roll-over relief arrangements, and it would clearly not be appropriate to undo by the current measures the good that we did on behalf of the industry at that time.
      On railways, there is no fiendish plot artificially to favour those involved in rail franchising. First and foremost, circumstances in the railways are rather different from those in the mainstream industries affected by the proposal. The Committee will reflect on the fact that the railway industry has historically been a loss maker. However much we may have debated the rights or wrongs of privatisation, we set out with a genuine intention to try to improve our railway system through privatisation and the franchising operation.
      Mr. Darling: I may have misunderstood the Government over the past three or four years, but I thought that the privatisation process was intended to ensure that profits, not losses, were made. I wonder, therefore, about the justification for excluding the railways, because I understood that they were to be in exactly the same position as, for example, an aircraft manufacturer or operator, and that they were to make profits. The hon. Gentleman seems to be acknowledging that they will never make profits and that they will have to be subsidised. That is a concession, is it not?
      Mr. Jack: The hon. Gentleman has spent a great deal of time considering particular points of detail in the Bill, and indeed in the schedule, but perhaps it escaped his attention that the provisions last until 2010, when they are to be reviewed, and that is precisely because we see the potential of increasingly improved finances in the railways. The Government are providing grants, which are now paid through the franchising director for the provision of loss-making services. If these measures increase the costs of the railway industry, those costs will simply come back to us through the subsidies that will be paid to the franchises that are to be negotiated. That is a sensible move. I emphasise that we expect the railway system to move into profit in due course. To judge by some of the excellent commercial ventures that have already been started by various franchise winners, the process is well under way.
      Mr. Paddy Tipping: I listened carefully to the Financial Secretary. He seems to have made two fairly clear commitments. If I am wrong, perhaps he will clarify the matter. Is he saying that all the railway companies will be in profit by 2010? If he is, is he guaranteeing that when the matter is reviewed in 2010, they will be put on the same taxation basis as everyone else?
      Mr. Jack: I refer the hon. Gentleman to paragraph 4 of the Inland Revenue press release of 26 November, which states:
      "Capital allowances will continue to be given at 25 per cent. a year on sea going ships and railway assets bought before the end of 2010, when this exclusion would fall to be reviewed by the Government of the day."
      That was my point. I have expanded on the reasoning behind the shipping and railway exclusions.
      If I understood him correctly, the hon. Member for Edinburgh, Central continued to probe the meaning of investing substantially in long-life assets. Those words are meant to make it clear that the sorts of enterprise concerned are exactly what the proposal says that they are: those that invest in long-life assets. In some trades, professions and activities, assets have a short life. We will discuss the question of life because many of his points revolved around the definition of long-life assets. That is why we recognised that there should be a cut-off—the de minimis exclusions—to try to take out the small and medium enterprises from the proposals.
      Hon. Members have touched on how the proposals affect individual companies, and the hon. Member for Dudley, West mentioned groups of companies. Groups of companies that spend less than £100,000 a year on long-life assets, other than assets wholly excluded in the rules, are excluded. It would be to his advantage to examine the information in notes on clauses. The definition of the scope involved was "sizeable expenditure" on assets that are treated in accountancy terms as being long life. We are talking about industries that invest in substantial structures, such as heavy machinery and pipelines. The oil industry was mentioned, as were aircraft.
      5.45 pm
      I hope that the answer to the question of the hon. Member for Edinburgh, Central suggests itself. In the real

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      world, certain assets are deemed to have a life of 25 years or more, and it tends to be the bigger end of the investing spectrum that is affected.
      Mr. Darling: May I seek clarification of that point, because it may help those who have to implement it? Does investing heavily refer to the value of the investment or to the nature of the business or individual? If the Minister personally decided to build a power station, would that be investing heavily? If a railway company that never bought any carriages suddenly bought one, would that be a light investment, even though it was a long-life asset? Is it the value of the investment or the practice and nature of the business that decides whether an investor is heavy?
      Mr. Jack: There are two parts to the definition. It is determined, first, by the life of the asset, and, secondly, by the value. The point of the de minimis exclusion was that many small investments need not be caught by the provision. Serious sums above £100,000 a year would be regarded as starting on the trail of heavy monetary investment. However, to be caught, the life of the asset must be considered. If, in terms of accounting practice, it has a life of 25 years, it will be deemed to be a long-life asset and will therefore be caught. To answer the hon. Gentleman's point, if companies do not invest, they will not be caught.
      Sir James Molyneaux: I apologise for my absence from the start of the debate; I was chairing a Committee.
      On the life of assets, is there not a strong case for differentiating between turboprop and jet aircraft, as the former tend to have a much longer life?
      Mr. Jack: I shall pre-empt some more detailed remarks that I was going to make on that. For light aircraft, matters such as the number of flying hours can be taken into consideration. It is for the company to decide all such matters when it starts in its accounting principles to deal with long-life assets. If there is a dispute about assets being long life or short life, the discussions with the inspector of taxes come into play. If no agreement is reached between the inspector and the taxable entity, the matter can be referred to the commissioners for further adjudication.
      At the start of the debate, we discussed bringing tax allowances into line with accounting principles: accountants will identify the asset at company level and decide whether it is appropriate to write it down in the company's accounts as a long-life asset. It is at that point that the tax treatment is triggered. We have brought the principles together as detailed in schedule 13.
      I want to pick up a point made by the hon. Members for Edinburgh, Central and for Clackmannan (Mr. O'Neill). Major components of aircraft such as engines can be treated separately. When such significant components are replaced, they can be treated as any other replacement part would be under a tax regime different from the long-life tax regime. An oil rig or exploration device may be made up of a series of separate modules, and the test would apply to each part. The principles are fair in their practical application.
      Mr. Tim Smith: Is my hon. Friend saying that it would be open to airlines to break down an aircraft into its
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      component modules? If the engines had a life of only 15 years, could they claim capital allowances at the current rate on the engines but claim for the fuselage under the new arrangements?
      Mr. Jack: Engines are generally treated as separate entities for tax purposes. That would not apply to the rest of the aeroplane. I hope that that is clear.
      Mr. Darling: The engines and fuselage are treated as different parts because they are made by different companies. My limited knowledge of aircraft manufacture is almost wholly gleaned from a recent visit to Rolls-Royce. I am no aircraft engineer, but I know that many other parts of the aeroplane can be separated. Is the Minister saying that many other parts of the aeroplane can be separated? For example, I understand that the most important part of an aeroplane is its wings. Those who make the wings tell me that the wings affect how the aeroplane flies and performs. The bit in the middle that we all sit in is of lesser interest.
      How can the Minister take the separation of the component parts of an aeroplane or anything else so lightly? Surely lawyers will have a field day arguing that the components of an aeroplane, a power station or anything else are separate assets and that the value of not one of them exceeds £100,000. The Minister can see what arguments might be open to accountants and lawyers. Will he be a little more helpful on what line the Revenue will take? We need some certainty.
      Mr. Jack: Those of us who use aeroplanes—I think that the hon. Gentleman occasionally travels home in one—would regard the placing of the pilot as rather more important than he implied. My remarks were predicated on the Inland Revenue's current tax treatment of significant and separate components. If the hon. Gentleman knows anything about aircraft, he will know that engines are taken out and new ones are put in as part of maintenance operations. A wing is an integral part of the structure of the aircraft: people would not normally take one out and put another one in. He and I can debate that, but I have British Aerospace's military aircraft division headquarters in my constituency, so I perhaps have a shade more knowledge of aircraft maintenance procedures than he has. I do not want to get into such a debate, Dame Janet, or you will rightly call me to order.
      The hon. Member for Edinburgh, Central spoke generally about the mobility of airline industry investment. My hon. Friend the Member for Beaconsfield (Mr. Smith) voiced a concern that has been expressed by the industry. The sum total of the effect of the proposal on the United Kingdom airline business on an annualised basis will be £25 million, against a total investment of some £2 billion. That represents an on-cost of £1 per passenger per year. Although the industry is bound to express concern, that figure puts it into perspective.
      The financing of aircraft, which is also affected by the proposal, is an international activity. People go around the world with their various lease arrangements, almost collecting tax allowances as they go.
      The hon. Member for Clackmannan drew the Committee's attention to the cable industry, and he expressed concern about how the proposal would affect it. It is important to put the matter into perspective.

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      The annual capital expenditure of the cable industry runs at some £2 billion, and £6 billion is to be spent over the next three to five years. Given the current annual turnover of about £1 billion—which is growing—the effect of this tax proposal on the cable industry will be containable. It is not a showstopper, given the size of the investment.
      We return to the question of non-distortion. It is fair to say that we have not tried to make artificial distinctions between one type of industry and another, apart from those of which I gave the Committee details a few moments ago. Given the size of the commitment, there is not a problem.
      The hon. Member for Clackmannan also drew the Committee's attention to the effect of the proposal on the oil industry and asked whether any calculation had been done to measure it. I hope that my comments will reassure him. The tax effect is the equivalent of less than one third of 1 per cent. of the industry's turnover. Any industry is bound to mount an argument for special pleading, but I genuinely do not believe that the oil industry can argue that the effect of the proposal is such a serious matter.
      There is, however, an important point of principle. The hon. Member for Edinburgh, Central was right to draw the Committee's attention to the need for an allowance regime that does not distort. It is important that decisions on major investments are not made by virtue of the tax allowances; sometimes, far bigger costs have to be taken into account. One of the biggest single costs to the airline industry is the amount of fuel used on a journey. One of the most important factors affecting profitability is—to use the colloquial expression—the number of bums on seats, which has a far greater effect on determining investment decisions. Airlines seek aircraft of a more modern design to save fuel, or with more capacity so that more passengers can be carried. Such considerations are more important than the effect of the tax allowance. It is important that decisions on investment should not be distorted by the allowance.
      Mr. O'Neill: I am grateful to the Minister for trying at least to give some figures. The sums that he gave were somewhat vague. One does not know what would be the significance for investment in, for example, the North sea. We have to take account of the globalised character of that industry. At the margin, a project might be disadvantaged by even a fairly modest change in the tax regime. Such a project may be in competition with another in Alaska or the Gulf of Mexico, and it might be to the company's advantage to move there. Oil companies care not where they get their oil but about the money that they get from the projects in which they invest. That is the point that I was trying to make.
      The Minister has not quite fiddled the statistics, but he has given a meaningless figure that needs either to be clarified or to be discarded as irrelevant.
      Mr. Jack: I am not prone to deliberately misleading the Committee, but I have been informed that the hon. Gentleman was right when he said that my figure was meaningless: it referred to the airline industry, not to the oil industry. I take this opportunity to apologise to right
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      hon. and hon. Members for my error. It adds to my argument about the airline industry and acknowledges the point that the hon. Gentleman made.
      Mr. Denis MacShane: Resign.
      Mr. Jack: For a third of 1 per cent., that is going a bit far.
      I am advised that the change mentioned by the hon. Member for Clackmannan is unlikely to cause any project, certainly in the North sea, to be dropped. I shall consider whether I can make any further points, with perhaps greater accuracy, to quantify the effect of the measure.
      I have dealt with the points made by the hon. Member for Clackmannan about the cable industry. I was pleased to have the support of my hon. Friend the Member for Beaconsfield. He raised a number of issues on aircraft and I hope that I have dealt with them. I was also grateful for his assistance in answering the point made by the hon. Member for Edinburgh, Central about aircraft being sold on. He answered it with clarity and knowledge.
      My hon. Friend also made some points about ships and railways, with which I hope I have dealt. He asked why we had chosen the figure of 6 per cent. Capital allowances on machinery and plant are calculated by pooling expenditure. That method is generally preferred by taxpayers as it is simple to operate, but it means that allowances are given on the reducing balance basis rather than on the straight line or any other basis that may be used in commercial accounts. It is misleading to look at the period over which the expenditure is written off on the reducing balance basis. In theory, it is infinite. In practice, it is not possible to determine because the identity of the expenditure is lost in the pool.
      The better comparison is with the net present value of allowances. On that basis, 6 per cent. gives the best fit with commercial depreciation for an asset with a working life of 25 years or more. That is the technical explanation. I draw my hon. Friend's attention to the Inland Revenue press release, which explains the transitional rules. I suspect that he would also have liked to mention the effect of the proposals on theatres, but did not have the time. I acknowledge his interest. If he will be kind enough to inform me of his concerns, I will be delighted to write to him about them. To pick up on some of the other transitional points that he mentioned would add an undue complication to our proceedings. I know that he would like all the matters to be dealt with through a tax law rewrite, but that is complex.
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      Finally, the hon. Member for Dudley, West took us at some length through the central issue of how one determines the life of an asset. He read out a number of quotations. The straight question of who decides the useful economic life of an asset that needs to be determined when the accounts are drawn up. That is one for the accountants, who are used to it and understand it. As I said, if there is a disagreement, it is the role of the tax inspector and the commissioners to sort it out.
      The hon. Member for Dudley, West asked whether inspectors would be bound by the expected economic life used in the accounts. That will be strong evidence of whether the 25-year test is made, but the inspector must

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      be able to query the figure if he is not satisfied that it is reasonable. Those are fairly simple and straightforward statements.
      Mr. Nicholas Winterton: I have been involved in industry, as has the hon. Member for Dudley, West (Mr. Pearson). How can my hon. Friend the Minister believe that in this modern age any asset lasts for 25 years? If we are to remain efficient in this competitive age, we need to replace machinery of almost any sort within 10 years. Writing off assets over 25 years is a total nonsense, and puts this country at a grave disadvantage with our competitors.
      Mr. Jack: My hon. Friend is right. If he is drawing the Committee's attention to the fact that machinery may be built that has an obviously shorter operating life, to take account of technological advance, that clearly is a matter for the accountant. I remember this argument being used when I was involved with the glasshouse industry. It was made clear that some of the structures might not last all that long. The advice to that industry was clear—take it up with the tax inspector.
      Mr. Winterton rose—
      Mr. Jack: I hope that my hon. Friend will forgive me if I do not give way again, as I want to draw my remarks to a conclusion.
      The life of an asset was a central part of the remarks of the hon. Member for Dudley, West. I shall certainly study carefully some of the further technical points that he made and, if he will excuse me, I shall write to him about them. I commend the clause and the schedule to the Committee.
      Mr. Pearson: I thank the Minister for his brief final comments and for explaining the meaning of life to the Committee. I appreciate that he will write to me about some of the technical issues, and so will not mention again building alterations, dry docks, grain silos and the treatment of groups of companies. Will he comment on how the Bill affects the private finance initiative, with particular reference to hospitals?
      Has the Treasury taken into account in its estimates of cost savings the way in which contracts will be redesigned to take account of the new legislation? It seems clear that, when putting in a new production line or a manufacturing cell, whereas one might have awarded a £2 million contract for 10 different machines and all the links, one will now use 10 or 11 different contracts plus an assembly contract to get around the legislation and claim the allowances.
      Mr. Winterton: I am grateful to the hon. Gentleman for giving way when my hon. Friend the Minister would not. Is not one of the problems the fact that accountants make these decisions rather than production managers or engineers, who have more knowledge of the benefit of equipment than accountants, who merely look at the figures and the bottom line? Would the hon. Gentleman, whose interest and involvement in industry and in rugby football I have considerable respect for, comment on that matter before the Minister responds?
      Mr. Pearson: The hon. Gentleman is right, if he is making the general point that too many accountants run
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      businesses and that too few people with a knowledge of production and manufacturing industry are on the boards of companies.
      I should appreciate a response from the Minister on the PFI and hospitals, on the extent to which the Department has taken account of the real world and on how contracts will be redesigned as a result of the legislation. It is easy to draw a coach and horses through some of the Bill because of the way in which it is drafted.
      Mr. Jack: We do not hide the fact that the Bill will affect the PFI and contracts where long-life investment exceeds £100,000. As the hon. Member for Edinburgh, Central said, the quality of the investment is what should see the thing through. The matter should not turn on the question of tax allowances, which is why we are removing this distortion. The underlying thesis is the fact that, in business terms, the highly competitive corporation tax regime is far more important to those who want to make quality investments than the tax allowance regime.
      Mr. Darling: I know that the Committee anticipates a vote and I shall not speak for too long, but I must refer to a number of matters. The debate has shown the difficulties that we can get into when a straightforward proposition becomes complicated by exemptions, and where different reliefs apply, depending on different definitions. Indeed, it appears that, while the Government were trying to simplify the provision of allowances, the position has become rather more complicated and many of the gainers will be lawyers and accountants.
      I will deal with one or two questions that the Minister did not completely answer. We should be grateful to him for clarifying the position on railways. We have a clear admission from the Government that the railways will be making losses for some years to come—certainly for 13 years. I understand the argument that there is not much point in giving a tax break to someone who has to be subsidised by the taxpayer. That admission undermines all the Government's claims about the railways. According to the Minister, they are loss making and therefore we cannot justify giving them a further tax break. I understand the logic of that, but it bears out what we have been saying—that the taxpayer will have to subsidise the privatised railways for many years to come. Thirteen years is a long time before any review.
      I have never understood why aeroplanes are included in the measure and railways are not. The Minister did not deal with that central point.
      It concerned me when the Minister, in effect, gave the industry tips on how to get around the provisions of the Bill, because it seems that the engines of an aeroplane can be removed and treated separately. Perhaps the example I gave, of wings, was not a good one, although the wings are a major part of an aeroplane. I should probably declare an interest, as I use aeroplanes at least twice a week. I have always—perhaps naively—thought of an aeroplane as being one body rather than the sum of a number of component parts, all of which can be treated differently for tax purposes and removed as appropriate.
      That illustrates my point. If operators and manufacturers get round the problem by treating different parts of the aeroplane in different ways, it will lead to precisely the difficulty that was pointed out by the hon. Member for Macclesfield (Mr. Winterton)—accountants

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      will instruct manufacturers to ensure that a part cannot reasonably have a life of 25 years and, therefore, obsolescence will be built in. When an engine or the electronics of an aeroplane is designed, the accountants will say that it must not last for more than 20 years, in case it gets caught. They can then claim the 25 per cent.
      That shows the problems that arise when the law becomes, not simpler, as we all profess to want, but more complicated. I am worried that we are, in fact, creating great opportunities for lawyers and accountants. When describing the new concept—the meaning of economic life—the Minister referred to accountants, saying that they understand these matters. I was once a practising lawyer, so I know that accountants and lawyers understand these matters. In particular, they understand that a good and long argument is a lucrative way of spending their time, and we should not put together a tax system that guarantees them work for 25 years. Nevertheless, that appears to be what we are doing.
      I have come to believe that the next Government will have to spend a substantial amount of time trying to sort out these difficulties, some of which will be immediately apparent, while others will only appear when the law starts to operate. It would be unreasonable to burden the next Government with having to report to Parliament in addition to that, as I suggested in my amendment.
      Question put and agreed to.
      Clause 82 ordered to stand part of the Bill.
      Schedule 13 agreed to.

    Clause 62

      PHASING OUT OF RELIEF FOR PROFIT-RELATED PAY
      Ms Dawn Primarolo: I beg to move amendment No. 4, in page 56, line 19, at end add—

      '(4) The Treasury shall produce a report each year on the companies which had schemes registered under that Chapter.

      (5) The report mentioned in (4) above shall analyse the actions taken by companies in relation to profit related pay after 1st January 1998.

      (6) The report mentioned in (4) above shall also describe separately the impact of the removal of tax relief for profit related pay on employees paying income tax at both higher rate and basic rate.'.

      The Second Deputy Chairman of Ways and Means (Dame Janet Fookes): With this, it will be convenient to discuss amendment No. 5, in page 56, line 19, at end add—
      '(4) That Chapter shall not have effect in relation to any payment made by reference to a profit period beginning on or after 1st April 1997 if the primary purpose of the scheme under which the payment is made is the avoidance of tax.'.
      Ms Primarolo: The clause deals with the Government's proposals for the phasing out of the tax relief on profit-related pay. Over a period of 10 years, the Government have spent £4 billion on an experiment to find ways to encourage a closer relationship between the remuneration of employees and their company's profits. Given the proposals in the clause, it is fair to ask certain questions. Was that £4 billion wisely spent? What were the Government's objectives and have they been met? When the tax benefit is removed, will employees still be
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      happy for 20 per cent. of their pay to remain in the schemes? What is likely to be the companies' reaction to the withdrawal of the relief?
      6.15 pm
      Only yesterday, the Deputy Prime Minister argued that the Government understood business very well—indeed, he claimed a monopoly for the Conservative Government in that respect. I am sure that hon. Members will agree that any business that invested £4 billion should monitor that investment and, at the end of the experiment, assess the effectiveness of the investment and whether the objectives had been achieved.
      The original objectives of the profit-related pay scheme were set out by the then Chancellor of the Exchequer, now Lord Lawson, in his 1986 Budget. It was floated as a potential cure for unemployment. He said that if "a significant proportion" of wages were more flexible and rose and fell according to the company's profitability:
      "This would not only give the work force a more direct personal interest in their company's success … it would also mean that, when business is slack, companies would be under less pressure to lay men off; and by the same token they would, in general, be keener to take them on."— [Official Report, 18 March 1986; Vol. 94, c. 172.]
      That does not appear to have been the result of this particular tax relief.
      The initial take-up rate was slow, with most companies taking advantage of the tax concession to continue their existing schemes. The original hope was that profit-related pay would reduce pay demands and prevent redundancies, but that has not happened. The evidence is that companies registering schemes are motivated more by a desire to secure extra tax relief for their employees than by a desire for flexible pay. The amendments seek to address that problem.
      In justifying the changes, the Government have identified the enormous cost to the Treasury and the abuses that now occur in the scheme. It is somewhat surprising that their discovery of abuse has come so late. In the 1993 Budget, the Chancellor asserted that £100 million would be saved in 1994–95 from closing down what was then identified as a loophole in the profit-related pay rules. The loophole was closed and employers were then unable to offer profit-related pay without some degree of risk that payments made under the regime might vary with profits.
      However, the Chancellor did not prevent the problem to which the Government are now returning—that of employers constructing schemes that expose employees to only a negligible risk of loss of earnings. Therein lies the problem. Employers typically guarantee to pay out 80 per cent. to 90 per cent. of the profit-related element of the pay, leaving only the remainder to vary with profits. Ernst and Young has estimated that 75 per cent. of the current schemes are an abuse of the objectives and says that it can clearly identify that the primary reason for implementing profit-related pay has been to contain costs, rather than to motivate employees.
      Effectively, 80 per cent. of employees must vote in favour of the scheme, so it is unlikely that a majority of employees will vote for a scheme in which there is a material risk to their pay—where they are likely to suffer a loss. The overwhelming majority of schemes have been converted into the guaranteed pay type where 20 per cent.

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      is the risk element of the payment. That reasoning has been supported by a survey of evidence from the income data studies report, which was produced in June 1996 and which suggested that the major part of the millions of pounds cost to the taxpayer of profit-related pay was funding schemes which provide tax-free pay rises rather than performance-related pay.
      The Government published a research report on profit-related pay in May 1995, commissioned by the Inland Revenue, the Department of Employment and the Treasury. Its main conclusions were that the tax relief had stimulated a significant take-up of PRP because companies and employees were sharing the relief and that from an employer's point of view the main benefits of the relief were in tax efficiency. The report went on to say that employee involvement had been created, although it did not substantiate that claim. It did not provide conclusive evidence that the cost to the taxpayer of performance-related pay was justified by improved economic performance.
      The arguments against the Government's case are clear and the Government now have an obligation to justify the expenditure. In 1986, when the then Chancellor—now Lord Lawson—introduced that tax relief, he said:
      "There is considerable inertia to overcome, so it might make sense to offer some temporary measure of tax relief."
      Ten years later, the present Chancellor of the Exchequer said:
      "I can no longer justify the ever increasing cost of the tax relief to the 22 million taxpayers who are not in profit-related pay schemes. We cannot permanently divide the work force into groups of people who pay different levels of tax on the same earnings depending on whether the firm that they work for is in a scheme or not."—[Official Report, 26 November 1996; Vol. 286, c. 165.]
      That is absolutely right: it is only surprising that it has taken so long for the Government to discover that. Some 3.7 million workers now in those schemes are threatened by the proposals to phase out the tax relief, possibly with dramatic drops in their take-home pay. What do the Government expect to happen once the tax break is removed? What consultation has taken place? Will pre-tax earnings rise as companies compensate employees, or will employees—particularly the low paid—suffer a loss of earnings?
      Although the abolition of profit-related pay is partly due to the mounting cost to the Exchequer, another factor must be that the scheme is being abused. There are a growing number of so-called "salary sacrifice" schemes, under which employees exchange part of their salary for profit-related pay. The tax saving is shared between employees and the company, which means that the employer's wage bill is reduced. The employer and the employee share the relief. One of the water companies with a profit-related pay scheme has notified its employees that that was exactly the purpose of its scheme: when the relief is removed, the scheme will be cancelled.
      The Government must explain why they did not prevent those abuses at an earlier stage. In many schemes there is little risk of employees' pay falling because employers gave an undertaking that if the Government changed the regulations the employees would be returned to their previous status. I will give examples of just a couple of schemes. Information circulated by the National
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      Westminster bank, Lloyds, TSB, Barclays and the Midland was intended to explain profit-related pay to employees in advance of the ballot on whether the scheme should be established. The documentation, which was not secret, made it absolutely clear that the proposal was to share the tax relief—which cuts straight through the Government's argument that it should be about giving employees a stake in the company's profits.
      A letter about the National Westminster bank scheme, which was started in January 1996, says:
      "The Revenue regulations will not allow these payments to be guaranteed"—
      that is the 20 per cent., the part that is supposed to be at risk—
      "but the Bank has stated that if, during the period the scheme is in operation, it believes it is falling dramatically short of its projected performance it will cancel the scheme, revert people back to their original salaries and ensure that individuals are in a no loss situation with regard to tax.
      The Bank is proposing a one year scheme which it believes would be protected from any changes in revenue arrangements for its duration."
      The Barclays bank document explains how employers and employees would share the tax profit. They did so on a 40:60 split. The number of employees in the PRP scheme meant that employees, who received 40 per cent., benefited to the tune of £20 million—that is loss of revenue to the Government—and the bank benefited by £30 million. They were sharing the tax relief in that case. Other banks had different schemes. Some operated a 50:50 split, for example, and the TSB scheme was intended to benefit the bank to the tune of £6 million in the first year.
      Those documents are freely available and it is beyond belief that the Inland Revenue did not discover them and see that this important measure, which was supposed to establish stakeholding for employees—employees would be given a share of their company's profitability—was being widely abused. Depending on what happens during the period of phasing out the relief, there will have to be a great deal of negotiation between employees and employers to restore employees to their original position.
      Even worse, having allowed the scheme to be abused, the Government have allowed good, genuine schemes also to be damaged in the process. The John Lewis partnership scheme is a prime example. A true sharing of profits is being undermined and disturbed by Government action in this area.
      The Labour party believes that it is right to reward success. We want employees to be involved in their companies and to benefit from their profits. We also want the Government, first, to state clearly—the amendment advances this case—that they will monitor the schemes so that we can see how many continue to exist once the tax relief is removed. Secondly, it should be a clear objective that any future arrangements for sharing profitability, however they may be constructed, are not allowed to degenerate into abuse and loss of revenue to the Exchequer, as the current scheme has.
      Through the amendments, we seek to press the Government for a post-investment audit. Employees who will now have to renegotiate their arrangements with their employers and who may lose out deserve an explanation, as does the Committee, of why an experiment was allowed to go on for 10 years and consume £4 billion of

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      revenue when the Government could clearly see that abuse was occurring and that they would have to act against it.
      6.30 pm
      Mr. Peter Bottomley: I note in passing that the Opposition seem to be allowed by their Treasury spokesmen to ask for reports, but not for anything else. No doubt that will change in time, whether they remain in opposition or not.
      The hon. Member for Bristol, South (Ms Primarolo) properly set out the purpose of the temporary measure. She described how, during the past year, there has been a great rush to take advantage of it in ways that produce no worthwhile effect, except to the employer and employees concerned. She drew attention to the position of people who work in the John Lewis Partnership, which is one of the best examples of co-ownership in Britain. It was set up 70 years ago as a result of an apparently eccentric decision, and its history should be better known. People who work in the group's stores are not employees, but partners.
      For people who are paid significantly more—perhaps those who are partners in firms of accountants or solicitors—the tax system provides all sorts of arrangements for income sheltering. If one took an average of the difference between the actual earnings of partners in top accountancy firms, established what proportion of those carry a direct burden of tax, and applied the same proportion to those working in the John Lewis Partnership, one might find that they could do better than under the existing scheme.
      I shall go a stage further than the hon. Lady and ask my hon. Friend the Financial Secretary what representations have been received at the Treasury from the John Lewis Partnership, what response has been made and whether meetings have taken place with the partners or the senior people in the partnership. My hon. Friend could respond when he replies to the debate or by letter afterwards. Will the Government consider over the next two or three years what changes might appropriately be made to reward those in genuine co-ownership and profit sharing? Of course, that is not the reason why the Chancellor introduced the scheme in 1986; he introduced it for flexibility, which is a by-product of co-ownership.
      I would advise my hon. Friend, and it would be in keeping with the mood on both sides of the Committee, to open up that prospect over the next year or so. In the case of the John Lewis Partnership, we are not dealing with megabucks—the tens of thousands of pounds that might be at stake for highly paid individuals. We are speaking mainly of people for whom £1,000—an extra month's pay—is roughly the reward for success and, for that matter, for expansion.
      During the next year the limit comes down from £4,000 to £2,000, and the following year it comes down from £2.000 to £1,000, before being eliminated—a millennium prize. Will my hon. Friend consider the mechanics of a scheme allowing one month's extra pay as a bonus or profit-share for companies that cannot offer a share ownership incentive? The John Lewis Partnership has no shares that can be given out to employees because they already own all the shares. Such a scheme would be in keeping with what many of us want to encourage.
      My hon. Friend may reply that the John Lewis Partnership is a deadweight issue. I should explain to those who have not had discussions with the Treasury that
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      every reasonable suggestion must get over the hurdles of deadweight, substitution and displacement. In this case it is a matter of deadweight. The Treasury might argue that the John Lewis Partnership has had profit-sharing or surplus-sharing for 70 years and did not introduce the practice because of the tax break allowed in 1986. I accept that, but the tax break was supposed to encourage the attitudes exemplified in one possible way by the John Lewis Partnership.
      I ask my hon. Friend gently whether he has had meetings with the John Lewis Partnership. Would he or his advisers be prepared to talk to the partnership and to others who may be interested in this subset of issues? Will he reflect on the possibility that in the Finance Bill next year or the year after it might be in the public interest to find a way of protecting those who benefit at low levels?
      Mr. Andrew Miller: The hon. Member for Eltham (Mr. Bottomley) addressed a request to his hon. Friend the Financial Secretary. I shall pose the same question to my hon. Friend the Member for Bristol, South (Ms Primarolo), in the expectation that she will shortly be on the Government Benches and have to decide on matters arising from the Bill.
      Unusually, I was away from the House on Budget day. I was in a mock-up television studio in Wirral, South, listening to the Chancellor's statement. Among the people on the panel were ordinary constituents from Wirral, South. After listening to the Chancellor, one lady said, "Bang goes my new car," and her husband said, "There goes my profit-related pay." He was worried that a scheme that was on the verge of being signed would disappear. Part of the argument that had been put to him and his fellow workers in an engineering company was the incentive, to be part of that commonhold and to have a stake in the operation.
      Like the hon. Member for Eltham, I have carefully studied John Lewis and other enterprises, such as Scott Bader—an unusual company with an equally odd history. In his will, Ernest Bader left the stock of the company to his employees. The company has survived through several recessions in a difficult area of chemical manufacturing. It should be regarded as a model operation.
      Unusually in the chemical sector, which I know well from my constituency, the company is situated in one of the most beautiful locations in the country, in Northamptonshire. It is difficult to see that the factory is there. The ethos has survived in an attractive environment and the company has quietly got on with its job, competing effectively in a complex market. Through most of the 50-odd years since Ernest Bader's death, the attitude of the employees has been a determination to succeed. I think that employee stakeholding is an important element in that company's success. My hon. Friend the Member for Bristol, South described the exercise as a £4 billion experiment. According to the 1986 Lawson Budget, it was a potential solution to some of our unemployment difficulties and, by that measure alone, the experiment has not proved terribly successful. If it were properly utilised and generated a feeling of ownership among employees of an enterprise, the scheme could be termed a qualified success. However, we do not know whether that has occurred.
      We are about to phase out tax relief on the basis of some new-found Treasury interpretation of fairness. The Chancellor claims that we cannot divide the work force

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      permanently into groups of people who pay different levels of tax on the same earnings, depending on whether the firms for which they work are members of the scheme. Fairness has been cited as part of the reason for the Treasury's withdrawal of tax relief, but the Treasury does not reflect upon the success or failure of other aspects of the scheme: first, has it had an impact on employment; and, secondly, has it improved relations between employers and employees in the sort of enterprises that the hon. Member for Eltham and I described? We referred to model situations, but there are many other lesser examples elsewhere. The experiment should be evaluated much more seriously.
      The scheme is somewhat muddled, and it is undoubtedly widely abused up and down the country by companies that view it as a convenient way of paying less tax rather than as a genuine measure that would achieve the objectives that the Chancellor set out when he introduced it. It is unfortunate that no one has tried to deal with those abuses. My hon. Friend the Member for Bristol, South referred to several highly publicised schemes whose raison d'être appears questionable in the context of the issues raised in the debate. The scheme has been poorly monitored.
      If we are to make any progress in this area, we must encourage a culture whereby employees have a greater sense of ownership in their companies. I have been party to a number of discussions about employee share option schemes over the years, and there is no doubt that such schemes have the potential to change attitudes in very difficult circumstances. It is a pity that we cannot evaluate whether that has occurred in this instance.
      I support the amendments spoken to by my hon. Friend. Against that background, I hope that the Minister will reflect a little more on the subject rather than simply ending the scheme apparently for reasons of fairness, which may be perfectly justified but which do not necessarily take account of the issues that hon. Members have raised today.
      6.45 pm
      Mr. MacShane: I hope that the Minister will accept the amendments spoken to by my hon. Friend the Member for Bristol, South (Ms Primarolo) as it would be no bad thing to build into the Finance Bill a commitment to survey and examine thoroughly the workings of profit-related pay before the proposed phase-out, which would be discharged by another Government—I hope and expect that it will be a different Government.
      My hon. Friend pointed out that Lord Lawson proposed the original changes to the tax law. I am extremely interested in this subject, but I did not know the extent to which profit-related pay in the context of British tax legislation was Lord Lawson's baby. It is remarkable how much of our catastrophic economic inheritance this decade is the result of that noble Lord's innovative decisions—whether it is the business expansion scheme, which led to widespread abuse, or the various other problems that have been set right in the past three or four Finance Bills. Many of our problems can be traced to the chancellorship of Lord Lawson, who I think is sinking down the league table of Chancellors—if there is such a thing. With each Finance Bill, he descends further down
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      the historical ladder. I do not know what he is losing faster: his weight or his reputation. Although he has spawned some wonderful children who write eloquently about many subjects in our national newspapers, Lord Lawson's historical reputation now lies in tatters.
      The question of profit-related pay is very important. The Government cannot simply write out 3.7 million taxpayers who have a stake in it: it is a significant part of their pay arrangements. We must consider the matter carefully and examine my hon. Friend's amendments. The earnings question is becoming more and more crucial in our modern society, as I was reminded over Christmas. A 17-year-old relative had secured holiday work in a restaurant and I asked whether she would be working on new year's eve. She replied, "No. The owner won't pay us double time, so none of us are turning up." I do not know whether it was a strike, but it was interesting that that 17-year-old and her fellow student workers had an idea of pay equity. When it was denied, they chose to do something else with their time.
      A disturbing aspect of the debate about profit-related pay is that the notion of fair pay rates has been thrown out the window as a result of various economic and fiscal policies that the Government have introduced in the past 18 years. It is no longer a case of a fair day's pay for a fair day's work—the Rotherham job centre now advertises pay rates of £1.50 an hour. As the Organisation for Economic Co-operation and Development never ceases to remind us, Britain has the widest—and most rapidly widening—gap between incomes and pay of any European or east Asian economy. People are desperately worried about how they are paid and about how their earnings reflect their efforts.
      Lord Lawson introduced the scheme in 1987 at the height of fascination with the Japanese economy. Dame Janet, you will recall from your visits to that wonderful country that the salaries of Japanese workers consist, in addition to monthly pay, of two annual bonuses that are supposed to be related to profits. At least, that was the myth. Anyone who speaks Japanese or who studies the complicated structures of the Japanese pay system soon learns that those bonuses are pre-negotiated and are not dependent on company profits. But the Government bought the myth that Japanese pay was profit-related and introduced it as a scheme to be encouraged in the United Kingdom. As we have seen, there has been a large increase in the use of it and nearly 3.7 million employees are involved.
      The irony in Japan is that many Japanese companies are moving away from the payment of bonuses, whether negotiated or based on profit. Japanese firms are finding that what really counted in the Japanese labour market was job security. As that has disappeared in Japan, firms are beginning to find that they must negotiate much harder with their employees on the basis of normal wages. It is in that area rather than linkages to profit that the real issue of pay has to be discussed.
      We know that the maximum annual tax-free payment under profit-related pay is £4,000 or 20 per cent. of salary, whichever is the lower. That can provide for a higher-rate taxpayer a tax saving of £1,600 a year. This debate raises questions that Ministers in the Treasury and other Departments will have to answer in 12, 24 or 36 months' time. Will the abolition of PRP lead to an impetus to pay-driven inflation as unions and employees seek to negotiate pay rises to compensate for the loss of tax relief?

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      The figures are startling. Higher-rate taxpayers would need to obtain a pay rise of £2,666 a year merely to compensate for the loss of PRP if companies did not make fair adjustments. My hon. Friend the Member for Bristol, South was right to stress the Treasury's responsibility to examine the issue in some depth and to send out messages or signals to ensure that companies do not cheat on their employees' pay. As I said, an extra £2,666 would need to be paid each year to compensate for the loss of PRP. It is a sizeable sum. We have been told that abolition stems from the cost of relief, which is running at about £1.5 billion a year.
      There seems, however, to be some intellectual dishonesty. If PRP had been introduced in all sincerity—in other words, had the Treasury wanted the scheme to work and wanted companies to move to paying partly on the basis of profits—it cannot be assumed that it would cover only 1, 2, 3 or 4 per cent. of the taxpaying population and the companies that employ taxpayers. It would have to cover the entire taxpaying population. Thus a level of tax relief ought to have been built into the planning of such a scheme, covering everyone.
      The real reason for abolition—strong evidence has been put before the Committee this evening—is that PRP has been abused. My hon. Friend the Member for Bristol, South quoted figures from Ernst and Young. I have seen an unpublished study produced by two young academics working on their masters dissertation at City university, which was sent to me a couple of weeks ago. They have examined different forms of share save, PRP, employee share ownership plans and share option schemes.
      The section on PRP in that report was extraordinary. It showed clearly that the vast majority of companies use PRP only as a tax fiddle and that if tax relief was removed, they would kill it stone dead. It was shown that PRP was not built in, as Lord Lawson had hoped, to encourage a relationship between the employee and the output of the company as expressed in terms of profit, but to avoid tax.
      Thus there is a growing number of so-called salary sacrifice schemes, where employees exchange part of their salary for PRP. Often there is little risk to employees that their pay will fall. In a sense, the scheme was not related to cyclical profitability because it became a tax abuse scheme.
      Service companies, and especially professional partnerships, will regularly use PRP vehicles, where it is relatively easy to engineer the required profit level. In an earlier debate, there were references to wings and fuselages of aeroplanes being separated for tax accountancy purposes. Similarly, accountants can separate out the earnings and profits of employees and companies, park them in different companies and ensure that a scheme that was started with good intent becomes a tax avoidance fiddle.
      In certain schemes, it became clear during the year that if the profit target for PRP purposes would not be met, the scheme would be suspended, with employees keeping the PRP that they received up to that point. Again, we find abuse of the scheme, there being no relationship to profit. Employees at all levels, from managers down to apprentices, do not accept such variation in their pay. The concept is spreading to quasi public sector areas such as higher education, where we are almost drifting into abuse. Lecturers are paid on throughput rather than on quality and the raising of education standards.
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      Instead of abolishing PRP so brutally and coldly in the Budget, perhaps it would have been better to tighten the rules so that relief applied only to genuine schemes in which a part of employees' pay would fluctuate in line with employers' profitability.
      The John Lewis scheme has been mentioned, under which 36,000 employees receive pay on the basis of the company's profitability. That is not the result of Lord Lawson's intervention 10 years ago. The John Lewis scheme has been in operation for more than 70 years. Many of us who shop at John Lewis and Peter Jones, or different partnership stores such as Waitrose, believe that, like the motto, "Never Knowingly Undersold", the Government should not so knowingly undervalue the contribution that is made by John Lewis employees. Those employees are now to see a very good system for them thrown out the window.
      There will be a move to another tax relief benefits scheme, perhaps a miniature version of the fat-cat package, which has caused such scandal in recent years. The most obvious candidate is an approved profit-sharing scheme under which employees might be given shares. The employer will be exempt from tax on the distribution of shares, provided that they are held by employees for three years. That, however, will not be fair on firms such as John Lewis—because, as with many other firms, John Lewis does not have marketable shares. It will not be fair on partnerships, co-operatives, trusts and many small firms that cannot gain advantage under an approved profit-sharing scheme that is based on employee share distribution.
      I support the amendments and I hope that the Minister will accept them. I hope also that he will understand that we want a serious examination to take place. One weakness of the current rules is the lack of an obligation imposed on employers to disclose to their employees the profit target for PRP purposes. In other words, employees do not know what they are meant to achieve by their extra work, diligence, innovation and imagination in making the company more successful, and, of course, there is the question of what profit is eventually achieved, be it within the firm as a whole or in its different component parts.
      Employers should be required to disclose that information and put it in an historic and more general context. Opposition Members do not want to see profit-related pay thrown out the window with quite the casual indifference proposed by Conservative Members who are seeking to bury Lord Lawson. We believe that PRP could become more effective in motivating staff, involving them in the business.
      7 pm
      In relation to quoted companies, it could be argued that the disclosure of profit targets to staff constitutes price-sensitive information, but that is no more significant than the profit estimates that are routinely issued and updated by brokers as a company's accounting period progresses, which anybody who deals in shares can get from the many consultants in the City, or even from the Internet, where they are widely available.
      One of the fascinating aspects of profit-related pay—I, of course, would be the hon. Member to bring this up, Dame Janet—is that it is now becoming a European issue. The European Commission, inspired by the take-up of PRP in Britain, is now examining the idea of profit-related

      1007
      pay and, indeed, seeing whether a directive could be crafted to encourage it in other European countries. It seems a shame that the Government are throwing profit-related pay out the window just at the moment when Europeans are adopting what is, at its kernel and with reforms, a sound British idea.
      Mr. Tipping: I shall speak briefly and compare and contrast two schemes that have been brought to my attention recently in the Nottingham area, one of which shows the positive values of profit-related schemes; the other can be described only as an abuse.
      I shall start with the abuse. In the autumn, some people employed at Nottingham university came to see me to suggest that the university was to have a "salary sacrifice" scheme. They were somewhat bemused in that they wondered how an institute of higher education could produce profit in the true sense of the word. They were also keen to point out to me that profit-related schemes have traditionally come from the private sector, and that the university, although no longer clearly in the public sector, was not a private sector animal in the true sense of the word.
      Those people were not just academics. The people most concerned were technicians who had worked at the university for many years. One of them, Graham Tomlinson, is a stalwart of the local community. He described the scheme as a scam. He said that it is about making money for the university and about tax avoidance. He said that they had been given assurances that they were not at risk. He pointed out that the whole point of the exercise was for the university to save money. He is a man of some integrity. He took the view that he did not want to avoid paying taxes, because he could see the irony of a situation in which his taxes allowed education to continue. In effect, taxes funded the university. I am pleased to say that the scheme at the university has not gone ahead.
      I contrast that scheme with the one at Philip A. Minson, a manufacturer and distributor of net curtains in the Nottingham area. Again, the directors and employees contacted me to say that theirs is a profit-related scheme in the true sense of the word. Its employees take risks. Their salary is dependent upon how the company performs. They pointed out to me that now that the scheme has come into effect, they are all stakeholders in the company and that performance has improved.
      I am concerned about what appears to be real abuse, and 3.6 million people are affected. There are about 13,000 schemes. In 2000, £1.7 billion will be saved. There is a real issue here.
      I am keen to support the amendment because it looks to the future, to a situation that I am keen to see—people adding value to their company, the company valuing them, and people becoming stakeholders in companies. There is abuse, as at Nottingham university, but there are examples of excellent practice, as at Philip A. Minson. That is why I am very pleased that the amendment calls for reports to be made in future.
      I do not think that this is the end of the line for the issue. I very much hope that, in future, we will introduce measures and policies that really will ensure that people who work for companies are part of that company,
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      that they are valued by that company and that in effect they become stakeholders, who get a payback from the company.
      Mr. Pearson: I begin by paying a warm tribute to the Chancellor of the Exchequer for taking the decision to phase out profit-related pay schemes. That was described in the magazine Taxation as being "politically courageous". That is right. Politics is about taking hard decisions. Undoubtedly there are a number of genuine profit-related pay schemes, but it is clear from all the survey evidence that has been published that there have been widespread abuses.
      If you will excuse me, Sir Geoffrey, I shall be self-indulgent and quote myself. I have never done that before. In the Standing Committee that considered the Finance Bill last year, I said:
      "all too often PRP schemes have been abused and used by companies as a tax dodge."—[Official Report, Standing Committee E, 15 February 1996; c. 351.]
      I pointed to the significant level of programme dead weight and the lack of additionality of the vast majority of PRP schemes. I also highlighted the fact that it was very much a get rich scheme for consultants, who were visiting companies and telling them, "I know how I can save money on your wages bill," and making a very easy sale because the tax man was picking up the cost.
      I feel sorry for those who have been operating genuine PRP schemes. I recognise that there might be some danger that the Chancellor has, as one of the directors of the CBI pointed out at the time of the Budget,
      "thrown the baby out with the bath water,"
      but I do not see any practical alternative when legislating in this area.
      I have particular sympathy for the John Lewis Partnership, which was mentioned earlier. Last year, it paid out more than a third of its £150 million profit in profit shares. The company chairman said:
      "No doubt some clever accountants and lawyers have run rings around the PRP rules, but the John Lewis scheme was a genuine sharing of profit from top to bottom of the company."
      I believe that to be correct. I have sympathy for any employees who will lose out as a result. I do not think that we can ignore the widespread abuses of the scheme. That is why the Chancellor was fundamentally right to take his decision.
      I must disagree with my hon. Friend the Member for Rotherham (Mr. MacShane) when he put the blame on Lord Lawson for the abuse of the PRP scheme. I think that any blame should be placed on another former Chancellor, the right hon. Member for Kingston upon Thames (Mr. Lamont). Until March 1991, fewer than 300,000 people were covered by PRP schemes; it was the March 1991 Budget, which doubled PRP relief, that led directly to the widespread abuse of the schemes that has occurred since then. In less than five years, membership of PRP schemes has grown from 300,000 to 3.7 million.
      It is worth reiterating the statement made by the Chancellor in his Budget speech, when he spoke of the 3.7 million people who would be affected by abolition of the scheme. He said:
      "I can no longer justify the ever increasing cost of the tax relief to the 22 million taxpayers who are not in profit-related pay schemes. We cannot permanently divide the work force into groups of people who pay different levels of tax on the same earnings

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      depending on whether the firm that they work for is in a scheme or not. The aim … of widespread use of PRP—has been achieved. and I would rather make faster progress on lower taxes for everybody."—[Official Report, 26 November 1996; Vol. 286, c.165.]
      I know that intellectual consistency is not normally the remit of politicians, but if what the Chancellor said, rightly in my view—I refer to the words
      "We cannot permanently divide the work force into groups … who pay different levels of tax on the same earnings depending on whether the firm that they work for is in a scheme or not"—
      applies to the 3.7 million people who currently benefit from PRP schemes, it applies equally to the 700,000 or so people who are participating in profit-sharing schemes, the 500,000 participating in "save as you earn" share option schemes and the 100,000 or thereabouts participating in company share ownership plans, which used to be described as discretionary share option schemes.
      If the Chancellor is intellectually consistent, he is clearly indicating that he wants to abolish tax relief on "save as you earn" share option schemes, company share ownership plans and profit-sharing schemes. If that is indeed the Government's intention, perhaps the Minister will tell us so in his reply.
      Mr. Jack: The amendment invites us to spend up to £150,000 on a report. That is unnecessary public expenditure. The details will be recorded in the Inland Revenue statistics, and I see nothing in the arguments that we have heard that commends the amendment.
      The second amendment confirms that profit-related schemes can save costs for companies. The job that Lord Lawson set out to do with the profit-related pay schemes—encouraging the establishment of such schemes—has now been done; my right hon. and learned Friend the Chancellor now believes that the relationship of profit to pay can be sustained, but without the need for further support from the tax system. I am therefore confirmed in that line of argument in the substantive part of the relevant clause.
      My hon. Friend the Member for Eltham (Mr. Bottomley) mentioned John Lewis. I have received a letter and a telephone call from my hon. Friend, and I will consider carefully what he has said; but I remind him that John Lewis has made it clear that it wishes to continue its scheme although, on this occasion, the profit-related pay scheme and the tax relief associated with it have been withdrawn.
      I invite the House to reject the amendment.
      7.15 pm
      Ms Primarolo: That was a rapid speech from the Financial Secretary. I think that he was spoken to about the length of the answers that he was giving. It is a shame that he could not be a little more forthcoming about the Government's assessment of the success of the profit-related pay scheme. It was breathtaking to hear him say that the Government balk at spending £150,000 on a report, when they have just spent £4 billion on a scheme that did not work. Let me add, just in case anyone thinks that that is a spending commitment, that we think that it could be done with the current resources.
      There are genuine schemes. I am sorry that the Financial Secretary could not be more helpful to his hon. Friend the Member for Eltham (Mr. Bottomley),
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      who made some very fair points about how we could assist in the future and continue to pursue the Government's stated objective. We have supported that objective—enabling employees to share in the profitability of the companies that employ them, which would encourage greater participation and more understanding of those companies.
      We entirely agree with the Government that they could not and should not continue to preside over a scheme that was being so widely abused, but we are entitled to a fuller explanation of the likely impact of the removal of the relief than "The Chancellor believes that it will be OK". I think that—to quote the Chancellor—hell will freeze over before we believe what the Chancellor has to tell us, if it is not substantiated.
      The Financial Secretary has behaved in a cavalier fashion this evening. There is a substantial amount of expenditure that he is not prepared to justify. The Government were prepared to squander taxpayers' resources without explaining why. The scheme that we are discussing was a clear abuse—an abuse that they knew was going on—and they have now left 3.7 million people high and dry in schemes that are to be wound up.
      We will pursue the matter on another occasion; but, as the Committee wants to make progress, I beg to ask leave to withdraw the amendment.
      Amendment, by leave, withdrawn.
      Clause 62 ordered to stand part of the Bill.

    Clause 92

      AGRICULTURAL PROPERTY RELIEF
      Mr. Tipping: I beg to move amendment No. 6, in clause 92, page 81, line 19, at end insert—
      'and
      (c) the public are allowed reasonable access thereto.'.
      This is a small amendment, but I consider it important. It could be described as a stile—a little hurdle that I want to put in the way of the Financial Secretary, making him pause for a moment and reflect before continuing on his path. I hope that we can find a signpost directing us to an agreed way forward: I am sure that hon. Members on both sides of the House believe that it is possible to improve the landscape and the environment, while at the same time allowing a greater opportunity for the public to enjoy the countryside.
      At the time of the Budget, the Ministry of Agriculture, Fisheries and Food put out a press release which stated:
      "The average full year cost of the proposal is estimated to be negligible."
      It is clear to me, and to my colleagues on the Front Bench, that the time has come to review rigorously all aspects of public spending, and I think that some real and hard choices must be made about priority. I felt that there was a throwaway ring to those words in the press release: the cost was
      "estimated to be negligible".
      It reminds me of the old story about expenditure bids. A bid of 0.1 per cent., or one tenth of 1 per cent., will not break the Treasury—but I know that my colleagues are mindful of the fact that just a thousand pledges like that would eat up the entire Budget.

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      One very interesting policy development has been the growth in so-called agro-environmental schemes—of which the prime mover is the countryside stewardship scheme. The amount of money committed to the countryside stewardship scheme has grown considerably. I estimate that, as of 1 April 1996, £11 million was committed to it. This Budget provides it with another £5 million, which, in the 1997–98 financial year, will increase spending on it to £21 million.
      I am not necessarily concerned about that expenditure, because a strong policy argument can be made that, if we want to make payments to farmers and landowners, we should switch the focus from payments for crop production to payments to improve the landscape and environment and to attract wildlife—to "green" the landscape, to benefit us all and to add value to the world. If one wished to discover where savings could be made, one should examine arable area payments. In 1995, £1 billion in such payments were made to farmers and landowners.
      I have no doubt that the type of schemes we are discussing are the schemes of the future and that they represent a switch in emphasis to achieve a "green premium". I support many aspects of the proposals; I merely seek to improve them. The schemes' principles are right, but they have not worked in practice. My amendment would require that, in habitat schemes,
      "the public are allowed reasonable access"
      before tax concessions are made. I draw the Committee's attention to the word "reasonable" in my amendment.
      There has always been conflict between public access and the need to protect countryside and habitat, and those conflicts must be resolved. The proposals will lead to increased bird life, for example, which I welcome. There have also been some very useful attempts to use set-aside lands as areas in which birds can breed and be protected. However, people should also have a right to access, so that they can go to look at birds and to see what is happening in the countryside. Countryside protection benefits not only wildlife but people, and finding a reasonable balance is extremely important. The history of agro-environment schemes does not make pleasant reading because, as I said, although enhancing the environment and greening the environment is the right principle, in practice we are not achieving that goal.
      I should draw the Minister's attention to schemes that accomplish the twin goals of creating wildlife habitat and of allowing greater public access. One current scheme—public access to environmentally sensitive areas—has all the hallmarks of the proposals that we are considering. I am holding a map that allegedly shows the public how they can locate a public access area in Dartmoor. The applicant is Mr. R. Jephson, who lives in Bedfordshire, and the address on the map is in Bedfordshire. As the map provides no other references to the site's location, it would be impossible for anyone to find the site, which is in Devon. The map was produced by the Ministry of Agriculture, Fisheries and Food and circulated by it in September 1995, and represents land that has been committed as an environmentally sensitive area, to which the public should have access. However, it does not give anyone a clue or a chance to find the land, because people would be looking for it in Bedfordshire rather than in Devon.
      1012
      The countryside access scheme is similar to the environmentally sensitive area scheme. I am holding two examples of the maps, documentation and information on that scheme published by MAFF. One of the examples concerns the operation of the scheme at Denham Hill farm. The problem is that "Denham Hill farm" is the only information provided on the location of the site. The map provides no other information, such as a nearby village, or any other way in which to find the site. We are paying a subsidy to that farmer so that people can enjoy a right to walk over his fields, but no one can find where his farm is located.
      An even better example is provided in a letter, dated 13 February 1996, from MAFF to the Ramblers Association, in which the association is advised that there is a right of access to a site belonging to an applicant—the Guilde Morden Townlands charity. The map does not provide the name of a town, county, road or other reference, but shows only a track, a pit and a coloured open-field site. We are paying significant amounts of money under the countryside access scheme to farmers and landowners, but, as MAFF's documentation shows, the public cannot find the sites. I spent a great deal of time trying to find the land belonging to the Guilde Morden Townlands charity, but I have been unable to do so. The examples demonstrate the current waste and abuse of public money.
      I have worked with the Ramblers Association in examining the countryside access scheme and public access to environmentally sensitive areas, and we have surveyed many sites. I think that we can draw two conclusions from those efforts. The first is that few people know of the so-called "new opportunities" because of poor publicity and misleading and unhelpful information. Secondly, once the sites have been located, local people have made it clear that, in half the cases, public access or a public footpath had already existed, and that, in a quarter of the cases, a de facto right to roam had already existed. The public are therefore losing out twice, because they either cannot find the sites, or, in 75 per cent. of the cases, they already had access to them. The situation is not scandalous, but I am deeply disturbed that significant amounts of money are being paid for the public to have rights of access which they cannot exercise or which already existed.
      As I said, the largest scheme is the countryside stewardship scheme, which the Agriculture Minister recently described as the premier vehicle for protecting and enhancing countryside access. The countryside stewardship scheme has the hallmarks of failure of the two other schemes that I mentioned.
      I draw the Minister's attention to a document entitled "Countryside Stewardship Scheme: Public Access Sites", which I helped the Ramblers Association to publish in March 1995. It was a survey of all the countryside stewardship schemes in the country at that time. It was a major undertaking in that 600 sites were examined.
      The survey found that a third of the sites were difficult to find, as I described in relation to other schemes, and, significantly, that 21 per cent. of the grid or ordnance survey references were wrong. That is clearly bad practice. More than 30 per cent. of sites had no sign at the entrance to say that they were countryside stewardship sites although such a sign is a condition of receiving a grant. Perhaps most important, 48 per cent. or almost half of the sites had access problems.

      1013
      Following the map provided by the Countryside Commission, I accessed a site at Pye Bridge—not far from the Economic Secretary's constituency in Derbyshire—and had to cross the Midland main line. There are eight tracks at that point and, as the Minister knows, trains travel the line in excess of 120 mph. Clearly, that site was wrongly identified and people's lives were being put at risk. I am pleased that the Countryside Commission has now taken the site off its list.
      7.30 pm
      Of the sites surveyed, access was already available to 44 per cent. of them. One criticism of the scheme is that sites are difficult to find, but, when they are found, it appears that de facto access or access across a footpath is already available. Such schemes need to perform better. I estimate that the access element of the countryside stewardship scheme will cost £6 million over 10 years. To put it baldly, we are not getting value for money.
      Another example of such a scheme is the conditional exemption from inheritance tax scheme under which the public are also allowed greater access to the countryside. The amendment is clear in seeking reasonable public access to land that is in a habitat scheme, but the conditionality of inheritance tax also has all the hallmarks of failure. I have raised this matter with the Financial Secretary before and I am very grateful for the interest that he has so far taken in it. I hope he will not find it churlish if I say that I have admired his interest but not what has been achieved.
      Again, there is a loss of inheritance tax to the public purse in—allegedly—allowing the public greater access to the countryside. The problem with this specific scheme is that because of taxpayer confidentiality, sites cannot be identified. Therefore, the public are in theory being allowed greater access to the countryside, but taxpayer confidentiality means that no one is told where the sites are. That is absolutely crazy, and I do not believe that anyone can justify that situation.
      The Countryside Commission administers the scheme on behalf of the Government. I know that the commission itself would like to see a change, and I hope that conditional exemption from IT and the habitat scheme will both be changed to allow greater public access so that people know where the sites are and can access them.
      I said that the Financial Secretary had been extremely helpful, although some of the answers to my questions did not inspire me with confidence. On 29 March 1996, the Financial Secretary replied to a written question. I asked how many sites had been given
      "conditional exemption from IT on the basis of public access having been granted."
      He replied:
      "The information requested about the number of locations which have been granted conditional exemption is not available."
      That is not good practice.
      In answer to another written question, the Financial Secretary confirmed that the cost of conditional exemption in such cases was between £5 million and £10 million each year. We are talking about significant sums of money—£5 million to £10 million a year in loss of inheritance tax, £10 million over 10 years on countryside stewardship schemes, and lesser amounts for the smaller schemes that I mentioned.
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      It is imperative that the spirit of the amendment is accepted. If payments are to be made, either in cash or by the avoidance of inheritance tax being allowed, the public should get something back—they should have greater access. The central problem is that Departments, backed by Ministers, are unwilling to advertise the sites.
      Also on conditional exemption, I asked the Financial Secretary what consultation had taken place. Again on 29 March 1996, he replied that tourist offices and town halls had been consulted. Since receiving that reply, I have written to every county council in England. With three exceptions, none could find any evidence at all of being consulted. To be fair, three did say that they were consulted but were not prepared to give details of sites in their county because of the prescription of taxpayer confidentiality. Some did not know, and a smaller group would not say. It was the same when tourist information centres were contacted.
      I asked the Financial Secretary how he knew that the relevant tourist centres were displaying information telling people about access to the countryside. Also on 29 March 1996, he replied:
      "I am unable to provide the requested information about tourist information centres as it is not held centrally. And, in any event, providing such information may help identify individual cases of tax exemption, thus compromising the normal rules on taxpayer confidentiality."—[Official Report, 29 March 1996; Vol. 274, c. 777.]
      There we have it—a promise is being made that tourist information centres are consulted and have the necessary information but, at the same time, the Financial Secretary is saying that they are not allowed to display that information for reasons of taxpayer confidentiality. To put it bluntly, it is a real mess—a quagmire. I have anxieties that the clause will lead to similar problems. Substantial amounts of money are being paid to farmers and landowners.
      It is important that people who want access to the countryside—there is an ever-growing demand—should have the information to find the locations that they want and that there should be new public access. That is the purpose of the amendment. It is a long, hard road, but people will not give up easily. There is a tremendous desire across the United Kingdom for a better, greener landscape. We want to enjoy that landscape.
      There should be a partnership between the Government and those who want to go to the countryside. The Government's policies have set up a series of misdirections, stiles and blocks on footpaths. That is not good enough. People will not tolerate it and there will have to be change. The amendment is a small step in pushing for that.
      Mr. Geoffrey Clifton-Brown: I should like to comment on the amendments tabled by the hon. Member for Sherwood (Mr. Tipping), whom I am delighted to follow, and his Front Bench colleagues. I oppose both amendments.
      The First Deputy Chairman of Ways and Means (Sir Geoffrey Lofthouse): Order. I must point out to the hon. Gentleman that we are debating only amendment No. 6.
      Mr. Clifton-Brown: Indeed. Amendment No. 6 was moved by the hon. Member for Sherwood and deals with

      1015
      public access to habitat scheme sites. I apologise for being confused about which amendments we are discussing. I hope to be able to catch your eye on the following amendment as well, Sir Geoffrey, but I shall now confine my remarks to the right of public access to habitat schemes.
      A description of what the habitat schemes in question are designed to achieve might be helpful. A pilot scheme was launched in May 1994, aimed at creating or enhancing certain valuable habitats by taking land out of agricultural production. or introducing extensive grazing. and managing it for the benefit of wildlife. The scheme targets three types of habitat: water fringes in six designated areas; farmland previously in the five-year set-aside scheme; and coastal salt marsh.
      There is a philosophical divide between the two sides of the Committee. I believe that this country's extensive right of way system is not used to its fullest extent. If the system was already fully used, I could begin to understand the objections of the hon. Member for Sherwood, but it is not. There are a number of reasons for the lack of use, not least of which is the presence of one or two unco-operative landowners and farmers. I condemn those who block up proper rights of way. The Countryside Commission's target is that all rights of way should be open by 2000.
      Introducing a public right of way over habitat scheme areas in a Finance Bill is not the right way to proceed. When a Government introduce an agri-environment scheme, they have to ask what that scheme is designed to achieve. I have already set out the nature of the scheme; it is designed to create better habitat. Many of the habitats that we are trying to create need peace and quiet. The Opposition's policy of a right to roam, with people wandering everywhere, would not work with this scheme. Permission to bring the scheme into effect will be granted only if the organisers believe that it will achieve the desired objectives. That will happen only with an out of the ordinary habitat, which would be impossible to achieve with people wandering everywhere. I strongly oppose the introduction in a Finance Bill of the right to roam over habitat scheme areas.
      The Government have an excellent record on agri-environment schemes, including the habitat scheme. The public want that to continue. We spend approximately £100 million a year on agri-environment schemes. That is a creditable record. I am delighted that the countryside stewardship scheme budget for England alone is £46 million. I hope that Labour Members warmly welcome our agri-environment programme.
      7.45 pm
      I do not want any action to be taken that would damage that progress. I have an interest to declare—I am a farmer. I am also a member of the Environment Select Committee. I believe in the duty of landowners and farmers to enhance the environment of our precious planet. I cannot support the amendment, because it would jeopardise the habitat scheme. There may well be other schemes in which a specific provision for a right of public access might be reasonable, but that should be implemented when the scheme is introduced, and by the
      1016
      same Ministry. When the Ministry of Agriculture, Fisheries and Food introduced the scheme, it had no intention of making public access part of it.
      Imagine a rare bird, such as the stone curlew, nesting in a habitat scheme area. Some well-meaning rambler might come along, not knowing what he was looking for or why the area had been designated as a habitat scheme, and put his foot on that rare nest.
      Mr. Tipping: If the hon. Gentleman looks closely at the amendment he will see the words, "reasonable access". I would certainly not put my foot on the nest. I know that the hon. Gentleman agrees with the point that I made about the need to balance conflicting interests in the countryside. That is why the word, "reasonable" has been included in the amendment.
      Mr. Clifton-Brown: I am grateful for that helpful intervention, which shows that we agree on the fundamental point that there should be proper access to the countryside. It is a pity when conflict occurs. However, we then part company. I do not believe that the scheme in question would benefit from increased public access, for the reasons that I have given. Many other schemes, to which the hon. Gentleman referred, have public access provisions built in.
      In the spirit of open government that we Conservatives believe in, any public access provision built into a scheme should work properly, otherwise it should not be in the scheme. I deplore the fact that certain people have undertaken to give public access and then obfuscated that undertaking at every stage. They should not draw public money with the promise of access and then try to deny the public that right, but that is not the case with the habitat scheme. On that basis, I find it very hard to support the amendment.
      I suspect that I would part company with the hon. Member for Sherwood over a general right to roam, which the amendment encompasses. All my remarks apply to a general right to roam, because exactly the same arguments can be applied both to the right to roam and to the right of public access to a habitat scheme area. Given his rambling interests, I am sure that the hon. Gentleman accepts that, just as there are irresponsible landowners and farmers who are causing difficulties with legitimate rights of way, there are some irresponsible ramblers. If the public are allowed to wander all over the place, some irresponsible ramblers will put their foot in it in the manner that I have described. If the hon. Gentleman accepts that there are some irresponsible ramblers, he must agree that we have to channel them into certain places.
      The habitat scheme forms part of an agri-environment scheme that the Environment Committee has considered. There is no doubt that some habitat schemes are near areas to which there is much access, such as the Cotswolds national trail and other national trails. The Select Committee visited one such trail in the Peak district national park, where great boulders had to be lifted in by helicopter to accommodate the huge right of access.
      I am not suggesting that habitat schemes and the terms of the amendment relate to such huge numbers of people, but one never knows. If such a scheme happened to be on the edge of a large conurbation, the very purpose for which the scheme was set up—to keep the area peaceful, tranquil and undisturbed—might be undermined.

      1017
      It is very hard to divine why the hon. Member for Sherwood has chosen to table an amendment on habitat schemes. I could have understood his tabling an amendment on one or two of the other schemes, where public access is catered for; I would have had some sympathy for his argument. When providing access, people who approved the scheme and paid public money for it, with the landowner and the farmer, would have considered the problem of excess public access and concluded that they could easily cope. I am not sure that the hon. Gentleman has thought the matter through and considered all the implications.
      I am keen to ensure that our environment is enhanced. We are considering not only some of our rare birds, about which we hear so much. The Environment Committee went to the natural history museum the other day to learn more about some of our endangered species. Habitat schemes were designed and introduced precisely to protect some of them. Although we hear much about some of our high-profile creatures, such as hawks, raptors and some of the small songbirds, habitat schemes are designed to protect many other extremely rare species.
      The Environment Committee was given a great lecture on lepidoptera—butterflies—and learnt that at least six species are in serious danger in the British Isles. Habitat schemes were specifically designed to help such very rare species, and rely entirely on the progression down the species in the animal kingdom. The progression starts with the larger mammals, which the schemes might help to protect, and goes down to smaller mammals and birds. Birds depend on food such as smaller insects, molluscs and other items further down the food chain. Many small insects are preyed on by larger animals, and they too need to be protected. That is precisely why the habitat schemes were inaugurated.
      On the visit to the natural history museum—
      The First Deputy Chairman: Order. This is all very pleasant, but it would be helpful to the House if the hon. Gentleman spoke about the amendment.
      Mr. Clifton-Brown: That is precisely what I was trying to do.
      The First Deputy Chairman: The hon. Gentleman should try to be more successful in doing so.
      Mr. Clifton-Brown: I shall try to confine my remarks more closely to the ramblers who put their foot in it, for whom the hon. Member for Sherwood is trying to prevent people receiving tax concessions.
      The amendment concerns not only larger mammals, birds and butterflies, but smaller insects. Experts in the Ministry of Agriculture, Fisheries and Food tell me that the habitat schemes are very important for the smaller insects. A computer mapping scheme on a worldwide basis includes the huge amount of information held at the natural history museum. It is the largest database in the world concerning all sorts of species. It is absolutely vital to preserve valuable habitat schemes and vital smaller insects for future generations to study. A vital aspect of the food chain would otherwise be lost.
      Mr. Nicholas Winterton: Sadly, I heard only part of the most interesting speech of the hon. Member for Sherwood (Mr. Tipping). Does my hon. Friend agree that
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      the right to roam, which is very much part of the argument advanced by the hon. Gentleman, has costs? Does he accept that those who grant the right to roam and want to move across the countryside contribute a cost, whereas those who are part of the countryside and have to maintain it must meet that cost? I am sure that, as a practising farmer and one who represents an agricultural constituency, my hon. Friend knows a great deal about such matters. Will he comment on the cost of the right to roam, which is so much part of the hon. Gentleman's argument?
      Mr. Clifton-Brown: I am grateful to my hon. Friend for introducing the subject of a right to roam, on which I have tangentially touched. I must, however, return to the smaller insects and the molluscs. [Laughter.] I do not know why hon. Members are laughing. I do not find the subject at all funny; it is very serious. The hon. Member for Sherwood wants the public to be able to walk all over—
      The First Deputy Chairman: Order. The hon. Gentleman must relate his remarks to the amendment and the clause. He is failing to do so. I hope that I do not have to draw that to his attention any more.
      Mr. Clifton-Brown: I am very grateful for your advice, Sir Geoffrey. I thought that I was trying to relate my remarks to the clause. We are talking about exemption from inheritance tax in relation to habitat schemes. The substantive Opposition amendment will be debated next, but the hon. Member for Sherwood is trying to give members of the public an automatic right to roam on sites exempt from inheritance tax.
      Mr. Tipping: I wish to draw the attention of the hon. Gentleman, again, to the amendment, which refers to "reasonable access". I have pointed this out to him, but he is getting carried away with his own enthusiasm. "Reasonable access" tries to balance the needs of the habitat and wildlife—about which he talks so eloquently—and the needs of the public. He knows that the countryside is a living countryside and that there must be a balance between those interests. The conflict between them interests all of us who are concerned with the future of the countryside.
      8 pm
      Mr. Clifton-Brown: Bearing in mind your strictures, Sir Geoffrey, and the two interesting interventions that we have heard, I shall move on to the second part of my speech and deal with "reasonable access thereto"—the exact words used in the amendment.
      Mr. Winterton: Does my hon. Friend accept that my intervention relating to the cost of "reasonable access" had an important impact on the amendment? The amendment states that the public should be allowed reasonable access, and the clause relates to inheritance tax. I repeat that my hon. Friend has considerable knowledge of the countryside because of his practical experience as a farmer. Are there not considerable costs involved with this amendment? Should not the amendment—which the hon. Member for Sherwood has quite reasonably tabled—clearly reflect the costs involved for those who own the land in question?
      Mr. Clifton-Brown: I am grateful to my hon. Friend for reinforcing his earlier intervention. It is a good point

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      to debate. What is "reasonable access"? Does it mean one person a year having access to one habitat site? Does it mean that an enormous number of people should have access, such as we saw in the Peak district national park where rocks were flown in by helicopter to maintain paths? They had to fly in rocks because thousands of people were visiting the area. I do not disparage that, but is it "reasonable access" to a habitat scheme? I would suggest that it is not.
      If the amendment were accepted, we would need a clearer definition of "reasonable access". My hon. Friend the Member for Macclesfield (Mr. Winterton) is absolutely right to suggest that a general right to roam is not "reasonable access" as it will have a cost. He rightly pointed out that I am a practising farmer, and I obtain some of my income from my farm. I know full well that unreasonable access on a completely ad hoc basis—which the hon. Member for Sherwood is seeking—could do immense damage, particularly to stock-rearing areas where, I understand, many of the habitat schemes envisaged in the amendment would be.
      The hon. Member for Sherwood wants the public to have an unfettered right of access to habitat scheme areas, but does he believe that that would damage the livelihoods of farmers? I support a right of access, provided that access is channelled to the right place at the right time, but if the public were able to walk everywhere—as I believe the amendment would allow—it would cause damage. For example, dogs might stray as a result of the type of irresponsible rambler to whom I have referred.
      The key to all my remarks is that farmers' livelihoods are being damaged by irresponsible ramblers, and although farmers accept that the vast majority of ramblers are responsible, there is always one who spoils it for everybody else. For example, a rambler might allow his dog loose and the dog might kill several lambs or ewes. Who will pick up the bill for that? The rambler who has let his dog loose will be long gone by the time anyone discovers what has happened.
      Mr. Tipping: May I remind the hon. Gentleman for the third time that the amendment does not ask for unfettered access but "reasonable access"? My position on this matter is set out clearly in the Access to the Countryside Bill, which I advise him to read. He can then identify my position, rather than make a false prospectus. Many of the points that he has made could not be attached to the Access to the Countryside Bill.
      Mr. Clifton-Brown: I am grateful to the hon. Gentleman for trying to clarify his position, and I look forward with great interest to reading his Bill.
      Sir Dudley Smith: I wandered in and thought that I had got my days wrong. I heard the discussions about habitats, but I thought that we were discussing the Finance Bill. I have listened with interest to my hon. Friend who, if I may say so, is making heavy weather of this. I hold no brief for the hon. Member for Sherwood (Mr. Tipping), but the word "reasonable" is very important in the legal sense. We all know that some people abuse these schemes, but we must bear it in mind that the public legitimately want access to the countryside and that we want to preserve habitats. There should be
      1020
      "reasonable access" and some give and take by farmers and ramblers. If people start going the wrong way, we must take action against them. But perhaps we should be more liberal than regressive on this matter.
      Mr. Clifton-Brown: I am trying hard to keep my remarks brief, Sir Geoffrey, but I keep being distracted. Unfortunately, my hon. Friend was not here for the start of my speech, so I must briefly tell him that I am not against public access at all, but that we must have the right attitude towards it. The existing rights of way network should be upheld, but if the hon. Member for Sherwood wants to table an amendment such as this, he must specify what he means by "reasonable access."
      Mr. John Home Robertson: The hon. Gentleman is making a terrible meal of this. He has made clear to the House that he has interests in a farm, and so have I. My farm is in Scotland where there is, in effect, a right to roam. It has never caused anybody any problems, and there is a good partnership between members of the public who walk around the countryside and the farming industry. What is the point in having a habitat scheme to protect habitats for the benefit of the public if we deny the public reasonable access to them? He is overdoing it.
      Mr. Clifton-Brown: The hon. Gentleman has shown clearly that he has no idea what the habitat scheme is for. The whole idea is to keep an area completely undisturbed to enhance a particular habitat, and we must not get that muddled up with other areas of farming land where the public have a perfect right of access. The whole idea is that we wish to enhance particular flora or fauna which otherwise would not exist. That is why we are prepared to pay taxpayers' hard-earned money—to enhance those things that the public want to see.
      I do not know about the farm of the hon. Member for East Lothian, but if the amendment were to be applied to it, I suspect that valuable areas of habitat might be affected. We are talking about small areas, and we do not want to deny the public the right of access to huge areas of countryside. We are making heavy weather of this because I keep being interrupted. The amendment is absolutely nonsensical and totally contrary to the purposes of the scheme. On that basis, I totally oppose it.
      Mr. Alan Milburn: We have had an interesting diversion for the last 28 minutes. It has been a veritable tour de force—a tour of fauna and flora, molluscs, insects and the animal kingdom.
      I want to bring the debate back to the amendment. My hon. Friend the Member for Sherwood (Mr. Tipping) has raised an important issue, which is something of a hardy annual in Finance Bills: it comes back year after year. My hon. Friend should be congratulated on being such a doughty champion of the right of access to land that has benefited from the public purse. He raised the issue in Committee last year and he has done so again today, this time in relation to clause 92, which extends inheritance tax relief to land within habitat schemes.
      The amendment would make the relief conditional on a modicum—a reasonable amount—of public access. That is exactly the sort of phraseology that was encompassed in the original Act to deal with the issue: the Finance Act 1976. The continual concern of the hon. Member for

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      Cirencester and Tewkesbury (Mr. Clifton-Brown) about the words "reasonable access" can therefore perhaps be laid to rest if he cares to examine previous laws dealing with the matter.
      The argument is not about the principle of relieving inheritance tax in exchange for gaining public access to important parts of the countryside. The simple principle is that if the taxpayer is forking out a small fortune—because that is what is represented by the millions of pounds of revenue forgone in the past—the Government should ensure that the recipients either fulfil their obligations to public access or forgo the tax advantage.
      It is a question of rights and responsibilities: the right to receive public subsidy and the responsibility to guarantee public access. That is the principle that my hon. Friend the Member for Sherwood wants to enshrine in the law through the amendment. The problem, as he said both this year and last year, is that public access cannot be guaranteed when information about the land concerned is not readily available.
      We do not even know the number of sites that are subject to conditional exemption. The Government's shuffling off of responsibility to the Countryside Commission and individual local authorities simply will not do, because the local authorities do not know, and the commission will not say, where the sites are. The public, who are the ultimate financiers of the relief, cannot find out where the land is.
      Last year, I paid particular attention to the Minister's comments when he replied to a similar debate in the Standing Committee. He sought to reassure my hon. Friend the Member for Sherwood about information being available to the public. He said that such information was available
      "if we care to ferret out the facts."—[Official Report, Standing Committee E, 27 February 1996; c. 555.]
      It is not. In any case, the public should not have to ferret out information that should by right be theirs.
      I appreciate that it would be wrong for the Inland Revenue to disclose information about the affairs of individual taxpayers. We do not ask how much relief is worth in individual cases, but we want to know where access has been promised in return for relief and we want that access to be guaranteed. As the Ramblers once memorably put it, the law is supposed to give the taxpayer some quo for its quids.
      Mr. Jack: Has the hon. Gentleman studied Inland Revenue publication IR156?
      Mr. Milburn: I have not had the opportunity to study that publication, but I am sure that in his response the Minister will acquaint the whole Committee with its contents. I am concerned to ensure that, if public subsidies are given to landowners to take land out of farming use and to attain the laudable environmental objectives of preserving the countryside, the people that that is supposed to benefit—the public—have a right to reasonable access.
      Mr. Nicholas Winterton: The hon. Gentleman is advancing a reasonable case, but he should consider the cost of granting that reasonable access to the countryside. I make this intervention because part of my constituency lies within the Peak park, which was referred to by my
      1022
      hon. Friend the Member for Cirencester and Tewkesbury (Mr. Clifton-Brown) in his 28-minute contribution. Will the hon. Gentleman make reference to the substantial cost that is often involved in granting what the hon. Member for Sherwood has rightly described as reasonable access to the countryside? I make particular reference to the cost of maintaining footpaths, as I have considerable knowledge of the Peak park and of the problems that growing access to the public cause to that rural environment.
      Mr. Milburn: The hon. Gentleman makes an important and telling point. If rights and responsibilities apply on one side of the argument they must apply on the other. We should certainly not condone behaviour in the countryside that causes damage to areas of outstanding natural beauty or creates additional costs for those who are responsible for looking after them. I hope that the Minister will take note of the hon. Gentleman's point about my hon. Friend the Member for Sherwood having a reasonable case.
      8.15 pm
      It is especially important that the right of public access should be guaranteed where it has been promised, because many of the lands covered by existing inheritance tax agreements lie in areas of outstanding natural beauty—the jewels in the crown of our countryside—but we do not even know where they are, so members of the public cannot properly enjoy them.
      Conservative Members have been as concerned as Opposition Members about some of the issues that we have discussed this evening. The National Audit Office also expressed concern about the operation of the current inheritance tax regime, which the clause extends to lands under the habitat schemes.
      An NAO report in 1992 said:
      "The Department should give further attention to the nature and frequency of the procedures to monitor owners' compliance with undertakings given in return for conditional exemption from inheritance tax on land, buildings and particularly chattels. They should also review the extent to which assurances on retention, maintenance and rights of access remain heavily dependent on owners themselves."
      It is five years since the office produced that report. I understand that a Public Accounts Committee report produced the following year made similar recommendations.
      Perhaps the Minister can allude to the Government's response to the NAO report and to the subsequent PAC report. A consistent thread runs through the arguments of the NAO, the PAC and my hon. Friend the Member for Sherwood. It is that simple maxim that if the public are to foot the bill through tax reliefs and tax subsidies to landowners, it must be conditional on the owners guaranteeing the public the simple right of access. That is an important principle, and I hope that the Minister will respond favourably to the amendment.
      Mr. David Lidington: I am grateful for the opportunity to speak briefly on the important amendment moved by the hon. Member for Sherwood (Mr. Tipping). The hon. Member for Darlington (Mr. Milburn) gave the game away in terms of his philosophical approach when he talked about the public

      1023
      footing the bill for tax reliefs or tax allowances. It is worth reminding him that we are not talking about handouts from taxpayers, but about a change in the law that would allow certain individual taxpayers to keep more of their own money and not have their assets taxed by the state as much as they would otherwise have been.
      Mr. Clifton-Brown: My hon. Friend may be confusing two issues. One is the payment for the habitat scheme, to which I think that the hon. Member for Darlington (Mr. Milburn) was referring. The other is set out in the clause on exemptions from inheritance tax.
      Mr. Lidington: I am grateful to my hon. Friend for putting me right. I am, indeed, referring to the inheritance tax reliefs in clause 92.
      My concern about the amendment of the hon. Member for Sherwood derives partly from the conservation efforts being made in my constituency and in other parts of the Chiltern hills and partly from the list of enactments in clause 92(3). Clause 92(4) empowers the Treasury to
      "by order made by statutory instrument amend the list of enactments in subsection (3) above."
      I shall return later to the principle of enabling powers, and of giving a further such power to the Government.
      First, I will deal with clause 92(3)(a) and (c). Paragraph (3)(a) refers to regulation 3(1) of the Habitat (Water Fringe) Regulations 1994.
      Mr. Clifton-Brown: Is my hon. Friend aware that there are six such designated areas under clause 92? The Committee may be interested to know that they are as follows: the York, Derwent and Rye system; the Ribble tributaries; the Shropshire meres, which are especially important for people who live in the Welsh Marches; the River Beult, which I gather is in Kent; the Flapton Ley, which I believe is in Devon; and the upper Avon, Wylye and Nadder valleys in Hampshire and Wiltshire.
      Mr. Lidington: I am grateful to my hon. Friend. Inland river systems sustain a great variety of wildlife, but they have come under increasing pressure in recent decades as a result of changes in farming techniques, improved drainage and the greater use of pesticides. It is important that we should do our utmost to conserve the flora and fauna that remain in those rich habitats.
      By their nature, water fringes, especially when they are near large population centres, attract many people as sites for picnicking, camping and other recreational pursuits. I am sure that my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Clifton-Brown) has, like me, enjoyed a family walk along a country river or around a lake. His mention of the Shropshire meres reminded me of such an afternoon in the company of my wife—and a very pleasant outing it was.
      Mr. Nicholas Winterton: My hon. Friend mentioned meres, but what about canals? I refer in particular to the Cheshire ring and the Macclesfield canal. What about the flora and fauna there? Will he comment on that in adding to his excellent contribution?
      Mr. Lidington: I am grateful to my hon. Friend for the benefit of his customary detailed knowledge of the area that he represents.
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      My hon. Friend the Member for Cirencester and Tewkesbury informed the Committee that regulation 3(1) of the Habitat (Water Fringe) Regulations 1994 does not apply to the canal systems in Cheshire mentioned by my hon. Friend the Member for Macclesfield (Mr. Winterton). However, statutory instruments, by their nature, can easily be extended and this one could be extended to cover more sites than were included in the original Department of the Environment list. It is certainly conceivable that the canals mentioned could come within the scope of subsection (3)(a) if the Government of the day decided to amend the provisions. My hon. Friend made an important point about canals, which sustain a variety of wild plants and animals. To his knowledge of the waterways of Cheshire, I add mine of the Aylesbury and Wendover arms of the Grand Union canal which both support wildlife and attract people who live and work in towns and want to get out and enjoy the countryside.
      This debate forces us to examine carefully the inevitable tension between the interests of conservation and of the rights of public access to recreation in the countryside. Water fringes are vulnerable habitats, but that is even more true of the saltmarshes mentioned in clause 92(3)(c). I do not know whether my hon. Friend the Member for Cirencester and Tewkesbury has been able to ascertain a list of those sites covered by the Habitat (Salt-Marsh) Regulations 1994.
      Mr. Patrick Thompson: Mention of salt marshes makes me think of the coast of north Norfolk. I am not expert on this part of the Bill. Can my hon. Friend explain whether coastal saltmarshes would be affected by the regulations?
      Mr. Lidington: The salt marshes of north Norfolk and the Wash would appear, at least in principle, to be eligible for inclusion in the Habitat (Salt-Marsh) Regulations 1994. If they are not among those sites which would be affected directly if the amendment were passed, they could be affected in the foreseeable future.
      8.30 pm
      Mr. Tipping: Does the hon. Gentleman accept that access to saltmarshes is already provided under one of the agri-environment schemes—the scheme on public access to environmentally sensitive areas? Does he agree that the balance between protecting the landscape and the environment and allowing public access is what is exercising the mind of the Committee?
      Mr. Lidington: I wholly agree with the hon. Gentleman that the test for the Committee is to get the balance right. It is my contention that that is best achieved by examining the terms of schemes and making arrangements for access to sites rather than by incorporating the rather broad language of the amendment in the Finance Bill.
      Mr. Clifton-Brown: My hon. Friend asked me whether I had been able to obtain any information about the saltmarsh option. Unlike the water fringe option, which is for inland waterways—fresh water—at six designated sites, the aim of the saltmarsh option is to create and extend areas of saltmarsh on suitable land, consistent with the provision of effective and sustainable coastal defence. That might be helpful to my hon. Friend.
      Mr. Lidington: Indeed. We have only to consider the pressure on saltmarshes, as on inland waterway systems,

      1025
      not only from agriculture but from development of various types, to see why we need to take great care to ensure that such sites are adequately protected. North Kent and the now aborted proposals to develop the Maplin area of the coast of Essex for an airport in the 1970s are just two examples of the pressure on saltmarshes around the coast of Britain. That is why the Committee should be careful before allowing public access in the way that the hon. Member for Sherwood wishes. I know that it is not his intention, but the amendment might unwittingly have the effect of allowing access to such an extent as to damage the habitat that attracted people there in the first instance.
      Mr. Patrick Thompson: I am becoming genuinely interested in the point about public access. There is a distinction between public access and total exclusion of the public. Is there any halfway measure under which restricted access could be allowed, either now or in the future? I know that certain categories of people are allowed into certain special conservation areas. Is that relevant to the clause?
      Mr. Lidington: My hon. Friend makes an important point. One of my quarrels with the term "reasonable access" in the amendment is that it does not seem to allow sufficiently for the dilemma that my hon. Friend has illustrated.
      I return to the point that I made to the Committee earlier. If a public access agreement is drafted which is specific to a particular site, it will allow for access to be given to biologists and genuine researchers. It would allow the public to be barred from sites at particular times of the year, in the same way as public access to the Fleet lagoon in Dorset is strictly limited when the wading birds are likely to be nesting. Detailed site-specific arrangements could then be made. My fear is that the language adopted by the hon. Member for Sherwood would allow public access to continue and to grow, perhaps to the detriment of particular sites.
      Mr. Clifton-Brown: My hon. Friends have raised an important point. Of course, the scheme is time-limited to 20 years, so any public access would be prescriptive rather than statutory. If it were prescriptive, would it be possible to limit public access to certain times of the year? To take my stone curlew nesting example, it is important to keep the public away during the nesting months of April and May. Does my hon. Friend think that that would be a good idea?
      Mr. Lidington: That would be a good idea. Even within a public access agreement for an individual site, it would be desirable to allow a degree of discretion to the managers or those responsible for supervising conservation on a particular site. For example, if a particular habitat is used by migratory birds during their flight north or south in spring or autumn, it would surely be sensible to allow a measure of discretion to those responsible for conservation so that if migration was early or late in a particular year, they could bring forward or put back the period of public access in the interests of conservation. My hon. Friend's point strengthens my view that the language of the amendment is inappropriate.
      I move from new section 124C(3)(a) and (c) to the subsection which, I confess, troubles me most. New section 124C(3)(b) refers to the Habitat (Former
      1026
      Set-Aside Land) Regulations 1994. As every member of the Committee will appreciate, set-aside land is found in every part of the country. No one knows for certain how the scheme is likely to develop. There have been significant changes during the past 12 months, as a consequence of the impact on the European beef market of the BSE crisis since March 1996. That brings me away from the coasts and back towards my constituency and neighbouring constituencies and to the Chiltern hills.
      The Chilterns are a valuable habitat. They include much land which is classed as an area of outstanding natural beauty, and much which is green belt, but the Chilterns also often mark the dividing line between land which is given that class of protection and land which is available for normal development, subject to the usual planning process.
      Counties such as Bedfordshire, Buckinghamshire and Berkshire, which are just beyond the rim of the London green belt, are peculiarly subject to development pressures. Anyone who has studied the Department of the Environment's recent Green Paper on household projections will know how the demand for housing and new premises for employment in those south-eastern counties is forecast to grow steadily—some might say dramatically—in the next 10 to 20 years. That growth will put still further pressure on agricultural land and woodland in my constituency and in other parts of the Chiltern hills.
      Mr. Clifton-Brown: And in the Cotswolds.
      Mr. Lidington: The Cotswolds and the Chilterns probably have a great deal in common so far as development pressures are concerned.
      Mr. Nicholas Winterton: My hon. Friend makes a good point, but does he accept that it is not merely areas to the north and west of Greater London, such as the Chilterns, his constituency and the Cotswolds, that suffer such pressures? Areas on the periphery of great cities such as Manchester also suffer. I refer to my constituency of Macclesfield in Cheshire, where the same pressures are being exerted and the same arguments are relevant to my hon. Friend's proposals, which he is making in an excellent contribution to the debate.
      Mr. Lidington: I thank my hon. Friend. Having some good friends who live not in his constituency, I fear, but nearby, and having visited Wilmslow, Knutsford and Mobberley, I am certainly aware that development pressures in Cheshire as a consequence of people coming out from the Manchester conurbation are probably as acute as those affecting counties such as mine, which are adjacent to the London conurbation, although on a slightly smaller scale in view of the relative size of the two cities.
      There is not only development pressure on the Chiltern hills and Buckinghamshire. Understandably, there is also a huge demand for public access and I have immense sympathy for that. I was brought up in north-west London and used to go for Sunday walks with the family along the Chess valley or the scarp of the Chiltern hills. None of us wishes to deny such walks to present or future generations, but we have to ensure that public access does not develop in such a way that it damages a precious environment. Public access has to be managed.

      1027
      In my part of the country, there are many opportunities for legitimate public access through long-distance paths such as the Ridgeway along the scarp of the Chiltern hills and the north Buckinghamshire and south Buckinghamshire footways, which Buckinghamshire county council has developed with great prescience and vision to balance public access, conservation and efficient farming in a way that I am sure that the hon. Member for Sherwood seeks to achieve as much as anyone else.
      There have also been clashes, however. A number of farmers and landowners in Buckinghamshire and Oxfordshire have been alarmed at some of the initiatives taken by the Ramblers Association and people such as the hon. Member for Sherwood who want a more general right to roam enshrined in law.
      8.45 pm
      Mr. Tipping: I think that the hon. Member for Aylesbury missed the beginning of my speech. I have never advocated an unrestricted right to roam. As I said earlier in this short—but extending—debate, my position is set out in the Access to the Countryside Bill, which tries to deal with the tensions that the hon. Member so rightly recognises.
      Mr. Lidington: I am grateful to the hon. Gentleman for making that point clear.
      Mr. Patrick Thompson: This is becoming a very interesting debate. Before I became a Member of Parliament, I spent much time in the national park areas involved with the Duke of Edinburgh award scheme and so forth. To what extent do these issues differ in national park lands and in the areas that he is describing in Bedfordshire and Buckinghamshire? Does national park status make a difference and, if so, how?
      Mr. Lidington: I am no expert on national park land. Some people have argued that the Chilterns or the Cotswolds might be given national park status. I would prefer to avoid that degree of what some people might describe as overmanagement and rely on finding a sensible and pragmatic balance between the differing interests of agriculture, forestry, public recreation and conservation in the way that I have sought to describe.
      Two local issues have given me cause for great concern about clause 92(3)(b). The first is my knowledge of the efforts being made by the Berkshire, Buckinghamshire and Oxfordshire Naturalists Trust to establish a network of nature reserves throughout the Chilterns to try to bring back some of the flora and fauna that have been lost as a result of poor stewardship during previous decades of this century. The people most closely concerned with those projects have told me that it is no good relying on a tiny network or series of oases of nature reserves, from which we exclude the public altogether and expecting that plants and animals will thrive in those isolated colonies. Instead, they argue, we need to link those oases through hedgerows and set-aside land which is responsibly managed in the interests of conservation. The creation of those links between nature reserves, in the traditional sense, could be put at risk by the amendment.
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      My second cause for concern locally derives from the ambitious project under way in the Chilterns—due in part to the great generosity of my constituent Mr. John Paul Getty—to reintroduce the red kite back into England. You will know, Sir Geoffrey, that the red kite is a bird of prey which, through persecution, had been confined to a small area of mid-Wales around Plynlimon, but which can now be seen by drivers along the M40, thanks to a sensible programme of conservation and management.
      The hon. Member for Darlington (Mr. Milburn), contributing from the Opposition Front Bench, referred to the fact that it was difficult to obtain details of every site listed under the various regulations described in clause 92(3).
      Mr. Tipping: I hesitate to correct the hon. Gentleman. However, the sites that we said the public had difficulty in finding were not those to which he refers, but those which have conditional exemption from inheritance tax to allow greater public access. I do not think that the hon. Gentleman has been following the debate closely enough.
      Mr. Lidington: My point is that in the interests of good conservation—this was certainly true in the case of the red kite—it is often important to keep the location of specific sites secret so as to ensure that rare species are allowed to breed and thrive without the attentions of bird egg collectors or poachers intervening in that process. I would not want circumstances to arise in which, in order to achieve the desirable objective of greater public access to and enjoyment of our countryside, we allowed intrusions that could severely damage efforts to introduce or restore species to habitats in this country and to ensure that they thrive there.
      I said earlier that I wanted to return to the enabling powers that the clause would give to the Government. I simply note that in clause 92 the proposed section 124C(4) to the Inheritance Tax Act 1984 would enable the Treasury, by order, to
      "amend the list of enactments in subsection (3)".
      It follows that if the Committee were to accept the amendment proposed by the hon. Member for Sherwood we would be putting into law a right of public access—or "reasonable access" in the terms of the amendment—not only in respect of those enactments already listed in proposed section 124C(3), but in respect of any future enactments added to the list by any future statutory instrument introduced at the behest of any future Government. It is a good principle that, whenever possible, we should try to avoid giving too many enabling powers and it is that principle which causes me to have further doubts about the amendment.
      Mr. Nicholas Winterton: The amendment moved very reasonably by the hon. Member for Sherwood (Mr. Tipping) seeks to make inheritance tax agricultural relief for land dedicated under long-term habitat schemes conditional on the public being allowed reasonable access to the land. Does my hon. Friend accept that protecting or improving the environment and creating public access to land are totally different objectives, albeit equally desirable ones? Is that not why there are different arrangements dealing with habitats and with public access to land? I have considerable sympathy with the argument advanced by the hon. Member for Sherwood, but are not

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      the matters relating to habitats and public access that we are debating two very different issues? Will my hon. Friend deal with those two issues?
      The First Deputy Chairman: Order. Before the hon. Member for Aylesbury (Mr. Lidington) deals with those points, I must say that that was a very long intervention.
      Mr. Winterton: And a very relevant one.
      The First Deputy Chairman: Order. Relevant or not, interventions are supposed to be brief and to the point—and that one was neither.
      Mr. Lidington: I am sure that my hon. Friend will try to catch your eye later in the Committee's proceedings, Sir Geoffrey, so that he can develop his important arguments.
      I want to conclude by saying to the hon. Member for Sherwood that, although I understand and have some sympathy with the motives behind his amendment, he has chosen a blunt instrument with which to secure his objective: there are better ways of securing improved public access to our countryside.
      Mr. Jack: This has been an interesting debate, which has shown that Conservative Members have a clear understanding of and a great deal of sensitivity towards the issues relating to the countryside and habitats.
      I want to deal directly with the lines of argument advanced by the hon. Member for Sherwood (Mr. Tipping) when moving his amendment.
      Mr. Robert Ainsworth: Some time ago.
      Mr. Jack: Indeed, it was some time ago. I might be wrong, but I believe that the hon. Member for Sherwood has stirred up the proverbial hornets' nest among Conservative Members.
      First, I want to direct the hon. Gentleman's attention to an important piece of logic relating to his amendment. I would not normally accuse him of being an opportunist, but there is an element of opportunism in the phrasing of his amendment. He has, in his own way, asked for land covered by clause 92 to be subject to an extra requirement in respect of access. As I know from a former ministerial incarnation, the hon. Gentleman takes an interest in countryside and farming matters, so he will understand that we could not have had this debate had it not been for the fact that the Government responded to representations from concerned landowners, who wanted to advance land into various environmental schemes for the general benefit of the people and of the countryside environment, but who would hold back from so doing if we were to leave the law unchanged. Taking into account the inheritance tax factors affecting ordinary farmed land, it is an entirely praiseworthy and meritorious development that we are now moving towards encouraging more land not to be farmed but to be dealt with in an environmentally sensitive way. I therefore hope that the hon. Gentleman will give us some brownie points for our actions in that respect.
      Although clause 92 is fairly narrowly drawn in the areas that have to be exempted from inheritance tax provisions, the debate has alerted us to a wider issue, with
      1030
      which the hon. Gentleman entertained the Committee. The narrow issue is the question whether there should be "reasonable" public access to the types of habitat scheme enunciated in proposed section 124C(3) to the Inheritance Tax Act 1984. What is distressing coming from someone who takes a genuine interest in countryside matters is the fact that the hon. Gentleman has not defined what he means by "reasonable".
      In my former incarnation at the Ministry of Agriculture, Fisheries and Food, I opened one of the first six habitat water fringe schemes. I recall tramping through a meadow adjacent to the Ribble and understanding precisely what was happening in that ecologically finely balanced area as a result of the scheme, which imposed a highly restrictive regime on the farmer concerned. If we had not had a clear definition of the word "reasonable", we might have had large numbers of people, having been alerted to that habitat scheme, tramping across the meadow land and taking away all the advantages of its entering the scheme in the first place. The Committee could not reasonably be asked to support the amendment without the word "reasonable" being more closely defined.
      Sir James Molyneaux: In view of the consensus that has been achieved in the course of this good natured debate, could not the two Front Benches come to an agreement—enter into collusion, if necessary—reinforced by all the rest of us, to ensure that any future Treasury Bench, under whatever management, would underwrite landowners' interests? I am only a window box farmer, but such a measure would cover landowners against public liability claims, which have arisen in my constituency to the extent that one farmer was forced to sell his land because of an alleged injury sustained by a rambler walking across his land. As no insurance company will provide such cover, a future Chancellor of whatever party should undertake to do so, even if it means increasing income tax.
      9 pm
      Mr. Jack: The right hon. Gentleman makes an interesting point, which may be relevant to the general issue of encouraging farmers to offer to put land into habitat schemes that require public access. Those points will no doubt have been noted by my right hon. and learned Friend the Minister of Agriculture, Fisheries and Food, who is responsible for schemes such as the countryside stewardship scheme. I shall draw the right hon. Gentleman's remarks to his attention.
      I have criticised the narrow point of the amendment and shall now trespass a little into other areas. First, however, I refer to the incisive speech by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Clifton—Brown), who made cogent, coherent and knowledgeable representations about this matter before the Finance Bill was published and before the announcement on the issue on Budget day. He spoke on behalf of many concerned landowners in advocating that we follow that measure. I publicly record my appreciation for his lines of argument alerting us to the matter in the first place. In my hon. Friend's knowledgeable speech, he attested to many of the real issues that surround the whole question of reasonable—however one defines that—access to land in the type of habitat scheme that is the subject of the amendment.

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      The hon. Member for Sherwood went wider than the narrow terms of the clause and took us into two important realms, one of which was land that is already the subject of the inheritance tax exemption, but which may be in various forms of habitat scheme. The debate ranged over schemes such as the countryside stewardship scheme, the countryside access scheme, environmentally sensitive areas and the woodland grant scheme, to name but four of the major schemes. If I understood the hon. Gentleman correctly, in moving his amendment in that way, he sought to make the wider demand that, if that land was to continue to enjoy the inheritance tax exemption, as does all other farm land, because of its habitat nature that land, too, should have greater access. He cited the Ramblers Association audit of knowledge about the schemes.
      I do not want to go into areas where I should not go, but it is worth reminding the hon. Gentleman to look carefully at publications on the countryside access scheme, which tell farmers who put their land into that area the ways in which they should make information more widely available. The hon. Gentleman and I have debated before the signposting of information in tourist centres and so on. The best service that I can render the hon. Gentleman and the Committee is to draw to the attention of my ministerial colleagues responsible for policing those schemes some of the deficiencies that have been attested to.
      It was interesting to note the figures that the hon. Member for Sherwood gave. He said that a third of the land was difficult to find. He did not, however, say whether the people trying to find it were experts in map reading and using other aids to locate it. Nor did he entertain us with information on whether the other two thirds was found easily.
      Mr. Tipping: I am conscious that the Financial Secretary had to miss part of the debate. Had he been present, he would have heard me say that at that time the countryside stewardship scheme was administered by the Countryside Commission, and that 20 per cent. of the grid references provided by the Countryside Commission were wrong.
      Mr. Jack: Clearly, that is historic information, but it is important. The point that I am making is that, to join all those other schemes, landowners must fulfil various access requirements, yet under clause 92(3) some other forms of land are particularly sensitive and one would have to be certain about what "reasonable" meant in those contexts.
      Mr. Nicholas Winterton: Will my hon. Friend give way?
      Mr. Jack: I should like to make a little progress, but I shall give way briefly to my hon. Friend.
      Mr. Winterton: Does my hon. Friend agree with the point made by the hon. Member for Sherwood (Mr. Tipping), that all landowners must—I emphasise the word "must"—publicise public access arrangements that are agreed by the appropriate heritage agency working in conjunction with local authorities and other interested
      1032
      parties? Is that not vital to the Government's aims, and does it not work towards what the hon. Member for Sherwood is trying to achieve?
      Mr. Jack: Yes, but I fear that three different issues concerning access have become muddled. My hon. Friend's remark is relevant and correct. In a moment, I shall deal briefly with the third issue, about which the hon. Member for Sherwood had something to say, relating to land that may be farmed.
      In general, if farm land is admitted to environmental schemes, closely defined access requirements are already built into the schemes, so there is no need to embroider them.
      I pay tribute to the perceptive and sympathetic remarks of my hon. Friend the Member for Aylesbury (Mr. Lidington), who drew our attention to the terms of the salient part of clause 92, which is of direct relevance to our discussion.
      The third issue to which the hon. Member for Sherwood drew our attention was those forms of asset—in this case, land—that were the subject of exemption from inheritance tax, in exchange for access, so to speak. I remember that last year the hon. Gentleman debated the subject at length, but I shall not attempt to paraphrase our comments. I undertook to make that information more widely available.
      The hon. Member for Darlington (Mr. Milburn) said in his pugnacious way that members of the public should not have to go ferreting around for that information. I can tell him that the ferrets can go back in the pocket and down the trouser leg: the public have no need to ferret about, because we have taken further action to make the information exceedingly widely available. That is why I asked the hon. Gentleman whether he had read Inland Revenue publication No. 156. I shall furnish him with a copy of that excellent new leaflet, which sets out the broad-brush approach for obtaining information about the land that is on the exempt register.
      I have asked the Inland Revenue to write to all the local authorities that run a library service, giving information about the availability of the Inland Revenue leaflet and providing a poster to publicise our efforts to make more knowledge available about where the land is and how it can be accessed, while maintaining taxpayer confidentiality. We have put the entire register on the Internet, so there is now public as well as private provision for obtaining the information.
      We have addressed all three of the areas of concern identified by the hon. Member for Sherwood. In the light of the information and assurances that I have given him, I hope that he will not press the amendment to a Division.
      Mr. Tipping: The debate has been stimulating and enthusiastic. We have been taken down paths that perhaps we should not have trodden, we have been to faraway fields, and at times the debate almost became a picnic. We have tested your tolerance, Sir Geoffrey.
      Across the Committee, there has been a recognition of the need for a balance between protecting the habitat and allowing public access. That is a great challenge. I have set out my position in the Access to the Countryside Bill, which is before the House. It deals with many of the points made in the Chamber—for example, the notion that access should be allowed only at certain times of the year,

      1033
      the notion of restriction orders, and the notion that access not only is a right, but entails responsibilities. I am particularly interested in the point raised by the right hon. Member for Lagan Valley (Sir J. Molyneaux) about owner liability. I am currently addressing that issue, with a view to including it in a subsequent version of the legislation.
      The Minister called me an opportunist—he was very nice about it—and I confess to that charge. The amendment was intended to provoke debate and discussion. One or two hon. Members said that their interventions would be short, but if their walks are as long as their short interventions, I shall never accompany them.
      I have taken the opportunity to raise issues such as public access to environmentally sensitive areas, countryside access schemes, the countryside stewardship scheme and conditional exemption from inheritance tax. I praised the Financial Secretary earlier in the debate for always listening and taking an interest in such matters. I believe that we shall continue to tread this path. I am conscious that changes have been made, but much more remains to be done.
      The hon. Member for Macclesfield (Mr. Winterton) referred to issues of cost, and he will recall that I identified sources of funding. For example, I mentioned the arable area payments scheme, in which the hon. Member for Cirencester and Tewkesbury (Mr. Clifton-Brown) is also interested. Landowners and farmers receive substantial sums from that source and the hon. Gentleman has advocated capping that expenditure.
      There is general agreement within the Committee that we must balance the people's right to access the countryside against the need to enhance and protect the countryside and lift the landscape. It is a complicated area, and I am delighted that we have had such a stimulating debate. I am glad that the Minister has re-examined the matter, and I shall continue to press him on those issues. Progress has been made, so I beg to ask leave to withdraw the amendment.
      Amendment, by leave, withdrawn.
      Mr. Milburn: I beg to move amendment No. 7, in page 81, line 46, at end add—
      '(7) This section shall only apply to land which has been acquired for bona fide reasons and shall not apply to land which has been acquired as part of a scheme or arrangement of which the main purpose, or one of the main purposes, is the obtaining of a tax advantage.'.
      The amendment has one simple, but significant, purpose: to protect the taxpayer and the Inland Revenue from any possibility of abuse as a result of the proposal in clause 92 to extend inheritance tax relief to land in habitat schemes. The Opposition support the principle behind the habitat scheme: promoting nature conservation is clearly a laudable objective, particularly as it applies to sites of special environmental significance. We would like to see the common agricultural policy reformed in such a way that it focuses resources still further on those positive environmental objectives.
      We are equally concerned about protecting family farms. Those family businesses provide a key focus for stability and continuity in rural communities—they are often the backbone of our countryside. It is clearly an important Government objective to try to avoid the break-up of working farms of that sort. The extension of agricultural property relief under the IHT rules in the 1992
      1034
      Budget from 50 per cent. to 100 per cent. was presented as a means of doing just that. Nowadays, exemption from inheritance tax can be gained after only two years of owner occupation of a working farm. Two years ago, provision for 100 per cent. relief was also extended to tenanted farms. According to the Budget press release of 26 November 1996, the Government's—
      Mr. Clifton-Brown: There is a slight inaccuracy in what the hon. Gentleman has just said. The exemption for tenanted farms was only that granted in the recent tenancy legislation for farm business tenancies, not for all tenanted farms.
      9.15 pm
      Mr. Milburn: That is right. It is 100 per cent. relief after seven years rather than two for owner-occupied farms.
      According to the press release of 26 November, the Government's new intention, which is enshrined in clause 92, is to extend relief from inheritance tax to land managed under the terms of the habitat scheme. The release tells us that the Revenue has received legal advice that as the law stands such land would not qualify for such relief. Perhaps the Minister will explain how that situation arose. He alluded to representations that have been made by landowners. I hope that he will tell us how many representations were made. He might allude as well to the legal advice that he has received that has necessitated the clause that is before us.
      I hope also that the Minister will indicate the costs of extending relief in the way that is set out in the clause. That is important for two reasons. First, those with land covered by the habitat scheme are already receiving a public benefit. Expenditure on the scheme is projected to rise to almost £2 million by the end of the decade. Extending the IHT relief to land in habitat schemes represents a double benefit at public expense so it is doubly important that the taxpayers' interests are properly protected from abuse.
      Secondly, as there is now a substantial body of evidence to suggest that agriculture property relief is being systematically abused for tax avoidance purposes, our amendment aims to prevent such abuse so that the extension of APR is available only to those who have a genuine desire to farm and to protect the countryside. It would prevent the unscrupulous from hiding behind a laudable environmental objective purely for the purpose of erecting a convenient tax shelter.
      Such abuse has become all too common. The Financial Times of 14 May 1994 contained an article entitled
      "Tax farming: an old crop is revived".
      It outlined how tax avoidance under IHT rules could not be simpler for those who could afford it. It is an interesting article. It referred to the current market for land and the fact that there were only a few farms available for sale at that time, partly because of the influx of British and foreign buyers. It reads:
      "British buyers now include the rich, eager to take advantage of the new inheritance tax rules. 'Sell a house in the English home counties', says Christopher Wilson of buying agent Wilson and Wilson, 'and put the proceeds into a farm with vacant possession. Work it for two years, perhaps by contracting out, and IHT will vanish.' His firm and accountants Grant Thornton have formed a `city landowners service' to handle that sort of work."

      1035
      In other words, those who are wealthy enough can enjoy a 40 per cent. tax windfall simply by parking some cash in farmland for two years.
      The article went on to suggest that the changes in IHT rules are distorting the market for farming land. There is some evidence to suggest that the very people who the IHT rules were designed to protect—small working family farmers—are losing out as wealthy buyers from home and abroad buy up land for tax avoidance purposes.
      I do not regularly surf the Internet, but thankfully we on the Opposition Benches have one or two advisers who do, and they came across an interesting article—if that is the right word for it—just two days ago, from Strutt and Parker. It says:
      "Since the beginning of 1996, Strutt and Parker have sold and purchased in excess of £100 million worth of farms and estates throughout the United Kingdom."
      The article talks about the upturn in the market for land and farms. It goes on to say:
      "However, 1996 saw the re-emergence of a substantial amount of non-farming money which purchasers were looking to invest in farmland. Many of these investors were tax driven, taking advantage of rollover relief and reinvestment relief. Others were looking to acquire agricultural property for Inheritance Tax purposes."
      Indeed, the article says that, such are the distortions in the market, towards the end of 1992 there was a lack of farms available for sale.
      The Sunday Times of 3 September 1995, commenting on the 1995 inheritance tax relief rules, quotes Mr. Adrian Baird, the Country Landowners Association chief tax adviser, as saying:
      "we are worried that exploitation of the legislation for tax avoidance, particularly by outside people buying into land, will bring it into disrepute."
      The article, which is entitled "Rich landowners to reap millions in tax changes" goes on to say that the paper has surveyed many of the country's biggest landowners and has looked at the way in which they plan to benefit from the new rules.
      "Some,"—
      it says
      "are interested,"—
      purely
      "because it allows the perfectly legitimate avoidance of inheritance tax, others because it offers ways of giving tenant farmers shorter leases."
      Indeed, the article quotes several examples. The Marquess of Normanby's 60,000-acre estate in Yorkshire is one such example. James Jackson, the Duke of Northumberland's agent, is quoted as saying that he was considering "one or two wheezes" relating to the new legislation on the Duke's 90,000-acre estate.
      The reality is that it is possible to drive a coach and horses through the existing inheritance tax rules. Of course there should be proper protection for people who are genuinely in the business of farming, but the current loopholes in the inheritance tax rules make it all too often little more than a tax shelter for the very wealthiest, at the public's expense.
      Inheritance tax, particularly agricultural property relief, is like manna from Heaven for the tax planning industry. I took the opportunity today to look at Tally's Taxfinder,
      1036
      the Bible on these matters, and I came across the following passage on page 23 of the 1993–94 tax planning guide, volume I, which says that the remarkable new regime introduced by the Finance Act 1992
      "is potentially there also for the benefit of others, since it provides the opportunity almost to 'buy' freedom from inheritance tax by purchasing an appropriate category of property and owning it for two years. It is even possible,"—
      it says
      "to do so through the purchase of a USM portfolio. which would require no participation in the business or the need to farm."
      It is precisely such loopholes that make tax avoidance so easy, and which are now being extended in clause 92. Indeed, extending them without proper safeguards, as the Bill as drafted does, removes the inconvenience of even having to farm the land to make the gain. Instead, the land can just be sat on for two years before 100 per cent. inheritance tax relief comes into effect.
      Mr. Home Robertson: It is worse than that, because not only can the land just be sat on to qualify for the tax breaks to which my hon. Friend referred but even more money can be paid in from the taxpayer by setting the land aside, and getting paid by the Ministry of Agriculture, Fisheries and Food for doing nothing.
      Mr. Milburn: I thank my hon. Friend for his intervention. He brings a certain knowledge to our debate—not knowledge of tax avoidance, of course, but knowledge of rural communities and the agriculture industry. Perhaps I have been too generous in regard to those matters.
      Without our amendment, the possibility of abuse and tax avoidance will be extended. The amendment would empower the Inland Revenue to deny inheritance tax relief to those owning land in habitat schemes when it was clear that the purpose was tax avoidance. We want relief to focus on those with genuine environmental objectives, not on those who shelter behind them merely to gain a tax advantage. The public should not foot the bill for the wealthiest, who are using lax laws to reduce their liability.
      At a time when ordinary families are paying more tax than they were at the last general election, the Government should stand up for the decent, hard-working majority of taxpayers. Those who are experiencing the biggest tax hike in peacetime history, following 22 separate tax rises, are entitled to demand a fair and efficient tax system; but the current inheritance tax rules ensure that the system is not fair and efficient. In many respects, inheritance tax has become a purely voluntary tax, and clause 92 would extend that spirit of voluntarism to land covered by habitat schemes.
      The loopholes in the inheritance tax system mean that many of the wealthiest members of society get off scot free, or at least mostly tax free. The latest figures for 1993–94 from the Inland Revenue's 1996 statistics—a riveting read, as the Government Whip will no doubt appreciate—show that there were only 1,478 cases of inheritance tax being paid on agricultural property, out of a total of 17,363 paying any form of inheritance tax. That represents just 6 per cent. of the total number of estates notified for probate.
      The Government's argument seems to be that, as the inheritance tax system that they created is so riddled with anomalies and loopholes, the answer is not to reform it

      1037
      but to extend it on the way to abolishing it. It is less a case of "If it's broke, fix it" than a case of "If it's broke, axe it"—and, as I have said, the beneficiaries of such an approach would be the wealthiest members of society. If the Prime Minister's objective—abolition of inheritance tax—were fulfilled, the wealthiest people would reap the biggest rewards. At the very top, each of the 201 families inheriting estates valued at more than £2 million would gain nearly £1 million. Such a tax cut would hand out millions to people who are already multi-millionaires.
      I do not believe that abolishing inheritance tax, or extending it in the way suggested in clause 92, will do anything to create an enterprise economy in which merit is the crucial determinant of success. If the Conservatives got away with their objective, it would merely make the wealthy even wealthier. If there is room for tax cuts in the future, they should be used to help the hard-working majority. Opposition Members want to reform the inheritance tax system rather than abolish it, and the amendment is a step in that direction.
      It is of course right that the inheritance tax system does not penalise people on middle incomes, whose property values may rise over time, which is why raising inheritance tax thresholds—
      The Chairman of Ways and Means (Mr. Michael Morris): The hon. Gentleman appears to be drifting into a general discussion on inheritance tax. The amendment—as he knows, because he moved it—deals specifically with inheritance tax and habitat schemes.
      Mr. Milburn: I was about to mention two matters. First, raising inheritance tax thresholds may be a desirable reform. Secondly, however, the system must be safeguarded against abuse if it is to have integrity and command public confidence. Amendment No. 7 intends to achieve precisely that objective, which is why it is so important.
      We want family businesses and farms to be protected. Opposition Members want to prevent the breaking up of bona fide businesses and farms and the tax system to work fairly and efficiently. The extension of inheritance tax proposed under clause 92 should not be made unless taxpayers' interests are properly safeguarded. Our amendment would accomplish that goal. It would prevent tax avoidance but offer help to genuine farmers and to those interested in preserving the very best of the British countryside.
      I find it hard to believe that an argument can be made against such a motive or that a convincing argument can be made against our amendment. In his speech, no doubt the Minister will prove me wrong. In the meantime, however, I commend our amendment to the Committee.
      9.30 pm
      Mr. Clifton-Brown: My hon. Friend the Financial Secretary to the Treasury kindly mentioned that I made representations to him on clause 92's exemption for habitat schemes. That tribute should have gone to my constituent, Mr. Michael Fitzgerald, because he brought the matter to my attention. Thereafter I brought the matter to the attention of my right hon. Friend.
      I think that it would be helpful if I explained to the House the origin of clause 92 and the need for amendment No. 7. I am indebted to the Country Landowners
      1038
      Association, of which I am a member, for providing the technical note which I shall use. It is important to understand how the issue arose, and the note at least partially answers the questions asked by the hon. Member for Darlington (Mr. Milburn) about why it was necessary to include clause 92 in the Bill.
      Under section 117 of the Inheritance Tax Act 1984, as amended, agricultural property can qualify for inheritance tax agricultural property relief only if the property is
      "occupied for the purposes of agriculture"
      during the required period. As the hon. Member for Darlington made clear, in the case of owner occupation the required period is two years immediately prior to any transfer of the property, and in the case of occupation by someone other than the owner, the required period is seven years immediately prior to any transfer.
      When set-aside schemes were first introduced, owners who elected the fallow option were considered to remain in occupation of their land for purposes of agriculture because the scheme required the landowner to maintain the property in a fit state for agricultural production. The Revenue's view was that, although minimum maintenance was required under the scheme, the requirement provided sufficient indication of intent, as suggested by the word "purposes".
      The 20-year habitat scheme, the inheritance tax exemption and amendment No. 7—all of which the Committee has spent so much time discussing today—push so far forward any prospect of future agricultural use that the requirement to maintain the land in a fit state for future agricultural use would not make sense. Thus, there is no hook on which the Revenue can justifiably hang a proper belief that such land remains in agricultural application.
      When I brought the matter to the attention of my hon. Friend the Financial Secretary to the Treasury, he took legal advice from the Revenue—perhaps also from elsewhere—and its view was precisely the one which I have paraphrased. However, he considered—I am grateful to him for this—that a charge to inheritance tax under the habitat schemes would deter people wishing to enter those schemes. Indeed, my constituent, Mr. Fitzgerald, who entered 212 hectares in the scheme, would not have done so had it not been for clause 92. I am therefore grateful that my hon. Friend has seen fit to remedy the situation in that way.
      The amendment exemplifies some of the worst fears of farmers and landowners. The hon. Member for Darlington made it clear that should the Opposition get anywhere near power, they will not only introduce changes such as that which they have proposed this evening but will seek to extend the scope of inheritance tax. One of the easiest ways to extend its scope would be to abolish what are known as potentially exempt transfers.
      Anyone who keeps an asset for more than seven years is exempt from inheritance tax, but I believe that one of the first things that the Opposition would do is abolish that relief. We should then have a potential wealth tax in the making—who knows, perhaps the Opposition are proposing a wealth tax. The Opposition have ruled out some personal taxation options but that means that others will have to be considered. This particular exemption relating to habitat schemes—
      The Chairman: Order. The hon. Gentleman knows when he is guilty of straying out of order.
      Mr. Clifton-Brown: To return to the amendment, I must say that it strikes one as a little spiteful. We are trying to improve the environment. If someone has the foresight to buy a piece of land, and probably pays a great deal of money for it, he is by nature altruistic and wants to improve the general habitat. Does it really matter if, at some stage in the future, he might get away without paying a little bit of tax? The amendment is simply jealousy of the highest order and shows that the Opposition are still unreconstructed when it comes to tax. Jealousy is still their motive.
      The proposed new provision contained in clause 92, which would give exemption from inheritance tax, is a preliminary to our abolishing inheritance tax. The Opposition spokesman made it clear that his philosophy is to extend it. Tonight's debate could not reveal more sharply the philosophical difference between us when it comes to raising taxation: the Opposition want to increase taxes in rural areas and destroy rural employment. Anyone thinking about voting for the Opposition at the next election should consider that point very carefully.
      Mr. Jon Trickett: Having listened carefully to my hon. Friend the Member for Darlington (Mr. Milburn), I have to say that I detected none of the implications referred to by the hon. Member for Cirencester and Tewkesbury (Mr. Clifton-Brown). I did, however, note that the point of the hon. Gentleman's speech was precisely what the amendment is intended to prevent—the possibility that a further loophole may be opened in the inheritance tax legislation and rules.
      In considering the matter, we are entitled to examine the broader context in which clause 92 is being proposed. Part of that context is formed by clause 91, which raises the threshold for the payment of inheritance tax from £200,000 to £215,000. That is £10,000 more than is necessary for the usual indexation, and it will cost £16 million a year in lost revenue to the Exchequer. Adding that to the previous year's huge increase, the threshold for inheritance tax has risen by 40 per cent. in two years, from £154,000 to the proposed figure of £215,000. Inflation is running at about 2.5 per cent. That threshold increase vastly outstrips the retail prices index and house price inflation.
      Conservative Members have declared an ideological opposition to inheritance tax. This further loophole may be designed to ensure that the tax is eventually abolished. The implications of abolition are substantial. The likely cost would be £1.6 billion—the equivalent of 1p on the standard rate of income tax.
      Given the Government's record and their ideological commitment to the removal of inheritance tax, we are entitled to be suspicious that they may be opening a further loophole in the tax through which millionaires and others could crawl, as happened with the 1992 decision to relieve agricultural properties from inheritance tax. A small industry has developed, advising estates on how to take advantage of that provision. The industry could also feed on clause 92. According to the 1996 Inland Revenue statistics, a large number of the country's wealthiest estates have already found loopholes to avoid inheritance tax.
      The Chairman: Order. The hon. Gentleman must relate his remarks to amendment No. 7.
      Mr. Trickett: Thank you for that advice, Mr. Morris. I shall endeavour to take it.
      1040
      It is clear that a large industry of tax advisers, lawyers and others has developed around the specific function of advising estates on how best to exploit any loopholes that emerge. Our amendment was drafted to offer the Government assistance—they are obviously in need of it—in avoiding the possibility of the clause becoming an additional loophole.
      Even without clause 91, there has been a decline in the inheritance tax base, as the Inland Revenue figures show. There has been a 2.5 per cent. reduction in the past two years in the number of estates paying inheritance tax. We need to ensure that a potential new loophole is not opened. The amendment would help to do that.
      Mr. Clifton-Brown: Do the hon. Gentleman or any of his hon. Friends have any idea why reliefs were given to agricultural properties? It was because agriculture is a long-term business with relatively low long-term returns.
      Mr. Trickett: I understand the hon. Gentleman's point. That may have been the intention, but, as civil servants in ministerial offices who draft legislation often do not realise, there is a wise world out there, full of people who do nothing but try to find ways of exploiting loopholes. The Sunday Times said that the Marquis of Bath, whose wealth is estimated at £40 million, was investigating the loophole. Our amendment is drafted to secure the objectives that the Government claim to want to achieve. We feel that there is a danger in the drafting of the clause that a further loophole might emerge.
      I thank you for your tolerance, Mr. Morris. I suppose that I have stretched the point slightly, but I have attempted to address the issues behind the amendment and the logic of our proposals.
      9.45 pm
      Mr. Jack: This has been an interesting debate. Before I deal with the substance of hon. Members' remarks, I hope that, with your indulgence, Mr. Morris, I can deal with the detail of the points relating to clause 92 and something that I said in previous exchanges.
      I did not in any way want knowingly to mislead the hon. Member for Sherwood when I said to him that we have made the register more widely available. I should be absolutely clear: the path that is more widely available in the ways that I described—through libraries and the Internet—relates to works of art. Particular provisions relate to the requirements that those who qualify for exemption for land should, with the help of heritage advisory agencies working with local authorities, draw up a list of such information. In following up the points, I satisfied myself—indeed, the hon. Member for Edinburgh, Central (Mr. Darling) probed me by means of parliamentary questions on how we audit the fact that such matters are properly adhered to—about that information, but in the light of the further comments of the hon. Member for Sherwood, I shall obviously look again at the matter.
      Mr. Tipping: I am very grateful for the Minister's comments. If works of art can go on the Internet and not breach taxpayer confidentiality, I find it difficult to understand why the issue of land cannot be considered again.
      Mr. Jack: I am sure that local authorities, for example, that keep lists of land that is available for public access

      1041
      will have taken careful note of what the hon. Gentleman has said. He will understand that those items of land are included in more general lists of land where access is available precisely for the reasons of taxpayer confidentiality. I am grateful for his comments.
      I turn specifically to the content of the amendment. With his considerable knowledge—not only from his direct farming interests—of land law and surveying, my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Clifton-Brown) made the farming background to the measure very clear. He went to the heart of why we are debating the item. Indeed, the hon. Member for Darlington (Mr. Milburn) asked me specifically where the representations came from, from whom we had heard, and so on, and made a number of points about legal advice.
      This is one of the rare occasions on which all Members of Parliament say to people, "Why don't you write in and we will have a look at the matter." This is one of the genuine occasions when a concerned citizen did just that through the good services of his Member of Parliament. As my hon. Friend the Member for Cirencester and Tewkesbury said, the matter was taken up by the Country Landowners Association, and we also received representations from the National Farmers Union. To a certain extent, the matter snowballed, but one could not say that there was a mass lobby of the Treasury on the point.
      Once we had taken legal advice on whether the concerns of those who made representations were real or imaginary, I understood very clearly the importance of ensuring, especially with regard to the narrow range of schemes so affected, that there were not unnecessary barriers to land entering an environmental scheme. Our previous exchanges identified fairly adequately the narrow range of habitat schemes that potentially would have caused somebody an inheritance tax liability—as clause 92 does—as opposed to other environmental schemes which would not. It was right to make the move.
      The reason why the Government said that the proposal's costs were negligible is that under the scheme the land has to come from within the curtilage of an existing farm. The short answer is that if the land had not gone into one of the tightly defined environmental schemes, it would have continued to have been farmed land. If the land had been on an owned farm or on one farmed under the Agricultural Tenancies Act 1995, to which my hon. Friend the Member for Cirencester and Tewkesbury referred, by definition it would have automatically qualified for inheritance tax relief, subject to the conditions to which my hon. Friend accurately attested. By definition, costs cannot therefore be anything other than negligible.
      In terms of this tightly defined scheme, we are talking about relatively small parcels of land. I stated earlier that I had been to see one habitat scheme alongside the River Ribble, and it involved a margin of land alongside a tributary of the river. We are not talking about broad acres, but narrow areas. Other forms of environmental scheme are more extensive in terms of acreage—for example, the environmentally sensitive areas scheme covers something like 10 per cent. of farm land in this country. The narrow scheme that we are discussing does not fall into the same category.
      As we have been invited to consider seriously the amendment, we must look at exactly what it says. At its heart there is a motive test. The hon. Member for
      1042
      Darlington (Mr. Milburn) had clearly done a certain amount of homework, but he did not tell us what kind of motive test he envisaged. If the amendment were passed, it would create considerable uncertainty among those who may have to act upon it. The amendment is flawed in that respect.
      The scheme cannot be deemed to be a vast handout to rich people. I doubt very much that anyone would follow the circuitous route referred to by Opposition Members during their remarks on the amendment. If one followed the logic of the hon. Member for Darlington, one would go out to buy a farm to put a piece of land into a narrow group of environmental schemes to get the inheritance tax relief that one could otherwise have received even if one had not put the land into such a scheme. He went down an extremely tortuous route to try to make his wider point—that inheritance tax relief on agricultural land is, in some way, a vast tax dodge.
      The constituency of the hon. Member for Darlington is surrounded by some of the best farming land in north Yorkshire, and he will know that the countryside can remain almost unchanged for decades and centuries, as families with a long-term interest in the area farm the land. If he ventures out from the urban citadel that is Darlington, he will meet some of the farmers whose families have farmed the land for up to three generations. These are precisely the people to whom the hon. Gentleman referred in his opening remarks, when he said that we must maintain the fabric of the community, and particularly family farms. These are the people who, by and large, form the farming communities in this country.
      The hon. Member for Darlington also asked what would happen if someone bought a farm to get the advantages of clause 92, but then simply "sat on the land" and allowed it to rot. He asked whether such a person would still qualify, and that is a serious point. This is where the two-year rule to which he referred is used. In judging whether the farm is a working farm, the Inland Revenue will look at the farm's accounts to see if proper business has been carried out. If it turns out that the farmer has simply sat on his backside and done nothing, the accounts would quickly start to show that it was not a properly farmed piece of land, and it would not—by definition—qualify for the types of relief about which we have been talking.
      I must remind the hon. Member for Darlington that the two-year test in terms of owner-occupation—introduced to establish whether the land acquisition was merely a passing fancy or a genuine attempt at farming—was a definition borrowed from the capital transfer tax regime that a previous Labour Administration introduced. We merely carried forward the test into our legislation, and I hope that he will agree that there is some sense in that. I hope also that he will accept our assurances about the way in which the Inland Revenue checks to make certain that the land is being properly farmed. If it is being properly farmed, the hon. Gentleman—from his earlier comments—can have no objection to the inheritance tax provision being applied. That is another reason why the amendment is entirely unnecessary.
      The hon. Gentleman gave the Committee the impression, perhaps inadvertently, that all farm land was owned by some vast group of rich people using it simply as a means of tax avoidance—no, I do him a disservice, because he mentioned family farms, and I must not mislead the Committee about that, although he did give

      1043
      that impression in his later remarks. He may be interested to know that the majority—more than 70 per cent.—of estates in receipt of relief are worth less than £500,000, and 90 per cent. less than £1 million. Considering that agricultural land prices might be £2,000 to £3,000 per acre, we are hardly talking about especially large farms.
      We are talking about precisely the group of farmers that the hon. Gentleman said should receive assistance, to avoid having the family farm broken up through the inheritance tax mechanism. I could not stand here and say that some people may not in the past have bought a farm with tax in the back of their mind, but the evidence that I put before the Committee this evening showed that proper working farmers gain the advantage of the provision.
      On habitat land, we are not talking about fly-by-night merchants. The habitat schemes require management undertakings for up to 20 years and if people did not do what they were supposed to—if they were to withdraw from a scheme before its end, for example—they would face penalties. The schemes are properly organised, managed and run.
      There has been a consensus across the Committee this evening that we want such environmental provision for land; if there was a barrier through inheritance tax, we have removed it in the clause. The amendment is therefore not necessary and I invite the Committee to reject it if it is pressed to a vote.
      Mr. Milburn: This has been an illuminating debate. I am especially grateful to my hon. Friend the Member for Hemsworth (Mr. Trickett) for his perspicacious probing of the Government's intentions on inheritance tax.
      I remind the Committee of the intention behind the amendment: to stop abuse of the tax system. It is designed specifically to prevent the buying up of farm land—in this case, land set aside for conservation purposes—as a cover for tax avoidance. It would empower the courts to test whether the buying up of farm land designated under a habitat scheme was for genuine purposes or for tax avoidance.
      The amendment has three aims: to protect genuine farms, and especially small family-run farms, from being broken up; to encourage more farmers actively to engage in efforts to preserve the best of the countryside; and to root out deliberate tax avoidance. We have heard how the current inheritance tax rules, which are being extended in the clause, are wide open to such abuse. The system effectively allows the very wealthiest to make a tax killing simply by parking cash for two years in farm land. That does nothing to encourage family farms and everything to encourage tax avoidance.
      I would have thought that a responsible Government would want to take a tough stance on tax avoidance. After all, in the Budget the Government declared war on tax loopholes. I am afraid that once more dogma is standing in the way of reason. The Minister has refused to give the Committee an assurance that tax avoidance will be clamped down on; instead, he has stood up once again for the vested interests of those who can make huge tax gains at the public's expense, simply because of their huge wealth. He has stood up for the few against the many; for unfairness against fairness; and for irresponsibility in tax
      1044
      matters against responsibility. For that reason, the Minister's approach leaves us with no alternative but to test the opinion of the Committee.
      Question put, That the amendment be made:—
      The Committee divided: Ayes 263, Noes 300.

      Division No. 49]

      [9.59 pm

      AYES

      Abbott, Ms Diane

      Davis, Terry (B'ham Hodge H)

      Adams, Mrs Irene

      Denham, John

      Ainger, Nick

      Dewar, Donald

      Ainsworth, Robert (Cov'try NE)

      Dixon, Don

      Allen, Graham

      Dobson, Frank

      Anderson, Donald (Swansea E)

      Donohoe, Brian H

      Anderson, Ms Janet (Ros'dale)

      Dowd, Jim

      Armstrong, Ms Hilary

      Eastham, Ken

      Ashdown, Paddy

      Ennis, Jeff

      Ashton, Joseph

      Etherington, Bill

      Austin-Walker, John

      Evans, John (St Helens N)

      Banks, Tony (Newham NW)

      Ewing, Mrs Margaret

      Barnes, Harry

      Fatchett, Derek

      Barron, Kevin

      Faulds, Andrew

      Battle, John

      Fied, Frank (Birkenhead)

      Bayley, Hugh

      Fisher, Mark

      Beckett, Mrs Margaret

      Flynn, Paul

      Beggs, Roy

      Forsythe, Clifford (S Antrim)

      Beith, A J

      Foster, Derek

      Bell, Stuart

      Foster, Don (Bath)

      Bennett, Andrew F

      Foulkes, George

      Benton, Joe

      Fraser, John

      Bermingham, Gerald

      Fyfe, Mrs Maria

      Berry, Roger

      Gapes, Mike

      Betts, Clive

      Garrett, John

      Blunkett, David

      George, Bruce

      Boateng, Paul

      Gerrard, Neil

      Bradley, Keith

      Gilbert, Dr John

      Bray, Dr Jeremy

      Godman, Dr Norman A

      Brown, Gordon (Dunfermline E)

      Godsiff, Roger

      Brown, Nicholas (Newcastle E)

      Golding, Mrs Llin

      Bruce, Malcolm (Gordon)

      Gordon, Ms Mildred

      Burden, Richard

      Graham, Thomas

      Byers, Stephen

      Grant, Bernie (Tottenham)

      Callaghan, Jim

      Griffiths, Nigel (Edinburgh S)

      Campbell, Mrs Anne (C'bridge)

      Griffiths, Win (Bridgend)

      Campbell, Menzies (Fife NE)

      Grocott, Bruce

      Campbell, Ronnie (Blyth V)

      Gunnell, John

      Campbell-Savours, D N

      Hain, Peter

      Canavan, Dennis

      Hall, Mike

      Cann, Jamie

      Hardy, Peter

      Carlile, Alex (Montgomery)

      Harman, Ms Harriet

      Chisholm, Malcolm

      Harvey, Nick

      Clapham, Michael

      Hattersley, Roy

      Clark, Dr David (S Shields)

      Hill, Keith (Streatham)

      Clarke, Eric (Midlothian)

      Hinchliffe, David

      Clarke, Tom (Monklands W)

      Hodge, Ms Margaret

      Clelland, David

      Hoey, Kate

      Clwyd, Mrs Ann

      Hogg, Norman (Cumbernauld)

      Coffey, Ms Ann

      Home Robertson, John

      Cohen, Harry

      Hood, Jimmy

      Cook, Frank (Stockton N)

      Hoon, Geoffrey

      Corbyn, Jeremy

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

      Corston, Ms Jean

      Howarth, George (Knowsley N)

      Cousins, Jim

      Howells, Dr Kim

      Cox, Tom

      Hoyle, Doug

      Cummings, John

      Hughes, Robert (Ab'd'n N)

      Cunliffe, Lawrence

      Hughes, Roy (Newport E)

      Cunningham, Jim (Cov'try SE)

      Hume, John

      Cunningham, Ms R (Perth Kinross)

      Hutton, John

      Dalyell, Tam

      Illsley, Eric

      Darling, Alistair

      Jackson, Ms Glenda (Hampst'd)

      Davies, Bryan (Oldham C)

      Jackson, Mrs Helen (Hillsborough)

      Davies, Denzil (Llanelli)

      Jamieson, David

      Davies, Ron (Caerphilly)

      Janner, Greville

      1045

      Jenkins, Brian D (SE Staffs)

      Prescott, John

      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, Nigel (Cheltenham)

      Radice, Giles

      Jowell, Ms Tessa

      Randall, Stuart

      Keen, Alan

      Raynsford, Nick

      Kennedy, Charles (Ross C & S)

      Reid, Dr John

      Kennedy, Mrs Jane (Broadgreen)

      Rendel, David

      Khabra, Piara S

      Robinson, Geoffrey (Cov'try NW)

      Kilfoyle, Peter

      Rogers, Allan

      Kirkwood, Archy

      Rooker, Jeff

      Lestor, Miss Joan (Eccles)

      Rooney, Terry

      Lewis, Terry

      Ross, Ernie (Dundee W)

      Litherland, Robert

      Rowlands, Ted

      Livingstone, Ken

      Ruddock, Ms Joan

      Lloyd, Tony (Stretf'd)

      Salmond, Alex

      Llwyd, Elfyn

      Sedgemore, Brian

      Loyden, Eddie

      Sheerman, Barry

      McAllion, John

      Sheldon, Robert

      McAvoy, Thomas

      Shore, Peter

      McCartney,Ian (Makerf'ld)

      Short, Clare

      Macdonald, Calum

      Simpson, Alan

      McFall, John

      Skinner, Dennis

      McKelvey, William

      Smith, Andrew (Oxford E)

      Mackinlay, Andrew

      Smith, Chris (Islington S)

      McLeish, Henry

      Smith, Llew (Blaenau Gwent)

      Maclennan, Robert

      Smyth, Rev Martin (Belfast S)

      McMaster, Gordon

      Soley, Clive

      McNamara, Kevin

      Spellar, John

      MacShane, Denis

      Squire, Ms R (Dunfermline W)

      McWilliam, John

      Steel, Sir David

      Maddock, Mrs Diana

      Steinberg, Gerry

      Maginnis, Ken

      Stevenson, George

      Marshall, David (Shettleston)

      Stott, Roger

      Marshall, Jim (Leicester S)

      Strang, Dr Gavin

      Straw, Jack

      Martin, Michael J (Springburn)

      Sutcliffe, Gerry

      Martlew, Eric

      Taylor, Mrs Ann (Dewsbury)

      Maxton, John

      Taylor, Matthew (Truro)

      Meacher, Michael

      Thompson, Jack (Wansbeck)

      Meale, Alan

      Thurnham, Peter

      Michael, Alun

      Timms, Stephen

      Michie, Bill (Shef'ld Heeley)

      Tipping, Paddy

      Milburn, Alan

      Touhig, Don

      Miller, Andrew

      Trickett Jon

      Mitchell, Austin (Gt Grimsby)

      Turner, Dennis

      Molyneaux, Sir James

      Tyler, Paul

      Moonie, Dr Lewis

      Vaz, Keith

      Morgan, Rhodri

      Walker, Sir Harold

      Morley, Elliot

      Wallace, James

      Morris, Ms Estelle (B'ham Yardley)

      Walley, Ms Joan

      Morris, John (Aberavon)

      Wardell, Gareth (Gower)

      Mowlam, Ms Marjorie

      Wareing, Robert N

      Mudie, George

      Watson, Mike

      Mullin, Chris

      Welsh, Andrew

      Murphy, Paul

      Wigley, Dafydd

      Oakes, Gordon

      Williams, Alan (Swansea W)

      O'Brien, Mike (N Warks)

      Williams, Alan W (Carmarthen)

      O'Brien, William (Normanton)

      Wilson, Brian

      O'Hara, Edward

      Winnick, David

      Orme, Stanley

      Wise, Mrs Audrey

      Pearson, Ian

      Worthington, Tony

      Pickthall, Colin

      Wray, Jimmy

      Pike, Peter L

      Wright, Dr Tony

      Pope, Greg

      Powell, Sir Raymond (Ogmore)

      Tellers for the Ayes:

      Prentice, Mrs B (Lewisham E)

      Mr. Kevin Hughes and

      Prentice, Gordon (Pendle)

      Ms Angela Eagle.

      NOES

      Ainsworth, Peter (E Surrey)

      Ancram, Michael

      Aitken, Jonathan

      Arbuthnot, James

      Alexander, Richard

      Arnold, Jacques (Gravesham)

      Alison, Michael (Selby)

      Ashby, David

      Allason, Rupert (Torbay)

      Atkins, Robert

      Amess, David

      Atkinson, Peter (Hexham)

      1046

      Baker, Kenneth (Mole V)

      Forman, Nigel

      Baldry, Tony

      Forsyth, Michael (Stirling)

      Banks, Matthew (Southport)

      Forth, Eric

      Banks, Robert (Harrogate)

      Fowler, Sir Norman

      Bates, Michael

      Fox, Dr Liam (Woodspring)

      Batiste, Spencer

      Freeman, Roger

      Bellingham, Henry

      French, Douglas

      Bendall, Vivian

      Fry, Sir Peter

      Beresford, Sir Paul

      Gale, Roger

      Biffen, John

      Gallie, Phil

      Body, Sir Richard

      Gardiner, Sir George

      Bonsor, Sir Nicholas

      Garel-Jones, Tristan

      Booth, Hartley

      Garnier, Edward

      Boswell, Tim

      Gill, Christopher

      Bottomley, Peter (Eltham)

      Gillan, Mrs Cheryl

      Bottomley, Mrs Virginia

      Goodlad, Alastair

      Bowden, Sir Andrew

      Gorman, Mrs Teresa

      Bowis, John

      Gorst, Sir John

      Boyson, Sir Rhodes

      Grant, Sir Anthony (SW Cambs)

      Brandreth, Gyles

      Greenway, Harry (Ealing N)

      Brazier, Julian

      Greenway, John (Ryedale)

      Bright, Sir Graham

      Gummer, John

      Brooke, Peter

      Hague, William

      Brown, Michael (Brigg Cl'thorpes)

      Hamilton, Sir Archibald

      Browning, Mrs Angela

      Hamilton, Neil (Tatton)

      Bruce, Ian (S Dorset)

      Hampson, Dr Keith

      Budgen, Nicholas

      Hanley, Jeremy

      Burns, Simon

      Hannam, Sir John

      Burt, Alistair

      Hargreaves, Andrew

      Butler, Peter

      Harris, David

      Butterfill, John

      Haselhurst, Sir Alan

      Carlisle, John (Luton N)

      Hawkins, Nick

      Carlisle, Sir Kenneth (Llnc'n)

      Hawksley, Warren

      Carrington, Matthew

      Hayes, Jerry

      Carttiss, Michael

      Heald, Oliver

      Cash, William

      Heathcoat-Amory, David

      Channon, Paul

      Hendry, Charles

      Chapman, Sir Sydney

      Heseltine, Michael

      Churchill, Mr

      Hicks, Sir Robert

      Clappison, James

      Higgins, Sir Terence

      Clarke, Kenneth (Rushciffe)

      Hogg, Douglas (Grantham)

      Clifton-Brown, Geoffrey

      Horam, John

      Coe, Sebastian

      Hordem, Sir Peter

      Colvin, Michael

      Howard, Michael

      Congdon, David

      Howell, David (Guildf'd)

      Conway, Derek

      Howell, Sir Ralph (N Norfolk)

      Coombs, Anthony (Wyre F)

      Hughes, Robert G (Harrow W)

      Cope, Sir John

      Hunt, David (Wirral W)

      Cormack, Sir Patrick

      Hunt, Sir John (Ravensb'ne)

      Couchman, James

      Hunter, Andrew

      Currie, Mrs Edwina

      Hurd, Douglas

      Curry, David

      Jack, Michael

      Davis, David (Boothferry)

      Jackson, Robert (Wantage)

      Day, Stephen

      Jenkin, Bernard (Colchester N)

      Deva, Nirj Joseph

      Jessel, Toby

      Devlin, Tim

      Johnson Smith, Sir Geoffrey

      Dorrell, Stephen

      Jones, Gwilym (Cardiff N)

      Douglas-Hamilton, Lord James

      Jones, Robert B (W Herts)

      Dover, Den

      Jopling, Michael

      Duncan, Alan

      Kellett-Bowman, Dame Elaine

      Duncan Smith, Iain

      Key, Robert

      Dunn, Bob

      King, Tom

      Durant, Sir Anthony

      Kirkhope, Timothy

      Dykes, Hugh

      Knight, Mrs Angela (Erewash)

      Elletson, Harold

      Knight, Greg (Derby N)

      Emery, Sir Peter

      Knight, Dame Jill (Edgbaston)

      Evans, David (Welwyn Hatf'ld)

      Knox, Sir David

      Evans, Jonathan (Brecon)

      Kynoch, George

      Evans, Nigel (Ribble V)

      Lait, Mrs Jacqui

      Evans, Roger (Monmouth)

      Lamont, Norman

      Evennett, David

      Lang, Ian

      Faber, David

      Lawrence, Sir Ivan

      Fabricant, Michael

      Legg, Barry

      Fenner, Dame Peggy

      Leigh, Edward

      Field, Barry (Isle of Wight)

      Lennox-Boyd, Sir Mark

      Fishburn, Dudley

      Lester, Sir Jim (Broxtowe)

      1047

      Lidington, David

      Oppenheim, Phillip

      Lilley, Peter

      Ottaway, Richard

      Lloyd, Sir Peter (Fareham)

      Page, Richard

      Lord, Michael

      Paice, James

      Luff, Peter

      Patnick, Sir Irvine

      Lyell, Sir Nicholas

      Patten, John

      MacGregor, John

      Pattie, Sir Geoffrey

      MacKay, Andrew

      Pawsey, James

      Maclean, David

      Peacock, Mrs Elizabeth

      McLoughlin, Patrick

      Pickles, Eric

      McNair-Wilson, Sir Patrick

      Porter, David

      Madel, Sir David

      Portillo, Michael

      Maitland, Lady Olga

      Powell, William (Corby)

      Major, John

      Rathbone, Tim

      Malone, Gerald

      Redwood, John

      Mans, Keith

      Renton, Tim

      Marland, Paul

      Richards, Rod

      Marlow, Tony

      Riddick, Graham

      Marshall, John (Hendon S)

      Rifkind, Malcolm

      Marshall, Sir Michael (Arundel)

      Robathan, Andrew

      Martin, David (Portsmouth S)

      Roberts, Sir Wyn

      Mawhinney, Dr Brian

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

      Mayhew, Sir Patrick

      Robinson, Mark (Somerton)

      Mellor, David

      Roe, Mrs Marion

      Merchant, Piers

      Rowe, Andrew

      Mitchell, Andrew (Gedling)

      Rumbold, Dame Angela

      Mitchell, Sir David (NW Hants)

      Ryder, Richard

      Moate, Sir Roger

      Sackville, Tom

      Monro, Sir Hector

      Sainsbury, Sir Timothy

      Montgomery, Sir Fergus

      Scott, Sir Nicholas

      Moss, Malcolm

      Shaw, David (Dover)

      Needham, Richard

      Shaw, Sir Giles (Pudsey)

      Nelson, Anthony

      Shephard, Mrs Gillian

      Neubert, Sir Michael

      Shepherd, Sir Colin (Heref'd)

      Newton, Tony

      Shepherd, Richard (Aldridge)

      Nicholls, Patrick

      Shersby, Sir Michael

      Nicholson, David (Taunton)

      Sims, Sir Roger

      Norris, Steve

      Skeet, Sir Trevor

      Onslow, Sir Cranley

      Smith, Sir Dudley (Warwick)

      1048

      Smith, Tim (Beaconsf'ld)

      Tredinnick, David

      Soames, Nicholas

      Trend, Michael

      Speed, Sir Keith

      Trotter, Neville

      Spencer, Sir Derek

      Twinn, Dr Ian

      Spicer, Sir Jim (W Dorset)

      Vaughan, Sir Gerard

      Spicer, Sir Michael (S Worcs)

      Viggers, Peter

      Spink, Dr Robert

      Waldegrave, William

      Spring, Richard

      Walden, George

      Sproat, Iain

      Walker, Bill (N Tayside)

      Squire, Robin (Hornchurch)

      Ward, John

      Stanley, Sir John

      Wardle, Charles (Bexhill)

      Steen, Anthony

      Waterson, Nigel

      Stephen, Michael

      Watts, John

      Stern, Michael

      Wheeler, Sir John

      Stewart, Allan

      Whitney, Sir Raymond

      Streeter, Gary

      Whittingdale, John

      Sumberg, David

      Widdecombe, Miss Ann

      Sweeney, Walter

      Wiggin, Sir Jerry

      Sykes, John

      Wilkinson, John

      Tapsell, Sir Peter

      Willetts, David

      Taylor, Ian (Esher)

      Wilshire, David

      Taylor, John M (Solihull)

      Winterton, Mrs Ann (Congleton)

      Taylor, Sir Teddy

      Winterton, Nicholas (Macclesf'ld)

      Temple-Morris, Peter

      Wolfson, Mark

      Thomason, Roy

      Wood, Timothy

      Thompson, Sir Donald (Calder V)

      Yeo, Tim

      Thompson, Patrick (Norwich N)

      Young, Sir George

      Thornton, Sir Malcolm

      Townend, John (Bridlington)

      Tellers for the Noes:

      Townsend, Sir Cyril (Bexl'yh'th)

      Mr. Roger Knapman and

      Tracey, Richard

      Mr. Bowen Wells.

      Question accordingly negatived.
      Clause 92 ordered to stand part of the Bill.
      To report progress and ask leave to sit again.— [Mr. Brandreth.]
      Committee report progress; to sit again tomorrow.

    Family Mediation Scotland
    Motion made, and Question proposed, That this House do now adjourn.—[Mr. Brandreth.]
    10.17 pm
    Mr. Allan Stewart: I am grateful for the opportunity to raise the important subject of Family Mediation Scotland. I know that my right hon. and learned Friend the Minister of State recognises the importance of the topic, as do Scottish Members of Parliament on both sides of the House, including my hon. Friend the Member for Ayr (Mr. Gallie) and the hon. Member for Moray (Mrs. Ewing) who, I recall, asked me a question on this very topic on 30 March 1994. I see the hon. Member for Edinburgh, Leith (Mr. Chisholm) on the Opposition Front Bench. The hon. Member for Monklands, East (Mrs. Liddell) was courteous enough to apologise to me for being unable to attend because of a particular commitment; I know that she, too, is interested in the subject.
    My right hon. and learned Friend's commitment to Family Mediation Scotland was demonstrated this morning, when he met me at short notice. He has given an extremely positive and speedy response to the representations made to him in respect of grants for Family Mediation Scotland under section 10 of the Social Work (Scotland) Act 1968, and he will no doubt want to bring the House up to date tonight.
    Mrs. Margaret Ewing: I am grateful to the hon. Gentleman, who has always been kind in this context, for giving way. I understand that only six of the 10 services will receive funding. Has the hon. Gentleman any indication of that? We all want the family mediation service to be fully funded at all levels and in each region of Scotland.
    Mr. Stewart: I understand that all the applications have been granted, but I would rather leave the details to my right hon. and learned Friend when he replies to the debate.
    Misunderstandings sometimes arise about what mediation is. It should not be confused with arbitration or marriage counselling. It is a voluntary process in which a trained, skilled mediator enables people to negotiate their own mutually acceptable resolutions to issues arising from separation or divorce, especially concerning the continued parenting of children. The advantages of mediation are clear. Although it must be recognised that it will not always be successful, at the other end of the spectrum it can sometimes save marriages. The major advantages of mediation are that it takes place at an early stage and that the children's interests are a priority of the process.
    Everyone recognises the desirability of resolving problems, if possible, before they reach the courts. That is in the best interests of parents, children and the legal system.
    The Minister of State, Scottish Office (Lord James Douglas-Hamilton): Will my hon. Friend accept, in response to the point raised by the hon. Member for Moray (Mrs. Ewing), that all who applied have received grants?
    Mr. Stewart: I am grateful to my right hon. and learned Friend for confirming my understanding of the situation. He is to be congratulated on his response to the representations made to him.
    1050
    How sad it is to hear a husband or wife say in court, "It should never have come to this." That is recognised in legislation, and the availability of accessible family mediation services is essential to the implementation of part I of the Children (Scotland) Act 1995, which my right hon. and learned Friend so ably piloted through the House. Part I of the Act, which was implemented on 1 November 1996, aims to create a new climate within which children experience parental separation and divorce. It is based on the following principles: first, that parental responsibility and rights in relation to children will not be affected by parental divorce; secondly, that co-operative parenting should be the basis of the relationship with children after divorce; thirdly, that parents should seek to take a non-adversarial approach to parental separation and divorce; and, fourthly, that court is not the appropriate place to resolve disputes in relation to children.
    Family mediation services provide not only opportunities for parents to resolve disputes but potential on-going support for parents in the co-operative parenting which the Act presumes. The Act also imposes specific obligations on the courts to give children an opportunity to express their views and to have them regarded by the court. As from 1 November last, the courts are obliged to make that further inquiry, which may involve sending an appointed person to seek the child's views. Litigation could become more lengthy and costly, but that could be avoided through mediation. It is crucial that services are readily available to ensure that the spirit of the 1995 Act is implemented.
    The Scottish Office is to be congratulated on its early, consistent and sustained support for Family Mediation Scotland through section 10 of the 1968 Act. Funding is available from a variety of other sources—trusts, fees, local authorities and fund-raising by organisations. My right hon. and learned Friend confirmed in his response that applications for continued section 10 funding from Borders, Tayside, Western Isles and Central Scotland have been granted, together with applications for new services in Dumfries and Galloway and in Grampian.
    There has been a growth in all-issues mediation—mediation as one process covering issues related to the children, property and financial issues. There are two possible sources of mediation in Scotland, including all-issues mediation: the services provided by the family mediation service, which is the subject of this Adjournment debate, and the services supplied by solicitor-mediators—people who are solicitors and trained mediators.
    The Scottish Legal Aid Board launched a pilot project in 1995 to pay out to solicitors as an outlay to a solicitor holding a legal aid certificate or as a payment under the legal advice and assistance scheme. I recognise that the pilot project will need to be evaluated. My right hon. and learned Friend will not be able to give such an evaluation this evening, but I hope that he will accept that the present legislative position seems to create a problem in Scotland, as against that south of the border. Under present legislation, the Scottish Legal Aid Board cannot make a block grant to the family mediation service without primary legislation. I am glad to see the hon. Member for Moray nodding in agreement. I understand that, in England, such a grant can be made under the Family Law Act 1996.

    1051
    With regard to the pilot project, there is a question about whether it is right to go down the solicitor-mediator route. The training of solicitors is adversarial: that is their role. I do not criticise them for that, but mediation is an entirely different process.
    A further question concerns the public expenditure implications of the other methods of financing mediation services. I make no criticism of the hourly rate paid to Scottish solicitors, which I believe to be of the order of £80 an hour under the legal aid arrangements. That is about 10 times the sum that mediators are paid by the family mediation service. Legal aid is demand led, and my right hon. and learned Friend will know the problems that demand-led programmes can create. My right hon. and learned Friend will not be able to provide answers tonight to questions about the pilot project because the evaluation has not been completed, but I hope that he agrees that those questions must be considered seriously. I hope that he will agree also to examine the legislative difference between Scotland and England and Wales, as it is clearly creating problems.
    My right hon. and learned Friend's commitment to mediation is extremely well documented and well known. During debate on the recent Children (Scotland) Act 1995, he emphasised that we must put the interests of the child first in this process. I look forward to hearing him respond to the debate tonight. I am happy to give the Floor to my hon. Friend the Member for Ayr (Mr. Gallie), who wishes to make a brief comment.
    Mr. Phil Gallie: My hon. Friend will have noticed in the Scottish press comments by the hon. Member for Cunninghame, North (Mr. Wilson) about my right hon. and learned Friend and his ability to listen and take the message on board. It seems that my hon. Friend has certainly been listened to, and he must be delighted by the way in which the message has been taken on board in this instance.
    10.31 pm
    The Minister of State, Scottish Office (Lord James Douglas-Hamilton): I congratulate my hon. Friend the Member for Eastwood (Mr. Stewart) most warmly on bringing this matter before the House. The presence of my hon. Friend the Member for Ayr (Mr. Gallie) and of the hon. Members for Edinburgh, Leith (Mr. Chisholm) and for Moray (Mrs. Ewing) in the Chamber tonight demonstrates the importance of the subject. In responding to my hon. Friend's speech, I shall try to present our thoughts about the future of family mediation services in Scotland. I will also deal with the future of the organisation, Family Mediation Scotland, which I visited recently.
    My hon. Friend has recalled the origins and development of family mediation in Scotland from the time of the establishment of the first service in Lothian in the early 1980s to the service that is now available in almost every part of Scotland. That is truly a remarkable achievement in a relatively short period. Those who pioneered the service in its early days must be proud—and justifiably so—of that achievement. Those who continue to provide and develop family mediation in Scotland must share that feeling of pride. It has not always
    1052
    been easy for them and they have come through some difficult times, but the sustained growth of a family mediation service in Scotland is a tribute to their determination and perseverance.
    I am pleased that the Scottish Office was able to play a part in the service's development from the very beginning of family mediation in Scotland. We funded the Lothian service from the outset in the early 1980s when it was an innovative pilot project. That project demonstrated the value of mediation, and services began to be established in other parts of Scotland. By the mid-1980s, the headquarters body—Family Mediation Scotland, or the Scottish Advisory and Family Conciliation Service as it was then known—had been set up. Again, I am pleased to say that we have also assisted the headquarters body with central Government grants totalling just under £600,000 over 10 years.
    During the past three years, we have provided support for several local services. We currently support five such services. When combined with the grant paid to the headquarters body, we are currently making available just under £220,000 for family mediation in Scotland. I say "currently" because, as I announced earlier today, from next year we intend to extend our support by some £50,000 in order to introduce a further two local services—Family Mediation Grampian and Family Mediation Dumfries and Galloway. In addition, we shall be able to renew the grants for four services beyond the end of their current funding period. I am sure that that will come as welcome news for those services, as it will for all those in Scotland who are concerned with mediation services.
    Mrs. Ewing: I am delighted to hear that there will be an extension of the service to Grampian. The Minister and I have been in correspondence about the extension over several years. Can he say how many qualified and trained mediators will emerge from the new project? It is not merely a matter of talking to somebody; we need people with qualifications. Will the Minister comment on that?
    Lord James Douglas-Hamilton: I shall be happy to make inquiries and to write to the hon. Lady with the precise detailed facts that she requires.33333333
    As a Government, we believe in marriage and the family as the proper foundation for a civilised and responsible community. For this reason, we propose to offer additional support totalling £50,000 to marriage guidance in Scotland. We believe that this will help to save marriages that still have hope of reconciliation. We shall shortly be advising the individual organisations about this.
    Sadly, a proportion of marriages nevertheless break down. Marital breakdown is a cause of distress, and it is exacerbated when there are children of the marriage. Our policies have generally been designed to ensure fairness to both parties when a marriage breaks down. This underlies the Family Law (Scotland) Act 1985. We have also promoted the need to consider the welfare of the marriage, and this principle is given legal status in part I of the Children (Scotland) Act 1995. It is generally accepted that where a marital breakdown is acrimonious, this is more damaging for the children. We therefore want to minimise the opportunities created by the law for acrimony between the parties.

    1053
    In the 1985 Act we provided that the matrimonial property should be shared fairly between the parties to a divorce. The Act provides that fairness demands equal shares, but the court has a wide discretion to make orders meeting the actual needs of the parties. One of the factors to be taken into account is the burden of caring for children, which may fall more upon one party than upon the other. In the Child Support Act 1991 we removed the issue of child maintenance from the divorce courts. This was another means of reducing the scope of litigiousness between the parties.
    In part I of the Children (Scotland) Act we have created a clear framework for the welfare of the children of a marriage to be the paramount consideration for the court in making orders concerning children. The Act sets out in sections 1 and 2 the responsibilities and rights of a couple as parents. Those responsibilities and rights should normally survive separation and divorce. Each parent is given an active responsibility to promote the child's continued relationship with the other parent. Ideally—this is a most important message—the parties should agree arrangements between themselves for the continued discharge of parental responsibilities and rights.
    Part I of the Children (Scotland) Act embodies the concept of minimum intervention by the court. Only if it appears to be in the interests of the welfare of the child should the court intervene. This reinforces the fact that the burden of making appropriate arrangements for the children now lies with their parents. The parents should explore all avenues and agree as much as possible between themselves before approaching the court. There may even be no need for the court to be involved, other than to grant the decree of divorce.
    Most importantly, if it proves necessary for the court to be involved, part I now requires the court to take into account the views of the child—if the child has sufficient understanding and maturity to express these and wishes to do so. There is a presumption that a child over 12 has sufficient maturity. It is no longer possible for the parents and the court to develop proposals for the child without the child being given the opportunity to be consulted, except in the case of very young children and those who cannot understand what is going on. Similarly, before reaching any major decisions which would affect their children, parents are required under section 6 to take into account the views of their children.
    It is against that background that we reaffirmed the important place of family mediation services in various remarks in this House and in the other place. We fully accepted that such mediation services have an important part to play in making certain that couples discuss any difficulties that they have concerning the future of their children. That reduces the scope for acrimonious litigation and the consequent harm that that can cause the children caught up in separation or divorce.
    For some years now, rules of court have enabled the court to refer parties to mediation at any stage during the process where questions arose about children in a family action. That rule has been re-emphasised with the commencement of part I of the Act by enabling the court to arrange a hearing at a very early stage of a case, to take out of contention the issues between couples involving children and thus to maximise the possibility of early resolution of such matters. We will monitor the effectiveness of court referrals to mediation as part of our general evaluation of the Children (Scotland) Act reforms.
    1054
    This may be an appropriate time to point out that neither the primary legislation nor the rules of court prescribe which organisation is to provide the mediation.
    My hon. Friend the Member for Eastwood drew attention to the fact that Family Mediation Scotland is the major player in family mediation in Scotland, and that through its affiliated services it has a very important part to play in our programme of reform. There is another source of mediation through solicitors who are members of Comprehensive Accredited Lawyer Mediators, otherwise known as CALM. They may provide mediation if either party is referred by their solicitor or the court.
    We are currently funding a research programme to study the effect of participation in mediation, whether provided by Family Mediation Scotland affiliates or by accredited lawyer mediators. That research is proceeding well and we believe that it will be successful in providing qualitative evaluation. It will also look for evidence that mediation is more cost-effective than traditional dispute resolution through the legal process in Scotland.
    The qualitative arguments for mediation are, to my mind, every bit as important as any financial arguments. It appears intuitively likely that a mediated agreement between couples about such issues as care of children after separation or divorce is likely to be a better quality agreement and to be more durable. We shall look for evidence of that from the research that is in hand.
    Mrs. Ewing: I am very interested in what the Minister is saying about the assessment that will be made. Will it include an assessment of the implications for aid and assistance? As constituency Members, most of us find that legal aid is often one of the major problems, from whichever direction it comes. Will an assessment be made of that?
    Lord James Douglas-Hamilton: On the subject of legal aid, as the hon. Lady and my hon. Friend know, in the White Paper on crime and punishment we have undertaken to consult on civil legal aid. Proposals for the future funding of family mediation is one of the issues that could be covered in that consultation. I hope that that will be of assistance.
    One challenge that I would like to offer to Family Mediation Scotland in its future development concerns the matter that I mentioned earlier of considering the views of children. If it is to play its full part in these reforms, it will need to develop ways of ensuring that parents accept their responsibility to take the views of children into account in reaching mediated agreements.
    I have already announced extensions to the funding of Family Mediation Scotland affiliated services from social-work-related grants, but I am all too well aware of the arguments that that is not a satisfactory long-term basis for funding these services. We have had extensive discussions with Family Mediation Scotland about the suitability of seeking to fund its services by charging the parties. That would unlock the possibility of its being funded as a legal aid outlay where the reference is made by the court or by a solicitor acting for a legally aided party.
    While Family Mediation Scotland has seen some scope to introduce charging for its services, I understand that it does not regard this as a way of securing the future of the local services. It stresses that mediation is most effective

    1055
    introduced early in the process of divorce and separation, when it is unlikely that the parties will have approached a lawyer. We have noted those points.
    We have also noted the support that Family Mediation Scotland has given to the approach south of the border, where the availability of mediation will be explained to parties seeking a divorce when they attend the compulsory information session at the beginning of the process. The Lord Chancellor intends mediation to be funded through block contracts with the Legal Aid Board, and to be subject to tests of means.
    We have not yet decided whether it is right to reform Scots family law in line with what has been done in England and Wales. In Scotland we have a background of less acrimonious divorce generally than south of the border. In 1995 around 65 per cent. of divorces in Scotland were on the grounds of non-cohabitation, but we accept that that percentage falls to 47 per cent. in relation to couples with children.
    We believe that the process of mediation can and should take place between the parties and their lawyers and should not be seen only as a diversion from the legal process. We shall certainly be examining the present state of our family law to see whether further reform is desirable to achieve that. Our examination will include consideration of such issues as whether fault grounds for
    1056
    divorce should remain. We shall also consider whether mediation by mediation organisations should be given a more prominent place in the process.
    Mrs. Ewing: Will the Minister give way?
    Lord James Douglas-Hamilton: I have only a few moments left in which to speak, and I have already given way twice to the hon. Lady.
    I hope that what I have said offers some reassurance to hon. Members, including my hon. Friend the Member for Eastwood. The main good news tonight will be the success of the applications for section 10 grant from Dumfries and Galloway and from Grampian. As for the longer term, I must stress again that we have under active consideration the future place of family mediation, both in relation to legal aid and in relation to family law generally. We shall of course consult widely on any new proposals, and I can tell all hon. Members who have been public-spirited enough to attend this important debate that they—along with interested organisations including Family Mediation Scotland—will be able to influence the outcome. I look forward to hearing their representations in due course, and I thank them for their welcome for the extra steps that we have taken.
    Question put and agreed to.
    Adjourned accordingly at fourteen minutes to Eleven o'clock.

HOME DEPARTMENT

  Animal Experiments (Greyhounds)
  Mr. Meale
  To ask the Secretary of State for the Home Department if he will make a statement on the suppliers of the six greyhounds used in scientific procedures during 1995. [11298]

  Mr. Sackville
  [holding answer 17 January 1997]: The establishment concerned purchased the greyhounds from racing kennels and from show breeding kennels.

  Mr. Meale
  To ask the Secretary of State for the Home Department how many project licences issued since 1 June 1994 under the Animals (Scientific Procedures) Act 1986 are still valid for the use of non-purpose-bred greyhounds in research. [11299]

  Mr. Sackville
  [holding answer 17 January 1997]: One—for the study of osteoarthritis in greyhounds. The six dogs were purchased by the establishment concerned to form a control group and were used solely for blood sampling purposes.

  Mr. Meale
  To ask the Secretary of State for the Home Department how many exemptions have been granted under article 10(3) of the Animals (Scientific Procedures) Act 1986 to allow the use of non-purpose-bred greyhounds in research since 1 June 1994. [11300]

  Mr. Sackville
  [holding answer 17 January 1997]: One.

  Mr. Meale
  To ask the Secretary of State for the Home Department how many of the greyhounds used in scientific procedures in 1995 were former National Greyhound Racing Club registered greyhounds. [11301]

  Mr. Sackville
  [holding answer 17 January 1997]: I will write to the hon. Member.

  Child Abuse
  Mr. Thurnham
  To ask the Secretary of State for the Home Department what has been the average number of convicted paedophiles released in each of the last three years, by category of conviction; and what proportion of each category have received treatment(a) prior to and (b) after release. [11711]

  Mr. Maclean
  From information available centrally on the release and treatment of sex offenders, separate estimates of paedophiles cannot be made with any accuracy.

  Mr. Sheerman
  To ask the Secretary of State for the Home Department how many convictions have been obtained in each of the last 10 years for(a) enticing children into prostitution and (b) living off the earnings of child prostitution. [11779]
  596
  Mr. Maclean
  Court proceedings data collected centrally on the number of offenders convicted of living on immoral earnings do not identify the age of the prostitute.

  Available information on the number of convictions for enticing children into prostitution is given in the table:

  Number of persons convicted at all courts for an offence under the Sexual Offences Act 1956 section 281 1985–1995

  England and Wales

  Convictions

  1985

  —

  1986

  3

  1987

  3

  1988

  1

  1989

  1

  1990

  2

  1991

  2

  1992

  —

  1993

  1

  1994

  —

  1995

  3

  Mr. Thurnham
  To ask the Secretary of State for the Home Department what proportion of convictions for paedophile offenders have related to offenders with previous convictions in the last three years. [11712]

  Mr. Maclean
  Estimates are available centrally from samples of offenders1,2convicted in 1994 and 1996. These are given in the table. However, estimates for these two years are not directly comparable1,3. In particular, improvements in offence recording since 1994 have made it possible to include offenders convicted of rape or buggery with a child victim in the 1996 estimates, whereas these are excluded from the 1994 figures.

  Percentage of offenders convicted of a sexual offence with a child victim who had a previous conviction, by type of previous conviction and year

  Type of previous conviction

  Percentage of offenders1,2convicted of a sexual offence with a child victim in:

  1994

  1996

  All offences2

  54

  52

  Any sexual offence

  15

  18

  Sexual offence with a child victim3

  10

  12

  Notes:

  1 Figures are based on a sample, from the Home Office offenders index, of those sentenced in each year. For 1994, the sample comprised the court disposals in three weeks. In 1996, two weeks were selected.

  2 Convictions prior to the setting up of the offenders index in 1963 are not included, but only a small number of offenders with convictions in 1994 or later are likely to have a last previous relevant conviction in 1962 or earlier. The offences covered by the offenders index are those on the "standard list". This includes all indictable offences, including those triable either way, and some more serious summary offences.

  3 Prior to 1995, statistics supplied to the Home Office for the offences of rape and buggery did not generally indicate the age of the victim. Since 1995, this has been the case for a more limited range of offences.

  Mr. Sheerman
  To ask the Secretary of State for the Home Department how many police authorities in England and Wales have specific units dealing with(a) child pornography and (b) child prostitution. [11778]
  597
  Mr. Maclean
  This specific information is not held centrally. Forty two police forces in England and Wales have units dedicated to work on child/family protection. Many forces also have specialised units to deal with all forms of pornography and prostitution. All forces have officers specifically trained to deal with all these issues. The allocation of staff and resources for tackling child pornography and child prostitution is an operational matter for each chief officer.

  Mr. Thurnham
  To ask the Secretary of State for the Home Department what is his Department's latest evaluation of the success of treatment programmes for convicted paedophiles(a) in prison, (b) in residential treatment centres and (c) in day centre treatment centres. [11702]

  Mr. Maclean
  The Prison Service has commissioned an evaluation of sex offender treatment programmes delivered in prison. The findings are due to be reported in June this year.

  Number of persons prosecuted at magistrates courts and convicted' at all courts for offences of living on immoral earnings by type of offence 1985–95

  England and Wales

  1985

  1986

  1987

  1988

  1989

  1990

  1991

  1992

  1993

  1994

  1995

  Living on earnings of prostitution or exercising control over prostitute (Sexual Offences Act 1956 Sections 30 and 31)

  Prosecutions

  124

  99

  84

  110

  117

  93

  106

  110

  72

  98

  67

  Convictions1

  122

  105

  83

  83

  118

  76

  79

  70

  49

  70

  51

  Man or woman living wholly or in part on the earnings of male prostitution (Sexual Offences Act 1967 Section 5(1))

  Prosecutions

  9

  2

  4

  4

  1

  1

  1

  —

  1

  1

  4

  Convictions

  6

  9

  4

  7

  3

  2

  —

  —

  1

  —

  1

  1 Will include persons proceeded against in earlier years or for a different principal offence when committed for trial by a magistrates court.

  Police Bill
  Mr. Cohen
  To ask the Secretary of State for the Home Department what representations he has received from the Data Protection Registrar concerning the protection for individuals in the provisions of the Police Bill; and if he will make a statement. [11346]

  Mr. Maclean
  The Data Protection Registrar commented on the Government's proposals for access to criminal records for employment and other purposes which were set out in the White Paper, "On the Record", and which are now being taken forward in part V of the Police Bill. She welcomed the Government's intention to put arrangements for access to criminal records for employment related purposes on a statutory footing, commented that the proposed arrangements go a long way towards setting up a framework acceptable from a data protection perspective and noted that appropriate action should be taken to discourage or prevent enforced subject access to criminal records. As indicated during Report state of the Police Bill, the Government intend to consider whether it might be possible to amend the Police Bill to prevent this practice. The Registrar has also written to the Home Office about the future role of the National Criminal Intelligence Service as our national unit for liaising with Europol.

  Interception of Communications
  Miss Hoey
  To ask the Secretary of State for the Home Department how many complaints have been investigated
  598
  The findings of a Home Office evaluation of community-based sex offender treatment were published in October 1996.

  These two evaluations are not concerned exclusively with the treatment of paedophiles, but a large proportion of the offenders receiving treatment fall within this category. Copies of the reports will be placed in the Library.

  Immoral Earnings
  Mr. Sheerman
  To ask the Secretary of State for the Home Department (1) how many convictions there have been for living on immoral earnings in each of the last 10 years; [11780]

  (2) how many successful prosecutions were made against those accused of living of immoral earnings in each of the last 10 years. [11781]

  Mr. Maclean
  Available information is given in the table.

  by the Interception of Communications Tribunal; how many of these investigations detected a breach of the Interception of Communications Act 1985; how much compensation has been paid; and how many staff are employed by the Interception of Communications Tribunal. [12021]

  Mr. Howard
  The tribunal has investigated 486 complaints since the Interception of Communications Act 1985 came into force on 10 April 1986. On no occasion has the tribunal concluded that there has been a contravention of the Act; the question of compensation has not therefore arisen. The Interception of Communications Tribunal is supported by one member of staff on a part-time basis.

  Police Numbers
  Mr. Whittingdale
  To ask the Secretary of State for the Home Department what is his estimate of the increase in police numbers in England and Wales in 1996–97; and if he will make a statement. [12540]

  Mr. Maclean
  It is for chief constables to decide on the allocation of their resources and the recruitment of officers. On the basis of estimates, chief constables have said that they expect police numbers to increase by around 1,000 in England and Wales in the 12 months ending March 1997. This would deliver a total of about 128,000 officers.
  599
  Mr. Merchant
  To ask the Secretary of State for the Home Department what is his estimate of the numbers of police officers released for operational duties in England and Wales in 1996–97 following civilianisation. [12585]

  Mr. Maclean
  Chief constables have estimated that between 1 April 1996 and 31 March 1997 an additional 1,151 police officer posts will have been civilianised, enabling those officers to be released for operational duties.

DUCHY OF LANCASTER

  Business Licences
  Mrs. Roche
  To ask the Chancellor of the Duchy of Lancaster how many different types of business licence currently exist; and if he will list them. [11809]

  Mr. Freeman
  A total of 365 types of business licences, licensing regimes and registrations are being looked at as part of the Government's review of business licensing. I have placed in the Library of the House a full list of these licences.

  Child Care Facilities
  Mr. Allen
  To ask the Deputy Prime Minister what child care facilities are supported by his Department; and who is entitled to use them. [11589]

  The Deputy Prime Minister
  The child care facilities available within the Departments and agencies, and those entitled to use them, are as follows:

  Facilities

  Available

  Cabinet Office (OPS)

  The Westminster holiday play scheme

  All staff

  Civil Service College

  Workplace nursery

  Permanent staff, students and private customers

  Central Computer and Telecommunication Agency

  None

  —

  Central Office of Information

  The Westminster holiday play scheme

  All staff

  Property Advisors to the Civil Estate

  Nursery placement

  All staff

  Security Facilities Executive

  None

  —

  The Buying Agency

  None

  —

  Departmental Public Relations Budgets
  Mr. Alton
  To ask the Deputy Prime Minister what are the public relations budgets for each Government Department for 1996–97; and what were the equivalent figures in 1993 and 1988. [11502]

  Mr. Freeman
  The information requested is not held centrally.

  Public Appointments
  Mr. Alton
  To ask the Deputy Prime Minister how many salaried positions are currently within the gift of the Prime Minister and Ministers of the Crown. [11503]
  600
  The Deputy Prime Minister
  Information is not held centrally in the form requested. However, "Public Bodies 1996", published by the Cabinet Office, Office of Public Service, shows that as at 1 September 1996, out of a total of 40,056 public appointments, 34,864 were made by HM the Queen or her Ministers. Entries for individual sponsor Departments show which public appointments are remunerated.

  Scott Inquiry
  Mr. Sykes
  To ask the Chancellor of the Duchy of Lancaster if he will make a statement on progress on the Government's response to the recommendations made by Sir Richard Scott following his inquiry into the export of arms and arms-related goods to Iraq. [12443]

  Mr. Freeman
  Consideration of the Government's response to all recommendations in Sir Richard Scott's report is virtually complete. A summary of the responses is set out in the table.

  Issue

  Scott Report section

  Action

  (a) Inquiry Procedures

  K1

  Completed—The Government referred Sir Richard Scott's recommendations on public inquiries to the independent Council on Tribunals, following a period of public consultation. The Lord Chancellor, in a statement to the House on 21 November [WA 149] accepted the Council's advice and said that it will be of considerable value when setting up inquiries. Copies of the advice were placed in the Libraries of both Houses.

  (b) Export Controls and Licensing Procedures

  K2 and K3

  Continuing—The President of the Board of Trade issued a public consultation document on the power of Government to control strategic exports and licensing procedures on 24 July. It was announced by way of a written Parliamentary answer [WA 4811, and copies of the consultation document were placed in the Libraries of both Houses. The closing date for receipt of comments was the end of October. The responses are currently being considered and will form part of the wider consideration by the Government of the way ahead on strategic export controls. The Foreign Secretary announced to the House on 21 January [WA 536-537] the conclusions and recommendations of the Inter-departmental review into the supply of arms of Rwanda. This work will also be taken into account in the further consideration being given to strategic exports controls. The Government is likely to need to undertake further more detailed consultation with directly interested parties as detailed proposals are developed.

  (c) Role of Customs and Exercise in Export Control

  K4

  Completed—The Government agreed to increased supervision by the Attorney General of certain Customs and Excise export prosecutions. Details were announced in a written Parliamentary Answer on 17 June [WA 337] and a paper placed in the Libraries of both Houses. On recommendations relating to Customs and Excise legislation and procedures, the Government has accepted these as they stand, or in a few cases, will meet the concerns reflected in an alternative manner. This was announced by the Chancellor of the Exchequer in a written Parliamentary

  601

  Issue

  Scott Report section

  Action

  Answer on 4 July, [WA 490] and a paper providing fuller details was placed in the Libraries of both Houses.

  (d) Prosecution Producers

  K5

  Completed with the exception of one small aspect—The Government announced by the way of a written Parliamentary Answer on 6 June [WA 554-555] that the concerns raised by Sir Richard Scott would be addressed by the provisions of the Criminal Procedure and Investigations Act and the code of practice to be promulgated under the Act. A paper giving fuller details was placed in the Libraries of both Houses. Booklets giving guidance to civil servants and other Crown servants on the procedure to be followed in relation to the disclosure of information relevant to an investigation or prosecution of a criminal offence will be published shortly.

  (e) Public Interest Immunity

  K6

  Completed—Following public consultation, the Government announced in the House on 18 December that the division into class and contents claims would no longer be applied by the Government and that public interest immunity would be claimed only when it was believed that disclosure would cause real damage or harm to the public interest [cols. 949–958]. A paper setting out the Government's approach was placed in the Libraries of both Houses.

  (f) Use of Intelligence by Government Departments

  K7

  Completed—A paper setting out the improvements Government departments have made, or are in the process of making, on the handling of intelligence was sent to the Intelligence and Security Committee on 14 May. The Government awaits the Report of the Committee which is expected to be published early in 1997.

  (g) Informing Parliament about Arms Sales

  K8

  Completed—Following consultation the Government announced to Parliament on 23 July [WA 212-213] that in future it would answer questions about defence exports as fully as possible. Any exceptions will meet the test in the "Code of Practice on Access to Government Information" that the harm or prejudice which might arise from disclosure outweighs the public interest in making such information available. A paper providing fuller details was placed in the Libraries of both Houses.

  (h) Ministerial Accountability

  K8

  The Government provided a Memorandum to the Public Service Committee on 29 March [HC 313-III], setting out the Government's understanding of the requirements of Ministerial Accountability and the provision of information to Parliament, as part of the Committee's consideration of Ministerial Accountability and Responsibility. Following receipt of the Committee's report, the Government published its response on 7 November [WA 594] reaffirming its commitments to arrangements under which it will remain open and fully accountable. Annexed to the response [HC 67] was "New Guidance to Officials on Drafting Answers to Parliamentary Questions" which makes clear that when information is refused in response to Parliamentary Questions reasons should be given relating to the exemptions laid down in the "Code of Practice on Access to Government Information".

NATIONAL HERITAGE

  National Lottery
  Mr. Ieuan Wyn Jones
  To ask the Secretary of State for National Heritage if she will make it her policy to establish a national disaster fund from the proceeds of the national lottery. [11723]

  Mr. Sproat
  The National Lottery etc. Act 1993 established five areas to benefit equally from the lottery: sport, the arts, the heritage, charities and a millennium fund to mark the year 2000 and the beginning of the third millenium. There are no plans to establish a national disaster fund from the proceeds of the national lottery.

LORD CHANCELLOR'S DEPARTMENT

  Judges
  Mr. William Powell
  To ask the Parliamentary Secretary, Lord Chancellor's Department if he will list those full-time judges now aged over 70 years still sitting on the bench, together with the date by which they must retire. [11072]

  Mr. Streeter
  The information requested is as follows:

  Retirement date

  The Right Honourable The Lord Goff of Chieveley

  12 November 2001

  The Right Honourable Sir Stephen Brown President of the Family Division

  3 October 1999

  The Right Honourable Lord Justice Beldam

  29 March 2000

  The Right Honourable Lord Justice Hirst

  31 July 2000

  The Honourable Mr. Justice French

  14 October 2000

  The Honourable Mr. Justice Owen

  22 November 2000

  His Honour Judge David QC DL

  30 April 1997

  His Honour Judge Sir Lawrence Verney TD DL Recorder of London

  1 June 1998

  His Honour Judge Halnan

  8 June 1997

  His Honour Judge Edwards QC

  22 July 1997

  His Honour Judge Ian Davidson QC

  23 September 1997

  His Honour Judge Atkinson

  7 October 1997

  His Honour Judge Baker DL

  29 March 1998

  His Honour Judge Sir David Hughes-Morgan CBE

  15 May 1998

  His Honour Judge Gerald Coombe

  29 May 1998

  His Honour Judge Esyr Lewis QC

  27 September 1998

  His Honour Judge Harrison-Hall DL

  28 September 1998

  His Honour Judge Morgan Hughes

  9 November 1998

  His Honour Judge Robert Smyth

  9 December 1998

  His Honour Judge Paiba

  19 December 1998

  His Honour Judge Tibber

  5 January 1999

  Her Honour Judge Viner CBE QC

  16 January 1999

  His Honour Judge Watts

  2 March 1999

  His Honour Judge Wickham Recorder of Liverpool

  2 September 1999

  His Honour Judge Goldstone

  26 September 1999

  His Honour Judge Harry Walker

  29 November 1999

  District Judge HG Hughes

  31 December 1997

  District Judge Lambert

  31 December 1997

  District Judge Wood

  30 November 1998

  District Judge Goodman

  19 June 1999

  District Judge Kendrick

  31 October 1999

  Legal Aid
  Mr. Beggs
  To ask the Parliamentary Secretary, Lord Chancellor's Department on how many occasions in each of the last five years legal aid certificates have been discharged by the Legal Aid Committee or legal aid department of the Law Society of Northern Ireland when evidence that incorrect information was supplied by claimants for the purpose of legal aid was established. [10955]

  Mr. Streeter
  Since 1 April 1994, 13 legal aid certificates have been revoked on account of false statements being made on applications. One was revoked in 1994–95, 11 in 1995–96 and one in the current financial year.

  Mr. Beggs
  To ask the Parliamentary Secretary, Lord Chancellor's Department how many prosecutions having been initiated against persons who succeeded in obtaining legal aid certificates were later discharged when it was established that the award was based on incorrect information supplied by applicants, in each of the last five years in Northern Ireland. [10956]

  Mr. Streeter
  Records relating to the requested information have been maintained by the legal aid authorities since 1 April 1994. Since that time, there has been one case in which a legal aid certificate was revoked and the application for legal aid was referred for investigation by the police. The case is under investigation.

  Mr. John Marshall
  To ask the Parliamentary Secretary, Lord Chancellor's Department how much has been paid by the legal aid fund during the last three years and so far this year to help in respect of cases under the Asylum and Immigration Acts. [11215]

  Mr. Streeter
  The information requested is not available since the data gathered by the Legal Aid Board does not identify separately cases brought under the Asylum and Immigration Acts.

  Assistance for people in immigration and nationality matters is provided through the legal aid scheme in two ways. First, advice and assistance is available through the green form scheme and secondly through the civil legal aid scheme by way of a judicial review of an administrative decision.

  Figures for the number of claims for green form advice and assistance paid by the Legal Aid Board over the last three financial years are as follows:

  Year

  Amount (£000)

  1993–94

  11,295

  1994–95

  14,572

  1995–96

  23,929

  1996–97 to January 1997

  20,039

  It is not possible to give figures for civil legal aid expenditure relating to immigration and nationality matters since the Legal Aid Board does not record judicial review cases by category of proceedings.

TREASURY

  Incomes
  Mr. Allen
  To ask the Chancellor of the Exchequer what proportion of income was paid in tax, including national insurance and VAT, by a family with two children earning(a) £10,000, (b) £15,000 (c) £20,000 and (d) £45,000 in each of the last five years. [10817]

  Mr. Jack
  The table provides figures for the percentage of earnings paid in tax by a one-earner couple with two children earning(a) £10,000, (b) £15,000, (c) £20,000 and (d) £45,000 in cash in each of the years 1991–92 to 1997–98.

  Estimates of indirect taxes are very approximate. The margin of error is particularly high outside the central range of earnings so even illustrative estimates cannot be made at the top and bottom of the range.

  Proportion of earnings paid in tax by one-earner family with two dependent children

  Percentage of earnings paid in

  Annual earnings£

  Direct taxes1

  VAT

  Other indirect taxes

  1991–92

  10,000

  11.2

  —

  —

  15,000

  18.8

  5.2

  7.7

  20,000

  22.6

  5.6

  6.8

  45,000

  29.4

  —

  —

  1992–93

  10,000

  9.1

  —

  —

  15,000

  17.4

  5.3

  7.6

  20,000

  21.5

  5.7

  6.7

  45,000

  29.1

  —

  —

  1993–94

  10,000

  8.4

  —

  —

  15,000

  16.9

  5.1

  7.8

  20,000

  21.2

  5.5

  6.9

  45,000

  29.1

  —

  —

  1994–95

  10,000

  9.5

  —

  —

  15,000

  18.0

  5.5

  8.8

  20,000

  22.2

  5.5

  7.4

  45,000

  30.3

  —

  —

  1995–96

  10,000

  9.8

  —

  —

  15,000

  18.2

  5.4

  9.5

  20,000

  22.4

  5.4

  8.0

  45,000

  30.2

  —

  —

  1996–97

  10,000

  8.0

  —

  —

  15,000

  16.7

  5.6

  10.1

  20,000

  21.0

  5.6

  8.5

  45,000

  29.1

  —

  —

  1997–98

  10,000

  6.7

  —

  —

  15,000

  15.5

  5.6

  10.8

  20,000

  19.9

  5.7

  9.0

  45,000

  28.1

  —

  —

  1 Income tax and NICs.

  605
  1. Income tax payments are calculated on the assumption that the households receive no tax reliefs other than the standard allowances and only have income from employment. The earner is assumed to pay class 1 national insurance contributions at the contracted-in rate. Child benefit is deducted from income tax.

  2. Figures for indirect taxes include estimates of the effects of the main intermediate taxes on households as well as the impact of taxes on final goods and services. Estimates of the impact of taxes on final goods and services assume that these taxes are fully incident on households. Estimates of the impact of intermediate taxes are based on the relation between intermediate production costs and final consumption derived using input—output techniques.

  3. Figures for indirect taxes since 1994–95 are estimated from expenditure patterns in the 1994–95 family expenditure survey uprated to later years using forecasts of aggregate tax receipts. For years before 1994–95 the 1985 family expenditure survey was used. All estimates are based on the illustrative assumption that 10 per cent. of disposable income is saved.

  4. Estimates of indirect taxes are very approximate, even where figures are shown, because spending patterns vary widely between households with the same composition and income. Because of sampling variation, there can be substantial differences between estimates obtained from family expenditure surveys for different years, so reliable comparisons cannot be made between the estimates for different years.

  Correspondence
  Mr. Winnick
  To ask the Chancellor of the Exchequer when he plans to reply to the letter of 12 November from the hon. Member for Walsall, North regarding a constituent. [10997]

  Mr. Oppenheim
  [holding answer 16 January 1997]: A reply was sent on 21 January.

  Schedule A Income Tax
  Mr. Quentin Davies
  To ask the Chancellor of the Exchequer what estimate he has made of the effect on revenue from inheritance tax of treating assets giving rise to schedule A income as assets comprised in a business carried on by the owner of those assets qualifying for business property relief. [11825]

  Mr. Jack
  The full year cost of extending inheritance tax business property relief to assets giving rise to schedule A income is tentatively estimated at £100 million.

  Mr. Davies
  To ask the Chancellor of the Exchequer what estimate he has made of the effect on(a) revenues from capital gains tax and (b) revenues from corporation tax on capital gains of treating assets giving rise to income taxable under schedule A as assets occupied and used for the purposes of a trade carried on by the recipient of the schedule A income. [11827]

  Mr. Jack
  The full year cost of treating assets giving rise to schedule A income as business assets qualifying for relief from capital gains tax and corporation tax on gains is tentatively estimated at £150 million.

  Mr. Davies
  To ask the Chancellor of the Exchequer what estimate he has made of the effect on(a) revenues from income tax and (b) revenues from corporation tax of taxing income currently taxed under schedule A as trading income taxed under case 1 of schedule D instead. [11826]
  606
  Mr. Jack
  The estimated full year cost of taxing schedule A income as schedule D case 1 trading income is £50 million in respect of revenues from income tax and £250 million in respect of revenues from corporation tax charged on company incomes.

  Charity Donations
  Mr. Pike
  To ask the Chancellor of the Exchequer what plans he has for changes in relation to the tax position on weekly covenanted charity donations; and if he will make a statement. [11940]

  Mr. Jack
  The strict application of the provisions governing lower rate taxpayers making covenants on which charities can claim relief at the basic rate from the Inland Revenue could mean that more tax may be due from taxpayers whose marginal rate is the lower rate. In practice, however, the Revenue exercises its judgment in determining what priority should go to recovering relatively minor amounts where such a shortfall arises, and the covenantor will often not be asked for the difference. I have no plans to change procedures.

  Central Bank Independence
  Mr. Michael Brown
  To ask the Chancellor of the Exchequer what is his policy regarding central bank independence for the United Kingdom. [12013]

  Mrs. Angela Knight
  The Government currently have no plans to make the Bank of England independent.

  Manufacturing Investment
  Mr. Milburn
  To ask the Chancellor of the Exchequer what has been the change in manufacturing investment in each G7 country in the last year. [12025]

  Mrs. Angela Knight
  [holding answer 21 January 1997]: Figures for investment growth in 1996 compared with 1995 are not yet available for any G7 country.

  The latest available international comparisons of investment do not cover manufacturing but rather investment by institutional sector and by type of capital good. Figures for each G7 country for 1995 can be found in the OECD publication, "Quarterly National Accounts", which is available in the House of Commons Library.

  Pesticides and Fertilisers (Excise Duty)
  Mr. Martyn Jones
  To ask the Chancellor of the Exchequer (1) what estimate he has made of the annual revenue which would be raised from introducing an excise duty of(a) I per cent., (b) 5 per cent. and (c) 10 per cent. on pesticides; and if he will make a statement; [10540]

  (2) what estimate he has made of the annual revenue which would be raised from introducing an excise duty of (a) 1 per cent., (b) 5 per cent. and (c) 10 per cent. on fertilisers; and if he will make a statement. [10541]

  Mr. Oppenheim
  No estimates have been made recently of revenue which might be raised by introducing excise duty on pesticides and/or fertilisers.

SCOTLAND

  Ministerial Visits
  Mr. Donohoe
  To ask the Secretary of State for Scotland 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. [9385]

  Mr. Michael Forsyth
  The number of visits made by Scottish Office Ministers during 1996 is as follows:

  Number

  Secretary of State

  255, including four overseas visits

  Minister of State

  134

  Mr. George Kynoch

  118

  Mr. Raymond Robertson

  134, including 10 overseas visits

  The Earl of Lindsay

  188, including 10 overseas visits

  Personalised Number Plates
  Mr. Donohoe
  To ask the Secretary of State for Scotland how many personalised number plates there are in the ownership of the executive agencies operated by his Department; and if he will list them. [11423]

  Lord James Douglas-Hamilton
  None.

  Ardrossan, Saltcoats and Stevenston Bypass
  Mr. Donohoe
  To ask the Secretary of State for Scotland when he expects consideration of the objections lodged against the draft road orders for the Ardrossan, Saltcoats and Stevenston bypass to have been completed; and when he expects that these proposals will be included in the Scottish Office's trunk road programme. [11329]

  Lord James Douglas-Hamilton: Consideration of objections lodged against the draft road orders is expected to be completed within the next three months. During that time objectors will be contacted by officials from the Scottish Office to determine what can be done to alleviate their concerns. The timing of construction will depend on the satisfactory completion of the statutory procedures and the relative priority of the scheme against competing demands for available resources when decisions on future starts are made.

  Local Government Reorganisation
  Mr. Davidson
  To ask the Secretary of State for Scotland what savings he estimates have been made as a result of local government reorganisation; and how these figures were calculated(a) in total and (b) for the financial year 1997–98. [11435]

  Mr. Kynoch
  The Government's view of the costs and savings associated with local government reorganisation are based on the report, "The Structure of Local Government in Scotland: Financial and Qualitative Appraisal of Options for Change" by Touche Ross, published in October 1994. Provision has been made, and is planned to be made, in the relevant local government finance settlements as shown in the table. It is too soon to estimate actual savings which will depend on decisions made by individual councils regarding their management and staffing structures.
  608

  £million

  1995–96

  1996–97

  1997–98

  1998–99 (and beyond)

  Transitional costs

  41

  70

  20

  —

  Long-term costs (29 rather than nine councils delivering "regional" services)

  —

  62

  62

  62

  Long-term saving (from stream-lined central administration)

  —

  92

  102

  102

  Net costs/(savings)

  41

  40

  (20)

  40)

  M74–M6
  Mr. David Marshall
  To ask the Secretary of State for Scotland what estimate he has made of the cost involved in renaming the M74 the M6. [11860]

  Lord James Douglas-Hamilton: The A74, A74(M), M74 route will be renamed the M6 on completion of its upgrading to full motorway status. A detailed cost estimate for the necessary signposting changes is not as yet available. Costs will, however, be kept to a minimum by overplating of existing signs wherever practicable.

  Mr. Martlew
  To ask the Secretary of State for Scotland when he expects the construction of the M74 to begin from the Scottish borders to junction 44 on the M6; and if he will make a statement. [11774]

  Lord James Douglas-Hamilton
  The orders for the A74 Carlisle to Guardsmill improvement scheme are now being prepared for making. Once statutory procedures have been completed, my right hon. Friend the Secretary of State for Transport will decide on the future programme for this scheme, taking into account the merits of including it in the M6 design, build, finance and operate contract.

  Local Authority Employment
  Mr. David Marshall
  To ask the Secretary of State for Scotland if he will list the number of employees, by category, in each local authority in Scotland and the totals at the latest available date. [11869]

  Mr. Kynoch
  I refer the hon. Member to table 8 of the press release "Joint Staffing Watch—July 1996 Return—Scotland", which shows the total full-time equivalent number of local authority employees by category of service in each local authority in July 1996. Tables 13(a) to 13(k) show, for each authority the total full-time equivalent number of employees by category of service by salary band. A copy of the press release is in the Library. Information on the number of employees in September 1996 will be published shortly.

  Pensioners (Glasgow)
  Mr. David Marshall
  To ask the Secretary of State for Scotland what estimate he has made of the number of (i) male and (ii) female pensioners resident in the city of Glasgow. [11863]
  609
  Lord James Douglas-Hamilton
  The Registrar General's latest—mid-1995—population estimates show that there were (i) 35,912 men aged 65 and over, and (ii) 77,138 women aged 60 and over in the city of Glasgow council area.

  Health Boards (Finance)
  Mr. Chisholm
  To ask the Secretary of State for Scotland what is the forecast(a) income and (b) expenditure at the end of the 1996–97 financial year for each health board. [12046]

  Lord James Douglas Hamilton
  The table shows the forecast income and expenditure for hospital and community health services for each health board as at the end of the 1996–97 financial year.

  £000

  Health boards

  Forecast income 1996–97

  Forecast expenditure 1996–97

  Argyll and Clyde

  279,496

  279,496

  Ayrshire and Arran

  219,868

  219,868

  Borders

  74,821

  74,606

  Dumfries and Galloway

  102,605

  102,128

  Fife

  207,541

  207,541

  Forth Valley

  163,514

  162,807

  Grampian

  334,136

  332,860

  Greater Glasgow

  649,003

  644,084

  Highland

  138,048

  138,048

  Lanarkshire

  322,072

  322,072

  Lothian

  480,269

  480,269

  Orkney

  14,845

  14,845

  Shetland

  16,886

  16,886

  Tayside

  293,271

  290,771

  Western Isles

  27,893

  27,893

  Total

  3,324,268

  3,314,174

  Marshall Food Group Ltd.
  Mr. Tom Clarke
  To ask the Secretary of State for Scotland what financial assistance has been provided to Marshall Food Group Ltd. in each of the last 10 years in relation to their production plant at Coatbridge; on what terms; and if he will make a statement. [11848]

  Mr. Kynoch
  The following financial assistance has been provided by the Department:

  Since 1987, a total of £2,857,500 has been paid under the regional selective assistance scheme. These payments related to offers made in 1987 and 1990 and the last payment of grant was made in 1993. Additionally, regional development grant of £679,942, offered in 1987, was paid in association with the RSA offers, the last payment being made in 1991.

  The purpose of these offers was to assist the company in undertaking a capital investment programme at Coatbridge involving the safeguarding and creation of jobs at that location. The company has met its obligations under the terms of the offers.

  The above grants represent all but a small part of the assistance provided in relation to this company's Coatbridge plant. Additional support has been provided by the Scottish Enterprise network in recent years; I will ask the chairman of that organisation to write to the hon. Member with details of this as soon as possible.

  Intensive Care Beds
  Mr. Donohoe
  To ask the Secretary of State for Scotland how many admissions were made to intensive care beds in Scotland in 1978–79 or the most recent year thereafter for which figures are available. [11332]

  Lord James Douglas-Hamilton
  The number of patients discharged from intensive care beds in the year ending 31 March 1979 was 8,137.

  Mr. Donohoe
  To ask the Secretary of State for Scotland how many admissions were made to intensive care beds in each health board area in Scotland during 1995–96. [11333]

  Lord James Douglas-Hamilton
  The information is set out in the table.

  The number of intensive care discharges at year ending 31 March 1996

  Health board

  Discharges

  Argyll and Clyde

  1,193

  Ayrshire and Arran

  803

  Borders

  215

  Dumfries and Galloway

  1,569

  Fife

  365

  Forth Valley

  506

  Grampian

  562

  Greater Glasgow

  7,211

  Highland

  900

  Lanarkshire

  3,465

  Lothian

  4,260

  Orkney

  —

  Shetland

  —

  Tayside

  2,740

  Western Isles

  —

  Scotland

  23,789

  Prescription Drugs
  Mr. Nigel Griffiths
  To ask the Secretary of State for Scotland what period of notice was given to general practitioners in Scotland in respect of the deadline for comments on the recent list of drugs to be removed from GP prescription; how many representations were received; and what discussions his officials have had with the British Medical Association about the period of notice. [11319]

  Lord James Douglas Hamilton
  On 25 November 1996, the Department of Health, on behalf of the UK health departments, issued a press release announcing consultation on recommended changes to the list of products which GPs may not prescribe on the NHS. Comments were invited by 9 January 1997. About 200 representations have been received in response. There have been no discussions with the BMA about the period of notice.

  Employment (Glasgow)
  Mr. David Marshall
  To ask the Secretary of State for Scotland if he will list by category the estimated total number of jobs located within the city of Glasgow and the estimated number of vacancies in each category. [11868]
  611
  Mr. Kynoch
  The table sets out the latest estimate of the number of employees in employment in the former City of Glasgow district council area and vacancies registered with the Employment Service.

  Industry 1992 standard industrial classification

  1995 Annual employment survey— employees in employment

  Vacancies registered with employment service October 1996

  Agriculture, forestry and fishing

  300

  9

  Energy and water

  3,000

  3

  Manufacturing

  37,600

  1,273

  Construction

  18,400

  1,223

  Distribution, hotels and restaurants

  67,500

  4,113

  Transport and communications

  22,500

  519

  Banking, finance and insurance

  67,600

  2,183

  Public administration

  97,000

  2,099

  Other services

  16,800

  1,603

  Total

  330,600

  13,025

  Source:Office for National Statistics, the Employment Service.

  Ayrshire and Arran Health Board
  Mr. Donohoe
  To ask the Secretary of State for Scotland what are the annual salary and employment costs for the communications manager recently appointed by Ayrshire and Arran health board. [11920]

  Lord James Douglas-Hamilton
  This information is not held centrally. Health boards have delegated responsibility for recruitment and for terms and conditions of their staff.

  Stone of Destiny
  Mr. Home Robertson
  To ask the Secretary of State for Scotland, pursuant to his answer of 5 December,Official Report, column 731, relating to costs in connection with the return of the Stone of Destiny, when he expects to have collated the costs; and if he will notify the hon. Member for East Lothian of the figures as soon as they are available. [9968]

  Mr. Foulkes
  To ask the Secretary of State for Scotland when he expects to have finalised the collation of all of the costs involved in relation to the return of the Stone of Destiny; if he will send details of the costs to all hon. Members representing Scottish constituencies; and under which budget heads the costs will be covered. [10660]

  Mr. Michael Forsyth
  [holding answers 22 and 13 January 1997]: The Scottish Office has already indicated that the costs incurred were expected to be in excess of £50,000. The cost of the ceremonies marking the return amounts to £34,434.15. In addition, the Scottish Office will meet £27,708.50 incurred by the armed services. All these costs will be met, as planned, from the Scottish Office administration budget.

PRIME MINISTER

  Scotch Whisky Industry
  Mr. McKelvey
  To ask the Prime Minister if he will make a statement on his discussions with the Indian Prime Minister in respect of the Scotch whisky industry. [12144]
  612
  The Prime Minister
  Although the Scotch whisky industry was not discussed during my meeting with the Indian Prime Minister, it was covered in the meetings between the Indian Finance Minister and my right hon. Friend, the President of the Board of Trade, at one of which representatives of the Scotch whisky industry were present. The Indian Minister indicated that whisky would be involved in a wider programme of liberalising imports of consumer goods into India, although the timing was not yet clear. The Government will continue to press for improved access for Scotch whisky to this potentially very important market.

  UN Special Session (Environment)
  Sir Anthony Durant
  To ask the Prime Minister which Government Minister will be attending the United Nations General Assembly special session on the environment in June. [12442]

  The Prime Minister
  I shall be attending the United Nations General Assembly special session in June.

OVERSEAS DEVELOPMENT ADMINISTRATION

  Export Licences
  Mrs. Clwyd
  To ask the Secretary of State for Foreign and Commonwealth Affairs at what stage of the special procedure which was used in respect of the sale of police and security requirements an export licence application was made; by whom the application was made; and at what stage of the procedure the decision to grant a licence was decided. [11834]

  Dr. Liam Fox
  Where the export of goods is prohibited without an export licence, such a licence must be obtained from the Department of Trade and Industry before the goods may be exported.

  Bahrain
  Mrs. Clwyd
  To ask the Secretary of State for Foreign and Commonwealth Affairs if he will review the procedure by which the Bahrain Public Security Directorate was able to buy a proportion of its police and security requirements through the Crown Agents; and on how many occasions similar procedures have been used in respect of other countries. [11804]

  Dr. Liam Fox
  The functions of the Crown Agents when acting as agents for the procurement of goods and services are set out in the Crown Agents Act 1979. The Government have laid down no special procedures for purchases for Bahrain. Crown Agents have operating procedures which apply to all their work as agents. An indication of the extent of this work and the clients involved is given in the Crown Agents' annual report and accounts, copies of which are in the Libraries of the House.

  Mrs. Clwyd
  To ask the Secretary of State for Foreign and Commonwealth Affairs if he will list(a) the police

  613
  and security requirements provided to Bahrain through the Crown Agents and (b) the British companies which supplied the goods and services. [11833]

  Dr. Fox
  The Crown Agents provide services to the Government of Bahrain on commercial terms; provision of information about specific goods and services is a matter for the Crown Agents' clients.

  Mrs. Clwyd
  To ask the Secretary of State for Foreign and Commonwealth Affairs what assurances were(a) asked for by the UK Government and (b) given by the Government of Bahrain that the equipment supplied through the special purchase procedure will not be used for internal repression. [11806]

  Dr. Fox
  The Crown Agents' functions when acting as agents for procurement of goods and services are set out in the Crown Agents Act 1979. Where the export of goods is prohibited without an export licence, the Government would not licence equipment assessed as likely to be used for internal repression.

  Mrs. Clwyd
  To ask the Secretary of State for Foreign and Commonwealth Affairs when the procedure which enabled the Bahrain Public Security Directorate to buy police and security equipment through the Crown Agents began; and if the arrangement still exists. [11805]

  Dr. Fox
  The British Government have specified no special procedure for purchases for Bahrain. The Crown Agents have always acted as procurement agents for overseas principals. Their powers to do so are currently set out in the Crown Agents Act 1979; that Act is still in force.

  Police, Security and Paramilitary Bodies
  Mrs. Clwyd
  To ask the Secretary of State for Foreign and Commonwealth Affairs which police, security and paramilitary bodies have enjoyed similar arrangements in the last 10 years with Crown Agents to that enjoyed by the Government of Bahrain; and which bodies continue to enjoy such arrangements. [11835]

  Dr. Liam Fox
  A list of Crown Agents' clients is published each year in the Crown Agents' annual report and accounts, copies of which are in the Libraries of the House.

  Yemen
  Sir Robert Hicks
  To ask the Secretary of State for Foreign and Commonwealth Affairs what requests the United Kingdom Government have received from(a) the Yemen Government, (b) the Aden port authority and (c) other organisations (i) to tender for projects and (ii) to assist (1) financially and (2) technically with the Aden port redevelopment programme; and if he will make a statement. [11684]

  Dr. Liam Fox
  The United Kingdom Government have received no requests to tender for projects. All requests for technical assistance are channelled through the Government of Yemen.
  614
  In 1995 the Overseas Development Administration provided assistance to the Government of Yemen in evaluating competing proposals for the development of the Aden container terminal. In late 1996, the ODA received a request for assistance in undertaking an impact study including preparation of programme specifications for the future of the port development programme. Consultants began their work on this assignment in early January.

  The Aden port and free trade zone development project is a large commercial undertaking where the lead is predominantly taken by the private sector company Yeminvest. The World bank is providing limited assistance to the Yemeni authorities on the public sector aspects of the project. ODA grant-funded consultancies form an important part of the planning phase of this project.

  Sir Robert Hicks
  To ask the Secretary of State for Foreign and Commonwealth Affairs if he will list the United Kingdom aid programmes to Yemen during the current financial year for(a) bilateral and (b) multilateral aid indicating the amount of funding; and if he will make a statement. [11685]

  Dr. Fox
  Figures are not yet available for expenditure in this financial year, but the outturn is expected to be similar to 1995–96.

  The bilateral programme is funding the Liverpool Port Consultancy Portia to undertake an impact study and preparation of programme specification on Aden port. Other activities this year include British partnership scheme funded projects. These range from support for the electronic engineering faculty at Hadramawt university and for the Central Statistical Office to English tuition at the Ministry of Foreign Affairs. The ODA also commissioned an appraisal of the Al Gamhouria hospital in Aden. This assignment was completed in the first half of 1996. The balance of the budget for this year is meeting the cost of continuing postgraduate education commitments in the UK. Following very heavy flooding in eastern Yemen in May and June, the ODA funded nearly £500,000 of emergency assistance which was delivered through the Red Crescent and other non-governmental organisations.

  Figures are not available for multilateral aid expenditure in this financial year. In the past six years, approximately £22 million—UK share £5 million—has been committed by the EC in the form of economic and development assistance to Yemen. It is expected that commitments and disbursements should continue at roughly the same level and pace over the next two years.

  Sir Robert Hicks
  To ask the Secretary of State for Foreign and Commonwealth Affairs if he will list for each year since 1991 the total aid support for Yemen, indicating the amount spent on (a) bilateral aid, (b) emergency aid, (c) pensions and (d) the United Kingdom contribution to multilateral aid programmes. [11683]
  615
  Dr. Fox
  Aid to Yemen since 1991 has been as follows:

  Total aid to Yemen 1990–91—1995–96

  £ thousand

  1990–91

  1991–92

  1992–93

  1993–94

  1994–95

  1995–96

  Total Bilateral aid1

  5,296

  4,984

  7,707

  4,053

  4,410

  1,477

  of which:

  Emergency aid

  —

  —

  74

  89

  672

  —

  Pensions

  488

  461

  434

  518

  371

  887

  1Source: British Aid Statistics 1996 edition.

  £ million

  1990

  1991

  1992

  1993

  1994

  Total multilateral aid1

  2

  3

  3.3

  2.7

  2.4

  of which:

  EC

  0.2

  0.2

  1.0

  0.6

  0.4

  UN

  0.5

  0.5

  0.7

  0.3

  0.5

  1Source: Multilateral share exercise.

FOREIGN AND COMMONWEALTH AFFAIRS

  Child Care Facilities
  Mr. Allen
  To ask the Secretary of State for Foreign and Commonwealth Affairs if Ministers are entitled to use child care facilities supported by his Department. [11593]

  Mr. Hanley
  Yes, although we are not aware of any Minister ever having made a call upon this service for his or her children.

  Gibraltar
  Mr. Colvin
  To ask the Secretary of State for Foreign and Commonwealth Affairs if he will list those European Union countries that have refused to accept Gibraltar-issued identification cards as valid travel documents between EU countries. [11817]

  Mr. David Davis
  Spain is the only EU member state to have notified the United Kingdom formally of its refusal to accept Gibraltar identity cards as travel documents within the EU-EEA.

  Mr. Colvin
  To ask the Secretary of State for Foreign and Commonwealth Affairs what response the Spanish Government have made to his Department about the validity of British dependent territories passports used by Gibraltar citizens for travel between Gibraltar and Spain. [11816]

  Mr. Davis
  The Spanish Government's response to our request for clarification of their position does not meet our concerns. My right hon. and learned Friend the Foreign Secretary will therefore be raising this issue when he meets the Spanish Foreign Minister in Madrid on 22 January, and he will be looking for a cast-iron assurance that the Spanish Government will continue to accept British passports issued in Gibraltar.
  616
  Mr. Colvin
  To ask the Secretary of State for Foreign and Commonwealth Affairs what will be on the agenda for the meeting between himself and the Foreign Minister of Spain on 22 January, under the provisions of the 1984 Brussels agreement. [11818]

  Mr. Davis
  The issue of passports will be high on the agenda. My right hon. and learned Friend the Foreign Secretary will be looking for a cast-iron assurance that the Spanish Government will continue to accept British passports issued in Gibraltar. We also expect the scope for greater cross-border co-operation to be discussed.

  Council of Europe
  Mr. David Atkinson
  To ask the Secretary of State for Foreign and Commonwealth Affairs what conclusions were reached in respect of the Council of Europe at the Dublin EU summit. [11823]

  Mr. David Davis
  Part VII of the "Presidency Conclusions" (document ref. SN 401/96) which was placed in the House Library on 15 December, records the views of European Council on the Council of Europe as follows:"The European Council believes that the Council of Europe has a crucial role in upholding human rights standards and supporting pluralist democracy.
  It sees advantage in using to the fullest, in co-operation with other international institutions, and expertise and mechanisms of the Council of Europe to advance these objectives. The summit meeting of the Organization, in 1997, will provide a significant opportunity to review the progress made in these areas."

  EU-Israel Trade Agreement
  Mr. Batiste
  To ask the Secretary of State for Foreign and Commonwealth Affairs when he estimates the UK will ratify the EU-Israel trade agreement. [11704]

  Mr. Hanley
  The Order in Council is currently being drafted, and we expect the agreement to be laid before Parliament shortly and debated next month.

  Entry Certificate Officers
  Mr. Cox
  To ask the Secretary of State for Foreign and Commonwealth Affairs how many entry certificate officers were employed in British high commission offices in(a) Pakistan, (b) Sri Lanka, (c) India and (d) Bangladesh, on 1 January. [11677]

  Dr. Liam Fox
  The post by post breakdown of the entry clearance officers in the four countries is:

  Post

  Number of officers

  Karachi

  5

  Islamabad

  26

  Colombo

  4

  Bombay

  10

  Calcutta

  1

  Madras

  3

  New Delhi

  12

  Dhaka

  12

  In addition, Karachi and Colombo each have one entry clearance manager, Bombay, Dhaka and New Delhi two and Islamabad four.

  Visa Applicants
  Mr. Cox
  To ask the Secretary of State for Foreign and Commonwealth Affairs how many(a) men and (b) women, were waiting for interview at British high commission offices in (i) Pakistan, (ii) Sri Lanka, (iii) India, and (iv) Bangladesh, to join husbands or wives resident in the United Kingdom, on 1 January. [11695]

  Dr. Liam Fox
  The post-by-post breakdown of applicants awaiting interview in the four countries is as follows:

  Post

  Men

  Women

  Bombay

  101

  211

  Calcutta

  0

  5

  Colombo

  4

  27

  Dhaka

  540

  147

  Islamabad

  1,024

  772

  Karachi

  32

  48

  New Delhi

  19

  99

  Total

  1,720

  1,309

  Statistics for Madras are still being prepared. I shall write to the hon. Member shortly.

  Mr. Cox
  To ask the Secretary of State for Foreign and Commonwealth Affairs what is the longest period of time a person had been waiting for an interview to join(a) their husband and (b) their wife, in the United Kingdom at high commission offices in (i) Pakistan, (ii) Sri Lanka, (iii) India and (iv) Bangladesh on 1 January; and if he will make a statement. [11678]

  Dr. Fox
  The post-by-post breakdown of longest waiting times in the four countries is:

  Post

  Husbands

  Wives

  Bombay

  6 months

  6 months

  Calcutta

  21 days

  Nil

  Colombo

  1 month

  1 month

  Dhaka

  6 months

  6 months

  Islamabad

  6 months

  4 months

  Karachi

  19 weeks

  19 weeks

  New Delhi

  2 months

  2 months

  Statistics for Madras are still being prepared. However, in 1995, the longest waiting time was six weeks for both husbands and wives.

  Mr. Cox
  To ask the Secretary of State for Foreign and Commonwealth Affairs what is the average time a person has waited for an interview in respect of an application to join(a) a husband and (b) a wife (i) in the United Kingdom and (ii) at British high commission offices in (1) Pakistan, (2) Sri Lanka, (3) India and (4) Bangladesh in the last year. [11694]
  618
  Dr. Fox
  The post-by-post breakdown of average waiting times in the four countries is as follows:

  Post

  Husbands

  Wives

  Bombay

  3 months

  3 months

  Calcutta

  10 days

  Nil

  Colombo

  10 weeks

  10 weeks

  Dhaka

  6 months

  6 months

  Islamabad

  3.5 months

  3.5 months

  Karachi

  18.5 weeks

  18 weeks

  New Delhi

  2.5 months

  2.5 months

  Statistics for Madras are still being prepared. However, in 1995, the average waiting time was six weeks.

  It is not possible to prepare equivalent figures for applicants already in the UK.

  Pillar Point Refugee Centre (Hong Kong)
  Mr. David Atkinson
  To ask the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the future of Pillar point refugee centre in Hong Kong and its residents. [11824]

  Mr. Hanley
  The Pillar Point refugee centre in Hong Kong is funded and managed by the office of the United Nations High Commissioner for Refugees. It was opened in 1989 and there are no plans to close it.

  Some 620 Vietnamese refugees and 540 non-refugees are accommodated in the centre. UNHCR continue to seek resettlement places for the refugees. The non-refugees' closest links remain with Vietnam and we are seeking to negotiate with the Vietnamese authorities for their repatriation, in accordance with the comprehensive plan of action.

  Far East
  Sir Irvine Patnick
  To ask the Secretary of State for Foreign and Commonwealth Affairs if he will list the(a) companies and (b) universities assessed by his Department to be assisting planning in (i) education and (ii) research in the far east; and if he will make a statement. [12023]

  Mr. Hanley
  Neither this nor any other Department carries out such assessments. We do, however, welcome the involvement of British companies and universities in this kind of work.

SOCIAL SECURITY

  Benefit Fraud Hotline
  Mr. Gareth Wardell
  To ask the Secretary of State for Social Security how many calls have been made on the benefit fraud hotline to date; how many of those have been found to provide information that was substantiated; and if he will separately distinguish the figures between England and Wales. [9690]

  Mr. Heald
  The national benefit fraud hotline has received in excess of 125,000 calls up to 12 December 1996.
  619
  Information is not collected to show numbers of calls where the information was substantiated—where our investigations entirely confirm the caller's allegation. The results of investigations from referrals generated by the hotline are only starting to emerge. However, of the 25,942 investigations initiated by the end of November, 11,180 have been completed. Of these, 3,082 investigations have achieved benefit savings of £11,760,635.

  Fraud investigations take some time to follow through, depending on the complexity of the investigation. Therefore in time, the volume and rate of investigations completed will increase until a steady state is achieved.

  It is not possible to give separate figures for England and Wales as the information is not collected in this format.

  Asylum Seekers
  Ms Harman
  To ask the Secretary of State for Social Security (1) what representations his Department has made to the Home Office to resolve difficulties concerning the prompt payment of benefit to eligible asylum seekers arising from the absence in form IS96 of a sign as to whether a claim for asylum has been made; and if he will make a statement; [10790]

  (2) what steps his Department is taking to resolve problems in the Benefits Agency concerning delays in the issuing of benefit payments to eligible asylum seekers arising from the fact that form IS96 does not show that a claim for asylum has been made. [10791]

  Mr. Roger Evans
  Form IS96 is issued to any person from abroad granted temporary admission under the written authority of an immigration officer. Officials from this Department and from the Home Office have met to discuss this issue and have concluded that it is not appropriate to annotate form IS96 issued to an asylum seeker because it is not a secure document and does not lend itself to be adapted for that purpose.

  An adjudication officer must be satisfied as to the true identity of a claimant before a benefit claim can be actioned. The bearer of form IS96: may not be an asylum seeker; may have been issued with more than one IS96 at different times, or may already have been refused leave to enter this country and granted temporary admission pending removal. Therefore, form IS96, annotated or otherwise, is unsuitable for use as a trigger for the payment of a social security benefit.

  Departmental officials are in regular discussion with officials from the Home Office to improve the exchange of information between the two departments, to enable adjudication officers to verify the circumstances of asylum seekers' claims promptly.

  War Widows' Pensions
  Mr. William Powell
  To ask the Secretary of State for Social Security how many pensions are currently being paid to war widows; and how many of these relate to service up to(a) 30 September 1921 and (b) 31 December 1945. [11075]
  620
  Mr. Heald
  The information is not available in the format requested and could be provided only at disproportionate cost. Such information as is available is as follows:

  A war widow's pension may be awarded where the death of the husband is due to service in the armed forces at any time. The number of war widows pensions in payment at 31 December 1996, the latest date for which figures are available, is 59,611. At 31 December 1995, a total of 1,544 awards were in respect of service up to 30 September 1921.

  Cold Weather Payments
  Mr. Simpson
  To ask the Secretary of State for Social Security how many cold weather payments were made in(a) December 1996 and (b) January 1997 to date. [11607]

  Mr. Roger Evans
  An estimated 1,410,720 payments were made in December. The number of payments so far in January, up to and including 17 January, is estimated to be 3,687,380.

  Mr. Simpson
  To ask the Secretary of State for Social Security which of the weather stations triggered cold weather payments in December 1996 and January 1997 to date; and how often each station triggered payments during this period. [11859]

  Mr. Evans
  The information is as follows:

  Triggers

  Weather station

  December

  January

  Abbotsinch (Glasgow Airport)

  —

  2

  Aberporth

  —

  1

  Aviemore

  2

  2

  Bedford

  2

  —

  Bingley

  —

  1

  Boltshope Park

  2

  1

  Boscombe Down

  1

  1

  Bracknell

  1

  1

  Braemar

  2

  2

  Brize Norton

  2

  —

  Capel Curig

  1

  1

  Cardinham

  1

  1

  Carlisle

  —

  1

  Chivenor

  —

  1

  Coltishall

  —

  2

  Crosby

  —

  1

  Culdrose

  —

  1

  Dumfries

  1

  —

  Dunkeswell

  2

  1

  Elmdon (Birmingham Airport)

  2

  —

  Eskdalemuir

  2

  1

  Eskmeals

  —

  1

  Flyingdales

  —

  1

  Gatwick

  1

  1

  Great Malvern

  —

  2

  Heathrow

  —

  2

  Herstmonceux

  2

  —

  Hum (Bournemouth Airport)

  1

  1

  Kinloss

  1

  2

  Linton on Ouse

  1

  1

  Liscombe

  2

  1

  Loch Glascarnoch

  2

  1

  Lyneham

  2

  1

  Manston

  1

  1

  Marham

  1

  2

  Mumbles Head

  —

  2

  Nottingham

  —

  2

  Plymouth

  —

  1

  621

  Triggers

  Weather station

  December

  January

  Portland

  —

  1

  Rhoose (Cardiff Airport)

  —

  2

  Rhyl

  —

  1

  Ringway (Manchester Airport)

  —

  1

  Sennybridge

  2

  1

  Shawbury

  1

  1

  Southampton

  —

  2

  St. Mawgan

  —

  2

  St. Catherine's Point

  —

  2

  Stansted

  1

  2

  Thorney Island

  —

  2

  Tulloch Bridge

  2

  1

  Waddington

  1

  1

  Wattisham

  1

  2

  Wick Airport

  —

  1

  Wittering

  2

  1

  Yeovilton

  1

  1

  Mr. Simpson
  To ask the Secretary of State for Social Security what is the average size of area covered by the weather stations responsible for triggering cold weather payments. [11858]

  Mr. Evans
  The average size of area covered by the 70 weather stations used in the cold weather payments scheme this winter is about 1,250 sq miles per station.

  Mr. Wigley
  To ask the Secretary of State for Social Security if he will arrange for the entitlement for cold weather payments in the Caernarfon constituency to be triggered by the temperature readings in the village of Deiniolen rather than at RAF Valley; and if he will make a statement. [11961]

  Mr. Evans
  No. Only weather stations which meet Meteorological Office requirements are suitable for the cold weather payments scheme. There are no such facilities at Deiniolen of which the Meteorological Office is aware or which meet its requirements.

  Personalised Number Plates (Executive Agencies)
  Mr. Donohoe
  To ask the Secretary of State for Social Security how many personalised number plates there are in the ownership of the executive agencies operated by his Department; and if he will list them. [11419]

  Mr. Burt
  None.

  Child Care Facilities
  Mr. Allen
  To ask the Secretary of State for Social Security if Ministers are entitled to use child care facilities supported by his Department. [11591]

  Mr. Burt
  Yes.

  Maternity Leave
  Mrs. Roche
  To ask the Secretary of State for Social Security (1) how many small employers reclaimed money under the small firms relief scheme for statutory maternity leave in 1995–96; [11810]

  (2) how much money was reclaimed by small employers over each of the last five years under the small employers relief fund for statutory maternity pay. [11813]
  622
  Mr. Heald
  The statutory maternity pay small employers' relief scheme was introduced from 4 September 1994 when the reimbursement rate for SMP was changed to 92 per cent. The scheme allows small businesses paying £20,000 or less annually in national insurance contributions to continue to receive full reimbursement of their SMP costs.

  Employers are not required to distinguish in their end-of-year returns between reimbursement under small employers' relief and the 92 per cent. rate. In 1994–95, £443 million was reclaimed by all employers this includes 100 per cent. reimbursement for all employers for the first six months.

  Information about employers' payments for 1995–96 will be available from May 1997 when employers' end-of-year returns have been assessed. It is estimated that around 38 per cent. of firms paying SMP were able to recover payments in full in 1995–96.

  Appeal Tribunals (Membership)
  Mr. Flynn
  To ask the Secretary of State for Social Security which former hon. Members are now members of social security appeal tribunals or disability appeal tribunals. [12145]

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

  Computers
  Mr. McNamara
  To ask the Secretary of State for Social Security (1) what is the nature of the design faults in his Department's national computer which necessitate its being closed down when a claimant's partner's claim is being considered; [10917]

  (2) who was responsible for the design of the computer system operated by his Department; and who operates it; [10918]

  (3) when the faults in his Department's computer system will be rectified. [10919]

  Mr. Roger Evans
  The administration of income support is a matter for Peter Mathison, the chief executive of the Benefits Agency. He will write to the hon. Member.

  Letter from Peter Mathison to Mr. Kevin McNamara, dated 21 January 1997:
  The Secretary of State for Social Security has asked me to reply to your recent Parliamentary Questions asking what is the nature of the design faults in his Department's national computer which necessitated it being closed down when a claimant's partner's claim is being considered; who was responsible for the design of the computer system operated by his Department, and who operates it and when the faults in his Department's computer system will be rectified.
  I have assumed your question refers to the recent incident at the Benefits Agency (BA) Hull District on 29 October 1996 when a customer was incorrectly informed that a payment could not be made due to a fault on the computer system which would not allow acceptance of a partner's National Insurance number.
  This is not a design fault of the income Support Computer System (ISCS) but is specifically included as a measure to prevent duplicate payments of benefit. The office has now informed all relevant staff of the procedures to enable clerical payments to be considered at an early stage where appropriate.
  I apologise that the information given previously to one of our customers was incorrect and for the inconvenience caused.

  623
  Information Technology Services Agency (ITSA) is an Executive Agency of the DSS. ITSA provides, either internally or through contracts with the private sector, the information technology services required to support social security provision. ITSA, in partnership with the BA and companies from the private sector is responsible for the design and operation of the ISCS.
  When any potential problems on ISCS are reported they are investigated by a combined support team of BA and ITSA staff. If a fault in the system is discovered as the cause of a problem, instructions are given to the users on how to deal with the matter whilst the fix to the system is scheduled. The resolution of identified faults is prioritised according to specified criteria.
  I hope you find this reply helpful.

EDUCATION AND EMPLOYMENT

  Capital Spending Projects (Schools)
  Mr. Don Foster
  To ask the Secretary of State for Education and Employment what estimate she has made of the value of the capital spending projects in schools which have taken advantage of the private finance initiative. [11340]

  Mrs. Gillan
  My hon. Friend the Minister of State for Local Government announced on 8 October 1996 that the Government would make available additional revenue support for £50 million of PFI investment in the local education authority schools sector between then and 31 March 1998. A good number of LEAs are very keen to reap the benefits of PFI partnerships with the private sector, and the are developing projects covering a wide range of asset-based services for schools. Provision is also available for grant maintained and voluntary-aided school PFI projects.

  Clinical and Academic Medicine (Pay Parity)
  Miss Emma Nicholson
  To ask the Secretary of State for Education and Employment what factors underlay her decision to end pay parity between clinical and academic medicine. [11771]

  Mr. Forth
  My right hon. Friend has taken no such decision. Indeed, she announced at the time of the Budget statement that a new condition of grant would be placed on the Higher Education Funding Council for England from 1997–98 requiring the council to enable universities and colleges to meet any additional costs for medical schools arising from any pay increase awarded by the Government to NHS clinicians.

  Teachers (Early Retirement)
  Mr. Blunkett
  To ask the Secretary of State for Education and Employment what advice she has issued to the Funding Agency for Schools in respect of the proposed changes to the early retirement provisions in the teachers's superannuation arrangements. [12072]

  Mrs. Gillan
  The Funding Agency for Schools has received a copy of the Department's consultation letter of 22 October on this matter. Advice on these changes was also set out in the annual grant letter to the agency, setting out the planned funding for the grant-maintained sector in 1997–98 and beyond. A copy of that letter was placed in the Library on 28 November 1996.
  624
  Mr. Tipping
  To ask the Secretary of State for Education and Employment if she will list those who have responded to her consultation document on the proposed changes in the teachers pension fund. [11959]

  Mrs. Gillan
  My right hon. Friend has so far received written representations from 33 consultees in respect of the proposed changes to early retirement provisions for teachers. They are listed in the table.

  List of consultees who have submitted written representations to the Secretary of State in respect of proposed changes to the TSS

  Association of Colleges

  Association for College Management

  Association of GM and Aided Schools

  Association of Headteachers of GM Schools

  Association of Teachers and Lecturers

  Committee of Vice-Chancellors and Principals

  Free Church Federal Council—Education Committee

  Further Education Funding Council

  Girls Public Day School Trust

  GM Schools Advisory Committee

  Governing Bodies of Girls' Schools Association

  Governing Bodies' Association

  Headmasters' Conference

  Higher Education Funding Council for England

  Incorporated Association of Preparatory Schools

  Independent Schools Association

  Independent Schools Bursars' Association

  Independent Schools Joint Council

  National Association of Head Teachers

  National Association of Schoolmasters/Union of Women Teachers

  National Association of Teachers in Further and Higher Education

  National Governors Council

  National Union of Teachers

  Professional Association of Teachers

  Secondary Heads Association

  Sixth Form Colleges Employers' Forum

  Society of Education Officers

  Teacher Training Agency

  Teachers' Superannuation Working Party

  Universities and Colleges Employers Association

  Welsh Local Government Association

  Welsh Office

  Workers' Educational Association

  Mr. Harvey
  To ask the Secretary of State for Education and Employment what estimate she has made of the number of teachers in Devon who have taken early retirement; and what percentage did so on the grounds of ill health, in each of the past five years. [12009]

  Mrs. Gillan
  The following table shows the information for teachers taking early retirement from the maintained nursery, primary, secondary and special sector in Devon.
  625

  Financial year

  Number of early retirements1

  Percentage retiring on ill-health grounds

  1991–92

  167

  47

  1992–93

  196

  42

  1993–94

  243

  40

  1994–95

  216

  54

  1995–96

  300

  34

  (provisional)

  1 Excludes those last recorded as in sixth form colleges.

  Mr. Blunkett
  To ask the Secretary of State for Education and Employment (1) what guidance the Funding Agency for Schools has issued to head teachers of grant-maintained schools in respect of premature retirements in 1997–98 and beyond; [12073]

  (2) what estimate has been made of the resources available to the Funding Agency for Schools to fund the cost of premature retirements following changes to the regulations. [12074]

  Mrs. Gillan
  The Funding Agency for Schools will offer assistance towards the cost of premature retirement in GM schools in 1997–98 and beyond on a case by case basis, according to criteria set by the agency, from within the total allocation set aside for special purpose grants. It is for the Agency to determine what advice and financial assistance is made available to GM schools in respect of premature retirements having regard to the proposed changes in the regulations. I have asked the chairman of the Funding Agency for Schools to write to the hon. Member with this information.

  Mr. Tipping
  To ask the Secretary of State for Education and Employment if she will place copies of the responses to her consultation document on teachers pension fund in the Library. [11960]

  Mrs. Gillan
  I will place copies of the responses from consultees to our proposals for the reform of early retirement arrangements for the teachers' superannuation scheme in the Library, except for any where the consultee has asked for the response to remain confidential.

  Mr. Hardy
  To ask the Secretary of State for Education and Employment what is the total number of teachers who have retired before the age of 60 years for reasons of health or disability during the last four years. [11850]

  Mrs. Gillan
  The numbers of teachers who have retired on grounds of ill health before the age 60 in each of the last four years is given in the table.

  Year

  Number of retirees

  1992–93

  4,900

  1993–94

  5,730

  1994–95

  6,303

  1995–96

  5,980

  Local Education Authorities (Finance)
  Dr. Lynne Jones
  To ask the Secretary of State for Education and Employment if she will list the capital allocations for 1997–98 to each local education authority(a) in cash terms and (b) at 1995–96 prices together with the average allocation at 1995–96 prices for the five years between 1992–93 and 1996–97 for each authority. [11958]
  626
  Mrs. Gillan
  The table lists each local education authority's 1997–98 annual capital guideline in cash terms and at 1995–96 prices. It also lists, at 1995–96 prices, the average capital allocation—annual capital guideline plus any supplementary credit approvals—for each LEA for the period 1993–94 to 1996–97. Comparable data for 1992–93 can be provided only at disproportionate cost.

  We expect to issue further supplementary credit approvals in 1996–97, and to issue supplementary credit approvals totalling about £66 million—or £63 million at 1995–96 prices—in 1997–98. The table does not include allocations under capital challenge.

  LOCAL EDUCATION AUTHORITIES CAPITAL ALLOCATIONS (Annual capital guidelines and supplementary credit approvals)

  Real terms1 = 1995–96 prices

  All figures in £000

  LEA

  1997–98 ACG

  1997–98 ACG in real terms

  Average real terms allocation 1993–94 to 1996–97

  Avon

  —

  —

  6,425

  Barking

  1,021

  977

  2,028

  Barnet

  901

  862

  2,838

  Barnsley

  1,153

  1,103

  2,622

  Bath and North-east Somerset

  1,221

  1,168

  388

  Bedfordshire

  2,247

  2,149

  2,313

  Berkshire

  1,634

  1,563

  3,605

  Bexley

  3,545

  3,391

  1,914

  Birmingham

  1,061

  1,015

  8,762

  Bolton

  1,422

  1,360

  802

  Bournemouth

  1,470

  1,406

  —

  Bradford

  3,981

  3,808

  6,650

  Brent

  54

  52

  595

  Brighton and Hove

  3,004

  2,873

  —

  Bristol

  174

  166

  794

  Bromley

  1,035

  990

  1,979

  Bukinghamshire

  4,235

  4,051

  9,455

  Bury

  55

  53

  702

  Calderdale

  88

  84

  1,836

  Cambridgeshire

  6,985

  6,681

  7,721

  Camden

  36

  34

  541

  Cheshire

  4,833

  4,623

  8,680

  City

  0

  0

  3

  Cleveland

  —

  —

  5,567

  Cornwall

  6,372

  6,095

  4,015

  Coventry

  5,486

  5,247

  2,277

  Croydon

  308

  295

  1,454

  Cumbria

  3,484

  3,332

  6,137

  Darlington

  53

  51

  —

  Derby

  832

  796

  —

  Derbyshire

  2,110

  2,018

  7,962

  Devon

  10,958

  10,481

  11,425

  Doncaster

  790

  756

  5,258

  Dorset

  1,637

  1,566

  4,736

  Dudley

  691

  661

  1,270

  Durham

  7,670

  7,336

  4,271

  Ealing

  3,528

  3,374

  2,832

  East Riding of Yorkshire

  385

  368

  108

  East Sussex

  11,763

  11,251

  14,665

  Enfield

  7,550

  7,221

  3,973

  Essex

  8,563

  8,190

  11,035

  Gateshead

  1,884

  1,802

  2,785

  Gloucestershire

  7,823

  7,483

  10,550

  Greenwich

  1,376

  1,316

  791

  Hackney

  771

  737

  1,079

  Hammersmith

  125

  120

  481

  Hampshire

  9,306

  8,901

  16,154

  Haringey

  3,960

  3,788

  2,464

  Harrow

  1,097

  1,049

  2,912

  627

  LOCAL EDUCATION AUTHORITIES CAPITAL ALLOCATIONS (Annual capital guidelines and supplementary credit approvals)

  Real terms1 = 1995–96 prices

  All figures in £000

  LEA

  1997–98ACG

  1997–98ACG in real terms

  Average real terms allocation 1993–94 to 1996–97

  Hartlepool

  5

  5

  10

  Havering

  61

  58

  507

  Hereford and Worcester

  2,845

  2,721

  4,707

  Hertfordshire

  9,986

  9,551

  4,000

  Hillingdon

  2,038

  1,949

  2,072

  Hounslow

  3,095

  2,960

  3,005

  Humberside

  —

  —

  5,599

  Isle of Wight

  2,604

  2,491

  3,458

  Isles of Scilly

  49

  47

  54

  Islington

  72

  69

  384

  Kensington

  84

  80

  633

  Kent

  19,937

  19,069

  19,973

  Kingston upon Hull

  96

  92

  40

  Kingston upon Thames

  3,009

  2,878

  660

  Kirklees

  1,554

  1,486

  2,988

  Knowsley

  1,447

  1,384

  1,180

  Lambeth

  651

  623

  829

  Lancashire

  5,225

  4,998

  9,509

  Leeds

  7,046

  6,739

  4,353

  Leicester

  162

  155

  —

  Leicestershire

  1,563

  1,495

  5,710

  Lewisham

  813

  778

  1,510

  Lincolnshire

  5,949

  5,690

  9,585

  Liverpool

  4,947

  4,741

  3.866

  Luton

  845

  808

  —

  Manchester

  5,944

  5,685

  11,990

  Merton

  47

  45

  658

  Middlesbrough

  616

  589

  251

  Milton Keynes

  2,724

  2,605

  —

  Newcastle

  407

  389

  2,970

  Newham

  2,892

  2,766

  2,036

  Norfolk

  2,301

  2,201

  4,050

  North-east Lincolnshire

  474

  453

  58

  North Lincolnshire

  319

  305

  40

  North Somerset

  3,207

  3,067

  599

  North Tyneside

  1,116

  1,067

  3,360

  North Yorkshire

  3,789

  3,624

  4,708

  Northamptonshire

  6,693

  6,402

  5,022

  Northumberland

  1,325

  1,267

  2,513

  Nottinghamshire

  3,074

  2,940

  2,741

  Oldham

  1,630

  1,559

  2,126

  Oxfordshire

  5,167

  4,942

  5,852

  Poole

  1,067

  1,021

  —

  Portsmouth

  2,275

  2,176

  —

  Redbridge

  7,688

  7,353

  4,787

  Redcar and Cleveland

  169

  162

  285

  Richmond

  129

  123

  225

  Rochdale

  910

  870

  739

  Rotherham

  1,547

  1,480

  1,252

  Rutland

  4

  4

  —

  Salford

  4,462

  4,268

  4,129

  Sandwell

  2,481

  2,373

  1,648

  Sefton

  70

  67

  1,640

  Sheffield

  4,676

  4,473

  4,674

  Shropshire

  3,891

  3,722

  6,758

  Solihull

  2,425

  2,319

  2,172

  Somerset

  2,028

  1,940

  3,423

  South Gloucestershire

  4,414

  4,222

  599

  South Tyneside

  571

  546

  874

  Southampton

  512

  490

  —

  Southwark

  1,789

  1,711

  1,088

  628

  LOCAL EDUCATION AUTHORITIES CAPITAL ALLOCATIONS (Annual capital guidelines and supplementary credit approvals)

  Real terms1 = 1995–96 prices

  All figures in £000

  LEA

  1997–98ACG

  1997–98ACG in real terms

  Average real terms allocation 1993–94 to 1996–97

  St. Helen's

  526

  503

  1,257

  Staffordshire

  4,368

  4,178

  3,355

  Stockport

  737

  705

  860

  Stockton on Tees

  165

  158

  158

  Stoke

  196

  187

  —

  Suffolk

  4,610

  4,409

  7,576

  Sunderland

  4,658

  4,455

  3,806

  Surrey

  9,114

  8,717

  9,693

  Sutton

  3,484

  3.332

  2,201

  Tameside

  2,117

  2,025

  2,603

  Thamesdown

  1,054

  1,008

  —

  Tower Hamlets

  3,085

  2,951

  10,755

  Trafford

  4,096

  3,918

  1,404

  Wakefield

  4,037

  3,861

  10,567

  Walsall

  557

  533

  666

  Waltham Forest

  1,161

  1,110

  2,447

  Wandsworth

  50

  48

  2,103

  Warwickshire

  970

  928

  8,654

  West Sussex

  5,893

  5,637

  3,587

  Westminster

  608

  582

  373

  Wigan

  1,685

  1,612

  1,911

  Wiltshire

  4,311

  4,123

  3,130

  Wirral

  1,468

  1,404

  2,057

  Wolverhampton

  685

  655

  1,927

  York

  476

  455

  185

  Mr. Rooker
  To ask the Secretary of State for Education and Employment if she will list for each local education authority(a) its percentage of the national school population and (b) the percentage of extra resources from the increase in the latest standard spending assessment allocated to it. [11942]

  Mr. Robin Squire
  The following table sets out the percentage for each authority of the national total of pupils underlying the provisional education standard spending assessment calculations for 1997–98 and the provisional percentage for each authority of the £592 million increase in the national total of education standard spending assessments, net of specific grants. The further additional resources available through the specific grant programmes are not included in this analysis, as they are not necessarily allocated on the basis of pupil numbers.

  Some care must be taken in drawing conclusions from this table. Each authority's share of the extra resources will reflect the year on year change in its pupil numbers and therefore may not be proportionate to its share of the national total of pupil numbers. Variations in the shares of the extra resources are also affected in particular by year-on-year changes in the proportion of children in each authority who are entitled to free school meals.

  LEA

  SSA increase

  Pupil numbers

  City of London

  0.0

  0.0

  Camden

  0.5

  0.3

  Greenwich

  0.2

  0.5

  Hackney

  0.7

  0.3

  Hammersmith and Fulham

  0.3

  0.2

  Islington

  0.4

  0.3

  629

  LEA

  SSA increase

  Pupil numbers

  Kensington and Chelsea

  0.1

  0.1

  Lambeth

  0.0

  0.3

  Lewisham

  0.7

  0.4

  Southwark

  0.3

  0.4

  Tower Hamlets

  1.0

  0.5

  Wandsworth

  0.5

  0.4

  Westminster

  0.3

  0.2

  Barking and Dagenham

  0.8

  0.4

  Barnet

  0.9

  0.6

  Bexley

  0.8

  0.5

  Brent

  0.6

  0.5

  Bromley

  1.2

  0.6

  Croydon

  0.9

  0.6

  Ealing

  0.7

  0.5

  Enfield

  1.1

  0.6

  Haringey

  0.9

  0.4

  Harrow

  0.2

  0.4

  Havering

  0.4

  0.5

  Hillingdon

  0.7

  0.5

  Hounslow

  0.6

  0.5

  Kingston upon Thames

  0.3

  0.3

  Merton

  0.4

  0.3

  Newham

  1.3

  0.6

  Redbridge

  0.9

  0.5

  Richmond upon Thames

  0.4

  0.3

  Sutton

  0.5

  0.4

  Waltham Forest

  0.4

  0.4

  Birmingham

  1.6

  2.3

  Coventry

  0.6

  0.7

  Dudley

  0.5

  0.6

  Sandwell

  0.7

  0.7

  Solihull

  0.8

  0.5

  Walsall

  0.7

  0.6

  Wolverhampton

  0.3

  0.5

  Knowsley

  0.7

  0.4

  Liverpool

  1.3

  1.1

  St. Helens

  0.5

  0.4

  Sefton

  0.6

  0.6

  Wirral

  0.3

  0.7

  Bolton

  0.7

  0.6

  Bury

  0.4

  0.4

  Manchester

  -0.1

  0.9

  Oldham

  0.6

  0.5

  Rochdale

  0.6

  0.5

  Salford

  0.5

  0.5

  Stockport

  0.5

  0.6

  Tameside

  0.8

  0.5

  Trafford

  0.7

  0.5

  Wigan

  0.5

  0.7

  Barnsley

  0.4

  0.5

  Doncaster

  0.6

  0.7

  Rotherham

  0.5

  0.6

  Sheffield

  0.7

  1.0

  Bradford

  1.0

  1.2

  Calderdale

  0.4

  0.5

  Kirklees

  1.1

  0.8

  Leeds

  1.8

  1.5

  Wakefield

  0.7

  0.7

  Gateshead

  0.2

  0.4

  Newcastle upon Tyne

  0.3

  0.5

  North Tyneside

  0.3

  0.4

  South Tyneside

  0.5

  0.3

  Sunderland

  0.5

  0.7

  Isles of Scilly

  0.0

  0.0

  Bath and North-east Somerset

  0.2

  0.3

  Bristol

  0.4

  0.7

  North Somerset

  0.4

  0.4

  South Gloucestershire

  0.6

  0.5

  Hartlepool

  0.2

  0.2

  Middlesbrough

  0.2

  0.3

  Redcar and Cleveland

  0.1

  0.3

  Stockton on Tees

  0.4

  0.4

  Kingston upon Hull

  0.4

  0.6

  630

  LEA

  SSA increase

  Pupil numbers

  East Riding of Yorkshire

  0.7

  0.6

  North-east Lincolnshire

  0.3

  0.4

  North Lincolnshire

  0.3

  0.3

  North Yorkshire

  1.2

  1.1

  York

  0.2

  0.3

  Bedfordshire

  0.9

  0.8

  Luton

  0.3

  0.4

  Buckinghamshire

  0.7

  1.0

  Milton Keynes

  0.5

  0.5

  Derbyshire

  1.4

  1.5

  Derby

  0.7

  0.5

  Dorset

  0.7

  0.7

  Poole

  0.3

  0.3

  Bournemouth

  0.3

  0.3

  Durham

  0.4

  1.1

  Darlington

  0.2

  0.2

  East Sussex

  1.2

  0.9

  Brighton and Hove

  0.4

  0.4

  Hampshire

  2.1

  2.3

  Portsmouth

  0.1

  0.3

  Southampton

  0.3

  0.4

  Leicestershire

  1.2

  1.3

  Leicester

  0.0

  0.6

  Rutland

  0.0

  0.1

  Staffordshire

  1.7

  1.8

  Stoke on Trent

  0.5

  0.5

  Wiltshire

  0.9

  0.8

  Thamesdown

  0.4

  0.4

  Berkshire

  1.4

  1.6

  Cambridgeshire

  0.8

  1.4

  Cheshire

  2.1

  2.1

  Cornwall

  1.1

  1.0

  Cumbria

  0.9

  1.0

  Devon

  2.2

  2.1

  Essex

  2.9

  3.2

  Gloucestershire

  1.3

  1.1

  Hereford and Worcester

  1.0

  1.4

  Hertfordshire

  2.0

  2.2

  Isle of Wight Council

  0.4

  0.3

  Kent

  3.4

  3.3

  Lancashire

  3.1

  3.0

  Lincolnshire

  1.4

  1.3

  Norfolk

  1.2

  1.5

  Northamptonshire

  1.3

  1.3

  Northumberland

  0.8

  0.7

  Nottinghamshire

  1.8

  2.1

  Oxfordshire

  1.1

  1.1

  Shropshire

  0.9

  0.9

  Somerset

  0.7

  0.9

  Suffolk

  1.5

  1.3

  Surrey

  2.3

  1.8

  Warwickshire

  0.7

  1.0

  West Sussex

  1.0

  1.4

  100.0

  100.0

  Training (Small Firms)
  Mrs. Bridget Prentice
  To ask the Secretary of State for Education and Employment if she will make a statement regarding the provision of training to small firms. [10591]

  Mr. Paice
  Many small firms will benefit from the £49 million Government support for employers training this year through local training and enterprise councils, and from provision aimed at young people and the work of their local further education colleges. In addition, nearly 13,000 small firms have been helped in the last 18 months through skills for small businesses, skills challenge, and the small firms training loans initiative.
  631
  Following a comprehensive review of the Government's support for businesses, local provision will be available through the local competitiveness budget from April 1997. This will continue to provide wide ranging advice and support to small firms through TECs and business links. Any small firms wanting guidance on skills and training should contact its local TEC or business link.

  Mr. Callaghan
  To ask the Secretary of State for Education and Employment if she will make a statement regarding the adequacy of training available to small firms. [10604]

  Mr. Paice
  Small firms can access training through local employer-led bodies such as training and enterprise councils and business links. TECs' specific small firms initiatives have helped nearly 13,000 small firms develop their training effort in the last 18 months alone. Recently published statistics show that, nationally, 84 per cent. of smaller firms have provided training for their employees, using a variety of methods to suit their circumstances.

  As a direct response to business needs, the Government undertook a comprehensive review last year, aimed at simplifying support to businesses. A key outcome for my Department of this review is the establishment of the local competitiveness budget from April 1997. This will continue to provide wide-ranging advice and support to local firms through TECs and business links.

  Education and Business Links
  Mr. William O'Brien
  To ask the Secretary of State for Education and Employment if she will make a statement on the initiatives her Department is taking to develop links between small businesses and colleges of higher education. [10606]

  Mr. Forth
  This Department has responsibility for supporting the development of closer links between education and business, including in particular those between higher education and employment.

  The enterprise in higher education programme has initiated a range of links between employers and higher education institutions, and the Department also funds various development projects. I am placing a copy of the "Higher Education and Employment Projects Digest" in the Library.

  Two new suites of projects have been started in 199697 specifically to develop links between higher education institutions and small and medium-sized enterprises.
  The "using graduate skills" projects will develop strategies and tools to increase graduate recruitment by SMEs, and assist employers in making better use of the graduates they recruit; and
  The higher education business partnerships projects have similar aims, but the focus is more sharply on forming permanent employer-led partnerships between higher education and the SME sector.
  The teaching company scheme enables firms to take advantage of the wealth of scientific, engineering, technological and business knowledge available in our universities with graduates working in a company for two years on projects central to the company's needs;
  632
  The postgraduate training partnerships initiative, which is jointly supported by DTI, involves the annual recruitment into each partnership of up to 10 postgraduate students to undertake industrially relevant research;
  The Shell technology enterprise programme is a Shell UK national placement scheme, part-funded by the DTI, which provides undergraduates with relevant industrial experience; and
  The focus technology programme, run in association with business links, aims to help research and technology organisations and higher education institutions to improve the contact they have with small firms and the technological services they provide to them.

  Education Welfare Service
  Mr. Blunkett
  To ask the Secretary of State for Education and Employment what consultation she undertook with members of the education welfare service, in drawing up the exclusion measures currently before Parliament. [11567]

  Mr. Forth
  The Department is in regular contact on a wide range of issues with the Association for education welfare managers and the National Association of Social Workers in Education. Consultations on specific measures in the current Education Bill included the local authority associations, which are representative of those responsible for the education welfare service.

  Nursery Vouchers
  Mr. Blunkett
  To ask the Secretary of State for Education and Employment what is the average pupil-teacher ratio in reception classes in the phase 1 areas of the nursery voucher scheme. [11563]

  Mr. Robin Squire
  Information about pupils and teachers in reception classes it not collected centrally.

  Mr. Blunkett
  To ask the Secretary of State for Education and Employment (1) if she will list the providers that have withdrawn from the nursery voucher scheme, indicating in each case(a) the reason for their withdrawal and (b) if they are in the public, voluntary or private sector; [11570]

  (2) if she will list the providers that were initially validated in the nursery voucher scheme, but have subsequently closed, stating in each case (a) the reason given for their closure and (b) whether they are in the public, voluntary or private sector. [11571]

  Mr. Robin Squire
  The number of providers in the nursery education voucher scheme will fluctuate for a variety of reasons. Of the 1,142 providers who joined phase 1 of the scheme, 40—3 per cent.—have subsequently withdrawn; a list has been placed in the Library. Twenty of these did not redeem any vouchers in either the summer or autumn terms. I understand that nine providers have closed and given as their reason for closure that too few parents chose to redeem their vouchers there. The providers who have withdrawn exchanged 446 voucher parts in respect of 122 children—less than 0.2 per cent. of the total.
  633
  Mr. Blunkett
  To ask the Secretary of State for Education and Employment when data on term 2 of the pilot phase of the nursery voucher scheme will be available. [11568]

  Mr. Squire
  Detailed information on the operation of phase 1 of the nursery education voucher scheme in the first half of the autumn term has been sent to the House of Commons Education and Employment Select Committee and placed in the Library. Information about the issue and redemption of vouchers in the second half of the autumn terms will be available shortly.

  Mr. Blunkett
  To ask the Secretary of State for Education and Employment how many hours of provision per(a) week and (b) day voucher-bearing children receive on average in each of phase 1 areas and overall. [11569]

  Mr. Squire
  Information is not available in this form.

  Tables 6.5 and 6.7 of the Department's report on phase 1 of the nursery voucher scheme show the numbers of sessions attended by voucher redeeming children in summer term 1996. An analysis of data for the first half of the autumn term 1996 has been placed in the Library: Table 5 gives similar information for the autumn term 1996, and shows an increase in the average number of sessions attended from 4.71 in the summer term to 4.92 in the autumn term.

  Providers in the voucher scheme must provide a session of around 2.5 hours for each voucher part, but are free to offer more if they wish. Provision in nursery schools and classes is predominantly part time (half day) and in reception classes full time (full day).

  Mr. Blunkett
  To ask the Secretary of State for Education and Employment what proportion of providers in(a) the private sector and (b) the voluntary sector, participating in phase 1 of the voucher scheme, carried out the self-assessment schedule. [11572]

  Mr. Squire
  The purpose of the self-assessment schedule was to help potential providers establish whether they could meet the conditions for joining the nursery education voucher scheme and to help them review their current practices. All phase 1 providers were encouraged to complete a self-assessment schedule.

  Mr. Blunkett
  To ask the Secretary of State for Education and Employment further to her Department's report on phase 1, November 1996, what further analysis(a) has been carried out and (b) is planned, of those parents of eligible children who (i) failed to claim a voucher, (ii) failed to redeem a voucher and (iii) redeemed only part of a voucher. [11573]

  Mr. Squire
  A survey of parents in the phase 1 areas to establish participation in pre-school education included questions to explore why not all eligible parents claimed vouchers for summer term 1996; or when they did claim vouchers, why they did not use some or all of them. The survey results are being analysed.

  Geographical patterns of redemption and non-redemption of vouchers in the autumn and spring terms 1996–97 will also be examined.

  Nursery Inspectors
  Mr. Blunkett
  To ask the Secretary of State for Education and Employment (1) how many people have 634
  (a) applied to become a nursery education inspector, (b) embarked on the course to become a nursery education inspector and (c) successfully completed that course and qualified as a nursery education inspector; [11561]

  (2) how many providers participating in phase 1 of the voucher scheme have been found by inspectors to have unacceptable standards of provision; [11562]

  (3) how many and what proportion of private and voluntary sector providers in phase 1 of the voucher scheme have been inspected by Ofsted, at the most recent date for which figures are available; and how many such inspection reports have been published; [11564]

  (4) how many nursery education inspectors have successfully completed training; and what is the target number of nursery education inspectors for phase 2 of the nursery voucher scheme; [11566]

  (5) when the Ofsted report on the operation of the voucher scheme in the phase 1 areas will be published. [11574]

  Mr. Robin Squire
  These are matters for Her Majesty's Chief Inspector of Schools. I have asked Mr. Chris Woodhead to write to the hon. Member.

TRANSPORT

  Vehicle Emissions
  Mr. Amess
  To ask the Secretary of State for Transport if he will make a statement about the implementation of the proposals announced by the Chancellor in his recent Budget speech on vehicle excise duty incentives for lorries meeting low emissions standards. [12658]

  Mr. Bowis
  We are today issuing a consultation paper on vehicle excise duty incentives for lorries meeting low emissions standards. Copies have been placed in the Library. The Chancellor's 1996 Budget Statement announced his intention to reduce VED by up to £500 per year for lorries meeting these standards. It is planned to introduce the incentive in early 1998 following this consultation on the practical details of implementation of the measure.

  The consultation paper seeks views on the administration and enforcement of the VED incentive. The closing date for comments is 22 April 1997. In the light of the replies, we will consider the most appropriate way of implementing the concession.

  Emergency Towing Vessels
  Mr. Amess
  To ask the Secretary of State for Transport if he will release the report of the trials of two emergency towing vessels during the winters of 1994–95 and 1995–96. [12659]

  Mr. Bowis
  Copies of the Coastguard Agency's report have today been placed in the Library.

  Milford Haven Port Authority
  Mr. Dafis
  To ask the Secretary of State for Transport what recent assessment he has made of the effectiveness
  635
  of the Milford Haven port authority; what measures he has (a) taken and (b) proposes to improve the operations of the authority; and if he will make a statement. [11351]

  Mr. Bowis
  The operation of the Milford Haven port authority is governed by the Milford Haven Conservancy Act 1983, which does not provide a basis for such an assessment. The terms of reference for the Marine Accidents Investigation Branch investigation into the causes of the grounding and salvage of the Sea Empress cover, inter alia, the safety of port operations in relation to that incident.

  MV Canberra (Inquiry)
  Mrs. Dunwoody
  To ask the Secretary of State for Transport what action(a) his Department and (b) the Marine Safety Agency is taking against (i) the operators and (ii) the officers and crew of the MV Canberra following the recent publication of the Marine Accidents Investigation Branch report into the incident in December 1994. [11516]

  Mr. Bowis
  No action has been taken by this Department or the Marine Safety Agency against the operators and crew of the MV Canberra. Although the MAIB investigation highlighted a number of deficiencies in both equipment and operational procedures onboard, these were not considered to justify prosecution.

  Between the 1994 incident and the 1996 Marine Accidents Investigation Branch report, the operators initiated a number of modifications to the boiler fuel system and operational procedures in order to prevent a similar accident happening again. We are satisfied that lessons learnt from the Canberra incident have been addressed.

TRADE AND INDUSTRY

  Qualified Majority Voting
  Mr. Waterson
  To ask the President of the Board of Trade what is his assessment of the effect of an extension of qualified majority voting within the social chapter on British business. [10607]

  Mr. John M. Taylor
  Thanks to our hard won opt-out from the social chapter, legislation adopted under it does not apply to businesses in the UK, irrespective of the voting mechanism.

  World Trade Organisation
  Mr. Benton
  To ask the President of the Board of Trade if he will make a further statement on the outcome of the recent WTO meeting in Singapore. [10608]

  Mr. Nelson
  Good progress was made on the United Kingdom's objectives in Singapore; a substantial programme of trade liberalisation was agreed; an information technology agreement was agreed in principle by the EU, US and 11 other countries; and progress was made towards an agreement to open up world telecom markets by February this year.
  636
  Mr. Fabricant
  To ask the President of the Board of Trade what assessment he has made of the impact of the World Trade Organisation meeting in Singapore on trade between the United Kingdom and North America. [10621]

  Mr. Lang
  The gains and benefits that will result from the recent WTO ministerial meeting in Singapore have not been assessed on a market basis. As an indicator of the importance of the information technology agreement to UK firms buying and selling IT equipment, the potential reduction in tariffs payable on UK IT imports and exports is estimated to be around £250 million. The value of the agreement between the EU and the US on the elimination of tariffs on brown and white spirits by the year 2000 has not yet been quantified, but it will offer significant benefits to the British drinks industry and has been welcomed by them. While any estimates are necessarily tentative, taking account of the large number of countries which have yet fully to liberalise their markets, and the potential for growth, a comprehensive WTO agreement to liberalise telecoms, negotiations for which are due to be completed in February 1997, could be worth £12 billion ($20 billion) in revenue to British companies by the year 2010. A significant proportion of this would be business on the UK-North America routes.

  Electricity Industry
  Ms Eagle
  To ask the President of the Board of Trade what recent representations he has received regarding takeovers and mergers in the electricity industry. [10611]

  Mr. Lang
  I refer the hon. Member to the answer I gave the hon. Member for Delyn (Mr. Hanson) earlier today.

  Small Businesses
  Mr. Bellingham
  To ask the President of the Board of Trade what plans he has to meet representatives of small business organisations to discuss schemes to encourage enterprise. [10612]

  Mr. Lang
  My ministerial colleagues and I meet small business representative organisations on a regular basis to discuss a wide range of issues.

  Mrs. Roche
  To ask the President of the Board of Trade what estimate his Department has made of the number of(a) forms and (b) regulatory visits which firms with (i) under 100 employees, (ii) under 50 employees and (iii) under 10 employees have to undertake each year. [11811]

  Mr. Page
  The information requested is not available.

  Industrial Action
  Dr. Goodson-Wickes
  To ask the President of the Board of Trade what assessment he has made of the cost of strikes to industry in the United Kingdom in 1996. [10613]

  Mr. John M. Taylor
  I have not made an assessment of the costs to British industry of strikes in 1996, but the number of days lost due to industrial stoppages was nearly four times as high as in the previous year, causing disruption to many businesses and the lives of millions of people.

  Privatisation
  Mr. John Marshall
  To ask the President of the Board of Trade what assessment he has made of the impact of privatisation on industry efficiency. [10614]

  Mr. Lang
  Privatisation is a major element in the Government's strategy to promote efficiency in the economy. It has led to increased investment, lower prices, better services and wider choice for consumers. A recent assessment by the Organisation of Economic Co-operation and Development concluded that"since privatisation, most of the regulated utilities have achieved substantial improvements in productivity".

  Public Sector Research Establishments
  Mr. Hall
  To ask the President of the Board of Trade if he will make a statement on the progress of the Government's prior options review of the public sector research establishments. [10615]

  Mr. Ian Taylor
  The Government are considering the prior options review reports. We are determined to achieve the greatest possible benefit from the substantial resources devoted to the public sector research establishments. We expect to make further announcements about outstanding decisions in the near future.

  Nano-technology
  Mr. Flynn
  To ask the President of the Board of Trade what proposals he has to increase research into nano-technology. [10616]

  Mr. Ian Taylor
  The Government are committed to innovation and the application of research across the full range of technologies including nano-technology. At least two new projects relevant to nano-technology have recently been introduced through the foresight programme, including a national centre for microelectronics. It is for the research councils, universities, academics and industry to take forward specific projects where appropriate.

  Manufacturing Industry
  Mr. Stevenson
  To ask the President of the Board of Trade what was the total capital expenditure by manufacturing industries, revalued at 1990 prices, in(a) 1995, (b) 1989 and (c) 1979. [10617]

  Mr. Greg Knight
  £12.6 billion, £15.0 billion and £13.6 billion respectively.

  Working Time Directive
  Mr. Clapham
  To ask the President of the Board of Trade what proposals he has made to the Commission to complete the working time directive in 1997. [10619]

  Mr. Lang
  None. My Department is currently consulting widely on implementation of the working time directive.

  Private Creditors
  Mr. McNamara
  To ask the President of the Board of Trade if he will make a statement concerning private creditors of firms going into liquidation. [10620]
  638
  Mr. John M. Taylor
  There is no category of private creditor recognised by the insolvency legislation. Creditors are, therefore, either secured, preferential or unsecured and a private individual could fall into any one of these categories. Their rights are determined in most cases by their contract with the company and by statutory provisions contained principally in the Insolvency Act 1986.

  Industrial Development Boards
  Mr. Jamieson
  To ask the President of the Board of Trade what recent assessment he had made of the procedures relating to industrial development boards. [10622]

  Mr. Greg Knight
  In general, the procedures for regional industrial development boards work well. The boards provide valuable advice to my Department in assessing the case for financial assistance to industrial and commercial investment projects. Some changes were introduced recently to provide additional guidance on conflicts of interest and on the size and quorum of industrial development boards. We are also continuing to develop additional procedures which take account of the recommendations of Lord Nolan's committee on standards in public life.

  Regional Policy
  Mr. Watson
  To ask the president of the Board of Trade if he will make a statement on the impact of the European Commission's first cohesion report on regional policy in the United Kingdom. [10623]

  Mr. Greg Knight
  I refer the hon. Member to the reply that I gave to the hon. Member for Wolverhampton, South-East (Mr. Turner) on 4 December 1996,Official Report, column 696.

  Manufacturing Exports
  Mr. Purchase
  To ask the President of the Board of Trade if he will make a statement about exports of manufactured goods to the European Union. [10624]

  Mr. Greg Knight
  The value of UK exports of manufactures to the European Union reached a record £74 billion in 1995, nearly 17 per cent. higher than in 1994. In the 12 months to October 1996, the value of exports of manufactures to the EU increased by over 8 per cent. compared with a year earlier.

  Manufacturing Investment
  Mr. Pope
  To ask the President of the Board of Trade if he will make a statement on the change in manufacturing investment in the past 12 months. [10625]

  Mr. Greg Knight
  I refer the hon. Member to the oral answer given by my hon. Friend the Minister for Trade to the hon. Member for Worsley (Mr. Lewis) earlier today. Currently, the conditions for investment are extremely favourable.

  Employee Participation
  Mr. Chris Davies
  To ask the President of the Board of Trade what is his policy towards the encouragement of employee participation within British companies. [10626]
  639
  Mr. John M. Taylor
  The Government support voluntary employee involvement by encouraging and publicising good practice, funding research, and through tax incentives for financial participation. Employee involvement arrangements should be tailored to each business's circumstances, not imposed by legislation.

  Competition Policy
  Mr. Charles Kennedy
  To ask the President of the Board of Trade when he last met the Director General of Fair Trading to discuss competition policy. [10610]

  Mr. John M. Taylor
  My right hon. Friend the President of the Board of Trade last met the Director General of Fair Trading to discuss competition policy on 28 November 1996. Meanwhile, I met the director yesterday.

  UK Space Industry
  Mr. Waller
  To ask the President of the Board of Trade if he will announce the results of the recent study of the United Kingdom space industry. [12541]

  Mr. Ian Taylor
  The major findings of the study undertaken on behalf of the British National Space Centre showed that, during the financial years 1994–95 and 1995–96, consolidated turnover increased in real terms by 26 per cent. to £613 million. Total UK space turnover is estimated at £740 million for 1995–96. Employment in the UK space sector has risen by 3 per cent. to 6,500. Mean value added per employee, which can be used as an indicator of competitiveness, increased in real terms over the past two years by 20 per cent.

  Radiocommunications Agency
  Mr. Waller
  To ask the President of the Board of Trade what changes he proposes to the service which the Radiocommunications Agency provides to investigate interference to domestic television and radio reception. [12543]

  Mr. Ian Taylor
  The agency currently charges £40 to visit householders to diagnose reception difficulties. This charge will be increased to £45 with effect from 1 April 1997 and will help to ensure that the agency does not undercut the private sector for this type of work. The agency continues to provide a free service to check specific sources of interference to television and radio reception in accordance with it regulatory duties.

  Policyholders Protection Act
  Mr. Waller
  To ask the President of the Board of Trade when he intends to amend the Policyholders Protection Act 1975; and if he will make a statement. [12542]

  Mr. Nelson
  My right hon. Friend the President of the Board of Trade announced his intention to amend the Policyholders Protection Act 1975 on 23 October 1995,Official Report, column 417, as soon as Parliamentary time permitted. My hon. Friend the Member for Bournemouth, West (Mr. Butterfill) has now introduced a Bill which implements all but one of the Government's proposals to amend this Act. The Bill is due to receive its Second Reading on Friday 24 January. The Government fully support the Bill.
  640
  The main objectives of the Bill are to amend the geographic coverage of the 1975 Act by excluding insurance risks outside the European Economic Area from the compensation scheme; to modernise its provisions in relation to the failure of non-life insurance companies; and to change some administrative procedures designed to speed up settlement of claims against insolvent insurance companies.

  The Bill also includes a proposal explicitly to extend the Act's compensation scheme to insurance policies issued by branches of United Kingdom companies in the Channel islands and Isle of Man covering risks in those territories. Hitherto, there has been some legal doubt about whether this business was covered.

  The Bill proposed by my hon. Friend the Member for Bournemouth, West does not include the Government's proposal to limit partnership benefits to those provided to incorporated bodies in the Policyholders Protection Act 1975. The Government intend to review this proposal.

  Payment Practice
  Mrs. Roche
  To ask the President of the Board of Trade when he plans to announce the results of his Department's consultation on stating payment practice in annual accounts. [11812]

  Mr. Page
  I shall announce the results of my Department's consultation on payment practice shortly.

  Prohibited Weapons (Export)
  Mr. Cohen
  To ask the President of the Board of Trade if it is Government policy to permit the export of weapons prohibited under the terms of the Firearms (Amendment) Bill. [11216]

  Mr. Nelson
  I refer the hon. Member to my reply to the hon. Member for Banff and Buchan (Mr. Salmond) on 18 December 1996,Official Report, column 698.

  Nuclear Power Stations (Ukraine)
  Mr. Dalyell
  To ask the President of the Board of Trade what assessment has been given to him by European bank for reconstruction and development about the report of the independent experts on(a) financial assistance for Chernobyl and (b) the proposed two new Ukraine power stations to be partially financed by the European Union and the G7. [11232]

  Mr. Page
  [holding answer 20 January 1997]: Action to follow up the EU-funded study of the options for dealing with the Chernobyl sarcophagus, including the need for further analysis, is now being discussed between the G7 countries, the European Union, the EBRD and the Ukrainian Government. I understand the results of the work of the independent panel, appointed by the EBRD and the European Commission to advise on Ukraine's energy options, are not yet available.

  Personalised Number Plates
  Mr. Donohoe
  To ask the President of the Board of Trade how many personalised number plates there are in the ownership of the executive agencies operated by his Department; and if he will list them. [11420]

  Mr. John M. Taylor
  I am asking the chief executive of each DTI agency to reply to the hon. Member.

  Letter from Seton Bennett to Mr. Brian Donohoe, dated 22 January 1977:
  The President of the Board of Trade has asked me to reply on behalf of the National Weights and Measures Laboratory to your question about personalised number pates in the ownership of executive agencies.
  This agency does not own any such number plates.

  Letter from John S. Holden to Mr. Brian Donohoe, dated 22 January 1997:
  You recently tabled a Parliamentary Question for the President of the Board of Trade asking how many personalised number plates there are in the ownership of the executive agencies operated by his Department. I am responding as Chief Executive of Companies House Executive Agency.
  The answer is none.

  Letter from Jim Norton to Mr. Brian Donohoe, dated 22 January 1997:
  You asked in your Parliamentary Question of 15 January to the President of the Board of Trade, how many personalised number plates there are in the ownership of the executive agencies operated by his Department.
  The Radiocommunications Agency has no official vehicles with personalised number plates.

  Letter from P. R. S. Hartnack to Mr. Brian Donohoe, dated 22 January 1997:
  I am replying for the Patent Office to your Parliamentary Question to the President of the Board of Trade about personalised number plates in the ownership of executive agencies.
  The Patent office owns no vehicles and thus owns no personalised number plates.

  Letter from Peter Joyce to Mr. Brian Donohoe, dated 22 January 1997:
  The President of the Board of Trade has asked me to reply to your question about personalised number plates owned by The Insolvency Service. The Service owns no such plates.

  Mid Kent Water
  Dr. Howells
  To ask the President of the Board of Trade what representations he has received from companies in connection with the proposed bid by Compagnie Generale des Eaux and SAUR for Mid Kent Water plc; and if he will list them [12052]

  Mr. John M. Taylor
  [holding answer 21 January 1997]: Excluding representations from the parties to the proposed merger, my Department received two representations from companies in connection with the proposed acquisition of Mid Kent Holdings by General Utilities and SAUR Water Services. Both of these representations were copied to the Monopolies and Mergers Commission either directly by the sender or by officials of my Department. Chapter 10 of the MMC's report, which was laid before Parliament today, contains details of the representations made by interested parties to the MMC.

  Dounreay Castle (Decontamination)
  Mr. Meacher
  To ask the President of the Board of Trade what applications he has received from the United Kingdom Atomic Energy Authority for assistance in the funding of the decontamination of Dounreay castle. [11913]

  Mr. Page
  Funding for decontamination of Dounreay castle will be provided under the DTI's existing programme of nuclear decommissioning and waste management on United Kingdom Atomic Energy Authority sites.

  Nuclear Waste Reprocessing
  Mr. Meacher
  To ask the President of the Board of Trade what quantities of radioactive waste will be brought to the United Kingdom under the terms of the latest contract for British Nuclear Fuels to process radioactive waste for the United States Department of Energy.[11912]

  Mr. Page
  Details of the contract are a commercial matter for BNFL and its US subsidiary, BNFL Inc. However, I understand that the contract for the waste treatment work at Idaho national engineering laboratory, worth an estimated £650 million, does not involve importing radioactive waste to the UK.

  Nuclear Waste Transportation
  Ms Walley
  To ask the President of the Board of Trade what estimate he has made of the staging requirements for 1997–98 in respect of police escorts of motorway and road transportation of nuclear waste cargoes trans-shipped abroad; and if he will make a statement. [10953]

  Mr. Page
  No estimates have been made because there is no requirement for police escorts to accompany the road transport of radioactive waste.

ENVIRONMENT

  Housing (Northamptonshire)
  Mr. William Powell
  To ask the Secretary of State for the Environment how many council houses were(a) built, (b) restored to use and (c) acquired in each local authority in Northamptonshire in each of the last five years. [11066]

  Mr. Clappison
  The available information on council houses built or restored to use is set out in the tables.

  New council dwellings completed1

  1991–92

  1992–93

  1993–94

  1994–95

  1995–96

  Corby

  —

  —

  —

  —

  —

  Daventry

  50

  6

  —

  —

  —

  East Northamptonshire

  31

  2

  —

  —

  —

  Kettering

  74

  3

  —

  —

  —

  Northampton

  —

  —

  —

  —

  12

  South Northamptonshire

  1

  —

  —

  —

  —

  Wellingborough

  42

  —

  —

  —

  —

  1Source: P2 returns from local authorities.

  643

  Vacant council dwellings restored to use after major renovation work1

  1993–94

  1994–95

  1995–96

  Corby

  n/a

  —

  8

  Daventry

  —

  —

  —

  East Northamptonshire

  2

  2

  —

  Kettering

  10

  11

  —

  Northampton

  44

  37

  27

  South Northamptonshire

  —

  —

  —

  Wellingborough

  —

  —

  —

  Source:

  1 Housing investment programme returns—HIP3 for 1995–96 and HIP annex B for 1993–94 and 1994–95. These data were not collected in this form prior to 1993–94.

  During this period, housing investment programme HIP2 returns submitted by local authorities in Northamptonshire reported six dwellings acquired for continued use, excluding low-cost home ownership schemes. These were in Daventry—one in 1992–93; in east Northamptonshire—two in 1992–93; in Kettering—one in 1991–92; in Northampton—one in 1992–93; and in Wellingborough—one in 1992–93.

  Water Undertakers
  Mr. Gordon Prentice
  To ask the Secretary of State for the Environment what independent means of verification will be available to ensure that water undertakers(a) maintain the pressure standard and (b) pay £25 to customers who do not receive this service standard as set out in the Water Supply and Sewerage Services (Customer Service Standards) (Amendment) Regulations 1996. [11524]

  Mr. Clappison
  Section 65 of the Water Industry Act 1991 requires water companies to supply water for domestic purposes at such a pressure as will reach the top storey of every building within their area. In practice, the pressure this requires can vary considerably. The Office of Water Services requires companies to report annually the number of properties which are at risk of experiencing problems where pressure falls below a reference level of 10 m head of pressure at a flow of 9 litres per minute, which could be described as sufficient to fill a 2 gallon container in 30 seconds. The way companies report against this standard is reviewed and verified by independent reporters. This enables Ofwat to monitor overall performance and take action where service deteriorates. In the event of a dispute over any claim for payment under the water industry's guaranteed standards scheme, the customer can refer the matter to the Director General of Water Services for determination.

  Snow Clearance (Allowances)
  Mr. Chris Davies
  To ask the Secretary of State for the Environment if he will list the allowances for snow clearing and ice gritting included within the highways standard spending assessments for each of (a) the inner-London boroughs and (b) the borough councils in Greater Manchester. [11428]
  644
  Sir Paul Beresford
  The information is contained in the table.

  Local authority

  Element of provisional standard spending assessments for 1997–98 relating to winter maintenance of highways (£ million)

  Inner London including City of London

  City of London

  0.103

  Camden

  0.211

  Greenwich

  0.312

  Hackney

  0.214

  Hammersmith and Fulham

  0.176

  Islington

  0.179

  Kensington and Chelsea

  0.171

  Lambeth

  0.295

  Lewisham

  0.298

  Southwark

  0.282

  Tower Hamlets

  0.168

  Wandsworth

  0.297

  Westminster

  0.322

  Greater Manchester

  Bolton

  0.659

  Bury

  0.441

  Manchester

  1.128

  Oldham

  0.714

  Rochdale

  0.681

  Salford

  0.584

  Stockport

  0.695

  Tameside

  0.597

  Trafford

  0.521

  Wigan

  0.702

  River Ouse
  Mr. Alison
  To ask the Secretary of State for the Environment if he will instruct the Environment Agency to study the increase in the variety of fish life which can be supported in the tidal reaches of the River Ouse in North Yorkshire, and publish the results with particular reference to the vicinity of Cawood, since the implementation of required European water quality standards. [11652]

  Mr. Clappison
  The physical nature of the River Ouse at Cawood is not conducive to sustaining significant fish populations, because of high levels of natural suspended solids and the strong tidal currents which exist.

  The Environment Agency is, however, implementing a strategy for improvements in quality to the discharges in the Selby area. One of the aims is to improve dissolved oxygen levels to allow the passage of migratory fish.

  Mr. Alison
  To ask the Secretary of State for the Environment if he will set out the time scale, under the European urban waste water treatment directive, relating to crude sewage outfalls, which applies to the crude sewage outfalls at present flowing into the River Ouse at(a) Rythen, (b) Wistow and (c) Cawood in North Yorkshire. [11653]

  Mr. Clappison
  The urban waste water treatment directive requires "appropriate treatment" by 2005 for discharges with effective populations less than 2,000. In the case of Cawood and Wistow sewage treatment works, which discharge to the Ouse, and Rythen, which discharges to the River Wharfe, this is likely to comprise fine screening to remove solids, or possibly primary treatment.
  645
  Mr. Alison
  To ask the Secretary of State for the Environment if he will instruct the Environment Agency to assess and report on the level of water quality in the River Ouse at Cawood in North Yorkshire and its compliance with(a) the European urban waste water treatment directive and (b) other relevant directives. [11654]

  Mr. Clappison
  The water quality of the River Ouse at Cawood is class D, "fair". The major influences on existing quality are the River Aire and some direct industrial discharges in the Selby area.

  The urban waste water treatment directive applies to sewage discharges, not to the river itself, but is likely to contribute to improvements in water quality once its requirements come into effect in 2000. The Ouse already meets the existing requirements of the EU dangerous substances directive.

  Mr. Alison
  To ask the Secretary of State for the Environment if he will instruct the Environment Agency to assess the risk, in terms of health and safety, of swimming and water sports on the River Ouse in the vicinity of Cawood, North Yorkshire. [11655]

  Mr. Clappison
  Advice about the acceptability or otherwise of swimming and water sports on the River Ouse in the vicinity of Cawood, North Yorkshire, is a matter for local public health officials.

  Teesside Development Corporation
  Mr. Devlin
  To ask the Secretary of State for the Environment how many jobs have been created or safeguarded by the Teesside development corporation. [11872]

  Sir Paul Beresford
  From its establishment in 1987 to September 1996, the Teesside development corporation had created 10,650 permanent jobs in new developments. The total number of job opportunities created by the development corporation now exceeds 25,000.

  Mr. Devlin
  To ask the Secretary of State for the Environment if he will make a statement on the work on(a) the Teesside development corporation and (b) Stockton city challenge. [11873]

  Sir Paul Beresford
  The Teesside development corporation was established in 1987 and will be wound up in March 1998. The corporation estimates that during its lifetime it will have achieved:

  the reclamation of 525 ha of derelict land;

  the building or upgrading of 29 km of roads;

  the building of 1,400 homes;

  provision of 470,200 sq m of non-housing floorspace;

  the attraction of £1,090 million of private sector investment;

  the creation of over 11,000 permanent jobs in new developments, and over 26,000 job opportunities.

  The development corporation has already made substantial progress towards these targets. Its activities are successfully transforming large areas of dereliction around Hartlepool, Middlesbrough and Stockton into exciting and attractive developments which are providing jobs, homes and leisure opportunities.
  646
  Stockton city challenge partnership currently estimates that during the lifetime of the initiative it will:

  create 3,400 jobs;

  lever in £111 million of private sector investment;

  build or improve 4,928 homes;

  support 291 new business start-ups;

  and provide 81,300 training weeks.

  The operation of the city challenge in Stockton has also helped forge closer working relationships between the public and private sectors and the local community.

  Sub-standard Homes
  Mr. Robert Ainsworth
  To ask the Secretary of State for the Environment if he will make a statement on Her Majesty's Government's policy for reducing the number of sub-standard homes. [11772]

  Mr. Clappison
  Between 1986 and 1991, the number of unfit dwellings in England fell by 10 per cent. to 1.5 million. Of these, 62 per cent. needed less than £2,000 of work to make them fit, the majority being owner-occupied. The Government are investing, through the housing investment programme, to help local authorities maintain their stock, promoting the transfer of local authority stock to not-for-profit private landlords such as local housing companies, encouraging housing associations to buy up and repair run-down stock and providing renovation grants to help private owners make improvements to their homes—in 1995–96 £450 million was spent on 95,000 such grants.

  Sewage Outfalls (Yorkshire)
  Mr. Alison
  To ask the Secretary of State for the Environment if he will instruct the Environment Agency and the National Rivers Authority to review the Yorkshire Water Services' plans for an accelerated programme for dealing with crude sewage outfalls at certain Yorkshire coastal villages and to assess whether Cawood, in North Yorkshire, should be added to the list of villages in the programme. [11656]

  Mr. Clappison
  The National Rivers Authority was subsumed into the Environment Agency for England and Wales on 1 April 1996.

  Yorkshire Water Services' plans to accelerate sewage treatment schemes voluntarily at certain coastal villages take account of the agency's views. The assessment of the agency is that the discharge at Cawood has a lesser effect which would not justify the scheme being given priority in advance of action to meet the requirements of the urban waste water treatment directive by the deadline of 2005.

  Environmental Information (Disclosure)
  Mr. Llew Smith
  To ask the Secretary of State for the Environment if he will make a statement on how the revised code of practice on access to Government information, second edition, published on 14 January, will affect the disclosure of environmental information. [11776]

  Sir Paul Beresford
  The revised code will not affect the disclosure of the environmental information. The code—like its predecessor—is non-statutory, and cannot
  647
  override the existing statutory right of access to environmental information contained in the Environmental Information Regulations 1992.

  Housing (West Midlands)
  Mr. Robert Ainsworth
  To ask the Secretary of State for the Environment how many families were(a) officially homeless, (b) living in temporary accommodation and (c) have had homes repossessed in (i) Coventry and (ii) the west midlands in each of the last five years for which figures are available. [11773]

  Mr. Clappison
  The information requested on homeless acceptances and households in temporary accommodation under the homelessness provisions of the Housing Act 1985 is as follows:

  Homeless acceptances

  Households in temporary accommodation at 31 December1

  Coventry

  1991

  459

  5

  1992

  455

  9

  1993

  341

  6

  1994

  362

  3

  1995

  644

  1

  West Midlands

  1991

  18,400

  2,120

  1992

  17,520

  1,650

  1993

  17,060

  1,430

  1994

  16,430

  1,250

  1995

  18,090

  1,470

  1 Covers both households accepted as homeless and households awaiting the outcome of inquiries into their application.

  Information is not available on repossessions in coventry and the west midlands.

  Packaging Waste Regulations
  Mr. Matthew Taylor
  To ask the Secretary of State for the Environment when the Government plan to implement the Producer Responsibility (Packaging Waste) Regulations. [11803]

  Mr. Clappison
  We hope to lay draft regulations before the House by the end of January.

  Radioactive Waste
  Mr. Meacher
  To ask the Secretary of State for the Environment what progress has been made in implementing the proposals concerning transparency in decision making relating to the rock characterisation facility proposals contained in the joint Radioactive Waste Management Advisory Committee—Advisory Committee on the Safety of Nuclear Installations. [12109]

  Mr. Clappison
  In March 1995, the Department published a report by a study group drawn from members of the Radioactive Waste Management Advisory Committee and the Advisory Committee on the Safety of Nuclear Installations on "Site Selection for Radioactive Waste Disposal Facilities and the Protection of Human Health".
  648
  In view of the importance which the report attached to transparency of decision making, Nirex made proposals to enhance and put onto a regular cycle the publication of information about its scientific work and the development of its repository programme. In the White Paper, "Review of Radioactive Waste Management Policy" (CM 2919), the Government welcomed this initiative and said that they would seek the advice of RWMAC on the company's proposals.

  RWMAC's advice is being published on Tuesday 21 January in a report, "Nirex's Proposals for Publication and Peer Review", copies of which are available in the Library of the House. The Government welcomes Nirex's proposals and RWMAC's recommendations on them. My right hon. Friend the Minister for the Environment and Countryside, has written to the chairman of Nirex commending the committee's recommendations to him.

  Energy Efficiency
  Mr. Eric Clarke
  To ask the Secretary of State for the Environment what plans he has to promote more efficient energy use. [10593]

  Mr. Clappison
  My Department actively promotes energy efficiency through a wide range of initiatives and programmes across all sectors, including information and advice, voluntary schemes, and selective use of grants, incentives and regulation.

  I am pleased that we were able to announce in the Budget an increase in funding for the Energy Saving Trust. Planned funding for the years 1997–98 to 1999–2000 has been increased by a total of £21.5 million.

  Genetically Altered Food
  Mr. Welsh
  To ask the Secretary of State for the Environment what representations he has received on genetically altered food imports; and if he will make a statement. [10609]

  Mr. Clappison
  A number of representations from various sources have been received on this issue. The importation and release of genetically modified organisms are controlled by part VI of the Environmental Protection Act 1990 and regulations made under it. In accordance with this legislation, the Secretary of State, acting jointly with the Minister of Agriculture, Fisheries and Food, may grant a consent for the release of genetically modified organisms after evaluating the impacts and risks posed to human health and the environment. The Ministry of Agriculture, Fisheries and Food has the general responsibility for the safety of genetically modified food.

  Walton Bridge Replacement
  Mr. Wilshire
  To ask the Secretary of State for the Environment when he will announce the starting date for the public inquiry into Surrey county council's proposals for a replacement Walton bridge over the River Thames and into the associated compulsory purchase orders. [11308]

  Sir Paul Beresford
  Arrangements for the public local inquiries into the proposed Walton bridge replacement are being held in abeyance pending expiry of the objection periods for the side roads order, compulsory purchase order and bridge schemes applications submitted to the
  649
  Secretary of State for Transport in relation to the proposal. It seems probable that joint inquiries into these applications and related planning and exchange land certificate applications will need to be convened. I can assure my hon. Friend that he will be notified as soon as a date for the inquiries has been agreed.

  Standard Spending Assessment
  Mr. Rooker
  To ask the Secretary of State for the Environment for what reasons the month of August was chosen for the count of income support claimant case load for each local authority in order for his Department to work out the standard spending assessment levels; and what consideration was given to seeking the most representative month. [11945]

  Sir Paul Beresford
  The Benefits Agency carries out its annual count of claimants in August as a matter of managerial practicality. Similar counts for other months are not available.

  Mr. Rooker
  To ask the Secretary of State for the Environment how many income support claimants his Department was unable to allocate to local authorities on a postcode basis used for the standard spending assessment calculations; and how these claimants were finally taken into account. [11943]

  Sir Paul Beresford
  For 98.5 per cent. of income support claimants, it is possible to allocate them to a local authority area by reference to a postcode. The assumption made in relation to the remaining 1.5 per cent. of claimants is that, within each benefit office, the distribution among local authorities of claimants whose postcode is unknown is in the same proportions as for claimants at the same benefit office whose postcode is known.

  Mr. Rooker
  To ask the Secretary of State for the Environment what are the expected benefits in moving from a sample count of income support claimants four times per year to a 100 per cent. count on one date for use in the standard spending assessment calculations; and how seasonality is taken into account in the change. [11948]

  Sir Paul Beresford
  We wish to base the standard spending assessments on the most reliable data available. We received representations from local government that the 100 per cent. count provided more reliable data than the quarterly 5 per cent. samples. The main advantage of a 100 per cent. count is its comprehensiveness, compared with the quarterly 5 per cent. samples. The advantages and disadvantages of both sources of data were discussed with the local authority associations. The data were also examined by the Office for National Statistics, which tested whether there were seasonal effects on the data. It advised that an adjustment should be made on this account in relation to a few authorities. Adjustments have been made in the light of its advice.

  Standard Spending Assessment (Pupil Numbers)
  Mr. Rooker
  To ask the Secretary of State for the Environment what action he is taking to check pupil numbers in Birmingham used in the standard spending assessment calculations in respect of information given to him by the local education authority. [11946]
  650
  Sir Paul Beresford
  The numbers of pupils used in the calculation of standard spending assessments are as estimated by the Secretary of State for Education and Employment. The Department for Education and Employment has been asked to investigate the representations about pupil numbers which we have received.

  Local Government Finance
  Mr. Rooker
  To ask the Secretary of State for the Environment if he will list the local authorities which have had meetings with Ministers in his Department regarding the provision of revenue support grant for 1997–98. [11947]

  Sir Paul Beresford
  The table lists authorities which have had meeting with Ministers in the Department of the Environment during the consultation period on the proposed local government finance settlement for England for 1997–98.

  Many other local authorities have raised revenue support grant issues in the course of meetings held throughout the year.

  1997–98 settlement consultation meetings with local authorities

  Total number of meetings: 79

  Authority

  Date

  Minister

  1. County councils (21 meetings)

  Bedfordshire

  9 January

  Mr. Curry

  Derbyshire

  6 January

  Mr. Curry

  Devon

  7 January

  Mr. Curry

  Dorset

  6 January

  Mr. Curry

  Durham

  6 January

  Mr. Curry

  Gloucestershire

  8 January

  Mr. Clappison

  Hampshire

  10 January

  Sir Paul Beresford

  Hereford and Worcester

  9 January

  Mr. Curry

  Kent

  9 January

  Mr. Curry

  Lancashire

  7 January

  Mr. Curry

  Lincolnshire

  8 January

  Mr. Clappison

  Norfolk

  7 January

  Mr. Clappison

  Northamptonshire

  16 December

  Mr. Curry

  Northumberland

  8 January

  Sir Paul Beresford

  Nottinghamshire

  7 January

  Sir Paul Beresford

  Oxfordshire

  7 January

  Mr. Clappison

  Shropshire

  9 January

  Mr. Curry

  Somerset

  6 January

  Mr. Curry

  Staffordshire

  9 January

  Mr. Curry

  Suffolk

  9 January

  Mr. Curry

  Warwickshire

  9 January

  Mr. Curry

  2. Shire districts (26 meetings)

  Blaby (Leicstershire)

  8 January

  Mr. Clappison

  Castle Point (Essex)

  8 January

  Mr. Clappison

  Castle Morpeth (Northumberland)

  7 January

  Sir Paul Beresford

  Copeland (Cumbria)

  6 January

  Sir Paul Beresford

  Darlington (Durham)

  7 January

  Mr. Curry

  Derby (Derbyshire)

  8 January

  Mr. Curry

  East Hampshire

  10 January

  Sir Paul Beresford

  Harlow (Essex)

  10 January

  Sir Paul Beresford

  Hertsmere (Hertfordshire)

  8 January

  Mr. Curry

  Leicester (Leicestershire)

  17 December

  Mr. Curry

  Luton (Bedfordshire)

  8 January

  Mr. Curry

  Milton Keynes (Buckinghamshire)

  6 January

  Sir Paul Beresford

  Northampton (Northamptonshire)

  7 January

  Sir Paul Beresford

  651

  1997–98 settlement consultation meetings with local authorities

  Total number of meetings: 79

  Authority

  Date

  Minister

  Nottingham City (Nottinghamshire)

  7 January

  Mr. Curry

  Plymouth City (Devon)

  8 January

  Sir Paul Beresford

  Poole (Dorset)

  6 January

  Sir Paul Beresford

  Purbeck (Dorset)

  8 January

  Sir Paul Beresford

  Rutland (Leicestershire)

  9 January

  Mr. Curry

  Salisbury (Wiltshire)

  7 January

  Sir Paul Beresford

  Stoke on Trent (Staffordshire)

  18 December

  Mr. Curry

  Warrington (Cheshire)

  9 January

  Sir Paul Beresford

  Waverley (Surrey)

  13 January

  Sir Paul Beresford

  West Lindsey (Lincolnshire)

  8 January

  Mr. Clappison

  West Somerset

  10 January

  Sir Paul Beresford

  Woking (Surrey)

  8 January

  Sir Paul Beresford

  York City (North Yorkshire)

  7 January

  Mr. Curry

  3. Metropolitan districts (12 meetings)

  Barnsley (South Yorkshire)

  6 January

  Sir Paul Beresford

  Bradford (West Yorkshire)

  9 January

  Mr. Curry

  Birmingham (West Midlands)

  9 January

  Mr. Curry

  Coventry (West Midlands)

  9 January

  Sir Paul Beresford

  Doncaster (South Yorkshire)

  7 January

  Sir Paul Beresford

  Manchester (Greater Manchester)

  7 January

  Mr. Curry

  Newcastle upon Tyne

  6 January

  Mr. Curry

  Rotherham (South Yorkshire)

  6 January

  Sir Paul Beresford

  Sheffield (South Yorkshire)

  8 January

  Mr. Curry

  South Yorkshire districts

  8 January

  Mr. Curry

  Stockport (Greater Manchester)

  6 January

  Sir Paul Beresford

  Wolverhampton (West Midlands)

  10 January

  Sir Paul Beresford

  4. London boroughs (10 meetings)

  Brent

  7 January

  Mr. Curry

  Greenwich

  8 January

  Sir Paul Beresford

  Hammersmith and

  8 January

  Sir Paul Beresford

  Fulham

  Harrow

  7 January

  Sir Paul Beresford

  Havering

  6 January

  Sir Paul Beresford

  Hillingdon

  7 January

  Sir Paul Beresford

  Kingston upon Thames

  9 January

  Sir Paul Beresford

  Merton

  8 January

  Sir Paul Beresford

  Redbridge

  7 January

  Sir Paul Beresford

  Richmond upon Thames

  7 January

  Mr. Clappison

  5. Unitary authorities (seven meetings)

  Bristol City

  8 January

  Mr. Curry

  Ex Cleveland Unitaries

  10 January

  Sir Paul Beresford

  Isle of Wight

  8 January

  Mr. Clappison

  Middlesbrough

  10 January

  Sir Paul Beresford

  Redcar and Cleveland

  7 January

  Sir Paul Beresford

  South Gloucester

  7 January

  Mr. Clappison

  Stockton on Tees

  10 January

  Sir Paul Beresford

  6. Police authorities (one meeting)

  Greater Manchester

  8 January

  Sir Paul Beresford

  7. Fire authorities (two meetings)

  Humberside Fire

  6 January

  Mr. Curry

  Tyne and Wear FCDA

  6 January

  Sir Paul Beresford

  652
  Mr. Rooker
  To ask the Secretary of State for the Environment on how many occasions in each of the past four years Ministers of his Department have met elected representatives of each metropolitan district and London borough to discuss levels of and calculations about the standard spending assessments, revenue support grant settlements and capping limits. [11949]

  Sir Paul Beresford
  The table lists those metropolitan districts and London boroughs which had meetings with Ministers in the Department of the Environment during the consultation period on the local government finance settlements in each of the last four years.

  Standard spending assessments, revenue support grant and capping limits have also been discussed in other meetings held by Ministers over the years.

  1996–97 settlement consultation Meetings with local authorities December 1995 to January 1996;

  Metropolitan districts

  London boroughs

  Birmingham

  Bexley

  Bradford

  Brent

  Core Cities group

  Camden

  Doncaster

  Enfield

  Kirklees

  Greenwich

  Liverpool

  Hackney

  Rochdale

  Havering

  Rotherham

  Hillingdon

  St. Helens

  Kensington and Chelsea

  Sheffield

  Kingston upon Thames

  Solihull

  Lambeth

  South Yorkshire districts group

  Merton

  Stockport

  Newham

  Wigan

  Southwark

  Westminster

  1995–96 settlement consultation Meetings with local authorities December 1994 to January 1995;

  Metropolitan districts

  London boroughs

  Barnsley

  Bexley

  Birmingham

  Brent

  Bolton

  Croydon

  Bradford

  Enfield

  Core Cities group

  Greenwich

  Coventry

  Hackney

  Kirklees

  Harrow

  Knowlsey

  Havering

  Liverpool

  Hillingdon

  Manchester

  Hounslow

  Newcastle

  Kingston upon Thames

  Rotherham

  Lambeth

  St. Helens

  Merton

  Salford

  Newham

  Sandwell

  Sutton

  Sheffield

  Solihull

  South Tyneside

  South Yorkshire districts group

  Tameside

  Wigan

  Wirral

  Wolverhampton

  653

  1994–95 settlement consultation Meetings with local authorities December 1993 to January 1994;

  Metropolitan districts

  London boroughs

  Birmingham

  Brent

  Coventry

  Greenwich

  Kirklees

  Hackney

  Knowsley

  Hammersmith and Fulham

  Liverpool

  Haringey

  Manchester

  Hounslow

  Rotherham

  Lambeth

  Salford

  Lewisham

  Sefton

  Merton

  Sheffield

  Newham

  Solihull

  1993–94 settlement consultation Meetings with local authorities (December 1992 to January 1993)

  Metropolitan districts

  London boroughs

  Barnsley

  Barnet

  Birmingham

  Brent

  Bury

  Camden

  Coventry

  Enfield

  Liverpool

  Greenwich

  Manchester

  Hackney

  North Tyneside

  Haringey

  Salford

  Harrow

  St. Helens

  Havering

  Sandwell

  Hillingdon

  Sheffield

  Kensington and Chelsea

  Solihull

  Lambeth

  Wigan

  Lewisham

  Merton

  Newham

  Richmond

  Sutton

  Mr. Rooker
  To ask the Secretary of State for the Environment what allowance is made for regional functions and factors in respect of metropolitan districts' level of standard spending assessments and revenue support grants. [11950]

  Sir Paul Beresford
  Regional functions are reflected in the formulae for standard spending assessments, and hence the revenue support grant allocations, by the inclusion of numbers of commuters, day visitors and overnight visitors.

  Standing Spending Assessment (Jobseeker's Allowance)
  Mr. Rooker
  To ask the Secretary of State for the Environment how claimants of the jobseeker's allowance are to be taken into account in calculating local authority standard spending assessment levels for 1997–98. [11944]

  Sir Paul Beresford
  The proposed standard spending assessments for 1997–98 use data on numbers of unemployed over a three-year period in 1993–96 and income support claimants in 1995. They therefore predate the introduction of the jobseeker's allowance.

  Pollution (Energy Conservation)
  Mr. Nigel Evans
  To ask the Secretary of State for the Environment what assessment he has made of the effectiveness of current energy conservation measures in reducing pollution. [12118]
  654
  Mr. Clappison
  The progress report on carbon dioxide emissions from the UK's climate change programme, which was published in December 1995, includes an assessment of the energy efficiency measures which were in operation at that time. The Government are preparing a second national communication under the United Nations framework convention. This will report on progress since December 1995.

  Mr. Maclennan
  To ask the Secretary of State for the Environment what plans he has to direct Nirex to investigate alternative sites for the establishment of an underground nuclear repository. [12150]

  Mr. Clappison
  None. Subject to planning permission and compliance with regulatory requirements, the selection of a suitable site for an underground repository for intermediate level radioactive waste is a matter for Nirex itself.

  Local Education Authority Spending
  Mr. Rooker
  To ask the Secretary of State for the Environment what factors underlie the differences in the rules for local education authority spending limits according to whether they are London boroughs, shire counties or metropolitan districts. [12054]

  Sir Paul Beresford
  In determining the caps limits for each class of authority, the Secretary of State takes into a range of factors including the pressures on authorities and the underlying increases in standard spending assessment.

WALES

  Sea Empress Oil Spill
  Mr. Dafis
  To ask the Secretary of State for Wales what estimates he has made, for each wild bird species affected by the Sea Empress disaster, of the total number of birds killed, indicating in each case the number as a percentage of the estimated population in the area affected. [11348]

  Mr. Jonathan Evans
  I refer the hon. Member to the reply given by my hon. Friend the Under Secretary on 25 April 1996,Official Report, columns 268–69. There are no significant changes in the number known to have been killed since then, although I am advised that a survey of the common scoter sea duck has suggested a substantially decreased number of the species from last winter.

  Hedgerow Preservation
  Mr. Donald Anderson
  To ask the Secretary of State for Wales what assessment he has made of the implications for Wales of the judgment of Hull county court by Judge Cracknell concerning preservation of ancient hedgerows. [11434]

  Mr. Jonathan Evans
  I refer the hon. Member to the reply given to him on 20 January by my hon. Friend the Under-Secretary of State for the Department of the Environment,Official Report column 437.

  Public Expenditure
  Sir Wyn Roberts
  To ask the Secretary of Wales what was the total spending per head of the population in Wales derived from(a) European Commission sources and (b) Her Majesty's Treasury, in the latest year for which figures are available; and if he will make a statement. [11504]

  Mr. Hague
  In 1994–95, control total expenditure within my responsibility was £2,248 per head. European agricultural guidance and guarantee fund and European regional development fund receipts channelled through my Department in the same year totalled £75 per head.

  Cardiff Print Centre and Bookshop
  Mr. Jon Owen Jones
  To ask the Secretary of State for Wales what assessment his Department has made of the financial and social impact of The Stationery Office's proposals for the Cardiff print centre and Cardiff book shop; and if he will make a statement. [11343]

  Mr. Hague
  My Department has made no such assessment. There is a contract between the Arts Council of Wales and The Stationery Office in respect of the management of the Oriel bookshop in Cardiff. The provision of services under the contract is a matter for the Arts Council and The Stationery Office.

  Public Appointments Panel
  Mr. Hanson
  To ask the Secretary of State for Wales when and by what means the appointments panel positions announced on 14 January were advertised. [11707]

  Mr. Hague
  They were not advertised.

  Mr. Hanson
  To ask the Secretary of State for Wales how many members of the public appointments panel announced on 14 January are members of a political party. [11705]

  Mr. Hague
  I am not aware that any are members of a political party, and they were not asked for this information.

  Mr. Hanson
  To ask the Secretary of State for Wales what were the criteria for inclusion in the list of advisers for Ministers on public appointments, announced on 14 January. [11706]

  Mr. Hague
  The criteria for inclusion on the list were wide experience of organisations and management at a senior level; an understanding of the context in which public bodies operate; and some distinction in their own careers or profession. Some direct experience of service in a public appointment was an advantage. The individuals on the list come from a variety of backgrounds and offer a wide range of different experiences and skills.

  Private Finance Initiative
  Mr. Barry Jones
  To ask the Secretary of State for Wales how many private finance initiative projects his Department is involved in; if he will list them; and if he will make a statement. [11672]

  Mr. Hague
  Private finance initiative projects in which the Welsh Office is involved include:where deals have been agreed: Welsh Office IT system—OSIRIS;— University Hospital of Wales, phases 1 and 2 car parks
  656
  and concourse; energy management schemes at Withybush and Llandough hospitals; where projects are being considered: Bute avenue, Cardiff; A55 Anglesey; M4 relief road; A465 heads of the valleys road; staff residential accommodation and IT system, district general hospital, Llantrisant; day surgery unit, Nevill hall, Abergavenny; community hospital, Chepstow; replacement of radiotherapy equipment, Velindre; new general hospital at Baglan; Bronllys-Newtown hospitals, elderly medical, nursing and mental health facilities; north Meirionnydd-east Dwyfor community hospital; national library of Wales, IS-IT system; Ysgol Gyfun Cwm Rhymni, Caerphilly.

  North Wales Health Authority Funding
  Mr. Barry Jones
  To ask the Secretary of State for Wales what level of capitation funding the North Wales health authority will receive in 1997–98; and if he will make a statement. [11669]

  Mr. Gwilym Jones
  The 1997–98 health authority allocations have not yet been announced.

  General Practice
  Mr. Ainger
  To ask the Secretary of State for Wales if he will list the number of general practices in each health authority area in Wales. [12078]

  Mr. Gwilym Jones
  The information is given in the table. Information for the new health authority areas is not yet available.

  Number of general medical practitioner partnerships at 21 March 19961

  Clwyd

  71

  Dyfed

  64

  Gwent

  89

  Gwynedd

  52

  Mid Glamorgan

  103

  Powys

  18

  South Glamorgan

  71

  West Glamorgan

  64

  1 Includes practices with only one principal GP.

  Community Hospital, Porthmadog
  Mr. Wigley
  To ask the Secretary of State for Wales if he will approve the start of construction of the new community hospital at Porthamdog. [12027]

  Mr. Hague
  No. The outline business case for this scheme has been approved, and Gwynedd Community NHS trust is testing for private sector interest within the private finance initiative. The North Wales health authority has asked the trust to delay discussions with the private sector until its completes its major review of service priorities in March.

NORTHERN IRELAND

  Northern Ireland Grand Committee
  Mr. Robert McCartney
  To ask the Secretary of State for Northern Ireland how many submissions he has
  657
  received in relation to his proposals for extending the powers and role of the Northern Ireland Grand Committee; how many were favourable; and if he will make a statement on his future plans and their timing on the matter. [11196]

  Sir Patrick Mayhew
  Six substantive responses have been received as of Friday 17 January. It would not be appropriate to comment on them without prior approval and in circumstances in which further submissions are expected.

  A decision in this context will be taken when the consultation process is completed.

  Eye Surgery
  Mr. Robert McCartney
  To ask the Secretary of State for Northern Ireland what is his policy with respect to providing the radial keratotomy procedure in the health service; what assessment he has made as to its efficacy; and if he will make a statement on its acceptance in respect of police appointments. [11197]

  Mr. Moss
  Radial keratotomy is not routinely available in the health and personal social services in Northern Ireland. The procedure is often viewed as cosmetic since short-sightedness can be corrected with glasses or contact lenses. It would be a matter for health and social services boards and general practitioner fundholders to decide whether or not to purchase this procedure based on the health needs of their population.

  A person who has had radial keratotomy is not regarded as acceptable for recruitment to the Royal Ulster Constabulary or the Reserve, as is also the case for most UK police forces and the armed forces. This advice has been included in recent medical guidelines circulated to the police service by the Home Office.

  Targeting Social Need Policy
  Mr. Worthington
  To ask the Secretary of State for Northern Ireland what(a) policy and (b) discussion papers he has issued since the "targeting social need" policy was adopted by the Government; how this policy was to be implemented; and what were the reasons behind that approach. [10940]

  Mr. Ancram
  The "targeting social need" initiative has sought to direct resources towards Northern Ireland's most disadvantaged areas and people, objectively defined as being in greatest need, irrespective of community background. A major effect of this should be to reduce socio-economic differentials between Protestants and Catholics. This approach was taken because of statistical evidence of greater levels of deprivation among Catholics than among Protestants, though socio-economic disadvantage exists on both sides of the community.

  The targeting social need approach has been reflected in a range of strategy documents and discussion papers published by Northern Ireland Departments in recent years on their social and economic policies. Examples include the Department of Economic Development's publication "Growing Competitively", May 1995, and the Department of the Environment's "Making Belfast Work" strategy document, March 1995. Published research papers on patterns of disadvantage and community differentials have also helped in applying the initiative.

  Further Education Initiative
  Mr. Worthington
  To ask the Secretary of State for Northern Ireland which further education colleges are being considered for initiatives under the private finance initiative; and what procedures are being followed in respect of such initiatives with particular reference to the Government's plans to incorporate the colleges. [10943]

  Mr. Ancram
  Procedures under the private finance initiative are currently being applied to major capital needs at the North West and Belfast institutes of further and higher education. These procedures will be unaffected by the planned incorporation of further education colleges in Northern Ireland.

  School Closures
  Mr. Worthington
  To ask the Secretary of State for Northern Ireland what(a) powers and (b) duties he has in relation to school closures and amalgamations. [10945]

  Mr. Ancram
  The Department of Education's powers and duties in relation to the closure or amalgamation of controlled or voluntary schools are contained in article 14 of the Education and Libraries (Northern Ireland) Order 1986.

  In addition, the Department has powers and duties under articles 80, 81 and 82 of the 1989 Education Reform (Northern Ireland) Order 1989 in relation to the closure, withdrawal of grant and winding up of a grant-maintained integrated school.

  Legislation Programme
  Mr. Worthington
  To ask the Secretary of State for Northern Ireland what plans he has to introduce legislation on(a) further education, (b) nursery vouchers, (c) education and library boards and (d) race relations. [10980]

  Mr. Ancram
  The legislative position is as follows:

  (a) I am currently considering the responses that I received during the consultation on the draft Further Eduction (Northern Ireland) Order 1997.

  (b) A draft Education (No.2) Order 1996, which includes provision for nursery vouchers, was laid before Parliament on 3 December 1996.

  (c) I am currently considering the responses that I received during the consultation on the draft Education and Library Boards (Northern Ireland) Order 1997.

  (d) A draft Race Relations (Northern Ireland) Order was laid before Parliament on 14 January 1997.

  Action for Community Employment
  Mr. Worthington
  To ask the Secretary of State for Northern Ireland if he will make a statement on the operation of the action for community employment scheme. [10979]

  Mr. Ancram
  Responsibility for the subject in question has been delegated to the Training and Employment Agency under its chief executive, Mr. Ian Walters. I have asked him to arrange for a reply to be given.
  659
  Letter from Mr. Ian Walters to Mr. Tony Worthington, dated 22 January 1997:
  The Secretary of State for Northern Ireland has asked me, as Chief Executive of the Training and Employment Agency, to reply to your question about the Action for Community Employment (ACE) scheme.
  The ACE scheme was introduced in 1981, as the Northern Ireland counterpart to the Community Programme in Great Britain, to provide temporary employment, with training, of up to one year's duration for long term unemployed adults in projects of community benefit. Its essential purpose is to enable participants gain practical work experience which in turn will help them to compete more effectively for available permanent jobs.
  There are currently 229 ACE projects of which the majority are sponsored by voluntary organisations, local community groups, charitable bodies and churches. The range of activities undertaken by the projects include care of the elderly and disabled, environmental and conservation work, research and administration.
  ACE peaked in the early 1990s with over 10,000 places available across Northern Ireland. As you know, the resources allocated to ACE were reduced in each of the last two Public Expenditure Surveys. In the 1995/96 financial year £49.96 million was spent providing an average occupancy of 9,189 ACE places. This year £39.8 million has been allocated to provide an average occupancy of 7,200 places. In 1997/98 and the following two years ACE has been allocated £28.5 million which will support around 5,200 places.
  One of the indicators which the Agency uses to measure the performance of ACE is the percentage of leavers who proceed into employment, further education or training. In recent years approximately 40% of participants achieved a positive outcome on leaving the scheme.
  You may also wish to know that at the end of September 1996, the latest date for which data is available, 53% of ACE workers were female and 35% of ACE posts were part-time.
  I hope you find this information useful.

  Higher Education (Research Support)
  Mr. Worthington
  To ask the Secretary of State for Northern Ireland what factors underlie the changes in the Northern Ireland arrangements for research support in Northern Ireland higher education. [10986]

  Mr. Ancram
  The maintenance of law and order as the Government's top spending priority in Northern Ireland and the decision to concentrate resources within the education service on schools, and in particular the classroom, were the main factors underlying the reductions which will be made from 1997–98, inter alia, in the levels of research support to be provided to the two Northern Ireland universities.

  Gallaher Ltd.
  Mr. Pendry
  To ask the Secretary of State for Northern Ireland when(a) he and (b) officials from his Department last met representatives of Gallaher Ltd.; what was discussed; and if he will make a statement. [11164]

  Mr. Ancram
  My right hon. and learned Friend last met representatives of Gallaher Ltd. on 13 November 1995 when he was principal guest at the Gallaher businesswoman of the year awards ceremony. Officials of the industrial development board last met representatives of Gallaher Ltd. on 29 November 1996 to discuss the company's plans to rationalise cigarette production in the UK.

  Youth Service Budget
  Mr. Worthington
  To ask the Secretary of State for Northern Ireland what is the budget for the youth service in cash and constant price terms for 1996–97 and 1997–98; what consequences this will have for the provision of services; and if he will make a statement. [10981]

  Mr. Ancram
  The budget for the youth service for 1996–97 is £15.5 million.

  Funding for the youth service is provided by education and library boards within their block grant allocations and by the Youth Council for Northern Ireland. Each board decides on the resources which should be allocated for its youth service, and their proposals for 1997–98 will be submitted to the Department for approval by 31 January.

  The Youth Council and the education and library boards will not have had sufficient time to determine the full effects of the expenditure reductions in the youth service. However, it remains the Government's priority that services should be focused on those most in need, and whenever possible, service provision rather than service support be protected.

  The Government also provide additional matching funding for youth organisations under the European Union special initiative for peace and reconciliation and will continue to provide additional funds to meet up to 25 per cent. of the total cost of projects funded under this initiative.

  Student Awards
  Mr. Worthington
  To ask the Secretary of State for Northern Ireland what is the budget for discretionary and postgraduate student awards in cash and constant price terms for 1996–97 and 1997–98; what consequences this will have for the provision of services; and if he will make a statement. [10983]

  Mr. Ancram
  It is a matter for each education and library board to determine how much of its block grant should be allocated to discretionary awards. The 1996–97 budget is £6.9 million but that for 1997–98 has yet to be determined.

  The table sets out the financial information for postgraduate awards made by the Department of Education for Northern Ireland.

  £ million

  Year

  Budget (cash)

  At 1996–97 prices

  1996–97

  4.6

  4.6

  1997–98

  4.4

  4.3

  The detailed application of the 1997–98 budget is still under consideration.

  I will write to the hon. Member about both discretionary and postgraduate awards when further

  661
  information becomes available and I will place a copy in the Library.

  Urban Regeneration
  Mr. Worthington
  To ask the Secretary of State for Northern Ireland if he will make a statement on the changes in financial and policy terms to the provision for urban regeneration, including "Making Belfast Work", arising from his recent statement on public expenditure in Northern Ireland. [10987]

  Mr. Moss
  The recent statement on public expenditure in Northern Ireland re-iterated the importance that the Government place on urban regeneration as a major policy initiative. "Making Belfast Work" will have £23 million available for its economic and social programmes in 1997–98 representing a £5 million baseline reduction in the existing allocation.

  Otherwise, urban regeneration vote provision is to be reduced by £4 million over the same period, leaving almost £31 million available for regeneration initiatives in Belfast, Londonderry and regional growth centres.

  Royal Ulster Constabulary
  Mr. Maginnis
  To ask the Secretary of State for Northern Ireland when he proposes to publish the 1996 report on the Royal Ulster Constabulary by Her Majesty's inspector of constabulary. [12586]

  Sir Patrick Mayhew
  Copies of the 1996 inspection report, which is the fourth RUC inspection report to be published, have today been placed in the Library.

  I welcome the report and will be considering its recommendations carefully.

  HMIC inspections offer the opportunities of independent, professional examination of policing practices, policies and priorities. This inspection forms part of an ongoing programme intended to examine over succeeding years aspects of police management. It is the fourth in a series and has covered a number of areas relating to the effectiveness and efficiency of operational policing.

  I am grateful to Her Majesty's inspector for the report and am pleased to note that overall he regards the force as efficient.

HEALTH

  Attention Deficit Hyperactivity Disorder
  Mr. Ieuan Wyn Jones
  To ask the Secretary of State for Health (1) if he will make it his policy to ensure that every child moved from one foster home to another more than three times should be assessed for attention deficit hyperactivity disorder; and if he will make a statement. [11532]

  (2) what recent evidence he has evaluated in respect of the number of times children in care are moved; if he will make it his policy to require all social service departments to incorporate a full assessment for attention deficit and hyperactivity disorder by a specially qualified medical practitioner into the social services' own assessment as to whether a child should enter care; and if he will make a statement. [11507]

  Mr. Burns
  The criteria for taking children into care is set out in sections 20 and 31 of the Children Act 1989.

  Local authorities have responsibilities and duties under the Children Act to arrange placement for children looked after which will promote and safeguard their welfare. In order to achieve this, authorities must undertake a full assessment of children's needs, including health needs, and match them to appropriate placements. The assessment should, when appropriate, be in collaboration with other agencies. It is for local authorities to monitor the number of times children are moved because of placement breakdown.

  Number of residents in residential and nursing homes and total expenditure by local authorities

  (a)Independent sector nursing homes1

  (b)Independent sector residential homes1

  (c)Local authority residential homes

  Total number of residents2, at 31 March 1996

  123,600

  228,600

  64,200

  Gross current expenditure by local authorities in England, 1994–95

  £371 million

  £507 million

  £824 million

  Local authority gross current expenditure per week for older people per supported residents2, 1994–95

  £231

  £246

  £283

  Notes:

  1Information on expenditure on independent sector residential care homes is not broken down between private and voluntary homes.

  2Residents in staffed homes only.

  Source:

  Department of Health annual statistical returns.

  Hypothermia
  Mr. Simpson
  To ask the Secretary of State for Health what has been the cost of treating(a) hypothermia and (b) hypothermia-related cases in each of the last five years. [11473]

  Mr. Burns
  This information is not collected.

  Dental Services
  Mr. Gordon Prentice
  To ask the Secretary of State for Health, pursuant to his answer of 6 December 1996,Official Report, column 820, relating to dentists' pay, what is his definition of a single dentist. [11606]

  Mr. Malone
  In my answer of 6 December,Official Report, column 820, the "single dentist" was the

  Rural Pharmacies
  Mrs. Ray Michie
  To ask the Secretary of State for Health what plans he has to safeguard rural pharmacies. [11474]

  Mr. Malone
  In England and Wales the essential small pharmacy scheme already provides financial support to pharmacies located more than 1 km from the next nearest pharmacy and which dispense fewer than 18,636 national health service prescriptions in a year.

  Residential Care Costs
  Mr. Thurnham
  To ask the Secretary of State for Health what is the average cost of a resident in(a) private nursing homes, (b) private residential homes and (c) local authority residential homes; and what estimate he has made of the total number of residents in (a) to (c) and the current annual costs to public funds arising from funding relating to (a) to (c). [11487]

  Mr. Burns
  Information is collected centrally on the overall numbers of residents of all types of care homes but not on the overall costs or costs per place in independent sector homes, nor on the costs to public funds overall of residents. The latest centrally available information is given in the table, including figures for gross current expenditure per week by local authorities on residential and nursing care for older people per supported resident.

  independent contractor who was paid the highest gross fee earnings by the Dental Practice Board in the relevant year.

  Capital Projects (Greater London)
  Mr. John Marshall
  To ask the Secretary of State for Health if he will list the capital projects costing over £100,000 which have been started in Greater London since 17 April 1992. [11488]

  Mr. Malone
  Information is available centrally only on capital schemes costing over £1 million, for which national health service executive approval is required. All such schemes in Greater London, with a start on site date between 17 April 1992 and 30 September 1996—the most recent date for which information is available—are provided in the table.
  665

  Regional office

  Scheme name

  Cost1 (£ millions)

  Start date

  North Thames

  Hammersmith Energy Centre M and E installation, Hammersmith Hospital

  1.32

  18 May 1992

  North Thames

  Hammersmith Hospital Cancer Centre

  3.76

  1 June 1992

  North Thames

  Hammersmith Hospital Energy Centre, incineration installation

  1.21

  5 June 1992

  South Thames

  St. Thomas' Hospital A and E upgrade/ extension

  2.35

  20 July 1992

  North Thames

  Central Middlesex Acute Secure Unit/mother and baby unit

  2.03

  27 July 1992

  South Thames

  St. George's Hospital combined heat and power

  3.58

  24 August 1992

  North Thames

  Regency Street Nursing Home for the Elderly (Victoria)

  1.78

  2 November 1992

  North Thames

  Great Ormond Street Southwood balconies and stairs

  1.83

  23 November 1992

  South Thames

  Queen Victoria Hospital Burns Unit

  1.44 29

  December 1992

  North London

  Chase Farm Hospital (Enfield) Centralization of in-patient services

  10.32

  1 April 1993

  North London

  Great Ormond Street Camelia Botnar Laboratories

  11.16

  3 May 1993

  South Thames

  St. George's Atkinson Morley Hospital theatres

  2.35

  4 May 1993

  South Thames

  St. John's Twickenham Redevelopment Phase 2

  2.92

  1 June 1993

  North Thames

  Homerton Relocation of services

  10.26

  5 July 1993

  North Thames

  Royal Free Hampstead Renal Unit centralisation

  3.40 20

  September 1993

  North Thames

  Whipps Cross Phase 2

  5.61

  25 October 1993

  South Thames

  Kings College Hospital Redevelopment of A and E/Radiology

  5.04

  1 February 1994

  South Thames

  Springfield Hospital Forensic Psychiatry Clinic

  3.02

  28 February 1994

  North Thames

  Moorfields Eye Hospital Redevelopment Phase 3A

  3.13

  1 April 1994

  North Thames

  Homerton Development of A and E extension

  1.52

  11 April 1994

  South Thames

  South Western Hospital Redevelopment

  10.13

  18 April 1994

  North Thames

  Medium Secure Unit— Hackney

  4.62

  19 April 1994

  North Thames

  Barnet General Hospital

  16.78

  I August 1994

  South Thames

  Royal Hospital Richmond Redevelopment

  7.00 31

  December 1994

  South Thames

  Kings College Hospital A and E and Out-patients Department

  2.39

  1 February 1995

  South Thames

  Lewisham Phase 2 Redevelopment

  13.15

  18 April 1995

  North Thames

  Homerton Hospital Acute services development

  11.36

  5 August 1996

  Source:

  Department of Health, NHSE Estates.

  Notes:

  1 Figures rounded up to the nearest two decimal points.

  Neurologists
  Mr. Gordon Prentice
  To ask the Secretary of State for Health how many neurologists there are per 100,000 population in(a) England and (b) each member state of the European Union. [11881]

  Mr. Malone
  There were 510 neurologists in England as at 30 September 1995. This gives one doctor per 100,000 of population.

  The Department receives no information about the numbers of neurologists in other member states of the European Union.

  Mr. Prentice
  To ask the Secretary of State for Health what is the average waiting time for a consultation with a consultant neurologist following a General Practitioner referral in each NHS trust in England. [11899]

  Mr. Horam
  This information is not available centrally. Such information as is available is contained in "Waiting Times for First Outpatient Appointments in England: Detailed Statistics—Quarter ended 30 September 1996", copies of which are available in the Library.

  Mr. Prentice
  To ask the Secretary of State for Health what steps he is taking to increase the number of neurologists. [11882]

  Mr. Malone
  The specialist workforce advisory group advises the NHS executive and the Welsh Office on the number of higher specialist trainees needed, to ensure an adequate supply of properly trained doctors in each specialty. The Government accepted its recommendation to increase the number of higher specialist trainees in 1996–97 by 1,500. Additional funding of £5.7 million has been provided for this. The recommended increase in numbers of higher specialist trainees in neurology was 12 per cent.

  Multiple Sclerosis
  Mr. Gordon Prentice
  To ask the Secretary of State for Health how many MS patients had been prescribed beta interferon by hospital consultants at the latest date for which information is available. [11885]

  Mr. Malone
  Data are not collected centrally on drugs prescribed and dispensed in hospitals. The only data available are from the prescribing analysis cost system generated by the Prescription Pricing Authority, and relate only to prescriptions dispensed in the community. A total of 266 prescriptions for beta interferon products were dispensed in the community during July—September 1996.

  Mr. Prentice
  To ask the Secretary of State for Health, pursuant to his answer of 10 December,Official Report, column 151, if he will make it his policy to collect information centrally on health authorities financial allocations for beta interferon. [11954]

  Mr. Malone
  No. It is for individual health authorities to decide the level and type of services purchased in partnership with general practitioners locally and through consultation with other agencies and local people, taking account of local circumstances and national policies and priorities.

  Accident and Emergency Departments
  Mr. Chris Smith
  To ask the Secretary of State for Health if he will list the number of accident and emergency departments by region. [11675]

  Mr. Horam
  The number of national health service trusts, special health authorities and directly managed units with large accident and emergency departments in 1995–96 is given by region in the table.

  Number

  Northern and Yorkshire

  30

  Trent

  16

  Anglia and Oxford

  21

  North Thames

  31

  South Thames

  30

  South and West

  25

  West Midlands

  25

  North West

  33

  England

  211

  Source:

  The NHS Performance Guide 1995–96.

  Cannabis
  Mr. Gordon Prentice
  To ask the Secretary of State for Health if he will list the cannabis derivatives which can lawfully by prescribed by doctors. [11876]

  Mr. Malone
  Dronabinol and nabilone are the only cannabis derivatives that may be lawfully prescribed by doctors.

  NHS Finance
  Mr. Bayley
  To ask the Secretary of State for Health (1) if he will place in the Library a paper indicating the(a) cash to be allocated for general medical services in 1997–98, (b) the percentage change in the GMS allocation from 1996–97 to 1997–98 and (c) the estimated resident population in 1997–98 for each health authority; [12086]

  (2) if he will place in the Library a paper indicating the amount of money gained or lost by each health authority from its HCHS capitation funding target for 1997–98 as a result of (a) changes to the market forces factor and (b) other changes to the capitation funding formula, indicating the nature of those other changes; [12088]

  (3) if he will place in the Library a paper indicating (a) in (i) cash and (ii) percentage terms the change in HCHS funding between 1996–97 and 1997–98, (b) the 1997–98 HCHS cash allocation and (c) in (i) cash and (ii) percentage terms the distance of each health authority from the HCHS target in 1997–98. [12089]

  Mr. Horam
  The information requested can be found in the 1997–98 "Health Authority Revenue Cash Limits Exposition Book", copies of which are available in the Library.

  Mr. Harvey
  To ask the Secretary of State for Health what account he takes of rurality when calculating funding for hospital and community health services and for general medical services. [12010]
  668
  Mr. Horam
  The analytical work on which the hospital and community health service formula is based considered both population density and the proportion of population living in urban areas as drivers of need that are relevant to rural areas. None of these factors proved to be statistically significant enough to feature in the formula. However, rurality may be a factor in the cost of providing services, particularly community health and ambulance services, and invitations to tender for appropriate research have been issued.

  General practitioners' remuneration includes specific fees to recognise the costs and pressures of practice in rural areas.

  Obesity
  Mr. Chris Smith
  To ask the Secretary of State for Health what percentage of(a) men and (b) women aged 16 to 64 years his Department assessed to be obese in (i) 1993 and (ii) 1994. [12057]

  Mr. Horam
  In the Health Survey for England 13 per cent. of men and 16 per cent. of women aged 16 to 64 were classified as obese—defined as a body mass index of over 30kg/m2—both in 1993 and in 1994.

  Walsgrave Hospital
  Mr. Robert Ainsworth
  To ask the Secretary of State for Health if he will make a statement on the latest position as regards the Walsgrave hospital's private finance initiative proposals. [11939]

  Mr. Horam
  The Walsgrave hospitals national health service trust has submitted the full business case for the private finance initiative scheme. The national health service executive and Her Majesty's Treasury are reviewing the business case and will make a decision on the approval at the end of this review.

  Income and Expenditure Returns
  Mr. Bayley
  To ask the Secretary of State for Health by what date(a) health authorities and (b) NHS trusts have to submit their 1996–97 third quarter income and expenditure returns and year end out-turn forecasts to the NHS executive; and when these returns will be available to hon. Members. [12129]

  Mr. Horam
  The forecast income and expenditure returns must be submitted to the national health service executive headquarters as follows:

  Health authorities

  (1) 1996–97 Quarter Three: 22 January 1997

  (2) 1996–97 Quarter Four (year end out-turn): 23 April 1997

  Trusts

  (1) 1996–97 Quarter Three: 31 January 1997

  (2) 1996–97 Quarter Four (year end out-turn): 30 April 1997

  These returns will be available to hon. Members, following the meeting of the National Health Service Policy Board on:

  (1) 1996–97 Quarter Three: 12 March 1997

  (2) 1996–97 Quarter Four: 18 June 1997

  Hospital Beds
  Mr. Ieuan Wyn Jones
  To ask the Secretary of State for Health (1) if he will publish the availability of hospital beds
  669
  in the United Kingdom and each other EU member state per 100,000 people for the latest available year in which the European Union average is indexed at 100; [11575]

  (2) what was the number of hospital beds per 100,000 people for the last three years for which figures are available in (a) the United Kingdom and (b) each EU country. [11565]

  Mr. Malone
  I refer the hon. Member to the reply I gave the hon. Member for Peckham (Ms Harman) on 19 June 1996 at column 496.

  Salmonella Gold Coast Contamination
  Mr. Martlew
  To ask the Secretary of State for Health (1) how many cases of food poisoning caused by salmonella gold coast contamination have been recorded in the last year; and what percentage of these cases can be attributed to cheese from Wyke Farms of Somerset; [11791]

  (2) how many cases of food poisoning caused by salmonella gold coast contamination have been recorded in each of the district council areas of Cumbria in the last year; and what percentage of these have been attributed to cheese from Wyke Farms of Somerset. [11792]

  Mr. Horam
  The public health laboratory service reported 86 cases of infection with salmonella gold coast between January 1996 and 17 January 1997. Information is not held centrally as to their distribution between district council areas.

  Epidemiological studies have been carried out on recent cases. These suggested a possible link with the consumption of cheese from Wyke Farms in 22 cases, around 25 per cent. of the total for the year. Scientific testing, using phage and molecular typing techniques, is taking place and has validated an association between the outbreak strain and some Wyke Farm cheeses. Full results are not yet available.

  In Vitro Fertilisation
  Mr. Jim Cunningham
  To ask the Secretary of State for Health (1) what plans he has to review the level of financial contributions the patient makes towards the cost of IVF treatment; [11794]

  (2) what financial contribution patients are asked to make to the cost of their IVF treatment; [11795]

  (3) if he will make a statement on the funding of the Human Fertilisation and Embryology Authority; [11796]

  (4) how much of the Human Fertilisation and Embryology Authority's funding is received from patients requiring in vitro fertilisation treatments; [11797]

  (5) how much of the Human Fertilisation and Embryology Authority's funding is received from doctors providing an in vitro vertilisation treatment. [11798]

  Mr. Horam
  In considering the Human Fertilisation and Embryology Bill, Parliament decided that a proportion of the Human Fertilisation and Embryology Authority's costs should be recovered by charging fees to licensed centres. The current aim is for 70 per cent. of the authority's costs to be met through fees from licensing, with the taxpayer meeting the remaining 30 per cent. This proportion is due to be reviewed by April 1998.
  670
  Licensed treatment clinics are required by the authority to pay an initial application fee of £250. A one-off fee of £100 is charged for each research licence and each storage facility licence. Renewal licences are charged according to the number of treatments conducted by the clinic. The charge rate is £40 for each IVF cycle and £10 for each donor insemination cycle. No charge is made for cycles abandoned. These rates have been in place since 1 September 1994.

  Charges for infertility treatment are a matter for individual clinics and it is for them to decide if and how charges made by the authority should be passed on to its patients. However charges are not made to patients receiving treatment under the national health service.

  The authority publishes its accounts annually and provides a summary in its annual report. The last annual report, published in July 1996, includes the authority's accounts for 1994–95. Copies of the report are available in the Library.

AGRICULTURE, FISHERIES AND FOOD

  Child Care Facilities
  Mr. Allen
  To ask the Minister of Agriculture, Fisheries and Food if Ministers are entitled to use child care facilities supported by his Department. [11599]

  Mr. Boswell
  Ministers of the Crown are able to make use of the child care facilities provided by the Department if they wish to do so.

  Poultry Feed (Antibiotics)
  Mr. Morley
  To ask the Ministry of Agriculture, Fisheries and Food what assessment he has made of the impact on the poultry industry of the proposed ban on Avoparcin by the European Commission; and if he will make a statement. [11640]

  Mrs. Browning
  Avoparcin has been used as a dietary enhancer in the European Community for more than 20 years. Although there are alternative products available, the British Poultry Meat Federation considers, that the potential loss of production could amount to between £10 million and £20 million a year in the UK.

  Avoparcin has been assessed on a number of occasions by the UK's independent scientific veterinary products committee and by the EU Commission's scientific committee on animal nutrition. In 1995, Denmark and Germany introduced unilateral bans on its use in animal feed as a result of work by the Danish veterinary laboratory which purported to establish a link between the use of Avoparcin in animal feed and resistance to Vancomycin in the treatment of humans. Danish and German data were examined by the SCAN, which agreed that the data identified the existence of what might, with the benefit of further studies, prove to be a hazard but concluded that the data failed to establish any risk associated with that potential hazard. The VPC agreed. The UK therefore opposed a ban on use, but fully supported the EU Commission's proposal to set up a programme to examine the problem of the development of antibiotic resistance in humans and animals. The proposed ban was approved by qualified majority in

  671
  standing committee in Brussels on 19 December with the UK voting against; subject to formal adoption of the amending directive by the European Commission, the ban will enter into force on 1 April 1997.

  BSE
  Sir Irvine Patnick
  To ask the Minister of Agriculture, Fisheries and Food what recent discussions he has had with farmers in South Yorkshire regarding BSE and other related matters. [11662]

  Mrs. Browning
  I met representatives of the National Farmers' Union, Country Landowners Association, Tenant Farmers' Association and Women's Farming Union on 3 December at the North East regional panel meeting to discuss BSE.

  No other official engagements have been undertaken by Ministers in the South Yorkshire area recently.

  Disintensification (Rules and Policies)
  Mr. Hardy
  To ask the Minister of Agriculture, Fisheries and Food if he will seek to amend those rules and policies designed to promote disintensification which creates difficulties, with special reference to the viability of the holding, for(a) small full-time farmers and (b) entrants to farming. [11849]

  Mr. Baldry
  In its 1992 reform of the common agricultural policy regime for beef, the Council of Agriculture Ministers recognised that the imposition of stocking density limits for subsidy purposes and the promotion of extensive production would help to eliminate surplus production within the Community. The Council subsequently recognised that intensive systems for both beef and sheep could give rise to environmental damage, and empowered member states to reduce livestock subsidies and impose penalties in such cases. The Government are willing to consider any constructive proposal to amend the rules governing these measures, provided that they are cost-effective, negotiable in EU terms, and that the environmental benefits are maintained.

  Food Premises Inspections
  Mr. Gordon Prentice
  To ask the Minister of Agriculture, Fisheries and Food how many inspections of retail and manufacturing food premises were carried out in each local authority area in England in each year since 1990. [12094]

  Mrs. Browning
  Copies of summaries showing the total number of inspections carried out in food premises in each UK local authority area for the years 1991 to 1995 have been placed in the Library. Data for the year 1990 is not available and the data for 1996 will not be available until May this year.

  A breakdown of these figures showing inspections specifically in retail and manufacturing premises in England is not readily available and could be produced only at disproportionate cost.

  Agriculture Council
  Sir Hector Monro
  To ask the Minister of Agriculture, Fisheries and Food what was the outcome of the Agriculture Council held in Brussels on 20 and 21 January. [12264]
  672
  Mr. Douglas Hogg
  The Council held a first discussion of the Commission's report on the future of the tobacco regime. I asked for the possibility of phasing out support for tobacco to be examined along with other options identified by the Commission.

  The Council unanimously adopted a proposal strengthening the controls over eligibility for aid for growing flax. It adopted by qualified majority, Germany opposing, a proposal providing for the EC to contribute to member states' costs in dealing with serious plant pests.

  During an informal discussion on follow up to the Cork declaration on rural development, Commissioner Fischler outlined his view that EU rural support policy needed to be simpler, more comprehensible and better integrated, taking greater account of subsidiarity. I broadly welcomed these principles, stressing the need for budget neutrality and the importance of considering these issues in the context of the CAP reforms which will be required to take account of EU enlargement.

  Agro-food Quality
  Mr. Martyn Jones
  To ask the Minster of Agriculture, Fisheries and Food what priorities to improve competitiveness have been announced since March 1995 as a result of the LINK programme on agro-food quality; and if he will make a statement. [10538]

  Mrs. Browning
  Since March 1995, nine projects within the agro-food quality Link programme have been successfully completed. These collaborative projects involved the efforts of 11 United Kingdom academic groups and 17 companies. The projects have contributed industrially valuable, underpinning knowledge in such topics as determining the importance of irrigation timing to the storage quality of root vegetables, the development and release of flavour in low-fat foods and an investigation of the factors contributing to the eating quality of meat. The results from these projects are now being used by the industrial partners from the project consortia.

HOUSE OF COMMONS

  Members' Staffing Costs
  Mr. Allen
  To ask the Lord President of the Council what progress has been made on separating the staffing costs of hon. Members out of the office costs allowance since his meeting with Sir Michael Perry. [11035]

  Mr. Newton
  Further to my reply of 16 October 1996,Official Report, column 903, the Senior Salaries Review Body is continuing its deliberations.

  Child Care Facilities
  Mr. Allen
  to ask the Lord President of the Council if he will extend the facilities and services of the staff
  673
  welfare department to hon. Members and their staff, with particular reference to nursery provision. [11353]

  Mr. Newton
  I have no such plans. Hon. Members may, however, charge nursery provision against their office costs allowance.

LORD PRESIDENT OF THE COUNCIL

  Consultants
  Mr. Milburn
  To ask the Lord President of the Council 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. [10188]

  Mr. Newton
  I am not responsible for any non-departmental public bodies.
  674
  Mr. Milburn
  To ask the Lord President of the Council 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". [10189]

  Mr. Newton
  The Privy Council Office makes only limited use of external consultants, but guidelines are in place on the procedures for placing such contracts. These require that proposals for any use of consultants should be submitted for my personal approval.

  Child Care Facilities
  Mr. Allen
  To ask the Lord President of the Council what child care facilities are provided by his Department. [11582]

  Mr. Newton
  None. The Privy Council Office has a staff of fewer than 40. It would not be cost-effective for a Department of this size to provide its own child care facilities.

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

The Lord Bishop of Hereford
John Keith, Lord Bishop of Hereford—Was (in the usual manner) introduced between the Lord Bishop of Lichfield and the Lord Bishop of Norwich.

The Lord Chancellor: Leave of Absence
2.43 p.m.
The Lord Chancellor (Lord Mackay of Clashfern): My Lords, before the commencement of business, I take the opportunity to inform the House that I am to undertake a meeting with the Prime Minister and other members of the Cabinet at Chequers on Monday, 27th January. Accordingly, I trust that the House will grant me leave of absence for Monday, 27th January.

European Union: Enlargement
Lord Hylton Lord Hylton asked Her Majesty's Government:
What progress is being made towards the enlargement of the European Union, and in particular the inclusion of Poland, Hungary, the Czech Republic and Slovakia.
Lord Chesham: My Lords, the European Commission is due to present its assessments of each country's application to join the EU immediately after the IGC has finished in June. The Council will then decide later this year which are ready to begin accession negotiations. These should start in the first half of 1998 at the latest; incidentally, during the UK presidency.
Lord Hylton: My Lords, I thank the Minister for that Answer. Does he agree that the countries mentioned in my Question, together with Slovenia, are essentially and historically part of the European family? Will Her Majesty's Government work towards their earliest possible admission, their access to European Union markets on favourable terms and for long transitional periods?
Lord Chesham: My Lords, we welcome the progress which Poland, Hungary, the Czech Republic and Slovakia are making in preparing for EU membership. The Council will decide which are ready to begin negotiations on the basis of the Commission's opinions. We should not forget that they are only four out of 10 central European countries which have applied for EU membership. Until negotiations begin, we cannot predict
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the type and length of any transitional periods. Those will depend on individual circumstances, but they must not be so long as to create second-class membership.
Lord Renton: My Lords, is my noble friend aware that the prospect of further enlargement of the Community makes it imperative that the Rome treaty should be revised, especially with regard to the possibility of integration and the so-called harmonisation of laws?
Lord Chesham: My Lords, it is true that the EU, as well as the countries which are applying, needs to prepare for enlargement. Any specifics which need to be included are for discussion and negotiation.
Lord Bruce of Donington: My Lords, is the Minister aware that it will be impossible for the countries named in the Question to join the European Community so long as the common agricultural policy as it now is remains in existence? Will the Government, after 20 or 25 years, make some effort to change radically the whole of the disastrous common agricultural policy?
Lord Chesham: My Lords, as I said in answer to my noble friend Lord Renton, the EU, too, needs to prepare for enlargement. The common agricultural policy is already overdue for further reform and the prospect of enlargement makes that all the more vital. In addition, the structural and cohesion funds need revision to make enlargement affordable and sustainable. I am delighted that on this matter I am in total accord with the noble Lord, Lord Bruce.
Lord Beloff: My Lords, does my noble friend agree that even on the most optimistic prediction it will be some years, if ever, before these countries are admitted to the European Union? In the interim, will Her Majesty's Government press the other members of the Union to give access to their markets, which they could do immediately, since it is what those countries and their people most want at the moment?
Lord Chesham: My Lords, the point is under discussion and it is desirable. However, we must also consider any possible implications under GATT.
Lord Avebury: My Lords, when considering the applications from the eastern European countries and others which are not mentioned in the Question, will the European Commission consider asking the High Commissioner for National Minorities of the OSCE to give it a report on each of those countries from the point of view of treatment of ethnic and religious minorities?
Lord Chesham: My Lords, I believe that the Commission may well be looking at that matter in forming its opinions. It might help the House to know that all the applicants are being measured against the criteria set out in the conclusions of the Copenhagen Council in June 1993. Those conditions are set out very clearly. It is against those criteria that the Commission will be forming its opinions.
The Earl of Lauderdale: My Lords, will my noble friend tell the House whether the accession of new members of the European Union will involve derogation of the current custom whereby each member has a representative on the Commission?
Lord Chesham: My Lords, that is all part of the negotiations which are taking place at present.
Lord Barnett: My Lords, while I accept that there is a considerable need for changes to the common agricultural policy, will the Minister agree that in order to achieve that it will be necessary, or certainly helpful, to change the qualified majority voting system?
Lord Chesham: My Lords, I believe that we are going slightly wide of the Question on the Order Paper.
Lord Pearson of Rannoch: My Lords, does my noble friend agree that the common agricultural policy requires a majority of 62 votes in order to change it; and so, further to the answer that he gave to the noble Lord, Lord Bruce of Donington, can he explain how that will be possible when the majority of voters on the common agricultural policy are recipients of its largesse?
Lord Chesham: My Lords, I refer my noble friend to my previous answer.
Lord Richard: My Lords, is the noble Lord aware that we on this side of the House agree entirely both that enlargement of the Community is desirable and that it should take place as soon as can be reasonably devised? I wonder whether the noble Lord does not consider, as I do from time to time, that in view of what is said in this House by, for example, two of the noble Lords who have just spoken about the European Union, it is passing strange that no fewer than 10 countries are hammering on the door.
Lord Chesham: My Lords, I am delighted to agree with the noble Lord, Lord Richard, on that. I should just make it clear that our vision is of a wider European Union which extends security and prosperity across Europe and which is outward looking, free trading and democratic.

Secure Training Centres
2.51 p.m.
Lord Allen of Abbeydale Lord Allen of Abbeydale asked Her Majesty's Government:
What progress is being made with the five secure training centres for young offenders envisaged under the Criminal Justice and Public Order Act 1994.
The Minister of State, Home Office (Baroness Blatch): My Lords, contract negotiations for the provision of the first two secure training centres are in their final stages. Contracts will be signed as soon as the terms of the contractual agreement have been settled. Bids for the provision of a third secure
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training centre at Onley, Northamptonshire, were received on 30th April 1996 and those are currently being assessed. Invitations to negotiate for the other two sites will be issued once outline planning permission is obtained.
Lord Allen of Abbeydale: My Lords, I thank the Minister for that characteristically informative reply. I have certainly no wish to add to this week's list of problems for my old department. Nevertheless, one recalls the urgency which the Government attached to the legislation which provided those centres for 12 to 14 year-old persistent offenders. In view of that, is it not perhaps a little surprising that more than two years after the date of Royal Assent, as far as I understand it, not a single brick has been laid; only one planning consent has been obtained; and the prospects of completing the programme do not seem to be in sight? Might it not have been better to have devoted resources to developing further local authority secure units, given that their standards of care, education and safety are a good deal better than is sometimes supposed?
Baroness Blatch: My Lords, the noble Lord's hostility to this policy is well known. It would not be the best use of resources to discontinue the policy. We are very anxious to continue it. There are two main reasons for the delay. One reason is the complexity of the contracts. I am sure that the noble Lord will agree that we want to make sure that the centres are not just built well but that they are managed well. That adds to the complexity of the contract.
The other side of the matter and the other cause for delay is the hostility of Labour councils with which we have to deal. Many of them are being particularly difficult as regards negotiations for planning permission and the details of follow-up planning permission after outline planning permission is granted. If we had received more co-operation from them, we should have made much quicker progress.
The final point to make to the noble Lord is that the secure training centres will provide a highly disciplined educational training programme for persistent young offenders. That is not provided in the secure places which are managed by social services.
Lord Carr of Hadley: My Lords, looking ahead and not backwards—and I am not addressing that remark particularly to the Minister—does she not feel that the availability of those important new centres is so urgent that the Government should reconsider their previous refusal to allow them to be developed locally, not instead of the central bodies when they are set up but pending the setting up of those bodies? Meanwhile, the courts continue their work without the availability of those very important new centres given to them by Parliament. Does the Minister think that it is right to go on without bringing some centres into use?
Baroness Blatch: My Lords, I understand the point that my noble friend makes. First, we believe that the new centres are imminent. We are about to sign two contracts and we hope that it will not be too long before

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we sign the third. We expect two and possibly three centres to be up and running by next summer. Therefore, my advice is that we should get on with it and get the places operational.
As regards facilities close to home, there will be five centres spread geographically around the country. There will be two kinds of parents of those children. There will be co-operative and very concerned parents. I believe that they will be grateful that an opportunity is taken for highly disciplined educational training programmes which will help to return those young people to more law-abiding ways. Then there will be unco-operative parents. Quite frankly, I believe that any opportunity should be taken to help the children of such parents, whether or not the centre is close to home.
An absolutely key part of the management of the programmes is that not only will there be a structured programme for those young people but that there should be communication with their families. That is all built into the management of those training programmes. For some of those young children, being away from home might actually be good for them.
Lord McIntosh of Haringey: My Lords, it is disappointing that the Minister thought it necessary to pass off the responsibility for the delays on to local authorities. Will she not acknowledge that when the legislation was being considered, we warned the Government as to exactly what would happen? It is nothing to do with local authorities. It is bound to take this length of time to negotiate those complicated contracts. Will the Minister also acknowledge, bearing in mind the second question of the noble Lord, Lord Allen of Abbeydale, that we said at that time, and we still say, that the opportunity for expansion of local authority secure accommodation was there and has been missed by this misguided policy?
Baroness Blatch: My Lords, the opportunity has not been missed. We have 170 new places. More than half are up and running and almost all the remaining half will be up and running by June. The noble Lord opposed this policy in a very hostile way. His colleagues in local government oppose it. Perhaps I may give the noble Lord an example. In Medomsley, which is the site for one of the proposed centres, the local authority would simply not make the decision on planning permission within the required time. That has caused enormous delays while we have tried to further that particular application. In the meantime, the site for the unit, where there was a former detention centre—and it has been empty for five or six years—has been subject to the most incredible vandalism. If that had been a responsible council, it would have welcomed the development of that site, which would provide an opportunity to turn very persistent young offenders into more law-abiding citizens. We should have welcomed the noble Lord's support but we know that he and the party opposite are not supporting that policy.
Lord Hutchinson of Lullington: My Lords, will the Minister confirm that the centres will be run by private companies? If so, can she explain how you make a profit out of locking up children of 12 years of age?
Baroness Blatch: My Lords, it is about the centres being well run. Within the Prison Service, prisons are being run more economically in financial terms and certainly as efficiently and in some cases more efficiently. It can be done. There will be an operations manual which will be made public for all your Lordships to see as soon as the contracts are signed. The noble Lord will be able to judge for himself, but we have every confidence that the centres will be well run, economically effective and, more important, that they will be operationally effective.
Lord Acton: My Lords, during the period when only the first two centres are operating, can the Minister say whether they will take young offenders just from their regions or from all over England and Wales, thereby causing grave difficulties for families and local social workers?
Baroness Blatch: My Lords, perhaps I may suggest that these families are experiencing grave difficulties anyway. I must spell out to the noble Lord the fact that we are talking about 12 to 14 year-old young offenders. They will have to have been convicted for three or more imprisonable offences; they will have to have previously proved either unable or unwilling to comply with the requirements of a supervision order in the community; and the nature or seriousness of the offending must require custody in line with the criteria contained in Section 1 of the Criminal Justice Act 1991.
Therefore, such young people and their families are having grave troubles at present. It is true that it will be a national facility. Therefore, when such centres are up and running, the facility will be available to take children from across the country; and, indeed from Wales. I must point out again that we believe this facility will benefit those young people. We should welcome that fact.

Gurkhas: Accompanied Service in UK
3 p.m.
Lord Harding of Petherton Lord Harding of Petherton asked Her Majesty's Government:
Whether their review of provision for married accommodation for Gurkha soldiers in this country will result in the provision of accommodation for Gurkhas on the same scale as for British soldiers.
The Parliamentary Under-Secretary of State, Ministry of Defence (Earl Howe): My Lords, as I informed the House on 14th January, I expect a decision on the review of Gurkha terms and conditions

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of service to be announced within four weeks or so. My noble friend will be able to judge the content of the announcement then.
Lord Harding of Petherton: My Lords, I thank my noble friend the Minister for that reply. However, I am afraid that he has not answered my Question. My understanding is that this has already been decided in the Ministry of Defence and that the entitlement of Gurkhas stationed in this country to married quarters will be on a lesser scale than that which they have always enjoyed. Can my noble friend say whether that decision can be reviewed? As Gurkhas stationed in Britain are to be attached to British battalions to make up the shortfall in the number of our own troops, surely it is not unreasonable that they should be treated more generously than in the past.
Earl Howe: My Lords, naturally I understand my noble friend's close interest in such matters. I can assure him that his concerns have been noted and that they will be taken into account. However, as he will appreciate, what I cannot do is pre-empt the announcement on Gurkha terms and conditions which we expect to make next month.
Lord Haskel: My Lords, can the Minister tell the House whether difficulties are being experienced in providing married accommodation for the Gurkhas because the Armed Services have recently sold off all their married quarters?
Earl Howe: My Lords, I should point out to the noble Lord that we have also leased back the majority of the married quarters to accommodate those entitled to them. I can assure him that, if accompanied service in the UK is something that we decide to offer to Gurkhas, there will be sufficient married quarters to accommodate those families so entitled.

Russia
3.2 p.m.
Lord Wallace of Saltaire Lord Wallace of Saltaire asked Her Majesty's Government:
What arrangements they consider should be made to associate Russia more closely with western international institutions, in parallel with the planned enlargement of NATO to Poland and other former Warsaw Pact countries.
Lord Chesham: My Lords, Her Majesty's Government co-operate with Russia in organisations of which Russia is a member, such as the Council of Europe and the International Monetary Fund, and support Russia's closer engagement with others such as the Organisation for Economic Co-operation and Development. In addition to encouraging Russia to play a full part in the North Atlantic Co-operation Council and Partnership for Peace, NATO is willing to build a new relationship with Russia which reflects her essential
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role in European security. This could include the establishment of a joint body overseeing political consultation and military co-operation, perhaps enshrined in a charter.
Lord Wallace of Saltaire: My Lords, I thank the Minister for that Answer. However, as I am sure the noble Lord is aware, Mr. Solana, the Secretary-General of NATO, has, within the last week, been talking about a relationship with Russia which involves a permanent Russian mission within NATO headquarters and a permanent NATO mission in association with Russian defence—in effect, country membership of NATO. That seems to be in the business of transforming NATO into a European security organisation. As I understand it—and the Minister may be able to help me—we are talking about the same sort of relationship with the Ukraine. Do the British Government accept that we are in the business of changing the whole nature of NATO as we make these arrangements with the Russians, the Ukrainians and other non-members?
Lord Chesham: My Lords, there is no question of negotiation with Russia about NATO enlargement. However, it is right not to ignore Russian security concerns. NATO does need a close and trusting relationship with Russia.
Lord Jenkins of Putney: My Lords, can the Minister say whether there has been any discussion to the possible end that Russia itself should acquire membership of NATO? Would that be acceptable to NATO? Further, has the matter been considered by Russia?
Lord Chesham: My Lords, at present Russia continues with an anti-enlargement line in public. However, the Russians now seem willing to work with NATO on developing some form of relationship. I do not believe that we are anywhere near the situation where it would be considered appropriate by this Government, or indeed by Russia, that Russia should become a full member of NATO.
Lord Quinton: My Lords, will my noble friend the Minister agree that the raison d'etre of an alliance is a common enemy; indeed, something to be against? Surely the obvious candidate is China, the last one of the three great mass murdering despotisms of the 20th century. Has not Russia as great an interest as the existing members of NATO—perhaps a greater one—in standing up firmly to Chinese aggression and preparing for it?
Lord Chesham: My Lords, that is a matter for Russia rather than for us. We continue to observe what is going on all around the world.
Lord Carver: My Lords, does the Minister agree that the Government and NATO have their priorities wrong? Should they not give priority to establishing a satisfactory security relationship with Russia over the enlargement of NATO?
Lord Chesham: My Lords, I thank the noble and gallant Lord for that question. However, I do not think I agree with him in this situation.
Baroness Blackstone: My Lords, following the question by the noble and gallant Lord, can the Minister say whether the Government support invitations to the Czech Republic, Hungary and Poland to join NATO, which I understand are likely to be made at the NATO summit in Madrid this summer? Can the noble Lord say whether the Government support such invitations, despite Russian concern? Further, can the noble Lord tell the House what the implications of their membership would be for the defence budget? For example, would the additional costs be covered by the defence budget or would other programmes have to be cut in order to accommodate them?
Lord Chesham: My Lords, it is too early to be discussing individual countries which may or may not receive such an invitation as a result of discussions at a meeting which is to take place on 8th and 9th July in Madrid. Therefore, to pre-suppose whether certain countries will receive an invitation is wrong. Finally, I do not have details on the costings involved, but I shall write to the noble Baroness in that respect.
Lord Mackie of Benshie: My Lords, can the Minister say how a close relationship with Russia can be established without negotiation?
Lord Chesham: My Lords, I have not suggested that there is no negotiation; indeed, negotiations are going on with Russia and the Secretary-General of NATO at present. However, they are not negotiating whether Russia will be joining NATO.
The Earl of Lauderdale: My Lords, can my noble friend the Minister say whether the project to enlarge NATO eastwards will be overshadowed by the different national interests of Germany and Russia, particularly the Oder-Neisse Line?
Lord Chesham: No, my Lords; I do not believe that that is an appropriate question for today.
Lord Bruce of Donington: My Lords, can the Minister say to what extent Her Majesty's Government have been able to evaluate the extent to which vast amounts of Russian armaments are under the direct control of the Russian Government? Is the Minister satisfied that negotiations can proceed on a satisfactory basis without such an evaluation being made, particularly in the light of press reports? I do not know the accuracy of such reports but the noble Lord probably does. Such reports suggest that there are very considerable amounts of armaments in Russia which are being sold abroad without the apparent consent of the Russian Government.
Lord Chesham: My Lords, I do not have details with me on the latest situation regarding armaments within Russia. I suppose that a response might be that if such items are being sold abroad without Russian Government knowledge—and I have no knowledge whether they are—it is unlikely that we would be receiving such information. However, it also means that there are less arms in Russia.
Lord Hylton: My Lords, the Minister mentioned a framework for co-operation with Russia. Will the noble Lord accept that one of the first tasks for such a body should be to provide help for clearing obsolete Russian nuclear submarines adjoining the Arctic Ocean?
Lord Chesham: My Lords, it is for Russia to ask for help on that matter if she wishes. We cannot force help onto Russia.
Lord Pearson of Rannoch: My Lords, does my noble friend agree that NATO has been a hugely successful organisation—certainly more successful than the European Union? Can he say whether NATO has ever had to resort to the qualified majority vote to achieve any of its decisions, and whether it is likely to have to do so in the Question as posed?
Lord Chesham: My Lords, that, again, is wide of the mark. However, I am not privy to decisions made within NATO.
Lord Wallace of Saltaire: My Lords, is the noble Lord aware that the latest NATO review contained an opinion poll on American attitudes to NATO enlargement which indicated that 52 per cent. are in favour of NATO enlargement to Russia, and a rather larger proportion say they are in favour of enlargement to several other central and east European countries? Does the noble Lord also agree that NATO works differently from the European Union because the Americans run NATO and tell us all what to do, and that is perhaps not the way we wish to do things in the European Union?
Lord Chesham: My Lords, I am not sure I agree that NATO jumps when America decides what it wants it to do; but there is no US influence on the EU.
The Earl of Sandwich: My Lords, does the noble Lord accept that the enlargement of European institutions, both NATO and the European Union, is just as important a question as integration in monetary affairs and monetary union? Why do the political parties and the Government not take a lead in informing public opinion on their position in these matters?
Lord Chesham: My Lords, there is a little confusion whether we are talking about the EU or NATO. We are talking about NATO and not the EU, which was the subject of the first Question. However, considerable overlap between membership of the two bodies is likely. It would be totally wrong to insist that countries must

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be members of both the EU and NATO, or of neither. That would risk creating exactly the new dividing lines that we are trying so hard to avoid.
business of the House: Debate this Day
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 Earl of Gowrie set down for today shall be limited to 3½ hours and that in the name of the Lord Campbell of Alloway to 2½ hours.— (Viscount Cranborne.)
On Question, Motion agreed to.

The City of London
3.13 p.m.
The Earl of Gowrie The Earl of Gowrie rose to call attention to the economic value of the international work of the City of London and to the case for City firms establishing systems of corporate governance which can maintain confidence throughout the world; and to move for Papers.
The noble Earl said: My Lords, I am delighted that my noble friend Lord MacLaurin has chosen this debate for his maiden speech and that so many on all sides of the House with City experience have put down their names. 1 want to set out some parameters for our discussion, which is an ecumenical one. The value to the British economy of the financial trading and services industry, generically called the City—although Edinburgh is also very important—is now common ground between the political parties. That is welcome. Even rhetorically political threats undermine confidence at home and abroad. Confidence makes the lives of Chancellors of the Exchequer a lot easier.
The House will have noticed that I seek principally to draw attention to the international value of the City. I do not underestimate the importance of the City to our domestic economy, but London is, with New York, the twin capital of the open societies financially. Therefore its health is vital to the international economy on which we all depend.
The modern-day success of the City was founded by a Labour Government, as it happens. In the mid-1970s my noble friend Lord Richardson of Duntisbourne, then plain Governor Gordon, persuaded the late Lord Wilson of Rievaulx, then plain Prime Minister Harold, to undercut European and American practices, notably the United States equalisation tax which then paid dollar deposits net, not gross. Would that successive administrations had liberalised fund management as well. Britain now manages a third of all funds managed in Europe but we are starting to lose out to Luxembourg and to my own dear native Dublin, which pay gross, not net. The Eurodollar market was born; other trades thrived. Under the benign regime of my noble friend Lady Thatcher the financial sector grew hugely and
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now employs over a million people. It contributed over £20 billion in 1995—a poor vintage year—to our balance of payments and it represents more than 3.5 per cent. of GDP. In my view, Britain must remain a low tax, liberal, partially offshore service economy; nor should we frighten foreign residents and investors whose capital we will never get our hands on in tax terms in any case.
That said, over the past few years a number of unfortunate incidents and scandals has started to worry people at home and abroad. They are small against the scale of City activity. However, we live in a world of mass communications. The public, in public relations terms, are now global. I shall not deal with cases in any depth. However, it would be wrong to ignore danger signals. If people feel problems are not being addressed, there will be a real threat to the City's health. We have experienced the Lloyd's disaster, BCCI, Maxwell, the fall of Barings, the copper scandal and, most recently, two helpings of trouble—however, I think only one of them is serious—at Morgan Grenfell.
With the exception of Lloyd's, those troubles are relatively minor, and nor is London unique. There have been great difficulties in Sweden; a damaging banking incident—Herstatt—in Germany; the Credit Lyonnais affair in France; and huge dents in confidence on Wall Street, notably the Savings and Loan, junk bond and Salomon Brothers upheavals. There have been political, financial and even Church scandals in Italy; serious questions about Switzerland now that more information about the years immediately after the war is coming to light; and dangerous continuing shocks in Japan. In general, Britain comes out of a period of unprecedented change very well. Our present regulatory framework, both statutory and voluntary, shows that we are prepared to move quickly. However, vigilance is a 24-hour cafe and vigilance is what we are here, as I see it, to discuss.
The legislative and self-governing framework is the corporate governance, so to say, of the sector as a whole. There is overlap with corporate governance in its usual sense: the habits and practices of individual firms in respect to their reputation and the interest and confidence of those who buy shares in them. At firm level, corporate governance is important for domestic confidence and public relations. Declaring my interest as one who earns his living as a non-executive chairman of a quoted company, Development Securities, and who sits on the boards of several others, I believe that good corporate governance is critical to the reputation and health of the City generally.
I recognise that financial regulation is different from corporate governance. Nor will good corporate governance always prevent intelligent but corrupt individuals from pitting their wits, sometimes successfully, against the system. The aim is to load the dice against them. Laws, as we well know, do not prevent crime just as religions do not stop sin. However, it is a moral and political duty to load the dice in favour of good.
The present legislative framework was introduced by the previous Conservative administration shortly after I left it. I hasten to say there was no connection between

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these great events. The Financial Services Act 1986 quite rightly leaned heavily on the concept of self-regulation. It was also concerned with protections for many new individual investors, particularly the PEPs generation which has succeeded the Pepsi generation, so to say. Acronyms rose like tower blocks over the City. The Act created the SIB, or Securities and Investment Board, funded by and with regulatory responsibilities over the industry. Smaller tower blocks on the SIB estate are: the SFA, or Securities and Futures Authority, which nannies stockbrokers and dealers in financial futures and derivatives; and IMRO, the Investment Management Regulatory Organisation—not to be confused with an earlier IMRO this century, the International Macedonian Revolutionary Organisation. Alas, the Balkans are ever with us. IMRO regulates fund managers themselves.
There is also PIA, or the Personal Investment Authority, the tallest of all the blocks. The PIA regulates the sale of financial products, large and small, to the genera] public. It includes products sold by insurance companies, the big clearing banks, and, increasingly and very interestingly, the big supermarket chains. The clearers and all the banks are under the supervision of the Bank of England. As a director of a merchant bank, Guinness Mahon, owning fund management and stockbroking businesses, I was rightly vetted by the Bank. The Financial Services Act decided not to cover general insurance, which still comes under the Department of Trade and Industry.
In general, and so long as we are ever vigilant in monitoring a fast-changing international financial culture, I am very much in favour of as much self-regulation as possible. It is faster than bringing in legislation. Consultative processes and the parliamentary timetable, we know, mean delays. Legislation also has a tendency to bolt stable doors after horses have fled. In my younger days, clumsy legislative reactions to the disgraceful practices of a bad-hat landlord called Rachman led to the effective destruction of the small, privately rented, housing sector. Think what that has implied for job mobility in our economy, my Lords! Codes of practice and "ombudspeople" are surely a better way. There is also the problem, as we have seen in a number of financial cases recently, of securing convictions, or consent to prosecutions, in respect of financial misdeeds of great complexity. Civil prosecutions involving compensation would in my view be a more effective method of seeking redress. But there must be a legislative underpinning, as is the case, to a system of self-regulation if it is to put on muscle. We also need a lot less of what Mr. H.R. Haldemann of Watergate fame called "situation ethics". Human beings require moral codes and disciplines as well as legal sanctions against misbehaviour. R. H. Tawney's great book Religion and the Rise of Capitalism deserves re-reading in this context.
There are also fair trading issues. Perhaps the noble Lord, Lord Borrie, will draw on his great experience when he comes to speak. The American Securities and Exchange Commission (SEC) is still, with the Federal Reserve Bank, the twin peak of US regulation. It has big teeth. Here, perhaps too many bodies cause
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jurisdictional or cross-boundary difficulties, leading to delays. We must monitor our own structure closely. Sir Ronnie Hampel's committee is considering important aspects at present, as well as revisiting the often inflammatory pay issues originally considered by the Greenbury Committee. But the structure needs time—and Sir Ronnie is reported as taking this view—to settle down. Then again, malpractices which have been averted do not hit the headlines, a sure sign that the system is working.
I should like to see the SIB and the PIA market themselves and their work more aggressively here and abroad. The City has an interest in funding them to do so. I am not against collective bodies like the TUC and the CBI. But the regulatory bodies are nowadays more important. Their heads need to become household names: people respected, and, like the Fed's boss, Mr. Greenspan, a little feared.
I believe that sometimes it may be necessary for Ministers and the regulatory authorities to work together speedily in order to defend overriding national interests. Lloyd's was too pervasive a difficulty for that to apply. It had to put its own house in order and I think that Sir David Rowland has done a very good job. Maxwell revealed simply the dangers that lie in a concentration of powers and the weakness of his board of directors. The Cadbury Inquiry made recommendations about the division of power. These are now widely observed and in any case are under review. Maxwell also revealed in effect the expense and folly of trying to bring criminal charges against the horse when it not only has bolted but died in the bolting. BCCI was a clear failure on the part of the Bank of England, but there is evidence that it has learned from it.
Barings is to my mind the case where the Ken and Eddie squad should have moved, and moved fast. It would have been intolerable for taxpayers to pick up Mr. Leeson's devastating bill or cover up any shortcomings by his supervisors with taxpayers' money. But Barings was the City's big brand name in the tiger economies. We all need credibility on the Pacific Rim. Frankly, our name is now mud and our French, German and American competitors are smiling. I do not believe that the Chancellor and the Governor could not have waved a few fiscal sticks and a few financial carrots at the clearing banks with the purpose of achieving purchase or rescue. Sanctions on individuals would still have obtained.
Let me close with a brief word about the role of non-executive directors. Our absolute responsibility is directed not at the management, however close we become to it, but at the interests of the individual and collective shareholders of the business. These take precedence. I am sometimes depressed at the pervasive unanimity of resistance by some boards to takeover. If I were convinced that the taking over of a firm where I worked was in the interest, other than a very short-term interest only, of shareholders I would say so and take my chances with the management if the bid failed. Non-executives should be vetted by the SIB; we are not. Fund managers and investment trusts should exercise more influence on boards. Often they do not do so because their parent or agent merchant banks want business from those same boards. I have even negotiated

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with most of my firms that they pay a fee to a vetted outsider who is given access to financial information but reports only to me. This is common in the US and I recommend it. The regulatory body with shark's teeth is the Gaming Board. When I was a director of Ladbroke's, the firm applied for and won a casino operating licence. The personal disclosures that I and others had to make were terrifyingly extensive, but I was all for them. This is because non-executives have a role in maintaining credibility and acceptability in the ecology of legislation, regulation and good practice which I have sought to describe. The system may appear remote from the concerns of most people. But indirectly it touches each and every one of us in our pocket. The system lies at the core of our economy, our international credibility, and this afternoon's debate. I beg to move for Papers.
3.27 p.m.
Lord Eatwell: My Lords, the whole House is grateful to the noble Earl, Lord Gowrie, for having introduced this important debate. The prosperity and success of the financial services industry in this country are a vital component of the prosperity and success of the British economy as a whole. And the continuing success of the financial services industry rests to a degree greater than in any other industry on its reputation—not just the reputation of individual firms, but of the industry as a whole. A few bad apples can indeed spoil the whole crop.
That is why there is a clear collective interest within the industry, and an equally clear public interest in prudential management, transparency and accountability, whether it be in investor protection, in the maintenance of confidence, in the integrity of markets or, most important of all, in the management of systemic risk.
Today we are faced by a considerable challenge, for the very factors which are behind the enormous success of much of the financial services industry over the past decade are exactly the same factors which pose the greatest threats to its future prosperity.
Liberalisation at home and abroad has resulted in a veritable avalanche of financial innovations: old boundaries have been broken down; the distinctions between markets, institutions and products have become blurred and even disappeared. Today highly geared derivative instruments blend product markets and national markets which were previously totally distinct. Markets are more integrated, and yet at the same time more varied and more complex. While that has occurred, the scale and speed of trading have grown exponentially.
These changes have created great opportunities and the City of London has been highly effective in grasping those opportunities. They have also created massive risks. In intensely competitive markets in which the pace of innovation is swift and accelerating, the fear of being left behind can easily undermine even the best prudential practice.
As familiar markets stagnate and old products wilt, the fear of being left behind can easily undermine even the best prudential practice. As familiar markets stagnate
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and old products wilt there is an insistent demand to move into new, unfamiliar territory. The more rapid the process, the more likely it is that the maintenance of high standards will be lost in the quest for high performance. Ill-judged risks will seem to be necessities in the struggle to keep ahead.
Sir Andrew Large, chairman of the SIB, argued in a speech last October that firms competing in such an environment can suffer what he calls cultural dislocation. The ethical principles that permeate good firms can come under extreme pressure in the pursuit of good performance.
We all know what can happen: astronomic salaries for so-called "stars" that end in the creation of perverse incentives to behave in a manner that is ultimately damaging to the long run interest of the firm; rushes into high-performing funds which result in the discovery that they are indeed "too good to be true"; and commitments made to individuals who claim the Midas touch, with little understanding on the part of the management of the true risks involved.
So in today's rapidly changing financial world more than ever there is a vital industry interest, and a clear public interest, in the maintenance of good practice. That is why an effective and flexible system of regulation is vital to the future success of the financial services industry.
But regulation is the second line of prudential defence, not the first. It is the management of the firms themselves which has prime responsibility for ensuring that proper practices are maintained. It is indeed striking that some of the most spectacular problems in recent years have involved management failure as well as regulatory failure. In the case of Barings, for example, the management did not understand, perhaps did not even care, what was happening in its own business; and the Bank of England did not understand the business that it was supposed to be regulating. In the disgraceful and terribly sad case of the mis-selling of pensions, irresponsible management was egged on by an irresponsible Tory Government.
Sound corporate practice and effective regulation should be two parts of the same seamless process. We may say that corporate governance and effective regulation are the two pillars on which the strength of the financial services industry is built. If management is irresponsible, if it is not transparent, and is imprudent, then of necessity regulatory processes become intrusive, prescriptive, rigid and expensive. If management sees its role as working with the regulatory authorities in an open and responsible manner, then regulation can be flexible and can contain a modicum of sound judgment rather than mechanical rules and regulations.
The need for a ceaseless dialogue demands that a clear and well-defined balance be maintained between the responsibilities of the regulators and the responsibilities and interests of the regulated. I believe that everyone would agree that one of the great strengths of the regulatory system that has evolved under the terms of the Financial Services Act has been practitioner involvement. The expertise and commitment of

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practitioner-regulators has played a vital role in developing regulatory expertise and spreading best practice.
However, I do not believe that there is any benefit in maintaining the present distinction between the SIB and the SROs. The regulator should not be a membership organisation operating by contract. Instead, the SIB should be directly responsible for the regulatory system covered by the 1986 Act.
Within the reformed structure the SIB should continue to be a free-standing agency, established by statute. And it is vital that the blend of public interest and practitioner influence should be retained on its board, and on the boards responsible for particular parts of the industry. These evolutionary changes will enable Britain's regulatory system to adapt more effectively to new market structures, eliminate duplication and provide the simplified structure of regulation for which the industry has called.
In a rapidly changing world, an efficient regulatory system should be flexible, non-discriminatory, and deliver value for money. As I have said, that is possible only if the industry itself is committed to supporting the regulatory regime, and also if the regulator is well informed and up to date.
If the regulator is to be capable of exercising judgment and not simply applying mechanical rules, regulatory staff must be of the highest quality: they, like practitioners, must be at the cutting edge. They, perhaps even more than the practitioners, must understand the dimensions of market and systemic risk involved in the latest innovations.
That is a tall order when many chief executives have considerable difficulty in keeping up with what is happening in their companies. The notion that we can have the very best staff in regulatory organisations is difficult to achieve. However, a proposal of considerable benefit might be for it to become customary for high-flying staff to spend periods on secondment to the regulatory authorities. In other words, a period working for the regulator should be regarded as part of the normal career pattern of the very best in the industry.
The obvious objection to that proposal is that it will be expensive; that the best talents should be making money for themselves and their firms, rather than playing gamekeeper. But consider the cost to the industry of a regulator staffed with other than the best; consider the cost in consumer confidence, in market integrity and even systemic risk. The mutuality of interest demands a mutuality of commitment.
Ultimately, the reputation and success of the financial services industry depend on creating an open, accountable culture of good corporate governance, allied with a knowledgeable, flexible, highly skilled and creative regulatory structure. Neither is possible without the other.
3.36 p.m.
Lord MacLaurin of Knebworth: My Lords, the day of my introduction to this House was one of the most remarkable experiences of my life. I felt a sense of real humility being among so many noble and learned Lords
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who have contributed so much to our society. I hope that in turn I can make a small contribution to the deliberations in this House on those issues of which I have some experience.
I should like to use this opportunity to say how conscious I am of the many kindnesses already shown to me by officers of the House and by noble Lords. I am very grateful for the advice and encouragement that I have received, which is helping me to overcome my natural nervousness when making this, my maiden speech.
I know that my remarks should not be particularly contentious or controversial. I cannot promise that any contributions I may make on industry and the economy in the future will always follow that precedent.
As some noble Lords may know, I have recently been given responsibility in connection with the other Lord's in an area of great importance to our country, if on a somewhat different level from this House. I have been appointed chairman of the newly formed England and Wales Cricket Board. I am sure your Lordships will join with me in wishing our team every good fortune in the forthcoming Test series in New Zealand. I can assure cricket lovers present that I intend dedicating a great deal of energy in the future to both "Lords'".
My noble friend Lord Gowrie has chosen for debate an issue that is crucial to our international reputation and economic wellbeing; namely, that of the economic value of the City of London and the integrity of the people who hold power within the City.
In recent months there has been much discussion on the issue of corporate governance. The Cadbury, Greenbury and Hempel Committees have worked to examine the issue in a thoughtful way. I do not want to dwell too much on their work now. I merely observe that we must be careful to ensure that we do not draft overly-bureaucratic procedures which create too much paperwork and prove counter-productive.
I know that my own company has benefited considerably from avoiding too much bureaucracy. It is, of course, all a question of the right balance. We need flexibility. The best of British industry manages to combine flexibility with accountability and corporate governance. My experience at Tesco and as a non-executive director of the National Westminster Bank, Guinness, Vodafone and Enterprise Oil makes me believe that it can be achieved and has been achieved by many companies.
The skills of British retailers now create economic value throughout the world. Tesco, the company with which I have spent most of my adult life and of which I am chairman until June of this year, now also operates stores in Hungary, Poland, the Slovak and Czech republics, as well as in France. Such expansion would not have been possible without the combination of flexibility, accountability and good corporate governance.
I believe that we need light but effective regulation, driven by those at the top of an organisation. As so often in life, responsibility must rest at the top; that includes chairmen and chief executives and, of course, non-executive directors.

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I believe the role of all directors, including non-executive directors, to be very important to good governance. Well informed and well resourced non-executives can, and do, add real value to companies. I believe that they perform a similar role in City institutions. It is, of course, important that there is transparency of appointment. Non-executive directors should not be appointed on the basis of old friendships; they must be qualified for the job in hand.
Well resourced and well informed non-executive directors help to foster understanding between sectors and emphasise that much of our industry is a chain. Economic value can be created by this interdependency. I have always encouraged colleagues to take on other directorships. If those appointments are in the public sector or perhaps in a small business, so much the better.
I believe that such an approach will help to confirm Britain's position as the enterprise centre of Europe, which is a goal that I hope we can all share. I believe that the City of London has already played a real role in helping to bring this to reality and that non-executive directors have a role to play now and perhaps an even greater role to play in the future. Those at the top of organisations have a responsibility to make sure that good corporate governance is strongly reinforced.
3.42 p.m.
Lord Haskel: My Lords, perhaps I may, on behalf of the whole House, congratulate the noble Lord, Lord MacLaurin, on his thoughtful maiden speech. What he said demonstrated not only his successful business career but an important business career. He joined Tesco in 1959 when it was a modest business and spent his working life building it up to the major international business that it is today. I am sure that all noble Lords will join me in welcoming this breadth of experience to your Lordships' House. We look forward to hearing the noble Lord in the future, perhaps when we are debating the important matter of cricket!
Today we are debating the Motion of the noble Earl, Lord Gowrie. Perhaps I may also welcome the conversion of the noble Earl to the cause of corporate governance. I congratulate him on introducing this debate. It has always seemed to me that the City consists of two sectors. One provides business and industry worldwide with valuable and important banking, insurance and financial services and an orderly market for shares, currencies, shipping and commodities and managing risk; the other is the facility which the City provides for speculation and gambling. I certainly join the noble Earl in applauding the first sector; and I am glad that he joins me in condemning the damage inflicted on business, industry and society by the errors and excesses of the second. The line between risk and speculation is a fine one; good corporate governance helps to control the risk and to avoid the speculation.
The noble Earl, Lord Gowrie, spoke of corporate governance being about vigilance. I believe that corporate governance must also be concerned with encouraging companies to be competitive in today's markets. Businesses should be about building and
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creating, not just about accounting and short-term profits. Corporate governance must encourage creativity and innovation; it must encourage businesses to invest in people, markets and technology. Directors must build up long-term relationships with employees, investors, suppliers and customers and the society within which they operate. In short, they should create what the RSA recently referred to as the inclusive company.
All companies, not just City firms, should practise that kind of corporate behaviour because it creates good companies which are the building blocks of our competitive economy. By providing financial services and helping to manage risk, the City contributes towards those building blocks, and that I applaud. The speculative sector of the City contributes towards the destruction of those building blocks by encouraging dishonesty, sharp practice and incompetence, and that I denounce.
The noble Earl mentioned Rachman. A more modern example is pensions. Providing and managing pensions is of great value in creating inclusive companies and organisations; mis-selling pensions by cowboy and opportunistic behaviour helps to destroy them.
Another example is the London Metal Exchange. I was under the impression that the purpose of the metal exchange was to provide an ordinary market in basic metals; but obviously that has become corrupted into a market for speculating in metals. The laxity of control in the market is such that one trader was able to lose 2.6 billion dollars in unauthorised trading. The irrelevance of the exchange to the real economy is surely proved by the fact that those huge losses remained undiscovered for several years. Indeed many actual producers and users of metals in the real economy trade outside the exchange.
The recent SIB report on the London Metal Exchange makes it clear that the concept of corporate governance is entirely alien to the board. Virtually all board members had a conflict of interest; they allowed themselves excessive credit, light regulation and obviously little supervision. That was partly explained in the name of self-regulation. The Prime Minister was obviously not entirely unhappy with that as the chairman of the exchange was honoured in the New Year's honours' list. I also look forward to welcoming him to your Lordships' House.
I agree with the noble Earl, Lord Gowrie. Good corporate governance would have made all the difference. Good corporate governance requires not only that there should be outside non-executive directors but also independent non-executive directors. There is a difference, as the noble Earl and the noble Lord, Lord MacLaurin, pointed out.
There should be an audit committee made up of those directors who, together with the accountants, keep a sharp eye on the internal financial controls and pay special attention to the risk of clients losing money due to speculation. The accountants and all the directors—executive and non-executive, independent and those with a conflict of interest—should be scrutinised not only from the point of view of what they do but also from the point of view of what they fail to do.

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Perhaps I may say in passing that I am encouraged by how, in recent years, I have come across some firms of accountants and some company secretaries who do an excellent job of advising and assisting audit committees by making them aware of, and helping them to carry out, those responsibilities. That is of even greater importance when there is self-regulation.
The ethos of corporate governance needs to be established in the many markets within the City: the currency market, the Stock Exchange, the commodities markets and most especially the derivatives market. Those markets seem to operate in a world of their own away from the real economy, and it is the real economy that matters.
So I congratulate the noble Earl, Lord Gowrie, and join him in calling attention to the economic value of the City of London when it is working in co-operation and partnership and sharing risks with the real economy. Good corporate governance will only enhance that.
3.50 p.m.
Lord Stewartby: My Lords, I ought to begin by declaring some interests. In recent years I have found myself in certain different roles which enable me to come to this subject from a number of different angles. Wearing one hat, I am chairman of the audit committee of an international bank; I am also a member of the Securities and Investments Board; and a few years ago I was the Minister responsible for introducing the Banking Act and the Building Societies Act in another place.
I think it is unquestioned that London is and remains the leading financial centre in Europe and one of the leading financial centres—if not the leading financial centre—in the world. Equally, I have no doubt that that is very substantially due to the fact that it is an open marketplace. It is not shackled by unnecessary restrictions and is not hampered by unnecessary distortions of free market processes. I see no reason why that should not continue, provided that we have the balance between regulation and flexibility in the markets as they change and continue even now to change so rapidly.
There is no question but that a formal structure of regulation and supervision needs to be in place in financial markets. I have no doubt of that, either as a regulator or a practitioner. When one looks at what happened at Lloyd's, where there was an inability to identify a conflict of interest, let alone deal with it, one realises that unrestricted self-regulation is no longer appropriate in today's financial world.
But it is also important that regulation and supervision should not be too intrusive. I very much agreed with my noble friend Lord MacLaurin when he said in his excellent maiden speech that regulation must not become too bureaucratic. If regulators and supervisors feel drawn into concentrating on detail, the chances are that they will give insufficient attention to the overall quality of governance and accountability of companies in the field. They must satisfy themselves that businesses are properly run. I agree very much—I was pleased to note that the noble Lord, Lord Eatwell,
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endorsed it—that regulation and supervision must involve a blend of practitioners' experience and professionals exercising the public interest.
But that is not an easy balance to achieve. We need to be constantly vigilant about how it is done. I believe that there will be a need for some revision of the legislation before too long. That is no criticism of what was put in place 10 years ago because the markets have changed dramatically in that time. It is one reason why the law needs to set out general principles and not become too detailed about specific requirements. I know that your Lordships sometimes become uneasy about Henry VIII clauses. But if it is impossible to update legislation with secondary legislation when there are changes—when new derivatives are invented and structural changes occur in the market place—and do it quickly and one has to resort to primary legislation all the time, the processes will be hindered.
But the general framework needs to concentrate in particular on the way in which companies are run. It is not the role of regulators or supervisors to tell companies what to do and in effect try to take commercial decisions by proxy. It is their duty to see that companies are properly run and that their governance is effective and suitable for the type of business that they conduct. That is the natural bridge to the other part of this argument, which is the responsibility of management itself. Any substantial company needs to have lines of accountability clearly understood within the organisation. Responsibilities need to be carefully defined and high level controls need to be put in place and monitored by the board and by the audit committee as well.
I regard the greater prominence of audit committees which has followed the Cadbury recommendations as one of the major developments in corporate governance in recent years. It is absolutely essential and is working reasonably well in practice in most cases. As chairman of an audit committee, I can say that it has greatly increased the degree of responsibility and the amount of time which needs to be devoted to the tasks, but it is essential.
We have to ensure that non-executive directors, who generally should carry out those tasks, remain independent but at the same time do not separate themselves from their Companies Act responsibilities to ensure that the companies on whose boards they sit are effective commercial enterprises. Unless a business is successful and profitable, it does not have the financial stability which is one of the great protections against systemic problems and, indeed, against abuse of process with customers.
I believe that the greater prominence of non-executive directors is not without problems. The people required to do those tasks need to be very experienced and if they are very experienced, they are likely to be very busy. Whether in fact there is a sufficient supply yet—it is a process which has only been developing over the past five years or so—I am not convinced at the moment. I believe that non-executive directors have a fundamental role in ensuring that processes of corporate governance are correctly established. They will thereby

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undoubtedly make a contribution to the profitability of the enterprises. If bad organisation exists or if controls are inadequate, the first intelligent, dishonest person who reaches any position of responsibility in that organisation will take advantage of that laxity. Therefore, the contribution of those who ensure that controls and processes are properly exercised makes a positive contribution to the business itself.
My last word on this matter will be that we have to be not only vigilant within the processes of regulation and supervision and in running companies but vigilant and flexible in the way in which in Parliament we address these issues and keep the framework up to date. For example, in the Financial Services Act, the Securities and Investments Board is not given all the powers that it needs to carry out its overall responsibility for the regulatory system. Anomalies of that kind have become apparent as that Act has been seen to work in practice. But, generally, I believe that it is the right foundation on which to build.
I conclude by thanking my noble friend Lord Gowrie for having raised this extremely important subject at a very topical time.
3.59 p.m.
Lord Clark of Kempston: My Lords, I congratulate and thank my noble friend Lord Gowrie for introducing this debate. I have felt for a long time—I am sure that some of your Lordships will agree with me—that the City is sometimes overlooked in regard to our economy. The City and invisibles are just as important as manufacture trading abroad. In 1993 invisibles from the City amounted to £2.7 billion. This past year, the figure is likely to be £12 billion. That shows the scope and the increased value of the City in relation to our economy.
As my noble friend Lord Stewartby has just said, we are an international centre. Thirty-six per cent. of world foreign exchange dealings are conducted in the City—more than in New York and Tokyo put together. I do not intend to say much about the single currency but we must keep it at the back of our minds that trading in European foreign exchange amounts to only 4 per cent. of our foreign exchange dealings. The red herring of the single currency should be put into perspective.
My noble friend Lord Gowrie referred to the assets in the City. He mentioned Lloyd's. Some time ago there was controversy as to whether Lloyd's was trading properly. I can tell your Lordships that the finance committee of another place initiated an independent inquiry into Lloyd's under the chairmanship of Sir David Walker. I happened to be a member of that committee. Many of your Lordships will have read the report. The committee found that there was no question of criminal activity and its recommendations were immediately implemented by the Lloyd's Council.
In the City, we have legal expertise, accountancy expertise and financial consultancy expertise. Those are some of the reasons why there is so much inward investment into this country. There was some £23 billion of inward investment last year. That is a tribute to our expertise in the City. Why should this
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country, through the City's expertise and so on, attract so much European inward investment? We get investment from the United States, from the Far East and from the European Union. One must realise that 98 of the 100 top companies in the world are in this country. That is the extent of the confidence foreign investors have in Britain.
Why do these foreign investors come to this country? I am sure your Lordships will agree with me that the labour on costs in this country are much lower, our corporation tax is far lower and personal taxation at the moment is much lower. Dealings in domestic equity are three times as high as they are in Paris and Frankfurt. One must not overlook the fact that there is a certain amount of envy on the part of Paris and Frankfurt of the City of London. We have to guard against trying to blacken the name of the City. The City's name for integrity and so on must be paramount.
My noble friend Lord MacLaurin referred in his excellent maiden speech to regulation. I was in another place, as were many of your Lordships, when the Financial Services Act was passed in 1986. Some of us sounded the alarm bells that we had to avoid over-regulation of the City. Let us consider the amount of regulation. There is FIMBRA, LAUTRO, IMRO, the SIB and the PIA. Many of those organisations overlap and that overlapping means that in some cases compliance costs are penal. I happen to be a consultant to the Life Assurance Association. It is pressing for a financial services council so that organisations such as the SIB, the PIA and so on can come together and try to work as a unified body.
I remind the House that some years ago the Stock Exchange abolished the unquoted securities market. The market provided capital for small but growing companies. When the USM was being abolished a committee was set up in the City. It was called CISCO. As a result of the activities of CISCO we got the alternative investment market. I must declare an interest as president of CISCO.
Our competitors would like a share of the world trading carried out in the City. What we have to do—I am sure your Lordships will agree with me—is to speak of the City's achievements, because the City is the jewel in Britain's economy.
4.6 p.m.
Baroness O'Cathain: My Lords, the Motion states:
"To call attention to the economic value of the international work of the City of London".
I am grateful to my noble friend Lord Clark, who concentrated on just that aspect. The first four speakers, with the honourable exception of my noble friend Lord MacLaurin, who made an excellent maiden speech, seemed to concentrate on the areas of our failures. There is a tendency in this country to concentrate on our failures. We fall into the trap of concentrating on bad news all the time. Perhaps I may make a few salient points to try to lift the tenor of the debate.
First, no fewer than 500 overseas banks have thought fit to establish themselves in the City of London. If we were seen as a failure-oriented country, I am sure that

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would not happen. Secondly, there is a massive turnover in the City of London. It brings huge earnings to the economy. The figures are so mind boggling that they are measured in trillions, although I am not quite sure what a trillion is. Thirdly, perhaps I may share with the House a little gem of information. The London International Financial Futures Exchange—LIFFE—has a greater share of the German bond market than Frankfurt. The banking and financial services in the City are world leaders. There is also the insurance industry, which is regarded as a City of London institution. When we talk about the European single market, I sometimes wonder whether we realise that there is no such thing as a European single market, because our insurance industry is still prohibited from playing a proper active role in the European insurance market. With its great expertise, I guess that if it played that role it would probably meet great resistance from the insurance markets of other European countries, which would suffer in the comparison.
I fell into something of a trap when I was preparing my notes for this debate by concentrating all the time on corporate governance. I wish to make three points. First, the City works remarkably well. That is not to say that there have not been problems from time to time, but, on balance, the culture of good practice is there. For centuries the City has operated on the slogan, "My word is my bond". That works. In any organisation, be it a company, a university or a local authority, there will always be the recalcitrants. However, whatever draconian measures of regulation, surveillance and monitoring are suggested to deal with such miscreants, the occasional unacceptable situation will arise. That is what we have to accept. It is human life.
Secondly, I firmly believe that the regulatory processes in place, albeit for the most part self-regulatory, with non-statutory codes of conduct or acceptance of 19 of the 20 Cadbury recommendations, should be allowed time to settle down, to become accepted practice and, in effect, to become second nature to all involved in the running of the City until we overload still further with more regulation.
Just as an aside, the adoption of the Cadbury recommendations has spawned a whole new industry of consultants offering all types of advice; lawyers running corporate governance seminars; acres of printed matter purporting to give advice to chairmen, executive directors and non-executive directors, company secretaries and legal advisers all of whom have been getting huge mail bags telling them how to do it.
What I am sure business and the City do not want is an increase in all this activity. Any such increase could lead to really massive indigestion and also tend to take the eyes of the operators off the goal that they should be fixed on; namely, to increase our activity trading both in the City and elsewhere and particularly on the international financial markets.
My third and final point is this. I have already referred to the fact that there will always be some who will misbehave anywhere. But if that should happen, may I make a plea that the subsequent investigations are speedy. Any delay brings a huge area of uncertainty.
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It causes reputations to fall. In fact, it is a great opportunity for the press to castigate both institutions and individuals. With the City's position as a leader in the world of international finance we really cannot afford that. It is quite unacceptable that an investigation into a certain well-known case involving City institutions started in December 1986. I believe that the investigation has been completed, but certainly the results have not been published. During that period all the uncertainty has been compounded. That is not good.
To recap: self-regulation is working. It has engendered a culture of the recognition of the need for compliance. Let us not forget that the City is a very worthwhile economic feature in this nation. It has a huge international reputation and let us not sell it down the river.
4.12 p.m.
Lord Ashburton: My Lords, this is a broadly drafted Motion on which it would be all too easy to speak for 20 minutes. It is peculiarly difficult to speak for eight minutes. There is also the ever present danger that one may be only repeating what has already been said by previous speakers. I should like to add my congratulations to the noble Lord, Lord MacLaurin, on an admirable maiden speech. Perhaps I may also congratulate the noble Earl, Lord Gowrie, with whose speech I found very little to disagree.
I also found a great deal to agree with in the speech of the noble Lord, Lord Eatwell. I am sorry that he is no longer in his place because there was something that I was extremely sorry to hear him say. He did in fact cast what I thought was a most unworthy aspersion on the management of Barings in saying that he was not aware whether it actually even cared about the business. I stopped being chairman of Barings seven years ago or so. I remained a non-executive director but ceased being one some time before the disaster happened. I can assure him and other noble Lords that I do not believe there was a management in the City of London that cared more strongly about the sort of business it did than the management of Barings.
The danger of trying to cover too much ground is particularly great for somebody like me who spent the best part of 40 years in the merchant banking world, and who was for a time particularly involved in the setting up of the arrangements for what became colloquially known as Big Bang. The House also has the opportunity of hearing from a number of individuals who have been involved, or who are still involved, in the affairs of the City whose views are by definition much more up to date than mine.
At the time I first became involved in the City few would have confidently foretold that the earnings of their activities collectively would become such an enormous asset to this country. But it has so become and it is perhaps worth a glance to see why. I believe that the consensus has it that London has provided a particularly attractive environment for international financial activity. Its legal system, as it relates to commercial activity, has proved to be better than those of other places and particularly adapted to

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international trade. We work of course in English, which largely because of its use by the USA and the ex-Commonwealth countries, is widely accepted nowadays as most people's second language. And shaming it is to compare the linguistic ability of most British people with the idiomatic fluency that one now encounters in others. We are neatly placed between Far Eastern and American time zones and we had, and still have, a relatively lightly regulated financial system. It is too light, I hear, in the eyes of some. I was interested in the noble Lord, Lord Haskel, trying to make a distinction between speculative and legitimate activity. I tried during all my life in the City to discern where the dividing line was. I do not believe that it is actually discernible.
Some of these advantages, it seems to me, will endure. The legal system, the language, the time zone even if its utility is somewhat eroded by the breakneck advances in global IT. Of course, London remains at least as pleasant and safe a place to live for expatriates as any of its competitors.
But there is no guarantee that in such a fast changing world as we now inhabit the economic asset that the City represents will remain uneroded. If we want it to survive—and I suggest that it would be sensible, nationally, to want that—there is probably little that we can do in respect of what one might term cataclysmic events—fundamental changes probably affecting financial activities worldwide. But against the more foreseeable threats I believe that we can be vigilant.
There is always a danger, particularly to those who are critical of the way financial markets operate, that those of us who have City backgrounds can sound far too uncritical. The City certainly has its blemishes. There is always room for improvement and to pretend otherwise is stupid and it can be offensive.
But what are the imperfections and blemishes and how big a threat do they represent? I do not propose to waste time on the question of very high earnings. Organisations which over-pay the wrong people soon find out and pay the price. There is a high degree of self-correction built into the system, as there is in the equally highly paid world of pop stars and top athletes. The subject nevertheless seems on occasion to obsess the media as do the shenanigans of those particularly highly paid when they lose their jobs. I regard the latter as being part and parcel of the trivial concern with personalities, which seems increasingly to obtrude in the press.
I do believe, however, that the regulatory regime is important. I also believe the effectiveness of the legal system in dealing with those who commit fraudulent acts has to be a part of any self-respecting financial system.
Because we believed it worked, we strove so far as possible in my day to maintain a self-regulatory system. It has since been refined and made a great deal more comprehensive. It clearly has shortcomings and I have always believed that the likelihood was that we would in the end, eventually, be pushed into a statutory system if only because of an increasing tendency to litigation.
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I have no doubt that the City would live with such a system and it would certainly be different. But the big doubt in my mind is whether it would be better. It would certainly raise costs of doing business and slow activity down. It would certainly give a further boost to the legal profession and some would say it would be visibly more just. I wish that I was sure, but those who are still involved in the City will have clearer views.
As far as fraud prosecution is concerned, all I can say is that I do not believe that the present position seems adequate. It is not for me to say whether the fact that so few of the prosecutions are successful is right or wrong, though I am amazed at the results. But the system does not seem to work consistently as between one case and another and reversals on appeal seem to make that aspect even worse. I should be very sorry to be told that things cannot be improved as I feel that it is important.
The last matter on which I want to touch is the importance of our membership—or otherwise—of economic and monetary union. I do not believe that the issue of whether we join EMU at the first opportunity is a matter of huge moment for the continued prosperity of the City. As I have said before in this House, the important thing is how we conduct our part in the setting up of that momentous step. It is, in my view, vital that we should not carp and that we should wish well those who decide to participate. However, if EMU comes into being and if its disciplines do not prove too difficult and divisive politically for its members and we continue to remain outside, I believe that the City's position would start to be eroded—and quite possibly very quickly.
I leave your Lordships with these three points: what I hope to see is the most pragmatic possible regulatory system; the swiftest possible bringing to book of those who commit fraud; and, finally, if EMU really takes off and succeeds, we must be a part of it.
4.20 p.m.
Lord Swaythling: My Lords, it goes without saying that the economic value of the international work of the City of London is immense for this country and one only has to look at the record of invisible earnings and those attributed to the City of London to know that that must be the case. My noble friend Lord Clark of Kempston discussed just that. But the debate calls for a discussion of the case for City firms establishing systems for corporate governance which will maintain confidence throughout the world and this in turn calls for a view as to whether the immense strides taken in this area have, in the first case, been adopted by responsible companies in the City of London and also whether they are in themselves adequate.
I believe that a further issue lies behind this discussion—this has been mentioned by enough noble Lords for me to be confirmed in my view—which is that people are concerned about whether the much publicised financial accidents of the past few years would have happened had corporate governance and best practices been more stringently observed or more emphatically stated. It is for that reason that I wanted to say a few words in this debate.

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First of all, I believe that the financial services area of the City has welcomed and responded positively to the many recommendations both in the Cadbury report in 1992 and in the Greenbury report in 1995. As we all know there are many further initiatives which have also been welcomed in the main by the City of London and acted upon.
The unwritten question about whether financial accidents would have been prevented with a stricter code is somewhat more complex. One thing that a bank can never do is to protect itself 100 per cent. from fraud. The only thing that can be said is that the earlier that this fraud is detected the better, but that is an obvious platitude. If a dealer in the sophisticated range of financial instruments now available takes a view and is proved wrong and he compounds that view by hiding it from his superiors, if he is adroit he can enter into a series of transactions which increase the exposure of his employers to protect himself or, rather, to justify his judgment. If after the first transaction or even the second he had explained to his superiors what he had done and cut his losses, he would not have needed to embark on this dangerous path. Seldom are those actions taken for personal gain; they are nearly always a reflection of his conviction that his view of the market is right and that the market has got it wrong. Of course, some involve fraud for personal gain; but these acts are usually rarer than those I have described.
Would corporate governance, even if it were far more complex than we have today, have identified these problems earlier? I very much doubt it. There is a strong argument that the success of the City of London has been very largely due to the arrangements for self-regulation and the imposition of extremely tight and legally binding rules would dampen and ultimately damage the entrepreneurial and flexible management of companies within the financial sector. I would argue personally very strongly this case. That does not mean that I do not support and appreciate the changes which have been made.
The audit committee of a company and especially of those companies operating in financial services—Cadbury recommended that such a committee should be chaired by an independent, non-executive director—should be independently minded and able to take action supported by the executive management of the concern. I do not think that in the financial field there are people who still doubt the adoption of best practices and sound corporate governance in the case of UK financial institutions and I think at this stage to attempt to bring in more stringent and complex requirements might defeat the object. It would seem that a period of consolidation is called for.
I base my judgment on these matters on 40 years' experience as a banker—the same 40 years as those spent by my friend the noble Lord, Lord Ashburton—and the six and a half years that I was a member of the Board of Banking Supervision at the Bank of England. Those six and a half years covered both the collapse of BCCI and the tragic failures in Barings. It is always the job of senior management to be alert to things which are going wrong and they cannot unfortunately—or fortunately—escape the responsibility but, in the case of
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the Barings situation, not enough attention was paid by the top management to the grotesque level of profits alleged to have been made in one offshore office. It was believed by management in London that those profits were being made from what was described as "risk-free arbitrage". There is no such thing as risk-free arbitrage. What might have been relatively risk-free would have not been so profitable—indeed, might have been barely worth doing for a very small return. Management in London should have been deeply suspicious of such profits and should have paid more heed to the recommendations of its own audit committee to separate the functions of the front and back offices in that offshore branch. But this is only a part of the story.
The City of London will have great opportunities whether or not this country joins the single currency mechanism and should be helped to take advantage of these rather than be shackled with even further controls of corporate governance. I felt it important that these points were made in this interesting and worthwhile discussion which my noble friend Lord Gowrie has introduced at such a timely moment.
4.26 p.m.
Lord Selsdon: My Lords, it is with great pleasure that I follow my noble friend Lord Swaythling. I had the privilege of being a director of his family merchant bank for many years—sadly, after he had left. Many there wished that he had never left and I feel sure that we would have done better had he remained.
I remember looking with envy at the family bank of the noble Lord, Lord Ashburton. We admired it as a bank of utter credibility with a remarkable range of customers and great loyalty. I pay tribute to the services of the noble Lord in helping to promote the interests of the United Kingdom way outside the banking world.
I have had to say "Plus ga change" to myself in connection with this debate, because many years ago I had the privilege of moving a similar Motion to that moved today by my noble friend Lord Gowrie but on the subject of invisibles. My noble friend Lord Limerick was the Minister who replied to that debate. I think also of the remarkable man who was chairman of my noble friend's bank. I refer to Sir Cyril Kleinwort, who effectively started the Committee on Invisible Exports, and was the first to focus attention on the potential of the City of London as a foreign exchange earner.
One of the comments that one always heard when attending such meetings was, "We must always concentrate upon our integrity. Our image for honesty and integrity is far above any financial manipulation". I remember my pride when I was a member of the board of an accepting house. I remember also the nervousness that one felt at the possibility of being questioned by one's colleagues, or even the partners, about whether a particular company that one had taken on as a new client was the right sort of company for the bank to have as a customer. I remember with pride being introduced one day as a "financier"—we somehow thought that financiers were people who sailed too close to the wind. We thought that they were of doubtful origin.

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My noble friends will recall that not so many years ago similar situations arose, with major bankruptcies occurring only a moment or so after the publication of the auditors' report or the annual report. I refer to Metal Traders, to Rolls-Royce and to the numerous scandals with investment funds. As I said, "Plus ça change". The problem was unfortunate. We suffered from success.
I have had the privilege of working for two merchant banks and for one of our clearing banks. The internal controls were positively frightening. Many of us thought that we could never have any growth business ever again. Those internal controls were good; and we were brought up to believe that there was one principle of banking, which was, "Know thy customer", and if you had the wrong customer that was your fault. If you had the chance of being a customer of a good bank, you would be proud if you were a customer of an accepting house. People were judged by the company they kept.
Now I fear, with regret, that the merging and the loss of accepting houses, the merging of brokers and the acquisitions by foreign banks have all reduced standards, not necessarily in the rush for growth, but because the changes are there and the morality has gone. The lawyers used to come in long after a deal had been consummated because we knew that we could not afford to pay for them; we still cannot afford to pay for them. But what worries me is not the success of the City of London, but the growing concern about liability.
I come to the question of corporate governance. It was right that one should know one's customer and, if one had a bad customer, one would be responsible for having taken him on. He too would be taken on by a stockbroker and an accountant and a lawyer. If a stockbroker resigned because he was not happy with a company, usually the shares would go down and there would almost be an internal investigation, asking what was wrong and wether there were adequate controls. Suddenly, people said, "You must have outside directors to control things". When I was in the banking world we were not allowed to be outside directors; we were not allowed to have an account outside the bank; we were not allowed to buy or sell a share other than within the bank. We were watched almost day and night, although I have to say that the days were much shorter than they are now. Perhaps when Big Bang came and internationalisation and the globalisation took place, it was not possible to control or to watch people 24 hours a day. However, I still believe that an employee has a responsibility to his employer and an employer has a responsibility to his employee.
These remarkable changes of units moving from one bank to another, solely in the cause of greed, gain and glory, are worrying. Glory? Many years ago public relations was not a major event of hitting the front page. In fact, if your bank was in the newspapers at all it was a matter for concern, and sometimes grave concern, because you were meant to be quiet and respectable.
The changes that have occurred lead me to wonder about what, if I remember rightly, Galbraith said—that banking may be a career from which no man really recovers. I have been and still am a director of public
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companies. I worry rather when I am on a supervisory board of a bank and I find that no foreigner wants to be a director of a big British company. They are worried about the liabilities. It is interesting, too, that an awful lot of retired civil servants do not want to be a director of a public company.
The remarkable speech of my noble friend Lord MacLaurin makes me think about a comment I heard the other day asking what is a non-executive director? Basically, I was advised that he is really a supermarket trolley that gets pushed in the direction the chairman wishes to go, occasionally going off course. One advantage, of course, is that he can hold more food and drink and another is that he will be blamed for the faults of others.
Today, a worry that I have concerns the liabilities that are facing accountants, lawyers, non-executive directors and all forms of adviser, in particular those in partnerships who have to incorporate within the costs or the fees that they charge not only over-expensive office buildings but the personal liabilities that can follow. Although it is undoubtedly a good idea to encourage the growth of the supervisory role of the non-executive director, as my noble friends and others have pointed out, one of his roles is to help expand the business in a respectable way. It is extraordinarily difficult to be able to keep an eye on all aspects of a company, not just the financial aspect or the remuneration committee, but on contracts which they may take which may suddenly go wrong. A bridge may collapse on the bus of a football team and the following litigation is out of all proportion to the damage caused.
It is a worrying time and I believe that, while growth in business is such that some form of greater control is necessary, I wonder very much about the trend that there is at the moment of trying to place too much responsibility upon the individual, who often lacks adequate protection.
4.35 p.m.
Lord Currie of Marylebone: My Lords, I am grateful to the noble Earl, Lord Gowrie, for introducing this debate on the City. Enough has probably been said about the dominant position of the City internationally, and that is to the great benefit of our country.
Having said that, one has to say that the competitive pressures are increasing. Hitherto, Paris and Frankfurt have not mounted any serious challenge to the position of the City, but Maastricht and the preparations for a single currency have spurred them to greater competitiveness. Yesterday I attended a conference organised by the Bank of England to discuss the preparations that the City has to make ahead of the introduction of the euro, whether the UK is in or out. It became quite clear that enormous work will be required for the City to be competitive in the future euro markets that are likely to develop. The representatives from the City were quietly confident that they were prepared, but they were under no illusion but that there was significant competition ahead.
The position of the City is not helped in that by some of the failures that have occurred over the past few years. I remember going to Spain on behalf of

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British invisibles with Peter Baring to promote the City of London in the Spanish markets. We had a very good reception, but three weeks later the Barings collapse occurred, and I have no doubt that that was a thousand times more damaging than any promotional effect that we had.
If one looks at the collapse it is natural to look at the regulator and point to regulatory failures, but that is not where the root of the problem lay. My noble friend Lord Eatwell was absolutely right to point the finger at the management and the management structure. The top people did not know their business. The noble Lord, Lord Swaythling, made the point that top management should have known that they could not make those enormous profits from the activities that were supposedly going on in the Far East. That was simple ignorance, and it is ignorance which is not excusable.
There is the additional point that the structure of the Barings equity arrangements created incentives for that collapse to happen: the bulk of the equity was owned in a non-voting form. Top management received a large part of their rewards in the form of bonuses. Their incentive was less concerned with looking after the future of the bank than with those large bonuses. I am not saying that people were consciously doing that, but the structure was such as to encourage poor management throughout the organisation, throughout the bank. Internal politics within the bank did not help.
Barings was an unusual case, but I have no doubt that similar problems, less acute, lie elsewhere. Management structures must be appropriately tightened and the auditory function enhanced in order to ensure that these difficulties do not arise. Management has to be enhanced. To plug a local interest of mine, management education in the City also has to be enhanced.
There was one element in the opening speech of the noble Earl, Lord Gowrie, with which I profoundly disagree. He suggested that the "Ken and Eddie show" should have come to the rescue in the Barings case, perhaps waving some taxpayers' money to rescue Barings.
The Earl of Gowrie: My Lords, I did not say that.
Lord Currie of Marylebone: My Lords, I apologise if that was not said.
The Earl of Gowrie: My Lords, as we are in time, perhaps I may correct the noble Lord. My point was that the individuals and the disaster could not or should not be rescued by taxpayers' money, but that there should have been pressure on and incentives for the clearing banks to take it over.
Lord Currie of Marylebone: My Lords, I apologise to the noble Earl for misunderstanding his point. I certainly agree that the leading City institutions should have been encouraged and should have moved in. Had they done so, if it was so critical to the interests of the City, they would have shown the leadership that was appropriate.
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In terms of regulation, it should be light-handed, but it must also be effective. In emphasising the management aspects, we should not underplay the regulatory framework. I believe that the debate so far has made it clear that the regulatory landscape which has grown up is unsatisfactory. It is a patchwork quilt. Regulatory bodies and responsibilities overlap in an unusual way which few fully understand. One trading house explained to me that in trading a repo of below £5 million one regulatory body had responsibility, but if it were above £5 million then a different regulatory body had responsibility. That is not an arrangement that makes sense when those two trades go over the same desk. We need to rationalise that.
It was correct to make the point, as the noble Lord, Lord Stewartby, did, that the SIB lacks the powers over the self-regulatory organisations that it needs. It does not have sufficient powers in those areas; it needs them. The structure needs to be overhauled. We need to find a way in which the regulatory structures can focus on controlling systemic risk in wholesale markets and in retail markets emphasise customer protection. We do not have a rational structure that corresponds to the functions of regulation. We need to put that in place.
In an international world, we also need to think about the relationship between European regulatory bodies and international ones. The challenge will be to foster high quality and efficient management and a better informed and more discerning public. I repeat that we cannot expect too much of regulation in a world where one can move risk. The risk profile of an organisation can be shifted in seconds through a single trade. Monitoring is not the answer. The right structures and the right incentives are the way to regulate. That requires and depends upon the quality of management. If that is in place, the City will flourish. However, we need to be cautious to ensure that scandals of mismanagement and criminality do not place that reputation at risk to the disadvantage of us all.
4.42 p.m.
Lord Birdwood: My Lords, I am delighted to be following a few speakers on from my noble friend Lord MacLaurin whose maiden speech we heard today. I hope that we can regard it as a loss leader, with future products with an extremely long shelf life.
My contribution to this valuable and timely offering by my noble friend Lord Gowrie will be extremely brief. For the moment I am accepting his focus on the City of London as a catch-all for the financial community. But it is a bit of a tabloid shorthand, as he has already agreed. From the granite authority of the Edinburgh establishment, through some of our northern cities, where I believe up to 10 per cent. of the workforce is in financial services, the mesh of the markets is as pervasive and immediate as the weather.
Two huge evolutionary processes have occurred while the present Government have been in power. The first is the total capitulation of the world's markets to electronic systems. A result of that, years ago, was that the time-scales of the markets far outpaced the time-scales of any political response. When a whole

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country can be altogether taken out of play by market sentiment in an hour's trading, it is quaint of politicians to pretend to their electorates that they can even delay, let alone block, the process.
One of the few logic-based arguments for European financial unification is that the firepower of a whole continent's currency could deter the aggression of all but the most buccaneering of market manipulators. I say only "could"—and not in the teeth of the whole market collectively.
The second deep change which has taken place while this Government have presided is much closer to home and has had a huge and positive effect on the City's standing and wealth, which it is almost impossible to overstate, and that is the principle of privatisation. I should like to think that the Treasury's strategists had planned that beneficial consequence, but, as we now know, the political ideology, as well as the need for a bit of extra cash in the kitty, was largely met with scepticism by the upper reaches of the Civil Service. I do not believe that anyone foretold that the whole world would watch the process in this country and latch on to the idea that what worked for the UK would work for it too.
There has been something purely Darwinian in the way that the agile, flexible, commercial creatures of a demand economy have replaced the lumbering beasts of a command economy. The process has been more or less painful, depending upon the historic political cultures of the country in question. In some cases, the dinosaurs have fought back or just disguised themselves for a while. The privatisation evolution is completely irreversible on a world view, and Britain's banks—the merchant banks in particular—found out how to do it first. They cut the template which every privatisation episode everywhere has largely followed. One City name alone has, for instance, been involved in 32 such exercises in Latin America.
I need to draw the distinction between relationship banking and transaction banking. In that context one would broadly rank privatisation deals as relationship banking. A direct consequence of that is that the Government and the Treasury bosses have made the effort over the past decade to understand the way the City works. That effort has been rewarded in that a deeper understanding now exists than could have been predicted in a political culture where the politicians themselves have become more professional in the pursuit of their trade. The consequence of that, as well as a supportive ideology, is that political restrictions in other parts of the world have opened major opportunities for the London operators. Just one example is sufficient: the position of the Eurobond market here which would probably not have migrated so successfully if the Swiss had not imposed a turnover tax of 1.25 per cent.
The message is clear. A government who offer a sympathetic environment to the financial markets and to the people who work in them find themselves with a whole flock of golden geese in their backyard. Of course a government wedded to ever more complicated tax regulations in a perverse way add to City income as specialists proliferate to cope.
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This is not the time or the place to blitz your Lordships with numbers. The actual value to the UK economy is enormous, incessant and critical, but it is not a divine right of this or any other regime. The golden geese must be cared for and every vigorous financial sector in the world—some very close to home—look with greedy eyes at London.
In the second strand of his Motion my noble friend airs the case for systems of corporate governance for the purpose of maintaining confidence. Who could disagree with such a proposition? However, in defence of the financial sector as a whole, and, in particular, the innovation drivers in London, the principle of compliance is already taken seriously. From my observation it is not a charade or an empty activity. Perhaps while the regulatory structures were settling down in the early days some fish wriggled through the nets. They always will, but very few as the regulatory authorities themselves grow in professionalism and sheer knowledge of the territory.
One hears that we need an authority such as the SEC—but there may be less to that body than meets the eye, at least in usefulness. In London, for instance, if something is not working we can change the listing rules in six months. Because the SEC is a unitary body, it is obliged to consult universally—a process which can take up to three years. I cannot see how an ideal transparency can yet be imposed on the City of London. After all, the impetus for transparency in quoted companies has come primarily from the need to protect shareholder rights. This means a lot less when ownership is outside the UK or private. We do not need to be told that these, too, have their dangers.
To what extent will the sense of progress be jeopardised by recent City scandals? Is a system of corporate governance necessary for the City to retain its place at the forefront of the investment world? To make the point is to heighten awareness of what is at risk in terms of lost reputation, but perhaps also to obscure the process of surveillance and controls which are already in place.
Managers now live in a climate of great rigour, where analysis and recommendation must be traced to source; where dealing processes need to be seen to be accurate and honest; and where penalties are genuinely punitive. I believe we are getting it about right. Please note that the ultimate market test is there for anybody to see. Companies and the people who give them validity are voting with their feet and the nation is the richer for it.
4.50 p.m.
Lord Lyell: My Lords, I thank my noble friend Lord Gowrie for giving us the opportunity to discuss this subject and to hear the extraordinarily good and memorable maiden speech of my noble friend Lord MacLaurin.
I may offend my noble friend Lady O'Cathain by concentrating on the unglamorous side. She referred to one or two failures. I may flicker over them, but I shall attempt to put a gloss on the defensive side, which is the subject of the second half of my noble friend's Motion. Usually I am the tail-end Charlie in such debates as this,

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but today I am somewhat higher up the batting order and there is a particularly distinguished list of speakers to follow who will be able to outline the enormous advantages of London and the City and what the Americans call the "can do attitude".
I believe that the three advantages of London and, as my noble friend Lord Gowrie pointed out, Edinburgh, are, first, the English language, secondly, the time zone and, thirdly, a concept of flexibility. The third advantage is the key point, but like all wonderful buzzwords and concepts it introduces various items such as derivatives, packages and strips, which I have read about in the Financial Times but have not taken too much notice of. I believe that they are connected with income. They are far from my chartered accountant training in the late 1960s.
That is the glamorous side of the City of London, but I should like to reflect on the unglamorous side; on what I call "the back office". Often, the back office is seen as a euphemism for, "No. It is disallowed. It is dull. It is unimaginative". However, almost all today's speakers have pointed out that if the City of London does not improve, insist upon and update its high standards on control and vigilance there are plenty of other financial centres in Europe and elsewhere which will be keen to seize its business.
In my little office within the precincts of your Lordships' House are six or seven fairly large and heavy tomes. They decorate one of the shelves and go under the name of Department of Trade and Industry Inspectors' Reports. They are fascinating, but there are two sides to them. The first is the boring, red-tape explanation of why the reports were published and why the circumstances reached such a pitch. Usually it starts with a tiny detail either from the Companies Act, the Yellow Book or the Takeover Code which was missed. That leads to another compounding error and soon an increasing amount of time is spent putting management on the defensive and on the back foot. That leads to a DTI report or, far worse, criminal proceedings.
There is a second side and a fascinating aspect to many of the reports. It is the unexpected benefits; the story of what has gone right with the City and what is unique to it, in particular as compared with other financial centres such as Tokyo. I refer to the success, flexibility and speed of controls. When something goes wrong it is put right very quickly. I have been greatly impressed with the success of the audit committees and the controls as regards the financial scene in the City.
This week your Lordships' House has discussed various pieces of legislation. It is relevant to sound a note of caution; that is, the more rules, regulations and complications there are, the more difficult are the controls and the more time management must spend on defensive duties rather than on the constructive side of its work. I am lucky to have sitting next to me my noble friend Lord Rockley. I remember reading in a 1990 DTI report, in which he was mentioned, that things happen very fast in the City and that one must take quick action. We shall hear from my noble friend later, but it has been said of him that "he has got his knees brown".
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He has 35 or 40 years' experience of the City and the DTI report to which I have referred shows that he got it right. I do not believe that compliance is dull or sinister. I believe that of all the speakers in today's debate I am unique. I do not have enormous experience of the City but I have 10 years experience of "the back office"; that is, the Whip's Benches in front of your Lordships. Working as a Whip in your Lordships' House is greatly akin to being a top class auditor and a top class back-office operator. One must know what is going on at all times, as must any good back-office operator in the City, as my noble friend Lord Ashburton will know. I hope that my noble friend Lord Gowrie will grant me some forgiveness. I remember one glitch in 1976 when we worked together, but I think we got it entirely right. That experience marked me and has given me great admiration for the back-office operators.
In conclusion, I draw your Lordships' attention to a recent interesting debate initiated by the noble and learned Lord, Lord Hoffmann, on takeovers. Paragraph 125 of the report of the European Communities Committee of your Lordships' House made one or two startling comments about the 13th directive and its possible impact on the controls and what we are delighted to see are the benefits of the City of London. Without the controls to which I have referred, which work extraordinarily well, all those benefits and others mentioned by my noble friend Lord Gowrie will be worthless.
5 p.m.
Lord Borne: My Lords, I add my congratulations to those of other noble Lords to the noble Lord, Lord MacLaurin, on the excellence of his maiden speech. Having known him for a few years now, I look forward to the noble Lord's next intervention when he will feel free to be controversial.
The noble Earl, Lord Gowrie, in his very welcome Motion today, lays stress on the need to maintain confidence in the City of London throughout the world. To my mind, that is extremely important in terms of invisible earnings, as many noble Lords have said, and, indeed, for the economic well-being generally of this country.
I ask myself how confidence in the City is to be maintained and, if possible, enhanced. I believe that it requires that firms and institutions in the City should be efficient, competent, stable, well managed, and to follow the noble Lord, Lord Selsdon, have a reputation for scrupulous honesty and the highest standards of ethical behaviour, for—and I use this one word for my several—the principle of integrity.
Perhaps I may say, in parenthesis, that those qualities are essential to maintain confidence in the City not only throughout the world, but among the people of this country. The misselling of some 2 million private pension schemes by UK companies to UK citizens is as much a shameful failure of the City as those scandals of international significance, such as Norton Warburg in the 1980s and BCCI in the 1990s.
But, to return to what is needed for international confidence to be maintained, I want to emphasise first the value of ensuring that markets are competitive.

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As in other markets, fair competition between rival firms in the various markets for investments and investment advice is the key effective spur to efficiency and competence. We cannot expect confidence in the City if competition is restricted or distorted.
In the late 1970s and early 1980s, the Stock Exchange in the City was in great danger of losing business abroad, particularly to the New York Stock Exchange. This was because our Stock Exchange was riddled with restrictive practices, particularly the rule that fixed commissions must be charged. Member firms could not compete on price. Following the pressure put upon the Stock Exchange by litigation, it was pushed into agreeing reluctantly to abandon these practices. I believe that the City's operations and reputation in the world would have been seriously in jeopardy had it failed to give up the old ways of the London Stock Exchange.
But—and this is a very big 'but'—the more competitive environment in the City arising from these events and others to which noble Lords have referred, such as the ending of exchange controls and globalisation generally, involved the growth of financial conglomerates and the arrival in the City of outsiders from the US, Japan, the Continent of Europe and so on inevitably had the consequence, as night follows day, that the old club-like atmosphere of the City that might have been relied on to combat, by way of peer group pressure, misbehaviour and conflicts of interest and to temper other excesses of the competitive spirit, disappeared.
Hence, as we all know, there was the need for the Financial Services Act 1986, to which many noble Lords referred. It has a complex web of practitioner-based regulation, and, in addition, we have had the three angels—Cadbury, Greenbury and Hempel—who followed up with detailed provisions for codes of practice on corporate governance.
The philosophy of the Financial Services Act, to my mind, is that, while competition is certainly necessary to ensure that firms are efficient and competent, in itself, that is not enough. At present, there are regulations to require high levels of staff training, transparency of costs and other information to clients and high standards of ethical behaviour, and to satisfy prudential requirements and provide for the security of one's investment. We have a great deal of regulation under the Financial Services Act and the SIB and the self-regulatory organisations have achieved much in their efforts to maintain standards in the City, although they have not always succeeded.
One problem arises that regulations designed to achieve high standards can go too far. The imposition of standards that are higher than necessary for the protection of the investor can work to the investor's detriment, because potential new entrants to the market can be discouraged and kept out by an overwhelming amount of regulation. One must always ensure that regulation does not go over the top. It is as well that the Office of Fair Trading has a statutory duty to monitor Conduct of Business Regulations and other regulations, and to report to the Treasury as to whether they unduly restrict competition. Trust and confidence in the City
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require a proper balance between regulation and reliance on the market. Regulation must not go over the top so that it strangles business, imposes undue costs or damages the very interests of the business and private clients it is meant to protect.
Ten years on from the Financial Services Act, it is time to review our complex regulatory structure. There is confusion on the part of the public and even within the City. This afternoon a noble Lord referred to FIMBRA. There is obviously confusion in that regard, because it no longer exists. But some rationalisation is needed. After the General Election, I do not expect the new government to wish to go back to square one and revise the whole of the Act, with its 212 sections and 17 schedules. I doubt whether a new government would give priority to such a huge task. But Mike O'Brien, Labour's Treasury spokesman in another place, spoke in October about making the Securities and Investments Board a statutory body and said that the various self regulatory organisations should be—and I like the phrase—"folded into" the SIB. He sparked off a useful debate in which the regulators and the Deputy Governor of the Bank of England have had their say. It is a timely debate, just as is the debate we are having in this House today.
5.9 p.m.
Viscount St. Davids: My Lords, I stand in awe of the maiden speech of my noble friend Lord MacLaurin. I am sure that his will be a valuable addition to the collective wisdom that is your Lordships' House.
I thank my noble friend Lord Gowrie for giving us the opportunity to debate this very important subject. I must declare an interest. I am a non-executive director in a securities house and have spent close to 40 years in the City.
The pre-eminence of the financial institutions of the City of London in world markets has been a feature of our national economic life for many years. What is laudable and should be highlighted in any debate on those matters is the manner in which the City has increased its market share as capital markets have developed in mainland Europe and the Far East. Of course, that is against the background of intense competition. It should be remembered that our large participation in the growth of the Japanese and neighbouring markets which started in the 1960s was achieved by skill and not by the weight of capital, any lack of capital being more than compensated for by the recognition of one of our greatest strengths—integrity. The motto "My word is my bond" today raises a smile but not so long ago, it was our greatest asset.
If today's debate is to achieve anything, it must recognise that corporate governance, regulation and related matters are not just abstract concepts for they have to exist in the real corporate world, which has no boundaries of time, nation or moral culture. The deregulation of the London Stock Exchange in 1986, which came with fundamental changes in its rule book, brought about a situation whereby the whole financial services industry would require a new regulatory regime. Unfortunately, those changes coincided with

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a major change in the political and economic culture. They were soon to provide their own caricature but their damage to the system is still with us.
Big Bang in 1986 introduced not only new market members, but also brought with it a clash of working cultures. I am sure that one of the prominent scandals of that time was, in part, due to this culture clash. That the City has been able not only to maintain but also to increase its share of financial trade during the past decade, despite very fundamental changes to its former working practice, shows that we have in it a national asset which must be encouraged and not overburdened with unnecessary—and I repeat the word "unnecessary"—regulation.
The City's international reputation does not exist in isolation to its domestic business which, in turn, relies on the confidence of our nation in its financial institutions. The multiplicity of SROs without common standards works against a coherent and viable system. Their number must be reduced. The current debate among practitioners in the industry on the structure of regulation in the United Kingdom is: should there be a "Twin Peaks" approach? That is to say, two commissions established on functional lines: one for capital adequacy and the other for the conduct of business and the care of customer issues. Others favour a "super SIB", with all the current SROs being merged into an SIB operating through two divisions, wholesale and retail.
A merger of IMRO and the SFA would also find favour. The present system is too expensive to operate and let us not forget that the customer pays. Any new regulatory body needs to be closer to the marketplace. That point was mentioned by the noble Lord, Lord Eatwell, who suggested that more senior members of the City institutions should be brought into the regulatory bodies.
Reports in the press that Lloyd's of London would like to join an external regulatory system, if true, would I understand require primary legislation and allow the whole question of regulation to be revisited. The quasi judicial nature of the SROs needs to be re-examined for, let us not forget, the system requires not only the confidence of the customer but also that of the practitioner.
When an investigation leads to criminal proceedings, all evidence should continue to be available to the prosecuting authorities. But where an investigation, occasioned, say, through a lack of due diligence or best practice, leads to a fine or other disciplinary action such evidence should not be available in subsequent civil proceedings. If practitioners are to have confidence in the workings of an SRO system, they must not be subject to a risk of double jeopardy. Evidence should not be available for a civil court because of membership of an SRO. At least one legal system requires the victim's family to pay for the executioner's bullet. It is not a system that I recommend.
The introduction of order-driven trading as opposed to quote-driven trading in the most liquid stocks will bring our practice into line with the main exchanges in most overseas markets. The United States
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and European investment houses have long said that such a change would encourage even greater use of London as a financial centre by overseas investors. There are concerns within the City that if the UK does not participate in the single currency it could be discriminated against by those who do. Non-participation may also have an impact on the very sizeable values of business which the City undertakes in foreign exchange.
If the City is to continue to prosper, some sanity must be restored to the application of EU directives. It has been shown to be the case that, in applying certain directives—I give as examples the Investment Services Directive and the Capital Adequacy Directive—our regulators have taken a "super-equivalent" stance and have made use of the implementation of such directives to enhance their requirements, thus placing an increasing burden on UK-based companies in contrast to their mainland European competitors.
Let us not only praise the work of the City of London; let us also do all that we can to enhance its position. Let us reconsider the whole structure of regulation. One important point that I should like to raise and which I do not believe has been covered in today's debate is that of education. Nearly all our citizens have an interest in financial matters, whether it is through savings or as contributors to pension funds. Surely it is time for some education in such matters to be brought into the national curriculum. Today's young people are tomorrow's savers and they are the providers for their own old age.
5.15 p.m.
Lord Rockley: My Lords, I must first add my congratulations to those already expressed by other speakers to my noble friend Lord MacLaurin on his maiden speech—my only problem being that the quality of his speech makes me somewhat nervous about my own contribution. However, I am equally delighted to have the opportunity to participate in this debate on corporate governance with a particular emphasis on the City of London.
Corporate governance has, I believe, become a rather loose expression and is regarded in some quarters as a panacea for all evils. But we know that it is much more complex than that. At its basic level, I believe it means that we ensure that a business is run by and through its board and that that board is properly accountable to its shareholders for its actions. The installation of structures/mechanisms will not create a well-managed business—the converse is undoubtedly true. There are problems in the installation of controls in international service businesses.
In a financial service business the most important feature is its people and their attitudes. The cult of the individual and the super-stars is to my mind an exceedingly unhealthy development. It is vital that the firm and its values are bigger than the person.
I have spent most of my working life in the City. A great many changes have happened during that time; indeed, it is almost unrecognisable from the place where I started some 30 odd years ago. Not all of the changes have been for the good, but they were inevitable if

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London was to maintain its position in the financial world. It has undoubtedly done so; in fact, it has enhanced it, as witnessed by the size of the market, the number of international participants and the business done. That has happened through the perceived efficiencies of London, its transparency, the regulatory environment and the confidence of participants to deal there.
So the City has done something right. But, regrettably, fraud and dishonesty are fellow travellers within the financial world and have been since time immemorial. If anything, London's success has increased its exposure. Its expansion has meant that there are potentially more rotten apples in the barrel. The position of the City, its connotations and its international scope mean that, whenever there is a sensation, the City always has an involvement—peripheral or otherwise—and it is always in the public eye.
Therefore, it goes without saying that it is vital for firms operating outside the City of London to be seen to conduct their affairs to the highest possible standards in their own market. In that respect, it is very healthy if disciplinary actions are well publicised. They have an unfortunate spin-off for the firms concerned. There is adverse publicity at the time and there may even be criticism from the regulator which, if the firm itself unearthed the transgression and dealt with it internally, may seem marginally unfair. That is corporate governance at work. That is the way it goes.
The regulatory system and its environment are vital. The regulators set the scene. They occasionally blow the whistle; but, fundamentally, it is the companies which create the tone and reputation of a marketplace and obviously of their own firms within it. A City firm has three major assets—its capital, its people and its reputation. Those are the tools with which management has to work for the shareholders. Capital is perfectly straightforward and we can all see whether or not it is there. But people and reputation are much more delicate subjects. The cult of loyalty is something that does not sit very readily in the international financial world of today.
Self-importance of individuals knows no bounds, and they seem to forget how they developed their skills, who taught them those skills and why they have those skills today. There is no shortage of management effort to try to promote that feeling of loyalty throughout every firm in the City, of that I am sure. Whenever there is what one might term a disaster, every management will re-examine its physical procedures and controls to see what it can improve. It will ask itself: could it possibly happen here?
As a result of those reviews, I am equally sure that every firm tightens up some aspect of its controls and processes. But the fact is that what went wrong in the first place was a fundamental breach of trust and an organised cover-up by others, be it within the organisation or externally. That is the case with all those well publicised sensations in recent years, whether they
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have emanated from Tokyo, New York, London or other centres. In the final analysis many systems are only as good as the people who operate them.
One can speculate why individuals go off the rails. It has been suggested only this afternoon that it is not necessarily for personal financial gain. With that I concur. I think that in many cases it is a question of prestige with their peers, of being important in the community and of appearing important in themselves. When that is the case, it is much more difficult for a management to detect. Technology is a wonderful thing; it is how the business is run. It is how the derivatives work. They have almost become a dirty word these days, but they produce cheaper funds for industry. But, equally, that technology can be manipulated for malpractice. Given the size of the marketplace and a period of non-detection, when those misdemeanours are uncovered they can be spectacular.
I refer noble Lords to a chairman's nightmare. However confident one is in one's firm's structures and its people, there is always a nagging worry that some link in the chain, somewhere along the line, is being surreptitiously weakened. There is only one way that that can be countered, and that is through the vigilance of management, using not only the controls but also the human touch of experience. In the modern competitive world everyone is striving for super-performance—when that occurs everyone is delighted—but there will be many instances where success against the trend will make management's tentacles twitch in considering whether it has found the Holy Grail or whether there are other reasons. It is for management to achieve this difficult task of control. I believe the responsible City managements are only too well aware that their own livelihoods depend on getting it right.
5.23 p.m.
Lord Desai: My Lords, I join other noble Lords in congratulating the noble Lord, Lord MacLaurin, on his excellent maiden speech. We look forward to hearing many more of his speeches in this House, but we shall entirely understand if his work at the other Lord's, which is very important, keeps him away now and then. We want our cricket team to achieve as much success as the noble Lord has achieved at Tesco's. That would be the day to celebrate!
I am almost one of the last speakers in the debate and unfortunately almost everything that I wanted to say has been said. However, there is one point that has been mentioned by many people which I wish to emphasise; namely, that the City is the only seriously competitive global level industry we have. It has been a global level, top-class performer for about 250 years. That is something to note. It has withstood many shocks and many innovations and has adapted and grown. As it has grown, problems have arisen. As new products and new innovations emerge, so do new opportunities for fraud. That is a sort of dialectical process. As these processes occur, one has to invent new forms of regulation. I do not think there will ever be a time when we shall have perfectly accident-proof financial markets, any more than we shall ever have risk-free arbitrage. It is inevitable that a fast-growing, innovative industry will

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occasionally experience these problems. Regulatory organisations will always be a little behind in catching up because many of these cases consist of shutting stable doors after the horse has bolted. However, that is part of the process.
As many noble Lords have already said, the choice we face today is to look at the patchwork quilt of self-regulatory organisations and some statutory bodies and to decide whether there are gaps now, or that we can anticipate in the light of forthcoming innovations, which ought to be filled. Should they be filled by self-regulatory organisations spontaneously arising in the City, or should we appoint a co-ordinated, overarching body? That body can either be a statutory or a non-statutory one. There are delicate questions of advantage and disadvantage on either side. I am not sufficiently expert on that matter to make up my mind about it. Some people like the model of the SEC, whereas other people have pointed out that it is somewhat slow in its operation. I used to be much more sceptical of the SROs, but their performance in the past year or so has improved considerably. Much learning is taking place. As my noble friend Lord Borrie pointed out, if we established a statutory body by means of a vast piece of legislation, how quickly could we change it when the next innovation emerges? How could we allow room for that regulatory body to adapt, change and grow? Those are important questions.
As my noble friend Lord Borrie also pointed out, a debate has already started on this matter. There ought to be a systematic formal response to that debate from practitioners in the City. Do they think that they can create a co-ordinated body of inter-connected, self-regulating organisations which would reassure retail consumers and those who worry about systemic risk that if problems arise they will be quickly taken care of; or is it the case that practitioners themselves think that in the light of all the problems we have experienced, and in the light of the European climate which is much more formally legislative than self-regulatory, we shall have to adapt ourselves to that sort of culture? That is an open question. We need to have much more discussion on that than we have had so far.
I now wish to discuss a matter which worries me much more than either corporate governance or regulation, and that is the level of competence in both management personnel and regulatory personnel. As the noble Lord, Lord Ashburton, said, I am sure that the management of Barings cared immensely about its business. I do not doubt that. What I doubt is that it knew what the business was all about. An age gap arises as financial innovations take place and as "rocket" scientists deal with derivatives and new products. Do the members of top management, who come from a different generation, understand the nature of the business they are in? Have they been retrained? Have they returned to the London Business School, where my noble friend Lord Currie could teach them a thing or two about the latest innovations? We should insist that top management occasionally retrain in this fast-changing business. Although it may appear that money makes money, money makes money in different ways nowadays than it did in the past. I am sure that as
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regards Barings and other companies which traded in derivatives there was serious misunderstanding about what they were doing and they could not unwind the deals. They could not understand the nature of the business.
I am not surprised at that. I work in the quieter field of academia but I need constantly to retrain. Even the quiet world of economics changes. At seminars I find that someone gives a paper which I do not understand because I have been out of touch for the past two years.
From the report of the Treasury Committee in another place on the Barings issue published last month, I am not clear that at the crucial weekend the Bank of England knew precisely what was going on. I am not sure that our regulatory personnel knew the nature of the exposure to which Leeson had subjected the bank, or whether the liabilities were unlimited or could be capped. There were all sorts of rumours.
I conclude by referring to this serious point. Our top management and top regulatory personnel need continual retraining. We must insist that that be done.
5.31 p.m.
The Earl of Limerick: My Lords, the Motion of my noble friend Lord Gowrie is timely in both its parts. It is timely in drawing attention to the past and present contribution of the City of London to our economy. It is timely in drawing attention to the reinforcement, the basis of trust upon which its success must depend.
I declare an interest, which is more past than present. A greater part of my working life, starting 43 years ago, was spent in and around the City: first, in accountancy, then substantially in merchant banking and latterly in fund management. During that time I was able to take a broader view from two perspectives. There is nothing like seeing yourself as others see you. For two years in the early 1970s, I was a Minister in the DTI, having responsibility for company law from which time I bear the scars of two notorious insurance company collapses—Maxwell-Pergamon, "Mark I", and others. From around 1980 I was chairman of the British Overseas Trade Board and, until 1991, of British Invisibles. I was charged with selling internationally the excellence of British goods, and latterly especially of British services.
It is upon success in trading in services, mainly financial, that the prosperity of the City of London depends; and with it a good part of our overall national prosperity. The numbers have moved onwards and upwards since I had them at my fingertips, but the headlines are worth remembering and highlighting.
However, first, I have a historical reflection. The City of London grew and prospered as British trade followed the flag around the growing Empire around the world. Some might say that it was the flag which followed trade. But it was based on the foundation of the Industrial Revolution from the heart of England.
Let us consider the remarkable transformation that we have seen in the wake of two world wars. As late as 1939, the UK share of world trade was still approaching 30 per cent., and, correspondingly, about 30 per cent. of world trade was financed in sterling—a burden to which

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manifestly a currency as small as ours could not aspire nowadays. This country now accounts for only around 6 per cent. of world trade in goods, and yet the part which the City of London plays in its share of those international services has been maintained and in some parts enhanced.
During that time the City of London exercised imagination and energy, increasing its market share in financial services as the underlying trade shrank relatively. I mention the example of the eurodollar market in the wake of the US interest equalisation tax in the early 1960s; our retention of the lion's share of international markets in insurance, foreign exchange, equity trading, ship and aircraft broking and external bank lending; and the development of new techniques for which an international demand is discerned.
Where do we stand in the markets on the most recent figures? We have 28 per cent. of marine insurance premiums globally, with 38 per cent. of aviation risks. We have the largest share of external bank lending. Our foreign exchange turnover (to which I have already referred) exceeds that of Japan and the United States combined. We have around half the fixtures in marine and aviation for charters on the Baltic Exchange; we have the contribution of Lloyd's List and international consultancies, and almost 60 per cent. of the world turnover in foreign equities. That adds up to a contribution from UK financial institutions exceeding £20 billion a year, and is still growing.
There is no questioning the national importance of these activities. What are the threats to the continuation of that success? I am not too worried by the looming single currency, whatever may be claimed in Frankfurt. The risks, I believe, are rather more internal than external. That success depends upon our reputation for fair as well as for efficient dealing. That in turn rests on confidence to sustain the reputation for fairness; and confidence is a tender plant.
As I see it, threats will include these matters. Technology was referred to by my noble friend Lord Birdwood. The dominant share that we have in the forex markets, and, alongside it, forward markets, derivatives, caps, collars, options and the rest, are a useful and valid means of avoiding or minimising risk for traders. But they also offer opportunities for speculation. Indeed, they offer invitation to speculators and opportunities for abuses. One has only to reflect that the turnover in the foreign exchange market globally is a multiple of—I understand that it is currently in excess of 20 times—the turnover in underlying trade. So an awful lot of buying and selling of foreign exchange is going on which is not used for the fundamental and obvious purposes of paying for goods and services. The sheer volume of money that moves around and the speed with which it can move can lead to destabilisation.
Technology in good part contributed also to the post-Big Bang problems of the late 1980s. Too much capital was injected with too little strategic thought into an overpriced sector at the end of a 14-year bull market.
The last risk to which I refer is greed, both corporate and personal. I refer to the cult of the star, the star salaries, and especially the large bonuses which follow.
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Every man is a debtor to his profession and there is a loyalty which should attach to that. I am very much in sympathy with the comments made by my noble friend and colleague Lord Rockley on that subject, and, I have to say, a little less sanguine than the view expressed by the noble Lord, Lord Ashburton.
I am clear that over-regulation would clip the wings, if not actually kill, the golden goose, and would cause certain golden goslings to refrain from coming from overseas to nest in London.
I am also clear that the answer must lie in the only form of discipline that works; namely, self-discipline. There are systems that have been developed which should be followed and which help that process. But self-discipline it has to be. It is incumbent upon those who run City institutions to introduce, monitor and insist upon, in detail, codes of conduct which ensure the high standards upon which the great name of the City was built and on which its future prosperity must depend.
5.40 p.m.
Viscount Chelmsford: My Lords, I am grateful to my noble friend Lord Gowrie for the chance to talk about my part of the City, the London insurance market, of which, I suggest, some 70 per cent. of the premium comes from abroad. It has a good track record in terms of balance of payments. The latest figures I have seen suggest that in 1993 it produced £5 billion; in 1994 £4 billion; and in 1995 £6 billion. If I understood my noble friend correctly, that is the sixth part of the £20 billion he mentioned, or 30 per cent. of the invisibles. The split of that £6 billion in 1995 was some £4.1 billion in respect of investments of one sort or another, including overseas trading; £1.1 billion to the brokers in terms of commissions and fees; and only £0.8 billion in respect of underwriting, which was split roughly 50: 50 between the insurance companies and Lloyd's.
The position of Lloyd's is quite interesting historically. Despite the crisis between Lloyd's and the capital providers—its Names—the capital deployed across the years has remained remarkably stable. I find for 1988 the highest number of Names ever—around 32,500. That may be compared with 1996, when the number was down to 12,800; but there are also 168 corporate vehicles. The capacity between those two years is almost identical. The premium income—significantly, because premium varies according to whether rates are high or low—was less in 1988 than it was in 1996. Lloyd's reputation for never failing to pay a claim remains untarnished. But, sadly, its reputation for financial strength is probably lost for ever. That is partly a result of the gradual demise of unlimited liability and partly because Names, although many had good reason, walked away from their losses and imperilled cash flow. The regulators, advisers and sophisticated clients of the world will be checking Lloyd's financial position evermore.
However, this was not just a Lloyd's problem; it merely seemed that way from the publicity. During the same period (since 1989), although nobody seems to realise it, 17 insurance companies have failed.

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The settlement at Lloyd's has been an enormous relief to all those of us who want to see the City flourish. Lloyd's is the hub for a very tight-packed market where face-to-face negotiations in respect of large or complex risks are not just in the opinion of most of us essential, but differentiate us from so many of the other markets around the world which try to deal by telephone.
In 1994 the London insurance market accepted £15 billion of premium income, which demonstrates what an important employer it is. It is believed that the City of London, Camden and Tower Hamlets between them currently employ some 37,500 people directly involved in insurance. It is estimated that there are another 15,000 employed elsewhere around the UK who are employed only as a result of the existence of the London insurance market.
I turn to corporate governance. As we have heard many times today, no news is good news. We have had too much news of the bad variety recently. Like others, I should like to start at the bottom. Although I have been retired for five years now, I have retained my copy of my company's Group Operating Policies. I turn to that document. On page 1, I find, "Our Business Principles", dated July 1986 (over 10 years ago). It states:
"Our success depends on our ability to command the confidence of our clients and our markets. This confidence must be earned"—
simple Anglo-Saxon words of not more than three syllables. It continues:
"Specifically we must strive to … Understand our clients and their needs … represent them properly in the marketplace … treat underwriters fairly and develop long term relationships with them … ensure the highest order of technical back up … maintain highest standards of communication—external/internal".
That was not just "apple pie"—it was followed by 20 pages of more detailed advice.
For most of my working life I have been regulated by the Insurance Brokers Registration Council. It has a code of conduct which begins:
"Insurance brokers shall at all times conduct their business with utmost good faith and integrity. They shall place the interests of their clients before all other considerations. Subject to this, they shall have proper regard to others".
That is marvellous stuff. I note that the insurance brokers' interests very properly come last.
The Insurance Brokers Registration Council regulates all brokers; but there is one terrible flaw in its activities. If you do not like the disciplinary committee, if you find the cost too great or the rules too onerous, you simply leave. The only penalty is that you can no longer call yourself a broker—so you call yourself an intermediary, and any insurance company will deal with you. Brokers have been trying to get legislation to close that gap for years but no government ever have time to pay attention to them.
I should like to refer briefly to practice at Lloyd's. The Lloyd's by-laws include a comment that, "failure to comply with the Lloyd's code of conduct is not in itself a disciplinary offence but may be taken into account by any disciplinary committee". That is sensible. Governance requires discretionary powers, flexibility to take account of character, attitude and track record. I am not ashamed to use the word "flexibility" for the umpteenth time this afternoon.
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A recent article in the Financial Times interested me. It stated that foreigners take the long-term view and accept lower profits than the UK. UK governance is held to be short-term and risk adverse. We perhaps need to think about that.
I received a letter from Barclays, as I dare say did other noble Lords. It was very brief and very sensible. It stated that corporate governance develops and matures through the development of best practice, not through regulatory and legislative change. I agree, as I believe do many other Members of this House.
The Association of British Insurers (ABI) reminds me that it represents 440 companies which manage £550 billion of funds. It has played significant roles in Cadbury, Greenbury and Hampel. It has published guidelines on areas such as composition of board directors, service contracts, share options and long-term incentive schemes. It established IVIS, which monitors resolutions by the top 800 companies and advises ABI members if they are inconsistent with Cadbury et al. Last year, it organised the first international conference on corporate governance; 21 companies came to London to participate. It is much involved in this year's conference in Paris.
So let the individual be taught high standards and be monitored by his company. Internal audit is valuable as a tool to improve company efficiency as well as to keep up standards. Let the company proclaim its standards and be monitored by the market regulator; and let that regulator use his nose and make unscheduled visits, rather than the forward advised routines that are usually practised. Let the law take a back seat and act only with care and restraint.
5.48 p.m.
Lord Ezra: My Lords, we have reached the stage in the debate when we may start to sum up the important points made. We are particularly indebted to the noble Earl, Lord Gowrie, for having so effectively introduced it. The debate has been remarkably well-informed. Every noble Lord who spoke brought to bear on the subject his own personal experience, be it from banking services or academia, as in the case of the noble Lord, Lord Desai. It has been a contemplative debate of the sort at which this House excels.
We have been able on all sides of the House to take a dispassionate view of the situation which relates to the remarkable success story achieved by the City of London; and it is a remarkable story. As the noble Lord, Lord Desai, reminded us, it goes back 250 years. It started with the sense of innovation and has continued with it. Indeed the greatest era of innovation has been in recent times.
The noble Earl, Lord Limerick—whom I am glad to see here because I served with him for many years on the British Overseas Trade Board—itemised some of the great achievements of the City leading up to the present massive earning of £20 billion per annum and rising. Had it not been for the earnings from the City, from financial services and investments abroad, we should be in dire straits in terms of our balance of payments. I need hardly remind your Lordships that since 1983

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our visibles balance—for various reasons which we have debated elsewhere and which I shall not go into—has been in serious deficit. That has been made good by the remarkable achievements of the City.
What is important in the context of our debate is how we can ensure that this great achievement is maintained in the future and see what are the problems, challenges and difficulties which we might meet ahead. I should like to refer to a few of those as they emerged in the course of the debate.
The question of confidence in the City was raised. The City was built on a sense of confidence, a shake of the hand being all that was required in the most important financial transactions. That confidence is of prime importance in dealing with the kinds of products with which the City is concerned. It has unfortunately been somewhat shaken by a limited number of cases that have arisen in the recent past. I emphasise that it is a limited number. Nonetheless they have done some harm to that feeling of confidence. It has been important that those few cases have been very carefully inquired into.
It has emerged in those cases—I refer particularly to the derivatives and fund management cases—that there was a confusion, if not a weakness, of management controls, particularly at the higher level. That seems to have emerged from the reports that I have looked at.
That raises the question to which the second part of the Motion relates—namely, the question of corporate governance. It is sometimes felt that, because the City is regulated, corporate governance should not be a necessary feature of its operations. But, as the noble Lord, Lord Eatwell, pointed out, corporate governance almost comes first and is possibly almost more important than regulation. The noble Earl, Lord Gowrie, is to be congratulated on having linked his Motion with the concept of corporate governance.
I very much hope that there will be a determined effort to ensure that, where the principles of corporate governance are not yet fully applied in City firms, they will be applied.
The concept of corporate governance is being reviewed by the Hampel Committee. I hope that that review will be on a wide-ranging basis. I have had experience of what happens on the Continent, having for some years been on the supervisory board of a Dutch company. I have also been a non-executive director of British companies and am therefore able to compare the roles of the two. Speaking from the point of view of the Dutch company, the benefits that I saw from their regime are as follows. First, the role of the non-executive directors was absolutely clear; there was no doubt about it. You were on the supervisory board; there was a chairman of the supervisory board; there was the management board, the chairman of which was effectively the chief executive of the company. The positions were clearly defined. When board meetings, which were presided over by the chairman of the supervisory board, took place the non-executives sat on one side and the executives on the other. The meetings always started with a report from the chief executive
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officer and the other executives which was debated and then we jointly discussed financial matters, strategy, and so on. We had our own meetings when it was appropriate and we met jointly with the executives when that was appropriate. At the annual general meeting it was the chairman of the supervisory board who presided and who was regarded as responsible to the shareholders for seeing that the company was properly managed.
That system is not a panacea; no system of that sort can be. Companies run into difficulties for all kinds of reasons. This particular company ran into difficulties because it carried out capital projects abroad during the boom years for which it had difficulty later in obtaining payment when there were sovereign debt problems. However, the benefit that the Dutch regime introduced was that we found out about the problems earlier than we might otherwise have done; and, secondly, we were able to deal more effectively with the consortium of banks which provided the facilities we operated on than might otherwise have been the case.
I do not suggest that we adopt that system here. However, I have found in the literature that the idea of a two-tier board, as recently in a CBI document, is pushed on one side in a rather cavalier fashion. I believe that we should look seriously at this option as we examine the structure of companies.
The question of regulation has been referred to. I believe that there is a consensus here that we should review the regulatory regime. I was surprised to learn that there are 20 bodies which report to the SIB. Some are big, some are small. It seems to me that that is a very large number of regulatory bodies to be operating in the financial services sector. If for no other reason than that, I believe that the regime ought to be reviewed. It is now 10 years since the Financial Services Act. I hope that before long there will be such a review, in which the practitioners must, of course, play a leading role.
Finally, I should like to refer briefly to the prospect of a single currency and the euro. Whether we are in or out, it is of vital importance that the City of London should remain the leading centre for trading in the euro, as it is now in the dollar, the yen and other world currencies. I applaud the initiative taken by the Bank of England in ensuring that financial institutions are kept fully aware of what is going on and prepare themselves for that eventuality.
In conclusion, I believe that this has been an extremely useful debate. We are agreed on the remarkable achievements of the City. I believe we are also agreed that it is very important that we should take steps to ensure that those achievements multiply in the years ahead and acknowledge that there are certain problems which must be addressed in order to achieve that.
5.59 p.m.
Viscount Chandos: My Lords, I start by adding my thanks to the noble Earl, Lord Gowrie, for his introduction of today's debate and for his wide-ranging and stimulating opening remarks, demonstrating once more his claim to be Renaissance Man. His noble

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friend Lord MacLaurin, on whose maiden speech I congratulate him, has an outstanding record as a businessman. Your Lordships' House should therefore welcome him and look forward to his future contributions, even if they do from time to time coincide with the policies of the party to which he belongs.
Like other noble Lords, I should declare an interest as a director of a small investment banking firm pursuing corporate finance advisory work and private equity investment, both in the domestic sphere and internationally. For many years I was no doubt an exasperating pupil of the noble Lord, Lord Rockley, and the noble Earl, Lord Limerick, whose speeches I enjoyed and to whom, as an author would say in his foreword to a book, all credit should flow for what I have learned and no responsibility should be attached for my mistakes, which are my own. I have also served on the board of the International Swaps and Derivatives Association in New York and remain a strong believer that derivatives, for all the new risks that they present, represent the most significant and broadly valuable development of the financial markets in the past two decades. That is a subject to which I shall return.
I have also been a non-executive director of several public companies, in one of which I recently tested to destruction the role of a non-executive director in trying to enforce good corporate governance. One interesting point emerged from that experience. Despite considerable publicity attached to my resignation and that of a better known fellow non-executive director, not one institutional investor in the company concerned made any attempt to discuss our concerns with either of us. So much for institutions' diligence. Perhaps the recommendations of the business commission in this field have a great deal of merit.
I reiterate the support of these Benches for the City of London, its work, domestic and international, and for the employment and earnings that it generates. It was no coincidence that my right honourable friend the Leader of the Opposition chose to make one of his keynote statements on the Labour Party's economic policy last year at the lecture sponsored by the Corporation of London and the London International Financial Futures Exchange. Perhaps I should not have reminded your Lordships of that, for fear of provoking the Deputy Prime Minister for the time being into labelling those bodies also and their members stooges of the Labour Party.
We should protect and enhance the position of the City of London and cherish the international earnings within it, so long as in doing so we do not jeopardise or neglect the other interests, even stakeholders, of our economy and our society. For that reason, notwithstanding the carefully explained focus on the international value of the City by the noble Earl, Lord Gowrie, I find that I cannot avoid considering some domestic issues at the same time, for they are two sides of the same coin. However, I do not intend to add much to the debate about regulation, other than to support most strongly the comments of my noble friend Lord Eatwell.
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The danger of a subject such as the one we are debating and at least a partial mitigation of its merits is that it risks over-emphasising the City of London's role as an end in itself. I am, as a quintessential member of New Labour, nonetheless unrepentant in my belief that financial markets and centres are a means to an end and not an end in themselves. They are the servant of every other branch of the economy and the community, domestic and global, and not their master. To believe that is not for one moment to undervalue or undermine the direct benefits to employment, prosperity and the balance of payments derived from the City. It is merely to acknowledge that there is a delicate and complex balance between the various roles and functions of the City. In vigorously defending it, we should not allow any one aspect of it to be disproportionately weighted.
I was delighted that the noble Earl, Lord Gowrie, linked the success of the City to a past Labour Government. As I have argued, a future one will protect and build on that established success. Even the late Lord Wilson of Rievaulx would have acknowledged, I suspect, that Britain's imperial history and, until the Great War, its role as a dominant exporter of capital to every other continent of the world were useful starting points. Moreover, it was during the first government of the late Lord Wilson that the pioneering innovations of Sir Sigmund Warburg in the Eurobond market established London's central role in that huge market. By the mid-1970s, the removal of interest equalisation tax in the United States led to barely a moment's pause in the development of the international money and capital markets in London. While the differing tax and regulatory regimes on opposite sides of the Atlantic contributed to the emergence of London's pre-eminence, we should not underestimate the importance of the innovative intellectual contribution by the pioneers of the international capital markets, like Sir Sigmund.
While the current skills in the City remain considerable, we should not be complacent about whether the innovatory cutting edge that existed in the 1970s and 1980s remains unblunted. It is striking that the driving force of the derivatives market and the state of the art trading techniques and technology are overwhelmingly derived from the United States and from American or American-trained individuals. We should worry that the education of the leaders of British merchant banks—in many notable cases in the Gymnasium of pre-war Germany—has been overtaken by that prevailing in the gymnasiums attached to the trading floors of Chicago and New York.
The overriding commitment on these Benches to the long-term improvement of education and training is as relevant to the City as to other areas of industry and commerce. Whatever established advantages London enjoys, which noble Lords have listed—location, time zone, language and supporting services—they will inexorably and inevitably be eroded by an under-educated and inadequately trained workforce in the next century. The PhDs that man the trading desks of the US banks are known as "rocket scientists". We should beware that our rocket scientists do more than grow a fancy sort of lettuce.

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If the international activities of the City could be threatened in the longer term by under-investment in education and the intensified global competition to which my noble friend Lord Currie referred, are there grounds for concern that currently the strong commitment to the development of international business is at the expense of any of the market's domestic obligations? In the short time available, I should like to suggest to your Lordships that there is at least one area where there seems to be an unsatisfactory imbalance. London has been enormously successful in channelling investment funds into emerging markets—from Russia to Vietnam, from Peru to Zimbabwe—but there remains an undeniable failure to provide venture capital funds to hi-tech and other early stage enterprises within the UK and indeed the entire European economy. In marked contrast, the United States has a vibrant and expert venture capital industry, with a strong but discriminating appetite for risk, as well in the over-the-counter NASDAQ equities market, which is another huge source of risk capital for hi-tech and high growth companies.
This is not a peripheral issue. In the period from 1980 to 1995, 25 million net new jobs were created in the United States, a growth of 1.6 per cent. per annum; whereas in the same period, the comparable net job creation in Europe was a mere 4 million, a paltry growth rate of 0.2 per cent. per annum. While there are obvious factors, such as labour market regulation and mobility, which in part explain that disparity, there is strong evidence, as produced by the American economist Horace Brock, that the dynamism of the equity markets is at least as important a factor. In that regard, writes Professor Brock, perhaps the most important lesson to be learned from the US experience is the importance of taking seriously the dreams and ambitions of young people, regardless of their economic or social background, and taking those dreams seriously entails both sociological encouragement, such as role models, and funding.
This is not something the Government can legislate for. Nor do I believe that tax concessions are effective, as demonstrated by the consistent failure of business start-up, business enterprise and enterprise investment schemes to fund productive, innovative investment, not least because investors attracted by tax shelters are throughout the world fundamentally risk averse. What is needed is a cultural change, achieved perhaps by self-starting, not just self-regulation, on the part of the City, that instils the same willingness to take risks in Newbury and Newcastle as in Lima and Lagos.
I hope therefore that, as the leaders of the City gird themselves for the fight over the coming years to maintain an increased London share of international capital market business, they will direct the same energy, commitment and risk capital to the financing of the new industries to be created by the creative and technologically skilled generation of young people. Only then can we be confident that the employment and prosperity enjoyed by those in the City is replicated throughout the United Kingdom and European economy.
6.10 p.m.
The Minister of State, Department of Social Security (Lord Mackay of Ardbrecknish): My Lords, this has been a most interesting debate initiated by my noble friend Lord Gowrie. The collective expertise of all the speakers is an eloquent reminder to us of the wide range of experience found in your Lordships' House. It was Ernest Bevin who, in a different context, said that he did not want to go naked into the conference chamber. I feel a little naked of non-executive directorships, chairmanships, consultancies and the like in this present company. But that is probably just as well as perhaps the noble and learned Lord, Lord Nolan, might have something to say about it.
We particularly welcome the maiden speech of my noble friend Lord MacLaurin. My noble friend started with Tesco in 1959. Since 1985 he has been its chairman, and in one guise or another has presided over that company's steady climb through the supermarket league to its position today as one of its leaders. I am not surprised. He shares his surname, which is not a common one, with a certain Colin MacLaurin. Indeed, I think he is quite fortunate. He must be the first "Mac" to have got into your Lordships' House for a long time who has not been a member of the clan Mackay. Colin MacLaurin was born at the end of the 17th century. My noble friend may be aware of this; in fact, he may well be related. He was raised in the Manse of the Kirk at Kilmodan in a place called Glendaruel. Some of your Lordships may have heard of it. At the age of 11 he left the glen and went to the University of Glasgow to study mathematics. By 19 he was the professor of mathematics at Aberdeen and at 22 became professor of mathematics at Edinburgh. Those noble Lords who managed to hold on to mathematics for a little time in their school careers may remember that he gives his name to one of the fundamental theorems in calculus. His success in academia in the 18th century has been well echoed by his fellow clansman in business today. We very much look forward to other speeches from him, which perhaps will be a little more controversial than his maiden speech today, on all matters concerning business and commerce and the prosperity of our country.
Perhaps I may stick to the Celtic fringe for a little time because I feel that I cannot allow the debate to conclude without saying that there is a little more to this than just the Square Mile. Many other parts of our country have excellent and profitable financial businesses. For example, Scotland—I cannot think why I draw it to your Lordships' attention—is a financial services centre of international standing. It employs 200,000 people and accounts for 15 per cent. of Scotland's GDP. Its success story is terrific and it has been the fastest growing sector in the Scottish economy over the past decade.
It has important clearing banks. Two operate internationally. Assets have increased from £26 billion in 1986 to £85 billion in 1994. Scottish insurance companies have well-established markets overseas and Standard Life is the largest mutual life company in Europe. Funds under management in 1995 were almost

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£94 billion. Scotland ranks third in the European Union after London and Paris and 14th in the world in terms of institutional equity funds under management.
Many of the Scots I meet in London when I go about my business wearing my other hat as Minister responsible for pensions in the Department of Social Security are in the pension management field, which is a tribute to Scottish education, particularly mathematics, if I may revert to Colin MacLaurin, and underlines the importance of the Union for our countries.
There is one ominous and threatening cloud on the horizon. I wondered how I was going to get this in because politics have been very much absent from the debate, but I knew I could rely on the noble Viscount, Lord Chandos, to introduce some party politics. I have to say to my noble friends Lord Rockley and Lord Limerick that, while I am sure they taught the noble Viscount banking well, they somehow missed out on the political education.
One threat to the Scottish position is the impact of Labour's plans for a Scottish Assembly with separate tax raising powers. Any increase in taxation arising from a "tartan tax" would make it more difficult for those important companies which operate north of the Border. In this highly competitive world, with the majority of customers living in England or indeed overseas, we could easily become uncompetitive and all those excellent jobs could simply migrate south of the Border or elsewhere.
Although this debate has concentrated on financial services—banking, investment and securities services and insurance—considerable earnings are generated from many other services, not least tourism and transport. My noble friend Lord Limerick drew particular attention to this with regard to the maritime sector. The UK maritime sector's contribution to our balance of payments has been estimated as at least £2.5 billion. The Baltic Exchange is the only organised market for ship broking in the world, handling half the world's ship sales and purchases.
The work of the City encompasses business directly transacted in and through the City. As my noble friend Lord Birdwood rightly reminded us, during the past 20 years we have seen a major expansion in the equity markets through privatisation, which was led in this country, and indeed around the world, by my noble friend Lady Thatcher, who I am pleased to see in her place today.
The work of the City also includes the business of subsidiaries and affiliates abroad. Its prosperity depends not only on the prosperity of this country and the markets here but also on the markets and performance of international firms operating around the world. In this context it is important to emphasise that it is not the origin or ownership of firms which counts but their ability to do profitable business here. The more profitable the business, the better for everyone.
My noble friend Lady O'Cathain suggested that we should not dwell just on some of the difficulties that the City has had in recent years but should look at its success. As I have marginally longer to speak than most of your Lordships, I should like to put on record as
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quickly as I can what that success shows in terms of earnings for this country. In 1985 the net overseas earnings of the UK financial sector were £10 billion. By 1995 those net earnings had doubled to £20 billion, equivalent to 3 per cent. of GDP. The figures essentially comprise earnings from the export of services and investment income from overseas assets. The banks were responsible for £6 billion of that; securities dealers for £1.7 billion; commodity traders for £500 million; and insurance institutions for £6 billion. My noble friend Lord Chelmsford drew our attention to that, as he has done in speeches on the Social Security (Recovery of Benefits) Bill, which successfully passed its final stages in your Lordships' House last evening. The pension funds have earnings of £2 billion and funds in trusts have earnings of £1.5 billion. This is big money, and a remarkable success story for the City.
These international activities create significant employment opportunities. The City Research Project commissioned by the Corporation of the City of London and carried out by the London Business School estimated in 1995 that international wholesale activities employed some 150,000 people. These figures underpin the City's justifiable claim to be the world's leading financial centre. New York and Tokyo owe their positions partly to the size of their domestic markets. The important distinguishing feature of the City is the size and range of its international business. It is the world's largest centre for the trading of international securities, with more foreign companies—530 out of 2,800—listed on the London Stock Exchange than on any other exchange. As my noble friend Lord Clark of Kempston pointed out, the City is the leading global foreign exchange market, with an average daily trading volume of £291 billion, almost twice that in New York and almost three times that in Tokyo, and representing 30 per cent. of the world's foreign exchange deals. It has more foreign banks than any other city in the world, including New York and Tokyo. It is the largest international insurance market, as my noble friend Lord Chelmsford pointed out, and its business continues to grow.
Perhaps I may turn to one point made by my noble friend Lord Gowrie. I do not believe that his fears that we may be losing markets to Luxembourg and Dublin are justified. The tax position of UK retail collective investment vehicles, which invest in the shares and securities of UK companies, compares very favourably with that of a UK equity fund established in either Dublin or Luxembourg. We actually changed the rules for authorising unit trusts in 1994 to provide the facility for them to pay distributions in the form of interest to overseas investors without the deduction of UK tax. That facility will also be available to open-ended investment companies. The noble Lord, Lord Eatwell, who has debated these matters with me, will recall that we decided to call them "OEICs", which is rather an unfortunate name. They will come on stream shortly and should provide a major plus to the marketing of such schemes. We have a huge success story here and we must not be fearful of trumpeting it both in this country and around the world.

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There is always a need to keep up with the game. Ten years ago Big Bang brought in tremendous changes, but the pace of change continues. The Stock Exchange continues to evolve. The City of tomorrow needs to develop institutions have to be one step ahead of the game. They have to be innovative in developing new products and new markets as well as responding to changes in existing ones. The noble Lord, Lord Ashburton, with his long experience, drew attention to the size of the change and, just as important, to the speed of change. Whether we are in or out of EMU—and I am not going to debate that tonight because I have many other opportunities to do so—I am confident that the City will respond positively and successfully. I am sure that the same will be true of the City's response to technological change in all its forms mentioned by my noble friends Lord Birdwood and Lord Limerick.
For their part, the Government have to ensure that tax and regulatory structures are effective and flexible and that they can adapt to rapid global change and to new products being developed while continuing to provide the right level of investor protection, prudential supervision and limitations on anti-competitive practice.
I now turn to regulation, which formed one of the main themes of almost every speech made by your Lordships. Regulation is about many things. It is about improving investor protection, promoting market efficiency and fair competition, so lowering the cost of raising finance for investment, and about encouraging high standards among practitioners, thus bolstering the reputation of the financial sector and promoting confidence among customers and clients.
The regime introduced by the Financial Services Act involved the least possible change from the previous regime. The chief regulators, the Bank and the SFA, deal largely with professionals who are familiar with the business in hand and, moreover, have access to specialist advice. That has made it possible to go for a relatively light regulatory touch, which a number of noble Lords, including my noble friend Lord Swaythling, with his considerable experience, highlighted as one of the important factors of success in the City.
I believe that the noble Lord, Lord Eatwell, had an interesting point when he suggested that there was a danger that the people who staffed the regulators would be second rate—I do not believe that he used those words, but I paraphrase them for the sake of speed. I know he will forgive me when he hears the rest of what I have to say—and the people who are really top class will go off to be high fliers and earn the kind of salaries that we read about and which I at least envy. He suggested that perhaps secondment of some of these high fliers would be a good idea. I shall certainly draw that to the attention of my right honourable friends in the Treasury who look at these matters. I am sure that other people and, hopefully, some of the companies involved employing such people might read what we say and contemplate the good sense of that arrangement.
My noble friend Lord Stewartby and the noble Lord, Lord Ezra, both suggested that there was a need to update the 1986 legislation and that we needed to keep
738
up to date. My noble friend Lord Stewartby also suggested that perhaps we should concentrate on principles in primary legislation and leave the details to secondary legislation. I know that that does not usually meet with the agreement of the noble Earl, Lord Russell, but I believe that in this case there is an argument because in that way the legislative framework can keep up with change in a very fast-changing world without the need to find time for primary legislation.
I believe that the noble Lord, Lord Currie of Marylebone, agreed with the need for that kind of approach. I also believe that he wanted to go a bit further in bringing together the various regulatory bodies. But he emphasised again the need for good, informed management. I am not entirely sure whether he was beginning to edge towards statutory regulation. The noble Lord, Lord Ashburton, posed some questions about statutory regulation which I found interesting. He asked whether it would work; whether it would be more costly and would it slow up business—that is a point which my noble friend Lord MacLaurin made—and, lastly, whether it would boost the legal profession. I do not know about the last point. Sometimes I believe that we are only here to do that by passing laws to keep the lawyers in business. We have to guard against that.
It is important that regulation is seen to work. As a number of your Lordships have said, we have not experienced more problems than other people. When we have experienced them we have put them right and we have not tried to hide them away. We have also learnt lessons from what has happened and that is very important. My noble friend Lord St. Davids made some points about the regulatory system. I know that he has a deep interest in that. I say to him that we have no plans to change it. The twin peaks approach which he mentioned, like other proposals for change, has some merit, but, like other proposals for radical change, it needs to be balanced against the disruption it would bring to industry, consumers and to the regulators.
The noble Lords, Lord Borrie and Lord Haskel, mentioned pension mis-selling. There is no disagreement between us on that. The damage that has been done has been caused not just to individuals, but also to the case for people taking out their own pension provision. That is a point that my noble friend Lord St. Davids underlined. I am pleased to see in the press that the PIA is pushing hard for these issues to be settled.
It was a little interesting that noble Lords did not mention the Maxwell pension scandal, although my noble friend Lord Limerick reminded us of his involvement as a Minister when, as he called it, the Maxwell-Pergamon Mark I business took place. I have always been very puzzled as to how, after that, the second affair was ever allowed to happen, but somebody may be able to explain it to me one day.
My noble friend Lord Cuckney deserves all our thanks for the success of the Maxwell pension unit. The pension Act should go a long way towards preventing abuse. I often wonder how Maxwell did it, because it was not just the pension funds but the governance of the companies as well. I believe that it was quite simple: he

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had politicians for his friends, newspapers for his mouthpiece and lawyers for his writs. I am happy to think that he cannot give me a writ now.
Despite these high profile cases, as the noble Lord, Lord Desai, mentioned, the City, if it is actually to do its business, cannot be entirely safe. Indeed, I believe that the noble Lord was actually echoing a point made by Allan Greenspan, the president of the Federal Reserve Board, who said,
"We should not forget that the basic economic function of these regulated entities [the banks] is to take risk. If we eliminate risk taking in order to reduce failure rates to zero, we will, by definition, have eliminated the purpose of the banking system".
A number of points were made about corporate governance. I thought that the most interesting one was by my noble friend Lord Lyell, who compared the Whips' Office in your Lordships' House with the back office of a City firm. Those who work there have to have an eye on everything and know about everything. To paraphrase, my noble friend may say that from his position now, but I do not believe that I could possibly comment from the Front Bench.
Undoubtedly, the responsibility for managing companies is firmly on the shoulders of the managers of those companies—that is a self-evident statement—the board of directors, the chairman, the non-executive directors and the like. Their responsibilities are underpinned by legislation through the Banking Act 1987 and the Companies Act 1985, which respectively define the duties of directors of banks specifically and directors of companies generally. That reflects the seriousness with which all governments of all parties have taken these matters.
The essence of corporate governance is to make sure that companies are managed and run in a way that meets the objectives of their owners and of the Acts. My noble friend Lord Chelmsford read out some interesting extracts and my noble friend Lord Rockley underlined the importance of structures, controls and management—all of which are most important. My noble friend Lord Swayfhling, from his great experience, welcomed the reports of both Cadbury and Greenbury, who looked carefully into such matters. We are now consulting on amendments to the Companies Acts to bring the disclosure requirements into line with Greenbury's recommendations to provide a measure of statutory underpinning and to avoid the unnecessary overlapping of requirements. We very much welcome the announcement of the new committee on corporate governance, chaired by Sir Ronald Hampel.
Good systems of corporate governance are crucial. My noble friend Lord MacLaurin spoke about how he encouraged his directors to be non-executive directors of other companies. That is most important. My noble friend Lord Gowrie explained how he had persuaded companies of which he was a non-executive director to pay for an outsider to give him reports about the financial information with which he had to deal. As always, my noble friend Lord Selsdon cautioned us against expecting too much from non-executive directors and from other professionals.
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The motto of the London Stock Exchange is, "My word is my bond". That old motto is as valid for the City as a whole as for the London Stock Exchange. It signals the confidence with which people from around the world can come and do profitable business in the City. They have done so for hundreds of years. I am sure they will continue to do so for hundreds more. Technological advances will only add to that business. But underlying it all will be the people who work in the City, whose skills, commitments and talents are the envy of the world. They make a significant contribution to the prosperity of this country.
Given the enormous volumes of business being transacted, there is bound to be some dealing which is not done to the highest standards of integrity. Where problems arise, the causes are rigorously examined and steps are taken to ensure that they cannot and do not arise again. But, as many noble Lords have pointed out, the City knows that its reputation, and therefore its future, rests on high standards of knowledge, professionalism and competence. The City itself therefore has a strong internal interest in reacting positively to these problems. Each firm will say to itself, "Could that happen here, and how can I ensure it does not?"
We are all grateful to my noble friend Lord Gowrie for introducing a debate on this important asset to our country. We in the Government are committed to encouraging the City by freeing up enterprise at home and overseas to ensure that the City remains in the big league by being attractive to international business; that it continues to make its contribution to national and European prosperity—for the City is a European asset—and that it remains the safest and soundest of market places in which to do business.
6.32 p.m.
The Earl of Gowrie: My Lords, I sought a thoughtful and ecumenical debate—I must say to the noble Viscount, Lord Chandos, that although I did indeed give a bouquet to the late Lord Wilson, I positively showered them on my noble friend Lady Thatcher—which in the build-up to an inevitably charged political atmosphere did not risk the health of what my noble friend Lord Birdwood called "the golden geese".
I sought the maintenance of an open and liberal system of regulation with legislative underpinning but principally self-governing.
Lastly, I sought for indications that no one should take the success of our financial industries, and all the benefits that that brings, for granted. My only quarrel with the otherwise admirable speech of the noble Lord, Lord Desai, is that the City is not our only industry with international dominance. We have another—it is called "the arts". We should cherish that as well.
I was reassured on all those important questions by nearly all the remarks made by those who took part. I thank them and beg leave to withdraw my Motion for Papers.
Motion for Papers, by leave, withdrawn.

Industrial Action
6.34 p.m.
Lord Campbell of Alloway Lord Campbell of Alloway rose to call attention to the effect on the community of any excessive or disproportionate industrial action taken by trade unions without the consent of the majority of members entitled to vote; and to move for Papers.
The noble Lord said: My Lords, the purpose of this debate on this Motion, which I beg to move, is as stated on the Order Paper. But the debate may also afford general discussion on other aspects of the proposals of my right honourable friend the President of the Board of Trade in the Green Paper Industrial Action and the Trade Unions —perhaps the last step in the step-by-step approach of my noble friend Lady Thatcher, whom we are so delighted to have with us today.
The doors as to representation on these proposals are not due to close until 28th February, so perhaps contributions from distinguished speakers from all sides of your Lordships' House may serve some constructive end. There will inevitably be dissention; there will evidently be argument. But I seek some practical, constructive end.
The views of the noble Lord, Lord Paul, a mega-industrialist, and of the noble Baroness, Lady Symons of Vernham Dean, an erstwhile doyenne of the First Division Association, who have not been so long with us, are indeed very welcome and are awaited with particular interest. A debt of gratitude is tendered to all noble Lords who are to speak in this debate as without an exchange of informed information and opinion, there is no debate.
The Motion calls attention to the freedom under the law of a trade union official, without the consent of the majority of the rank and file membership entitled to vote, to initiate strike action on seven days' notice, to maintain strike action without any requirement as to reballoting—strike action (and I use these words advisedly) known and intended to inflict wholly excessive disproportionate expense, hardship and inconvenience on the community.
Let us not mince matters. This is a matter of consequence to the electorate. It is a matter on which there is no prospect whatever of political convergence, save as between the parties opposite. The importance of debate is wholly evident, for the industrial action of scale of this order poses an untoward danger to our competitive economy, in particular to inward investment, and to the City of London—and this is where this debate dovetails with the first debate; I heard my noble friend on the Front Bench say the remarkable success story, and so indeed it is—but not only that, to our balance of trade in goods and services and to the integrity of our currency in the markets.
Exploitation by the Royal Mail and the London Underground unions in August 1996 of this gap in the step-by-step approach has afforded a most unwelcome, unacceptable precedent—a gap (and I say this because I know) which was advisedly left open in the hope that no further step would have to be taken—and a hope which was justified until August 1996, but no longer.
The London Underground strike was called on seven days' notice—albeit with the support of 50 per cent. of the membership entitled to vote—but there was no provision for reballoting. In the result, on each day of each strike about 2 million travellers suffered disruption in their everyday life, and substantial damage was caused to the economy, estimated by some in the City as of the order of £50 million a day—at the behest of 1,500 train drivers.
This is a situation which no government ought to accept. I know my noble friend Lady Thatcher well enough to say that she would not accept it, and I know that my right honourable friend the Prime Minister will not accept it, and he is committed to seek to ensure that the community is not held at random hostage.
The purpose of these proposals of the President of the Board of Trade is to maintain and increase favourable trade. Assuredly, it is not to slight the trade unions, the trade union movement or any of the many responsible activities of trade unions. However, as membership and recognition of trade unions is dominant in the public sector, some settled framework—for which beer and sandwiches or whatever at No. 10 affords no substitute—is needed to discourage disproportionate industrial action.
There are rumours that the parties opposite favour the reintroduction of self-regulation, voluntary conciliation and arbitration. But is it realistic to suppose for one moment that any such regime could be any more effective than the facilities that already exist, or indeed that the trade unions would ever accept a system of compulsory arbitration?
As to the economy, the Thatcher administration—I think I can say it in the presence of my noble friend Lady Thatcher—was the first to recognise that the economy was—and I heard this expression used in the other debate—the goose which laid the golden eggs. In 1979, with 30 million working days lost through industrial action, double the days lost on the OECD average—about 10 per cent. in the public sector—no eggs could even hatch.
Those were the old days, the tough days, and we now are indebted to the legacy left to us by that administration. We were then the sick man of Europe. Our economic viability was only such as was accorded by the IMF; hence the step-by-step approach as implemented for the past 17 years under this Conservative administration. Today the state of our thriving economy is the envy of Europe. From 1992 to 1995 the working days lost through industrial action, on average, were less than half a million a year. But in August 1996 more working days were lost than in the whole of 1994 or 1995—in the main due to the series of strikes on the Royal Mail and London Underground.
Notwithstanding the article in The Times on 2nd January with the heading "List of candidates cuts links with unions", as the noble Lord, Lord Callaghan, affirms, that link must be maintained. This symbiotic relationship between the trade unions and the Labour Party shall inevitably hobble Labour, whether in or out of office, in taking any relevant initiative in this context. Why so? By force of circumstance. It is a no-go area

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for Labour because, by tradition, it is a no-go area for the trade unions. In this respect the trade unions are neither able nor willing to put their own house in order.
It is much to be doubted whether Mr. Blair, if in office, could ever be in a better position than that of Lord Wilson or the noble Lord, Lord Callaghan, as regards taking any effective action. Indeed, the brave initiative of the noble Baroness, Lady Castle of Blackburn— In Place of Strife —as we know from the copious references in Volume 3 of the Crossman Diaries, split the Wilson cabinet right down the middle. It never took root.
The Callaghan administration, which was unjustly—I stress that—deprived of trade union support, died a dingy death at the behest of militants in that winter of discontent with the three day working week. The economy—Tony Crosland's solution to the dilemma of democratic socialism—was in ruins.
As to the present policies of the Labour Party, such it would appear, could only widen the gap to which this Motion calls attention. It is understood that it is proposed to enforce statutory recognition, to enlarge legal immunity, to enable industrial action to ensue without fear of dismissal, although in breach of contract of employment, by affording such entitlement as from day one to all employees, whether full-time or part-time. The proposed automatic deduction for trade union dues from wages affords anxiety as to victimisation and as to intimidation. I gave evidence before the Donovan Commission and paragraph 924—I looked it up the other day—adverts to the very considerable benefit to the political funds of trade unions and concludes that this is a political question, not a question of industrial relations.
The Conservative Party proposes a relevant and constructive resolution that the majority of those entitled to vote must be obtained on a pre-strike ballot; that 14 days' notice must be given to enable business customers and the public to make preparations and alternative arrangements if statutory immunity is to be conferred, and that there should be some requirement as to the reballoting for the continuance of industrial action. It is also proposed to remove immunity from industrial action where there is a manifest disproportion between the purpose of the strike and the consequences to the community as inflicting serious damage on the economy or subjecting everyday life and business activities to significant disruption.
I accept that the drafting of such provision to reflect the concepts of paragraphs 2.4 to 2.8 of the Green Paper and establish a new framework based on legal criteria will require meticulous attention.
In conclusion, my Lords, surely it is now wholly apparent, almost irrespective of party, that some effective initiative must be taken by any government to discourage strikes, the cost and inconvenience of which the community is no longer able or willing to tolerate. This package of Green Paper proposals may also commend itself to your Lordships to safeguard the economy, the wealth of a nation which can ill-afford disproportionate industrial action or a kingdom disunited. I beg to move for Papers.
6.49 p.m.
Lord Paul: My Lords, sadly, during the 1960s and 1970s we had a history of industrial disputes in this country which created a "them and us" attitude. This was an important factor leading to our poor competitiveness.
When she became Prime Minister, a distinguished Member of your Lordships' House—I am delighted that she is in the Chamber—decided that something had to be done if British industry was to regain its competitive edge. Contrary to popular belief, at first she encouraged unions and management to work together. But after a few years this even-handedness was disregarded.
Managements were pampered and labour unions reviled. The result was that labour was squeezed and management awarded themselves higher rewards. Predictably, this produced a return to the "them and us" society, worse industrial performance and a more severe recession than that suffered elsewhere.
In my opinion, good relationships between management and employees cannot be created by legislation. New legislation will create new problems and so, although I congratulate the noble Lord, Lord Campbell of Alloway, on introducing this Motion, I do not welcome it. An attack on the right to strike is a charter for the bad employer. I know, because I come from a family business and we believe that we must all work together for the betterment of British industry and British society.
Industry today operates in an environment of intense competition. Trade unionists know that employer and employee are both subject to this pressure. Employees also need to know the aims and rules of a business in order fully to identify with it. Motivation and action require clarity of purpose. That is what managers are struggling to achieve and if it is absent there is no point in penalising the employees.
We should be looking at how to get rid of the need to strike, not the right to strike. That can be done only by building relationships at work based on partnership and trust. People expect to be treated fairly and to have a say over matters that concern them at work. Good management is about fostering co-operation, not confrontation. Lawyers have no role here. That is why most disputes are settled by negotiation. If there is a feeling of fairness and unity of purpose with the company, everybody wants to work. Therefore, in practice, the circumstances of the Motion would hardly arise. In an establishment where there is a dispute, no union would embark on industrial action if fewer than half its members had not participated in a ballot.
When Ian Lang introduced his Green Paper on industrial relations in another place on 19th November 1996, he introduced the concept that abstention would count as a "No" vote. Obviously, the noble Lord, Lord Campbell of Alloway, agrees with this. In exactly the same way, it is equally impractical to assume that a trade unionist will consider an abstention as a "Yes" vote.

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In any industrial relations, the way to deal with disputes is not to try to brow beat people into a docile state of mind. It is to identify a community of interest. This is why the key words in modern industrial relations are "empowerment", "involvement" and "commitment".
For our businesses to be more competitive in today's commercial world, employees have to understand what is going on in a company, so that they can become involved in its progress and use their own initiative to encourage and achieve this. Staff have to be empowered because companies can no longer afford detailed supervision. People have to be trusted to get on with their work. They need to become better skilled and educated to handle new technology and deal more intelligently with problems and decisions as they arise. This is what is required to compete in business today, and it can be achieved only in an atmosphere of perceived fairness.
The Government's Green Paper contributes little towards achieving this. The Green Paper seems to be designed to feed the prejudices of noble Lords opposite about industrial relations, and thereby perhaps the Government seek to acquire some advantage in the forthcoming election. This only reflects the Government's incompetence at managing people, which they have demonstrated time and time again.
If there is a real problem, it could be in the regulated and sheltered service industries. But these do not reflect the British economy as a whole. Recent disputes in these organisations, such as the Post Office and London Underground, have had a lot to do with employees' frustration at lack of progress, lack of investment, and lack of perceived fairness in these organisations. Legislation will not solve these problems. Management, investment and competition will.
Lord Campbell of Alloway: My Lords, may I ask the noble Lord to give way? He has a minute left, could he possibly condescend to give us a hint of Labour Party policy?
Lord Paul: My Lords, it would be difficult to give Labour Party policy in one minute. The Labour Party wants to have good relations with business and industry.
It could well be that the unrest in these service monopolies is caused by a feeling of job insecurity. The way to deal with this is to tackle the insecurity and not the balloting rules for industrial action. These companies had a tradition of lifetime employment, but today employees have to make a difficult transition from a job in an industry where there was little change, to a new job in a new industry requiring higher and different skills and abilities. Nothing less than a re-employment system is required, because it is the individual who is at risk.
If the noble Lord wishes to protect the community from industrial action—however it is voted on—the law is a poor instrument. The real way to protect the community is to improve the quality of the staff working in the businesses which service it, and help people to improve themselves.
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This has been the message from industry for many years now. People can earn a satisfactory living, and get job satisfaction, if they have the encouragement and opportunity to improve their skills, knowledge and education to tackle the new challenges which are bound to come.
7 p.m.
Lord Rochester: My Lords, it is a pleasure to follow the noble Lord, Lord Paul, with his industrial experience. I believe that, like me, he is fond of cricket—but that, I suppose, is another story.
I am glad that the noble Lord, Lord Campbell of Alloway, has, by introducing today's debate, remedied an omission in our proceedings, for when on 19th November last the Secretary of State made his Statement in another place on the Government's Green Paper on industrial action it was not repeated in this House.
However, as the noble Lord knows, I am sorry that the Motion is worded as it is, for what the Government are now proposing is not to make it unlawful for trade unions to call for industrial action which has disproportionate or excessive effects unless it has the support of the majority of union members entitled to vote. They are proposing to make such action unlawful, irrespective of whether it has that support.
On a number of occasions since 1979 my noble friends and I have found ourselves in broad agreement with the Government's step-by-step approach to the reform of industrial relations law. Indeed, in at least one instance—namely, in seeking to extend the use by trade unions of secret ballots—we were ahead of the Government. In this case, however, I do not feel able to support the Government.
The noble and learned Lord, Lord Fraser of Carmyllie, will know that in the light of responses to the 1981 Green Paper on trade union immunities the Government decided that they should not then seek to restrict the right of workers in essential industries to strike. But now they are contemplating legislation which could have even wider effects.
As Liberal Democrats, my noble friends and I are naturally predisposed to safeguard the right of individuals in the last resort to withdraw their labour. But apart from the question of principle—and I do not forget that the community, too, is dependent for its protection on the law—as someone who has had first-hand experience of handling industrial relations in a large company, I am concerned about the practicality of what the Government now have in mind.
First, there are problems of definition; in particular, what is to constitute a strike which has, in the words of the Green Paper, "disproportionate or excessive effects".
The consultative document attempts to deal with that problem by listing a great range of factors that the courts would have to take into account. It is claimed that these legal criteria would allow a judgment to be made as to whether in a particular instance industrial action had, or was likely to have, unreasonable effect. But the

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Government cannot deny that such judgments might be difficult to reach. Indeed, the Green Paper concedes at paragraph 2.8 that in determining these matters:
"there would inevitably be some initial uncertainty, but this should reduce as case law builds up".
Judges have made it plain enough in the past that they do not relish getting embroiled in the minutiae of industrial disputes, and although, understandably, none of them is taking part in the debate, the initial reactions of industrial lawyers to the Green Paper suggests that the judiciary are unlikely to welcome participating in the Government's proposals.
However that may be, as I see it, the main danger in what the Government now have in mind receives only scant attention in the Green Paper. Paragraph 2.32 rightly argues against taking action to ban specific strikes in selected areas, thereby avoiding, as the document puts it,
"the problems of definition and targeting inherent in any general approach".
I wish to ask a question because, frankly, I am uncertain of the answer. If those groups had no assets, could the individuals comprising them be brought to court and their property seized? If so, one wonders whether the Government have taken sufficient account of the findings of the Donovan Commission in 1968 on unofficial action and of how, four years later, the Government's face was saved in the infamous case of the dockers who were rescued from imprisonment only by the intervention of the Official Solicitor.
I know it will be said that any worker who strikes can be sacked and could, in theory, be sued by his employer for breach of contract. But as the Government acknowledge in Section 2.25 of the Green Paper:
"In practice this never happens because even when the employer does not reinstate sacked employees it is not worth while to sue them".
Then it is proposed that the period of notice of strike action after a lawful ballot should be doubled from seven to 14 days; that such action should be legal only when a majority of those entitled to vote are in favour, rather than a majority of those voting, a point emphasised by the noble Lord, Lord Campbell; and that strikes, once started, should be subject to fresh ballots at intervals of two or three months. But these changes would tilt the balance even further than at present in favour of employers.
That point is referred to in paragraph 2.26 of the Green Paper, which discusses the case for partial removal of immunity to allow trade unions to be sued for damages caused by any industrial action which they induce. In dismissing such a step, the Government say:
"It would fundamentally shift the balance of power towards employers".
The trouble is that there are differing views as to where that point of balance should lie. A further proposal is to end the right of officials of recognised trade unions to take time off for union activities and to be given information for purposes of collective bargaining.
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In the past, I have argued, particularly in debate on what became the Employment Act 1982, that it is in the interest of employers to consult and provide employees or their representatives with adequate information on matters affecting them. I am sure that the noble Lord, Lord Campbell of Alloway, will recall the discussions that took place at that time and the sympathy he then expressed for the amendment that I put forward which formed the basis of what ultimately became Section 1 of the Act. This requires companies employing more than 150 people to include in their annual reports a statement describing the action taken during the financial year to develop arrangements aimed at involving employees in the company's performance in a number of specified ways.
I suggest it is significant that that section forms part of an act concerning industrial relations. I have given notice to the Minister that I should be grateful if, in replying to the debate, he would give a general indication—I realise it cannot be much more than that—of how during the past 15 years companies have responded to this statutory requirement.
The Green Paper does not appear to take any account of such a positive approach to the problem with which it is concerned. I simply do not understand why the proposals it contains are put forward now, except perhaps as a populist measure in contemplation of the forthcoming general election. It might be that they will do nothing to improve this country's industrial relations.
I can compliment the Government on one point: that their proposals appear in a Green Paper rather than in a White Paper and in the precipitate legislation which was threatened at the time of the last Conservative Party Conference. This at least permits the canvassing of alternative ways of dealing with what I acknowledge is a serious problem.
Perhaps I may give an example of one such alternative. In its initial reaction to the Green Paper, the Institute of Personnel and Development suggested that managers and unions should be encouraged to reach no-strike agreements and commit themselves to arbitration if no common ground could be found. This voluntary approach to arbitration receives some support in paragraph 2.30 of the Green Paper. In the view of the institute, only if a union were to reject such a framework or submit to it only to embark on industrial action in the face of an arbitrator's decision should remedies like those now proposed by the Government be brought into play. This, it was said, would put employers just as much as unions on the spot, for under the scrutiny of independent arbitrators they, too, would have to ensure the integrity of every decision made in their dealings with trade unions.
I do not say that that is necessarily the course which the Government should now follow. I quote it as only one example of how, in the view of managers having wide practical experience of industrial relations, the Government's proposals might at least be modified. In conclusion, I urge the Government to think long and hard before committing themselves to the action proposed in the Green Paper.
7.10 p.m.
Lord Harris of High Cross: My Lords, I wish to join in thanking the noble Lord, Lord Campbell of Alloway, for initiating this broad debate on the future of trade union law. However, at the outset I confess to a certain lack of zest in taking part. I thought hard about that. I believe that it is due to more than advancing years and general degeneration. In the first place, even in this House in the past all the debates that I can recall on trade union powers have generated a great deal of party political heat from which it is well known that we innocents on the Cross-Benches shrink in some horror. Either we have never been in the kitchen or we have retired here to recover from the burns.
I am afraid that it is even worse in my case because I must tell your Lordships that the noble Lord, Lord Wedderburn, and I are both old scholarship boys of Queens' College, Cambridge, where we arrived in 1945 from our respective grammar schools and spent the next two or three years in endless undergraduate debate. It is one of my great personal sadnesses that the intervening half century has not brought us much closer together except on the unmentionable issue of Europe.
Another reason for my lack of enthusiasm is that, much as I go along with Her Majesty's Government on the next steps on union reform outlined in Mr. Lang's Green Paper, I fear that the coming election is likely to deprive the Tories of the power to carry them into effect, although the noble Lord, Lord Paul, thinks that they would be politically popular and are really for the purpose of the forthcoming election. My old friend the noble Lord, Lord Wedderburn, may therefore have the last laugh, at least for the time being, until, perhaps, new Labour comes round to stealing this further remnant of Tory clothing. It is true that the winter of discontent is fading from public memory but I believe that the next postal or underground strike is likely to revive in acute form public support for removing the wrecking power from union militants invariably lurking in the woodwork.
However reluctant I was to join in the debate, I overcame my hesitation at the pressing invitation of the noble Lord, Lord Campbell of Alloway, with whom I share an ashtray in the corner of the Library, much, it is believed, to the disapproval of the noble Baroness, Lady Blackstone. The noble Lord was very persuasive, although I emphasise that no cash changed hands, not even a pipeful of our favourite Three Nuns tobacco. The noble Lord merely drew my attention to the Green Paper and suggested artlessly that I should read it. That did it. At once memories came flooding back of the early 1980s. Indeed, it was highly nostalgic. Soon after I came to this House in 1979 there was a succession of Bills to withdraw immunities from strikes; to enforce closed shops; to contest union demarcation; to engage in secondary action, and so on. Although those Bills were advanced in this House by the most amiable and emollient noble Earl, Lord Gowrie, who was here a few moments ago, they were bitterly opposed tooth and nail by old Labour. Indeed, the noble Lords, Lord Wedderburn, and Lord McCarthy, vied with each other in denouncing those measures as unjust, vindictive, unworkable and all that.
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And yet, so far from a future Labour Government promising to restore the full panoply of union immunities, I gather that Mr. Blair and his more moderate colleagues know that reversing the major Thatcher reforms in this and other respects would tear the mask from new Labour and render it again unelectable.
Therefore I find it difficult to know how seriously to take Labour's opposition to the Green Paper. After all, it was the noble Baroness, Lady Castle, some 30 years ago, who first discovered with great surprise, which she announced, that if unions are left with wrecking powers, even the most moderate union leaders will not always be able to prevent them being deployed by shop floor militants. I remember her great speech about power having passed to the shop floor. Why leave those dangerous weapons lying around as a temptation to the militants? Indeed, I believe that was the point of In Place of Strife, on which I shall not dwell to save the embarrassment of those on the Labour Benches.
My view is that strikes are always and everywhere a crude and iniquitous weapon. The power to inflict indiscriminate hardship, damage and danger on the community has no necessary correlation with the merits of any particular dispute. As we saw with the railway signalmen some time ago and the postmen and tube train drivers, the threat of disruption is invariably deployed to defend out-dated working rules and other Spanish practices.
The question is what can be done to protect the vulnerable public interest? A ballot may serve as a trip wire against wholly frivolous strikes. But I believe that the Government deserve backing for their proposal to require a majority of 50 per cent. of all members rather than 50 per cent. of those who take the trouble to vote. I also approve of the notion of periodic reballoting.
As a lifelong market economist, I rejoice that we now have a wider consensus on the link between unit labour costs and unemployment. As a result, again and again we see that where reason prevails, the risk of unemployment itself will check strike blackmail in the cause of preserving old-fashioned practices or demanding unearned wage increases.
But, where strikers supply essential services with strong local or national monopoly power, they may hope to pass the unemployment effects of higher costs on to other workers. In such circumstances a check on unjustified strikes would be in the long-run interests of the employees as well as the employers and the consumers.
Therefore, I welcome very warmly the Government's central proposal to withdraw legal immunities from what it calls "industrial action which has disproportionate or excessive effects". Perhaps I may say to the noble Lord, Lord Rochester, that the clinching argument in relation to the legal difficulties which he raised is dealt with, it seems to me, by the annexe to this Green Paper. There we discover that similar restraints or even outright prohibitions are implemented in other advanced countries to maintain public safety and to prevent disruption. A wide variety of measures are listed there, including compulsory arbitration, which the

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Government rightly reject, forbidding strikes in specific jobs and the conscription of strikers, which I thought rather spirited. In America there are compulsory fact-finding inquiries to set out the rival claims.
The final argument is that familiar case which this Government have made popular and understood and which the Opposition increasingly show glimmerings of understanding; namely, that we face an era of unprecedented change in products, processes, competition and global trade. We all understand that the accommodating adjustments in working arrangements are always unwelcome to mostly conservative workforces. Yet as the noble Lord, Lord Paul, said, lifetime employment is no longer available. Flexibility is indispensable for employment prospects and continued economic and social advance.
What these proposals boil down to for me is the removal of a major remaining obstacle to the necessary erosion of obsolete working practices. We all recall the bad old Fleet Street days of strikes and restrictive practices which gave well-paid, short-term security to printers only at the expense of long-run redundancy. The defeat of SOGAT and NATSOPA removed a major barrier to the redeployment of labour and capital, which the noble Lord, Lord Paul, wanted but for which he would not accept the conditions necessary to exploit new and exciting opportunities. Those opportunities will continue to beckon. They should not be obscured by the threat of union disruption in the service of preserving outdated working practices.
7.20 p.m.
Lord Carr of Hadley: My Lords, it is a long time since I last spoke on industrial relations either in Parliament or indeed outside. I am grateful to my noble friend for introducing today's debate. It has brought to life old memories, as indeed, more vividly still has the sight opposite me of two old opponents in argument. I refer to the noble Lords, Lord McCarthy and Lord Wedderburn of Charlton. Our arguments were sometimes fierce but, speaking for myself, I found them enjoyable.
The vividness of my memories has also been slightly stirred, because it so happens that last week marked no less than the 26th anniversary of having my home bombed by the "Angry Brigade" as part of the violent protest against the Industrial Relations Bill. I merely mention that fact because, after those 26 years, what I most remember about the aftermath of that incident is the fact that among the literally hundreds of letters, telephone calls and telegrams that I received expressing sympathy for me and my family about what had happened, a large proportion of them made clear that those sending such messages were members of the Labour Party and/or members of trade unions. They also made clear that they disliked the policies which I and my government were following but they stood up very strongly indeed against actions of that kind.
I suppose in difficult times that feeling helped keep alive within me, and even perhaps strengthened, a conviction which I have held for a very long time about the importance to society, and indeed to industry itself,
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of having strong, independent trade unions with large representative membership, provided—and I emphasise the word "provided"—that such unions are controlled in a genuinely democratic way and that both unions and employers operate within a good comprehensive framework of industrial relations law. The great contrast between then and now is that then the great debate was whether there should be a framework of law. It was not about what it should be; it was about whether or not there should be such a framework. That was the main point of contest. However, I am glad to say that the existence of a framework of law and the need for it are generally accepted. The argument is much more about the contents of that legal framework rather than about whether it should exist.
I believe that all of us can now see the benefits of having a framework of law. The law does work. I remember people saying both loudly and clearly in those days, "The law can't work; the law won't work"; and, in the early days of difficulty perhaps saying, "The law doesn't work". But—and it is a very big "but"—what has happened since then supports the belief that I have also always held; namely, that in the long run, while law does not turn bad men into good men, a good framework of law, or any framework, affects for good or for ill the way in which individual men and women and the organisations to which they belong do their business together, the way in which they exert their rights and the way in which they accept their obligations. I believe at last, thank goodness, that that general proposition is held. We are all seeing the benefits of it. Perhaps that basic principle is no longer a matter of deep political controversy within this country.
However, having said that, there are still gaps in the protection which society enjoys. It is not a matter of tilting the balance in favour of the employer or of the union; it is a matter of tilting the balance in favour of the consumer—in other words, the public, the ordinary citizens of this country. That is what we ought to be talking about. Employers and trade unions as such are unimportant in comparison with the interests of the public at large. They have their interests and the public must grant them, but it is the interests of the public which must be put first.
In this day and age when we look at what happened during the past year in only small sections of the employment field—notably perhaps as regards London Underground and the Post Office—the public at large have been subjected to more than a degree of inconvenience simply for the sake of potential advantages to employees, which are minimal compared to the disruption caused. I believe that the Government are right to come forward with further proposals. That is part of the step-by-step process which I believe has rightly been followed over the past 20 years. If I may say so, I very much approve of the spirit in which that has been done. I like the tone and, in general, I like the content of the Green Paper.
I welcome the tone of the Green Paper because the Government are putting forward for open discussion a whole range of proposals and seeking opinion upon them; they are not rushing into action beforehand. But, at the same time, they are making clear their own dislike

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of some of the more prescriptive and restrictive of the possible actions open to us. I believe that they are right to turn their faces, for example, against measures to ban strikes in certain areas of employment. They also appear to be against compulsory arbitration and against compulsory conciliation—and I emphasise "compulsory". They are also against Ministers making ad hoc judgments on particular strikes. I welcome that because I believe it is the right way in which we should try to take the next step forward. We should do so in a way which, with reasonableness on both sides, can be constructive for the good of everyone in industry as well as the public at large.
I wish to support in principle the broad proposals which the Government are putting forward for our discussion. I welcome the proposal to increase the period of notice. When the public are going to lose basic services—and, of course, this applies also to particular industries—they must be given longer notice than they have often received in the past. I also think that the Government are right to consider the need to qualify the conditions applying to strike ballots. I believe that they may have gone too far in suggesting that there should be a majority of all those entitled to vote. That is very difficult to achieve. This is not quite the same, but I believe I am right in saying that only one government in the whole of this century have taken office with a majority of the electorate behind them.
However, on the other hand, it is equally wrong and much more damaging to the whole country if only a small percentage of those entitled to vote—and a bare majority of a small percentage—can cause a strike to take place. I believe that the Government are proposing to move in the right direction, but I would prefer a prescribed percentage of 70 per cent. of those entitled to vote rather than 100 per cent. If we are not careful, we might bring ballots into disrepute, whereas I believe that they have been gaining in repute in recent years. That is the sort of issue that the Government wish to discuss. I certainly support the proposal in principle. When one thinks of how the public are made to suffer, we must accept the need to reballot in long-drawn-out strikes. How frequently is another matter, but I believe that the Government are right to go for a period every so often rather than leaving it to each occasion when an employer makes a different offer. Nevertheless, in principle, it is the right thing to do.
I also support the concept of applying the principle of disproportionate effect. This is done in a number of other countries. Not being a lawyer I find it difficult to judge how the courts would cope with this, and the practicality of it, but in principle the concept of trying to check action which is totally disproportionate in the damage it does to the community as a whole in relation to the issue at stake is something which we ought strongly to consider bringing into our law.
I warmly welcome this debate and I warmly welcome the direction in which the Government are proposing to move. I trust the Government will continue along the lines they have suggested—as I am sure they will—to put these matters forward for discussion and to listen to
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what is said before they decide the details of action. I hope they will not in any way resile from the need to act in a way broadly along the lines they propose.
7.30 p.m.
Lord Wedderburn of Charlton: My Lords, I join in welcoming the Motion of the noble Lord, Lord Campbell of Alloway, on the two items which it selects from the Government's Green Paper. On the whole, I shall confine my remarks to those two items which are stated on the Order Paper, rather than follow the will-o'-the-wisp of trawling through the Green Paper, or indeed following the historically bizarre musings of the noble Lord, Lord Harris of High Cross, whom I have known a long time. That is perhaps why, as he progressed through his speech, I said to myself, "Ah, yes, I know it well".
The items in the Green Paper deserve to be discussed in detail. That is another reason I shall confine myself to the matters mentioned on the Order Paper. We are reminded that the Government's step-by-step engine of legislation concerned with the liberty of combinations of work people has not stopped. I mention my next point advisedly because I care about it. No mention is made of the fact that the international organisation's distinguished committee of experts—namely, the International Labour Organisation—in each of its annual reports since 1989 has pronounced upon matters germane to the Green Paper when it has stated that our law has been brought below the standards of the convention on freedom of association. Some noble Lords may not care about that or they may get round that by saying, "It has not been presented to the governing body as a separate issue in a certain procedure". However, the ILO is clear in its statements both in its reports and in its freedom of association committee. This is a matter which should be looked at carefully.
The first of the two items would introduce the doctrine of proportionality into strike law generally. At the moment the doctrine of proportionality finds a place in remedies because if in an interlocutory injunction case, or an interim injunction case in Scotland, the employer or other plaintiff can demonstrate a serious case, the court has to decide what is the balance of convenience. I quote the words of Lord Justice Stuart-Smith in 1989 when he said that account must be taken of,
"the impact on innocent third parties and the economic wellbeing of the nation".
The Government use that concept in their Green Paper as a reason for extending proportionality as a test for substantive liability. However, the position is precisely the opposite. To extend proportionality into substantive liability would make for a test in our courts where either the employer would win every time—instead of often, as now—or where the tests are so uncertain as to be unworkable within the rule of law. One of the first propositions one puts to a student is that what constitutes part of the rule of law is the reasonable predictability of the norms involved.

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It is true that a similar test is applied in the German labour courts. That is extremely important. In my submission the Government are wrong in citing the labour law of the Netherlands and of Belgium and their rather different systems. However, in Germany the proportionality principle infuses the entire system of law, based on a wide institutionalised consensus. Professor Weiss of Frankfurt, an authority on labour law, has stated that the,
"proportionality principle…must be observed in the context of the law on dismissal and on industrial action".
Of course that must be the case, because it underlies the whole system. It underlies the institutions of obligatory works councils, of co-determination rights, of constitutional rights to strike and so on. One cannot simply cherry-pick a little bit from another system and bring it home. The noble Lord, Lord Carr, will remember that some of us disagreed with the efforts made in 1971 to import into Britain, as it were with scissors and paste, parts of the American Taft-Hartley law on national emergencies. Rather as in the case of a transplant, the system rejected what was put into it because it was not part—institutionally or in any other logical way—of the system as a whole.
If noble Lords want proportionality, they must have proportionality far beyond unfair dismissal or doctrines of that sort which protect workers. They must introduce it into all sorts of other areas of co-decision. Then we could discuss proportionality. But taking the word "proportionality" from the German as it were—which is what the Green Paper does—is not worth many marks. It is a rather low grade operation after all these years that we have discussed the matter.
The second item in the Motion is what I call the gross majority demand; that is, the demand for the approval of industrial action in strike ballots to come not from a majority of votes cast but from a majority of all the members entitled to vote in a dispute. I cannot understand how anyone can take that seriously. That provision would mean that the right to abstain would be abolished by law. If one abstains, one is considered to be voting no. All absentees, for whatever reason, are probably counted as voting "no", unless a special paragraph is included to cover the situation where people are ill. That provision appears in the same paragraph of the Green Paper which states that industrial action requires substantial support. If one assumes that all those who have not voted have voted no, one is further away from knowing whether the action has substantial support.
The gross majority principle is not a normal part of our law on associations, so why introduce it here? I believe there is a reason for that. The reason has nothing to do with good industrial relations. It cannot possibly have much to do with what has been called the community at large. I wish I had time to discuss that because the phrase "community at large" is probably more misused in debate than any other. Indeed, we have seen that this proposal has little or no support from management. The Government once introduced a gross majority provision in the Employment Act 1982. It was stated there that if a new union membership agreement received a certain percentage of support, it could be
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valid for certain purposes. The percentage was to be an 80 per cent. majority of those entitled to vote. There was little explanation at the time of that mysterious provision and it was repealed four years later. I suspect that the weak arguments in the Green Paper—of all the bits to pick, this is the weakest argument—may also be seen, quite properly, as proposals to weaken the position of organised work people, from whom, of course, it is always said all ills come: if there is an ill to the community, or to society, or to the Tube, it comes from those who have taken industrial action. I suspect the noble Lord, Lord Carr, would agree that behind every piece of industrial action there is a long history of stoking up the fires on both sides. We do not need the stoking up of fires, but more conciliation and rapid arbitration procedures.
A recent survey of some 559 strike ballots over six months, covering 273,000 workers in 24 unions, disclosed that 81 per cent. resulted in a positive vote for industrial action. Those are probably the best figures that we have at present. But in the positive ballot cases—that is those cases in which approval of industrial action was successful—63 per cent. saw no industrial action followed. One could mount an argument, although I do not, that in certain cases the ballot has a utility in the working out of sharp industrial relations differences. But I suggest to noble Lords that there is no simple answer as to the function of ballots at present. I suspect that there are hawks in the Government, certainly those who wrote the Green Paper, who do not and did not expect this situation to be the result of their complex and sometimes highly unfair legislation. Complex? A solicitor of my acquaintance has 93 points through which he takes his unions. It is remarkable that the unions get through with so few injunctions. The Government did not expect that. Unfair?—yes. It is unfair, for example, to have to give the employer the name, if need be, of those who take part in a dispute. I have never heard anyone defend that in any sensible discussion. It would be useful to have a Green Paper which considered again some of those points.
The party opposite should dust off from its shelves the works of its two great Ministers of Labour, Walter Monckton and Ian Macleod. They both well understood the need of the community at large in industrial relations law not for one-sided legal formulae but for new initiatives in conciliation and arbitration for the rapid settlement of disputes.
7.42 p.m.
The Viscount of Oxfuird: My Lords, I join with other noble Lords who have spoken in thanking my noble friend Lord Campbell of Alloway for giving us the opportunity to discuss this important matter.
In December 1953 I arrived at Southampton on the New Zealand shipping company's ship "Rangatiki". The following day I found my photograph in the local news section of The Times. The reason my photograph was in the local news section was that as we tied up in Southampton the dockers went on strike. The heading

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was "Southampton dockers strike. New Zealanders unload own ship". I have long believed that God looks after those who look after themselves.
Industrial relations is a subject which tends to raise strong emotions and it is therefore heartening that this afternoon this debate has largely avoided recourse to partisan points. A few political points may have been made. I shall try to do likewise but I do not promise to refrain from political points.
In reviewing the current status of industrial relations legislation in this country, I suggest that two words should be paramount. Those two words are balance and dignity. That is balance in the weight that we give to the rights of industry and the community over the rights of the individual; and dignity for the working man and woman.
It has become fashionable these days, and rightly so, to promote the philosophy of total quality management (TQM). I have spoken several times in your Lordships' House on this subject. One of the prime tenets of total quality management is the belief in continuous improvement. That is a belief that there is no institution or organisation which cannot do just a little bit better. It is in the spirit of achieving continuous improvement in our industrial relations legislation in this country that I ask your Lordships to view the Motion this afternoon. Continuous improvement is not an attack on the right to strike. I am sorry that the noble Lord, Lord Paul, is not in his place. I think that he would agree with me on the tenets of that philosophy.
From the time of Edward I to the end of the first quarter of the 19th century, there were more than 30 legal enactments all of which extended the common law to prohibit and prevent the combination of workers for industrial action. With the coming of the Industrial Revolution, and the far reaching industrial changes that took place in the 18th century, a new impetus was given to the establishment of embryo trade unions. This culminated in the 1799 Combination Acts, which rendered illegal the combination of workers for industrial action.
By 1824 the wisdom of such repressive action was beginning to be questioned and a Select Committee of the other place reported that,
"Those laws—had a tendency to produce mutual irritation and distrust between masters and workmen, to give a violent character to the combinations and to render them highly dangerous to the peace of the community".
Following this report, and the resultant Acts of 1824 and 1825, there followed a period of relative immunity for trade union activities until the Trade Union Acts of 1871 and 1876 and the Conspiracy and Protection of Property Act 1875, which made provision for the registration of trade unions and legalised peaceful picketing. Those Acts relieved the unions from certain penalties under the criminal law. The Trades Disputes Act 1906 did the reverse and established the legal immunity of trade unions before the common law. It was followed in the immediate pre-World War I period by a significant increase in industrial unrest.
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Perhaps your Lordships will forgive me for giving this brief history. My purpose is only to demonstrate that for more than 200 years we have been striving in our own way for continuous improvement in our industrial relations, or at the very least to achieve the right balance between the needs of the workforce and the wider needs of the community as a whole.
Moving on to the specifics of the Motion, it is important to recognise the dynamics behind the changes that have occurred in industrial relations legislation in this country over the past few decades. I well recall the 1970s, when I spent most of my time travelling the world exporting and promoting the sale of British manufactured engineering products. It is not too strong to say that we had become the laughing stock of the world. It was soul destroying to return to a customer seeking new business when the first thing one had to do was to explain why his last order had not been delivered due to a strike at the works or their suppliers, or by the coal miners or railway workers, or at the docks.
Thanks in part to the far-sighted industrial relations legislation of the 1980s, that position has now been transformed. The Green Paper published last year provides factual evidence not only that the number of working days lost through strikes in the United Kingdom has fallen dramatically since the 1970s, but that our record stands up well compared with other countries in the European Union or the OECD.
This sea change has not been obtained easily. It has been resisted at every step of the way by the trade union establishment. Perhaps that is understandable. They were, after all, defending a well-entrenched position. To quote the words of Ernest Bevin at the Trades Union Congress of 1927:
"The most conservative man in the world is the British Trade Unionist when you try to change him".
So we come right up to the present day and to the proposals which are up for consultation in the Green Paper, one of which is the subject of today's debate; namely to introduce legislation to raise the threshold required for a pre-strike ballot to confer immunity on a trade union only if industrial action is taken by a majority of those entitled to vote.
I am inclined to support such a change as a further step along the road towards continuous improvement of our industrial relations laws and the creation of a total quality environment here in the UK, although I do not for one moment claim that that would be anything more than just one piece in the jigsaw that we must complete if we are to achieve such a challenging total quality goal. It must be pursued in parallel with other equally important initiatives such as the Investors in People standard, the raising of the levels of numeracy and literacy of young people emerging from our educational establishments, continued low inflation, encouragement of inward investment, and many more.
The most important point is that such legislation would target that area where an analysis of the available facts indicates that action is necessary. The analysis in the Green Paper shows that in recent years around 70 per cent. of all working days lost through strikes are

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in industries where the employers come from the public sector, and often from industries that enjoy a monopoly or near monopoly in the service that they offer.
That highlights the need for balance. Is it right that a relatively small number of postal workers or underground train drivers should be able to inflict hardship on whole communities? I believe that they should certainly be allowed to do so only as a measure of last resort, and only when they are able to demonstrate a strong level of support for the action that is proposed from the majority of their membership. I submit that recent experiences have demonstrated that here we have an example of where the interests of the community as a whole override the sectional interests of a small group of trade unionists.
In conclusion, noble Lords may well think that the concepts of balance and dignity to which I referred in opening are fairly reflected in the relevant proposals in the Green Paper as being essential to the maintenance of a viable economy and as giving comfort to those who wish to invest in the United Kingdom.
7.53 p.m.
Lord Monkswell: My Lords, it is engendered in us to thank the initiator of such debates. However, the wording of this Motion is unfortunate. It shows the lack of understanding of trade unions and industrial relations on the part of the Conservative Party. I shall address these issues and try to redress the flaws in Conservative understanding of the real world.
Noble Lords may ask on what basis I can do that. I can only speak from personal experience. In my time I have been an ordinary trade union member, a shop steward and therefore trade union official, a manager in industry and also chairman of the board of a medium-sized enterprise. So I have seen the whole situation in industry and commerce from top to bottom.
First I point out that trade unions are not distinct and separate from their membership. They are comprised of their members. Without them they have no existence, and can do nothing without their support.
Perhaps I may say a little about industrial relations. One of the problems that we have in this country, partly as a result of the misconceived view that industrial disputes are caused by unions, is that the trade unions and working people generally are effectively excluded from playing a positive role in industrial discussion and decision-taking. They are forced almost, by virtue of their situation, to play a reactive role. In most cases trade unions react to decisions made by managements in which they have had no involvement.
A number of noble Lords referred to recent industrial problems in the postal system and on the London Underground, and suggested that they were all the fault of the workers and that workers should have some sort of penalty imposed upon them. But if we view the matter the other way round we may see that the public lost those valuable services as a result of bad management. We have heard no calls today
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for the managers who caused those disputes to be surcharged, to pay a penalty—a personal penalty, I suggest—for their actions.
I give just two examples, one that is second-hand, the other from first-hand experience. The second-hand example was recounted to me by a very good manager with whom I had the privilege of working. He had served his apprenticeship at the Ford Motor Company in Dagenham.
In the 1950s in the Ford company at Dagenham the foreman had the power to hire and fire. One of the problems that resulted was that if somebody's face did not fit he could be fired. To counteract that practice, the trade unions evolved a system whereby, if a foreman took unfair action against any of their members, the shop steward would get up on a bench and ring a bell, and everybody would walk out. There was no question of taking a ballot and counting the numbers. It was an instant reaction to an instant problem with which they were faced.
That problem was resolved by the introduction of procedure agreements and by taking that power away from foremen, who had often used it arbitrarily, and bumping it up the management tree, together with the institution of sensible forums for discussion, debate and the resolution of conflicts.
My other example is that of Massey-Ferguson, the company for which I used to work, in the 1970s. The company had introduced a new range of tractors. They started to come off the production line, got into the hands of customers and almost immediately started breaking down. There were flaws in the new design.
The company caused a strike on the shop floor by precipitately changing the procedures that were the well understood custom and practice for the introduction of new models. The management changed those procedures and created a strike which stopped the production line. The company did not want to produce the tractors because the design flaw needed to be sorted out. The strike hit the national headlines. There were references to "Bolshie workers", and all the rest of it. The strike was resolved by management as soon as it started to affect the engineering department. Obviously if it affected that department they would cease to be able to get the work done. The situation was created by management and yet workers were blamed for it.
Industrial disputes erupt as a result of unfairness. The British people are fair. They will not put up with unfairness. The noble Lord, Lord Carr, referred to an incident in his experience where there was an upsurge of resentment at his being treated unfairly, as it was perceived. It was a very vivid example.
Of course we need rules of behaviour, and they are very important, but they should be agreed by all concerned—negotiated, if you like. They should not be imposed. If they are imposed, they will not work.
Speakers on the other side of the Chamber have said that the climate has changed over the past 15 or so years. They attribute that to a large extent to the changes in industrial relations law. The noble Lord, Lord Harris of High Cross, cannot be anything but

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honest, and he let the cat out of the bag. He effectively said that the reason why there were fewer industrial disputes was because we had mass unemployment; it was used as a weapon against the workers.
Lord Harris of High Cross: My Lords—
Lord Monkswell: My Lords, I may have paraphrased the noble Lord in a way which he does not appreciate; but, put succinctly, that is effectively what he said.
The cost of working days lost due to strikes during the 1960s and 1970s was raised. Conservative politicians take great delight in highlighting the terrible figure for production lost. However, when we look at the number of days of production lost due to 1 million people being unemployed over and above those who were unemployed in the 1960s, 1970s, 1980s and halfway through the 1990s, we can see that the figures are completely different. That puts a very interesting perspective on the situation.
I said that fairness was important, and I think we all agree about that. One of the problems is that we are faced with yet another occasion when the Conservative Party seeks to change the rules. I think we all appreciate that they do not seek to change the rules in order to improve industrial relations; their talk of changing the rules is like a stick to beat the trade unions with, to put them into a corner and suggest that they are bad and need to be controlled. I believe that the British public are waking up to the realisation that they have been conned by the Conservative administration over the past 18 years and I am very hopeful that at the next general election they will mark their ballot papers as if to say: "We are not prepared to be conned any more. We demand fairness in our industrial relations, fairness between management and trade unions, between those who are in a position of power and the ordinary working people whose only way of combating that power is by working together to seek a society in which everyone can be fairly treated."
Lord Carr of Hadley: My Lords, before the noble Lord sits down, I wonder whether he would like to answer a question. In view of all he said about the wickedness of those on this side of the House, why was it that a Labour Government removed from the statute book a provision which I put onto it on behalf of the Heath Government to the effect that all companies above a certain size should have proper joint consultative machinery?
Lord Monksweli: My Lords, one of the difficulties that often arises within companies and industrial relations is that good things may be thrown out as a consequence of a greater bad. I have seen that situation enough times in my experience in industry to realise that good relations between individual managers and the workforce can unfortunately be soured by some bad managers and bad attitudes.
8.4 p.m.
Baroness Symons of Vernham Dean: My Lords, I too am grateful to the noble Lord, Lord Campbell of Alloway, for introducing this important debate.
Thirty years ago the playwright and novelist Michael Frayn wrote:
"Public opinion, so far as I can tell, unquestioningly concedes the right of men in a free society to withdraw their labour. It just draws the line at strikes."
It is a good point. Strikes are not the simple, union-engineered issue which the current Government have liked to characterise them as being. They are a complex and serious matter—both more complex and more serious than the Government's latest pre-election Green Paper on strike resolution suggests.
I address your Lordships as someone who before entering this House was for 20 years a trade union official. In that work, the overwhelming amount of my time was spent in resolving, not creating, conflict. Where they work best, trade unions act as a kind of hinge between employers and employees, facilitating their working well and completing their mutual purpose. That constructive, positive role of employees and employers working together in partnership is how we on this side of the House see trade unions: as contributors to the efficient—and, where applicable in the private sector, the profitable—working of business and organisations.
Let us be clear. We on this side of the House do not want to return to the industrial relations of the 1960s and 1970s. So much of the contributions of noble Lords on the other side of the House concentrated on aspects of those unhappy years. My right honourable friend the Leader of the Opposition said only yesterday that, if Labour forms the next government, it has no proposals for changing the bulk of employee relations legislation. That is right. Full membership, decision-making and participation by secret ballot in trade unions and at work has become part of the bedrock of good, stable industrial relations.
However, strikes do occur. In 1981 there was a Civil Service strike which lasted for five months. At that time I saw at first hand the human dimension of what happens when workers strike. I saw the effects of the strike, not on union militants but on ordinary men and women with families who felt that they had no alternative but to strike when their employer had simply torn up a pay agreement which had existed for over 20 years. Strikes are not easy affairs of first resort in employee relations; they are rather the last resort, often a desperate public demonstration of how badly wrong employee relations have become and how much they need to be improved.
Some of the Government's moves in this area have been sensible—balloting before strikes, for example, or for the election of trade union officials. I speak as one who was twice elected as a trade union general secretary under these laws. However, together with these entirely sensible reforms, we have seen other moves which have been either vindictive or irrelevant: repeat ballots on union check-off arrangements, for instance. In what other situation does an individual have to say every

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three years that he or she really did mean to join an association? Certainly members of political parties do not have to do that. Another move was the creation of the Commissioner for the Rights of Trade Union Members, a government agency so little used that the new commissioner is working his way into his job by asking a range of people and bodies, including the trade unions, if they have any idea what his job is actually supposed to be.
In their latest Green Paper the Government try to deal with the hoary old question of strikes in the so-called essential services. In doing so they have come up with one or two clever little ruses to deal with the serious problems surrounding legislation in this area. However, they are tricks which, even if put into effect, would have little, if any, practical consequence for the improvement of employee relations, organisational performance and overall competitiveness of Britain's economy today.
Since coming to power in 1979 the party opposite has looked with monotonous regularity at the "problem" of strikes in key services. The pattern is a familiar one. Ministers feel the need to do something about a strike and they light again upon the idea of industrial legislation.
I should like to deal with two major points in the Government's latest proposals. The first is the difficulty of defining what is meant by "an essential service" and "excessive or disproportionate" effects. The Green Paper states that it is action which carries risks to life, health or safety; threatens national security; does serious damage to property or the economy; or brings about significant disruption of everyday life or activities in the whole or part of the economy.
On that definition, it would seem that every strike would or could be so defined. But who are essential workers? Perhaps doctors and nurses in the NHS are essential workers but what about hospital porters, the people who work in hospital kitchens, the people who bring food into the hospitals? Instead of theorising, let us look at practical examples. There was a real strike in the Post Office last summer. In practice, that strike was nowhere near so damaging as it was claimed at the time and nowhere near so damaging as it has just been portrayed on the other side of the House. Only this week the chief executive of the Post Office, who had issued near apocalyptic warnings at the time of the strike about the future of postal business in Britain, admitted that the strike had had no effect on the Post Office's business volume, its finances or its profitability. So it is not only the difficulty of defining which strikes could be classed as falling under such legislation, but the difficulty of when the assessment takes place.
A second worrying point is the Government's proposal to raise the threshold required for an industrial action ballot to confer immunity on a trade union from the majority of those voting to a majority of those entitled to vote. Where else do we seek to impose such a test? Certainly not on a political party going into government for five years, which is not only able to influence but to legislate on health and safety, able to fashion the national economy and able to affect virtually every part of our lives in this country. When voting for
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the government of the day, we do not even demand an overall majority of those voting. In the 1992 election, the Conservative Party secured 42.3 per cent. of the vote, but fewer than one third of those eligible to vote voted for the Government. They obtained merely 32.6 per cent. of those eligible to vote.
But it is quite clear that the electoral timetable and the lack of a government majority in the other place mean that there is not only no realistic prospect of legislation going ahead before the election but that there is no prospect at all. So far from being a piece of government business, this document is in fact a piece of Conservative Party business. It is a run-out for an idea to be contained in the Conservative Party election manifesto.
It is not only we on this side of the House who find these proposals so implausible. Take the arguments of Britain's employers: the Confederation of British Industry, the British Chambers of Commerce, the Institute of Management, the Engineering Employers' Federation or the Institute of Personnel and Development. Even the most free market of the employers' groups, the Institute of Directors, is sceptical. Not a single major employers' organisation is in favour.
We on this side of the House take a rather different, more serious and more searching view on strikes than the prejudice dressed up as policies in this document. A new Labour Government would not be about trying to fight once again the long gone battles of the past. We will be about a real agenda facing Britain; about jobs, security, improvement and competitiveness. A new Labour Government would not be about trying to deal with the effects of industrial action, as the Green Paper does explicitly. It would be about dealing with its causes, through fostering new concepts of partnership at work, such as the recent job security agreement freely reached by the leading cement manufacturer, Blue Circle, in painstaking but ultimately rewarding negotiations with its trade union.
A new Labour Government would not go back to the old ways of the 1960s and 1970s. As my honourable friend the Shadow Chancellor rightly showed this week, there will be no yielding to inappropriate and unwarranted demands on public sector pay, however they are backed up. A Labour Government would be tough on strikes, but tough on the causes of strikes as well. More than the dried-up doggerel in this document, that approach will be a real help to our employers, our employees, our economy and our country.
8.15 p.m.
Lord McCarthy: My Lords, there have been nine speeches in this extremely wide-ranging debate. So far as I can see, five of those speeches opposed all and everything in the Green Paper and four speeches said that there was something to be said for the Green Paper. So, in a way, there is a majority but not a gross majority, because nobody has a gross majority. That is what the Government want to impose on the trade union movement.

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Even those who spoke in favour of the Government qualified what they said. If I understood him rightly, the noble Lord, Lord Harris of High Cross, said that it did not matter because they would not get a chance to put it into effect because they would not win the next election. He did not know why we were debating this matter at all. I am glad to say that the noble Lord, Lord Carr, came down in the end, against the gross majority rule. He thought it was as silly as I do. In exchange, let me tell him that I agree with him about joint consultation, which dropped through the net when it should not have done. The noble Viscount, Lord Oxfuird, took his time but came round in the end to saying that he thought there was something to be said for the Green Paper.
So I come to the speech of the noble Lord, Lord Campbell of Alloway. I was looking forward to the debate with him. I thought, as did my noble friends Lord Wedderburn and Lady Symons, that the noble Lord wanted to debate a particular aspect of the Green Paper; indeed, something wider than the Green Paper and more relevant: the problem of high turnout. That is a very real problem.
The first version of the noble Lord's Motion, which appeared on 19th December in the Minutes of Proceedings for 22nd January, wanted:
"To call attention to the effect on the community of industrial action taken by trade unions without the consent of the majority of members entitled to vote".
That is all. There was nothing whatever about this nonsense of "excessive or disproportionate industrial action". As I saw the issue, he wanted to debate the very real problem of high turnout. It has been shown to be a problem which derives basically from the abolition of the workplace-based vote.
There is a very distinguished study by Undy and company—I shall not read out all their names—called Managing the Unions. It shows that, with a postal vote, unless there are very good relations with the employer, so that the employer will assist in combating the distancing effect of the postal vote, there will be a lower turnout. It is a very real problem.
Unions, contrary to what many people in this House seem to think, desperately want the highest possible turnout. It tells them what members think and gives them some idea of how people will react. Of course, not to vote means something. Very often it means, "I'll leave it to the rest of you. I don't know what to say or what to think but I'll back what the majority say". That is a very simple and honest way of looking at things. But one would much rather that people thought about the issues and voted. So the trade union movement is very much interested in the problem of high turnout.
Unfortunately, the noble Lord, Lord Campbell of Alloway, muddied the waters. His second Motion on 16th January was:
"To call attention to the effect on the community of any excessive or disproportionate industrial action"—
that is put into his Motion before he goes back to his earlier wording:
"taken by trade unions without the consent of the majority of members entitled to vote".
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I do not understand that at all. I hope that he will clarify it when he comes to sum up the debate, if he has the time. There seem to be three possibilities: one, he is not bothered about the consequences of a strike so long as the majority say yes—which seems bizarre to me, but it is one interpretation of his Motion. Two, he is not bothered about how many say yes so long as it has no impact on the community—which is even more ridiculous. Three, some of the words got lost; or maybe the Government persuaded him to widen the Motion—but not particularly effectively. Therefore, I want to focus, first, on what I call the pre-Christmas Motion, because that is the one I like.
Lord Campbell of Alloway: My Lords, in case there is not time, no one has persuaded me to do anything.
Lord McCarthy: My Lords, I am not surprised about that either. It was spontaneous intellectual combustion.
I turn to the pre-Christmas Motion. It is important to all parties—the unions, the Government, the community and employers—that there should be high participation rates and high votes. I wish to make four brief points about the problem. First, despite the effects of the withdrawal of facilities, particularly in the public sector, where it is very, very bad, we support the introduction of postal balloting. And, if I may quote from the survey from which my noble friend Lord Wedderburn quoted, the number of votes is holding up well. In the sample taken, the turnout was 60 per cent. on average. It was even higher in recent public sector disputes. It is interesting that several public sector disputes have been quoted in this debate, for example, the London Underground dispute. I would argue that in that dispute the unions passed the new gross majority test. So turnout is holding up well.
Secondly, so is the pro-strike voting, as, again, my noble friend Lord Wedderburn pointed out. In 1995 the number voting pro-strike was 61 per cent. In 1996 it had moved upwards to 81 per cent. So, on the present evidence, we could in many cases even now meet the gross majority rule. Thirdly, as has also been said by my noble friend Lord Wedderburn, the fact that we have these ballots and have this turnout does not mean that the result is strikes. Indeed, in most cases, we do not have the strikes. For the most part, the ballot has become part of the negotiating ploy in industrial relations, and things are none the worse for that.
Finally, I want to give a concrete example of the current position in order to find out what the House thinks. I shall take a concrete example which is frequently talked about—the Royal Mail. In the Royal Mail dispute there were two ballots. There was a ballot in June 1996 and a ballot in October 1996. In the first ballot the turnout was 74 per cent. In the second ballot the turnout was 78 per cent. It was a good turnout on both occasions. In fact, the turnout rose on the second occasion. In the first ballot the affirmative vote was 68.1 per cent. In the second ballot it was 61.5 per cent. There was thus a marginal fall in the affirmative vote. As a result, whereas the first ballot would have passed the gross majority test because it would have represented 50.3 per cent. of the total voting roll, the

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second ballot fell away by less than 3 per cent. and as a result the majority was 47.4 per cent. So the second strike would have been unlawful.
Does anyone seriously suggest that an insignificant shift of that kind at that time in that dispute would have helped to produce a settlement? It would undoubtedly have led to unofficial action. The union would have been forced to repudiate the strikers and there would have been chaos in the Royal Mail. Everyone knows that. The management knows it, which is why you will not find management in the Royal Mail or the Post Office supporting the Green Paper. There would have been chaos because no one could have said in advance whether a strike would have been lawful or unlawful. If the ballot went the wrong way, those who voted—in favour of a strike by 70 or 75 per cent.—would have considered that they had been betrayed by their union. That is the kind of thing the Government are wanting to encourage.
At this point I wish to say a few words about the second proposal—proportionate non-excessive action. A good deal of this has been debated by my noble friend Lord Wedderburn. The point I wish to make is that we would not be trying to work out whether such a strike had a significant impact upon the economy or was causing serious damage to the economy; or whether part of the country had been affected in some way. Because the employer would be using the injunctive weapon, all the employer would have to show is that there was a "serious case to answer". It would be very difficult for a judge to say that there was not a serious case to answer. If one puts the injunctive remedy on top of what the Government are saying, it becomes much more serious and dangerous. Indeed, it is an attempt to put strikes out of court.
My final point is that if the Government were really making a case for measures of this kind, there would have to be something very funny happening to the strike statistics. The noble Lord, Lord Campbell of Alloway, was very proud of this Government's strike record and of the way the numbers of working days lost had fallen compared with most of our competitors, and of the way they had fallen more in Britain in recent years than in many other European countries. The Government are very proud of that too. Yet they come along with this Green Paper.
It is the first Green Paper I know which has a white cover and if you turn to the back you are told that if you want to get it you have to go to the accredited agents in the Yellow Pages. So it is a very strange paper; it is a sort of Brown Paper really. And if you read it you find that, by massaging the figures with a degree of subtlety, the Government have used August to September 1995-96 and compared that with the average of August to September 1992-95. When you see strike statistics starting in August of one year and ending in September of the next year you know you are being fiddled. On the whole, strikes statistics use calendar years. The Government have done it this way because it helps. There were three large strikes in the summer and 84 per cent. of the increase is caused by those strikes in those three months of the year. Unfortunately, however, after the Government produced the Brown Paper, the
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Employment Gazette of the Department for Education and Employment, published this month, showed that in October the figures fell away again, and now they are back to the average of the previous three years.
So it is all a statistical fiddle. It is all manipulation. It is all, as my noble friend Lady Symons said, aimed at the general election. We are surprised—mildly surprised—that the noble Lord, Lord Campbell of Alloway, has lent himself to that.
8.27 p.m.
The Minister of State, Department of Trade and Industry (Lord Fraser of Carmyllie): My Lords, I am grateful to the noble Lord, Lord Campbell of Alloway, for initiating this debate and to my noble friends and the noble Lord, Lord Harris, for welcoming the Green Paper which the President of the Board of Trade published some two months ago. Perhaps I may say to my noble friend Lord Carr that I have no doubt that my right honourable friend the President of the Board of Trade will be particularly reassured by what he had to say about the tone of the Green Paper.
Today's debate is timely. It provides a useful opportunity for the Government to hear the considered views of your Lordships. If though what my noble friend hoped he would achieve would be to flush out to what extent and with what conviction New Labour has accepted the industrial relations of this Government in the 1980s and to hear an acceptance of that from the Front Bench, he will have just heard that his hope was a vain one. But I suppose that for the noble Lord, Lord McCarthy, it would indeed have been an impossible pirouette to have asked him to perform. However, I certainly appreciated—
Lord McCarthy: My Lords, I can repeat what my noble friend Lady Symons said. However, it would be easier if I said that I agreed with it because the noble and learned Lord will then have been answered already.
Lord Fraser of Carmyllie: My Lords, I was certainly going to say that the noble Baroness seemed to me to earn Brownie points for the loyalty with which she repeated the words of the Leader of the Opposition. However, what I was saying was that in many respects what we appreciated more was the distant thunder of the old Wedderburn views.
I say to the noble Baroness, Lady Symons, that, with her experience, what she might have addressed more specifically was last summer and autumn when this country did indeed see a resurgence of industrial action on a scale that we have not experienced since the early 1990s. In the year up to November 1996 it is a fact that there were 1.3 million days lost. That is nearly four times more than the corresponding period in the previous year.
The most significant feature of this strike activity was its concentration in the public sector or in companies which were until recently part of the public sector. These sectors have accounted for a growing share of all days lost. In the 1970s, strikes in the public sector and

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the now privatised utilities usually represented less than 15 per cent. of all days lost. Last year they had risen to around 70 per cent.
In contrast, much of the private sector is now strike-free. Days lost through strikes in this part of the economy remain close to all-time lows. That is a major achievement. It shows how much has changed for the better in our industrial relations. We have also seen some improvements in the public sector's industrial relations, but there the pace of change has been relatively slow. There are many possible reasons for the slower progress in the public sector and in some utilities. One contributory factor is the lack of competition in these sectors. The Government are therefore pursuing their policies of privatisation and increased competition. Meanwhile, it is clear that industrial action in sectors with a monopoly or near-monopoly have the potential to cause substantial disruption or worse. My noble friend Lord Oxfuird asked some searching questions about the position within that area.
We all experienced some disruption last year. Londoners and visitors to the capital suffered when the Underground was closed down. Millions were inconvenienced by the actions of a few workers. Other parts of the country also suffered. For example, rail services were disrupted in Scotland; fire services were withdrawn in Derbyshire and Merseyside; and, of course, virtually everybody in the country must have been affected in some way by the strikes in the Royal Mail.
In formulating the proposals contained in the Green Paper, we were guided by four broad principles and objectives. First, we wanted to ensure that industrial action was taken as a genuine last resort only. Without going as far as the noble Lord, Lord Harris, in describing them as "crude and iniquitous", I would have hoped that on both sides of the Chamber there was a realisation and appreciation that strikes should indeed only be a genuine last resort. It is for that reason that our proposals on balloting, including raising the threshold, are designed to meet that objective.
Secondly, we wanted to ensure that the spill-over effects of industrial action on third parties, including the general public, were minimised. My noble friend Lord Carr identified with acuity exactly how that had been the shift of the focus in the approach that we wanted to take.
Thirdly, and subject to these considerations, we wanted to preserve the freedom of workers to take industrial action. Fourthly, we wanted to build on our previous achievements in extending the democratic rights of union members to control the activities of their unions.
When we drew up the Green Paper, it also made sense to take the opportunity to look again at other aspects of the law on trade unions and industrial relations. In general, we found that much of the existing law was working well. I welcome the approval by the noble Baroness, Lady Symons, that
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is now bestowed on the reforms that we introduced. However, we did identify a few areas where improvements could be made.
Of course, proposals for reform must be workable. We knew that there were difficulties in developing practicable proposals for reform in this complicated area. Previous attempts to formulate workable proposals had foundered on the apparently insuperable problem of defining the essential services in question. Our proposals therefore avoid the need to specify a list of sectors where strikes should be restricted, although in a number of other countries that is the route that has been followed.
Instead, we propose a different and, I would argue, a better targeted and accordingly a fairer approach. Other countries often outlaw any form of industrial action in sectors regarded as essential. I say to the noble Lord, Lord Wedderburn, that I agree with him that one cannot set about a cherry-picking approach to it. But if we were to adopt the German approach in its entirety I am sure that pre-eminently among your Lordships he would appreciate that large numbers of those who are described as the Beamten are deprived of any right to strike at all. That would include some of those who enjoy the right to strike in the United Kingdom.
Lord Wedderburn of Charlton: My Lords, as the Minister has gone off on the subject of the essential services generally, which I for one was unable to debate because the subject is not in the Motion, will he agree that in many of the countries which he obviously has in mind such as Italy and Spain and to some extent Germany—there are other examples in Western Europe too—it is the case that the law requires the employer and the unions to try to agree on what is an essential service or, in the case of Italy, an indispensable minimum service? Does he not have that in mind?
Lord Fraser of Carmyllie: My Lords, I appreciate that there is a wide variety of models that have been followed through seeking to define what are essential services. The approach that we have taken is that that route is too complicated. It is for that reason that we have spelt out the approach that we have taken in this Green Paper.
As the noble Lord appreciated, under our proposals even in a sensitive area a union can call industrial action provided it acts responsibly and organises that action in a way which avoids the risk of serious damage and disruption to third parties. In some countries that would simply not be permitted even if there were not the risk of serious damage or disruption.
Lord McCarthy: My Lords, this is the last time that I shall interrupt. I thought I heard the noble and learned Lord refer to the right to strike in this country.

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If there is a breach of contract one can be dismissed for doing that. There is no right to strike in this country.
Lord Fraser of Carmyllie: My Lords, if the noble Lord wants me to elaborate on that shorthand, I believe that he will appreciate exactly what I mean. For example, if at the present time one works within the Royal Mail and the right procedures are followed through, it is open to one to go on strike. If one happens to be in much the same position in Germany, that is not an opportunity which is open to the worker. That distinction is perfectly obvious to the noble Lord.
The centre part of this debate turns on the issue of the disproportionate or excessive effects. I say again to the noble Lord, Lord Wedderburn, that I am grateful for his acknowledgement that the concept of proportionality is understood in our law, certainly at the stage when one is looking to interim interdictus, as I would describe it, or an interim injunction.
The noble Lord, Lord Rochester, rightly made the point that judges are not much enamoured of becoming embroiled in the details of an industrial dispute. Perhaps I may refer him to paragraph 2.7 of the Green Paper where it is specifically acknowledged that that is an issue. It points out:
"However, the courts would not be required to judge the merits of a dispute. The notion of 'disproportionate or excessive effects' relates to whether the impact on those affected by the industrial action is reasonable, not to any relation between the purpose of the action and its effects".
So that point is readily enough understood in the Green Paper and I believe that we are in agreement on it.
We also spell out in that part of the Green Paper how we believe the legal criteria might be established and how the courts might interpret them. I am bound to say that I do not see, certainly at the stage of seeking an interdict or an injunction, that there would be anything like the difficulties that some have claimed would follow from it. I predict that, were such a change to be introduced, as is the case at the present time, the prospects of anyone following through to the time when damages might be sought would be very limited indeed. If the matter had been resolved at the time of injunction or interdict, I would anticipate that the narrowing of the immunity to exclude actions with disproportionate or excessive effect would mean that actions for damages would continue to be rare.
Another matter that has been raised is the threshold for a ballot majority. It is worth recalling that under the existing legislation those who have to participate in the ballot do not now have any great task to perform. After all, ballot papers are now sent to their homes with a reply-paid envelope. Members have every opportunity to vote. They do not even have to leave their own homes to achieve that level of participation.
The noble Lord, Lord Wedderburn, and others will be aware that there are other examples of thresholds higher than a simple majority in our company law. Perhaps I may take another example which I have no
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doubt will not appeal to the noble Lord. Nevertheless, he might like to look to the arrangements in the European Parliament where such a weighted majority is required. I accept that that example will not appeal to all Members of your Lordships' House. Indeed, I looked around to see whether my noble friend Lord Pearson was in his place before I dared to make it. My simple point is this: the idea that there has never been any circumstance in which such a majority has been required or is considered desirable is nonsense. It is absurd to describe it as somehow being anti-democratic when it is in fact part of the procedures of the European Parliament. However undesirable one may find that, it is absurd to caricature it as something that no civilised society would ever contemplate.
Lord Wedderburn of Charlton: My Lords, the noble and learned Lord is putting words into our mouths about civilised societies. He mentioned company law, but we are speaking not of a qualified majority of, say, three-quarters or two-thirds; we are speaking of a majority of the electorate or of what I would call the "gross majority". Where in company law can one find that?
Lord Fraser of Carmyllie: My Lords, if the noble Lord looks to what I said, he will see that I did not say that there was such a majority in company law; I said that there were examples of special majorities. I am sure that the noble Lord recognises that I deployed that phrase because it covers a range of circumstances and more than a simple majority of those voting.
Lord Monkswell: My Lords, I wonder about the prospect for government business if the same rules were to apply in this House and if the Government had to secure 600-odd votes to get their business through.
Lord Fraser of Carmyllie: My Lords, I have now made the point rather too clear. It would be a great help if the noble Lord could sometimes listen to just something that is said. As far as I am aware, it is no part of our arrangements that we shall allow for ballot papers and reply-paid envelopes to be delivered to the home of every Member of your Lordships' House. As the noble Lord has not understood that, I am given the opportunity to repeat in the simplest of words how easy it is for any member of a trade union to participate in a strike.
The noble Lord, Lord Rochester, caused my jaw to drop by indicating that he had given me notice of a question. I am afraid that I have not received that notice, but I hope that I can answer his question now. The statutory requirement for company reports to contain a statement describing the actions taken within the financial year to promote various forms of employee involvement has, frankly, generally added little to our knowledge in this area. That is a pity because other evidence shows that British companies have a multitude and a growing number of ways of involving employees. The wealth and diversity of voluntary employee involvement reinforces the

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Government's view that rigid legislation, such as the works council directive, would be disruptive and damaging if ever applied in the United Kingdom.
Despite what the noble Lord, Lord McCarthy, said about the colour of the cover of the document, I emphasise that it is, indeed, a Green Paper. This is a complex area and we have benefited from listening to the expert and informed opinion of noble Lords. The consultation period on the Green Paper lasts until the end of next month. Once all the responses are in, the Government will consider how to proceed. The President of the Board of Trade has already made it clear that legislative proposals are unlikely to be forthcoming before the election. Anyone with any understanding of parliamentary procedures will recognise the impossibility of achieving such legislation within that period. However, I urge all those who have views to respond to the document.
The noble Baroness, Lady Symons, referred to a number of organisations and their views. I must advise her that at present, not unexpectedly, we have not yet received any significant range of views in the department. However, I anticipate that such views will be received before 28th February.
I rather suspect that we shall see a repeat of what has happened at almost every stage of our gradual approach to the reform of industrial relations. As each step has been taken and after each step has been taken, it has grudgingly been agreed that that step was the right one to take. Once again, it seems that in this debate we have heard the same "A bridge too far" speech which we hear repeatedly from noble Lords on the Opposition Benches.
We believe that there is a strong case for limited and targeted action in this area. Last year's disputes demonstrated all too clearly how intemperate industrial action can disrupt normal activity. Our Green Paper puts forward limited, fair and workable proposals to address the problem. The proposals provide the necessary protections for business and the general public while—and I emphasise this—preserving the essential freedoms of workers to exercise democratic control over their unions.
8.46 p.m.
Lord Campbell of Alloway: My Lords, my noble and learned friend has taken a remarkable line which has covered the whole of the argument that I would have wished to address in reply, so all that I wish to do is to thank all noble Lords for having spoken. They have not spoken in vain because it has been demonstrated beyond all peradventure that neither the Labour Party nor the Liberal Party has any policy whatever to deal with this situation. The noble Baroness, Lady Symons, said, "I have had a word with Mr. Blair. He is going to be tough on strikes". That is no good. How does Mr. Blair propose to deal with a situation analogous to that of London Underground or the Royal Mail? That is what we want to know. That is why I put down this debate—to try to find out whether the parties opposite have any policies at all. They have not.
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I am obliged to all who have spoken. This has served one purpose that I sought, but I am a little disappointed. I beg leave to withdraw my Motion for Papers.
Motion for Papers, by leave, withdrawn.

Cuba
8.48 p.m.
Baroness Young Baroness Young rose to ask Her Majesty's Government what are their present relations with Cuba.
The noble Baroness said: My Lords, I tabled this Unstarred Question for two reasons. I did so first because I have taken a great interest in Cuba for some time now and I paid my third visit to that country last October. I believe that it is important that we should not neglect Cuba or any part of the Caribbean. I did so secondly because I believe that now that we know the results of the United States elections this is an appropriate time to look again at the effects of the Helms-Burton legislation. Perhaps I may add how very grateful I am to all those who are to participate in the debate.
Over the past four years Britain has established a wide range of new relationships with Cuba. During this time we have seen ministerial visits—two by my honourable friend Mr. Ian Taylor, the Parliamentary Under-Secretary of State at the DTI, and one by my honourable friend Mr. Tom Sackville from the Home Office. They were the first ministerial visits for 20 years.
What is valuable is that we are now able to discuss openly and frankly with all members of the Cuban Government—including, importantly, President Castro—issues ranging from trade and narcotics interdiction, to our concerns about civic rights and the development of a civil and more open society. We have also seen our relationship and dialogue with Cuba develop with a wide range of Cuban Ministers visiting the United Kingdom to discuss issues ranging from biotechnical, medical and other research in which Cuba is engaged to the problems of deepening trade and other exchanges. I wish to say at this point how fortunate I believe we are in our ambassador and his staff in Havana who have worked tirelessly and effectively to promote Britain's interests.
All this activity has been paralleled by a growth in British commercial activity in the spheres of both investment and trade. British companies are now involved in a wide range of investments and financing, from agriculture through to manufacturing. The Commonwealth Development Corporation, which is actively engaged in the creation of a number of joint ventures, will open an office in Havana before too long. This has been paralleled by an increase in trade, with companies being well represented at major exhibitions such as the Havana International Fair and Expo Caribe in Santiago de Cuba.
However, despite this mutual interest, what worries me at the present time is that we are now in danger of losing this early advantage to others in Europe and

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elsewhere. As your Lordships may know, I chair the Cuba Initiative. This consists of businessmen and women with officials from the DTI and the FCO and the noble Lord, Lord Kennet, whom I am glad to see in his place, and its purpose is to promote trade between Britain and Cuba. There is a similar committee in Havana chaired by Minister Cabrisas, the Minister for Foreign Trade.
The danger is that the good work I believe we have been able to achieve may come to nothing if we are not able to respond to Cuba's interest in involving our companies more closely in their economy. I speak here about the absence of ECGD cover and an apparent unwillingness to consider mechanisms which are acceptable elsewhere in other countries in the case of Cuba. I regret to say that the approach of ECGD is in stark contrast to that being taken by our European partners. That is why exports to Cuba from France exceeded 220 million dollars last year and those from Spain 380 million dollars in 1996. Holland totalled 120 million dollars, Italy 120 million dollars, and others in Europe were not far behind; Canada I believe exported 370 million dollars' worth. Indeed, if we in Britain were to be doing as well as France, Spain or Canada, Cuba would be one of our largest markets in Latin America and certainly the largest in the Caribbean.
It is therefore a sad fact that our exports at 40 million dollars come far behind. In saying this, I wish to make it clear that this is no criticism whatsoever of British companies, which have been working very hard indeed, but which have had this difficulty about ECGD cover.
Indeed, this startling recent progress on the part of our European Union partners has followed from a willingness to provide short-term credits on a revolving basis against guarantees of payment from the future earnings of commodities such as nickel and sugar. France and Spain appear to understand what we do not. That is that if Cuba is ever to be able to repay its commercial debt—a matter it has just begun to explore with certain other countries—it needs to upgrade and retool its productive sector, an approach facilitated by the provision of credits. There is therefore a double danger. Not only are we falling behind in our exports, but there is a real possibility that we will not get our debt repaid, either. Perhaps I may say while on this matter that it is something which I have raised directly with Ministers in the DTI. The position that ECGD is now taking will lead to the probable loss of a £20 million contract offered to a British supplier. If this is the case, I believe it to be a tragedy in which there are no winners whatever in this country. I find it difficult, if not impossible, to understand.
There is now a strong case for high level representatives of ECGD to visit Cuba to reassess their position, for them to consider the approaches that are being taken by other European nations and, if necessary, to discuss with them how they manage to deal with what are very similar problems to those which we experience ourselves. I hope also that the DTI will send a senior official at the earliest possible opportunity to learn about the unique trade opportunity that we are missing. I should be most grateful to my noble and learned friend if he will comment on these two particular points.
They are of the utmost importance, and I know that I am speaking, in saying this, on behalf of very many British companies today.
Turning now to the effect of the Helms-Burton legislation, in December last the EU agreed a common position on Cuba. That statement encouraged change in Cuba and makes it clear that member states would seek to effect change through engagement and dialogue rather than by the approach preferred, I am sorry to say, by the United States. Unhappily, the United States continues to seek some uncertain future for Cuba through a process of isolation, which I believe could only lead to social and political chaos that would eventually spill over into the rest of the Caribbean, were it to succeed.
Moreover, the United States—a country for which I have great admiration—has sought through the unacceptable extra-territorial Helms-Burton legislation a unilateral solution on us all in response to their differences with Cuba. Surely, this cannot be right in a world moving to multilateral solutions to problems. That is why the action brought by the EU in the World Trade Organisation has much wider implications and needs to succeed.
This month President Clinton again waived Title III of this extra-territorial law, thereby again postponing the ability of US citizens with pre-registered claims to allegedly expropriated assets to bring action against individuals or companies from third countries. However, the very fact that every six months international policy towards Cuba is held hostage in this way can hardly be acceptable in a world where we are trying to find long-term solutions to problems through consensus and debate. That is why the EU action at the World Trade Organisation against Helms-Burton is so important as it makes clear to our friends in the United States that they cannot assume the right to legislate for us on this or indeed on any other issue.
Much of the focus in the debate on Helms-Burton has been on Titles III and IV, which deny entry to named individuals into the US. However, I believe that we should also be concerned about Titles I and II, which seek to determine how a transition in Cuba should take place. While much of the content of this part of the legislation should be principally a matter of concern in the United States, surely it cannot be sensible that the US administration has allowed its hand to be tied in a matter as critical as determining how to respond to change in Cuba. Indeed, I believe it to be the case that if President Castro indicated that Cuba was preparing for multi-party elections, the legislation would not allow the US president to recognise this as a transition to democracy. Situations can change rapidly, as we saw in eastern Europe. Helms-Burton is, in my view, not helpful in any aspect to encourage a gradual change in Cuba in a manner that can be endorsed by all its people, which is something we all want to see.
On my last visit to Cuba I had the opportunity to meet with Dr. Lage, the vice-president of the Council of Ministers. Dr. Lage is by any standard an outstanding representative of all that is new in the Cuban Government's thinking. I believe that the time has come

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for Britain to facilitate a constructive dialogue with the new generation of Cuba's leaders, as have our friends in Canada and elsewhere in Europe. I therefore hope that it will be possible for Britain to recognise the value of inviting Dr. Lage to the UK either later this year or early in 1998 so that a broader range of individuals can fully understand Cuba's new thinking and the progress that is being made in restructuring the economy.
In some circles in North America it is suggested that the economic reform programme has ended. That is far from the truth. I believe that the Cuba Initiative knows this well from conversations with some intimately involved in that complex process. What is now under way is a far-reaching but low key process of consolidation of the first phase of the reform process. That involves the complete reform of the banking system, the full introduction of a tax system, the removal of subsidies, and the establishment of all enterprises on a fully commercial basis. That process which will affect the lives of every Cuban is of great complexity but is showing early signs of success, with the Cuban economy again moving forward with a growth last year of 7 per cent.
No one would deny that we have our differences with Cuba, but there are many other countries with significantly worse records with which we continue to trade and to deal. Our way is through engagement and dialogue. The time has come for Britain to move on to a deeper relationship from which our companies, our exporters and the Cuban people will all benefit.
9.1 p.m.
Baroness Hooper: My Lords, I thank my noble friend for once again bringing this issue before us and for giving us the opportunity to update our information on the current state of our relations with Cuba. Noble Lords may be aware of my interest in Latin America. In that region, Cuba is now the only country whose people do not enjoy the benefits of a pluralistic democracy and free and open government. Nevertheless, as my noble friend has enumerated, many changes have come about in recent years. In part, that is as a result of the break up of the Soviet Union. The move towards a market economy is very much to be welcomed. I support my noble friend in wishing to encourage Cuba to move further and faster in what we consider to be the right direction.
I, too, deplore the actions of the United States in seeking further to isolate Cuba and to penalise foreign countries doing business inside Cuba. If it is all right to trade with China, why not Cuba? I, too, will be interested to hear from my noble and learned friend the Minister the latest information on the status of the Helms-Burton legislation. As my noble friend said, the so-called temporary waiver brought in before the US elections has been extended for a further six months. It is important to remember that that waiver affects only the implementation of the policy; that is to say, the imposition of penalties and fines.
In the meantime, I understand that the US authorities continue to compile lists—black lists, perhaps we should call them—and on the latest figures I have those
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consist of some 318 foreign companies reportedly doing business with the Castro regime. They include 147 EU firms, 27 of which are British and include household names such as Fisons, Tate & Lyle, and Glaxo Wellcome. I was talking only this morning in the City to a leading stockbroker who deplored the fact that no member of his firm can go to Cuba at present because of the extent of its business in the US which would be imperilled by that legislation. At the very least, other companies have slowed down or delayed investment there. That must be a tragedy for all those in Cuba who are trying to push change further.
I am pleased that in addition to the unilateral protest from the UK, we have joined our EU partners in protesting, as my noble friend said. In demanding that the WTO declares the Helms-Burton legislation illegal, and contrary to the general principles of international law and the sovereignty of independent states, we are bringing to bear the most important forces. I shall be interested to hear from my noble and learned friend the Minister about the progress of the WTO intervention.
However, I regret hearing from my noble friend that the ECGD does not sufficiently support the trade effort of British companies which are keen to do business in Cuba. In that respect, I hope that the Treasury has not been deterred by the attitude of the United States. I know from my experience of the DTI that considerable support is given to businessmen and that subventions are available for trade missions to other countries in Latin America. A major conference, supported by the joint initiative of the DTI and the Foreign Office, will take place in early February. It will be attended by the presidents of Brazil and Peru and other leading figures from Latin America. It is intended especially to encourage the trade effort between this country and the various Latin American countries. I understand that Cuban representatives will also be attending that conference.
On another front, I am however glad that a second Minister to visit Cuba in 25 years is my honourable friend Tom Sackville, to whom my noble friend referred. He went there last month and was able to sign a Customs and Excise co-operation pact with Cuba as part of an offensive to close down drug smuggling routes through the Caribbean to Britain. I understand that two Scotland Yard officers are due shortly to go to Cuba as part of that effort. That policy affects the UK itself with regard to the five Caribbean dependent territories. I understand that the Foreign Office plans to take on new powers to crack down on money laundering in those territories as part of a joint effort.
Recently there has been even more encouraging information that Cuba is also co-operating—believe it or not!—with the United States on that front, and last month handed over to the US authorities six tonnes of cocaine seized from a Colombian freighter. Those are all welcome signs of progress and openness in Cuba and our relations with Cuba. I hope to hear more from other speakers and from my noble and learned friend the Minister.
9.8 p.m.
Viscount Waverley: My Lords, I am at one with the common desire to bring democracy, freedom and human rights to Cuba. That said, I am totally opposed to the principle of extra-territorial legislation, whatever its source.
I consider myself a friend of the United States and am sensitive to our close bilateral relationship. However, I would like to express certain concerns. Although I recognise that certain provisions of the Helms-Burton Act have been suspended, it is of continuing concern to me that the United States is not a team player.
Policy towards Cuba is only but one example. Development policy both near and far, decertification action against a number of regional states, a disagreeable protectionist attitude and holding out on UN arrears with a "What is in it for us?" approach is being neither statesmanlike nor appropriate as the sole superpower.
The United States could offer a great deal to our global village but is doing little more than being a recalcitrant big brother. It will not have escaped attention that even Canada's Foreign Minister, representing Cuba's leading trade and investment partner, began a state visit to Havana yesterday. It seems to me that Canada, as a co-partner in NAFTA, has proceeded with this visit in spectacular defiance of United States policy.
My fervent hope is that the forthright Secretary of State designate is able to knock some sense, worthy of her reputation, into the foreign policy of the United States and into Senator Helms.
9.11 p.m.
Viscount Montgomery of Alamein: My Lords, the noble Viscount, Lord Waverley, will be pleased to hear that I agree with every word he said. He is totally on the right lines, for once, which is very encouraging.
Noble Lords: Hear, hear!
Viscount Montgomery of Alamein: My Lords, I, too, am indebted to my noble friend Lady Young for introducing the debate. She has done sterling work in the past few years in promoting our trade with Cuba. Her chairmanship of Caritag and the Cuba Initiative is well known and is greatly to be commended. I was in Cuba in August. I went to many meetings which concluded in discussion of what my noble friend was to do and how much they were looking forward to her visit. I felt a little like John the Baptist in the context of preparing the way for someone much greater than myself. Long may that continue and I hope that my noble friend will continue with her work.
I first went to Cuba in 1960 as a senior executive of Shell in order to participate in the reorganisation of that company's affairs in Cuba. I had been involved in Latin America for some years and I hoped that I would stay in Cuba for some time. It is an incredibly beautiful
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island, filled with hard working, intelligent people. It is richly endowed with an enormous variety of natural resources and it is a veritable tropical Garden of Eden.
Unfortunately, my stay was short lived because by then the revolution was well on its way. It was decided that the foreign oil companies were not required and so I had to leave. Needless to say, I was a little irritated because I thought that my stay would be enjoyable. However, it did not curtail my Latin American activities and I have returned to Cuba many times since. Not only have I returned, but the Shell company, whose service I left more than 35 years ago, is also back there in action. It is looking to the future and not to the past, which is the case with so many companies.
At the time the revolution appeared to be entirely justified because it was replacing a wholly corrupt regime which had been in existence for some time. The Cuban Revolution espoused the notion of creating a pure socialist state, and because of circumstances, the Cubans were much encouraged in that by their subsequent linkage with the Soviet Union. When I was a young man at school, I thought that the notion of a pure socialist state was rather a good idea but many years of working all over the world has taught me that it does not work quite as well as I thought at that time. I have no doubt that the noble Lord, Lord Peston, might agree with that concept.
The Cubans were encouraged in that and to a certain extent had no alternative because the US policy was flawed from the beginning. The embargo that was created gave them no alternative, so that that linkage with the Soviet Union, which appeared to be so beneficial, turned out to be something of a millstone around their necks for so long. Indeed, those of us who visited Cuba in the interim period from time to time trying to do trade found that there was not much that we could do. There was nothing on offer because Cuba had that artificial trading system.
Since the collapse of the Soviet Union and the Soviet system, all that has changed and Cuba now has the option of trading with the whole world. That is what is so exciting and that is why the initiatives that have been taken and followed up by my noble friend Lady Young are so important.
I turn to Helms-Burton because that has been mentioned already and is bound to be mentioned again. That is a scandalous piece of extra-territorial legislation. It is absolutely contrary to the whole concept and idea of the WTO and for the world's leading economic power to conduct itself in that way is absolutely absurd.
I do not know what can be done about it because my understanding is that it is almost impossible to repeal legislation under the US constitutional system. I do not know whether that is correct and I do not know whether my noble and learned friend can answer that. However, perhaps he will inquire from his friends in the Foreign Office as to how the US can possibly repeal that legislation, because the idea that every six months it will be postponed indefinitely is absurd. Nobody can live in that sort of situation. Where do we go from there? How will the US get out of that hole into which it seems to have dug itself? It may be that when the WTO has its

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next plenary session it should censure the US as regards this matter so that it is forced to do something about it. Let us hope that something happens along those lines.
In the meantime, Cuba is very busy cultivating its new relationships, because obviously it has a great deal of support in those activities from the whole of Latin America and from the NAFTA countries of Mexico and Canada and, indeed, from the whole of the European Community. The United Kingdom has been in the vanguard of all that. We have pioneered the way. There have been missions by my noble friend Lady Young and others and visits by Ministers. As my noble friend Lady Young said, we have a first-class embassy there led by a superb ambassador for whom no praise is too high and who really does understand what is going on.
As a result of all these activities, a good number of very spectacular opportunities have opened up. But what is the result of all those opportunities being opened up? We have pioneered the way, as my noble friend's figures illustrate, but our European partners will reap the rewards because we have no government support. There is no ECGD cover. The French have credits; the Germans have credits; the Italians have credits; the Spanish have credits; and where are we? It is an absolutely deplorable situation.
I hope that my noble and learned friend will say something extremely positive about this. If he cannot give us an affirmative decision this evening, which may well be the case, I hope that he will talk to his colleagues and persuade them that something must be done about it forthwith because otherwise, not only will the opportunity be lost to which my noble friend Lady Young referred, but many other opportunities are also going out of the window. I wonder what is the point of the visits of my noble friend or anybody else if they have no proper back-up.
I turn now to the European Union because in the early part of last year the European Commissioner responsible for international affairs visited Cuba with the idea of negotiating a co-operation agreement but the Cubans did not like the conditions imposed upon them at the time. When I was in Cuba in August, I spent quite a lot of time discussing the matter with them. I pointed out that when there is an international agreement, conditions are always imposed. I remember talking to the Cubans. They said that they had no dealings with either the Inter-American Development Bank or the IMF. They told me that they disliked those two institutions. I told them that many other countries in Latin America and around the world also disliked those institutions but as time developed they found it necessary to make adjustments in order to obtain the benefits. I told them that all international banking and loan arrangements are always subject to conditions. Anybody here who wishes to have a loan is subject to conditions. That is the normal procedure. I believe that the Cubans are beginning to think about the real world in which they now live. Conditions are always imposed in order to obtain benefits. They may not like it initially, but it is something which they must come to accept as a necessity if they are to live in the real world in which they now find themselves.
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It is also encouraging to think that at the last meeting of the European Union's economic and finance Ministers—known as ECOFIN—a policy was adopted,
"to encourage a process of transition to pluralist democracy".
That implies that there is now a specific policy towards Cuba in the EU which is a very new development. I hope that that will lead to further visits from the EU Commission so that the co-operation agreement can come back into existence because it would certainly be very beneficial to Cuba; and, indeed, to the EU, of which we are a major and important part.
Before I close, I should like to make one further point. My noble friend Lady Young suggested that Dr. Lage should come on a visit here. I have met Dr. Lage. He is a quite brilliant young man. I believe that it is a splendid idea. Indeed, not only should Dr. Lage come here on an official visit but so should many other Ministers. I hope that my noble and learned friend will not only encourage this but that he will also encourage others to do likewise. The idea of a concept of a deeper, better and more profound relationship with Cuba is something which we must all welcome and to which we must look forward.
9.21 p.m.
Lord Kennet: My Lords, may I begin by saying how convinced I am, from direct acquaintance with it, that the work being carried out by the noble Baroness, Lady Young, as chairman of the steering committee of the Cuba Initiative is extremely valuable. I count myself very fortunate to be associated with her. In point of fact, I do not believe that I have ever before known of such a body. I think it may be a little atypical.
It is an organisation within which there is a representative of each of the two major parties from this House, the purpose of which is mainly to encourage and give political edge to an interface between government departments and British firms as regards what to do next, and between the bureaucracy of this country and the European bureaucracies. Our voices get heard—at any rate, that of the noble Baroness does. When it is looked at retrospectively by whatever government are in power to see whether it is worth doing, it may be that this form of organisation will be found to be worth expanding for use in other circumstances.
The noble Viscount, Lord Waverley, said much that I would have said if he had not said it. I shall not dwell on the position of the United States in the world. However, I should like to dwell for a moment on the position of Helms-Burton as a political/constitutional phenomenon within the United States. It goes not only against international law, because, as is perfectly obvious—indeed, it has been for I should have thought about eight or nine centuries now—you cannot go charging businessmen of a third country who happen to be in your country because they have been trading with another country which you happen to dislike. The principle is pretty well enshrined. You cannot go excluding businessmen from your territory because they had dealings with another country. All that is completely beyond the pale of international law.
And now a case has arisen in that respect which shows pretty clearly that the Helms-Burton Act is producing results which are unconstitutional in the

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United States. The case is that of Mr. Tom Johnson who is the President of CNN. Of course, the latter is not known as a great friend of American governments; but, equally, it is not known to be a particular enemy of them. Nevertheless, Mr. Tom Johnson has had an experience which he says beggars comparison with the experience he had with Chinese bureaucracy when he tried to set up a CNN operation in China.
The experience was as follows. Mr. Johnson wanted to set up an operation in Cuba and was informed that in order to do so he must have a licence—presumably under Helms-Burton—a kind of waiver which should ensure that he would not be imprisoned. But he was told that he would not be granted such a licence. If one looks further into the background—Mr. Johnson has said this publicly—one sees that the reason apparently is that the proprietor of the Miami Herald, which is the chosen newspaper of the hundreds of thousands of Right-inclined Cuban refugees in Florida, has kicked up a political storm about the matter. He has said that he wants to keep his monopoly of reporting on Cuban reality to the American people. Such is the weight of the Florida vote that he is winning the day and CNN is to be excluded.
I seem to remember that the American constitution was amended for the first time in the direction of the freedom of the press. This is a direct denial by the American Government of the right enjoyed by one of its citizens to go to another country and report home on what is going on. That in itself is almost as important as the trade shenanigans. Such action is against the first amendment to the American constitution as well as being against the WTO and the rest of it. I hope that under the guidance of the noble Baroness we shall be able to—
Noble Lords: Time!
Lord Kennet: My Lords, we are 17 minutes ahead of time.
Lord Chesham: My Lords, the noble Lord still has only four minutes in which to speak.
Lord Kennet: My Lords, I understand that. I utter one hope. Under the guidance of the noble Baroness I hope that we shall be able to play a more active part to get European Union movement in this field, and especially to line up with the European ECGDs.
9.27 p.m.
Lord Thomson of Monifieth: My Lords, like other noble Lords who have spoken I, too, thank the noble Baroness, Lady Young, for asking this Unstarred Question, and especially for being such a notable ambassador for Britain in expanding trade with Cuba. I was therefore all the more disappointed to hear some of the criticisms she felt she had to make about the response of the Government in terms of ECGD. That was echoed by the noble Viscount, Lord Montgomery. I hope that in due course we shall receive an answer from the Minister on those points.
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My own view is that by far the best way to increase our influence in a country such as Cuba is through trade and dialogue. During my many years in politics I have had some experience of sanctions. I started as a sanctions enthusiast, but as the years have gone by I have become more sceptical about them. Sometimes they are no doubt necessary and inevitable, as in the case of Iraq, but they involve the difficulty that they tend to make the poor poorer and powerful politicians more powerful. Ever since the Second World War and ever since the revolution in Cuba we have maintained an embassy and an ambassador there and have maintained a dialogue. I believe that is the better way to proceed in this case. Britain has, of course, historic relations of importance in the Caribbean generally. We have much to gain from encouraging the right sort of developments in Cuba. Cuba is, I suppose, almost the last of the old fashioned Soviet type communist states in the world. If we can do something to encourage a gradual movement towards a more civil society—as the noble Baroness called it—that would be important. It is important to encourage it to join the mainstream of Caribbean democracy.
As has been said, as a byproduct of our efforts in Cuba, there is the useful co-operation in the battle against drugs. I was glad to read that the Cuban Minister, the chairman of the commission, visited this country last year, and Scotland Yard has a team in Cuba at present. As almost every noble Lord has said, for their own domestic and regional reasons the Americans have adopted a different policy towards Cuba over a period of years from that adopted by the United Kingdom and our European and Commonwealth partners. The latest example of that is the notorious Helms-Burton Act. In terms of its results, the American policy seems to leave them in a very solitary situation. I note that the last time there was a resolution at the United Nations on the issue, 137 members of the United Nations voted to persuade America to repeal the Helms-Burton Act, with only two supporters, Israel and Uzbekistan. That is hardly a recipe for successful international diplomacy.
On our side of the Atlantic, not only the Government but the Government in association with its European partners have been wiser and more active in the diplomacy that they have promoted. I listened to what the noble Viscount, Lord Montgomery, said about this. I was interested to see that the European Union recently passed a new regulation to deal with the matter. It seemed to be of a usefully balanced character. It was robust and vigorous in terms of defending the interests of the European Union in international trade if the United States were foolish enough to pursue seriously the Helms-Burton proposals. At the same time, it was equally forthright in its espousal of the need to promote human progress and human rights in Cuba. I believe that it may have helped President Clinton at least to give the further six months suspension of the Helms-Burton Act. I believe that it was a good example of how European Union diplomacy can be effective and can play a useful part.
I believe that the European Union regulation requires a United Kingdom order to implement our responsibilities in respect of that regulation. I should

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be grateful for information on how that is proceeding. I should also be grateful to hear from the Minister the Government's position about any British companies which feel that they are suffering damage from the effects of the American Act, and what help they can expect if the Americans were to proceed further on that matter.
As other noble Lords have said, the Act is still on the statute book. As the noble Viscount said, it is unsatisfactory that we have to proceed on the basis of hoping for a fresh suspension every six months. I do not know what the constitutional answer is. However, I hope that if the Act cannot be repealed, like many Acts of parliament in many countries it might be allowed to wither on the vine or allowed to rust away and not be put into effect. I believe that the maximum international effort is required through the World Trade Organisation, and in other ways, to ensure if possible that the Act is never put into operation. I hope that Her Majesty's Government will play a leading part in that.
Before I sit down, I should like to say how greatly I admire, not for the first time, both the stamina and the versatility of the noble and learned Lord, Lord Fraser. He has just turned from the intricacies of domestic trade union law to the intricacies of the Helms-Burton Act. When he replies, I hope that he can give a positive response to the complaints made by the noble Baroness, Lady Young, about the trade matter, and reassure us that Her Majesty's Government will do everything possible in association with their partners to deal with the situation created by the Helms-Burton Act.
9.34 p.m.
Lord Peston: My Lords, we are indebted to the noble Baroness, Lady Young, for raising the matter before us tonight. I speak as an outsider. Noble Lords are aware that only in the most extreme circumstances do I ever allow myself to cross an international frontier. My speeches never contain sentences such as, "When I was in such-and-such a country". That does not mean that I am not sympathetic on this or on other occasions.
My task is particularly easy. The noble Baroness, Lady Young, and other noble Lords have raised the important points. All I can do is echo and reinforce their remarks.
I start by emphasising that the Cuban people are our friends, and I wish them well. I have no desire to tell them what to do, or to interfere with their freedom to make political and economic choices according to their preferences. That does not mean that I agree with them; nor—following my good friend, the noble Viscount, Lord Montgomery of Alamein—that I regard the command economy in its communist or other forms as desirable or as remotely economically efficient. I had my starry-eyed days, as did the noble Viscount. I was very sad to realise that one has to learn other things. But one does.
For me, as for all other noble Lords, the one-party state is unattractive. However, I take the view that the Cubans themselves must decide the path that they wish to follow and when they wish to follow it. All I say to
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them is that it is possible to have parliamentary democracy and a free, mixed economy which is both prosperous and able to achieve fair outcomes for all citizens. I do not say that it is easy or guaranteed, or that, for instance, the democracies of the West do not sometimes go backwards as well as forward. However, I am optimistic that, over time, we do move forward and that we know how to rectify evils when they occur. I wish to persuade the Cubans, and for that matter others, of that belief. But I have no desire to threaten them, nor any wish to associate myself with those who do. In that connection—this is the nature of our debate—we do not mean in the military sense. I include economic threats. In the case of the Cubans, such threats are undesirable per se. But they are also undesirable in practice when confronting a proud nation. Here I somewhat echo the remarks of the noble Lord, Lord Thomson of Monifieth.
I am not naive. I do not say that the position in Cuba with regard to human rights, for example, is acceptable. However, I repeat, the Cubans themselves must rectify that situation. I very strongly agree with the noble Lord, Lord Thomson that we must not reinforce the belief of those in Cuba who see the outside world as enemies and seek to justify limitations of expression and other freedoms on the basis of preserving the nation against outside threats.
The relevant comparison is with the totalitarian dictatorships of Eastern Europe. In the end it was the people themselves, coupled with the inexorable power of modern economic forces, that led to the downfall of those regimes. They were not brought down by economic or military threats. Sadly, and it is worrying in the present context, the economic failure of the successors to the former Soviet Union—I hope only for the time being—provides a very poor model to follow. I truly believe that the West failed the Soviet Union in its responsibilities there.
However, there need be no similar failure in Cuba when the time comes and when, as it is already doing, it eventually opens itself up more fully to the rest of the world. The Cubans are right in not wanting to see the return of United States based Mafia corruption, and worse, and all that went before. I hope that they are aware that we agree on that point. There is no inevitability that that will happen if Cuba opens itself up and we trade with that country as friends, not enemies.
The point about threats holds good equally in regard to the relationship between the United States and the European Union, and, from our particular point of view, between the United States and the United Kingdom. The United States and the European Union are of equal importance, and neither should threaten the other. That is my point regarding the Helms-Burton legislation. The United States and United Kingdom are allies of very long standing and, a fortiori, neither should threaten the other. That is what Helms-Burton seems to seek.
Let me say a word on ECGD. I was very upset to hear what the noble Baroness said and I hope that the Minister can reassure us. I am particularly concerned about this matter. It is not entirely my field of expertise, as an economist, but I would have thought that using

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ECGD in this area should be self-financing and that there should be no public expenditure implications. I should like to know whether that is the problem and whether we are prevented from doing something which is sensible because of the forthcoming election and because no one is allowed to say that they would like to spend money on anything. In this case I do not see that that is the issue. I shall be told to be at least as silent as the Minister is on these matters. It seems to me that this is an example of something sensible which would not place a burden on the public purse. I should like to hear the Minister's view on that.
I believe there is no doubt about the illegality of Helms-Burton and its eventual total ineffectiveness. Essentially it is causing a lot of trouble to no good end. Can the Minister tell us whether United Kingdom companies have already been in touch with his department? There are two dimensions to this. Have they been in touch because, as Lord Thomson said, they have been threatened? More to the point, is there any truth in the rumour that the US has been constructing what I think is called a hit list of companies and is having a go? I am quite confident—and it shows how confident I am that I am able to speak in this context—that, if that is happening, Her Majesty's Government will stand up to this nonsense. It is quite intolerable in the modern world, at the end of this century, after having fought for 200 years for free trade, that, of all countries, the US, the great leaders in our time in matters of free trade, should adopt this kind of policy.
We are all in complete agreement. In this case I am absolutely certain that Her Majesty's Opposition is in complete agreement with Her Majesty's Government, whichever way it turns out we shall be in a few weeks' time.
9.42 p.m.
Lord Fraser of Carmyllie: My Lords, I am delighted that in this important and well-informed debate—unlike in the debate to which I responded about an hour ago—there is clear unanimity of view about how Cuba should be approached. I am grateful to my noble friend Lady Young for giving the House an opportunity to consider our relationship with Cuba. We take that relationship very seriously.
In recent years there has been an extensive exchange of business delegations, Ministers and officials responsible for trade, investment, health, justice and other fields. My ministerial colleague at the DTI, Ian Taylor, paid a very successful visit to Cuba in 1995. In line with our policy towards Cuba, there are currently no plans for an exchange of visits on a purely political level. However, my noble friend may know Mr. Mike Mowlam, the DTI Director for Trade Promotion in the Americas. He will be available to visit Cuba at a suitable time to explore commercial opportunities.
It will come as no surprise to your Lordships to know that our policy towards Cuba, along with our European Union partners, is to encourage that process of transition to pluralist democracy and respect for human rights and fundamental freedoms, as well as a sustainable recovery and improvement in the living standards of the Cuban
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people. A Common Position to this effect was adopted by the European Union in December last year. The Common Position notes that transition would be most likely to be peaceful if the present regime were itself to initiate or to permit such a process. We believe that constructive engagement is the most effective way of encouraging the reform process in Cuba, as the noble Lord, Lord Thomson, and many other noble Lords indicated.
We hope that our political relations will progress in tandem with our trade and investment links. While we have made some headway in that political relationship, human rights and fundamental freedoms—we must be open about this—remain areas of particular concern.
We have called for an ending of arbitrary detentions and for the release of political prisoners; fair trials with independent courts; freedom of expression; free media; the right of citizens to seek political or public office individually or as members of parties or organisations; publication of legislation; lifting of restrictions on non-governmental organisations; Cuba's accession to the international covenants on civil and political rights and economic, social and cultural rights; and co-operation with the United Nations special rapporteur on human rights. So there are a number of areas where we have our differences, but we have spelt them out openly.
Let me turn to the other main strand in our relationship with Cuba: the development of our trade and economic relations. These have been further strengthened over the last year with, I am glad to say, a substantial increase in two-way trade. The figures to the end of November last year show exports of goods from the United Kingdom to Cuba of £23.1 million. That is an increase of some 33 per cent. on the same period last year and already exceeds those for the whole of 1995 when exports were just some £19 million.
In the other direction, imports from Cuba to the end of November 1996 were £18.5 million compared with £8.2 million for the whole of 1995. I am sure that the visits to Cuba made by my noble friend and others will have played their part in this satisfying increase in trade.
Activities last year which attracted financial support from my department included DTI-sponsored representation at the Havana International Trade Fair. That 1996 fair was the largest ever, with some 36 companies at the fair.
In June there was a DTI-CARITAG trade mission which comprised some 14 companies. I am pleased to say that another trade mission is planned for the coming month of July.
I turn to the Commonwealth Development Corporation. I am sure those who have participated in this debate will probably be aware that the corporation received ministerial authority to commence operations in Cuba in June 1995 and that an agreement was signed for the CDC by my honourable friend Mr. Ian Taylor when he visited Cuba. The CDC has identified four areas in which initially to concentrate its investment activity: the financial sector, mining, agriculture and industry.

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I am delighted to be able to tell your Lordships that the first investment by the CDC will be signed on the 5th of next month for a financial sector joint venture. CDC will own 60 per cent. of a company to provide short-term working capital facilities in Cuba and will second a general manager to run the company. The remaining 40 per cent. will be owned by the commercial banking arm of Banco Nacional de Cuba. In line with CDC's private sector focus, the company will provide working capital and lease finance to commercial enterprises in Cuba which are subject to market disciplines. CDC will provide a line of credit of up to 15 million US dollars to the new company.
The Investment Promotion and Protection Agreement between the United Kingdom and Cuba which came into force in May 1995 will, I hope, encourage further investor confidence and investment flows. I should add that the CDC is also a financial intermediary for the European Community Investment Partners Scheme, an EU initiative which the DTI promotes to British companies wishing to create joint ventures in Cuba or indeed in other parts of Latin America.
Financial funding remains a necessary part of our relationship, both for humanitarian purposes and to underpin our efforts to encourage economic reform in Cuba. We contribute significantly to EU aid to Cuba, which was approximately £24 million in 1995, of which our share was about £3.7 million. That covered humanitarian assistance, support via non-governmental organisations and economic reform.
We recently donated some £50,000 to the Red Cross for emergency relief, following the damage caused by Hurricane Lili in October last year; the EU provided £480,000 in addition to that, of which our share was about £81,000. Again to encourage economic reform, there is a British Partnership Scheme through which £150,000 is available per annum for suitable schemes.
Several noble Lords raised the issue of drugs. Certainly drugs and drug-related crime pose the biggest single threat to the security and stability of the Caribbean islands as a whole. Cuba, by virtue of her geographic position, is a particularly attractive target for drug traffickers. Fortunately, the Cuban Government now recognise that threat and recognise also the importance of close international co-operation in that fight.
Our counter-narcotics is increasing and over the past few years the Government have provided assistance bilaterally and also through the United Nations drug co-operation programme in the form of training and equipment for Cuban customs and police. That has been very successful. Indeed, one such course run by Her Majesty's Customs and Excise resulted in a significant seizure of cocaine during the practical part of the course at Havana airport.
I turn to the issue of the ECGD. I shall take a moment or two to spell out the various ways in which we believe we have been extremely helpful in seeking to improve the economic performance and offering various lines where trade and investment might be improved in Cuba. The position on ECGD may not be as encouraging or
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satisfying to those who have contributed to the debate. ECGD's short-term operations were transferred to the private sector credit agency NCM in 1991 and NCM, as a private sector company, will underwrite business with Cuba—it is a decision for NCM—only if a confirmed letter of credit is in place. The medium cover provided by ECGD was withdrawn in 1983 when Cuba first rescheduled its debt with the Paris Club. I regret that Cuba has allowed substantial arrears to build up under these rescheduling arrangements. Once Cuba has normalised its position with its creditors, ECGD would be prepared to review its cover position with regard to Cuba's readiness for new medium-term credits, but resumption of cover would depend on Cuba being able and willing to service new external debt on commercial terms in a proper manner.
My noble friends Lady Young, Lady Hooper and Lord Montgomery made reference to the approach adopted by other countries. Our information is that ECGD's approach is not out of line with export credit agencies in other countries trading with Cuba. The key issue for most agencies is whether in a given project the payment risk can be externalised. If it can, ECGD would be prepared to consider medium-term cover. I understand that the French credit agency adopts a similar policy view. As my noble friend Lady Young mentioned, the French have provided short-term cover in an arrangement involving sugar bartering. Although that may be the case, it was for short-term cover, and in the United Kingdom that is now in the hands of NCM and not in the hands of ECGD.
Baroness Young: My Lords, I am sorry to interrupt my noble and learned friend because what he is saying about ECGD is so extremely important to everyone. I want to make sure that I have understood the position. As I understand it, it is very difficult for Cuba to repay its debt unless it can get better machinery and so on to improve its sugar crop, nickel output and so on. We are in a kind of chicken-and-egg situation whereby we cannot help Cuba to improve its production and therefore it cannot repay its debt. Therefore, I do not quite see how we can get out of this log-jam.
Lord Fraser of Carmyllie: My Lords, I appreciate the real difficulties for Cuba. However, those have arisen because, having come to an agreement with the Paris Club and having secured a rescheduling, Cuba has not allowed that position to be worked through, and substantial arrears have built up. That is why I took some time to try to express to your Lordships the other ways in which opportunities are being opened up with the support of the United Kingdom to allow for investment in Cuba and to allow, through ECGD and others, for lines of credit to be opened up. It is through those routes that we would hope it will prove possible. I do not suggest that it can be achieved overnight, but it would be a way to improve the performance of the Cuban economy.
What is quite clear, but will not help it, is the Helms-Burton legislation. The noble Viscount, Lord Waverley, and, I believe, everybody who contributed to this debate, expressed their concerns about it. Of course

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we and the United States share a desire to see the democratisation and economic reform of Cuba. However, we have made it very clear that we do not accept that the United States has the right to export its sanctions legislation and to penalise United Kingdom business people for undertaking normal trade.
I believe that it was the noble Lord, Lord Peston, who asked me whether anyone had in fact yet been targeted. Two UK citizens, Sir Patrick Sheehy, who I do not believe is known for having a particularly leftist view of politics, and Mr. Rupert Pennant-Rea, who are both board members of the Canadian mining company Sherritt, have for that reason been excluded from the United States. Otherwise, we are not aware of any United Kingdom companies or citizens being targeted at present, but that is enough. In our view it is quite unacceptable.
The United Kingdom and its EU partners have taken positive action to respond to the unacceptable assertions of jurisdiction by the United States contained in this legislation. We have instituted proceedings in the WTO against the legislation and the EU has also adopted a regulation designed to counter the effects of US legislation on Cuba and indeed on separate US sanctions against Iran and Libya. They came into force on 29th November last year.
These actions demonstrate that the United Kingdom and its EU partners have responded firmly to these unacceptable assertions of jurisdiction. I believe that the views expressed during the course of this debate that the firmness of the EU response has paid off are correct
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because on 3rd January President Clinton suspended the right to bring actions against alleged traffickers in expropriated US assets for a further six months.
My noble friend Lord Montgomery is absolutely correct to say that endless repetition of these suspensions is no satisfactory conclusion. However, I cannot answer him as to how easy it would be for the United States to repeal this legislation, but ultimately we are quite clear about this: that must be the end goal. We shall persist with our pressure. I hope that the Americans themselves realise that and that the six months' repetition is not suitable.
What we must emphasise is that we consider Helms-Burton to be an international trade issue and not an argument with the United States about the aims of policy towards Cuba. As I have already stated, the goal of promoting political and economic reform in Cuba is one that we share with the United States. However, we differ fundamentally on the means to achieve that.
I have possibly taken a little longer than I ought to, but it is an important relationship with Cuba. I hope that this debate has been helpful to spell out the individual initiatives and activities through which we are taking forward our political and economic relations.
In summary, we need to maintain pressure to improve human and civil rights while engaging in a constructive relationship in which support for the growth of a market economy plays a prominent part. That approach is in the common interest of Britain and Cuba. I can assure your Lordships in a House where there seems to be a keener interest in Cuba than in another place, that the Government will continue to conduct their policy towards Cuba on these principles.
House adjourned at one minute before ten o'clock.

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