Sitting of 15 October 1997

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

The Lord Bishop of Wakefield
Nigel Simeon, Lord Bishop of Wakefield—Was (in the usual manner) introduced between the Lord Bishop of Norwich and the Lord Bishop of Hereford.
Lord Newby
Richard Mark Newby, Esquire, OBE, having been created Baron Newby, of Rothwell in the County of West Yorkshire, for life—Was, in his robes, introduced between the Lord Harris of Greenwich and the Lord Thomson of Monifieth.
Lord Hardy of Wath
Peter Hardy, Esquire, having been created Baron Hardy of Wath, of Wath upon Dearne in the County of South Yorkshire, for life—Was, in his robes, introduced between the Lord Kirkhill and the Lord Merlyn-Rees.
Lord Hughes of Woodside
Robert Hughes, Esquire, having been created Baron Hughes of Woodside, of Woodside in the City of Aberdeen, for life—Was, in his robes, introduced between the Lord Kirkhill and the Lord Carmichael of Kelvingrove, and made the solemn Affirmation.

Government Information Service: Staffing
3.10 p.m.
Lord Campbell of Croy Lord Campbell of Croy asked Her Majesty's Government:
How many of the senior information officers in government departments have resigned, or have been asked to relinquish their posts or to move to other appointments, since 1st May.
Lord McIntosh of Haringey: My Lords, taken literally, the phrase "senior information officer", mentioned in the noble Lord's Question, means an officer in the information service of the grade of senior executive officer. Since 1st May no such officers have been asked to relinquish their posts or to move to other appointments.
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However, I assume that the noble Lord means his Question to be interpreted more widely. Since 1st May, vacancies have arisen for heads of information at the Scottish Office, the Department of Social Security, the Treasury, the Ministry of Defence and the Northern Ireland Office. The jobs will be filled either by existing civil servants or through open competition organised and run by the Civil Service. They will continue to be Civil Service posts and their holders will he subject to the conventions which successive governments have applied to the Government Information Service.
Lord Campbell of Croy: My Lords, I am grateful to the Minister for that full Answer. However, is he aware that more than a month ago The Times Whitehall editor reported the departures of the heads of the information divisions in the four departments which the noble Lord mentioned, since when there have been two more? That makes a total of six in less than five months. Is not that very unusual? Why has it been necessary for the Head of the Government Information Service to state, according to The Times, that some tactics deployed by Labour Party spin doctors would not be used by civil servants?
Lord McIntosh of Haringey: My Lords, as regards the noble Lord's first question, it has been the case under successive governments that where there is a lack of chemistry between the Secretary of State and the Head of Information, that Head of Information will move. That has happened under both Conservative and Labour governments.
As regards the noble Lord's second question, there has been no change in the role of or instructions to the Government Information Service. Indeed, the note published in the guidance to the work of the Government Information Service, which was published in July this year, is virtually identical to the document published in 1992, except that it is shorter and clearer.
Lord Hayhoe: My Lords, how often has the lack of chemistry, to which the noble Lord referred, occurred under this Government, leading to a change, and how often did it occur during the five years of the previous government?
Lord McIntosh of Haringey: My Lords, that is a detailed question to which the noble Lord would not expect a statistical reply. However, perhaps I may give an example of the lack of chemistry. The noble Lord may care to look at the memoirs of Sir Bernard Ingham in which he records how he was summarily removed from the post of Head of Information at the Department of Employment when the noble Viscount, Lord Whitelaw, returned from Northern Ireland with his own press officer.
The Earl of Northesk: My Lords, the Minister will no doubt be aware that a senior source—presumably one of the Government's spin doctors—was quoted in the media as saying:
"You could say that they are going to be sent to spin school. Most of them know how newspapers work, they just don't know how to make them work for them".

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Does that have any bearing on the departure of so many information officers? Furthermore, how does it relate to the maintenance of impartiality and political neutrality within the Civil Service?
Lord McIntosh of Haringey: My Lords, the noble Earl has no justification in assuming anything about what he calls "a senior source". There is no change in the position of the Government Information Service. Indeed, he may well know that there has been correspondence between the Minister without Portfolio, the Cabinet Secretary and the Institution of Professionals, Managers and Specialists. Ministers are meeting representatives of the institution tomorrow in order to discuss the matter further. However, there has been and there will be no change in the role of the professional Government Information Service.
Lord Harris of Greenwich: My Lords, will the Minister join me in welcoming the interest in maintaining the impartiality of the British Civil Service, particularly in the light of the behaviour of Mr. Heseltine, who tried to recruit civil servants to work for the Conservative Party before the previous general election?
Lord McIntosh of Haringey: My Lords, I did not rise to the invitation of the noble Lord, Lord Hayhoe, to give many examples of previous practice. However, the noble Lord, Lord Harris, is right, and I could give many examples of malpractice if I were to succumb to that temptation.
Lord Strathclyde: My Lords, is the Minister aware that what is not entirely clear to him is clear to almost everyone else to whom I have spoken: this is a case of playing politics with the Civil Service? It is also a problem relating to the egos of senior Members of the Cabinet. Can the noble Lord confirm that Mr. George Robertson, Secretary of State for Defence, complained that he was one of the least known politicians in the country, which is why the information division in his department has been reorganised; that Mr. Frank Dobson has bawled out his team for their failures; and that Miss Harriet Harman, Secretary of State for Social Security, has been dismayed by the lack of back-up at weekends?
Lord McIntosh of Haringey: My Lords, the statement which the noble Lord made in introducing his question is mere asseveration and is not worthy of response. As regards other Ministers and Heads of Information, the contracts between the Heads of Information and their departments are a personal matter between them and the department and it would not be appropriate for me to comment on them in detail in their absence and without their permission.
Lord Evans of Parkside: My Lords, will my noble friend confirm that during the period of Conservative government between 1979 and 1992 the then Prime Minister, who changed scores if not hundreds of civil
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servants, always asked the question "Are they one of us?"? Is not that really playing politics with the Civil Service, as opposed to the few minor changes that have taken place here?
Lord McIntosh of Haringey: My Lords, my noble friend's question sounds all too likely.
Lord Campbell of Croy: My Lords, does the Minister agree that slick manipulation in handling news and the media is not to be encouraged, should not be an attribute in the public service and should not be expected of its senior members?
Lord McIntosh of Haringey: My Lords, in those terms, yes, I agree with the noble Lord. However, I have yet to be convinced that there is evidence of slick manipulation. The Government have a duty to explain their policies and initiatives to those who are affected by them. I believe that they are doing so with the valued assistance of the Government Information Service.

City Centre and Out-of-town Shopping Centres
3.17 p.m.
Lord Dean of Beswick Lord Dean of Beswick asked Her Majesty's Government:
What is their policy on city centre shopping and the development of large out-of-town shopping centres.
The Parliamentary Under-Secretary of State, Department of the Environment, Transport and the Regions (Baroness Hayman): My Lords, the Government's policy is to promote new retail and other development in existing centres. In our response to the House of Commons Environment Committee report on shopping centres, which was published on 31st July, we reaffirmed our support for Planning Policy Guidance Note 6 on town centres, which sets out the Government's policy in more detail. Out-of-centre sites should be considered only if more central sites are not available.
Lord Dean of Beswick: My Lords, I am pleased with the Minister's Answer. Is she aware that where huge developments have taken place—for example, Meadowhall and Dumplington outside Manchester—there has been a devastating effect on trade in the inner cities? Most of those driven into bankruptcy have been small shopkeepers and market traders. Does the Minister agree that the demise of such traders mitigates completely against the regeneration of those inner city centres?
Baroness Hayman: My Lords, I agree with the points made by my noble friend. The objectives of government policy are to sustain and enhance the vitality and viability of centres, especially town centres, which can serve the whole community and to ensure that there is available a wide range of shopping opportunities to which people have easy access.
Lord Skelmersdale: My Lords, if the Minister and her department wish to encourage life in the cities and inner

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towns will she give approval to the 20–20 Round Table organisation and its LOTS scheme; namely, Live Over The Shop?
Baroness Hayman: My Lords, the noble Lord will forgive me if I do not give an instant response to his question, but I shall look at it in detail and write to him.
Lord Graham of Edmonton: My Lords, will the Minister accept that many of the casualties in the battle of the giants of the high street have been thousands of small traders, and market traders in particular, as mentioned by my noble friend Lord Dean? I am pleased to hear the Minister say that that situation occurred in the past. However, can she reinforce her assurance that in future special attention will be given to the small towns and market places where such people have served for centuries and whose absence would result in those town centres and the countryside being the poorer.
Baroness Hayman: My Lords, I very much accept what my noble friend says. There is scope for encouraging town centre management to bring together the public agencies, investors, retailers and residents to develop a strategy for enhancing the vitality of town centres and for increasing activity by locating businesses, leisure developments, houses or offices—all those different components—in or near town centres. Indeed, as the noble Lord suggested, there should be encouragement to occupy flats above shops.
The Earl of Lindsay: My Lords, I remind the Minister that the development of out-of-town shopping centres needs to be balanced not only with city centre shopping but also with the needs of shops in small towns and rural villages. Therefore, will the Government implement the initiatives which were being advocated by the previous Conservative Government as regards rate relief schemes for small town shops in order that they also can be helped and their needs can be balanced with those of large out-of-town shopping developments?
Baroness Hayman: My Lords, we are well aware of the concerns in those areas. We are currently looking at the detailed options for review of the national non-domestic rating system. We shall be consulting widely with businesses, local authorities and others to take into account just the kind of matters which have been raised by the noble Earl.
Baroness Sharples: My Lords, does the noble Baroness agree that perhaps the proliferation of charity shops in small towns is having quite a considerable effect on other small shops in those towns?
Baroness Hayman: My Lords, I know that that is an area which causes concern to small traders and is of interest to Members of the House. However, I suspect that if we start to interfere in the workings of the market place and planning permissions in that kind of detail, we shall be accused of being far too interfering.
Lord Dean of Beswick: My Lords, will the Minister join with me in congratulating the people in the centre of
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the city of Manchester for the way in which they tackled the regeneration of the city centre following the appalling damage caused by the bomb placed by the IRA? Will she join me in congratulating everybody concerned, including the local authority and the traders involved?
Baroness Hayman: My Lords, I am very happy to do so. I was actually in Manchester on the day on which the bomb went off because I was visiting my mother in hospital. I saw how the local hospital responded on that occasion to what, thankfully, was not an enormous number of casualties but at that time that was not known. From then on, the response from within the city has been what one would expect from the people of Manchester but nonetheless admirable for that.
Lord Chesham: My Lords, since the Minister is so concerned about small businesses, will she explain how those will be helped by the introduction of a minimum wage?
Baroness Hayman: My Lords, I shall not say that that is extremely wide of the original Question. I shall say that when looking at the minimum wage, the Low Wage Commission is taking into account all the elements and all the considerations that need to be looked at in coming to a settlement and a level of wage compatible both with our desires to create a strong and sustainable economy and to do justice to the low paid.

Local Education Authorities: Extra Funding
3.24 p.m.
Lord Ponsonby of Shulbrede Lord Ponsonby of Shulbrede asked Her Majesty's Government:
What benefits are expected to flow from the provision of £1 billion for local education authorities to spend on education, and a further £1.3 billion to improve school buildings and equipment, as announced by the Chancellor of the Exchequer in his Budget on 2nd July.
Lord Whitty: My Lords, that was indeed a very significant additional provision in the Budget. It reflects our priority to raise standards in all our schools. It means more money for books and equipment and more support and training for teachers and head teachers. It means more resources to tackle discipline and truancy. It can also begin to help to deliver reductions in class sizes for five to seven year-olds.
On the capital side, this year, as an immediate consequence of the increased capital provision, pupils and teachers in 2,300 schools in England will benefit from badly needed repair and improvement work. By the end of this Parliament, we shall have made long overdue progress as regards replacing unsafe and sub-standard buildings and outdated equipment so that our schools can provide an environment fit for teaching and learning.

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The Government look also to their local authority partners to play their part by translating our spending plans into real improvements in their schools.
Lord Ponsonby of Shulbrede: My Lords, I thank my noble friend for that Answer. Does my noble friend agree with me that parents and schools will measure the success of that injection of funds by what happens in the classroom? Will he explain to the House and to me how he has consulted with local education authorities and what procedures he has put in place to ensure that every penny of the money that has been released for that purpose actually goes to the classrooms and the schools themselves?
Lord Whitty: My Lords, there have been and there are continuing long discussions with the local authority associations and individual local authorities to make sure that that money goes to where it is intended. It is precisely the case that it is intended to improve the situation for pupils in the classroom: to improve the quality of teaching; to improve the quality of equipment; to improve the quality of the environment in which they work; and in particular, to improve the technology with which they work in their schools.
Baroness Williams of Crosby: My Lords, perhaps I may seek some clarification with regard to the Minister's interesting reply. First, can he specify the exact period for which this particular increase will apply? Secondly, given the change in the deflator from 2 per cent. per year to 2.75 per cent. per year in the Budget of July 1997, will the Minister tell us what is the net value of the increase in education given that the value of the original education budget has been reduced by 0.75 per cent. per year?
Lord Whitty: My Lords, as regards the second matter, the recurrent expenditure, which for this year is just over £1 billion, is 5.7 per cent. in money terms, which in real terms is a 3 per cent. increase. There are two parts of the provision: £1 billion this year and recurrently, and £1.3 billion towards capital improvements which covers this year and the next four years.
Lord Taylor of Gryfe: My Lords, I am aware that under the devolution proposals, education and health will be devolved. Could I have some assurance that the large sums which are mentioned here for distribution in education will be distributed on the Barnett formula in relation to Scottish education?
Lord Whitty: My Lords, the new money in the recurrent funding includes provision for Scotland of £50 million. As regards capital expenditure, the allocation for Scotland this year is £9 million and £27 million for each of the subsequent years. The grants in Scotland are allocated on a somewhat different basis from those in England. However, that is the commitment of this Government to education in Scotland as it is in England and Wales.
The Earl of Onslow: My Lords, owing to the absolutely super economy which the present
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Government inherited from their predecessors, has it not been noticeable that the recruitment of teachers has now become rather more difficult and that there appears to be a shortage of teachers? How, therefore, shall we decrease the number of pupils in a class if it is more difficult to recruit teachers without increasing expenditure by rather more than the present Government have pledged to do?
Lord Whitty: My Lords, despite some improvement in the economic situation, we inherited a situation in education whereby spending per pupil had declined for each of the past three years in real terms. We have already started to reverse that and we shall continue to do so.
There is not an overall national problem in relation to the recruitment of teachers but there is a problem in particular specialties, in some head teacher posts and in particular in London. Your Lordships will have noticed that on Monday of this week, the Teacher Training Agency announced a major new programme for the recruitment of teachers. That also forms part of our strategy for improving the quality of teaching which is delivered to our pupils.
Lord Merlyn-Rees: My Lords, I understand that those two sums of money are for different purposes. Can we be assured that priority will be given to the inner city areas, which are areas where people of influence do not live? Therefore, inner cities are often forgotten.
Lord Whitty: My Lords, many of your Lordships and I live in the inner cities and I am sure that there is some influence in this House on inner cities. When assessing educational priorities, it is the intention that the social needs of schools of all sorts will be taken into account. It can be seen immediately from the individual allocations, where it is clear which schools will obtain what in England, that the deprivation of some inner city schools is being urgently addressed.
Baroness Blatch: My Lords, can the Minister confirm that the figures he gave on the Scottish and Welsh allocations are in fact consistent with the Barnett formula? Further, can the noble Lord at least give the House an assurance that, without special measures or ring fencing arrangements, there can be guarantees that this money will be spent locally in the way intended by the Government given the fact that local authorities determine local spending priorities at a local level?
Lord Whitty: My Lords, on the capital allocations in England and, in a slightly different sense, in Wales, local authorities have to submit bids and therefore it is absolutely clear directly where the money is going. As regards the recurrent funding, we have reached agreement with local authorities on what their priorities should be. At the end of the day, it is of course the delivery mechanism, which I do not believe any party in this House has challenged, that the local authorities have to deliver this money to local schools. I do not believe I mentioned the figures for Wales but, as for Scotland's allocation, this will indeed fit in with all the

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formulae established by the Treasury. Indeed, I suspect that my right honourable friend the Chancellor of the Exchequer would not have allowed it had that not been the case.
Baroness Blatch: My Lords, my question was not whether it would fit in but whether it was consistent with the Barnett formula?
Lord Whitty: My Lords, I understand that to be the case.
Lord Tope: My Lords, is the Minister aware that there is great concern among local authorities about how the Government will distribute such additional resources as there may be? Will the Minister, therefore, give an assurance to those local education authorities which have always made education a priority that they will not be disadvantaged in relation to those local authorities which have never made education a priority and might, because of that fact, be seen to have greater needs?
Lord Whitty: My Lords, clearly there could be some conflict within the field. It is not the intention to undermine those authorities which have always made generous provision for education. However, in some of the areas it is clear that the capital depredation needs addressing as a matter of urgency. There is therefore some concern in those areas but I believe that we can explain the situation and bring along the local authorities with us in the allocation of this money.
Lord Elton: My Lords, will the Minister remind the House from what fund the extra £2.3 billion came and say whether it is the same fund from which the extra money now going to the NHS came? If that is the case, can the Minister say how much is left in that fund for future use?
Lord Whitty: My Lords, it is true that some of the money came from reserves in this case. However, that is not the situation with the extra money for the NHS which has been announced during the past few days. That was a reallocation of existing budgets within existing targets.
Earl Russell: My Lords, is the Minister aware that the Government's attempt to claim to have spent additional money has proved no more persuasive to the Institute for Fiscal Studies than it has to my noble friend Lady Williams? In the light of that fact, should not this Question have been covered by the rule that Ministers do not answer hypothetical questions?
Lord Whitty: My Lords, it would restrict the number of Questions tabled in this House significantly if we were to follow that doctrine absolutely. Obviously some
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of that money has not yet been spent. In general terms I am aware of the views of the Institute for Fiscal Studies. So far as concerns local authorities and the education system, it is pretty clear that we are talking about extra money. As regards both the capital and the recurrent expenditure, it is real money which they are obtaining now to improve services over and above the inheritance from the previous government.

Utility Regulation: Review
3.33 p.m.
Lord Paul Lord Paul asked Her Majesty's Government:
What progress is being made with the review of utility regulation.
The Minister of State, Department of Trade and Industry (Lord Simon of Highbury): My Lords, the Government are pressing ahead with the review which is considering whether changes are required to the existing systems of regulation in telecommunications, electricity, gas and water, against the guiding principles of transparency, consistency, predictability and accountability. We wish to ensure, in as far as we can given the dynamics of these new markets, open and predictable regulation, which is fair to all consumers and to shareholders; and which, at the same time, provides incentives for managers to innovate and improve efficiency. The review will report to Ministers by the end of the year. If Ministers conclude that change should be contemplated, a consultation paper, setting out the options, will be published early next year.
Lord Paul: My Lords, I thank my noble friend the Minister for that Answer. I have two further questions for him. First, regarding the report from the London School of Economics, are we sure who will assess the true cost of the regulators? Secondly, there was a wide perception in the previous administration that consumers were not getting a fair deal. Therefore, are we going to give consumers a higher priority?
Lord Simon of Highbury: My Lords, the intention is that consumers will be given equal priority with the other interested parties. Perhaps I may use the word "stakeholders" in that context. However, the question of cost must be answered separately. At present there is no statutory duty to assess cost. The crucial issue—and it is one that has been raised by the utilities—is the flow of information required in order to understand both consumers' requirements and those of the utilities. We need first to get the right information base. Then we shall need to discuss whether the costs are appropriate and indeed whether it will be necessary to apply controls.
Lord Ezra: My Lords, while it is satisfactory to note that Ministers will be considering the matter by the end of the year, can the noble Lord assure the House that any action required will be quickly taken thereafter because we are talking about very important issues? In particular, can the Minister confirm that among the issues to be considered will be the desirability of

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bringing the regulation of gas and electricity together in view of the fact that an increasing number of firms are dealing with those two fuels? Further, is the Minister prepared to say whether there will be an attempt to depersonalise the system of regulation by having non-executive directors associated with the regulators?
Lord Simon of Highbury: My Lords, as regards the speed of enacting any decisions that are taken to change the system, I can assure the House that we shall take any action as quickly as possible, consistent with a consultation process. As for the question of the gas and electricity regulatory processes being merged, that is indeed one of the key issues now being studied by the report team. It would be premature for me to give an answer to that question at this stage. Finally, I would rather leave the question of non-executive directors to the report team rather than preview it here today.
Lord Borrie: My Lords, does my noble friend the Minister agree with me that one of the downsides of the new competitive environment in gas and electricity is that some of the new suppliers are cherry-picking the better-off customers with the result that there is an increasing discrepancy in the price for these basic essentials as between the better-off and the poorer customers? Would it not, therefore, be a good idea to require regulators to have an obligation to protect the disadvantaged customer?
Lord Simon of Highbury: Indeed, my Lords; in the creation of the market place we have seen an extraordinary price differential on offer. That is one of the successes of the policy. I should like to point out that my honourable friend the Minister for science, energy and industry has asked the DGES for reports on the practical implications for differential pricing in the electricity market. He is also concerned about the widening gap among gas customers, especially those on prepayment. My honourable friend has also asked the Director-General of Gas Supply to review the situation.

Competition Bill [H.L.]
Lord Simon of Highbury: My Lords, I beg to introduce a Bill to make provision about competition and the abuse of a dominant position in the market; to confer powers in relation to investigations conducted in connection with Article 85 or 86 of the treaty establishing the European Community; to amend the Fair Trading Act 1973 in relation to information required by the Director-General of Fair Trading with respect to monopoly situations; to make provision with respect to the meaning of "supply of services" in the Fair Trading Act 1973; and for connected purposes. I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read a first time.—(Lord Simon of Highbury.)
On Question, Bill read a first time, and to be printed.

Land Use in the Countryside
3.40 p.m.
The Earl of Lytton The Earl of Lytton rose to call attention to land use in the countryside and to the demands placed on it by society; and to move for Papers.
The noble Earl said: My Lords, in moving this Motion, I am mindful that in March of this year the House debated the rural economy. I follow that with a related topic: land use in the countryside. I welcome the large number of distinguished speakers who have chosen to take part today. I look forward particularly to the contributions of the maiden speakers. I am delighted that they have chosen this day to make their debut.
I declare an interest as a co-owner of a hill farm high in the Exmoor National Park and of some mainly wooded and pretty soggy acres in the low Weald of Sussex. Therefore I come from the traditions of extensive livestock husbandry, not intensive agribusiness. I am a practising chartered surveyor and a member of the Country Landowners' Association. I have a special interest in rural land use management but my views are those of a private sector land manager and are essentially my own.
The saying goes, "Live your life as if you would die tomorrow but farm your land as if you would live for ever". At the heart of this is a social responsibility. It is on this aspect that I intend to start and finish in this debate. Land uses have shaped the countryside mainly by farming and by forestry. Of course land use in the past, particularly pre-war, was extremely diverse. But that turned into an imperative to grow two blades of grass where one grew before. Now the view is that much of the countryside is more valuable for other uses and methods of husbandry are coming under critical scrutiny. One of the biggest land use issues is the rural share of the 4.4 million households projected by the year 2016.
Most land is under private management but the process is immensely more complex than for previous generations requiring new skills not easily learnt or taught. Environmental and public amenity factors have been added to the fiscal and regulatory challenges of the past. Unless a land manager is in the business to make a profit he will almost certainly go under. Production support after the war, the CAP and the fiscal regime did much more than change techniques of husbandry; they altered the culture of land use, shifted the capital base and revised the entire rationale of the management process. It is not surprising that something started in wartime and continued thereafter for 40 years will take some time, perhaps even a generation, to refocus.
Society is questioning the old order and I question it too. What is being asked of land managers has changed and the practical and business environment has been substantially and irreversibly altered. A simple comparison of land value and the extraordinarily low returns achievable from its use compared with any other business shows us how far this has gone. In the uplands, where my chief interests lie—leaving land value aside—it is frequently not possible to make a profit on the cash account alone without grants and subsidies. That is

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clearly a questionable basis for a business and for the environment in the longer term. I recall that I sold my single Buckler beef herd and its quota some months before the BSE crisis, not because I had any premonitions but because they simply could not be made to balance the books.
Some land managers—and I am one—try to diversify to augment their income but the opportunities are woefully limited and sometimes involve specific requirements. Few schemes succeed in tapping the public interest and public demand for facilities in the countryside. When they do that tends to be for tourism. The problem with that is that the season may be short, competition with foreign holidays fierce and the risks are accordingly high. At the same time public perceptions of what is valuable in the countryside result in closer scrutiny of what goes on there. But critically, conservation and recreational factors may produce no land use benefits. They may not even relate to legal ownership. Woodland plots for leisure rather than silviculture and pasture for amenity and horses are increasingly common phenomena.
Too much has changed to turn the clock back to an age of low input, low output farming, and I should know. The countryside is in play as a commodity. Everyone is now expecting the CAP to change but without an agreed policy to supplant the current and admittedly flawed system. In this vacuum land management philosophies have become a good deal less cohesive. It is easy to destroy land use utility but much harder to recreate it. Land managers are understandably a little confused. Doubt represents cost and risk and affects management and land use. The response becomes more short term and tends to be opportunistic. Where fragmentation of farms and estates results, they frequently default to high value second or retirement homes with a few acres and capital starved ranch land beyond. Therefore the entire level of expectations within society as a whole and among land managers in particular has shifted.
The rights of ownership from which much management control derives its authority are said to be a social construct. However, it is worth remembering that social realignment may itself lead to conditions in which management and resultant land use alter and often in imperceptible ways over many years. Short-term measures, sometimes in response to public opinion, can conflict with the need for longer term strategies. Indeed, despite the interest in the countryside there is a real gap in the understanding of rural land use and its management by the majority of the nation who do not live there. This situation leads to incompatible objectives. If environmental works have no benefit for the land manager, he needs other means to fund them. If he is strapped for resources, even a 60 per cent. grant still leaves him 40 per cent. short. If the only way to get grant aid is by long-term commitment through a management plan of questionable profitability, that may have the same effect as no grant at all. Unprofitable habitat management, especially where bank managers are involved, makes little sense.
Old hazel coppice in my part of Sussex has value for dormice, but save for small-scale schemes, it has little economic use. I calculate that it costs between £800 and £900 per acre to rejuvenate. Grants of up to 50 per cent. can be obtained when there is some money in the kitty. But spending say £450 an acre to maintain land worth £1,200 an acre with no prospect of return is an elegant way of "going bust". Of course some of us like a challenge but that is not a sustainable way of dealing with the matter on a wider scale. It is little wonder that such woodlands lack management. Despite all that I am encouraged by the great amount of work that is being done in the countryside in these difficult-to-manage areas.
Similar considerations may apply to the regulation of protected areas. On Exmoor I have heather moorland, improved pasture and other bits and pieces of woodland in a site of special scientific interest. However, according to my calculations, there are six other designations which all affect my land and which all have different emphasis. Consultation is longwinded and tortuous to say the least. On occasions I have missed windows of opportunity altogether. The rules change fairly frequently making forward planning pretty difficult. The regulators—I make no particular criticism here—tend to lack knowledge of land use. The administrative cost to me is high. That is a disincentive because there is no end to it all. It is no good taking away control by designation and then wondering why management falls off.
It is not possible to democratise land use in the sense of undertaking consultation at every turn. Public debate at national level needs to set the cultural filters and philosophies. That is fine, as is an expression of broad local preferences, but this must be followed by executive decisions and good relevant advice if land managers are to be guided effectively. This gets more pressing the more the regulatory process bites into daily land management.
Official bodies have grown up to deal with specific problem areas but it is apparent that many of their tasks overlap—I suggest to the point of unnecessary duplication in some instances. The regulatory process appears heavily fragmented in a number of instances. The approach tends to be prescription rather than targets. When targets are set the means are all too often methodological standardisation. Of course that leads to arguments about the best way forward. There is a real need for a new approach. The present process is inefficient and gives the impression that the regulatory agencies hold no real authority to deal with the matters under their control and that the public interest speaks with many and often discordant voices.
I think that the number of bodies claiming to represent the public interest, in particular with regard to the proportion of annual budgets devoted to administration, needs looking at. Despite the valiant efforts of the staff of your Lordships' Library, to whom I am most grateful, it is almost impossible to identify the element devoted to administration. The indications are that the costs are well in excess of the amount acceptable in a well run charity. The matter should be looked into.
No one is guaranteed a living; but value for the purposes of publicly acceptable land use could be added to holdings. Land managers need to be able to capture some of those values which society places on the use and management of land. High grade land may always be profitable; and land with higher amenity value, such as the uplands, may always have a command for special assistance. However, mediocre land in between—and there is a lot of it—is susceptible to reductions in product support and grant, with precious few alternative uses. Therefore there are real risks of land use change, disinvestment and rural deprivation.
There needs to be a better understanding between consumer and producer. The consumer is entitled to environmentally acceptable methods of production, but he has to show commitment by purchasing a product so produced. Unfortunately this simply does not happen. As consumers we cannot go on asking the impossible, compromising the countryside use and expect no change in land use.
Public access to the countryside—I promised the Minister that I would not make an issue of this—is a huge asset. It creates business for the makers of maps and hiking boots but is seldom a resource to the land manager; sometimes quite the converse. The same applies to a view, a place to picnic, to paddle in streams, and so on. Many land managers provide access free, but beyond a certain level it represents a cost and a risk. I await with interest to see how the responsibilities on users will be imposed under a statutory right of open access. I think that enforcing it will be a difficult task. It is that which would worry me rather than the principle of open access.
On urban fringes, there are impediments to husbandry because of levels of access. I refer in particular to dogs, vandalism, and so on. Not unnaturally, land use and general amenity suffer. Woodland buffer strips may be preferred but they result in loss of views, landscape change and perhaps cover for fly tippers. Risks have to be shouldered in respect of that. It is almost impossible for private sector managers to police and manage those areas effectively. I noted today that Dr. Miriam Rothschild confirmed that lack of appropriate management is one of the most significant causes of ecological and environmental loss. That has to be considered in the context of lack of management, and the inability to manage the land because there are no means and resources to do so. Simply tightening the regulatory framework misses the target. Part of my land is so full of ticks that grazing is limited. An imposed grazing regime may fail if the livestock simply will not eat what is on the ground.
I invite the Government to take a new initiative. A cohesive domestic rural policy is needed without having to wait for the rest of Europe. The culture of taxation of rural business needs fresh consideration so that multipurpose long term land use is encouraged, not discouraged. Hedges and habitats could be made assets to the land manager. As matters stand, environmental works do not even rank as farming for tax purposes. In short, we need to make public objectives of land use valuable in the hands of managers. Some holdings will
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have to diversify. Planning officers and governments issuing guidance need to be positive about changes, including rural housing and diversified activities.
There have been failures in both the public and the private sectors. I recall policies which involved grants for preserving hedges while at the same time assisting their grubbing out. That was not many years ago. Land managers may have sinned but I suspect that it is mostly in pursuit of Government and EU policy. Re-education all round is needed; but it also needs motivation with relevant and accessible training.
Partnership is a current buzz word. All I will say is that partners share costs, risks and investment culture. They have compatible and transparent agendas. And I have a word about management plans. Often those have different meanings for different people. They should never be compulsory, even less the sole means of providing incentives or grants. They should be kept simple, cost effective and flexible. Whole farm plans should not represent an entry ticket for gaining planning consent.
Despite those concerns, I am positive about the future. The problems can be overcome and land managers have had to become enormously flexible in their approach. But the right signals need to be given. That has not always been the case in the past. A new long-term strategy is needed especially for those areas where farming will never make money, or where land use is controlled on environmental grounds.
If collectively land managers and government on behalf of society can formulate common aims and objectives for the future of the countryside, I believe that the latent expertise of managers will deliver results. To adapt a quote from Errol Flynn, we all need to,
"reconcile our gross habits with our net income".
I beg to move for Papers.
3.55 p.m.
Lord De Ramsey: My Lords, I am most grateful to the noble Earl, Lord Lytton, for instigating this short debate on land use in the countryside for two reasons: first, because the European Commission has this year issued its paper entitled Agenda 2000 on the reform of the common agricultural policy; and, secondly, because it gives me the opportunity to make a speech on one of the few subjects about which I know anything.
I have to declare an interest. My family have lived and farmed at Ramsey on the edge of the Fens for over 200 years. Our land is mostly below sea level, which is inclined to concentrate the mind. Ramsey men and women have been forced by their geographical situation to concentrate on survival. It is therefore probably no surprise that when I started farming there was an advertisement in the Ramsey Post which read, "Ramsey man seeks wife with tractor—please send photograph of tractor". But Ramsey is no exception. The British countryside has always had to survive by change although I expect many people would be surprised if they could be shown how much Bronze Age man altered the wilderness and how agricultural it was even in those days.

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Most of the changes have been gradual. The violent depopulation of the countryside by the Black Death was not equalled until the 1880s when a combination of bad summers and imported grain from the opening up of the middle west brought dereliction on a scale that was not seen again until the depression of the 1930s. We saw then the effect of dereliction on the countryside; and we know that we never want to see it repeated.
The Scott Report published by the Government in August 1942, Land Utilisation in Rural Areas, was surprisingly lyrical about our countryside. It stated:
"The landscape of England and Wales is a striking example of the interdependence between the satisfaction of man's material wants and the creation of beauty…The beauty and pattern of the countryside are the direct result of the cultivation of the soil and there is no antagonism between use and beauty".
Those of us who live in the country cannot help feeling that there is something rather unnatural about town life. That is why it sticks in our throats to be told by urban man that farming practices are unnatural and that what we need are urban solutions to rural problems. What we need has not changed. We need thriving rural communities and, as over 500,000 jobs have been lost over the past 50 years, we need new employment. Clearly, this will not be agricultural employment but small and medium-sized businesses which suit their locality because without jobs and profits the countryside will lose that spiritual quality which is so special to us.
That is why I am so delighted to be able to take part in this debate. We need to get across the message that the Scott Report was right when it said that the countryside was not there just to provide recreation and holiday facilities for the town. I have seen many examples of small tourist businesses all over the country, in particular the West Country. People are very enterprising. On one visit, a notice on a farm gate said, "50p to visit the Tomb of the Unknown Rambler".
We are partly to blame for failing to explain how the countryside works. The 1947 planning and agricultural Acts enshrined the belief that the countryside is just for agriculture; but while 80 per cent. of land use will always be agricultural, our communities cannot survive on agriculture alone. We need to spread the word through schools and open days to influence our local decision makers. Like many farmers, I have parties of school children round the farm and hope to educate them and, in turn, their teachers and parents. I am not normally at a loss for words but on one occasion, after I had been explaining about the Fens and flooding and had referred to Noah's Ark, a small girl asked me a question. "Were you on the Ark?" she said. "I certainly wasn't", I replied, rather offended. With that unanswerable childish logic, she said: "Well, why weren't you drownded then?".
I count myself extremely fortunate to be able to contribute not just to the patch of land that I farm, but also to the health of the countryside through the Environment Agency. I have two mottoes on my desk. The noble Earl has already mentioned the first: "Live as if you were to die tomorrow, but farm as if you will live for ever". The second is: "The town has a face but the country has a soul". That spiritual quality is the reason
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for making sure that we manage change successfully. Therefore I look forward to hearing the wise words of advice which I am sure this debate will evoke.
4.1 p.m.
Baroness Nicol: My Lords, it is a great pleasure on behalf of the whole House to congratulate the noble Lord on his maiden speech. I confess that I was rather surprised to find that it was his maiden speech. The noble Lord seems to have been present in the House for so long that I thought he had delivered it long ago. It was thought-provoking and helpful. Apart from anything else it was a very learned speech. Noble Lords may not know that in his own area the noble Lord is a shining example of how to live in an environmentally friendly way. He is greatly respected in the neighbourhood for that approach. I hope that we hear from him a great deal in the future.
The time allowed is very short. The House will be pleased to hear that I shall not attempt to refer to the CAP. We must remember that this debate is conducted against a background of the Government taking up the legacy of the previous government; namely, the commitment to sustainable development. I am therefore very pleased to agree with the noble Earl's remark that a great deal has to be done to the regulatory system in order to get it right.
The two main pressures on land are the need to maintain the viability of rural areas and the demand for housing. The estimated need for 4.4 million houses referred to by the noble Earl is a subject for argument. However, there is undoubtedly a need for considerable expansion.
Earlier this year a regional conference took place in East Anglia on what should be done in relation to the pressures on land. Noble Lords will forgive my particular mention of that area since it is where I live; a number of the points raised are also relevant to other parts of the country. It is perhaps obvious that we should use brownfield sites first where they exist and encroach on valuable agricultural or recreational land only as a last resort. I include in the term "recreational land" landscape and open natural countryside which provide an escape from our crowded way of living and for which the Countryside Commission has a special responsibility. I commend its efforts to fulfil its aims.
But the amount of brownfield land is diminishing and in some areas, such as East Anglia, there never has been enough to make a significant contribution to the projected need. East Anglia is under particular pressure at this time. It has the fastest growing population in England and, although the new development of industry there is welcome, it brings its own pressures.
The first priority requirement is the need for clearer government guidance on what constitutes brownfield land and how the target for its use is to be measured. Does it include, for example, derelict brick pits and abandoned military sites in rural areas? That is an important question in East Anglia, as it is in other parts of the country.
If we are to achieve sustainable development we shall need integrated government policies on planning, housing, employment, crime prevention, education,

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health and transport. If we are to improve the viability of existing rural communities and make life better for rural dwellers, the same considerations apply. The health of our environment is ultimately linked with the health of our communities. Poverty-stricken communities in a derelict landscape are not to anyone's advantage. It would be helpful if the Minister could give some indication as to whether such considerations have been, or will be, part of government thinking.
4.5 p.m.
The Lord Bishop of Bath and Wells: My Lords, in the time available I want to make one theological, spiritual point and one practical one. In English we use two words for what in Hebrew is expressed in one. The Hebrew word "eretz" means both "earth" and "land". There is no doubt about the teaching of the Old Testament that,
"the earth is the Lord's and all that is in it",
and the human race is given a direct and clear responsibility for stewardship of that earth—an earth which is wonderfully made and held in trust for each generation. These two words, earth and land, often each carry a distinctive culture. "Earth" is the word used in expressing the big ideals, the cosmic questions, doomwatch predictions, green policies like the concept of sustainability—attempting to ensure that this generation's quality of life is maintained and enhanced only in a way that does not jeopardise the quality of life of succeeding generations—whereas "land" most often refers to parcels of earth, whether it be a country or a building plot.
"Land" is used to describe a possession, a commodity, where we tend to resent any restriction upon our ownership. Of course we all need to have clear, defensible space and people need to make their living from the land. That will always involve an element of being treated like a commodity, but it remains a parcel of the earth and carries with it important responsibilities as well as rights. It is my belief that real dialogue is needed between those who concentrate on the use of the word "earth" and its big ideas and those who use the word "land" in a very practical way.
Secondly, I wish to make a practical point. In my experience in Somerset most farmers are highly conscientious about their responsibilities for the countryside. We owe many of them a great deal for their persistent care; and many farmers—especially in the hill country—are struggling to survive. The structure of subsidies is generally biased towards intensive and large-scale, industrial farming, leading all too often to the destruction or removal of important habitat, reduced variety of species and severe inroads into the natural food chain. What is the philosophy which lies behind subsidies of £193 per acre for oilseed rape and yet only £20 per acre to encourage any change to organic farming methods? Has the time not come in Europe and the UK—I was interested to hear about the developments in Europe—to recognise that the impact of subsidies should be urgently reviewed in the light of the need for greater sensitivity to the ecology of our countryside? In New Zealand a new look at subsidies
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has, in the longer term after real initial difficulties, brought about impressive improvements. I believe these issues have to be faced for the sake of the countryside and of the longer term security and satisfaction of farmers in combining the essential production of food with the stewardship of natural resources.
Moreover, with or without a reform of subsidies, there is a need for good ecological information to farmers as they decide how to manage their land. It is not just a question of ownership; it is foremost a matter of management. Are farmers getting enough good and tested information in relation to the delicate ecological balance in their area? For instance, why has the monoculture of rye grass been largely unchallenged, thus excluding a variety of plants and insects and distorting the natural order? I am convinced that with a positive and resourced approach, most farmers would respond. As a lay member of the Conservation South West Awards, I saw at first hand what could be done with woodlands and landscapes given the right advice. I commend the work and approach of the Farm and Wildlife Advisory Groups (FWAG), which are constructive and realistic, revealing how much difference can be made by thoughtful and practical steps to preserve conservation headlands—creative spaces where nature can grow and be a host to a greater diversity of plant, insect and bird life.
The whole intricate balance in the creation of Planet Earth is endangered by what we so often do in the use to which we put land. We all carry responsibility and share the stewardship—the use of cars, the waste we accumulate and not least the way in which we seek to use our countryside without destroying it. It is already five minutes to midnight; the situation is serious; but we can all do a lot in the remaining five minutes to give the earth a better chance if we behave like the good stewards God wants us to be.
4.10 p.m.
Lord Beaumont of Whitley: My Lords, the length of the list of speakers bears testimony to the debt that we owe to the noble Earl, Lord Lytton, while constraining us from expressing it fully.
It is my very welcome duty, on behalf of the whole House, to congratulate the right reverend Prelate the Bishop of Bath and Wells on his maiden speech. He is one of those people who comes to us with an enormous reputation before him. Many of us in the Church of England have been waiting for Jim Thompson to come to the House of Lords and wish that it had happened earlier. We are very grateful to see him here.
I take family farms as my subject. My noble friend Lady Hamwee will deal with some of the other matters which arise from this subject. She has kindly said that I may trespass on one or two of her lavish 10 minutes if I need to do so.
I am a vice president of what used to be called the Small Farmers' Association until they began to be afraid that they would be taken for a race of hobbits. It is now called the Family Farms Association. I did my later practical training in farming on two small south Devon farms.

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This is an important subject and one on which I should be speaking from these Benches, because I suspect with some confidence that the members of my party in another place represent more small farmers in the West Country, Wales and the north of Scotland than does any other party. But the most important reason for raising this subject is that in both the short and the long term family farmers can do more for this country in human terms, which are the only terms worth our considering, than can large farmers.
In the short term an increase in small farmers can repopulate the countryside. The countryside is primarily for agriculture and it is a sad and sorry distortion of its nature if we divide it up into areas for factory farming and a series of playgrounds for the urban masses. The more people we have living in the country the better. It relieves the overcrowding of the towns and provides the demand which is needed for the provision of rural public transport, shops, cottage hospitals and all the other services which no one with an ounce of humanity and aestheticism wants to see replaced by endless cars, supermarkets and enormous health centres.
We want to repopulate the countryside and we want to repopulate it with people who respect it and want to serve it, not just people who sit opposite a computer screen at the end of a 'phone, useful though those tools are. If that means having rather more people living in new buildings in the countryside than the CPRE would like, that is just too bad. I do not believe that we need to fix the British countryside in an Edwardian pattern of large Dukeries, prosperous large tenant farmers and underpaid agricultural labourers any more than we want to turn it into an industrial waste of large farms with no hedgerows.
I therefore ask the Government—and have given notice of the question—what they are going to offer to the small farmer, who has been the lifeblood of the countryside and can be exactly that again.
It is quite clear that CAP reform must embrace "modulation" with enthusiasm. It is essential to address the ridiculous situation where 80 per cent. of aid goes to 20 per cent. of farmers. We must address the situation where more food is essential to feed more people. It is realised that small farms and indeed smallholdings are the most efficient way of doing this—not the most efficient in terms of pounds and pence but certainly the most efficient per acre of ground and in providing human employment in a world where conventional economics have deprived millions of people of employment; the most important in terms of producing healthy food, as no doubt the noble Earl, Lord Clanwilliam, will remind us; and the most important in providing an ecologically sound and environmentally attractive countryside.
I hope that the Minister will tell us that the Government will resist the blandishments of the big and greedy farmers and listen to the small farmers for a change. I hope that they will pledge themselves to an approach to modulation which will help the latter even if it robs the big men of some of the million-pound cheques that we have heard about. I hope that, beyond that, they will announce some imaginative policies in
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areas into which, for lack of time, I have not been able to venture, such as efforts to help new entrants to farming, in which, as the SAFE alliance reminds us, we fall behind both the Republic of Ireland and some of our partners on the Continent. I do not necessarily want to go back to my party's tradition of five acres and a cow, but the small farms and small farmers of this country deserve respect and encouragement; I hope that that is what they will receive in the future.
4.16 p.m.
Lord Astor of Hever: My Lords, I should like to argue the case for forestry as a versatile land-use option that fits into a rural development policy and is able to fulfil a range of resource, recreational and environmental needs.
The production and manufacture of timber is a significant generator of jobs. Current research indicates that one hectare of productive hardwoods sustains the equivalent of one full-time employee. Commercial activity along the timber chain tends to be more labour than technology intensive, making enhanced activity in this sector a fruitful focus of investment when sustainable employment is a goal. Projections forecast that productive forestry is set to create 1,000 jobs a year over the next 16 years' expansion.
Forestry performs well as an alternative to agriculture and is a recreational resource for a largely urban population. Woodlands can be managed for recreation without loss of production and can absorb large numbers of people without the appearance of crowding.
Forestry has a significant contribution to make to environmentally sound economic policy by providing a renewable, managed resource of raw materials. Timber is the second largest traded commodity after petrochemicals. The UK currently imports 85 per cent of its timber requirements. The British wood products sector is therefore in a strong position as a supplier, and demand is expected to increase in all sectors.
The key to further investment in processing is resource security. Our forestry industry must achieve a sustained annual yield of 15 million cubic metres per anum. This will require approximately a further 275,000 hectares of commercial softwood planting (exclusive of amenity, native woodlands and community schemes, where productivity is not a principal objective).
The previous government set ambitious targets for forestry expansion in the three rural White Papers: in England, doubling over 50 years; in Wales, a 50 per cent. increase over 50 years; and in Scotland, a steady expansion. There has been talk recently of reducing these targets to "encourage a significant expansion" and I am unclear what the Government's policy is. I should be grateful for some clarification and encouragement on this point from the Minister.
4.20 p.m.
Lord Nathan: My Lords, I have had the honour over the past five years to be chairman of the Sussex Downs Conservation Board, which is responsible:
"for the protection, conservation and enhancement of the natural beauty of the Sussex Downs area of outstanding natural beauty, including its physical, ecological and cultural landscapes".

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The AONB has been made beautiful by nature, substantially aided by economic activity over the generations: by farming, forestry—and, yes, by industry. It is only by development of economic activity that the landscape will be maintained and improved and that wildlife will be protected and enhanced, as we all desire. The integrated rural policy presently being promoted by the Countryside Commission should be a great instrument to achieve that.
In that context, and in view of the shortage of time, I confine myself to one activity in which I have recently become particularly interested; namely, coppicing, which was briefly mentioned by the noble Earl who opened the debate. We have worked closely with the Wessex Coppice Group based in Hampshire and much of what I say has been derived from information which it has most kindly supplied. I find it interesting that, in speaking of coppicing, I echo the few words that the noble Earl, Lord Lytton, devoted to it and also the noble Lord, Lord Astor, who referred to forestry. There are many in your Lordships' House who have extensive knowledge of forestry and coppicing, whereas I have very little; yet it seems to me that there is something to be said for coming down to earth and avoiding the great wide issues which others are so much better equipped to address than I.
In Hampshire there are about 16,000 acres of neglected coppice and there is a substantial and probably somewhat similar area in East and West Sussex. Coppicing has been neglected for the past 50 years. Revival depends on marketing. Some idea of the size of the market can be gauged from charcoal, of which some 40,000 to 60,000 tonnes a year are required and of which about 4,000 tonnes are produced in the United Kingdom. The employment potential is substantial. Sales of hurdles are increasing; in the suburbs, demand is growing to replace panel fencing; likewise on motorways. Coppice workers are struggling to meet demand.
Studies of the financial viability of hazel coppicing indicate that, if harvested every eight years, the highest quality might produce some £9,000 per acre. If 5,000 acres were restored—out of the 16,000 acres in Hampshire, for instance—a total sum of some £45 million would be raised, or over £5 million per annum. Restoration costs for an area of 5,000 acres are estimated by those qualified to do so at around £3 million. Coppicing is financially viable. The main problem is the cost of restoration.
But beyond the economic and social benefits are benefits to the environment, particularly to landscape and wildlife. Sir David Attenborough put it succinctly when he said about the hazel coppicing industry:
"Here you have a unique situation where we are talking about both creating jobs and wealth and also improving the side of Britain that conservationists most treasure".
I very much hope that the Government will encourage the new regional development agencies and MAFF to use their influence and resources to aid the training of
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those already in the industry and those wishing to join and to promote its expansion and development for the benefit of the economy and the countryside.
Baroness Farrington of Ribbleton: My Lords, perhaps I may respectfully remind speakers that when three minutes is signalled on the Clock that is the end of the time the speaker has been allotted. We are in danger of some speakers not having time to speak at all.
4.24 p.m.
Lord Gisborough: My Lords, I must start by declaring an interest as an owner of land. National parks and beauty spots will come under increasing pressure and the proposed open access to moorland will do irreparable damage to it.
The North Yorkshire National Park published a figure of 16 per cent. of walkers wishing to walk off footpaths. More recently, an officer of the park put the figure at 1 per cent. The walker wants and should have a good footpath system. With very few exceptions, landowners have always been prepared to talk about that and most of them support it. But the vandals, the egg collectors and the long dogs men will all enjoy any right of access. Even now, 56 per cent. of walkers on the moors run their dogs out of control, in contravention of the country code. Drystone walls will simply not stand up to the pressure of orienteering.
Of course, it would be against the law to vandalise, but there is no way in which the national parks can be under supervision all the time, any more than populated areas can always be under the eye of the police. Once there is disheartenment over the management of moors near urban areas and it has gone, inevitably high heather and bracken will soon turn even the militant rambler back onto the footpath. By then the moors will be permanently ruined for everyone. If Ministers do not understand what is involved, I hope that they will make it their business to find out. They will be welcome visitors to any moorland manager. It cannot be right to jeopardise the economy, management and consequent enjoyment of 84 per cent. of walkers—those who say that they wish to walk on footpaths—for the sake of satisfying the political desire of a militant minority, who should not be allowed to wreck things for everybody else.
The rural interests are worried and would like an assurance that, in the proposed merger of Objective 5b, they will receive a fair share. The countryman feels, with some reason, that he is largely represented now in Parliament by town dwellers with little practical knowledge of country problems. Therefore, it behoves the Government to take particular notice of the countrymen's concerns.
This is a huge subject. I had a mass of points which I had to throw away. I do not feel that a debate such as this should be conducted in three minute speeches. It makes a nonsense of the debate. When a debate is scheduled and the number of speakers means that the time allotted falls below seven or eight minutes, the list should close. There is no way an argument can be developed in three minutes.
4.27 p.m.
Lord Palmer: My Lords, I too am grateful to my noble friend Lord Lytton for introducing this important and timely debate. I must declare an interest as a farmer and landowner and as someone whose home and garden are legally obliged to be open to the public.
I say "timely", because most stewards of the countryside are currently experiencing significant economic difficulties. Cereal farmers in Scotland, for example, have had a poor harvest and cereal prices are very significantly down on last year, in some cases by as much as 50 per cent. Hill farming and particularly the beef sector continue to face the consequences of the BSE crisis. Our commercial timber producers face severe competition from imported timber. If we are to have a well tended countryside, we need to ensure long-term economic stability of farming and forestry. Much of Scotland's tourist industry is based on the attractiveness of its managed countryside and the scenery that it produces.
It is important to remember that the countryside is not a natural resource which has been created overnight. It is the result of generations of hard work and applied land management, achieved at great expense to those generations. Had fox hunting been banned 100 years ago and other field sports 50 years ago, dare I say how very different our countryside would look today?
Public interest in the care of the countryside is a relatively new phenomenon. Traditionally, the countryside has been relied upon to produce food and timber and particularly strategic supplies in time of war. The great success that was achieved must not be swept aside. I believe that it was criminal, back in the 1970s when we were told that more food was required, to say, "Drain the wetlands and here is a grant to do so." Now, we are told, "Stop, set it aside and here is a grant to do so." Real commercial management is the raison d'être for ongoing management in the countryside and that must not be forgotten. Who would want to see ranch or prairie-type farming in this country?
What we really need and deserve is a proper balance between modern production measures and economic pressures, and, most importantly, sustainability and preservation of the intergenerational equity. I urge Her Majesty's Government to look at that most carefully, especially as land use, farm production and, indeed, the woodlands sector require long-term planning. One simply cannot correct yesterday's mistakes overnight and such long-term planning is essential and vital for the future of the countryside.
I believe that a departure from the situation in which land managers are seen to be those responsible for damaging the countryside and jeopardising biodiversity is a number one priority. Single pressure groups must not be allowed to think that they know best. In reality, there is a very great cost to land managers of having the public presume that they can wander wherever they wish. Responsibility is very much a two-edged sword. The voluntary principle of countryside stewardship is vital to the countryside as a whole. I just hope and pray that this Government have no intention whatever of doing away with it.
4.30 p.m.
Lord Marlesford: My Lords, I declare an interest as the chairman of the Council for the Protection of Rural England. It is good evidence—not just anecdotal, but polled evidence—that there are few matters about which the British people mind more, whether they live in the town or the country, than the English countryside.
It is about two years since the previous government produced the first substantial White Paper on rural matters and about a year since that White Paper was updated by the previous government. The special point about the White Paper was that it required all government departments to take an interest in the concern for rural matters. That needed some doing. It was not just a product of the then Ministers who were responsible for the environment and agriculture. Michael Heseltine took a big part in pushing it as did the then Prime Minister also. I hope that the new Government will take that mantle and inheritance, burnish it and update it and fairly soon bring out their own views where they may differ. In general they were supportive of that White Paper.
One area where I know the Government are considering possible changes is in the speeding up of the planning system. Planning was one of the two great legacies of the Attlee Government. I believe that the beauty of rural England and Britain as a whole would not be what it is without the planning system. I should like to bring one specific point to the Government's attention.
Planning is essentially something in the public interest and the cost of the proper planning process should be part of the cost of development. There is a real danger of local authorities and other completely legitimate objectors to certain proposals by developers being intimidated either by the prospect of costs being awarded against them by the inspector in the case of a planning refusal on appeal or, indeed, by developers bullying and intimidating objectors, particularly local authorities and saying that they will ask for damages for delay.
It is necessary for the present Government—it should fit in with their ideological attitude to these matters—to ensure that, unless there is evidence of malevolence or impropriety in an initial refusal of a development application, the planning appeals should be heard without local authorities being landed with extremely heavy costs. Going round to the CPRE county branches, again and again I have been told that local planning authorities, faced with a bill for costs of perhaps as much as £100,000 for expensive lawyers hired by developers, are intimidated and inhibited from doing their proper duty in planning. This is an important point and I hope that the Government will respond to it.
4.33 p.m.
Lord Taylor of Gryfe: My Lords, I declare an interest as the chairman of the Parliamentary All-Party Group on Forestry. I am indebted to the noble Lord, Lord Astor of Hever, for making the case for forestry so positively and succinctly this afternoon. I hope that his speech will be taken on board by the Minister.

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I want to put forward two statistics which justify the concern for an expanding forestry policy. One is the fact that imports to this country of wood products amount to £6 billion per annum. We are the least forested country in Europe. The other statistic is not economic; it is social. In the Forestry Commission estates last year, 50 million day visits were paid by ramblers and people escaping from the dreariness of towns to enjoy the beauty of the countryside. Those statistics are important.
It is interesting that in the past—20 or 30 years ago when I was chairman of the commission—we had a policy of partnership in forestry. The private and the state sectors worked together in research, training and forestry management. I regret that during the period of the last government that partnership disintegrated because there was an obsession with privatisation. Ramblers, trade unionists, land owners and everyone involved with the countryside opposed privatisation; but privatisation was practised by stealth.
Let me give the House a further couple of statistics. Forestry Commission planting 20 years ago was 15,500 acres per annum. Last year the Forestry Commission planted 461 hectares. Twenty years ago the number of employees in the Forestry Commission (we have been discussing employment in the countryside) was 8,000; 10 years ago it was 5,700; last year it was 3,600. Those are skilled people who know what they are doing in the countryside and love the countryside. That represents a reduction of state interest in forestry.
Can the Minister give me an assurance that under the new policy of the new Government we will restore the partnership that formerly existed in forestry? Can he also give me an assurance in relation to devolution? I notice that devolution is a subject devolved to Scotland. One of the things I did during my time in the Forestry Commission was to take the commission headquarters to Edinburgh. Edinburgh is the centre of the Forestry Commission (UK). Under the devolution proposals Scottish forestry will be devolved to the Scottish parliament. What will happen to English forestry? It will have no national authority and no national office. Can the Minister assure me that national forestry policy will be protected?
4.36 p.m.
Lord Renton of Mount Harry: My Lords, perhaps your Lordships, on this autumn day, will let your imaginations stray for a moment from Westminster to a grassy valley two miles outside Lewes in Sussex which has been walked over or ridden over on horseback by the people of Lewes from time immemorial. That grassy valley has almost all the initials attached to it that the noble Earl, Lord Lytton, mentioned in his opening remarks. It was a site of special scientific interest, environmentally sensitive and outstandingly naturally beautiful.
This spring the local farmer ploughed up the valley. He gave notice to English Nature. He followed the rules. But English Nature was unable to make an adequate financial settlement with him. He therefore ploughed it up and planted a crop of flax—wholly unsuitable to the
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flint and chalk out of which the Sussex Downs are made. I walked up and had another look at the valley last Sunday; it is close to my home. One third of it is outside the SSI. The crop has been harvested and there is now six inches of brown stubble. The one third in the SSI has been replanted with either wheat or grass which is starting to grow and, most remarkably of all, the bottom third has been "de-ploughed". Volunteers from Lewes came out to roll the turves back onto the ground which they had walked over for so many years.
I do not blame the farmer for acting as he did, although my family too had walked over the valley for many years. He did it because of the subsidy. He was able to obtain a subsidy of £500 per hectare for his flax crop, no matter what the yield. That compares to the £40 subsidy for continuing with the grassland which he and his father had previously had. The matter received a certain amount of national interest. I mention it in the House because the noble Lord, Lord Donoughue, promised an answer as to how the conflict between Department of the Environment aims and Ministry of Agriculture subsidies will be resolved. We wait with interest to hear what is to happen. Obviously, what happened can be repeated in other parts of the Downs.
I must declare my interest. I have the honour to be succeeding the noble Lord, Lord Nathan, as chairman of the Sussex Downs Conservation Board in just two days' time. It will be very hard to follow in the noble Lord's footsteps. He is aware, as I am, of the tremendous pressures that are now on the Sussex Downs and on other areas of outstanding natural beauty which, like them, get no direct central government grant and no mandatory local authority grant either.
I suggest to the Minister that the Government, who are to spend £750 million on a millennium dome, might consider putting aside some millions of pounds for the Sussex Downs which, after all, attract 32 million visitors a year and which have 10 million people living within an hour's drive. I suspect that the Downs will be there and being enjoyed for very much longer than the millennium dome.
4.40 p.m.
Lord Cobbold: My Lords, I should like to thank my noble kinsman, Lord Lytton, for introducing this important debate so early in the life of the new Government. In the interests of brevity I shall confine my remarks to one topic; namely, the vexed question of rights of way. Local authorities currently have a target of having the rights of way network properly maintained, well publicised and legally defined by the year 2000. Under this umbrella there has been a lot of activity as councils have attempted to agree on the definitive map for their areas. Much of this activity has been contentious, expensive and, in many cases, has verged on the absurd.
I have been involved in two cases recently—one where an expensive two-day public inquiry was necessary, when in fact all parties were in agreement outside the meeting on the appropriate solution, but that could not be put forward by the local authority for procedural reasons.

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The other involved the designation of a footpath/bridleway as a byway open to all traffic or a "BOAT" as it is curiously called. This designation means that the byway can now be used by motor cycles and four-wheel drive vehicles, in competition with the pedestrians, cyclists and horse riders who used it all along.
The rather spurious evidence used for the BOAT designation was a variety of ancient maps which indicated that these routes may—and I stress the word "may"—have been used by horse-drawn vehicles in previous centuries, but their usage during the current century was not taken into account.
I believe that the present situation is illogical and often absurd. The previous government issued a consultation paper a year ago entitled Vehicles on Byways. That paper contained some valuable and commonsense suggestions, particularly for the creation of a new class of highway determined by whether the surface has ever been metalled.
I do not know what has happened to that paper, but I hope that the Minister will be able to resuscitate it. It is not an issue of party politics, but of common sense and balancing not necessarily irreconcilable interests. I hope that the Minister will be able to respond on that point.
4.43 p.m.
Baroness Sharples: My Lords, having lived in the country all my life, I certainly appreciate my good fortune. It was not until I grew up that I realised that with such a privilege came responsibility for the land. We are only the custodians and I believe that we should be careful in such a position not to alienate those who wish to visit or move from the city to join our rural communities.
I believe that more should be done to help newcomers to understand that the country needs managing, and that has been referred to by other speakers. The cost is not inconsiderable, as we all know. I have only 43 acres, but fencing, keeping footpaths clear; keeping stiles in good repair; woods free as possible from rabbits; protecting badgers and bats—I have a cave full of bats—are all things that take many hours of attention. There is also the responsibility of cutting down dead trees—something which appears to upset those who come from the city more than many other things that one does. They do not seem to understand that trees actually die.
Having planted 700 hardwood trees in a valley, I take pride in what I have done and want others to enjoy my efforts. I have also put in a lake which is fed by a nearby spring. The grants for planting amenity shrubs and trees are far from generous. I received £190 for an area of 100 such shrubs and trees and that cost me £900. That is not very much encouragement for a small farmer such as myself.
Welcoming 50 youngsters to use the woods for part of the national motorcycle trials has proved a great success and perhaps more people should follow that.
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These are only a few examples of what can be done if we have the will to understand the views of others who may have a very different perception of rural life from our own. Thank you.
4.45 p.m.
Lord Bridges: My Lords, I first became interested in the subject of land use as a schoolboy growing up in the Second World War when there was a very active debate on this subject. I read with some fascination what appeared in magazines such as Picture Post, the Architectural Review, or the writings of Thomas Sharp, Lewis Mumford and various other authors of eminence. It was out of this debate that we had the Labour Government's Town and Country Planning Act to which the noble Lord, Lord Marlesford, has paid some tribute and I join him in that. It was a milestone piece of legislation. It was perhaps a trifle too comprehensive and it could be described as a belt and braces and buttons piece of legislation designed to constrain or contain any unplanned expansion or contraction. It was left to what now appear to be the decades of Conservative government which followed to trim off some of the unwanted excrescences of that legislation and such things as development charges or undevelopment payments, which were not really necessary. I believe that what we have now is a pretty well tried and worthwhile system. I very much hope that the Government will be able to continue it.
Speaking as somebody who has spent much of his life living abroad, one becomes very aware of the deficiencies of those nations where there are no such systems. Perhaps the leading example in my life has been the coastline of Attica, a natural jewel which has been desecrated by human development and to which the final insult is now to be added; namely, the installation of a major international airport at Spada in the centre of the peninsula. In looking at our system I hope that the Government will be able to concentrate on one or two areas where I believe that some updating and improvement is now necessary.
The first question to arise is that of resources, both human resources and cash resources. The human resource is very important. It is a question of the human quality of those managing the system on which all depends. Some years ago I became interested in the way in which the Department of the Environment selected, appointed and trained inspectors conducting planning inquiries. I was rather impressed by the trouble that they took. I hope that that investment in human quality can be continued.
There is also inevitably the question of the cash resource. Here I have been concerned that the budget for the Countryside Commission, which is responsible for supervising and controlling much of importance in the countryside, appears to be lacking resources for funding such things as the committees which run areas of outstanding natural beauty. Even more important is the inability of the commission to make evidence available to public inquiries in areas in which they are interested. That seems to me to be a serious failing and I very much hope that this resource deficiency can be made good.

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I would also like to say a brief word about the question of 4.4 million houses. I believe that the way in which that figure has been arrived at is open to serious criticism. It is derived from a study of population statistics at the centre. The figures are then extrapolated and allotted to counties. That is not the right way for us to arrive at the best system. It would be far more sensible if local input could be obtained at an earlier stage so that the local authorities who have some better knowledge of social trends and requirements can devise a system in a more sensible way. The present system fails to distinguish as it should between economic need and social reality. This is an important debate, but I have tried to keep within the time limit available. I hope that the Government will be able to respond to some of the constructive suggestions that we have already heard.
4.49 p.m.
Baroness Strange: My Lords, we are all grateful to the noble Earl, Lord Lytton, for initiating this debate. We have also heard two scintillating maiden speeches, particularly appreciated by those of us who live in rural areas.
Although there are many advantages in living in the country, such as lack of pollution (although not always, because sometimes, with intensive farming, erosion sets in, the topsoil starts blowing off, and everything gets covered with a fine red dust); lack of noise (although not if you live within a mile or so of a motorway); birds and butterflies, particularly if you feed them and do not spray; hedgehogs and roe deer, and rabbits (if you call those an advantage), there are many disadvantages too. That is shown by the number of people who find it easier to live in an urban area. Shops, libraries, cinemas, theatres, recreational facilities such as swimming baths and public parks, and public transport are all there and easy to get to.
In rural areas there used to be vans coming round—now there are not. We have no milk delivery, nor bread, and the grocer's van with its horse is long a thing of the past—although we do have a fish van from Arbroath on Thursdays. Buses to town are few and far between, and there may be as much as a mile or even further to carry home your shopping. The local rail station, to which I used to bicycle every morning to go to university in Dundee, has now closed down.
A car is therefore a necessity, not a luxury, for all rural families. Of course, most people in the country grow their own vegetables and keep hens, but they do not all have a cow or make their own bread. They need a car to fetch the other essentials for living or, dare I say it, to go to church, to the cinema, or to take their children to school (or at least to the school bus), or swimming. The girl who lives next door to us at Megginch had a baby yesterday, called Fern, and doing well. Luckily, her husband had a car and was able to drive her 10 miles to the hospital, saving the ambulance journey and the heavier petrol consumption that that would have meant. I am making a small plea to the Government to consider reducing the tax on one car per family for people who live in a rural area and who really need it.
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Those of us who scrub mud from our leeks and carrots, who put on gumboots when we go out and overcoats when we come in, may not have all the advantages and rich pickings of Johnny Town Mouse, but though like Timmie Willie we prefer to live in the country, because that is where our roots are, we would still like to have some.
4.52 p.m.
Baroness Masham of Ilton: My Lords, I have always felt that visitors to the countryside should be given plenty to do so that they enjoy, and learn to understand, value and respect it. I thank my noble friend for this debate. My wish today is to bring to the notice of your Lordships one important matter in which I must now declare an interest. I refer to the use of agricultural land for riding schools. Many people, be they locals or tourists, who cannot afford their own horse or pony and have no facilities to keep one, use those facilities if they exist. I have a small centre for just that purpose in North Yorkshire.
Running a riding establishment is very expensive. One has to produce or buy the horses or ponies, provide the facilities, buy and repair the tack, provide the feed, repair the fences, worm the animals several times a year, shoe them regularly at £40 a time, pay the staff and do the administration such as paying the telephone and vet's bills and the insurance and licence fees. Advertising costs are high, but so is the growing need for security. In the past 10 days my small centre has been burgled twice. Crime in the countryside has become big business. Tack seems to be very popular and resaleable. Even with security lights and alarms, padlocks and chains, the burglars still keep coming into the rural areas from the cities to reap from the countryside what they can get. Many villages no longer have policemen who used to give protection and a feeling of security.
On top of all those problems, the councils are trying to rate such establishments out of existence. I now quote from Horse and Hound magazine of 9th October:
"Surrey School new victim of rates burden. A Surrey riding school has become the latest victim of savage business rate rises. Ray Lodge Riding School at Lingfield was forced to close after its rates soared from £790 to £4,300. To worsen the blow, proprietor Sheila McCory was presented with a back-dated bill, landing her with a debt of £8,000. The farm is to revert to purely agricultural status. Mrs. McCory said she would take the case to the European Court".
That sort of thing is happening up and down the country.
Many young girls in particular spend hours helping at riding establishments in return for free rides and instruction. Their parents know where they are. Riding gives them a healthy interest, keeping them away from drink and drugs. These places provide a service to their local communities. They should not be penalised and put out of use. I hope that the Minister will give some hope to the people who are struggling to provide a leisure facility in the countryside. Compared with set-aside, where farmers are paid for doing nothing, this seems totally unfair and ridiculous.
4.55 p.m.
The Earl of Onslow: My Lords, I must declare an interest. Unfortunately, the Onslow estates are not nearly as big as they used to be—we seem to have dissipated them—but I am a landowner and today I hope that I can draw your Lordships' attention to what I believe is the countryside's greatest need. We need a multi-use countryside. What the noble Baroness, Lady Masham, has said about riding schools is only too true. Others have referred to shooting and to the other activities that take place in the countryside. We must have a multi-use countryside. We must get away from the idea that the countryside is merely a prairie producer of grain. The noble Lord, Lord Renton of Mount Harry, told us a horrifying story of a farmer behaving completely and utterly legitimately, but in a way which must run counter to the public interest.
One of my noble kinsmen owns about 20,000 acres of Suffolk. His set-aside payment on that was in excess of 1 million quid. As he owns chunks of Vancouver and a large number of Guinness shares, I am not totally sure that he needs that payment. I cast no aspersion on him and say merely that he should kick his advisers to make sure that he gets the cheque earlier. No blame attaches to him; it is the system which is absolutely crazy. It is a system which makes life more difficult for hill farmers and which makes it more difficult for us to keep the countryside populated.
The common agricultural policy has failed completely—not only in this country, but in France and Germany also. Parts of Burgundy are depopulated. In the Beauce and the Île-de-France one sees mile after mile of cereal monoculture, which puts large sums of money into the pockets of the Alsace grain barons. I have no objection to them claiming their subsidy. However, it is a totally silly way of spending public money because not only is public money being used to enrich the rich, but the system also taxes the poor. If you want to buy margarine because you cannot afford butter, you encounter the import tax of £2,000 per tonne. It is crazy to run a system of agricultural support which does not support the countryside and which penalises the poor who wish to buy cheaply. It is madness to a previously unparalleled degree.
We must ensure that subsidies in the countryside are not directed towards food production. For want of a better phrase, they should be directed towards "gardening and gamekeeping"—that is, they should be paid to those who look after the place, make it look right, and maintain its appearance and its biodiversity. Subsidies should be directed at keeping the ecology of the countryside sound. They should not be directed only at the grain barons.
I had an environmental assessment carried out, and the assessor's comment on a barley field was that it was an environmental desert. That is because a good barley field contains nothing but barley plants. Nobody is denying that it is essential that we have food, but food should be produced in a free market and without subsidy. It is the things that we care about in the countryside, such as protecting the environment, that need economic subsidies. We must also ensure that
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maximum use is made of the countryside by the maximum number and in the maximum number of activities compatible with good biodiversity and sound ecology.
4.59 p.m.
Lord Norton: My Lords, I thank the noble Earl, Lord Lytton, for bringing this important and much neglected issue to the attention of the House. First, I declare an interest. I have a small estate. Therefore, I understand people's problems in trying to work and live in what can be described as a harsh environment. I say "harsh" because those who live and work in the countryside have a very limited choice of jobs, public transport, shops and schools. Frequently the villages in which people have grown up are places in which they can no longer afford to buy houses because of pressure from second home buyers. This threatens the whole community.
Some years ago I kept bees in the second most productive area of the country. I regularly obtained over a hundred pounds of honey from each hive. The bees were in a good environment. It was warm and relatively pollution-free. I was keeping them in the centre of London. On this morning's "Today" programme we heard that there are more species of birds in urban areas than in the countryside.
Society's perception of the countryside and what many expect from it is, I believe, totally confused. Although I have described it as harsh, it is perceived by many as a good place in which to live; it is quiet, scenic and less polluted. The people who do not have some of that—there are now many—want it. At one moment we say that we need 4.4 million new homes and we should build 2.2 million in the countryside, but where are the figures which state how many are to be created in the 60,000 hectares of vacant urban land and from the currently estimated 1.5 million dwellings that are unfit for human habitation? Where are the figures to show how many dwellings are to be created from offices that are no longer required?
The countryside is also under threat from building on green belt land. The present Government show no signs of being sympathetic about that threat. Recently the Deputy Prime Minister overturned a public inquiry decision and allowed 140 acres of building at Peddimore in the West Midlands. That land is said to be worth £28 million and the new Labour local authorities will benefit from the sale. To demonstrate that point further, we have spent the past 15 years putting shops in big lumps in rural areas so that we can ruin the countryside and finish off market towns at the same time. What are we trying to achieve? We have dying city centres and a dying countryside. There are obvious countryside issues such as the saving of hedgerows, but the countryside is a complex resultant of all factors of living, be it the netting of salmon in the North Sea or education policies.
It is natural that people wish to escape from an urban environment that is stereotyped and boring but this in turn imposes unrealistic pressure on the remaining countryside. It is said that 300 people a day leave the towns. In conclusion, I argue for a rural urban

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environment rather than an urban rural environment. That will ease the great pressures on land use in the countryside.
5.3 p.m.
Lord Rotherwick: My Lords, I declare an interest in the countryside as a landowner and farmer in an area of outstanding beauty. I am also a member of the CLA and the NFU. Sadly, this is such a short debate that one can hardly cover some of the more interesting subjects. I would have very much liked to debate the waste disposal problems in the countryside as well as access, which I should now like to cover.
The countryside is home to 25 per cent. of the population and it must also answer the recreational demands of many sports and hobbies. It does so on a day-to-day basis and also at weekends and during holiday periods. Many types of activities occur in the countryside. Some of the main activities, such as angling, cycling, golf, model aircraft flying (believe it or not), motor cycle sports, parachuting, rambling, riding and shooting, all take place in the countryside. If one gave an advantage to one of those it would perhaps be incorrect. For example, to give a right to roam would mean that walkers were accorded preference over other groups. Arguably, it would damage our patchwork country, but that is a long argument on which we do not have time to expand today.
I suggest that the best way to increase access to the countryside is by negotiation. I also believe, like many bodies such as English Nature, the RSPB, the CPRE, the CLA, the NFU and—I say to the noble Earl, Lord Lytton—the Royal Institution of Chartered Surveyors, the Association of County Councils and many others, that the best way forward is to manage and increase access by negotiation. I believe that there is a problem in this route and that a lot of work can be done to improve the framework of negotiation. We should be able to make the negotiation process easier and more constructive.
Some of the problems that need to be addressed relate to management. It is essential that management of access is environmentally and economically sustainable. Resources are required to cover the cost of providing and managing high quality public access and public rights of way in other forms. Perhaps most importantly, especially from my perspective as a landowner, there is a need to remove the barriers that hinder positive action by owners to improve access. I refer for example to concern over occupiers' liability, dogs and litter. One should be able to have a sensible discussion with groups of people to provide new footpaths without owners being worried that once footpaths are drawn on a map they can never be removed or altered even if faults come to light at a later date. It is interesting that negotiation has worked well for the hunting fraternity. It has access to large areas of the countryside as a result of negotiation, not legislation.
I observe that I have run out of time so I shall cease. I hope that the House can have another debate on this topic another time. There is much more to talk about.
5.8 p.m.
Lord St. John of Bletso: My Lords, noble Lords have heard a number of emotive speeches today and a good number of alarming statistics on the projected pressures on the countryside from increased housing and traffic flows. Clearly, there were a number of disastrous housing developments in the countryside in the 1980s. In many cases local authorities had no statutory obligation to take design into account when considering planning applications. It was encouraging that in February of this year the Department of the Environment issued planning policy guidance which formally recognised design as a vital criterion in planning applications.
In the few minutes available to me I should like to explore possible constructive solutions to sustainable development. To that end I simply focus on the subject of responsible planning and development. If rural England is to absorb a share of the millions of new homes that are planned by the Government over the next 20 years detailed consideration must be given to architectural character, local culture, the impact of traffic flows, the provision of employment and support services and the vitally important aspect of reliable public transport in rural areas.
The planning system, wisely used, should and can be a driving force to enable and encourage change to the benefit of the nation as a whole. Both the public and private sectors should play a far more active role in ensuring responsible planning. I favour a system of developers undertaking a village audit of urban, and more specifically, rural developments. Moreover, with large developments, it should be the developer's responsibility to provide good and reliable public transport for the area.
If the Government are looking seriously at the regeneration of town centres to try to stem the flow of people leaving our major cities for the countryside, it is vital that good public spaces and sports fields be provided in urban areas.
The problem of compatibility between growing urbanisation and the preservation of the countryside is common to almost all over-populated European countries. New roads, new business parks, and new houses are needed in many parts of the countryside where there is poverty and high unemployment. I do not mean to say that I subscribe to the adage of urban solutions for rural problems. I hope that sustainable development can be achieved through responsible and consultative planning and development.
5.12 p.m.
The Earl of Clanwilliam: My Lords, demands from the whole population for convenience foods and shopping have combined to cement the intensive farming scene in this country. As the noble Earl, Lord Lytton, said, the farming community has been depopulated by some half a million people over the past 50 years. There is no likelihood of solving that problem by intensive farming.
It is the CAP which is at fault. It has become a kind of incurable disease. Farmers are paid £2.3 billion a year and the housewife pays £20 a week more on her

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shopping bill. There is something arcanely ridiculous about that. The noble Earl, Lord Lytton, mentioned Dr. Miriam Rothschild who says also in her book published today:
"Nature cannot just survive in reserves. It depends upon what farmers are paid to do in the wider countryside".
If we can alter some of that, we shall have much better intensive farming.
Your Lordships would expect me to make one plea for consideration of a serious attempt to increase the area of land farmed organically in the UK. The Soil Association reports that the level is static at 50,000 hectares. That is a derisory 0.3 per cent. of UK farmland. The noble Earl, Lord Lytton, said also that intensive farming would never be able to cope with the nation's total demand for food. That is true. There is an enormous demand for organic food which is not satisfied by the organic market; two-thirds of the organic food sold by the supermarkets in this country is imported.
I take this opportunity to congratulate the right reverend Prelate the Bishop of Bath and Wells on his maiden speech, and in particular on his excellent reference to the anomaly which arises from the difference in support prices for oil seed rape and organic farming. I thank him for that remark. As a member of the Soil Association, I hope that he will join us. Perhaps he is already a member.
Demands for access to the countryside present a serious problem not just from urban incomers who need a manicured vista of pastoral bliss to satisfy their politically correct ideas of the countryside but from the urban motorist who has a similar agenda. The urban motorist needs more and more roads. I recognise that the construction industry would be hard put to turn an honest penny if there were not a considerable road-building programme, but motorists will not have a chance to enjoy the freedom of the road. That is a joke if ever there were one.
5.15 p.m.
The Earl of Macclesfield: My Lords, I, too, have an interest to declare as one of a family of landowners. I, too, should like to thank the noble Earl, Lord Lytton, for introducing this debate, and inviting the countryside to town. We all turned up in force in July. I am sure that other speakers today would agree that reservations about the future of the countryside which have been expressed today were the reason for the presence of the vast number of people who filled Hyde Park in July. It is reasonable to point out that we did not just fill it, we behaved in a thoroughly responsible fashion when demonstrating all our reservations about the future of the countryside. We left Hyde Park in a state fit for someone else to come in an hour later.
We left the police sitting in their minibuses doing whatever they wanted for the day. There was the delightful sight of two coppers wandering in shirtsleeves around what, in theory, was a protesting group of people 100,000 strong. That says an awful lot for the values of the countryside. I hope that the Minister will take into account today that sort of thing and what we heard from
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the noble Lord, Lord De Ramsey, in his excellent maiden speech when he said that we do not like being talked to by townsmen who do not really know what they are talking about.
It is a great sadness that the governing party has no support on its Back Benches. They will presumably be coming forward with legislation in due course. At the beginning of December about three years ago there was a debate in your Lordships' House on a White Paper on the countryside. I am sure that the noble Baroness, Lady Nicol, will recall it. She opened it in those days for Her Majesty's Opposition. The noble Lord, Lord Carter, closed the debate for the Opposition. Unfortunately, the noble Lord found himself at the wrong end of the words of the noble Earl, Lord Ferrers, who pointed out that the noble Lord, Lord Carter, had no supporters, presumably because they had all gone roaming.
It is a sad reflection of what is going on today. I felt that that was what was going to happen from that day onwards; the countryside was going to face legislation brought in by those who have not tried to understand the countryside. The noble Lord, Lord Gisborough, issued an invitation to Ministers to come to the countryside to learn. That would be a nice thought. Would not just Ministers, but Back Benchers and others like to spend time in the countryside? We have some time for the subject today. We do not have enough of it. The countryside does not clockwatch. It is no good coming to the countryside for three minutes or three days. The minimum cycle will be a week. Would the governing party of this country care to come out, look around, talk to those who live and work in the countryside and who understand the countryside, and learn about the problems? Instead of concentrating quite so much on the three Rs, would they give a little thought to the fourth R and biology? If a great deal more biology were taught, we should not be faced with quite so many silly ideas about the countryside. If we dealt with the fourth R, the problems would not arise anyway. What is the fourth R? It is the reason for this building—responsibility.
5.18 p.m.
Lord Milverton: My Lords, it is a pleasure to support the Motion tabled by the noble Earl, Lord Lytton. I do so because I studied agriculture in Kenya and a good part of my ministry in the Church of England was in rural areas. When we observe the countryside, we are struck by the differences in its appearance. The contrast is sometimes distinct. The way land is being used will indicate the care that is being taken and the purpose for the land use. Is it just to gain the necessities we need or is the work done in harmony with our knowledge of nature so that the riches of nature are preserved rather than merely taken out? Are we leaving nature less healthy and without any replenishment? That is something that we can see clearly if land is over-grazed or over-cropped. We can see that on even the slightest of slopes or hillsides where there is erosion. Heavy equipment with massive towers must cause a wearing away of important topsoil into powder. We know that thousands of feet trampling in areas of public access on

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open ground—parks, trust land and so forth—wear away the surface. That is the problem which must be tackled.
The sight of hedges having gone is a sad one, bearing in mind how they protect the land and provide a habitat for birds, other creatures and animals. Hedges, where they are still kept, are lovely and beautiful, and that goes also for trees. Both enhance the landscape. They are a necessary, wise protection, as I saw from a farmer on Points West. They are a positive protection for nature's life.
Set-aside, if not done with thought and planning, can be useless if the area is just left with no positive ideas, with no purpose. The need is for an attractive, useful area rather than just an untidy mess and the possibility of controlled pastures of mixed grasses and flowers. There is a need for the encouragement of art and craft enterprises as well as light industries and also sports facilities. Helping the young to stay in the countryside is necessary. One knows that many would like to do so, but financial reasons do not make it easy. Why should there be unkept, dirty land?
If people are to have the right to move over and roam over the countryside, as one has read in newspaper articles, they may need to think not only of rights but to think in greater depth. They should ask themselves in what way they can take part in creativity and help promote respect for the land. Respect for the land goes with respect of the landowners.
That is the crux of the matter for all. Are we going to participate in the work of creation's creativity so that the countryside can be a wholesome place in which to live and work for the harmony of all elements of nature, including ourselves? That includes the young, many of whom would like to be able to live in the countryside if it were possible and many of whom have a real desire to preserve it. That is what many young people have told me. I hope that Her Majesty's Government will be able to be positive for the countryside.
5.22 p.m.
Lord Colwyn: My Lords, I wish to draw your Lordships' attention to the problems of many thousands of people living and working in the vicinity of the beautiful Cotswold rivers, the Churn, the Coln, Ampney Brook and, more particularly, the Windrush. I declare an interest as a house owner on that river.
The local media have recently highlighted a campaign aimed at the Secretary of State to give special protection to the River Windrush. Continual complaint over the past five years has led to assurances from the Environment Agency and Thames Water but they have been unable to identify the cause of what they describe as a very complex problem, let alone implement a satisfactory solution.
The thousands of people who enjoy the river for its wildlife, fishing, history and recreational activities agree that it is dying—not because of the recent droughts, but because of the amount of water being abstracted at various levels. The Cotswold town of Witney's wealth
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as a centre for wool was due to the sparkling, fast running waters of the river. That water is now being diverted to supply many thousands of households.
Although the river is now less than half its former size, the Environment Agency maintains that flow gauge readings have not significantly changed over 20 years. Statements it has made in the River Windrush Catchment Water Resources and Abstraction Licensing Policy in 1992 and in the Local Environment Agency Plan in 1996 are directly contradictory.
During very low flows, abstraction can be as much as 30 per cent. of the total river flow. Thames Water blames the restricted rainfall, but the problem goes back 20 years and the permanent effect on the river's ecology is largely due to constant abstraction. Flow levels are also affected by the large scale gravel abstraction where very often water which leaks into gravel pits is not returned to the river but is pumped into nearby brooks which have been dry for many years.
The licensed low flow rate states that water cannot be abstracted if the flow is less than three million gallons per day. Given that the average daily flow is 63 million gallons, it theoretically allows Thames Water to abstract when there is only 4.7 per cent. of the average flow. The Environment Agency puts all its emphasis on averages when it is obvious to conservationists that it is the data on low flows which need to be scrutinised.
Since everyone who knows the river estimates that it now flows at less than one quarter of its original volume, I ask the noble Baroness to seek assurances from the Environment Agency that it will have another look at the matter.
I know that the Secretary of State has been contacted and I hope the noble Baroness will also be able to ensure that the Environment Agency takes proper account of the important issues when formulating its action plan for the Windrush. Can it look carefully at the plan to spend £9 million on a new treatment works at Worsham? If water has to be taken from these rivers, does it not make more sense to take it at its confluence with the Thames, thus maintaining levels upstream?
Under the Government's new guidelines, all abstraction licences issued in the 1960s have to be reviewed. I would ask the Minister to take notice that the abstraction licences affecting the Windrush are carefully considered and that she recommend that a low flow study is implemented for the Windrush as it has been for other local rivers.
5.26 p.m.
Baroness Hamwee: My Lords, first, I apologise to the House for being unable to be in the Chamber for much of the debate. I have been attending a meeting of the Procedure Committee in the Moses Room. However, I was lucky enough to be present for the two notable maiden speeches. I was not, as some of your Lordships might have thought, in the Prince's Chamber auctioning some of my minutes.

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During the three minutes allowed, it is difficult to deal sensibly with many of the issues raised by the topic. The title of the debate is to call attention
"to land use in"—
perhaps "of"—
"the countryside and to the demands placed on it by society".
I thank the noble Earl for drawing your Lordships' attention to those two aspects. As regards the demands of society, one might say that the topic can be dealt with in two words; cui bono, for whose benefit?
One cannot deal separately with issues raised narrowly, at any rate geographically in the countryside, without also being aware of pressures on other parts of our society, particularly in urban areas. Town dwellers have interests in the countryside, too—not only food production but development. The noble Baroness, Lady Nicol, asked what is to be treated as brownfield land and how it is to be dealt with. There are issues of town planning, and town dwellers reap great value from the countryside by being able to visit it. I believe that there are approximately 1.3 billion daily visits each year. I am a tourist to the countryside and recently in the north I came across a sign directing travellers to the Lakeland Oasis Farm Village. I believe that it is a commercial enterprise which seems to be an interesting conjunction of characteristics. Perhaps it satisfies town dwellers in achieving everything in one visit.
My noble friend Lord Beaumont of Whitley referred to the need to move away from seeing the countryside as something set in amber. He talked about it in terms of the social hierarchy. It is all too easy for NIMBY characteristics—no development in my back yard, which are all too obvious in towns—also to apply in the countryside. The countryside as it is today is not entirely natural; it is the product of development over many centuries. I refer to enclosures and the industrial revolution. Many of the distinctive features of the countryside include those which are man made. I mention that because I believe that one cannot resist all change. I suggest that the context for change should be a respect for tradition but coupled with productive use of the countryside and the need for new ventures. One cannot expect landowners simply to preserve. That is not an end of it. They have interests, very supportive interests, and they have to make sure that they can survive. Preservation or conservation cannot happen as though there are no economic factors surrounding it.
In other words, regeneration is a rural as well as an urban issue. We need to plan for it, possibly or probably at regional level. We need to plan for the needs of our regions. We need a strong regional planning framework, observing the need to integrate economic, environmental and social issues.
There is a major demand—and reference has been made to it—for affordable housing. There is an argument for good country houses, which I support, as good examples of architecture and for modern houses which add to our historical heritage. But that is irrelevant to many who are in need. I was pleased that my noble friend Lord Beaumont of Whitley referred to demands for new settlements. I do not believe that the need for new settlements can be ruled out. But it is
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important that the new settlements should comply with agreed and strict criteria—criteria of design, sustainability with regard to individual buildings and the facilities which new settlements should provide for businesses and for services, not least to minimise the need to transport people from a new settlement to other settlements.
New settlements probably will have to be located away from areas of major employment if only to discourage commuting. I do not suggest that all that needs to be imposed from one centralised master plan. The need for partnership has been referred to and there are many partners who can be a part of that process. There is a need for participation and democracy. I look forward to debates in your Lordships' House on regional identity when we come to consider the proposed new regional development agencies. However, I should like to see the place of regional government discussed and I believe that that would have a role in assisting the countryside.
The countryside is a resource to be cared for as well as exploited. It is a home to communities which are to be nurtured. But it is also the bedrock of economies. They need hard work and innovation to sustain them. It comprises also an environment which we must respect. But it is not a museum piece. We could fight every new development, tolerate every vested interest and, as a consequence, suffer, for example, a lack of affordable housing and appropriate services. Or we could—and I suggest we should—shift our perspective to the regeneration of the countryside to fit the new world.
5.33 p.m.
The Earl of Lindsay: My Lords, this has been a very stimulating debate and, as the noble Earl, Lord Lytton, said, in his opening remarks, it has attracted a large number of distinguished speakers. I compliment the noble Earl on initiating the debate and giving us such a thought-provoking and wide-ranging introduction to what is an immense subject.
There is little that has not been touched upon by someone. I was delighted to hear the noble Baroness, Lady Nicol, speak on brownfield sites. I believe that we should have more specific debates on the subject of brownfield sites and contaminated land in the near future. We had some tremendous contributions on forestry from the noble Lords, Lord Taylor and Lord Nathan, and my noble friend Lord Astor. There were some very good contributions on planning from the noble Lords, Lord Bridges and Lord St. John, and my noble friend Lord Marlesford. We went on through' the index of rural issues even as far as the rabbits of my noble friend Lady Strange. Our discussion has extended from riding schools to the bees of the noble Lord, Lord Norton.
I am delighted that the excellent performance based on the accumulated experience of this House provided such a good setting for two excellent maiden speeches. My noble friend Lord De Ramsey, who has established an impressive reputation as chairman of the Environment Agency, made a long-awaited maiden speech and a very good one at that. He was cleverly

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away from his seat when my noble friend Lord Colwyn put in a plea for the Environment Agency to attend to the River Windrush. I was delighted to hear also the maiden speech of the right reverend Prelate the Bishop of Bath and Wells. He gave us some interesting thoughts for debate, not least about the word "stewardship" which has been a theme running through much of the debate.
The Government are very keen on focus groups. I believe that this debate alone has, in an informal way, gathered a focus group of extremely wide experience and expertise with a large number of informed comments and expert opinions. I hope that the Minister and her advisers and colleagues will consider what has been said. I share the regret of many that the time limit on today's debate has been so punitive on those who had so much to contribute. However, I believe that the prize goes to the noble Lord, Lord Palmer, for squeezing the maximum number of words into the legal time limit.
We have covered the sheer diversity of the countryside, economic viability, enterprise and opportunity. We have covered the prosperity of the countryside not only in its economic sense but in its environmental and social sense. We have covered environmental stewardship, housing, and, in many different ways, we have covered the options available to management. The diversity of this debate is a true reflection of the diversity of the countryside. It is not just a diversity of landscape or topography; it is a diversity of people, varying aspirations and traditions. It is thus a fear of many noble Lords who have taken part in the debate that the countryside is subject increasingly to simplistic and misleading generalisations. It is increasingly vulnerable to prescriptive edicts and formulae, regardless of the sheer diversity of circumstances which lie out there.
Most vulnerable in terms of misconceptions about the countryside is the role of economic enterprise in our rural areas. As the noble Baroness, Lady Hamwee, said, the distinctive features of our countryside are not necessarily God given—and I say that with respect to the right reverend Prelate. It is not a museum. Much of what is there owes its existence and final shape to the hard work of man. The countryside is merely a series of working landscapes. It is the scene for seven-days-a-week and 52-weeks-per-year industries and enterprises. Those land-based enterprises in the countryside form a considerable economic element not only of rural Britain but, indeed, of our whole national economy.
I do not say that from quaint, rose-tinted, rustic sentiment. The employment statistics, up and downstream, of all our major land-based economic activities are considerable. There is a fashion to focus on the fall in on-farm employment since the Second World War. But if one looks at the increase in employment of up and downstream industries to agriculture since the Second World War, it can be seen that agriculture still comprises a huge industry and a very important part of the landscape in every sense.
The CAP and the problems that its subsidies have presented to land use were touched on widely by my noble friends Lord Renton of Mount Harry,
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Lord Onslow, Lord Clanwilliam, the right reverend Prelate and the noble Lord, Lord Beaumont of Whitley. As many noble Lords will know, the CAP is up for reform in the very near future. The one issue which must be guarded against by the Government in the negotiations is that of modulation.
A number of speakers today complained about large farms, about the rich becoming richer and, indeed, about the need for small-scale family operations. However, we must be very careful in our negotiations in Europe to ensure that the consensus across the Channel for modulation does not disadvantage farmers in the United Kingdom unnecessarily. The average farm size on the Continent—indeed, across the whole of the EU as a statistic—is half the average farm size in the UK. Moreover, the average farm size in Scotland is twice that of the United Kingdom. Therefore, modulation, which is something that the last Government fought very hard to prevent in 1992, is something which must not be imposed upon us. It is not a matter of simply stopping the rich becoming richer; it is a matter of protecting the average-sized family farming unit in this country. I hope that the Minister will be able to assure the House that modulation is something that the Government will do everything they can to prevent in negotiations.
There is a very strong link between economic prosperity and environmental prosperity. The myth has for too long been that if land use is economic and successful, surely it is environmentally damaged. There is a second myth in parallel; namely, that the interests of land management and the interests of natural heritage inevitably conflict. Neither of those myths is borne out in reality. It is the farmer, it is the woodland manager, and it is the land user who is economically viable who is able to incorporate environmental value adding stewardship into his operations. In his very strong opening remarks the noble Earl, Lord Lytton, dealt extremely well with that fundamental economic reality and the environmental benefits which accrue.
The most eye-catching and vivid manifestation of society's demands and the pressures that they place on land use in the countryside involve the huge explosion of tourism and the desire for greater access. The noble Lords, Lord Cobbold and Lord Rotherwick, dealt with those issues. However, that is another subject which I believe would be best handled as a separate debate. But those whose livelihoods are based in the countryside should welcome the interest that those based in urban and suburban areas are showing in the countryside. It is an enthusiasm for the countryside which can bring great benefits. The sheer and straightforward economic opportunities provided by tourism represent one obvious symptom of the benefits that can accrue from people taking a greater interest in our rural areas.
There are also educational opportunities which I hope will be grasped. The noble Earl, Lord Lytton, talked about the gap in understanding and my noble friend Lady Sharples mentioned the disappointment that urban and suburban people feel when they see a tree that has been felled in the countryside, simply because they do not necessarily understand how the countryside

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operates. It is not just a matter of managing the visitors; it is also a matter of educating them so that they understand why some rural activities have to be managed in a certain way.
There are some contentious aspects to rural activities. The management of wild deer is just one. Similarly, the 130 million activity days devoted to country sports of various sorts, the near 100,000 full-time or full-time equivalent jobs which depend upon country sports and the £6 billion in direct and indirect expenditure from those traditions are all vital elements of our countryside.
When considering what has been said in today's debate, I hope that the Minister will do her utmost to take on board some of the hard-earned experience which has been outlined. I also hope that she will take note of the pleas for partnership approaches to policy making and decision making as far as possible and of the need to be sensitive to the needs and desires of the countryside, especially when it comes to such contentious single-issue themes.
I also hope that the Minister and her colleagues will recognise the benefits that can come from working with land managers rather than in a way which alienates them. Land managers can bring a commitment, they can bring energy and resources, and they can work with rather than against in a rather neutral and unconstructive format. I hope that the Minister will be able to take away with her the points so well made by speakers from all parts of the House.
5.43 p.m.
Baroness Hayman: My Lords, as the noble Earl said, we have indeed had a fascinating and constructive debate today. I should like to add my congratulations to the noble Earl, Lord Lytton, both on the very lucid and considered way in which he introduced such a wide-ranging and diverse subject and on choosing a subject which has attracted such a long and star-studded cast of contributors in your Lordships' House. I have to say that it also gives the person concluding the debate from the Government Front Bench what I believe would be described in current parlance as a challenging task. However, I shall do my best to respond to the points raised.
As many noble Lords said, today's debate has provided us with two outstanding maiden speeches. The noble Lord, Lord De Ramsey, gave us a speech of great wit as well as great eloquence and indeed of passion. That is a very good combination for a maiden speech and of course for any speech made in this House. I am sure that we all look forward to hearing from him in the future. Equally, the right reverend Prelate gave us a wonderful balance between the spiritual and the practical. If I may say so, it is not many Members of your Lordships' House who have their maiden speech trailed on the "Today" programme for them. Perhaps it gave us all expectations which were not in the least disappointed by listening to the right reverend Prelate. It is possible that the timing of today's speeches and contributions were such that we all ought to have practised for the format of the "Thought for the day" slot and then we would all have got the timing absolutely right.
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As I said, today's debate has been extremely wide ranging. Although I shall not be able to cover everything that was said, I shall do my best to write to noble Lords on specific subjects. I shall certainly write to the noble Lord, Lord Colwyn, about the River Windrush, although I was tempted to suggest that we simply cut out the middle man and that I refer him immediately to the noble Lord, Lord De Ramsey, in his position as chair of the Environment Agency.
The only aspect of today's debate which somewhat concerned me was the suggestion that the Government represent only urban interests. I should point out to the House that after 1st May the Government—and, indeed, Members in another place—now also represent a wide swathe of rural interests. The responsibilities of representing those interests—that fourth "R" of responsibility and one that the Prime Minister himself has emphasised many times—is something that we take most seriously. We have to be a government of the whole nation and that involves listening carefully. I can assure the noble Earl, Lord Lindsay, that we will listen to what has been said today. Indeed, we do want to know about and hear from those who have an enormous contribution to make from their own experience. However, I do not believe that it does any of us any good to categorise the other side of the argument either as distant and unknowing members of the countryside who do not recognise the problems of urban deprivation or vice versa in terms of people who live within towns and cities having no feeling for the problems or respect for the values of the countryside.
The need for partnership was an aspect stressed by the noble Earl, Lord Lindsay. I should like to endorse that. Indeed, we do need partnership which brings together the very considerable devotion of skill and effort which will be needed if we are to formulate policies which will actually tackle some of the very real problems which were so eloquently outlined today.
Several speakers today pointed out that we need to have an integrated approach. We made clear our intention to place the environment at the heart of government policy, to pay our duty to eretz in its widest sense. But today we have also been talking about eretz, as the right reverend Prelate said, in its narrower sense in terms of the specifics of land use. Many strands of government policy have an impact on rural areas. It is vital that we take an integrated approach to address those distinctive needs. My noble friend Lady Nicol made that point. Matters such as jobs and transport—as referred to by the noble Baroness, Lady Strange, and the noble Lord, St. John of Bletso—housing and employment in rural areas and the protection of and access to the countryside are all closely linked. I stress that we are committed to considering them in the round. It is only through a genuinely integrated approach that we can aim to consider the issues that have been raised by noble Lords tonight.
The countryside and rural policy have been considered as part of the Government's comprehensive spending review. The aim will be to set priorities for rural policy for the medium and for the long term. The need for a long term view, as expressed today, is something that we take seriously. We need to consider

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the best means of delivering those policies in institutional terms. I believe that the noble Earl made that point in his introductory speech. The review is being jointly conducted by my department, the DETR, and by MAFF and is taking into account other departmental interests. In areas such as transport the work that we are doing on an integrated transport policy must have at its heart the needs of people in rural communities and must recognise that the solutions that we find for congested inner cities will not be appropriate for isolated rural areas. We have also invited comments on this process from others interested in countryside issues.
As one would expect, several speakers such as the noble Lords, Lord Gisborough, Lord Milverton, Lord Rotherwick and others, referred to our manifesto commitment on access to open countryside. We shall publish a consultation paper setting out how this matter is to be taken forward. I hope that my next point will reassure some noble Lords who have spoken today. The consultation paper will recognise that legitimate aspirations to walk more widely in the countryside need to be set against other legitimate concerns. It will strike a balance between rights and responsibilities of walkers and landowners including respect for wildlife and the natural environment. We are firm in our intention to enable more people to enjoy the countryside but we are equally determined to respect the rights of those who live and work there. We shall keep compulsion to the minimum necessary to meet our objectives and we shall encourage the use of voluntary agreements. That issue was mentioned today. I hope that noble Lords will find that the consultation paper covers their concerns and allows them the opportunity to contribute. We look forward to drawing on the long experience of land management in this House and elsewhere to develop practical proposals for legislation.
On a specific issue, the noble Lord, Lord Cobbold, asked for reassurance on the consultation exercise on vehicles on byways. The Government have considered the results of that consultation exercise. We expect to make an announcement shortly. I return to the substantive issue of the debate, land use in the countryside and the demands placed on it by society. The countryside is a vital national resource and a key part of the economy where many people live and work. Our countryside must be a living countryside with a defined purpose as important as that of towns and cities but where non-renewable resources are carefully managed to preserve them for future generations. If we are to balance these needs, we must foster an attitude to development which ensures that it enhances or preserves the character of the countryside, its market towns and villages. Sustainable development is a cornerstone of the Government's rural and planning polices.
Revised national planning guidance for the countryside was published earlier this year by the previous government. The noble Lord, Lord Marlesford, emphasised the importance not only of having the right planning policies but also of having streamlined and effective procedures. That is something we have already debated in this House. We are considering proposals for
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speeding up the planning system as part of the comprehensive review. We shall bring forward proposals in the light of that. As regards funds for the Countryside Commission to appear at public inquiries, I understand that the commission has had to consider carefully its priorities in relation to individual development proposals. I am afraid that determining priorities is something that all public bodies, like all government departments, have to do.
I have already said that our countryside must be a living countryside. It has been said this evening that the countryside cannot be embalmed and kept as it is. There are many reasons why it is important that our countryside is a living countryside. That helps to contribute to general economic growth and to support conservation. It can combat social exclusion and the poverty that is often not recognised but which still exists within the countryside. We have talked about dying cities as well as dying countryside. Government planning policy aims to revitalise our towns and cities while maintaining and enhancing the environmental quality of urban areas. That is important not only for its own sake but to stem migration of people from towns and cities which increases the pressure for new development in the countryside. I welcome the thoughtful remarks of the noble Lord, Lord St. John of Bletso, on quality as an important ingredient of sustainable development. It is that issue of the need for more housing and the growth in the number of households that poses one of the big challenges. Many speakers mentioned it in the debate today including my noble friend Lady Nicol, the noble Lord, Lord Bridges, and the noble Baroness, Lady Hamwee.
It has been mentioned today that 4.4 million new households are expected to form in England alone between the years 1991 and 2016. Noble Lords are no doubt familiar with that statistic. I know that there has been some debate about the methodology for calculating that figure of 4.4. million. The methodology is set out in the 1996 Green Paper Household Growth: Where Shall We Live? We believe that the methodology is robust. I remind noble Lords that household growth is not a new phenomenon. It has been evident since the 1920s and particularly in the 1950s and 1960s. All previous forecasts have proved to be under estimates rather than over estimates. Of course much of this growth is already accommodated in regional planning guidance and structure plans and many of the houses needed have already been built. However, making further adequate provision for these households locally will not be easy. They will all generate pressure on transport, the utilities, water resources, energy and on both urban areas and the countryside. We shall give careful consideration to the responses to the previous government's consultation paper before deciding what the next steps should be.
We are committed to re-using previously developed land, particularly in urban areas, to assist urban regeneration and to create more sustainable patterns of development. The current national target is for at least half of these new homes to be built on previously used sites—the "brownfield" land that has been alluded to today—and these might include former MoD sites

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where a sustainable mixture of residential and other uses can be achieved. Recent statistics indicate that nationally local authorities are now close to meeting this target. The Government's planning policy guidance clearly states that authorities should make the most effective use of "brownfield" sites for housing. But it is inevitable that some greenfield sites will be needed. We are of course still considering definitions and targets for the re-use of "brownfield" land as we consider responses, in consultation, to the household growth Green Paper.
A number of noble Lords referred to the importance of making substantial changes in the operation of the common agricultural policy, particularly if the more remote farms are to remain viable. Reforming the CAP is a major Government priority. Although a key objective is to secure substantial budgetary savings in due course and benefits for consumers, we recognise that in the past too little agricultural support has been linked to measures which actively improve the rural environment. Radical reform of the present CAP would bring substantial budgetary savings, and we want to divert some of those savings to positive measures for rural development and for the enhancement of the environment.
The Government fully understand the needs of small farmers, a subject so eloquently argued by the noble Lord, Lord Beaumont of Whitley, and referred to by the right reverend Prelate the Bishop of Bath and Wells. The Government's aim is to promote an efficient, prosperous and outward-looking agricultural industry which makes a positive contribution to the rural economy. That policy is pursued for agriculture as a whole and helps smaller farms. Measures such as the environmentally sensitive areas scheme and farm woodlands scheme acknowledge the important role of family farmers in a rural economy. They will be of considerable benefit to smaller farmers. As the noble Lord, Lord De Ramsey, said, farming is the most significant contributor to the appearance and character of the landscape. In particular, in remote areas those small family farms play the biggest part of all.
Farms need to respond to changing marketplaces, but consumers' expectations, as well as expectations for the environment and recreation, have to be recognised. However, those demands do not need to be at odds. I indeed expected that the noble Earl, Lord Clanwilliam, would raise the benefit of organic farming. I take much to heart the points he made about the extent to which we rely on imports for the demand that is already there nationally for organic products. Environmentally friendly production methods can add value to farm produce, although UK farmers do not yet satisfy market demand for organic food. We are carefully considering how to encourage an expansion of organic farming. The noble Lord, Lord Renton of Mount Harry, also raised the issue of flax grown on SSSIs. We are looking at this matter urgently in order to close the loopholes to which he alluded. I hope that he will be
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reassured that we are looking at it seriously. We hope to come to some conclusions soon.
Of course, the pressures on the countryside vary, depending on a number of different factors, although the common thread throughout is the need to safeguard the environment. The noble Earl, Lord Lytton, referred to the problems faced by upland areas in particular. There are voluntary support schemes of payments available to farmers under England's agri-environment programme, mainly through the countryside stewardship scheme and the environmentally sensitive areas scheme.
Those schemes are subject to regular review in the light of experience and environmental needs. For example, the schemes are, where relevant, being adapted to help achieve biodiversity targets. We work closely with non-governmental organisations in monitoring and developing these schemes through the National Agri-environment Forum and Regional Agri-environment Consultation Groups, public consultation exercises and formal and informal contact with relevant organisations. This reflects the importance—it is a theme running through tonight's debate—placed by the Government on consultation and the open exchange of views.
Of course in recent years, farmers across the board have looked increasingly to supplement their incomes from non-agricultural alternatives. The noble Earl, Lord Onslow, talked about the multi-use countryside. Much farm-based work now features activities such as woodland management, equestrian businesses—referred to by the noble Baroness, Lady Masham—sporting facilities and tourism generally. National planning guidance for the countryside recognises the potential benefits of farm diversification to individual rural businesses and the wider rural community and encourages local planning authorities to take a positive approach to such development. I mentioned woodland management as one form of farm diversification. The management and creation of woodland also affect, and are affected by, many of the other issues to which I have alluded. Woodland offers recreational opportunities, landscape diversity and wildlife habitats. The Government support a steady expansion of woodland cover and the sustainable management of our existing woodland resource.
The noble Baroness, Lady Sharples, asked about farm woodland grant rates. The Government increased the grant rates under the farm woodland premium scheme in April this year. In the period to the end of June 1997, over 6,000 applications to convert 37,500 hectares of agricultural land to woodland have been approved under the scheme.
Several noble Lords raised the issue of forestry, including the noble Lord, Lord Astor, and my noble friend Lord Taylor of Gryfe. The Government are considering how best to progress woodland expansion in England, taking account of responses to last year's

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consultation by the Forestry Commission and the Countryside Commission which were published recently.
Lord Taylor of Gryfe: My Lords, I am sorry to interrupt. Did the noble Baroness say that the Government are considering plans for expansion in England?
Baroness Hayman: My Lords, indeed I did.
Lord Taylor of Gryfe: My Lords, 90 per cent. of forestry expansion is in Scotland.
Baroness Hayman: My Lords, my noble friend asked me specifically about England. With his concern that with devolution the base and focus of attention might go to Scotland, I sought to reassure him that we were looking at the situation in England as well.
The countryside is a precious part of our national economic, cultural and spiritual life, a point made from the Bishops' Bench and elsewhere today. We have a collective responsibility for the protection and enhancement of the countryside and to ensure that development is sustainable. We will look at the demands placed on the countryside and the needs of rural communities through an integrated approach to rural policy. This bestows on all of us obligations as well as rights. We will take account of the points made during this debate and will be happy to go on listening to, and taking seriously, views from the wide range of rural organisations and from the people in the countryside themselves.
6.6 p.m.
The Earl of Lytton: My Lords, it falls to me to wind up. Your Lordships will be glad to know that I shall do so in fairly short order.
First, I thank all noble Lords who have spoken. When I arrived in the House today I was, frankly, amazed at the number of speakers on the list—and not a little concerned that there would be insufficient time for them to say what they needed given their expertise. I give special thanks also to what I have written down as two "outstanding maidens". I am sure that the House will take it in good part when I say that they were two very special maiden speeches. As I said earlier, I am pleased that they chose to speak on this occasion. The speeches were thought provoking, providing much food for thought for the future.
I am grateful for the positive comments made by the noble Earl, Lord Lindsay, and the Minister. I felt reassured by what the noble Baroness said.
There have been many candid expressions around the House from those with thoroughly non-partisan expertise. I cannot mention individuals' contributions because there is not time. I do not label the Government "urban"; nor do I criticise them for the present situation. We should not ask why things have happened. But we are in the present situation and we have to look forward.
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I wish to be forward looking. What is needed is a series of philosophical tools which will inform consideration of ever more complex sub-divisions, as one considers special interests and site specific considerations. I believe that we have lost some of that linkage. It needs to be rebuilt.
It is a huge subject area for debate. I hope that this is just a way station in a process leading to a larger discourse in the country generally. The countryside is a finite resource. It is a valuable resource. It needs to be nurtured and it needs inward investment. It is also an organism, not a static object. It requires process management. My time is up; I must sit down. My Lords, I beg leave to withdraw the Motion.
Motion for Papers, by leave, withdrawn.

Pensions
6.8 p.m.
The Earl of Buckinghamshire The Earl of Buckinghamshire rose to call attention to the case for greater pension provision; and to move for Papers.
The noble Earl said: My Lords, I think that it was P.G. Wodehouse who remarked that, "Earls are hot stuff". Fortunately for P.G. Wodehouse pensions did not become a burning issue in his time. Otherwise I imagine that he would have been stretched to make a comedy out of the situation that we face today.
The 1997 report of the Office of Fair Trading stated in its introduction:
"Sadly, as we all know, in the past legitimate expectations have been betrayed".
The Director General went on to say:
"I find that currently available products often fail to meet consumer needs".
Those comments set the scene for our debate. It would be appropriate at this stage for the House to note that I am a partner in Watson Wyatt Partners, a leading firm of consulting actuaries and human resource consultants. The views that I express today are mine and do not necessarily reflect the views of Watson Wyatt.
There are a whole series of issues which need to be faced. They include, first, the relationship between the state, the sponsoring companies and individual provision and, secondly, whether we pre-fund or switch to a pay-as-you-go system. We need to consider the inequality in pension provision, a topic raised yesterday in this House at Question time. We need to think about better provision for those who stay at home and the low earners among us; and we need to think very carefully about the impact of divorce.
The final issue is taxation, where we are moving away from a system of "exempt, exempt"—in other words, tax relief on contributions going in, tax relief on the investments from both income and capital, which was changed significantly in the last Budget, and then taxing on the benefits.
What makes the whole debate so fascinating is that it covers many diverse and conflicting pressures that will be very difficult to reconcile as we go forward. The

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Government have stated that they want to build a framework for pensions based on consensus. That has led Harriet Harman to issue at least nine challenges to the respondents to her inquiry. John Denham has separately required responses which consider the nature of the problem, the balance between state and private provision and the form that future provision might take. This debate is primarily about the nature of the problem and the need to try to encourage pension provision in the United Kingdom.
What are the problems? There are a considerable number, and they are well documented in the report of the Office of Fair Trading, the Consumers Association report and Sir John Anson's 1996 Retirement Income inquiry. The last made some very interesting observations on demographic trends. I draw to the attention of the House the 1996 IMF report, Ageing Populations and Public Pension Schemes, and further valuable work was done by Labour Market Trends. While the UK is not so badly off as other European Union countries, our ratios of those in work and those retired projected into the next century do not look comfortable. That is especially true when taken in conjunction with the current value projections for the state pension in the next century.
Of equal concern is the number and percentage of those below 65 who have retired early. The Labour Market Trends report indicates that for males aged 60 to 64 the percentage in employment has fallen since 1970 from 78 per cent. to just under 50 per cent.; and in the age group 55 to 59, the percentage has fallen from 93 per cent. to 75 per cent. I believe it was the Anson report that suggested that the major concern for our citizens is not dying early (which is an interesting subject for most of us) but living longer. It impacts not only on pensions but on the National Health Service and on health care provision.
There is not time to study the statistics in greater detail—and it has to be said that within themselves the statistics hide other issues: for instance, between 1982 and 1986 some 2 million younger people joined the workforce, possibly causing the retirement of older and more expensive employees. There are at least four points to note about the statistics on early retirement. It is important to try to achieve a balance in our discussions on pensions since there is much adverse comment on pension provision in the newspapers. First, defined benefit plans have helped significantly in the process of retiring people early on reasonable incomes. Secondly, there is presently a trend in this country towards the introduction of defined contribution plans. That is particularly true of small and medium-sized companies. Even some of our major companies in the financial services industry have moved to defined contribution plans. Unless significant investment goes into such plans, they will not provide the same level of early retirement benefits for those leaving work in their fifties and early sixties. One outcome is that while early retirement benefits have been there, there must have been a considerable strain on unemployment and other benefits paid by the state. Lastly, as an individual who has reached the enviable stage of being over 50 (I hope
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that my colleagues in Watson Wyatt are listening) I can say that there is a considerable loss of experienced people at crucial ages.
Turning to other problems, the reports indicate that fewer than 50 per cent. of those employed are in occupational pension schemes. The statistics that I have show that in 1996 some £8.5 billion was invested in personal pensions. These seem very high figures. However, many people have made no significant investment in private pensions and will be totally reliant on the state unless something happens to change that.
In the 1970s, when I was involved in putting in many new pension schemes, I quite often heard the objection from members to the company pension scheme: "Why should I pay 5 per cent. of my income into the scheme? It will be a waste of money. The state will provide". I have not heard that comment for some 15 years. The comment that I now receive when I put in a new scheme is: "Will it be worth it for me to invest in a pension, because it may impact adversely on my husband's invalidity or other benefit?" In other words, there is an issue related to the introduction of means-testing and the level perhaps being set too low.
Other issues which have been a problem in the area of pensions are listed in an Office of Fair Trading report. There is mention of poor value for money in personal pensions. The pensions scandal has certainly done nothing to enhance the attractions of private provision. It will take some time for that particular spectre to go away. Looking back to 1978, there has been a considerable lack of stability over the past few years—I dare say that will give noble Lords on the Opposite Benches a means to get back at noble Lords on this side. Given the latest Budget changes in relation to tax on dividends, if we ever thought about changing the taxation system away from giving tax relief on contributions going in so that there was no tax relief at all on contributions but the benefit was paid tax free at the end, there is a question as to when any of us would ever trust that to be the actual position in 30 or 40 years' time.
There are a number of other problems in pension areas. Inequality of provision was touched on yesterday at Question Time in this House. There are low earners, part-timers and those who stay at home. These people all suffer from a lack of pension provision.
My final point relates to the complexity of the whole pensions arena. In my business we make money out of complexity. But matters are reaching such a stage that it will serve no good if the complexity, the regulations and other matters, are not simplified as we move forward. Other noble Lords will perceive other problems associated with pension provision in the United Kingdom which discourage people from taking up pension provision until it is too late.
What about the solution and the framework? I suspect that it will be easier to diagnose the cause of the problems than it will be to offer solutions.
It seems clear that neither sponsoring companies nor the state will be a bottomless pit for future funding. It will be necessary to re-emphasise that pension provision is a partnership between the state, the employer and the

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individual. Where there is no employer, the partnership has to be between the individual and the state. That partnership will need to be far more robust and a good deal simpler to understand than it is at present. The individual will need to pay more, and probably by compulsion, unfortunately, as voluntary provision seems not to have worked.
What about reallocating resources? I am not sure that it is true, but we saw in the press last week that the possibility was being raised of taking away tax relief at the higher rate. On the face of it, this would seem an easy thing to do, but what do you do about the non-contributory schemes unless you tax employers' contributions to approved schemes as a benefit in kind, and what will you do about the self-employed?
I should like to see some consistency in the approach to tax and benefits. I suspect that the Minister will be able to confirm that a review is being undertaken by the Chancellor of tax and benefits, although I understand that that will not form part of the current pensions review.
I have no statistical reason for saying this, but I have a suspicion that there is a need for greater co-ordination between the Treasury and the Department of Social Security. I think that would be helpful, although I suspect that the Treasury might miss those wonderful little surprises that they give us in each Budget.
I have already said that the framework needs to be simplified. I think that we shall probably need one all-encompassing pensions Act in order to do that. One of the points that I have found particularly difficult to deal with in my professional life is the fact that personal pensions and occupational pensions do not go hand in hand: you cannot be a member of an occupational pension scheme if you are in a personal pension arrangement. I believe that that has added to the difficulties we have had in the area of providing pensions in the United Kingdom.
I could continue to speak about the solutions to the problems we have, but I believe that that is for another debate. This debate is about the need to make greater pension provision in the United Kingdom. I hope that what I have said will form at least the basis for an interesting discussion this afternoon. In the interests of time I have decided not to raise in any depth the question of tax relief on dividends nor to discuss another situation dear to my heart, the minimum funding requirement, where I believe there are significant issues. However, noble Lords who follow me may well raise questions on those matters. My Lords, I beg to move for Papers.
6.24 p.m.
Viscount Mackintosh of Halifax: My Lords, I should like to thank the noble Earl for initiating this debate and bringing to the attention of the House a most important topic.
I should bring to your Lordships' attention the fact that I am a partner in a large professional services firm, Price Waterhouse, and in that capacity I advise individuals in relation to their tax and financial affairs.
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The provision of pensions is a most important part of such financial advice. I therefore felt that I should make a short contribution to the debate today but the views I express are mine and mine alone.
We are moving away from relative certainty in the field of pensions to a position of significant uncertainty. There was a time when people thought that they could rely on the state pension to keep in line with earnings. In addition, those employees who were lucky enough to be members of a company pension scheme usually relied on receiving a pension in line with their earnings on retirement. The amount which they paid into the scheme was not directly related to the pension they received; they had a defined benefit on retirement which they usually knew in advance.
These things are now not as certain as they were. The state pension is no longer linked to earnings but to prices and so it is gradually falling behind earnings. I do not necessarily think that that is wrong providing other income supplement is available for the most disadvantaged members of society. The state pension is not funded at all but is paid out of the taxes contributed by the current working population. With people living longer and an increasing population of pensionable age, the costs of providing a state pension linked to earnings would be a huge burden on any government. However, the Government should be honest about the state pension. If the state pension is not going to keep pace with earnings, those people who want an income in retirement that does keep pace with earnings need to make alternative arrangements. They should know when they start their working life that they need to make some provision for their retirement, not discover this at the end of their working life.
For those in a company pension scheme we are starting to move away from the old certainties of receiving a pension related to earnings. As the noble Lord pointed out, the defined-benefit schemes are becoming too expensive for companies to run. Life expectancy is increasing; people are retiring earlier; and, most significantly, in the last Budget the Government introduced measures which restrict the income which pension schemes receive on their investments by not allowing them to reclaim tax credits.
As a result, we shall see an acceleration in the number of pension schemes which change from providing a pension related to earnings to providing a pension related to the amount paid in to the scheme. This move to the so-called money-purchase schemes has already started but will gather pace and is the way in which those who are self-employed have had to provide for their pensions for some time.
In practice, this means that more and more the pension available on retirement is directly related to the amount of provision made during working life. On this basis there is significant under-funding of pensions and a need for a very large increase in pension provision. Many people will be disappointed, and some extremely worried, as they approach retirement when they realise at that point the extent to which they have insufficient funds to provide the pension which they hoped for.

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The size of pension which can be received from provisions put aside will vary depending on many factors, including current and expected interest rates, the age of retirement, whether a part of the pension will continue to be paid to the spouse after death and whether it will increase with inflation.
As an example, for a male employee retiring at 60 with a wife who is just younger than him, for every pound of pension received with no indexation he will need to have a provision of £10 at the time of retirement. Thus to provide a pension of £5,000 he will need a provision of £50,000 on retirement. That £5,000 will not be index-linked and thus in real terms will be decreased by inflation over time.
For an index-linked pension with, say, a two-thirds pensions going to the surviving spouse, for every £1 of pension received in retirement £18 of capital will be needed. Thus to receive an index-linked pension of £5,555 a year the huge sum of £100,000 provision on retirement will be needed.
The amount of provision required to fund pensions is very high indeed. As a workforce we are not making these provisions. An employee at the young age of 25 who wishes to retire at 60 on about two-thirds of final salary will need to put aside between 15 and 20 per cent. of income until the date of retirement to achieve this objective. If action is delayed until the age of 40 the percentage of income that will need to be saved for retirement to achieve a pension of two-thirds of final salary will be so high that most employees could not make such a provision.
There is a need for much greater pension provision but we shall only achieve that through a major exercise to educate the working population in the need to make this provision.
I spent a few days during the summer in the United States looking at how the workforce there copes with providing for retirement. Like many matters financial, what happens in the United States often happens in this country a few years later. In the United States there has already been a shift from the defined-benefit pensions schemes to the money-purchase schemes to which I referred earlier. There is still under-funding for pensions, but employees are much more aware of the need to make contributions out of income than, I believe, is the United Kingdom workforce today. It is not uncommon in the United States for employees at all ages, including those in their 20s and 30s, to take financial advice and have drawn up for them a formal financial plan. I am not talking just about senior executives earning significant sums of money. In the large corporations, hundreds and thousands of employees on average earnings are taking financial advice. Often the employer will provide a financial plan for employees as a benefit. The employee will state his or her objectives—how much income they would like to receive on retirement and the age at which they wish to retire—and take into account other income they may receive, such as federal income on retirement or from a company scheme. The plan will calculate the amount of provision the employee will need to make to reach his pension objective. The employee may not keep up the
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required contributions but at least he has a plan. If he knows what is needed at an early age to reach a given level of pension, the level of funding is likely to be higher than if there is no plan at all.
We must increase the awareness of what is required to fund pensions if we are to achieve adequate provision. We shall need the combination of employers and the Government working together to raise the awareness of the workforce, especially those starting out who must start making provision early. It is unfortunate that the misselling of personal pensions by a number of companies has meant adverse publicity at a time when many should be taking out suitable pensions. I hope the Government will attempt to counter those adverse factors by emphasising the importance of properly providing for retirement.
It also seems a retrograde step for the Government to have reduced the return on pension provision in the last Budget at a time when there is a need for much greater provision. Now, an employee will have to save even more for every £1 of pension that he or she receives on retirement. I hope that the Government will indicate that at least some of the extra revenue taken from employees' savings in the Budget will be spent on educating the workforce on the need for extra provision.
We certainly need greater provision for pensions. We need to start making that provision now.
6.32 p.m.
Lord Grantley: My Lords, the House is indebted to the noble Earl, Lord Buckinghamshire, for introducing his Motion on this most important topic. Saving for a pension is, of course, just one among many different forms of saving and needs to be seen in that context. But governments have a particular interest in encouraging pension savings in order to avoid the growing burden upon the state to pay both conventional and earnings-related pensions out of public expenditure to an ageing population in the years ahead, arising from increasing longevity and the stagnant birthrate. That burden is not only growing but is widely considered to be unsustainable. So encouragement to improve currently inadequate individual pension savings is of the highest importance.
These developments have led to speculation that the Government are considering making pension savings compulsory, as happens already in countries such as Chile, Australia and Singapore. I should be in favour of that under certain circumstances but such arrangements do not yet exist. It must be recognised at the outset that compulsory savings represent a very serious invasion of people's liberty, with major implications for spending decisions and lifestyle. Most people save anyway, if they can. But pension saving is a very special and, in the abstract, disadvantageous form of saving as the saver loses access to the savings over the years or decades during which the pension fund is accumulating prior to retirement and there are restrictions on the use of pension funds post-retirement, which is a point to which I shall return.
To overcome those disadvantages, I believe that three conditions would need to be met: first, tax treatment to make pension savings clearly more attractive than other

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forms of saving; secondly, sufficient political stability—a point touched on by the noble Earl—to give people confidence that such tax treatment will not suddenly be withdrawn to their detriment after they have invested; and thirdly, complete freedom for people to invest their pension savings both before and after retirement as they may desire. None of those conditions is satisfied at present.
On the first point, it is at least arguable that investing in a personal equity plan (PEP) is better value than investing in a pension. Although one is permitted on retirement to withdraw up to 25 per cent. of a pension fund in the form of a tax-free lump sum, the "tax free" aspect is somewhat misleading as the balance of 75 per cent. has to be invested in an annuity, which is liable to income tax on both the interest and capital components. I cannot think of any other common form of investment in which return of capital is liable to income tax treatment rather than the normally more advantageous capital gains tax treatment. Since individuals can already invest up to £9,000 a year in PEPs, it is not obvious that there is any good reason to compel them in addition—always supposing that they can afford to do so—to invest any more than that by way of pension provision.
On the second point, the lack of political stability governing the tax treatment of pensions has been dramatically illustrated by two recent and, in my view, unwelcome developments. The first, mentioned by previous speakers, was the sudden withdrawal from pension funds of their ability to reclaim the tax deducted from dividends on equities. If that change had been made as part of a fundamental and comprehensive review of all forms of taxation and regulation of all forms of savings, including pensions, it might have been palatable. As it is, the way it was introduced has caused quite serious financial damage retrospectively to millions of investors in pension schemes who invested in good faith on the assumption that the tax treatment would be an enduring feature of the system.
Not only that: the change also has major adverse public expenditure implications. It has made contracting out of the SERPS considerably less attractive, which is surely not in line with the Government's policy of keeping public expenditure under control. I understand that the Government are now in negotiation to increase the national insurance rebate payable under the contracted-out scheme. The cost, according to newspaper reports over the weekend and depending on which newspaper one reads, would be between £500 million and £2 billion a year. I shall be interested to hear from the Government their estimate of the net, as opposed to the gross, public expenditure impact of the withdrawal from pension funds of the dividend tax credit.
The other unwelcome development is speculation that the Government are considering withdrawing full tax relief on pension contributions. In my view, if that happens, many people will do their sums and conclude that it may not be worth investing in a pension fund
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after all or that the advantages of doing so are not sufficient to compensate for the disadvantages of pension saving to which I have already referred.
I come to my third condition for compulsory pension saving. At present, one must invest by the age of 75 at least 75 per cent. of a pension fund in an annuity. I believe that that requirement is iniquitous and ought to be abolished. As a matter of principle, people should be free to decide for themselves how they wish their savings to be invested. Why should the Government insist that pension funds are invested in one form rather than in another?
In my view, there are two overwhelming reasons why people should not invest in annuities under any circumstances. The first is that investing in annuities is contrary to the interests of a family. Annuities are virtually unique among all forms of investment in that they are worth nothing when the investor dies. If, as I hope, it is government policy to encourage parents and grandparents to leave on death as much as possible to their children and grandchildren, the Government should not compel but on the contrary positively discourage people, particularly elderly people, from investing in annuities.
The second reason is simply that annuities are a lousy form of investment. That is not just a personal view but the market consensus, as can be seen from the fact that very few people indeed invest in free-standing annuities—that is to say, those annuities which people are not compelled to purchase—in comparison with other forms of investment.
The market in free-standing annuities is minuscule, and for good reason. On a short-term view, to obtain certainty of income—the only reason for buying an annuity—one would be better off in gilts. For example, at the end of last week a man aged 60 with a pension fund of £100,000 could have bought a level annuity guaranteed for five years of around £9,000 a year. Alternatively, for the same amount of money he could have bought gilts maturing between 2003 and 2007 with a higher income of £9,650 a year by way of interest and a fixed capital value on redemption of £82,000. That is, of course, a grossly misleading comparison because even pensioners should not be taking a short-term view of their life expectancy. The Office of Fair Trading made the point that frequently people's retirement even exceeds the length of their careers and therefore one should be taking a longer-term view.
On a longer-term view, undoubtedly people would be better off in equities in order to benefit from capital appreciation. I believe it to be the case that there has hardly ever been a period of 10 years or more in which people would not have been better off investing in equities rather than in fixed interest instruments. All financial advisers would agree that people's savings should be invested in an appropriate mixture of equities and fixed interest. But—this is the key point—it should be up to the individual, not the Government, to decide for himself or herself what is appropriate.
My final point arises from the pension report of the Office of Fair Trading published in July of this year. It is an excellent and comprehensive document and I agree

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with almost all of its recommendations. It may be quicker for me to mention the only two recommendations with which I disagree. The first is that annuity rates for men and women should be equalised, notwithstanding differences in life expectancy. That seems to me to be an absurd piece of political correctness. The second is that "designated pension plans" must be passively managed. There are good reasons for pension plans being passively managed, but I see no reason why an individual should be prevented from choosing an actively managed plan if he so wishes.
The Office of Fair Trading devoted a good deal of space, including the whole of one appendix, to showing how poorly early leavers are treated under occupational pension schemes of the final benefit type. It points out that nowadays people change jobs on average more than five times during the course of their working lives. The problem therefore has become widespread. I am an early leaver under a final benefit scheme and I know therefore how disadvantageous it can be.
I have one suggestion for the Government to consider on that point. If an employee is entitled to a pension calculated at a certain percentage of final salary or whatever, and leaves early, the employer should pay as a minimum such proportion of that pension as the period of service bears to the period the employee would have served if he had not left early. One may be forgiven for thinking that that is already the case, but it is not.
I conclude by issuing a modest challenge to the Government. Can they publish or cause to be published one pamphlet containing, in sufficient detail and with sufficient clarity for a layman to read and understand, all the relevant rules and regulations governing pensions and taxation of pensions in this country? I suspect the answer will be "No, we cannot do that. First, it would be far too long a document; and, secondly, it would be so complicated that nobody would understand it." That is precisely the point. Any simplification of the issue will he welcomed by everybody.
6.44 p.m.
Baroness O'Cathain: My Lords, I welcome the initiative of my noble friend Lord Buckinghamshire in calling attention to the case for greater pension provision. There can be few people who have not expressed concern about the future of pension provision. Indeed, there has been so much scaremongering about the difficulties which may be encountered in the early part of the next century that none of us can be unaware of it. The fact that our continental European neighbours are likely to be even worse off than us is absolutely no consolation.
Since the general election I have been in some difficulty in trying to ascertain what exactly the Government's position on this issue is likely to be. I feel that I have been receiving very strong conflicting messages and I hope that the Minister will be able to set my mind to rest and clear the air. The noble Baroness, Lady Hollis, says that she doubts it, but I doubt that she doubts it. Of course, I am very aware that it may be too early to get a definitive "steer" as to what policy is likely to be formulated, and when. But I hope that in the
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review currently taking place, the concerns and suggestions put forward in this debate today will be addressed.
At the outset I should like to state the two premises on which my thinking about the subject of pensions is based. First, coming from a background of many years in business I am somewhat surprised that successive governments have neither encouraged nor discouraged company schemes. On the most superficial examination it must be obvious that such schemes do a great deal to alleviate pressure on government resources and I believe that they should be encouraged. Secondly, I believe, most strongly, that individuals should be encouraged to think about their likely future financial needs long before they reach "pensionable age" and to save for their long-term future in the same manner as many save for short-term requirements, such as the family holiday or the new car. My noble friend Lord Mackintosh of Halifax gave us a stark picture of the amounts needed to provide for what many people would regard as a fairly low pension. His suggestion that such calculations should be emphasised more widely is very pertinent.
For many years I have been dismayed to realise that the propensity to save is by no means universal; there is little incentive to save—despite the good efforts of National Savings. Young people today are not "switched on" either by the concept or product. Perhaps it is a generation phenomenon. Perhaps this new Government who have certainly manifested their appeal to youth could encourage greater saving.
We have been told that the Government want individuals and their employers to provide for their retirement. I support that wholeheartedly. That desire of the Government can be met by both of my two personal premises; namely, that company schemes should he encouraged and that a new "savings philosophy" should also be encouraged.
"Encouragement" is the salient word. Without encouragement individuals are unlikely to be persuaded to lock away significant sums of money over a long period. Encouragement should include tax incentives. The growth of the pensions industry has been greatly helped by favourable tax treatment of pension contributions, of pensions fund income and of payment to pensioners—particularly the tax-free lump sum on retirement. Employer schemes should be encouraged. Such schemes are usually managed at company expense and costs can be as low as 5 per cent. of contributions. That is significantly less than the 20 per cent. or more the sellers of personal pensions deduct to cover costs and profit.
Another area of encouragement is flexibility. It is an obvious area of advantage and is also an obvious requirement if flexibility in the employment market increases. It is only fair that individuals are enabled to transfer funds between pension schemes. Flexibility should also be encouraged in permitting individuals to establish a higher level of contributions matching his or her circumstances. We all recognise that demands on one's income vary enormously from being very high when first setting up home, having children and seeing them through the education period to much lower when

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the mortgage seems to absorb a much less significant part of one's income and the children have fled the nest. Less rigidity would encourage greater saving for retirement—especially when retirement day does not appear to be as far away as it appeared some years previously. That sentiment is heartfelt.
Simplicity and clarity are two other areas where encouragement would not go amiss. Because of the high-profile cases I believe that the general public has a strong fear of putting their hard-earned resources into pensions. The almost arcane language of all pension documents does not help this case. As an aside, I recently received a communication from the DSS about my future pension and, quite frankly, I took several looks at the words, the layout, the length of the document, the attempt to "cover the waterfront" by addressing all possible types of situation whereas my situation is just plain and simple—at least that is how I see it—and I gave up. I shoved the lot back into the envelope and phoned my accountant. But not everybody has an accountant and not everybody can afford to employ an accountant. I shudder to think how long it would have taken me—and I am supposed to be reasonably intelligent—to plough through all that lot. I would probably have been no wiser at the end of it. We really must have clarity in this area.
Similarly, we must have regulation which is easy to understand. My noble friend Lord Buckinghamshire referred, quite honestly, to the fact that his organisation makes money out of complexity, but he also made a plea for less complexity. I support that plea completely.
It really is in the Government's interest that in all these areas a long, hard look is taken in a constructive manner. If not, the Government may find themselves in a situation where there will be an escalating demand for yet more and more funding for retirement.
The Government surely want to avoid having to provide a base pension for every man and woman when they reach retirement age. That could be achieved by the following: first, employers should once more be permitted to make membership of the company's scheme part of the contract of employment. This compulsory element was allowed until 1988 and, with hindsight, it should really not have been changed. Secondly, if a benign environment is created for private pensions, the Government can concentrate on meeting the needs of those least able to look after themselves; for example, those not in paid employment such as a parent raising children or the unemployed, enabling them to receive credits towards a retirement entitlement.
I would now like to turn to the issue of fully funded versus pay-as-you-go pensions. It is quite right that companies are required to set up schemes separate from the employing company, controlled by the trustees and fully funded by contributions over employees' working lives. There is a sense of security in knowing that one's contributions are targeted on funding one's own pension. However, under the Government's present pay-as-you-go approach for state pensions we are paying for the pensions of current pensioners without any assurance that we shall reap commensurate rewards
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ourselves in the future. The sense of security that is present in the company scheme is certainly not matched in the state pension scheme.
Today, state pensions are funded by taxation: National Insurance contributions are seen as nothing less than a tax. To gain acceptance for the idea of investing in your pension, separate funding on a proper actuarial basis is surely needed.
We all recognise that the Government must seek to contain costs. One of the biggest costs is the DSS budget. Anything that can be done to contain or reduce this huge drain on the Exchequer must recommend itself for serious consideration. I really do believe that individuals can be persuaded to fund the bulk of pension needs, but they need incentives to do so—carrots instead of sticks. However, recent developments in this area do not fill me with the hope that common sense will prevail. The Treasury has increased the tax on pension funds and the DSS has got bogged down in over-regulation. Neither action is helpful and, I ask plaintively: do they ever talk to each other?
The disincentives currently being stacked up, or threatening to be stacked up, are formidable. I shall just mention three. First, the abolition of ACT credits has added some 10 per cent. to the average cost of funding schemes. Secondly, the growing complexity of pensions. The rules set up under the recent Pensions Act introduced a series of regulations so complicated that. I am told, even the actuaries are struggling. Has the DSS created a beast that is not capable of being controlled? Thirdly, the minimum funding requirement rules set up under the Pensions Act, which the Minister knows I have previously addressed in debate on the Pensions Bill, introduced a very serious contingent liability for companies, particularly companies with mature schemes which are heavily invested in equities during a period when equity prices are at the bottom of the cycle. There is a paradox here. The Government want to see more normal investment by companies, but seem to have forgotten that pension funds are still the biggest provider of new equity for companies.
MFR hits only at pensions that are based on final salary schemes yet all the evidence is that what employees most want is a pension scheme which relates to their salary prior to retirement. The alternative, the money purchase scheme, which is beginning to be the norm for newly-established pension schemes, does not provide this assurance as the size of the pensions depends crucially upon investment performance, and we know how unpredictable that can be over a long period with no guarantee of underpinning from any employer. Yet, ironically, and quite unbelievably, this inferior form of pension escapes the danger of MFR.
Have the Government any more "nasties" of this nature in mind? Will the review come up with yet more disincentives? I sincerely hope not. The company pension scheme is a very successful and efficient vehicle capable of delivering the relief that the Government seek from the burden of an ageing population with all the concomitant resource implications. Incentives need to be preserved. Previous incentives need to be restored. New incentives such as I have outlined need to be introduced.

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It is only then that we can build on our enviable strength compared to our Continental European neighbours. It is imperative that we take all these issues seriously and I do hope that the Minister can give us reassurance on these points.
6.57 p.m.
Lord Borrie: My Lords, the House must be immensely grateful to the noble Earl, Lord Buckinghamshire, for initiating this debate and indeed for giving us the benefit of his own personal expertise over his own lifetime. The Government have announced already their wide-ranging pensions review and therefore the House will certainly be looking forward to the reply to the debate by the noble Baroness, Lady Hollis of Heigham. In opposition the noble Baroness established a formidable reputation for knowledge in her field and for compassion and dedication.
In thinking about pensions policy I believe that there must be some measure of agreement among us all that the principal objective should be to enable the great majority of people to enjoy in retirement a standard of living which in some way approximates to the standard of living they enjoyed during their working lives. For some people already retired, and for some about to retire, that objective has already been attained and they can continue to enjoy in retirement quite a high standard of living as a result particularly of the growth in recent years of occupational pensions to which they have contributed during their working lives.
But, as has been pointed out by the director-general of the Office of Fair Trading in the report on pensions to which at least two speakers have already referred, most occupational pensions, by reason of being defined benefit schemes, are generally based on the employee's final salary, so that people who leave their employment lose out. Each time they move their employment the value of their pension or pensions is whittled away. As the noble Lord, Lord Grantley, pointed out, the average employee in the United Kingdom at the present time moves probably five times in his working life. Therefore, that is a serious shortcoming. Nobody is likely to predict that the number of changes in one's working life is going to reduce, because it may well increase further as the years go by.
Moreover, the proportion of our working population who have joined an occupational pension scheme—the number has increased considerably—seems now to have stabilised at something less than half of that working population. That is hardly surprising given that such schemes are normally available only to those in permanent, full-time employment with major, or at least fairly substantial, employers. However, we are living longer and several other speakers have already referred to the need for saving throughout one's working life in order to achieve an adequate pension on retirement. As has been pointed out, there is also the question of early retirement. The need for such savings is becoming more urgent every year.
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The alternative of personal pensions has, for many, proved to be a mirage through the misselling of pensions and the lack of transparency as to the substantial commission and other charges (often upfront charges) which diminish their true value.
For purposes of clarification, perhaps I should point out that I have not been the Director General of Fair Trading for five years now so I take neither credit nor responsibility for the report to which reference has been made and which I should like to mention because the present Director General, Mr. John Bridgeman, has said—this was quoted in part by the noble Earl who initiated the debate—that in recent years the legitimate expectations of many have been betrayed through the misselling of pensions, especially to those induced to leave their existing entitlements in favour of some less advantageous personal pension scheme.
However, it is not just a matter of the scandals which we hope are past and which are now being dealt with, although in this context I should like to pay tribute to the forthright language and actions of the Economic Secretary to the Treasury, Mrs. Helen Liddell. In the report, the Director General, Mr. Bridgeman, states that too many pensions today are poor value. As the noble Viscount, Lord Mackintosh of Halifax, said, there will be many who will be disappointed, shocked and amazed when they are entitled to claim their personal pensions on retirement at what poor value they offer, compared with the prognostications made by those who sold them the pension. To quote Mr. Bridgeman:
"Their benefits are consumed in the high levels of expenses needed to support the marketing effort and the active management of the funds. Their expenses are often loaded on the early years and … employers' contributions may be inadequate or non existent".
Mr. Bridgeman puts forward an interesting and, I think—but I am not an expert in these matters as is the noble Earl—well worked out scheme for what he calls a "designated personal pension" which could be offered by friendly societies, trades unions and employers' associations as well as by individual firms or private companies. It would enjoy a contribution from the employer when the employee opts out of the occupational scheme. Contributions would be invested in tracker funds and be passively managed and, of course, the pension would be portable from job to job. I believe that that is essential in this day and age. I hope that the Minister can say that the Government are looking carefully at such proposals in the course of their pensions review.
Mr. Bridgeman came to no conclusion about compulsion. The noble Lord, Lord Grantley, referred to a number of conditions which he thinks should be met before any question of compulsion is introduced. I found those points good, but I also have the feeling that some element of compulsion will become essential to the success of any second pension plan. Above certain income levels, employees are already required to a degree to contribute to the basic state pension and to the state earnings related pension scheme, or to an equivalent contracted-out scheme, and this has been so ever since my noble friend Lady Castle of Blackburn introduced that scheme some 20 years ago.

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Of course, there will be those who, at least at some stages of their life, cannot afford to pay the kind of contributions that are necessary to secure a good second pension. The noble Viscount, Lord Mackintosh, mentioned the kind of contributions that could cause great difficulty to those in less well paid jobs. Others, by reason of being disabled, sick or unemployed at some point, will need to be credited with contributions. I know that that involves a public expenditure commitment and I know that those on the Benches opposite will not agree with me on this point, but it seems to me to be more socially just to charge to public funds such a credit for those who are unable to make their own contributions than it is to allow the 40 per cent. tax relief on contributions which is now available to higher rate taxpayers. It is certainly vital that a national pension policy for the 21st century caters for all—women as well as men, part-time as well as full-time workers, as well as for the increasing number of self-employed people and those on short-term contracts.
I am told—and I believe—that Her Majesty's Government look forward to at least 10 years in office. Surely any such government are right to be thinking of a strategy for the long term. Such a government should be seeking to lay the foundation for those who are starting their working lives now. I accept the point that those at the beginning of their working life need to be encouraged and educated to think of such matters over the next 30 or 40 years until they retire. Indeed, as I have said, the Government should be laying the foundations for those who are starting their working lives now and who will not retire before 2030 or 2040, but that does nothing for those who are now in retirement or who are soon to retire.
As this point has not yet been mentioned, I should like to say that we all know that the basic state pension is far too low to sustain any sort of dignified retirement, and that because of the indignity and stigma attached to applying for additional sums by way of income support, hundreds of thousands of pensioners fail to make a claim and have a lower income than is their legal entitlement.
Unlike my noble friend Lady Castle, who unfortunately is unable to be present today, I do not think that the answer lies in a substantial across-the-board increase in the basic state pension, claimable by all pensioners. I believe that that would dissipate large amounts of public expenditure and taxpayers' money on the significant numbers of retired people who do not need such an increase. The great need is to find a way to target those who right now urgently need more money.
I have favoured some sort of minimum pension guarantee, a sum set above the present basic pension and above income support levels, which would enable people to enjoy a reasonable standard whereby they can truly feel a part of normal society and not feel excluded from it through poverty. I certainly want to get away from the stigma involved in the present means-tested system, which involves, in effect, having to say, "I am
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poor. Please give me more money". That system inevitably leads far too many people to be ashamed to ask for what they are entitled to.
Perhaps we should try a new system in which all who retire at 65 say that they are 65 and that they want their entitlement. They would disclose what other regular income, especially pension income, they were likely to receive. If it was small or nil they would be able to claim as of right the minimum guaranteed pension. If however they were in receipt of reasonably significant amounts of occupational or private pension they would receive from the state only the basic state pension as it now is or as it may be upgraded in November. The principle of to each according to his needs is a respectable one. We need an efficient claims system that is effective in putting that maxim into effect.
7.10 p.m.
The Earl of Lindsey and Abingdon: My Lords, I too should like to thank the noble Earl, Lord Buckinghamshire, for initiating this short debate. Just before the Summer Recess I tabled a Written Question regarding the proposed alteration to the treatment of advance corporation tax in respect of pension funds. I asked Her Majesty's Government why, in proposing to alter the treatment of advance corporation tax for pension funds, it was intended to abandon the convention that tax was levied either on contributions or on pensions in receipt but never on both for personal pension holders and the self employed. The Answer I received from the noble Lord, Lord McIntosh of Haringey, was as follows:
"There is no tax charge on exempt pension funds when they receive dividends. But they will no longer receive a subsidy from the Exchequer on their dividend income. The reform of corporation tax has removed a distortion which gave a tax incentive for pension schemes to prefer dividends to long-term growth".—[Official Report, 30/7/97; col. WA 64.]
I believe that the Government may in the long term regret this change to the tax regime. I spent 38 years of my working life in the insurance industry. However, I spent only one-and-a-half years of that period promoting and selling personal pensions and money purchase schemes. One matter that I learned during my time in the City was that when trying to explain the advantages of an insurance plan which involved a long-term commitment the important consideration in the minds of most people was whether it was a tax-saving project. It was relatively easy to persuade people to take out schemes where there was an attractive investment which attracted as little tax as possible. This applied to pension schemes as well as to other insurance policies. Even in the case of Lloyd's I was able over the years to persuade about 30 people to become underwriting members. That was done on the back of tax incentives such as reserve funds which were exempt from higher rate tax, making capital work twice over, etc. When it came to explaining the downside, such as the high risk ratio and the aspect of unlimited liability, people tended to apply cotton wool to their ears. They did not want to know. What mattered were the tax advantages.

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There is also the concept of mis-buying as well as mis-selling. I am pleased that the Government are committed to retaining and upgrading the basic state pension. That must be available to everyone including the self employed, followed by a second tier pension scheme for everyone including the self employed, and then a voluntary third tier. My main worry is not so much about the larger company pension schemes in relation to the proposed change in advance corporation tax. They will comply and find ways to cover the extra cost. One unpleasant way of doing it is to lay off some of the older employees within 10 years of their retirement. That can be a big money saver for the employer.
The real danger arises with small businessmen and the self-employed who are not involved in big pension schemes. Having taken out what they believed to be a good personal pension to supplement the state basic pension, when they retire they find out that they are worse off because of the Government's retrospective legislation to amend the treatment of advance corporation tax on pension funds. I think not so much of the high-earning barrister but the 90 per cent. of people who earn less than £30,000 per annum during their working lives. They will not thank the Government when they discover that their pension plans are likely to yield 25 per cent. less than they thought. For a government that describes the mis-selling of personal pensions as one of the greatest financial scandals of modern times to propose a tax change that will hit many victims even more severely, along with the self employed who cannot belong to final schemes, this is an unprincipled act.
In conclusion, I make the following plea to the noble Baroness, Lady Hollis, on behalf of people with money purchase arrangements that have no surplus to absorb the shock. They can and should be exempt from advance corporation tax changes as are Treasury civil servants. Their schemes are not funded and therefore they are automatically immune to this discriminatory raid.
7.18 p.m.
The Earl of Clanwilliam: My Lords, we are indebted to my noble friend for this most important debate, especially as he comes from an actuarial background. The members of that profession certainly on this occasion, but not always, speak with one voice and a great deal of authority. There exist already two well researched proposals. I begin with Mr. Lilley's basic Pensions Plus, which seeks to solve the demographic problem over the longer term by the immediate introduction of compulsory pension planning. Secondly, there is the more immediate proposal by the Minister, Mr. Frank Field, which was published during the last Parliament. That combines reform of both pensions and social security and requires some kind of compulsory contribution. I feel slightly awkward in presuming to define these great appraisals so briefly, but I am sure that all noble Lords are well aware of their scope, which provides great food for thought.
In the meantime we heard in the Budget of the proposed reform of PEPs and the introduction of a new savings scheme. Perhaps we may assume that this is
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being considered by Mr. Martin Taylor, who has been appointed to review the proposals. On top of that there is the review by Mr. Denham. One wonders whether there is a danger of confusion which is compounded by separation of the two essential parts of the same problem. PEPs form a vital part of pension planning and of planning for the future and preparing for indigent old age, by providing tax-free capital from tax-paid contributions, as has already been said.
In addition, PEPs can be used to provide tax-free cash sums on retirement to pay off mortgages and to replace their anomalous counterpart, the tax-free sum from the accumulated pension fund. The accumulated pension fund should be used to provide income for the future, whether in the form of a partly or fully deferred annuity is another matter. Perhaps the noble Lord, Lord Grantley, will allow me to say that if the sum is totally free someone may well go off and buy a yacht, go bust, and then become an indigent person dependent upon the state for support. We do not want that. There should be some form of control. There must be a level below which an accumulated fund should not be allowed to drop.
Lord Grantley: My Lords, I am grateful to the noble Earl for giving way. Just to clarify the point, I was not arguing that governments should not impose limits on the extent to which pension funds can be drawn down. I agree with the noble Earl on that point. I say merely that there should not be limits on the investments into which the drawn-down income needs to be put.
The Earl of Clanwilliam: My Lords, I thank the noble Lord for that clarification. I agree with him. I agree also that the annuity is a nasty animal, but there does not seem to be a better one about. We have the long-established occupational pension scheme run by many of our great companies, greatly to their cost, where total contributions vary between 12 per cent. of salary in the smaller schemes and up to 16 per cent. in the schemes of some public bodies. That is extremely expensive. It is an indication of the level of planning required for personal pensions.
I shall take the bull by the horns on the subject of occupational schemes, which, in particular, have been hit by the Chancellor's raid on ACT. The effect has been to render some schemes liable under the minimum funding requirements. Fund managers of all types of pension plans have in some instances gone out of equities and into gilts, which reduces the effect that the Chancellor intended. In addition, it will require companies and contributors to increase their payments, adding to the load of tax rebates on the revenue.
Another snare is that a number of contributors will now tend, as has been said, to rejoin SERPS, which will be another added cost to the Exchequer. To avoid that, the Chancellor will have to increase the rebate on national insurance contributions for those who wish to remain contracted out. That will be yet another cost to the Exchequer. On that basis, the Chancellor is on a hiding to nothing.

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All in all, while it has been said that the previous Chancellor was considering limiting ACT, I can now see clearly why he did not do so. In relation to that I shall give one short excerpt from a press release from the Pensions Management Institute, which states:
"For many companies, the increased costs of maintaining final salary schemes could mean a reduction in profitability or cash flow. Unless employees make increased contributions to money purchase arrangements for personal pensions, they will see a reduction in their expected pension. Local authority schemes will also be affected and this could well result in a rise in the Council Tax".
That matter was raised before the Recess.
Of the remainder of the population who are not in occupational pension schemes, fewer than a quarter have private provision. Those who miss out are the part-timers and the self-employed, including men and women who are taking a break between jobs, for whatever reason, and even more importantly those who are busy at home looking after the country's future generation. They have no earned income from which they can make contributions under existing Inland Revenue rules, and are likely to be left widowed, if they are not single parents, with greatly reduced resources and will be a consequent liability of the state.
The adjustment of the rules governing investment rates and fund limits, as well as the earnings rule, is one of the greater problems to be solved, and when tackled successfully will, I hope, lead to a greater level of savings in the long term. That certainly is a long-term problem, and obviously fits in with any decisions by the Inland Revenue in its future reviews in respect of tax relief on contributions on up to what has been suggested by some quarters of the pensions industry should be a relatively low maximum rate.
However, none of that dilutes in any way the overriding need to ensure that those who are in employment are compelled—I have to use the word "compelled"—to make a basic personal pension provision through the existing NIC system. I have spoken on this subject many times before. If people do not do it, it will be too late, as was pointed out by my noble friend Lord Mackintosh, who described the costs of late investment.
If there is to be a stakeholder plan, then the plan must belong to the stakeholder personally and not be a credit available from some Treasury fund which is so conveniently available for whichever Chancellor may be in power at the time to raid, as has been so spectacularly demonstrated recently.
We await decisions from these unending reviews, but in the meantime perhaps I may suggest that we take a leaf out of the Australian book with regard to fund management. They have "Major Funds" where a combination of major suppliers manage a series of funds. Managers of the occupational pension funds in this country have shown some skills in amassing some £675 billion and they would qualify to run such a scheme, which, one would imagine, would do a great deal to reduce the upfront costs which so beset personal pension selling at the moment, as has been demonstrated.
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Admittedly the managers of occupational pension schemes manage defined benefit schemes as opposed to defined contribution schemes. My noble friend Lord Mackintosh mentioned the problem of combining occupational and personal pensions. We have free-standing additional voluntary contributions which can be separate from the occupational scheme. That is a personal pension. There is no reason why that system should not be developed so that personal pensions can take over from occupational schemes as they become too expensive for companies to run. As I have said, contributions of up to 12 per cent. per annum are too high. They are a vast charge on the competitiveness of our great companies. It is interesting to note that the cost to our companies of achieving that £675 billion has been something like 6 per cent. on their annual profits. That is a sum which has not been charged by our friends in Europe. They have not paid those sums. They do not have those funds. If they are to catch up with us, they will find themselves in a somewhat less competitive position with our own great companies.
I hope therefore that the reviews will determine that personal contributions will have to be supplemented to make a viable sum of something like £100 a month or 10 per cent. of earnings, whichever is the greater, to be supplemented by the state, or in the case of the employee, by both the employer and the state.
The personal plan, as has been said, must be portable and accessible. The beauty of it is that it is visible. The person who has it can see at any one moment what it is worth. He can adjust his contributions to it in accordance with the need. That is why for the past five years I have said that a personal pension plan is a vital element in any future pension planning operation by either government.
There is an urgency in the matter, as all are agreed, and I hope that my approach may be construed as constructive. We are in a prime position to deal with this demographic problem, but we must act soon or it will be too late.
7.30 p.m.
Earl Russell: My Lords, I, too, thank the noble Earl, Lord Buckinghamshire, for introducing the debate, which is very timely. During the general election campaign, to my considerable surprise, the requirements of party balance dictated that the BBC News should interview me on pensions. I spent about a minute expounding my party's pension policy and about 15 seconds providing a sound bite about the other two parties. I do not believe that anyone in this Chamber will be in any doubt which of those was broadcast.
For reasons of which that is typical, I wish to take the opportunity provided by the debate to comment on the pension policy of my party. I am sorry that the speech is not being made by my about to be ennobled friend Lord Goodhart who is the author of the policy and to whom I look forward to hearing on the subject on many future occasions. But, as it is, the task falls to me.
Sadly, it is an arithmetical rule that the more people belong to any category the harder it is to be generous to them. But as the noble Earl, Lord Buckinghamshire,

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pointed out, the ratio with which we are concerned is not just of pensioners to non-pensioners but of pensioners to earners. In financing pensions, the rule that early money is like yeast, which I am sure is already familiar to the noble Baroness, applies very clearly indeed. Therefore, I agree with the concern expressed by Chancellor Kohl that the increasing tendency to prolong the educational process is causing a funding problem for pensions. As part of pensions policy, we should be thinking about getting younger people into employment rather quicker.
We, too, belong to the consensus which has moved away from linking pensions to earnings and links them to prices. I entirely agree with what the noble Lord, Lord Borrie, said about the costs involved. Ann Robinson, addressing a fringe meeting as a guest at the Liberal Democrat conference in 1996, summed that up as a consensus that we should keep the state pension but not be too generous about it. I said to her that I thought that description was ungenerous but not inaccurate.
It is the dilemma caused by precisely that point which our party policy is designed to address. We have decided that we should keep the basic state pension. If it is argued that it is not affordable, I wish to quote a few words which I discovered by accident when looking through my papers. They were written by Mr. Donald Dewar when he was social security spokesman for the Opposition during the previous Parliament. He said:
"After all, the Government's own statistics show that this country spends 23 per cent. of GDP on social protection. The comparable figure for the European Union is 26 per cent. As Ministers repeatedly imply that the country cannot afford adequate state pensions it is easy to forget that private pensions do cost money".
Furthermore, every means test that I have ever come across has gaps in it. There are always people who fall through the net. For that reason, some basic universal provision is essential. However, I entirely agree with what the noble Earl said about the need for partnership between the state, the employer and the individual. I hope that that is now common ground in every quarter of the House.
I do not agree with the remarks made by Mr. Frank Field in an interview with the Express on 4th August when he proposed as a long-term plan to abandon the income support supplement for pensions on the ground that it was necessary to compel people to go in for private contributions. I do not disagree with the argument for compulsion, but, as regards dropping the supplement, it is Mr. Field's job in this Government to think the unthinkable—it is the thinkable that he seems to find so difficult!
I am much more in agreement with the remarks being made by Mr. John Denham, who might be described as Minister for the thinkable. Writing in Parliamentary Policy Forum last month, he stressed the difficulties faced by low income workers, those with intermittent employment patterns and those who cannot contribute to second pensions; for example, because of caring responsibilities. One should also include those who are part-time and earning below the national insurance limit and a category in which I should declare an interest because I belong to it; those who have spent part of their working life abroad and who fall out rather badly in some ways.
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Taking those points into account, we decided that we would split the basic pension; we would keep a universal pension which was linked to prices and we would have a means-tested supplement which was linked to earnings. To that we have now added a further supplement of £5 a week for the over-80s. That is a limited category of pensioner among whom a great deal of poverty is concentrated and who are least able to supplement it with earnings, as they can do now that the earnings rule has been happily abolished. We would abolish SERPS which we believe produces a very bad return—20 per cent. of the final salary—while many of the occupational schemes such as mine can produce something approaching half the final salary or occasionally something better.
However, we would have a compulsory occupational scheme for all employees funded by the usual partnership scheme. Of course, where people are not in regular employment our second part of the basic pension—that related to earnings—comes into play. Therefore, I hope that we would target the state spending on those in greatest need—and I agree with the noble Lord, Lord Borrie, that that is a proper charge on public funds. I do not see what else it could be.
We also believe that we need much better regulation of the private pensions industry. There is a welter of regulatory bodies—what I might describe as an Acropolis of acronyms. I am not an expert on exactly how those bodies should be put together, but some kind of linking should be done. We are also concerned that not all the recommendations of the Goode Report have yet been put into force. We want trustees representing the employees and trustees representing the pensioners, who are two potentially conflicting interests. We want those trustees not to be removable by the employer's trustees and we want it to be clear and certain that under no circumstances will the employer trustees have a majority on their own over the other two bodies.
The need for that principle is clearly illustrated in the sad story of the bus company pensions; the Bus Employees Superannuation Trust, commonly known as BEST. It reminds me of the remark of St. Augustine that the decay of the best is the worst. Perhaps I may say to those who know the original Latin that they will notice that I made a parliamentary translation of the saint's words.
Originally that was an alteration of the clear terms of the pension scheme, which had directed that the surplus should be distributed to the employees, altered by a vote of the trustees to transfer the surplus to the employer from whom it got further diverted to the Government. I say that without respect to party because government policy on that has shown no sign whatever of changing as a result of the general election. We are dealing with a government as the executive animal rather than any particular political party.
The ombudsman was clearly of the opinion that that transfer of funds was illegal. I pass no judgment on whether or not that was so. But it clearly contradicted legitimate expectations because it contradicted the express words of the scheme under which people had contributed to their pensions.

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If the law were to be changed, it should have been changed by parliamentary legislation without retroactive effect. This matter is now sub judice in the courts. It may be that in the end the bus employees will receive what they believe, with some reasonable excuse, they deserve. But one should say that a posthumous pension, like a posthumous partner, is of very limited, if not negligible, usefulness. Therefore, I hope that the Government will think again about that and, whatever they think the law should be in future, they should do something now about that very legitimate grievance.
That exactly illustrates why there is a case for better regulation. We are asking people to invest a very great deal of their money and future security in schemes over which they do not have direct control. The degree of trust which is needed, especially if we are to compel people to do that, is very great indeed. I do not believe that our institutional framework is yet ready to bear the weight and something should be done about it.
I intend to make just one more remark dealing with the subject of long-term care. It is not perhaps technically within the words of the Motion but it is very closely related to it. The Government's manifesto committed them to a review. We agreed with that commitment and said something closely similar. At the end of the Labour Party Conference, the Prime Minister said that he hoped that those who conduct the review will not tell him that that is a subject which needs more money. According to the rules of counsel, as understood by every medieval ruler, it was the duty and first mark of a faithful counsellor to tell the ruler things that he did not want to hear. I hope that the Prime Minister has faithful counsellors.
7.43 p.m.
Lord Lucas: My Lords, when I saw the list of speakers I knew that today's debate would be of high quality but even those expectations have been exceeded. I listened with fascination and awe to most of the speeches and with relief to some of them, including that made by my noble friend Lord Buckinghamshire which was so high powered that I feel quite unable to even attempt to reply to it. I do not envy the challenge placed upon the noble Baroness, Lady Hollis, in responding to the debate.
The Motion addresses a matter of great national importance and it is one which the Government have set out to take on. In doing so I hope that they can count on a great deal of support from us because I think that we share the aims that they have set out and I hope that in many instances we shall be able to approve of the methods they choose.
We are all living longer, we hope, and living better. That places a great strain on the finances of the country and on the way in which that income in our retirement is to be provided. We face a challenge of what to do with our poorer pensioners not only as regards how we are to provide for them but how we are to deal with the transition between poor pensioners for whom the state provides and slightly better off pensioners for whom the state does not. It would indeed be a very odd twist of a
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compulsory additional pension scheme if it turned out to be a tax on the relatively poor, who ended up no better off than they would be on social security, and a benefit for the rich who ended up with additional money.
It is a problem of great complexity. We must understand how to incentivise people and to persuade them that parting with that additional money is the correct thing to do. We must understand how to control and decide on the degree of risk which individuals should be asked to take as to what their final pension is to be and, if we wish to moderate that risk, how it should be moderated. We need to pay particular regard to some of the side effects that those great changes will have.
I take one particular example which was mentioned by the noble Lord, Lord Grantley, in what I thought was a superb speech: that is, tracker funds. Tracker funds are a parasite on the markets of which they are a part. They contribute nothing to decision taking within that market and nothing to the ultimate functions of that market to allocate capital correctly. A market can withstand them in low volumes but they pose all sorts of problems if they become a serious part of pension provision.
What are they to track? Are they to track a limited index and leave companies out of it or are they to track an index comprising all quoted shares and become totally indiscriminate? Are they to take in European shares? Are we sure that the rules of the European Union and the ecu will permit us, in the evolution of the timescale that we are talking about, to have our principal pension fund investments restricted to UK shares? Indeed, what is a UK share? Is it one that is listed here or is it restricted to companies which have the principal proportion of their business here? If it is to be a company which is listed here, why should we discriminate in favour of a company which has chosen only to list here rather than one which has an almost identical business but happens to be listed in, for example, New York? There are all sorts of problems in deciding what to track.
If tracker funds become a significant proportion of a market, then the opportunities for people to play against them become enormous. Tracker funds have to buy shares and, as anyone who has looked at the way that currency speculators can make money out of markets where governments are committed to going in one direction will understand, there are enormous opportunities for people to play against tracker funds: to sell to them when they have to buy; and then to make it impossible for them to sell when the market is going down. It is possible to make extremely substantial amounts of money by playing against them. Therefore, I hope that we shall not go down that route.
But, of course, not going down that route re-opens the question of how risk and expenses are to be controlled in that additional saving. Asking people to save more also re-opens the whole question of what a pension fund should be. Again, as the noble Lord, Lord Grantley, pointed out, as currently structured, pension funds are disadvantageous forms of saving. The advantage is made up only by the tax advantages which they enjoy. The restrictions placed upon them are cumbersome and

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difficult to live with. If we are to be asked to save greater proportions of our money in pension schemes, it seems to me that we should look at how we incorporate houses and real property in them. Why should I not, during my life, put aside money in the form of a villa in the south of France? That is something which, when I no longer wish to use it, I can sell, and that is providing for my retirement. That is perhaps taking a rather gross example but why should saving have to be additional to that? Coming down to a more ordinary level, why should people have to put aside money throughout their lives when they have bought a house which is suitable for themselves and their children and which, in retirement, they will be happy to down-size to a smaller house and release that capital to be part of their pension funds.
The noble Lord, Lord Grantley, raised the question of annuities. I agree with him entirely. As currently set up, they are an iniquity. Few people with any sense and the freedom to choose would invest in an annuity. It does not reflect personal circumstances. There is the extraordinary situation whereby if you wish to insure your life, which is rather the other side of an annuity, your health will be assessed but if you want an annuity, the fact that you are likely to die two years hence makes no difference.
The investments underlying an annuity, as it is currently structured, have to be low risk, steady investments with a consequent low rate of return. When people are picking up such annuities to look after them for, say, 20 or 30 more years, the underlying investments should, if they are to give the best value to the pensioner, be much more flexible. If, as this Government suggest, we are to increase and make compulsory the additional pensions and additional savings for retirement, such matters must be addressed.
In proceeding with this difficult and important task—and one which we hope to be able to support—I hope that the Government will adopt three principles—namely, openness, thoughtfulness and trust. I say openness because what the Government know, in particular what the Civil Service knows, is limited. We are talking about enormously complicated areas. There are many people in the world who understand bits of such areas better than the Civil Service. The Minister need only look at the Pensions Act that we passed and its consequences to realise the limitations of the Civil Service which produced it. That legislation was produced by a team of 80 civil servants with a great deal of effort and intelligence. Yet it has still produced some side effects that we regret, as well as being a cumbersome and unpractical way of tackling the problems that it set out to address. It is most important that such matters should be widely discussed and aired before we commit ourselves to further legislation.
Secondly, I emphasise thoughtfulness. In my view it is enormously important that the Government should think before they leap. The Budget was a great example of doing the exact opposite. As the noble Lord, Lord Grantley, and my noble friend Lord Mackintosh, said, it will perhaps turn out to have been the death knell of
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defined benefit schemes. That is surely not something that the Government, in taking a longer term and calmer view of things, would wish.
The additional tax on pension funds was said to be a move to encourage companies to invest more long term. However, because of the structure of the pension funds industry and because of the way in which the Pensions Act that we passed bites and, indeed, because of the way that pension funds are currently valued, it will instead result in a net cash outflow from companies in the short term. It will also result in institutions taking a shorter-term view of investments and demanding even more cash back from companies by way of share repurchase and other systems to make up for their lack of income. Its effects in the medium to short term will be exactly the opposite to those which the Chancellor of the Exchequer said he wished to have. As pointed out by other speakers, that is likely to result in a large-scale return to the SERPS scheme which, again, is something which surely, given the time to think about it, the Government would not have chosen to do.
Thirdly, there is the question of trust. I believe that the noble Lord, Lord Borrie, and others quite correctly raised the issue of pensions mis-selling. Clearly, that is a betrayal of trust. If we are to ask people to trust us and to trust the investing institutions with money under restrictions over a long period of time so as to provide something which is very important to them, then trust is the essential ingredient. That is why we are seeing the likes of Marks and Spencer and Virgin coming into this market. They do so with a clean sheet and they are names which we have learned to trust. That must be an enormously important part of whatever is put before the public in the future.
However, it is equally important that the Government should earn our trust. An individual who was due to retire shortly after the last Budget will find, at a stroke, that he will get 16 per cent. less by way of pension. That is not the sort of action which is likely to encourage people to believe that their pensions, and the arrangements under which they are made, are in safe hands under this Government and the proposals which they make. As my noble friend Lord Lindsey and Abingdon pointed out, I very much doubt whether this would have been brought forward if the senior civil servants who proposed it had thought that it would mean a 16 per cent. cut in their pensions should they retire the year afterwards. But, of course, it does not affect them because they belong to a different scheme and are not subject to this particular additional tax.
Breaking the trust of the nation in the way that the Government did with the last Budget—indeed, breaking the trust in terms of the promise which they made not to increase taxes and directing that tax at pension funds where trust and long-term trust is so important—is a mistake which they will regret for a long time.
7.55 p.m.
The Parliamentary Under-Secretary of State, Department of Social Security (Baroness Hollis of Heigham): My Lords, while there are many strengths in our pension system and many people who do enjoy a

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reasonable degree of independence and security in retirement, far too many, as has been mentioned tonight, do not. The failure of the last government over the past two decades to develop an adequate pensions strategy has resulted in widening inequality among pensioners. As we noticed yesterday in an interchange which took place during Question Time, the gap between the richest and the poorest pensioners has more than doubled in the past 18 years. A quarter of all pensioners either receive or—worse—are entitled to but do not claim income support. Many more depend on means-tested benefits. All the indications are that these inequalities will continue and widen in the future if we simply continue with the current system.
Far too many people at work today face the bleak prospect in retirement in which they passport the poverty of their working lives into a poverty of old age. That will continue to be the case unless we tackle the failings in the current system. Past policies have left too many people without access to value for money, or to secure and flexible pension provision.
Occupational pensions now cover less than half the work force and as local and central government staff numbers have retracted, so has that proportion shrunk since the late 1960s. We need also to address the problems and difficulties faced by low income workers, especially those with intermittent work patterns—that is, those working part-time, casually or on temporary contracts. We need to understand the situation of self-employed people and we must also recognise, as many speakers have said tonight, those who cannot contribute to a second pension because of their caring responsibilities. As I said, even among those with access to occupational pensions, too many are choosing not to join such schemes.
We know that this is the broad picture of the pensions world that we have inherited and these issues are central to our review of pensions. The initial consultation period is now well under way and will last until the end of October. We plan to publish an initial framework for change in the first part of 1998. There will then be a period of further consultation before firm proposals are finalised. However, at the heart of the difficulty—and this has been mentioned tonight in our most thoughtful and wide-ranging debate from which I have certainly learnt a great deal—is the fact that pension provision today is too often misaligned with the world of work that it represents. The world of work has become a flexible world, but pension provision has not followed suit.
I shall now attempt to answer the questions raised by speakers tonight. In a thoughtful and most professional speech the noble Earl, Lord Buckinghamshire, was highly altruistic. He is someone who makes his money from pension complexity, but he called for pension simplicity. We look forward to his continued pro bona publico work in that area in the future. The noble Earl made two main points. First, he was right to emphasise the need for a good second pension and to highlight the inadequacy of existing second pension coverage. The noble Earl drew our attention to the fact that defined benefit schemes were being replaced by defined
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contributions which of course lay the risk off onto the employee—which is perhaps the downside—but which equally can offer good returns based on equities and a more flexible response, especially with transfers, to a flexible labour market.
The noble Earl also drew our attention to the problems which can arise with personal pensions, as indeed did other speakers. However, in my view none of your Lordships criticised the triple scandal surrounding personal pensions. I have in mind not only the scandal of mis-selling that has already been mentioned but also the scandal as regards charges. In the latter case, even if a personal pension lasts for only two years, 75 per cent. of the money invested can go into charges. If it is a matter of 10 years, then up to one third of the money can go into such charges. Indeed, overall, one quarter of the money is likely to go into charges. That is scandalous.
However, there is a third scandal; namely, that over 50 per cent. of these mis-sold personal pensions were based merely on the recycling of a national insurance rebate which is so low that they are unlikely to float their recipients off income related means-tested benefits in old age. That is a triple scandal. These pensions have been mis-sold to people and as a result people's own best efforts to meet the aim that we have identified tonight which is a portable, transferable and flexible means for secure retirement, have failed and their trust has been destroyed. I do not think there is any doubt in this House that we must seek to ensure that no such scandal ever recurs. When talking about the report of the Director General of Fair Trading, my noble friend Lord Borrie was right to make the points that he did. I am sure that all Members of your Lordships' House welcomed that report.
The noble Earl also referred to the problem of inequity of pension provision for part-time workers, for those who are caring for others at home and other such people. He will know that is precisely why, in addition to our stakeholder pension, we seek to provide for those in flexible labour situations. We shall introduce a citizenship pension to enable those who have home and caring responsibilities to passport into a version of SERPS the contributions that at present the Government would have to make. We hope that that citizenship pension will provide proper taxpayer support for the old age of those with legitimate caring responsibilities. We shall bring proposals forward for that in due course.
The noble Earl mentioned the need for simplification of our pension formula. In this he was joined by the noble Lord, Lord Grantley, and the noble Baroness, Lady O'Cathain. As your Lordships will know, the Pensions Act has been in place for less than 12 months. We are monitoring it. That is necessary to allow the new arrangements to settle down. However, trustees are required to provide information about the schemes. We shall want to monitor that to ensure they are doing so properly and successfully. The Government may consider an investors in pensions award to publicise such activity. As has been rightly said, if people do not know of the virtues, the advantages and the investment policy of the pensions that trustees are managing on their behalf they will not invest so readily in those

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pensions and they will not take advantage of the available opportunities. I am sure that we all speak with one voice on that issue.
The noble Viscount, Lord Mackintosh, asked us to be honest about the state pension and its inadequacies. We are honest about it. It is precisely for that reason that my honourable friend in another place, the pensions Minister, Mr. John Denham, is reviewing proposals for a stakeholder pension. He, too, is concerned—as we all are—that people should think about and start pension provision at the beginning of their working lives, when they have ample time to build up a pension fund to meet the pension promise they are entitled to enjoy, rather than at the end. That is why in its New Deal proposals Labour is anxious to ensure that people enjoy a good working life as the basis on which to build a secure pension life.
The noble Viscount reminded us of the significant problem of the underfunding of pensions, particularly in the case of people such as women who have intermittent working lives. He was right to mention that. For that reason many years ago in the late 1970s my noble friend abolished the right of newly married women to pay a limited national insurance contribution which would result in only limited pension rights. As this scheme progresses, more and more people will benefit from pension coverage. The noble Viscount also asked us to consider encouraging employers to develop financial plans—as in the USA—for their employees to consider their long-term pension future and to increase their awareness of that. That is a useful and interesting suggestion and certainly one that I shall ask my honourable friend John Denham to bring to the attention of the pensions review if it is not already on the agenda, as I suspect it is. I thank the noble Viscount for that suggestion.
The noble Lord, Lord Grantley, made an interesting speech in which he considered the issue of compulsion. As my noble friend Lord Borrie rightly said, there is already a considerable element of compulsion within the existing pension arrangements. Contributions to taxation which funds the state pension scheme and contributions over the income level of £62 a week to SERPS or their equivalent are already made. However, I refer to the wider issue of compulsion. The Government are of course happy to consider representations made to us on this matter. If it is clear that there is an overwhelming consensus on this I am sure that the Government would be happy to move in that direction. However, at this stage it is an issue for the pensions review to consider in the light of representations made to it.
The noble Lord, Lord Grantley, was in favour of compulsion on three conditions: first, that there is better tax treatment; secondly, that there is sufficient political stability; and, thirdly, that there is complete freedom for investors to choose how they draw down their annuity rates. As regards tax treatment, that brings us to the spectre at the feast—if I can call it that—of ACT which either hovered over or subverted most of the speeches tonight. At the end of the day I believe that there is a basic division of opinion between those on the Benches
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opposite and those on these Benches who do or do not believe that pensions should be supported by an artificial distortion of the investment market.
As we all know, what has happened with ACT is that money has been drawn for short-term income benefit which in our view should instead have been invested in the capital strategies of companies to produce the long-term economic health on which the companies themselves and their long-term pension plans rests. There is a fundamental difference between us on this but we do not believe that people should be attracted to pensions exclusively by virtue of a distorted pensions regime of taxes as opposed to being attracted to pensions because they represent—as I believe they do—the most healthy and satisfactory method of making a long-term investment in one's own, one's company's and one's country's economic future. I believe that only pensions based on that premise will be healthy and secure. As I said, that is the division between us. Before the changes in the Budget, ACT warped and distorted the economic framework of investment in this country. The Budget in its wider context, including the reduction in corporation tax, the new deal proposals and other such measures seeks to establish a healthy pensions framework built on a healthy economy of investment. We believe it is right that we should take the long-term view on this.
The noble Lord, Lord Grantley, also wished to build sufficient political stability. I was delighted to hear the interesting speech of the noble Earl, Lord Russell, and the interesting comments of the noble Lord. Lord Lucas. I was delighted to hear that they will join with us in seeking to establish an agenda for a generation in which we can all be secure. Your Lordships were right to point out that pension schemes in which people can have no confidence for the future and which they believe are subject to the vagaries of political judgment will not attract the savings and the investment that they need. I welcome their contributions to the discussions and debates to ensure that that stability is achieved.
The noble Lord also referred to the need for investors to have complete freedom for investment and not to find by the age of 75 that 75 per cent. of their income is forced into annuities. The pensions review will consider the rules regarding the drawing down of annuities to see whether that is correct. However, we believe that pensions funds and the regulatory regime that surround them should be required to take the long-term view, as is the case with annuities. I believe that the noble Lord asked for a pamphlet on all the pension rules. My answer to that is that it would be some pamphlet and some rules!
I now address the thoughtful remarks made by the noble Baroness, Lady O'Cathain. She emphasised—rightly in my view—that government must encourage saving and that government must encourage a propensity to start saving early. We need to increase saving but the problem has been that irregularity of income, which is what flexible work engenders, does not encourage regularity of saving. That is why we must work with the pensions industry to develop new packages, new portfolios, with which to carry that investment into old age. As the noble Baroness said, we

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need to encourage employer schemes. She is right to emphasise that charges in occupational pension schemes at about 5 per cent. are very favourable and beneficial in good occupational schemes compared with personal pensions. She is also right to say that we must have regulation that is easy to understand.
The noble Baroness asked me whether the Government will reconsider the changes made in 1988 by the previous Government which did not require employees to join employer schemes. I believe that since 1988, and as a result of that change, 1 million employees now forgo the opportunity to be members of good occupational schemes. Like the noble Baroness, for most of them that must surely be short sighted, although in some circumstances it may be a prudent decision.
However, that is why we are considering the issues as regards what goes into stakeholding to make that an attractive alternative funded scheme in order to offer the benefits of flexibility, portability, and so on, that some of the occupational schemes have not offered in the past. We hope, therefore, that it will encourage the generation of people who I believe should be in occupational schemes to have a good, satisfactory alternative on a group base, or the like, which currently they do not have.
The noble Baroness and other noble Lords asked about credit for carers. That is exactly why we shall be developing citizenship pensions, so that those who in good faith take themselves out of the waged labour market to enter the unwaged labour market of caring should not be penalised in old age for doing so. We all know that too often being a carer and helping someone else to cope with the poverty of old age ensures that the carer will be impoverished and isolated when in turn he or she enters old age and finds no one to care for him or her. The Government take the issue seriously and will seek to review it. I am chairing a review on disability and carers' allowances.
The noble Baroness asked the wider question as to why we do not offer more carrots as well as sticks in encouraging people into pension provision. We should emphasise that pension schemes continue to benefit from significant tax exemptions. Government made it clear in the last Budget that, for example, they would not implement the previous Government's proposal to phase out tax reliefs on employee contributions. Companies were privileged as a result of the cuts in corporation tax—they are now the lowest in Europe—which we believe will provide an environment for investment. We believe that pensions continue to provide an attractive and tax supported regime for savings, but we shall look at the issue in our review.
My noble friend Lord Borne, and the noble Earl, Lord Russell, raised the problem—it is dear to my heart—about the increasing inequality within the pensioner world, if I may so put it, through the growing dependence on income support while many others rightly enjoy the financial comfort of occupational pensions. Income support is received by 1.8 million people. A further million should receive it but do not
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claim it. About another 400,000 to 500,000 people are within £5 of income support levels and are therefore deeply poor.
My noble friend Lord Borrie and the noble Earl, Lord Russell, were right to draw attention to the problem that if we raise the basic state pension, all of us, including many of your Lordships, stand to gain except those who need it most—elderly women who simply see it deducted off their income support. How do we achieve targeted help without stigma? It is precisely because of that problem that the pensions review needs to consider over the next year the roots of earnings link as opposed to the RPI link for the state pension.
The noble Earl, Lord Lindsey and Abingdon, and the noble Earl, Lord Clanwilliam, raised the question of ACT. I hope that I have addressed that. There was reference to rebates to the National Insurance Fund. Should the Government Actuary decide to raise the issue with Government, at that point the Government would consider those representations.
The noble Earl raised a wider point about whether pensions were a burden on companies, handicapping British companies in the competition with Europe. Employers do not have to provide occupational pensions. It is a choice they make because they believe that it is to their economic advantage so to do.
The Earl of Clanwilliam: My Lords, I am grateful to the noble Baroness for her remarks, and for giving way. I entirely agree. It is greatly to the credit of our great companies that they make these provisions. The only point I make is that at an additional charge of some 15 per cent of salary companies are finding it almost too expensive to provide those pensions.
Baroness Hollis of Heigham: My Lords, again it is a matter for the individual company whether it sets up funds and what the contributions will be, in particular in cases where companies have moved from defined benefits to the equivalent of money purchase schemes. The reason that blue chip companies offer good pension schemes is precisely because they see it as part of the total remuneration package with which they attract and retain good employees, which is what every company wishes to do.
The noble Earl, Lord Clanwilliam, and the noble Baroness, Lady O'Cathain, raised the question of minimum funding requirement and whether there had been a move from equities to gilts. I believe that I am right in saying that there has been no evidence of any major shift taking place. Where there has been any such shift, my advice is that it may well be due to the maturing of many pension funds rather than to any changes in the Budget. However, that is an issue which must be kept under review.
I turn now to the final speeches from the Liberal Democrat and Conservative Benches. The noble Earl, Lord Russell, reminded us of the ingredients of the Conservative menu for pensions, ranging from a universal basic state pension, a means-tested related earnings pension, a £5 slice, and attitudes towards SERPS. Listening to his speech, I supported part but not

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all of his menu. I can see why it perhaps neatly bridges the "thinkable" and the "unthinkable" with the conference "sayable". The noble Earl raised concerns about the National Bus Company. I have sought advice because he was kind enough to give me notice of his concern. Ownership of pension scheme surpluses, as we all know, is an emotive subject. There are conditions and requirements in legislation which must be satisfied before a payment can be made to the employer. Those are strengthened from April. As regards the National Bus Company, it was a decision by the pension ombudsman who is an independent statutory commissioner. As the noble Earl will understand, it is inappropriate for Government to comment on his ruling in individual cases. However, as the noble Earl said, the case will be coming before the courts.
I was delighted that the noble Earl joined with the noble Lord, Lord Lucas, in seeking to join us with the pension settlement which will have widespread consensus and staying power. I am sorry that he was so harsh on tracker funds in particular as some of my PEPs are in tracker funds. He regarded them as parasites on the market and, therefore, people like me as parasites on the market. I am not sure that his views would be widely shared by his colleagues behind him or by the pension industry as a whole. If I understood him correctly, I was also slightly puzzled by his proposal that people should be able to draw down mortgage equity released sums into their pension, considering the huge expense that this would involve to the public exchequer in terms of Inland Revenue rules. But perhaps now that the Conservatives are in Opposition, they feel free to make proposals which could have significant public expenditure in a way that they would not have done six months ago.
I also thought that he was rather harsh on the Pensions Act 1995, which he described as cumbersome and impractical. Again, I am not sure that that is a view widely shared by those behind him or in the pensions world. But I am sure that he is right to raise the questions he does even though some of them somewhat surprise me.
The debate has been interesting and wide-ranging. The issues raised have included coverage; flexibility; compulsion; simplification; and tax treatment. I have answered as many of your Lordships' questions as I was able to in the time. In so far as I have been unable to answer, I shall write to noble Lords, and shall certainly ensure that this debate is drawn to the attention of my honourable friend Mr. Denham and of the Pensions Review.
It is clear that we have inherited a major challenge on pensions policy. In the review we are conducting we want to lead the process with the help of all noble Lords on all wings of this House, so that we shall be able to meet that challenge and build a sustainable consensus on the future of pensions in this country.
8.20 p.m.
The Earl of Buckinghamshire: My Lords, I thank everyone who took part in the debate. The Minister kindly summarised everybody's speech for me and picked up on most of the major points. I wish to take
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up one or two issues in my concluding remarks. Before doing so, I congratulate my noble friend Lord Clanwilliam, who has great stamina. He has now sat through two debates. I hope that he enjoyed the greater freedom of this one in relation to time. I should also like to congratulate the noble Earl, Lord Russell, who is a great pleasure to listen to. He brings a sense of humour to a debate such as this that I cannot rival.
The noble Lord, Lord Borrie, mentioned that support on these Benches for removing higher rate tax may not be as evident as he might think. There are complications in moving that tax relief. Secondly, I suggest to the Government that any move to remove tax of that nature or reallocate it is part of an overall strategy on tax and benefits. One of the points that I put to the noble Baroness related to whether the Chancellor is undertaking an overall benefits and tax review. Perhaps she will let me know later.
Baroness Hollis of Heigham: My Lords, it is certainly the case that the Chancellor has asked Martin Taylor to conduct the inquiry into tax and benefits. We await the recommendations that he will in due course make to the Chancellor.
The Earl of Buckinghamshire: My Lords, I thank the Minister for that clarification.
Another point made by the noble Lord, Lord Borrie, related to defined benefit plans and how early leavers are not treated all that well. It is clear that in the way defined benefit plans are designed there is a cross-subsidy between the young and the old, and a cross-subsidy between the early leavers and the stayers. That is a fact of those types of plans. It is why, philosophically, many companies, particularly American companies, prefer to move to a defined contribution arrangement where those types of subsidies do not occur. I am not an apologist for defined benefit plans; however, I believe that they have a very important place in the pensions planning of this country. Defined contribution plans equally have a place; and other types of plans might be considered—clear average and cash balance, for instance. They also have their place. The critical issue in relation to early leavers is that their benefits are operated in line with inflation rather than national average earnings. If the Government decide to make that sort of change, it will add yet again to the cost of defined benefit plans.
Turning to the question of compulsion, mentioned by the noble Lord, Lord Grantley, it is to be hoped that we shall not arrive at a situation such as that in New Zealand, where there is great objection to the concept of compulsion. I totally understand the idea that it infringes on personal liberty. Now and again, personal liberties have to be examined in relationship to other issues. In particular, we do not make enough provision in this country for our retirement. Another point is that there is quite a degree of compulsion at the moment in our system in providing for a mandatory state earnings related scheme and the basic state pension. It is particularly important that in considering proposals, the Government—it is to be hoped with the help of

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everyone in this House and the other place—put forward a plan whereby this is not seen as merely another means of convenient taxation on individuals in this country.
I congratulate the noble Baroness, Lady Hollis, on her very competent summing up. I enjoyed listening to her. I suppose that it will be another few months before she is unable to blame the previous Government for everything that she finds.
On ACT, the interesting point is that actuaries can never agree on anything; and the good thing is that economists can never agree. Is there any evidence that companies will reduce their dividends in the way that the Minister suggests—in that they will actually reallocate tax back into research and development or into other areas? I believe it was BAT which, following the tax changes, came under colossal pressure from shareholders for not increasing its dividend. The dilemma needs to be addressed. It is always nice to know that the economists are warped and distorted—perhaps that is an alliteration that I should not draw from the comments made.
As we move forward we shall certainly need to get used to some new terminology in this House: citizens' pensions, stakeholders' pensions, and designated personal pensions—which go by the slightly unfortunate initials of DPP. Perhaps the noble Lord, Lord Borrie, will be able to revisit his old stamping ground and help the Government through with that.
The debate has been about the need for the greater provision of pensions. In closing, I wish to draw the attention of the House back to the origin and terms of reference of the Pensions: 2000 and beyond inquiry by Sir John Anson and his colleagues. The report provides a final word on the matter which perhaps I may quote:
"Looking forward over the next 40 years, the number of pensioners is rising and the number of active working people supporting each pensioner is declining. This is a world wide phenomenon. The cost of state pensions in the United Kingdom will increase even though the basic state pension is falling as a proportion of average earnings. And there is a widening gap between incomes of pensioners who have been able to make sufficient contributions to occupational or personal schemes, and those who rely on the state".
That is a very good summary of the issues raised in our debate today. I look forward to playing a part as one of the intelligent species of this House. I hope that that debate will take place before I am perhaps removed. That is possibly too gloomy and pessimistic a view of life. Once again, I thank everybody who took part. I enjoyed the debate and hope that everybody else did.
I beg leave to withdraw the Motion for Papers.
Motion for Papers, by leave, withdrawn.

Colombia
8.28 p.m.
Viscount Waverley Viscount Waverley rose to ask Her Majesty's Government what support or encouragement they are giving to the state of Colombia in dealing with its internal political and security situation.
The noble Viscount said: My Lords, let there be no misunderstanding, the internal political and security situation in Colombia has the potential to escalate in its enormity and tragic viciousness, placing it alongside the conflict between the Israelis and Palestinians, Kashmir and Afghanistan. The issues are complex, easily misunderstood and often misrepresented with the power of the state being undermined, a weakening of the rule of law, a threat to democracy and civil rights impinged upon as a consequence.
This evening I will offer an overview on matters relating to security, guerrilla activities, narco-terrorism, drugs and human rights, all of which are interlinked, and finally comment on how the integrity of one of Britain's largest and most successful companies, British Petroleum, is being called to account. I have a close association with Colombia and wish to see misunderstandings reversed.
For background, Colombia endured between the years 1948 and 1964 a bloody civil war between liberals and conservatives which left an estimated 300,000 dead. The war displaced peasants to the cities, concentrated rural property in fewer hands, increased impunity, escalated delinquency and weakened the power of the state.
The war finished thanks to a political pact which alternated public office for 16 years between the two traditional parties. The political consequence was that opposition to the Government diminished and "clientism" increased as a way to bestow favours from the state and ensure support from the popular classes. The result was that from 1965 incipient insurgency against the government and regional elite increased and has caused a continual war since. The state is in many cases unable to extend benefits and authority into the rural areas, where the outlaws are fighting a war, not for political power, but for control of the land.
Colombia is undergoing terror and counter-terror. The increase in insurgency provokes an increase in counter-insurgency, each cycle involving a wider and wider net of social classes and groups, both to the detriment of society and the state.
In the first instance the conflict was ideological. Now, however, economic and political means are being used to obtain armed domination, territorial control and with it the displacement of people—some reports suggest 1 million in the past decade.
Terrorism in Colombia is a complicated phenomenon. The difficulties facing the country can be divided into three broad categories: guerrillas, narcotic traffickers and paramilitaries. The guerrillas have developed a system of extorting money from landowners and businessmen which relies on the assassination or kidnapping of those who do not pay. Of 1,496 reported kidnappings in 1996 over 40 per cent. were the work of guerrillas and the rest of general delinquency.
Apart from exerting influence locally, they ambush and assassinate police and soldiers, force civil servants to divert public funds, and attack the oil and electricity industries to extort money. They also attack villages and rob businesses and banks, netting the guerrillas an estimated annual income of up to $620 million; and in

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its attempts to control the guerrillas the state spends 31.5 per cent. of the total government budget on defence.
The Revolutionary Armed Forces of Colombia (FARC) are the most powerful guerrilla organisation, credited with having 70—some say up to 100—fronts and approximately 8,000 to 10,000 men under arms, with three times as many militants. They attack government installations, are responsible for protecting the narcotics trade and maintain a high level of kidnapping. They operate close to the main cities and in rural areas throughout the country, are well armed, well trained and have good resources which reportedly include light aircraft and helicopters. They are very strong and are rarely put under pressure by the security forces.
Regretfully, FARC has gained political legitimacy as a well equipped, belligerent force in the eyes of some national and international observers, with human rights abuses and narco-trafficking down-played by sympathetic media observers.
The National Liberation Army (ELN) is the next most organised group, with approximately 10 urban and 20 rural fronts. It is most noted for attacking infrastructure, especially that involving foreign companies, has some contact with the narcotics trade and actively kidnaps. It is strong but susceptible to concentrated military pressure.
The weakest of the three established groups is the Popular Liberation Army (EPL) and dissident factions of M19. But all groups, and particularly FARC and ELN, sporadically join forces and work together under the banner of the Co-ordinating National Guerrilla (CNG) movement.
International narco-trafficking has the ideal conditions to prosper in Colombia with its chronic insurgency and weakened government. However, the two major cartels have been effectively dismantled by the country's successful and ongoing series of operations. Some of the trade has moved overseas, but many refining and transport operations continue and have diversified to include heroin as well as cocaine. They have an increasing level of protection and involvement from the guerrillas, particularly FARC, and it is this aspect that what is already a highly debilitating national problem is developing into an even more serious situation.
Thus far all the groups are in conflict with the government and the law of the country. That does not wholly apply to the paramilitaries, whose origins lie in rural self-defence organisations, created by landowners and cattle ranchers who armed themselves in order to protect their communities, something the armed forces could not guarantee. Almost predictably, it took little time for them to become dissatisfied with pure defence and they now take the fight to what they see as the common enemy of the government and themselves, the guerrillas. They will attack anyone who they believe is assisting their enemy, including businesses forced to make extortion payments, the families of kidnap victims paying ransoms and communities sympathetic to the guerrillas. Justice is arbitrary. By kidnapping the families of guerrillas and forcing an exchange of
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victims, paramilitary groups are seen to be more effective than the police or the army and have thus gained some popular support. They have excellent local knowledge and information.
It is against that backdrop that I now wish to say a word about British Petroleum's presence in Colombia. BP, like other companies, extracts oil in isolated regions where the guerrillas and paramilitaries are active. The exploitation of oil deposits causes social imbalances and attracts migrants looking for work, creating local inflationary pressures.
BP's operations have been called to account by a British Member of the European Parliament and in a series of "World in Action" television programmes in which the company was accused of direct violations of human rights and association with death squads in Casanare.
I have now visited the oil region twice and spoken in depth to BP on all related issues. Far more importantly, I have met separately with a wide range of local NGOs, community representatives and elected officials. It was their view—and they should know the true position—that the allegations against BP were without foundation. They would be dismayed if BP were to pull out through unwarranted pressure; it would be seen as a defeat for Colombia as well as for Britain. They recognise the reality that the enormous wealth that BP and its partners are generating can, if used wisely, contribute significantly to Colombia's economic development and search for social stability.
It must be understood that terrorists have the means for distorting facts by maligning the state by posing as victims, exploiting ecological issues, arousing the indigenous peoples and manipulating the media through their representatives. The ELN, for example, which accuses foreign oil companies of polluting the environment, is itself easily the worst polluter. It has caused massive contamination of rivers and water supplies by constantly blowing up oil pipelines.
I believe, however, that there may be a strong case for BP's principal Colombian partner, Ecopetrol, to be encouraged to take full responsibility for the security of the oil operations, a point that I made forcibly to President Samper. In co-ordination with the government, the oil companies might be encouraged to design policies to ensure a fairer distribution of the wealth generated and to prevent and correct those undesirable effects which increase social conflict and offer opportunities for the guerrillas to justify themselves as defenders of the victims.
The local representatives whom I met felt that the company, as the operator, could do more to improve its relationship with local communities in several areas, not least by being more accessible, responsive to concerns and generally more people-friendly. I believe they are right about that, and BP itself recognises the validity of those comments. I therefore urge the company to move rapidly to address them.
Colombia is approaching local elections, set for 26th October, under a severe threat by the guerrillas, who have vowed to disrupt the process. Considerable violence can be expected. The guerrillas are resorting to

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kidnappings and assassinations—176 between January and August this year—with voters and candidates being intimidated by terrorist threats, including attacks on political headquarters and voter-registration offices. Since August the numbers have dramatically increased. Colombia needs the support of the international community in backing the democratic process and in condemning these acts of violence. Last weekend was one of carnage, when 28 members of a judicial commission and police and army officers were slaughtered within 60 miles of Bogota.
There is a debilitating divergence of opinion on how the country's problems should be addressed. One faction, including the new defence Minister, heralds peace talks as offering imminent hope for a resolution of the war with the guerrillas, with others insisting that military action offers the only hope for defeating them. The reality probably lies somewhere in-between. However, a clear direction and a coherent strategy are essential, if resources are to be concentrated and used effectively.
Notwithstanding the current major government military offensive, about which, rightly, little is known, the geography makes it almost impossible for the army to defeat the terrorists and, conversely, for the guerrillas, as they do not have enough popular support, to win power. Peace negotiations, when they do begin, with guerrillas and paramilitaries might usefully include a new social chapter and political pact, as much in Colombia's interest as that of the world at large. In addition and most fundamentally, the state should be encouraged to end impunity once and for all.
The Colombian political system has lost the ability to resolve its internal difficulties by itself and without international support to press for peace negotiation, Colombia will be faced with an escalating civil war with catastrophic results. God knows, the country has already paid dearly—in the past 10 years more than 20,000 Colombians, including judges, journalists, policemen and innocent civilians have lost their lives in the war on drugs. Yet, during 1996, the country eradicated 73,500 acres of coca and poppy, confiscated 615 tonnes of coca leaf and 57 tonnes of pure cocaine and cocaine base, confiscated a record amount of precursor chemicals, and destroyed more drugs processing laboratories, clandestine airstrips and transportation infrastructure than ever before. At the same time, it enacted tough laws to forfeit the assets of drug traffickers and increased drastically the penalties for their crimes.
President Samper proposed a global agenda against drugs in the United Nations General Assembly last September, which I believe is worthy of attention. It includes agreement on controls of chemical precursors and weapons trade, a mandate to combat money laundering with seizure and forfeiture of assets from drug trafficking extended on a global basis, a worldwide intelligence network against drug cartels and a global treaty of judicial co-operation.
So, what can Britain do to help? Other than supplying much sought after hardware, such as helicopters, I believe that the single most important assistance, as a
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country with influence over the United States and other consuming nations, is that we could propose a new attitude to the problem of drugs and promote a co-responsibility which controls the sale of chemicals and arms and attacks money laundering. A single multilateral approach must be developed.
What is not generally known in Europe is that Colombia is being castigated by the United States, placing it in a category of pariah states, for not doing more to curtail the export of drugs. The United States Government has decertified Colombia, which rightly feels that that is a kick below the belt. All that is despite the reality that the Colombian national police and armed forces are essential to any effort to combat the flow of illicit drugs. The United States has imposed that sanction on Colombia for its perceived failures, yet at the same time retains 90 per cent. of the profits and controls the largest market for consumption. None of that is to say that we in the United Kingdom do not share similar concerns and objectives to those of the United States. But we differ in approach.
The difficulties that Colombia faces are overwhelming and the social and military programmes necessary to defeat them are beyond the resources of the country. International support is crucial. It is certainly in the best interest of the international community to have Colombia face and defeat those problems, particularly those of terrorism and narcotic trafficking. There is no alternative to supporting democratic institutions in Colombia, with their weaknesses approached realistically, its system of justice made more effective and its law enforcement agencies and armed forces supported.
8.45 p.m.
Baroness Hooper: My Lords, Colombia is a beautiful country. It has a population of about 40 million but its territory is about the size of Spain, France and Portugal combined. It is a vast territory. One of its main exports to this country is flowers: the carnations and roses that we can buy on the streets. It is a country which has produced Gabriel Garcia Marquez, acclaimed by his peers as perhaps today's greatest novelist. It is a country which has embraced democracy and a more open form of government. It has also succeeded in opening up its economy and improving its economic performance, with a falling trade deficit, rapid growth in non-traditional exports and an inflation rate under control.
Therefore, it is very sad that all those positive factors should be overshadowed by the fact that the improvements in internal security which were reflected in the greater confidence in Colombia's economy shown earlier this year have gone away. Ground has been lost to the guerrillas, as the noble Viscount dramatically told us, and they now control a very sizeable territory in Colombia. Again, as the noble Viscount pointed out, the local elections due to take place later this month have provoked an offensive. He mentioned some aspects of that offensive. I have been informed of the Maoist ELN movement kidnapping 12 town councillors in two communities, including the entire town council in Simiti in the north, as well as kidnapping five mayors in the

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province of Narino and the killing of a senator. Doubtless, next year's presidential elections will also provoke the terrorists.
In the war on drugs, in the past 10 years, over 20,000 people, including politicians, judges, journalists, policemen and innocent civilians have lost their lives. Small wonder then that there is a lack of confidence in the judiciary and fears of corruption in the public sector.
Therefore, I believe that it is both useful and important to discuss this issue in your Lordships' House—not in any way in a spirit of wishing to interfere with the internal order of another country but because the pressures affecting Colombia affect international trade and investment. In particular, they affect the growing bilateral relationship between our two countries, which not only the United Kingdom Government but also institutions such as the CBI, chambers of commerce and private sector companies, have all been working hard to cement. It is also important because narcotics trafficking and its consequences are the responsibility of all countries, whether they are producer countries, consumer countries or merely transit countries. I am, therefore, grateful to the noble Viscount for providing us with this opportunity for debate and for setting out the issues.
Since I believe that most of the concerns about internal security in Colombia flow from the vicious narcotics trade and because I believe that that is very much an international responsibility, I want to dwell on that topic. I should point out—indeed, the noble Viscount has already referred to the matter—that previous administrations in Colombia succeeded in taking very great steps against the trade. The administration of President Vergilio Barco, who sadly died earlier this year, succeeded in smashing the much feared Medellin cartel. The current Samper Government have also succeeded in taking many measures, as enumerated by the noble Viscount. Among their successes has been gaoling the leaders of the Cali administration, the organisation which replaced the Medellin cartel. The sadness about the whole area is that as soon as the baddies are pushed down in one area they pop up in another.
However, the Colombian Government are making every effort in their fight against illegal drugs and spending around 2 per cent. of their GDP in that fight. As has already been said, they have eradicated many areas of illegal drug crops; 30,000 hectares have been taken out of production already this year, and that exceeds their target for the year. They have taken a variety of other measures and there has been an international effort to encourage crop diversification. It is vital that those programmes continue, but the fact remains that the prices paid to producers in a country such as Colombia is a small fraction of the trade price of narcotics, and demand is not diminishing in the consumer countries.
What can and should we be doing? The noble Viscount listed a number of points and perhaps I can add one or two of my own. I should like to refer back to the World Drugs Summit held in London in 1990. It was hosted by our government jointly with the United
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Nations. It was attended by many leading actors in the drugs field, including President Barco of Colombia and Senor Perez de Cuellar, the then Secretary-General of the United Nations. It was the first time that consumer countries properly acknowledged and recognised that they had a responsibility to do something as well as demanding that the producers do something, particularly in the area of curbing demand.
As a result of that conference in this country, the then Prime Minister, Margaret Thatcher, announced the formation of a drugs task force to help in taking initiatives on the education and preventive front. I had the privilege of leading one of the task force visits to various countries in Latin America in pursuit of that aim. I shall be interested to hear from the Minister if that drugs task force continues in existence and if the Government have any plans for it.
I hope that the Government will support the next United Nations drugs summit, planned for next year, in order to be able to increase the pressures on consumer countries to play their part in this fight. I hope also that the Government will ensure that the necessary and appropriate precautions are taken to ensure that what is a legitimate trade in precursor chemicals emanating from this country is safeguarded so that those chemicals are not diverted into the illegal drugs trade. I hope that the Government will take every opportunity to point out to the United States Government, as mentioned by the noble Viscount, that their policy of decertification is counter-productive and hits many innocent people.
I hope that the Government will continue to support companies like British Petroleum in its struggle to carry out legitimate business to the benefit of the Colombian economy and its people. I know that we shall be hearing more on that front from other noble Lords in the course of the debate. In supporting the economy of Colombia, I hope that the Government will follow up on the many trading initiatives that have been taken. There was a successful British festival in Colombia in May and I hope that the DTI support for trade missions that have taken place in the past to encourage the fostering of relationships will continue. Perhaps the Minister can give us an assurance on that.
I hope that the Government will give the appropriate support to ensure free and fair elections, both in terms of the local elections at the end of this month as well as the presidential elections next year. It is essential that we continue to foster our trade relations, along with other cultural and educational links with Colombia, in order for the peace and stability of that country to be reflected throughout the region.
8.55 p.m.
Lord Rea: My Lords, I too thank the noble Viscount, Lord Waverley, for bringing this important problem before the House. I must confess that, alas, I have never visited Colombia except in transit for one hour en route to Quito in Ecuador, its next door neighbour. I know, however, that Colombia is a very beautiful country with extremes of climate from alpine to tropical.
All the Colombians that I have met—quite a number visit Britain—have been charming, friendly and generous. As the noble Baroness, Lady Hooper, says, it

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is tragic when such a country is enmeshed in a continuous guerrilla war with thousands of violent deaths and disappearances occurring every year. But terrorist movements and the counter-insurgency which attempts to suppress them—which nearly always has worse effects on ordinary people than the guerrillas themselves—have an underlying cause which needs to be understood.
In Colombia that cause is not hard to find. The "war against drugs" is usually held to be the main cause of the conflict and the short briefing that I received from the Colombian embassy puts that at the top of the list. However, to a great extent I suggest that, though it is important, it is a secondary issue providing a smokescreen for the real problem in Colombia; that is, the gross economic disparity between a small ruling élite and the impoverished majority. Three per cent. of Colombia's landed élite own over 70 per cent. of the arable land and 57 per cent. of the poorest farmers subsist on under 3 per cent. of land. The poor farmers and the landless do not feel that the democracy of which the Colombian Government are so proud gives them a fair hearing. They have reason for that.
More than 1,500 members of the left wing Patriotic Union Party (the UP) have been killed in the past 12 years since the party was founded. It is suggested that the rate of killings may have dropped in recent years. But according to the Inter-American Commission on Human Rights—the human rights wing of the Organisation for American States; not a particularly left wing organisation—of the 26,710 Colombians who were killed in 1996 due to political murder and common crime (5 per cent. more than the previous year), 3,600 were killed for political or ideological reasons. Sixty five per cent. of those murders were attributed by non-government sources to the armed forces and the paramilitaries, as described by the noble Viscount.
As the number of political killings by state forces declined, those by the paramilitaries—the unofficial forces—increased. The Colombian human rights ombudsman—the Colombian Government are to be congratulated for creating such a post—reported last year that paramilitary activity had increased by 60 per cent. since 1992. One of the worst features of the continuing extrajudicial killings and other human rights abuses, as the noble Viscount said, has been the relative impunity of the armed forces and paramilitary groups who carry out the majority of those murders.
In June 1996 the Consejo Superior de la Judicatura, the Superior Council of the Judiciary, reported that between 97 per cent. and 98 per cent. of all crimes go unpunished and that 74 per cent. of crimes go unreported altogether. Human rights monitors assert that virtually 100 per cent. of all crimes involving human rights violations go unpunished. However, there is some hope that that will change—at least as far as violations by the military are concerned—since the decision of the Constitutional Court in July this year which stated that military personnel who commit crimes which violate human rights can now be tried in civilian courts. Previously they could only be tried in military courts which seldom, if ever, gave a verdict of guilty.
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However, there is strong pressure by the military, who are influential in parliament as well as in government circles, to reverse that situation. The Colombian Government should be strongly encouraged to stand firm on the issue as a central plank of upholding human rights and ending this damaging impunity.
Amnesty International summarises the events of 1996 as follows:
"More than 1,000 civilians were extrajudicially executed by the security forces and paramilitary groups operating with their support or acquiescence. Many victims had been tortured. Human rights activists were repeatedly threatened and attacked. More than 120 people 'disappeared' after detention by the armed forces or paramilitary groups. 'Death squad' style killings of people regarded as 'disposable' continued in urban areas. Several army officers were charged in connection with human rights violations, but many others continued to evade accountability for thousands of extrajudicial executions and 'disappearances' in recent years. Guerrilla groups were responsible for numerous human rights abuses".
Amnesty International is not only instancing the abuses of one side. They include,
"scores of deliberate and arbitrary killings and the taking and holding of hundreds of hostages".
Amnesty International particularly emphasises the dangers faced by defenders of human rights. It quotes this particular case:
"In October, Josué Giraldo Cardona was shot dead in the presence of his two young daughters by an unidentified gunman outside his home in Villavicencio, Meta department. Josué Giraldo [was] President of the Comité Cívico por los Derechos Humanos en el Meta"—
a human rights organisation in Meta—
"and an activist with the legal left-wing [UP] party. [He] had received repeated death threats in recent years which he attributed to members of the Colombian armed forces".
The Colombian Government could do more to protect the lives of those such as this man who speak out for the rights of ordinary people. One has to question the Colombian Government's commitment to human rights, however, when the president himself can say, as he did in 1995:
"As President and Commander in Chief of the Armed Forces, I prefer to see the military confronting subversion in the mountains, and not in the country's courts answering unfounded accusations brought by their enemies".
Thus he is suggesting that he believes that the upholders of human rights make "unfounded accusations" and that they are the "enemies" of the armed forces. Enough said.
Despite government promises to take action to establish mechanisms for the protection of human rights defenders, little progress has been made. This failure to take effective measures has led to the killing of further human rights workers. For example, Mario Calderon's flat was broken into on 19th May this year. He, his wife and his father were killed and his mother seriously wounded. He was a member of CINEP, which is one of the biggest human rights organisations in Colombia working mainly for popular education and the promotion of the defence of cases of human rights violations.
A further cause for great concern, as the noble Viscount mentioned, is the displacement of the civilian population from many rural areas, a by-product of the

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counter-insurgency operation. The vacated land is sometimes occupied by friends of the paramilitary groups and ownership claimed by powerful local landowners. As a result, as the noble Viscount said, there are now some 1 million internally displaced people, many swelling the shanty town districts of large towns, with very little help offered to them by the government. That is a very similar situation to the one that I saw in south east Turkey. The policy follows the counter-insurgency tactics of the military in the civil war in El Salvador.
What is the solution to all this? Clearly, it will be a long, uphill process. The peace talks between the government and the guerrillas in 1995 broke down. There is some doubt as to whether the military or the guerrillas wanted peace. The noble Viscount discussed that. In the meantime I suggest that the best way forward will be for the Colombian Government to show with action as well as words that they support the observation of basic human rights, particularly that very basic right, the right to life itself.
As a postscript it is worth quoting some figures given to me by the Colombian embassy.
"In 1996 profits in the financial sector amounted to $796 million, an increase of 12% over 1995. Foreign investment funds rose, with a portfolio of $1.1 billion, 27% more than in 1995".
So it would seem that for those with real money things are not so bad. Possibly that is one reason why there is slow progress in improving human rights. The status quo seems to be suiting some people in powerful positions both inside and outside Colombia rather well.
9.7 p.m.
Lord Wright of Richmond: My Lords, I too am grateful to the noble Viscount, Lord Waverley, for tabling this Unstarred Question on Colombia. I should first declare an interest as a non-executive director of British Petroleum. As the noble Viscount emphasised, BP is a substantial investor in Colombia, a country with which the United Kingdom has long had close commercial and historical ties. BP has been developing and operating the Cusiana and Cupiagua oilfields for several years, and production is now approaching some 300,000 barrels of oil a day. By any standards, that ranks as a significant development.
For that reason, BP finds itself—both metaphorically and sometimes, I fear, literally—in the firing line when it comes to the security problems which lie at the heart of the noble Viscount's Question. I am grateful to the noble Viscount for quoting the view widely held in Colombia that the allegations against BP are without foundation, but the company has become an obvious target for those whose political agenda is to undermine what has been, after all, one of the oldest and most stable democracies in Latin America.
The problems which BP faces in Colombia are similar to those which many other British companies are facing in other parts of the world. It is, I think, relevant to consider for a moment how far the investment and operations of global companies in countries such as Colombia offer their inhabitants precisely the sort of support and encouragement they need to escape from the violence and intimidation which they face.
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Investments by multinational companies often have very long lead times, involving highly technical challenges and difficult financial decisions. These can only be progressed in close co-operation with the relevant authorities and governments, both local and national. Once these hurdles have been overcome, it is vital, from any company's point of view, that the investments are sustainable. Companies like BP—and I speak from six years' experience on the main board—are not in the "get rich quick" business. Their investments are for the long term. That is why sustainability is vital, and, to be sustainable, the company's operations and activities must he perceived by all concerned as yielding substantial benefits for the host nation.
Anything which smacks of selfishness, greed or lack of concern for the local environment, is likely to prove unacceptable to those whose consent and goodwill is essential to the project. It hardly needs saying that anything which contributes to violence undermines the whole viability of the operations.
That is partly why BP accepts that the wealth which it helps to create in countries across the world—including Colombia—must be shared between its shareholders (without whom there would be nothing to invest in the first place) and the countries themselves.
Both the noble Lord, Lord Rea, and the noble Viscount, Lord Waverley, talked about the case for a fairer distribution of the wealth generated by oil production. The fact is that in Colombia more than 85 per cent. of the revenue which BP and its partners earn is returned to the Colombian people, either through taxation or through the Colombian Government's equity share. Along with BP's partners, the company also invests voluntarily in a significant social programme of some 10 million dollars a year in health, infrastructure and education.
I hope that that illustrates the way in which a global company can help the transition from an economy plagued by drugs and terrorism to one where wealth is created legitimately for the benefit of all. The more successful the oil industry can be in Colombia, the less the temptation to rely on illegal activities such as narco-terrorism. That, of course, is one reason why global companies are so often the targets of those whose power and influence will be undermined once the culture of violence is replaced by a free-trading, liberal economic environment.
That is inevitably a process of transition, which cannot be achieved overnight. Meanwhile, transgressions are undoubtedly committed by all sides of the conflict. The Colombian Government themselves are deeply concerned about the widespread impunity for even the most serious crimes. The noble Lord, Lord Rea, has referred to that. Even in the region of Casanare, where BP operates, which is one of the more peaceful areas of Colombia, some democratically elected officials and respected community leaders, such as Mr. Carlos Arregui, have been murdered. Along with others, BP has urged the Colombian authorities to ensure that the perpetrators are brought to justice. Mistakes by the civil

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or military authorities can also be made which, while they can never be excused, are regrettable and are inevitably components of Colombia's violent history.
Global companies need to ensure that their principles are never compromised. BP adopts the same ethical and environmental standards in Colombia as it does world-wide. Global companies have a duty to condemn unequivocally all violence irrespective of its origin. They also have an obligation under the United Nations Universal Declaration of Human Rights to respect the rights and dignity of individuals, wherever they operate in the world. But in an atmosphere of violence companies also have a responsibility to ensure the safety of their staff and contractors unless they are to disinvest, which is probably the goal of some of their critics. Protection is needed from physical attack and from other threats such as kidnapping and ransom demands. Unless companies are to provide themselves with private armies, this means relying upon the host country's arms and legitimate security forces. This can often prove to be a difficult relationship. In Colombia the arrangements are not ideal, and I know that BP would like to see them improved. But the need for security cannot be ignored.
It is sometimes alleged that global companies offer legitimacy and the means of survival to non-democratic dictatorships. This is most certainly not the case in Colombia. There as elsewhere global companies hold out the prospect of material and social improvement for people who would otherwise have very few opportunities to help themselves. I have no doubt that the average citizen of Colombia would be infinitely worse off if international investment were to be successfully discouraged or threatened.
To revert to the noble Viscount's Question, I hope that the Minister will give an assurance that, when offering support and encouragement to Colombia "in dealing with its internal and political situation", Her Majesty's Government continue to regard the activities of global companies as an indispensable part of that process.
9.16 p.m.
Lord Moynihan: My Lords, I also thank the noble Viscount, Lord Waverley, for initiating this debate and allowing noble Lords to hear some outstanding contributions from varying perspectives. The focal point has been the guerrilla war. There are a number of factions involved in the guerrilla war. Nonetheless, the main ones are the FARC and the ELN. The FARC is by far the largest and best organised faction in Colombia, and it is also the oldest. The scale of the problem has been graphically demonstrated by all contributors to the debate. In 1997 more than 30 mayors were killed as a result of guerrilla action. Kidnappings, extortion, murder and other atrocities have been committed by both the guerrillas and the paramilitaries. The guerrillas have also become involved in the drugs trade that provides them with a valuable source of income.
But I believe that we should look at the beginnings of a peace process. In an effort to lay the foundations of some form of peace process President Samper suggested
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making contact with the guerrillas in June of this year. On 22nd August he went one step further and said that the government were ready to consider the establishment of a zone of détente for a period of time to facilitate peace talks. As a public gesture to emphasise his determination to pursue the peace effort the president sacked the chief of the Colombian armed forces, General Harold Bedoya, who defiantly refused to capitulate to the guerrillas in the eyes of many commentators. I hope therefore that your Lordships' House accepts that to a great extent the Government have been committed and determined to tackle many of the very serious problems that they face. I agree with my noble friend Lady Hooper who has argued, correctly I believe, that it would be counterproductive for de-certification immediately to be rolled on to a third year without recognising the efforts that are being made by the Colombian government in the circumstances, for the obstacles to peace are very real.
The president and his government face a number of seemingly intractable problems in their search to broker a peace. First, to make peace with the rebels will require the government's agreement to such concessions as land reform, the disarming of paramilitary groups and the army's withdrawal from certain areas. These are issues that will infuriate the army and Colombia's powerful conservative elements. Secondly, the FARC appears to be uninterested in negotiating with a president and government that it believes are unlikely to survive the array of political challenges that they face. Thirdly, the guerrillas are also motivated by profit more than ideology. Consequently, a government-sponsored political agreement will not necessarily placate the rebels. My concern is that in the light of the obstacles to a negotiated peace there is little hope of a cessation of violence in the short term. In fact, in view of the FARC's recent successes it may be encouraged to pursue its strategic aim of creating liberated zones. Such a policy would lead to escalation. Moreover, there is speculation of an arms race building up among the guerrilla factions, particularly the FARC and the ELN. As a consequence of the funds gained from extortion, kidnapping and drugs dealing, the guerrillas possess the financial clout to purchase heavy and sophisticated weaponry. They have also stated that they intend to launch final and massive offences, not least next year.
It is, when one considers the war on drugs, very much as my noble friend Lady Hooper said, an international responsibility. Despite criticism from the US, the government have nevertheless scored a number of successes in the war on drugs. The government appointed General Rosso Jose Serrano Cadena as the director of the national police to lead a major crackdown on the drugs trade. The new director proved extremely successful, co-ordinating the capture or elimination of all the eight top leaders in the Cali Cartel, as we have heard this evening, in addition to implementing a largescale eradication programme.
Tougher sentences on drug traffickers have been passed and legislation facilitating the seizure of assets has been enacted. Coca plantations have been sprayed with defoliating agents so successfully that it provoked a peasant revolt last year. The seizure of drugs and the

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destruction of laboratories have been widely reported. So I hope that the international response will be understanding and positive in an effort to assist the Government to tackle those problems which go beyond the borders of Colombia.
An important contribution was made to our debate this evening by the noble Lord, Lord Rea, for he focused on the humanitarian disaster and the human rights issue. The rural population is often caught between the crossfire of the guerrillas and the right-wing paramilitaries. As we have heard, frequently people have been executed on the mere suspicion of being sympathetic to one group or another. Amnesty International has pointed out graphically that more than 1 million people have become homeless in the past 10 years as a result of the civil war in Colombia. In 1996 alone some 180,000 people abandoned their homes in north west Colombia, fleeing persecution from right-wing paramilitaries.
The situation in Colombia is unusual as those people fleeing are not technically refugees; that is, they are not entering another country. As the noble Viscount stated, Colombia needs the support of the international community in facing these issues, because the social implications of the crisis are very grave. There is a further distressing dimension to the refugee problem as it is the male villagers who are mostly killed in the conflict. The majority of refugees are women and children. Moreover, in order to survive, tragically many women have to resort to prostitution.
When I read Amnesty International's work on the subject I was impressed by its criticism of the UN with regard to its operations in Colombia. It is worth the House noting that while the UN has dedicated 150 personnel to observe human rights in Rwanda, a mere six currently operate in Colombia.
I should like to take the opportunity to express my support for the efforts of the Colombian Government in addressing the complex political and security situation which confronts them. The Republic of Colombia, as the noble Lord, Lord Rea, pointed out, is Latin America's oldest democracy. I am certain that I reflect the view of your Lordships' House when I wish the government success in preserving the nation's democratic institutions and in promoting the country's socio-economic prosperity.
As we are all well aware, the political violence and instability that have afflicted Colombia have metastasised, affecting those beyond the republic's national frontiers. The internal problems that face the Colombian Government are no longer parochial and are increasingly having an external impact in a variety of ways. The illegal export of cocaine is a notorious example of internal problems manifesting themselves into international issues. However, the country's internal turbulence has also had political repercussions on our own shores. This year, for instance, we have witnessed a significant increase in Colombian refugees fleeing their country and seeking political asylum in the UK. Nevertheless, it is perhaps the activity of a leading UK multinational company in Colombia that has poignantly served to focus British domestic public attention on the plight of that Andean country.
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As we have heard graphically from the noble Lord, Lord Wright, BP has recently been at the centre of intense, albeit frequently misleading, media attention with regard to its operations in Colombia. I read some specious allegations made with respect to BP's complicity in human rights violations by Richard Howitt, the Member of the European Parliament for Essex South. In addition, more recent claims have alleged its responsibility for grave environmental damage.
Perhaps your Lordships will allow me to take up one or two points made by the noble Lord, Lord Wright. I listened intently to his view of the aims of a multinational operating in the world. I believe that those aims can best be summarised as fourfold: to maximise the returns for its shareholders; to implement a rigorous health and safety programme which ensures the protection of its employees as well as the interests of the local community; to maintain stringent environmental standards, thereby minimising the company's impact on the environment; and to behave in this day and age as a corporate ambassador, not only representing its country of origin but the international business community as a whole.
In addition to complying with this set of criteria, I believe that there are a number of fundamental principles with which these aims should be imbued; namely, there must be a significant degree of interaction between the multinational and the local community. It cannot operate in isolation or to the detriment of the indigenous people who surround it. Indeed, it must seek to support and improve their standard and quality of living. Consequently, its presence should strive to stimulate the local economy and it should also seek to nurture close social and cultural ties and endeavour to respect the environment.
Assuming that local resources warrant the commitment, the multinational should tailor its strategy to accommodate a long-term presence and investment in the region. I strongly welcome the noble Lord's comment on the importance of a long-term approach to its presence in any market, for the era of the swift economic pillaging of a developing country's resources has been and rightly must be consigned to the history books.
Finally, and perhaps most importantly, a multinational must preserve the highest ethical approach to its operations. Again, I welcome the comments made by the noble Lord, Lord Wright, since BP is an exemplary case of displaying a corporate probity commensurate with its international standing, and not differentiating between applying the highest standards wherever it works in the world.
In the light of these questions and in the context of the debate, it has been reasonable to ask to what extent BP measures up to the theoretical model. As a preamble, if I may beg your Lordships' indulgence, and as we have heard tonight, I wish to emphasise that the actual environment in which BP operates is far removed in Colombia from any situation that could be envisaged in a hypothetical model. BP must operate in an environment where the rule of law is unashamedly

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challenged by the twin threats of the narcotraficantes—the drugs traffickers—and left-wing guerrilla factions. These factions are implacably hostile to foreign oil companies exploiting the country's hydrocarbon resources and consequently they target the personnel and facilities of the various oil companies in Colombia.
Nevertheless, there is another dimension to their opposition. It would be an oversimplification to suggest that their hostility is founded on purely ideological grounds. The political purity of their cause has long since been corrupted by their participation in the lucrative drugs trade. As a consequence, these factions have become well financed, resorting to extortion, kidnapping and sabotage to further their goals—both political and financial. Certainly, BP has refused to be intimidated by these tactics. While some international companies may have considered acquiescing in blackmail out of political expediency, British Petroleum has not. Perhaps it is BP's refusal to play by the "rules of the game" that has left it exposed to a smear campaign orchestrated by those unable to bribe the company's co-operation.
In addition to this, it is worth noting that the ELN, which is very active in the Casanare region—an area some 250 miles east of Bogota where BP operates—has targeted the multinational, declaring that all its employees and facilities in the province are legitimate military objectives. As a result of this official declaration of war, BP's facilities have been attacked—16 incidents in 1996 and three major attacks in addition to a number of other incidents this year—and the safety of its employees has been threatened.
In that unusual context, health and safety standards assume a different complexion. In such an environment, it is even more incumbent on BP to fulfil its commitment to guarantee the health and safety, or, more succinctly put, the security of its employees and contractors. Thus, like other companies operating in Colombia, whether they be in the hydrocarbons industry or other sectors, BP has turned to the state for the protection of its employees and facilities. As is ultimately the case in the United Kingdom, it is the Colombian military and the police which are the only legitimate bodies responsible for addressing the multinational's security.
Despite efforts in some quarters of the media to invoke a sinister complexion to the voluntary agreement with the government, there is nothing untoward, given the circumstances of the situation in which BP is active. Those are the facts about BP's security arrangements in Colombia. I have visited the facilities in Casanare and have spoken extensively to senior management. Prior to that, I had the privilege and honour of being the Minister responsible for oil and gas, keeping a strong watching brief on the international activities of our oil companies.
Perhaps it is appropriate and timely to quote the Minister of State at the Foreign Office, Mr. Tony Lloyd, who, following his recent visit to BP's operation in Casanare stated in a press conference:
"Well, I've spent a big part of today in Casanare and obviously I've talked to many people in Casanare about the role of BP, and I asked them specifically whether they could confirm or support the
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allegations made against BP. And people from a wide range of backgrounds told me very clearly that they believed there is no evidence to support those allegations against BP. Now I must make it clear that the British Government doesn't come here to defend abuse by any British company, but nor can we simply accept rumour or unsupported allegations as being an acceptable way to put British Petroleum in the dock".
In the light of those observations by the Government and in view of the Foreign Secretary's commitment to place human rights at the heart of British foreign policy, I wonder for a moment whether the Government intend to add some substance to that laudable and lofty goal. If so, surely the issue of human rights in Colombia would be an appropriately fertile context in which to provide the impetus for the implementation of a joint initiative between Bogota and London.
9.32 p.m.
The Parliamentary Under-Secretary of State, Foreign and Commonwealth Office (Baroness Symons of Vernham Dean): My Lords, I too should like to thank the noble Viscount, Lord Waverley, for providing this opportunity to debate the complex issues facing the Colombian people.
This House will be aware that the publicity given to Colombia as a leading producer and distributor of cocaine masks a much more positive and important truth about the country. As the noble Baroness, Lady Hooper, reminded us, Colombia is a long-established democracy and one which is going through very difficult times. It is reassuring that, despite all the obvious difficulties, many of which have been highlighted during the course of our debate this evening, the vast majority of Colombian people have resisted the temptation to turn away from democratic principles. Many courageous Colombians have stood and faced the difficulties confronting them. It is incumbent upon Colombia's friends to encourage those who are trying to improve the country's international reputation and to continue to offer what assistance is possible and appropriate to help them in that time of need.
Speakers in this evening's debate have highlighted the areas of specific concern. They are drugs, internal security, human rights, corruption and judicial shortcomings. I suppose that we might be forgiven for thinking that there does not seem to be much else that could possibly go wrong. Yet, despite the long-running drain of the civil conflict, Colombia's economy has recorded consistent and impressive growth and stability over the past 40 years, only stumbling slightly in the past few months. That is a notable achievement in the face of so much adversity and it is worth noting that Colombia's economy has been one of the most stable in the region as a whole. It is that performance which has attracted substantial British investment to the country, to the point at which Britain is now the largest investor, even ahead of the United States. Moreover, for all the adverse publicity about the issues that we have discussed this evening, significant progress has been made in dealing with some of them.
First, as the noble Viscount, Lord Waverley, the noble Lord, Lord Moynihan, and the noble Baroness, Lady Hooper, said, there is a real problem in Colombia on the drug front. However, as many noble Lords

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acknowledged, action has been taken on drugs, including the dismantling of the Medellín cartel which led to the eventual death of its notorious leader, Pablo Escobar, the arrests of which we have heard and the imprisonment of the Carli cartel, which succeeded the Medellín cartel.
In addition, there has been a raft of tough new anti-narcotics legislation in the past year, including pre-sentences for the traffickers, thus allowing the authorities to seize assets acquired through criminal activity. Unprecedented numbers of drug seizures have taken place both at the point of origin and in Europe. My honourable friend the Minister of State for foreign affairs, Tony Lloyd, had, as we heard from the noble Lord, Lord Moynihan, the opportunity last month to obtain a vivid first-hand impression of the dangers that the Colombian security forces face in their daily battle against that deadly trade. It is also worth mentioning the excellent co-operation that we received from the Colombian anti-narcotics authorities.
There has, too, been some action on human rights. There has been an improvement in the performance of the Colombian security forces. In 1993 they were believed to be responsible for more than half of the human rights violations in Colombia. Today that figure stands at around 10 per cent. Of course we must not be complacent about the situation. The so-called "para-militaries", about whom the noble Viscount spoke so graphically and who operate outside the law, are seen by many NGOs as fundamentally linked to certain military units and as being responsible for around 50 per cent. of all crimes of violence committed by parties to the conflict. Most of the remainder of the crimes are perpetrated by the guerrilla forces, whose possible original ideological motivation has long since been largely replaced by the law of financial reward from kidnapping and their unholy alliance with the drug traffickers.
The Government of the United Kingdom condemn unreservedly the attempts by the para-militaries and the guerrillas to undermine the democratic process in Colombia through the violent intimidation which has been offered to those engaging in local elections. There has also been action on the peace process. The noble Viscount gave us a vivid picture of guerrilla activity. The Colombian Government have recently made approaches to the guerrillas aimed at bringing them to the table to discuss a peace framework. To date, regrettably, the guerrillas have rejected that approach.
There has, too, been action on corruption. Here there are signs of resolve to tackle the serious problem even though results may not be immediate. There are currently 20 congressmen under investigation for corrupt practices under a legal process called "Process 8,000". Eleven of them have been imprisoned. Other senior political figures have been scrutinised under the process, including the former attorney general and the Mayor of Cali, Colombia's third largest city.
It is against that background that I turn to the Question facing the House this evening: what are the areas in which the United Kingdom has been able to give meaningful and constructive assistance to
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Colombia and what more can we do? The new Labour Government will adopt an approach of constructive engagement. We need to encourage and exploit the evident willingness on the part of the Colombian Government to tackle their serious problems. But the administrative shortcomings of the system in place seriously hamper the Colombian Government's ability to cope with such problems.
There is a wellspring of goodwill towards Britain in Colombia as well as much admiration for what we have been able to achieve in the field of administrative reform. We should take advantage of that and ensure that any assistance we give is sensitively and constructively focused. I hope that I have outlined the key areas of concern. That is where we have concentrated our resources. In addition, we are making contributions to projects for promoting better standards in government, for the protection of the environment and for the exploitation of renewable natural resources through the bilateral co-operation programme of the Department of International Development.
What has the United Kingdom done to help on the drugs question? The UK has provided some £14 million in drugs related assistance to Colombia since 1989, focusing mainly on law enforcement, training, demand reduction and alternative development. We have had excellent co-operation, as was evidenced on Mr. Lloyd's recent visit. He saw, too, the strengthening of that co-operation in the discussions that he undertook. We also have a bilateral asset confiscation agreement which was signed in February this year. Earlier this year we ran a money laundering prevention course in Bogota for Colombian financial institutions.
As regards extradition, we fully support the Colombian Government's attempts to change the constitution to allow extradition of Colombian nationals. We believe that sends a strong signal to the drug traffickers. This Government recognise the appalling threat—which so many noble Lords have mentioned this evening—posed by the international drugs trade from its point of production and trafficking to its point of distribution and consumption. It poses a terrible threat to thousands of innocent people and, most tragic of all, in particular to thousands of young people and children. Whenever we go abroad it is always on the list of issues which I and other Ministers raise with our interlocutors in other countries. There will be a drugs summit in the Caribbean later this year. As I am sure noble Lords are aware, we have appointed an international drugs co-ordinator to look at ways of improving our international co-operation on this important question.
The noble Lords, Lord Rea and Lord Moynihan, concentrated many of their remarks on the human rights issues. The human rights situation in Colombia is of great concern to us. We take every opportunity to raise our concerns with the government and maintain regular contact with the NGOs both in Colombia and in the UK. We strongly support the work of the newly established United Nations human rights office in Bogota. Human rights are the central part of our foreign policy. We do not hesitate to make our concerns known to our partners. We believe that much can be achieved through constructive dialogue. My honourable friend Mr Lloyd

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made clear to the Colombian ambassador, who is also the Colombian vice president, how strongly this Government feel about human rights. He also naturally referred to human rights issues on his recent visit to Colombia. We have contributed to the strong EU statement on the killings of human rights workers and researchers which the noble Baroness mentioned.
The noble Lord, Lord Rea, mentioned in particular the Amnesty report. This Government share Amnesty's concerns about the human rights situation in Colombia. We are aware of Amnesty's concerns regarding the extent of the links between the army and the paramilitaries. While we do not dispute that links exist, their extent is not clear. It is most likely that individual units and personnel are involved and that co-operation takes the form of providing intelligence or turning a blind eye to paramilitary activities. The noble Lord, Lord Rea, expressed particular repugnance at the impunity enjoyed by so many who commit appalling crimes. The Colombian Government have given assurances to my honourable friend Mr. Lloyd that they recognise the problem and that they will put in place measures to correct these problems including tackling the paramilitaries and reforming the penal code. In the new year President Samper announced a package of measures including reform of the military justice system and updating of human rights programmes with regard to the military. I understand that little has been implemented but the statement itself offers some encouragement. More recently the head of the Colombian armed forces, General Bonett, assured EU heads of mission on 29th September that the military was genuinely seeking to improve its human rights performance and also aimed to deal evenhandedly with the guerrillas and the paramilitaries.
The noble Baroness, Lady Hooper, raised the point about the local elections due to take place on 26th October which have been threatened with disruption by the guerrillas and paramilitaries. Although the elections have been cancelled in nearly 20 municipalities, sadly, the Colombians are determined that they will take place elsewhere. I am happy to assure the noble Baroness that the UK Government have agreed to make a contribution towards the cost of the Organisation of American States which will act as observers to the elections.
The noble Viscount, Lord Waverley, the noble Lord, Lord Wright of Richmond, and the noble Lord, Lord Moynihan, told us about the specific difficulties being faced by large companies such as BP which have been the subject of allegations about complicity in human rights abuses by the Colombian armed forces and paramilitaries. BP has also been accused in the media of serious environmental damage. I was delighted to hear the noble Lord, Lord Moynihan, quote so appreciatively my honourable friend Mr. Lloyd. I hope that it is the first of many such quotations that we may expect from the noble Lord, and that his appreciation will continue.
However, as the noble Lord pointed out, when Mr. Lloyd visited last month the area in which BP operates he met many people from a wide range of different backgrounds, as did the noble Viscount, Lord
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Waverley. He asked them specifically whether they could confirm or support the allegations against BP. As we have heard, he was told that those people believed that there was no evidence to support the allegations. In the absence of fresh or corroborating evidence, the Government hope that we can draw a line under these allegations which have now been rehearsed several times in the media.
But in doing so, I wish to make three points. First, in this day and age, large companies can no longer act with impunity. Demands on them have changed. It is no longer sufficient for them to consider only the commercial implications of an operation. As the noble Lord, Lord Moynihan, said, the responsibility for them to be seen to be operating ethically and transparently is now more important than ever. Those obligations are here to stay. Secondly, it is right that scrutiny of the activities of British companies should lead to questions being asked of them when necessary. We take such questions seriously and will continue to follow them up as appropriate, looking to the companies concerned to provide a credible response, as we have done with BP. Finally, if in responding to the allegations which have been made against it, BP has been able to introduce measures to ensure that as far as possible it will not again be vulnerable to similar criticism, that in itself is a result.
However, perhaps I may also say that sometimes BP and other large companies like them are easy targets. It is far easier to make people believe that because they are big enough they can somehow ignore the rules that are made for them to abide by too. Like the noble Lord, Lord Wright, I believe that they can be a force for the good, contributing to the future of the country in which they operate and bringing real and constructive development to local communities. I hope that that gives the noble Lord the assurance he seeks.
The question that we are considering this evening is that of encouragement to Colombia. In addition to the activities I have already described, I mention also our efforts to promote and maintain high level contacts with Colombia. The most recent example was the visit of my honourable friend. During that visit he spoke to many different people. Such visits send strong messages to those who are bent on destabilisation and trafficking. They must not have it all their own way. Our ambassador and his staff travel widely in Colombia, often visiting areas at the centre of conflict between various warring factions. Again, we believe that this sends a strong and unequivocal message to those we are striving to support in their endeavours to improve the situation. Much of this activity is carried out in close consultation with our partners in the EU who recently issued a collective statement robustly supporting the Colombian Government in their effort to promote peace and stability, and condemning those whose declared goal is the destabilisation and overthrow of the established order.
I hope that it will be clear from the answers that I have attempted to give to the questions raised and remarks made by noble Lords this evening that we are taking constructive steps in helping the Colombian Government to deal with the many serious problems that

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they face. I hope that I have presented your Lordships with specific examples of the sort of assistance that we have given, either bilaterally or in concert with our partners in the European Union.
But we must remember that none of that assistance would be possible without the co-operation of the Colombian Government whose acknowledgement of these problems is a vital starting-point for everything we are able to do. We will continue to seek ways in which we can work with the Colombian Government and with
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the non-governmental bodies to promote respect for human rights and encourage the implementation of the principles of good government. We will continue to seek opportunities to offer UK expertise where it is appropriate. But we will not shirk constructive criticism where we believe it is merited. We want to send the message very clearly to our friends in Colombia that we are indeed friends in need.
House adjourned at ten minutes before ten o'clock.

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