Sitting of 22 October 1997

Preamble
The House met at a quarter past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Chichester.

Lord Davies of Coity
David Garfield Davies, Esquire, CBE, having been created Baron Davies of Coity, of Penybont in the County of Mid Glamorgan, for life—Was, in his robes, introduced between the Lord Graham of Edmonton and the Baroness Dean of Thornton-le-Fylde.
Lord Roberts of Conwy
The Right Honourable Sir Iuean Wyn Pritchard Roberts, Knight, having been created Baron Roberts of Conwy, of Talyfan in the County of Gwynedd, for life—Was, in his robes, introduced between the Lord Gibson-Watt and the Lord Thomas of Gwydir.
Lord Cope of Berkeley
The Right Honourable Sir John Ambrose Cope, Knight, having been created Baron Cope of Berkeley, of Berkeley in the County of Gloucestershire, for life—Was, in his robes, introduced between the Lord Marlesford and the Lord Wakeham.

Competition Bill
2.48 p.m.
Lord Borrieasked Her Majesty's Government:
How many responses they have received to the draft Competition Bill.
The Minister of State, Department of Trade and Industry (Lord Simon of Highbury): My Lords, the Bill has attracted much interest in the commercial world and we are still receiving responses. So far we have received more than 150 replies to the consultation, mainly from business but also from legal practitioners, consumer groups and academics.
Lord Borrie: My Lords, I thank the Minister for that reply. Will he confirm that some of the responses from business have objected to the powers of investigation and the deterrent penalties provided in the Bill, although those featured also in the last government's proposals for a competition Bill? Will the Minister assure the House that the Government will stand firm in maintaining those provisions, which are so essential for combating cartels and other anti-competitive practices?
Lord Simon of Highbury: My Lords, in general terms, I would say that there has been business support for the
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Bill, largely because a prohibition-based system and closer alignment with the European approach is supported. But it is true that there have been discussions about the level of penalties and that aspect of the enforcement of the regime. However, I confirm that we believe that the powers need to be tough. That is meant to be a deterrent. The Office of Fair Trading needs a big stick on occasions to uncover and deal with the damaging nature of anti-competitive cartels. Therefore, we shall try very hard to make the level of penalties relate to the seriousness of the behaviour, but 10 per cent. of UK turnover is the level that we think appropriate, although that is the maximum. Therefore, I confirm that we are serious about making the regime more competitive.
Lord Clark of Kempston: My Lords, will the Minister not agree that our competitive position, particularly in international trade, is dependent upon the strength of sterling? Therefore, will he agree that any increase in the bank rate will have a detrimental effect on our exports?
Lord Simon of Highbury: My Lords, I am sure that the noble Lord knows that the Question is not about the strength of sterling but about competition. However, I should point out that there are many more bases for the competitiveness of a firm than the exchange rate; namely, the quality of its products, the capacity of its service and the skills of its employees. I could go on but I feel that the noble Lord has had a very good answer to his question.
Lord Burnham: My Lords, I note that the Bill contains conditions which will prevent unwarranted use or disclosure of information obtained under this Bill. Will the same apply to other aspects of government policy?
Lord Simon of Highbury: My Lords, that is a very difficult question to answer in relation to the Bill until we have had a debate. However, I am sure that we shall all come out in agreement.

Overseas Aid and Trade
2.53 p.m.
Lord Juddasked Her Majesty's Government:
What changes they propose to introduce in the relationship between overseas aid and development programmes and the promotion of overseas trade.
Lord Whitty: My Lords, all our programmes are being reviewed. That includes the relationship between overseas aid and the promotion of overseas trade. As your Lordships will be aware, the Government's plans will be set out in the White Paper which is due to be published in early November. The Government will encourage and assist developing countries to become more fully integrated into the multilateral trading system and to participate in the World Trade Organisation. In that process, we shall also work closely with the UK private sector to develop a new agenda designed to increase both investment into and trade with developing countries.
Lord Judd: My Lords, will my noble friend accept that we are all looking forward with great eagerness to the publication of the White Paper? Will he assure the House that, in view of the lamentable episodes under the previous administration, while it is to be welcomed if British economic interests coincide with genuine development priorities, in so far as the relationship between aid and trade is concerned, where aid funds are being deployed they must always be deployed without qualification—by criteria for development, and sound development, alone?
Lord Whitty: My Lords, those issues are being reviewed and the full answer to that question will be in the White Paper. However, it is quite clear from measures taken by the previous administration and ourselves that the provisions which led, for example, to the disastrous episode of the Pergau Dam could not be repeated even under the present arrangements and, as I say, they are being further reviewed.
Lord Steel of Aikwood: My Lords, I support what the noble Lord, Lord Judd, said. Under the previous government the Overseas Development Administration was too often overruled by what were perceived to be the wider issues of government. Will the Minister ensure that when the promised White Paper comes forward, there is a clear delineation of expenditure on trade promotion, which should properly come out of the DTI budget and not out of the already constrained funds for overseas development?
Lord Whitty: My Lords, we certainly agree that there needs to be a clear distinction between the two objectives. Again, that will be in the White Paper. Certainly in relation to aid projects, the developmental criteria will be the paramount criteria.
Viscount Waverley: My Lords, is not a difficulty that, while there is justification for political and economic tied aid, it should be referred to as something different in order to distinguish it from aid in its true sense?
Lord Whitty: My Lords, there may be some change in definition which we shall need to introduce through the White Paper. There are obviously gradations in that area but the objectives need to be clear. The objectives in the view of the Department for International Development will clearly be developmental objectives.
Lord Taylor of Gryfe: My Lords, is the Minister aware that it is a common practice in bidding for overseas contracts by our competitors to ensure that there is an element of aid in the bid contract? Will he keep in mind, in reviewing that matter, that the interests of British exporters have also to be protected?
Lord Whitty: My Lords, that is precisely why we are saying that it is extremely important that there is a partnership between the private sector and the British Government's aid programme in those areas. That is very much part of the strategy which will be demonstrated in the White Paper.
The Lord Bishop of Durham: My Lords, will the Minister assure the House that direct overseas aid, in terms of the percentage of the gross national product, will be at least maintained by present standards and perhaps even increased?
Lord Whitty: My Lords, as the House is well aware, we are constrained in relation to the commitment for the first two years of this Government. However, it would be the intention that a higher percentage of public expenditure would go to the aid programme in subsequent years.
Baroness Young: My Lords, will the Minister recognise that in giving overseas aid he might consider the particular needs of the dependent territories which have not been that well treated in the recent past?
Lord Whitty: My Lords, the House will be aware that a review of the dependent territories is currently being carried out and that will be one aspect of the review.
Lord Judd: My Lords, will my noble friend accept that his answers are reassuring? However, can he reassure the House also that the news which he is circulating today about the future of the Commonwealth Development Corporation is news which we shall have an opportunity to debate in this House before final decisions are made?
Lord Whitty: My Lords, that is an excellent suggestion which will need to be conveyed to the business managers. Your Lordships may be aware that this morning the Prime Minister announced that the Commonwealth Development Corporation will in future be allowed to attract private investment and private funds. That is yet another example of the partnership between the Government and the private sector in the aid field which will be part of our overall strategy.
The Earl of Sandwich: My Lords, is the Minister saying in his first Answer that the aid/trade provision is to be abolished? If that is the case, it will be greeted with great relief by the aid organisations. Secondly, is he prepared also to divert some of those ATP funds to the poorest developing countries which need trade because world trade with them is falling?
Lord Whitty: My Lords, on the latter point, we are very much involved in the WTO's efforts in relation to the least developed countries to allow them more effective access to the world trade markets. As regards the former point, the noble Earl will have to wait for the White Paper. In this case he will not have to wait for long because, as I said, we are intending to publish it in early November.
Lord Lucas: My Lords, I suspect that the noble Lord, Lord Judd, will not wish to join me in congratulating the Government on their first privatisation. May there be many more to come! Does the Minister support the theme of the Commonwealth business forum which is

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taking place in London today—that trade, investment and development are the road to Commonwealth prosperity? Further, may we expect to see an increased emphasis on such projects in the White Paper?
Lord Whitty: My Lords, the tenor of almost everything that I have said is that the private sector, aid and trade are all important in our development strategy. That was reflected in the Prime Minister's speech this morning and in our commitment to extending the role of the Commonwealth Development Corporation. It is not a privatisation in the traditional sense; it is a form of privatisation which will increase the ability of this country to aid the least developed countries in the world. I believe that all of us in this House ought to applaud that.
Lord Rea: My Lords—
Noble Lords: Next Question!
Lord Rea: My Lords, only 10 minutes have expired out of the allowed 30 minutes for Question Time. Therefore, will my noble friend the Minister consider the case for the least developed countries to have short-term tariffs in order to protect their indigenous rather than internationally-owned industries so that they can diversify from their dependence on raw commodity products?
Lord Whitty: My Lords, I believe that my noble friend will be aware that within the existing rules of the WTO there is provision for short-term protection in those circumstances. However, the long-term aim must be to bring those least developed countries into the world trade structure. That is the strategy of the WTO and indeed of this Government.

Coal Industry
3.2 p.m.
Lord Dormand of Easingtonasked Her Majesty's Government:
What they expect the future role of coal will be in meeting the country's energy needs.
Lord Haskel: My Lords, the Government are aware of my noble friend's concern about the coal industry, but the Government must look to the country's energy needs as a whole. Our objective is to have a secure, diverse and sustainable supply of energy at competitive prices. Coal plays a significant part in the UK energy mix and although coal demand is declining, coal use will remain significant in the future.
Lord Dormand of Easington: My Lords, my noble friend the Minister has given a most promising Answer for which I thank him. However, given the Labour Party's traditional support for the miners—and I remind the House that there are still 20,000 miners in the industry—can they depend on the Government's help in the especially difficult circumstances experienced by the
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Industry at present? In particular, will the Government stop giving further approvals to gas-fired stations for at least three or four years? That would give the industry a good breathing space, not least because of the so-called "sweetheart" deals which were authorised with the regional electricity boards. Further, will the Government speed up their evaluation of clean coal technology and, at the same time, stop importing heavily subsidised German coal into this country, which has been done by flouting the European Union regulations?
Lord Haskel: My Lords, I believe that my noble friend posed three questions. On the question of gas-fired power stations, the Government consider all applications for new power stations on a case-by-case basis. Gas certainly plays an important part in giving the UK a secure, diverse and environmentally sustainable fuel mix. The development of gas-fired generation has contributed to that diversity.
As regards my noble friend's point about electricity deals, I can tell the House that the franchises which have enabled such deals will come to an end next year. Those deals have enabled the generators to force domestic customers to bear the cost. However, competition in the electricity market should put a stop to that practice and ensure that a more level playing field is achieved. On the question of clean coal technology, the Government are doing all that they can. The position is that the emissions of sulphur dioxide and nitrous oxide are under control. The issue of emissions of carbon dioxide is proving difficult, but the Government are doing what they can to encourage research and development to overcome the problem.
Lord Peyton of Yeovil: My Lords, is the Minister aware that he owes a very considerable debt of gratitude to the noble Lord who asked the original Question for the astonishing mildness of the noble Lord's supplementary question? Does he appreciate that we have not often had strung together such a mass of meaningless platitudes as was contained in the original Answer?
Lord Haskel: My Lords, I thought that my answers were quite factual and not platitudinous.
Lord Mason of Barnsley: My Lords, can my noble friend the Minister say whether RJB Mining is seeking government intervention? Further, as regards the whole of the coal industry, is there no prospect of direct government assistance?
Lord Haskel: My Lords, it is not the Government's intention to subsidise the coal industry. Many exchanges are taking place between the Government and RJB Mining about removing subsidies elsewhere which distort the market, about clean coal technology and about delaying electricity liberalisation. The negotiations which are taking place between RJB and the generators are not a matter for the Government. As regards direct government assistance, I can tell my noble friend that the Government's objective is to achieve a level playing field. That will be achieved by removing

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subsidies elsewhere, such as in Germany and in Spain, and helping our coal producers sell both here and elsewhere.
The Earl of Lauderdale: My Lords, does the Minister agree that clean coal technology involves an on-cost whereas natural gas is cheaper and cleaner?
Lord Haskel: My Lords, because the Government wish to have a diverse source of energy we encourage both the use of gas and coal, and indeed, the use of clean coal technology.
The Lord Bishop of Leicester: My Lords, in the light of his previous answer, can the Minister give any assurance to those whose livelihood is tied up with the Ashfordby colliery in Leicestershire, which is likely to close? Further, is the local community likely to see any return on the considerable sums of public money which have been invested in that mine in the past decades?
Lord Haskel: My Lords, the Government deeply regretted the news of the geological problems which caused Ashfordby to close. But ultimately the decision was one for RJB Mining to take and not one for the Government. In those circumstances, it is plainly difficult for the Government to challenge any decisions of a private company. However, every effort will be made to provide alternative employment. As the right reverend Prelate may know, on 6th October my right honourable friend the Deputy Prime Minister started an investigation as to precisely how this assistance to the coalfields can be speeded up.
Lord Shepherd: My Lords, can the Minister say whether the evidence which is available to the Government shows that cheap German subsidised coal is being dumped into this country? Further, can the noble Lord say how long that has been taking place and tell us what steps successive Governments have taken to deal with the matter so as to protect at least one of our basic industries?
Lord Haskel: My Lords, I am not aware of how long this practice has been going on, but certainly one of the first things that the Government did on taking office was to tackle the question of subsidised coal from Germany and Spain. That is why we complained to the European Commission about the high levels of state aid paid in these two countries. So far, those initiatives have led to the closure of one subsidised anthracite producer in Germany which was selling anthracite into the UK market at below production costs. The Commission has opened an investigation into the matter and has now written to the German Government in strong terms asking them to explain that aspect of their regime. The DTI will also be writing to the Commission on the issue of steam coal subsidies in Germany. Moreover, the Government have also been assisting Celtic Energy with its complaints to the German Government.
Viscount Ullswater: My Lords, is the Minister aware that the major supply of current electricity to the grid comes from the nuclear industry, which is more than coal and more than gas? If the Government are not prepared to subsidise the coal industry any further, what plans do they have to secure the same diversity of supply in the next century instead of relying entirely on the gas-fired power stations?
Lord Haskel: My Lords, I do not think that the noble Viscount is quite right in saying that the major source of supply is nuclear. Under the Government's fossil fuel levy scheme a levy helps pay for research into renewable energy which seeks ways of increasing the supply of electricity from wind power, hydro-electric power and other kinds of renewable energy.
Lord Dormand of Easington: My Lords, in his reply my noble friend made two important points about security of supply and price. Is he aware it is estimated that there are 500 years' supply of coal still left in this country? As regards price, will he comment on, and if necessary disagree with, the coal industry's prices of 1.7p per kilowatt hour for coal, 3.2p for gas and up to 5p for nuclear? If those figures are correct, there is a strong economic case for coal.
Lord Haskel: My Lords, there certainly is a strong economic case for coal but equally the Government are committed to reducing emissions and that matter must also be taken into consideration in the calculation. Regarding the price of electricity, I am sure that the noble Lord is correct; but this matter has to be left to the market. The regulator is obliged to ensure that the regional electricity suppliers purchase electricity at an economic cost. The regulator is independent. This is not a matter in which the Government should intervene.

EMU: Referendum Proposals
3.12 p.m.
Lord Taverneasked Her Majesty's Government:
Whether they plan to hold a referendum on British membership of EMU before the next general election.
The Parliamentary Under-Secretary of State, Home Office (Lord Williams of Mostyn): My Lords, my right honourable friend the Chancellor of the Exchequer will make a Statement in another place when their Recess is over.
Noble Lords: Oh!
Lord Williams of Mostyn: My Lords, it would be quite inappropriate for your Lordships to think that I had laid any stress on the word "their". The Statement will set out the Government's position on the single currency and United Kingdom membership in 1999.
Lord Taverne: My Lords, have the Government really thought through the referendum issue? Are they aware that there will seldom be a more favourable time

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to secure a commitment in principle to Britain joining a monetary union than when the Government are popular and the Opposition are divided? As someone who wishes the Government well, are they aware that the Prime Minister is in real danger of following the path of his predecessor, who started with warm words about Europe, creating great expectations and then, through a failure to face hard choices—the Prime Minister's own words—and a failure of vision and leadership, Britain was left on the sidelines where it has no influence to help to decide issues which will affect this country in a wide and important sense?
Lord Williams of Mostyn: My Lords, the noble Lord spoke of a conjunction of circumstances, with the Government being popular and the Opposition divided. Of course that is a conjunction of circumstances which I expect to continue for many years. What the Prime Minister said in the clearest of terms—I am able to remind your Lordships of it—on 17th March was,
"If the issue does arise in the next Parliament—and we say if—there is a triple lock in place: first the Cabinet must agree"—
Noble Lords: Oh!
Lord Williams of Mostyn: My Lords, I hope that I am not intruding into private grief on the Opposition Benches. The Prime Minister continued,
"second, Parliament must give its backing; most of all, the people must have the final say in a referendum".
That is the Government's policy.
Lord Bruce of Donington: My Lords—
Lord Barnett: My Lords—
The Lord Privy Seal (Lord Richard): My Lords, this is not a position in which I wish to find myself. We have five minutes. I assume that there is room for both my noble friends. Perhaps in the interests of solidarity one will go first.
Lord Bruce of Donington: My Lords, irrespective of the terms of the referendum and of the date on which it might or might not be held, will the noble Lord give the House an assurance that Her Majesty's Government will make representations to the European Commission to stop broadcasting misleading and tendentious propaganda on this subject coming down on one side only, bearing in mind in particular that the British taxpayer out of the Consolidated Fund is paying 12.5 per cent. of the Commission's extensive expenditure in this entirely unauthorised field?
Lord Williams of Mostyn: My Lords, in this difficult area one always wants to avoid being misleading and in particular to avoid being tendentious. I am sure that the Government will have well in mind the necessity for the British public to be fully informed of diverse views—which I believe there to be—upon this important question for our country's future.
Lord Barnett: My Lords, recognising the difficulty that my noble friend will have in answering this
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question, I ask him to convey a message from me to our right honourable friend the Chancellor of the Exchequer to tell him that it would be appalling—if the reports are accurate—if he had it in mind to rule out all options of entering a single currency in this Parliament, which would inevitably mean that we would not be able to enter until after a referendum in 2002, 2003 or 2004. In those circumstances, given that our right honourable friend the Prime Minister wants to be a leader in Europe, does he recognise—this is my message to the Chancellor—that it would be impossible to achieve that and to have any influence whatever if he ruled out for all time in this Parliament the opportunity to join a single currency?
Lord Williams of Mostyn: My Lords, as the Home Office Minister in your Lordships' House I am well accustomed to taking messages to my superiors. I am happy to tell the noble Lord, Lord Barnett, that I shall, of course, transmit his well intentioned message to my right honourable friend the Chancellor of the Exchequer. As to any possible suggestion that the influence of Britain in Europe is declining, I utterly and entirely repudiate it. Quite the opposite is true. If one travels on any kind of ministerial business in Europe, one finds that quite the opposite is true. Our colleagues in Europe look to the present Government as a beacon, to coin a phrase.
Lord Jenkins of Hillhead: My Lords, will the noble Lord accept on behalf of the Government that, if the Government are to maintain their command over events which they have hitherto shown on the whole, it is highly desirable that on this central issue they adopt a clear-cut and bold policy and, if necessary, a policy involving some risk, rather than fall into the position—which was the hallmark of the previous government's European policy—of being puffed by every breath of wind?
Lord Williams of Mostyn: My Lords, I recognise the contradistinction which the noble Lord points to with his enormous expertise in these matters. There is no prospect of this Government—united as we are on these important questions—falling into the habits of the former government. I entirely accept that such habits did this country's interests infinite harm and the present Prime Minister and the present Chancellor have the responsibility to try to put that right.
Lord Mackay of Ardbrecknish: My Lords, I congratulate the noble Lord on being recruited to the Treasury team when it comes to the European currency. I suggest to his colleagues that his safer pair of hands might be better than those of the Chancellor, especially over the past few weeks.
Will the Minister make it clear—are the present Government as committed as the previous government were to giving the British people the fundamental choice as to whether or not they wish to enter a single currency? Is that still the policy of the Government?
Lord Williams of Mostyn: My Lords, it is my fault, for not reading the briefing out clearly enough. This is what the Prime Minister said on 17th March:
"If the issue does arise in the next Parliament—and we say if—there is a triple lock in place: first the Cabinet must agree; second, Parliament must give its backing; most of all, the people must have the final say in a referendum".
I hope I have made that plain.

Business of the House:Standing Order 38
3.20 p.m.
Lord Richard: My Lords, I beg to move the first Motion standing in my name on the Order Paper.
Moved, That Standing Order 38 (Arrangement of the Order Paper) be dispensed with on Monday next to enable the Motion standing in the name of the Lord Privy Seal to be taken before the Third Reading of the Firearms (Amendment) Bill.—(Lord Richard.)
On Question, Motion agreed to.

Business of the House: Debates this Day
Lord Richard: My Lords, I beg to move the second Motion standing in my name on the Order Paper.
Moved, That the debates on the Motions in the names of the Lord Dean of Harptree and the Viscount Cranborne set down for today shall each be limited to two and a half hours.—(Lord Richard.)
On Question, Motion agreed to.

Saving for Retirement
3.21 p.m.
Lord Dean of Harptree Lord Dean of Harptree rose to call attention to the importance of encouraging saving, with particular reference to saving for retirement and the need for stability in the financial markets; and to move for Papers.
The noble Lord said: my Lords, I declare an interest. I am fortunate in having pensions from both the public and the private sector. I hope that the House will agree that this Motion is topical in that the Government have asked for views on their pensions review by the end of this month. It is topical also because of the confusion that now exists over the Government's policy on EMU, which is unsettling the markets and could well have a bad effect on the investment, saving and pension decisions of companies and individuals.
I wish to concentrate largely on the pensions review. It is of great importance in that millions of people now pay for and receive social security benefits. It is also of immense importance to the economy. The cost of social security is now nearly £100 billion a year, and growing. It represents over half of government expenditure. On the plus side, there are the very substantial savings that exist in occupational pension schemes, which now
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amount to £600 billion. On any reckoning those are very large figures indeed and they convey the importance of the subject.
The Government say that they seek consensus in the pensions review. That approach is very welcome. In a long-term business such as pensions it is important to have stability. We are more likely to have stability if agreement can be reached.
The Government also say that they believe in private sector funded schemes. That is also welcome, although it is a change from traditional Labour policy—namely, that the state would provide, and there was some suspicion in relation to private provision. However, we need to be convinced that the apparent conversion is genuine and earnest. I must express some doubts. I remember distinctly that when the previous government introduced substantial reforms in pensions designed to reduce the cost of state benefits and concentrate resources on those most in need, the then Labour Opposition opposed not all, but most, of the measures then introduced.
But there is a more recent doubt in my mind. It concerns the raid by the Chancellor of the Exchequer in his Budget on occupational pension schemes. You cannot take out £4 billion to £5 billion from occupational pension schemes without undermining confidence in the Government's intention. For most schemes it is bound to lead to higher contributions, lower benefits, or both. Also, it is unfortunate since at the present time there is a tendency for firms to go for money purchase schemes for new employees rather than final salary schemes. I fear that this Budget measure could well accelerate that undesirable tendency.
There is another reason why I believe the Chancellor of the Exchequer was short-sighted in his Budget. The more we shift the emphasis from unfunded state schemes to funded occupational schemes, the more it will mean that the present working population will have to pay twice. They will have to fund their own pension schemes, but they will also have to find the money to pay state benefits to their parents and grandparents. I deduce from that that the tax relief arrangement should be more rather than less generous in view of these circumstances.
We also hear rumours that the Government are considering the removal of tax relief from higher earners. I hope that will be vigorously denied.
In sum, it seems that the Government in this field, as in some others, are saying one thing and doing the opposite. Their words are not matched by deeds, and there is confusion. I suspect that one of the reasons for the confusion is that there are too many reviews going on and that they are not properly co-ordinated. The new policy, welcome as it is, will not succeed unless people have confidence that the Government will do what they say.
I hope, too, that the Government will take very seriously the criticisms that have come from very knowledgeable and responsible bodies such as the National Association of Pension Funds and the Institute

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and Faculty of Actuaries, both of which are confused about government policy and worried about the direction in which it appears to be moving.
The time is ripe to ask some fundamental questions about future pensions policy. First, has Beveridge achieved its purpose, and is it now out of date? By that I mean the concept of state cover from cradle to grave for all, irrespective of means or needs. It is understandable that 50 years ago such a policy was desirable. At that time there were very few occupational pension schemes outside the public service; and because of the difficult conditions for saving in the 1920s and 1930s it was not possible for people to build up a substantial nest egg. Now, the situation has been transformed thanks to encouragement by means of government policy. Over half the pensioners now retiring have a good occupational pension and other savings. In fact, our children and grandchildren talk about "WOOFs"—well-off old folk.
In the light of this situation I ask another question. Is there now a case for saying that those in the working population who have substantial cover should be able to contract out completely from the national insurance scheme? It is certainly worth considering. After all, they would still help to finance benefits through taxation.
However, there is a big weakness in this whole area which previous government policies were not able to deal with effectively; namely, that only about half the workforce are covered for a second funded pension. If the shift from state to private provision is to work, it is urgent that that gap should be closed. I am thinking, for example, of people in irregular or part-time work; women who have a break in their work pattern for maternity and to bring up children; people with bad health records; people who give up work in order to care for elderly relatives; and some self-employed people. It is groups like that who will need assistance in building up an effective second pension. They will need rebates on national insurance and possibly other help in topping up their savings if they are to obtain an adequate second pension. I do not mind whether it is called "basic pension-plus" or "stakeholder pension", the principle is the same behind the two ideas. The principle is right. I believe that we should not shirk the possibility that, if this is to work effectively and everyone is to be covered, compulsion may be necessary. It should be seriously considered.
The other point I wish to raise briefly concerns residential and nursing home fees. We all know that as people get older there is an increasing worry that their savings will be eaten up by the fees and will not be able to trickle down the generations to their children. There will not be too many of them, we hope, but the trouble is that we do not know who they will be until it is too late. The previous government raised the limits, which assisted in alleviating the problem to some extent. I am glad that the present Government intend to continue studying the question. It seems to me that on the face of it, the situation lends itself to insurance. It is a long-term business solution that will be required. I have heard it said that the friendly societies may be interested in extending their activities into the field. Of course, they have a long and honourable history. They have
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experience of such matters and it may well be that they would be suitable for giving assistance in this important area.
In conclusion, there is plenty to do. I welcome the pension review. I hope everyone who has anything to say will co-operate with it. But the Government must speak with a clear voice and words must be matched by deeds. We want from Government the zeal of the convert to funded occupational schemes and no back-sliding into old Labour ways. I beg to move for Papers.
3.32 p.m.
Lord Barnett: My Lords, I too begin by declaring an interest because I have used the tax system to my personal advantage. I have also been ministerially responsible for it, although I hasten to add that that was at a different time. Of course we all agree with the noble Lord, Lord Dean, that savings are good both for the individual and for the economy. No one would doubt that. But there is also a need to recognise that there are millions on very low incomes who will never be able to save enough and the state will have to help them in one way or another.
I agree again with what the noble Lord, Lord Dean, said that over half the population—I do not know the exact statistic but I take his word for it—will be in receipt of reasonably good pensions on retirement. So perhaps one should allow for the possibility of an opt-out from the state scheme. That seems a possible course of action which might be considered. I strongly support the review and I hope that it will take account of that suggestion.
However, I am bound to say that there are millions who can afford to save but who are still not doing so. That is undoubtedly the case at the moment. What can we do to help those people and encourage them in some way to save for themselves and their families in retirement?
The tax system can clearly be used to help them. It has been used in the past; indeed, I have used it myself. I have taken out annuity policies and I can recommend them to all noble Lords who wish to make use of them, although I do not normally give advice on such matters. I strongly recommend that if noble Lords are 40 per cent. taxpayers, then every £1,000 they invest costs them £600 and the investment grows tax-free. I see the learned Clerk at the Table looking closely at me. It costs the investors £600 but £1,000 grows tax-free until retirement. So it is possible to utilise the tax system to help and encourage savings, particularly—as the Motion says—for retirement.
I hope that the Chancellor of the Exchequer has it in mind to make changes—and all Chancellors like tinkering with the tax system, so it would be no surprise if my right honourable friend, if he listens to me occasionally, at some stage tinkers with the tax system. But it can be argued that I am not the right kind of person for whom the tax system should provide help. There may be others—I have no doubt that there are—who will be more deserving of help through the tax system than I. I am not sure whether the Chancellor

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would have in mind removing the 40 per cent. tax relief on pensions. If he does, it will undoubtedly have an impact on the margin of savings. I myself am well past that point so it would not be for me, but it would detract from some savings on the margin. I would regret that.
However, there are other tax reliefs available to help savings. We all know of TESSAs, PEPs, National Savings Certificates and many other forms of tax relief which are used often by very low income people who obtain tax relief and make savings which will be useful for them and their families in retirement. I know that the Chancellor has indicated that he might have in mind making changes in those directions. We do not yet know what he will do, although I gather there is to be a Green Paper. The idea of Green Papers on the subject is helpful. As Green Papers are supposed to give Ministers an opportunity to take account of the views of others, I hope that, when a Green Paper is issued on the subject of savings and forms of tax relief on them, when the Chancellor publishes the Green Paper and receives—as I imagine he will—a large number of recommendations about it, he will take account of them.
I turn to the other part of the Motion moved by the noble Lord, Lord Dean:
"the need for stability in the financial markets".
Those words were added recently. Not having been born yesterday, I have no doubt that the noble Lord, Lord Mackay of Ardbrecknish, may have had some influence in the matter. I may be doing him an injustice, but I imagine that that will be the case. It may give him an opportunity to have a go, for a change, at the Chancellor and others in the Government on the subject of the Chancellor's recent statements, leaks and so on. I hasten to add that I have no interest to declare in that regard; I do not use the Red Lion pub, although I walk past it daily or regularly on my way to and from the gym. Perhaps in future I should stop there; I might learn more about the Chancellor's policy or non-policy in this field.
The markets, particularly the stock market, are affected for many reasons, some of them extraordinary. There was a recent front-page article in the Financial Times by a gentleman called Robert Peston, who is related to one of our noble friends. If I may say so, anyone who knows him and his writing will know that he is an excellent journalist. That article had the effect of sending the FTSE 100 index up substantially by 150 to 200 points. That is what the article did.The Times, which used to be a substantial newspaper, had an interview with the Chancellor who was foolish enough to give it to them. He should have known that, from a Euro-sceptical paper like The Times, he could not expect the right kind of headline. I first saw the headline in The Times, and then read carefully through the interview given by my right honourable friend the Chancellor. I could find no words to justify the headline. Nevertheless—perhaps not too surprisingly—it had an impact on the markets.
There were also warnings about the crash of 1987 and fears that the 10th anniversary of that crash could result in a further crash. The head of the Federal Reserve in
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the United States, Mr. Greenspan, offered warnings about the overpricing of the markets. Happily that did not have any impact. Indeed, even on Monday of this week the market fell by only 60 points. The fact is that words from people such as the Chancellor, his advisers or anybody else—even journalists and I see one nodding on the Opposite Benches—do not always have the effect that it was thought they might. In any case, although there was a 60-point drop in the FTSE 100 last Monday, it went back up 20 points the following day. So it is foolish to pin the blame on a simple statement in a newspaper or by a Minister. Frankly, that would be playing foolish party politics—which I expect the noble Lord, Lord Mackay, to do a little later. Incidentally, perhaps today he will tell us what the effect of the Opposition's policies would be on the markets.
It is worth asking the question: what do we mean by stability? What is stability? Since 1st January this year, the FTSE 100 has gone up from 4100 to 5300. It is now slightly less than that. I suppose that that is instability. Are savers unhappy? Speaking as a saver, I am not unhappy about that particular change in the market.
So, what is a recipe for stability? Everybody—including those from all sides of your Lordships' House—is now in favour of free markets. But free markets, by the very nature of those markets, particularly the stock market, do not provide for stability.
I do not believe that the second part of the noble Lord's Motion makes a lot of sense. For the reasons I indicated, I can agree with the first part of the Motion. However, if there were to be a vote, I certainly could not support the second part, because it makes no sense whatever.
3.43 p.m.
Lord Hooson: My Lords, not having the experience, skill or knowledge in financial matters of the previous speaker, regrettably I have no interest to declare on this subject. But I must admit that I had not intended to take part in this debate. It was not until I noted today in the Order Paper a change in the wording of the Motion which enlarged its ambit that I decided to speak.
I entirely agree with the sentiments expressed in the Motion. Nothing discourages saving so much as great instability in the market. However, I want to concentrate my remarks on the words:
"the need for stability in the financial markets".
It seems to me that, however much we desire it, the idea that in a global economy with swift modern communications a government—this Government or any government—can create the basis for stability in the financial markets of this country in, for example, the period 1999 to 2002, or any other period, is, to put it mildly, highly optimistic. What they are much more likely to do, with the spectre of a post-election referendum on joining the euro looming in the distance, is to create by leak or otherwise a climate of uncertainty and speculation, which will lead to anything but stability in the financial markets in the latter years of this Government.

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I believe that it is necessary for the Government to look at any government's ability to run the economy or the financial markets to a blueprint, which seems to be indicated in the Motion. That is totally outmoded thinking. It is rather like the thinking of old Labour or Right-wing Conservative thinking in the past. Without any doubt, we are likely to have greater stability in financial markets if we join the euro at the first possible opportunity.
The coming of EMU in 1999 is now a near certainty. As your Lordships will know, the US Deputy Treasury Secretary, Lawrence Summers, said yesterday in his evidence to a Congressional Committee:
"It will herald the biggest change in the international monetary system since the breakdown of the Bretton Woods system in the early '70s".
Like all other epoch-making changes, that carries risks—risks to all its participants. They are there for everybody and would be no greater for this country than for the others. But the rewards of success will be very great. The risks of being outside after a successful launch are much greater than the risks of being on the inside. Indeed, it would lessen any risk of the launch itself for the UK to be part of it and for every other country that could qualify for entry to be in on the ground floor.
The impact of the euro on the world financial system will be great. The effect on world confidence will be very telling. A country such as ours, procrastinating on the outside, will see its currency become the inevitable prey of financial speculators. I fear that this country and this Government will pay a very high price—for what?—for its own lack of confidence and lack of leadership on this very issue. As Shakespeare said:
"There is a tide in the affairs of men, Which, taken at the flood, leads on to fortune".
But the history of our relationship with post-war Europe generally has been our failure to spot the tide early enough and, when we have spotted it, the failure to take it at the flood yet, inevitably, to be driven by the success of Europe, to follow in the wake or slipstream of others' creation, not having been part of that creation or inside at that very creative period.
In fact, the world's observers look at our lack of confidence and lack of leadership against that historical post-empire background. Included among them are speculators, who will thrive on the instability in the financial markets. Regrettably, I have come to the conclusion that, because of this Government's attitude at the present time—they have made an awful botch in the past month through leaking their intentions with regard to the euro—we are inviting great instability in the financial markets and will pay the price for being outside, whatever the risks of being on the inside, when the euro is created.
3.48 p.m.
Lord Clark of Kempston: My Lords, we are all indebted to my noble friend Lord Dean for giving us the opportunity to discuss pensions. The pension question seems to have been generating quite a lot of interest recently. Unstarred Questions have been tabled and my
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noble friend Lord Buckinghamshire introduced a debate on the matter. To make the same points in this debate would be mere repetition. But I am absolutely certain that within the country there is enormous interest in the future of the pensions industry and what it means to the individual.
Taking the long-term view, in 1995 there were 10.4 million state pensioners in the country, of whom 1.8 million were on income support. One should therefore ask about the other 8.6 million, and clearly those other 8.6 million pensioners in most cases—99 per cent. of the cases—enjoy an occupational pension.
But the danger long term, as I see it, is that by the year 2030—which is not that far away—there will be 14.2 million pensioners. Consequently, one wonders how many will be on income support. Despite the promises made in the manifesto that there would be no increase in taxation, we have in fact suffered 17 such increases. The one on which I want to concentrate affects the pension funds of this country—fiscal incentives.
I agree with my noble friend Lord Dean that fiscal incentives are essential. At the moment one enjoys contributions from the employer as well as the employee. The employee obtains a tax benefit and the employer benefits through a reduced corporation tax. The money in the pension fund is also free of capital gains tax.
Everyone who pays into a pension, whether it is a personal or occupational pension, is affected by what happens to the pension fund. The actuaries work out what one's pension should be, presupposing that the fiscal advantages enjoyed by the pension fund continue. If those incentives change, then the actuarial value of the pension fund decreases to the detriment of the ultimate pensioner. In the last Budget the Chancellor of the Exchequer took away one of the fiscal advantages—that is, advance corporation tax—thus depleting pension funds and affecting many pensions.
When an employer promises an employee a certain pension, it is based on a specific scheme. If that scheme is reduced in value then, in order for the employer to maintain the contract with the employee, he must increase his contribution by putting a further tranche of money into the pension fund. It may be argued that pension funds are buoyant at the moment. They are. When one is in a bull market in the Stock Exchange of course one's assets in the pension fund will increase. But what happens when one is in a bear market? Then those assets decrease. My noble friend mentioned as an aside how the dithering we have seen over the past two or three weeks in relation to a single currency has affected the pension funds of this country.
I am sure your Lordships are aware that of people aged 69 or under, 60 per cent. have an occupational pension. The present employer must honour his pension commitment. That is the basis of my argument. When changes are made in the fiscal advantages of a pension scheme, I, as an employer, must put further tranches of money into that fund.

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An employer, if I may use jargon, is "stuck" with the contract he has with his present employees and must honour his commitment. But if pension funds are depleted by our tax regime then employers, though they may honour their present pension commitments to their employees, may resist new employees being included in the scheme. The Government should therefore reconsider the changes made in the recent Budget. I accept that in the short term there may be benefits for the Exchequer. But for the long-term view for the economy, the changes must be reconsidered.
I conclude with a quotation from an independent organisation, the Liverpool Quarterly Economic Bulletin. Nobody can say that it is Tory biased. It says,
"Tony Blair is fortunate to inherit a solvent state pension system and a vigorous private one. To make it work better he could build on the Lilley ideas, give back the pensions tax credit and, most difficult of all, carry out New Labour promises of toughness on welfare recipients. If that is what the stakeholder pension is really about, it deserves our fullest support. Somehow I wonder if it is.
3.56 p.m.
Lord Poole: My Lords, the noble Lord, Lord Barnett, so beautifully dealt with the oxymoron of market stability that I hope your Lordships will allow me to stick with pensions.
It is clear beyond a peradventure that how we ensure that the state and the individual save enough to fund everyone's expectation for retirement has become one of the great issues of today. It is important, but it is certainly not understood or even much cared about outside the arcane world of the actuary or the pension fund expert.
We are facing a pensions earthquake. A few simple statistics demonstrate the size of the shocks to come. Today there are four people in work for every pensioner; by the year 2050 there will only be 1.5. Today the state pension is around 15 per cent. of average earnings; by 2050 it will be below 6 per cent. and falling. We spend £32 billion on pensions out of a total social security budget of £92 billion; and that share will continue to rise.
Unless we can continue to develop and extend what Frank Field recently called the,
"miracle of British occupational pensions",
two things are certain: the cost to the state will continue to skyrocket; But, perhaps much more importantly, pension provision will fall far short of the growing expectation that people have regarding what they consider a proper standard of living in retirement.
It is excellent that the noble Baroness, Lady Hollis—sadly, I see she is not in her place—has many years of experience of local authorities to bring to this issue, because there are seismic rumblings of what is to come at a national level unless action is taken. What are those early warnings? Quite simply, the cost of pension provision is running out of the ability of councils and public bodies to pay without undermining their ability also to fund vital day-to-day expenditure. Of course, it is partly demographics: the population is ageing. It is also partly the result of a number of other factors;
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for example, the easy option of using early retirement as a tool to manage change. Even the Treasury has fallen into this trap of offering irresistible index-linked pensions to get rid of people.
For councils alone early retirement has cost £3.8 billion over the past six years. It can cost up to £300,000 to let an official take retirement 10 years before it is due. But no up-front provision is made; no immediate holes appear in the year's spending budgets; but the cost is real.
Sir Paul Condon tells us that the number of policemen in London is significantly below the level it should be because of the costs of pension funds. According to the Audit Commission, 25 per cent. of the fire service budget now goes on pensions; it is a service where early retirement is endemic. The lesson from local authorities and public bodies is that we simply cannot afford a situation under which the state tries to bear the full burden of the cost of retirement. It is an illusion to think that we can. We should not try.
We have to find a balance between state provision and private provision that will really stand the test of time, that will stand the test of changing governments, and that will stand up to that most difficult of tests, the aspirations of the people concerned. Harriet Harman was right in September when she said,
"We have to agree where responsibility shall lie and how it will be allocated between the public and private sectors".
Finding this consensus is a key task for the Government's current review.
I have to say that, looking ahead, I find it difficult to believe that government will find it possible to provide much beyond a very basic means tested level of benefit. What we must ensure is that only the very smallest number of people fall into the category of those who have nothing else to rely upon. To achieve this, the Government's principal task will be to create an environment in which substantial long-term saving will take place. I suspect that some compulsion may indeed be necessary. But if saving is required it will mostly work best if it is driven by choice. For choice to work, there has to be real understanding. There is a major education process to be undergone, and we should welcome the Government's initiatives in this regard.
The need to be understood is extremely important. If a government are to foster saving this must not be seen as another government conspiracy to avoid their responsibilities. It is an urgent problem that we all, as citizens, share as we grow older. It is not just about education. We urgently need hugely to simplify the rules governing pension savings. The world of pensions is frankly incomprehensible. Most of the rules have been created in labyrinthine complexity largely to prevent abuse by the rich, and probably rightly so. But to the vast majority of those who need to save, these rules simply do not need to apply.
I would urge the Government to override the paranoia of officials and require them to simplify by setting thresholds on contributions above which abuse prevention should operate but below which simplicity, clarity and transparency should be the overriding objective. People will not willingly do what they

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cannot understand. Above all, overriding all other considerations, if government are to foster savings, savings that must be built up over a life-time, government have to foster trust. We should be extremely grateful that the Labour manifesto promised to establish a new trust on tax with the British people. One of the principles rightly identified in that manifesto is that tax policies must promote savings and investment.
Persuading people in work to save requires trust that government really will take their eyes off the pressing needs of this year's funding and not see pension savings as a honey-pot of irresistible proportions. There has to be a firm covenant with the people that pensions' savings will be left alone. That is a covenant that has to run not for 10 years or 20 years, but for everyone's lifetime. That is why it was such a terrible shame that the Government recently decided that it was expeditious to raid the nation's pension schemes. The economics are had but the real cost has been to undermine the fundamental long-term contract that has to exist between government and people. No tax on the way in, tax on the way out. Five million members of personal pension schemes have had their trust abused by a frankly retrospective imposition.
If symmetry of tax treatment during a person's working life is removed, why should anyone bother to put his savings into such a locked up arrangement as a pension if he cannot believe that his savings will be left alone? Indeed, we have already seen a worrying trend of people contracting back into SERPS, the very last thing we or the Government should want. Let us hope, as the Government consider the future for pensions, that this is the last occasion when words and actions will quite so obviously conflict.
4.6 p.m.
Baroness O'Cathain: My Lords, I am grateful to my noble friend Lord Dean of Harptree for introducing this important subject, a subject that will almost certainly gain in importance as the numbers of people over the age of 60 increase beyond the normal historic level and when almost all of them will require income over and above what can in any circumstances be called a "reasonable state pension".
Last week in your Lordships' House we discussed pensions. This debate is turning into a pensions debate, although the word "pension" does not appear in the Motion. I took part in the debate on 15th October and felt that this whole area is so important that I wanted to look at the subject again, albeit from a slightly different angle.
The emphasis in the Motion today is on saving, whereas last week's Motion majored on pension provision. Saving for retirement will almost always be equated in the mind as being encompassed by pension provision. This is the single most important form of saving for retirement, but not the only one. Indeed, the very concept of saving should be encouraged. It would be good if at the end of the debate we were given some hope that new initiatives to encourage saving are likely to be forthcoming.
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Very frequently in our debates we are reminded of the deprivations in our society, deprivations which the state, quite rightly, attempts to alleviate. What we seem to hear less about are the measures to encourage people to run their own lives in such a manner as to ensure that, barring severe misfortune such as catastrophic breakdown in health leading to a continuing drain on savings, they can look after their own financial future.
I have always felt that those who can, should make significant provision for their own future, relieving the state of some obligation and enabling the state, in turn, to concentrate on those who, for whatever reason, are unable so to do. Such provision can only be guaranteed by saving, but saving in a responsible and sensible manner. We have all heard of unfortunate people who have lost what they call their "life savings" by foolishness or indeed by greed. The Barlow Clowes example comes immediately to mind. Sadly, with the demise of Latin teaching in our schools, I fear that not enough people today follow the maxim caveat emptor.
Taking a bird's eye view of the way we run our lives compared to the way our parents and grandparents did, one of the biggest differences is in the attitude to saving or, more colloquially put, "providing for a rainy day". My Lords, does anyone use that expression any more? When I was a child it was one of the most frequently used sayings of my grandmother. She would give me half a crown and in the same breath would say, "Remember to save for a rainy day". Well, as it was practically constantly raining where I was brought up, I never could quite see the point of that at the time. Pocket money was "saved" for long periods so that something special could be purchased for Christmas. Today, time after time I hear young people say, want X or Y. Thank goodness for Visa, or Mastercard, or a bank overdraft, or whatever". Seldom, if ever, does one hear, "I want X or Y and it will take me three months to save for it". The famous advertisement of the 1970s said it all, "Take the waiting out of wanting". But have we completely lost sight of the idea that if one could not afford to have something now, we had only one alternative; and that was to save for it.
I am not decrying the universal availability of instant credit. The advent of the plastic card has had a huge impact on growth, on helping people to manage their expenditure in a planned way, and on stimulating the economy. Most people are responsible about using these cards. But the universal and easy availability of such cards militates against the concept of saving and pushes such an idea to the back of one's mind. The whole principle of saving is that we cannot afford to buy today and the excitement of looking forward to possession encourages a regular commitment of doing without something today in order to obtain the satisfaction or pleasure tomorrow. None of us hears much about that concept nowadays.
An even more insidious enemy of saving is the availability of the so-called "nothing to pay for 12 months" and the "no interest on loans" schemes. People actually believe that the providers of goods—furniture and motor cars spring instantly to mind—are utterly altruistic and are, in effect, giving away their products. That raises a very serious issue of basic

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education. How is it that it is possible to beguile countless thousands of people? Is the consumer so naïve? I saw a recent TV advertisement for a company called Suite Shop which encouraged people to buy three-piece suites by paying nothing until 1998 and then receiving four years' interest-free credit. Why should anyone save when offers such as this mean that you can have it today?
What it really does is to encourage people to spend, probably beyond their means, by fooling them into believing that they are special customers who are getting a special deal. These customers do not realise that either they are paying for it in the price or that other customers, who do not wish to have a debt burden of any type around their necks, are subsidising their needs for instant gratification. Either way that is wrong. We have an Office of Fair Trading: does this subject recommend itself for investigation by the OFT? I would like to believe that it does.
I do not want to be accused of being a supporter of the nanny state, but I believe that tougher regulation on the ludicrous claims made by so many organisations in their attempts to get one to purchase their goods and services would be commendable. Such organisations should be made to disclose the true inflated costs of goods and services concomitant on supposed interest-free benefit. That form of disclosure should reduce the number of individuals who fall prey to that type of selling and, by extension, encourage saving.
A debate concentrating on saving should not dwell too much on spending, but I believe that the illustration I have given underlines the point that there has been a distinct shift away from saving to consumption and that such a shift has dangerous implications for the provision for retirement by both individuals and the nation as a whole. We need to give serious attention to the possibility of encouraging a return to the concept of saving.
The introduction of the form of saving in terms of the personal pension has increased awareness of the need to save for retirement. However, it is often far too late and final benefits are, thereby, substantially reduced. Even the photographs in the advertisements illustrating personal pension plans tend to be of people like me tending one's garden in a slightly arthritic way rather than the lively 20–30-something year-olds in the wine bar with a mobile phone stuck to their ear. Even employers nowadays tend to down-play the importance of pensions; it is almost the last item to be mentioned or considered in what they call the "package of employee benefits", coming way down the list after salary, holiday entitlement, medical insurance, sports club membership, etc., instead of at the top of the list. I fear that salaries are seen as funding today's expenditure and no thought is given to the possibility of putting some of that aside for the future. That is another example of the lack of a "savings" culture.
So what can be done about it? Harking back to the debate last week, I reiterate that encouragement is required. Tax concessions are always a powerful incentive and I have no hesitation in supporting their cause. It is not like the three-piece suite. By giving tax
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concessions the Government are, in effect, making an insurance premium contribution to ensure that when the time comes for retirement the recipient of such concessions will be one less person who has to be maintained by the state.
Yet again I use the word "encouragement". If the Government wish to enhance the commitment of the population to provide additional retirement benefits for themselves there have to be inducements. In addition I believe that there should be a programme of information distillation—not by spin-doctors—drawing attention to the fact that there are currently insufficient numbers making provision for themselves. Some figures produced in the Financial Marketing Handbook 1997, which is compiled by NTC Publications Limited, show that in 1995 only 17 per cent. of the population contributed to a personal pension and, equally worrying, only 58 per cent. of the population contributed to any pension. I am assisting the noble Lord, Lord Barnett, by supplying that statistic. Sadly, women seem to be even less convinced of the need for pension provision than men. Only 30 per cent. of the contributors to personal pensions were women. That is yet another area which needs highlighting and encouragement for women to think about. The days are long since gone when men were the great providers for women throughout their lives.
I end by expressing great anxiety about the messages that we are receiving concerning the Government's attitude to long-term saving. I know that we should not believe everything that we see in the papers—witness the great EMU debate—but a recent article in the Financial Times raised my fears about the implications for savings by the move to abolish TESSAs and PEPs. Both these vehicles for saving have been hugely popular and have encouraged saving. Messing around with these is just the sort of thing which does not encourage long-term saving and I hope that either there is a rethink about it or another proposal put in their place which will be equally attractive or even better.
4.16 p.m.
Lord Lucas: My Lords, I want to concentrate in my speech today on tracker funds. That is because I am aware that it is a matter which the Government view with a great deal of sympathy and one which may come to play a very important part in the Government's thinking if they are considering a further degree of compulsory saving. When I raised the subject in the course of a rather general speech last week I was surprised by the reaction of the noble Baroness, Lady Hollis, to my mild words of caution.
When one first thinks about the subject, tracker funds seem immediately appealing. The argument for investing in equities has always been that the equity market does better than investing in gilts or cash, and by buying tracker funds one is buying into that market without having the burden of costs imposed by an active management and without having the risk that that management will result in a substantial under-performance of the market. In other words, one is buying what one wants.

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But tracker funds are a parasite on the market. A market exists to combine hundreds of thousands of individual decisions into larger ones and to enable, through that mechanism, decisions to be taken on the pricing of securities and on the allocation of resources. Imagine a market which was entirely made up of investors using tracker funds. It would be a nullity; there would be no decisions being taken of any variety. If I wanted to launch the great "Lucas Corporation" for £1 billion, all these funds would have to subscribe for it. It would not matter what the purpose of the business was. It could be entirely worthless—it probably would be! As a market goes towards the point where tracker funds form a larger and larger proportion of it, its utility as a market is decreased.
A market, left to itself, has mechanisms for dealing with this problem, as tracker funds are predictable. If such funds are known to be investing in particular stocks—say, tracking the FTSE 100—and they represent as a collection of funds, say, 20 per cent. of the market, then those stocks will become much more valuable. This opens up the possibility of trading on the entry and exit of stocks from that index. Indeed, that is a very profitable source of money for a number of operators in the market even at the current level of tracker funds, which is about 10 per cent. of the market. If one has a tracker fund one cannot deal with the problem that one has to pay an average of, say, 15 times earnings for a stock which is outside the index and 20 times if it is in the index. People who are not bound by the rules of a tracker fund can drive a stock out of the index or into it, and make one pay them their profit at the end of the day. So, if tracker funds are a large enough part of the market, the rest of the market can begin to get value back from them and make them under-perform.
It might be thought that one way of avoiding that would be to use tracker funds which track the all-share index, but you cannot easily do that because you cannot buy small numbers of shares in all of those companies. You have to do it by proxy. Although such funds may say that they are tracking the all-share, they generally track a proxy, and if people know and understand what that is, they can trade against the tracker funds in the same old way. If all-share funds represent a significant proportion of the market, one starts to get what one might call "issuance" fraud. It becomes so easy for the big companies to issue shares, as they go straight into the maws of the tracker funds, that one sees distortions of the way in which the market behaves. Big companies can profit from that—at the eventual, long-term economic expense of the tracker funds.
There are also problems because tracker funds reduce the amount of money that is available to small companies. They reduce their valuation and make it harder for such companies to raise money. One of the functions of the market—surely one must seek to protect this function—is its ability to nurture small companies and to bring them on. Such companies are the future prosperity, rather than the present prosperity, of this country.
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Tracker funds are in any case only a partial answer. I cannot believe that any scheme of regulation into which the Government may enter would be allowed to prescribe that investors have access only to UK shares. Surely these days we must have access to European shares. Indeed, why not have access to shares on all of the world's markets? Why not cash? Why not bonds? A whole set of decisions on asset allocation has to be taken by somebody. Such decisions matter a great deal.
Another great problem—this could be the subject of another speech—is annuity fraud. There you are, you have spent 40 years building up your funds by taking long-term decisions in long-term assets when suddenly, in an instant, you are made to take a decision on converting the fund into an annuity. If the market is low, you lose out. If the gilts market is high, you lose out. It is entirely wrong that such instant decisions are imposed on that pattern of long-term investment. The Government must tackle that if they are to impose a higher level of saving. Indeed, it would be a good idea if the Government tackled that matter anyway. Safety has a cost, and the Government must pay attention to the side effects if they are thinking of imposing safety on investors in any way.
As an alternative to tracker funds, the Government might think of going for guarantee funds. I do not mean the sort of guarantee funds which use "mirrors" and simply sell the investor what he has already bought and call it something else. Sadly, there are still such funds in the market. I mean guarantee funds which are based on buying options so that they can genuinely guarantee that if the fund—it is probably a tracker fund anyway—falls in value, that value will be made up from elsewhere; or one which specifies that if the fund ever reaches a particular level of the all-share index but, at redemption, is below that level, the difference will be made up. Those guarantees are based on options which are traded in the financial markets, and they are all very well at the level of the guarantee funds at the moment.
Only a small percentage of the market comprises such funds. However, as soon as there are a lot of them, the liquidity of the market will be put under strain. It is not a market which is backed by investors selling the options; it is backed by the banks taking positions in such options. If we in any way major on guarantee funds, we will put the financial system at risk and increase the chances of the market being pushed into a crash as a result of people desperately trying to cover their positions. The Government have to take the broad picture into account if they are to impose such restrictions on investments in the "people's pension" or whatever the Government may choose to call it. My message to the Government is, "Don't push a good idea too far".
Perhaps I may put forward one idea as a constructive contribution to the debate. I am conscious that the Government are worried about the level of fees charged for managing money. Why do the Government not say that if you are managing money under the new people's pension scheme, there is a limit on the costs that can be charged? If the Government were to set that limit low enough, there would be two beneficial effects. First, fund managers would be made to think long term.

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If they were not allowed to incur much by way of dealing costs, they would have to take long-term decisions because they could not afford to churn the portfolio. That would be an excellent change in the way in which the City of London thinks.
Secondly, if the amount of costs allowed to be incurred were limited, the fund managers would not be able to spend a great deal on marketing and would have to think of products with a real underlying value which could be recommended by word of mouth rather than products which rely on pizzazz advertisements in the newspaper and which sell by the coupon at the bottom—or by whatever other deceptive method a number of people are, sadly, using even today. If one wanted to put some cream on that rather dry cake, one could allow fund managers to take a share of the performance if they beat the all-share index.
4.25 p.m.
Lord Rowallan: My Lords, it is with a great deal of deference and temerity that I rise to speak in this debate. We are in knowledgeable company and I am someone who foolishly relied on my pension coming from your Lordships' House. As an hereditary Peer, I am now fast discovering that my pension is disappearing before my very eyes.
I rise to speak about savings in relation to Mr. and Mrs. Average—not about the big pension funds or the big companies. It strikes me that Mr. Average does not want to save. He is determined to live for today because tomorrow may never come. Mr. Better Off is also slightly frightened because of the myriad of taxes that he can face. However, we should be encouraging saving as much as possible because saving ultimately saves the taxpayers' money and results in a gain for the Exchequer when tax is paid on the resulting income from savings. Savings are the life-blood of the banks, the stock market, the building societies and the pension funds. The first three are all cashable items, but the pension fund is held in trust until the end of its term.
I wanted to speak in this debate having read an article in the Daily Mail on Wednesday, 15th October. We all know that we always believe everything that we read in the newspapers. Under the heading,
"I have lost my pension",
the article discussed what unfortunately happens to people who go bankrupt. Many people go bankrupt quite deliberately, but I am not talking about such people. In this day and age when we have faceless bankers, many people are made bankrupt through no fault of their own but purely and simply because the equity in their home or business has changed and the bank decides that it is no longer prepared to lend them that money. Anyone who unfortunately finds himself in that position will see his lifetime's savings apparently disappear before his very eyes.
We must remember that such a person has no vested interest in his pension until he retires. If you are 45 or so, you have little or no chance of being able to refill your pension coffers, so you are obviously reliant on the state, which is not a very satisfactory situation.
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Even three years later, when the person is out of bankruptcy, he will not get back his pension. The trustee can surrender the policy immediately or keep it until it matures without adding to it, or the trustee can add to the pension out of other confiscated funds in order to pay the creditors at a later date. I am told that a company pension is not normally touched. Apparently, such pensions might even become safer when the Pensions Act 1995 comes into force later this year. However, old-style retirement annuities and personal pension plans or company pensions that have been transferred to life companies all go.
Lawyers are apparently arguing the case, as lawyers are wont to do, that if a pension company puts in a forfeiture clause, you will not lose your pension. Apparently, it works like this: the bankrupt loses his automatic right to the benefits, but gets them indirectly through the pension scheme trustee, who can pay him, his family or dependants. In theory, that keeps the trustee in bankruptcy at bay. Apparently, retirement annuities cannot be protected like that. Obviously, there have to be safeguards against gratuitous alienations made to a pension fund at the last minute.
I found all that rather peculiar, so I thought that I would ask someone who should know about it. I contacted a Glasgow-based bankruptcy expert and asked him his thoughts. He replied that he had seen three legal firms and asked for their opinions as to his powers with regard to seizing pensions containing forfeiture clauses. None was able to give him a definitive answer. The partners were all in total disagreement on whether he did or did not have the powers to confiscate the pension. So he then went further and asked three QCs. Lo! and behold, they also disagreed.
There is no statute because parts of the Pensions Act 1995 have not yet been enacted. So I ask the Minister to tell the House whether the Government intend to implement those provisions.
So what does a man or a woman do? We are encouraged to save but so much of life and taxation today says "Spend, spend, spend". If you do not spend, when you die inheritance tax will have to be paid, which in turn means that when your goods and chattels are sold to raise the money to pay the tax, capital gains tax has to be paid.
The Government are removing reliefs on taxation and there has been a lot of chat about the wealth tax. Is that encouragement to save? Not in my book. No one in this life knows what lies in store for them, but as long as there is a problem there is a disincentive to save, which takes me back to where I started. Without people saving there can be no borrowing, and it is saving that we must encourage in order that people can save for their future so that they have a future and so that they do not have to rely purely on the state pension fund, which more and more people are probably having to do.
4.31 p.m.
Viscount Brentford: My Lords, I too would like to thank my noble friend Lord Dean of Harptree for introducing this debate. The more I have thought about it since I saw it on the Order Paper the more important

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I have thought it. I welcome the Government's interest in the question of savings and I hope that they will be listening to the advice of your Lordships this afternoon.
I believe that the greatest need in the whole field of savings is for it to be demystified. I am not sure if there is such a word but I hope it is clear what is meant: it is taking the mystique, taking the mystery, taking the feeling out of it that it is incomprehensible and one has to rely on experts. The more that we can do to simplify savings, the better I believe it will be. I am talking, of course, not about government pension schemes but the work of the individual in saving money, especially for his retirement. In answering the question on how does one encourage it, I would like to consider certain problems that I see in the country today.
First I will deal with certain practical steps of encouragement. I would like to see this subject mentioned in sixth form classes in schools where the pupils are preparing for life. When you are a sixth former the question of a pension is totally irrelevant but if the emphasis is made that as soon as you start work and start earning you need to start saving for your retirement, the idea may click at a later date. I believe that people need to be spoken to about this subject and for it to be discussed as often as possible in order for it to have effect. So I hope that it can feature, without taking up much time, in those regular preparation for life classes which are called different names in different schools.
Secondly, employers, whether in large businesses or small, and I believe this is more common in large businesses, need to point out to a new employee where he or she can obtain advice on a pension. If there is a company pension scheme which people automatically slot into, that is fine. But a lot of employers do not have corporate pension schemes. It should be the job of every employer to say where advice can be obtained so that the whole question of savings can be demystified as quickly as possible.
The third point I wish to make, which again has been touched on by some noble Lords, is that this is much more of a problem for those on lower incomes than for those on higher incomes. One reason for that is that the tax savings for those on lower incomes will be proportionately less than for those who pay a 40 per cent. rate of tax. Again, an early start is all the more important. I wish that I had started saving for my pension the moment I started earning. I did start fairly soon, but I would have done better if I had started the moment I began earning a proper salary. I believe that the more that people can start right at the outset, the better for savings; the better for the individual and the better for the country. Again, the question of advice is all the more important for an employee on a low income, and encouragement needs to be given for that.
On the question of savings, particularly for those on lower incomes, I have not yet heard in this debate any mention of friendly societies. I believe that friendly societies are organisations which can well be encouraged in this field. I believe that that again is a means by which encouragement can he given.
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Fourthly, I would like to pick up on something my noble friend Lord Rowallan mentioned: spend, spend, spend. There is a tremendous conflict for the individual today between the pressure to spend and the pressure to save. Advertising is always about the individual spending money: to buy this, to gain that for whatever purpose it may be—a slightly more expensive holiday or, as my noble friend Baroness O'Cathain said, buying a suite and not paying for it for at least one year and then incurring no interest for the next few years. It is all spend, spend, spend. This temptation to borrow money to spend more money militates against saving. There is conflict in this materialistic time which needs to be faced as we aim to encourage saving.
Fifthly, I would like to refer to the long-term future, not only of this country but of other countries too. Many futurologists say that the country will not have the resources in 20 or 30 years time to maintain its present high standards. I read somewhere that today three French employees contribute to the pension of one retired employee but in about 10 or 15 year's time there will be only two employees who contribute to one person's pension. Life will become tougher in the future. There will be less high standards which means that it is all the more important for the individual to save money today.
The Government are contemplating individual savings accounts, ISAs, I assume. I have a question on the word "individual". If this Government wanted to be really radical, I wonder whether they would look at the field of family savings and family insurance syndicates, which are ideas that are being thrown around at the present time to help people, particularly on lower incomes, to look forward together for their future. We have become such an individualistic nation that the extended family is not of much interest today but I believe there is a great deal of scope for looking at schemes for family savings in the future.
I wish to make another point about ISAs when the Government look at it after their research. I wonder if ISAs could be sold as widely as lottery tickets are sold today, to make them available to anybody coming off the street so that they can put aside a small amount from time to time when they can, when they receive a weekly pay packet or a monthly pay packet, to be able to buy their share of the ISA. It would make it much easier if they could go in, as they pass—not necessarily the Red Lion pub—somewhere that sells lottery tickets or somewhere like that. It should be made relevant to the individual so that he could spend money buying a lottery ticket on chance as well as gaining a secure savings scheme, something I am sure the Government's ISA will be.
I hope that the Government will be able to promote a national savings culture—to quote a phrase already used—and to keep it simple. I hope that the noble Lord, Lord McIntosh of Haringey, will "KIS ISA". KIS, of course, means keep it simple. I hope that he will take this to heart.
4.40 p.m.
Baroness Seccombe: My Lords, I wish to add my congratulations to my noble friend Lord Dean of Harptree on initiating this debate today. The subject of personal savings has always been of great interest and importance to me. It is vital to use every opportunity to keep it high profile. I see myself, and speak, as a small saver. I do not intend to keep your Lordships for long. I wish to make just one or two points. First, we should recognise that there has always been a sector of society which has considered saving to be a way of life, while the majority hope that the rainy day will never come, and so never even contemplate such action. They just hope that they will manage.
Inflation is a great evil and great disincentive for saving. I am sure that we all remember with horror what happened during the previous Labour Government when, in the late 1970s, inflation touched 27 per cent. That resulted in prolific spending. Everyone knew that if they needed something they had better buy it that week, because by the following week it would cost more. Saving at that time went out of the window as few had sufficient funds to save, and, in any case, it did not seem sensible to do so. We all learnt from that experience as we watched people who had retired on what they thought would provide for a modestly comfortable way of life, find that they had to reduce their standard of living.
The introduction of PEPs and TESSAs was a much welcomed idea. Both are free of income tax and capital gains tax. They have been enormously popular, with 4.5 million people investing in TESSAs and 2.5 million in PEPs. We now await the details of and the debate on ISAs.
People who have invested would obviously be greatly concerned were there to be a cap on capital already saved. That would constitute retrospective taxation. That is something that is never popular; certainly not fair; and which should be condemned. If, in addition, tax were to be paid, even at a very low rate, the scheme would probably not be attractive for low-rate taxpayers—the very people we are anxious to encourage to save for their future. I understand that these matters are high on the agenda, and will be announced for consideration and discussion before long.
The last government's proposals for savers were visionary and exciting. The new measures were well liked. In addition to the vast growth in personal and occupational pensions, they took this country to the forefront of providing additional resources for retirement. One of the best and most liberating initiatives of the past 10 years was the independent taxation of married women. It opened up a whole new world and gave millions of women the opportunity to become savers in their own name.
I hope that I may be allowed, and will be forgiven if I am not, to mention the splitting of pensions on divorce. I know that when in opposition, the Government were keen that that should proceed quickly. We all await their proposals.
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I cannot end without mentioning the Chancellor's raid on pension funds. The growth in occupational pension funds has been most impressive. Here perhaps I may declare an interest as I am chairman of a trustee's pension scheme fund. We must have the goodwill and support of employers. The start-up of schemes has been encouraged, but action such as that taken by the Chancellor in his Budget can act only as a disincentive to those employers who are considering introducing a scheme for their employees.
This country has £600 billion invested in pension funds. That is more than the rest of Europe put together. I am deeply concerned that were we to enter the EMU, this country would end up paying for other European countries to put their houses in order. That would be unacceptable to the British people.
Over the past 15 years, we have all become aware of the need to save. We are all living longer. Who knows what our financial needs may be. We must encourage everyone to save, paying special attention to those on low incomes and those who have to take time out from work for family responsibilities. We have made progress. We must build on that firm foundation, and not let it wither on the vine.
4.46 p.m.
Lord Taverne: My Lords, I, too, am grateful to the noble Lord, Lord Dean, for initiating this debate. I shall not follow the noble Lord, Barnett, and my noble friend Lord Hooson and discuss the impact of EMU on the savings market, much as one is tempted. However, one might observe in passing that clearly the City thinks that joining a monetary union would be of benefit, and of course it would provide enormous opportunities for fund managers as there is likely to be a vast expansion of investment in equities and in cross-border investment, in which this country is particularly skilled.
In a 10-minute wind-up it is impossible for me to refer to all the worthwhile contributions that have been made. However, I wish to say how much I agree with everything said by the noble Lord, Lord Poole, and how fascinated and instructed I was by the speech of the noble Lord, Lord Lucas.
I wish to turn to pensions and savings and deal with a subject which has not been discussed in detail this evening, and was not discussed in detail last week. It is the question of how far we need to face compulsory contributions to private pensions. The aim of the stakeholder pension is not necessarily to abolish all poverty in old age, but to achieve an end whereby everyone at work can look forward to a reasonable replacement ratio in retirement of their earnings while at work.
The most important decision relates to compulsion or choice. If the aim is to achieve what I have described, compulsion is the only way. There is no other way of reaching the parts that the present system fails to reach. Which categories of people do we want to reach? First, there are the 3 million people on state benefits. Many of them will not have earned much. The only way of dealing with their plight is probably through the proposed citizen's pension—whatever form that may

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take. Many will be people who have worked but who will have made no contributions apart from their national insurance contributions. In future there may well be many who now make contributions to private pensions which are insufficient.
The average contribution per month made to private pensions at present is some £68 whereas to secure a two-thirds replacement ratio it would have to be some £140. In what occupations do the people work who are not reached by the present system? They are the mobile workers. They are the people in the construction industry, the hospitality trade, the retail trade, in many cases the tourist trade, and those who work for small employers who feel that they cannot afford to contribute to an occupational pension.
However much is done which can and ought to be done on the lines advocated by many noble Lords—for example, the noble Viscount, Lord Brentford, made excellent suggestions about how savings for pensions and other forms could be encouraged—the fact remains that a voluntary scheme will not attract those people into savings. Tax incentives will not attract them into savings. As many noble Lords have pointed out, many people do not earn very much and therefore tax incentives are not worth very much. Indeed, tax incentives already exist.
The only way is a compulsory contribution of approximately 10 per cent. to be shared equally between employer and employee as a minimum. Anyone who contributes more will be exempt from the compulsory requirements. I assume that the basic state pension will be retained. I assume that SERPS will be phased out. It is an incomprehensible scheme which is worth little at present. It makes no sense to abolish it for those over the age of 50, but for those under 50 it should be phased out.
If the basic state pension is kept and SERPS has to be continued for those over 50, national insurance contributions must continue. The Institute of Fiscal Studies has calculated that there would have to be a new rate of about 8.5 per cent. How far would that mean double payment? It means that in future people will pay 8.5 per cent. plus a minimum of 5 per cent., making a total of 13.5 per cent. That is 3.5 per cent. more than they pay now. If that is phased in over about four years, it is not an insupportable burden; it is perfectly feasible. Of course, it must be a pension which is of low cost, portable and with certain minimum guarantees. Indeed, the Government could do much worse than look at the experience of Australia and at the system in the Netherlands, which probably has the best balanced pension system in Europe, including the UK. One noble Lord referred to the miracle of UK occupational pensions, but the Netherlands has a far wider coverage, with 85 per cent. of the population covered by occupational pension schemes of good value and invested in equities.
Such a scheme, if it were properly introduced, would not only reach the patches of poverty which are not now reached but it could also be popular. As was shown in Switzerland during their referendum—a popular subject at present—on whether there should be a compulsory, private occupational pension scheme, the Swiss, who are
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notoriously conservative, voted in favour. The Australian scheme has proved to be popular, as has the Dutch scheme. The French scheme, which is a different, compulsory, non-funded system, is also popular.
I said that I would talk about pensions and savings, so perhaps I may comment on the impact on savings of a compulsory scheme, which I am sure the Government will have to adopt in the end. The target groups which would be reached by a stakeholder pension, if it were a compulsory scheme, would be those which do not save. They do not have the savings culture, the lack of which was referred to by the noble Baroness, Lady O'Cathain, and the noble Lord, Lord Rowallan. He referred to the spend, spend, spend culture, which affects many people inasmuch as they have money to spend. I calculated the net total new savings and reached a conclusion on a rough and ready back-of-the-envelope basis that they would be at least some £7 billion. I am fortified in that conclusion because work was undertaken by London Economics on behalf of the National Association of Pension Funds in preparation of its case for the Anson Committee inquiry, which also reached the conclusion that the total amount of net savings would be some £7 billion.
Of course there would be some loss of tax revenue. I agree with noble Lords who said that it is essential that contributions to pension schemes must receive the benefit of tax relief. One cannot have a system whereby some pensioners pay tax on their pensions and others do not, as the unfortunate Mr. Lilley proposed—I believe that the Treasury imposed it on him—and some pensioners receive relief on their contributions and others do not. If the compulsory scheme is to be acceptable, it must be seen as savings and there must be tax relief. Therefore, there will be some loss of tax income but that will be vastly outweighed by the extra savings generated. The total net effect on the economy would be wholly beneficial.
The Government must be clear in their aim. If they are, they will recognise that the route must be that of a compulsory pension. Many problems are associated with it; problems of administration, security and acceptability. However, such a scheme, if properly prepared—I am glad that the Government have taken such pains in setting up the working party and preparing for it—should be acceptable. It could be popular and it would be immensely economically beneficial by providing us with the savings that the country needs.
4.55 p.m.
Lord Mackay of Ardbrecknish: My Lords, we have had an interesting debate and I thank my noble friend Lord Dean for introducing it. There is a major link between the two aspects of the Motion; savings and the financial markets. Both require stability, certainty and security. The Government, in the past few months since they came to office, have not done very well on those counts. I do not wish to disappoint the noble Lord, Lord Barnett, so I shall deal first with the financial markets.

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As the noble Lord, Lord Barnett, pointed out, on 26th September in the Financial Times a distinguished political editor, Mr. Robert Peston—not unknown to some of us in your Lordships' House—wrote an article in which he stated:
"The government is on the point of adopting a much more positive approach to European economic and monetary union, with a statement shortly that sterling is likely to join at an early opportunity after the 1999 launch".
There was also a quote from a Minister, stating:
"It is now clear that we must indicate our willingness to be in there".
For three weeks the markets assumed that that report was accurate and correct. Equities and gilts rose and sterling fell. After listening to the noble Lord, Lord Williams, today I do not believe that I shall receive any answers to any of my questions, but my first question to the Minister is: if the Chancellor knew that the report by Robert Peston on 26th September was wrong, why did he not do something about it? He saw the false markets based on information which I assume he knew to be false and he did nothing. Therefore, was he content with the article? Was it at that stage a true reflection of government policy?
On Saturday 18th October, The Times—significantly, when there is anything anti-European the Murdoch press can be relied upon to cover it—printed an article with the Chancellor attempting to change tack. The article stated:
"Britain will not join the first wave of monetary union on January 1, 1999".
Will the Minister confirm that in the remaining two months of this year the Government will act to take advantage of John Major's opt-out and indicate to our partners that we will not be joining a single currency in the first wave?
The article goes on to state that the Government's long-term intention will be made plain, which is that Britain will not join in the present Parliament. Will the Minister confirm what his noble friend failed to confirm today in a Question from the noble Lord, Lord Taverne, that with or without the triple-lock, as it was described to me today, the Government have no intention of joining a single currency in this Parliament, whatever the circumstances? I wish to underline "whatever the circumstances". I wonder whether during their cosy walk at Chequers the Prime Minister told Chancellor Kohl that he had no intention of joining a single currency in this Parliament.
I do not want to be told that I should wait until the Chancellor makes a Statement next week. This is one of the Houses of Parliament. A Statement could easily have been made here last Thursday and not made to the Murdoch press. A Statement could easily have been made yesterday. I offered the Government the opportunity of accepting a Private Notice Question, but they declined, saying that the matter was not urgent enough. It could be made today when the noble Lord responds to the debate. Clearly, either the story on 26th September was false or the story on 18th October was false. One or other of them, perhaps indeed both,
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for all I know, created a false market. If a company gives wrong information to the market and, as a result, decisions are made on the basis of that information, it would be a very serious matter indeed.
There were some very unusual movements in the markets just before those articles appeared. On 25th September, the day before the article in the Financial Times, from around midday on, people were quite clearly selling sterling and its value fell sharply, indeed, by four pfennigs. And then on Friday 17th October, the day before the article in The Times, sterling rose all day from the opening of the market to the end of the market. It rose from 2.82 to 2.87. Therefore, on both those days there were movements which appear to have foreshadowed the newspaper stories which were about to be published, emanating from the Government, whether from the Red Lion or not, I know not.
Perhaps there are other explanations as to why those movements took place. Perhaps it was just an accident. If so, I should love to hear the Minister's explanation; otherwise, some people will conclude that all that spinning was out of control before those articles appeared.
My right honourable friend Peter Lilley has written to the Governor of the Bank of England asking him to investigate those movements. I want an assurance this evening that the Government will co-operate with the Governor in investigating those movements and, in particular, they will tell the House whether the Government issued any debt during that important three-week period.
I turn to the first part of my noble friend's Motion which refers to savings, of which pensions are a very important aspect. We have heard some very interesting contributions this afternoon. My noble friends Lord Rowallan, Lord Brentford and Lady O'Cathain emphasised the need to encourage people not just to spend, spend, spend but to save and, indeed, in relation to pensions, to start early.
My noble friend Lord Poole explained the statistics which underline the need for more pension provision. Those are statistics which your Lordships have heard me talk about on previous occasions.
All those matters are important. One of the most important aspects of pensions is the question of security. I re-read some of the debates that we had on the Pensions Bill. Your Lordships will remember that a fair proportion of that was trying to make sure that no other person would inflict damage on pensions in the way that Mr. Robert Maxwell had done.
There was a great deal of discussion on pensions during the course of that Bill. The noble Baroness, Lady Hollis of Heigham, said that the test to apply was to ask,
"Do they deliver the pension promise that in return for an appropriate contribution to the scheme of choice, one's pension will be both secure and adequate?".
My goodness, if one applies that test to what the Chancellor did two or three weeks ago, one can say that it is not secure. He did not secure the pension promise. The explanation given by the noble Lord opposite at the end of July and given again by the noble Baroness last

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week was that the abolition of ACT would stop short-term income benefit and lead to more long-term investment benefit. They have said that a lot but they have never adduced any evidence for it.
I have some evidence which is a study made by the City University Business School in a report commissioned by the NAPF. That report says quite clearly:
"We show that companies that pay dividends are more likely to invest in R&D and their R&D expenditure is significantly higher than those who do not pay dividends".
That totally contradicts what the noble Lord, Lord McIntosh, told me at the end of July and what the noble Baroness, Lady Hollis of Heigham, told your Lordships last week.
The report went on to say:
"Overall, our analysis does not provide support for the short-termism argument and suggests that dividend payments as well as investment in R&D are distinct strategic decisions of the firm, both aimed at maximising shareholder wealth. The two decisions arc complementary and neither is at the expense of the other".
I hope that we shall not hear any more nonsense about that argument unless the Government can show us the research on which their assertions are based. Indeed, the only reason that the Chancellor did what he did was that he needed £5 million. That is it.
I have a final question for the noble Lord, Lord McIntosh of Haringey. Did the Treasury consult the DSS before it made that decision about ACT? If so, what did the DSS say about the impact on SERPS? How many people was it thought would opt back into SERPS? How many of the 6 million people who have opted out will opt back in and cause serious problems for the Government's finances? What will it cost? In case the noble Lord does not have an answer, I suggest that it will cost at least £500 million per year to the Government's funds from people opting back into SERPS. That seems to be totally contradictory to what I always understood was the Government's proposition that they wanted to try to get away from SERPS and into a different kind of savings and pension scheme.
Those are important issues. Pensions need stability; the financial markets need stability. We need a clear decision from this Government about the single currency and about where they are going on pensions.
5.6 p.m.
Lord McIntosh of Haringey: My Lords, I see from the Daily Telegraph this morning that I am to be forced to respond to this debate this afternoon. I assure the Daily Telegraph and noble Lords that I certainly do not need forcing. It gives me enormous pleasure to be able to respond not to one debate but—and I was going to say to two debates—perhaps to one and a quarter debates. There is one serious debate which has occupied virtually all the time and all the speakers this afternoon; that has been the debate about savings and pensions. I propose to devote the bulk of the time available to me in responding to that serious debate. I congratulate and thank noble Lords who have taken part in that.
There has been a much less serious "quarter debate" which has been dominated by the extraordinary speech of the noble Lord, Lord Mackay of Ardbrecknish.
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My noble friend Lord Barnett, out of the goodness of his heart, did the "quarter debate" the honour of spending five minutes of his time on it, and the noble Lord, Lord Hooson, who also has a very good heart, thought that it was desirable to pay attention to the late addition to the subject matter of the debate. But we all know that that was a political trick which was being carried out at the expense of the House and of noble Lords who came expecting to have a proper debate about savings and pensions.
I must commiserate with the noble Lord, Lord Mackay, because he has been peculiarly unfortunate in his timing. If the House had sat on Monday, no doubt he would have sought a Private Notice Question along the lines of the statements of Mr. Peter Lilley, who said that the discussion on EMU would have that desperate effect on the markets and,
"serious implications for the state of financial markets and the well being of people's savings and investments".
Brown Monday did not happen—indeed, it was barely even beige. The stock markets fell by less than 1 per cent.—by 60 points—and have regained part of that since then. The pound changed by less than four pfennigs and that has recovered. There can be no serious claim that there are significant fluctuations in financial markets over any significant period of time as a result of the perfectly proper debate about European monetary union which has taken place over recent months. Therefore, both in its timing and motivation, the intervention of the noble Lord, Lord Mackay of Ardbrecknish, has been unfortunate for him as well as, in my view, somewhat insulting to the House.
Lord Mackay of Ardbrecknish: Answer my questions.
Lord McIntosh of Haringey: My Lords, because the noble Lord has asked a question and because he is a serious politician and a Member of the Opposition Front Bench for whom I have a lot of respect, I shall attempt to answer his questions when time becomes available.
As I think noble Lords would wish, I shall return to the more important issues of savings and pensions. I thank the noble Lord, Lord Dean of Harptree, for introducing a debate which has gathered very serious and thoughtful contributions. As the noble Lord and the House will know, and as we heard last week in the pensions debate to which my noble friend Lady Hollis replied, there is in train a review of pensions. The consultation period runs until the end of October. A White Paper will be published in the first half of next year and then there will be further consultation. Therefore, the words of noble Lords and their reactions to the White Paper will be taken very seriously because no one can claim that this is a simple matter for which there are simple solutions.
It is true that pension provision has become misaligned with the patterns of people's working lives. Someone—and I am afraid that I did not record who it was—asked me whether Beveridge was true now. We know about the devotion of my right honourable friend the Prime Minister to Lord Beveridge; but my answer to the question would be yes, Beveridge was true when

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the principle was put forward. It is not a case of Beveridge's analysis having gone wrong, but that the pattern of people's working lives has changed. It is no longer true that very many people stay in jobs for which occupational pensions of the old kind will ultimately produce proper pensions. Therefore, there have to be changes. If those changes are to be effective, as a number of noble Lords have said, it is true that such changes must be achieved by consensus. That is why our consultation is so complex and so interactive.
However, I have to say that any claim that the Labour Party has rejected consensus which the Conservative Party has applauded is very wide of the mark. After all, the first serious revision of Beveridge was developed by Mr. Richard Grossman in the Wilson Government during the late 1960s and was immediately abandoned by the Heath Government in 1970. The replacement for that, produced by Barbara Castle with agreement across both parties, was massacred by the Conservative Government in 1988. That is why we have the present difficulties with SERPs and with the balance between occupational and other pensions. That is why we have very largely the scandal of mis-selling of pensions, which I noticed was not a subject of debate today.
It is not enough for the noble Lord, Lord Mackay, in particular, to concentrate that half of his speech, which was about pensions, on the ACT decision as if, somehow, it was a huge change in the funding of pensions. The experience has been that that is not the case; indeed, the experience has been that, although we shall not have the valuation until next year or the year after, pension funds have the ability to absorb such changes. The changes have the advantage of removing an anomaly of double relief on pension funds which had to be done in any event.
Perhaps I may deal with that part of the noble Lord's questions. He talked about research by the City University into the balance between companies which pay dividends and those which do not. Surely the issue is not between those companies which pay dividends and those who do not. That is largely the difference between private and public companies. Of course there will be differences in that respect. The balance for public companies is that in this country such companies pay very much more in dividends than comparable companies of our principal European competitors. That is the comparison which should be made and not one between public and private companies.
To deal with the second question on the matter put forward by the noble Lord, Lord Mackay, I was asked whether the Department of Social Security was consulted before the ACT decision was made and what was its advice. I do not believe that the noble Lord would be likely to reveal officials' advice to Ministers. I do not recall any occasion when he did so when he was in government. However, the decision was a decision of all the Government and not of a particular department.
I return to the issue of savings and pensions. I do not believe that noble Lords made this mistake, but it would be a mistake to equate the two of them too readily. After all, savings are very necessary and they are part of the potential for growth and development in our economy;
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but they are not the same as pension funding because the latter is inevitably locked in whereas saving can be reversed. That makes a difference—some economic difference—but, in particular, it makes a difference to the kind of tax concessions which are appropriate for savings and for pensions. I thought that the noble Lord, Lord Taverne, made several very pertinent points in that respect, although I am not sure that I can go along with him in anticipating the outcome of our review and say that some form of compulsory saving will be essential. However, it must be the case that if you make the tax advantages of saving too attractive, there is a danger of people choosing forms of saving which are not locked in rather than those which are to the detriment of pensions. I do not know where the final balance lies, but that balance must be taken into account.
I return for a moment to the ACT change. A number of speakers referred to the issue of tax treatment of pension payments and savings. On savings, noble Lords will know that my right honourable friend the Chancellor of the Exchequer referred to developing plans for individual savings accounts in his Budget Statement. I take the advice of the noble Viscount, Lord Brentford, that the arrangements should be kept simple. The details of those individual savings accounts have not yet been finalised, and any discussion which has appeared in press reports in the past week or so is, I am afraid, pure speculation. The noble Viscount will have to wait for the result of the review to see what form such accounts will take. He can then tell me that it is not simple enough.
The changes in the advance corporation tax are nothing like as significant as the changes which Mr. Lilley in his role as Secretary of State for Social Security proposed before the election. Several speakers made it clear that the tax treatment of savings and pension payments are important. Mr. Lilley went as far as to say that the contributions should be taxed rather than the receipts. The implications of that in terms of inter-generational equity are enormous; but, because of the election, I do not believe that they were debated fully. However, such implications will have to be debated if we are to consider the full range of options. I hope that we shall agree that it is right to do what we have done with cross-party agreement for many years; namely, to encourage payments into pension funds by making the tax relief at that stage rather than at the stage of the receipt of pensions.
I now come to something which has not been debated: the inter-relationship between stability in financial markets and pensions—it is not quite true to say that because my noble friend Lord Barnett did mention that aspect. I thought that he talked good sense, as always. My noble friend referred to something quite significant in the light of what the noble Lord, Lord Mackay, said towards the end of his speech about this claimed instability in financial markets. It is often stated in certain sections of the press that markets would be less unstable if there were less discussion of such issues among special advisers, press officers, Ministers or whoever with the public and if there were less of it which was unattributable.

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My noble friend referred to Mr. Alan Greenspan. If the latter makes a speech on the record, every single word—every single comma—that he uses is examined with theological intensity and the stock markets in the United States rise and fall according to the journalists' interpretation of what he is saying as if it were a discussion on the number of angels on the head of a pin. I do not think that we get round the problem of instability in financial markets, especially in a free market economy as has been said, by cutting out unofficial briefings and by relying on the words on the record of the chairman of the Federal Reserve Bank or anyone else. As regards the remarks of the noble Lord, Lord Mackay, about Mr. Lilley's letters to the Governor and to the Chancellor, I can give him the assurance that the Treasury will co-operate fully with the Governor in any investigation he chooses to undertake, and that the Chancellor will respond in detail to the letter which he has received from Mr. Lilley, I understand only this morning or yesterday.
To turn to the effect on pensions, they are of course long-term investments. Some of the anxiety which has been expressed has concerned relatively short-term investments. The whole thrust of government policy since the election—as exemplified in the Budget Statement and accompanying papers—is to establish a monetary framework as exemplified by the changes in responsibility for short-term interest rate policy regarding the Treasury and the Bank of England with low inflation targets. As the noble Baroness, Lady O'Cathain, said, that is a pre-condition of stability in our financial markets. At the same time our deficit reduction plan will produce sound, long-term growth and will reduce uncertainty about the interaction of government policy and the markets. That is most important. As I said, the whole thrust of government policy is to increase the stability of financial markets. In the long term, that is the best recipe for an effective savings and pensions policy.
I turn now, in what I think is an appropriate allocation of time, to the questions asked by the noble Lord, Lord Mackay, in relation to the EMU debate. He has accused us of indecision and speculation. That is a bit rich coming from the Opposition Front Bench. The formula expounded by the Conservative Government was that they would go into EMU when the time was right. For Mr. Kenneth Clarke that meant any coming day or any month, and for Mr. William Hague that means not in the lifetime of two Parliaments, not in 10 years, perhaps not in 20 years and perhaps not in 30 years. I listened carefully to his speeches when he was a candidate for the leadership of the Conservative Party. In other words, the reaction of the Conservative Party to this most important issue in our economic life has been fuelled and controlled by dissent within the party rather than by the economic interests of this country. I do not take kindly to accusations of indecision or speculation from noble Lords on the Bench opposite.
The noble Lord has invited me to make the Statement to Parliament which the Chancellor has promised to make when the House of Commons reconvenes. Irrespective of historical precedents, that is an extraordinary suggestion. The historical precedents are
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rather clear. On Black Wednesday of September 1992 when we were forced out of the exchange rate mechanism—at a time when, if we are to believe Mr. Kenneth Clarke, he was a member of a government which had no economic policy at all—was Parliament recalled to debate that? No, it was not. On Black Monday of 1987 when the stock market fell—as it failed to fall this Monday—was Parliament recalled to debate that? No, it was not.
Lord Mackay of Ardbrecknish: My Lords, I am grateful for this historical journey. However, Parliament does not have to be recalled. My point was that this House is sitting.
Lord McIntosh of Haringey: My Lords, I am fascinated by that. I wonder whether Mr. Peter Lilley—I should hate to disturb his "bonding" in Eastbourne—would feel that his demands had been satisfied by a Statement from me in this House rather than a Statement from the Chancellor in the elected House of Commons. I rather feel that he might dust up old clichés about organ grinders and monkeys. I hesitate to say that all of this has been got up by the press, but there is an element of that. We must concentrate on what the Chancellor actually said. What he said was contained in an interview in The Times on 18th December, as we were reminded by the noble Lord, and—this is much more important—in a speech at the Stock Exchange on Monday morning.
The Chancellor has confirmed that when the House of Commons has reconvened he will make a Statement to Parliament, which will cover much more than the issue of whether we will join the system in 1999. It will cover the formal communication to our European partners under the treaty about whether we shall join in 1999; the Government's approach to the working of the stability pact and the convergence criteria; the Government's position on the future of ECOFIN and economic co-ordination in Europe; any action that the Government propose on economic convergence; the action that the Government propose to take to ensure greater flexibility in Europe to avoid any risk of potential shocks if there is a monetary union, and making the European economy more employment friendly; the Government's determination to have a successful presidency to ensure that proper and orderly decisions are taken about EMU under the treaty; the way in which the Government's business advisory task force will help business and the City to prepare whether we are in or out; and the need for a period of stability. That is the Statement which Parliament deserves and that is the Statement which Parliament has. However, on an issue as important as this we shall simply not be rushed. There is no price to be paid for not being rushed.
As I have made clear, the speculation about disturbances in financial markets and in the understanding of government policy is extremely wide of the mark. We have a serious and concerted review of the options for monetary union. It is being carried out with all the seriousness that it deserves and it will be reported to Parliament at the proper time. I apologise to the noble Lord, Lord Dean of Harptree, for making

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those statements in the course of winding up his debate. I am glad that it was he who introduced this debate. It was a good debate and we are grateful to him for introducing it.
5.27 p.m.
Lord Dean of Harptree: My Lords, I thank all noble Lords who have taken part in this interesting and wide-ranging debate. I particularly wish to thank my noble friend Lord Mackay of Ardbrecknish who has spoken on these matters with his usual authority and good humour. I also wish to thank the noble Lord, Lord McIntosh of Haringey, who has listened to the entire debate and has answered fully many of the points which have been raised. However, I am slightly surprised that he is upset that we included a reference to the financial markets. The noble Lord is a skilled parliamentarian. I should have thought he would admire the skill and ingenuity with which we have included what is an important issue. I should have thought he would admire us particularly for including that reference at a time when another place is not sitting and therefore the Chancellor of the Exchequer is not able to reply to these comments until next week.
This important issue should be clarified at the earliest moment. We in this House have been able to perform a service by introducing the issue in the debate today. My only regret is that we have had no speeches from the Government Back Benches—
Noble Lords: Lord Barnett!
Lord Dean of Harptree: My Lords, the noble Lord is sitting on the Cross Benches. I suspect that that has more to do with the Government Whips than with a lack of interest in the subject of the debate.
Noble Lords will be relieved to know that I have no intention of attempting to summarise this interesting debate. The subject is important. I feel sure that we shall return to it frequently in the future. I beg leave to withdraw the Motion for Papers.
Motion for Papers, by leave, withdrawn.

Northern Ireland
5.30 p.m.
Viscount Cranborne Viscount Cranborne rose to call attention to the situation in Northern Ireland; and to move for Papers.
The noble Viscount said: My Lords, there are a number of good reasons for asking your Lordships to consider the situation in Northern Ireland. Not least, we are as it turns out to be fortunate enough to hear maiden speeches from my noble friend Lord Mayhew and the noble Lord, Lord Alton. I greatly look forward to hearing both of them, as I am sure the House does. Their experience in parliamentary matters generally, but more particularly in the recent history of the Province of Northern Ireland, will make a considerable contribution to our debates in this House. I wish them good fortune in their maiden voyages.
But there are other reasons, too. The noble Lord, Lord Merlyn-Rees, reproved me during exchanges last Thursday for raising the question of Northern Ireland at all. Your Lordships will recall that he said:
"Will my noble friend further agree that raising the Question in this manner today—that is, in a questioning manner—might do more harm than good? It is not a questionable matter"—
he was referring to the question of consent—
"it is there, and needs no questioning".—[Official Report, 16/10/97; col. 554.]
For an experienced parliamentarian like the noble Lord, who is vastly respected in both Houses as a believer in parliamentary government, to suggest that a subject of great importance should not be discussed in Parliament when the media in five continents show no such inhibition is a remarkable phenomenon. I hope that the noble Lord has reflected on his position—indeed, I suspect that he may have done since I see that he is due to speak immediately after I sit down. Like everyone else in this House, based on agreeable experience, I greatly look forward to his contribution.
That does not mean that I do not agree with something else that the noble Lord implied in his supplementary question last Thursday. The noble Lord clearly implied that anything we say in this place should not make the search for peace more difficult. I agree with that implication as I am sure does every one of your Lordships.
What debates like this can do is express our support for the search for peace and wish the Government well in their endeavours. That, like the rest of the House, my party does wholeheartedly. Indeed, it would be surprising if we did not, considering the risks that my right honourable friend the former Prime Minister took in initiating and pursuing the policy that this Government have adopted.
However, that equally does not mean that Parliament does not have a duty to examine the way in which the policy is being executed, or that Parliament should not hold the Government to account for their actions—bipartisan policy or not. Indeed, it is incumbent on Parliament to warn the Government if it sees dangers emerging from Ministers' words and actions, just as the present Government did when we were in government and they were in Opposition.
I fear that this Government are already beginning to show that they find another place an inconvenience. It is significant that the Prime Minister confessed to his party faithful in Brighton a few weeks ago that his political hero is Lloyd George. Lloyd George also found another place inconvenient, particularly after the First World War. The Prime Minister has obviously noticed that the Welsh wizard had a plan that nearly succeeded in its object of enabling him to escape the trammels of parliamentary control: he tried to construct a coalition. It was a coalition composed of Lloyd George Liberals and, as he hoped, Tory coalitionists. But he was eventually stymied by the initial meeting of the 1922 Committee. This Prime Minister clearly realises that for the New Labour Party the Liberals are more promising territory for exactly the same ploy. I am sorry that the noble Lord is not in his place and I hope he will forgive my referring to him without warning him, but one has only to listen to the slavish

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adulation of the Government that your Lordships hear almost every day from the noble Lord, Lord Harris of Greenwich, to understand why.
I therefore make no apology to the noble Lord, Lord Merlyn-Rees, for returning to the subject of Northern Ireland today, particularly when it must be obvious to the House that, if the Government find another place inconvenient, they find this House convenient for a slightly different reason. They find it convenient to ignore us—as we heard from the noble Lord, Lord McIntosh, in a typically elegant and weighty speech. The noble Lord wrapped it up nicely; nevertheless, that is what he meant. The Government find it convenient to ignore us unless the Prime Minister, or indeed as I sometimes feel, the Leader of the House, wants to use us as a straw-man to make the trade union fat boys' flesh creep.
When another place is not sitting, noble Lords might think that this House has a particular responsibility to hold the Government to account as the only sitting House of Parliament. Your Lordships might have expected the Government to keep Parliament informed through the medium of this place on their extraordinary incompetence in the matter of their policy over EMU, whether it be the pronouncements of Chancellor Brown or the pronouncements of the real press chancellor, Mr. Charlie Whelan, and on developments in Northern Ireland, to take but two examples. Instead, by the happy chance of an Opposition Day, it was mere coincidence that your Lordships were able to wrest at least some Members of the Government from the protective, if confusing, shelter of the spin doctors.
As I say, I wish the peace process well, as do all your Lordships—and it is for that reason that I particularly welcomed the full, frank and unequivocal answer from the noble Lord, Lord Dubs, to my Question last Thursday.
Let me remind your Lordships of the noble Lord's words. He said:
"My Lords, the Government remain fully committed to the principle of consent in all its aspects, in particular that any change in the status of Northern Ireland should only come about with the consent of a majority of the people there. We regard consent as a guiding principle in the negotiations now taking place in Belfast. We want those negotiations to produce a comprehensive agreement which is supported by unionists and nationalists, which secures consensus among the parties, is endorsed by the Northern Ireland people in a referendum, and is approved by Parliament. We thus remain firmly committed to the triple lock".—[Official Report, 16/10/97; col. 553.]
I repeat those remarks because they are important and I welcome them, as I made clear last Thursday. But equally, I hope that the noble Lord will be able to confirm that his words supersede earlier words of his Secretary of State which he spoke to the Belfast Telegraph on 29th August last. If the House will allow me, I shall quote again. The Secretary of State is reported as saying:
"I understand consent to be that it is that the wishes and support of the people that a conclusion or accommodation or outcome is reached.
I don't define it in numbers terms, necessarily. I don't necessarily define it in a functional, geographical sense, because those could change the nature of the outcome as both sides are very fearful.
Consent means a willing accommodation. I think there is a willing accommodation for a peaceful outcome by many people in Northern Ireland".
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Far be it from me in any way to comment on the difference of style between the noble Lord, Lord Dubs, and his own Secretary of State. I should hate to do anything which drove any sort of wedge of comparison between the two distinguished Ministers. I am delighted to find that the noble Lord, Lord Dubs, lives fully up to the finest language standards current in this House in terms of clarity. The noble Lord is much respected in this House and I can attest from our time in the other place that he was held in affection and respect there. I am sure he would agree with me that any equivocation on what is meant by "consent" will tend to scupper the talks and any hope of a settlement. The noble Lord will be all too well aware that the loyalist community in the Province already harbours the deepest suspicions about Whitehall in general and the Northern Ireland Office in particular. It feels that the British Government machine will do anything in its power to ensure the result it thinks it wants. The community thinks that what the British Government—of either colour—want is, in the loyalist community's terms, a sell-out to Dublin, if necessary by undermining the principle of consent in order to obtain it.
The noble Lord, Lord Dubs, knows, and I am sure, that those suspicions are wholly unjustified. However, they exist, as the noble Lord has no doubt found during his time in the Northern Ireland Office. I have to say that those suspicions were increased by his right honourable friend's remarks on 29th August which I quoted. I hope that they were allayed by his remarks on Thursday, particularly since they came from him. Nevertheless, I hope that the noble Lord will be able this afternoon to put a little more flesh on the bones of his reply than he had time to do on Thursday.
In their short tenure of office the Government have acquired an unenviable reputation for fixing referendums. It grieves me to say so, but we all know that even if they had conducted the Scottish referendum on an equitable basis, the Scots would almost certainly still have voted yes to both questions. But it is at least arguable—and I say this in the presence of the noble Lord the Lord Privy Seal, who is a more recent Welshman than I—that they would not have achieved the result they wanted in Wales. In both cases, they used government resources and taxpayers' money to support their campaign and did their best to exclude the no campaigns completely from equal access to the media. If it had been a general election, they would have probably been accused of breaking electoral law. And in the case of Wales, against the advice of your Lordships' House I note, they held the referendum a week later, hoping that the Scottish result would influence the Welsh to vote yes.
By any standards, it was a shabby performance more reminiscent of pre-Reform Bill politics than today's. It has not increased the Northern Irish majority's trust of this Government's capacity to conduct referendums equitably. It is for this reason, if no other, that it is urgent and essential that the Government should join with Opposition parties to frame rules for the conduct of referendums in general. Perhaps such an attempt would attract the unimpeachable sponsorship of Madam Speaker herself. Were an attempt to produce rules by,

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say, next spring to be successful, any proposals emerging from the peace talks by, let us say, May could then be submitted to the people of the Province as the second lock in the triple lock mechanism, with at least some of the majority's fears being duly allayed in the Province.
I hope that the noble Lord, when he comes to intervene, can at least express sympathy with this proposal and that the Government can return to this House and another place as soon as possible with suggestions as to how we might proceed with maximum expedition.
I have given one example of how the Government might increase the confidence of the majority in the Province in the peace negotiations and in the mechanisms the Government use to test whether there is consent for their proposals.
I have to say that there is another example of muddle which has undermined confidence in the Government's capacity to handle the Northern Ireland situation. I shall not rehearse the whole unhappy saga of the deal that the Government apparently did with Mr. Irvine over the transfer of Jason Campbell to a gaol in Northern Ireland. Let me pass over the question of whether Mr. Dewar talks to Dr. Mowlam and whether Mr. Blair talks to either of them. The question that arises is simply this. Do the Government believe that any prisoner in a UK gaol is a political prisoner? I hope that the noble Lord, Lord Dubs, will this afternoon be able to give an unequivocal no to that question.
However, this sorry saga implies that at least some Ministers in the Scottish Office would answer yes instead of no to that question. In his typically courteous response to a Question from the noble Lord, Lord McConnell, on 16th October, the noble Lord, Lord Dubs, reassured this House that there had been no discussion whatsoever between Northern Ireland Office Ministers or any civil servant and any loyalist party about the transfer of Mr. Campbell. But the noble Lord did state that "communication" took place on the subject. I am sure that the whole House would be grateful if the noble Lord were able to assist us further in explaining what the communication was and when it occurred.
Further, if it is true, as was reported, that the Northern Ireland Office applied to the Scottish Office for the transfer of Jason Campbell, will the Minister inform the House on what grounds that application was based? The suggestion that any prisoner should be transferred in the United Kingdom from one jurisdiction to another on the grounds that they have connections with a political group is quite unacceptable. The only criterion for such transfers, as I am sure the noble Lord knows, has in the past related to whether the prisoner concerned had close family connections in the other country. Therefore, I hope that the noble Lord will make it clear that that policy continues to apply and that no one at any stage in this sorry affair entertained any thought otherwise.
Unless the Government can do that, they are by implication saying that we have political prisoners in the United Kingdom—something on which Scottish Office
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Ministers, I am sure, on more mature reflection might wish to revise their opinion. This sorry episode is bound too to have an unfortunate effect on confidence in the Government's capacities. Taken in conjunction with the Secretary of State's remarks on 29th August, it produces an unfortunate overall effect.
Nevertheless, the Government face, as we did, a difficult few months in which they will have to convince all of us, notably the people of the Province, that Sinn Fein/IRA will not be allowed to use the threat of a return to violence to overturn the will of the majority of the people of Northern Ireland; in which they will have to ensure that the situation in the Province is represented fairly in the media, particularly, if I may suggest it, in America; and in which they will have to demonstrate their determination to keep Northern Ireland as part of the United Kingdom, since that is what a majority of its people want, including, I venture to suggest, many Roman Catholics. We wish them well in that endeavour, in spite of the strictures in the earlier part of my remarks, and express the wish too that they will take Parliament, including this House, into their confidence in so far as they are able. It would be a change for them on past record, but they might even find some support for their policies here if they did so. I beg to move for Papers.
5.46 p.m.
Lord Merlyn-Rees: My Lords, I note that the terms of the Motion before us are to discuss the situation in Northern Ireland. That is what I wish to do. I have been in this House five years and the way in which we also wander around other issues still surprises me. The noble Viscount suggested that we should consult Madam Speaker. We might consult the noble Lord, Lord Dean, who was a Deputy Speaker. Much of what we say here would be cut short straight away in the other place because we had wandered.
I would like to stick to the Motion that is on the Order Paper. I note that it concerns,
"the situation in Northern Ireland".
I point out that in the difficult area of Northern Ireland there might be a different situation tomorrow. It is not like discussing pensions, where one is discussing a document; one never knows what will happen. The situation in Northern Ireland is much the same as it was a couple of months ago. All the documentation that I have examined in preparation for today came from the previous government that were in office for about 18 years. I do not expect the debate today to range over the three strands that were laid down by the previous government: the constitutional situation in the north, the north/south relationship and the relationship of the government of the south with the Government of this country. We could not possibly do that. I wish to ask a number of questions, one of which relates to consent.
I meant what I said last week, having been associated with Northern Ireland for a long time; I counsel that we choose our words carefully. There are soldiers and policemen on the ground. I discovered that they did not take kindly to clever stuff in the Houses of Parliament. My father was a soldier in Ireland in 1916 and he always

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said to me: "Watch politicians, they are out for their own clever stuff, they don't care about soldiers on the ground". I do, and I care about the RUC on the ground. That is why I thought the method by which the Question was raised last week was very "Oxford Unionish", jolly funny and a chance to raise the Northern Ireland issue. It is a good time to do so today in a two-and-a-half hour debate. But in this country there will be no banner headlines in tomorrow's press on what we say about Ireland; our comments will go unnoticed. However, in Northern Ireland they will be noticed. What is said here this afternoon will be in all the many newspapers of Northern Ireland and in the south. In Northern Ireland they are not in a happy position. Real politics there concern the Border and the relationship of Sinn Fein with the IRA and the paramilitaries. That is what they talk about. Here our political agenda is laid down by the "Today" programme in the morning and the briefings given by No. 10 to the media, as happens with all governments.
That is why I said what I said last week. I applaud our having the debate today. It gives us a chance to talk about the issues of Northern Ireland as we see them today. Politics in Northern Ireland are for real. They concern the basic issues that have faced the Province for the past 25 years and longer.
I should like to ask about security. In the discussions that are taking place, the Armed Forces of the Crown can never be put under the control of any other government but the Government of the United Kingdom. When I first became involved in the affairs of Northern Ireland there was confusion. There was confusion in 1972 as to whether the devolved government in Northern Ireland controlled the Army. When I asked who decided to introduce internment, the answer came from two wings: the central Government did it; no, they did it. Let us be absolutely clear that security is in the hands of this country. Nothing that comes out of the talks should possibly alter that.
Secondly, although 20 years ago the police were not so independent, they are now completely independent. There must be no question of setting up a police force that is under the control of any political party. The RUC has achieved great things in the past 20 years. It is now one of the best police forces in the United Kingdom and it must remain independent.
As for the speed of change, history looms over everything in Northern Ireland. There are certain things that history teaches us. In 1922 there was a civil war in the south, after the Lloyd George agreement, when there were more casualties than there were during the whole of the time of the British occupation—if such it was. The danger in Northern Ireland is the wrong word and the wrong innuendoes. Agreement could be reached and still there could remain other groups who are involved in the violence. We have to be prepared for that. It will take time for reconciliation and to achieve the kind of thing that we dream of on this side of the water.
As for consent, that is not a new word. It was used by De Valera, by Wilson and in the two Downing Street declarations. It appears all the time. What, in fact, does it mean? In fact, I want to ask what it meant to the
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Conservative administrations between 1979 and this year. It is not a new use. I have been looking at the papers in the Northern Ireland Office—there they would all be written. The noble Lord, Lord Mayhew, who will speak today and who, during his tenure of office achieved many things—good and great things in my view—knew what they meant by "consent". So, why is the question asked by a former Member of the Cabinet? Was it not discussed? What does it mean? It cannot mean a numerical figure and that, with 750,001 against 740,009, because there is a majority there is consent. To think of consent purely in numerical terms is a mistake. It cannot be done. It sounds rather like those in Northern Ireland who used to say to me, "The Catholics are outbreeding us. It will get to the pitch when they will have one or two more than we do and then there will be a united Ireland". That is nonsense. The numerical approach to consent cannot possibly stand up at all. What does it mean? What is the situation now in Northern Ireland with regard to consent? I hope that we shall be told what the previous government meant by "consent".
I turn to the situation in relation to politics this side of the water. Before 1914 Ireland dominated politics. The photographs and paintings on the walls just outside the Chamber show it. Ireland dominated British politics. It dominated the situation when the time came for reform of the House of Lords. It has not dominated politics since 1979. My noble friend Lord Callaghan made sure that the Opposition were brought into the discussions. The noble Lord, Lord Whitelaw, led the way when he became Secretary of State. He briefed me completely as to what was going on. I did the same when I became Secretary of State. It is not the normal political approach. It is not like a discussion on economic affairs. One does not come to Parliament to hear a good discussion of economic affairs. One goes somewhere else. It is reduced to over-simplicity. I hope that is the situation in this House, now that the previous government has left office. The situation in Northern Ireland is too serious for party politics.
Our duty is to discuss these issues in a sane and sensible manner. That is what I meant by the approach that was made by the Questions the other day—to have the questions being asked, when all the documents on the table that are being discussed in the talks in Belfast are the same papers, with a different heading, as were there at the time of the previous administration. They would have been approved by the Cabinet.
So, why ask what is going on in Northern Ireland now and say that some great change is taking place and that the Secretary of State, in raising the issue of consent, somehow broke a convention that changed the situation? That was the situation before. There is no need to raise the issue in this way. The situation in Northern Ireland is still fraught. I, for one, rate the chances as not very high.
I believe that what has been done by the Secretaries of State in recent years has been excellent. I have had two disagreements with the Government in the past 20 years. One was over internment, which was an error, and I ended it. The law will now be changed, so that internment cannot return without the matter coming before Parliament. But internment was ended a long

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time ago. As for political status, I ended political status, which was introduced by the previous administration and was a mistake. Now, we have the matter raised today: is the present new Government going back to political status? Political status ended in 1975. To suggest that the movement of a common criminal—a mistake in my view—was somehow political trading is wrong. One can consult the various Secretaries of State in Northern Ireland regarding what has gone on about the movement of prisoners over the years. There will not be much to report today on Northern Ireland. The talks are where it is all happening. We have to realise that the talks may break down, because they may well do so.
We have not found the key to the door. But I commend what the noble Lord, Lord Mayhew, did and what the present Secretary of State is doing. That is the only way through. One cannot sit back. One has to try. I hope that in doing so, we shall not turn to narrow party politics in questioning what is going on.
5.57 p.m.
Lord Mayhew of Twysden: My Lords, no fewer than seven of my nine predecessors as Secretary of State for Northern Ireland are Members of your Lordships' House. One of the most distinguished has just resumed his seat and I thank him for his kind observations about me. There are others yet of your Lordships who have even greater knowledge of Northern Ireland than they have, let alone than I have. So it is with a totally unfeigned diffidence that I venture to trouble your Lordships at all in this debate with my own pennyworth of reflections. But I do so, sustained by the knowledge of your Lordships' customary kindness on these occasions and also by my own tremendous sense of gratitude for the privilege of having been able to serve for five years as Secretary of State of that most beautiful Province.
It is a great pity that so many people outside political life seem to regard that post as either a poisoned chalice or a one-way ticket to Siberia. I think it is a pity, first, because it is not true but, secondly, because giving currency to that mistake leads to resentment and is bad for confidence in Northern Ireland. As we all know, confidence is in rather short supply in Northern Ireland.
I have never thought of the job like that, which, as things turned out, was rather fortunate for me. I always considered it, as I still do, about the best job in the gift of any Prime Minister, though no doubt five years of doing it is enough in the interests of all concerned. I agree with one of my predecessors, who said to me not long ago, "Once you have held that job, you never get it out of your system". I would add, "You never desire to get it out of your system".
It is important that these things should be publicly said. I have found that in Northern Ireland so many people seem to suffer from a debilitating sense of being unfairly rejected, as though outside their own Province they are somehow seen as beyond redemption. That would be bad enough for anybody and it is certainly bad for them.
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I had many saddening things said to me in my time there, but none more sad than the refrain which perennially met me and which I first encountered when on my second day in the Province I was walking on the pavements in central Belfast. Time and again people wistfully said to me, "We are not all bad, you know". Even then I knew how good so many of them were and of course I know that even better today.
But what qualities come to mind? One can take only a few examples: of course their courage, but also their kindliness and their warmth; their generosity, especially to charitable causes, and their hospitality; their family cohesion and their sense of community; their resolution, their humour and their hope. It seems to me to be relevant to any debate on the situation in Northern Ireland that one should call those qualities to mind, while not of course ignoring that there is a darker side as well. They are qualities that have endured and I believe they will continue to endure.
They are part of the situation in Northern Ireland and a major part too. They are the foundation for a better future for Northern Ireland, which is why they are foremost among the reasons that make me sure that in time better things can come for Northern Ireland. By that I mean that the principle of consent, properly understood, will come to be accepted and that the mounting weight of public opinion influenced by those qualities and many others will come to displace violence and the threat of violence as a practicable political weapon in anybody's hands.
We must acknowledge that today things are far from right in Northern Ireland. First, so incomplete is support for the principle of consent that no fewer than 18,000 soldiers are still needed to back up the RUC in upholding the rule of law. There is a substantial contribution from the Royal Air Force and the Royal Navy, and I pay the most heartfelt tribute to all the security services who serve there. Secondly, hideous, so-called punishment beatings continue, I am told, at the rate of 13, 14 or 15 every month and of course they are wholly political in their purpose. Lastly, in the governance of Northern Ireland the substantial and damaging democratic deficit persists. Those factors oblige us to say "in time". But how much time? Nobody can tell how long it will take for those who balk at it at the moment to accept the principle of consent. That is what it will turn upon.
The noble and right reverend Lord, Lord Eames, spoke in a recent lecture about,
"the vital importance of human reaction and attitude as the determining factor for the future of Northern Ireland".
He said that,
"it was in the hearts, minds and actions of people that a solution will emerge or be rejected".
For what it is worth, I respectfully agree.
I end by mentioning three developments in this context from which in particular we may take heart: first, the burgeoning on the ground of courageous and innovative examples of co-operation between the communities, frequently led by women. It is happening. Secondly, there is the continuing reduction in

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unemployment, particularly among the long-term unemployed. Lastly, but it perhaps should be first, there is the resumption of the talking process.
The great objective of a settlement founded on consent is now widely owned. People know that it can only be reached by a process of free negotiation; but it must be free. So we can take heart from this; but we must also take care. It is surely uncontroversial to say that the great objective which we share will be reached only if no participant is ever allowed to get away with demanding concessions with the threat of violence in default. The firm rejection, which I anticipate, of any such blackmail will sustain support for the process; it will bolster and underpin confidence and trust and, no less necessary, it will be seen to vindicate the remarkable and admirable courage now being shown by certain other participants.
6.5 p.m.
Lord Alderdice: My Lords, it is not only a pleasure, but a very real honour to follow the noble Lord, Lord Mayhew, in his maiden speech. I know your Lordships will agree that it has been a privilege and a pleasure to listen to him.
I have particular affection for him in the contribution that he made, for, though I was not around to become familiar with his academic accolades at college, his experience in national service, his early service in the legal profession or indeed his earlier political career in another place, I had the good fortune to spend some years working with him as he toiled at the Northern Ireland office to try to reach an accommodation in our Province. All the grace and elegance, all the courtesy and responsible public service which we have seen tonight in your Lordships' House demonstrated by his speech, was fully evidenced in all the work that he did in the office of Secretary of State for Northern Ireland. He was and continues to be a man greatly respected, and rightly so.
It is also a great pleasure to note that his partner, not only in marriage but also in political work in Northern Ireland, Lady Mayhew, is here also, for she was singular in her commitment to advancing not only the cause of peace, but also the welfare of women and all who were vulnerable in Northern Ireland. She has therefore gained for herself enormous respect in that regard.
On a personal note I should like to thank the noble Viscount, Lord Cranborne, for making possible this debate on Northern Ireland this evening and to apologise. I need to return to Northern Ireland this evening and I may not be able to be in your Lordships' House for the full debate.
The noble Viscount is absolutely right when he says that scrutiny of Northern Ireland issues is as necessary as scrutiny of any of the other matters which fall to the responsibility of government. Indeed, one could legitimately make the argument that it was a failure of scrutiny by this House and the other place over many years, after the foundation of Northern Ireland and up to the end of the 1960s, that led to things developing which were totally unsatisfactory and, indeed, in the end to matters breaking down into violence. Therefore it is
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welcome that this House is giving time and has given time over the past year or so to the scrutiny of these matters. The arrival of the noble Lords, Lord Mayhew and Lord Alton of Liverpool, today further enriches not only the general debate of the House, but also its informedness on Northern Ireland matters. We also have my noble friend Lord Cope, who is a man of great experience in the affairs of Northern Ireland and we welcome him too.
Scrutiny is one thing; the danger is that folk can introduce Northern Ireland matters with reference to matters in other areas. We are unfortunately familiar with the fact that there have been times in the past when parties, indeed in this place, have introduced a Northern Ireland matter as a way of making play on the political stage on this side of the water. That is no more true of British politics than it has been of the politics of the Republic of Ireland, where there is a temptation to raise Northern Ireland matters from a partisan point of view.
I say not in any way that the reference to referendums on this side of the water is to that effect at all. But it is important to point out that there has been widespread agreement by all the participants in the talks that any format of referendum in respect of the talks in Northern Ireland must be agreed upon by the participants in the talks in Northern Ireland, and not be something that should be decided upon or mediated by the Speaker in another place.
For in truth the context in which referendums might be held in Northern Ireland is different from that in other parts of the United Kingdom. One welcomes very strongly the move towards devolution and the results of those referendums and perhaps succeeding referendums. But let us be clear: devolution in Northern Ireland will not be entirely the same matter as devolution in the rest of the United Kingdom. It will have many common factors and the dynamic created towards devolution in the rest of the United Kingdom is welcome as it assists us towards devolution in Northern Ireland. Let us not delude ourselves, however. There is no likelihood of Scotland seeking to have relationships with Scandinavia as a separate matter in the same kind of way perhaps as a Northern Ireland administration will have to have particular relations with the Republic of Ireland.
Perhaps I may turn to the scrutiny of these matters and deal with the issue of prisoners which was raised by the noble Viscount. He is absolutely right. There are not political prisoners in Northern Ireland. But there are, let us be honest, prisoners who are there having committed crimes that were politically motivated. They are crimes no less but they were politically motivated. We delude ourselves if we do not acknowledge that to be the case. How then do we treat such matters? They come before the courts and are exposed to the full rigours of the law. People are appropriately sentenced and committed. However, when we come to deal with them, one of the dangers is that we find political components entering in.
I have to say that the decisions that were made, at least in the first instance, in respect of the particular prisoner to whom the noble Viscount referred, were wrong. They were foolish and ill advised. Some of the

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transfers which did not take place under the previous administration because of the political views of the previous Home Secretary were every bit as ill advised and every bit as much decided upon by political injunction.
What is it that has really informed the mistakes? It is largely this. People look at the situation in Northern Ireland and decide not what is right to do and then do it but what is some form of balancing act between Unionists and Nationalists. They say, "Here is a procedure which we choose to undertake but the Unionists will not be so pleased about it. So let us do another little thing that perhaps will appease the Unionists." So, for example, we have the North Report producing a set of proposals about parades which we shall discuss in your Lordships' House next week. "The Unionists are not so happy so let us add another little bit about other cultural matters sufficient to confuse the whole matter totally and perhaps render the original sane proposal quite unworkable". Or we have other situations where there is a proposition to come forward but it is seen that Nationalists will not be terribly amenable to it. So, instead of arguing the case through and doing something because it is right, the response is to put in a little something for Nationalists to appease them.
In general, what happens is that one ends up pleasing no one and, worst of all, not even doing what is right. If one goes back to the time when the civil rights marches began, the call by civil rights marchers, including, for example, people like the noble Lord, Lord Fitt, was for British rights for British subjects; for everyone to have the same rights; and for everyone to have respect. What do we find now? Two sets of rights—Unionist rights and Nationalist rights: Protestant rights and Catholic rights; the creation of a form of apartheid, of separate development, which is in no one's interests. I would confess a particular self-interest in that regard as someone who does not want to be pigeon-holed as either a Unionist or a Nationalist but rather a tolerant and pluralist individual who wants to develop a society in which everyone has his place, in which everyone has respect and in which everyone has his rights respected. That is the way forward—not having two sets of rights, forever setting each other apart and forever a matter of dispute as to whose rights are being respected most.
I welcome the scrutiny of this debate because it is a complex and difficult issue. I do not for the moment take quite the low-spirited view that the noble Lord, Lord Merlyn-Rees, takes, because my own experience of the talks, even over the past couple of weeks, has not been an entirely discouraging one. But there is a talks process involving democratic politicians. If we reach a settlement that is not unanimous but has the overwhelming support of both sides of the community and across the community as a whole—that is not impossible—the question is whether the peace process will hold, an entirely different matter from the talks process.
For the peace process is about those on the extremes who are at best ambivalent about democracy and at worst are only using it to promote some of their own
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political ends, often with a threat of a return to violence. The question is whether the peace process will hold if the democratic talks process produces its outcome. To that question I cannot give quite such a sanguine response at this point. It lies in the hands of those who may be in the talks but may as yet be only partly constitutional, semi-detached from democracy as it were. This time next year we shall perhaps know better in that regard.
6.16 p.m.
Lord Alton of Liverpool: My Lords, I feel especially privileged this afternoon to follow the noble Lord, Lord Mayhew, not only because of the memorable speech which he made today but of course because of the distinguished contribution which he made to seeking reconciliation and political progress in Northern Ireland. I am also pleased to follow my friend, the noble Lord, Lord Alderdice, who has made a characteristic contribution to the debate this afternoon in the service of reconciliation in Northern Ireland. In a previous existence it was always a great pleasure to work with him in Northern Ireland. He will know that because of the British-Irish mix in the City of Liverpool, the city from which I come, it is sometimes jokingly referred to as the capital of Ireland.
As a student, elected to its city council in 1972, the council then under the distinguished leadership of the noble Lord, Lord Sefton of Garston, I entered a town hall which still had a sectarian party and a politics where the last vestiges of orange and green rivalries still lingered. In 1979, during a maiden speech in the other place, I reflected on that sectarian past and spoke of the beginning of the constructive, new ecumenical partnership then being forged by the city's two bishops. Last year Archbishop Derek Worlock died, and last month Bishop David Sheppard retired, having made many significant interventions in your Lordships' House. He said he knew it was time to go when, during a parish visit, a youngster asked him if he had ever been interested in cricket.
Enduring though their legacy will be, there has not always been such amity. Forty years earlier, the city's bishops declined to say the Lord's Prayer together. Twenty years before that, the city council, for sectarian reasons, declined to give permission for the construction of the city's Roman Catholic cathedral. The formidable efforts of our two bishops and the Free Church leaders have today made such scandalous sectarianism an impossibility—and their philosophy of "better together" has helped to heal historic divisions.
There are all too obvious parallels and applications in Northern Ireland. Cardinal Cahal Daly, the former Irish Catholic Primate, well understood the nature of sectarianism when he told a meeting which I helped to organise here, three years ago, that,
"both houses of hate are a plague on our society",
and that both sides must abandon any "solution" that implies a victory for either side.
My maiden speech in the other place was made in unusual circumstances. Twenty-four hours before my election Lord Callaghan's Government had been

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defeated on a confidence Motion and a general election declared. As Members packed their bags and left for the hustings, I had little choice but to risk a maiden within hours of arriving and leaving again. Thankfully, today's debate is being held in less exacting circumstances. But, more poignantly, on the day after my by-election, Mr. Airey Neave was assassinated by the IRA within the precincts of the Palace of Westminster. It was an acute reminder to me of the enormities to which ancient hatreds can lead. How right was Liverpool's most famous son, Mr. Gladstone, when he mused, at the time of the defeat of his Home Rule Bill in your Lordships' House, that,
"the one and only conspicuous failure of our political genius",
had been the failure to achieve a political solution in Ireland.
Nearly a century later, in 1985, with the noble Lords, Lord Donaldson of Kingsbridge, Lord Hunt, and the noble Baroness, Lady Williams of Crosby, I helped to draw up a report on the future of Northern Ireland. We recorded the terrible and pointless waste of life and the disastrous effect on the economy caused by that continued political failure. Since then the toll has risen inexorably. Since 1969, and by September of this year, 3,196 people had died in Northern Ireland. That included 2,247 civilians, and a further 37,617 people had been injured. Life has been lived and lost against the backdrop of more than 35,000 shootings, nearly 10,000 bombs exploded and nearly 20,000 armed robberies. Protection rackets, many involving drugs; so-called "punishment beatings"; intimidation and expulsions have disfigured life in Northern Ireland. These have gone on unabated even while the talks have continued at Stormont. Between June and September of this year the Northern Ireland Housing Executive had to rehouse 132 families ordered off their estates by paramilitaries seeking to assert their authority. In Gostin Street, Belfast, a man was recently held down and his fingers on both hands smashed with a hammer. Ten days ago, in the Grosvenor Road area, an 18 year-old man was shot in the legs. Last month, a mixed-marriage family was forced to leave Craigavon with their children aged 11 weeks and 20 months. Such intolerable behaviour should have no place in a democratic society. This blatant intimidation certainly has nothing to do with the rule of law.
An end to this catalogue of violence remains the elusive prize which will reward the patience and perseverance of those constructively engaged in the present negotiations. For their original act of courage, Mr. John Major, the noble Lord, Lord Mayhew, Mr. Albert Reynolds, along with all those of Northern Ireland's political and religious leaders who continue to take risks for peace, deserve our unqualified praise and unambiguous support.
I could think of no more appropriate debate in which to venture to take the risk of making a maiden speech. My own mother is an Irish speaker from the famine lands of the West of Ireland. My late father was a Desert Rat and my uncle lost his life serving in the RAF. Along with my own children, I have both British and Irish passports. Why? Because love of country need not imply a hatred of another country. In common with
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millions of others who draw on the diversity and strength of the British and Irish traditions, I would add my voice as an encouragement to the Government as they painstakingly work for an end to sectarianism and an end to the violence in Northern Ireland. I thank the Members of this House for listening to me with such courtesy.
6.23 p.m.
Baroness Park of Monmouth: My Lords, the House is most fortunate to have the noble Lord, Lord Alton, among us. I believe that he has a special third passport here. His first speech has certainly whetted our appetite. It was full of generous indignation and real knowledge. He already knows so much, which is going to be immensely valuable to this House, including his ecumenical experience, if I may call it that, from his Liverpool roots. One has to remember that when he entered the other place in 1979 he was the youngest MP to be elected. Possibly he may not be our youngest Peer. But he is certainly going to bring energy, enterprise and a generous courage to our debates. I believe that we are most fortunate to have him among us. We warmly welcome him.
I feel diffident about speaking not only after hearing the noble Lord, Lord Alton, but also two distinguished Secretaries of State. I greatly admired the speech of the noble Lord, Lord Mayhew, as we all did.
It would be wrong at so early a stage in the talks to abandon hope of a successful outcome. It is certainly right, now that all political parties right across the spectrum in Northern Ireland, including Sinn Fein/IRA, are there, to give them a chance to work out something. However, I believe that we need to consider what the game plan will be if the ceasefire should end, as I sadly believe that it will. As the noble Lord, Lord Alderdice, pointed out, we are talking about two different things—the talks and the peace process.
The IRA has already said that it does not consider itself bound by Sinn Fein's acceptance of the Mitchell principles. Sinn Fein has said that its agenda is "Brits out, and a United Ireland". The Prime Minister, on the other hand, has said that,
"a settlement is to be negotiated between the parties based on consent";
and that,
"Northern Ireland will remain a part of the United Kingdom as long as a majority here wish";
to which Mr. McGuinness's reply was that he hoped that the Prime Minister would be the last British Prime Minister of Northern Ireland. Those points of view are difficult to reconcile. Gerry Adams said in 1995 that Sinn Fein's strategy,
"must be based on the widely accepted view that there can be no internal solution";
and Sinn Fein has long argued that the vote of the majority is an unacceptable veto. Decommissioning means for Sinn Fein/IRA that the British must give up their arms and go; and a Sinn Fein discussion paper in 1996 called for the disbandment of the RUC and its

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replacement by an all-Ireland police service. As we all know, the IRA will not contemplate giving up one ounce of Semtex at any time. All that does not augur well.
But is it right that we should tacitly assume that only talks which carry Sinn Fein with them are of any value? Is there not some mileage in building as strong a consensus as possible on a series of practical issues between the parties who represent the non-violent majority (and who include many nationalists) and who wish to remain part of the United Kingdom? Most, if not all, would welcome more cross-Border co-operation between north and south—such ventures as the new offshore oil exploration initiative involving Harland and Wolff, the University of Cork and Queen's, Belfast. And most want more practical grass roots co-operation within Northern Ireland, and of course the ability to attract investment.
But these people need confidence-building measures from the two governments as much, if not more, than Sinn Fein/IRA which seems to be getting the lion's share so far. Unionists and moderate, non-violent nationalists need reassurance that the whole process is not to become a mechanism for buying off, or at least constantly placating, Sinn Fein/IRA, not because it has more than a minority political constituency but because it is the political face of the IRA. The recent report of an intention to include questions of cultural identity in the legislation on parades is perhaps an encouraging signal, and the Irish Government's confirmation this week that Articles 2 and 3 will indeed be up for discussion during the substantive negotiations is another, though I found the phrase,
"as part of balanced constitutional change",
ambiguous and not entirely reassuring.
The next few months will be taxing for all concerned, and it is never helpful in long and delicate negotiations to keep pulling up the plants to see how they are growing. But I do suggest that the full IRA/Sinn Fein agenda is simply not negotiable if the differences between it and the other democratically mandated parties are to be, in the words of the joint statement of December 1993,
"negotiated and resolved exclusively by peaceful political means".
Perhaps, therefore, even more energetic efforts to build the confidence of those parties are needed now rather than next May to ensure that they all stay at the table and work out something other than the Sinn Fein/IRA agenda. Who knows, even some of Sinn Fein might join in. The IRA will in any case make its own decisions and follow its own agenda. It is perfectly accustomed to moving from the political phase to armed struggle and back again.
In the wake of the devolution referendums in Scotland and Wales it is, I suggest, even more important to repeat yet once more, loud and clear, the Prime Minister's unequivocal commitment in his statement of 16th May in Belfast that,
"Northern Ireland will remain a part of the United Kingdom as long as a majority here wish".
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That must be unequivocal. His speech of 25th June enlarged on that with its references to devolution in Northern Ireland and to an elected assembly, but it repeated his commitment to the triple lock. We must hold him to that.
Nevertheless, there is a general tendency to blame the majority parties, especially the Unionists, for any difficulties in the talks, and that will increase as Sinn Fein/IRA finds it harder to obscure the stark fact of its non-negotiable agenda. It will do a Drumcree if it can, and it will be of the greatest importance for the truth to be kept steadfastly in view. The publication of the aide-mémoire sent by the Government to Sinn Fein on 13th June was an excellent example of making sure that the truth about what was said was published and could not be invented by Sinn Fein.
Of course the Unionists will be difficult; but no one should expect turkeys to vote for Christmas, and these turkeys speak for very many citizens of Northern Ireland whose future is at stake. They speak for many more than just the Unionists. As has been said, we should take great care not to put people into separate boxes. There is a large majority in Northern Ireland who wish for peace; there is a very small minority who have the power, unfortunately, to refuse that peace, but we should not confuse them. This could be a valuable debate and I am grateful to my noble friend Lord Cranborne for initiating it. I have been particularly privileged to hear from two previous Secretaries of State and from our other new Peer.
6.31 p.m.
Lord Molyneaux of Killead: My Lords, I am delighted to follow the noble Baroness, Lady Park of Monmouth, and to compliment her on her understanding remarks. Time restrictions inevitably prevent me from paying adequate tribute to the two former Secretaries of State who have spoken and to their good ladies who made more of a contribution to the Province than they themselves probably realised at the time or since.
Last week, on 16th October, on the initiative of the noble Viscount, Lord Cranborne, who has provided us with another opportunity today, we had exchanges on the principle of consent and there was agreement with the noble Lord, Lord Merlyn-Rees, when. with his years of experience behind him, he declared that consent is not a questionable matter. That view was reinforced by the noble Baroness, Lady Park of Monmouth, who has just spoken.
It follows that the principle of consent must not be qualified or muddled by tortuous forms of words. Whatever other items might be included in a referendum, perhaps in the form, "Do you agree or disagree with Section 4(4)(2) of the agreement?", which would not convey very much to the average elector, a clear-cut question ought to be asked also—namely, "To which nation do you wish to belong?"—because the answer to that question will place all other issues in their proper context.
This debate enables your Lordships' House to caution against the current use of a foolish exhortation which runs, "Do get around the table and find a solution which

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will end terrorism". "Getting round the table" is not a new phrase—it sounds good when applied to world-wide trouble spots, but it seldom works because its very appeal to the news industry always results in the participants being launched on what I have frequently called a "high wire act"—thus making it virtually impossible to secure agreement. So our hearts must go out to those like the noble Lord, Lord Alderdice, who are required to perform in the glare of the spotlights.
But even if by some miracle a solution were found in the Stormont talks, an even greater miracle would be required to bring terrorism to an end, because terrorists deal in absolutes not compromises. When it becomes apparent that no government anywhere in the western world can ignore the principle of consent and immediately concede terrorist demands for the ultimate, the killing will be resumed by the main terrorist body or one of its sub-contractors.
In a perverse way, terrorist reaction is being made more likely by a Northern Ireland Office speciality not invented by this Government—termed "confidence building measures" which in reality and in plain English are concessions to terrorists designed to keep them on board the "peace process", which itself is an American invention exported to various parts of the world with equally varying success.
But confidence building concessions are not a harmless pastime; they are a deadly, dangerous miscalculation for they convince terrorists that force, or even the near threat of force, is certain to gain objectives which no democratic system could deliver, even if it so wished. But perhaps I misjudge the British and Irish Governments. Perhaps having completed phase one of the confidence-building concessions to terrorists, they are about to introduce a phase two of benign confidence building measures designed to restore the confidence of all the law-abiding people, Protestant, Catholic and people of no faith, in Northern Ireland and for that matter in the rest of the United Kingdom.
I assume that the Northern Ireland ministerial team will have prepared an impressive catalogue of balancing measures overdue for over a quarter of a century, perhaps beginning with a modest updating of administrative mechanisms in line with the other three parts of the United Kingdom. These and other updatings do not in any way relate to what is condemned as an internal settlement, which seems to be the unforgivable crime, for these would be of real, immediate benefit to people of all shades of opinion. They would do something far more important also; they would provide the only real lasting foundation for stability.
This past week we have been confronted with a most serious and most urgent development. I refer to the appalling spectacle of editors of certain Dublin newspapers being tempted with free offers of classified documents from the files of the Irish Department of External Affairs. I have discovered that many of those confidential files originated in the Joint British-Irish Secretariat. Some of those already examined contained sensitive security information which could not be disclosed, and never was disclosed, even to senior Privy Counsellors, except those in the need-to-know category.
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Such is the treacherous nature of some in the Joint Secretariat that United Kingdom national security information is now being peddled in the backstreets of Dublin and at least four files have been passed direct to the IRA Army Council.
I do not attach blame to the Minister nor to his colleagues, but as one whose duty involved access in former times to secret information for over 15 years, I now have a duty to warn your Lordships of what is referred to in our Writ of Summons as "dangers impending" as a consequence of those continuing disclosures and that the Prime Minister, who bears the burden of national security, be respectfully requested to withdraw the British element from the Joint Secretariat with immediate effect.
6.38 p.m.
Lord Blease: My Lords, I thank the noble Viscount, Lord Cranborne, for initiating this debate and for his helpful and constructive expression of interest in Irish affairs. The timing of this debate is useful at the commencement of this Session of this Parliament.
There have been 11 Secretaries of State for Northern Ireland since the abolition of the Stormont Parliament in 1972 and the passing of the Northern Ireland Act in July 1974. Several noble Lords have held positions as democratically elected government Ministers or other positions relating to Northern Ireland during these past 25 years. My noble friend Lord Merlyn-Rees mentioned certain strains upon family life and how Ministers have to take decisions. I recall two Ministers with whom I was acquainted. I was present when one was informed of the shooting and death of his security officer, and the other of a similar occurrence. One came from the Conservative ranks and the other from the Labour ranks. I mention this because Labour and Conservative are both naturally human at heart and both can reflect the serious issues they are called upon to deal with and the spontaneity; that they may have to react under tremendous pressure has to be really understood to be appreciated.
The present position is that terrorists and other misguided people are still taking wild action against efforts to establish law and order. There are blatant attacks intended to destroy the fabric of democracy and parliamentary principles. Today, even after some 27 years of blatant abuse and attacks designed to destroy parliamentary democratic procedures, there still exist deep divisions and bitter sectarianism. The ugly no-go peace lines, the awful fear of favourably agreeing to middle ground and lawful measures, are borne with serious consequences. Those who seek to build bridges to peace and prosperity are victims and often suffer bodily attack. Even the stigmatised areas in the divided community areas are riddled with vandalism and dereliction. Children and families suffer. Those who seek to uphold law and order are constantly under attack.
It is against that background that we have the new ceasefire and that the inter-party peace talks are taking place. Those talks are now in their fourth meeting at the Castle Building in Belfast and they are under

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considerable strain. I think we should bear with the situation and let the talks proceed without any political interference from outside or demands for more public statements of progress. It is to these talks that the many peaceable people look for hope, peace and progress—peaceable people in Northern Ireland, Britain, the Republic of Ireland, the United States and other countries. It is hoped that a new democratic government process may be established: that a consensus may be found to give a sound basis for lasting peace.
The noble Viscount, Lord Cranborne, made mention of the method by which this is to proceed and I think note must be taken of it. How can this House of Lords, this Westminster Parliament, this United Kingdom Government help towards a peaceful democratic outcome of these talks? I am glad to say that over the past 27 years there has been an understanding, democratic bipartisan approach to Northern Ireland affairs, both in this House and in another place. I would certainly hope that that approach would be upheld in the letter as well as in the normal acknowledgement of the processes.
There is no personal kudos, there is no party political gain to be attained on a singular point-scoring basis. The United Kingdom Government are still responsible for the day-to-day ongoing efforts in Northern Ireland. These cover all facets of life in the Province: security, law and order, economic development, health, education and family life in general. These must proceed along the normal parliamentary process and it is important that we establish the ways and methods by which they should proceed. The talks may go on at another level. The well established legislative and administrative arrangements and procedures for upholding these democratic objectives are well known: we have parliamentary debates, we have Question Time, we have the Northern Ireland Special Committee, we have other special committees dealing with parish affairs. There is the Northern Ireland Forum which I think sometimes ought to be consulted on certain matters, and there is also the Anglo-Irish Inter-Party Group.
I think it is the duty and responsibility of Members of this House and Members of another place to appreciate that they have not only the responsibility but are committed by oath to uphold the good government of the nation, and it is important that we look at that in the light of what has been asked for. We have been asked at times to sever the links with Britain—that the British and Irish nations must be separated. There has been no thought about the 2 million first-generation Irish people, from Northern Ireland and from Southern Ireland, who still hold positions in Britain. What is to happen to them? Have they been consulted? It is the duty of all Members of the House of Lords, and particularly of Members of Parliament who represent constituencies in Britain, to acknowledge the tremendous strain that is being placed upon those people in many ways; they are being asked to give up of their own free will homes and opportunities for education and employment that they have established here.
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I also feel that a word should be said about the creeping method of the condominium type of rule that now exists in Northern Ireland. It is the result of international agreement and the Anglo-Irish Agreement; but the establishment of the Maryfield has, I believe, dealt a terrible blow to the Northern Ireland Civil Service and to its methods of doing work. I know that they may not measure up to some of the British civil servants in Northern Ireland Office who have an ethos and a way of explaining things, and they do not require civil servants from the Irish Republic. I wish to see a united Ireland, a united people of Ireland, united by heart and mind not simply by the movement of a line on a map.
This debate has been useful. I hope that the bipartisan approach will continue to have a worthwhile effect in Northern Ireland.
6.47 p.m.
Lord Cooke of Islandreagh: My Lords, I too believe that we should be grateful to the noble Viscount, Lord Cranborne, for introducing this debate. The situation in Northern Ireland is important and if anything can come out of this debate which will help to bring peace to Northern Ireland, it will be good.
It is unfortunate, but a fact, that after three years of effort by governments to progress the peace process, distrust and fear throughout Northern Ireland are now worse than they have ever been and tension is high. I believe it is important to look at the reasons for this because, if the reasons can be defined, perhaps something can be done. Sinn Fein/IRA in its ceasefire mode has been working hard to prevent the communities coming together. It has worked to bring them into conflict and this work has been effective—for instance, the Garvaghy Road, Drumcree problem. Mr. Adams has said that it took them two years to get the Garvaghy Road residents to act as Sinn Fein wanted. They put in an outsider, a convicted terrorist, to organise the residents and persuade them to object to every parade and never to compromise.
Sinn Fein has made great efforts to encourage nationalist-minded people to have unrealistic expectations and demands. The increasing number of protest parades is evidence of that. If the talks lead to a settlement, this will not stop because the objective of Sinn Fein will remain. They will still want to prove that the Province is ungovernable as the next stop before they get the Brits out. That does not help community relations. That fact must be recognised and taken account of.
Almost as serious is the effect of both governments' determination to bring Sinn Fein into the talks by making concession after concession to terrorists. The people of Northern Ireland and the security forces have opposed terrorism for 27 years. They have suffered ethnic cleansing in the west, indiscriminate bombings and unspeakable atrocities. Loyalist paramilitaries have reacted and made things worse, but now, with concession after concession to Sinn Fein/IRA, everyone can see that violence pays.

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In Northern Ireland, an integral part of the UK, we have the extraordinary situation where our neighbour state has a constitution which requires its government to work to take over Northern Ireland as part of its territory. That is unfriendly to say the least. They have been allowed, by the terms of the Anglo-Irish Agreement, to interfere in the internal affairs of Northern Ireland. It has a large establishment—Maryfield, near Belfast—which is staffed by officials from the Department of Foreign Affairs who have direct access to Northern Ireland Office officials on classified matters. They now regard it as their right to appoint a proportion of members to our public bodies and boards. They can veto a candidate of whom they do not approve. I support what the noble Lord, Lord Blease, said about the effect that that has had on our own civil servants, whose decisions have been questioned and overridden by officials from Dublin.
In the past few days we have had the release of classified documents in Dublin to which the noble Lord, Lord Molyneaux, referred. It is no surprise for that to happen in the political community in Dublin. We in Northern Ireland—citizens of the UK—are told nothing about the extent of the involvement of the Government of the Republic in our affairs. Some things come to light occasionally, but there is evidence of much more. Is it any wonder that the majority in Northern Ireland who wish to remain in the UK are fearful of the future and are becoming distrustful of governments?
The Secretary of State has talked about confidence-building measures. So far they have been in the form of concessions to Sinn Fein. If the Government wish to give some confidence to the majority who support the Union, they will call a halt to the interference in Northern Ireland affairs by the Republic of Ireland and will exert positive pressure to have Articles 2 and 3 removed from its constitution. Only then can Strand 2 talks on North/South relationships begin properly with equal parties working to develop relationships for mutual benefit.
How about the Government seeking some advice from people in Northern Ireland instead of consorting with a foreign state? Have the Government thought of that? Perhaps the Minister will be able to allay some of the fears which are so widespread in Northern Ireland.
I wish to mention something which the most reverend Primate the Archbishop of Armagh, the noble Lord, Lord Eames, said yesterday in Northern Ireland. He was commenting upon the absence of trust which separates the people and communities in Northern Ireland. I shall paraphrase. He said that we would only have peace when that feeling of separation had been overcome and people settled down to live together. He said that a settlement in the peace process alone would not be enough. He emphasised that that would take time and much care. He felt that more open government was necessary and important. I believe that he is correct. A settlement reached in the talks will not of itself bring peace. Peace will come only when we have mutual trust and a will to live together. That is why today's debate is so important.
6.55 p.m.
Baroness Denton of Wakefield: My Lords, I imagine that every former Minister making his or her first speech from the Back Benches must feel a degree of sadness. Mine has been much leavened by hearing the maiden speeches of my noble friend Lord Mayhew and the noble Lord, Lord Alton. I hope that the noble Lord will participate in many future Northern Ireland debates. Brilliant though the speech of my noble friend Lord Mayhew was, how much more interesting would it have been had he been able to include parts which can never be made public.
I congratulate my noble friend the Leader of the Opposition on calling the debate. I have never before seen such an illustrious list of speakers on a Northern Ireland issue or such a full House, although it is not such a capacity audience as Scottish devolution attracts. Were the noble Lord, Lord Williams, to walk into the Chamber, he would be somewhat surprised by the number of people here. I should like to take the opportunity to express my gratitude to him and to the noble Lord, Lord Holme, for the courtesy that they always showed to me and the Government while I was in office.
It may be appropriate for me to follow the noble Lord, Lord Cooke. He is one of Northern Ireland's businessmen. He is one of those responsible for the growth of the Northern Ireland economy and the happy situation which the Government inherited. How much better could the position be were there to be a termination of violence.
When I looked at the list of speakers for the debate, I assumed that everyone would talk about politics. That is important, but it is long term. In the meantime, the majority of people get up every morning and get on with their lives. They should not be neglected while the talks continue. The confidence building must include them. They must have the confidence that their children will continue to have a good education and that they and their families will be well served by Northern Ireland's good health service.
That confidence must currently be in doubt after the announcement made with so much vigour of the extra £300 million going to the NHS. That is not that much money for the health service. The result is that £17 million will go to Scotland while only £5 million is going to Northern Ireland, where it is acknowledged that the people's health is unfortunately worse than anywhere else in the UK. There are many battles to be fought there.
Many people are in work. There are more people in work than ever before. That is good news. Unemployment continues to fall. I ask the Minister to look at how many prospective jobs are tied up in the planning process, to recognise that a second ceasefire cannot be as trusted as the first, and that the need to find inward investment is imperative for the majority of people living in Northern Ireland.
If we stay out of the European single currency, or continue to confuse people about our position, Northern Ireland will be one of the earliest and worst sufferers. It is very easy for inward investors, looking at the North,

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to go South. Large amounts of money and attractive tax incentives are offered. Despite that, the people who have been working in the North have attracted inward investment. I ask the Government, please, not to make it more difficult for them. Northern Ireland is a gateway to Europe, but it has to be a continuous path. With 1.6 million people, no one can live on a domestic market; exports are lifeblood. A strong pound will stop the flow, however competitive the companies—and I assure your Lordships that they are.
I note increasing conversation about cross-border executive agencies and I ask for the Minister's views on the current situation. Does he really believe that they are of economic benefit? Are they not another political sop? Why put costs and bureaucracy on to something which already occurs? It has been made to happen by the people. The trade unions have worked cross-border for many years. The CBI works shoulder to shoulder on many occasions with its southern counterpart. The Ulster Farmers' Union works with its colleagues in the South. Young people easily cross the border at weekends and voluntary bodies work together. It is important that those activities are not slowed down by the bureaucracy and the establishment of bodies which, as I see it, will produce no benefit.
Is it not time that costs and bureaucracy were examined? The Government have found out the hard way—though we could have shared the knowledge with them—that there is never enough money to do all that needs to be done. Why does Northern Ireland need more bodies and more officials than Greater Manchester? The noble Lord, Lord Alderdice, questioned that in a previous debate. Also, what is the situation as regards public appointments? Is it changing and are we bringing forward more people? Of course we all support Nolan and Peach, but women, young people and minority representatives need nurturing and they are, not surprisingly, nervous when often the independent member of a panel is a former civil servant and the line of appeal is to the Permanent Secretary. We need to see increased representation of all parts of the community at all levels. Sometimes we ask the impossible; we ask people to be responsible without giving them responsibility.
There are many success stories in the Northern Ireland economy, all based on the excellent workforce and particularly highlighted by reinvestment. However, they receive little coverage. That is why I criticise the visit of the Prime Minister to Northern Ireland. Once again we saw world-wide coverage of heightened tempers and clashes, which fortunately are not the norm and hopefully not the future. And I must disagree with the Northern Ireland Office spokesmen who apparently said that the Northern Ireland Office does not see the Connswater visit as a PR disaster. One must have sympathy with the Secretary of State, who works so tirelessly for peace in the Province, if that is the support she is receiving. One must feel sympathy, too, as regards the internal leaks she has suffered and even more sympathy following the remarks of the noble Lord, Lord Molyneaux, which send a chill to the stomach.
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Too often Northern Ireland argues for special treatment and sectors of Whitehall fail to distinguish between GB and UK. As the talks continue, important as they are, it must be remembered that the Province is part of the United Kingdom and, more importantly, it is one of the outstanding parts.
7.4 p.m.
Lord Desai: My Lords, I rise to speak in the debate precisely because I have never been involved in any Northern Ireland business, nor have I ever lived there. It is important that the debate on Northern Ireland does not become restricted only to people who speak on the subject. As was said by the noble Baroness, Lady Denton, we should not go with the GB/UK divide but take the view that the Northern Ireland question is important to us all and that if we have a view we should express it.
I am grateful to the noble Viscount for introducing the debate. It has also been an occasion of two very good maiden speeches, in addition to many others. I echo what was said by the noble Lord, Lord Mayhew. I have been to Northern Ireland many times and have pleasant memories of working with both universities in Belfast. On every occasion I have had a good time. The people are good and friendly; they are also most worried that the mainland will forget them. They want us to discuss the problems as often as we can, because one of the worst things would be that they were forgotten. That was the feeling some years ago and now there is no such danger because a process is in place.
I do not wish to make a long speech because I want to leave time for other Members. One of the most difficult problems in Northern Ireland—as it is in Kashmir, Cyprus or Palestine—is that history is the enemy of the future. As soon as you go there you are classified by your religion and your origins. I first went there 27 years ago and it was a happy occasion because I was about to be offered a professorship at the University of Ulster. I put it to the vice-chancellor that I had just come out of LSE student troubles with my name emblazoned across many newspapers for revolutionary activities and asked whether I would settle down or get into trouble. He was Australian. He said, "No, not at all. I always use a simple rule. Whenever I give a party I invite equal numbers of Catholics and Protestants, except that with the Protestants you must be very careful to balance the Presbyterians and Anglicans". At that point I decide that I should not go there, which was a mistake.
I wish to urge on my noble friend Lord Dubs, who knows my views, a belief that we have not used sufficiently in this battle the non-Christian population of the United Kingdom. There are people who are neither Catholics nor Protestants, but who know a great deal about peace and reconciliation. They have different histories of quarrels and battles and have learnt different lessons. It is time that we took advantage of the Jews, the Moslems, the Hindus and the Buddhists. After all, if we are to be a multi-racial society we should exploit the advantage which that gives in relation to this difficult problem.
7.8 p.m.
Lord McConnell: My Lords, in this timed debate I wish to deal only with two issues. The first is the illogical nature of the way in which Northern Ireland is being governed. We have a list of civil servants from the Irish Republic stationed in Belfast who should be acting impartially. However, Articles 2 and 3 of their constitution dictate that they should take us over. It is hard for anyone to be impartial when he has territorial ambitions over the part of the world in respect of which he is supposed to be impartial. Now we have the latest statement from Mr. Andrews, the Foreign Secretary of the Irish Republic. He was recently reported to have said:
"As the negotiations progress we will discuss proposals for change in the Irish constitution as a part both of balanced constitutional change"—
whatever that means—
"and of an overall agreement".
In other words, they are once again putting off facing up to the question of acknowledging British territory to which they are not entitled and which is in contravention of the rules of the European Community where it is laid down that one country in the European Union is not allowed to seek to take over part of the territory of any other country. But that does not seem to worry them in the slightest.
It is difficult to know, even if they do declare that they will do away with that part of the constitution, how long that is likely to last because early on, after the 1920 Act, a boundary commission was established. There was a leak of the report to the effect that Northern Ireland was to be given part of east Donegal and part of north Monaghan. They immediately rushed across to London and the tripartite agreement of 1925 was entered into in which the Irish Free State, as it was then, acknowledged British sovereignty over the six counties of Northern Ireland. They even went as far as taking the matter to Geneva and having it registered as an international treaty. A few years later they produced a constitution and completely disregarded their obligations under that agreement.
At Sunningdale, once again, they recognised our existence but that has not lasted very long. So what confidence can we have in them if they say once again that they are prepared to recognise us?
Also, a great deal of harm has been done as a result of the notorious Anglo-Irish Agreement, for which the present Government bear no blame. As I have said already, we have Republican civil servants in Belfast. Apparently, their document security is very poor because documents are being leaked all over the place. One of the latest leaks published in the newspapers was in relation to a senior civil servant going to see Mrs. Rogers, a prominent member of the SDLP with a list, described as the six-monthly list, of public appointments to ask who she wished to have appointed. I agree with the noble Baroness, Lady Denton, that those bodies should be even-handed and should represent all sections of the community. To take the list to one party only and ask it who it wishes to have appointed is not the way to achieve evenhandedness. That destroys
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completely any possible confidence that there can be in that administration. It is so completely unfair to have those secret negotiations, about which we find out what is going on from time to time only because there is a leak. It is about time that they were above board and that the minutes were published of discussions between the Northern Ireland civil servants and those people from the Irish Republic; otherwise, secrecy in what is supposed to be a democracy leads only to ill will and difficulties of all kinds.
In fact, the same Mr. Andrews, talking about another document that was leaked to a newspaper, which apparently refused to publish it, said:
"If the Anglo-Irish documents had been published they would have endangered lives".
It makes one wonder what was in them if that is how he sums up the matter. The noble Viscount, Lord Cranborne, referred to that perverted idea of political crimes. It is a fairly degraded sense of politics to describe as a political crime a horrible murder whereby a young man had his throat cut because he had on the wrong football jersey.
Therefore, let us try to have some agreement between the law-abiding people of Northern Ireland and forget about trying to placate terrorists and people who never will be placated. They will only want more. I believe that it is time that we had a more realistic approach to the governing of Northern Ireland.
7.16 p.m.
Lord Monson: My Lords, may I first take a moment to commend the two quite outstanding maiden speeches that we heard this evening. Next, I should like to try to reinforce a couple of the points made by the noble Lord, Lord McConnell.
From time to time, one sees the Guardian or, occasionally, the Independent reporting with weary exasperation that unionists are complaining yet again about Articles 2 and 3 of the Irish Constitution, as if taking offence at Articles 2 and 3 is yet another eccentricity peculiar to those tiresome unionists. In reality, every thinking individual in England, Scotland and Wales ought also to voice their distaste with the irredentist and therefore hostile claims contained in those articles. But most fail to do so for one of two reasons. If they are well to the left of the political spectrum, they instinctively and automatically take the line, "British patriotism is bad; all other patriotism is good", as they always do.
In contrast, the moderate left, the centre and the right hold fast to the unspoken establishment convention that Irish governments, uniquely among all the governments of Europe, the Americas, Asia and Africa, should be virtually immune from criticism. I suspect that that is largely because the establishment subconsciously regards the Irish as prickly, touchy, volatile adolescents who are ready to explode at the slightest provocation and who must therefore be treated with kid gloves.
The Irish have little respect for that approach but being only human, they naturally take full advantage of it. I contend that the Irish of today are overwhelmingly mature, responsible adults, fully capable of taking

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criticism on the chin when it is justified, as it certainly is in this case. Yes, the Irish Constitution has been in existence for 60 years and Articles 2 and 3 could perhaps be tolerated reluctantly so long as there was not the slightest attempt to assert those claims in practice.
But the deplorable Anglo-Irish agreement of 1985, much regretted in retrospect by our then Prime Minister, as I understand it, changed everything. The moment the Republic was granted powers over the north, those articles should have been revoked or at least drastically altered. They should not be used cynically as a bargaining counter in the present negotiations and it should not be left to the main unionist party to say as much.
Very commendably, the Prime Minister, Mr. Tony Blair, said in a speech on 16th May at the Royal Ulster Agricultural Show that it would be a helpful confidence-building measure if the Irish Constitution could be changed in advance of any settlement, to which one can only add, "Hear, hear". That message should be hammered home time and time again by the Government and, indeed, by Opposition Spokesmen.
That brings us to another aspect of the principle of consent. Up until the early 1980s, I think that it is fair to say that British Government policy, irrespective of which political party was in power, was broadly to try to foster an Ulster identity, an Ulster patriotism, if you like, based on the fact that Ulster Protestants differ quite a lot from Protestants in Scotland and the north of England and that Ulster Catholics differ quite a lot from Catholics in the south of Ireland. That may have been an uphill task but it was certainly not an ignoble strategy, far from it. The policy was reversed almost overnight in the early 1980s for reasons one can only guess. "There are two totally different cultural identities and two totally different cultural allegiances" became the buzz phrase followed by, "and never the twain shall meet".
Ignoring totally the existence of the party of the noble Lord, Lord Alderdice-the Alliance Party—all Roman Catholics were deemed to be automatically anti-British, Gaelic speaking and fervent republicans who dream day and night of a united Ireland and, with rather more accuracy, all Protestants were deemed to be unionists, English speaking, pro-monarchy, and so on. Politics now became a matter of an elaborate checks and balances, designed to give each supposed cultural group equal validity and respect. Those who wished to destroy the state, provided that they did so peacefully, were deemed to be every bit as admirable as those who wished to preserve it. Total impartiality was the order of the day and Ministers of the Crown were actively discouraged from openly supporting the union.
By way of compensation, it seemed to be generally agreed that no constitutional change should take place without substantial support from each community. However, that safeguard has frequently been undermined by fudging—whether deliberate or accidental I really do not know. The requirement for the consent of "the" majority is often replaced by the
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requirement for the consent of "a" majority. The substitution of the indefinite for the definite article makes all the difference in the world.
Let us suppose that as a result of a few more IRA bombs in the City of London and elsewhere on the mainland—thus utilising part of the vast stockpile of weapons and ammunition given to the IRA by Colonel Gaddafi—massive pressure was brought to bear on the British Government to accept a settlement which was almost wholly favourable to nationalist aspirations and which, moreover, gave the Irish Government vastly more powers than they already possess. The unionist parties would resist to the utmost but the Government would almost certainly insist on a referendum—a referendum in which, for example, 98 per cent. of nationalists might vote in favour of an agreement, while only 13 per cent. of unionists would do so—mainly business people, perhaps sick and tired of their businesses being bombed or burnt to the ground and prepared to sacrifice their principles for a quiet life. That voting pattern could theoretically produce a tiny overall majority of 50.1 per cent. or 50.2 per cent. In favour of drastic constitutional change. That would happen against the passionate opposition of seven out of eight unionists. Such a situation would be neither fair nor conducive to peace whether in the short or long term.
Can we be assured, first, that any referendum results will be announced on a constituency-by-constituency basis so that any one-sided voting pattern such as the one that I described will become clear and be capable of being acted upon? Secondly, can we be assured that any referendum will be merely advisory and not binding upon the Government?
7.24 p.m.
Lord Fitt: My Lords, I shall only take a few minutes with what I have to say. I had intended to speak at greater length but, unfortunately, I had other commitments this evening. In the four minutes that are at my disposal I should like to say that the situation in Northern Ireland now—that is, all the turmoil, the fears and suspicions that are raised—is all about legislation which was introduced by the Tory government. I have in mind the Anglo-Irish Agreement, the framework document and the Anglo-Irish Declaration. So one cannot claim from the Government side of the House that it was all one way or the other.
I have sat in both Houses since 1966 debating Northern Ireland. Therefore, I hope that I shall be regarded as non-partisan—that is, being neither on the Conservative nor on the Labour side. My main interest has always been Northern Ireland. I believe that I am the only Member present in the Chamber this evening who took part in the Sunningdale agreement negotiated under the Conservative government of the time. I said then just after it, I say it now and, indeed, I will say it tomorrow: the best and most hopeful agreement that ever came to the Northern Ireland conflict was the Sunningdale agreement, especially Article 1 which dealt with the internal situation.
I have always believed—and will continue to believe—that the internal solution between unionists and nationalists, Catholics and Protestants, in Northern

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Ireland was achievable. It was the second strand which made provision for relations between Northern Ireland and the Republic. The power-sharing executive of Northern Ireland, which I believe was one of the most hopeful and constructive political movements ever, was all brought crashing to an end because of Article 2; namely, what they now call "strand 2". I can only live in hope—and I stand here in the depths of despair—because I believe that there are awful similarities with the situation at present. I believe that strand 2 will perish again as it did in 1974. Awful nationalistic pressures will be applied to force the Northern Ireland people into constructing some sort of agreement between north and south which will be entirely unacceptable to them.
I see that I have only one minute left to speak. Perhaps I may make a plea to the originator of the debate and to my noble friend to take something out of the Northern Ireland vocabulary: "confidence-building measures". In the vocabulary of the vast majority of people in Northern Ireland, the phrase "confidence-building measures" means transferring murderers and prisoners from one gaol in Britain to another place and letting them out. They say that all that is done in the name of building confidence in those people who are now taking part in the Northern Ireland political process. They may be giving confidence to those people who have killed and murdered over the years, but they are certainly not giving confidence to the vast majority of people in Northern Ireland.
Because of a construed or mis-construed policy under the Conservative Government, people who had been killing and murdering over many years were brought in and are now going into the Stormont talks. They have been seen walking in and out of No. 10 Downing Street under both governments. I urge the present Government and those who have initiated tonight's debate to take into account the vast majority of people in Northern Ireland—that is, both Catholics and Protestants—who feel sickened to the stomach at seeing people who have been guilty of murder now going into talks, allegedly to instil confidence into the political process of Northern Ireland. I hope that the Government will take that fact into consideration.
7.28 p.m.
Lord Holme of Cheltenham: My Lords, perhaps I may begin by saying what a great and unexpected pleasure it is to find myself following the noble Lord, Lord Fitt, and to see him back in his place well restored and in characteristically vigorous voice. Although the noble Lord's warnings are gloomy ones, we all recognise his experience and respect it. Indeed, we would do well to heed what he has said.
I should also like to thank the noble Viscount for introducing tonight's debate and for having the idea that we should spend substantial time in this House discussing the situation in Northern Ireland. The quality of tonight's contributions is sufficient evidence of the wisdom of that course. With that acute historical sense of his, the noble Viscount led us down some fascinating byways. However, I was slightly puzzled as to why he wanted to remind us of the heavy price that poor Mr. Lloyd George had to pay for relying on the
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Conservative Party, but no doubt he had his reasons for talking about that. He also at one point wished the Government well. I absolutely accept his sincerity, as I know what a pillar of a cross-party approach he has been, but the terms in which he wished the Government well made me think for their sake that I hope he never wishes them ill.
As several speakers have mentioned, we have heard two absolutely outstanding maiden speeches this evening. The speech of the noble Lord, Lord Mayhew of Twysden, showed the characteristic generosity of spirit and integrity of approach which made him such an outstanding Secretary of State and which I am sure will make him a great contributor to your Lordships' House. I say to my old friend David Alton that I remember the Edge Hill by-election as if it were yesterday, although he does not look a day older. It is extremely good to see him in this House. He brought to his speech that passion and commitment which all who know and respect him expect of him. I hope that we shall hear from him often in your Lordships' House .
There have been many outstanding speeches this evening but I wish to dwell for a moment on that of the noble Baroness, Lady Denton, with whom I have had the pleasure of working from these Benches for some years. She is right to remind us that under all the political froth and the deeply felt history there is an important reality in Northern Ireland which is to improve the strength of the Northern Ireland economy and to make it less dependent and less suckling on the teat of Government. It needs to be made more entrepreneurial to attract more inward investment into Northern Ireland. Her efforts in that respect will bear fruit over a long time. As the Government pursue—as they have to—their political agenda, I hope that they do not lose sight of that equally important economic development agenda to which the noble Baroness made such a notable contribution.
It is difficult to obtain from such a varied debate a clear sense of themes. However, I believe that three "Cs" have preoccupied us this evening: the first is consent; the second is compromise and the third is confidence building. Those three items have featured in many of your Lordships' speeches. On the matter of consent I venture one or two thoughts of my own. One meaning of consent that we are in danger of losing is the crucial and, in the United Kingdom, unique notion that we are saying to the people of Northern Ireland that they have self-determination and that it is up to them to determine their future. This has been the rock on which the Anglo-Irish Agreement, the Downing Street Declaration and the Framework Document have been built.
When we talk of consent let us remember that it is ultimately the consent of the people of Northern Ireland. I am extremely sceptical that it is possible to have consent which includes all the parties to the talks. Is it possible to imagine that there is a version of the future of the Province to which both Gerry Adams and Dr. Paisley sign up? That is not easy to imagine. In fact if we had such a formula, by definition it would be superficial and meaningless and without content. Therefore the crucial point about the consent formula is

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one that the noble Lord, Lord Dubs, identified in a Starred Question which the noble Viscount asked in this House last week; namely, that consent does not have to embrace all the parties to the talks. When the noble Lord replies to the debate, I should be grateful if he could reiterate that crucial point. He mentioned it the other day but it cannot be too clearly established in the Province and in the wider world, not least in the United States. It is extremely important that in any agreement we get the main constitutional Unionist and Nationalist traditions. That is the crucial point of consent. Everything beyond that is a bonus. However, in straining for the bonus, let us not lose sight of the main prize.
A point on which I strongly agree with the noble Viscount is the rules for referendums. It is no longer good enough to treat referendums as an ad hoc administrative measure. A commission was set up by the constitution unit on which the noble Baroness, Lady Gould, and I served, together with Mr John Whittingdale from the Conservative Party, in which it was suggested that there should be rules for referendums. It is desirable that there should be such rules in the public interest, including, crucially, rules on the question of representation of contrary views on the main issue.
I turn to the question of compromise. The noble Lord, Lord Fitt, has just mentioned power sharing. That absolutely depends on compromise. I know that in some circles compromise is a dirty word but these talks will go nowhere unless the Ulster Unionists and the SDLP come to them with the intention to compromise; in other words, to abandon previous fixed positions and move towards each other in such a way that it is possible to share power and possible at long weary last for the two main traditions to confront the fact that they have to share the same geographical space and co-exist successfully. I believe that demands a move from the questions of process—which have endlessly preoccupied the early skirmishing of the talks—to questions of substance. Your Lordships have referred several times to what is the nature of the all-Ireland element—the so-called Strand 2. There must be room for compromise and movement on that. It is unwise to make over-ambitious plans for the nature of the all-Ireland body. As several noble Lords have said, that may become an impediment to a sensible agreement. I am not saying that there should not be institutions and methods of co-operating within the island of Ireland—of course there should—but to place too much weight on the bridge of this small vessel may sink it.
I now turn to the question of confidence building. It is absolutely essential that confidence building measures are addressed to the people of Northern Ireland and not exclusively to the more extreme representatives of the former—we hope they are former—military wings of the two sides in the conflict. I believe that the confidence of the people of Northern Ireland has been severely dented. Confidence building measures are the key requirement now. The noble Lord, Lord Molyneaux, was quite right to refer to administrative progress. That must be possible. I am extremely sceptical of the doctrine which has held us up for so long; namely, that nothing is agreed until everything is agreed. Most
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people would recognise that that no longer serves any commercial or political negotiations. One builds incrementally on progress. However, it is extremely difficult to do that if all the pieces are held up in the air until the last possible moment.
Finally, on the matter of confidence building, it would be helpful if the new Irish Foreign Minister, Mr. Andrews, whom we welcome back to that position, were to clarify in a helpful way the circumstances in which Articles 2 and 3 will be laid on the table, as they must if these negotiations are to be successful beyond the table. I hope that the Government keep their nerve and keep their eye on what matters, which is a strong relationship between London and Dublin and a growing accommodation between those who are capable of agreeing, rather than the will-o'-the-wisp of unanimity. Then we shall be justified in being slightly more optimistic than the noble Lord, Lord Merlyn-Rees, allowed himself to be.
7.40 p.m.
The Parliamentary Under-Secretary of State, Northern Ireland Office (Lord Dubs): My Lords, perhaps I may begin by thanking those who have made such valuable and important contributions to this debate. I am conscious that in this House there is a wealth of experience and knowledge of Northern Ireland, much of which was assembled this evening.
I was particularly pleased to hear the excellent maiden speeches by both noble Lords whom I knew well when I was with them in the other place. I am well aware that the noble Lord, Lord Alton, has an enormous level of commitment to a number of important causes. I look forward to hearing more from him as the years go by. As regards the noble Lord, Lord Mayhew, we jousted occasionally in the other place. I know what an enormous contribution the noble Lord made towards Northern Ireland and I shall refer to it shortly.
I am most grateful to the noble Viscount, Lord Cranborne, for providing the House and myself with an opportunity to expand on some of the key issues and on some of the positive things that have happened over the past six months. Let us remember that the IRA cease-fire has been renewed; and the Loyalist cease-fire has remained in place. For the people of Northern Ireland that is already a tangible benefit. It is beginning to change their lives, and that is surely important.
The stage was set, in many respects, by the previous Government, and by the noble Lord, Lord Mayhew, in particular. When in Opposition we gave the previous Government our support through our agreed bilateral approach and we are grateful for support in the same manner now.
But of course peace and prosperity are interlinked, as the noble Baroness, Lady Denton, mentioned in her important contribution. The Secretary of State and her ministerial team are working hard on both fronts. The Northern Ireland economic indicators are presently very positive. It is worth reminding the House of some of the key figures. Employment levels, with over 585,000 persons in employment in June 1997, are the highest on record. Unemployment at 7.7 per cent. of the

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workforce (in September 1997) is at its lowest level for 17 years. Over the year manufacturing output has increased by 4.7 per cent. Manufacturing exports, at £3.1 billion (1995–96), represent an 18 per cent. annual growth rate. During the financial year 1996–97 Northern Ireland attracted 11 new inward investments and 24 existing overseas companies announced expansion—representing investment of £190 million and 4,641 jobs promoted. The figures are technical; but to the people of Northern Ireland they represent jobs and hope.
The efforts of the people of Northern Ireland have been the key to generating these successes. With long-term stability, their efforts will generate even greater rewards. It is our aim to do all that we possibly can to make that possible.
A number of specific questions were asked during the debate, including questions about the talks. It is a great achievement to have reached the present stage of the talks. We now have an inclusive process in which all strands of opinion in Northern Ireland are participating or entitled to take part. Since 7th October they have been addressing the key issues relevant to a future settlement. They are doing so in a constructive and businesslike way.
It has taken courage and vision to get us there. We have seen those qualities from political leaders in Northern Ireland. They are the qualities conspicuously shown by the noble Lord, Lord Mayhew, and his colleagues in the far-sighted policies that they have pursued in recent years with our support.
The talks give an opportunity to bring about peace and stability with the promise of a happier and more prosperous future for all sections of the community in Northern Ireland. We firmly believe that a settlement can be achieved within the target that we have set of concluding by next May. We in this Government are all determined to see that the moment is seized. We shall do everything in our power to facilitate progress in the talks. It is, however, the participants as a whole who must find a settlement. The critical hurdle is the reaching of agreement among the parties.
We shall submit any outcome to a referendum. We are acutely conscious of the democratic deficit in Northern Ireland to which the noble Lord, Lord Mayhew, drew attention. No one believes that direct rule is a satisfactory form of government. As in the rest of the UK, we are committed to increasing accountability in government; and as we move towards devolved structures in Scotland and Wales, the current system of administration in Northern Ireland appears all the more starkly inappropriate. Finding arrangements by which elected representatives in Northern Ireland can administer affairs there is one of the key challenges that will face the talks.
I now turn to some of the specific points raised. There were many, and I shall try to do justice to them; however, noble Lords will understand that the time constraint means that I shall have to give fairly cursory answers.
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I shall deal first with the question of prisoners. I assure the noble Viscount, Lord Cranborne, that there are no political prisoners in the United Kingdom. Those who commit acts of terrorism are lawfully convicted and sentenced under the criminal law. They neither deserve, nor are they accorded, any special status.
As regards the issue of Jason Campbell, in his application for transfer, Jason Campbell claimed family ties in Northern Ireland. On subsequent investigation it was discovered that those family ties did not exist and the transfer was accordingly refused. That was a correct decision. The purposes of transfer are to assist prisoners to retain links with their families, wherever those prisoners are and from whichever part of the United Kingdom they come, and to prepare prisoners for release.
The noble Viscount asked about communication between the Government and the Loyalist parties in relation to the application for transfer by Jason Campbell. As was widely reported, Jason Campbell's name was included in a list passed to the Government by a representative of the PUP. That was the extent of any communication. There was no discussion or negotiation.
I now turn to the question of consent raised by many noble Lords. The Government are pursuing and want to achieve the widest measure of agreement to, and full-hearted endorsement of, a settlement. There must, as a minimum, be sufficient consensus achieved in the talks that they have the support of parties representing a majority of each of the two traditions in Northern Ireland. That outcome would then be put to a referendum. We would not take any outcome forward without the support in that referendum of the majority of people voting in Northern Ireland. That is the clear policy, as I said in answer to a Question last week. It remains the answer today. And of course the final outcome would have to pass through Parliament.
Perhaps I may refer to another point made in the opening speech. It is vital that talks take place in an atmosphere of peace, free from all threats of violence. Sinn Fein have signed up to the Mitchell principles, which commit them to exclusively peaceful methods and to abide by the terms of any agreement. We shall hold Sinn Fein to that commitment.
The noble Viscount asked another question about a referendum. If I understood him correctly, he suggested that there should be the same rules for referenda in all parts of the United Kingdom—Scotland, Wales and Northern Ireland. Is that in fact the Opposition's policy? We shall address the precise way in which the referendum is to be held nearer the time when the talks have made some progress. It is too early yet to enter into such specific points.
My noble friend Lord Merlyn-Rees made a number of important points based on his great experience of Northern Ireland. I take one particular theme; namely, that we must choose our words very carefully. Even though it is possible to speak in generalisations and make statements here in this House, in Northern Ireland we must expect those words to be scrutinised in

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meticulous detail. That is why it is important to be absolutely careful that the words we use are exactly the words that we mean to use and no other.
I turn to the very interesting contribution of the noble Lord, Lord Mayhew. He drew attention to the increasing role of women in community activities in Northern Ireland. Over the past few months I have seen that particular phenomenon at first hand. While I am on the subject, perhaps I may pay tribute to the excellent work carried out by Lady Mayhew in encouraging such activities. I have heard it said in Northern Ireland, in relation to the time when the noble Lord was Secretary of State there, that people were getting two Secretaries of State for the price of one.
It is a regret that women are under-represented in political life in Northern Ireland, although we now have the welcome participation of the Women's Coalition in the talks. I should like to see a wider representation of women in political affairs in Northern Ireland at every level. Indeed, I should like to see a wider representation of women in all activities in Northern Ireland. I hope that over the fullness of time we shall get nearer to achieving that outcome.
The noble Lord, Lord Mayhew, paid tribute to the security forces, and I fully endorse that tribute. I believe that the police, the RUC and the Army have played a valiant and difficult role over many years and it is right that their steadfastness and dedication should be fully appreciated and respected by this House.
A number of speakers referred to punishment attacks. I take this opportunity to condemn absolutely what are called punishment beatings and shootings. They are outrageous and cannot be justified in any civilised society. The RUC remains the only legitimate law enforcement agency in Northern Ireland and no group or individual has the right to take the law into his or her own hands by meting out these barbaric assaults. There have been 45 punishment beatings and shootings since the cease-fire on 20th July: far too many. Every one of those is to be condemned, although the figure is lower than it has been. I should like to see every one of them stopped, there should be no punishment beatings or shootings.
The noble Lord, Lord Alderdice, talked, as did many others, about confidence-building measures. He emphasised the importance of the Government doing what is right rather than seeking a balance between giving concessions to Nationalists and Unionists. The noble Lord is absolutely correct, the role of government is to govern fairly and see that we can win the trust and confidence of all the people. It is vitally important that confidence building is seen as something of importance to all parts of the community in Northern Ireland. It would be wrong to think of it in terms of a shopping list put forward by one side to the exclusion of another. The Government want to win the trust and confidence of all parts of the community in Northern Ireland by clearly being seen to be fair and even-handed to everyone. I believe that that is what we have been.
A question was asked by the noble Baroness, Lady Park, about what would happen if the IRA ceasefire were to break down. As I said earlier, Sinn
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Fein are committed; they are in the talks because they have given an undertaking, through the unequivocal restoration of the ceasefire. They have signed up to the Mitchell principles of democracy and non-violence and we expect Sinn Fein and the IRA to honour those undertakings. If the undertakings are dishonoured, then they cannot remain in the talks.
The noble Lord, Lord Molyneaux, made a number of important points in his speech from his wealth of experience in Northern Ireland. He talked about the leaks that had emanated partly from Dublin. This Government deplore leaks as such. They are not helpful and can only serve to undermine trust. We have an extremely good working relationship with the Irish Government and are absolutely confident that the leaks will not affect that good relationship. However, I shall pass on to my colleagues the noble Lord's fears about the contents of the papers which were referred to. The matter of the leaks themselves is for the Irish Government to investigate and I understand that they have instigated a criminal investigation. It is therefore not appropriate for me to speak any further.
Another point made concerns the secretariat at Maryfield. I hope that if the noble Lord has any information to support his accusations, he will pass them on to me as soon as possible. I hope that he will write either to me or to the Secretary of State or even the Prime Minister, so that we may assess the implications. The secretariat at Maryfield exists to exchange information. Some of it is sensitive and necessarily so in our joint attempts to resist terrorist crime. There is a good record of exchanges, despite the recent leaks, and we have no reason to believe that the channel has been compromised.
I believe that there are too many misconceptions circulating about the intergovernmental conference, the secretariat of the Anglo-Irish intergovernmental conference at Maryfield. I am certain that it does not have the malign characteristics which some speeches tonight suggested. There are many instances of good co-operation—for example, on security—between the two governments through the secretariat. I hope that we can demystify the secretariat, as it were, and therefore alleviate the fears that apparently surround its work. It is, of course, open for the talks process to propose new approaches in Anglo-Irish relations and we shall look forward to the discussions.
The noble Lord, Lord Cooke of Islandreagh, also talked about the role of the Irish Government and referred to appointments being made, as did some other Members of the House. It is certainly open to the Irish Government to determine how to identify candidates whom they wish to put forward for consideration for appointments. It is also open to anyone to put themselves or any other person forward as candidates for public appointments. Let me emphasise that public appointments in Northern Ireland, as with everywhere else in the United Kingdom, are made on merit. There is no question of Irish officials overruling our own officials on the matter. The Nolan principles apply and we are meticulously careful in how we select appointments. I know that, when appointments have come to me, on occasions the Irish Government have

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put forward names and I have treated those names on their merits, not because of the source from which they came.
The noble Baroness, Lady Denton, made a number of comments about the National Health Service. We have increased the amount of money going to the health service, both nationally and to Northern Ireland. The additional £5 million funding which she spoke of was Northern Ireland's proportionate share of the additional £300 million made available across the whole of the UK. However, in addition to that, my honourable colleague Tony Worthington, the Minister, also announced a further £7 million for 1997–98, to tackle pressures in relation to waiting lists and community care. We will continue to pursue our reform agenda on this. I have already referred to the economic issues and I agree with the noble Baroness on how important they are.
As regards Articles 2 and 3, I understand that following the morning session of talks on Monday, Mr. Andrews, the Irish Minister for Foreign Affairs, indicated that as the negotiations progressed the Irish Government would discuss proposals for a change in the Irish constitution as part of balanced constitutional change and overall agreement. There is a willingness there to which I pay tribute.
I am running out of time and am conscious that there are a number of specific issues with which I should have liked to have dealt. However, in conclusion, I repeat that the Government remain fully committed to the principle of consent, in the terms in which I described it today and last week. Any change in the status of Northern Ireland will only come about with the consent of the majority of the people there.
As I said in this House last week, what we seek from the talks is a comprehensive settlement which secures consensus among the parties, can be endorsed by the people of Northern Ireland in a referendum and is approved by Parliament. That is our policy and I look forward to a positive outcome of the talks.
7.59 p.m.
Viscount Cranborne: My Lords, I am grateful to all noble Lords who have made so many distinguished contributions to our debate. I am especially grateful, though not surprised by it, for the generous and comprehensive way in which the noble Lord, Lord Dubs, answered the debate.
On the question of holding referendums and the mechanisms for doing so, I was grateful for the interest expressed by the noble Lord, Lord Holme of Cheltenham. I can assure the Minister that, heartened by the noble Lord's interest, we shall return to the subject in greater detail. I hope that he will be able to help us in that regard.
Let me just add how extremely pleased I was to hear from the noble Lord, Lord Fitt, particularly as one who voted against the Anglo-Irish Agreement in another place. His intervention made it perfectly clear that the habit of intervening occasionally in the gap is well justified in your Lordships' House. I was also delighted to hear the two most distinguished maiden speeches, one from my noble friend Lord Mayhew and the other from
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the noble Lord, Lord Alton. I do not have the time to praise either of those speeches in the way that they deserve. I simply say to my noble friend Lord Mayhew that I personally have been extraordinarily grateful to him for his tolerance of me as a colleague during some years in the last Government. He knows how grateful I ought to be for that.
The only question that I ask the noble Lord, Lord Alton, is whether he is not betraying his Liberal principles, or at least his Liberal origins. I always thought that the greatest living son of Liverpool was Tommie Smith.
I have come to the end of my allotted time. I am grateful to all those who took part in this debate. With your Lordships' permission, I beg leave to withdraw the Motion.
Motion for Papers, by leave, withdrawn.

City of London and Electronic Commerce
8.1 p.m.
Lord Renwick Lord Renwick rose to ask Her Majesty's Government: What steps they intend to take to ensure that the City of London remains the leading centre for world-wide electronic commerce in the face of United States government initiatives intended to ensure that Internet-based commerce is conducted under US law and to US security standards.
The noble Lord said: My Lords, the world has moved on since I tabled this Question before the Summer Recess to urge Her Majesty's Government to take advantage of the opportunity afforded by President Clinton's policy announcement on 1st July on electronic commerce. Within the past 10 days, the European Community has issued a report, written up in the Guardian newspaper last Thursday under the memorable headline:
"Europe spikes spooks' E-mail eavesdrop bid".
That, in fact, goes some way to providing the framework for an answer to my Question.
Even more recently, the French Government proposed legislation to ensure their continued access to corporate electronic communications, which is causing the same worry as parts of the US initiative. As chairman of the Parliament Industry Group for the European informatics market, EURIM, I welcome the Commission report, so far as it goes, and fear the French move.
Before I explain the reasoning behind my Question, I ought to declare an interest apart from EURIM. I am chairman of a new company called Virtual Precincts Limited which will be offering electronic commerce services and home shopping over broader bandwidth than is currently available on the Internet. My relationship with SAP (UK) Limited should also be mentioned, although that too is commercial and has nothing to do with lobbying. But the EURIM working party members are lobbyists. I should like to think that they are effective ones too. Neither I nor my fellow directors from both Houses are paid and I am delighted

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to see the two from this House—the noble Baroness, Lady Dean of Thornton le Fylde, and my noble friend Lord Chelmsford—preparing to do stalwart service at this late hour. Among our membership, we claim 23 other Members from your Lordships' House, 46 (and rising) from another place and 21 Members of the European Parliament, from all the main political parties. But the 60 or so suppliers and users who brief us have a vested interest in seeing that their views are heard and we expect them to represent those vigorously in our working parties. Where they can agree, we ask them to summarise those views on four sides of A4, so that these can be absorbed even by their chairman.
The briefings relevant to my Question today have been made widely available to all sections of your Lordships' House. I should like to thank Graham Marriner of the Post Office and David Harrington, Director General of the Telecommunications Managers Association, for acting, respectively, as chairman and rapporteur of our electronic commerce working party; and, of course, Philip Virgo, Secretary General of EURIM, who keeps us all on course.
My justification for wording my Question as I did is, of course, that from Petty France to Old Jewry, from Lombard Street to Russia Court, London has been a multicultural community as well as an international trading centre for nearly 1,000 years. Today, London is still at the heart of the global electronic market place, with initiatives supported by the Corporation of London, such as the London Link Association and the PORT project, the latter in association with the Worshipful Company of Information Technologists. Those running the markets may now be physically based almost anywhere in the UK. But for how much longer? We hear much talk of the global information society of the future. But most of those planning for that future appear to assume that the language will be American, the values those of Hollywood and the legal framework that of Perry Mason.
But the United States model of the information society is not the only one. I am told that over half the credit card outlets around the world do not have electricity, let alone a telephone line. Over the next decade or so, the Latin American, Indian, Chinese and Moslem world are likely to leapfrog the West into a world of low-cost mobile communications. The impact will be dramatic if they also leapfrog the world of Windows and Internet browsers into a world of mobile electronic commerce accessed by GSM videophones using local language speech and TV zapper controls.
A crude analysis suggests that in 20 years' time the main languages of the information society will be English, Mandarin, Arabic, Hindi, Spanish, Russian and German. Those selling to some of the world's wealthiest communities will need to handle many more languages, from Finnish to Hebrew. The global electronic marketplace will be more like an eastern bazaar than a western shopping mall, with business conducted under Chinese, Indian or Islamic law as often as under common or Roman law.
The proposals from President Clinton are best viewed as opening bids in a global negotiation. It is now up to the UK and Europe to respond positively and work towards a consensus that is acceptable to all trading nations and cultures. We must avoid the backlash that would follow were we merely to adopt "the American way", albeit modified to meet the most deeply felt prejudices of the British, French and Germans and the aspirations of the Commission.
However, we must also recognise reality. The Internet is still merely the standby capacity for United States military communication networks, made available for academic use in peacetime in return for testing and development. Over 80 per cent. of Internet users are American. Most Americans, including most American businessmen, have never been out of the United States. Meanwhile, most of the world's population do not speak English, let alone know how to use Windows or wish their commerce, education and entertainment to be policed by American regulatory lawyers.
The main American players, public and private, are only too well aware that their future prosperity depends on leading the rest of the world into the global information society and creaming the high value-added jobs. We can see how they have worked with their government to achieve that in computer hardware and software, films and entertainments and communications infrastructure. We can see how they are currently achieving this with regard to information services and educational materials. We can see the remaining British world-class players moving key operations, and the jobs that go with them, across the Atlantic. Can we afford to watch the traders of London follow suit? For once, we must be equally far-sighted. We must also recognise that we should be playing bridge and not poker. There is a win-win scenario.
There is much to be welcomed in the current proposals from the United States for international electronic trade, as stated by President Clinton on 1st July and expounded around Europe by his envoy, Ira Magaziner. But how does one interpret a communications policy which claims to be driven by market forces and just happens to include a 2 billion dollar cross-subsidy for education? How do you interpret a policy which claims to rely on private sector investment but is underpinned by billions of dollars of federal spend on the Intranets that service the United States defence infrastructure and link its users direct to its suppliers and product developers?
We need to work with and through our many allies among those Americans who recognise the need to think multicultural and not just to preach global Americanisation. For example, most US based multinationals oppose their Government's policy on encryption. At the global Internet project encryption summit in London in April, the heads of security for General Motors and IBM spoke out against it in front of invited delegates from around the world. I am told that EDS recently took a quarter page advertisement in the Washington Post to protest against policies designed for a bygone world.
When we look at frameworks for secure electronic commerce, the concept of keys in escrow to recover or unscramble confidential traffic should come last, not first. The first role of a trusted third party is to provide the electronic equivalent of the letter of introduction: "This man is good for such and such a sum". The second is to authenticate traffic: "This man is who he says he is, is authorised to do this and is now legally bound by what he has agreed". Most businesses in most parts of the world would not trust a third party who was liable to pass their keys to the local government, let alone use only keys which can be broken by current and former members of the Cold War security services.
The target should be a workable consensus for pan-European electronic commerce that provides both a sensible negotiating position vis-à-vis the United States and a model for a truly multicultural information society, unconstrained by current technology assumptions and trusted around the world. The recent European Commission report, Ensuring Security and Trust in Electronic Communications, appears to provide a good basis for action during the UK presidency.
The image of the Internet and of electronic commerce as being outside the law is as misleading as the image of untraceable anonymity. One well-known American Internet service provider has already had to be requested to stop selling analyses of the personal interests of its customers based on the web-sites they have visited. Those whose facilities are used to access content that is already illegal under existing UK and European law can be held to be publishers. They may share liability for breach of copyright, libel and slander as well as breaches of consumer protection laws covering misleading advertising or mail order. The international transfer of files for routine back-up may also be an offence under data protection legislation. Unless and until UK law is clarified it would appear that ignorance as to what is being carried or where it is processed is no defence for the network provider. Similar situations exist in most nations of the world, though there are significant differences as to what is illegal.
Hence the expected proposals from the European Commission for a liabilities directive. The need is to harmonise not only liabilities for breach of copyright but also rights and responsibilities for all the other activities for which Internet users or suppliers may be held liable. We should use the UK presidency of the Commission to ensure that any proposals balance the rights and responsibilities of customers and consumers with those of content providers and network operators. We must ensure that ill-thought out proposals do not cause communications and content providers to move offshore or otherwise destroy or distort the industries and markets of the future.
We also need to move fast enough for the Americans to see us as partners and not just rivals, let alone mere obstacles. There is little indication that the urgency of the need for action has been widely appreciated. We must respond rapidly, actively and positively in partnership with the rest of Europe to the initiatives announced by President Clinton to reduce the risk of growing conflicts on legal jurisdiction, encryption policy, data protection and intellectual property rights,
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with US-based operations powering ahead while we try to negotiate from positions of ever-increasing weakness. But we in the UK need not only to use our presidency of the European Union to progress these matters on a European front; we also need to be in the lead within Europe if London is not to lose out to Frankfurt or The Hague as the legal location of choice for electronic trading.
There are many more issues that need to be addressed than I have time to cover, but I conclude by commenting that I am told that many more UK jobs and tax revenues ride on the timely implementation of the Law Commission's work on electronic signatures than on any of the measures in the current legislative timetable.
8.13 p.m.
Baroness Dean of Thornton-le-Fylde: My Lords, I welcome this debate this evening tabled by the noble Lord, Lord Renwick. When I saw the list of speakers, just three of us—though I too declare an interest as a director of EURIM—I was reminded of the saying, "Out of acorns grow oak trees".
This is a big issue in the world outside, though perhaps not to many speakers here this evening. Nevertheless, it is a tremendous opportunity for Britain, provided we get the base line right. When I talk about the base line I mean the access being universal and ensuring that a monopoly does not take over and cut out all the wonderful services that will be available.
Though EURIM consists basically of commercial and parliamentary interests—the noble Lord, Lord Renwick, listed companies that are members—it also has a consumer voice. I should not like this House and the Minister in particular to believe that it consists solely of business interests. The consumer's voice regularly enters our debates. I have been encouraged by the balanced view that has emerged—on the one hand the commercial attractiveness of doing business electronically and, on the other, recognising that for that to succeed we must have a framework within which the consumer (be it an individual or a company, large or small) can have confidence and feel safe and secure in the fact that standards are applying so that they can look at the product or service that they are buying without wondering whether behind it there is some disreputable involvement.
Another interest I must declare in this debate is that I am chairman of an organisation called ICSTIS, which is in the value-added or premium rate telephone industry. It was possibly the earliest form of electronic commerce whereby the consumer pays for a service which is delivered—certainly at the moment, though there are indications that that may change—on-line by the service being delivered within the call. As a result of the industry not having proper consumer protection initially, it was almost shut down. It was only the regulation being introduced that enabled the good parts of the industry to flourish—that is what we are seeking here—and for the less reputable parts to be regulated. That is when the industry took off in the UK.
It is interesting to see the comparison when one looks at other countries. Even recently in Germany CompuServe were involved in a situation which

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overnight shut down that sector of the industry. We do not want that to happen with the exciting new developments that are taking place at the moment. Provided we get the framework right, provided we do not have monopoly control and provided we have universal access available, we are poised to take off into what I regard as another revolution—industrial, commercial, call it what you will, but a peaceful revolution.
Much is being done, but still more needs to be done. It is a fact, even as we speak tonight, that technology continually outstrips the ability of the laws and regulations that we have in place to be able to respond quickly and positively to the challenges that we face. Those are the checks and balances at which we need to look. We need to examine consumer security, protection and redress. There must be privacy on the one hand; but on the other there must not be old-fashioned regulation. That will not work; it is not working now, though ways can be found round it. We do not want regulation that will put an iron ring —albeit a "virtual" iron ring—round the new services which will inhibit their development.
There are already some worrying indications. The Vice-President of the United States, Al Gore, was put in charge of that area by the President some time ago. Only this week Microsoft were fined in a big profile case. It is an indication of what could happen to this whole sector of industry which could be enormously creative for the world in which we live in coming years and, indeed, the world in which our children live though it will not wait for them: it is taking off in our own generation.
It needs co-operation and collaboration between service providers and regulatory bodies. But there must also be co-operation and collaboration between governments, and that is where the Minister comes in. We must have confidence in what is proposed. We in ICSTIS could see that whereas the industry started off as a national industry, today it is an international industry. So we formed the European Auditext Regulators Group, 14 countries coming together. The more we come together, the more we know from the shared experience that we have to collaborate.
In this new world the old system of regulation will not work. Here I pay tribute to the work that was carried out by a DTI Minister in the previous government, Ian Taylor, who picked out this whole area of the emerging technologies in terms of the possible commercial opportunities and the input of the consumer, too. His work received support from my colleagues in another place. This is not a party political issue. It is not an issue on which we challenge each other. It is an issue where, if we can collaborate with our colleagues throughout the world, we are in a win-win situation. However, there are some serious concerns at the moment.
The Question refers to the City, but there are internationally agreed standards affecting so much of our lives. In Britain there is the BSI. There is the
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European CEN and also ISO. It is not a case of putting on the lid; it is a case of encouraging confidence.
Perhaps I may put to my noble friend the Minister a number of concerns I have and questions which I hope he will be able to answer. Britain has the European Union presidency next year. It comes at a time of great change in many areas. I was at the European regulators conference in Austria last week. Austria deregulated its telecoms industry in August. An Austrian civil servant said that when Austria takes over the presidency from us this whole area will be one of its priority topics. I wish to ask my noble friend the Minister whether this area of potential wealth generation for Britain will feature in the work we do as part of our EU presidency.
Yesterday I chaired a session at the Electronics Commerce conference. We were delighted that the Minister, Barbara Roche, was able to address us. She gave a very good address to the conference. She said that Britain is well placed. She is right. Our language is certainly well placed for these developments. Accepting that we are well placed, I hope that we learn from the lesson of UK Limited's past. We have been well placed in so many industries through the generations since the Industrial Revolution. Time after time, having been well placed—ahead of the game, if you like—we have suddenly found ourselves at the back of the game because we did not make the best of what we had. I hope my noble friend the Minister will comment on what proposals the Government may have to ensure that we can hold onto our place ahead of the game. This is not an area where, if we fall back to third or fourth place, we can catch up again. It really is, as spivs sometimes say on the corner of the street, a once in a lifetime opportunity. This is a real opportunity for us. I hope that we shall make the most of it.
I am well aware of the Government's policy, which I fully support, that we should have education, education, education. I am told that we are potentially short of 50,000 skilled workers in this field. It seems criminal that while we have people unemployed we have a skills shortage in this area. As this is an industry which can be transferred across boundaries, companies cannot just pay more and get the workers. They may simply move outside our national borders. I do not expect the Minister to have the magic answer today but I hope he will look at the point and be prepared to discuss it further with people in the sector. Only today I was at a meeting at which a company told me that it is having to look at what it does about its future technology because it cannot get skilled people. It is not in a position to pay more to get them. It has a fixed budget.
I welcome this debate. In many respects it has been a long time coming. Perhaps we should have had it earlier. I know that the Minister will not interpret the small number of noble Lords taking part in the debate as an indication of the importance of the issue to UK Limited.
8.25 p.m.
Viscount Chelmsford: My Lords, I thank my noble friend Lord Renwick for giving me the chance of speaking on this subject. I am a director of EURIM and I declare that I am president of the Electronics Commerce Association. There are various other bits and pieces, all of which are in the Register and all of them are unpaid.
We live in a world where technical change is happening faster than most of us can assimilate. Many business leaders cannot take it in. It is therefore not altogether surprising that politicians become confused and that new laws are enacted on obsolete concepts. Two major factors today must be taken into account: first, the convergence of phone, fax, PC, TV—or, should I say, speech, text, data, image, moving pictures, all travelling along as bits; and secondly, the arrival of the Internet, making electronic commerce, at any rate in theory, available to all.
What is the Internet? First, what is it not? It is not a single network; it is not a legal person; it does not have a sole regulator; it does not provide information to anyone; rather it is a collection of computer networks with numerous owners. It allows us to forget distance and to ignore geographic boundaries, with all the complications that set in as a result of jurisdiction problems and lack of redress. It is in fact a competitive free-for-all where governments are not the key players. It sends packets of data around the world, no matter the message type. It threatens existing bilateral telecoms arrangements. A recent study by the consultants McTavish Hepburn states:
"Telecoms Operators are manifestly failing customers on business multi-media".
To return to the Internet: it is today a legal and regulatory quagmire. It is currently self-regulated on an ad hoc basis by regulators who have no global authority and are unlikely to get it.
So where do we go from here? I suggest we have to resolve what I see as the European dilemma. Which has priority—external trade or internal equity? My money is on the first but I should like to talk briefly on both. Let us start on internal equity. The EU desires to harmonise law, tax and, more immediately, the horizontal issues of privacy, IPR, security, cross-border payment and redress. We hear talk of a liabilities directive to encompass them. Conversely, the Commission calls for enhanced plurality and diversity. Yet diversity prevents common solutions, the very solutions it is looking for on its horizontal issues. The USA has one language and has had 100 years of honing one set of laws to conform between federal and state government. The EU has 15 languages and three major cultures which have been described as the Vikings, the Teutons and the Latins. It has umpteen different legal solutions to horizontal problems. So by all means let us work to reduce these differences, but let us also put trade first. It is interesting that Commissioner Martin Bangemann came the other day to the global standards conference
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in Brussels. Talking at the plenary session he dropped the new word "charter" and then went on to talk about "best practice". I am not altogether clear what he was getting at, but if he was actually suggesting that, rather than trying to force through directives, it would be better to try to build up best practice between 15 nation states, I believe that is good news. I do not believe that it is sensible to fight for directives which blow someone's existing culture high and wide.
So does the EU have the clout today in negotiations with, for example, the USA? I believe that it does. We have seen telecoms and industrial trade and, it is to be hoped, we shall see financial services, all liberalised in negotiations with the World Trade Organisation. I believe that Sir Leon Brittan has made good use of his EU-improved buying power. Free trade is in the interests of the United Kingdom. There was an interesting comment in the Financial Times the other day suggesting that if we failed in the WTO to reach agreement on financial services, that would damage the City of London. The thought was that the EU might then move to restrict competition to those countries with compatible access to our own. That would be in the same way as the EU is currently threatening the trans-border movement of personal data to countries unregulated in the data protection area. I do not believe that it is in our interests to get too far down that line, particularly when corporates feel inhibited about publishing such simple statistics as employee phone and e-mail directories across the world lest they be found to infringe personal data. Here it is worth quoting a leading UK lawyer speaking at a seminar I attended only this week who did not know we were having this debate. He said,
"[The] EU directive transborder dataflows rules are incompatible with Internet architecture".
What he meant by that is that there is no way of policing the requirements of Articles 25 and 26 of the EU treaty. Life has moved on but the treaty has not.
As noble Lords heard from my noble friend Lord Renwick, the Corporation of London is advising that its London Link Association offers secure e-mail and extends to 12,000 mail boxes. Its objective is world-wide communications and a global infrastructure. There is another scheme which it has called PORT, which is looking towards global business-to-business networks. In the insurance industry we have a broker network called WIN—the World Insurance Network, which is looking into the same. It is WIN which is worrying about names and addresses.
Since the world, sadly, cannot agree on the law of the sea or the law of space, it seems to me unlikely that it is actually going to agree on the law of global electronic commerce. Meanwhile we are actually getting a plethora of country-specific applicable laws on the Internet, which are mostly inappropriate and frequently unenforceable. It may surprise noble Lords to know that the USA has more Internet actual or pending legislation than any other country. It sends

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Ira Magaziner to Europe to exhort us to follow it in freedom and self-regulation. But I quote the White House paper, which says,
"Signs of these"—
meaning regulatory—
"types of commerce inhibiting actions are already appearing in many nations. Pre-empting these harmful actions before they take root is a strong motivation for the strategy outlined in this [US] paper".
Yet the USA's regulation on encrypted products is commerce-inhibiting and a harmful action. Again the White House paper says,
"Parties should be free to order the contractual relationship between themselves as they see fit".
That is fine for corporates who are supposed to know how to handle these matters, but where is the codicil on consumer protection and the comment about 30 days to return the goods if they are not what one expected? The United States is not the only country bringing in such laws. Germany now has a multi-media law. Singapore allows access to business, but not to the home, which is absurd. It must be very tiresome for all the Singaporean employers. China and Vietnam are seeking restrictions and if one goes to Burma with a laptop computer one is automatically put in gaol for 15 years, so I should not advise it. Here we do not want pornography, crime and racism any more than anyone else, but I suggest that we do not want unworkable restrictions either. I believe that no one has all the answers, but I would like to offer a few pointers and ask both the United Kingdom and the EU not to act in haste on any law which they may later repent of at leisure.
Why do we not all try for the easier points of agreement first? I read that the Government will use the presidency to emphasise consumer law and so I propose four simple ideas which ought not to cause too many problems in this area. First, family self-regulation. Why do we not implement one of the many schemes which are around which allow parents the right and the ease to censor what their children do and see? Will the Government act as the catalyst and call the players together who claim the various solutions? Will they get them to agree the standards and guidelines? This is not a matter where the Government have to throw out money; they simply have to act as the central catalyst.
Secondly, why do we not seek the widest possible agreement on default jurisdiction, meaning the law to be applied when contracts are silent as to which law should be applied and yet the contract is cross-border? Corporates, of course, should not need that, but consumers certainly do. We should be able to achieve that pretty easily, at least in the EU and, I hope, wider still. Thirdly, why do we not seek a standard default contract, at least within the EU, which would apply to consumers who receive or accept goods without actually signing a contract? Again, we can try for wider support among other nations. All these default suggestions are basically consumer oriented. Companies ought to know better than to trade without a contract even though it seems to me that some
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SMEs grow more like consumers daily. Incidentally, the United States is suggesting the use of the Uncitral New Model Law, which is a very good model. It is a little broad for consumers, perhaps, but it will at least allow the EU to get talking.
Fourthly, existing law should not leave a consumer worse off in electronic trade than he is in manual trade. The Government know that UK statute currently can do that. Recommendations have been made to the DTI solicitor on that. Some words need changing in the definition in the interpretation Act. As far as we are aware, no research by other EU states has taken place, but it seems likely that the same problem will apply to them also.
Perhaps I may make two more suggestions, which are not wholly consumer oriented. Fifthly, the database directive actually widened the gap on IPR between Europe and the other nations. I believe that that is an error in tactics. We need to exhort the Commission to concentrate on global implementation of existing treaties which are not yet law around the world. Here at least the US is on side by saying that countries should implement WIPO.
There is a simple rule of thumb which noble Lords might wish to consider for global trade; namely, that no major legal revision should take place until two-thirds of the world has implemented the last global revision. Sixthly, we need to concentrate on success in reducing the "have nots" because that increases the size of the potential electronic commerce market for consumers. One major inhibitor in this area arises from the fact that the Internet uses only the English language. If we can find some way of exhorting the vendors to crack the problem of translation between English and other languages then we open up a whole host of extra potential consumers.
So we get three major objectives of the EU riding together. We can enhance diversity and plurality if we can get other languages onto the Internet. We can reduce the number of ICT "have nots" if people using other languages can use it. We can increase global trade through the Internet because they are using it.
So in summary there is a place for EU harmonisation, but it is just that in my view it is not first place. That should go to trade; namely, UK trade globally and EU trade globally. The one thing that the American Government do brilliantly and which we are not at all good at is that they have the knack of identifying the right moment for them to act as a catalyst for new technologies needing to get a start up. They also have the wealth to throw money at the start-ups. The combination has meant that time and time again the US has been first in the market with products for private industry to sell. After that, the US comes to Europe to explain that the industry is self-regulating, that the US Government are uninvolved and that our governments should stay likewise.
This is not a plea on my part for money because the UK will never match the USA in wealth, but it is a plea for more government interest in start-ups, in the need to lay down the basic infrastructure rules for

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such start-ups and thus to remove investment uncertainty. It is sad that tonight there are only three noble Lords speaking plus the Minister because this topic is a very important part of the future of this country. I know that it is late at night, but it would have been lovely to have a few more noble Lords present.
The US is not by any means the automatic leader in everything to do with electronic commerce. It is not the leader in, for example, mobile telephony. It is not the leader in smart card development. The Guardian is suggesting that EC determination to have secure privacy and digital signatures could leave the USA third behind Europe and Asia in respect of electronic commerce. We need to work to turn that into reality. Sadly, the French Government did not help us a couple of days ago when they decided to support the USA on this issue.
To conclude, I ask the Minister whether the Government agree with my priorities—that is, that external EU trade should come first and internal harmony second, and I ask the Minister to study what I hope are six reasonable suggestions for the UK presidency to promote as part of the internal and external harmony which we need with other nations.
8.41 p.m.
Lord Haskel: My Lords, I must congratulate the noble Lord, Lord Renwick, on initiating this debate. The subject of electronic commerce is one on which his views command much respect. As chairman of PITCOM, he and his colleagues whom he has brought along this evening, together with EURIM, have recently produced some excellent constructive reports. I maintain a continuing interest and enthusiasm in these matters, having seen the impact of information technology on business and industry from its very early days. I also served on the inquiry into the information society which was undertaken by your Lordships' Select Committee on Science and Technology—a very interesting exercise.
All speakers have referred to the promise of the current IT situation in the UK. The noble Viscount, Lord Chelmsford, and the noble Lord, Lord Renwick, referred to the City. It is because we can be among the best that we can confidently face the initiative of global electronic commerce recently announced by the US Government. Their approach is understandable. As the noble Lord reminded us, historically the centre of gravity of the Internet has always been the US. The Internet began in North America and US companies continue to invest heavily in its development so that the majority of Internet content is still American in origin. As such, the US will necessarily be a key player if any progress towards meaningful international agreement is to be achieved.
Certainly there have been problems—for example, in initial industry proposals for Internet domain names—but in general the US has been responsive to representations. President Clinton's new initiative is not specific in terms of hard policy proposals. The key principles espoused are a kind of "motherhood and apple pie" which the UK would fully support. The
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announcement in any case commits the US Administration to pursue their goals through discussion in international fora such as the OECD, the World Intellectual Property Organisation and the WTO. As such, the Government warmly welcome the initiative and will certainly ensure that the needs of the UK are fully represented.
Because of the excellence of our industry, the UK has much to offer these discussions since we are already doing a great deal in support of electronic commerce and the information society. Indeed, in some areas Europe is ahead: for example, in the GSM standards for mobile telephony and in the transmission standards for digital broadcasting.
My noble friend Lady Dean asked what the Government intend to do. The short answer is that we shall seek to shift the IT centre of gravity towards the UK by encouraging its use here. I take note of what my noble friend said about the shortage of skilled employees. That is a very important part of the calculation. Nevertheless, the Government will do, and are doing, all that they can to shift the balance back to Europe.
We must first recognise the clear need for businesses and consumers to have the confidence to become IT literate. Only today yet another report has been published suggesting that over 50 per cent. of the population are not IT literate. The Government's own figures from the end of last year suggest that up to 54 per cent. are not IT literate. There is a need to make people aware of the opportunities and the possibilities.
The information society initiative, Programme for Business, supports the development and informed uptake of new technologies and applications by all UK businesses, particularly small and medium-sized enterprises. We are further encouraging the use of the Internet by SMEs by sponsoring the TradeUK initiative—a virtual business park on the world-wide web where UK companies can promote their products and services. We will also soon be launching the Internet Enterprise Zone, designed to help SMEs to obtain quick and easy access to the wealth of business information available on the Internet.
The IT for All programme aims to raise awareness among the public of the benefits that new technologies can bring to everyday life. The Government are committed to ensuring that the benefits of the information society are available to all, avoiding the creation of an "information underclass". My right honourable friend the President of the Board of Trade recently authorised a further £2.75 million expenditure this year for this programme.
This theme of access and opportunity is central to the Government's programme. The Government themselves are committed to making better use of information and communications technologies through the Government Direct programme. This aims to make government services more accessible to its citizens—directly through networks and public access points. We are actively exploring new ways in which this might be achieved. The Prime Minister has committed the Government to ensuring that 25 per cent. of their

811
business should be electronically conducted by 2002. Perhaps the most critical aspect of this access theme is in education—our top priority. Noble Lords will be aware of the National Grid For Learning, launched recently.
With opportunities and access also come risks. All noble Lords have referred to this aspect. It is imperative that businesses and consumers are aware not only of these risks, but also of the tools with which they can guard against them. The Government are active here in promoting the availability of such tools.
We strongly support, for example, the deployment of the Platform for Internet Content Selection. This gives individuals and parents the ability to control the nature of their and their children's experience on the Internet which is vital in reassuring them that this can be a safe and secure environment in which to work, learn and play. We are monitoring the progress of voluntary initiatives such as the Internet Watch Foundation, which deals with illegal material on the Internet. We will keep an open mind on the possible need for further action to support such efforts although they appear to be operating pretty successfully so far.
Security is another example. As noble Lords have said, cryptography is now an essential tool for electronic commerce. It can provide the confidence necessary in the integrity, authenticity and confidentiality of transactions conducted electronically. That is why the DTI is active in consulting on developments in cryptography with both businesses and other governments. We expect to announce our conclusions on the way forward in the next few months.
The development of framework standards in partnership with and led by business interests in this area, as in others, is important in guarding against the de facto imposition of particular US solutions which so concern noble Lords who have spoken tonight. British industry is playing a leading role here—for example, in the work of both the European Telecommunications Standardisation Institute and the Key Recovery Alliance.
More generally, the legal and regulatory framework is a major factor in determining attitudes towards electronic commerce. The Government want to ensure that there are no barriers to future development; that competition is promoted properly; property respected and consumers protected. Equally, we want to ensure that, while lawyers on both sides of the Atlantic deal with electronic commerce, that is not at the expense of the rest of us through court cases concerning unclear or uncertain law.
I can assure my noble friend Lady Dean that the consumer interest is at the heart of our approach. Here I should point out the simple fact that transactions carried out via electronic commerce are subject to the same laws regarding consumer protection as face to face transactions. The Internet is not a legal vacuum. Certainly there are issues raised by the possibility of buying products and services across national borders. But in general it is only minor adjustment and reworking
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of existing law that is required, if anything, coupled with international co-operation between jurisdictions on the handling of particular cases.
The Government's views on the regulatory and legal framework are similar in principle to those set out in the US initiative. Our guiding principle, like President Clinton's, is neutrality and transparency, ensuring that the law applies on-line as it does off-line. This results in the commonsense proposition on the hotly debated topic of liability that each individual will be liable only for his own conscious acts and omissions. We will also look to build on our partnership approach with industry, looking to business to take a lead in developing practical approaches to uphold these principles. And here I thank the noble Viscount, Lord Chelmsford, for the suggestions that he made. We have taken note of his four simple ideas—which are really not so simple. I have responded to some of his points about the consumer interest, but will respond to the other rather more complicated ones later.
There are areas where legislation governing commercial transactions may not cater adequately for the electronic age—for example, in dealing with digital signatures and their admissibility in court—as noted by the Law Commission and indeed the EURIM reports. We expect to launch a consultation around the turn of the year encompassing the reform of the regulatory framework for broadcasting and telecommunications and adaptations of general law which might be needed for electronic commerce. These are areas where we will ensure that UK law is not left behind.
Within Europe the Commission is expected to present proposals for Community action on electronic commerce issues before the end of the year. I can assure noble Lords who have spoken that we are also likely to hold a major debate in this field in the Council of Ministers during the UK's presidency at the beginning of next year. Our aim will be to use our presidency to give these issues a boost and we will ensure that Europe and the UK will not be left behind in wider international developments.
I agree with the noble Lord, Lord Renwick, that effective copyright protection for electronic commerce is also essential, given the ease with which material may be copied and distributed. Here UK copyright law already provides cover for electronic storage and on-line transmission of works. The UK will continue to be active in international development of copyright treaties in the World Intellectual Property Organisation.
Technical solutions are also important in the protection of electronic copyright. Cryptographic solutions, which I mentioned earlier, are particularly relevant, as are the development of effective micro-payment systems. Here the Government are actively progressing matters, working closely with industry to keep track of developments and to assess whether our regulatory approach may need to be uplifted in future. We have, for example, set up a National Smart Card Forum, to provide a focus for card-based developments.
My Lords, if, in the short time available to me tonight I have not been able to do justice to all the points raised,

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and I would invite noble Lords to write to me. But it should be clear that the Government are acting. Our aim is not to leapfrog the US initiative—that is simply not realistic—but to work with it through international organisations. Our task is to build confidence in IT and to encourage its use. I have spoken about how we are doing this in industry, in education, in the community and in government itself. The Government are also tackling the legal and regulatory framework so it will
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not be taken over by the US Government initiative. The US will pursue this work through international trade organisations and we will ensure that British and European interests are given full weight. If the noble Lord, Lord Renwick's, purpose is to ginger us up, I hope that we have shown that we have already started to act.
House adjourned at three minutes before nine o'clock.

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