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British Overseas Territories

Volume 699: debated on Wednesday 5 March 2008

asked Her Majesty’s Government what plans they have to act on the findings of the National Audit Office report on the overseas territories.

The noble Baroness said: My Lords, I tabled this Question for Short Debate in November when the National Audit Office report was due for publication. Time has gone by and this first possible slot came at rather short notice, so I am most grateful to all those who are participating and bringing forward their expertise and knowledge on individual overseas territories to enlighten our debate. Due to the early start of the debate I am not sure all the speakers are in your Lordships’ House at the moment.

I had not appreciated that this week the governors of the overseas territories are meeting in London and that the House of Commons Select Committee, which is preparing a report on the overseas territories, is also sitting today. It has been a busy week for officials at the overseas territories department of the Foreign Office and I apologise for adding to their burden, but as yet they are not in the Box either.

Over the years, I have had the privilege of introducing a series of debates concerning the overseas territories and there has been much change and progress in that time. The last occasion was in 2004, which was before the constitutional review process had been completed but subsequent to the Government’s stated aim of building a modern and effective partnership with the overseas territories on the foundation of our shared past, with Britain guaranteeing security and defence to the territories on the one hand and on the other the territories developing further as well governed, small island economies, where the rule of law and internationally accepted standards are observed. This, of course, remains the Government’s broad objective as I understand it.

The National Audit Office report, which I find to be an extremely helpful and useful document, covers all 14 overseas territories, 11 of which are permanently populated. It assesses key risk areas and the Government’s ability to manage the risks and responsibilities in their evolving partnership with the territories. In terms of this debate, the report also gives us a peg on which to hang the broadest possible range of issues. I hope that noble Lords who are taking part will make the most of that.

At the outset I emphasise that, in talking about the overseas territories in general terms, I fully recognise the diversity and differences of each individual territory. As the report puts it, they range,

“from the uninhabited, environmentally sensitive British Antarctic Territory, to Bermuda which is home to over 65,000 people and is one of the world’s leading financial centres”.

Each and every one of them is put under the spotlight in the report. I draw attention in particular to the table on page 27 with its illustrations of the UK’s risks and liabilities in the territories, from the unfunded pensions issue in Gibraltar to the risks of further volcanic eruption in Montserrat, and even to the decline of the stamp sales from the Pitcairn Islands which has destroyed the economic base of the tiny population.

However, because of time constraints I intend to focus on just a few of the main issues. The report recommends, in recommendation 1, a need for better understanding across all government departments and the establishing of a clear contact point within each department. The territories themselves welcome that and so do I. It is not just for the Foreign Office and DfID to be aware of the overseas territories and their status and to illustrate that in the area of education, but I remind your Lordships of the successful campaign that we carried out to exempt students from the overseas territories from paying overseas student fees. It was a case of first convincing the then Department for Education and Skills and then the Treasury. Happily, that is now operating.

Another illustration is biodiversity conservation. I have received some very useful briefing from the RSPB. The rich biological diversity of the territories far outweighs their diminutive size. They are home to more priority bird species than the whole of Europe, including 34 species at risk of global extinction. Many of the territories are important seabird breeding islands and, as a result, the UK has responsibility for a third of the world’s breeding pairs of albatrosses. We already know that over the past few hundred years more than 20 endemic birds have become extinct in the overseas territories, and because the livelihoods of many of the territories’ inhabitants are dependent on biodiversity conservation—for example, revenue from fisheries and tourism—the Department for Environment, Food and Rural Affairs has an important role to play there.

There are healthcare issues involving the Department of Health and pensions updating issues, but my final example is in relation to cultural heritage. St Helena, for example, needs funding to conserve and preserve its unique buildings and to build up its tourism potential. Currently, heritage lottery funding cannot be sought outside the United Kingdom. Therefore, I ask the Department for Culture, Media and Sport to make an exception here for the tiny territories involved, as we did in relation to the education issue.

The report states that measures to regulate financial services in the overseas territories have had variable success in keeping up with rising international standards. Some of the territories are of major importance in the global financial system: Bermuda, Turks and Caicos, Cayman, the BVI and—closer to home—Gibraltar are all well known names in that area. It is essential that they operate robust regulatory regimes. They recognise that and some have made great strides in protecting themselves from, for example, the risk of money-laundering. They all recognise the problems of anti-competitive tax practices and are working with the OECD to develop appropriate standards of transparency and exchange of tax information. That is a complex area and, when one considers that, for example, over 800,000 offshore companies are registered in the BVI alone, it is a huge task. I know that others participating in the debate will be talking on this subject, and look forward to hearing from them and hearing what the Minister has to say.

I just have time to raise one or two matters which the UK Overseas Territories Association has drawn to my attention and which fall outside the scope of the report. One relates to representation at ceremonies such as Remembrance Day. Some territories have impressive war records and now that they all have democratically elected Governments, maybe it would be opportune to enable them to participate with the Foreign Secretary in laying wreaths at the Cenotaph, which is their wish.

The second issue is perhaps more for the House authorities than the Minister: access to Parliament. Representatives currently have to queue with the general public or masquerade as research assistants. Would it not now be more appropriate to issue them with a pass in their own right?

Finally, having received the Foreign Secretary’s recent communication about the Foreign Office’s new strategic framework, I am sorry that the essential services, policy goals and priorities listed in the leaflet contain no reference either to the Commonwealth or the overseas territories. I hope that the Minster will be able to reassure me that they will not be forgotten.

My Lords, it is my pleasure to congratulate the noble Baroness on her choice of subject and the way in which she delivered her speech.

How could one explain the overseas territories to a Martian? They range from Bermuda, with the highest GDP per capita in the world; to the Cayman Islands, where 80 per cent of worldwide hedge funds are based; to Pitcairn, which used to depend on the sale of postage stamps; to areas such as BIOT—the British Indian Ocean Territory—and South Georgia, peopled only by soldiers and scientists. The only nexus appears to be the link to the Crown, and no policy fits all.

The Martian would also be puzzled by the paradox that this Parliament spends much time debating foreign countries over which we have no control and very little time debating the overseas territories for which we have sovereign responsibility. In passing, I should add that a way to remedy this in part would be an agreement that the system under which parliamentarians can visit EU and EEA capitals should be extended at least to Gibraltar, which is within the European Union.

Since the last report of the NAO in 1997, there have been some welcome developments. Obviously, Hong Kong, the most populous of the territories, has become a special administrative region of the People’s Republic of China. However, since 2006, there has been a much happier relationship between Gibraltar and Spain. There have been some dramatic changes. However geographically isolated, no territory is immune from the modern scourges of money laundering, drugs and terrorism, and they need help.

The NAO report has one major omission: it stresses the importance of governance but fails to mention the valuable role of the Commonwealth Parliamentary Association in capacity building of legislators; that is, in assisting them to make the Executive accountable. This week and next, for example, delegates from the Cayman Islands, Montserrat and Turks and Caicos are attending the Westminster seminar in our Parliament.

On details, much is said about the improvement in the quality of governance. It is said that work within the overseas territories is not a mainstream career path. Yet the clearly limited number of posts in the UK administration poses some constraints. It is ambitious to expect specialism in UK departments. Against that, Appendix 4 of the report shows how few governors have any previous experience of overseas territories when they are appointed to their posts. Surely there is a vast difference between the role of a diplomat in a foreign country and that of a governor in an overseas territory. The scale and nature of training must be examined.

Much is said about joined-up government in the UK. A specific contact point in each relevant government department is a valuable suggestion. Perhaps more relevant, since the overseas territories themselves can provide expertise and experience for other overseas territories, is the possibility of examining secondments from one overseas territory to another. I know that, for example, Gibraltar, which has a high-quality administration, has volunteered to assist in this field.

On risk assessment, as the noble Baroness said, there is the potential £100 million on pensions for former Spanish workers in Gibraltar. There is the question of natural disasters such as volcanoes and hurricanes. There is a continuing liability if the appeal is successful for the Ilois to return to BIOT, from which they, the Chagossians, were so shamefully removed in the 1960s.

The Overseas Territories Association draws attention to the case for the uprating of UK state pensions in overseas territories. After all, they are sovereign British territories. The point has surely been recognised by the Government in respect of tuition fees for students from overseas territories. There is concern about the Department of Health’s questioning of the current quota system for secondary healthcare.

Finally, I have two points from the Falkland Islands Government. They acknowledge an excellent relationship with government departments and welcome the report. They also recognise that Her Majesty’s Government have a duty under the Ottawa convention to remove landmines but state that the landmined areas of the Falklands are safely fenced off. There is no call for an expensive demining programme from within the Falklands. Equally, the Falklands Government stress that the Government of Argentina still refuse to lift their unilateral ban on charter flights. However, the Falkland Islands Government will continue to assist the Argentine Families Commission to organise next-of-kin visits, including planning for a large-scale seaborne visit.

Overall, this has been a valuable report. I am only sad that there has been no report since 1997. Indeed, many of the recommendations made should have been tackled earlier. However, we look forward to a progress report rather earlier than 10 years from now.

My Lords, I, too, congratulate the noble Baroness on securing this important debate on the overseas territories. I apologise to her for missing the first five minutes of her speech. I have a good excuse: I was at No. 10 Downing Street with delegates at the Commonwealth Parliamentary Association seminar and had to leave what was promising to become a rather good party.

I shall talk about three of the smaller overseas territories that I have visited in recent years. First, we have already heard something about the Turks and Caicos Islands. One of the delegates across the road whom I spoke to a few moments ago is the honourable Donhue Gardiner MP, who is a senior adviser to the Minister at the Ministry of Home Affairs and Public Safety of the Turks and Caicos Islands. The report mentions that the islands have received many Haitians fleeing economic and civil disorder. He says that this is true. Every month, around 300 Haitians are repatriated. Given the population figures mentioned in the report, this is about 1 per cent of the population of the Turks and Caicos Islands. It is quite a drain on their resources. It does not explain entirely the increase in their overseas debt, but we must keep an eye on it. The honourable Donhue Gardiner’s view is that he needs a bit of help from the UK Government. Perhaps the Minister can take that on board.

Secondly, I shall speak about the Falkland Islands, which were mentioned by the noble Lord, Lord Anderson. I returned from the Falkland Islands a fortnight ago. I went with the CPA delegation, so I hope that I can bring an up-to-date situation report. The report mentions that squid stocks are variable, particularly of the ilex squid. They spawn in Argentinian waters and then come down the coast. The mature squid enter the 200-mile Falklands zone and are an important part of the Falklands economy, but the stocks are variable—people cannot really tell from year to year what they will be—which causes peaks and troughs in revenue. That is something that we need to keep an eye on. Visits from cruise ships are increasing, but there is a lack of capacity to cope with the increasing number of passengers who come off just for half a day to have a look round the island. There is a need for more transport, more catering facilities and other tourist facilities in order to try to increase the average tourist spend. Land-based tourists stay longer and spend more. Both types are increasing, which is good news for the Falklands.

The report mentions oil exploration. There is some evidence that there will be new drilling in the Falklands in the next year or two. Seismic surveys seem to have indicated some areas where drilling might be fruitful, but unfortunately Argentina has sent threatening letters to potential investors warning them off getting involved in oil exploration in the Falklands. That could be tragic because the Falklands are financially well run. If they could find oil, they would be very well off financially. I know that the Prime Minister has invited the President of Argentina to London in April, I think, and it is important that he brings up these issues with her in order to make sure that we try to reach some kind of normal situation with Argentina. We were there for six days and, while we were there, there were three semi-incursions into the 200-mile zone, two by ships and one by a plane, and Tornados were scrambled to see them off. Argentina is not playing ball.

Thirdly, I want to talk briefly about St Helena. Its airport is vital; without it, the economy is unsustainable. St Helena costs the British taxpayer a lot of money at the moment—£14 million a year—and that will only increase. We need to get that airport. I do not know whether how far the airport has got is in the Minister’s brief, but the sooner it is started, the better, otherwise we will have a generation of Saints who have lived off the island and will probably not want to go back and it will be difficult to attract people back. There are 600 Saints—as they call themselves—on the Falklands, and they inquired whether, when there is an airport on St Helena, there will be a flight from the Falklands to St Helena so that they can get back to see their loved ones.

Can the Minister give us a report on Operation Zest in Tristan da Cunha? It relates to the wall of Calshot harbour, which needs urgent repair work. I think that a ship has arrived and that the Royal Engineers are due to start work soon. It would be interesting to get an update on that. Has the fire at the adjacent fish-processing factory had any impact on Operation Zest? The factory caught fire on 13 February; the Valentine’s night dinner had to be cancelled because it knocked out all the electricity. I understand that a new generator is now working properly, but I would like to know what plans the Government have to help to get that fishing industry back on track.

My Lords, the noble Baroness, Lady Hooper, deserves congratulations. She has been consistent in her support for overseas territories over many years. I could almost take the whole of my speech declaring my interests, but I shall confine myself to two points: first, I have been a governor of Gibraltar and, secondly, I resigned with the noble Lord, Lord Carrington, over the Falkland Islands after that foreign policy disaster in 1982. Having been an administrator in Kenya, rather a long time ago, I witnessed at first hand the transition from colonial empire to today’s remaining responsibilities in these 14 overseas territories. Each territory needs to be treated on its own merits, as the noble Baroness rightly said, because each has different characteristics and different problems to be dealt with.

I shall touch first on Gibraltar. History is a governing factor for Gibraltar. The Treaty of Utrecht constrains any aspirations that the people of Gibraltar may have for total independence. Notwithstanding that, Chief Minister Peter Caruana deserves warm congratulations on three major achievements: first, the Cordoba agreement in 2006, which has led to enhanced regional co-operation between Gibraltar and neighbouring Spain without prejudice to the sovereignty issue; secondly, the new constitution, which is non-colonial and reflects today’s reality; and, thirdly, the economy, which has been diversified and strengthened and has moved away from defence to areas such as tourism and financial services with a strong regulatory system. I believe that the chief minister and the people of Gibraltar deserve congratulations on those achievements.

As far as the NAO report is concerned, we need to bear in mind the need of HMG to provide for each territory a clear framework within which it can operate. In the summary, I was struck by the point that there needs to be a balance between the desire of the people of those territories to have maximum autonomy and the need to ensure that the United Kingdom can meet its responsibilities and minimise its exposure to potential liabilities. It therefore makes sense for these overseas territories to negotiate constitutions that provide maximum autonomy and reflect the non-colonial age, but at the same time, depending on their circumstances, it is important that adequate safeguards should be in place. The example has been given today of the growth of offshore financial services, on which there is a strong recommendation that there should be robust regulation. It is good to note that the OECD praised the United Kingdom overseas territories for the way in which they are co-operating in transparency and the exchange of information. There is no doubt that all the time we have to ensure that the regulatory framework is robust and strong.

The second area in the report that needs highlighting relates to law enforcement. My experience will be the experience of any governor. On the one hand, he is responsible for internal security and the police force but, on the other hand, the local government tends to pay for that security, so the relationship between the governor and the chief minister needs to be close. I agree with the report that there needs to be strong local participation and ownership in the security situation. For example, Gibraltar has now set up a statutory police authority.

The point that I shall end on was touched on by the noble Lord, Lord Anderson. It is the reference in the report to the appointment of governors and supporting staff. It is important to stress that there is a big cultural difference between going out to a country as an ambassador with a representational role and being a governor with responsibilities for the governance and administration of that territory in co-operation with the elected chief minister. They are two quite different things. There is always a danger that the Foreign Office will try to nanny its governors. It is not a wise thing to do—I can say that with clarity. It is striking that only 15 per cent of governors, deputy governors or desk officers have had experience of working in overseas territories in previous posts. Most of the governors have diplomatic backgrounds.

I welcome the idea that there should be a distinct specialism and career path, but it is limiting when you have a total population of only about 200,000 in those overseas territories. The Government should not be afraid to look for wider experience in governorship and in administrative support in those territories, not only from politics—dare I say?—because I have had the privilege of being a governor, but also from the Armed Forces, the Civil Service and local government. A lot of skills could be made available. We should not be looking purely to the Diplomatic Service for the support that we give to the overseas territories.

I end with the reflection that, although the Foreign Secretary has plenty of British interests to pursue, that must never be at the expense of our responsibilities for our overseas territories.

My Lords, I, too, thank the noble Baroness, Lady Hooper, for giving us this opportunity. I agree with my noble friend Lord Anderson that it has been long overdue—the last report was issued in 1997. I hope that it is not as long before we get another one.

I first declare an interest in the overseas territories, especially Gibraltar, because I have the freedom of Gibraltar, something of which I am very proud and which I was pleased to receive. It is a great honour indeed.

I echo what has been said by other speakers about the difference that overseas territories, their governors, ex-governors and even the administration in the Foreign Office make. Sometimes that is not appreciated. The 15 per cent level certainly needs to be raised, because it involves specialist knowledge. I am glad that it is recognised by the Foreign Office that it is absolutely necessary to develop more career civil servants, and so on, in future. I realise that a small number of people are involved, but that is an expertise that can lead only to a better understanding between the UK and the overseas territories, which can only be good for all of us.

Another thing that has been referred to briefly is the need for joined-up thinking about overseas territories by all departments of government. I cannot see why pensions are frozen in some of the overseas territories. In Europe, of course, Gibraltar qualifies. Pensions are not frozen there, nor are they in Bermuda, but they are in the other overseas territories. It would not cost an awful lot to address. The most recent Question asked in this House, in June 2007, referred to it costing only £500,000 to unfreeze them and to update those pensions. They are sovereign territories, so I do not see why that could not happen.

I understand that the Department of Health is looking again at the relationship between this country and overseas territories in health. On primary care, there are reciprocal agreements. It is on secondary care that we find a mismatch, because some have quotas; some can send all the cases that they need to do to the United Kingdom; while others have no agreement at all. It is being looked at from the point of view of whether the arrangement could be reciprocal. Of course it cannot be for secondary care, because many overseas territories do not have the facilities. That is why they have to send people to the UK. I do not think that I need to remind the Minister that those who live in the overseas territories are British citizens. They are entitled to a British passport and, if they lived here, they could use the NHS freely, so I do not see why that should not apply for secondary care. There should not be a quota system whereby you must be ill early in the year or you will not qualify because the quota has already been used up. We need to look at that.

Finance centres have been referred to. The fact that those small territories are sometimes worldwide players says an awful lot for them. I join the noble Lord, Lord Luce, in praising Gibraltar for changing over from a territory absolutely dependent on the dockyard and engineering into a financial centre. It recognises that it is important that it is well regulated and that there is transparency. I am very pleased that it is working so well on these matters with the OECD. I was very pleased that the British Virgin Islands got special reference for what they are doing on that. All the overseas territories are well aware that there is a need to track down criminal activity in those territories.

I refer to something mentioned by the noble Baroness, Lady Hooper: the question of the Cenotaph. We all know that, at the Cenotaph, overseas charities are represented by the Foreign Secretary, but they now all have elected Governments, so why cannot they be represented in their own right? Many people from overseas territories have lost their lives defending or fighting on behalf of the UK, and I am sure that that will happen again in future. Why cannot they be allowed to place wreaths on the Cenotaph along with the Foreign Secretary? That does not seem a big thing to ask.

Finally, the noble Baroness, Lady Hooper, also referred to access to Parliament. If you are a high commissioner, you get automatic access to Parliament. These people are representatives of the territories. There is only a small number of them. We, as Members of both Houses, need to have as much understanding as possible of them; indeed, we take a very big interest in them. Why cannot they have automatic access to Parliament in their own right?

I hope that the Minister will take those two points on board as well. My time is up. I again thank the noble Baroness, Lady Hooper, and welcome the report, as, in general, do the overseas territories.

My Lords, I, too, add my thanks to the noble Baroness, Lady Hooper, and all noble Lords who have taken part in such an informative and useful debate.

The Government’s direct responsibility,

“for more of the world’s shady places than any other country”,

was highlighted last week by Polly Toynbee. I hope that she is right about the OECD's determination to end the secrecy that shields the tax havens from proper scrutiny. The NAO states that the small number of reports of suspicious activity indicates that the financial institutions do not know or monitor their customers sufficiently or are unaware of their obligations to report. It cites the IMF assessment of the territories' compliance with global standards of regulation, which finds that in the smaller territories, there is an alarming degree of non-compliance.

There cannot possibly be proper, world-class international financial centres in as many as seven territories with hugely variable capacities, as well as in the three Crown dependencies—although I accept the assertion of the noble Lord, Lord Hoyle, about high standards in Gibraltar, and others have referred to the BVI, and so on. The risks have been growing with the development of all the territories as financial centres. In the case of Montserrat, the governor has special powers to limit the development of the tiny financial centre. In the Turks and Caicos, the NAO identifies nine areas of bad governance. We are directly responsible for financial regulation there, as we are in Anguilla, but in the rest of the overseas territories, the dangerous policy is to advise from Whitehall on developing local regulatory agencies, but otherwise to let things rip.

Neither the Government nor the NAO have anything to say about the risks of legal financial activities that result in a loss to UK taxpayers of £25 billion—equivalent to 8p on the standard rate of income tax. I welcome the Chancellor's announcement of preliminary moves towards recovering some of the tax lost to the non-doms, which is estimated to yield £650 million a year. We need to balance these measures with advice to the overseas territories on diversifying their economies in order to replace the revenues that they now derive from tax avoidance.

On the BIOT, which the noble Lord, Lord Anderson, mentioned, the NAO is wrong to say that,

“successive court rulings and Orders in Council have disputed the right of displaced Chagossian natives to return to the Territory”.

The Government dispute the right, but it has been upheld twice in the High Court and again in the Court of Appeal. The Law Lords have now agreed to hear a further appeal on the condition that, whatever the outcome, the FCO pays all costs, which are so far not the £600,000 mentioned by the NAO but £2.17 million, before the Court of Appeal, which the former Governor of Mauritius estimates will have raised the total to £3 million, with the Law Lords hearing still to come.

The islanders had customary title over the land stretching back over five generations, but now they hope to reoccupy only two of the outer islands. The FCO doctored a preliminary report by experts on the feasibility of return, as revealed by the Public Accounts Committee, qualifying the key conclusion in the draft that return was physically possible. The cost of resettlement, estimated by Bill Rammell, the former FCO Minister, at £5 million back in 2004, had ballooned to £22 million by the time the case got to court, and has now almost doubled again to almost £40 million in the next 10 years. The NAO wrongly attributes this figure to the resettlement study, which was expressly prohibited from looking at costs, as I hope the Minister will acknowledge.

The Ascension islanders have also had the roughest of raw deals from the Government. The governor told them that rights of abode, property rights and local democracy would be introduced. An island council was elected in November 2002, and a constitutional adviser went there the following year. The council presented a five-year plan to Bill Rammell during his ministerial visit, and the FCO-appointed Attorney-General produced a timetable for land tenure and rights of abode. All of a sudden, that was all scrapped. The council resigned en bloc, and when the subsequent general election was boycotted, the governor appointed an advisory group, which meets in secret and publishes no minutes. There is no democracy there. DfID said that its objective is to enable all aided territories to reach self-sufficiency, although apparently not Ascension. It justifies its dictatorial treatment of the inhabitants by saying that they are almost all short-term contract workers, although some have lived there for 40 years.

To end on a happier note, the Minister, Meg Munn, visited Ascension at the beginning of January and expressed the hope that the democratic process could be restarted, and the noble Lord, Lord Malloch-Brown, assures me that the views expressed to her by representatives of the people on what the FCO should do for that purpose were now being considered. It is clear that the contingent liabilities that might arise from granting rights to the inhabitants were grossly exaggerated and now need to be spelled out for discussion. If all economic activity in the island were to cease, we would of course have an obligation to evacuate the people. However, the strategic importance of Wideawake airfield makes that most improbable, and with a small and stable community, there is no question of DfID being asked to pay for large-scale public utilities or other infrastructure.

My Lords, I thank my noble friend Lady Hooper for securing this debate. In doing so, she raises a number of important questions to which the findings of National Audit Office report HC4 give rise. She has a great knowledge of the subject, and has illustrated the report’s findings with great eloquence.

Although the United Kingdom currently remains responsible for the 14 overseas territories, each choosing to remain under the sovereignty of the United Kingdom, the territories have full independence and enjoy a large degree of autonomy. Their economic survival currently depends on one or two core industries. Although they are not constitutionally part of the UK, most citizens of these territories have been entitled since 2002 to full British citizenship and the right to reside in the UK. The noble Lord, Lord Hoyle, highlighted this.

The last report by the National Audit Office in 1997 considered the key factors in the relationship between the UK Government and their territorial counterparts. Among the points raised by the report was the effectiveness of UK government departments’ work with the territories’ Governments, and despite the territories being a UK-wide responsibility it appears that much of the burden of responsibility falls on the Department for International Development and to a lesser extent on the FCO. Currently, DfID and the FCO have a total of 60 or so staff between them but maintain separate teams. Yet the need for other departments to take their share of responsibilities must be addressed if individual territories are to put processes in place that will build capacity holistically. My noble friend Lady Hooper spoke of the need to ensure that other departments play a far greater role.

The 1999 White Paper, Partnership for Progress and Prosperity: Britain and the Overseas Territories, laid down the future principles for the relationship between the UK and the overseas territories. These include mutual responsibilities, whereby the UK has the right to expect the highest standards of probity, law and order, good government and the encouragement of sustainable development. Although some of the territories such as Bermuda, the British Virgin Islands, Gibraltar and the Cayman Islands are developing and promoting good governance and implementing sustainable processes, huge improvements need to be made by others such as St Helena, Montserrat and Pitcairn, on which £28 million of the £48 million of UK funding is spent.

Does the Minister agree with the report that, in order to ensure that the British people have confidence in good governance in the overseas territories, all governing authorities must deliver timely public accounts and the legislatures must exercise proper in-depth scrutiny over the acts of the executives? The report found that in some of the territories, standards lagged woefully behind those expected in the UK, due to lack of capacity and the experience of local participants. The FCO and DfID should promote the appointment of ex officio members with relevant skills. Will the Minister say whether the Government will look into this recommendation?

Although the United Kingdom Government remain responsible for the citizens of the territories, it is also vital that the territories do not become financially dependant on the UK. As I said earlier, some are better than others at managing risk, monitoring territory public finance and diversifying economically. Will the Minister say what measures the Government have put into place to foster economic development in the territories such as Montserrat to reduce dependency? In 2005-06, Montserrat and St Helena received £28 million out of the total £48 million spend on overseas territories.

Many of the territories are at great risk from both natural and manmade disasters. Indeed, these have had an adverse impact on the Caribbean territories’ major sources of income, often through tourism. Will the Minister tell your Lordships what plans the Government have to ensure joined-up thinking in disaster planning, particularly with regard to fulfilling all elements of the disaster-management cycle of preparedness, mitigation and response and recovery, and to ensure that local measures in the territories accord with international good practice? The UK’s exposure to risk in relation to the territories is varied, and includes meeting international obligations, funding liabilities and deficits and ensuring that the areas of regulation in sectors such as transport and the financial services are implemented.

Although the report recognises that there has been a degree of improvement in the regulation of off-shore financial services, much remains to be done in centres that have weaker controls. Only 10 per cent of the governors, deputy governors, desk officers and London managers have had any experience of the overseas territories, as has already been mentioned. Does the Minister recognise that this remains a weak link in trying to establish better governance, and that further steps need to be taken to establish a clear career path? Does he agree that the challenges faced by governors and territory officials often have cross-over issues, and that the promotion of shared practices and personnel exchange, such as short-term secondments, could improve the way in which some of the less efficient territories manage themselves? The noble Lord, Lord Anderson, alluded to this.

It is confusing that, while many of the issues cross several governmental departments—for example the Treasury, policing, transport—it remains predominantly a DfID responsibility. As the UK stays responsible for the principal obligations applied through the annexes of the Chicago Convention of 1944, which sets the standards and recommended practices for aviation safety and security, and many maritime protocols and conventions through the International Maritime Organisation, failure on the UK’s part to ensure that the overseas territories are not meeting standards and regulations could have severe consequences for the UK and the territories, particularly through claims by travellers affected by safety or security issues. Will the Minister comment on that?

The report presented an in-depth illustration of some serious challenges for the UK in respect of some of its territories. While some are obviously more proactive in their desire to respond to greater efficiency and economic sustainability than others, your Lordships’ House needs to know what progress is being made by the Government on this. In conclusion, I heartily agree with my noble friend that the Commonwealth and the overseas territories must remain firmly in the Government’s mind.

My Lords, I, too, congratulate the noble Baroness, Lady Hooper, on having introduced this timely debate on an essential and important area of United Kingdom policy. I shall not be able to address all the points raised, many of which were comments rather than questions. If there are matters on which I do not touch, I hope that it will be satisfactory that I write to all noble Lords who have taken part in this debate.

Britain has close and deep historic links with the overseas territories and takes its responsibilities towards each of them very seriously. This unique relationship is based on a partnership with mutual responsibilities and obligations. It is against that background that Her Majesty’s Government warmly welcome the National Audit Office report as a valuable contribution to the management of risk in overseas territories. I am encouraged that the NAO has acknowledged that much progress has been made since its last report in 1997, but more still needs to be done. The report has recognised that there are many challenges for the UK Government and the Governments of the overseas territories. It is helpful to us, and we thank the NAO for it, that the NAO has taken a close look into this important area and has suggested constructive recommendations.

As the debate has shown, the management of risk and the relationship between the UK and the overseas territories cover a multitude of areas which offer challenges on the one hand and opportunities on the other. Unfortunately, the brief amount of time that I have allows me to select a couple of the key themes only arising from this report; namely, first, the UK Government’s approach to risk management in the overseas territories and, secondly, progress made towards managing and mitigating that risk.

The United Kingdom retains responsibility for the territories which have opted to retain British sovereignty rather than follow the route towards independence, but it must be remembered that the territories are not constitutionally part of the United Kingdom and largely administer their own affairs in accordance with their own constitutions. I should emphasise at this stage that the constitutional position of each territory is different, so some of my comments will not be appropriate for all territories.

We have, particularly since the 1999 White Paper, sought to allow the territories to run their own affairs to the greatest degree possible. Indeed, elected representatives in the territories make the overwhelming majority of decisions. That makes good sense for a number of reasons: first, it is desirable on democratic grounds; secondly, it maximises local decision-making, which should increase local governments’ capacity to govern themselves; and, thirdly, it should also in theory, and in practice, result in better decision-making than would result from micro-management from Whitehall.

That said, the UK Government have an obligation to ensure that they can discharge their responsibilities to these territories properly. This is an obligation to ensure security and good governance and to ensure implementation of the UK’s international obligations. Further, it is an obligation to the UK taxpayer to protect the United Kingdom from potential liabilities. Increased self-government does not reduce the requirement for the UK to retain and, where necessary, to exercise these key powers in any overseas territory, should the need arise. Any intervention requires extremely careful consideration. We sincerely hope that, by working with the territories to reduce risks and ensure sound governance, we will find the correct balance.

On the progress that has been made towards managing and mitigating risk, the Foreign and Commonwealth Office and the Department for International Development co-operated closely with the National Audit Office. I am aware that both departments approached the whole review as an opportunity to take stock of risk management in the territories and to identify priority areas on which they could focus future efforts.

The noble Baroness’s Question asked what plans the Government had to act on the findings of the report. I shall highlight a few key areas where work is already started. Since the report was received, the Overseas Territories Directorate in the Foreign and Commonwealth Office has revised its business plan towards the overseas territories to place a much greater emphasis on risk management, so that the areas of weakness identified in the report become the main focus of our work. We have in tandem realigned our funding programme to reflect the new priorities.

The FCO and DfID, which are responsible for the delivery of development assistance, share a close working relationship on many of these issues. For example, they are working jointly to influence European Union funding levels for the overseas territories. More recently, the two departments have worked very closely with the Ministry of Defence to deliver essential medical supplies to the remote island of Tristan da Cunha. Officials of the two departments are also working together to define the future direction of the Montserrat Volcano Observatory to ensure that it can meet the needs of the territory over the next 10 years.

Both departments have also sought greater involvement from Whitehall partners to assist the UK in discharging its responsibilities. The permanent secretaries of the FCO and DfID have written to their Whitehall counterparts to seek greater engagement. A number of departments, such as the MoD and the Department for Transport, already carry valuable work in the territories. The engagement of other government departments will be a key element in our ability to support sustainable development in the territories. It is important for us to remember that the UK’s responsibilities towards the territories are government-wide and concern not merely the FCO and the other departments that I have mentioned.

We also recognise the NAO’s finding that the pooling of resources, sharing of expertise and identification of efficiency savings are equally important to improving risk management in the territories, where capacity constraints often hamper progress. We encourage that approach and are now seeking to identify more areas where territories can capitalise on networking opportunities and linkages. We will focus attention on financial services, which were mentioned specifically, international obligations, public sector accountability and criminal justice.

Risk management practices have been high on the agenda over a number of years, and that needs to continue. We have a rolling programme of capability reviews, and we are engaged in one in St Helena, which was mentioned by the noble Lord, Lord Jones. Great emphasis on the identification and appropriate management of risks and sharing best practice is widely encouraged.

On financial services, we have already provided assistance to the Government of the Turks and Caicos Islands to draft new legislation on proceeds of crime, banking and insurance. We plan to do the same for Anguilla and Montserrat. In addition, we have funded financial intelligence unit workshops for all of the Caribbean OTs and Bermuda and have provided support for establishing a financial investigators’ qualification at University College in the Cayman Islands. With the support of our Whitehall partners, I can report that we are taking forward the NAO’s recommendation that we should develop a financial services strategy.

Where applicable, territories have also been informed of the report’s recommendation to move to full-cost recovery for the provision of aviation safety regulation services. The Government will continue to work closely with the overseas territories to promote local ownership and participation in internal security issues. Work to encourage an integrated criminal justice strategy for them has been under way for a while. Territory officials work closely with our own law enforcement adviser and prison reform co-ordinator, whom we have now co-located in Miami to instil greater impetus to this agenda. They will meet with all key law enforcement agency personnel from the territories at a conference in April to discuss how best to take forward the recommendations. We are also grateful to the Ministry of Justice for its support, in particular that of my noble and learned friend Lady Scotland, who will host a conference of Attorney-Generals in the Turks and Caicos Islands next month. Where appropriate, we need to encourage territory Governments to commit adequate resources to all areas of the criminal justice system

I have a couple of minutes left, so I shall do my best to answer some of the points that were raised. We will pass on to the DCMS the issues raised by the noble Baroness, and it will then contact her. The issues on governance and developing overseas territories administrations were raised by a number of noble Lords. We fully recognise the importance of developing that experience base. All governor positions are now advertised across Whitehall. Two of the three governors appointed in the past 12 months have previous overseas territories experience. All staff deploying to governors’ offices now spend time with the Overseas Territories Directorate for full briefing and attend relevant courses, including specialist disaster management training.

I appreciate the strength of feeling expressed on the issue of access to the House, but in the end it is a matter for the House authorities. OT representatives do not have diplomatic immunity and therefore do not have that access. With regard to the Remembrance Day ceremony, the position is as outlined by my noble friend Lord Hoyle: the Foreign Secretary acts in the capacity of laying the wreath on the Cenotaph, and I do not think that there are any plans to change that. However, because feelings are running high on the matter, I shall take it back to the department.

My time is up. I thank all noble Lords for the experience and knowledge that they have shown in this debate, and I thank in particular the noble Baroness, Lady Hooper, for bringing this matter to the attention of the House.