asked Her Majesty's Government:

What action they are taking in the international community to ensure the survival of the tiger both in India and in Sumatra.

My Lords, last year the Deputy Prime Minister announced government funding of £50,000 for tiger conservation which went to projects in India to support direct action against poaching and illegal trade in tigers, and to Indonesia to help to save the Sumatran tiger. We plan to match this in the coming year in support of tiger conservation projects, bringing spending on tigers over three years to over £150,000.

My Lords, I thank my noble friend the Minister for that reply which appears to confirm that the Government remain in strong support of the Convention on International Trade in Endangered Species. However, will the Government join in efforts to persuade the governments of Asian countries to advise their populations that tiger parts have no value as aphrodisiacs?

My Lords, this January the United Kingdom became the first non-range state to join the Indian-based Global Tiger Forum. We hope that this will encourage other countries to join. As chair of the Convention on International Trade in Endangered Species Standing Committee, the UK earlier this year led high-level missions to tiger-range and consumer countries. My noble friend may be pleased to hear that through DNA testing it is now possible to trace where tiger parts have been used illicitly. My noble friend will, of course, be aware that those who may in the past have felt the need to rely on tiger parts may now in certain circumstances benefit from Viagra prescribed through the National Health Service.

My Lords, have any of the tigers in the areas we are discussing been bred in captivity? I have read that tigers from zoos in certain countries have been reintroduced into the wild. Has the UK been involved in any such project?

My Lords, London Zoo is involved in such a project. We seek to do everything we can to help in this matter. At best, between 5,000 and 7,000 tigers remain in the wild, of which between 2,000 and 3,000 are in India. Any appropriate tiger project will receive government support.

asked Her Majesty's Government:

How many women were in prison in England and Wales in March 1996; how many in March 2000; and what plans they have to forestall a further increase.

My Lords, in March 1996 the number of women in prison in England and Wales was 2,120 In March 2000 the figure was 3,392. The size of t he female prison population depends on the individual sentencing decisions of the courts, in which the Government cannot, of course, intervene. However, the Government take seriously the needs of women in the criminal justice system, and keep them under review in the context of sentencing policy and when considering new initiatives.

My Lords, I thank the Minister for that reply, but is not this a thoroughly dismal increase? Does he agree that there is something particularly sad and destructive about a women's prison with its air of families destroyed and children abandoned? Instead of spending millions of pounds on two new prisons for women which are planned For England and Wales, will the Government look again at this whole subject in the light of the fresh ideas set out in Professor Wedderburn's recent report and focus in particular on the possibility of devising effective means of punishment outside prison which would avoid some of these disastrous consequences?

My Lords, we welcome the Prison Reform Trust's report, Justice for Women and the Need for Reform as a major contribution to the thinking on the treatment of women in the criminal justice system. As the noble Lord will know, the Prison Service and the Home Office supplied the trust inquiry with data about women in the criminal justice system and information on regimes in prison.

The noble Lord will know, too, that a working group has been established to develop a strategy in regard to the treatment of women in prison which will provide an opportunity for wide consultation on this issue. Its next meeting will be on the 15th of this month.

The serious recommendations made in the report will be considered extremely carefully by the Government. The noble Lord would not expect me at this stage—it being less than a month since the report was first published—to say which proposals may or may not be accepted. The noble Lord's record in this field is extremely well known and his remarks are taken very seriously.

My Lords, how many girls under the age of 17—particularly 15 and 16 yearolds—are still in prison? Does not the Minister agree that they would be better off in full-time education rather than learning more criminal skills before they come out of prison?

My Lords, I cannot give the noble Baroness the exact figure. She will know that at present females under the age of 18 are held in a number of young offenders' institutions. But, under the detention and training order, from April of this year we have begun to place them in non-Prison Service accommodation. That is a step which I believe the noble Baroness and the whole House will consider to be progress.

My Lords, does the Minister accept that the proportion of women with no or few previous convictions who are sentenced to imprisonment is higher than for men in similar situations? Does he further accept that most women do not commit serious violent crimes and that more than 8,000 children are affected by the number of women in prison today? Will he look back at the 1991 report of the Probation Inspectorate which stated that women would benefit more from intensive probation and community service orders rather than imprisonment?

My Lords, it is important that we bear in mind that sentencing women to prison presents particular problems, largely to do with children. A large proportion of women sentenced to prison are the mothers of often very young children, so the noble Lord makes a good point. However, there are offences that women commit, alas, which are dangerous to the public, even if they are not violent offences. For example, a large part of the increase in the offences for which women are sent to prison is connected with drugs. That does not mean possession of drugs but the selling of drugs, dealing in drugs and, sometimes, the importation of drugs. There can often be some mitigation for women—they can, for instance, be under pressure from male partners—but these are serious offences which are a danger to other women and to other people in general.

My Lords, is the Minister aware of the excellent report published last summer by the Catholic Agency for Social Concern, with the support of the Church of England and other Churches? Does he agree that ensuring the best possible care for the children of mothers serving custodial sentences should be firmly on the Government's agenda, as recommended by the report? Does he further agree that sometimes there are unsatisfactory arrangements for the children of women in prison, partly because the mothers do not think they will receive a custodial sentence and do not make any provision for them? Would it not be a good idea to look at the Dutch proposal for deferring sentence for a few days to ensure that proper care is in place?

My Lords, the answer to all the right reverend Prelate's comments is "Yes". These are all matters that need to be looked at seriously and with speed. As I said, there are particular problems involved in sending women into custody which revolve around children. The children of course suffer—but sometimes the courts are left with no alternative.

My Lords, does the Minister agree that the Government cannot absolve themselves of all responsibility for the level of sentencing, whether of women or of men? In the era of the former Home Secretary, Michael Howard, the prison population went up by 50 per cent in four years because of his pronouncement that prison works. Will the Minister look again at his answer that the Government are not accepting responsibility for the level of imprisonment of women or of men?

My Lords, I spoke only the truth. Individual sentencing decisions are, and must be, for the courts to decide. My noble friend is right to the extent that governments have a role in setting out the parameters of sentencing policy—this Government will be no different from any previous government—and that what Home Secretaries say and do plays a part in sentencing patterns. But—and this is critical—it is up to the court to decide in each individual case what the appropriate sentence should be.

My Lords, further to what the Minister said about the number of women in prison for drug offences as a result of being influenced into offending by partners, does he think that an amendment to the legislation is required so that where a woman is convicted but the court is satisfied that she committed the offence because of the influence of an undesirable or criminal partner, there should be provision for a lower sentence?

My Lords, it does not need the law to say that. I speak from some years of experience in the courts in this field. Any self-respecting defence lawyer would raise the issue that the woman had been influenced by the man—it is not always that way round but mostly it is—and, in my experience, any judge who did not take some notice of that, if it was established, would be successfully appealed against.

My Lords, the noble Lord rightly explained that many women are in prison because of dealing in drugs in some way, but many, many more are in prison because of the effect of taking drugs or of drinking too much. For those people, we know perfectly well that prison is neither a disincentive to their behaviour nor a cure. Do not the Government have it in their heart to say that they will come to Parliament with a measure that will lead to fewer people going to prison? They should not shuffle this matter off onto those who carry out the sentencing. It is not good enough simply to say that the Government have a role. Something must happen. The figures are disgraceful. I am very glad that my noble friend has raised the matter.

My Lords, the Government, too, are glad that this subject has been raised because it is a very important and worrying one. I remind the noble Baroness that under the provisions, which still apply, of the Criminal Justice Act 1991 an offence has to be so serious that only a custodial sentence is appropriate. That is still the law. At the same time, it is right to say that a good deal is going on in terms of rehabilitating drugs offenders, both women and men. But the noble Baroness is quite right to say that a large number of women are in prison first and foremost because they are drug addicts. It is vital that, whether it is inside prison or, it is to be hoped, outside prison, something positive is done about that.

My Lords, is the Minister aware that New Hall prison in Wakefield is designated as an officially overcrowded women's prison? One of the particular problems concerns sanitation. Women are put together in cells which were not designed to be shared. They are locked up for 12 to 14 hours at night and have to share the one lavatory between them, which is unpleasant and degrading. Is the Minister able to give any indication as to whether that can be avoided in the future?

My Lords, I do not know the answer to the right reverend Prelate's question. However, I promise to look into the issue to see whether there is a solution and write to him.

My Lords, is the Minister able to account for the more than 50 per cent increase in women prisoners? Is it that women are committing more crimes or that the crimes they are committing are more serious?

My Lords, the short answer to the noble Baroness is "both". The population has nearly doubled over the past number of years and the reasons given in the report mentioned by the noble Lord, Lord Hurd, are accurate. More women have been going through the courts and a higher proportion are receiving custodial sentences, and for longer periods. But I point out again that 50 per cent of the rise in the past five years is due to drug offences. So the answer to the noble Baroness's question is "both reasons".

asked Her Majesty's Government:

How, after two years of the New Deal, they assess the potential offered by intermediate labour market projects to ease the period of transition for those furthest from the labour market.

My Lords, we believe that, especially when linked to jobs with employers in a given area, intermediate labour markets have an important role to play in moving long-term unemployed people from welfare into work. We are using intermediate labour markets within the New Deal, and in other programmes, all of which are being, and will continue to be, fully and independently evaluated.

My Lords, I thank my noble friend the Minister for that very encouraging answer. Does she agree that the New Deal is the most determined and serious attempt yet to get third-generation unemployed people into work? Does she agree with me that there are areas where unemployment is still high and where the New Deal will be discredited, as earlier training programmes have been, if programmes such as, for example, the Sheffield intermediate labour market, warmly praised by David Blunkett, are not created and pay a proper wage? Are they to be part of what the 15 new employment zones are to offer?

My Lords, I am most grateful to my noble friend for his support of the New Deal. It is the most determined and serious attempt to tackle the problems to which he referred. Long-term unemployment is at its lowest for nearly 20 years. While I agree that there are blackspots where unemployment is still high, the spread of unemployment around the country at regional level is relatively even compared with the position in the 1980s. My noble friend mentioned the New Deal intermediate labour market in Sheffield. That provision is certainly helping New Deal participants to gain valuable work experience in a whole range of skills. It will be looked at within the overall evaluation of the New Deal. On my noble friend's final point, I reiterate that local intermediate labour markets will be used in the new employment zones to help those who have limited chances of getting a job to do so. It is part of a pathway to helping them to become more employable.

My Lords, given that most people taking part in the New Deal are involved with the employment and training sector, does the Minister share my disappointment that, according to the latest figures, only one in 10 of those involved in that sector complete the course and that only 8.5 per cent go on to get full jobs as opposed to going into the other three sectors? Can she say what the Government will do to motivate more of them to take full advantage of the scheme?

My Lords, I certainly would be very disappointed if the figures given by the noble Baroness were accurate and correct, but I do not believe that that is what the figures show. Around 42 per cent of those who are on the education and training option go into jobs. That is what the statistics collected by the Government indicate. I would accept that even 42 per cent is a lower proportion than should be the case. It is important that we continue to work on evaluating this option and that we provide rather more help to young people with regard to the kind of jobs they can get and how to get them. In other words, it should not be an option that simply provides employment and training; it should provide good guidance and proper preparation for work.

My Lords, the information I gave was information given in answer to parliamentary Questions in the other place. Perhaps we need to look those up.

My Lords, I am happy to check the source but I think that what the noble Baroness is describing is a slightly different figure. I am advised that 42 per cent of those who come through that option find employment. However, I accept what lies behind the noble Baroness's question: that those on the education and raining option have to be given more help and preparation in terms of getting a sustainable job.

My Lords, on the subject of statistics, can my noble friend the Minister advise us just how much youth employment has fallen since the Government came to power? What further plans and ideas are being considered by the Government to ensure that this trend is maintained, especially in the pockets of high unemployment which were mentioned earlier?

My Lords, the number of JSA claimants aged 18 to 24 has fallen by 21 per cent over the past two years. Youth unemployment is now at its lowest level for 25 years. That is a substantial achievement. However, we cannot be complacent about it. We have to continue to invest in the New Deal and continue to make sure that the maximum number of young people come out of the New Deal, get a job and sustain that job, so that they stay in the labour market. It is also important to make sure that those young people are employable over the long term. That is why the acquiring of skills is so important and why the Government are investing a great deal of additional funding in further education and intermediate skills levels right across the UK.

My Lords, how much has the New Deal cost over the past two years?

My Lords, the average cost of a New Deal place is £2,000. The average cost of a young person getting a job through the New Deal is £4,000.

My Lords, is the Minister aware that the New Deal has been least successful in some of the inner London boroughs in bringing young people back into stable employment? Has she any explanation for that?

My Lords, I do not quite know what the answer is, or why youth unemployment in London has proved to be more intractable than in some other parts of the country. Youth unemployment is particularly high in London, as is unemployment generally. It is sometimes thought that unemployment is especially high in the north-east, for example, but London is one of the blackspot areas. The situation is being evaluated and examined. I shall be happy to write to the noble Baroness if we have any further information about the specific case of London and why the problem is greater there.

asked Her Majesty's Government:

Whether, following the European Union designation of Cornwall for Objective One funding, they will support the establishment of the Combined Universities in Cornwall by providing the necessary matching funding.

The noble Lord said: My Lords, I beg to answer the Question—ask the Question—standing in my name on the Order Paper.

My Lords, the noble Lord might have an answer to the Question too!

We welcome the collaborative approach taken by higher and further education institutions within the Combined Universities in Cornwall initiative. I understand that the CUC partners are in consultation with the Higher Education Funding Council for England in developing their plans for a higher education hub in Falmouth or outside Falmouth linked to developments in further education colleges. Match funding from all potential sources, including the private sector, can only be properly addressed when there are fully developed project proposals.

My Lords, I thank the noble Baroness for most of that Answer. My interest is as Chancellor of Exeter University—of which the admirable Camborne School of Mines is a part—and which, together with Plymouth University and the Falmouth College of Art, is a leading partner in the project. Do the Government accept that the combined universities are a core project for Objective 1 funding for Cornwall—a county which has no university—in order to "dynamise" education as a catalyst for business? In view of the last part of the Minister's Answer, do the Government recognise that a proportion of the Objective 1 funding needs to be allocated in each year of the planning period, and that it is therefore crucial that a decision by the Government on match funding is taken early, preferably in the comprehensive spending review this July?

My Lords, I accept that Objective 1 funding for Cornwall can, and should, be used for a project of this kind. There are rules and regulations regarding the application of Objective I funding and some aspects of the overall proposals made by the CUC may not be eligible for Objective 1 funding; but from a general point of view, there is no reason why it should not be used, and indeed the Government welcome its use.

On the noble Lord's point about funding from elsewhere, funds may be raised from a whole range of different sources: from the private sector and from local organisations of one kind or another, as well as possibly from government. It is difficult for the Government to make any commitments until there is a carefully worked out proposal as to exactly what the capital funding in particular will amount to.

My Lords, does the Minister agree that many major companies seeking to invest in the UK require a location close to an established higher education centre, in order to have access to well qualified staff and an appropriate range of people, before they will even invest? I admit to an interest as a governor of Plymouth University and as one who is hopeful about the project going forward. One difficulty already established is that, as a very poor county, Cornwall has been accorded Objective 1 status because it cannot raise funding locally. Will the Minister therefore think specially of Cornwall in this case? The county will find it very difficult to raise any private investment funding, given that it does not already have an educational establishment.

My Lords, I entirely accept that universities can have an important role in helping to provide highly skilled graduate employees for an area where the private sector may wish to invest. However, many young people go to university in an area where they have no intention of remaining. We cannot assume that all graduates from a university in any part of the country will remain there. At the same time, the Government are grateful to the University of Plymouth, Falmouth College of Art and the University of Exeter for the work that they are doing. I think that funding must be a matter for those institutions, for local interests and for the private sector, as well as for the Government It would not be right for me to make a commitment that Cornwall should receive more favourable treatment than some other parts of the country which also do not have a local university.

My Lords, why are the Government so reluctant to commit themselves to match funding for Objective 1 areas when they are ready to commit themselves to increased spending in the future for departmental areas such as health and education? Surely Objective I status and the money that flows from it are of value to those areas.

My Lords, the Government do not in any way deny the value of Objective One funding for the areas that are eligible for it. However, they also believe it right that the areas concerned should attempt to raise match funding from a variety of different sources rather than automatically assuming that the money should come from the taxpayer via central government.

My Lords, I congratulate the Minister on her work in regard to Objective 1 funding and the joint university project in Cornwall. She is, of course, aware that the Open University is another growth area of which the United Kingdom has great reason to be proud. Will she support the Open University's push to assist the enlargement countries of the European Union by bringing the very real benefits of the Open University to extremely poor countries such as Romania?

My Lords, I have long been an admirer of the work that is done by the Open University, not just in the UK but overseas. The OU has an international reputation, and it is extending its overseas work. If it can operate in countries such as Romania, where there is a desperate need for higher-quality higher education, that is all to the good, not just of the UK but of Romania.

My Lords, at a convenient moment after 3.30 p.m. my noble friend Lord Bach will, with the leave of the House, repeat a Statement that is to be made in another place on the demonstrations in central London.

My Lords, I beg to move the Motion standing in my name on the Order Paper.

Moved, That the Lord Grenfell be appointed a member of the Select Committee.—(The Chairman of Committees.)

On Question, Motion agreed to.

My Lords, I beg to move that this Bill be now read a second time. This Bill is a key element in the Government's programme for the modernisation and reform of public services. The Postal Services Bill will ensure that the country has both a Post Office and postal services fit for the nation's needs in the 21st century. The Bill will establish a modern Post Office that is able to develop its business and grow as a significant global player so that it can meet the enormous challenges and take advantage of the opportunities which now arise in the rapidly changing national and international markets. It will provide a firm basis for greater competition in the postal services market and a better deal for all consumers. All this will ensure that we have a strong Post Office that is better able to serve each of its customers in all parts of the country.

The Post Office has for too long been denied the opportunity to develop and modernise itself. The plans of the previous administration to modernise the Post Office and postal services came to naught. All that the previous Conservative government did was to extract greater sums from the Post Office to support the debts that they had incurred. The Post Office was denied the opportunity to invest and grow, in marked contrast to the way in which the Dutch Post Office has been given the opportunity to buy one of the world's leading carriers, TNT, and the German Post Office has been allowed to acquire the shares of several important businesses, notably 25 per cent of one of the other major carriers, DHL.

The Government are determined that the Post Office should have the opportunity to compete with the leading players in the market so that this country can benefit from having one of the leading postal operators in the world. This is vital not just for the Post Office in its own right but for the country as a whole because of the way in which so much of our business and social life is highly dependent on efficient postal services. This Bill will enable us to complete the package of reforms which I outlined to the House in December 1998 and described in greater detail with the publication of the White Paper Post Office Reform in July of last year. We have already taken steps to allow the Post Office to invest more, having reduced the "dividend" that the Government effectively take out of the organisation to 40 per cent of post-tax profits from the 75 to 90 per cent taken by the previous government. In addition, we have allowed the Post Office to borrow up to £75 million without specific permission from the Government with further sums to be approved on a case-by-case basis.

We have already seen the benefits of these changes in the acquisitions made by the Post Office since the end of 1998. It has acquired 100 per cent stakes in German, Austrian, Irish and Dutch parcel companies and the US company Citipost. This will help the Post Office to grow its business by entering new markets. The Bill will give the Post Office greater commercial freedom without removing it from public ownership. We have seen this model adopted successfully elsewhere. Sweden and Denmark have shown that it is possible to give post offices commercial freedom, while keeping them in the public sector. At the same time, the new independent regulator will increase competition and guarantee a universal service.

The Bill before your Lordships has four main objectives. It will put consumers first by establishing a new independent regulator and a new consumer council, both with strong powers to protect and promote the interests of the users of postal services. The Bill will also further consumer interests by placing duties on the regulator, first, to ensure the provision of the universal postal service and, secondly, otherwise to promote the interests of the consumer wherever practicable through greater competition. This can be achieved by reductions in the scope of the licensed area or by the granting of licences to compete within the licensed area. The Bill will give the Post Office scope to modernise and run a fully commercial business in the 21st century. We shall achieve this by converting it from a statutory public corporation to a public limited company with ownership remaining with the Crown. A plc is a well understood commercial structure which is more appropriate to a forward looking business; and it will also complement the greater financial flexibility that we shall give the Post Office. Lastly, the Bill will reinforce the Government's commitment to a modern counters' network, with powers to ensure reasonable access to Post Office counter services.

Part I of the Bill creates a new independent regulator, the postal services commission. This part also creates a new consumer council, to which I shall refer later. It will be the duty of the commission, as detailed in Clause 3, to ensure the provision of a universal postal service at a uniform tariff, as set out in Clause 4, and to look after the interests of consumers. It will do this wherever possible by promoting effective competition. The commission will be responsible for a new licensing regime for postal services within the reserved area. The arrangements are detailed in Part II of the Bill. Through this licensing regime the commission will regulate prices, enforce high quality standards and improve choice through greater licensed competition.

It is anticipated that the first licence will be granted to the Post Office company, but others will be able to apply for licences to carry out services within the reserved area, as described in Part II of the Bill, in what is at the moment effectively a monopoly area for the Post Office. In addition to being able to promote regulated competition, the commission will be able to propose reductions in the scope of the reserved market area. Such changes will be subject to approval by a resolution of both Houses. By introducing competition in this way, we shall stimulate greater innovation, lower prices and promote better services for customers.

In passing, perhaps I should say that in all the changes that we make we shall endeavour to ensure that the Post Office meets the needs of all its customers. Much of its business will come from large-volume users, and the organisation needs to be free to provide services which are commercially attractive to them. But the needs of individuals must also be fully provided for, and under the provisions of Clause 5 in performing its duties the new regulator will be required to have regard to the interests of those who live in rural areas, the disabled or chronically sick, pensioners and those on low incomes. In addition, under Clause 43 we shall issue social and environmental guidance of which the regulator will be required to take account. That will help to ensure that the benefits of a modern post office are available to all users throughout the UK.

In Clause 41 the Bill also gives the Secretary of State power to direct the commission to impose a licence condition which requires the licensee to provide free postal services for blind and partially-sighted people. This will ensure the continuation of existing non-statutory practice by the Post Office to convey certain items free of charge for blind and partially-sighted people, known as "articles for the blind".

Where competition does not provide effective protection of consumer interests the Bill will give the regulator new duties and powers to promote consumer interests, regulate prices and ensure a high level of service to all users. Part I of the Bill thus imposes a duty on the new regulator to ensure the delivery of the universal service at a uniform tariff. The postage will be the same regardless of the distance of delivery within the UK. Whether one is talking of the Isle of Dogs, the Isle of Wight or the Isle of Skye, the cost will be the same and will be guaranteed in law. Through a licence condition the Post Office will be required to provide the universal service which will include daily delivery to all addresses at an affordable, uniform tariff.

The commission will have responsibility for setting quality standards and regulating prices. To police these the commission will also be given powers of investigation and enforcement, including the power to impose monetary penalties for breach of licence conditions. Licensees will be required to achieve quality of service standards or risk being fined by the regulator.

Part III of the Bill provides further protection for consumers through the replacement of the Post Office Users' National Council with the new consumer council for postal services. This will be given the same powers as the new consumer council that is being established in the energy market, including wider access to relevant information from the Post Office to enable it to do its job effectively. For the first time there will be a single national body for postal users. Within that national framework the Bill also requires the consumer council to set up separate committees for Wales, Scotland and Northern Ireland and allows for regional committees to be set up in England. These measures give consumers the powerful watchdog that they have lacked for so many years.

Part IV of the Bill will provide a modern framework to enable the Post Office to deliver a world-class service and compete with overseas competitors. The time has come to give the Post Office more freedom and enable it to meet the challenges and opportunities of the changing market, increasing competition, technological change and substitution and changing customer needs.

Britain's Post Office has great achievements to its credit and it is one of the country's most recognised and valued brands. But to build on these achievements in the future the Post Office will need to meet four major challenges. It will need to respond to the growth of e-mail and other forms of electronic communication as an attractive alternative to the traditional letter. It will need to meet the challenges of the liberalisation of postal markets in Europe and elsewhere. It will need to meet the growing competition for the business customers who provide the most profitable parts of the Post Office's business and who will increasingly look to service providers to offer them a full range of express, parcels and logistic services as well as the traditional delivery of letters. And it will need to adapt to the emergence of new business opportunities as e-commerce expands.

All postal administrations face these challenges and each of them faces the need to become more commercial, to improve its productivity and working practices, to establish new alliances or joint ventures, to make strategic acquisitions to link up with other logistics and express carriers and to offer a wider range of services. Throughout Europe change is now taking place and the pace is likely to accelerate rapidly in the next few years.

Already the Post Office faces competition in the UK from overseas postal administrations and delivery companies, some of whom are ahead of the game. This Bill will provide the freedom to enable the Post Office to develop to its full potential while maintaining it within the public sector and delivering our promises about share disposals.

The provisions of Part IV of the Bill reinforce our manifesto commitment to give commercial freedom to the Post Office within the public sector. They will convert the Post Office into a public limited company, able to be more responsive to market developments and customer demands.

The plc model is widely understood and clearly sets out the duty of directors to the company; it helps establish the clear separation of the functions of ownership and management; and also enables Government to receive a proper dividend rather than the Post Office having to build up cash deposits on its balance sheet. The new Post Office company will be governed by normal company law, making much clearer the responsibilities of Government, as owner, and the Post Office Board, as managers of the business. Any special arrangements that the Government may need to make to protect the public investment in the Post Office company will be entirely transparent.

The Bill delivers, through Clauses 65 and 66, our promise that there would be no general sale of Post Office shares without primary legislation. Disposals may be made only in the limited circumstance where the Post Office company enters a joint venture or other working arrangement, and the disposal is part of that deal. Such a disposal must be in the commercial interests of the Post Office company.

The commercial future of the Post Office depends on its being able to compete effectively with other global players. The Post Office must be equipped, therefore, to develop its business, and this may well involve forging alliances and commercial partnerships with those having complementary skills and franchises. We need to ensure that the Post Office has the freedom and commercial flexibility to do this. But under Clause 67 any share sale or swap, to cement a commercial alliance between the Post Office company and a partner, requires approval from both Houses of Parliament. Similar restrictions apply to the disposal of shares by the Government or the Post Office company in any subsidiary company engaged in providing the universal postal service. These provisions underline the transformation of the Post Office into a more commercial, though publicly owned, organisation. They will enable the Post Office to realise its ambition to become one of the top global distribution companies.

The new framework for the Post Office will put it in a position to develop all aspects of its business, including the counters' network. We fully recognise that the network of post offices has never been static, and over the past 20 years it has slowly reduced in size as people's lifestyles and buying habits have changed. But the network of post office counters is a cherished and socially valuable national asset, performing a vital role in local communities especially in rural and deprived urban areas. We are therefore making some specific provisions in the Bill to help ensure the maintenance of the network, and the continuation of the important community and social role played by post offices.

In the first place, the social and environmental guidance that the Government will issue to the regulator, in accordance with Clause 43, provides the vehicle for ensuring reasonable access to postal services. The regulator and consumer council will closely monitor the network against this guidance and advise the Government on the accessibility of public post offices. The regulator will be required to take account of the social and environmental guidance when carrying out its duties, in particular its duty to monitor and advise on the number, location and accessibility of public post offices.

The Government are helping the Post Office develop the counters' network. We are investing nearly half a billion pounds towards equipping all post offices—over 18,000 of them—with a modern on-line computer system, called Horizon, to enable them to provide a wider and better range of services. This will enable the Post Office to extend substantially its arrangements with banks and building societies which should greatly extend the banking facilities available to bank customers generally, especially in rural and some urban areas from which the banks have withdrawn. The Horizon platform should also enable the Post Office to improve the service it gives to existing customers and open up exciting opportunities for attracting new business.

This new on-line system will enable post offices to attract new business and improve their commercial viability. The Post Office is an under-utilised resource. Its services need to be enhanced and more widely advertised.

Already the Post Office is changing. The provision of 3,000 new cash machines at post offices up and down the country is indicative of the new opportunities the business is exploiting. In addition, a bureau de change service is available at all post offices throughout the country. Over 4,000 post offices have National Lottery on-line terminals, including 1,500 in rural areas. The number of post offices providing vehicle licences has doubled in the past 20 years. And mobile phone pre-payment cards are available from nearly 5,000 post offices—rising soon to over 6,500.

We are also taking a radical look at the viability of the post office network so that it can face the future and no longer have an unhealthy over-reliance on Benefits Agency work. That is why the Prime Minister, last October, asked the Cabinet Office to carry out a special study of the network, reporting directly to him. But in case this is not sufficient, the Government have, as a safeguard, made provision, in Clause 102, for financial assistance if this should prove necessary at some point in the future. It is an enabling provision, which is not intended to presuppose that financial assistance will be needed. But it would have been irresponsible of us not to make provision in this Bill for the possibility of some sort of Government intervention at some time during the lifetime of this legislation.

The Bill modernises much of the existing body of law relating to the Post Office—and in Parts V, V1 and V11 we are updating many of the provisions of the 1953, 1969 and 1981 Acts which will still be needed in future.

This is a comprehensive piece of legislation which is designed to enable the Post Office to move boldly into the 21st century in such a way that it can win new business, expand into new markets and create jobs and wealth in Britain while maintaining high standards of service and protecting disadvantaged groups and communities.

The Bill provides for strong consumer protection, wherever possible through competition, and ensures that the benefits of a competitive, modern postal service are available to all. The Bill provides for a Post Office with a modern, commercial structure without removing it from public ownership. It provides the commercial freedom, backed up with greater financial freedom, which will enable the Post Office to become a major global player, while ensuring that we retain the important social obligations that make the Post Office such an important part of the social fabric of our country. I commend the Bill to the House.

Moved, That the Bill be now read a second time.— (Lord Sainsbury of Turville.)

My Lords, I thank the Minister for the careful way in which he explained the Bill, even though at the beginning he was somewhat selective in glossing over the opinion of his party when it was in opposition. However, that is politics and therefore I shall excuse him!

At the headquarters of the postal workers' union, there is on display a silver salver presented by me on the occasion of the delivery of the 5 millionth package on behalf of my former United Kingdom mail order business. When I decided to move my posting department from Lewes in Sussex to Newport, the district postmaster came to see my co-director to ask what he had done wrong—absolutely nothing, as it happened.

In Newport, those working for the Post Office helped me with the design of my factory to ensure that its vans could drive right inside the building. They did their sorting inside the building and many a time when a van was full they drove off with an extra sack or two on the lap of the driver's mate. I tell your Lordships that to show that I appreciate at least as well as anyone in the Chamber both the value of an efficient Post Office which puts service to its customers high on its list of priorities and also the hard work of the postal workers.

We give the Bill a cautious welcome. The reform of the Post Office, giving it commercial freedom to compete in the marketplace, is an objective which we fully share, especially the continuing commitment to the universal delivery. Indeed, we wanted to bring in suitable legislation as long ago as 1994, but we were thwarted in our aims by our thin parliamentary majority and, as I said, by the implacable opposition of the party now in government. However, we recognise the key reforms set out in the White Paper and agree in part with some of them. I notice that the noble Lord, Lord Razzall, who will forgive me for saying so, is again starting on me as soon as I get to my feet.

In the midst of the conflicts between government departments and the U-turns, such as over the level of the monopoly, there seems to be a recognition that restructuring is the only way to improve the efficiency and competitiveness of the Post Office. The Bill creates a new Post Office regulator and a new consumer council for postal services, but this is the first time that a 100 per cent government-owned industry has had both a regulator and consumer body. It is therefore essential that their relationship with the Post Office is clearly defined.

However, we are concerned that the powers given to the commission, especially over the production of documents, will result in creeping regulation of the unlicensed area. Similarly, the Bill provides for the consumer council to have power to make proposals to businesses operating outside the licensed area. It is our view that minimal interference in the intended new commercial freedom of the postal services is absolutely essential.

The Bill presents two main objectives. One is to enable the Post Office to adapt itself to modern methods of delivery of communications and to compete not only with the quicker and cheaper faxes and e-mail, but also with private commercial firms and some foreign post offices, particularly the German and Dutch. The commercial activities of the Post Office include providing services at commercial prices to the Government, including the Benefits Agency and various organisations such as the BBC and the DLVA via Post Office Counters.

The other objective is to run the vast network of privately owned and operated sub-post offices spread across the country, which not only provide all the services of Post Office Counters, but in many cases are the focus of the local communities. I refer to the 18,500 local shops to which no doubt many references will be made during today's debate.

One-third of their income is derived from the services they provide for the Benefits Agency and the DSS, and a large part of the remaining two-thirds comes from the customers who spend some of the money in the shop while they collect their pensions or allowances. They represent an investment by their owners of some £2 billion. During the Third Reading debate in the other place, the Minister for Competition and Consumer Affairs disputed that figure and suggested that it was only £1 billion. Well, £2 billion divided by 18,500 is about £108,000 per unit. Taking into account the value of the buildings, stock and goodwill, I suggest that £2 billion is probably closer to the mark.

That is the kind of money that is at risk in the Government's proposals to take the profitable business of the payment of benefits from the sub-post offices and make a present of it to the banks. I wonder what your Lordships think of the possibility of a sub-postmaster who wants to retire getting a decent price for his business today. That aspect is the single greatest cause of concern among Members of the other place and I have no doubt that it will be of concern to many of your Lordships.

I want to deal first with the so-called "solution" which the Government came up with at the 12th hour of the matter being before the other place. Despite promising the Opposition that provisions would be introduced at the Committee stage to provide a subsidy for sub-post offices, the Government failed to do so until the final stages of the Bill. In introducing it, the Secretary of State had the good grace to apologise for the fact, saying that they did not have the opportunity to introduce the amendment in Committee. The more likely reason was that there was a furious argument between the DTI and the Treasury.

The Secretary of State went on to say that some honourable Members might criticise him for that. He got that right! He claimed that he deliberately chose to delay the new clause (Clause 102 in the Bill before us today) so that it could be debated by the whole House instead of only by its Committee—and, naturally, I believe him—and that it was nothing at all to do with preventing the clause receiving the scrutiny that its vagueness, loose drafting and ambiguities demanded. I can assure the Minister that your Lordships' House will take the opportunity to give it the attention it absolutely requires.

In order to help the Minister—as he knows, I always try to do so—I shall indicate the matters in the clause that need to be clarified so that he may prepare himself to deal with them either today or, I suspect more likely, as the Bill progresses through the House.

The subsidy is a discretionary one, which I believe makes the whole exercise completely meaningless. We do not even know whether the subsidy is to be permanent or transitional; we do not know the criteria for providing it; and we do not know whether it will be automatic according to some transparent and uniform arm's-length formula. We do not know who is the mysterious person, referred to in Clause 102(2), who shall decide to make the payments, or who is the other person, referred to in subsections (3) and (4)(c), who shall pay the money, or whether they are one and the same other person. The Ministers in the other place failed to explain that. Who are the persons to whom such subsidies will be paid? How are we to ensure that the subsidies will not be used as another piece of political bribery—perish the thought? We especially do not know how much the subsidy will be.

The Secretary of State was not able to say how much is available to save about 9,000 sub-post offices which are likely to go to the wall and deprive their communities of what he described as their,

"important community and social role".—[Official Report, Commons, 15/2/00; col. 808.]

I should like to offer him a suggestion. The interest on the interest on the incredible windfall of £22.5 billion from the sale of digital telephone licences would produce more than £80 million a year. We shall most certainly want a detailed reason for the final subsection (6), requiring Treasury consent, which makes the whole ramshackle scheme even less plausible and lifts the art of gesture politics to new heights.

It is obvious, really. If the Treasury saves £400 million, somebody else will have to lose it. The whole problem of the sub-post offices is caused by the Treasury's desire to grab an extra £400 million a year—not just a one-off—from the pockets of the sub-postmasters at the expense of the whole social structure of our small communities. It is not yet clear how the Treasury's overriding sanction is to be operated; whether there will be a blanket consent or a case-by-case award. If the sub-post office of Mudbank-on-Sea needs £1,000 a year to keep going, is the whole panoply of interdepartmental consultation going to be gone through by two bands of civil servants while in the mean time the problem solves itself because the poor sub-postmaster goes bankrupt?

The Secretary of State could provide no answers in the other place. All he could do was to offer discussions with interested parties, including the representatives of sub-postmasters and sub-postmistresses. Who else does he consider is interested? There is no movement by customers to close sub-post offices.

It was impossible for the other place to examine Clause 102 properly because of the late stage at which it was introduced. It is equally impossible for your Lordships to do so unless the Government clearly spell out the detail of what they have in mind, and unless the report of the Performance and Innovation Unit is published at an early stage of the Bill's progress through your Lordships' House. The sub-postmasters want income, not subsidies, and we support them. But of course in this case subsidies are the last resort.

The whole scheme is nothing but a sticking plaster to attempt to patch up the gaping wound that will be inflicted by the Government if they introduce the automatic credit transfer system. On the one hand, the scheme will certainly save the Treasury money, but another department will have to find that money in order to pay the dole and income support to thousands of people who will lose their jobs and businesses as a result.

I make one final point before I leave the important subject of subsidies. I should like the Minister, either in replying to the debate or, if he cannot do so, by writing to me, to give me an assurance that any subsidy will not fall foul of EU rules.

I make no apology for having spent so much of my time on the issue of sub-post offices. It is absolutely no use to promise, as the Bill does, a universal postal delivery if the customer has nowhere to go to buy a stamp. That is the essence of the whole matter. The dilemma faced by the Government has been to find a way to give the Post Office the greater commercial freedom that everyone agrees it urgently needs. The solution that we favoured—privatisation of 51 per cent—has been rejected by this Government because of the continuing objections of the unions. This is certainly not the time and place to rehearse that debate again.

However, perhaps I may touch on some of the other problems that your Lordships will be asked to solve. The status of being a publicly-owned company will do little, if anything, for the commercial freedom of the Post Office. The Times' City commentary describes the proposals as granting the Post Office,

"bogus new commercial status within the state's maw".

That article was written—and I wrote my speech (or, at least, thought about it)—before it became politically incorrect to use the word "bogus", and I saw noble Lords' concern.

The bogus status is emphasised by the Post Office's limited borrowing powers: a derisory £75 million a year without extra Treasury approval. I, in common with the rest of your Lordships, regard £75 million as more than pocket money. However, in the world of the communications industry, that sum is peanuts when the kind of deals that are done involve, if noble Lords will excuse the pun, telephone numbers—hundreds of millions of pounds at a time. The Post Office was given permission to spend £300 million on German Parcel. The Dutch Post Office bought a mere 25 per cent of DHL for a secret figure that we can assume was well above £75 million. The Secretary of State has power to make loans to the Post Office or its subsidiaries from the national loans fund. But the question is: at what rate of interest? The Government assured the other place that it would be at commercial rates, but that is not set out in the Bill.

A problem also exists in that, if the Post Office borrows from outside sources, the Government will be seen as a guarantor and that would also give an unfair commercial advantage. Then there is the question of VAT. Pursuant to EU directives, the Post Office does not have to charge VAT on its parcel service but its competitors do. Sweden and Finland charge VAT on parcel services. I ask the Minister to tell us in his reply how the Government propose to level the playing field for the Post Office's commercial competitors in this area. The Post Office itself is profitable, but Parcel Force is less so. The EU directive on postal services requires the keeping of separate accounts to enable cross-subsidy between the reserved and the non-reserved areas to be detected. The regulator has given a welcome assurance that the licence will contain a provision to that effect. Indeed, I understand that a draft licence has been circulated, although the DTI has certainly not sent me a copy. The Minister for Competitiveness told the Committee in the other place:

"We want to ensure that there is no cross-subsidy between reserved and non-reserved areas".

However, again, that is not in the Bill, and I ask the Minister why not.

My honourable friend the Member for Rutland and Melton raised the same issue in Committee in the other place but was persuaded by the Minister to withdraw his amendment. He did so, as he said, in order to give the matter further consideration. Well, we have done so carefully and are convinced that this is a matter which must not be left to the possible changing view of the licensing authority. It must be enshrined in the Act. Therefore, this is an area that we shall certainly wish to probe as the Bill continues through the House.

Your Lordships will have noticed that during this rather long speech I have not yet mentioned the Horizon project for automatic credit transfer, although I dwelt on the disastrous effect that it will have on local sub-post offices. The problem that will hit the post office network is generated by the activities of two other departments that are not really involved in this Bill; namely, the Treasury and the DSS.

However, two questions as yet have not been answered by the Government. First, how will pensioners and recipients of benefits collect their money if there is no local post office or, indeed, no bank? In other words, physically what will they have to do, where will they have to go and what identification will they have to produce once the benefit books are phased out? The Minister of State for Social Security admitted as recently as 29th March in the other place that the Government did not have the answers to all the questions.

Secondly, to the extent that the Government hope to involve the banks in handing over the cash by one means or another, how can we be sure that the banks will be persuaded to be benevolent enough to provide that service for nothing and that they will not be a major recipient of the proposed subsidies?

The Government have rushed this Bill be fore Parliament before the effect of ACT and the access aspect have been evaluated fully. The report of the Cabinet Office's high-sounding Performance and Innovation Unit is long overdue, and I await its findings with considerable impatience.

I began by giving a cautious welcome to the objectives of the Bill. I conclude by saying that we have considerable misgivings about some o f the details, and we shall explore them very carefully in Committee. However, I can assure the Minister that we shall explore them not only carefully, but also constructively, during the remaining stages of the Bill.

My Lords, I join the noble Baroness in thanking the Minister for the clear way in which he explained the Bill. I am sorry that the noble Baroness is sensitive with regard to the apparent opposition from the Liberal Democrat Benches to some of the remarks that come from the Tory Benches. I can assure her that that has nothing whatever to do with her personality, which I have always found exquisite; it is entirely to do with the fact that very often she says things with which I disagree.

For her elucidation, when she became slightly oversensitive on the novel constitutional doctrine that she seemed to be putting forward, I was commenting to my colleagues that in 1994 the then Tory government did not see fit to bring forward the legislation to regulate the Post Office that they would have liked to do because they did not have the necessary majority. It was my belief that in those circumstances the natural constitutional doctrine was that a government resigned and tested the opinion of the electorate as to who should be running the country. But there we are!

Again, like many noble Lords, I am sorry that what is, on many issues, an important Bill has to some extent been side-tracked by the issue of sub-post offices. Both the Minister and the noble Baroness addressed most of their remarks to the issue of sub-post offices. I am second to none in recognising that it is a most significant issue. However, it is only part of the very important debate on which we in this House are now embarking with regard to the future of the Post Office.

It is particularly unfortunate that the debate regarding sub-post offices has coincided with the events that are to take place on 4th May. I suspect that a number of the comments made by all political parties on this issue have been dictated more by electoral necessity than determining the right solutions for the sub-post offices network. I do not wish to spend a great deal of time discussing that issue on Second Reading. The subject has been well debated. At a very late stage the Government introduced recommendations for a subsidy. Like the noble Baroness, we on these Benches wish to test exactly what the Government have in mind with regard to the importance and detail of what we had believed would be Clause 1 but is now Clause 102. Clearly, a number of decisions taken both by the previous government and this Government have had a seriously deleterious effect on the sub-post office network. I know that several of my noble friends will wish to touch on that matter in more detail.

The fundamental issue enshrined in the Bill, which has been the subject of debate and lengthy battles with governments of various political hues for a number of years, is how to reconcile the Post Office having the commercial freedom, which all parts of this House recognise it should be given, and public ownership. I suspect that the Tories consider it an easy issue and that, if only they had had the votes, privatisation would have taken place in 1994. The issue for the present Government, as I expect will be demonstrated by a number of speeches from members of the government party today, is finding a satisfactory compromise between giving the Post Office the commercial freedom which everyone recognises is essential and the factors of ownership, control and democratic accountability. It seems to many on these Benches that the compromise, as reflected in the Bill, is an uneasy one.

First, we have a plc, with its connotations for the financial community. But, of course, there is no ownership change. That remains with the Government. The Bill proposes that the external finance limit under which the Post Office currently operates should be replaced, as the Minister indicated, by a new, commercially-based shareholder dividend at an agreed percentage. That, of course, is not a dividend which is subject to the commercial realities of the Post Office. It is a dividend imposed on the Post Office plc by the Government.

The Government also propose that the Post Office should have the freedom to borrow—but only up to £75 million per annum. In reality, does that represent commercial freedom and commercial freedom to borrow? The Government are proposing that if a subsidiary supports the universal service obligation, the Post Office can conduct a future share sale or swap. Is that commercial freedom? Is it commercial freedom to say to a subsidiary, "You can do a share sale or a share swap"—some form of disguised privatisation—"provided it comes into Parliament for approval"?

On this fundamental issue, it seems to many of us that we have a structure under which the Government are edging forward three steps towards privatisation but taking two steps backwards. That is perhaps an uneasy compromise on the face of the Bill. A number of commentators, particularly the report of the Trade and Industry Select Committee of September 1999, have raised a number of questions that must lie uneasily with the Minister if his argument is that total financial freedom has currently been given to the Treasury.

First, the case made by the Minister is that, with new borrowing facilities at commercial rates and the Treasury forgoing the excessive dividends previously taken, the Post Office will be adequately funded. However, the Trade and Industry Select Committee suggested that no case had been made that by these mechanisms the Government were providing vast sums of extra money for the Post Office.

Secondly, to reiterate points made when the Government brought forward the White Paper for consideration by this House, if the Post Office is being given proper commercial freedom, is it to be permitted to create a salary structure for its executives that is commensurate with international companies operating on a world scale, or are the Government saying, as they are perfectly entitled to, that those salary structures need to be in line with Civil Service salary structures and approved by the Treasury?

Thirdly, the Government are giving the Post Office the power to borrow £75 million per annum. Is it seriously suggested that £75 million per annum will give the Post Office the commercial freedom to compete on the major scale that your Lordships' House would want?

Finally, on this issue, if the Post Office is to be given commercial freedom to conduct its activities, are those activities to be conducted according to the obligations to which commercial organisations are subject? For example, will there be the transparency, under this Bill, that would apply to any multinational company? If a multinational company in the private sector were to make a major acquisition overseas, it would be subject to the transparency and the approval process in the public arena to which all multinational companies are subjected. The Post Office, under this Bill, as was seen in its recent major acquisition in Germany, would not be subject to that scrutiny and transparency—another unhappy compromise between public accountability and public ownership.

We on these Benches are entirely clear that what has led to this uneasy compromise is the Government's mistake in having failed to accept the original recommendation of the Trade and Industry Select Committee that the Post Office should have been transferred into an IPOC, an independently publicly owned corporation, with complete commercial freedom but also 100 per cent public ownership. The uneasy compromise that has emerged as a result of the Government's mistake is demonstrated by all the difficult circumstances that I have outlined and the contrast between what should happen and what will happen in the future.

I have two important points of detail to make before I ask the Minister two very fundamental questions on the Bill. The first—and no one has referred to it—concerns the role of the postal services commission. With regard to the Government's perceived role vis-à-vis the Post Office, there is a major issue with regard to whether the monopoly on postal services is to be left to the regulator or to the Government. Are the Government simply going to leave to the postal services commission the question of whether the monopoly will come down from £1 to 50p, or are they going to lead the debate? As we know, the Post Office would like a move in line with European practice. Are the Government simply going to say to the regulator, "We have no view. You, the postal services commission, will decide on the extent of the Post Office monopoly in this area"?

Secondly—a fundamental point to which the noble Baroness referred—are the Government going to let us see at some stage, before the Bill passes through this House, the report of the Performance and Innovation Unit? In another place, Mr Byers promised that that report would be available before the Bill was sent to the Lords. Is it proposed that we in this House should see the report before the legislation passes through this House? It appears to be yet another example of the Government's problem in getting through 32 or 33 Bills without taking into account promises made in order to ensure that the legislation is correct. The Performance and Innovation Unit report was promised in another place. We need it in this House before we can pass the Bill.

In conclusion, I ask the Minister to give an unequivocal undertaking that, whatever happens to Clause 102 dealing with subsidies to the Post Office, this Government are committed to operating a policy that will ensure the basic maintenance of the sub-post office network. That is what people in the country and your Lordships want to hear. Forget the detail. Will he say that the Government are committed to maintain the sub-post office network in more or less its current form?

Secondly, will the Government give a categorical assurance that the Post Office is to remain in public hands? Again, that is the assurance which noble Lords and the public require. They want to know that this Bill is not the first step to privatisation of the Post Office.

My Lords, with the leave of the House, I shall repeat a Statement made in another place by my right honourable friend the Home Secretary. The Statement is as follows:

"With permission, I should like to make a Statement on the violence and disorder associated with the so-called anti-capitalist demonstrations which took place over the Bank Holiday weekend in London and elsewhere.

"Yesterday's shameful violence was the culmination of a loosely organised series of events which took place from Friday to Monday. While all the events were broadly described as protests against capitalism, they were organised by a number of wholly disparate groups.

"None of the organisers was willing to discuss their preparations in advance with the police, who therefore made their plans on the basis of the best information obtained by them. The police response in London was a joint operation conducted by the Metropolitan Police Service, the City of London Police and the British Transport Police, using a joint command structure based in New Scotland Yard.

"The events held by protesters oil Friday, Saturday and Sunday passed off relatively peacefully, both in London and in other centres. As had been expected, however, the main challenge to public order occurred yesterday. In Manchester up to 400 protesters caused damage to shops and disruption to the tram system. Twenty arrests were made.

"The protests in central London began at around 10 a.m. when about 500 cyclists made their way to Parliament Square from Hyde Park Corner. By 11 a.m. about 2,000 protesters were in Parliament Square, many of them engaged in digging up the turf.

"The first incidents of violence were reported at about 12.25 p.m., when police and private vehicles were attacked by protesters close to Parliament Square. About an hour later 1,000 or so people moved into Whitehall from Parliament Square and demonstrated outside Downing Street, when missiles were thrown at police guarding the barriers. It was around this time, I understand, that vandals desecrated the Cenotaph and defaced the statue of Sir Winston Churchill.

"Shortly after 2 p.m. the Whitehall branch of McDonald's was attacked by a crowd of about 80 people. Some injuries to the police were sustained, as was serious damage to the premises.

"At about 3.15 p.m. there was serious disorder and violence in Trafalgar Square, including throwing of missiles at the police. At that point police in riot gear moved to contain and control the crowds in the square, which they continued to do for the rest of the afternoon. Separately, about 500 demonstrators crossed the river and congregated in Kennington Park, about a mile south, where missile attacks were made on the police at about 6 p.m. Meanwhile, from about 6.20 p.m., police began a controlled dispersal of the crowd remaining in Trafalgar Square. At around this time about 150 protesters attacked commercial premises and vehicles, including police vehicles, in the Strand. The crowds in Kennington Park were dispersed by 8.30 p.m. and a crowd off Waterloo Bridge was finally held at bay and dispersed by the police just before 9.00 p.m.

"I regret to have to tell the House that nine police officers were injured including one who was struck by a brick in his face. He was taken to hospital but thankfully there was no need to detain him. I understand that the police are aware of injuries to nine members of the public, all thankfully minor.

"I am informed by the commissioner that 97 people were arrested in the course of the day, on charges including public order offences and assault. A major investigation by the police to detect other offenders, including the perpetrators of the desecration of the Cenotaph and the defacement of the statue of Sir Winston Churchill, is already under way.

"Everyone in our democracy has a right to demonstrate peacefully but no one has a right to demonstrate violently. Yesterday, there was a peaceful demonstration in London by over 2,000 people. That was organised by the TUC to commemorate international workers' day and to campaign for the saving of jobs at Rover's Longbridge plant and elsewhere in the West Midlands. But those peaceful demonstrators were physically denied their right to use Trafalgar Square by the mindless violence of the groups by then occupying the square.

"What was witnessed in central London yesterday was criminality and thuggery masquerading as political protest. In our democracy there is neither reason nor excuse for such appalling behaviour.

"A particularly shocking aspect of yesterday's events was the defacing of the statue of Sir Winston Churchill in Parliament Square and the desecration of the Cenotaph in Whitehall. Yet without the sacrifice of the millions who gave their lives to defend our freedoms, no one yesterday would have been enjoying any right to protest at all.

"The fact that the statue of Sir Winston Churchill has already been cleaned up and, I am told, that no lasting damage has been caused to the Cenotaph is of little comfort to the public for the huge affront caused by this vandalism especially, but not only, to those ex-servicemen who served and saw comrades killed in both world wars.

"Planning by the police for the weekend's events took place over many months, and took account of all the contingencies which they could identify. The planning took into account the lessons learned from very serious violence which took place in the City of London in June last year.

"The police devoted greater resources-5,500 officers—to yesterday's situation than they have done for any comparable situation in the past 30 years. Knowing the determination of some of those involved to perpetrate serious violence and disorder, the police had to make a fine judgment that it was better to contain the trouble, as they did, in confined areas than seek to bar people from these areas, with a high risk of wholly unpredictable outbreaks of serious violence to the public as well as to the police and property virtually anywhere else in central London. The police had to make equally fine judgments as to precisely when and where to deploy police in riot gear.

"In our system of policing, these decisions are properly ones made by chief officers of police. For the avoidance of doubt, that will remain the situation after the Metropolitan Police Authority, the Greater London Authority and the mayorship come into being in early July. I want, however, to tell the House that the commissioner had and has my full support and confidence in the very difficult decisions which he and his colleagues had to take. As with any large policing operation, the commissioner will be reviewing what happened yesterday and will be discussing this with me. I shall, of course, be ready to respond to any recommendations he makes.

"I am sure that I speak for the whole House in offering our thanks and gratitude to all those police officers who dealt so professionally, diligently and courageously with the violence which occurred yesterday".

My Lords, that concludes the Statement.

My Lords, I am sure that the whole House is grateful to the noble Lord for repeating the Statement made by his right honourable friend the Home Secretary in another place. Over the weekend, yet again, we saw the police having to deal with mindless thuggery. At least, that was what I thought at first, but it was not mindless thuggery. The people were well minded in what they did and it was highly politically motivated thuggery.

I am sure that I speak for all noble Lords in saying that I am pleased to hear that the injuries incurred by the police and those suffered by a number of members of the public were not serious. I doubt that any noble Lord can fail to be moved by the picture in many of today's newspapers—it was on the front page of the Daily Express—of five year-old Charlotte Rose, in the arms of a policeman, after being hit by a bottle. Not only did the police and their families have their May Day disturbed, but also many people who thought that they could come into central London to enjoy a day out had their day badly disturbed.

I hope that the press and television companies will make available the many pictures and film footage that they have taken so that the police can identify those criminals whom they have not yet identified and arrested. Perhaps the Minister can assure me that approaches will be made to those companies. It may also be worth while the police asking whether any members of the public, who took photographs on their day out in central London yesterday, have any photographs that may help the police to identify the culprits.

On the lead up to yesterday's events, were there discussions between the police authorities and the Home Secretary as to what kind of tactics should be undertaken? Did discussions take place on whether a "softly, softly" approach should be taken, at least at the beginning of the disturbances, in order, as the Minister said, to contain the demonstrators in small areas? I noticed a contrast with the way in which the police dealt with demonstrators during the recent visit of the Chinese president.

Is it true that English Heritage advised in favour of protecting the Cenotaph, but that that was rejected as likely to be inflammatory? I do not believe that the demonstrators needed anything to inflame them in their vandalism. Perhaps we should learn some lessons from that. Like everybody, last week I saw some footage of people saying what they would do in Parliament Square. Digging up a bit of turf does not matter one way or the other, although it seems to be an odd way to improve the greenery around us.

Clearly, yesterday's events were bound to be attended by a degree of violence. On the vandalism to the statue of Sir Winston Churchill, I do not suppose that Sir Winston would be bothered because he dealt with the greatest thug in the previous century. I do not suppose a few ghastly people demonstrating how badly behaved they can be would bother him too much.

Do the Government accept that the public will expect the courts to deal very severely with those who come up before them in regard to offences that took place over the weekend? How many of them, I wonder, are in receipt of benefits from the capitalist society and from the workers who pay their taxes against whom they demonstrated and whose day they so badly disturbed? Perhaps the Benefits Agency will look at the photographs to decide whether what certain people were doing comes within the definition of availability for work.

We have seen a number of such civil disobediences. Clearly, protest is part of democracy, but violent protest is not part of democracy. Stopping people by violent means from doing what they legally and legitimately can do is quite simply wrong and has to be stamped upon.

This is the second time that this kind of incident has taken place in London. In a big way we saw a similar disturbance in Seattle and in a more minor way— although just as serious—we have seen another anti-capitalist demonstration even more recently in America. Does the Minister agree with my right honourable friend Steve Norris—as I understand it, the only man who stands between the Prime Minister and Mr Livingstone—who today said that as mayor he simply would not permit such an event to become annual? Next year it should not be a matter of discussing tactics or containment, but whether such a demonstration of this kind should take place at all.

Quite clearly, the people who organised the event—it seems a bit of a contradiction to say that anarchists organise anything—had no intention of it being peaceful. They had every intention that it should be violent. Perhaps the Minister will consider saying that, "Two strikes and you are out; you have done this twice in London in recent times and should not be allowed to do it again".

My Lords, I, too, thank the Minister for repeating the Statement. It is right that we should spend some time discussing the activities of the vicious thugs who were involved in yesterday's totally unacceptable behaviour.

Although I shall try to avoid the response of all too many of us in the past of trying to make recommendations for changes to the law, one or two questions arise. First, is there a requirement to announce, in advance, what demonstrators propose to do? I recognise that yesterday a number of disparate groups were involved, but somebody organised the 500 cyclists who pedalled their way from Hyde Park Corner to Parliament Square. Clearly, that was organised, so should there be some form of statutory requirement that people who seek to take action of that sort should give several days' advance notice to the police?

Secondly, on the attitude of the courts—a point touched on by the noble Lord, Lord Mackay of Ardbrecknish—it is not for us to say what should happen in individual cases when particular persons appear before the courts. However, I believe it would be helpful if the Home Secretary were to ask the Crown Prosecution Service to report to Parliament on the scale of penalties imposed on people convicted of public order offences yesterday and in the previous disturbances in the City of London, so that we can be aware and so that future potential demonstrators can be aware of the penalties to which the) could be subjected.

Thirdly, I am sure that all noble Lords are gratified that there were not more police casualties and casualties among innocent members of the public. Will the Minister pass on to the Commissioner of the Metropolitan Police our congratulations to the police on what they did yesterday and good wishes to those police officers who were injured?

My Lords, I thank both noble Lords for their helpful and generous comments and for sharing with me their praise of the police for the way in which they conducted themselves yesterday. I shall do my best to answer the important questions that were asked.

The noble Lord, Lord Mackay of Ardbrecknish, asked whether a request would be made for television and media companies and the public to give up photographs so that those responsible for these outrages can be identified. I am happy to say that the answer is yes, and I am also assured that the police themselves took great pains to ensure that there was video coverage of the demonstration. As we know, there is no better evidence than that of photographs or video, from which it is hard to escape.

On discussions between the Home Secretary and the commissioner, there were bilateral discussions and a special discussion some weeks ago. However, I am not in a position to be able to tell the House exactly what was discussed on those occasions.

With regard to the Cenotaph and the protection of monuments, discussions were held with the police about the protection of nationally important monuments in the area covered by the protests. I am sure that the bodies responsible for their upkeep will have taken full account of police advice in reaching their decisions on what to do.

In relation to the reference made to one of the candidates in the mayoral election—I do not want to go into the election this afternoon—it will not be up to whoever is successful on Thursday as to whether or not a protest march should take place. As the noble Lord knows well, the current law enables the commissioner and, outside London, district councils to apply for marches to be prohibited when serious public disorder is anticipated and to attach conditions to public assemblies. Whether or not to use the powers is an operational matter for the commissioner or the chief of police in any county.

The noble Lord, Lord Harris, is right that we have to be careful in relation to the courts. It is important that those who are convicted of committing offences are not only rightly convicted, but also rightly punished. However, as we discussed earlier this afternoon, under our system that must remain a matter for the courts to lay down and not for Parliament or the Home Secretary or the Government. I am sure that we all have our own feelings as to what should happen. I hope I have covered all the questions asked.

My Lords, one specific question I asked was whether or not a report could be obtained from the Crown Prosecution Service as to how the courts dispose of offenders who appear in relation to yesterday's events and also in relation to those who appeared in the previous riots in the City of London.

My Lords, I thank the noble Lord for repeating the question. The answer is yes; but the independence of the Crown Prosecution Service will also be observed.

My Lords, this matter has not only brought shame upon the perpetrators of this horrible behaviour, but also the fact that we have in our midst, calling themselves subjects of this country, people who can behave in this dreadful way, is a slur upon the nation.

Perhaps we can look a little more closely at the question raised in regard to the courts and the way in which they deal with these matters. Obviously, we cannot dictate what the courts should award those who are found guilty by way of punishment, but what the public may recognise as being a slight improvement is this. Knowing that violence was to be perpetrated, and knowing that for some considerable time, should not courts be pre-convened to deal with those matters, so far as they can, consistent with our systems of justice? In other words, why do we not set up courts whereby, instead of after a long delay when all these matters have been investigated and then for the very first time the perpetrators of the violence come before the courts, at the outset the people whom the police had seen behave in this violent way could be dealt with immediately. The courts would then decide what cases ought to be adjourned in order for a defence to be properly put. And, again, I hope that they would consider it proper to treat this as an emergency and allow short periods of time consistent with justice when there is a question of remand. The courts could decide immediately, in very bad cases, whether or not to remand in custody.

What is troubling in this matter is that we will go away after this discussion; Parliament will have dealt with it in both Houses and we will hear about cases brought before the courts in three, four or six weeks' time. Is that good enough?

My Lords, the House knows that my noble friend speaks with tremendous experience and wisdom on these matters. I want to be careful what I say in response and he will understand why. As I understand it, the 97 who were arrested yesterday will have been brought before the court at some stage today. Whether or not the court has dealt with any who admitted guilt, I do not know. But, if they protest their innocence, they must be entitled, as my noble friend knows better than anybody, to prepare their defence. But I agree that it is important, from everyone's point of view, whether these cases are heard eventually in the magistrates' or the Crown Courts— much will depend on the charges laid by the Crown Prosecution Service—that they are dealt with as quickly as possible.

My Lords, first, when the Home Office is in a position to tell us, will the Minister undertake to advise us as to how much those vandals cost the taxpayer during the past 48 hours and in the run-up to the demonstration yesterday? Secondly— this is a matter for information—is he able to inform the House as to whether or not Mr Ken Livingstone expressed an opinion about the events of yesterday? If so, was that opinion supportive of the vandals or of the forces of right?

My Lords, the first question is easier to answer than the second. Of course, once the cost is known—that may take a little time—I shall write to the noble Viscount and place a copy in the Library. There may be other ways of circulating that information to other noble Lords.

In relation to Mr Ken Livingstone, I have only read the press reports. But it matters not to me one way or the other what he had to say about this issue; his previous opinion was well known.

My Lords, I have tremendous regard for my noble friend Lord Mishcon because he was my tutor. But is not the Minister concerned at his suggestion that there should be a separate entitlement to trial for those people? Should not the persons concerned be treated as equal before the law? That being so, is it not better for existing magistrates to determine whether or not they should be tried? They are entitled to put their cases before the bench, where there is sufficient reason so to do. That being so, does not my noble friend agree that the people concerned should attend before the magistrates; that the magistrates should determine whether or not they should be tried before that bench or somebody else; and the magistrates have the right at the present time to determine whether or not the case should be heard at that time or at some other stage?

My Lords, I agree with my noble friend and nothing anyone has so far said is against his premise. It is, of course, right that the more the public are affronted by an offence, the more essential it is that the law should take its proper course. That must happen in this as in every other case. I am sure that the courts of this country, whether magistrates' courts, Crown Courts or wherever the perpetrators end up, will ensure that those charged with offences receive a fair trial. It would be a disgrace if they did not.

My Lords, will the Minister give the House an assurance that in future the Cenotaph will be protected against any acts of violence or desecration by such people? The Cenotaph is important to practically every family in the land. Whether or not it offends certain groups of protestors, it should be protected from damage.

Hear, hear!

My Lords, the noble Lord is quite right. Of all the violent offences committed yesterday, speaking personally, I felt that the attack on the Cenotaph was the worst. I shall be careful in choosing my words here, but discussions were held beforehand on what should be done between those responsible for the Cenotaph and the police. My understanding is that advice was given by the police that the Cenotaph should have been fenced or boxed in. I am quite sure that if such a situation is ever again reached, the Cenotaph will be protected.

My Lords, what is the situation as regards my noble friend Lord Carnarvon's proposal that it should be an offence to wear a mask with the objective of wrongfully evading identity in public?

My Lords, as always the noble and learned Lord has asked a pertinent question. Under the provisions of the Criminal Justice and Public Order Act 1994, as amended this year by the Government, that Act has now been strengthened by the inclusion of new powers to enable the police to remove face coverings when a Section 60 order made under the Act is in force. Perhaps I may remind the noble and learned Lord that a Section 60 order empowers the police to stop and search for weapons and dangerous implements without the need to suspect particular individuals once the order has been invoked. I realise that that does not answer the noble and learned Lord's question about the suggestion that the wearing of masks should be an offence in itself, but greater powers are now in place. I understand that those powers were used yesterday in an attempt to identify many of the miscreants who were wearing balaclavas at the time they committed their offences.

My Lords, the Minister has referred twice to the bilateral discussions which took place between the police authorities and the Home Secretary. Can the Minister assure the House that no direction or request of any kind was made by the Home Secretary or anyone acting on his behalf which in any way persuaded the police authorities to desist from taking action or putting in place remedial measures that might otherwise have been implemented?

While I am sure that all noble Lords share the words of praise that have already been expressed by several speakers for the police on their skill and careful tactical planning, everyone—not only in this House but throughout the country—feels a sense of absolute disgust and shame at the desecration of the Cenotaph, the attack on the statue of Sir Winston Churchill and the destructive digging in Parliament Square. Those acts were deliberately designed to provoke and attack the established attitudes and adopted views of the people of this country.

In the light of what has taken place, will the forthcoming review endeavour to answer one most important question: where does the protection of public property end and the appeasement of anarchy begin?

My Lords, I believe that I can give the noble Lord the assurance that he sought at the beginning of his contribution. We all share in the noble Lord's feelings about the offences that have taken place. However, I feel that it is important to stress that in not the slightest way has there been any move to give in to the forces of anarchy expressed yesterday. The police did a very professional job and the position could have been infinitely worse if they had not taken all the right decisions. I believe that the House is generally of the view—it has certainly been expressed today—that the police behaved admirably. Nothing was given to the anarchists and nothing will be given.

My Lords, is my noble friend aware of a report in The Times today stating that the McDonald's in Whitehall was closed after a police warning and that the handful of staff present had to flee to safety through the rear of the building as chairs flew through the air? My noble friend cannot possibly be aware that I had breakfast in McDonald's in Whitehall yesterday morning—long before the violence took place—and that, as ever, I found all the staff to be extremely helpful, attentive and courteous. Will the investigation into the attack on McDonald's be pursued with the greatest possible vigour?

My Lords, I am grateful for my noble friend's contribution. I can assure him that the investigation into what happened at McDonald's in Whitehall will be pursued with the greatest vigour, as will all other parts of the investigation.

My Lords, perhaps I may ask the Minister whether it is still the Government's policy to be tough on crime and to be tough on the causes of crime? If that is the case, while addressing the judicial matters that have been discussed in your Lordships' House this afternoon, will the Government also look behind these events—along with violent incidents of football hooliganism such as that which took place in Istanbul—and question the reason why so many young people behave so badly, whether they are young men or women? Furthermore, will the Government look closely at the reasons why so many incidents of violence are taking place in our society today?

My Lords, in response to the noble Lord I can assure him that of course the Government continue to believe in being tough on crime and tough on the causes of crime. However, I am not sure that on this occasion the noble Lord has chosen the best example. Certain youngsters, both male and female, get into trouble and then need help rather than punishment. However, I do not believe that that applied to those who were involved at the front of yesterday's demonstration.

My Lords, can the noble Lord clarify one point for me? I have read that, before the march began, the police were not able to secure from one particular group a degree of information about its intentions and plans. Normally the police would expect to receive such information. Is that the case, and if it is, can anything be done about it?

My Lords, the noble Baroness is quite right. As I said when I repeated the Statement of the Home Secretary, none—I repeat, none—of the organisers was willing to discuss their preparations in advance with the police. That of course goes against all the normal procedures followed by demonstrators of all kinds who have held their protests peacefully over many years in our society. Usually discussions between the organisers and the police take place, whatever their standpoint may be. However, these people were not prepared to hold advance discussions with the police. That might suggest to some that they were looking for trouble.

My Lords, as one who in the past has participated in many non-violent demonstrations, whether in relation to jobs, the environment or peace, like my noble friend, I regret that those who wanted to occupy Trafalgar Square to make their protest about the situation at Rover were not able to do so. Perhaps I may also say that I join with all noble Lords in condemning those who committed acts of violence yesterday and caused injuries to the police. I am sure that the House will agree with me when I say that I hope that those police officers who were injured—in particular one officer who was hit in the face with a brick—will soon be fit and back on duty protecting the public once more.

My Lords, I am grateful to my noble friend and I know that he has spoken for the whole House.

My Lords, in view of the fact that no one was prepared to discuss such arrangements with the police, could not the Government suggest to the in-coming mayor of London, when we know who he or she will be, that if such a situation arises again it would be desirable to close Whitehall altogether because the Cenotaph is there? I do not believe that anyone wants to see it boxed in whenever there is a demonstration. Further, bearing in mind the fact that 1st May seems to have been an inflammatory date in this matter, would the Government consider changing that holiday and perhaps granting an extra one at Whitsun?

My Lords, I must remind the noble Baroness that this issue has nothing to do with the mayor. It is a matter for the commissioner and the Home Secretary, but operationally for the commissioner alone. With respect, I do not agree with the noble Baroness about 1st May. It is a day upon which many peaceful people wish to celebrate what they believe in. The behaviour of certain people on that date is an insult to those who want to celebrate May Day in a way that has been practised for many years.

My Lords, the noble Lord has already undertaken to provide information regarding the cost of yesterday's demonstrations, but can he confirm that all police leave in London was cancelled to enable the force to police the crowds? Will he further undertake to publish for the people of London the cost to them of just the policing element because the people of London will lose out in that respect as regards the funding for their police service? Yesterday was quite disgraceful and the people of London deserve an answer to that question. They will lose policing because of yesterday's demonstrations and they need to know that.

My Lords, I am grateful to the noble Baroness who has great experience in such matters. Yes, I can confirm that all police leave was cancelled and that in due course the public can expect a response in terms of the cost involved.

My Lords, in rising to speak I must declare an interest as a Post Office pensioner and as someone who has many friendships and much regard for people in the Post Office and in sub-post offices. We are discussing today an issue that concerns all of us; namely, the excellence and cost-effectiveness of our postal services, as well as the long-term well-being of what has over the past two centuries been a major national asset in a world where no business, whether public or private, however much regard it has been held in by the public and however illustrious the service it has given, can look to the future with confidence.

My concern is that this Bill should provide a framework that will give the Post Office an opportunity to emerge in a very uncertain world as one of the main players in Europe. The Minister was my predecessor at the University for Industry (the UFI). We dedicated ourselves to the service of people and in equipping them to be effective throughout life in terms of work in a rapidly changing world. The latter affects the Post Office very much. The Minister referred to four factors in that change. The one that comes immediately to my mind is the awesome advance of information technology and, equally awesome but even more surprising, the ability of people to use it.

In this world of change, I am very much aware that there is a movement in the Commission to liberalise postal services across Europe. I am concerned that Britain should emerge as one of the successful nations in providing postal services to Europe.

I have had a particular worry about this matter which goes back 20 years. I have in mind the uncertainty that has, to my knowledge, persisted during that period about the framework within which the Post Office will be able to operate. This was highlighted by the Trade and Industry Select Committee in the other place when it criticised that uncertainty and referred to the damage that it was causing to the prospects of the Post Office. Therefore, even though it has taken them a little time, I am grateful to the Government for seeking to resolve that uncertainty.

However, in expressing that appreciation, I have nevertheless a few points to make. Whether the Post Office is able to be successful in this new environment depends very much, as I said, on the framework within which it will operate. Fundamental to that is the strength of its balance sheet when it is set up as a company. For example, will it have the resources to enable it to be a major player, or will the Treasury play it careful and thereby ensure that it is not?

I noted with interest the provisions in Clauses 68 and 69 for government loans and guarantees. I should be much happier if they were not there and if the Post Office's balance sheet made such provisions unnecessary. I say that because all my experience in working on public corporations is that the more arm's length the relationship with a government, the more the latter are concerned purely with creating a framework and in discharging those functions that are proper to a shareholder, the better for government, the better for the public and the better for the organization—in this case the Post Office. Therefore, could the Minister tell us, if not this afternoon then perhaps on a future occasion, what the Government have in mind for this balance sheet?

I note that Clause 67, for reasons that I totally understand, provides that there shall be no disposal of shares or share swops without the approval of both Houses of Parliament. However, as the Minister knows well, decisions often have to be made swiftly in the commercial world. Those who are in the front-line must be able to act with confidence and conviction. When these matters are brought before Parliament, I urge the Government to do so swiftly and not to spend ages working out a position with the Treasury. In those circumstances, Parliament will respond decisively with either a yes or no to the proposals. So much for what I see as the big issue for the Government. I say to them, "The more you stand aside and discharge your responsibility as the setter of a framework and as shareholder, the better for everyone".

I turn now to Clause 102, which deals with subsidies to what are called "public post offices". I did not note a definition in Clause 117 of "public post offices", which is a new term to me. I noticed a definition of "post offices", but I imagine that what I used to call "post office counters" is what is meant by that term. I realise why the Government are introducing this provision, but I very much regret the need for it. I assume that it comes from the decision that social security benefits will in future be paid through automatic credit transfers. I believe that that came from the calculation by the DSS that the cost to it of such transactions could be reduced, so I am told, to one penny as compared to 48 pence, thus making a saving of £350 million. I have no doubt about: the accuracy of any such calculations. However, I learnt long ago that it is not the arithmetic that matters; it is the thinking that underlines the arithmetic.

What worries me is whether those responsible for taking that decision have done a total cost-benefit analysis regarding the cost to society as opposed to the benefit to the DSS in making this change. Did the Government calculate those sums? If so, can the Minister tell the House the outcome? Did the Government ask the banks whether they wanted this business? Further, did the banks say that they would do it for nothing, or is it possible that they will charge? Is it not the case that bank charges are no light matter? In making such savings, could it be that the DSS is transferring the costs to people who can ill afford them—for example, pensioners or families with children who draw family benefits—or is it transferring them to the Post Office? There will be costs, and they will be big costs.

I am pleased to know that the PIU has been invited to look at the future and at how the future might be secured for the network of post offices, but I wonder whether it has also been asked to do the total sum, because it is the validity of that total sum which should first concern the House before we move on to the issue of subsidy. There is no security in subsidy. I would say to the Minister, for whom I have a warm regard, that I understand why he should have referred in his speech to an unhealthy reliance on the payment of benefits, but perhaps the 8,000 sub-post offices that have that unhealthy reliance might see it rather differently.

I referred earlier to the regard and respect in which I hold many people in the Post Office. I had particularly in mind the courage shown by many postal workers and especially lonely sub-postmasters and sub-postmistresses who have had to resist with great courage armed attacks which, in my time as chairman, sometimes occurred at a rate of 10 or 20 per week: little people, old people, mature matrons, pillars of the Church, wrestling on the floor of the post office to safeguard public moneys. I remember the immense courage of people in Northern Ireland. I remember going into a sub-post office at the entrance to a housing estate in Belfast. When I entered I was faced with a one-way mirror as protection for the staff in that sub-post office, which had been raided 10 times. Behind the counter was a ladder so that they could shin up to the loft if they were attacked again. The courage of these people was awesome. In a recent letter to the Minister I quoted Mark Anthony:

"The good [that men do] is oft interred with their bones;…"

Let us just remember, in taking these decisions, the good service that these good people have given.

To sum up, I ask the Minister about the balance sheet. I ask him to give great public service by using his energies and knowledge as a businessman to ensure that the Government, in the administration of this Act, are "hands-off". I ask the Government to reserve their role to that of a shareholder. I also ask the Minister to tell the House about the total costs and benefits of the change regarding social security benefits. I would also like to ask the Minister, as he was asked by the noble Baroness, Lady Miller, how the subsidy scheme will work and if we can be sure that it will work in a way that will help to re-establish the competitiveness and the ability to get business of these sub—post offices and Crown Offices. We would all wish it to operate in a way that is uniform throughout the land and is not subject to local decisions which will impair it. It is a great national service—a mass provision of post offices throughout the land in the service of the common people.

My Lords, in my view this Bill signals the beginning of the end for our world renowned postal service. Let me declare at once my interest. It began 54 years ago when, at the age of 14, I joined the GPO, as it was then, as a telegraph boy. That interest continued throughout the following 51 years until I retired as a trustee of the Post Office pension funds. The period in between included employment as a postman and a sorter and for 36 years I was a representative of the Union of Post Office Workers. I spent the last 14 years as a national officer of the union and served for 10 of those years as its deputy general secretary. I am in receipt of an occupational pension from my union.

I was reminded earlier by the noble Baroness, Lady Miller of Hendon, of the silver salver that she presented to the staff of the Post Office. That salver was placed in a cabinet in my office at the union's headquarters, and it was not until I entered this House that I realised the connection. I just hope that my successor is looking after the salver as well as I did.

I am sure your Lordships will understand that speaking in this Second Reading debate is a sad and painful experience for me—painful because of what I firmly believe will happen to our great Post Office and the service it provides to every part of our islands and abroad. It is particularly painful for me to criticise my party in public for the first time in my life.

When the Government published the Bill earlier in the year, many people, both inside and outside the Post Office, welcomed the fact that at long last commercial freedom was to become a reality. The noble Lord, Lord Dearing, mentioned the long period of indecision leading to the problems that have been faced by the Post Office. At the time the Bill was published I had my doubts about the method being suggested to bring about that freedom. I believed, and still believe, that the proposed creation of the plc will eventually lead to private shareholding in the Post Office at some future date.

Of course commercial freedom is essential to the future of the Post Office. That has been glaringly obvious for many years. In my maiden speech on 1st December 1998, I said:

"Commercial freedom will allow the Post Office to plan outside the Government's public expenditure cycle. It will give it freedom to borrow and invest, freedom to enter into acquisitions, joint ventures and strategic alliances, and freedom to allow the workforce to share in the success of the Post Office".—[Official Report, 1/12/98; col. 410.]

I firmly believe that all these freedoms would have been possible without the need to create the plc. I shall say more on that point later.

The Bill will replace the old-fashioned EFL, the external finance limit, with the new, commercially based shareholder dividend. It will give freedom to borrow at commercial rates up to £75 million per annum for acquisitions, joint ventures and business investments, for the fast-track process for investments in excess of this amount. These measures are to be welcomed.

The inclusion of the universal service obligation for letters and parcels to all the 26 million addresses in the United Kingdom at a uniform price is also to be welcomed. However, it will require some safeguards for the Post Office when the question of a monopoly limit is addressed. The regulator will be charged with reviewing the scope of the letter monopoly and reporting to the Government within one year. If that report does not fully accept that the universal service obligation will need a reasonable monopoly limit, then I am afraid that the excellent service now provided by the Post Office will be put at risk. We shall have to wait and see what the newly created regulator recommends.

This House needs to know the exact role and powers of the new postal services commission. It is essential that the House be made aware of the level at which the regulatable recommended monopoly is to be set. Commercial freedom and exposure to greater competition will require a sensible, gradual and controlled liberalisation of postal services, not just in the United Kingdom but throughout the European Union. Perhaps my noble friend the Minister can give the House an assurance that the Government will take steps to ensure that this will happen. I am confident that the Post Office and its dedicated staff will meet whatever challenges are set by the new regulatory machine in respect of the collection, distribution and delivery of letters.

The Bill has a very important bearing on the future of the Post Office Counters network. We await the report of the Government's Performance and Innovation Unit. The unit was asked to identify the contribution made by post offices to the vitality of local communities and to consider how the Post Office can best contribute to the Government's objectives in the future and, in the process, formulate objectives for the Post Office network.

During the Third Reading debate in another place on 18th April, the Secretary of State for Trade and Industry expressed his regret that the PIU report was not available for Third Reading. I also regret that. The Secretary of State said that he hoped the report would be given to the Prime Minister soon after Easter. Following that, an announcement would be made on his view of the PIU's work. There is not a Member of this House or of the other place who could not quickly have given the answer to the first part of its remit. I refer to the identification of the contribution made by post offices to the vitality of local communities. Their role is essential to community life. The value of the Post Office network has been well rehearsed in your Lordships' House. We have heard today from the noble Baroness, Lady Miller of Hendon, about the vital part it plays in our community. At times of crisis, such as the passport fiasco last year, the closing by Barclays Bank of some of its branches, and on many other occasions, the Post Office has fulfilled an essential role— a role that is not confined to rural sub-offices. Crown offices are also vital to the communities they serve.

The Post Office has been able to meet these needs simply because it was there when needed. Any further reduction in the network can only go against the interests of communities which the Post Office has served for centuries. Perhaps my noble friend the Minister will today give the House an assurance that the Government are determined to maintain the network at its present level. Perhaps the Minister can give the House more detail about the subsidy proposed at the time of Third Reading in the other place.

Members of this House, myself included, have from time to time sought assurances from the Government that arising from the decision they have taken to pay benefits directly into claimants' bank accounts from 2003 instead of over the counter in cash at post offices, no one who wants to retain the ability to receive his or her benefits in cash will be denied this facility. A number of assurances have been given. I again ask my noble friend whether he will give a guarantee that no pressure advertising will take place in an attempt to woo claimants away from their chosen method of payment.

Last September the Trade and Industry Select Committee said that the decision to pay benefits into bank accounts would mean the Counters business facing annual losses of £ 100 million. In a Statement in another place, and repeated by my noble friend the Minister in this House, the Secretary of State asserted:

"Taken together, our proposals for greater commercial freedom will bring over £600 million into the Post Office over the next three years".—[Official Report, 8/7/99; col. 1028.]

That statement was repeated at his press conference on publication of the Bill. I would appreciate it greatly if my noble friend the Minister could confirm that the figure of £6 million is made up of two elements.

Am I correct in assuming that the £125 million per year reduction in the negative EFL together with the £75 million per year borrowing accounts for the £6 million over three years? Am I also correct in saying that the £75 million is not money available to improve services but will constitute loans to fund acquisitions and will need to be repaid with interest?

Set against this extra money will be substantial financial drains on the Post Office's resources. Will my noble friend confirm that the revised Horizon project—the automation of Counters offices—is likely to cost the Post Office £100 million per year and that the estimated loss on accumulated EFL surpluses amounts to £107 million per year in 1998–99? Will my noble friend also confirm that if the monopoly was reduced to 50p (and 150 grams) it would lead to the Post Office facing a further reduction of profits of approximately £100 million? Following the recent merging of the two Post Office pension funds, does the Minister agree that the contributions holiday that the Post Office has enjoyed for many years is unlikely to continue? If my understanding of the situation is correct—I am confident that I shall be told its that is not the case—the seemingly advantageous position is not quite so attractive as one might have been led to believe.

I am conscious of the length of my speech. As I said, I am fearful for the future of the Post Office. So, too, I am sure, are other noble Lords. I wish therefore to return to the part of the Bill that causes me great distress and not a little disappointment; namely, the whole question of the plc status and the shareholding concept that will allow a partial share sale in Post Office plc in order to further a joint venture or partnership. I believe that by creating a plc and introducing the concept of shareholding the Government have made a grave mistake. The benefits to the Post Office contained in parts of the Bill, especially those that provide the much needed commercial freedom, could have been obtained by the creation of an independent publicly owned corporation (IPOC), as mentioned by the noble Lord, Lord Razzall.

On 8th July last year, I asked my noble friend the Minister where, in the Labour Party's manifesto for the 1997 general election, I would find any reference to making the Post Office a plc. My noble friend replied:

"I do not think the question of a plc was covered in the Labour Party manifesto, but things do happen in this world that were not covered in that manifesto".—[Official Report, 8/7/99; col. 1033.]

Today, in referring to share ownership, the terms "plc" and "shareholding" were linked together by the Minister in almost the same sentence. Of course the question of a plc was not included in the manifesto. No one in their right mind would have thought that the Labour Party would make such a proposal. After all, the Labour Party, the public, many institutions and the trade unions had campaigned vigorously against the previous government when it was suggested that the Post Office should be privatised. Therefore I was not surprised that the question of a plc could not be found in the manifesto. I am surprised, however, that the matter has appeared in the form now before us.

I respectfully suggest that if the proposals contained in the Bill, as they refer to the creation of a plc, had been proposed by a Conservative government, the Labour Party would again be campaigning against such a proposal. Those within the Government who are determined to have their way will say that the proposals in the Bill do not constitute privatisation. I agree that they do not at this stage but I believe that this Bill, if enacted in its present form, will make it a simple exercise for the shares to be sold at some future date.

The warm words of comfort that say, "Trust us, we do not intend to sell private shares", are meaningless unless there is an unequivocal statement that we shall never sell private shares. Of course, my noble friend cannot commit future governments for ever. He can, however, say that a Labour government will never come back to this House and another place with proposals to go further than the Bill as at present drafted allows. So far such a statement has been missing. My noble friend can assure the House that the words of the Secretary of State for Trade and Industry on Monday 7th December 1998, repeated in this House by my noble friend on the same day, are no longer part of the Government's thinking. I refer to his comment:

"I should make it clear that we certainly do not rule out the possibility of introducing private shareholding into the Post Office—for example through the sale of a minority stake in it—at a later stage".—[Official Report, 7/12/98; col. 744.]

Today I respectfully ask my noble friend to say unequivocally that there is no suggestion, now or in the future, that a Labour government will ever sell private shares in the Post Office. Of course my noble friend cannot bind any future government to this principle. The Bill makes it only too easy for a future Conservative government to have in place the means for secondary legislation to be swiftly introduced that would effectively kill the publicly owned Post Office. Or, perhaps, has my party reached the stage where it believes that it will remain in power for ever? I should like to think so. However, history tells us that all good things come to an end. I cannot believe that we, in my party, are so arrogant that we believe that there will never be another Conservative government.

Any reading of the provisions of Clause 67 shows that the Treasury will always hold the ace cards in any share dealings with prospective partners in any joint venture. It is also clear that there is to be no limit or cap on the disposal of shares. At present, unless it is amended, there is an open ended provision which in itself brings into question the oft-repeated statement that the Post Office will remain publicly owned. I suggest that my noble friend gives consideration to introducing a statutory limit of 10 per cent of the total share capital of what will be Post Office plc. By providing such a cap on what can be disposed of, or swapped, or traded in a joint venture, some credibility could be restored and the public would see that the Government's statements about keeping the Post Office in public ownership might be better believed. It would certainly help me to believe what is being said.

I expect that someone will ask, "What if the prospective partner with whom we want to go to bed wants 10.5 or 11 per cent?" That argument could be pursued up to the 50 per cent plus figure that would take the Post Office out of public ownership altogether. It would be better to introduce a limit in the first instance and then examine any problems that may arise if the cap is found to be too low. To my knowledge there is no experience anywhere in the world of a "share swap" arrangement between operators in the postal business. That is not surprising given that so few postal operators are at present in the private sector or have plc status. There is evidence of such deals in the field of telecommunications. There is the case of the deal between France Telecom and Deutsche Telecom. In that case each company has given the other 2 per cent of its shares. If it ever came to pass that the Post Office were to enter into a similar arrangement, 10 per cent of shares available for such dealings would be more than sufficient to arrange such a marriage.

What is more common within the telecommunications industry is the establishment of a joint venture for a particular range of services. In such cases some of the assets of the two partners may be transferred into the new joint venture. A good example of how the arrangement could work for the Post Office in the future is the announcement made in early March that the Post Office had signed heads of agreement with TPG in the Netherlands and Singapore Posts. The form of the alliance is a global joint venture in which TPG will hold a 51 per cent stake with the British Post Office and Singapore Posts each taking a 24.5 per cent stake. What is significant in this case, which will provide cross-border mail services, is the fact that the alliance does not involve any assets of the three respective partners. I am sure that my noble friend is aware of these facts. I believe that the Government should look at providing for a limit as I have suggested.

The word "democracy" and the concept of democracy are often heard in this House. Along with countless thousands of ordinary Labour Party members, I value and have worked hard for democracy within the Labour Party—a democracy that gave its support for a resolution at the 1999 party conference which stated that the Post Office should remain a 100 per cent publicly owned service. It also stated that,

"there must be no uncertainty or ambiguity both now and in the future about the commitment of a Labour Government to the continued public ownership of the Post Office".

The resolution also urged that,

"a commitment to full public ownership of the Post Office is clearly contained in the Labour Party manifesto for the next General Election".

Some parts of the Bill are welcome but, in my view, a number of clauses stand the decision of that democratic conference on its head.

I said at the beginning of my remarks—I apologise for the length of them—that this is a sad day for me. To misquote a phrase made famous by my good friend Neil Kinnock,

"The sight of a Labour Government, a Labour Government, bringing forward proposals that will eventually destroy a valuable public service, a public service that has served our country so well for over three and a half centuries. fills me with great concern".

I hope that before the Bill leaves this House it will be amended in a way that gives some comfort to the Post Office, its staff and the public that it serves.

My Lords, the Postal Services Bill is a compromise to allow the Post Office some of the freedoms of privatisation while, at the same time, maintaining ultimate government control and ownership of the parent company.

At this stage, I should declare an indirect interest as a member of VIRSA, an organisation which is working with the Government and sub-post offices to try to promote their future.

In her opening speech, my noble friend referred to the many concerns that we have on these Benches. I should like to add my weight to three in particular. My first concern relates to the relationship between the regulator, the consumer body, the post offices and the Government. This is an issue we shall certainly discuss at Committee stage. My second concern relates to the £75 million limit—which, as other noble Lords have said, sounds like a huge amount but which, in today's business world, is very small. Again, we shall have to return to this issue if we are to make some sense of it. My third concern relates to the discretionary subsidy, an issue which many noble Lords have already mentioned and to which, I suggest, others will speak later. I am concerned about how it will work, whether there will be even-handedness and whether it will enable all areas to work within the same framework—a theme to which I shall return later.

While I share these worries, my main concerns today are much narrower and centre on the effect of the Bill and on the associated pronouncements made, for instance, in the July 1999 White Paper on low income communities in rural areas and in towns and cities.

My most serious concern is in relation to the effect of the intention to abandon the Horizon smartcard system in favour of payment of benefit through the automated credit transfer system into bank accounts. The situation was confused—I think it still is—and I, like many others, have continued to table Questions about it. Only recently, the Minister responded to a debate in the House on the issue. I hope that when he responds to the debate he will refer to the matter again.

For the people out there, the situation is still very confused. The information given by the Government has been provided in a series of statements which contain no actual conclusion. On 2nd February the Prime Minister stated that:

"We should … modernise so that benefits are paid into bank accounts for people who want that, but we shall make arrangements for those who do not want that to enable them to continue collecting in cash".—[Official Report, Commons, 2/2/00; col. 1036.]—

not necessarily at post offices, but in cash.

However, Mr Rooker had stated in January:

"Following the move to ACT from 2003 customers will have their benefits paid into a bank account but will continue to have a choice of where they access their cash, with those who wish to collect at post offices still being able to do so".—[Official Report, Commons, 24/1/00; col. 83W.]

Mr Rooker had earlier stated in October:

"As at August 1999, about 65 per cent. of all benefit recipients were receiving payment in cash by order book or girocheque at the Post Office".—[Official Report, Commons, 26/10/99; col. WA 842.]

In his evidence to the Trade and Industry Select Committee, Alistair Darling said:

"About 85 per cent of those who receive benefits have bank accounts".

If only 15 per cent of those who receive benefits do not have a bank account, but 65 per cent of benefit payments are claimed at the Post Office by giro or order book, it appears to me that 50 per cent of benefit recipients prefer not to use banks, for whatever reason. There are many reasons for that and perhaps I may mention some of them.

Banks reserve the right to apply monies entered into a customer's credit to the overdraft. Trite but true. Many benefit payments result from the payee's financial distress caused by circumstances such as job loss, which tends to result in overdrafts. Secondly, many recipients have shared bank accounts and at times of financial stress they need the facility to apply benefit payments to their own needs. Thirdly, one of the most difficult times for many people is the breakup of a marriage or of a long-standing relationship. Whichever parent has responsibility for caring for children, he or she may need to have a source of ready cash which does not involve using family bank accounts which may not be immediately available to them.

Other noble Lords have spoken eloquently on the subject. I look with great admiration at the noble Lord, Lord Dearing, and wish that I could speak without a note.

Alistair Darling also quoted to the committee the comparative costs of paying benefits, and other noble Lords have referred to this. Giro cheques cost 79p per payment; order book costs 49p per payment; the payment card would have cost 6'7p; to pay by ACT costs about a penny.

It may cost the Government one penny under whatever system they plan to operate, but I beg leave to doubt that it costs one penny in toto. I am left wondering where and how the remaining cost elements will be recouped by those providing the service. Bank accounts are notorious for accumulating charges—just as banks prefer to operate in areas not noted for the presence of benefit claimants.

I turn now to my other major worry, which is the effect on sub-post offices of the loss of government revenue from servicing the benefit payments system. We should remember that many small, privately-owned sub-post offices have been bought by people who have left their careers early, either through redundancy or early retirement. They have been relying on the sale of those businesses to top up their interrupted pension provision. If the Government's moves threaten the viability of those businesses, it is unlikely that they will be readily saleable. I pose these questions to the Minister: have the Government kept this matter in mind? What will they do about it?

The Government have responded to the worries of the sub-post office franchisees by proposing a subsidy. We await, as other noble Lords have said, the report of the PIU. Even for this modernising government, the length of time they have taken to bring this report to light beggars belief; it should have reached us earlier. Still we await the report on the detail of how the subsidy will work, but in the interim I should like to quote from the press release of the General Secretary of the National Federation of Sub-Postmasters, Colin Baker, following an amendment at Third Reading in another place. It states:

"We are however encouraged that the Government are looking for ways of supporting a network of post offices and if matters get to such a point then clearly subsidies particularly temporary ones may help to get the network through a very difficult phase. We would set our face completely against local authorities giving or administering subsidies because we think that we would rapidly lose control over the network as different local authorities will most certainly deal differently when faced with the need to subsidise and we must not forget that different local authorities may be under different political control"—

and have different vices and different hopes.

"We cannot therefore work up any enthusiasm for that prospect.

"We would say the answer to the network is investment, not subsidy allowing us time to get through this difficult period and out the other end".

It wants to see a long-term prospect of business success.

It is worth noting that so many of our people, whether or not they have bank accounts, choose to claim their money through post offices. It is also worth noting that 95 per cent of the population live within one mile of a post office compared with 60 per cent living that close to a bank. I am sure that I do not need to say anything further about the level of bank closures in rural areas and towns. Indeed, a bank closure was recently announced which we hoped would not take place, but it has now taken place. In rural areas, only 9 per cent of villages have a bank but 60 per cent have a sub-post office.

I shall not go into greater detail today because Second Reading is not the time so to do. But Second Reading is the time to make clear to the Government the fears held by many vulnerable and frail people. Such people are hardly able to get to post offices, let alone to banks—which may no longer be there. They are extremely concerned about the future of their local sub-post offices. If something is not forthcoming from the PIU report, the 8,000 post offices that are likely to be closed will be under a great threat.

I have three questions for the Minister. Is the suggestion of subsidies just one option? If it is, perhaps he will enlarge on that a little more. If it is not, and although we do not have the PIU report, will he enlarge on what some of the other options for the survival of these sub-post offices might be? Finally, can he give us a greater indication of when the report will be available?

These are difficult times for those whose livings are very much under threat. I, like, I am sure, other noble Lords, went to the rally at Central Hall which followed the presentation of a petition of 3,128,000 plus signatures. This is not a small item. I know that it is a small item by comparison with the whole Bill but it is extremely important. The Bill should not be just about making the framework work for the Post Office's sake. It should also serve the people who will be using the Post Office. I hope that when the Minister comes to reply he will be able to do so positively rather than say, "We will hear, we will hear, but we do not know when".

My Lords, I wish to touch on two issues with regard to post offices and sub-post offices, particularly in rural areas. The first concerns reasonable access and the second concerns how small sub-post offices will be kept going when they face a 40 per cent cut in their income.

If I were a cynical person, I would think that the PIU report had been delayed deliberately. I am sure that the Government did not intend that, but it is regrettable that the PIU report and the White Paper have both been so delayed. No doubt the reason is that some of the questions that need to be answered before the Bill passes through the House are particularly difficult. The question of access to services is one of them. I looked recently at the attempt of the Index of Local Deprivation to define what access means. In an extremely good and jargon-free report it said that it is very difficult to define access to services,

"because it may not necessarily be a question of physical proximity to services. For example, someone without a car and with poor public transport options could have more difficulty reaching a post office that is one mile away than someone with a car or good public transport options who lives five miles away from the nearest post office. Range, cost and frequency of public transport are a key".

Unfortunately, the best measure that the Index of Local Deprivation can come up with is an "as the crow flies" measure. When the Post Office comes to look at how reasonable access will be measured, I fear that it will have no greater success than the Index of Local Deprivation.

Noble Lords have touched on the issue of access to small sub-post offices and the services that they offer. The Third Reading debate in another place also concentrated on post office services. For rural areas and many urban neighbourhoods, the post office is a means of delivering a wide range of services, not all of which are post office services. I wish therefore to move to the question of subsidy. How much of the subsidy will be for post office services? That is clearly what the Government must intend as it is in a Postal Services Bill. But if it is okay to subsidise government services, how is that not an unhealthy reliance on one form of government service? How is it that, suddenly, a subsidy for providing information through small sub-post offices is permissible and is not to be regarded as unhealthy?

How will this form of subsidy deal with multifunctional premises where perhaps the sub-postmaster also runs a garage? He may be receiving a healthy income from the garage, but he may have to deal with much paper work in the evening and spend much time in order to run what is very much a charitable service for his community as the sub-post office would not provide a meaningful income without the subsidy. How will the Government begin to test sub-post offices for viability?

In endeavouring to put the question of post office services into one small pocket and look at a subsidy for that—and in advance of the White Paper on rural matters and the PIU report—the Government will struggle. I hope that the PIU report will be available before the Bill completes its passage through this House. From which pocket of money is the subsidy likely to come? The Treasury, so it thinks, has made a large saving of £400 million. In order not to spend vast amounts of its now saved money, will it think of taking the subsidy for rural post offices out of its matched funding for the rural development regulation money, thereby diminishing that pot? Perhaps it is thinking of taking it out of some other pot earmarked for rural areas. I should be interested if the Minister believed that the subsidy would come out of new money. The history of Treasury subsidies for rural areas does not lead me to think that that is in the slightest way likely. What stage have the discussions with the Treasury reached? What understanding is there with the Treasury as to whether this money will be found by regions or areas from money already allocated to them, or will it be genuinely new money?

My Lords, where Heseltine hesitated, Labour has acted. Where the second-class Tory plans for the Royal Mail were lost in the post for 18 years, Labour has delivered. This first-class Bill has arrived on time and on form to match the challenge of rapidly changing national and international markets; above all, the single European market.

Labour is modernising the Post Office in a sensible and reasoned way; providing a firm basis for greater competition in the industry; giving the new plc greater financial freedom to expand and innovate, while retaining this much loved institution in public ownership—because that is what the public wants—and so producing a better deal for consumers, including the blind and the socially disadvantaged. This Bill has the stamp of authority and, I might add, of common sense.

Pleasing, too, is the Government's response to two decades of rural neglect, inherited from the previous government. The sub-post offices of Britain are being updated and transformed by the Horizon Programme, giving our loyal sentinels in the countryside sub-post offices the weapons to defend rural values while opening up new horizons in expanding a panoply of new services: 3,000 new cash machines installed; 1,500 rural lottery ticket sales points started; vehicle licence transactions doubled; and 6,500 sub-post offices, selling telephone pre-payment cards, delivered this month. These rural post offices, the quintessence of satisfying public/private partnerships, will be the focus of further commercial opportunities. The Government's announcement of the possibility of subsidy to retain such post offices for social need, determined against new statutory assessment criteria, is a master-stroke entirely unforeseen by the philosophers on the Benches opposite. Your Lordships might be readier to listen to the collective wisdom of the Opposition if the hue and cry for rural post offices were matched by a complementary concern for sub-post offices in inner-city areas. Isolated communities are not found solely in the wide, open spaces of rural Britain.

My Lords, I hesitate to intervene, but the noble Lord follows me quite closely. I mentioned the inner cities as well, so I hope that he does not think that we do not equally consider the problems of inner-city post offices, as we do the problems of those in rural areas.

My Lords, I am glad to have that reassurance. However, when colleagues opposite speak on the issue a little more balance might be welcome.

In addition, I welcome the introduction of ACT, which will eliminate losses of £200 million through theft and fraud. Does the party opposite?

My principal remarks relate to the origins of the Bill, which enacts the provisions of the 1997 EU postal services directive. The attempt to establish a single European market in postal services is wholly laudable. The 1997 directive points the way, not only in supporting a gradual and orderly liberalisation of postal services, but also in insisting on a universal postal service delivered at a uniform tariff. That must be right if we are to implement the twin objectives of establishing an efficient and effective market to support British and European business and commerce, while at the same time providing our citizens with the medium to communicate with family, friends and fellow citizens from addresses right across the Continent—from Lapland's Father Christmas to Greece's farthest climes. This is another practical step in making Europe work for each and every one of us.

However, perhaps I may express my regret that the first-class stamp in Britain can no longer be used to send letters to other parts of the EU. Having a uniform rate was part of a building block of a Europe of the people, by the people, for the people. The present E-stamp compensates in some measure, and makes people's lives easier. While I am speaking of a people's Europe, let me repeat that I hope the use of the E-stamp will continue to expand as a complementary service for the convenience of customers. However, I should be sorry indeed to lose national stamps, whose variety, colour and display wonderfully illustrate the splendour and diversity of Europe. We should celebrate such diversity, which, culturally and commercially, is Europe's secret weapon.

But on Europe, as ever, the party opposite is divided and disparaging—none more so than Mr Peter Lilley, who, in debating the Bill in another place on 15th February, attacked the Government thus:

"Labour's main bogey is the threat of international involvement in our Post Office, or its involvement overseas. No group is more xenophobic than the Labour Party. Mr. Haider could take lessons from it. By contrast, the Conservatives believe that free trade and free investment maintain and build links between countries"— [Official Report, Commons, 15/2/00; col. 825.]

Your Lordships may excoriate such racy language and, even more, toy with the challenging thought that the Conservative Party, in contrast to Labour, vies to be part of an international brotherhood. But Mr Lilley's main thrust is that the liberalisation of the EU postal market should be total and immediate. Even single market commissioner Frits Bolkestein is not so daft or dogmatic. But in proposing to open up the market to letters and material weighing 50 or 75 grams and above, he is playing with fire. He and Mr Lilley should note that Sweden, in liberalising its market too precipitately in 1993, has seen the cost of the standard stamp rise by 60 per cent. Everywhere else in the European Union the cost of the standard stamp declined during the same period by 2 per cent under a regime of state-owned mail delivery.

Last month, in Lisbon, EU leaders rightly called for the speeding up of postal liberalisation. But a 50-gram limit would be breaking the speed limit. The European Commission estimates that national post offices would lose 38 per cent of profits if 50 grams were the threshold. I believe that the revenues lost would be even greater if attractive mail flows were cherry-picked commercially and the universal service obligation remained the duty of governments. A 150-gram limit, to come in by 2003, is a more equitable ambition; 50 grams would be to gild the lily.

I conclude on a positive note, and one that illustrates Europe and its postal services at their best. I refer to Letternet, a scheme to get school students across the European Union to exchange letters with each other by finding new pen-friends quickly and easily. My 14 year-old daughter was offered the opportunity to participate in Letternet at a school in Chester. She and her friends have successfully done so, and now letters are winging their way par avion and Luftpost to and fro between Britain and Germany. Tellingly, the innovation was the idea of Deutschepost, the German post office. I am sure that our own postal authorities will be as imaginative as our continental colleagues in creating a Europe for all its citizens, young and old alike. This is the time and the Bill by means of which to sound the "Last Post" on Euro-scepticism, which serves only to separate people and not to bring them together—the complete antithesis of a modern, vibrant postal service which allows citizens to speak peace unto citizens across the face of a United Kingdom and a uniting Europe.

My Lords, listening to the noble Lord, Lord Harrison, I was reminded of a prep school jingle, which went:

"If Moses supposes his toeses are roses;

Moses supposes erroneously"

While on the educational theme, the fourth Starred Question today was on tertiary education in the West Country. Listening to the Minister's speech, I rather wondered how, if I were an academic, I should mark it, or what comment I should make on it. I found it long on "what", medium on "how", and very short indeed on "why".

That said, the noble Lord, Lord Razzall, is right in his view that it is hardly surprising that much of the debate on the Bill, both today and in another place, has surrounded the issue of post offices, especially sub-post offices, urban or rural. This is, of course, a serious issue. It is so serious that in the time I have been connected with the retail mail order business—in which I declare an interest which I hope the rules of the House, and indeed your Lordships, will allow to last through all stages of the Bill—I have seen them decline from 22,672 to 17,255. That is a reduction of nearly 24 per cent, roughly 1 per cent a year. That is serious indeed.

There are many reasons for the reduction. Changing patterns of rural life, the growth of supermarkets—one wonders whether the noble Lord the Minister is a poacher turned gamekeeper—and more and more commuting to work are some of them. Governments, and to some extent the Post Office corporation itself, have failed to appreciate that they are a service industry: they need to provide services that people want, and to be open when people need them to be open. The Horizon project will help a little. But why is it, for example, that one does not find a post office counter open after five o' clock in the afternoon? Perhaps the Minister can tell us. I had a suspicion that this was a matter of government regulation, but I have been informed recently that it is part of the rules of the Post Office. It is certainly the fault of the Government that one cannot get a passport application form in any but a Crown or franchised post office.

The Government are also at fault in their mishandling of the issue of the payment of social security benefits and pensions. having given the impression that they will enforce payment by direct automated credit transfer into bank accounts rather than in cash over the counter. As I understand it, this is simply untrue. Like my noble friend Lady Byford, I hope that the Minister will confirm that when he comes to wind up. Whatever his answer, it comes out as a muddle, as did the proposed, and short-lived, reduction of the monopoly ceiling. It is quite likely that the intensive restructuring and promises about the corporation's financing will turn out the same way.

However, the issue of rural post offices, important though it is, had little if anything to do with this Bill. As my noble friend Lady Miller pointed out some time ago, the outcry has provided us with Clause 102. I do not want to drop boulders in tranquil ponds, but it is, after all, quite possible to run a mail service without a single post office. All one needs are collection depots, which do not even have to be in the United Kingdom. One of the reasons why the corporation has lost out in recent years is that more and more British businesses have sent their mass printing abroad. That material is then posted to individual customers in this country from foreign countries.

I agree with all noble Lords that it is high time that the Post Office was given more commercial freedom. I welcome the Bill if it works as intended. One of the current proposals is share swaps. The noble Lord, Lord Clarke of Hampstead, commented on that proposal in a very brave speech. What he did not say might well be encompassed by the phrase "his worst fears"; namely, what happens if, say, the French or German post offices, which own a chunk of British Post Office shares, are themselves privatised? In those circumstances, what happens to the shares under the Government's proposals?

None the less, joint ventures should be performed with foreign post offices. I argued for that in an article that I wrote some two years ago. I went considerably further than today's Bill and asked for a partial privatisation of 49 per cent of the shares. No government have been brave enough to go even that far, although at least on one occasion during a postal strike they went as far as to suspend the Post Office's monopoly, quite rightly. But it did not happen during the postal strike in 1971, when I was engaged to be married. I had to undergo all kinds of contortions to get letters to my future wife in Zambia. One of my friends who was a pilot posted my letters from wherever he landed. I had another friend in Ireland to whom a third would take my letters for onward transmission. I am glad that in extreme circumstances the Secretary of State can suspend the monopoly again under Clause 10.

This brings me to universal service provision. I am surprised that, as the Government claim, this Bill enshrines it in law for the first time. The Royal Mail works effectively only if there is cross-subsidisation. I doubt that anyone would send a letter to, say, the island of Colonsay in the Inner Hebrides if he was forced to pay the full cost, which I am told is about £10, but that is no reason why there should be a monopoly. I am glad that the principal job of the regulator will be to introduce competition into the current market of under 350 grammes. The £1 level is a total nonsense as it is eaten away by inflation, even in these days of low inflation. The only true point of reference is weight. Weight is equally important to Parcelforce, where there is already competition.

In passing, in my experience, that competition has not improved the service very much. My noble friend Lady Miller pointed out the continuing loss to the Post Office accounts as a result of Parcelforce. I am not clear whether the regulator is to become involved here. Will existing competing carriers have to be licensed? Will the universal service obligation apply? If the service is regionalised will it be able to apply different rates to different areas, for example the West Country as compared with the Highlands and Islands? Will an entrepreneur be able to set up a service covering only one region? These latter questions apply equally to letters and small packets as they do to parcels.

With the regulator in mind, can he prevent the total abandonment of second-class post, as an article in today's Evening Standard suggests could happen? There is to be an independent check on these matters, and many more, by the consumer council for postal services which is to replace POUNC, with which we are all familiar. But what necessitates this change? Why not simply extend its brief and give it teeth, which I fully admit are somewhat lacking in its present existence? The Explanatory Notes give no guidance on this matter or in relation to Schedule 9, which relates to repeals.

I am glad that the Minister referred to e-mail. He will recall that I have a long-running interest in Subscription Services Ltd, the Post Office's comparatively new telemarketing business. I understand that since its inception it has been prohibited by the telecommunications Acts from distributing its incoming data by electronic means; in other words, firms can send their information to the company by electronic means but the latter is not allowed to distribute it other than in printed form. Is this not now "obsolete or unnecessary" (to quote the Explanatory Notes)? It is possible—I shall discover in Committee, if not today—that that restriction is in Section 63 of the British Telecommunications Act 1981, as amended by paragraph 78 of Schedule 4 to the 1984 Act. If so, I welcome its disappearance; if not, at some point we must discuss whether the time is now right for that business to compete on a level playing field with existing businesses in the private sector. After all, Clause 110 makes clear that the corporation must make the Post Office address file available to anyone who wishes to use it. The clause does not say that it must be used for addressing mail. In this day and age that is more than a little out of date. Faxes and e-mails are just as likely to be used, or indeed required.

Despite those quibbles, the Bill is 'very definitely a step in the right direction, especially as it will, one hopes, inhibit the Secretary of State of the day from interfering as much as he has to date with the activities of the Post Office. The noble Lord, Lord Dearing, is absolutely right, and, given his experience, that is hardly surprising. "Hands off" is most definitely the cry. However, it is worrying that the scope for interference has not disappeared. The Secretary of State still has far too great an opportunity to take action by orders, only a few of which require the consent of Parliament. I hope that the Delegated Powers and Deregulation Committee will have something to say about those particular clauses of the Bill.

The history of government corporations of all kinds shows that governments run businesses extremely badly. If the Post Office must be a wholly state-owned public corporation, in the opinion of many commentators this is the way to go about it, although many who have spoken today are, to say the least, somewhat suspicious. Of course, it does not have to be. However, as my noble friend Lady Byford said in relation to another subject, that battle is for another day.

My Lords, perhaps I may take up a moment of your Lordships' time to turn away from the substance of the Bill to the manner in which it is drafted. I refer to Clause 118, "Index of defined expressions". I congratulate the draftsman on including in the Bill this invaluable device which saves the reader so much time and trouble. He can discover immediately from the first column of the index whether a simple word such as "employee" has a special meaning or the dictionary meaning. If it has a special meaning, he can discover immediately from the second column where that meaning is to be found among the 123 clauses in the Bill.

This most user-friendly practice featured in four Bills during the 1997–98 Session; and not in one single Bill during the last Session. I submit that the device deserves more frequent consideration by the Office of Parliamentary Counsel than perhaps it receives at present. When used, it is quite invaluable.

My Lords, it is my task to wind up from these Benches. Having spent part of the holiday reading the debates on the Bill in another place, I am struck by the good humour and constructive criticism of the speeches in this House in contrast to the highly politicised atmosphere in another place. As my noble friend Lord Razzall made clear, we on these Benches extend a broad welcome to the Bill. It helps to bring a major institution into the 21st century. It keeps it—as we on these Benches think fitting—as a public sector institution providing a universal postal service across the country at a uniform rate, but gives the commercial flexibility needed to compete in the age of modern digital communications, and the power to borrow directly from the market and to pursue mergers and joint ventures within limits.

In return for its public service obligation to provide a universal postal service at a uniform price, the Post Office retains, for the moment at least, the monopoly for all postal services under the £1 limit; and given the retention of that monopoly it is appropriate that this new semi-private sector organisation should be subject to regulation in that reserved area, and that there should be not only the establishment of a regulatory body—the postal services commission—to oversee competition in these areas, but also a reinvigorated voice for consumers—the new consumer council for postal services—referred to by the noble Baroness, Lady Byford.

All that we welcome. The Bill brings to an end an era of extended uncertainty for the Post Office which has already done a great deal of harm to that body and to the extended network of sub-post offices. As the noble Lord, Lord Dearing, made clear, 20 years ago when British Telecom was separated from the Post Office it was clear that if the Post Office were to compete in the new age of digital communication it needed investment and commercial freedom to pursue new markets. Far from giving such opportunities, the Conservative Party shackled it firmly within the public sector, limiting its freedom to borrow or develop its services, interfering in its pricing decisions, dictating its internal structure, milking its profits to the tune of over £1 billion and, finally, holding the threat of privatisation over it for a full five years between 1992 and 1997.

In the process it shut down 974 Crown post offices between 1979 and 1997 down from 1,508 to 606—and 3,482 sub-post offices. It was a record number of closures, the maximum, nearly 400, being between 1984—85. While we share the Conservative Party's concern about the network of sub-post offices, its defence would sound to these Benches a little less hypocritical if its record in office had demonstrated earlier more appreciation of the value of that network. It was the Conservatives who initiated the disastrous Horizon project. They were responsible for its original specification which is the cause of much of the aggro that the system faces.

Nevertheless, one cannot blame the previous government for all that has happened to the Post Office. The present Government have hardly helped matters. They dithered and dallied for over two years over this Post Office decision, finally producing their White Paper in July last year when the Select Committee to review it had been set up the previous November. In the meantime, we have again seen sub-post offices being closed at a record rate.

We think that the proposals are timid. They do not give the freedom of manoeuvre that governments in other countries have given their post offices. Let us take Holland, Germany or New Zealand. There are many examples of public sector institutions which have been given much greater commercial freedom than the Government propose to give the Post Office now. Freedom to borrow remains highly constrained. Other noble Lords have mentioned that £75 million is not a large sum these days, particularly when the chief executive officer of the Post Office has estimated that a minimum of £3 billion of investment is required. So one has to go cap in hand to the Treasury and say, "Please may we have a little more?"; and we know perfectly well what the Treasury answer will be.

It is all too apparent that substantial constraints have been put on all aspects of borrowing. As the noble Lord, Lord Dearing, mentioned, the opportunities for joint ventures and acquisitions are constrained not only by the Treasury but also by the need for affirmative resolution before the House. While we applaud that—we like open Government; we like the fact that the democratic part of the legislature will be asked to approve such matters—one must echo the reservation of the noble Lord, Lord Dearing, about the time that that may take. Such matters should not he stopped en route by the departments concerned, but brought as rapidly as possible before the House so that quick decisions can be made.

On top of those timid moves towards commercial freedom, the Government then dropped another bombshell. I refer to their decision last May to accelerate the payment of social security benefits directly through banks through the automated credit transfer system. If pursued, with one blow it effectively wipes out one-third of a staple source of the income of sub-post offices. That decision is a prime example of the lack of joined-up thinking by Government. The noble Lord, Lord Dearing, asked whether a full cost benefit analysis had been done. The situation smacks of the Treasury and the Department of Social Security being only too anxious to make savings at the expense of rural and urban sub-post offices. At a time when one of the Government's main issues relates to social exclusion, it is extraordinary that they should allow such a decision to be taken.

Having launched the Bill in another place, the Government dramatically changed course by introducing at Third Reading new Clause 102. The new clause changes the nature of the Bill, giving the Government the power to introduce subsidies to maintain the Post Office network. One cannot help but suspect that late in the day the Government have come to realise how disastrous were their decisions about the ill-fated Horizon project and the payment of benefits through the automated credit transfer. During the Third Reading in the other place, our spokesmen reiterated that time and time again.

What is promised in the new clause is vague in the extreme. We have no idea how the subsidy is to be paid, to whom it is to be paid, or how far it will help to keep open small rural and urban sub-post offices. We greatly welcome the fact that the Government accept that they may well have to pay subsidies, but that is where the transparency ends.

It is disingenuous for people to say that there have never been subsidies in the Post Office. Implicit in the whole concept of a universal provision at a uniform price is the concept of cross-subsidy. I am told that it costs eight times more to deliver a letter in rural areas than in urban areas. There has constantly been a process of cross-subsidisation and we are well used to that in all our public utility services. Telephones in rural areas are subsidised by the use of telephones in the urban areas. The same principle applies to gas and electricity.

The decision was, and remains so with the regulator, to use cross-subsidisation as a form of providing the social services, rather than having an explicit subsidy. As an economist, I have a preference for an explicit transparent subsidy, where people are subsidised for social purposes, rather than hiding that subsidy. Equally, our only example of an explicit subsidy for a public utility service is the rural bus service. Our local authorities must now pay an explicit subsidy. I do not believe that that is a happy example because one sees precisely what one fears might happen within the Post Office; namely, despite subsidies, the total collapse of rural services. However, I make that point as an aside.

My colleagues here and in another place have consistently argued in favour of retaining the universal public service obligation for the Post Office because we recognise the importance of the postal services to all communities in the country. We have been consistent in arguing to retain the higher £1 limit on the monopoly, at least until the regulator has had an opportunity to assess the situation. We have been consistent in arguing that the payment of all benefits through ACT should be delayed until the completion of the Horizon project and that the sub-post offices are linked into the system through which benefits can be paid. Like the noble Lord, Lord Skelmersdale, my reading of the situation is that there is no need for people to receive their benefits by automatic payment. As the Minister in the other place reiterated several times during the debates, it is open to people to continue to have their benefits paid directly to them at the local post office. Therefore, it is up to people who claim benefits to keep their post offices open and it is important that that is made known to them.

We on these Benches have been consistent in arguing that the whole process should be delayed until sub-post offices can play an active part in the new financial services network. We have been consistent in supporting the role of the sub-post offices in both rural and urban communities as focal points of community activities. Therefore, I join my noble friend Lord Razzell in asking the Minister to reassure us that this Bill is not the beginning of the slippery slope towards privatisation; that the Post Office will be kept in the public sector; and that within its framework we shall retain our network of sub-post offices.

My Lords, the Postal Services Bill provides for the Post Office to be converted from a statutory corporation to a public limited company, ownership remaining with the Crown. The Bill introduces a new system of licensing arid regulation for postal services or providers operating in the area of the market currently reserved largely as a monopoly for the Post Office.

The Bill gives the independent regulator, the new postal services commission, new duties and powers to protect the interests of users of postal services. In particular, it enshrines the universal service obligation in primary legislation and makes it the duty of the commission to ensure the delivery of this service at a uniform tariff.

Subject to that duty, the commission is required to further the interests of users, wherever appropriate, by the promotion of greater competition in postal markets. The Bill states that the commission will be able to promote competition through recommending changes to the scope of the reserved area and by permitting licensed competition within it.

The commission will also have responsibility for setting quality standards and regulating prices. Consumers are in theory given greater protection through replacing the Post Office Users National Council with the consumer council for postal services. The creation of that body brings consumer representation in the postal services market in line with the provision for other utilities.

We on this side of the House, while giving the Bill a cautious welcome, believe that it offers a confused half-way answer. The Government have failed to give the Post Office the freedom it needs to compete against its international rivals. Without full commercial freedom, the Post Office cannot take advantage of being the most efficient postal service in the world. We welcome the decision to grant plc status but regret the 100 per cent retention of public ownership.

We believe that the Government should have sold at least 51 per cent of the shares, enabling the Post Office to compete, particularly with Dutch and German post offices, on a level playing field. As was stated in the Economist last year, in a commentary on the White Paper which laid the foundations for the Bill:

"The results are an uneasy and probably unworkable political fudge. The Post Office is to be converted into a public limited company but with only one shareholder: the Government. Inside the Blair administration there is a split on whether this should or should not lead to privatisation".

In addition, the Government have backtracked on plans to reduce the Post Office's legal monopoly over deliveries from £1 to 50p. The noble Lord, Lord Harrison, mentioned the Lisbon summit which asked for greater freedom for national postal services. The Government started out on that path, but they have backtracked. The saga was quite extraordinary. In December 1998, Peter Mandelson proposed the phasing out of the Post Office's monopoly over letters costing less than £1.

The 1999 White Paper proposed that the Post Office's legal monopoly over deliveries costing less than £1 should be reduced to 50p and in July 1999 a statutory instrument was laid on that. However, in October 1999, a second statutory instrument was laid, the effect of which was to reverse the first. The decision on the future of the reserved area will now be taken by the new postal services commission. We believe that the failure to privatise fully and go below £1 on the monopoly is due to worries about the reaction of the Post Office workers' unions.

Another of our concerns—and I echo the comments of my noble friend Lady Byford—is that the Bill offers little comfort to those threatened with losing their livelihood following the decision to switch benefit payments to automatic credit transfers. That threatens the future of 18,500 sub-post offices and has caused the introduction of the new clause, Clause 102. As my noble friend Lady Miller of Hendon and the noble Lord, Lord Dearing, stated, we do not know how the subsidy will work or whether it will be permanent or temporary. We support the National Federation of Sub-Postmasters in its desire for income, not subsidies, for sub-post offices. As the noble Lord, Lord Dearing, stated, there is no security in subsidy.

As has been stated, benefit payments account for approximately £400 million of income—one-third of Post Office Counters' turnover. Of the 18,500 sub-post offices, only 10,000 are commercially viable. At this point, with regard to the comment of the noble Baroness, Lady Sharp of Guildford, about sub-post office closures under the previous Conservative administration, perhaps I may set out the figures for the record. Between 1979–80 and 1996–97, an average of 143 sub-post offices closed annually. Between 1992 and 1997, 99 sub-post offices closed annually. However, in the first two years of this Government the annual figure was 235 closures a year. This year, that number will exceed 500.

The change to the benefit payment system will alter the finances of so many sub-post offices. I do not believe that the Government will subsidise each and every one that experiences financial difficulty. Closures will result and due to those will be lost a focus of the local community. People go to their sub-post offices not only to buy stamps but also to shop for other items. Therefore, as other noble Lords have done, I ask the Minister to explain how the subsidy system will operate in detail in order to reassure those sub-post offices whose livelihoods may be threatened.

I should also be grateful for a response from the Minister regarding other financial considerations. First, can he assure the House that there will be transparency in the accounting structures to ensure that there is no undue hidden cross-subsidy from monopoly to non-monopoly areas within the Post Office? Secondly, how will it be possible for the Post Office to enter into a joint venture or strategic alliance with another company by way of a limited sale or exchange of equity, as detailed in Clause 67? The Bill would seem to allow for such a disposal, but how would it work in practice? Thirdly, what will be the rate of interest, mentioned in Clause 68, charged on loans taken out by the Post Office? Will it be a commercial rate, as the noble Lord, Lord Clarke of Hampstead, stated? Clause 68(2) states that it will be,

"at such rates as the Secretary of State may, with the approval of the Treasury, direct".

In summary, we give the Bill a cautious welcome, but in particular we are concerned about the effect of the switch to ACT, which threatens the survival of thousands of sub-post offices across Britain, and which, as the noble Lord, Lord Dearing, said, is a cost to society.

Finally, as many noble Lords have said, we wait for the PIU report.

My Lords, it has been a privilege for me to listen to what has been an extremely interesting and, indeed, well-informed debate. Once again, I believe that it has proved the strength of feeling that exists in this country with regard to the valuable service provided by the Post Office. This debate concerns how we ensure that it continues to provide that valuable service while at the same time responding to the major challenges and opportunities that confront it.

I am particularly grateful for the many comments from noble Lords who welcome the introduction of the Bill. I now deal with some of the points raised. I am delighted that the noble Baroness, Lady Miller, feels able to give the Bill a cautious welcome and, indeed, will approach it in a constructive manner. I felt that her criticisms were somewhat half-hearted, but I attribute that to the excellence of the Bill.

I deal, first, with the question of what I believe is currently called "regulatory creep"; that is, the issue of information required by people who are not in the licensing system. We have been concerned to provide for the regulator to have all the necessary powers to ensure the delivery of the universal service and, indeed, to promote competition and the interests of consumers. Many of those powers will simply replicate those previously exercised by the Secretary of State or the Post Office in relation to the monopoly area. There are only minor requests about information with regard to the area outside the licensing area. Therefore, I believe that there is no need for concern on that particular front.

One of the major themes of the debate has been the impact of the new ACT system. However, that does not form part of this particular Bill. The reason that we have had to take action on that matter is to clear up what has, rightly, been pointed out to be an entirely misconceived system which the previous administration introduced in a great hurry. It was well behind schedule and was believed by most people to be undeliverable.

My Lords, perhaps I may say that we are talking about the Horizon project, to which I assume the Minister refers. On several occasions, until the last minute, government Ministers said that it would be delivered and that it was a very good service. In the end, they found that they could not deliver it. That is all. When the Minister says "misconceived", I say that it was equally misconceived by Ministers on the other side. However, I do not accept that it was misconceived.

My Lords, I believe that it is now generally considered to have been misconceived. The Select Committee in another place was very clear about that. Perhaps we should have spotted earlier that it was in trouble. However, it is now generally considered that it was undeliverable and would not have worked.

In that connection, I wish to make the point that we have a simple choice with regard to the Post Office systems of updating them to ones which are based in the end of the 20th century and using those systems to replace ones which were appropriate to the first half of the 20th century. The idea that we should allow the Post Office to go forward in the future with the paper-based systems which currently exist seems to me to place the Post Office in a totally defensive arid unacceptable position, particularly with regard to gaining new business.

Of course, one can always effectively subsidise a business by keeping and continuing to fund totally antiquated and labour-intensive systems. However, with all due respect to many noble Lords who have spoken on that issue, I hardly believe that that is a way to provide Post Office Counters with the means to deal with the future. We must give it modern systems which enable it to obtain new business and play a new role in the rural communities. As the noble Baroness, Lady Miller, said, it is not a question of taking away the profitable business and giving it to the banks; it is a question of bringing it up to date with the kind of systems that we should have in the 21st century.

I turn to a matter which, again, I believe has dominated this debate; that is, Clause 102. I believe that it had been made very clear that this is an enabling clause which will enable us, if necessary, at a suitable time in the future to produce a scheme to subsidise the post office network. It is not proposed to use i t at present and we have not tried to put in place a system of subsidy which would not be appropriate at this stage.

Finally, the noble Baroness, Lady Miller, raised the question of the Post Office's structure. We have put forward a structure which is necessary to enable the Post Office to compete in this new world of international competition, rather than searching for ideological purity which means that we must have at least 51 per cent in the private sector.

The question of transparency of accounts is covered by the European Postal Service Directive. That will cover the question of cross-subsidy. There will, therefore, be total transparency on that issue. A final point needs to be made in this context. It has been pointed out that Treasury consent is necessary for the borrowings. This is a simple and uncomplicated provision. Most financial provisions have it in one form or another.

I turn to the comments of the noble Lord, Lord Razzall, who described very well all the issues that need to be covered in considering the kind of structure that is appropriate for the Post Office in the future. The noble Lord suggested that the way to resolve all these issues is effectively to keep it within the public sector and with a public sector structure. I find it difficult to see how that would resolve the problem of how to keep a public sector influence in a body which also has a commercial one. Therefore, while his description of the issues was extremely good. I am by no means convinced by his argument. He certainly did not put forward any reasons to suggest that this would resolve any of the tensions which inevitably exist in such an organisation and which are reflected in structure between the public sector aspects and the purely commercial ones.

The noble Lord, Lord Razzall, raised two fundamental issues with which I shall deal. The first concerned the question of the national network. We are determined to maintain a national network. This Government have, for the first time, publicly laid down the criteria for access which will enable that statement to be properly judged. It is a major step forward. It is, of course, very easy to say, "We support a national network", without knowing what it means. For the first time, we are laying down criteria as to what it means.

Another theme that has run through this debate is the status of the Post Office and the question of privatisation. I again make it quite clear that the Government have no plans to privatise the Post Office. It will remain publicly owned. When publishing the White Paper, the Secretary of State promised that the Government would not seek to dispose of Post Office shares without further primary legislation, except where limited sale or exchange of equity would be in the interest of the Post Office to cement a joint venture or strategic alliance with another company, in which event the approval of the Houses of Parliament would be required. That is a very clear and unequivocal statement about where we stand on that particular issue.

I turn to some of the points made by the noble Lord, Lord Dearing. The noble Lord, Lord Dearing, knows more than anyone in this House about the Post Office and, moreover, played an enormous part in reinvigorating the organisation when he took over as the chairman. I can assure him that we will make certain that the balance sheet of the Post Office is commercially sound. Indeed, there is no point in having a plc unless we give it that strong balance sheet as a basis for going forward. As was announced in the Statement to the House in 1998 and restated in the White Paper in July 1999, the Post Office's balance sheet will be restructured by 1st April 2002, in order to place the Post Office company on a more commercial footing so that it can be better benchmarked against its competitors. We are employing advisers to help us make that transition. However, I certainly take the noble Lord's point, of which the DTI is very conscious, that we have to make certain that commercial decisions are taken speedily and that the whole basis for the relationship will depend on a hands-off stance being taken by Ministers.

In relation to the question of cost of ATC, there is no question of cost being transferred to those who receive the benefit. People will, in exactly the same way, be able to get payments at their post offices in cash, without deductions from them. That obviously will depend on them not using any of the other banking services. They can continue to get benefits from the Post Office in cash in the normal way.

My Lords, perhaps I may press the noble Lord on that issue. I appreciate his response to the many questions that we have raised. The question that has been raised relates to how people will get their money. If there is to be no book or giro, how can they get hold of the cash? That is the unanswered question. If I have interrupted too early, I beg the Minister's pardon.

My Lords, there may be a question of how the identification is established. However, as I understand the system, the money will simply be transferred into an account at the relevant post office. In that sense, they will simply have to go and draw it from that account. It is a system by which the payment is sent out to them and they can claim it at the Post Office. In case I am in any way wrong about this, I will check that point and write to the noble Baroness. It is a point which appears to cause a lot of concern. As I understand the system, it will be possible to withdraw the cash from the Post Office, in the same way as is possible at present by using a book. However, I will check that point and confirm it by letter. It is clearly a point of considerable interest and concern to people and it would be helpful if that point were established.

The savings which will accrue from this system, as was mentioned, will be very substantial. Indeed, the ability to control fraud, which is calculated to cost £140 million per year, will also result in a substantial saving from this system. I cannot see any way in which those very substantial savings could be lost in other aspects of the system. The question that has been raised is whether the pressure on the finances of the post offices that we seek to close might have a social cost which has to be taken account of in relation to this system. I still feel that it is inappropriate, in those circumstances, to say that we shall maintain what is seen to be an inefficient system involving a lot of work in post offices and that supports their finances. That is simply another way of effectively giving them a subsidy. It is inefficient and not very cost effective.

I turn to the comments made by my noble friend Lord Clarke. We have made it clear that pensioners and people in receipt of benefits will get them in cash. As far as I can establish, the figures that he presented are essentially correct. However, I do not want to comment on the question of the pension holiday for the post office, because that clearly would depend on actuarial valuations. Many of the questions that he raised will have to be taken account of in the final structuring of the balance sheet. It is, of course, difficult to make comparisons without looking at the final balance sheet, which obviously is unlikely to include the strange arrangement of a lot of government gilts which are earning interest for the Post Office. That will have to be accounted for in the restructuring of the balance sheet.

I believe that there are huge advantages to having the Post Office as a plc, if it is to maximise opportunities abroad. In many cases, it will be dealing with foreign companies and with bankers who are used to the concept of a plc and are not necessarily aware of all the ramifications of what a state-owned enterprise will be. Therefore, the fact that it is a plc will make much easier any investment and banking arrangements. It makes a great deal of difference in clarifying the relationship between government and the plc, if it is a plc, because that has very clear responsibilities which are understood by everyone on the board.

As regards the cap, we need to maintain the maximum flexibility to enable the Post Office to develop its business in the most commercial manner appropriate. It is quite likely that if there were to be joint ventures, they would take the form which my noble friend Lord Clarke mentioned; namely, putting together assets which would not necessarily involve the holding company's shares being sold.

My noble friend is correct in wondering whether 10 per cent or 11 per cent is the better figure. I do not believe that we should get into that kind of auctioning of figures. This proposal is very carefully constrained. The Post Office must come forward with a proposal and that must be agreed by both Houses of Parliament. That provides a tight control over the situation.

The noble and learned Lord, Lord Brightman, made some complimentary remarks about the work of parliamentary counsel which I shall happily pass on. It is not a channel of communication which is overflowing with compliments and I am sure that they will he delighted that their excellent work has been noted by such a distinguished lawyer.

The noble Baroness, Lady Sharp, referred to reaching agreement for borrowings. In most commercial situations, if companies are borrowing large sums of money, they have to go to talk to people—rating agencies, bankers and others. Even in the world of commerce, some discussions must take place before large sums of money are raised. The Government have given an extremely clear assurance in the White Paper that there will be a fast-track 28-day approach to approval of large investments of over £75 million. That was employed for the approval of the purchase of the German parcel operation. So it is quite clear that that can be done if the will is there to do it.

I turn to the points raised by the noble Lord, Lord Northbrook, about the structure. I see no reason why there is anything magic about 51 per cent of the shares being sold. If it can be done on the basis of 100 per cent ownership by the Government, I am not sure why 51 per cent in the private sector enables it to compete better; for example, against the Dutch post office.

As regards the reduction of the Post Office monopoly, the Select Committee in another place suggested, after the Government made their announcement, that that should be the first job of the regulator. We listened and agreed to that.

Finally, the interest rates will be commercial rates, but they will take account of the fact that there is government backing for the Post Office.

The Government believe that they have chosen the best way forward for the Post Office and its customers and, indeed, for the country. They are seeking to implement the reforms as quickly as they can. The greatest disservice and damage we could do to the Post Office is to cause further delay.

By implementing the reforms set out in the Bill, the Government are confident that they will put in place the means to deliver a Post Office which meets the needs of its UK customers, both business and private consumers, effectively and efficiently; a Post Office that can compete in international markets as a major overseas postal service provider; a Post Office that can develop its business and invest for the future; and most important, a Post Office which protects its social obligations and the principles of universality, accessibility and affordability, providing a world-class service throughout the United Kingdom.

My Lords, before the Minister sits down, various points were made by noble Lords which he has not had time or, perhaps, the inclination to answer this afternoon. Will he give us an assurance that he will write to noble Lords on those points?

My Lords, certainly. If noble Lords feel that I have not covered any points which they have raised and would like me to do so before the Committee stage, perhaps they will let me know and I shall write to them about those matters. I shall certainly read the debate in Hansard and try to pick up any points which I have not dealt with. I commend the Bill to the House and ask it to give it a Second Reading.

On Question, Bill read a second time, and committed to a Committee of the Whole House.

rose to ask Her Majesty's Government whether the introduction of the euro will be good for the British tourism industry, regardless of whether the United Kingdom adopts the euro.

The noble Lord said: My Lords, over the weekend, my family and I, as tourists, visited the Royal Crown Derby visitors' centre. My wife bought a vase there and I am elated to say that its sale price was expressed in euros as well as pounds on the receipt. That 250 year-old firm is looking to the future while celebrating the past; so must we, as a country.

Tourism is the vanguard industry of the euro and tourists its stormtroopers. It is the industry which best illustrates the advantages of Britain adopting the euro, not only for Britain's tourism businesses but also for the man and woman in the street. After all, why is it that every year, each and every one of us who travels to an EU holiday destination chooses to give away a proportion of our holiday spending money before we have set foot on foreign shores? In swapping pounds for pesetas at the local Thomas Cook's, we offload cash that might otherwise purchase us better accommodation, tastier meals out or more exotic presents to bring home to loved ones? The commission charged and the hedging against the exchange rate fluctuation costs holiday spending money.

Let me put it another way. Would you not be breathing fire out of your nostrils if, in electing to holiday in Wales, you were obliged to exchange pounds sterling for Welsh dragon notes and coins? But that, in effect, is the burden placed on British holidaymakers now travelling to the Continent. In contrast, domestic tourists within Euroland now enjoy the fruits of eliminating currency fluctuations and reduced or banished commission rates.

And, of course, what is good for the tourist in Euroland is also of immense benefit to businesses in the tourism industry, which no longer see their profits eaten away by the necessity of changing currencies. Small firms in particular, which compose the vast majority of businesses populating the tourism industry, gravitate to that slashing of red tape.

Secondly, the euro introduces transparency of prices and costs. That will make holiday shopping an even more stimulating experience for the tourist. No longer will there be a need for the callisthenics of mental arithmetic in converting lira to pounds. The true comparison between a pair of shoes espied in modish Milan and nice boots in no-nonsense Northampton will be a cinch for the euro window-shopper.

In addition, the euro will shoehorn in a new era of competition within the single market to the benefit of the customer. And what is true for him or her is even more relevant to tourist businesses. In an already internationalised industry, the euro will facilitate cost-based comparisons, thereby driving down prices to the consumers' benefit. None should fear such increased competition except the entrepreneur who fails to travel with the times.

I offer noble Lords an example of how that will work. Recently the Observer revealed how booking the same package holiday to Majorca through a travel agent in Dublin, rather than one in Britain, could cut the price of the holiday by 67 per cent. Imagine, now, the situation in which Britain enjoyed the single currency. Such a comparison would be made even plainer, no longer subject to the prism of converting the Irish punt to pounds.

Thirdly, the tourist and the tourism industry will stand to benefit from the stable economic climate which is achieved and likely to be the enduring characteristic of Euroland. Since its inception, commentators have concentrated on the descent of the euro against the pound and the dollar, forgetting the remarkable internal stability which Euroland is experiencing. Low interest rates, a function of low inflation, mean that the cost of money is cheaper. In turn, that provides the stable and predictable economic climate in which business can plan and invest long-term. Of course, such business stability works its way through to the consumer in the form of cheaper holidays.

The elimination of exchange rate fluctuation benefits consumers in other ways. The current strong pound may have benefited Britons on the Continent over the Easter break, but there has been an offsetting and an upsetting pressure on our domestic tourism industry. We find ourselves uncompetitive at the whim of an over-priced pound. How much better the secure climate of Euroland would be, where the British traveller going abroad can plan an annual holiday sensibly rather than confront the carousel of a rising and dipping pound. Moreover, fluctuating currencies distort consumer choice of holiday destinations when selected according to favourable exchange rates, rather than by the intrinsic worth of holidays offered by the industry. Inevitably, such havoc in the market translates further down the line into costlier holidays for the consumer.

Fourthly, the euro is spreading as a currency of exchange beyond Euroland. That benefits the tourism industry in particular. Because of its international character, the industry is already finding all kinds of savings in cross-border transactions, whether buying forward purchases or eliminating needless hedging to reduce exposure from such purchases. Savings in seigniorage will accrue and, as the euro becomes a rival currency of exchange to the dollar, such rivalry will, of itself, promote beneficial currency competition.

In turn, third countries will elect to deal in the euro, as they now barter in the dollar, to the distinct advantage of the tourist industry with its global character. Indeed, we should remind ourselves that tourism is the world's largest industry and it is set to double in size over the next decade. In my view, that makes it all the more reprehensible that we should shy away from the concept of being proud of the euro as Europe's common currency, and still manifest obeisance to a foreign currency, the American dollar.

Last week, on Radio 4, there was a report on the Japanese tourism industry, concerning the deadly delicacy of poisonous fish eaten in tourist restaurants. For the life of me, I cannot see the attraction of eating fish that, if wrongly prepared by the chef, may be one's last supper. However, I regret that the BBC reporter told us the price of the delicacy in dollars. Why give the price in dollars in a report to a British audience? I yen for the day of the euro, unpoisoned by our negative media. As a patriot I am proud of the pound, but I shall be proud of the euro when Britain adopts it as its domestic currency.

Fifthly, and perhaps most importantly, the euro will reinforce the drive to complete the single market. Some commentators opine that a single market does not require a single currency. That is true, but it is pretty daft not to have one. The single market and its wise tourist guide, the single currency, will provide tourism with its biggest kick and fillip. My philippic to your Lordships this evening is that completing the single market is ours and Europe's quickest route to jobs and prosperity.

So far I have set out the economic reasons that benefit tourists and the tourism industry in Euroland. Let me add one other argument that confers a compelling social advantage. I refer to the blind and visually-handicapped, of which there are some 7 million citizens in the European Union. They, too, want to travel and enjoy themselves as tourists, but they fear being cheated through unfamiliarity with foreign currencies. For them, the euro is a godsend; it is their passport around Europe.

The new euro notes and coins are designed to be user-friendly to the blind and the visually-handicapped by the nature of their shape, size and sharp colours as well as by the distinctive embossments currently featured on many continental currencies. Such aids to the blind are absent from the pound sterling and the US dollar. Indeed, the greenback is the worst conceivable design of a currency note for the blind, lacking as it does embossed markings and possessing a uniform size, shape and colour. In contrast, the euro will offer a competitive advantage to the dollar and, for that matter, to the poorly designed sterling notes. The euro notes and coins will help the blind to see their way around Europe as well as offering the industry a new untapped source of custom. Remember, once learnt in your home country, the euro is portable throughout Euroland. For the blind, the old and the young, familiarity with the new currency will breed "content".

Principally, I have set out to explain the advantages of the euro to tourists, the industry and all those within Euroland. Let me now dwell on the consequences of Britain staying too long outside the euro. I believe that the strong pound, plus exclusion from Euroland, will begin to affect Britain's tourist industry. I shall give just one example. The existence of Euroland will indisputably encourage tourists from the rich nations of the world, such as the USA, Japan and Korea, to come to Europe. The red tape of 14 currencies, currently slowing down Europe, will be slashed and burnt by the onset of the euro.

As many inbound tourists buy multi-destination packages, increasingly tour operators will plan packages exclusive to Euroland. To a degree, Britain will be shunned. Indeed, the European Tour Operators Association has suggested that some 3 per cent of inbound American tourists may avoid London as a result of Britain being isolated from the euro. If one has to use a second-hand currency instead of euros in a second-hand bookshop in Notting Hill, even a Julia Roberts may be tempted to take her custom straight to the Continent, handsome Hugh Grants notwithstanding.

Will not the euro enter Britain in 2002 in note and coin form in a whole variety of informal ways? First, British tourists will return from continental and global holidays clutching superfluous euro coins and notes. In turn, they will resent being landed with excess currency and look for outlets to unload them. Inevitably, certain commercial outlets will attempt to steal a competitive advantage on their rivals by offering such facilities for spending euros.

Already Marks & Spencer has scheduled new tills capable of expediting euros and is training its staff to handle that new custom. Its competitors will have to follow suit. New outlets will appear to receive payments in euros. A London taxi driver, with an even larger brain than some of his colleagues, gave me the knowledge. He told me that he would happily charge in euros for foreign travellers passing through London, but I do not know how impressed our putative Julia Roberts will be when charged a large commission in her euro fare to Notting Hill. That will not reflect well on London or on Britain's readiness to accept overseas tourists.

Nor should we consider this to be merely a metropolitan problem. Tourist towns, like my own Chester, and countryside attractions will perforce have to deal with euros if the punters bring them into hinterland Britain. Will Britain's post offices be ready for that kind of change? They should be if we are serious about tourism and diversification in Britain's rural areas.

One other special case is Northern Ireland. For years tourism has been underachieving in Northern Ireland because of the Troubles. Despite it being a wonderful tourist destination, Northern Ireland's tourist take is well below that of its southern neighbour, the Republic. Imagine our peripatetic Julia Roberts as an American tourist researching her Irish roots on the island of Ireland. How much easier that research would be if the euro operated on both sides of the border. After all, 12 American presidents can trace their ancestry back to Northern Ireland itself and not just to the Republic. What a market for the euro to tap—the greenback returning home!

The Northern Ireland Tourist Board and the other national tourist boards join with the British Tourist Authority in believing that the euro will be good for the British tourism industry if we enter,

"at the correct level and in the near future".

In their recent briefing on the subject they highlight the particular and unique opportunity offered to Britain's small businesses were we members of Euroland.

I have tried dispassionately to offer the economic reasons why Britain should join the euro for the wellbeing of its domestic tourism industry and also for the benefit of all of us who holiday outside the United Kingdom. I shall not attempt to rebut some of the non-economic arguments that no doubt will be forwarded in this debate and which may be characterised under the general heading of fear of the loss of sovereignty and the particular gripe of losing the Queen's head from our currency. It is therefore a compelling paradox to note that, with the acceptance of the euro, the Queen's head will be more widely broadcast throughout Britain than is currently the case. How can this be so? Noble Lords will be aware that at the moment the Queen's head appears on only two of the nation's banknotes circulating in the United Kingdom. When Britain joins, euro coins bearing the Queen's image will achieve blanket coverage of our own country, something that has never occurred before in our history and for which we shall be beholden to the European Union. The EU is the true and only begetter of European peace and prosperity. Touristically speaking, are we ready to coin it?

My Lords, I congratulate my noble friend Lord Harrison on introducing such a topical debate. Only last week the director-general of the CBI described the euro/sterling exchange rate as,

"a major threat to the UK's position in the world tourism league".

Until recently the UK has maintained a broad balance between the growth of inward tourism and the growth of outward tourism, whether in numbers or in value. Not surprisingly, that growth has been above the growth of real GDP—roughly double—at 6 to 7 per cent per annum, as compared with a GDP growth of, let us say, 2½ or 3 per cent. However, over the past two or three years, there has been a disturbing change in the balance of the "in" and the "out".

Value and volume figures are quite tricky in this field, but the broad position over the past two years has been that inward growth has moved down to around 3 per cent whereas outward growth has surged ahead to the order of 10 or 12 per cent. The absolute figures therefore show a gap. We are spending over £25 billion a year abroad while visitors spend around £15 billion here.

I can remember the time, along with many other noble Lords, when £10 billion here or there on the balance of payments was not peanuts. Indeed, one can recall the issue of one jumbo jet entering the trade figures, causing major political havoc during the 1970 general election.

Evidence is growing to show that a serious problem is developing. A number of tourist bodies are now putting together that evidence. Perhaps I may quote parts of it. Some tour operators say that the strong pound/weak euro relationship is most likely to affect certain groups of visitors, such as young travellers whose budgets are limited to start with, or day trippers coming over for shopping. As one would expect, there is a direct correlation between currency fluctuations and our visitors' average daily spend. In contrast, business tourism is very resilient, as is the sector for people coming here to visit family and friends.

Evidence can be seen in the estimated figures for the first three-quarters of 1999 when the number of business visitors increased by over 6 per cent while holiday visitors decreased by around 5 per cent. Fortunately, in recent years the advent and growth of low-cost airlines in Europe, along with competitive air fares and increased capacity on transatlantic routes, have substantially reduced the cost of reaching Britain and, to some extent, have offset the effect of the higher value of sterling.

However, if one looks at Britain's performance as a tourism destination against other European destinations, there is evidence to suggest that we are losing out. Had tourism to Britain continued to grow at the same rate as tourism to the rest of Europe in recent years, this would have generated an additional £2 billion in revenue, which in turn could have supported the equivalent of 70,000 jobs.

Perhaps I may cite some views from Ireland which, as my noble friend Lord Harrison pointed out, is an interesting and special case. The relationship of the punt to the pound and to the euro will be watched with particularly close interest. One Irish tour operator stated:

"Britain is far too expensive because of sterling. Tour numbers are slightly down, although prospects for 2001 are better. Seven nights in Ireland for eight people in a group costs the same as four nights in Britain".

Another operator from Ireland stated:

"Over the last 12–18 months, Paris, which has historically been second to London by a substantially less number of bookings, has gained market share and is now almost on a par with London. The value of sterling is the only reason for this and until the rate of sterling improves, Britain is likely to lose further bookings to other destinations".

A third operator said:

"The first quarter of 2000 has shown a reduction in bookings to London of around 10 per cent and a reduction to other parts of Britain of around 20 per cent. This is purely the result of the increase in the value of sterling against the punt. Paris, Amsterdam and Budapest are fast gaining market share on city breaks in Britain. I predict this slump is likely to continue until the price of sterling is reduced".

I turn now to some views from the United States. Britain is losing market share of European travel, in particular to Italy and France due to the euro's value to the dollar, which has made both destinations 15 to 20 per cent cheaper in dollar terms than last year, and in comparison to Britain. The relatively high value of the pound has meant that London has been widely reported in the media as one of the world's most expensive cities.

A view expressed from Sweden states that the recent decrease in numbers is due to the strength of the pound. Over the past five years it has grown 40 per cent more expensive against the Swedish krona. The Swedes are still visiting Britain because of budget airlines and the surge in Nordic stock markets, creating wealth and disposable income.

Finally, a view from France states that the problems are undoubtedly the pound versus the franc, the feeling that Britain is an expensive destination and that London is losing some of its initial "in vogue" feeling. Overall, unless sterling begins to depreciate again and the group market returns in force, growth cannot be predicted, but rather a small reduction in numbers in the short term. Much of this is down to the exchange rate. Clearly, we now find ourselves in the position of having an unsustainable rate. Whether the extent of this against the rest of the euro-zone is 10 per cent or 15 per cent is a matter for debate.

What is now needed on that front—my submission is the same as that advocated by Sir Samuel Brittan in the Financial Times and repeatedly urged by others, including the TUC—is for the Chancellor to make an opening bid for the range of conversion rates at which he would like sterling to enter the euro, obviously on present evidence and if the other conditions are met. Otherwise, we shall all have to go on repeating the mantra about the conditions with no idea of how they are being addressed or how the exchange rate relates to them. The drift of confidence for exposed sectors will continue.

The Americans are often portrayed as implicit euro-sceptics. But one point is often not noticed about the value of the euro. It is nearly the same as the value of the dollar. The Americans will be very comfortable seeing prices set out in euros. Indeed, recently I was speaking to someone in the retail business who said that in their stores in Antwerp and Amsterdam, it is already clear that it is the Americans who are taking to the euro like a duck to water. This will be true not only of tourism. As a consequence, the euro will become the dominant cultural and industrial reality across the board.

An example of the dramatic impact of the euro and of UK non-membership is perhaps worth describing. Let us take the example of a conference organiser in one euro-zone country. He will be able to secure comparative quotes for a range of hotels in a range of euro-zone countries and easily compare them to see which one is offering the best value. However, that will not be so with Britain. In fact this illustrates three points.

First, even to be in the competition one has to be in the frame. The prima facie answer is that we may not be in the frame at all. It will be in the euro-zone—Euroland, as described by my noble friend, and indeed as the press now call it—where those kinds of comparisons will be made. Such brochures will circulate on a euro basis.

Secondly, even if the hypothetical organiser takes the trouble to bring a foreign currency—for example, the pound—into this world of continental comparisons, he will find that UK prices are well out of line with euro prices, given the exchange rate changes I described earlier. Thirdly—this flows directly from the second point—he will not know, he will not be able to say, what the exchange rate will be when the conference takes place and will find that not many UK hotels are ready to give a fixed price in euros.

It is only that last point which is under the control of the UK bidder, if he gets that far in the tendering process. But it emphasises the importance of at least considering how to make it more attractive to quote in euros from the end of next year, and that means starting the planning now. Others on the Continent are already getting on with the training and so forth.

I shall return briefly to that theme at the end of my remarks; but that may be where we should conclude this debate. There is a difficulty for the individual hotelier in doing the market research and getting feedback on the question of quoting prices in euros. I have been away from London over recent days and found it noticeable how the prices in brochures for France and Italy and so forth were all in euros, as my noble friend said.

I appreciate that some people may use a totally different line of objection to everything that I and my noble friend have said. It may be said that it has nothing to do with the Government; that they should keep their nose out of it; that business is business and business knows best what is in its own interest. That may sound a bit like a caricature, but not overly so. The theme, "What is good for General Motors is good for America" comes too near the truth for comfort as describing one approach to the public debate on this matter in Britain. But it is uniquely wrong. It is a precise example of an issue where public policy has to give a lead; where people look to the Government. In my saloon bar, it is said, "It is up to the Government to suggest what we ought to do. The Bank of England or someone higher up the hierarchy of policy-making than us should give a lead and make the position clear." Can we imagine the French 'authorities standing around and saying, "We will wait and see how it plays in Antibes or La Rochelle"? Of course not.

What is our national stance in face of the overwhelming evidence now before us? Of course, we could adopt the pre-set of the person who wrote, in a letter to the Daily Telegraph: "We do not need any more tourists. We have enough already". That is one point of view. But taking that view seriously for a moment, we had better be clear that, on that argument, we in this country ought to stop going abroad as well. That is what the issue amounts to. There is a massive world growth in tourism and we had better be part of it. If we are not, how long can we continue being at a unique disadvantage in the big tourism league, whether euro-tourism or other sorts of tourism?

We have done surprisingly well in some aspects of tourism. And it cannot be the weather! The facts are that over 50 per cent of Brits (that now seems to be the term) have now been to France at least ono.! and only 15 per cent of the French have been here. Twelve million Brits last year went to France while 3 million French came here. And last year we received approximately 26 million tourists from abroad, yet 53 million of us—that is double and pretty much all of us—went abroad. Even if we ignore the double counting, that is a lot.

There is nothing wrong with making hay while the sun shines. But the trend of an ever-widening gap cannot go on for ever, especially if other parts of the balance of payments are going the same way. There are those at the present time who, in the famous words of Lord Whitelaw, seem to go about stirring up apathy. One variation of that is to say that plastic money is what everybody uses these days, so what is all the fuss about? But that is only true up to a point. We must be careful to identify what is fallacious about that argument.

It is true that approximately 50 per cent of tourist payments are in scriptural (that is, non-cash) form and the other 50 per cent in notes and coin. But whichever bit goes in which price index at the end of the day the whole lot is affected by the most fundamental change of 2002, the end of next year in case anyone had not noticed. That is when our credit cards and so forth will have to go from Britain through a foreign exchange charge on top of a handling charge. And it does not matter whether we are talking cash or non-cash. But others on the Continent will not have to do that and are getting on with matters very thoroughly.

So we must look to our laurels. If I were running the British tourist industry, I should be saying, like the old town crier, "Oyez! oyez! Start quoting your prices in euros". Two million jobs are involved and they are not there because they have a God-given right to be there. In conclusion, therefore, will my noble friend take delivery of a suggestion that a specific remit be taken on board by the Treasury to consult with the tourism industry and other relevant sectors to draw up recommendations as to measures that could facilitate pricing in euros? That should be as a trial run in the year 2001 and be fully up and running when the euro comes into full effect in 2002.

My Lords, I thank the noble Lord, Lord Harrison, for introducing the debate. Although all our newspapers have been full of the plight of the Rover car plant—there is understandable concern in that regard and in the Financial Times on Saturday there was a leading article on the role of the high price of sterling in the fate of Rover—nonetheless, we should remember that tourism employs five times as many people as the entire car industry in this country. It is right therefore that we should look at the effect on tourism of our absence from the euro.

Can we look at the facts? It is undoubtedly true that it is harder to win business from Europe than ever before. The British Tourist Authority—of which I am a member, and I should therefore declare that as an interest, though as I do not entirely agree with the BTA line on the euro there is no danger of me trying to brainwash your Lordships—points out that it reduced its estimates of the growth in tourism expenditure vis-à-vis numbers this year, principally from euro-zone countries.

We are not just talking of euro-zone countries. In France, day trippers were down 9 per cent last year on the previous year. That is a factor of the exchange rate; there is no point in denying that. The point has also been made that mainland Europe is a more attractive destination for the American market than the UK in price terms. The problem is what we can do about that. It should console some noble Lords that the American travelling to Europe might be reassured to find the euro worth roughly the same as the pound; but he will not be reassured that his hotel in Paris costs him 1.8 times the cost of an hotel in New York.

We must also bear in mind that the exchange rate is low compared with 20 or 25 years ago. We have a "strong" pound only compared with the disaster after our withdrawal from the ERM. The other factor that needs to be borne in mind—this is not just semantics—is that it is not so much a strong pound as a weak euro. In fact, the pound has marginally depreciated against the dollar in recent months. What happened? We must bear in mind in this regard that the conference organiser who booked his conference in Europe when the euro was launched, would now find that he could have bought 15 per cent more euros today if he had waited until now to pay. Regrettably—and I say this in no sort of euro-sceptic mood of jubilation—the euro is in freefall. Rightly or wrongly, world markets do not want to buy the euro; they want to buy the pound and there may be reasons for this.

For what it is worth, I believe that the world markets, rather like the stock market in this country, always overvalue success and downsize failure slightly too much. The pendulum may swing back. After all, the actual performance of countries in the euro-zone in terms of growth in GDP is better than it is here. Inflation is pretty low, though not as low as here, and interest rates stand at about half the level of those in this country. There are many good signs. But one way or another, try as the European Central Bank may, people do not want to invest in the euro. It has fallen by 15 per cent since it was launched on 1st January 1999.

Therefore, when we ask whether the euro is good for British business, it really is quite difficult to work out whether the exchange rates would have been as bad as they are had we not had the euro. I would find it impossible to prove that one way or the other. My guess—and this is only a guess—is that the countries in the euro-zone have depreciated against the pound rather more because they are in the euro than they would have done if they were still independent economies. That is only a guess and an unprovable one, but world markets tend to look on the euro with disfavour. In many cases, they do so wrongly. However, it is a fact and that is what determines exchange rates.

I ask noble Lords to recall the last time that this country tried to fix its exchange rate; namely, when we went into the ERM. The rest of the world thought that we had got it wrong. We had a panic and spent £6 billion of our reserves trying to prop up sterling—then, after a day, we gave up and instead of the pound standing at 2.85 to 2.95, it dropped to about 2.30 within months. World markets determine the value of sterling and the value of the euro. We need to consider exactly what the present Government can do to reduce the value of sterling. Are we saying that the Bank of England has been wrong in all the decisions it has taken about interest rates? There is an argument in that respect; but if these independent economists shorn of political bias from the Government decided that interest rates at those levels were necessary to curb inflation, were they so totally wrong? I rather doubt it.

The benefits of a fixed rate were admirably stated by noble friend Lord Harrison. Of course, I concede that tourism is almost tailor-made for the euro. Tour operators, book 18 months ahead. The stability of exchange rates is a great idea for tourism. The fact that you cut out this business of the banks taking about 10 per cent of your cash every time that you change money is a wonderful idea for the tourist. It will undoubtedly increase travel and reduce operating costs. That is good for tourism. However, the problem is at what level you go in. That is something with which both this and the previous government have wrestled. I wish that the debate on the euro in this country would move a little above the black and white sloganising that tends to characterise such debates. We need to recognise that we are talking about different shades of grey and that it genuinely is a very difficult decision to make. There is no one right, easy solution.

In my television days I was once asked to present a programme entitled "What is a Budget?" for schools. It was by far the most difficult television programme that I ever had to present. If it involves politicians, it is easy: you just talk about inflation, the touch of the accelerator, the brake, and so on. No one knows what he is talking about but it is part of the great conspiracy of politicians and commentators that we talk about these things as though they are economic certainties. In fact they are not; otherwise, we would have been able to cure inflation a long time ago.

I often wonder what I would do if someone asked me to present a programme on the euro—that is unlikely, thank goodness—and whether we should join. I believe that my first response would be to plead a previous engagement. However, I think that I might start with the question: what is there against having a stable currency exchange rate for every country in the world? Of course, there is a good deal against it. But by asking the question we would at least indicate what the conditions are for having a fixed exchange rate between countries in a group. Clearly it would be unfair to some of the developing countries if the exchange rate were fixed at their current level of development, because they will improve quite markedly and, indeed, faster than some developed countries. So the maturity of the economy is one factor to be considered. The development of raw materials in a country can also have a dramatic effect in this respect. For example, the whole of the Middle East was transformed in terms of economic prosperity because of oil.

So what are the conditions? We need to ensure that the countries in question are broadly at the same level of economic maturity and are moving pretty well in step with one another. That is the great problem. Is it a case of one size fits all in Europe, even for Europe as it is, let alone with Britain? I suspect that we may get some interesting evidence on this point during the next week or so and from not very far away. I say that because, rather like Britain, Ireland is booming, while a lot of the rest of Europe is stagnating. Ireland is at a stage where the head of the European Central Bank has said that its economy is overheating and something must be done about it. But what can Ireland do about it? It cannot change its interest rate, which might have the normal effect of dampening down demand, because that is decided in Frankfurt. Moreover, Frankfurt will be rather more concerned at present with a stagnating German economy and with trying to get it booming again than it is with Ireland.

As my noble friend Lord Mackay will know, similar complaints are often made in the UK that interest rates are set at a level—here I am parroting the nationalist line— that suites the south-east of England and ignores parts of rural Scotland, while forgetting that parts of Scotland, like Aberdeen, are much more akin to the south-east of England in terms of economic prosperity than they are to other parts of Scotland. But the areas over which you try to impose a fixed interest rate must be ones that are liable to move in step with one another. I do not believe that to be true at present, although I rather wish it were. I am a great believer in the concept of Europe, but I should like to see that happen.

The answer lies not in doing something about the pound; it lies in the European governments doing something about the euro. I strongly suspect that one of the reasons for the euro's unpopularity is that successive governments in this country have at least tried to start grappling with the problem of providing for pensions. Some European countries simply have not done so. Therefore, their currencies in the world market are being badly devalued.

The Irish situation is interesting for other reasons: they are out of step with Europe and require a form of action that the rest of Europe does not need. In the absence of the power to do anything about their exchange rate, what will the Irish do? During a debate on Northern Ireland, I heard the noble Viscount, Lord Brookeborough, talking about the effect of petrol prices in the Republic on petrol stations and shopping in his part of the world. As I see the noble Viscount in his place, I shall leave it to him to develop that point; indeed, he will do it so much better. If you lose control over your exchange rate, you have a situation where you have lost a safety valve. That may be a price worth paying. I happen to think that it is in terms of Scotland and the Union. However, I am not yet convinced, although I hope to be in time, that it is a price worth paying in terms of the euro.

I have a few further points to make. I concede that the pound is overvalued. The Economist recently produced an economic index based on the value of a McDonald's big burger. On that basis, we are overvalued against the dollar by about 20 per cent. It sounds a very rough-and-ready method of doing economics, but the economics editor of the Economist said that the burger chart—the purchasing power/ parity chart—has a remarkable success rate in determining exchange rates over the longer term.

The question is: what do you do? In my view, regrettably, you interfere with the market at your peril. The last time we did it, George Soros could see off the British Government; and so we have to be careful. There have been suggestions that instead of using the windfall from the sell-off of the third generation of mobile phones we should be investing in the euro, trying to prop it up and then pick up the capital gain and so on. Equally, I have seen other suggestions that we should do a gilts issue, raise £20 million and again invest in the euro; then pick up the capital gain and the euro would improve. If the world market does not want to do it we could be throwing our money away. Therefore I strongly suspect that we are going to be a prisoner of a weak euro until Europe starts putting its own house in order, as I very much hope it will.

In the meantime there are some things that the Government can do. I think we could ameliorate the effects of an adverse exchange rate by doing something about our taxation of tourism industries in the United Kingdom. It is not often realised that most European countries charge differentially lower rates of VAT on hotel accommodation than we do. In Paris, for example, it is 5.5 per cent and in Rome it is 6 per cent. The Government need to take another look at that. We are being priced out of the market. But for low cost air traffic, we would have been priced out of the market even more demonstrably. I think we need to look at that. We also need to look at—I am glad to note that the Chancellor did this—keeping high taxation on petrol. We are becoming markedly uncompetitive. Parts of the world, like mine, are out of the reach of people who have to pay current petrol prices.

I was also glad to note that the Chancellor took a very sympathetic view of the air passenger duty issue. I think he deserves applause for that. It is dawning on the Treasury that tourism is a very important issue and should not be adversely affected if we can possibly avoid it.

I end on an optimistic note. If people's main holiday abroad is costing them less—which it is—then they will have more left of their disposable income to take a second holiday in the United Kingdom. We must place at least some of our faith in that for the future.

My Lords, first, I must declare an interest in that I am involved in tourism in Northern Ireland. After being stifled by terrorism, Northern Ireland should see the dawn of a dramatic expansion of tourism. However, we have exchange rate problems like everyone else. The value of our currency, as the BTA say, may be only part of the story in the decision-making process of potential tourists. However, the BTA's publication to the trade, Market Issues, only gives statistics up to 1998, and a great deal has happened since then with the introduction of the euro and its decreasing value.

I would like to give the Government and the BTA an alarm call—a wake-up call perhaps—to take a look at our experience. We in Northern Ireland are at the coalface with the euro: the only land-based border with the euro-based currency of the punt. During the past 30 years the number of mainland European visitors has remained robust, even with our well publicised troubles. However, in the last two years a dramatic change has been showing. Due to the peace dividend, inquiries are up but bookings from continental Europe are down by some 40 per cent in crucial areas such as hire cruisers, bed and breakfast accommodation and hotels. The disparity between the currencies is fluctuating between 20 and 30 per cent and euro-zone visitors are increasingly going south of the border.

Even touring by car is more expensive because our fuel prices are 30 per cent higher in real terms, not just punt per pound. Although I accept that the Government cannot do a great deal very quickly about exchange rates, I think that they could give us a more level playing field. They could reduce the disparity in our tax regime compared with mainland Europe. For example, as we have heard, we have fuel tax and airport tax and we have also heard another example on VAT. This tax, especially in service areas such as hire cruisers, is very harmful. In the Republic it is 5 per cent, as opposed to our 17.5 per cent: that is an extra 12.5 per cent on top of our currency disparity. I appeal to the Government to become more pro-active than reactive and to tackle a worsening situation in Great Britain before the mainland European traveller flies to alternative destinations.

My Lords, there have been occasions during this debate when I have wondered whether I was actually taking part in the wrong debate. I had understood the Motion to be asking whether the introduction of the euro would be good for the British tourism industry, regardless of whether the United Kingdom adopts the euro. My own conclusion on that was that the introduction of the euro will impose costs on the British tourist industry, and indeed the British Tourist Authority has already made it clear that those costs are already being incurred by the British tourist industry. If we nevertheless stay out of the euro, those costs will be incurred by the tourist industry, which will not reap any of the offsetting benefits. That seems to me to be an appropriate conclusion to the Motion, as raised.

We have heard, as I hope the noble Lord, Lord Mackay, will duly note, some very strongly Europhile speeches—the sort of speeches he loves to attack—and I hope he will on this occasion give credit to the fact that the Europhilia has flowed more strongly from the Labour Benches than from the Liberal Democrat Benches which he also so loves to attack. I regret in some ways that we have missed the usual suspects who wish to attack the abomination of European cooperation. Indeed, the noble Lord, Lord Pearson of Rannoch, left us halfway through the debate. I hope that the noble Lord, Lord Mackay of Ardbrecknish, will therefore do his best, although I have been sitting here worrying about his many Italian relations, of which he has often told us so much. They will not only incur additional exchange costs on their visits to Britain, but they will also find it more expensive to visit Britain while the pound is so much higher against the euro. However, it does of course help the noble Lord, Lord Mackay, to go to Italy more cheaply than he used to be able to.

There are many nonsenses in this whole debate about Britain and the euro. The noble Lord, Lord Harrison, touched on the question of the Queen's head on the coin. My German friends often remark that it is a wonderful symbol of English nationalism that the preservation of the current head of House of Saxe-Coburg-Gotha is regarded as essential to Englishness in its own way.

The noble Lord, Lord Gordon of Strathblane, said that the rest of Europe is stagnating. I saw an OECD report the other week which suggested that the prospects for Euroland in 2001 are estimated to be a rate of growth between 3 per cent and 3.5 per cent. That does not seem to me exactly like stagnation. We all accept the importance of tourism in the United Kingdom. We are the fifth largest tourist recipient in the world. It is a major part of the British economy, and it is not just a case of including London, Oxford and Cambridge but increasingly also the regions.

I remember well 20 years ago when Bradford started promoting Bradford as a tourist region and various newspapers ran jokey pieces about it. I also remember walking up from Howarth to the farm on the top of the Pennine Way some years ago in February, in fog. The farm there was the origin of Wuthering Heights. I noticed that the path is signposted all the way in two languages: English and Japanese. One in four of those walking on a very cold and foggy February day was indeed Japanese, appropriately clad for the occasion. I note that Barnsley is now doing its best to follow the Bradford region. If I may make a small plug for Saltaire, I am extremely happy that Saltaire is part of this trend, much helped by David Hockney's efforts in promoting the village, and that last year Saltaire was accepted as a candidate for world heritage status. It makes it harder for those of us who like to spend weekends there to walk down the main street in dirty jeans and dirty trainers, as we used to, but at least it does a lot for the local economy.

However, I know there is tough global competition. David Quarmby, a good Yorkshireman who is head of the British Tourist Authority, said only last month that the tourist environment is tough for Britain at the moment and that we are going to have to work very hard to maintain our current position. I also note what was said at the tourism summit in March—and I quote:

"the UK will only keep its position of fifth in the world in terms of tourism receipts, let alone improve that position, with effort".

Europeans account for two-thirds of visitors and half of the inbound spend in tourism. However, it was also stated that,

"tourism is very price elastic".

That sets the context in which one has to discuss whether or not the introduction of the euro provides costs and benefits and how we balance those for Britain.

The margins of cost on currency exchange are a relevant cost which tourists will take into account. If tourism is price elastic, that is one of the issues which we have to bear in mind. As I said at the outset, we all know from the briefings we have received that the British Tourist Authority is actively engaged in encouraging the tourist industry to adapt to the euro, whether or not Britain takes a later decision to join the euro. Therefore the costs are already being incurred.

Different categories of tourists raise different issues. Tourists from within Europe, who form the predominant number of tourists to Britain, now treat Britain as part of their domestic market. I have some association with Westminster Abbey as a former chorister there. One of the reasons that Westminster Abbey introduced charges some two years ago is that staff there had begun to notice that 20 minutes after each Eurostar arrived at Waterloo there was a noticeable surge in people with backpacks or whatever entering the abbey through the west door. That is one way in which the Channel Tunnel and the ease of cross-Channel travel have transformed the relationship between Britain and the Continent, many of us think for the better but a few perhaps think for the worse.

Over 10 years ago I chaired a meeting on European police co-operation in which a number of chief constables took part. The chief constable of Kent asked how he would fund training in the French language which an increasing number of members of his police force needed. The chief constable of Dyfed said that he needed a certain number of Dutch-speaking, members of his police force to cope with the number of Dutch tourists who visited north Wales each summer. I also have a wonderful memory of walking Hadrian's Wall with my children three or four years ago when I discovered that a high proportion of the tourists visiting Hadrian's Wall were Italians. They had chosen a different destination because of the war in Yugoslavia. Some of them even had cars with Rome number plates.

That is the context in which we now operate. Intra-European tourism is fundamentally different from what it was 20 or 30 years ago. The world has not stood still over the past generation. Dutch people have second homes in southern England and English people, including Eurosceptics, have second homes in France and Spain. The case for having a single currency within that market is therefore extremely strong. It matters to Britain, to British tourism companies, to British airlines and to British airports that Britain should remain the first stopping point for those who come from the United States and Japan to "do" Europe. If we stay out of the euro, London Airport, British Airways, Virgin and others risk being adversely affected by people choosing a different first stopping point.

We also need to distinguish between the high value of sterling at the moment and the overseas costs of staying out of the euro. The pound is strong at the present moment. If the dollar goes down and the European economy begins to expand further, we may switch from a strong to a weak pound, and the Italian relations of the noble Lord, Lord Mackay of Ardbrecknish, may once again find that visiting this country is cheap. However, the exchange rate costs will remain.

There is not just a European but a global trend towards more common currencies. Some weeks ago I was fascinated to discover that there is a debate within North America about whether or not NAFTA needs to move towards a single currency. My Conservative noble friends will recall that many people within the Conservative Party would prefer Britain to leave the European Union and join NAFTA. Indeed Conrad Black and others have actively promoted that. A delegation from the United States came over here only the other week.

I was also fascinated to discover that there is within Canada a debate about whether or not Canada and Mexico would benefit from a common currency with the United States. Indeed I read about that in Canada in some Hollinger-owned newspapers of Mr Conrad Black's consortium. Therefore the question of national sovereignty being maintained with one's own national currency is all part of the mythology which still reverberates around Britain and with which one defends national sovereignty. However, one also thinks of how many Conservative former Ministers have found jobs in international companies or in many cases have even managed to assist in selling British companies into foreign ownership, whether that be German, American, Swedish or whatever. The mythology of the British national currency has somehow become one of these great totem poles for resisting globalisation.

However, the world does not stand still. Tourism in Britain has become an increasingly important industry, not just for Britain but for many areas in the north of England which used to be the old industrial heartland. Tourism is a tough market. We have many international competitors. It is a vital employer in the regions and in rural areas. The British tourist industry, like the rest of British industry, will prosper best within a fully integrated European market. I suggest that full integration includes a single currency.

My Lords, noble Lords may wonder why I am taking part in this debate. The reason is terribly simple; namely, I have decided that the noble Lord, Lord McIntosh, needs some competition as regards the number of departments he covers. I am not sure whether I shall win that competition. However, I stop short of taking over the Deputy Chief Whip's job, not only debating and arguing but then going into the Lobby to count the names to see whether I have won the argument! I shall not go that far, but I do not mind making an effort to compete with the vast number of departments that the noble Lord manages to cover.

I am grateful to the noble Lord, Lord Harrison, for making his speech. But, frankly, it must win the competition for the speech that contains the greatest number of dreadful puns I have heard since I was a schoolboy. Perhaps the noble Lord intended that. If he did, he certainly succeeded. However, he clearly came across as an absolute fanatic for the single currency. His noble friend Lord Lea was not far behind. Indeed I thought at one stage that they put the poor noble Lord, Lord Wallace of Saltaire, almost in the wet and wimpish category!

There was no qualification in the speech of the noble Lord, Lord Harrison. I suggest to the noble Lord that he advises his right honourable friend the Prime Minister to enter the euro immediately. Having heard the noble Lord's speech, I assumed that if we did not enter the euro now everything would end in disaster. According to the noble Lord everything about the euro—including, I presume, its current rate—is just heavenly. It is amazing that anyone is in the least bit sceptical or even a little frightened of joining the euro with the pound at its current rate against the euro.

It is worth reminding ourselves—as I did by reading today's newspaper–just exactly what the pound's value is vis-á-vis European currencies. It is valued at 11 French francs and 3.25 deutschmarks. That is an enormously strong rate of exchange against the deutschmark. It is valued at 276 pesetas. As the noble Lord, Lord Wallace of Saltaire, mentioned my Italian relations, the pound is valued at 3,200 lira. I can indeed afford to buy a better bottle of Italian wine than I would normally buy without spending any more money. I think that is marvellous, and so does my daughter, provided that I am still paying for it!

I have never really thought of myself—I am sure that most tourists have not thought of themselves in this way—as a stormtrooper, as the noble Lord, Lord Harrison, put it. The only stormtroopers that I should have thought we have in the tourist industry are those ghastly thuggish football hooligans who so besmirch the name of—dare I say quietly?—English football when they travel abroad. The idea of tourists being stormtroopers is a little misplaced. As for the idea that somehow or other people will want to traipse round the world with a fistful of euros in order to have a comfortable life, I have news for the noble Lord. People prefer to traipse round the world and visit various countries outside the euro-zone with a fistful of those dreadful American "greenbacks". If the noble Lord saw—

My Lords, would the noble Lord care to take a bet on that—perhaps in euros?

My Lords, the noble Lord should check the number of countries where the dollar is considered to be equal to the local currency. Frankly, I suspect that the American tourist in Europe will often be told the price of things in dollars. The reality is that the dollar is the major world currency, and will remain so. It is a very poor argument in favour of the euro to suggest that it may replace the dollar. There are many other arguments for the euro, but that one is a total non-runner.

I shall not get into the territory of suggesting that the noble Lord was offering the euro as a quick solution to the Northern Ireland problem, but his speech began to get a bit like that and I wrote down a note to say so.

The subject of Ireland brings me to the noble Lord, Lord Lea. He was answered—as I would expect him to be—by the very thoughtful speech of the noble Lord, Lord Gordon of Strathblane. He made a much more balanced speech about the problems of the euro for this country than either of his two noble friends. Ireland may look very good at the moment but, frankly, if it does not do something about its 4.6 per cent inflation, the advantages—if they are there—will rapidly disappear and it will not be able to do anything about it in the traditional way. It has no control over its own bank rate. It will be interesting to watch how the government in Ireland react over the next few months to the problems of a severely over-heating economy and increasing inflation rate when they do not have control over the traditional mechanisms for dealing with them. Inflation at 4.6 per cent will rapidly remove any competitive advantage that the current euro/pound rate gives. We have to be careful when looking at that.

The noble Lord, Lord Lea, suggested that the euro/pound link had something to do with the fact that more people from this country went to France than French people came here. The simple fact is that the French holiday in France, by and large; they are not very good at going to other countries. I cannot say that I blame them for that. They seem to prefer to holiday in France. Most people steer clear of France in August because all the French are holidaying there. They are very nationalistic from that point of view. I know that the noble Lord, Lord Wallace, thinks that is a dreadful thing when it comes to being British; he dismisses everything that is British, as we heard again this evening. The French do not take that view at all; they are very patriotic. Good luck to them and more power to their elbow when it comes to resisting some of the silliness that comes out of Brussels. I see that some of the splendid street markets in France are about to be abolished by rules from Brussels. That will make France a bit less French and it may not do its tourist industry a lot of good.

No one needed to get up early this morning to realise that the value of the pound against the euro—and therefore against the currencies of other euro-zone countries—is at such a high level that it will affect the tourist industry adversely, just as it affects manufacturing business adversely. The noble Lord, Lord Paul, said on television at the weekend how damaging the pound/euro rate was to manufacturing industry. We all know that that is one of the reasons why BMW, with all its skills and resources, has found it impossible to turn Rover round.

Of course the tourist industry is important, as a number of noble Lords have mentioned. It creates perhaps up to 2 million jobs. In many parts of Britain it is the major employer. We do not mention these matters often, but when I was a Member of another place the constituency I represented was heavily dependent on tourism. I suspect that it was perhaps its major industry. It was not big businesses—although there were one or two of them—which made up this very important industry, but, by and large, lots and lots of very small businesses.

I suspect that the corporate sector is pretty robust and will not be much affected by exchange rates. It is used to exchange rates and working within them. If those within it want to go to a grand conference in Britain, they will go to Britain; if they want to go to Barbados, they will certainly go there. Noble Lords will understand the different attractions. So I do not think that the corporate sector will be greatly affected.

However, as regards the domestic sector, where we British go on holiday will be affected by the value of the pound. It is undoubtedly much more attractive to go to Spain or to any of the countries in the euro-zone because of the exchange rate. Many British people go to America—where the currency has not fluctuated much in many years—for the simple reason that they want to go to the United States on holiday. People will certainly find it more attractive to holiday abroad, which will of course have an effect on the domestic market—although, as the noble Lord, Lord Gordon of Strathblane pointed out, if their foreign holiday is a bit cheaper than it might otherwise have been they might have some money left over for a two or three-day break in this country. I have no doubt that the various bodies which advertise holidays in Britain will look at that market and try to target it.

The other side of the issue concerns the overseas tourists who come to Britain. It stands to reason—I think it was Just William who devised that phrase to explain things—that if the value of our currency is high, as it is, people from abroad—the European part of abroad, of course— will find it more expensive to come to this country than to go to other parts of the European Union. But they will also find it quite expensive to go to the United States or to other parts of the world because the euro is very weak against a lot more currencies than the pound only.

It may well be worth asking—but not ton ight— why the euro is so weak. It is a serious problem for the euro that it continues to decline. I did not think it would ever reach the level it has reached now, but who can forecast how much lower it will go? That is quite a serious matter for the currency. I saw last week that some of the economic advisers to the German Government are having second thoughts about the exchange they have made of a strong mark for a weak euro.

There is already evidence of a fall in the number of tourists coming from southern Europe to Britain—one noble Lord mentioned that—and it is beginning to show in those coming from northern Europe. But I do not think anyone has offered any solution—apart from the noble Lord, Lord Harrison, who maybe thinks that we should join the euro immediately. I do not know whether or not that was his solution, but we have been very thin on the ground for solutions to this problem. Perhaps the only one is to tell our European friends that they should start getting their act together and improve the relative position of the euro.

Tourism is an import/export business, so to speak, and when I looked at the statistics for the past few years I noticed that in 1995 the balance of payments was £3.5 billion in deficit—in other words, we spent more abroad than we earned from abroad—and that in 1996 the figure was just under £4 billion; in 1998 it had reached almost £7 billion; in the first eight months of 1999 it stood at £5.6 billion. These figures were given by Janet Anderson in the other place on 25th October; perhaps the Minister will be able to tell the House what were the year-end figures for 1999. On my calculation, they must have been something like £9 billion—I do not know—by the end of the year if they were £5.6 billion for eight months. I accept that the tail-end of the year is not a vigorous time for tourism here, but I suspect it may be a vigorous time for people deserting this country to look for a bit of sun. I suspect that things would have got worse as the year advanced and as the position of sterling improved so far as British tourists going overseas were concerned.

It would be very interesting to know whether one of the effects of a Labour government is that the balance of payments for tourism has gone badly against us and perhaps more than doubled in the past four or five years. I almost promised myself not to make any political points, but I cannot resist that one.

It has been an interesting debate. Just as manufacturing is important, tourism is an important industry. In fact, manufacturing is more important because if we do not have a manufacturing industry—whether it be old-fashioned manufacturing or new manufacturing and computer technology and so on—people will not have the wealth with which to go on holiday. In my view, the manufacturing industry is perhaps more important because without it we will not have the wherewithal to have tourism at all.

In both those industries, the position of the euro against the pound is serious. I have not heard a solution to this problem. Frankly, I do not believe that there is an easy solution, because, as the noble Lord, Lord Gordon of Strathblane, explained, the market determines the rates of currencies, not, I regret to say, Chancellors, not, I regret to say, the Monetary Policy Committee of the Bank of England, and not even the European Central Bank.

My Lords, in expressing my gratitude to my noble friend Lord Harrison for introducing the debate, I base my gratitude on the quality of the speeches made in the debate. I am particularly pleased that he flushed out the noble Lord, Lord Mackay of Ardbrecknish, who seems to have set himself a target of following me around. If in the future he intends to make from the Dispatch Box after-dinner speeches like that one, I shall be even more grateful to him. It is the one kind of speech that I am totally terrified of making myself. The noble Lord, Lord Mackay, can make after-dinner speeches at any time of the day or night. I cannot make them after dinner, not even when I have had enough drinks to make it possible. I listened to the noble Lord with great envy and great admiration. I was very glad that he resisted almost to the very end the temptation to allow politics to enter his speech.

The subject of the Question is whether the introduction of the euro will be good for the British tourism industry, regardless of whether the United Kingdom adopts the euro. That is the theme which I propose to take for my speech. In other words, I shall not talk about the strong pound, because that is not an issue in whether or not we adopt the euro. The Chancellor and the Prime Minister have made very clear the economic conditions for our adoption of the euro. I shall not talk about the timing of entry. I shall certainly not follow the noble Lord, Lord Lea, in his suggestion that we should declare an entry rate or a range of entry rates now. As he well knows, that should be the result of whether or not we achieved the economic conditions for entry, not the determinant of them. Perhaps I shall not make a political speech either. I shall certainly not make the wider political speech which some speakers would have wished me to make. But I am going to talk about tourism. I am going to talk about what the Government intend to do, because that is what I was asked to do in the Question.

I want to confirm what all speakers have said, that tourism is an important industry for the United Kingdom. It employs 1.8 million people, which represents 7 per cent of all employment in this country. Perhaps I may say to the noble Lord, Lord Gordon, who made similar comparisons, that it is larger than construction or transport. Although the final figures are not in—I cannot give the noble Lord, Lord Mackay, the final figures on the balance of payments in tourism for the end of last year—we estimate that more than 25.5 million overseas visitors spent over £12.6 billion in the UK last year. Total tourism expenditure in the United Kingdom in 1999 is thought to be in excess of £63 billion. As the noble Lord, Lord Wallace, said, the UK currently ranks fifth in the world in terms of earnings from visitors. The good news is that the provisional figures for the two months of 2,000 already show increases in both overseas visitor numbers and in the amount of money that they are spending. I hope that that will encourage the noble Lord, Lord Lea, who feared that the strong pound had already resulted in a reduction of visitor numbers, although he took some comfort from the existence of and the increase in the numbers of low fares.

Visitors from European countries which make up the euro-zone are important customers of our tourism industry. The British Tourist Authority reports that in 1998, which is the last year for which figures are available, we received 14 million visitors from the euro-zone and they spent £4.3 billion. As the noble Lord, Lord Wallace, said, that represents two-thirds of the visitors and roughly half of the expenditure. But we do not need only facts and figures to tell us that tourism is important. In this part of London, except yesterday, one has only to listen to the languages spoken outside the House to recognise the importance of tourism to this country.

However, we cannot rest on our laurels. Tourism is an intensely competitive industry. All of our tourist establishments, whether guest houses, hotels, museums or visitor attractions, are bound to be in competition with those in Germany, France or other countries. I am not sure that I understand what the noble Lord, Lord Wallace, was saying about tourism being price elastic. It is not easy to make direct comparisons of price between this country and other countries when standards are so difficult to achieve.

My Lords, I was quoting from the minutes of the tourism summit of 1st March 2000 which the Library kindly provided for me. One of the points made is that for every 1 per cent increase in prices the level of tourism is thought to go down by 1.5 per cent. As a very limited economist, that seems to me to be a good definition of price elasticity.

My Lords, I am grateful for that definition and I am grateful for the source of the definition, which I should have read and had not noticed. What that means—I acknowledge the truth of what the noble Lord, Lord Wallace, says—is that at that level of price elasticity we have to be particularly cautious about additional unnecessary costs which, as the noble Lord, Lord Harrison, said, could be imposed on us by any failure to adapt to the existence of the euro, whether or not we adopt it.

I have never thought that the transaction costs are a prime reason for British entry into the euro-zone. The issue of competition and many other issues are more important than transaction costs, but there is no doubt that they are particularly important in the tourism industry. I rather doubt whether preparations in the 11 euro-zone countries are advancing as fast as the governments of those countries would wish. I have been in France, Spain and Portugal in the past three months. Other than the fact that by law price tickets must be declared in euros, I have never heard anyone mention a euro at any time. Although I am pleased to have a euro chequebook, I use it only to pay my bills rather than to pay for things on a day-to-day basis. I think that there will he quite a considerable shock in the euro-zone, let alone in this country, when we come to the very last days of December 2001. If we overestimate the speed at which they will adapt, we may cause ourselves too great concern about the extent to which the euro will be demanded in this country before that time.

However, UK tourism businesses need to ask themselves whether that means that their customers may find travel in the euro-zone more attractive. That will happen even without the adoption of the euro. It will happen simply because of the fixed rates of exchange. Some parts of our tourism industry may say that there will be little or no impact. That is fine. But they will need to develop the ability to deal in euros, just as many of them have already developed the ability to deal in dollars in order to maintain and expand their markets. The point for the tourism industry is that if a tourism business is to succeed, it has, just as with any other business, constantly to meet and exceed its customers' needs and expectations. If its customers want to pay in euros, it risks losing them if it cannot accept those euros.

Let us briefly consider the practicalities. Credit cards can be used anywhere, in any currency, and the entry simply appears on a bank statement on one's return. But if people coming to this country want certainty, I can see the difficulty about declaring in a tourist brochure in advance what the equivalent in euros to pounds may be. But surely we could very soon be in the position to say, when someone arrives at a hotel, that the price for a night's stay will be £60 or 95 euros; it will appear on a display board in the hotel and will be the basis on which, in 2002, the tourist can pay in his own home currency, in cash if he wants to do so. The same will be true of shops and restaurants. There is no reason why we should not adapt in that way. Even though I do not think that anything very much has happened on the ground, and no one is thinking very much in terms of euros. Next year French civil servants, for example, will start to be paid in euros and will want to start to use the currency.

Like all business changes, the introduction of the euro presents threats and opportunities. For businesses that are customer-focused there will be opportunities; those that fail to take the consequences will lose out. We have been active in making sure that businesses understand what the introduction of the euro means. We have produced and distributed factsheets on a range of strategic and technical issues. The forums we have set up in each English region and in Wales, Scotland and Northern Ireland bring together all those organisations that are interested in business support. Advisers from the euro preparations unit in the Treasury are frequent speakers at conference events. We have produced a series of case studies setting out how real businesses are meeting the challenges presented by the introduction of the euro, on the basis that I find to be sound: that people a re much more likely to believe what other businesses say than they are to believe government lecturing on the subject. We shall soon be publishing case study material on the tourism industry—small firms that a re typical of the sector: a small hotel chain, a bed-and-breakfast in Wales, a shop selling tourist souvenirs.

To answer my noble friend Lord Lea directly, we have set up the Euro Preparatory Working Group, co-ordinated by the Department for Culture, Media and Sport, working closely with the industry, seeking to raise awareness of the impact of the euro on tourism businesses and to disseminate information to the industry. The British Tourist Authority is working closely with that group and the national tourist boards produced a guide to assist small tourism-related businesses to prepare for the introduction of the euro last year.

A number of noble Lords, notably the noble Lord, Lord Gordon, and the noble Viscount, Lord Brookeborough, talked about the need to tackle the taxation of hotels. We have debated the matter at length in this House in recent months. I have pointed out that the balance of taxation benefiting tourism in this country is very much greater than would appear from the fact that we have taxation on hotels. The fact that we do not have VAT on public transport, food and children's clothing very much outweighs the cost of taxation on hotels. I gave the figures and am happy to send a copy of Hansard to anyone who doubts them.

We have run out of time. If I have missed any points to which I ought to have responded, I shall gladly write to noble Lords. I hope that I have convinced those who have taken part in this valuable debate that the Government do not in any way under-value the importance of the tourist industry or the importance to the industry of adapting to the existence of the euro, whether or not the United Kingdom adopts the euro.

House adjourned at four minutes past eight o'clock.