asked Her Majesty's Government:

What steps they are taking to ensure the independence of the Food Standards Agency.

My Lords, the Food Standards Agency was set up as an independent non-ministerial government department, operating at arm's length from Ministers. The Food Standards Act gives the FSA the power to publish information and advice, including advice to Ministers, without needing to seek the agreement of Ministers or the Government.

My Lords, a month or so ago, it was widely reported that Mr Michael Meacher was backing the Soil Association, which was calling on the Food Standards Agency to take a more favourable view of organic farming. Since the Soil Association's principles are founded on the absurd and false proposition that synthetic chemicals are bad and that natural chemicals are good, and since its claims that organic food is healthier for people and better for the environment have been consistently rejected, does that not show a bias on Mr Meacher's part in favour of mysticism and against scientific evidence? Since he sought to bring improper pressure to hear on the Food Standards Agency, should be not reconsider his position?

No, my Lords. I do not believe that we in the Department of Health are particularly qualified to comment on mysticism or other such philosophical matters. The fact is that within Mr Meacher's department, and following on from the Curry report, the department has encouraged an action plan for developing organic food and farming. That is a perfectly proper responsibility of that department.

The remit of the Food Standards Agency concerns food safety and nutritional matters and ensuring that consumers have information on which they can make an informed choice. The view of the chair of the Food Standards Agency is that there is no appreciable proven difference in terms of food safety or nutrition between organic food and conventionally produced food. It would therefore not be appropriate for the FSA to make comments that would favour one over the other. These are perfectly amicable and constructive discussions between two different government departments.

My Lords, returning to the independence of the agency, does the Minister agree with me that it is the openness of the Food Standards Agency and the core policy of putting the consumer first that have improved the confidence of the nation in food standards? Would he also agree with me that we have set a model for openness, based on the evidence, showing that an independent approach is more effective in handling risks and winning public confidence than is secrecy? That is outlined in the Government's review of the handling of risk. I therefore ask the Minister whether he will endorse the independent position of the agency. In saying that, I declare my interest as a member of the board of the Food Standards Agency.

My Lords. the noble Baroness speaks with great authority as a member of the board of the Food Standards Agency. She is right; the whole purpose of creating the FSA was to secure independence and public confidence in food safety in this country. I believe that the agency, through its statements, the work that it has undertaken and the robust nature of its leadership, has shown itself well able to display such independence and has therefore enhanced public confidence in food in this country.

My Lords—

My Lords—

My Lords—

My Lords, I believe that it is our t turn.

Elton!

My Lords, I am under the impression that it is normal to take turns and that it is our turn.

I do not want to give undue weight to my question; I merely ask whether the Minister thinks that the supplementary question of the noble Lord, Lord Taverne, or that of the noble Baroness, Lady Howarth, were entirely free from the bias and prejudice to which the noble Lord, Lord Taverne, took such exception.

My Lords, all noble Lords bring to our debates a high degree of objectivity. I would not discourage that at all.

My Lords, on the question of the noble Lord, Lord Elton, is there not a great danger of those on either side of the organic food argument shooting from the hip? Also, as promised by the FSA some years ago—virtually since its formation—is it not high time that we had some quality research in that area?

My Lords, the judgment that the FSA made in relation to safety and the nutritional value of organic as opposed to conventional food is based on the evidence available to it. Of course, it will always be appropriate to consider whether research should be undertaken. My understanding is that a workshop was held by the FSA a little time ago to consider the matter. I do not believe that the FSA has yet come to a conclusion. When it does so, no doubt that conclusion will be placed in the public domain.

My Lords, is the Minister aware that more than 60 years ago my father wrote a book called Charter for the Soil? It was all about organic farming and was not in the least mystical. Absolutely everything in that book is perfectly relevant today.

My Lords, as relevant as the questions of the noble Baroness always are.

My Lords, whilst one can understand the concerns of people over chemicals in food and the organic arguments point, does the noble Lord agree that the human body is in fact nothing other than a great chemical factory? It ingests chemicals; it creates chemicals; and it disposes of chemicals. What is the fuss about?

My Lords, I really think that the noble Earl must speak for himself on this matter.

My Lords, if the Food Standards Agency is so independent, why will it not answer questions put by Members of either House? When one writes to it with questions, one is referred to the relevant department.

My Lords, if the noble Baroness would care to put to me specific instances, of course I shall take that matter up with the chair of the FSA. I must say that of course the FSA answers a great deal of correspondence. I should be very surprised if that was not being handled satisfactorily. But there is also a complaints system through which complaints against the FSA can be taken. But I am very happy to investigate specific causes of complaint.

My Lords, in the Minister's answer to the first of my noble friends, he stated that it would not be proper for the FSA to comment on the two situations—organic and sensible. Surely, it is its duty to do so if it has the evidence available.

My Lords, the point here is that the FSA sees its remit as concerning issues to do with safety and the nutritional value of foods. Its conclusion from the research that it has reviewed is that there is no significant difference in terms of safety and nutritional value between organic food and conventionally produced food. Therefore, the FSA considers that it would be inappropriate to make a value judgment saying that organic food is better than conventionally produced food. At the end of the day, the credibility of the FSA depends on its advice being robust and evidence based.

asked Her Majesty's Government:

What assessment they have made of the standards in non-grammar schools in local education authority areas where selection for secondary schools takes place.

My Lords, the department has not undertaken this comparative assessment. However, we are aware of research by others which suggests that at GCSE pupils who attend non-selective schools in selective areas are out-performed by those who had similar key stage 3 results and attend comprehensive schools in non-selective areas. We continue to note any conclusions that are reached.

My Lords. I thank my noble friend for that reply. As she is aware, for many years the Labour Party and Labour governments have said that selection at 11 years of age is wrong for a number of reasons. Indeed, she made that remark herself not too long ago in the Chamber. One of the main reasons is that often those who are not selected are quite capable of undertaking what we might call the "grammar school course". What happens to those children? Can she confirm that in some areas of the country parental choice is the only criterion of a system that is manifestly unfair? Is it not a serious misjudgment that a child's education and progress should be so handicapped when the Government's frequently stated policy is cast aside?

My Lords, the Labour Party and the Government have been very clear in ensuring that we do not wish to see further grammar schools. I reiterate what I have said previously in your Lordships' House. Our concern in this matter was of the number of children not allowed to pursue the quality of education that was offered within the grammar school system in days gone by. What we now have is a schools system where every child is moving towards being able to achieve his full potential and in many schools is already able to achieve his full potential. We want to ensure that every school gives the best opportunity to every child. It is true that in schools where we still have selection in certain areas we offer that opportunity. It is also true that our own figures show that in comprehensive schools children from the brightest groups do better than they do in grammar schools.

My Lords, is the Minister prepared to congratulate Kent County Council on providing a variety of schools? It has a selective system that caters for children of different abilities—vocational, academic and so on. Are the Government prepared, as they award Beacon excellence to grammar schools and some of the Kent vocational schools, to accept that that is an alternative? Is the Minister prepared to accept Professor Jesson's evidence, which has been seriously questioned in a number of academic journals?

My Lords, as the noble Lord has referred to Professor Jesson, I shall do the House a service by reporting on what he actually said. He was commissioned to look at the structure and performance of secondary education in Kent. The major findings of his report were that grammar schools in Kent and Medway do less well and are performing at lower levels than other grammar schools in the country and that secondary modern schools show similar, if less pronounced, characteristics.

In looking at whether I should congratulate a local education authority, I think it is absolutely pertinent to ask whether we think that we can support that education authority to achieve better outcomes for all its children. That is entirely what the department would wish to do. So I am quite clear that if Professor Jesson's research is correct—I have no reason to believe otherwise—we need to support Kent to ensure that it is able to do the best it possibly can. I am sure that all the political leaders and officials in Kent are very keen to do that. Indeed, I know that they are.

My Lords, in view of the research done by David Jesson and others, does the Minister agree that the best system is a good comprehensive school in which the special needs of children at both ends of the ability spectrum are well catered for and well resourced?

My Lords, as I said, we know that children at the upper end of the band do better—marginally better—in comprehensive schools. We also know that, generally, a well delivered comprehensive education delivers for all the children. That is a cornerstone of the Government's policy, so I agree with the noble Baroness that it is important that we offer that breadth and quality of education to every child.

There are still some grammar schools. We have made our policy towards them clear with the parental ballot, and we still believe that that is the right way to go. We work with all schools to ensure that, whether one lives and raises a child in a selective or nonselective area, the quality of education that the child will receive is the highest that it can be.

My Lords, does the Minister agree that the most extensive and detailed research done in Great Britain and Northern Ireland is that done by Dr Marks'? Dr Marks concludes that selection is better for all pupils, not just those selected to attend grammar schools. The average advantage is about 25 per cent at GCSE. 'The good overall performance of the selective system is, in part, due to the good performance of pupils at the widely underrated secondary modern schools. That is most evident in Northern Ireland, where the system is entirely selective. There, education results are well ahead of those in the rest of the United Kingdom—by 30 per cent, at least.

My Lords, Dr Marks provides important evidence. In part, that is why, in my Answer, I said that we continued to note conclusions. There is different evidence, and, often, the issue is whether the evidence can be used to make genuine comparisons. I mean no criticism of any of the research by that, but, often, when we examine the research, it is difficult to see the comparators in the way that noble Lords might want.

It is clear that the provision of the highest quality education must be paramount. From the evidence that we have, we believe that we provide that best through a comprehensive system that is high quality and looks to meet the needs of all children. That is what we will continue to do.

My Lords, Professor Jesson has a knighthood, so he has done rather well. However, the Minister did not answer my question. Professor Jesson's research has been seriously questioned in at least three academic journals. Is the department aware of that questioning?

My Lords., we continue to consider all research and the questioning of all research. That is why I said that we look to ensure that the comparators are equal. We know that Professor Jesson examined 15 selective areas, although we would recognise only 10 of those as being within our criteria. That is an important point.

I am more concerned about Ofsted reports, which help us to ensure that we have high quality education. In view of this debate, noble Lords will understand why that is an essential part of our evaluation of schools.

asked Her Majesty's Government:

Whether the up-to-date information that appeared in the British Intelligence Dossier on Iraq's weapons of mass destruction published in September has now been passed to the United Nations observers for verification and any necessary action.

My Lords, a copy of the Government's dossier on Iraq's weapons of mass destruction was passed to UNMOVIC at the time of its publication. It is up to UNMOVIC to decide how to act on the contents of the dossier.

My Lords, I thank the Minister for that slightly cautious reply. Does she accept that it is infinitely better that the so far unfettered UN observers, backed by all the, presumably, detailed intelligence and evidence that we and the Americans possess, should seek out and destroy any nuclear, biological and chemical weapons— a better description than weapons of mass destruction— that still exist? That is better than using quibbling over paperwork to drift into a war that, whatever the early success, will have untold consequences for the longer-term stability of the Middle East.

My Lords, I agree with the noble and gallant Lord. So far, there have been 200 such inspections.

I am unaware of the sort of quibbling to which the noble and gallant Lord referred. As I said, the dossier was passed to UNMOVIC at the time of its publication. The noble and gallant Lord may be pressing a little further on other intelligence that has been conveyed to UNMOVIC and the IAEA, over and above that published in the dossier. If that is what concerns the noble and gallant Lord, I can tell him that, in addition to the published information, further information has been made available to the inspectors.

My Lords, now that the Foreign Secretary has—rather belatedly—recognised and acknowledged the intimate links between rogue states such as Iraq and the global terrorist system, can we look forward to another dossier, giving some of the intelligence underpinning that conclusion, on the lines of the information that has been circulated in Washington and provided to Congress about terrorist links with Iraq? Is it not now time for us to hear the same story, in order that those who have doubts about the war against Iraq and the need to take out Saddam can be reassured?

My Lords, I take issue with the pejorative remarks about it being late in the day to acknowledge links. We have always said that there were no direct links between Al'Qaeda and Iraq. There are no such direct links on which we have firm information or intelligence, and I continue to answer your Lordships' questions on that point. There are links between Iraq and some other organisations, and we have discussed those. A connection can certainly be made, in so far as it might be claimed that, "My enemy's enemy is my friend". I suggest that that may well be the sort of link that informs the noble Lord's question.

We will continue to publish information that we believe to be helpful in explaining why Her Majesty's Government take the view that they do of weapons of mass destruction in Iraq, but we will always put the safety of our intelligence sources and of our Armed Forces in the forefront of any judgment about what to publish.

My Lords, given press reports that some circles in Washington are sedulously denigrating the work of Hans Blix, can my noble friend the Minister assure us that there is no question of a casus belli being constructed from information that has not been corroborated by Hans Blix, simply on the grounds that it has not been passed to him?

My Lords, there have been voices in the background criticising Dr Blix since before he got to Iraq in the first place. I repeat to your Lordships that Her Majesty's Government has the utmost confidence in Dr Blix and in Dr ElBaradei.

There will be a discussion on the Iraqi declaration made on 8th September—all 11,807 pages of it—at the UNSC tomorrow, 9th January. That will be an opportunity for Dr Blix and Dr ElBaradei to give an update on their work, and I suggest that that will be an opportunity for any of the worries that the noble Lord mentioned to be aired in the most suitable place—the Security Council.

My Lords, in view of what the Minister has just said—rightly—about the safety of British intelligence forces and other western personnel, is she aware that 42 per cent of the population of Iraq are under 16? That represents 9.6 million children. Is the same weight given to the probability of innocent suffering in Iraq, should war break out, as to the protection of our people?

My Lords, one of the most awesome and dreadful responsibilities that a government can face is the responsibility of having to put troops into a conflict. It is an awesome and terrible responsibility not only because of the risks to the troops of this country or any of our allies who would be involved and the terrible loss that there would be if the worst circumstances were to prevail, but also that all war, by its very nature, may involve the loss of innocent life.

It could be argued that the loss of young life is, in many ways, more terrible than the loss of older life. However, I am bound to say to your Lordships that, whether a person was 16 or 60, the loss of an innocent life would always be a matter of grave responsibility. That is why we are so careful in how we proceed on that issue. It is why we have pursued the United Nations route; why we have persuaded others that that was the right route to pursue; and why we have also put as much information into the public domain as we possibly can to explain why the Government are so convinced that we are taking the right action on that issue.

My Lords, I should like to express a degree of—

My Lords—

My Lords, the noble Lord, Lord Redesdale, has given way on at least two occasions. I believe that it is his turn.

My Lords, the Minister has expressed the Government's confidence in Hans Blix and the work that is being undertaken by the UN inspectors. However, if the UN inspectors find no material breach, is there any reason for military action to be undertaken by the Government?

My Lords, the initial full report to the United Nations Security Council is not due until 27th January—although, as I have indicated, there will be a preliminary discussion of the findings so far taking place in the United Nations Security Council tomorrow.

I stress to your Lordships that the report on 27th January is not the end of the process. It is merely a staging point which was committed to in UNSCR 1441. If there is no material breach at that point, that does not mean that the whole process of inspections is over. It is up to anybody else who feels that he has material breaches to report to do so. There is nothing to stop any other country at that point also bringing the Security Council into its confidence over what it believes is happening. But at that point it would be a decision about the continuation of the inspection. Therefore, I stress to the noble Lord, Lord Redesdale, that that date is not a date on which a decision must be made one way or the other. It is simply a point at which a report will be made and discussed.

asked Her Majesty's Government:

Whether, in view of the suicide bombings in Tel Aviv on 5th January, it is still their intention to proceed with a Downing Street meeting on the Middle East Plan.

My Lords, we condemn the suicide bombings that have taken place and ex press our condolences to the relatives of all those concerned. However, we believe that these events emphasise the need for a political process. The London meeting is intended as a part of this. We would regret a decision by the Israelis now not to allow the representatives of the Palestinian Authority to attend. This would not help the cause of peace and security for Israelis any more than for Palestinians. We are therefore in touch with the Israeli authorities about ways in which Palestinians we have invited might be able to come.

My Lords, I agree with my noble friend that the recent slaughter of 22 innocent people in Tel Aviv is to be utterly condemned. I also agree that the withdrawal of the present talks regarding the situation in the Middle East would be unfortunate in the extreme. What steps are being taken internationally by the Government to rally support for this imaginative concept, albeit on a different date? I stress that the negotiations must be wider than with the Israelis concerned.

My Lords, I reiterate the outrage which I am sure we all feel at the appalling carnage and barbarous murder of innocent people in Tel Aviv. However, we believe that the already delayed process of getting back to negotiations would be helped by the talks which the Prime Minister has suggested on reform of the Palestinian Authority. Not only have we been in contact with the Israeli Government, but members of the United States Administration have joined us in asking the Israeli Government to think again on that point.

I can report that Her Majesty's Ambassador in Tel Aviv, Mr Sherard Couper-Coles. is due to see Prime Minister Sharon at 3.45 p.m. our time today. He will be handing over a letter from my right honourable friend the Prime Minister urging the Israeli Prime Minister to think again about the travel ban that he has placed on the Palestinian Authority. We shall not have a definitive response on that issue until later today. But the Americans support us in our suggestion that thought should be given again to this matter.

My Lords, it is vital for the sake of both peoples, both of which are suffering, that a way towards peace is found which is acceptable to them both. Does my noble friend see that when atrocities are carried out by the Al-Aqsa Martyrs' Brigade, which is part of Arafat's Fatah, it makes it very difficult for the Israelis to take part or to agree to separate negotiations with the Palestinians because, rightly or wrongly, their government believe that that is impossible while they denounce the terror but take no steps to prevent it?

In those circumstances, what can our Government do to bring the parties together or, in the words of the classic Arab proverb, make both hands clap?

My Lords, of course the key to peace is to find a way forward which is acceptable to both parties. However, I stress to my noble friend that the only way that can be done is not through the barrel of a gun but through discussion. One of the major concerns voiced by the Israeli Government is what they describe as the lack of reform in the Palestinian Authority. Some of their concerns in that respect may well be justified. It is for that reason that my right honourable friend thought it wise and sensible to hold the conference that he suggested should take place next week. It will also be attended by members of the quartet, as well as representatives from Egypt, Saudi Arabia and Jordan.

My noble friend says that it is difficult for the Israeli authorities to allow the Palestinian representatives to attend in those circumstances. I appreciate that the Israeli authorities have many grave concerns over that and, in light of the recent atrocity, little wonder that they do. However, elected authorities or elected governments cannot always be responsible for the terrorist activity of those operating within their territories. I believe that drawing the direct line between the two is unfortunate. We very much regret that the Israeli Government have taken the view that they have and we hope that they will, on wider consideration, think again.

My Lords, if a Palestinian citizen from Ramallah were to migrate to the United States and set up settlements in Brooklyn, would that not be considered an act of aggression and a criminal act? Why on earth should people from Brooklyn be allowed to migrate to Israel and set up settlements subsidised by the government of that country?

My Lords, as the noble Lord, Lord Lamont, is aware, we have discussed settlements in your Lordships' House on a number of occasions. I have been perfectly clear that Her Majesty's Government are extremely unhappy about the level of settlement activity. When we last discussed it I reported that in the past year there have been some 34 settlements in the Occupied Territories which Her Majesty's Government consider to be illegal.

I fully take the point made by the noble Lord. However, we must find a way forward. It is sometimes easy for what I can only describe as both sides of this argument to reiterate the grievances that they have. There are grievances on both sides. They are very deeply felt by both sides. Simply reiterating those grievances does not move us any further forward. That is why we need to talk, and talk around a table, as we should be doing next week.

asked Her Majesty's Government:

Whether they retain responsibility for the observance of international law and conventions on Diego Garcia.

My Lords, yes.

My Lords, can the Minister assure us that the Government are fully briefed on the conditions under which the United States is keeping prisoners from the Taliban on Diego Garcia in view of the serious allegations made in the Washington Post and the Herald Tribune on 27th December? The United States is, at the very least, steering close to the wind as regards the Geneva Convention and other aspects of international law. This is sovereign British territory and therefore, as I understand it and as the Minister has confirmed, the British Government are responsible for ensuring that international law is fully observed.

My Lords, I am aware of the stories in the press. Those stories are entirely without foundation. The United States Government would need to ask for our permission to bring any suspects to Diego Garcia. They have not done so and no suspected terrorists are being held on Diego Garcia.

My Lords, will my noble friend take this opportunity to reaffirm the Government's position that, in everything we are doing in pursuing Al'Qaeda, the way we do so manifests the kind of society that we are trying to protect against international terrorism? Will she also reaffirm that abuse of prisoners and torture have no place anywhere within such a strategy?

My Lords, I am pleased to agree with my noble friend. We as a government have made it absolutely clear that we shall do everything we can to fight international terrorism. We have also made it absolutely clear that we shall apply all the relevant rules of international law.

My Lords, having declared an interest in the International Criminal Court Act—and I thank the noble Baroness for the assurance that the reports in certain American papers are not well-founded—what human rights are accorded to terrorists and to prisoners of war on Diego Garcia and how is such distinction drawn, as the United States has declined to ratify the statute?

My Lords, I repeat that the stories which have appeared in the press are completely without foundation. The Unites States Government would need to ask our permission to bring suspects to Diego Garcia and they have not done so. No suspected terrorists are being held on Diego Garcia and, under current British Indian Ocean Territory law, there would be no authority for the detention of Al'Qaeda suspects in the territory.

My Lords, is my noble friend aware that there was a recent parliamentary delegation to Mauritius? There is tension between Mauritius and Her Majesty's Government over the Chagos Islands of which Diego Garcia is part. The Chagos islanders are not able to visit the graves of their relatives, even though we suggested that the Americans could use their helicopters to fly them in, including to Diego Garcia, without any security risks. Is it not important that we are seen to be like Caesar's wife on this issue, or there will be other consequences?

My Lords, I am of course aware of the concerns of the Chagos islanders and their wish to go back to Diego Garcia. I have been involved in discussions on that matter. We have consulted the United States, as we have a responsibility to do so under the treaties we have signed with the US. The US has not given agreement to this but we have agreed that there could be a return. We chartered a vessel but, unfortunately, it was not made available. We are happy to reinstate any such visit but it would not include Diego Garcia because of the reluctance of the US Government.

My Lords, will the Minister confirm whether the United States holds prisoners of any kind on Diego Garcia? Perhaps I may ask a related question. Do the Government continue to make representations to the United States about the number of British citizens held under similar conditions in Guantánamo Bay?

My Lords, I can confirm that we continue to make representations with respect to Guantánamo Bay. My right honourable friend the Foreign Secretary has spoken on a number of occasions to Secretary of State Powell about that issue. I am not aware of any requests having been made to the British Government about any prisoners being held on Diego Garcia, and I am not aware of any prisoners being held on Diego Garcia.

rose to call attention to the problems in the electricity supply industry created by the absence of a strategic decision mechanism; and to move for Papers.

The noble Lord said: My Lords, it is clear that the electricity supply industry is experiencing some severe problems at present. Some well-publicised examples are the financial problems of British Energy and other generators such as TXU, AES and PowerGen. At the other end of the spectrum lie the delays in restoring electricity supplies disrupted by bad weather.

But these problems, serious as they are to those involved, are only symptomatic of the deeper problem which I want to examine today: a problem which threatens the long-term reliability of electricity supply in this country and hence our prosperity and standard of living.

Let me explain my reasons for doing so. I have spent much of my life in the electricity supply industry, joining the City of Birmingham Electricity Supply Department in 1946 as a graduate trainee. The industry was nationalised in the following year, the better to meet the huge construction programme required to remedy the non-investment of the war years and to provide the basis for post-war industrial recovery.

The British Electricity Authority was formed in 1947 to take over the activities of more than 600 separate electricity undertakings, municipal and private. In 1956, almost 10 years later, the Herbert committee, set up by the government to review the organisation, concluded that it was over-centralised and recommended the separation of distribution activities into 12 statutory area boards, but retention of centralised generation in the Central Electricity Generating Board. A recommendation to establish a central authority with responsibilities for the industry as a whole was not accepted. Instead, the Electricity Council was created with a rather Utopian view that within it,

"the generation and distribution sides of the industry can resolve their problems under independent guidance".

This was to be the first of a number of occasions on which the government of the day rejected expert advice on the management of the industry with unfortunate, though predictable, results.

Fortunately, and largely for political reasons, the organisation in Scotland took the form of two boards: the South of Scotland Electricity Board and the North of Scotland Electricity Board, each of which combined generation and distribution operations and were not part of the Electricity Council for England and 'Wales, reporting to the Secretary of State for Scotland instead of the Secretary of State for Energy. Henceforth, the industry in Scotland was to be more coherently managed, with great benefits to staff, consumers and plant manufacturers.

In 1976, the Plowden committee was set up to examine the industry organisation in England and Wales and recommended integration of generation and distribution activities in a new Electricity Corporation. This was accepted by the government of the day, a draft Bill was published in the form of a White Paper, and the measure appeared in two Addresses from the Throne, but the Bill was not presented to Parliament for a variety of political reasons.

At this point, I should return to my own career in the industry. After working in grid control in the power stations, I was asked to start a commissioning and trouble-shooting department for GEC power plant division, where I later became divisional manager. I then joined the South of Scotland Electricity Board in 1968 as director of engineering and became chairman in 1974. In 1977 I was asked to become chairman of the Electricity Council for England and Wales and chairman-designate c f the proposed Electricity Corporation. Three years later, in 1980, I resigned in protest at the failure to bring about changes which I considered essential to the health of the industry.

Things continued in that way until 1989 when the industry was privatised. This was done on the basis that the distribution boards, which had been formed on the basis of management delegation, were capable of becoming viable private companies. During the intervening years they have all become subsidiaries of foreign electricity companies, in one case a nationalised one, and ownership of them has changed hands on a number of occasions.

But the attempt to create competition in the generating side of the industry ran into even more trouble. For some years, generators were not allowed to acquire distributors. Recently this has changed so that there is now a motley collection of pure generators, pure distributors and hybrid combinations of the two, all of them served by a single trading system—and this for a product which, by its nature, cannot be stored, so that theoretically instantaneous pricing must be attempted at the margin.

The latest attempt to produce such a mechanism— the new electricity trading system (NETA)—has produced the present chaos, in which the wholesale price of a kilowatt hour has fallen by almost 40 per cent over two years while the retail domestic price has remained substantially constant. The beneficiaries have been some large industrial consumers, opportunist retailers as diverse as British Gas and the Royal Society for the Protection of Birds, and some others notorious for pressure selling techniques, and, importantly, those vertically integrated companies fortunate enough to be well balanced.

Regulation since privatisation has concerned itself with short-term issues and not with the long-term health of the industry. Generating companies are in serious difficulty and are mothballing plant, and nowhere is the future shape of the industry being seriously addressed. Government is quite low on the learning curve of dealing with an essential long-term industry subject to short-term market forces.

The latest lesson comes with British Energy, which is receiving short-term state aid and a change of management. Investors there have seen their assets vanish, and the prospect of renewed investment in companies subject to capricious government actions must be remote. For, in addition to the adverse effects of NETA, British Energy output is subject to the same climate change levy as that of fossil fuel generators, despite the fact that nuclear power does not produce carbon dioxide and so does not contribute to climate change. The adverse effect of this particular aberration on British Energy is some £80 million per year.

Additionally, the rating burden on nuclear power stations is 50 per cent higher than that on fossil fuel stations and 200 per cent higher than that for wind power. Even further, British Energy has been constrained to maintain expensive reprocessing of used fuel as part of a plan to privatise BNFL. The only common factor in these various decisions is damage to the long-term future of the industry.

Future planning for the electricity supply industry is complicated because of the long time-scales involved and the complexity of many of the technical issues. For example, the price and security of supply of competing fuels in the future are major uncertainties. It is estimated that in 2020 some 80 per cent of our electricity requirements may be met by gas imported thousands of miles from areas such as Russia and North Africa. Optimists will tell us that governments in those areas are stable and have good commercial reputations. But 20 years is a long time in politics and in international trade, and the vulnerability of the UK to political pressures, price instability and terrorist action would be very great.

Problems of secure fuel supply have featured prominently in the past in the planning of the electricity industry, which had to deal with miners' strikes and the Yom Kippur war. In both cases, disruption resulted but was manageable. I emphasise that that planning originated within the industry. There is no possibility of a similar strategy emerging from the present fragmented and fragile industry. Instead, as nature abhors a vacuum, we have seen the emergence of countless government policy reviews and procrastination as a wholly unsatisfactory substitute.

Such reviews are unlikely to contribute to the long-term problems of developing an industry to face the changing challenges of fuel supply and environmental pollution, partly because they are usually conducted without an appreciation of the technical challenges involved but also because political issues pre-empt the objective examination which is necessary.

In my experience, the classical political answer to difficult problems is to avoid decision for as long as possible and, in the meantime, to do a number of limited things to mollify vocal groups. A current example is the present reliance on wind power, heavily subsidised, to make a contribution to the national electricity demand, which is likely to be substantial but will be of little value to the industry's major problems.

The essential problem is to reconcile the short-term demands of the market with the long-term investment and planning needs of the industry. Future plans have to cope with many uncertainties—for example, technical problems, construction delays. planning delays—any of which can imperil or delay the financial return on the project. Such a project, in isolation, is unlikely to appeal to investors but can be undertaken by an established industry within which the project uncertainties can be accommodated. Examples of this, of which I have first-hand knowledge, are electricity supply itself (properly organised), oil exploration and aero engines.

The last of these provides an interesting example. Following receivership in 1971, Rolls-Royce became a small player in the world market for aero engines because it could not support from its own performance the investment needed to keep pace with international competition. Of course, the Treasury was unable to contemplate investment on the scale needed. The solution lay in privatisation after 17 largely wasted years in government ownership. Extensive new investment took place—largely funded by releasing working capital—and within six years Rolls-Royce was again a major player on the world scene, a position which has since been consolidated and extended.

So it is evident that privatisation of a long-term capital-intensive business is not impossible if the management structure and determination exist. The essential problem lies in establishing a relationship between the industry and the public interest as represented by government and its regulatory mechanisms. This is the key problem in the electricity industry today.

Here, history can offer some pointers, although it is necessary to go back some 60 to 80 years to find them. After the First World War, the emerging electricity supply industry was very fragmented, with municipal and private companies operating in a generally isolated way. The solution proposed by the Williamson committee of 1918 was to establish electricity commissioners to oversee the operation and development of the industry. It had powers to approve reorganisations and give consent for building new power stations. It was described by the Weir committee of 1926—which led to the establishment of the National Grid—as,

"an expert committee carrying out a continuous investigation".

That committee commanded the respect of the multifarious companies then operating.

It is interesting to note that at the time of nationalisation, as I said earlier, there were more than 600 undertakings in existence under the general control of the electricity commissioners, with the National Grid, set up in 1926, operating the interconnections and trading arrangements. Unless some such system to organise and direct the present fragmented industry can be established, I fear that the present short-term approach will inevitably lead to power failures on a large scale, imperilling our national prosperity and standard of life. Present efforts to deal with this problem are too short term and diffuse to offer a satisfactory solution.

The industry has been well served by periodic reviews of its structure and problems. The Williamson committee of 1918, the Weir committee of 1926, the Herbert committee of 1956 and the Plowden committee of 1976 are all constructive examples which identified structural problems and went on to propose solutions.

It is interesting to note that, in general, while the proposals of committees before the Second World War were generally accepted and implemented, those after the war were generally not. In my view, today's problems largely stem from that post-war desire to interfere on a political basis with solutions proposed as a result of careful and expert analysis. This tendency can be seen in other activities and perhaps reflects an over-valuation of the possible contribution of politics to complex industrial problems.

The history of the electricity supply industry since nationalisation in 1947 has been marred by intervention for political reasons. I hope that a similar tendency will not mar today's discussions. That would be highly undesirable in discussing an issue of great national significance which should transcend party political interests. In my view, all three parties share responsibility for the present chaotic state of the industry and all parties should be prepared to recognise the problem and contribute to a solution.

I suggest that the way forward is for the Government to set up an independent expert committee to report to them on the problems facing the industry and to recommend remedial steps. The matter is one of considerable urgency and I hope—although I can give no assurance—that there remains time for order to be restored and a reliable electricity supply system to be established. The present situation—ad hoc responses to successive crises—will simply not do. It damages confidence and morale both within and without the industry, and sows the seed for further difficulties.

I raise this issue because of its importance, and because I believe that I am able, by virtue of independence and experience, to identify and describe the problems. My Lords, I beg to move for Papers.

My Lords, we have heard an extremely powerful and experienced speech from the noble Lord, Lord Tombs. He has been kind enough to remind us—and some of us may have needed reminding—of his long experience in the industry. He speaks with enormous authority. I had the pleasure of his chairmanship when I sat on the Select Committee on nuclear waste—whose report remains one of the major guidelines for government in dealing with a current problem facing the industry.

In the light of the noble Lord's recounting of the history—which will make interesting reading in Hansard—I can understand his wish to see some "strategic decision mechanism", as spelt out in his Motion. He indicated that he preferred a committee to review the position rather than a straight move to a strategic decision mechanism. For my part, I approach the suggestion of a strategic decision mechanism with some caution. Had the Motion called for "a coherent policy framework" to be provided by government, I should have been much happier. However, I understand that it is not the custom in such debates as this to table amendments to Motions. I should certainly have hesitated to table one to a Motion from so knowledgeable a noble Lord.

It is the word "decision" that worries me. Since the electricity industry was privatised, I have found that there has been a great deal of support for the concept of a competitive market for electricity. Yes, it must be properly regulated, of course; and I shall have something to say about that shortly. But the major decisions—to invest, to enter into contracts, to merge or de-merge, to buy and sell commercially—are all decisions to be made by the players, not by the Government or by some government appointed mechanism.

I should find it possible to support such a market-based system were it allowed to operate properly. But the present system is not being allowed to work properly, for reasons which become clear to anyone who has taken the trouble to read the DTI document headed: Energy White Paper: Responses to Stakeholder Consultation on Key Energy Policy Issues. It is no more than 37 pages: a closely typed, summarised account of some 2½ thousand responses to the Government's consultation document published in May last year.

Of course, there are areas where a government decision is crucial—for instance, in getting on with the business of dealing with nuclear waste. The noble Lord's Select Committee report appeared nearly four years ago, and so far we have heard nothing, other than about further consultation on how to consult—which is in effect all that DEFRA has done. I heard Mr Michael Meacher declare to a meeting that I chaired that he wants to go down in history as the Minister who solved the problem of nuclear waste. I do not know how much longer he thinks he will remain a Minister, but at the present rate, it will have to be a very long time. Here is an issue where government do have to take the lead and make absolutely clear where they stand.

Returning to the document to which I referred, most respondents recognised that we are in an electricity market which is not just in the UK but which is becoming EU-wide. This support for the market resonated in last year's report from the Trade and Industry Select Committee in another place. Perhaps I may quote one paragraph from the committee's report, Security of Energy Supply (HC 364-I), to illustrate what I mean. Paragraph (j), on page 60, states:

"We agree with the view that it should not be the role of Government to dictate the appropriate mix of fuels for electricity generation, although that need not prevent intervention by the Government and the Regulator to ensure that long-term security of supply is maintained".

The report contains many other paragraphs—with, of course, a Labour majority—making the same point. It is for the industry and not for the Government to make these decisions.

So what we are discussing today is a market where most of the decisions, strategic as well as operational, are rightly taken by the market. Why is it not working? I entirely agree with the noble Lord, Lord Tombs, that there is a great deal wrong with the present system—it is not working. The phrase that I used as an alternative to a "decision-making" institution was "a coherent framework". I am afraid that I detect very little evidence that we have such a framework for the electricity industry.

What I do see—and here I entirely agree with the noble Lord—is a whole raft of constantly changing interventions, more and more mechanisms to interfere with the market, more and more targets announced, many of them only to be abandoned, sending out conflicting signals and conflicting policies, all of which serve to confuse and de-stabilise what could be a proper working market.

There are many examples, but time allows me to mention only a few. Everyone recognises that the policy framework has to reconcile at least three conflicting objectives: security and diversity of supply—with security being exceedingly important; the need to reduce the environmental impacts of electricity production, particularly with regard to global warming but also with regard to sulphur dioxides and nitrogen oxides; and, thirdly, addressing the problem of fuel poverty. It is difficult but by no means impossible, with the right policy framework, to work towards the achievement of all three objectives.

My first example refers to the regulatory system. When this House debated the Utilities Act 2000, many concerns were voiced that undue weight was being placed on the third of those objectives, the question of fuel poverty, and the overriding need to keep down the price of electricity to the consumer, even at the expense of the other two. The new electricity trading arrangements set up under the Act, policed by the new regulator—which eventually adopted the name of the old one, Ofgem—have demonstrated that the fears voiced in this House at the time were justified.

At the last moment this House accepted two amendments which I proposed, aimed at broadening Ofgem's objectives to add a further objective:

"to secure a diverse and viable long-term energy supply".

It had to apply to both electricity and gas, therefore it appeared twice: in Sections 9 and 13 of the Act. That was fiercely opposed by the Government, but, with the help of parties in all parts of the House, it was carried against them by three votes. I subsequently had a letter from the noble Lord, Lord McIntosh of Haringey, to say that the Government were not going to reverse the amendments in another place.

But what has happened? Last year I attended a seminar at the Institute of Economic Affairs addressed by Mr Callum McCarthy, the director general of Ofgem, the regulator. I asked him how he was giving effect to the clauses written into the Bill by Parliament to form part of the Act. His reply startled me and others present. We were given the firm impression that he had been given guidance that the Government did not want the clauses and that he should not pay too much attention to them.

I subsequently drew attention to that remarkable state of affairs in a letter published in The Times last year. I was mildly surprised that nobody sought to challenge my statement. So, I was even more surprised to read in the responses to the consultation document, which I referred to a few moments ago, that the regulator regarded "diversity and security" as being at the heart of his obligations. He could have said that in response to my letter to The Times. At some stage somebody decided not to do that. The statement is extremely difficult to accept, when one looks at what is happening on the ground.

As a result of Ofgem's price regulation regime, wholesale electricity prices have fallen by 40 per cent in the past three years, as the noble Lord, Lord Tombs, said. I do not believe that I am alone in not having noticed any such change in my domestic electricity bills. But what has been the impact of the 40 per cent cut in wholesale prices on the generators?

The noble Lord mentioned British Energy. I shall add only that the effect of the price cuts has been to price nuclear energy out of the market. That required, therefore, short-term financial support from the Government, because British Energy faced serious problems. The most extraordinary of the Government's policies on nuclear energy is what I can only describe as their pig-headed refusal to recognise that, if ever an industry should be exempted from the climate-change levy, it is the nuclear industry. It generates no carbon; it contributes nothing to global warming and climate change. Yet, because some Ministers are deeply hostile to the nuclear industry, that has not been done. I give that as a clear example of the conflicting policies to which I referred.

Let me give another example. Last month I had an agonising cri de Coeur from the Combined Heat and Power Association. No doubt, the noble Lord, Lord Ezra, will have something to say about it, too. I shall be very brief. The association pointed out that at the last election, the Labour manifesto said:

"Labour is committed to a secure, diverse and sustainable supply of energy at competitive prices … a doubling of combined heat and power by 2010."

The paper from the association continued:

"But what has happened? According to the Government's annual digest of UK energy statistics in 2001:

Additions of new CHP capacity have fallen by 95% in a year;

The output of existing CHP schemes has fallen by at least 17%

The capacity of operating CHP plant has effectively fallen by 800 MWe since 2001.

This means that:

£1 bn of investment in consented CHP schemes is now currently stalled.

Not surprisingly, UK emissions of carbon dioxide from the power sector have risen by 13%".

The industry has been priced out of the market. It is unable to contribute to the reduction of global warming. We now read that it is almost certain that the target of doubling the output by 2010 is yet another one that will have to be abandoned.

The last example I shall give, which the noble Lord also mentioned, is the Drax coal-fired power station run by AES Drax Power Limited. This is the only large coal-fired power station to have fitted a flue gas desulphurisation plant to limit emissions of nitrogen oxide and sulphur dioxide. It cost nearly £700 million to install. The annual running cost is about £30 million. Falling wholesale electricity prices are leading buyers to switch to lower-cost non-abating coal-fired generators. As a result, more coal is being burned by the higher polluters and less by Drax, which is saddled with the cost of its flue gas desulphurisation pollution abatement plant. I could give figures, but I should bring my remarks to a close.

How can that possibly make sense? What does it say about the Government's commitment to environmental improvement? What does it say about Ofgem's professed commitment to diversity? I hope I have said enough to demonstrate that, so far from having a coherent framework within which a competitive market could work, the Government's energy policy is a shambles. They have no lack of wise advice. Much of it forms part of the response to the consultation paper. I shall quote only one more extract from it. There are pages of it, much of which is extremely sensible advice. Paragraph 7, under the heading of "Transmission, Distribution and Trading" asks:

"What more can be done to provide a stable framework for investing in these sectors?"

Paragraph 7.1 states:

"There was support from across the energy industry and unions for a clear economic and political framework for energy".

That is what we will be looking for in the White Paper, which the Government are to publish within a month or two. And, by God, we need it.

My Lords, I declare an interest. Like the noble Lord, Lord Tombs, I have been involved in the energy sector for many years. I am currently chairman of Micropower, which exists for the promotion of small-scale electricity generation. I am delighted to participate in this debate, which was so ably introduced by the noble Lord, Lord Tombs. I was closely associated with him, particularly when he was chairman of the Electricity Council and I was chairman of the Coal Board. We had not only good personal relations but good trading relations. At that time, I am glad to say, the electricity industry was taking large quantities of coal, so we met in a celebratory frame of mind, unlike the present situation, where unfortunately the amount of coal, particularly British coal, being used to generate electricity is dwindling.

The noble Lord is very lucky to have won the ballot for this debate because it is extremely timely in view of the proposed White Paper, as both his speech and that of the noble Lord, Lord Jenkin of Roding, made clear. As that document seems to have been a little delayed, perhaps the Minister can tell the House when it is likely to appear. The latest date that I have heard about is March, but we originally expected it to be published at the end of last year. I should appreciate some enlightenment on the subject.

The debate is not only timely because of the White Paper that is due to appear; it is also timely because of the considerable amount of disarray in the electricity market at present, to which both noble Lords referred. It is unfortunate that a number of the leading companies involved in electricity generation should have been so adversely affected by the dramatic collapse in the wholesale price, which, as the noble Lord, Lord Jenkin, pointed out, has certainly not been passed on to the domestic sector and, therefore, has caused a great deal of harm to those who have generated as opposed to those who both generate and supply. That is an aspect of the development of which I believe the Government were not particularly in favour. They wanted to separate these various activities.

Not only have the large operators been adversely affected in the present situation. Smaller ones have also been involved. This covers both renewables and CHP, to which the noble Lord, Lord Jenkin, referred. The discrepancy between the gas price on the one hand, which has remained relatively high, and, on the other hand, the wholesale electricity price, which as become very low, has caused real problems for CHP operators. The Balancing and Settlement Code of NETA that discriminates against intermittent suppliers, which renewables and CHP inevitably are, has added to the problems. Some corrections have been introduced into that code, and it is possible that more are contemplated. Perhaps the Minister could also refer to that possibility.

There is no doubt that electricity is absolutely crucial, not only in the consideration of energy policy but also in the affairs of the nation as a whole. The drastic effects of possible power cuts, or of major variations in the price of electricity, are situations to be avoided. I hope that the White Paper will deal with the problem of electricity in all its ramifications, and propose the sort of framework to which both noble Lords have referred. In documents dealing with energy policy, it has all too often been the practice to treat primary sources of energy as being of major importance, while leaving electricity as a follower-on because it is a secondary source. However, it has now become the most important element in energy policy. I hope, therefore, that in the forthcoming White Paper there will be a comprehensive chapter devoted to electricity.

The White Paper should consider the problem in ways that subdivide themselves quite easily under the headings mentioned by both noble Lords; namely, security, diversity, and efficiency. The latter, of course, has an impact on climate change. I should like to say a few words under each of those headings.

Security of supply is absolutely vital. Hitherto, there has been a substantial surplus of capacity, but that has been eroded by a number of plant closures, two of which were announced just a few days ago, and by plant being mothballed. Even though I was told in answer to questions that I have raised on the subject that the mothballing of plants was a form of security, that is not entirely so. It takes several months for a mothballed plant to be brought back into action, which means that it cannot deal with an immediate situation. There must be at least 15 to 20 per cent surplus capacity, which, under the previous regime, the CEGB made sure was always available. The present regime does not allow for that; and, therefore, there should be a modification in the regulatory arrangements to ensure that there is an incentive to generators to maintain that degree of surplus capacity.

The other possible security risk could arise from terrorism. I have no doubt that suitable measures have been put in hand to safeguard major power stations, especially nuclear stations. But in the longer term, a further safeguard could be achieved by decentralising the way in which electricity is generated.

I turn to diversity. Since the dash for gas in the 1990s, the gas generation of electricity has built up from virtually nil to over 40 per cent. It could raise to 60 or 70 per cent on a business-as-usual basis, as defined in the PIU report, as mentioned by the noble Lord, Lord Tombs. At that stage, something like 90 per cent of the gas used in the United Kingdom would have to be imported. That strikes me as being a disturbing and very serious prospect, but it did not seem to be treated as such in the PIU report; indeed, the report seemed rather detached about it and suggested that the situation should continue to be monitored. I do not know what "monitoring" really means. What happens if, in the process of monitoring, it is found that a serious situation is arising? How, at the drop of a hat, could one deal with the problem of the massive dependence for the generation of electricity on gas and on the imports of gas? Something more positive than just monitoring must be introduced.

We need to consider other ways in which electricity could be generated. Serious consideration should be given to such alternatives. It will be no surprise to noble Lords if I start with coal, which could have a major part to play in the future generation of electricity. Clean coal technology has now been developed to the point at which it can be fully effective. Such plants are operating in the United States, and in other European countries. It can also be associated with carbon extraction, which is also another valid and proven process.

Two projects have been put forward in the United Kingdom for such plants—one at Hatfield in Yorkshire, and another at Onllwyn in South Wales. I very much hope that the Minister will be referring to those pioneering efforts and that he will indicate ways in which the Government could help them to come to fruition. After that start we could have many more such plants, and begin to see some diversification in the way in which electricity is produced in the future.

Mention has already been made of the nuclear sector. It really is time—indeed, the time has almost passed—for a decision to be reached on the future of the nuclear industry. We all know that there will have to be a progressive withdrawal over the next 10 to 15 years of most of the nuclear plant operating at present, and that the time-scale for new nuclear plant, if such should be decided, is very long for planning and capital expenditure reasons. Therefore, more than a pointer needs to be given in the White Paper about this. But, if such a pointer is to be provided, it will be necessary to take into account all the issues relating to nuclear waste in which the noble Lord, Lord Tombs, was very much involved.

I remember reading the report that appeared nearly four years ago. It seemed to me to make a very sensible suggestion as to how nuclear waste might be dealt with, and yet the problem is not yet resolved. Perhaps the White Paper will show how it is to be resolved. There is also the problem of special security for nuclear stations, as well as the question of the capital cost and the role that it is to play in climate change—a matter to which the noble Lord, Lord Jenkin, referred.

We also need to consider renewables. The Government have rightly said that they consider renewables to be of great importance; indeed, they have given the matter much support. But, at present, renewables are mainly limited to wind power, and particularly on-shore wind. There is an increasing amount of resistance on visible environmental grounds to the extension of on-shore wind. Therefore, the Government need seriously to consider ways in which the concept of renewables can be widened. I should prefer a term such as "clean energy" to replace that of "renewables", which could include such processes as methane recovery from disused coal mines, in which the noble Lord, Lord Jenkin, has been much involved, clean coal technology and combined heat and power.

This brings me to the issue of efficiency, because combined heat and power means that the output of large scale power stations that currently produce only about half the heat content of the primary energy put into them will be virtually doubled, resulting in up to 80 or 90 per cent efficiency. The trouble with large scale power stations is that the waste heat cannot be used. With smaller scale power stations it can be because you can site combined heat and power stations near consuming points and therefore make use of the waste heat. That doubles the efficiency with which energy can be produced and used and helps to deal with the problem of climate change.

The noble Lord, Lord Jenkin, drew attention to the doldrums through which combined heat and power is passing. It is important that the White Paper indicates what will be done to correct this serious situation if the Government want to achieve their climate change objectives.

I am involved, as I have indicated, with micro-CHP: combined heat and power in domestic households. It has been developed technically; products will be on the market in about a year's time and that could revolutionise the way in which the electricity distribution system works. Hitherto it has worked one way; namely, through the progressive flow of power from the main power stations to the consumer. If we have a wide spread of CHP plant and go into the household so that every household effectively becomes a power station we will need a new distribution system. I am glad that Ofgem have recognised this and have talked about the "rewiring" of Britain.

There will be a dramatic change in the electricity industry. It is necessary for this "rewiring" to take place quickly. When these products come on to the market they will be like a domestic boiler but will produce both heat and power; consumers will have all the electricity they require and they will need to sell surplus electricity into the grid. That is why changing the distribution arrangements is necessary.

It is important that there should be a carefully thought-out strategy for the electricity sector. The Government have an opportunity in the White Paper to achieve that. The issues of security, diversity and efficiency need to be clearly tackled and the new and developing technologies such as micro-CHP should be given a helping hand so as to change the electricity system in Britain for the better.

My Lords, I too thank the noble Lord, Lord Tombs, for introducing this discussion. It is timely because day after day we read in our newspapers of the problems facing the electricity industry. In today's Financial Times there is an article headlined,

"US group hit by wholesale electricity price falls".

It reads,

''NRG Energy, the struggling US electricity group, is in talks with banks",

to reschedule its finances. Even today as the debate takes place we see that the electricity industry is struggling.

It is rather daunting to follow such a distinguished group of speakers: a former Secretary of State for Energy; a former chairman of the National Coal Board; and the noble Lord, Lord Tombs, himself, who was chairman of the Electricity Council. I cannot match that in any way, although I was employed in a humble capacity in the electricity supply industry at a power station. The noble Lord, Lord Tombs, and I met on the Electricity Council when I was a member of the National Joint Council for the Electricity Supply Industry trying to earn a crust for my fellow trade unionists at low levels in the industry. I do not know whether I succeeded but at least I tried; that is the best one can do.

The noble Lord, Lord Tombs, gave proper recognition to the nationalisation of the electricity supply industry. Indeed, for a time it served the nation extremely well. I like to think that public ownership might be the way by which we could bring order into a chaotic industry but I fear that towards the end nationalisation did not serve the country well. I shall explain why. The reorganisation that began in 1956 eventually led to the formation of the Central Electricity Generating Board which became too big and too powerful. The CEGB dominated the industry and fixed prices to suit itself. The regional boards had virtually no say over prices or policy which meant no say for the consumer either.

The CEGB, in other words, grew too big for its boots and failed to respond to the market. It continued to build power stations to meet an exponential annual increase in demand of 10 per cent when mass demand had fallen to 2.5 per cent or less. As a consequence we had a large surplus of capacity—over 100 per cent in Scotland and over 50 per cent in this country—with dire consequences for the consumer. That should not have happened. The board's insistence on retaining current cost accounting when inflation was falling added further to the consumer burden.

When I was in the other place I was a member of the House of Commons Select Committee on Energy. I came up against the CEGB, which was impervious to any criticism and unresponsive to any ideas to improve its performance. It was not averse to concealing the truth, especially about the true cost of nuclear energy. The Department of Energy seemed to have no influence and was mesmerised into impotence by self-serving experts on the CEGB. I was worried when full-scale denationalisation of the industry was decided on, but we could not return to such a system. It corrupted public ownership and brought it into disrepute, which I regret.

The noble Lord, Lord Tombs, is correct, as are the other speakers. Electricity is so vital to every part of everyone's life and to the soul of this nation that it cannot be allowed to slip into neglect and chaos and become the plaything of private owners, particularly foreign owners whose only interest is making as much profit as possible and who pull out when it suits them.

Government policy, if it can be discerned at all, is not helpful. Their laissez faire approach deprives the industry of the leadership that it needs and the direction it should take. The policy of the regulator, which has already been mentioned, in driving down prices to unsustainable levels seems to conflict with the Government's other policy of reducing energy consumption on environmental grounds. How can one reduce energy consumption by constantly making it more easily and cheaply available to the general public who use it? It is not a reasonable and well thought out policy. It also does nothing to conserve indigenous gas supplies. This country will soon be completely dependent on foreign sources of supply. That cannot be good. It will again create difficulties for the whole industry.

The United States group, which I mentioned, bought Killingholme power station for £400 million. It is now worth £200 million. Such losses are unsustainable. What will happen to the industry if there are large-scale bankruptcies of various owners? Who will pick up the tab? If they can no longer afford to generate the needed electricity, who on earth will take over? There can be only one source—the state. If that is to be avoided, it is vital to ensure that the existing arrangements can operate properly, profitably and to the benefit of the consumer.

As I said, it is clear that the current system is not working and that a crisis in security of supply could be looming. The noble Lord, Lord Ezra, is right: we have mothballed plant, both oil and coal. However, it would take months, perhaps years, to bring those power stations back on line, and they would pollute the atmosphere, which is also against government policy. It is the Government's duty to prevent that crisis happening.

Wind power has been mentioned. However, it is the most inefficient and most environmentally damaging way of dealing with alternative energy sources. The noble Lord, Lord Ezra, mentioned combined heat and power and measures to save electricity. All of those were discussed by the Select Committee on Energy; again, however, they were obstructed by the CEGB. Nevertheless, those measures are far better than building wind farms which produce electricity at about three times the cost of gas and cause environmental damage at the same time.

It is difficult for me to give the Government any advice on how to proceed on a macro basis. However, it may be that, while not bringing the industry back entirely into public ownership, they may well have to go back to the Weir report and consider having the national grid under public ownership. That may well be a way of providing leadership to an industry that is currently fragmented and, unfortunately, failing.

The noble Lord, Lord Tombs, was right to put forward his idea of setting up an expert committee to examine the current situation and make recommendations to achieve better cohesion and to ensure that this vital industry and vital commodity are under protection. Other than food, there are two essentials in this country: water and electricity. Without electricity, civilisation collapses. Therefore, the Government do indeed have a grave responsibility. I hope that they will meet it.

My Lords, I am very glad to follow the noble Lord, Lord Stoddart of Swindon. I think that he perhaps undervalued and devalued his own experience as someone at the sharp end in the industry, on the Electricity Council and on the Select Committee in another place, where we served together. I enjoyed his contribution, as I enjoyed greatly the speech by the noble Lord, Lord Tombs—to whom we are very grateful for initiating this debate. There was much cause for thought in his comments.

Following the remarks of my noble friend Lord Jenkin of Roding, however, I feel that the need is perhaps less for a new mechanism and rather more for quicker and better decision-taking by government. To illustrate those themes, I shall concentrate my remarks on just two spheres. The first is nuclear, which might be considered as the tough end of the electricity generating spectrum. The second is renewable energy, which for many commentators and politicians is at the softer, more politically correct and fashionable end of the spectrum.

Although I have an interest to draw to the attention of the House, having been a non-executive director of a renewable energy company since about the time that I came to your Lordships' House in 1997, I make it clear at the outset that I support both forms of electricity generation: nuclear and renewables. If I may have the temerity to correct the noble Lord, Lord Ezra, however, I should add in passing that there is a bit more to the renewables industry than wind power. There are many plants generating electricity from other sources of renewable energy.

I certainly want to tell the House that I do not belong for one moment to the "nuclear power is evil, wind power is wonderful" school of thought. Nor, however, do I belong to the "burning of biomass is an environmentalist cop-out, while nuclear is the only way, truth and light" tendency. There is no ideal form of electricity generation; all have their problems, costs, inefficiencies and environmental impacts. However, in a balanced and integrated energy generation policy, each has its place, and each should be considered in any strategic decision-making process, for which the noble Lord, Lord Tombs, called, and in any joined-up thinking by government of whatever political colour, Tory or Labour.

I turn first to nuclear power. Having been invented in the 20th century. nuclear power cannot be disinvented. I believe that it should be a component part of any joined-up, 21st century UK energy policy. Without its contribution to diversity and certainty of supply, future availability and continuity of electric power will not be guaranteed, particularly in the face, as other noble Lords have pointed out, of apparent growing over-dependence on potentially volatile imported gas supplies from the Middle East, North Africa, Central Asia and elsewhere.

I believe that any decision on new generation nuclear capacity does, of course, fall into the "acutely difficult" box for any government; there is no denying that. I also believe—although I do not want to shock my own Front Bench that we have a far-sighted and courageous energy Minister in Mr Brian Wilson. He understands these issues and he wishes to catch this particular falling knife. I mean what I say: I do not seek to damage Mr Wilson in any way at all with these warm comments from the Tory Back Benches. I wish to reassure the Labour Front Benchers about that.

However, my prediction for the New Year is that, following the much-spun forthcoming White Paper, the Government will fudge the nuclear issue. They will take no decision on nuclear power before the next general election. Thus uncertainty will reign and growing insecurity of supply will follow in a sector which, by any standards, has exceptionally long lead times.

I have made these points about nuclear power as an entirely disinterested observer. As regards renewables, I have a long and very direct set of experiences, as I declared to the House earlier, as a director of Energy Power Resources Limited, which is a company with a portfolio of plants from wind to those burning biomass, making it easily the largest generator of electricity from alternative sources in the United Kingdom. Indeed. I am told that it now accounts for about one quarter of all the electricity generated from biomass in the whole of western Europe. But companies such as these are still very much in the foothills of development, as is probably the company of the noble Lord. Lord Ezra.

Governments of both political colours have recognised that and have encouraged the growth of alternative energy. I do not doubt for one moment the good intentions of this Government. I can see a slight nervousness coming over the face of the Minister in that more praise is going in the Government's direction from these Benches. I believe that the Government have had very good intentions. However, in promoting the principle and practice of renewable energy, it is not to decry those good intentions to say that in my judgment progress is so slow that the UK has absolutely no chance whatever, on present trends, of meeting the Government's targets in the matter of the generation of electricity from renewable sources, whether for the middle of this decade, for 2010 or for 2020. If the Minister who is to reply to this debate disputes that, I hope that he will set out exactly when and how these targets are going to be met. I believe that the Minister understands the science of all this very well indeed and better than most of us. He knows the figures and the trends derived from them as well as I do.

In the interests of realism, which suits all of us concerned in these matters and which certainly suits the national need, perhaps the Minister might add another spot of what I understand to be called in polite No. 10 circles these days "target revision". I understand that that is what it is called in polite spinning circles. The Minister might add a little target revision in this area to the plethora of government target dumping which has so noisily been falling around us since the turn of the year: from targets about the misuse of drugs to those about participation rates in higher education, all of which have been thudding to the floor as they have been dumped by the Government.

In the face of the looming shortfall, probably the biggest waste of taxpayers' funds would be for the Government and the department to conjure up lots of fancy new grants for new plants in this area of renewables. There is certainly no special pleading from me on and for that: indeed, to the contrary. Present regimes need watching very carefully indeed. Perhaps I may give a couple of small examples. There is the bio-energy capital grants scheme, which currently sets out a requirement that renewable energy plants of over 20 megawatts capacity should use about 25 per cent of energy crops by the third year of their construction, and 50 per cent by the sixth year of operation.

Those are exceptionally unlikely targets to be met; they are impractical expectations. Targets are a good discipline for all of us privately; but pragmatically and practically they should be realistic. Politically they can be very damaging to the Government's health if they are not realistic. Policy-makers should beware of grasping at straws in this area. Probably the best way of killing stone dead at a stroke, as we used to say, the nascent renewables generating industry would be to allow the co-firing of renewable fuels—such as straw, wood residue, miscanthus among the energy crops or coppiced willow—with coal.

We have heard from the noble Lord, Lord Ezra, that there are many large, mothballed old plants waiting to come back to life. If even 10 per cent of the fuel burnt in them with 90 per cent coal was allowed to qualify for renewable purposes, that would overwhelm the small plants which are fuelled 100 per cent by renew able sources. It would also encourage a fresh surge in the burning of fossil fuels like coal as well, which many people concerned environmentally would not wish to see. I can well understand why the directors of these companies considering co-firing wish to see it occur because they have mothballed coal plants in their portfolios and wish to breathe new life into old assets. I see the fearsome figure of the noble Lord, Lord Ezra, rising to his feet.

My Lords, surely the noble Lord will accept that if clean coal technology with carbon extraction were to come onto the market he would support it.

My Lords, I certainly believe in these forms of technology enabling electricity to be generated from coal or from anything else. The point which I am making is that the kind of proposals current in the industry at the moment concern people wishing to bring back into use mothballed coal plants and co-firing them with some renewables which count towards the renewables obligation. That would breathe new life into the mothballed assets of companies which have already been written down or written off entirely in the balance sheet.

I believe that policy makers should be aware of the unintended consequences of their apparently benign intentions, which is the line of thinking in the department which says, "Renewable energy is not developing very fast. People have come forward with the idea of co-firing, which will mean that we have a little more renewable biomass fired with coal. Therefore, we can say that we are burning more biomass and more renewable energy is coming". That might be produced for a year or so, but at the same time the genuine nascent renewables industry would be killed off in a very short time. That would be the unintended consequence of the benign intentions of policy makers. We have all seen that.

It would be much better and at nil cost to taxpayers' funds, which I am always anxious to avoid, to kick-start innovative technologies and encourage new entrants, new companies and new investment into renewable energy without any Government support at all, by introducing differential banding under the renewables obligation for different forms of alternative energy regeneration from wind through biomass burning and back again. That would give much greater depth to the industry. Perhaps the Minister will have time to explain why we do not have this differential banding regime in place.

That having been said and that request made, perhaps I may end in the bi-partisan spirit which has rather overwhelmed me this afternoon. I do not doubt the Government's good intentions. I am a particular fan of Mr Brian Wilson and his brave approach. I applaud the spirit behind the Government's good intentions as regards many parts of energy generation. I applaud the spirit behind their target setting although I believe that they are pretty quixotic in quantum and that they will learn to rue having set them year by year.

As regards nuclear, alas—as I said, the noble Lord, Lord Sainsbury, well understands the science—I certainly doubt the courage of the Cabinet, even when collectively cheered on by the Minister to whom I have referred quite enough already. As regards alternative energy, I doubt that the members of the Cabinet fully understand the impact of some of their policies, be they co-firing or the lack of banding under the renewables obligations.

I greatly welcome the opportunity provided by the noble Lord, Lord Tombs, to take part in this debate. Should the Government decide to accede to the request of the noble Lord for a committee of inquiry, the Minister will easily find his number in the telephone directory. If the noble Lord demurs from the chairmanship of the committee, I should be happy to put my name forward. However, given the rather straight-faced look of the Minister, I believe that I am unlikely to receive that invitation.

My Lords, the noble Lord, Lord Tombs, has provided us with a good opportunity to discuss the matter. So far we have heard many authoritative speeches. However, I fear that mine will probably not be among them. I have certainly noted the emphasis on the need for stable prices and security of a diverse supply of electrical energy. I have the privilege of owning some commercial woodland in Scotland which could be used as biomass.

I recently tabled a Question for Written Answer on the replacement of the generating capacity at Chapelcross nuclear power station in Dumfries which has been closed. I was most surprised when I received the answer that the Government had no policy for such a replacement and that it was being left to the market for new generating capacity to evolve. Noble Lords will be mindful that energy is a largely reserved matter in Scotland and is, therefore, a matter that we can debate in this Chamber.

I was almost astounded to read that a Labour government had no expectation of a power generating policy. That seems to be remarkably laissez-faire. In Scotland we have been generating power by various means for a considerable time. More power is generated in Scotland than is consumed in Scotland. So, electricity is an export along with whisky. computers and tourism.

Much to the chagrin of some political parties in Scotland, 42 per cent of electricity is generated by nuclear at Hunterston and Torness. Coal and gas stations supply just over 20 per cent each. Some 12 per cent comes from renewables and most of that is from various forms of hydro, which I am certain have not yet been mentioned today. Hydro accounts for 10 per cent of Scottish generation. New style renewables provide up to 2 per cent. There is good potential in and around Scotland for developing the various forms of modern technology. Wind is obviously in abundance and a new factory has been established at Machrihanish to produce aerogenerator equipment. Wave and tidal resources are naturally very available around Scotland. Solar potential, both wet and photovoltaic, is good though patchy. Biomass is distinctly possible but issues of transport and siting are involved. Combined heat and power is very possible.

The potential for micro generation at home is as good as anywhere else, but my fellow Scots are a fairly conservative bunch and are not yet in sufficiently pioneering mode for micro generation to be widespread. I fear that it is still viewed as being only for eccentrics. Evidence from pilot projects would help with that. So here there is a definite role for government to become involved.

The issues of transport and voltage drop are relevant in a country with plenty of land and a sparsity of population. I am undoubtedly in favour of more hydro schemes but I recognise that most of the existing ones are situated a long way from our cities. However, this is a proven technology. It is clean and it is easily absorbed into the landscape as an asset. Some other renewables are not so acceptable in the landscape.

In an ideal world the generating station would be situated on the edge of the town or city, which does away with the voltage drop problem. That is difficult to arrange but it may not be as difficult as we think. It probably depends on getting the right economies of scale.

If one considers a biomass generator on the edge of a town, one has to accept that it needs to be surrounded by an industrial scale forest to provide the fuel without exorbitant transport costs. I am in favour of such an approach for only 45 per cent of commercially produced timber goes to the sawmill. The lop and top is anything up to 55 per cent. However, I also recognise that Scotland is a land of small woods, and that we object to wall-to-wall plantations. A multitude of small woods is a valuable landscape asset and is a very marketable tourism asset as well. We need to make a judgment between biomass generation and tourism and recreation.

Energy generation in Scotland is an issue with which government could be more involved. I know that the siting of generation plants is more the responsibility of the Scottish Parliament and local planning authorities but it would be helpful if a more positive steer came from the United Kingdom Government. It is, of course, deducible that the United Kingdom Government favour generators that do not produce greenhouse gases to meet Kyoto targets. I wish that the Government would agree that they favour nuclear, hydro and modern renewables and that they are less in favour of coal, gas and oil.

Assistance could be given towards small-scale generators and towards micro generation to encourage its take-up by citizens who see themselves as normal. More schemes akin to the biomass district heating plant in Lochgilphead would help to normalise those new approaches, as would that which is proposed on the Isle of Arran.

Government could promote various types of generation and pilot new ones. Why will they not do so? I look forward to the White Paper.

My Lords, I congratulate the noble Lord, Lord Tombs, on being successful in the ballot and thank him for introducing this important debate. I congratulate him also on the way in which he promoted the debate, drawing enormously on his expertise and experience. Like the noble Lord, Lord Stoddart of Swindon, and the noble Earl, Lord Mar and Kellie, I wish to mention the excellence and experience of those noble Lords who have already spoken. I very much hope that not only the Minister but also Members of another place will treasure that expertise and experience.

The New Electricity Trading Arrangements (NETA) were introduced in March 2001 by Ofgem and the DTI. They seem to have been successful in increasing competition and reducing wholesale prices by 40 per cent compared with 1998. One of the main reasons for the fall in prices is that there was a significant degree of generating overcapacity. Of course, some overcapacity is certainly needed not only to meet peak demand but also to allow for the fact that inevitably some plant will be out of action from time to time because of breakdowns and the need for servicing. It is estimated that there is 22 per cent more capacity than is needed to meet peak demand.

Currently the wholesale prices of electricity have actually fallen below production costs by as much as £5 to £7 per megawatt hour, which has caused grave financial problems to various generators, as the noble Lord, Lord Tombs, mentioned. I had intended to discuss the problems of British Energy but my noble friend Lord Jenkin of Roding has already done so and, as time is running on, I shall not mention that.

The problems of electricity generators have resulted in the renegotiation of contracts with BNFL, which will cost the Government between £150 million and £250 million a year for the next 10 years. I say that quickly, but that amounts to some £1.5 billion to £2 billion, and that is only for the next 10 years—and even that may not be the end of the road. There will be a further knock-on effect on the struggling British coal industry. Powergen has so far mothballed two of its plants, and is seeking a credit line of no less than £9.3 billion. TXU Europe has been cut adrift by its American parent and is in danger of insolvency. The German company Innogy is under pressure to mothball capacity.

We in the Conservative Party strongly believe in the market governing prices and supply, but we are also concerned about the continuity of supply of this essential utility. On 18th November 2002, the noble Lord, Lord Ezra, asked whether the problems being encountered by generators would lead to difficulties in supply. In a supplementary question, raised the matter of the Californian experience, in which uneconomic pricing and the insolvency of Enron resulted in widespread electricity blackouts. I received reassuring replies from the Minister, who told me that,

"it is likely that generating capacity will be taken over by another supplier".—[Official Report, 18/11/02; col. 134.]

The noble Lord, Lord Ezra, was told about the many plants that had mothballed. He commented today, as did the noble Lord, Lord Stoddart, that it takes some time to take plants out of mothballing.

We are having the debate today on the premise that there is an absence of a strategic decision mechanism for the electricity supply industry. We on these Benches believe that in a sense there is one with which we should not interfere. On the one hand, it is right and proper that the market should govern prices, the number of identity of suppliers and the sources of fuel. On the other, it appears that Ofgem is doing a good job in regulating prices in the network monopolies of distribution and transmission and in ensuring continuity of supply, which are its essential functions. It is also right that we have abolished the old mechanism whereby there was only one monopoly supplier and uncompetitive prices were a hidden stealth tax imposed by—and I freely admit this— successive governments.

From the investor's point of view, it is equally right that the regulation of the industry should be in totally independent hands, and not subject to the political vacillation of successive governments or of Treasury policy.

The Conservative Party's energy policy was succinctly set out by my honourable friend the Member for Maldon and Chelmsford East, in a debate in another place on 20th June 2002. He indicated that our four key objectives were economic efficiency, security of supply, environmental benefit and relief of fuel poverty. With the exception, to some extent, of economic efficiency, the other essential and worthy objectives cannot be the sole responsibility of the commercial concerns, supplying an essential utility to industry and private consumers at prices that are in effect controlled by the regulator, however lightly.

The delivery of our electricity supplies, whether in the form of the power stations, the Grid or the power lines in the street leading to our homes, offices and factories, are as much part of our national infrastructure as are the roads, the railways, the water and sewage systems. It is the responsibility of the Government, as well as that of the generating and supply industry, to ensure that the essential framework is there, because of the national policy decisions that are required. My noble friend Lord Jenkin of Roding made that point.

Diversity of supplies is essential. With finite natural resources of our own, we cannot allow ourselves to be dependent on only one type of fuel or one supplier. Our energy is currently produced in approximately equal thirds of gas, nuclear power and coal, with a mere couple of per cent of renewable sources. So what of the future? What percentage of our electricity should come from coal, for example—and, indeed, which coal? There are billions of tonnes lying under the British isles that are mostly uneconomical to extract because it is cheaper to import it from abroad, sometimes even from the other side of the world.

The next four paragraphs of my notes relate to Drax, but my noble friend Lord Jenkin and the noble Lord, Lord Tombs, discussed that so thoroughly that I shall not bore your Lordships by repeating what they said.

What percentage of our electricity should come from gas? Our current North Sea reserves are estimated to last for about 11 years at the year 2000 rate of consumption. It is believed, although "hoped" might be a better word, that there are further as yet undiscovered reserves. However, by 2005 we shall certainly have to start importing some gas. At some time in the future, our own gas will run out, and we will then he entirely dependent on overseas sources of supply. To that extent, we could be in the hands of far from stable suppliers. We shall also have to compete with the many other gas users for the available supplies. As was pointed out during "Utility Week", on 2nd November 2001, the United Kingdom will no longer be self-sufficient in oil and gas later this decade.

The use of coal and gas as fuel for generating electricity results in the production of acid rain, sulphur and nitrogen, contributes to global warming and is directly contrary to the Government's environmental targets.

Then there is nuclear power. I have heard many noble Lords say that this is a cleaner source, without quite as many unhealthy emissions. However, the nuclear industry has its own costing problems, not merely because of the necessity of operational safety factors but because of the decommissioning costs. The nuclear industry has to factor those in, whereas the gas, coal and oil industries do not have to internalise the cost of dealing with the pollution that they cause.

Since 1995, both Conservative and Labour governments have said that building nuclear power stations must be a commercial decision, but it can be done only if there is a governmental willingness that it should happen, including ensuring that planning consent is given after due public inquiry. The commercial decision then would be for the industry to decide whether to take up the opportunity offered by the Government's policy. Even when the commercial decision is made, it must be borne in mind, as the noble Lord, Lord Ezra, said, that, what with one thing and another, it takes a long time from deciding to build a nuclear power station and bringing it into commission. One way or t'other, some decisions need to be taken now, or certainly very soon.

The Conservative Party's policy on nuclear power was stated by my honourable friend the Member for South Suffolk, in another place on 22nd October 2002. He said that a future Conservative Government,

"would not take a decision to replace nuclear with nuclear; nor would they rule out new nuclear-generated electricity if, with the legacy costs provided for and the associated risk accounted for, it proved to be the most economic way of continuing to meet the global requirement of addressing climate change".—[Official Report, Commons, 22/10/02; col. 223.]

I think that that means that the Conservative Party would take the decision—I do not think that the word "not" was originally there. It must have been typed in by my secretary. Many noble Lords asked about that. Will the Minister answer the question of my noble friend Lord Jenkin as to why the nuclear industry still has to pay the climate change levy? Everyone is interested in that. I remember asking that question myself, and the Minister said that it was cost neutral, but it is worth asking again.

Finally, I come to the policy on renewable energy sources. As the Trade and Industry Select Committee pointed out almost a year ago, successive governments have claimed to support the development of renewable energy sources for more than 25 years. However, those sources have their own difficulties. Wind farms on land are deemed by their neighbours to be too noisy and by neighbours and environmentalists to be unsightly, while seafarers regard offshore sites as a hazard to shipping and an impediment to what remains of the fishing industry. The noble Lord, Lord Ezra, pointed that out, and my noble friend Lady Wilcox is saying it from a sedentary position. Either way, the amount of electricity produced would be too small, too intermittent and too costly.

As to tidal power, despite the large sums poured into research—that was not intended as a pun—the engineering problems have proved so far to be insurmountable. Unless global warming results in some future climate change in the United Kingdom, solar power is also totally out of the question in this country. My noble friend Lord Jenkin and the noble Lord, Lord Ezra, have discussed combined heat and power, and I shall not go into it again. Nuclear fusion—the creation of energy by fusion of hydrogen atoms—is well into the distance.

We believe that the electricity industry will work best if governed by the market. As to the sources of supply of the raw materials for generating electricity and distributing power to consumers, and inevitably the amount that is charged for it, we support the regulator and his work. But the industry cannot operate on its own, utterly divorced from input from the Government. It most certainly cannot operate in a strategic environment that changes as often as the weather. At one time there was a so-called "dash for gas", and then, in an attempt to prop up the indigenous coal industry, new gas-fired power stations were barred. At one time, nuclear power stations were seen as the future of total power self-sufficiency. However, perhaps because some Labour politicians opposed them root and branch until the realities of office sunk in, they gave them only a grudging nod of approval. As I have said already, renewable energy sources have been sought by successive governments, but none of them has been prepared to put in the funding and to say that, if and when it proves practical, those development costs will be written off so that the power can be generated economically.

I remind the House very briefly of the report of the European Union Committee of this House dated 14th February 2002. It said:

"We see no fundamental conflict between liberalisation and energy security. Indeed in our view, liberalisation can help promote security by promoting more flexible and diverse markets'".

Ofgem's statement of its corporate strategy for 2003 to 2006 includes,

"monitoring the wholesale electricity market as it develops so that electricity supplies remain secure and the market continues to be competitive".

We endorse that and its other objectives.

What is required is for the Government to lay down the framework, and then minimise their day-to-day involvement by leaving it to Ofgem—the regulator— to ensure the continuance of those flexible and diverse markets not for the short term, which can take care of itself, but for the medium and long term. That must be a realistic market that allows the industry to develop and operate for the benefit of its customers, determines what fuel sources are to be used, in what proportions and from what sources, and determines to what extent the Government accept the responsibility of ensuring that the infrastructure—especially that part affecting the environment—is in place.

In common with other Members of your Lordships' House and, I have no doubt, the entire power industry, I hope that the Government will take the opportunity afforded by the debate to tell us exactly what their commitment to the objectives is and how and when they intend to bring them about.

My Lords, I thank the noble Lord, Lord Tombs, for his speech and others for their contributions and insights. I am very conscious of the fact that they are based on knowledge of the energy and electricity industry at the highest levels.

I begin by recognising the considerable achievements of the electricity industry both while it was in the public sector and in the private sector. The nationalised industry, particularly in the post-war years, had huge achievements, not least in bringing electricity to virtually everyone in our country. Before privatisation, the main investment decisions were taken at the centre by the government and the Electricity Council and its associated boards. While that approach had strengths, it also lent itself to investment decisions which were supply rather than demand-driven, and to decisions being made on a political rather than on a market basis.

I was surprised that the noble Lord saw nothing wrong in the performance of the nationalised industry. In a sense, I was disappointed by his speech, because he did not really deal with the question that I thought he would raise; that is, that of strategic decision-making or what the noble Lord, Lord Jenkin, called a co-ordinated policy framework, which we should have. He seemed to hark back to an overall large corporate approach that market forces played no part in. That was also the approach of the noble Lord, Lord Ezra, who said that we should somehow go back to planning our energy policy on a national basis rather than seeing a role for both market forces and a co-ordinated policy framework.

My Lords, I was really, I thought, supporting what the noble Lord, Lord Jenkin, said. All of us were saying that we want a clearly defined framework and look forward to seeing it in the White Paper.

My Lords, if that is the case I take back my comments. I thought that the noble Lord was harking back. He seemed to say constantly that he wanted governments to take decisions about which energy sources should have priority, where decisions should be made about investment, and so on. That is not the role of government. As the noble Lord, Lord Jenkin, rightly pointed out, the role of government is to provide a coordinated and coherent policy framework in which the decisions are made by private industry.

I say to the noble Lord, Lord Tombs, that it is not an answer to have an expert commission to decide what the body should be. We have debated the matter a great deal over the past 50 years. We have a system now: the question is whether it provides the right strategic mechanisms or whether we should seek to change it. If the noble Lords, Lord Patten and Lord Tombs, are looking to the chairmanship of an expert body to resolve that question, it will probably be in vain. However, what I say will not come as any surprise to them.

Privatisation released electricity companies to invest and to innovate in ways that were previously impossible. Companies, not government, now made key investment decisions. That allowed managements to make many good decisions and savings. which regulation passed on to consumers. They also made some mistakes. The key difference is that in this situation the private sector takes the risk, makes the returns when things go well, and makes losses when things go wrong.

The electricity industry now operates in a market environment, but also, it must be stressed, within a framework designed by the Government to ensure that our policy objectives are delivered. We see four such objectives, which, until this debate, I thought were uncontroversial. The objectives are those that the noble Baroness, Lady Miller, stated clearly. They are competitive prices, security of supply, a low-carbon future, and addressing the problems of the fuel poor.

I was surprised that the noble Lord, Lord Jenkin, did not mention competitive prices in his three objectives. He seemed to start by giving approval to market forces, and then complained about prices coming down, which I would have thought it was hoped competitive market forces would produce. He was concerned about the closure of redundant capacity. If one wants a quiet life and no change, the thing to do is to have a planned economy and accept all the inefficiencies that go with it. However, if one brings market forces into areas such as energy policy, one will get changes. One will get situations such as that involving British Energy. One will get changes such as those that have happened on combined heat and power because electricity prices have come down. One will get situations—I say this to the noble Lord, Lord Stoddart—where the value of a company changes. That is the nature of market forces.

My Lords, I thank the noble Lord for giving way. Inevitably we are constrained by time, but on a previous occasion I warned the Government of the dangers of running the electricity market on the basis of short-run marginal cost. As the noble Lord will know from his own experience, to run a business by pricing based on short-run marginal costs is the surest way to bankruptcy. That is what I am concerned about. I hope that either the Minister today or the White Paper will address that. Prices have fallen by 40 per cent. Look at the damage that has been caused.

My Lords, I accept that there will be moments—anyone who has worked in industry will know this—when prices in the marketplace do not give good returns. One has to ask the question whether the prices we had before were the right prices. Of course they were if one wanted to keep large amounts of redundant capacity in place. But if one accepts the principle of a market economy, one has to accept that prices will reflect supply and demand and there will be periods when prices fall and one does not make highly desirable levels of profitability. That is the nature of the market. Frankly, the market will respond with people taking action on capacity to bring it into line with the supply. If one does not want that, one must go back to some kind of planned economy.

The point I want to make was that as well as the electricity market now being part of the market, it is also co-ordinated, both on a day-to-day basis and more strategically by a number of bodies. First, the DTI is the ministry responsible for policy towards the electricity industry and is the sponsor department of Ofgem.

Ofgem of course is the major body responsible for economic regulation of the gas and electricity industry in Great Britain. It operates under the direction and governance of the Gas and Electricity Markets Authority, which sets all major decisions and policy priorities. There is also the National Grid Company, Transco plc, which, as the owner of the licensed electricity transmission company in England and Wales and the main licensed gas transporter in Britain, co-ordinates the electricity—and now also the gas— market under the rules set up by Ofgem and the DTI.

So strategic decisions are not left only to the market. The Government maintain responsibility for the overall framework. We have put in place measures to shape the strategic framework and to keep that framework under review.

On coming to power we rebalanced the regulatory system in favour of the consumer and established Ofgem to better co-ordinate gas and electricity regulation. We created the network operating companies, which have been much under the spotlight in recent months, to underpin competition and to focus management on their core responsibility. We have also underpinned the fledgling retail market with new wholesale electricity trading arrangements (NETA) and made other changes to reduce market power.

A number of noble Lords, including the noble Lord, Lord Tombs, believe that NETA has been causing what I think the noble Lord referred to as a situation of "chaos", although I felt that the only evidence he produced was that prices had fallen sharply. I do not regard that as necessarily a sign of chaos. The fact that companies had to adjust their strategies does not seem to be a chaotic situation but one that is highly desirable in the circumstances.

The noble Lords, Lord Tombs and Lord Stoddart, were concerned about foreign ownership. Foreign owned utilities are subject to exactly the same level and scope of regulation as those owned by their UK parents. They pay tax to the UK Treasury and must compete in our market. This situation of acquisitions is not one way. British utility companies own assets abroad; the most obvious being National Grid Transco itself, which is now one of the largest operators in New England. Our utilities, like our economy at large, are rapidly beginning to operate as part of a European and indeed global economy in which we are all interdependent.

I agree very much with the noble Lord, Lord Patten, that we need to keep open options on energy sources. I further agree that we simply do not know which energy sources or which combination of energy sources will best meet our four objectives in the future. Therefore, I believe that the key thing is to keep those options open, to put in the right framework and, in particular, to give the incentives for areas such as renewables and then to leave the matter to the market to choose which option within that framework, with its social obligations, provides the right targets.

I am not in favour of the idea of banding types of renewable energy. That sounds remarkably like trying to pick winners. I am—and I am sure the noble Lord is—against that as regards commercial matters. Although, obviously when one is looking at where one allocates R&D resources, one takes account of what are the most likely winners in terms of the technology.

I say to the noble Earl, Lord Mar and Kellie, that it must be clear from our policies that we are wholly supportive of renewables. Again, they have to compete in the marketplace. But we have given them huge incentives in terms of the climate change levy and the renewables obligation, which is a very strict and important obligation on electricity companies. As to hydro schemes, the problem is that we are simply using all the hydro power that there is in Scotland. There is very little scope to have more.

The noble Lord, Lord Jenkin, and the noble Baroness, Lady Miller, raised the question of nuclear waste. I agree with them: this is an issue that we must get on with. On the other hand, we must face up to the fact that the previous policy failed in 1997 because it did not have a broad level of support. Therefore, having a consultation period to try and get support is a critical part of the whole process.

The security of electricity supply was raised by a number of noble Lords. As I have said previously in the House, the situation for this coming winter is that we have a reasonable level of capacity. We have about 17.5 per cent spare capacity. There is also mothballed capacity, but I accept that that takes some time to be recovered. The longer-term issues have been assessed in the White Paper. Also last year we set up the joint energy security of supply working group so that officials from the DTI, Ofgem and National Grid Transco could carefully monitor developments affecting security of gas and electricity supplies.

I am glad that the noble Baroness, Lady Miller, reminded the House that liberalisation of markets—

My Lords, I am obliged to the Minister for giving way. On the question of security of supply, a matter which I have questioned before, is it not true—according to the newspapers—that over the weekend during this cold snap the supply reached within a hair's breadth of about one megawatt the figure of 54,000 megawatts? That really is not security of supply. I think that the noble Lord should look at it.

My Lords, as I understand the position, we have this quite considerable margin of supply of 17.5 per cent. That is on the assumption that a certain capacity is mothballed, which of course it may not be. So in fact the figure is very close to 20 per cent. which is usually given as being the correct or ball park figure within which it should be. I shall however check those figures and write to the noble Lord if they are wrong.

I was going to say that I was glad that the noble Baroness, Lady Miller of Hendon, reminded the House that liberalisation of markets is not in conflict with diversity and security. On the contrary, markets give the security that we seek.

I hope that, overall, noble Lords will take comfort from the fact that we continue to address the strategic issues that face the electricity industry. Strategic analysis continues to be carried out, and the Government, the regulators and the industry are all fully engaged. We also need to prepare policies for the coming century. The Government's energy White Paper will outline the key energy policy issues for the future. It will be published in the spring.

We must address the long-term future security of energy supplies. Fuel diversity requires that we enhance international relations, especially with producer countries. We must deal with nuclear waste and the future of nuclear energy. We must move to a low-carbon economy. Deeper emission cuts will be necessary in the longer term. If we grasp the opportunities in time, innovation and technology will help us to address that and provide export and inward investment opportunities. We must remain competitive and—last but by no means least—we must protect the most vulnerable by working in partnership with industry to address fuel poverty through low prices and energy efficiency measures.

The Government have the strategic capability to deliver on our objectives. However, the measures that we need to take can and should be implemented against a background of liberalised markets operating over regulated networks that are required to apply non-discrimination towards their customers. In that way, we can use the benefits of the innovative and investment skills of good industry management to deliver service to our customers and the policies that we need to see brought in over coming years.

My Lords, I have enjoyed the discussion that has taken place. It was almost always well informed, and I am grateful for that.

The noble Lord, Lord Jenkin of Roding, raised the question of the meaning of "decision" in my Motion. I can see how it could easily be misconstrued, so I shall explain it further. Decisions must be taken at various levels. The executive decision to build a power station rests with the company building it; the decision to create a climate in which that is legal, possible or desirable rests with the Government; and the decision to provide the finance rests with the market. There are a lot of decisions.

In proposing the expert committee to which the Minister takes such exception, my intention is that its decision would create a climate in which the other decisions could be made. That does not exist at present. The fragmentation of an industry is the antithesis of long-term planning. It results in the adoption of narrow-minded, short-term views that relate to the welfare of an individual company, and that is exacerbated by the short-term view of the markets, which require performance this year in an industry that requires long-term commitment.

An example that struck me at the time as coming high up the stupidity scale was the combination of electricity and gas in Ofgem: they are different industries. The gas industry, like the water industry, is concerned with the exploitation and distribution of a natural resource. The electricity industry is a conversion industry that takes a series of feedstocks and converts them using complex and capital intensive mechanisms. The investment and planning requirements of each industry are different. It is tempting, as Ofgem has done, to bring to the job the retailing of the product. I understand that the Minister is in sympathy with his own background, but that does not address the problems of the industry. The problems of the industry are safeguarding investment and supply in 15 to 20 or 30 years' time.

The White Paper is no substitute. It should do the Government's job and should set out a sensible strategy for the country. However, for the reasons that I gave, it cannot decide or, at least, achieve the building of individual plants. It should recognise its responsibilities.

I have some sympathy with the views of the noble Lord, Lord Ezra, although I recall that our relations were not always cordial. Occasionally, we disagreed on the price and quantity of coal. I was particularly taken with his description of micro-generation and his alarming suggestion that the whole electricity system might be re-wired. It is an incontrovertible fact that an electron does not mind whether it travels from right to left or left to right along a conductor. I do not see why such mythical micro-electricity exportation should create any more problems for the conductor than its importation. I would be glad of an explanation of that at some stage.

My Lords, I shall explain. It requires regulatory changes.

My Lords, that is not the same thing as re-wiring the country. It may be re-wiring the brain of the regulator, which may be more difficult.

We had some discussion on nuclear power, and I went out of my way not to get drawn into that subject. It is a subset of what I am trying to discuss today. Nuclear power, wind power, wave power, solar power or coal require important decisions within the electricity industry, but the framework for the electricity industry to work and make such conclusions does not exist. That is the burden of what I said today. If I have not made that clear, I do not know how to make it clearer.

I was greatly impressed by the noble Earl, Lord Mar and Kellie. He over-responded to my request for nonpartisanship. Perhaps, it was the noble Lord, Lord Patten, and not the noble Earl. I apologise.

My Lords, I am the one without the beard.

My Lords, I was greatly impressed by the contribution made by the noble Lord, Lord Patten, although I thought that he overdid his response to my request for non-partisanship. I am delighted to see that there can be compliments from one side of the House to the other, but I did not want it overdone to the point at which they agreed all the time. That would be depressing for the rest of us.

The noble Earl, Lord Mar and Kellie, displayed a sensible approach to the balanced use of renewables and other forms of power, including nuclear power. However, he fell into a trap: I had not made clear what I meant by "decision". The noble Earl was in favour of government decision making, I am in favour of governments making decisions in the areas in which they can make decisions but not pretending that they can make what I would call macro decisions—those that are strategic in the sense that they are long-term but individual in the sense that they are short-term.

I was disappointed by the Minister's reply. It struck a new low in my experience of government responses to new ideas. It is not possible to say, for example, that I saw nothing wrong in nationalised industries. I agree that the nationalised industry was supply-driven and that it incurred costs. However, I mentioned that I had resigned because the Government would not allow the industry to be organised efficiently, and I would have thought that that was sufficient indication that I did not think that nationalised industry was perfect. That was a substantial error.

The Minister made reference—flippantly, I hope—to some competition for the chairmanship of the expert committee. I rule myself out of serving on any such mythical body, desirable though it may be. I rule myself out partly on age and partly because I have spent far too much of my life trying to advise governments who do not listen. I have no ambition to extend that career. It needs to be done, but I would rather that somebody else did it.

There is a pressing need that was not evident in the Minister's reply. I do not know how I can get the Minister to recognise it. I hope that he will think more deeply about the arguments. There is a need for a consistent framework in a fragmented industry that is subjected to short-term impulses. By its nature, such a structure cannot produce coherent decisions, and it is not fair to expect the Government to make such decisions. The Government have an important strategic role, but they must see, receive and evaluate a view from an industry that, in its present framework, is not capable of producing it.

I shall not withdraw the term "chaos". It is there, and it will increase. I note the Minister's confidence that we will not have power interruptions in the next few years. I do not share that confidence. I am not surprised that he has withdrawn the existing 17.5 per cent margin of supply. He was right to do that.

I did not intend to be unduly critical of the Minister. I know how difficult it is for a Minister to come to a debate in this House with no real notion of what it will be about and deal with a subject that is not primarily his. The Minister did that well and did it bravely, and my critical comments were not critical in an overall sense.

I thank your Lordships for allowing me to ventilate the topic. The House, in general, has appreciated the debate. and I hope that the Government will think more deeply about the matter. With some pleasure, I beg leave to withdraw the Motion for Papers.

rose to call attention to the stability pact for the Balkans; and to move for Papers.

The noble Lord said: My Lords, I think I should begin by declaring an interest or, perhaps more accurately, an involvement in the stability pact. I am chairman of the governing board of the International Institute for Democracy—a small but, I believe, extremely efficient and effective French-registered NGO located in Strasbourg. It was established 12 years ago jointly by the European Parliament and the Parliamentary Assembly of the Council of Europe, which is in itself unique, and has the support of some 25 parliaments in Europe, although, unfortunately, national constitutional arrangements preclude parliaments of certain large countries—such as our own, Germany and France—from making financial contributions to such an organisation.

The institute has an agreement with the stability pact to take the lead, under Table 1 which deals with democracy, in promoting what I would generally describe as "Parliamentary Standards". To that end, we have promoted a series of seminars throughout the region and continue so to do.

Secondly, it might be helpful to your Lordships, and an aid to recollection, if I briefly sketch the background to the stability pact and how it works. This might also save some of the Minister's breath later on. Credit for initiation goes to the French. In 1993, Edouard Baladur, then French Prime Minister, suggested a,

"Pact for stability and security in Europe".

At that time he was thinking more about Hungarian minorities in Romania and Slovakia than Yugoslavia. Remember, this was when the Bosnian war was at its height. Srebrenica did not fall until July 1995.

However, after the Dayton Peace Agreement in November 1995, the French pushed their ideas further by proposing a,

"process for stability and good neighbourliness in south-east Europe"

—the so-called "Royaumont Process"—which, in due course, fused into the stability pact for south-east Europe, which was signed in Cologne on 10th June 1999; the Germans at that time being in the chair of the European Union and solemnly adopted by the heads of state at the Sarajevo summit on 30th July 1999.

The intention was to seek to stabilise the Balkans, not only by encouraging reconciliation and the development of democracy and human rights but also, most importantly, by economic support. The stability pact was and is organised and directed by the European Union. Essentially, it is a co-ordinating mechanism seeking to match the offers of donor countries which, apart from the European Union itself, are notably the United States, Canada and Japan from the G8, with smaller but still significant contributions from countries such as Switzerland and Norway, and match that to the needs of the recipient countries.

There is a co-ordinator—the first being Bodo Hombach who has since been succeeded by Erhard Busek. The co-ordinator chairs the regional table or standing conference which oversees the work of the three working tables: Table 1 on democracy, Table 2 on economic questions, and Table 3 on security and justice. It may sound a little complicated to your Lordships, but perhaps that is because it is.

The first two years of the stability pact coincided with the two concluding years of my period as President of the Parliamentary Assembly of the Council of Europe, during which time I moved around the Balkans a lot and attended a number of conferences whose main focus was the stability pact. It is on the basis of that experience that I want to make a few comments and ask some questions.

There is no doubt that the stability pact was launched with many fanfares of trumpets and great clashing of cymbals which were repeated at the First funding conference in Brussels at the end of March 2000 when the so-called "Quick-Start package" was unveiled. That created a high level of expectation among the recipient countries which, in turn, during the two years which followed, slid into disillusionment. I remember one leading Romanian politician saying to me that there were,

"too many tables and too little on them to eat".

Whether that could have been avoided is a question which will be long debated, but which needs to be debated.

The recipient countries "in transition", as the euphemism has it, were already struggling with the realisation that transition from communist dictatorship to pluralist democracy did not automatically and swiftly produce prosperity; indeed, for many, it created impoverishment. The stability pact was therefore seen as a kind of saviour; a kind of Balkan Marshall Plan. And it was not or is yet so to become.

No major environmental project has, so far as I know, been completed. I sometimes think that, from the point of view of political presentation and also the acceptance of the necessary degree of transparency in tendering and implementing projects, there should have been an early concentration on one major project—the most obvious being the clearance of the Danube and the reconstruction of the bridges at Novi Sad, destroyed by the NATO bombings. That would have yielded widely-spread benefit throughout the whole region, not least in Romania and Bulgaria at the bottom, which gave us necessary but, for them, extremely politically difficult support during the intervention in Kosova.

The extent of the mismatch between the standards required by the Brussels bureaucracy and the capacities of the recipient bureaucracies was, I do not think, fully anticipated and caused many delays. There was always. of course, the shadow of corruption which was and still is widespread in many of the recipient countries. I remember sitting for nearly three hours with President Voronin of Moldova while he graphically described to me the extent of corruption in his country at every level which he had inherited and which I think explained the seeming paradox of the communists being re-elected there.

Can the Minister give us any idea of the extent to which progress is being achieved in this very difficult area? There is no doubt that Bodo Hombach is a brilliant man, but the personality of Erhard Busek may prove better suited to the task of co-ordinator.

I noted in particular one phrase in his report on setting priorities for 2003 and beyond. He said:

"While the Pact remains committed to promote long-term trends, the Special Co-ordinator recognises the need to deliver tangible results on an annual basis".

People want to see evidence of progress.

My second question for the Minister concerns resources. Obviously there must be clear accountability of expenditure—for example, wastage of money on Bosnian houses which were never built. The issue in Albania which I do not believe we need to go into again, and others, were matters that gave great concern. However, if we accept that there is improved confidence in the way things are done, is there any serious resource default? In other words, do they need more money to achieve what could otherwise be achieved? Perhaps the Minister could also give us an idea of the level of contribution made by the main donors; that is, the European Union, the United States, Canada and Japan. I realise that it is a complicated matter because some gave not money but paid in kind.

In the time at my disposal, it is not possible to cover all aspects of the work done through the stability pact, but I think especial credit ought to be given to the development of free trade arrangements in the region; to the work done in the transport and energy fields; to the training of administrators; and to the tackling of organised crime.

One most important piece of feedback that I get is the emergence of a much more strongly articulated determination throughout the region to put its own house in order and not to blame the inadequacy of external help for its own shortcomings. When I was in Skopje at the end of November, I heard that very strongly expressed. Of course, it will continue to need nurturing on quite a large scale for a long time, but where this proceeds against a growing mood of selfreliance—or the wish for self-reliance—the chances of success improve.

I want to make three further points in conclusion. In November 2001, I spoke at a conference organised by the Congress of Regional and Local Authorities of the Council of Europe in Istanbul, which was concerned to encourage "economic twinning", if I can call it that, between western cities and regions and cities and regions in the Balkans. The idea was mainly to provide expertise but in some cases also direct assistance. Has the Minister any information on how that is proceeding? Are any British cities involved?

"Balkanisation" is a kind of swear word in the British political vocabulary. While it dates back perhaps more than a century, it still persists as a negative idea. Some politicians, especially those in large countries, are deeply attached to the development of the grand design and the emergence of new small countries is anathema to them, despite the evident success of the Baltic States and Slovenia.

That brings me to Kosovo. Kosovo is in drift and in my opinion that drift will not be arrested until the United Nations bites the bullet, accepts that after what took place re-absorption into Serbia—or Serbia-Montenegro, as it may become—is completely unacceptable to the Albanian Kosovans and that it should become what we still call "a sovereign state".

Unfortunately, I was not well yesterday and so was unable to participate in the debate on the Convention on the Future of Europe which I had intended and wanted to do. That is the background. The enlargement of the European Union and foreseen further enlargement, the work of the Council of Europe in reducing the importance of borders without necessarily removing them, and the emergence within our established, though not so very old, so-called "nation" states of pressures for greater self-determination in Catalonia, in the Basque country, in Bavaria and—dare I say it?—in Scotland and Wales, have created a new scenario. What used to be called "independence" is not seen as being contradictory to the fullest cross-border co-operation or to the achievement of regional or European-wide common standards, policies and institutions.

It seems a contradiction, but I believe that Kosovo and Serbia will co-operate much better if they are apart than if they are forced together. Post-war Europe found it convenient, if perhaps necessary, to found its diplomacy on territorial integrity and non-interference in the states' internal affairs. With the blessed growth of the recognition of the universality of human rights, these notions are changing and becoming out-dated.

Finally, can the Minister say whether the European Union has set any time-scale on the operation of the stability pact? When I ask that question I receive different answers: some say six months; some say a year; some say that it is open-ended. I think, at this stage, with so many continuing uncertainties, it must be open-ended.

The stability pact began hesitantly but it has done much constructive work. It has much still to do, but without it we would not have made the progress we have. I beg to move for Papers.

My Lords, I am pleased that this debate is taking place. We are indebted to the noble Lord, Lord Russell-Johnston, for tabling it. My take on the whole of the West Balkans stability pact issue is different from his. That will become clear as we go along. My main knowledge arises from the report which we prepared in Sub-committee A of the European Union Committee under the distinguished chairmanship of the noble Lord, Lord Grenfell. He was such a distinguished chairman that he has now been promoted.

We visited Sarajevo, Belgrade, Zagreb and so forth about a year ago and concluded our report, HL107, published on 16th April. It goes under the jazzy title, Responding to the Balkan Challenge; The Role of EU Aid. As the noble Lord, Lord Russell-Johnston, said, there are a considerable number of countries in the stability pact; far more than the 15 in the EU. There are the G8 comprising America, Canada, Japan and so forth and there are many others in eastern Europe which are not in the EU or even located in the Balkans. The noble Lord hinted at the criticism, which I would put more strongly, that the stability pact was grossly overhyped in France and Germany at the start. It led people in all the places we visited, as well as in Romania and so forth, to believe that there would be new money on the table.

An official DfID citation states:

"The Stability Pact has no funds of its own and what the Pact Secretariat describes as Stability Pact assistance to SE Europe is in fact made up of assistance from individual donor states and the Commission, plus infrastructure lending and grants from IFIs".

That is the position, and it highlights the fact that probably 90 per cent of all the money we are talking about is EU money. I would say that it is nearly all multilateral. Ten or 15 per cent add-on is bilateral from Britain, Switzerland and so forth, but it is essentially EU money. In broad, ball park terms, it amounts to 5 billion euros over five years.

I want to contrast that figure with 5 billion euros over one year for the military. The name of the game should be to ask, first, how can we get more of the military into the civil side so that the military can go home. It is an expensive operation. However, people such as General Kiszely, whom we met, confirmed the evidence of our own eyes. The military cannot be allowed to go home if that means the whole place sinking hack into chaos. That is a generalisation. But there are parts of the Balkans—I do not need to specify which—where that would still be the case, although progress is being made. I would give a good seven or eight out of 10 to the EU aid programme and the improvements that have been made over the past three years in particular.

Chris Patten is doing a very good job in Brussels in reconstructing the aid programme, and the European Agency for Reconstruction, particularly in the Serbia/ Kosovo area, is giving much more ownership and involvement to people on the ground. I believe there is now a 10 to one ratio in terms of locals working on a job and people working for Brussels. That is a very important statistic because no one in their right mind believes you can get the involvement of local authorities, magistrates' courts, trade unions, the police and so on. Private investment is obviously the biggest need, but you cannot get any of that by just having officials turning up. There needs to be a lot of ownership on the ground.

The stability pact has acted as a catalyst for some of this broader thinking to get through to people. It also has the advantage, unlike individual aid programmes, of the so-called country strategy paper—the EU road map—being negotiated with each country, which is very important. The stability pact has given a regional dimension to the whole area.

Let me say a word about what I mean by the "whole area" because it is a rather interesting question. We use the "Balkans" word. Some people do not like the "Balkans" word. We use "West Balkans" as a term. Some people do not like it. However, there is another concept floating around in the area which is even more interesting. It is what I would call the "south-east Europe hinge".

Let me explain what I mean by that because at the next EU summit in Thessoloniki in June we shall hear much more about it. It involves the roles of Greece and Turkey and Greek-Turkish relations bilaterally with Skopje, Sofia, Bucharest and so on. I made a brief visit to Macedonia just over a year ago to carry out work for the Foreign Office on the industrial/trade union position on employment, which has been very negative as a result of the catastrophic way in which the privatisations have been carried out, a point made by the noble Lord, Lord Russell-Johnston.

My programme involved a meeting with all the trade unions in the stability pact in Thessoloniki. There is a European college there which is a convenient place for everyone to meet. Our ambassador in Skopje came down to meet me—I suspect that he wanted to see the Greek museum of anthropology rather than to pick me up—and drove me three hours up the road to Skopje. When you get to Skopje, Europe is not there in Brussels but is down in Salonika and Athens. This will be the hinge of the area in future—from Ankara to Athens to Bulgaria to Romania and most of the Balkans—for work which is changing the Greek/ Turkish relationship.

I have made several visits to Athens when I have found it absolutely impossible to complete a sentence without someone screaming abuse at me for making the wrong use of the word "Macedonia" or for a wrong thought about the relations between people in Greece and the country that we now call the former Yugoslav republic of Macedonia. That situation is now easing. When I got to Skopje, I found that when I suggested meetings between the trade unions in Macedonia and Athens—in construction, forestry, travel, transport and so on—they all said yes. That would have been unheard of five years previously.

I believe that the penny has now dropped. I shall probably be chopped into little pieces by the noble Lord, Lord Hannay, who is to speak shortly, for saying that I detect more strategic rethinking now on these issues in Athens and Ankara—not only because of Cyprus but because, at the next stage of EU enlargement in 2010, or whenever, all of these issues will raise important questions. Before the lead up to the EU summit in Thessoloniki in June., the Government should ponder the significance of the Thessoloniki venue and realise that this is a big issue on which I have been trying to put my finger. Regional co-operation is a delicate matter—but it is there, and this summit will be rather different from the Corfu summit, the last time, I believe, a summit was held in Greece, some six or seven years ago.

There is also a rethink going on—in part under the umbrella of the stability pact—in regard to the ethnic business. I reflected when we were in Sarejevo—a little knowledge is a dangerous thing, but that has never stood in my way—that the people in the Ottoman empire in 1600 who went to Constantinople to work as janissaries and so on for 25 years were Muslims when they came back. Some people said that that made them ethnically different. That is nonsense. They were not ethnically different; they were Muslims instead of Christians.

All of these issues can be interpreted in several ways but I suspect that once people have stopped screaming at each other, there is a lot of scope for them to get on rather better than they have in the past.

Returning to the issue of the 5 billion euros a year for military and 5 billion euros over five years for civil aid, we need to have rather more of a neo-colonial relationship with the Balkans, just as we do in Africa and other places, because, although it is not Bokassa's diamonds, we cannot afford to hand out money and not care where it goes. That is not the kind of accountability our taxpayers want. They want very much to see us succeed because, in saloon bar speak, if we do not succeed in getting economic stability over there, they will all come over here. That is the kind of thinking that drives voters in Europe. There has to be much more involvement on the ground with how the money is spent.

This requires a lot of ownership on the ground. At the moment there is still a big problem getting underneath governmental layers. As Chris Patten told us, the more we want accountability for every penny, and hold up every penny of expenditure until we have the accountability and everything else pinned down, the more we are singing a different song to the one that we have been singing about ownership, encouraging micro-businesses and encouraging people to do their own thing.

What is emerging is an interesting new concept—nothing is new under the sun, of course, but it is fairly new in the scale in which it is operating—namely, that the EU road map is becoming "owned", in the new way in which that term is used, at many levels, by many layers of society, in many of the West Balkan countries, from Zagreb through to Albania. It is "owned" by these people because it rings a bell with them. A road map is something you chuck on the back seat of the car; no one tells you that you have to look at it. But you certainly do have to look at it when you get to the T-junction in order to figure out that if you want to go to one destination you turn right and if you want to go to another you turn left. That is playing with words, but there is, psychologically, quite an important change in thinking in the West Balkans. People want to aspire to the stabilisation and association agreement.

Incidentally, the words "stabilisation and association agreement" bring in the word "stabilisation" in a confusingly similar way to the word "stable", as in "stability pact", but they are not the same animal.

Under the stabilisation and association agreement, the country's strategy papers—which concern banking, water supply, infrastructure, magistrates' courts, border zones, VAT and so on—are an important new way of doing business.

In conclusion, although I believe that the stability pact was over-hyped, there is scope for regional co-operation, which is a pre-requisite to private investment. I do not believe that anyone will invest in an "itsy-bitsy" place where the market is only two peanuts. If the growth and stability pact and the country strategy papers are worked on against this umbrella, there can be some scope for viewing with confidence the future of the West Balkans.

My Lords, I, too, welcome this debate on an area of Europe which is very important to its future. I speak as a member of the Parliamentary Assembly of the Council of Europe. I am grateful to the noble Lord, Lord Russell-Johnston, for giving us this opportunity to debate and perhaps raise the profile of the stability pact for the Balkans. The noble Lord's expertise on the area is considerable. He set out the issues very clearly in his opening remarks.

I did not know the area well. Like many people, I had been on a very happy holiday to Split and Dubrovnik many years ago. This autumn, however, I went as an official observer to the elections in Bosnia-Herzegovina and subsequently attended the parliamentary conference entitled "Enhancing Security and Political Stability through Economic Co-operation"—a progress report conference on the stability pact for south-eastern Europe.

As the noble Lord, Lord Russell-Johnston, has explained, a parliamentary troika sponsorship system for the activities of the stability pact was established in June 2001. The European Parliament and the Parliamentary Assemblies of the Council of Europe and the OSCE each take the lead on a six-months rotating basis. The first conference was chaired by the European Parliament and took place in Brussels in 2001. The Parliamentary Assembly of the Organisation for Security and Cooperation in Europe chaired the second conference, which took place in Bucharest in June 2002. The Tirana conference—chaired by the Parliamentary Assembly of the Council of Europe—took place in October 2002. On that occasion, as a representative of the Economic Affairs Committee of the Council of Europe Parliamentary Assembly, I was appointed as Rapporteur of the proceedings. We shall have a debate on the report in the coming January session of the Council of Europe, which it is hoped will take matters forward to some extent.

What I learnt from that conference—indeed, it is generally self-evident—is that no country or region can remain in isolation any more. South-eastern Europe has some 55 million people. If we add these to the 112 million consumers who form part of the central European free trade area, this creates a potential market with huge possible benefits.

The practical steps for bringing together the countries of the stability pact for the Balkans are very important. That is what we were monitoring at the conference. One of the ways in which matters were being taken forward from the first two conferences was the creation of free trade agreements between the various countries.

Twenty-one such agreements had originally been proposed. In October, it was reported that 10 out of the 21 had been signed. At a subsequent meeting that I attended in November, I understood that matters had moved on: that some 12 agreements were complete and nine were actively under way. So we are approaching the target of 21.

It seemed to me that, although it is desirable to have the free trade agreements completed, the mere fact that such agreements are being set up between countries in the region is an important step forward for political as well as economic reasons.

It was clear from the discussions—which were attended by representatives of all the countries involved—that the negotiations themselves have proved very efficient tools for easing tensions between countries. The agreements serve as connecting links, to establish co-operation which was either non-existent or had been severely disrupted by years of conflict.

The pact's intention to transfer the ownership of its activities to the beneficiary countries themselves was also made clear. In doing this, the pact has managed to instil a new spirit of co-operation between officials and experts of the countries concerned. As a result, we now see former adversaries sitting around the same table, jointly drawing up and implementing the agreements. A few years ago, this would have been unthinkable for many of the countries.

The free trade agreements also demonstrate the region's institutional and human capacity for applying and implementing Council of Europe and other international standards on good governance, openness and transparency in all the institutions involved.

It is important in this context to recognise that all the efforts and changes are not exclusively for the countries in the stability pact region of south-eastern Europe. So long as the European Union member countries perpetuate policies such as the common agricultural policy and its system of subsidies, the more we prevent less developed countries, often relying on primary agricultural products, from making economic progress and standing on their own two feet. I am probably getting on everyone's nerves by repeating this every time I speak on the subject, and in many different contexts, but I believe that reform of the common agricultural policy is something about which all of us, as parliamentarians, must keep reminding the Government.

As well as co-operation between the member countries of the region, we need to see on-going co-operation between the many international organisations, such as the World Bank, the EBRD, the Council of Europe Development Bank and the European Investment Bank, which are all involved in the stability pact process. Ensuring that kind of co-operation and co-ordination is clearly a task for the special co-ordinator, Mr Busek, and his team. It is also a theme to be pursued at subsequent parliamentary troika conferences of the nature of the one I attended in Tirana.

However, I wish to point out in this context—as a plug for the Council of Europe—that the Council has an additional unique opportunity to monitor and ensure such co-operation, since all the global and European organisations involved in the stability pact attend our sessions in Strasbourg at least once a year to report back and to answer our questions. I believe that this is the only parliamentary forum where we can call to account representatives of the World Bank, the EBRD, the OECD and other such institutions. We left Tirana agreeing that in our various assemblies—the European Parliament and national parliaments—we would put pressure not only on our governments but also only on those institutions.

Providing a framework is important. Signing up to free trade agreements is important. However, as the noble Lord, Lord Russell-Johnston, said, the crucial factor in terms of public perception is the practical steps which are taken.

The co-ordinator provided us with a list of 46 quick-start projects of which cross border/trade facilitation projects constitute to date only six. But to those can be added the development of the regional electricity market. I hope that at future conferences we shall hear of further progress.

Perhaps I may read out the Tirana Declaration. It called for the creation of a parliamentary structure involving the countries concerned; a continued push for the speediest completion of infrastructure projects, including the transport, energy and water management sectors and simultaneously the systematic introduction in each sector by a strategic approach to infrastructure development in the region: the timely conclusion of the remaining 10 (as it then was) regional free trade agreements before the deadline of December 2002, followed by their rapid implementation; renewed efforts to develop, by appropriate agreements, the free movement of people across the region; an intensified fight against corruption and organised crime, including trafficking in human beings, drugs and arms; creating conditions conducive to the voluntary return of refugees and displaced persons and ensuring protection of minorities; and UNMIK to provide conditions necessary to promote the participation of Kosovo in regional cooperation. That point was made by the noble Lord, Lord Russell-Johnston. The extract from the final declaration will provide the agenda for the next parliamentary troika conference. In January we shall debate the issue in the parliamentary assembly in the Council of Europe in Strasbourg. I shall be happy to furnish any noble Lords who would like more detail on the subject with a copy of the report and the Tirana Declaration.

It is important that we continue to raise awareness of the work of the stability pact whenever an opportunity arises. High expectations were raised regarding the consequences of the stability pact, with the expectation of a possible Marshall Plan for the Balkans. Since it will be a slow process it is important that the people with obligations do not forget them; and that the people on the ground have patience. I look forward to hearing the Minister's response.

My Lords, I should like to add my thanks to the noble Lord, Lord Russell-Johnston, not only for raising a topical and important foreign policy issue—the stability pact in the Balkans—but also for thus enabling the House to repair an omission of its own making: the failure so far to debate the report to which the noble Lord, Lord Lea, referred, on the European Union's aid to the Balkans, which was submitted by its European Union Committee in the first half of last year.

I hope that I may be forgiven for raising this seemingly rather parochial point about the scheduling of debates on reports of the European Union Select Committee, but it is important. It is all very well having a scrutiny procedure which is the envy of other parliaments in the European Union and respected in Brussels for the quality of its reports; but. if we cannot find the time to debate the reports in a timely manner, that surely deprives the whole process of a good deal of its meaning. That is one among a number of other points being raised by the Select Committee in its report on ways to improve our European Union scrutiny procedures. Is it too much to hope that this rather striking example of current shortcomings will attract the attention of the "usual channels" and lead to some remedy in the future?

When Bismarck made his much quoted remark about the Balkans not being worth the bones of a single Pomeranian grenadier, he was perhaps making a valid point about the undesirability of the European powers meddling in the sanguinary ethnic quarrels of the Balkans. But the history of the twentieth century also demonstrated, no less than three times, how difficult, indeed impossible, it was for the rest of Europe to insulate itself from turmoil and instability in that region. It is after all an integral part of our continent. It is totally dependent for its trade, investment and prosperity on the rest of Europe. In the most obvious sense it is Europe's backyard and, therefore, somewhere where Europe's common foreign and security policy has to begin, if not to end.

If we had been holding this debate 10 years ago, in the first month of 1993, the atmosphere would have been a good deal more fraught, the mood one close to despair, as the different parts of the former Yugoslavia slid deeper into the quagmire of war and massive human rights abuses and the efforts of the international community to counter this slide proved inadequate or unavailing.

In Bosnia a full scale war was raging; in Croatia a fragile and unstable truce showed no signs of durability; in Kosovo repression by the Serbs was the order of the day; in Macedonia a new multi-ethnic state faced challenges from all its neighbours; and, in Belgrade, Milosevic, the great destabiliser of the Balkans now facing trial for war crimes at The Hague, ruled unchallenged and was master of the most powerful military machine in the Balkans, which he showed no hesitation about using to further his ambitions. Faced with that daunting prospect, the international community was a prey to divided counsels and infirmity of purpose. And three international organisations—the United Nations Security Council, NATO and the European Union—on whose strengths and effectiveness our security and prosperity crucially depended, were being mocked and sidelined and made to look feeble in a way which many commentators predicted would inflict permanent damage on them.

Now, 10 years on, we can look back with some relief and perhaps a very modest degree of satisfaction to the fact that many of these Doomsday scenarios did not materialise; but, more importantly, we can seek to learn from and to apply the lessons from that earlier, dismal period. The first of those was that divided counsels, either between the Europeans themselves or between the Europeans and the United States were a recipe for disaster and for the frustration of the objectives of each of us. The second was that we should never send a large but under-equipped peacekeeping force into a region where there was no peace to keep in the first place. A determination to meet aggression and massive human rights abuses by the use of force, if necessary, was an essential part of any successful strategy. The third was that if we were to manoeuvre the Balkan countries out of the dead end of mutual hostility and economic collapse in which the break-up of the former Yugoslavia had left them, we needed a judicious blend of sticks and carrots, the most important of the latter being the longterm perspective of becoming a member of the European Union; and that we also needed—all of us—a long-term commitment to the region. The fourth was that the three vital international organisations—which I mentioned [to which we belong are much more robust and adaptable than we once feared. All three now play a crucial role in the post-conflict peace-building in the Balkans of which the stability pact is an important part.

That is the good news; but we certainly cannot yet afford to take the stability of the Balkans as a given or assume that these damaged countries, with their pitifully weak economies, can be left to fend for themselves. After all, by no means all the signals that reach us from that region are very positive. The region is a prey to organised crime, corruption and drug and human trafficking. As such, it adversely affects our own security. Democracy is shallow-rooted at best and still far too obviously based on ethnic divisions. A situation whereby recently in Serbia and Montenegro more than 50 per cent of the population could not be persuaded to vote in a democratic election is hardly a recipe for long-term durability. Legitimate economic activity remains anaemic and inadequate to provide a living, let alone prosperity, for the populations, whose tendency then is to be sucked as illegal immigrants towards the more prosperous countries to the north and west.

It would be remarkably feckless to assume that the Balkans can, in the foreseeable future, dispense with the pro-active engagement of the international community. But we must face the fact that that engagement will require a strong leadership role by the European Union. For some time now the balance of external involvement has been shifting in that direction. The European Union has taken over from the United Nations the responsibility for the civilian police mission in Bosnia. It is ready to succeed NATO in Macedonia, and, thanks to the Copenhagen meeting's welcome resolution of the outstanding problems on European security and defence policy, this will take place in full co-operation with NATO, and with full NATO backing. The European Union may, at a later date, need to do the same in Bosnia.

All that makes good sense; but it needs to be approached with caution and without excessive European bragging. There was quite a lot of that at the beginning of the 1990s, and it left us with egg on our faces. It remains critically important that the United States continues to be fully engaged as an active partner. not just in spirit but on the ground.

Although the establishment of the stability pact took place on the initiative of the European Union, it includes the United States and other non-European countries as full participants. It is thus part of the cement provided by that wide external engagement needed to hold together the Balkan region and to prevent regression to the practices of the past. Its launch may have been accompanied, as other noble Lords said, by excessive expectations. Its early history may have been marred by turf fighting and duplication. But its tasks of co-ordination among the external donors, building confidence and security among the Balkan neighbours, exercising downward pressure on their military spending and intentions, and increasing respect for human rights are as essential and valuable as they were at the outset.

However, it is important to ensure that the stability pact is fitted into a coherent overall approach to the problems of the Balkan region. It does not have, or need, an independent role of its own. It needs to be fitted in with everything else being undertaken in the region, in particular by the European Union.

Among all the institutional complexities, the task of the stability pact is simple: to work itself out of a job. If in 10 years' time, or perhaps more, we can conclude that the countries of the Balkans are just normal European countries that have definitively renounced the use of force, either between themselves or in their internal affairs, and which are applying systematically the European standards of human rights, we should also be able to conclude that the stability pact has played its role in bringing about that desirable objective.

My Lords, I welcome the opportunity to debate an important issue and an excellent EU Committee report, which I read with much value yesterday while preparing for this debate. I am reminded of previous debates with the noble Lord, Lord Russell-Johnston, on the relationship between Scotland and the rest of the United Kingdom, stretching back in my case to Liberal Party conferences in 1968 and earlier. We never agreed entirely on how far devolution should go.

As the EU Committee report and the Government in their response remarked, the stability pact had over-optimistic beginnings. And, as the noble Lord, Lord Hannay, remarked, in the early stages of Yugoslavia's collapse there was much over-hyping of what the European Union was capable of. But we have all learned from the bitter experience of the past two years. What worries me now is that the stability pact implies a scale of commitment over a timescale that few in national parliaments—and, I suspect, some in governments—fully appreciate yet. As the noble Lord, Lord Hannay, said, we are talking of a 10-year or 15-year to 20-year period that ends with the states becoming full members of the European Union.

That will cost a great deal of money over a long period. The EU Committee report remarks on the scale of the financial transfers already under way. Commissioner Patten has made speeches remarking that the European Union must adjust to the extent to which calls upon the common budget will come increasingly for the purpose of dealing with the European Union's near neighbours rather than spending on our own agricultural and other problems. I am not sure that these issues are yet fully appreciated by enough people at national policy-making level. Therefore, EU governments need to absorb the implications of the commitments they have agreed. It is a road map to full membership. It is a financial commitment that the French and German governments were willing to talk about in principle but not to follow through in negotiations on the future of the EU budget. It, therefore, has major implications for the overall priorities of the EU budget.

A commitment is given to nation-building and state-rebuilding, which is still very unfashionable on the other side of the Atlantic. But the European Union is taking it on here and perhaps more so in Afghanistan and elsewhere. If it cannot be done successfully in south-eastern Europe, this is the test that will show our failure to do so outside Europe.

We are all conscious that the costs of failure are immediate, even as far as Britain. The KLA was, after all, raising funds from the Albanian community in London at an early stage in the development of the Kosovo conflict. There are Albanian groups in trans-national organised crime. I am told that they have been involved in smuggling drugs and people into Britain. Many transnational people-smuggling networks across Europe have strong connections with the western Balkans in one region or another. So, Britain is concerned with what the noble Lord, Lord Hannay, called not just Europe's backyard, but our backyard. We cannot disengage.

The European Union is now effectively in a protectorate situation with Bosnia and Kosovo, which, again, we shall have to manage for many years to come. With Serbia and Montenegro and with Albania and Macedonia we are in a situation of trying to impose tough conditions on weak governments, surrounded by rather corrupt actors who are, therefore, not entirely in control of their states. We need to offer assistance with training of all kinds to help change the domestic culture. The weaknesses of the region are very obvious.

Some months ago, when I had to spend a week, first, in Sofia and then travel to Serbia/Montenegro, I was extremely grateful to the British embassies there for the assistance that they gave me as regards learning about the region. I was especially interested when they told me that I could travel by land from Sofia to Belgrade if I was willing to spend a day in Niš in southern Serbia—a place where the British embassy had had no contact since the Kosovo war. I wish that they had told me before, but I spent some time in the university where it seems that I was the first western speaker to deliver a public lecture since 30 of its students had been killed during the bombing of the Kosovo war. Thus, I received a rather warm welcome.

The experience gave me a sense of the desperate isolation from the outside world experienced both by the teachers and the students over the past 10 years. I recognised how much we can do to help in terms of recreating exchanges—inviting people out of the country—and by offering education to the younger generation so that they will have a greater sense of being back in a European network. We need to educate them together with people from other countries in the region.

I was very pleased and proud in Belgrade to be asked to give a lecture to the Diplomatic Academy and to discover that its deputy director was someone who I taught 10 years ago. He was one of the first students for whom George Soros paid, coming out of Serbia as Yugoslavia collapsed. I refer to the teaching of Serbs, Bosnians, Croats and others at the Central European University. After the lecture, I was particularly pleased to hear older Serbs saying that the active way in which students at their diplomatic academy ask questions throughout the seminar was very un-Serbian and very European. That is something upon which I encourage the British Government to spend more money. Please may we have more scholarships—more Chevenings—to bring people out and get them together. We need to send more British exchange scholars into the region and more British academics should be attached to its universities. We also need more British policemen helping in the training of their police forces, and so on. That is very much the sort of thing that we can do well. In summary, it means educating the next generation, and providing assistance of all kinds.

We are also necessarily concerned with the immense economic weakness of the western Balkans. There are too many small and weak states with out-moded systems of manufacturing and of agriculture, as well as an astonishing lack of regional integration. One of the biggest shocks that I experienced arose during the short while during which I was transferred from one car to another at the Bulgarian/Serbian frontier, which, I was told, was one of only two crossing places. At 10 o'clock in the morning, I observed that there were almost no trucks crossing from one side to the other. I was astonished by the absence of regional economic integration, which is the real problem.

When we talk about the western Balkans, it is very important that Romania and Bulgaria should also be treated as part of the larger region. We need to rebuild a sense of what was, after all, one integrated region under the Ottoman empire and what is now a relatively small and concentrated area. Therefore, infrastructure spending does matter, but it has not yet been entirely rebuilt. Stable government and non-corrupt government also matters. The problem of corruption and organised crime was recently evident both in Sofia and in Serbia and Montenegro. I refer not just to the clan links and the traditional black economy but also to the former socialist networks—the KGB, and others—which, as many people know, have privatised themselves very effectively. In Serbia there are the former Milosevic networks that continue to maintain important stakes in the economy, which leads to a very delicate situation where one is trying to revive economic growth.

There have been some weaknesses in the western approach. It seemed to many of us that part of the problem in the early stages was the fact that too many bodies were involved. It was not just a case of NATO, the EU, the UN; it was also the OSCE. I remember at least one occasion when it involved a conference at the UN Economic Commission for Europe. Not surprisingly, there were too many meetings with not enough going on. It is much better to move towards a situation in which the EU becomes the main responsible actor. I agree with the noble Lord, Lord Hannay, that keeping the United States and Russia engaged and linked in with what is underway is important in the process, but this is primarily an EU responsibility. Indeed, our American friends tell us on regular and repeated occasions that they regard it as largely an EU responsibility. Again, I worry a little whether here, as in other areas of common foreign and security policy, too much may be left to the Commission, without there being sufficient continuing political and national involvement. It is an underlying weakness in CFSP that some national governments, especially some of the smaller ones, can slip into the assumption that when the EU is dealing with a matter they can leave it there rather than recognising that this means that we are all in the process together and we all have a part to play.

I turn to the question of state building and the number of states involved. The noble Lord, Lord Russell-Johnston, may be right to say that there is no alternative in the future of Kosovo but independence. Many of us would regret that, and many of us accept that it is quite right to postpone answering that question for as long as possible. As for Montenegro, I hope that all pressure from outside will be put on trying to maintain Serbia and Montenegro together. As I remember from MoD briefings during the war, Kosovo is roughly the size of Ulster, with the same population. Montenegro is roughly the size of Cyprus, with the same population as Bradford. Its main economic activity this time round was cigarette smuggling. In the early period of independence, Montenegro survived on a very small national budget, largely through mountain agriculture. It was only when I took my children to see the "Merry Widow" that I realised that Franz Lehar had written an entire opera making fun of the idea that Montenegro could, indeed, be independent, and that its entire national debt could easily be owned by one widow—thus the threat to the future of this "joke state", as he wanted to put it.

What we need is integration in the region, not disintegration. We have a long-term commitment of 10, or perhaps 20, years, which will end with EU membership—indeed, we discussed yesterday where Europe ends—and will include at least two, possibly three, majority Muslim states. We should be saying that to the Turks as we discuss the question of whether we wish to exclude Muslim countries with them. We all have shared national interests at stake, and there is a valued British contribution that we need to be making in our enlightened self-interest. Clearly, the stability pact is a useful framework for the way forward through stability and association agreements to partnership agreements. Eventually, perhaps in 10 years' time or longer, it will lead to entry into the European Union. That has to be the long-term goal. It will provide the leverage for conditionality to bring the western Balkans back into the European family.

My Lords, I, too, should like to thank the noble Lord, Lord Russell-Johnston, for initiating, with his great experience, today's debate on a subject that is close to my heart. It was fascinating to hear first-hand from the noble Lord. At this stage I must declare an interest as a member of the British Association of Central and Eastern Europe. When I was a Member of the European Parliament and vice-president of the Bulgarian and Romanian delegation, I took the Bulgarian/Europe agreements through Parliament. I am also a governor of the American University in Blageovgrad and still visit the Balkans frequently.

We have had an interesting and constructive debate, with few speakers, but ones who are genuinely interested in the subject and the area. It has been a debate of exceptionally high quality; what one would expect from your Lordships' House.

I support the noble Lord, Lord Wallace of Saltaire, in congratulating the noble Lord, Lord Grenfell, on his report.

Just think, it may soon be possible to drive from Vienna to Sofia in seven hours, much the same amount of time as it takes to drive to Scotland. I will not mention how long it takes at present. This part of the infrastructure plan is just one of the noble aims of the stability pact, to which I shall return later.

Why is the stability pact so important? It was established in 1999 as a German initiative during its presidency. I am grateful to the noble Lord, Lord Russell-Johnston, for filling in the background to its establishment. It was designed to bring lasting peace, prosperity and security by tackling the formidable problems of south-eastern Europe, which had suffered critical injury following almost a decade of war and internal conflict.

We all remember the past problems that haunted the Balkans. To quote Vladimir Philipov, the distinguished co-ordinator in the area,

"The understanding underpinning it was that the problems of the Balkans are problems of Europe and that the efforts of all European states were required to solve them. The Pact had to live up to huge positive public expectations".

Many people called it the new Marshall Plan and everyone had high expectations. But it was not that simple, as we heard from the noble Lord, Lord Lea, and others. Huge demands were soon being made from countries in other parts of the world. Those countries' financial problems were soon pulling at all the Western powers' purse strings. But, despite the lack of expected funds and a certain amount of paternalism, there have been considerable successes.

Reading through the many speeches by the special co-ordinator Erhard Busek shows that much has been achieved in the relatively short space of three years. The possibility of conflict between any of the countries, which gripped the headlines of the last decade, has become remote.In Prague in November 2002 the invitation was extended to seven countries including Bulgaria and Romania to join NATO. This is an enormous step forward towards future stability in the area. The way is now being paved towards future membership of the European Union in 2007.

These are giant strides from an area that was often called "the forgotten Europe" during the Cold War, and by Bulgaria, which in those days risked being the forgotten country. The Balkans are an integral part of our continent, as the noble Lord, Lord Hannay, rightly stressed. There will be other exciting developments to look forward to during the Greek presidency engaging south-east Europe, culminating in the Thessaloniki summit at the end of June.

There have been several other achievements and many issues are still in progress: free trade agreements; problems with refugees; dealing with the abolition of small arms and light weapons; organised crime; and trafficking in human beings. All are vital to the future of the area.

In the short time available I shall concentrate on. one issue: infrastructure. I strongly believe that one of the most important issues is the development of infrastructure in the region; figuratively speaking we need a revolution in the infrastructure sector. Infrastructure can play the role coal and steel played as a core for western European integration, both for the security and for the development of the Balkans. It will stimulate the emerging spirit of co-operation among the new generation in the region.

In the Bulgarian case, this was manifested best in the assistance to find a solution to the problem of where to locate the second bridge across the river Danube. The former special co-ordinator Mr Hombach was personally involved in solving the Danube bridge problems. Will the Minister tell the House about the progress that has been made in restoring full navigability to the Danube and its tributaries, and the cross-Danube road and rail links in Serbia? How much progress has been made with the project for the Sofia-Nish highway?

I support the noble Lord. Lord Russell-Johnston, in remembering the help that the Bulgarians, under difficult circumstances, gave during the Kosovo war. The land communications between the Black Sea and the Adriatic are being improved, largely through the corridor VIII road and the rail project to link Burgas and Durres. These will bring further co-operation and trade and make it less likely that the area should descend into further conflict.

I should like to ask the Minister about the EC stabilisation and association agreement with Croatia. The agreement's ratification was suspended by the Government last year because, as I understand it, of the Croatian Government's refusal to hand over General Janko Bobetko to The Hague tribunal. I am sure the House would be interested to hear what the current state of play is, what the prospects are for a renewal of ratification and what conditions the Government have set Croatia for any renewal.

The stability pact is ultimately meant to lead to EU membership for the nations of south-eastern Europe. I welcome the fact that the target of 2007 is still there for Bulgaria and Romania. It is noticeable that Bulgaria's progress in the accession chapters has been stronger than Romania's. How does the Minister think that Romania can be encouraged to make faster progress?

The special co-ordinator Mr Busek is looking to increase the focus of the stability pact on regional trade. What are the Government doing to help this aim? The enlargements of 2004 and 2007 will pose challenges to the Balkan economies, as we heard from the noble Lord, Lord Wallace of Saltaire.

I would like to conclude by putting forward an idea of Mr Vladimir Philipov. He suggests that the word "development" be inserted in the name of the pact in order that it should reflect the new situation, expectations and approach, and for it to be called in future, "the stability and development pact". I ask the Minister to consider raising that idea.

My Lords, I too am grateful to the noble Lord, Lord Russell-Johnston, for promoting the debate. I commend him for his considerable knowledge of the region and the hard work he undertakes there. I also thank my noble friend Lord Lea of Crondall for drawing our attention to the hard work of the Select Committee and members, including my noble friend Lord Grenfell, in compiling their report. I have some sympathy with the point made by the noble Lord, Lord Hannay, about the timeliness or otherwise of debating these reports, but those are matters for the usual channels.

As all have noted, this is a region with a great deal of history. The wars and nationalism in the first half of the last century shaped and damaged the region as much as any region in the world; so in the second half of the 20th century did the divisions of the Cold War and the dictatorial imposition of state socialism. The falling away of the Iron Curtain and the collapse of the former Yugoslavia were momentous events. The latter led to some of the worst atrocities in Europe since the Second World War, notably the Srebrenica massacre.

It is now seven years since the Dayton/Paris peace accord. So the peace in Bosnia has now lasted twice as long as the war did. I commend the leadership of the noble Lord, Lord Ashdown of Norton-sub-Hamdon, as the High Representative. That leadership is gradually restoring normality, building on the considerable work of his predecessors.

The Kosovo conflict is more recent. Since 1999, the United Nations—thanks to Michael Steiner, the Secretary-General's special representative in Kosovo, and his predecessors—has been working with KFOR, the EU and the OSCE to restore stability and peace. There is therefore little present or immediate threat of renewed war in either conflict. Britain has played a major part in bringing that about, working with our NATO allies, EU partners, Russia, the UN, the OSCE and others in the region including the EU special representative in Macedonia, now Ambassador Brouhns.

The noble Lord, Lord Russell-Johnston, specifically asked about Kosovo's status. The United Kingdom fully supports Special Representative Steiner's approach of "standards before status". The provisional institutions of self-government have come to prove that they are committed to making Kosovo work before status can be discussed, and that includes establishing a dialogue with Belgrade. The United Nations Security Council said in Resolution 1244 that Kosovo is part of FRY. It has agreed that final status must be resolved in due course through dialogue between political leaders in Belgrade and Pristina, but neither side has yet demonstrated its full commitment to the benchmark that the special representative has laid out.

Having dealt quickly with the past, much of which the noble Lord, Lord Russell-Johnston, sketched out, perhaps I may turn to some issues concerning the future. The relative peace in the region and the turning of the corner in history gives the region a real future to which it can look forward. Peace offers the people of the region optimism—optimism fuelled by a desire for peace, prosperity, freedom and security, all of which are very natural desires. Those same desires, and indeed the same principles, underpinned the drive to create what became the European Union. And those values are at the heart of the EU.

Soon, on 1st May 2004, as the Copenhagen Council confirmed, more countries will be joining us. As the Copenhagen Council also made clear, the EU has underlined our determination to support the efforts of the Western Balkans to move closer to the Union. In order to move closer, the countries of the Western Balkans have to take the right steps—steps set out in the EU's stabilisation and association agreements. The agreements state clearly how the countries of the region can become part of a modern European Union.

As the noble Lord, Lord Russell-Johnston, said, the stability pact goes a great deal wider than that. Much has changed in the region since the creation of the pact at the Cologne Council in the wake of the Kosovo conflict. The pact offered a brighter future for the region. Now, however, the pact is changing to reflect the very changes in the region itself. It is increasing its focus. prioritising better, streamlining its operations and working to hand activity over to the region. I commend its special co-ordinator, Ambassador Busek, on all his work on all these fronts.

As the noble Lord, Lord Russell-Johnston, noted, the pact's current mandate and the associated budget provided for by the EU expires at the end of June 2003. The EU Balkan summit, scheduled by the Greek EU presidency for June, will provide the opportunity to review the mandate. In answer to the specific point raised by the noble Lord, it is very much as he suspected: there is no end date. It will end when the integration to Europe is sufficiently well advanced—when it has, as the noble Lord, Lord Hannay, said, effectively worked itself out of a job.

Despite the problems that the noble Lord, Lord Russell-Johnston, described, there has been some real progress. I look forward to the continuation of that progress and the added value which the pact is able to bring in promoting integration of the Western Balkans towards the EU. For example, the free trade initiative to complete a free trade area across southeastern Europe is a commendable goal and one which I was very pleased to hear the noble Lord himself applaud. The latest free trade agreement was concluded only last week by Croatia and the Federal Republic of Yugoslavia.

I am therefore happy to tell the noble Baroness, Lady Hooper, that we still hope that by mid-February there will be 21 bilateral free trade agreements, as she indicated she hoped there would be, between all the countries of the region and that they will be completed. Thereafter, the pact plans to work on practical implementation of those free trade agreements. Clearly there will still be a great deal of work to do on them.

I hope that I do not have to remind the noble Baroness, Lady Hooper, how strongly I agree with her on the points she made about full reform of the common agricultural policy if we really are to open up trade between the EU and the countries of the Western Balkans. She appealed to her colleagues in your Lordships' House to lobby the Government on this issue, but perhaps I should try to persuade her that there is no need because we are convinced. I suggest that your Lordships' energies would be far better deployed lobbying some of our colleagues elsewhere in Europe and, perhaps more pertinently, asking some of the Balkan countries themselves also to lobby some of our colleagues in Europe.

The noble Lord, Lord Hannay, forcefully made the point about why the Balkans are so important to the United Kingdom. Many other noble Lords also touched on that point. Our support is firm because the region is so important to the United Kingdom. It is true that the region is not under the daily spotlight as it once was, but that is in itself a healthy development: it means that the appalling and tragic events which newspapers and the other media have to record and place before us daily are no longer occurring in the region. If the region flourishes, then—for all the reasons spelled out so eloquently by the noble Lord, Lord Hannay—the rest of the European Union will flourish. Britain also benefits from a safer and more prosperous Europe. By the same token, if the region fails, we in Britain and our fellow citizens across the European Union will be more at risk—more at risk from crime, drugs and human trafficking, much as the noble Lord, Lord Wallace of Saltaire, described.

So Britain and our EU partners have a real stake in success in the region. That is why the biggest investment of European money, troops and political effort ever made in one region has been going into the Balkans over the past few years. The noble Lord, Lord Russell-Johnston, asked specifically about resources. The European Union is the biggest donor in the region, providing about 4.5 billion euros of aid assistance between 2002 and 2006. We in the United Kingdom contribute approximately 20 per cent of that sum, totalling about £600 million over six years. We do not have the figures for the US, Canada and other donors which the noble Lord requested because the stability pact does not ask donors to publish their contributions.

We in the United Kingdom not only provide that aid but have bilateral programmes in the region outside the EU's assistance. Those programmes amount to more than £35 million in cash terms and much more when the cost of troops, police officers and liaison officers posted across the region are included.

My noble friend Lord Lea of Crondall made a powerful point about the sums spent on aid and the military presence and said how much better it would be to use the money spent on the military on aid and development programmes. It would of course be better, but the conditions would have to be right to enable us to do so. I spent time with our military in both Bosnia and Kosovo. British peacekeeping is so sought after because it is so good and so effective. Soldiers know the members of the various communities in which they are working and where they live. They can tell who is likely not to get on with someone down the road. They know which elderly people are targeted by some of the tough locals and who, for example, cannot get out to do their shopping. They know which children are liable to cause trouble. That is really important. It is also important that our peacekeepers know where drugs are traded; who handles suspect money and who may be corrupt in politics and public life.

I sympathise with the noble Lord in his overall objective, but I ask him to go very carefully when calling for a switch of money at the moment from the military who are doing such a terrific job in these areas.

My Lords, I am grateful to my noble friend for giving way. The thrust of my remark was exactly as she has stated. It would be very nice if it could be the other way round as regards 5 billion euros a year for the military and 5 billion euros over five years which is the sum for aid. But we can only do that if the other conditions are satisfied. I am sorry if I did not express myself clearly. I agree totally with the point my noble friend made.

My Lords, I am glad to know that we are at one on that. The international community, therefore, can be said to be playing its part and with one or two exceptions the countries of the region now live up to their obligations and take responsibility for their own future.

Progress towards the conditions for EU eligibility have been mixed so far. The peace is fragile, as I have described. In some places it is still dependent on large numbers of peacekeepers, but those numbers are diminishing. NATO will review the position later this year. Meanwhile, as I indicated, those troops are still necessary. Democracy is starting to take root. There has been a host of elections across the region during the autumn. Broadly speaking, they have been fair, free and peaceful. Most have been run very effectively by local authorities with only modest support from the international community. So the region is taking ownership of its own democracy.

But the elections also exposed a growth in apathy on the one hand and in a nationalist vote on the other. I agree with the points made by the noble Lord, Lord Hannay. For example, only 45 per cent of the population voted in the recent Serbian presidential election. Not all elections deliver effective governments with the will or the capacity to push ahead with the reforms that the region needs. As the noble Lord said, this is no recipe for long-term durability. It is something which is still very much in the forefront of our minds as being a difficulty for us.

On the plus side, the region's economies are recovering, underpinned by sound reform. That offers new hope for citizens and the prospect of better times. But there is still a long way to go. Almost everyone in the region is poorer than they were 10 years ago before the war started. That is a solemn thought. The refugee crisis is improving. After Europe's biggest refugee crisis since the Second World War, most refugees have now returned in large numbers and in safety. But others still have to find the courage to make that brave trip home. Some war criminals have been brought to justice. Milosevic is on trial at The Hague. There are others from every side in the recent war and clearly not all those indicted are at The Hague. Mladic, Karadzic and others remain free and we remain committed to bringing them to justice.

Perhaps I may touch on four key areas which are the priorities where we believe that the work must continue. They are similar to the points made about the Tirana declaration by the noble Baroness, Lady Hooper. There is the strengthening of democracy. Democracy is about binding a society in which the leaders are accountable to the people who elect them. In democracies there are constitutional checks and balances which moderate the power of elected governments. There is an independent judiciary and parliament to which the government is accountable. There is a free media which is able to criticise the government without fear of persecution. All these components of a mature and stable democracy are developing in the region, but more is needed.

There needs to be greater reform in the economies. Everywhere a start has been made, but much more needs to be done if the region is to create jobs and prosperity including mixed economies in which private and public sectors both play some part not only in manufacturing but also in the development of services. There has to be improvement in tax collection and real tackling of corruption in the public services; a simple, certain and transparent legal structure that encourages legitimate economic activity and foreign direct investment. In this the emphasis by the noble Lord, Lord Wallace of Saltaire, on training is very apposite and his point on education exchanges is very relevant. I shall undertake to take a look at Chevening scholarships for the Western Balkans and come back to him on the points he made because I agree very strongly with what he said.

We need well-trained publicly accountable police forces, official and impartial courts and a real effort to stamp out organised crime. The Balkan mafia is still very well organised and it is very well armed; sometimes it is better resourced than some of the Balkan governments. Sadly, I have to agree with a number of the points made by the noble Lord, Lord Wallace of Saltaire. That is why the UK Government hosted a conference in London in November with the regional countries, European Union members and others to focus international attention on the problem of organised crime in southeast Europe and to agree on key measures which we each can take. The London conference produced a joint commitment and strategy to tackle these issues.

I gave an answer to my noble friend Lord Tomlinson on 27th November which set out the successes of the conference. The documents have been placed in the Library of the House. I believe that they answer a number of the points made by the noble Lord, Lord Russell-Johnston, when he asked about the measures being taken by this Government to tackle corruption. In addition to those internal measures we hope that the governments of the Balkans will accept and co-operate with the authority of the international criminal tribunal in The Hague. The fact that the governments have a legal obligation to co-operate with the tribunal is not always acted on by those governments. It is clearly established by international law under the UN charter. In co-operating with the tribunal, governments send a very clear signal either that they want to be treated as genuine candidates for membership of the European Union or they do not. If the countries in the region seriously aspire to membership of the EU and closer integration with the other international structures, they have to take the obligations of the international court.

The noble Lady, Baroness Rawlings, raised the question of what had happened in Croatia in relation to Bobetko. The process of ratification will continue once the ICTY informs us that Croatia is fully cooperating, which is not the case at the moment.

I said that there were four key issues and I have dealt with three of them. I turn to the fourth very important issue which many noble Lords have raised about regional ownership. Nobody wants the international community presence in the region to continue forever. I was very pleased to hear the reported remarks that the noble Lord, Lord Russell-Johnston, was able to tell us came from one of his interlocutors who said that those in the region really do want to take responsibility for themselves. The InterCam national community does need to work itself out of a job in the region, but nobody wants to jeopardise the gains of the past few years. So the change has to occur in a measured way as conditions allow. The international community recognises the progress which has been made in the past few years, but also recognises that engagement must continue in an open way as I have described at least for the foreseeable future before we are able to move forward to disengagement.

I make it clear that we in Britain intend to stay engaged in the region. We want to stand by all who want reform and a modern European future. We believe that we can be proud of what we have done for the region. Our troops are helping to deter war and build peace; our police are helping to build local police forces that can operate to European standards; and our development experts are helping to promote good governance and sustainable recovery. Our diplomats continue their good work with the governments of the region and others to sustain the stability and reforms of the region. We shall sustain that engagement for as long as necessary.

My Lords, before the noble Baroness sits down, can she tell us what is happening about the Danube bridges?

My Lords, this question was raised by both the noble Baroness, Lady Rawlings, and the noble Lord, Lord Russell-Johnston. The Danube Commission is leading on the clearance of the Danube. The Commission comprises a collection of international financial institutions, the European Commission and the countries of the region. It is making some progress although I agree very much that the progress has been slow. One shaft of light that I can offer your Lordships is that the stability pact has formed a similar Commission for the Sava river, which is a tributary of the Danube. The noble Baroness was also interested in the tributaries. The Commission has been successful in clearing the Sava and we have supported it.

On the larger question of progress on the Danube, I am afraid that it is painfully slow. I shall seek additional information on that issue and write to the noble Baroness, Lady Rawlings, and to the noble Lord, Lord Russell-Johnston, and place a copy of the letter in the Library of the House.

My Lords, this has been a good debate. It has also demonstrated a high level of consensus for there has been little disagreement.

I wish briefly to comment on a few matters. The noble Lord, Lord Lea of Crondall, said that he viewed matters differently from me. So far as I could judge, he did not. Admittedly, I did not talk about the eastern Mediterranean access and the problems of Greece and Turkey. However, I believe that Simitis has moved Greece forward enormously. One of the most significant things that happened was the rejection of the mention of religion in the Greek passport. That step took a lot of courage in the face of the orthodox Church and illustrated the way that the Government think. The noble Lord did not mention Giscard in his remarks on Turkey which I thought were ill-timed and ill thought-out. We have to look at Turkey in terms of a bridge to the Islamic world and not in a negative way such as Giscard set out.

My friend, the noble Baroness, Lady Hooper, and I have been together for a long time in the Council of Europe. She stressed the positive effects of pressure for free trade agreements and the fact that negotiations have served as a vehicle for improving relations. They have; that is very true.

The noble Lord, Lord Hannay, said that we have not debated the excellent report of the European Union Committee. I note that the noble Lord, Lord Grenfell, is no longer present. I did not try to initiate a debate on that report but have read it and it is very good indeed. However, the noble and learned Lord the Lord Privy Seal controls these matters. I note that he is present. He may well take note of what is being said.

The noble Lord, Lord Hannay, also said that it is dangerous to assume that everything is all right. I refer not only to the fact that on two occasions under 50 per cent voted in presidential elections in Serbia and Montenegro, but also to the fact that on the first occasion Seselj, who is the direct supporter of Milosevic, received 25 per cent of the vote. That is worrying in my opinion.

The noble Lord, Lord Wallace of Saltaire, emphasised our failure properly to appreciate the length of our commitment in the Balkans. He was unlucky to find no trucks crossing the Bulgarian/Serbian frontier. One of the successes of the stability pact is that the long queues of trucks on both sides of the Customs posts have been considerably reduced. I am afraid that I shall not argue with the noble Lord about Montenegro but I could do so and I shall in another place.

The noble Baroness, Lady Rawlings, is absolutely right to stress the importance of infrastructural development. I always remember flying in a helicopter from the south to the north of Albania. Both the road and rail land connections in Albania are awful. However, it is potentially an enormously rich little country with a relatively low population, immensely good agriculture and an absolutely unspoiled coastline. But one needs good links to get from one place to another.

The Minister gave a good and positive response. As regards Kosovo, I do not disagree with her that one should have standards before status. That is a good way of putting it. However, it is possible to indicate that if you reach a certain standard, you will achieve a certain status. That really was what I was saying. As regards there being no good end date, I thought that the phrase that the Minister used about the pact bringing an added value sums up the whole matter very well indeed. She was the only person who mentioned the Hague; I did not. As I said, the Srebrenica massacre took place in 1995. Mladic is still at large in a relatively small geographical area. That means that some people are actively not co-operating with the whole Hague process.

I end by again saying that I am grateful to noble Lords who took part in the debate and to those who listened to it. They also serve who only sit and listen. I hope that the debate was useful. I beg leave to withdraw the Motion.

rose to ask Her Majesty's Government what steps they are taking to combat misleading food labelling.

The noble Lord said: My Lords, misleading food labelling has increased, is increasing and must be diminished. That undoubted truth prompted my Question and will inform my speech in opening this debate.

The House knows of my interest in chronic illness and disability both as the first Minister for Disabled People and before then, as a Private Member, author and promoter of the Chronically Sick and Disabled Persons Act 1970. This interest alone makes the health effects of misleading food labeling—not least the avoidable chronic illnesses and preventable disabilities they inflict on children—an issue of deep concern to me.

That the Government share that concern is made clear by the welcome presence here this evening of my noble friend Lord Hunt of Kings Heath. I know that he and the Government also share my concern about the daunting difficulties—and indeed dangers—that more than 2 million visually impaired people face in trying to cope with widely practised dishonesties still permitted by labelling legislation.

Of course, the DTI has a major interest in food labelling; but it is plainly of compelling importance also to the Department of Health and merits the participation of a Health Minister in this debate. Certainly no one sees more vividly than my noble friend why prevention was prioritised in the founding principles of the National Health Service. I acknowledge as well this evening the genuine concern my friend Patricia Hewitt, the Secretary of State for Trade and Industry, has about this policy area.

A further interest I have in this debate is that of lifelong membership of the Co-operative movement, in which I have held the highest elective office as President of the Co-operative Congress. I declare that interest with pride and do so in the presence of two other Congress Presidents: my good and noble friends Lord Graham and Lord Fyfe. They will be as mindful as I am this evening that many of our predecessors in that distinguished office also served in your Lordships' House. One of the earliest of them, perhaps to the surprise of some noble Lords, was the Earl of Roseberry who—four years before becoming Liberal Prime Minister—presided over the Co-operative Congress held in Glasgow in 1890.

I know that my noble friends Lord Graham and Lord Fyfe share my delight in the leadership our movement has been giving in campaigning for better protection of shoppers against unscrupulous food labelling. Its reports on abuses permitted under current legislation—Lie of the Label and Lie of the Label2—reflect its core principles and a tradition of ethical trading that goes all the way back to its birth in Rochdale in 1844.

The two reports won support from the Consumers Association in Food Labels, the hidden truth and the Food Standards Agency's Consumer attitudes to food standards. Their impact was further increased by extensive NOP research and a survey of the marketplace by Sustain, the report of which quotes a label bearing the "pork pie" of a legend:

"80 per cent fat free crisps".

When shown the label, 61 per cent of NOP's respondents said they thought it was a low-fat product. In fact it was almost all fat and, when told the truth, over 80 per cent said such claims should be unlawful.

Inventive marketing is not, of course, confined to food labelling. We live at an exciting juncture in marketing techniques, with drug companies under heavy fire for trying to invent a new disease, female sexual dysfunction, to generate Viagra-sized profits from curing it. As my noble friend Lord Hunt may have seen, the current issue of the British Medical Journal states editorially that "female sexual dysfunction" is the clearest case yet of a,

"corporate-sponsored invention of a disease".

Yet drug companies have nothing to teach unscrupulous food labellers. For they create, not imaginary disease, but the real thing.

Lie of the Label, published in 1997, was an exposé of those who, in food retailing and manufacturing alike, market their products with no regard for ethical values. "Seven deadly sins" aimed at hoodwinking customers were identified, as were the limitations of current legislation for tackling them.

The second report, Lie of the Label 2, published in mid-2002, highlights a worrying lack of progress in addressing serious health concerns. Thus the prevalence of obesity in England has trebled over the last 20 years and continues to rise. In 1980, 8 per cent of women were classified as obese and 6 per cent of men. By 1998 the prevalence had risen to 21 per cent of women and 17 per cent of men. Over half of all women and two-thirds of men are now either overweight or obese.

With their weakness for the stars of TV and cinema and for computer screens, children are shown to be particularly vulnerable to the heavy marketing of food products. Quick-fix convenience foods and a constant barrage of advertising of fatty and sugary foods are important factors in the upward trend of child obesity and the health problems involved.

For the good of child health it is crucially important for food labelling to be clear, readily understandable and governed by effective legislation. But that is not happening now. The provision of nutritional information is merely voluntary and only legally required where a nutrition claim is made. How then do shoppers know how much fat, sugar and salt are in the products they eat and give their children? All too often manufacturers hide the truth, including many household names among the producers of chocolate, sweets and soft drinks, making any meaningful attempt to balance our diets impossible.

My Lords, I am grateful to my noble friend Lord Morris of Manchester for raising the matter of misleading food labelling. I am particularly pleased as I was a director of the Cooperative Group, the CWS, for 20 years, and its chairman for 11 years and was involved in many instances in the initiatives that led to more responsible food labelling.

I also have a personal interest. Throughout my adult life I have had periods of dietary problems. But my interest is not just business or personal; it is based upon my concern for the health of the population at large and the long-term consequences of unhealthy eating in terms of avoidable illness.

I shall focus on three items raised by my noble friend Lord Morris: first, Braille; secondly, the "Fairtrade" endorsement; and, finally, marketing to children. On Braille. difficulty understanding information is one thing, but not being able to see it is entirely another. In 2001 my noble friend Lord Morris helped the Co-op launch its Braille on product packaging initiative as part of its access-for-all policy. The Co-op continues to apply Braille to packaging wherever it can and it is working with the packaging industry to overcome specific technical issues and help other retailers to provide this important information.

To my knowledge no other retailer has followed the Co-op's lead. I believe that the Government should intervene to accelerate the process of providing Braille on packaging, in particular on medicinal products where grave dangers are caused by potential misidentification.

On "Fairtrade", there appears to be a growing number of endorsements appearing on the front of packaging these days—whatever those endorsements happen to mean—to the point that what are designed to be key selling points are competing with each other and being overlooked by highly confused customers. The endorsements include organic certification. farm assurance schemes and environmental issues, "eat five" and "animal friendly". The list goes on. It is not surprising therefore that many of those marks are not, according to the IGD, easily recognised or understood.

One such endorsement is the "Fairtrade" mark. This simple logo makes a difference to millions of people in developing countries who would otherwise toil in poverty to satisfy the western demand for products such as coffee, bananas and chocolate. Building awareness of this critical mark and sales of these products on which it is founded should be at the top of the agenda of any retailer who considers himself to be socially responsible.

The Co-op has recently taken a huge step in its market leading drive to bring Fairtrade into the mainstream, by converting all its own brand chocolate bars to Fairtrade sourcing. At the same time it has produced a report that investigates the cocoa market in terms of supply and inequality of trade and examines just what difference Fairtrade can make. The report challenges other retailers and the manufacturers of leading chocolate brands to develop Fairtrade products of their own.

I pick up on the point mentioned by my noble friend Lord Morris earlier relating to the very worrying trend of obesity in children, and raise the issue of the lack of government action in banning advertising during children's television hours. It is well documented that advertisers explicitly target children. The Co-op's report Blackmail of July 2000 revealed that of all the food products advertised during children's TV hours, 95 per cent were high in fat or sugar.

There seems little point in the Government investing in free fruit for primary school children if and when they sit down in front of the television after a hard day's study, they are brainwashed into pestering parents for all manner of sugary and fatty foods. Recently 130 MPs signed an Early Day Motion asking the Government to ban advertising to pre-school children.

Last year more than £161 million was spent on advertising chocolate and confectionery; a further £34 million was spent on advertising crisps and snacks. Much of that will have been targeted directly at children. But advertisers claim that parents also watch those adverts and so do not produce figures for specific child marketing. Those huge advertising spends compare to just £5 million spent on advertising fruit in the same period. It really is quite staggering.

I do not suggest for a moment that fruit or vegetables are completely free of danger. One of the deadliest vegetables I am acquainted with—to my cost—is cucumber, which really can have devastating effects upon one's digestive system. Those of us who have enjoyed the hospitality of Her Majesty at Buckingham Palace may find that that portion of the food available is highly inedible. Certainly, I would caution great care when dealing with cucumber. But. like so many other foods, of course it is subject to trial and error. One does not know that one is allergic to it until one has suffered the consequences of it. After that brief criticism of cucumber no doubt I shall be railed at by the cucumber growing association—if there is such a body—if they hear of that comment in the House.

The food industry denies that it is responsible for growing levels of obesity, blaming instead cultural shifts and lack of physical activity. Part of that may be true. But the simple question is: if advertising of fatty and sugary foods does not encourage purchase, why is so much spent on marketing?

As part of its Blackmail campaign two years ago, the Co-op committed itself to a voluntary ban on advertising high fat, sugar and salt products during children's TV hours and called on the Independent Television Commission and other parties in the food industry to do the same. The Co-op has gone further still, banning the use of child oriented marketing on such products in stores, such as in leaflet promotions, including free gifts and using cartoon characters on packs as part of the store environment. Where is the progress elsewhere in the industry and what is the motivation for such progress when the Government apparently will not take a strong stance on the way in which the food industry is damaging our children's health?

I say that because although self-regulation by manufacturers and retailers is highly desirable, it is I regret to say also highly unlikely. That is why I believe that the Government must take a strong line.

Perhaps we could spare a thought once in a while for the working mother with limited time and a modest budget. Her priority, quite understandably, is to fill her children's stomachs. She may not have the time or the inclination to analyse food labelling or the knowledge to discard misleading information. That is why labelling must be clear and easily understood. That is a matter, frankly, of education.

The costs to the NHS arising from misleading and inaccurate labelling must be enormous. I would not care to hazard a guess, and I do not expect my noble friend the Minister to do so. However, he may care to give the matter some consideration and, perhaps, reply in writing. The cost must be enormous.

A great deal has been done to improve dietary information. Much remains to be done. I know that my noble friend the Minister shares the concern expressed on these Benches. I look forward to his response.

My Lords. I begin by declaring my interest as a consultant to the Cooperative Group, and I congratulate my noble friend Lord Morris of Manchester on his excellent overview of the situation. He sought not only to highlight the contribution of the Co-operative Group but, I hope, to alert us to what was known in the Co-op movement as "consumer education". That was the fashionable phrase then.

I remember Caspar Brook helping to create the Consumers' Association 50 years ago. I remember how the movement was created. Although there are blemishes, pitfalls and disappointments, when I look back over the advances made in consumer education over the past 50 years, I find it remarkable. Of course, one of the original principles of the Rochdale pioneers, more than 150 years ago, was to educate the consumer. Ordinary people could neither read nor write, and they certainly required some uplift, which they got.

I remember a remarkable coincidence. When I entered the House, I met the former Labour Chief Whip, Lady Pat Llewelyn-Davies. She was a great lady and a great Chief Whip. I said to her that the only other Llewelyn-Davies that I had come across was Margaret Llewelyn-Davies, the first national secretary of the Women's Co-operative Guild. The guild's motto was "The woman with the basket". It made no pretence: it was interested in the lot of the ordinary working woman. Lady Llewelyn-Davies said that her husband, Dick, was the grandchild of Margaret LlewelynDavies. That was a remarkable link, and it was humbling to realise that there was such continuity.

It is not just the Co-op movement. One of the things that I have acknowledged is the fact that most large supermarket organisations—whether through Cooperative initiatives or not—long ago recognised that they ignored the interests of the consumer at their peril. There was a commercial benefit as well as a social benefit. Speaking corporatively, I might call it a dividend, which accrued to business. As a student. I learnt the phrase "Caveat emptor"—"Let the buyer beware". That tag, which explains it all, says, "You know what you're buying, or you ought to. If you decide to buy it and pay for it and it turns out to be a dud, that's your fault". That is a point of view, and I have bought as many things as anybody in the House, only to get home and realise that I had not wanted to buy what I had, in fact, bought.

My twopennyworth about the subject of labelling is the extent to which it has crept into our lives. It is remarkable. I went to see a lovely lady who is a dietician in my local GP practice—a lady called Linda—and what she drummed into me was that I should read the label and understand what it tells me. She told me the guidelines for fat, sugar and calorific intake. It was good common sense.

It is not a party issue and never has been. The first lady to be chairman of the National Consumer Council was Lady Elliot of Harwood, a great lady, who was in the House when I came here, in the 1980s, and had a first-class record. The noble Baroness, Lady Wilcox, is not unfamiliar with her role and work. Lady Macleod and Naomi McIntosh, wife of my noble friend Lord McIntosh of Haringey, were also chairmen of national bodies. There has been a growth in protection for the consumer, and the Minister will not take it amiss if we prod him, when he discusses with his colleagues how to do things better.

One of the things that I found out when I listened to my dietician and read the label was the extent to which cholesterol played an important part for someone such as myself—not obese, but fatter than he would like to be and recognising the danger of having too high a level of cholesterol. Everyone in the House will know that that level should be down between five and seven, for a man. I have managed to get between five and seven, but I have heard of people who have gone to the doctor with a problem and have been told that their cholesterol level was 15 or 16 and had to be brought down. It can be brought down, provided that we follow the advice.

One piece of advice that I picked up was that it is possible for someone who has a liking for a certain thing—marmalade, for instance—to find a substitute. I suffer from diabetes, so I follow a little regime and look after myself in that way. My noble friend Lord Morris of Manchester swept up everything in his tour de force and did not leave the rest of us much to get our teeth into. He dealt with the problem of cholesterol and the manner in which the unscrupulous—or careless—producer and labeller tries to sell his products and says to himself that it is up to the buyer to know what the label says.

On the basis of experience in the Co-op movement and elsewhere, we can say that we are in an age in which ordinary people—families, young mothers, wives—lead not one life but two or, sometimes, three. I remember how my mother looked after a family of five, with my dad on the dole. She made everything—the bread, the puddings, everything. I used to go down to the Grainger Market in Newcastle and buy the products as cheaply as I could. I bought the sheep's head; she made the soup. I bought the rabbit; she made the rabbit pie. I have pleasant memories of the quality of the food. Those days are gone, except for those on the lowest income, people on a tiny budget, as my noble friend Lord Fyfe of Fairfield said in his excellent speech. He missed out the fact that, for many years, he was the chief officer of a Co-operative Society and had to put his reputation on the line every week about quality.

I hope that the Government will apply themselves to the question of whether it is right that women should go to work. Is it right that people use a car to go shopping? Is it right that the big supermarkets get bigger and the number of competitors smaller? That is not the object of today's debate. The object is to say to the Minister that there is a job of work to be done. That job does not rely just on the Government, or retailers, or producers, or suppliers, or wholesalers; it depends on the concerted effort of everyone. I am sure that the Minister will tell us of the various initiatives which he and his colleagues are taking in an attempt to try to obtain a consensus of how we should be approaching the issue. It will not be easy because if it costs money to either the Government or the producer, there will be resistance.

I believe that my noble friend Lord Fyfe made one of the most valuable contributions today. Ultimately, if we eat badly or poorly, the consequence is that we shall become ill more quickly than we might otherwise. The costs fall on the consumers because the National Health Service picks up the bill. When I see illustrations in the newspapers about people who are obese or who abuse themselves with drink, drugs or in any other way, I become as boiling mad as anyone because they have done it to themselves.

However, the Government with their resources, their research and their dedication, have the opportunity to deal with the problem far better than any retailer or group. Reflecting on the advances that have been made by ordinary people in so many ways, it would be 1,000 pities if, in the next decade or two, we find that people's greed. ignorance or pure cussedness lead us into the state that I believe we are in danger of becoming.

One might say as I say, "If they cannot look after themselves why should anybody else look after them?". But that ought not to be the spirit in this country. I do not believe that it is. I look forward to the Minister giving us hope that the matters highlighted are not only well known, but are also understood by him and his colleagues, and that they have some solutions to the problems.

My Lords, the noble Lord, Lord Graham of Edmonton, is, of course, correct. The mislabelling of food is wrong. There is no party political divide on that. If there is a mislabelling, the Government would be right to crack down on it as hard and vigorously as they could.

I appreciate the contribution made by the noble Lord, Lord Morris of Manchester, in introducing this brief debate. I did not intend to contribute because the debate seemed to be a proposition so worthy in its objective that it would be something that would enjoy universal approval in this House. However, the noble Lord, Lord Fyfe, cannot be allowed to get away with his brutal attack on the dumb but humble cucumber.

It is a wonderful plant and I believe that someone must speak up for it. That is my only purpose in contributing to this brief debate today. I agree that some modern cucumbers are so bland, awful and unacceptable, that no one should eat them. However, I hope that I might persuade the noble Lord, Lord Fyfe, on one occasion at least to come with me to the land that the Ancient Greeks once described as Arcadia—the modern republic of Georgia. The Georgians have as a starting dish the simplest food which must be entirely acceptable to everyone. It is a simple dish of ugly tomatoes—certainly not grown for their external beauty, but wonderful in their taste—and cucumbers—certainly not prepared or grown for their external beauty but, again, wonderful in their taste. Combine the two together, sliced, covered with walnut oil and walnut flour, eat with rough bread and a glass of wine, and I ask anyone to find me a simpler, more beautiful dish in the world.

If the noble Lord objects to cucumbers, I hope that he will come at least on one occasion to Tbilisi to appreciate that it is not some dumb, stupid, clumsy vegetable, but really something of great beauty and taste.

My Lords, perhaps I may make a confession. My consumption of cucumber is probably limited to the domestic variety. However, I should be very happy to accept the noble and learned Lord's invitation.

My Lords, would the noble and learned Lord, speaking of cucumbers, care to repeat that?

My Lords, someone has just said, "Follow that"! I expect most noble Lords are merely wanting to get away for dinner now that that exquisite description of food has taken place.

The debate, which was well introduced by the noble Lord, Lord Morris of Manchester, has highlighted a very important area of everyday life. People should be able to trust the food that they buy and that it is what it says it is. At the moment, the most certain thing for most people is simply the price. They are not certain what they are getting for that price.

Food bought falls into two main categories—food that is bought to eat or cook at home and food bought when eating out. I believe that misleading labelling in canteens or restaurants is equally worthy of further government attention. I look forward to the Minister's comments on that issue.

In both those areas consumers are rightly demanding more information about what they put in their bodies as well as on other issues such as animal welfare and food miles. Those are the types of issues, together with the desire to ascertain what is not in their food, that have made the organic movement so singularly successful. Bearing in mind the Question asked earlier today about the Food Standards Agency, I believe that it is deliberately myopic of the Food Standards Agency to concentrate on whether organic food is more nutritious or not.

That is only a small part of the question. People are reassured by the fact that organic food does not contain pesticides or antibiotics. The Soil Association aims for its members to produce food of as high a standard as possible. Its label has become one of great reassurance.

There is, too, real interest from shoppers in local and regional labelling. People want their local produce to be more clearly labelled. Here, I must declare an interest as chairman of Somerset Food Links and as a Somerset county councillor. Both those bodies have been working on developing a form of labelling that is suitable for local producers to use. It may sound simple to print labels saying "Produce of Somerset" and slap it on food or other products. Actually, it is far more complicated than that. To produce a scheme that can be verified properly by Trading Standards, who will have to police it, has proved difficult.

However, we are having some success. We shall see a label during this year. I know that several other counties, too, have embarked on this work. During the next couple of years, the ease with which people will be able to identify what is their local or regional food will improve greatly. Part of the difficulty that the public have had is that they simply have not known where the food originates.

Many retailers, especially in the independent sector—delicatessens and butchers—and the Co-op, which has been mentioned many times today, have made significant voluntary efforts to provide customers with very good, accurate descriptions of their produce. That is perhaps true of butchers in particular.

Therefore, it was a great surprise to me, and very disappointing, that Food from Britain this year—far from recognising these efforts from a sector that has kept the concept of British food alive during the past couple of decades—should see fit to award their Retailer of the Year Award to the American giant Wal-Mart. I believe that someone from the independent sector might have merited that award. I am sure that noble Lords will agree that having heard at great length of the work of the Co-op—both on fair trade and labelling issues—they, too, had a claim for that award. I do not expect the Minister to deal with that point in his reply, but I merely want to register my disappointment with that outcome.

There are many ways in which the public can be misled by the various adjectives. They include traditional, farm fresh, country style, tasty, mature, classic, finest and gourmet. I went through them at the weekend while conducting a small survey in preparation for the debate. I could probably have taken up two minutes reading out the list of adjectives I found on the cheese counter alone. However, I believe that on the whole consumers understand that those are marketing devices and I do not find their use too difficult a concept. I believe that they are not so much a deliberate attempt to mislead as a reasonable attempt to create an image.

Far more serious is a matter which was well picked up by the Consumers' Association in December 2002 in its report on misleading descriptions of processed food, The Ready Meals Market. That is a salutary survey of the current position. Ready meals list the ingredients in the order of the quantities in which they appear in the meals. However, that is useful only if one can read well, if one can read at all and if one is not long-sighted. When I was looking at the packaging, I found that in many instances I needed a magnifying glass—and my sight is not that bad! Otherwise, one will rely on the name of the product.

As regards the name of the product, one would imagine that an "Ocean Pie" was mainly fish or products of the ocean. But the one I examined contained 80 per cent ingredients other than fish. A Birds Eye chicken pie contained only 18 per cent chicken, 2 per cent peas and 2 per cent carrots. I had to ask myself why they bothered with the vegetables which amounted to such a small portion of the ingredients.

A large part of many ready meals is made up of bulkers; tapioca, starch and potato and wheat derivatives. That is the worst kind of misdescription. Dolmio creamy mushroom sauce contained 11 per cent mushrooms, but my winner in the survey was a Heinz chicken in a creamy mushroom sauce with new potatoes. I would have assumed that it contained mostly chicken—perhaps at least 30 per cent chicken—but no, it contained only 11 per cent.

Noble Lords have highlighted the results of eating a diet of such ready meals which are high in starch, sugar and salt and low in vegetables, meat or fish. At first glance, such meals may look good value, but I believe that at £1.50 or more for a dollop of wheat, tapioca and potato, with some flavourings and a smattering of protein, it is not good value and work needs to be done in this area.

No doubt your Lordships will recall the Sunny Delight debate when a drink purporting to be a fruit product had to withdraw its claim to be an orange juice. The product now makes no claim to be orange juice. However, on the shelf below the stack of Sunny Delight in my local Tesco in huge letters was a shelf-screamer which claimed "orange outburst". That was clearly designed to mislead. I therefore believe that together with food manufacturers the supermarkets should take responsibility for trying hard to describe the product. Perhaps my winner in this area was the new Disney range "Roo Juice". Noble Lords might assume that it is squashed kangaroo, but actually it is apple and strawberry juice and a lot of sweeteners.

Finally on fruit juices, often they are labelled as being sugar free. They are sugar-free but they contain a great deal of artificial sweetener such as aspartame about which many health doubts have been raised. I must at this point mention the best among the fruit juices for accurate labelling. It was Copella, with its apple and elderflower, which was 99 per cent apple juice and 1 per cent elderflower.

The Food Standards Agency has come up with some useful guidance on clear labelling but it has yet to tackle misleading labelling. As the debate shows, that issue is of fundamental importance. It is no use being able to read the labels if still they are misleading. I hope that the Minister will be able to tell us that the Government believe it to be their ultimate responsibility to ensure that people have protection from being exploited either by canteens, restaurants, pubs or supermarkets.

My Lords, I, too, want to express my gratitude to the noble Lord, Lord Morris, for bringing to the attention of the House the issue of misleading food labelling. I congratulate him on a most informative but deeply worrying and detailed account of the situation as he sees it. I believe that the debate will contribute to the ongoing progress towards clearer food labelling which is allowing consumers to make informed decisions about the purchases they make.

Here I must declare my interest. I have been in the food industry for 25 years. I come from a family of fish processors and suppliers of supermarkets nationally for many years, including Co-op Wholesale and Co-op Retail—companies we were delighted to work with. I come from the days when fish was wrapped in newspaper or in a brown bag. How times have changed! We have even heard about the possibility of a Braille label.

I must also declare that I am on the hoard of Cadbury Schweppes PLC, where I chair the main board committee on human rights, ethics and social responsibility and where we endeavour to trade fairly. I was also the chairman of the National Consumer Council for six years. I am president of the National Consumer Federation of the Consumer Policy Institute. I am also president of the Trading Standards Association.

The noble Lord, Lord Graham, described most eloquently the progress which has been made thus far in consumer education. It was lovely to hear him talk about that great consumer champion, Lady Elliot. I have therefore had a lovely time of reminiscence. I hope that in listing my interests I have indicated that I can see the problem from both sides. I see it from the point of view of a manufacturer, where there is an understandable reluctance to cover every inch of the product with labels containing complex information, origins, ingredients and processes, let alone the dreaded special offer stickers which the supermarkets usually want putting on at the last minute when one has to try to find a space.

Sometimes the label is as large as the product itself, or, as the noble Baroness, Lady Miller, noted, the print on the label is reduced beyond legibility. All of this adds great costs to the products. Over the years, I have watched and I have seen how manufacturers—particularly the ones which were supplying supermarkets—have struggled to try to sell their product in an attractive packaging while at the same time trying to set out on their product all the information that is constantly required.

On the other hand, the needs and rights of the consumer to be easily able to gather relevant information about products they wish to buy must be paramount. We are not talking only about someone who checks a label for a few calories but about those for whom food labelling is extremely important: those who have allergies and for whom avoiding certain ingredients is a question of life and death; and those with health concerns or moral and religious beliefs which dictate the choices they make as consumers.

I would like to think that the needs and wants of the manufacturer and of the consumer are not irreconcilable. That may be a job for the Minister when he replies to the debate. Standardisation is needed. Let us have enforceable guidelines from the Food Standards Agency for manufacturers so that all concerned know what are the expectations. Consumers can then make direct comparisons between products with the confidence that they are not being misled, and the manufacturers themselves will have an even playing field, safe in the knowledge that their competitors face identical requirements.

The food labelling regulations of 1996 took us some of the way, but clearly more needs to be done. Accurate information on the country of origin must be standard. Part of this must involve closing the unhelpful loophole which allows meat reared and slaughtered abroad to be labelled as British as long as it undergoes some minor further processing in the United Kingdom. To this end, I fully support the Private Member's Bill in another place which makes a good start at tackling the problem.

More work must be done to protect certain groups of consumers. For those with allergies and those with religious or moral beliefs about what they eat, there should be the removal of the rule whereby ingredients do not have to be included on the label if they make up less than 25 per cent of the overall product; and more must be done to protect those with safety concerns over GM foods and those with, as I have learnt today, health concerns and disabilities that need consideration—even difficulties with cucumbers.

This should all be relatively straightforward, but there is another aspect to the debate that must be, and has been, addressed. By far the most widespread misleading food labelling—the noble Lord, Lord Morris, explained this so clearly with his seven deadly sins—involves more subtle marketing strategies: words, pictures and symbols that are implicitly used to mislead consumers by drawing them to make false conclusions about the products that they buy.

Presently there are no obligatory guidelines for the use of words that can be used to mislead consumers such as "Light", "Low Fat", "Traditional" and "Pure". Moreover, frequently pictures on labels are designed to bring about a belief that what is on the label is featured highly in the ingredients. This can be extremely misleading—for example, Knorr Tastebreaks creamy chicken pasta, which has pictures of succulent chickens featuring significantly on the label but contains only minute traces of chicken in the product.

To clarify this muddle of misleading labelling, criteria for claims—whether explicit or implicit—need to be clearly defined. As the noble Lord, Lord Fyfe, said, matters need to be clear and easily understood. We need a list of approved words and symbols and a minimum standard must be met in order to make certain claims. Thus confusing labelling could be replaced by a clear system of coding which the consumer is able to trust.

I look forward to hearing the Minister's reply to the debate, to this further call for action—from all sides of your Lordships' House, I am glad to say—on misleading labelling.

My Lords, it has been an excellent and informative debate. I join other noble Lords in paying tribute to my noble friend Lord Morris of Manchester for his excellent introductory speech. He was absolutely right to make the connection between the speech he gave today and his tremendous work in bringing forward the Chronically Sick and Disabled Persons Bill so many years ago.

As he rightly said, the debate today focuses on the experience of individuals in this country. People who are chronically sick and disabled need to have confidence that, on the issue of food labelling, they ultimately understand what they are buying and that they can rely on the system to ensure that they know what it is they are being asked to purchase.

My noble friend is a past distinguished president of the Co-operative Congress. My noble friends Lord Graham and Lord Fyfe also undertook such senior office in the Co-operative movement. I bring no great qualification in terms of seniority in the Co-operative movement, although I am a member of the Cooperative Party and of the Midlands Co-operative Society, and my children have been active in the Woodcraft Folk movement, which is closely associated with the Co-operative movement. I believe that we should be very proud of what the Co-operative movement has achieved over the years. When we come to debate the issue of foundation trusts in the reasonably near future, it will become apparent that many of our proposals for the future organisation of the NHS rest on the philosophy and values of the Cooperative movement. Indeed, we have received a great deal of advice from the Co-operative movement on how we should take forward the organisation of the NHS at local level.

My noble friend Lord Graham referred to the historic links between Members of this House and members of the Co-operative movement. He mentioned in particular Margaret Llewelyn-Davies and Pat Llewelyn-Davies. Hattie Llewelyn-Davies continues this work through the generations and is currently chair of an NHS organisation in Hertfordshire.

The question of Braille is very interesting. While it is very valuable that the Co-op has introduced Braille on many products, as a health Minister I am particularly interested in the introduction of Braille on many over-the-counter medicines, and I pay tribute to the society. I agree with my noble friend Lord Fyfe that we should encourage other retailers to do likewise. As the noble Baroness, Lady Miller, said, legibility is of crucial importance to many people, whether in regard to food, medicines or other retail products.

As a health Minister, I am greatly concerned about the question of obesity. My noble friend Lord Fyfe asked about the impact of obesity on the National Health Service. We reckon that 21 per cent of adults in England are obese. A further 34 per cent of women and 45 per cent of men are over weight. The prevalence of obesity in England has trebled since the 1980s.

My noble friend asked about the cost. I cannot give him precise figures, but a report by the National Audit Office highlighted the substantial burden of obesity on our society. Taking health, social and financial costs together, the NAO estimated that obesity costs the economy in excess of £2.5 billion each year.

Our action in relation to the food industry has an important role to play in tackling obesity. But I believe that the question goes wider. The national school fruit scheme, the efforts that we are making to improve health programmes generally, and the encouragement particularly of young people but of all people to take part in exercise programmes are of equal importance.

I agree with my noble friend Lord Fyfe that the whole issue of the promotion of food to children is very important. The Food Standards Agency is considering a number of programmes to tackle these issues. It has established an independent expert review of the available evidence. That will pick up some of the issues that my noble friend has raised about the role of TV advertising in food choice. It will also examine surveys of the nutritional content of some foods promoted to children. I hope that that work will give rise to more concerted action in relation to the promotion of food to children. All of us who are parents know that this is not by any means an easy issue to tackle; nor is it easy for schools. Schools which have made brave attempts to promote healthy eating have often been knocked back because there has been a consumer reaction and they have lost money. We need to do a great deal of work in health and in education to try to move forward in a way that takes children with us, which is what we must do.

I come now to cucumbers! The noble and learned Lord, Lord Fraser, invites my noble friend to accompany him to Tbilisi. Other speakers too would be very willing to do so. I think that my noble friend risks a transition from eating cucumbers with Her Majesty to eating cucumbers at Her Majesty's pleasure if cucumber lovers have their way! The substantive point is that food is a great thing, but it also carries its risks. We seek to provide informed information to enable individual consumers to make up their own mind. I am sure we all agree with that.

We are all consumers. As consumers we have a right to expect clear, honest and accurate food labels so that we can make properly informed choices. My noble friend Lord Morris made a powerful and persuasive speech to that end. My noble friend Lord Graham said, "Let the buyer beware". The noble Baroness, Lady Miller, gave some excellent examples of why the buyer has to beware. There is no doubt that the importance of food labels is increasing as consumers become more discerning and the food industry introduces new products, new technologies and new ways of processing food.

I agree that consumers have a number of concerns about the way food is labelled. Can they believe what they are being told? Are they able to understand the information they are given? Is that information clear? Is it relevant? Is it easy to find and to read? Consumers want information on labels for a number of reasons. Not everyone necessarily wants the same information. People with allergies need very specific information to avoid substances to which they may have an allergy. For them, that information can be a matter of life and death.

As my noble friend Lord Morris and the noble Baroness, Lady Wilcox, suggested, others look for specific health benefits. They may be attracted to food making claims such as "low fat", "reduced salt", or "helps maintain a healthy heart". There are those consumers who just want to know that they are getting value for money and are not being taken for a ride when they make a purchase, as my noble friend Lord Graham suggested.

Whatever our personal attitudes to the many concerns consumers may have, there is surely one thing about which we are all agreed: that there should be clear, accurate and honest information so that the consumer can make properly and fully informed choices. I have no hesitation whatever in saying that the Government believe that it is crucial to make sure that we can combat misleading food labelling. For that we undoubtedly need proper regulatory tools and effective enforcement of those rules.

We know that consumers are not satisfied with the current regulatory position. We know that they are concerned that some claims, particularly those made on foods which may contain lots of fat, sugar or salt may not be reliable or simply fail to tell the whole story. The noble Baroness, Lady Miller, gave us some excellent examples. There is also evidence to suggest that, despite there being regulations to protect consumers, there may still be products on the shelves which are mislabelled or labelled in ways that they feel are misleading. That is an enforcement issue.

Clearly, we have regulations. We have laws which provide certain safeguards although, I readily accept, not all the safeguards that noble Lords would wish for. But as a first step to improving the current situation, it is important that enforcement of the current law is as adequate as possible. I believe that there is some good news here. I pay tribute to the work of law enforcement officers. The noble Baroness, Lady Wilcox, has a particular relationship now with trading standards officers. I pay tribute to them and the environmental health services provided.

When the Food Standards Agency was created, one of its responsibilities was to ensure the effectiveness of enforcement across the UK. A framework agreement on local food law enforcement was fully implemented in April 2001. Importantly, that gives the FSA a clear role and remit to monitor, set standards and audit the performance of the individual local authorities. That is an important step to encouraging consistency—we all want consistency; industry needs consistency—and a vigorous but proportionate approach. Ultimately, if an audit identifies real failure by a local authority to discharge its functions adequately, the agency has powers of direction and report. It has not used them yet; but they are powerful ammunition to encourage local authorities to take the matters seriously.

Noble Lords commented on the Food Standards Agency's guidelines. They are not statutory but are valuable in giving enforcers and the industry a clear framework within which to encourage and adopt consistent, appropriate labelling practices. Many retailers, including butchers. as the noble Baroness, Lady Miller, said, and the Co-operative movement, as several others said, have played their part in constructive dialogue. Although I fully accept that we need to look at the statutory framework under which we operate, there is much room to work constructively with industry to ensure that good practice is adopted. Retailers will benefit if they develop good practice, because more consumers will use their products. We wish to emphasise the need for good practice alongside statutory regulation.

The FSA has emphasised several points in its guidance. First, in the ticklish area of places of origin, it makes clear that origin labels on food must be unambiguous. It stresses the importance of clear labelling and, in particular, the need to consider how consumers will interpret labels and store displays. I readily accept the problem. Bacon or ham, for instance, processed in Britain using Danish pork should not be described or presented as British. The agency has recently published guidance on the terms "fresh", "pure" and "natural", which I hope will be extremely helpful. It has also published advice aimed at improving the clarity of food labels. That was another concern highlighted in the Co-op's excellent reports.

I readily accept that guidance can take us only so far and that we need to look at the legislation. Much of it is harmonised at EU level. The Government undoubtedly welcome the recent Commission initiative to review EU labelling legislation. Commissioner David Byrne recently announced a comprehensive review of that legislation. The Commission has made clear that it places labelling clarity and country of origin labelling high on its list of priorities. It is employing consultants to carry out the review and has set up a steering group to oversee the work. It is anticipated that it will report towards the end of 2003. Industry and consumer interests are represented on the steering group.

The Government will take a pro-active role in arguing our cause within Europe. The Food Standards Agency has a critical role to play in European discussions. Among the things we want are a full declaration of specified food allergens in ingredient lists and more comprehensive ingredient lists to help those who want to avoid certain foods. Proposals aimed at achieving that have already reached common position stage in Brussels and are likely to be finally adopted later this year.

I note what my noble friend Lord Morris said about the need to see links between certain foods and diseases. I understand that consumers want easy-to-use nutrition labelling on all foods and agreed criteria for making health and nutrition claims such as "low fat", "high fibre", "good for the heart", "lowers cholesterol", et cetera. The Commission is drawing up proposals to address those issues. We will seek to ensure during negotiations that proposals are as comprehensive and as consumer-focused as possible. We have also been successful as the UK Government in persuading the Commission, with the support of other member states, to look at the rules on origin labelling.

I note what the noble Baroness, Lady Miller, said about catering outlets. I know that research has indicated a number of different information issues with regard to non-pre-packed foods and foods sold in catering establishments. I believe that there is a balance to be drawn in this respect. I agree with the noble Baroness, Lady Wilcox, about the degree of information that needs to be available, but the agency is to hold a stakeholder meeting in late January 2003 to establish the way forward. I hope that that move will be seen as a constructive response.

In conclusion, I should stress that I am by no means complacent about the current position. I take the strictures of my noble friend Lord Graham to heart. There cannot be any room for complacency. We must be ever vigilant. However, at the same time, short of the legislative changes that we shall undoubtedly see in the next few years, there remains much to be done in partnership with the responsible end of the industry. I commend the Food Standards Agency for its approach. We have had an extremely constructive debate this evening. I end my remarks by thanking my noble friend Lord Morris for his quite excellent opening speech.