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The Earl of Onslow: My Lords, why on earth should a reduction in excise duties for all vehicles encourage the increased use of fuel of one specialist type? That seems to be totally illogical.

Lord McIntosh of Haringey: My Lords, I am sorry that my answer was elliptical. What I meant was a rebate of vehicle excise duties for those converting to natural gas and liquified propane gas.

Lord Renton: My Lords, as the Government quite rightly wish to reduce the amount of air pollution caused by road vehicles, and as the noble Lord acknowledges that greater use of natural gas would do that, how is it that he maintains that it would not be convenient or in the public interest to reduce the duty on vehicles using natural gas?

Lord McIntosh of Haringey: My Lords, I did not maintain that it would not be in the public interest. I said that we are reducing the duty in real terms by not increasing it in cash terms and that the differential between gas and other fuels is increasing as the duty for other fuels increases. I was arguing that a more targeted response in terms of vehicle excise duty is more effective. If I may add to the point made by the noble Earl, Lord Onslow, in addition to the rebate for gas powered vehicles, there is a complete remission of vehicle excise duty for those vehicles such as ambulances, fire vehicles and so on which are particularly suited to gas because they refuel at depots rather than on the open road.

Lord Dixon-Smith: My Lords, is the Minister aware that even if the duty on liquid petroleum gas was at the minimum level permitted by the European Union, the

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saving on running costs because of that remission of duty would still not be sufficient to pay for the very high initial capital cost required for conversion to LPG for each vehicle? Do the Government have in mind other incentives to try to persuade people to make the change, bearing in mind the great improvement, particularly in metropolitan atmospheres, that could result if the owners of fleet vehicles were persuaded to change?

Lord McIntosh of Haringey: My Lords, I have already indicated the two ways in which the Government encourage the use of gas for road vehicles; namely, through the vehicle excise duty and the freezing of fuel duty. If the noble Lord has any other suggestions we shall be glad to listen to them.

Baroness Thomas of Walliswood: My Lords, is the Minister aware that there is another way of encouraging the use of these and other experimental fuels? The Government could convert their own large fleet, much of which is in metropolitan London, to the new fuels. Do they have any plans to do that?

Lord McIntosh of Haringey: My Lords, last week or the week before I answered extensively a Question on this subject. The Government car service is not a very large fleet. There is a policy of converting to dual use, both gas and petrol, as the vehicles are replaced over the next four years.

Earl Attlee: My Lords, in order to send the right signals, if the Minister decided to reduce the duty rate to the EU minimum, can he say how much duty the Government would forgo?

Lord McIntosh of Haringey: My Lords, I should have an answer to that question, but I do not. I shall write to the noble Earl.

Building Societies: Special Deposits

2.52 p.m.

Lord Evans of Parkside asked Her Majesty's Government:

    What representations they have received from building societies about being required to place special deposits with the Bank of England from 1st June.

Lord McIntosh of Haringey: My Lords, the Bank of England Act requires banks and building societies to place cash ratio deposits with the Bank of England in order to fund the unrecovered running costs associated with its monetary policy and financial stability activities. Only institutions with more than £400 million eligible liabilities will have to place cash ratio deposits with the bank; so about two-thirds of all building societies will be exempt.

We received six representations from the building societies sector. A summary of all representations was included in the Government's response to consultation

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on cash ratio deposits published in April 1988. I have placed in the Library a copy of the response to consultation from the Building Societies' Association.

Lord Evans of Parkside: My Lords, I thank my noble friend for that reply. Will he confirm that this new requirement will cost the larger building societies many millions of pounds annually, which will have to be borne by the depositors and mortgage holders? Will he also confirm that the building societies have made representations that other financial deposit takers, such as insurance companies, contribute to the costs of the Bank of England thereby spreading the burden? Will my noble friend inform the House why such other organisations have not been invited to take part in the new scheme?

Lord McIntosh of Haringey: My Lords, my noble friend is right in that the larger building societies will have to contribute to the cash ratio deposits for the first time. I am sure he will recognise that as so many of them act as banks as well as building societies, it would be very difficult to discriminate between them. He is also right in saying that the building societies believe that alternative methods of funding the Bank of England should be examined. I believe that that has been done. They wrote to the Economic Secretary to the Treasury on 22nd April and said,

    "The overall outcome of the consultation, which has resulted in the exemption of small banks and building societies from the CRD scheme, will be viewed favourably by most societies".

Lord Clark of Kempston: My Lords, the scheme is going to cost the building societies more money, particularly the large ones and that is going to affect the rate of return for depositors in building societies. In addition, it will add to the burden of borrowers. Does the Minister agree that it is a big mistake to charge the building societies, when they are trying to keep down the borrowing rate, because of the Government's disastrous policy as regards the base rate?

Lord McIntosh of Haringey: My Lords, the noble Lord is being very selective in his argument. Building societies and banks are active in the mortgage market. It would be invidious to discriminate in that respect. In any case, the total burden of cash ratio deposits will fall. Between 1997 and 1998 the cost increased from £147 million to £182 million, assuming an interest rate of 7 per cent. The new cost, at the rate which has been announced under the Bank of England Act, will be only £129 million. I suggest that the effect on mortgages in total is likely to be positive rather than negative.

Lord Razzall: My Lords, perhaps I am widening the Question somewhat, but does the Minister agree that there must be concern that the recent increase in mortgage interest rates by the building societies and the

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new bank building societies is more likely to increase the likelihood of a hard landing for the economy as we move through the year?

Lord McIntosh of Haringey: My Lords, the noble Lord is widening the Question more than slightly.

Lord Higgins: My Lords, is it not increasingly apparent that there is a serious lack of co-ordination between the Government's monetary and fiscal policy? Can the Minister tell us whether the Treasury or the Bank of England is now responsible for controlling the money supply? In that context, does the Minister envisage that in future the deposits will be used to that end?

Lord McIntosh of Haringey: My Lords, the Government are in charge of both monetary and fiscal policy. They chose to delegate to the Bank of England responsibility for short-term interest rates, but that does not mean any derogation of authority or responsibility.

Nuclear Weapons: Elimination

2.56 p.m.

Lord Jenkins of Putney asked Her Majesty's Government:

    Whether they will now urge the nuclear states to take serious steps towards the elimination of nuclear weapons in order to avoid further proliferation.

The Parliamentary Under-Secretary of State, Foreign and Commonwealth Office (Baroness Symons of Vernham Dean): My Lords, all states are aware of our commitment to a world free of nuclear weapons. The five nuclear weapon states have all signed the Comprehensive Test Ban Treaty. We and the French have ratified it, and we continue to urge others to follow our lead. The five are committed to enter into negotiations on a fissile material cut-off treaty as the next step towards our goal.

We have to stop nuclear proliferation to attain our ultimate goal of a world free from nuclear weapons. The Comprehensive Test Ban Treaty was an important step in the right direction. By testing, India and Pakistan have moved the other way.

We condemn these tests and urge both countries to sign unconditionally and move to ratify the Comprehensive Test Ban Treaty; enter negotiations on a fissile material cut-off treaty and accede to the non-proliferation treaty.

Lord Jenkins of Putney: My Lords, I am most grateful to the Minister for that reply. I am particularly grateful to my noble friend for reaffirming our manifesto undertaking on the global elimination of nuclear weapons. Does she agree that, to take further the Government's action, it would be useful if they were to encourage other members of the Security Council to

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envisage the same goal of the global elimination of nuclear weapons so that we can begin to make real progress in the matter?

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