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House of Lords

Thursday, 9 July 2009.

11 am

Prayers-read by the Lord Bishop of Exeter.



11.06 am

Asked By Lord Harrison

The Parliamentary Under-Secretary of State, Department for Communities and Local Government & Department for Work and Pensions (Lord McKenzie of Luton): My Lords, the Government fully support the highest standards of corporate governance and ethical behaviour and believe they should contribute to better company performance by helping a board discharge its duties in the best interests of shareholders. Nonetheless, we believe that a non-prescriptive approach to developing policies in this area is the way forward.

The current legislation already requires a scheme's statement of investment principles to include a declaration of the extent to which social, environmental and ethical considerations are taken into account in its investments.

Lord Harrison: My Lords, research from FairPensions shows that only one in three of our top 20 UK pension funds publishes the positive actions that they take to manage financial risk associated with social, environmental and corporate governance assets. Will my noble friend help shareholders in the vital role that they perform in protecting those assets-and, ultimately, our financial risk as a nation-by obliging pension funds and their investment intermediaries to publish openly these positive actions that are taken alongside the stated policy of investment?

Lord McKenzie of Luton: My Lords, this is a very important issue. We know, in particular, that research indicates that companies perform better when their activities are monitored by shareholders. The Government have put in place the investment governance group to encourage best practice in investment-related governance. One of the six main principles that it promotes relates to responsible ownership. This is aimed at requiring trustees to adopt the Institutional Shareholders' Committee's statement of principles on the responsibilities of shareholders and agents. It also requires that trustees should report periodically to members on the discharge of such responsibilities.

Lord Shutt of Greetland: My Lords, where do the Government see the members of the pension funds, and the pensioners, in this? This reference is to the middle men. What about the responsibility to the members of the pension fund in these important matters?

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Lord McKenzie of Luton: My Lords, it is the role of the trustees, under their fiduciary duty, to take account of members' interests. It is the trustees' role in particular, as guardians of that interest, to take account not only of strict and short-term financial returns on investments, but the wider context. That is the right connection with members.

Baroness Turner of Camden: My Lords, among the social considerations must surely be the fate of elderly people. What can the Government do to make sure that the benefits arising from these schemes are sufficient to provide the elderly people who will look to benefit from them with a sufficient standard of living?

Lord McKenzie of Luton: My Lords, that is a little removed from the original Question, but it is a very important issue. As we have discussed extensively, the Government's strategy in relation to pensions is to put in place a clear underpin through state provision while recognising that, because of demographics, people will need to be responsible for topping that up through private sector provision. Therefore, with regard to the whole framework of pension provision, the deregulatory review and the protection from the Pensions Regulator and the Pension Protection Fund are all components of encouraging private sector provision to sit alongside the state pension.

Lord Skelmersdale: My Lords, the Minister will remember very well our discussions on last year's Pensions Bill, which, inter alia, investigated and made lawful the activities of the Personal Accounts Delivery Authority. The subject of ethical investment came up on several occasions during our discussions. Is his expectation that PADA will have an ethical investment fund now being worked upon?

Lord McKenzie of Luton: My Lords, the noble Lord may have attended the seminar in January set up by PADA to focus on this very issue of socially responsible investment. Following on from that, PADA issued in May a broad consultation document seeking views on the advice that it should give to its trustees on the approach to investment. I think that the cut-off date for the consultation is August so it is still very much work in progress.

Lord Joffe: My Lords, bearing in mind that pension funds and institutional funds are influential owners of most of the companies soon to be subject to Defra emissions guidelines, does the Minister agree that those guidelines should be extended to their investment portfolios, which has been done very successfully by a major pension company in Australia?

Lord McKenzie of Luton: My Lords, the noble Lord is right: the Defra emissions reporting guidelines are out for public consultation. They are expected to be published by October. These guidelines explain how an organisation should measure its corporate footprint as a first step in helping it to improve its emissions management. Those are very important data that one would expect would influence shareholders,

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be they trustees or others, in their engagement with companies. The purpose of the consultation is to seek views on the guidance. As with all consultations, the views of those who respond will be given full and careful consideration by the Government before any final decisions are made. Therefore, it would not be appropriate for the Government to pre-empt where that consultation may lead.

Baroness Gardner of Parkes: My Lords, I declare an interest as a National Health Service pensioner. As regards people with public service pensions who have received letters to say that we have all been overpaid for years and that our pensions will be adjusted-as I understand it, that has not worked too badly-what would be the position if an elderly person was in a difficult position through having something changed retrospectively? What is the general policy on this issue?

Lord McKenzie of Luton: My Lords, I do not have the details of the issue that the noble Baroness raises. I imagine this would principally be an issue for the trustees. However, I am happy to look into the specifics of that and write to the noble Baroness.

Armed Forces: Trident


11.13 am

Asked By Lord Judd

The Minister of State, Department for Business, Innovation and Skills and Ministry of Defence (Lord Drayson): My Lords, I am sure that the whole House will wish to join me in offering our sincerest condolences to the family and friends of Lieutenant Colonel Rupert Thorneloe, Trooper Joshua Hammond, Private Robert Laws, Lance Corporal David Dennis, Lance Corporal Dane Elson, Captain Benjamin Babington-Browne and the soldier from the Light Dragoons killed in Helmand province on Tuesday 7 July. All were killed on operations this week in Afghanistan. We also offer our condolences to the family and friends of Flight Lieutenant Kenneth Thompson and Flight Lieutenant Nigel Morton, who were killed when their Tornado F3 crashed on Thursday 2 July in Scotland while on a routine training flight.

This Government are committed to the current nuclear deterrent and to the development of the replacement system, as set out in the 2006 White Paper. We estimate that this replacement will cost between £15 billion and £20 billion at 2006-07 prices and we expect the first successor submarine to enter service in 2024. As part of the 2008 equipment examination, we decided to delay the carriers by one to two years, recognising that this would add cost. Our

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latest, yet-to-be-approved, estimated cost is £4.6 billion. We expect the in-service dates to be towards the end of 2015 and 2018 respectively.

Lord Judd: My Lords, I am sure that the whole House will endorse without reservation the tribute to the fallen in Iraq and Afghanistan. With our forces as stretched as they are, in operations that are likely to be the pattern for the future, is not the top priority to ensure that they have the very best equipment for the tasks that they are undertaking and are likely to be undertaking? Is it not, therefore, essential to reassess the replacement of Trident because of the vast expenditure involved? Should we not look at alternatives and is it not essential that the House should have an opportunity to debate this issue before initial gate decisions are made? If aircraft carriers are essential for flexibility in deployment around the world-and I, for one, believe that they are-do we really need the kind of, arguably, oversophisticated vessels that are currently planned? Would not more simple vessels do the task very well? Indeed, will the aircraft be available to make the expensive, sophisticated carriers fully operational?

Lord Drayson: My Lords, we put absolutely as our first priority the support to our troops on operations. We have shown that by providing through the UOR process more than £2.2 billion to operations. But we need to do both. It is our primary responsibility to provide for the security of this nation and we cannot do that without a nuclear deterrent. We have said that the nuclear deterrent will not come at a cost to investment in our conventional forces and, no, there is no alternative to the provision of the capability that the carriers will provide. As my colleague on these Benches said when he was First Sea Lord, this is four acres of British sovereign territory that can move 500 miles in a day without the by your leave of any other nation.

Lord Pearson of Rannoch: My Lords, can the Minister repeat the assurance given to your Lordships' House the last time that this subject was raised in Oral Questions, to the effect that the two new aircraft carriers will not be diluted into any European defence force?

Lord Drayson: I am happy to give that assurance, my Lords.

Lord Lee of Trafford: My Lords, in the private sector, if one trades when one knows that one's operation is insolvent, that is a criminal offence. At the present time, the Ministry of Defence, frankly, is bust. There is a yawning gap between resources and commitments. We have a belated defence review that should have come two or three years ago, as many of us were asking for. What are a Government who place a Secretary of State for Defence 21st out of 23 in the Cabinet's pecking order going to do about the desperate financial situation of the MoD?

Lord Drayson: My Lords, I am afraid that I do not recognise at all the characterisation that the noble Lord has just set out. On returning to the Ministry of

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Defence recently, I have been struck by the way in which it has been able to respond to the pressures of operations and by the success that our forces have achieved in Iraq, for example. We recognise the pressures that they are under, but we are supporting them and seeing progress in the way in which they are making their contribution to the international effort in Afghanistan. We obviously have to manage our finances adequately and we are committed to doing that, which is why we announced earlier this week the Strategic Defence Review.

Viscount Tenby: My Lords, in the light of recent reports in the press about a £1 billion overrun on the two carriers, to which the Minister referred in his original Answer, what steps are the Government taking to ensure that this undesirable trend does not occur year on year?

Lord Drayson: My Lords, this increase in costs is due to the decision that we took last year to put back the delivery date of the carriers. The project itself is not leading to increased costs; the primary cost increase caused by the delay is due to the inflationary effect on working capital because of the length of the project.

Lord Astor of Hever: My Lords, from these Benches we, too, send our condolences to the families of the soldiers and the two flight lieutenants whom the Minister mentioned. I very much welcome the noble Lord back to the Dispatch Box with his defence brief. Last month in the other place, the Prime Minister claimed that,

Is that really the case?

Lord Drayson: Yes, it is, my Lords. The Prime Minister is absolutely right.

Lord Ramsbotham: My Lords, the very sad list that the Minister read out at the start of his Answer, on which I am sure the whole House expresses its condolences, draws attention yet again to the fact that the operations that we are conducting require people. The Minister has confirmed that the equipments mentioned in the Question are covered in the budget. Can he confirm or deny reports that three infantry battalions are likely to be cut from the budget, while these equipments are to be retained?

Lord Drayson: My Lords, I am not aware of those reports at all, so I cannot comment on them.

Lord Mayhew of Twysden: My Lords, is it the view of Her Majesty's Government that Russia, in particular, still presents a risk sufficient to warrant our acquiring the defensive assets referred to in the Question of the noble Lord, Lord Judd, as a prudent insurance policy?

Lord Drayson: My Lords, this is not about Russia or any other country. We need to recognise that the replacement of our deterrent will come into service

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from 2024 and will stay in service until the late 2050s. It is very difficult for us to predict what the world will be like at that time, which is why we are committed to maintaining our deterrent and replacing the Vanguard submarines.

Agriculture: UK Food Production


11.22 am

Asked By Lord Livsey of Talgarth

The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Davies of Oldham): My Lords, UK self-sufficiency in all food currently stands at 60 per cent and was 59 per cent in 2007. UK self-sufficiency in indigenous food-food which can be produced domestically on a large scale which is economically viable-stood at 73 per cent in 2008. Under European legislation, there are specific requirements to label certain food groups with their country of origin. For other foods, the food labelling regulations require the labelling of origin if failure to do so might mislead.

Lord Livsey of Talgarth: My Lords, the more eagle-eyed among your Lordships will recognise that I have had to pull my Question on set-aside because the Secretary of State is making a statement at the Royal Show today-the last-but-one day of the Royal Show. Next year, I urge people to come to the Royal Welsh Show, the most successful show in the United Kingdom.

Will the noble Lord acknowledge that self-sufficiency of UK agriculture production has fallen disastrously, by 10 per cent, over the past decade? Will he confirm that the cost of temperate food production imports into the UK now stands at approximately £23 billion? Will he seek to reverse this trend, including urgent action to stop the food-labelling scam of imported food being labelled as British just because it has been packed and processed here in the UK?

Lord Davies of Oldham: My Lords, we are certainly concerned about scams where food is misleadingly labelled, and we have powers to deal with that. However, the noble Lord will know that food labelling is mainly a European issue. He, together with the House, will take delight in the fact that the Commission is currently consulting on strengthening European legislation on food labelling regulations, and we expect that work to bear fruit in the not-too-distant future.

Lord Taylor of Holbeach: My Lords, I declare an interest as a farmer and grower. Does the Minister agree that the days of assuming that there is plenty of food in the world for British consumers to access are over? What measures are the Government taking to give support and encouragement to British growers and farmers to increase production in this country?

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Lord Davies of Oldham: My Lords, I agree somewhat with the noble Lord's original contention. It is, of course, the case that British self-sufficiency in food has increased very significantly over the past two or three decades. That is a reflection of the productive work of British farmers and their international competitiveness. We should take delight in the progress being made. Of course, the Government are very concerned to ensure that British farming is competitive and is supported in all possible ways so that it can play its part in international markets. The noble Lord will also appreciate that the strongest position for British agriculture is that it should be internationally competitive as, in so many areas, it is.

The Countess of Mar: My Lords, I declare an interest as a small farmer. As oil is a finite resource and as agri-industry is so dependent on oil, not only for fuelling tractors and machinery but also for pesticides and fertilisers, will the Minister say what forward planning is being done to ensure that we retain our ability to produce food in the event of oil running out?

Lord Davies of Oldham: My Lords, of course the noble Countess is right to say that we have to have regard to changes in demand for oil products, the importance of oil as regards carbon emissions and the limitation on world oil supplies. At this stage, it would not be right to suggest that the very significant problems faced by many small farmers, which need consideration by the Government, such as the question of oil supplies running out, should not be a significant priority for the Government.

The Lord Bishop of Exeter: My Lords, is the Minister aware of the 2009 farmers' intention survey which highlights a fall in dairy farmers' confidence and records the lowest numbers intending to expand since the survey began in 2004? It seems almost certain that there will be a fall in GB milk production over the next year or two of the order of some 5 per cent. From my own experience in Devon, I know that few new entrants to farming intend to enter the dairy sector. If dairy farming is not in crisis, as the noble Lord firmly averred in this House last week, does he agree that we seem to be at a tipping point, especially in the context of increasing pressures on world food markets, and that that ought to be a matter for real concern?

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