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A simple and practical example is the annual patent applications per million of population. Germany's top non-capital eight cities have an average of around 400 patent applicants a year, France has around 200 patent applicants a year, and the top eight non-capital English cities have an average of 70 patent applications a year. To me, that sums up the problem. England has been-the United Kingdom less so-hugely overcentralised. One of the things that the Government are trying to do which I am particularly pleased about is to reverse that trend. The economic contribution of our cities has never been more vital to the growth of the United Kingdom.

The government publication Unlocking Growth in Cities, launched in December, comes at a decisive moment for the economy. The document builds on an amendment to the Localism Act, originating from the core cities, which I and other noble Lords present have spoken to and supported in this House. It sets out the goals, opportunities and process for bespoke city deals, giving each place the means to improve their specific circumstances-not to a one-size-fits-all formula. These are called city deals and initially those deals will be with each of the eight core cities-Birmingham, Bristol, Leeds, Liverpool, Manchester, Newcastle, Nottingham and Sheffield-but with a clear and stated ambition to go much further.

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Each of these cities, working with their local enterprise partnerships, is engaged in discussion and negotiation across Whitehall for further decentralisation of the tools and resources to drive up growth and jobs and drive down dependency on public services. As I said, these eight cities already produce 27 per cent of the country's total economy. However, recent independence forecasts by Oxford Economics demonstrate that the eight core cities local enterprise partnership areas are capable of delivering an additional £61 billion in GVA and 1.3 million jobs beyond those currently predicted up to 2030.

Some contributing growth factors are beyond the control of local or national governments, and we need to recognise that. But others, including a more locally sensitive application of the levers of growth, can and should be devolved.

The eight core cities I mentioned have a particular role, but their work has always been applicable to a much wider constituency of towns, cities and local authorities. What works for them can work in other places, particularly using the bespoke method that the Government have put in place. Unlocking Growth in Cities and the Localism Act set in motion a long-term process of decentralisation for growth, and it is not a one-off initiative. It is my hope that many other places will in due course come forward, jointly with business leaders, to benefit this process-perhaps several times as needs change-and that we will in turn all benefit from the increased growth that they produce.

I listened with interest to what my noble friend Lady Eaton said about Bradford. It has been a common comment, because there has been a misunderstanding that somehow this is only about eight cities. It is about those eight core cities that have for the past decade been planning for how they could use the levers of government to drive growth. It was made absolutely clear by the Deputy Prime Minister in his speech in Leeds in early December to launch the new cities policy that this was the forerunner for other cities. There will be a second round starting later this year, and this should be perceived as a continuum.

Cities will need to be bold, and all those who would like to be in a further round will equally need to be as well. Government departments will also need to be bold following the localist lead set by my right honourable friend the Minister for Cities. This requires nothing short of a complete culture change in the way we all work, moving from a central to a more local model, driven by good city governance, with political and business leaders working more closely together.

This is about rebalancing the economy away from an overreliance on London and on financial services; it is about our need to invest and build in our cities so that they can create more of their own wealth and a rising tax base, without simply being dependent on financial support from London and the south-east.

So what needs to be different? We need to manage cities in a different way. Rather than waiting for the centre-Whitehall-to give out money tied to specific programmes and outputs, we need to use money, which may be limited, wisely, defining the local priorities that are felt to be important, and let them shape the funding to fit that set of local priorities. Local authorities

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will in future be less development managers and more development facilitators. They will act less on the basis of national targets and work more in collaboration with neighbours to establish growth ambitions and delivery. Crucially, risk and funding, which are currently undertaken at the centre, will be managed by the local authority, the council, the first eight core cities and their city regions. This is quite a significant culture change that the Government are proposing.

However, the context is very important and it relates to governance of the United Kingdom. There has been devolution to Scotland, Wales, Northern Ireland and London, and there will probably be increasing devolution to all those places. Perhaps we do not talk enough about the implication of that for England, which cannot be left out of that process. The Localism Act, which is now in place, focuses mostly on local government and its relationship to Whitehall within a context in which government offices in England have been abolished.

There is a strong centre of government in London and there are strong centres of government in Wales, Northern Ireland and Scotland, but there is no longer a government office in Newcastle upon Tyne, my city, or in any other regional capital in England that hitherto existed. There are some outposts of Whitehall departments, which are very welcome, although I sometimes feel that they could be better co-ordinated. Perhaps at some point they might all be collocated. We will see. As I said a moment ago, we have to address the issue of devolution from Whitehall.

Noble Lords may care to look at the document, Unlocking Growth in Cities, which was published in December. It gives a list of 21 policy areas in which the Government are prepared to enter into negotiation with cities to establish greater freedoms to invest in growth. I cannot go through all of them but some are very important. It refers to one consolidated capital pot for local decision-making and powers for cities to offer business rate discounts to local businesses. There will be a particular role, from 2014, for structural fund-the European RDF and European Social Fund-programmes under which there is a plan across Europe to adopt a special focus on cities and which will be able to play more of a leading role in shaping bespoke and integrated programmes.

There will be the ability to create industry-specific business improvement partnerships and tax increment financing, which is part of the Localism Act and in essence enables a local authority to borrow against future business rate income. At the moment, in England, councils are required to borrow prudentially against guaranteed sources of income. Therefore, there is a greater risk management in tax increment financing but also enormous potential rewards in the form of growth. There could be benefits in local authorities opting to pool business rates across their local enterprise partnership. There is the possibility of devolving local transport major funding and the responsibility for commissioning local or regional rail services, and for developing greater accountability to local communities for local bus services in the context of wider bus service operator grant reform. Public sector assets could be vested locally in a single local property

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company. As I say, no longer are there government offices to manage some of these things. There is a gap which someone else might have to step into to do these things.

Some of the spending functions of the Homes and Communities Agency-including a whole range of things such as planning, broadband and skills-could be devolved to councils and cities. It is a major concern to me that, despite all the multi-millions of pounds that have been spent in my region and in many others on skills development in the north-east of England, 25 per cent of manufacturing and processing companies are finding it difficult to recruit people to work in them. There is a mismatch between what the private sector needs to create wealth and therefore tax income for this Government, and the investment that is being put in. It seems to be leading people to develop skills, which in one sense is very good but in another sense does not help us drive the growth of the economy that we need.

Areas that should be looked at are city apprenticeship hubs, the creation of a city skills fund, and much closer working with and perhaps leadership of Jobcentre Plus. There certainly should be greater integration in the service of Jobcentre Plus at a local level. I would welcome it working much more closely with the Department for Work and Pensions. The Government can do a whole range of things. Each city will be different. One size will not fit all. I hope, first, that by Easter some cities will have reached agreement with the Government and that others can follow quickly. After that, round 2 can start and it is to be hoped that similar agreements can be reached.

As I said at the start of my speech, I am immensely encouraged by what the Government are doing. There is enormous potential in the policy work that is now being done and I hope very much that this will be grasped by all the cities and urban areas in England in order that we can produce the growth that the country needs.

2.25 pm

Baroness Randerson: My Lords, in the past decade we have seen for the first time more than half the world's population living in cities and city regions. In the United Kingdom, 74 per cent of the population lives in cities and their regions. Therefore we are more urbanised than most. That figure is forecast to rise to more than 90 per cent by 2030.

As my noble friend said, cities are the engines of national economies but it is important that we take note that not all our cities are automatically winners. A recent paper by the Institute for Government and Centre for Cities has an interesting analysis. It contrasts Brighton, which saw a 25 per cent increase in private sector jobs between 1998 and 2008, with Stoke, which was once at the centre of our international pottery industry and has lost getting on for one in five private sector jobs in that same decade. That is why I strongly recommend and welcome the Government's document, Unlocking Growth in Cities. The picture is not one of even growth and a great deal must be done. Along with Stoke, the other losers in that analysis are Burnley,

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Birkenhead, Gloucester, Blackburn, Oxford, Birmingham, Nottingham, Swindon and Blackpool. I should like noble Lords to note that these cities are not all in the Midlands and the north of England. In the past decade, for every 10 jobs created in London and the south-east, just one was created elsewhere, which is why our economy desperately needs rebalancing.

Cities compete all the time with each other for talent, investment and funding. That competitiveness is encouraged by even artificial constructs and devices, such as the city of culture. I well remember that my own city of Cardiff lost out to Liverpool, the city of my noble friend Lord Storey, in the city of culture competition a decade or so ago. Although we were really sorry not to have won and although we envied Liverpool its year of culture, we benefited from that competition. It stimulated cultural ideas and cultural planning in Cardiff. We have, for example, the Artes Mundi competition. It is a modern art competition of world status and was established when we were hoping that we might win the city of culture competition.

I make no apologies for drawing on examples from Cardiff. I know that it is not on the magic list of the eight core cities that have been referred to but we are a city of considerable significance. Although Cardiff is a minnow in terms of size compared with Liverpool, Manchester and Birmingham, it is a city of considerable strategic importance because it is the capital city of a small nation.

Looking across the cities of Britain, historically, each of them has a reason for being-a geographical reason, a reason of climate or of raw materials. Manchester, for example, exists because of its climate and the cotton industry. Stoke exists for the potteries. My own city, Cardiff, exists because it was a port and because of the proximity to that port of mines, the iron industry and, later, the steel industry. It was at one point the greatest port in the world. It is an interesting piece of local history that the first £1 million cheque in the world was signed in the Coal Exchange in Cardiff. The port still remains, of course, but is a shadow of its former self, so, like other cities, Cardiff has had to find a modern reason for being. Like other cities, it relies on being a thriving retail centre. In 2009, the largest new shopping centre in the UK was opened there, bringing, at a very difficult time for the economy, more than 400 new jobs. Cardiff now ranks among the top 10 retail cities in the UK. However, you have to have more than shopping and retail, so the city council has important plans for a central business district and has already indentified £40 million of capital finding to take that project forward. Rather belatedly, I am very pleased that the Welsh Assembly Government opted to follow the example of the UK Government by establishing a series of enterprise zones. One has been earmarked for Cardiff, specialising in the financial sector.

I put in an unashamed plug to the Minister. Cardiff would be an ideal location for the green investment bank, especially because of the promised electrification of the train service through to Cardiff, and the almost promised electrification of the valley lines. The central business district will create, as well as a lot of jobs in an important financial sector, a new bus station and

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will improve the train station. I am talking about transport because transport links are the key to the development of city regions. City regions are the way forward, because they spin out jobs to the rest of the economy in the area around the city.

While many of our great cities can be recognised as city regions, the idea has been resisted in south Wales until now. There has almost been a resentment of the growth of Cardiff. Therefore, I strongly welcome the fact that there is currently a Welsh Government consultation on Cardiff as a city region. It is so important that it is recognised that the future prosperity that we all hope the south Wales valleys will have depends on Cardiff, Newport and Swansea flourishing as cities, because they provide jobs for that region.

City regions can be seen as a sign of co-operation between urban areas rather than competition. The region of Leeds, which I do not think anyone has specifically mentioned so far today, includes Bradford, Kirklees, Barnsley, Wakefield, York, Harrogate and more. It is a massive conurbation which requires a great deal of co-operation across local authority boundaries. It is absolutely essential that that co-operation takes place. It has to be the way forward, because outright competition on all fronts often simply means shifting the jobs around from one area to another. The current crisis in the retail sector might be partly due to the fact that we have decided to shop online instead of in the city centres. It is also partly due to the difficult economic times that we are in. However, it pinpoints that you cannot have a city based entirely on the fact that it has a nice shopping centre. The shoppers move, and the jobs move, to the newest shopping centre which has opened. You always lose shoppers and jobs when a new shopping centre opens within your area.

We have to be careful about initiatives which might move jobs from one area to another. I think back to the 1980s and the enterprise zones. Analysis since then has shown that, to a large extent, they moved jobs around the country. Although I strongly welcome the enterprise zones that the Government have now introduced, I am pleased to see that there are measures to prevent that happening this time.

The Government's strategy starts with the eight core cities, our largest. As my noble friend said, there will be, we hope, a second tranche. Of the eight that have been announced so far, I note that only one of them, Bristol, is not in the Midlands or the north. That is understandable, but it is important that the balance is redressed in the future. Otherwise there is a danger that the south-west will be excluded from growth because of the empowerment and funding that is going into those eight core cities. I realise, of course, that the core cities have chosen themselves on the basis of size, but a strategic look at the geographical spread of the cities in the second tranche is needed.

My noble friend Lord Shipley has referred to the fact that devolution inevitably means that there is a separate treatment of the cities in the devolved nations. None of the Welsh cities that I referred to earlier is included. That is because of devolution. It is thus important that the two Governments work closely together. To return to Cardiff, there are already concerns that although the UK government initiatives such as enterprise zones, tax increment financing and local

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enterprise partnerships are being copied in Wales, they are being copied at a slower pace. In the economy, there is often no prize for second place. There is nothing if you have done a very good job but have not managed to be the best. Indeed, Wales has already lost one major development to an enterprise zone in England: the Jaguar Land Rover engine plant. Plans have been announced to establish it in an enterprise zone in Wolverhampton. The hope that it would be located in south Wales was unfulfilled.

Whatever the political differences, it is essential that economic policy in all devolved Administrations works with the grain of the UK's Government's macroeconomic policy. Otherwise, the cities of Scotland, Wales and Northern Ireland risk falling into the gap between the two Governments and the two sets of regulations. I am particularly attracted by the "tailored city deals", as the Government's strategy refers to them, empowering the leadership of our great cities. For many decades, we have had the drift of power to the centre, away from local government. Indeed, the term "local government" really does not reflect the reality of city regions such as Manchester, with a population of 2.6 million people. That is almost as large as the whole population of Wales and larger than the population of Northern Ireland. It is vital that we think globally. The competitors to our major cities lie not just in other parts of the UK but across the world. That global success is the envy of the UK economic success as a whole. We need to do comparatively better than other global cities if we are to succeed internationally. We are not, as my noble friend explained, doing as well at the moment as they are in many European cities.

I very much support the power of general competence given to local authorities in the Localism Bill and the proposed business rates retention that will enable local authorities to create tax increment financing schemes and allow borrowing for capital investment. I support financial empowerment. It is so important that cities are enabled to look towards the private sector to energise and empower them, rather than, as they have been doing for decades in the past, looking upwards to government for a handout in difficult times. Our cities are the strength of our economy and they need to be empowered in order to fulfil that.

2.41 pm

Baroness Sharp of Guildford: My Lords, I thank my noble friend Lord Storey for initiating this important debate. The White Paper, Unlocking Growth in Cities, which was published in December, received remarkably little publicity for what it had to say, so it is good that we now have a chance to debate it at somewhat greater length.

As has already been mentioned by other speakers, the White Paper had two key themes: first, that,

"Cities are the engines of economic growth and they will be critical to our economic recovery";

and, secondly, that,

As the White Paper says,

"We want to help cities exercise their independence and take their economic destiny into their own hands".

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When I announced that I was going to participate in this debate, somebody jokingly asked me, "Are you going to talk about Guildford?". I said, "Certainly not, the last thing that Guildford wants is talk about the case for any sort of growth", although it does have aspirations to be a city. No, my reason for wishing to participate in this debate stems from research that I undertook during the 1990s, when I was a research fellow at the science policy research unit down at the University of Sussex-I should perhaps declare an interest as I remain a visiting fellow of that unit-and was looking into innovation in Europe.

In particular, one issue that emerged from that research was the role played by a number of the core cities in Europe. In Germany, a large number of the cities play a vital role within their Land-one thinks of Munich, Stuttgart, Frankfurt and Dortmund. With the increasing prosperity of eastern Germany, cities such as Dresden are now emerging as core cities that lead their local areas. However, we looked not just at what was happening in Germany, which is the most decentralised of the European countries, but at what had happened in Spain, where devolution had encouraged Barcelona. Over the past 20 years since the Olympics, Barcelona has built itself to be a hub of growth within its local region of Catalonia. Again, Helsinki in Finland, which 20 years before had been a dull city, had also taken itself forward-partly on the back of Nokia and the electronics revolution-to become much more important and another hub of growth. I was interested in the role of cities within their sub-regions and regions, and I was interested in the degree to which they became a core for growth.

The other reason I wish to participate in this debate is because, in the course of the past year, I have been chairing a commission for the National Institute of Adult Continuing Education and the AOC that is looking at the role of colleges in their communities. I wanted to flag up the importance of colleges as well as universities within this agenda.

Let me start by taking up the whole issue of European cities, which has already mentioned by my noble friend Lord Shipley. As I said, my interest stems from the work that I did in the 1990s, but that work was carried forward to a considerable degree in the early part of this century with a report published by the then Deputy Prime Minister's Office-in the time of the noble Lord, Lord Prescott-called Competitive European Cities:Where do the Core Cities Stand? That was led by research from Professor Michael Parkinson at Liverpool John Moores University. Among his co-authors was Greg Clark-I rather excitedly thought that this might be the Minister in the Department for Communities and Local Government, but on chasing him up further, I discovered that it was not the same person, although the name is the same.

The Competitive European Cities report picks up some of the points made by my noble friend Lord Storey. It is a rather depressing story. The report was written in 2004 so it does not reflect the continuing growth in our core cities that took place from 2004 to 2008 and their continuing renaissance, which my noble friend Lord Storey talked about. It showed that Britain's core cities in the late 1990s and the early years of this

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century, while going through something of a renaissance, nevertheless in general lagged behind their European competitors in terms of productivity, GDP per capita, innovation, education levels, connectivity-the transport and communication routes, both electronic and physical -social cohesion, quality of life, political capacity and connections with their broader sub-regions. The only exception to that was Bristol, which in GDP terms was actually above the national average rather than below. With the exception of Bristol, all the major cities in GDP per capita terms fell below the national average.

Equally, the very positive message from the study was that the situation can be turned around, albeit over time. It instanced the very positive stories of cities such as Barcelona and Helsinki, which I have already mentioned, which over the previous 20 to 25 years have transformed themselves and their regions from being backwaters into being leading global players.

The factors that were listed as contributing to success were interesting. One was economic diversity-not being too dependent on a single sector of the economy but having a range of sectors, all of which contributed to their success. Connectivity, the physical and electronic capacity to move goods and services and people quickly and efficiently, was important. In that sense, airports played an important part. Barcelona, for example, has a splendid new airport that was built for the Olympics and it has made a great deal of difference to the city. Again, in Spain, the linking up of all the Spanish cities by the TGV-type fast train has made an enormous difference.

Other important factors included strategic decision-making capacities, the significance of networks and the relationship between key players in public and private sectors to get things done and get them decided. Networks are extraordinarily important-I want to come back to that point because that links up with the work that I was doing on colleges in their communities.

Innovation and investment in knowledge-based industries, combined with research education capacity, are also vital. That is something that one sees so strongly in countries such as the United States. I remember back in the 1970s being very impressed with the degree to which a group of universities in North Carolina had created a hub of growth within what had been a very backward state. One sees this very much in the United States, where the links between university and research have carried many states and regions within states forward.

Decentralisation and access to a skilled workforce are also very important. I want to pick up both of those issues and talk a little bit more about them. Decentralisation is very interesting and was an issue that hit me in my own research. The Competitive European Cities report said:

"Although it is not a straightforward relationship the evidence does suggest that where cities are given more freedom and autonomy they have responded by being more proactive, entrepreneurial and successful. Decentralisation in France has invigorated provincial cities during the past 20 years. The most successful cities in Europe have been German, which is the most decentralised country in Europe. The renaissance of Barcelona in part stems from the move towards regionalisation and the lessening of the grip of ... Madrid".

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The question arises as to whether the new powers we are proposing to give to our core cities are sufficient in this respect. My noble friend Lord Storey has been quite optimistic, but others have been much more critical about how much real economic decentralisation is proposed. In looking at the list of new freedoms that were being given, it seemed to me that it was again-one has seen this before-a list of pots for funding for this initiative and that initiative. Such funds are of vital importance, but the only new money seems to be the degree to which these cities are able to control business rates. Indeed, all they seem to be getting is the right to access any money from the growth in business rates-yet I think it was perhaps the noble Baroness, Lady Eaton, who said that this is now being constrained as the Treasury is holding it back.

England remains the most fiscally centralised country in Europe and, probably, in the world. In the week in December in which this announcement was made, the Secretary of State for the Department for Communities and Local Government announced that, after a two-year freeze on council tax, he will intervene if any council raises its council tax by more than 3.5 per cent this coming year. Such intervention would, in most countries, be regarded as quite untenable. Most of these successful cities in Europe have the discretion not only to set their own tax rates but often to develop new forms of tax, such as local sales taxes, local property taxes and so forth. They also have-and this is very important-freedom to go to the market to raise capital. One looks at German cities and the importance of the links they have with the local Landesbanks, with which they are often in partnership in new projects and developments. That seems so important.

However, in this country, if you want to raise money, you go cap in hand to the Treasury and say, "Please sir, can we raise the money for this? Can we have the money for that?". The Treasury controls absolutely everything. You can devolve political leadership-we have seen that and we have some very fine local leaders-but as long as the Treasury is not prepared to devolve in economic terms, and unless those leaders have the tools to do the things they want to do, I am not confident that we will see this turning around that one has seen in some of these European cities.

I will just spend a little time talking about colleges in their communities. My remit was to look at the role that colleges can and do play within their communities and the value that they might add as potential leaders. That led me to visit a great many colleges. If you are talking about the role and levels of education and so forth, a lot of emphasis is put on universities and the development of graduate education and research, which is absolutely important, but the majority of those at the local level-if one is talking about skill levels-are trained by the colleges rather than by the universities. Where Britain really lacks capabilities is in the intermediate and technician-level skills, where colleges can potentially play a very important part. The skill profile in many of these cities is below the average; they have a disproportionate number of those completely lacking higher-level skills such as Level 2 or 3 and a disproportionate number with very low-level skills.

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I was very encouraged by what some colleges are doing in reaching out, for example, to work with local employers. I am thinking of a college such as Birmingham Metropolitan College, which has worked with the BBC to train technicians for the digital switchover and with Samsung to train electronics technicians. The college has also developed a new link with Caterpillar and its supply chain and developed lots of apprenticeships. However, I also think of a college such as Barnsley College, which is facing very different conditions. Most of the local employers are small and medium-sized enterprises, which are loath to take on apprenticeships. Barnsley College has set up a separate company to employ apprentices off their own bat, whom they then hire out to small and medium-sized businesses. Some 99 per cent of these young people fulfil their apprenticeships and there are no problems, but the college acts as a guarantor and will always take them back if it does not work out.

It is so important that colleges link up in partnership, not only with employers but also, for example, with the police and local youth offending teams to bring the NEETs into college and give them experience and that they link up with community groups and ethnic minorities. All of this is happening as best practice in the best of our colleges, but one just needs to see it happen far more widely. This whole issue of upgrading the skill levels of people generally is an absolutely vital one if our cities are to succeed.

2.58 pm

Lord Liddle: My Lords, on behalf of the Opposition, we welcome this debate about cities and thank the noble Lord, Lord Storey, for tabling this Motion. It is a tribute to the Lords that in this short debate we have had very informative contributions from former leaders of three great northern cities-Bradford, Liverpool and Newcastle. We have also had very good contributions from the noble Baroness, Lady Randerson, with her deep experience of circumstances in Wales, and Cardiff in particular; and the noble Baroness, Lady Sharp, with her great knowledge of universities, and of the knowledge economy and its relationship to economic development. We also welcome the government paper published in December, Unlocking Growth in Cities, which I think is a response to cross-party pressure from all sides of this House and elsewhere suggesting that our great urban centres need more power to shape their own destinies.

This has never been more needed. I have welcomed the fact that the Liberal Democrats chose this subject for debate. However, on this side of the House we have to put on record that our big English provincial cities in particular need these powers to facilitate growth and to generate dynamism and momentum because the current austerity programme, which the coalition is pushing through too far and too fast, is hitting disproportionately hard those very English provincial cities that the Liberal Democrats have been speaking of so eloquently today. It hits them hardest in terms of public sector jobs cut, in youth employment and in welfare cuts that will cause real social misery and pain. We are facing this challenge because of that austerity programme.

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That has to be said, but there is here a bigger and longer-running issue which has nothing to do with party politics. Given the intense feeling that a lot of people have that we are as a country too centralised and need to be more localist, why has that not happened? I have just a few thoughts on that. I have been a localist all my life-I have spent 10 years in local government-but my thinking on the role of the city in localism was greatly affected when I did an exercise for the president of the European Commission in Brussels, looking at the social challenges facing Europe. I came across the work of a US urban theorist called Richard Florida, who had written a very good book called The Rise of the Creative Class. The core proposition in that book is that metropolitan regions with high concentrations of technology workers, artists, musicians and lesbians and gay men exhibit a higher level of economic development than do other places. You could say that this is a flawed piece of academic punditry, and certainly some of it goes a bit over the top. Professor Florida, for instance, produced an index of what he called "high bohemian" cities. But it does to an extent at least accord with the reality of what is happening on the ground. I saw this when I came back from Brussels in 2007 and became chair of Cumbria Vision and involved in regional development. Our great northern cities were undergoing a remarkable renaissance. They had been devastated by the austerity of the 1980s, although they were rescued in part by the great vision of the noble Lord, Lord Heseltine. But our cities have had to spend the last quarter century finding new drivers of economic activity. To an extent, those have been found. Look at higher education and the contribution made to Tyneside, for example, by the expansion of universities in Newcastle, with the new Northumbria university. Look at how the UCLan, in a much smaller city space, has made a big contribution in Preston. Look at the explosion of sport as a driver of economic activity and how important it is, particularly to Manchester and Liverpool. Look at culture, with the Tate in Liverpool, the Lowry in Salford and the Sage in Gateshead. It is a great flourishing of culture, a celebration of diversity and a triumph of the creative spirit, acting as a magnet for sources of dynamism in our society.

I am really proud of what the Labour Government contributed to the transformation of our cities in the past 15 years. It has become the stock in trade to knock the regional development agencies and what they did. Of course, they had their faults; everything does. They were over-bureaucratic, and the regional political dimension to complement them was never put in place. But what they did and contributed to makes me immensely proud of what my party did in its period of government, including the regeneration of Liverpool Docks, Media City at Salford Quays, the bringing together of the new university at Manchester, which will be world class, and the Daresbury science complex-as well as a new university with a campus even in a place like Burnley. This is the fantastic urban development that took place.

The coalition chose to toss away the achievements of the regional development agencies, which was a wilful destruction of the capacity for economic

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regeneration at the time when that capacity was never needed more. Therefore, the coalition will have a heavy price to pay for job losses and increasing regional equalities-I say to the noble Lord, Lord Henley-that are occurring in this country under his Government's stewardship.

What are we to make of the latest initiative to fill this gap? As I have said, we have seen lots of initiatives in the past for greater localism. When I was first a special adviser working for the noble Lord, Lord Rodgers of Quarry Bank, in the Callaghan Government in the 1970s, I remember writing lots of memos for him on the work of the Layfield report and how it was going to introduce more decentralised local government. Well, that did not come to pass.

It is tempting to blame the Civil Service for seeing off localism and local government, and I know from personal experience that there is deep-seated control- freakery in parts of Whitehall departments. I see quite a bit of this lurking in the language of the December paper. But our politics is also responsible for the centralisation of our country. In sections of my own party, people are deeply committed to Fabian centralisation, and in the Conservative Party you have Mr Eric Pickles proclaiming his commitment to localism. As one of the noble Baronesses opposite pointed out, he is introducing the fiercest regime of rate-capping and control of council budgets that has ever been in place. It is not just on the central issue of finance that he is controlling; he deems it proper to decide how often councils should collect their bins. There is no consistency. What you do not have is genuine commitment to local decentralisation. What you have there is commitment, frankly, to populism.

When I look at the latest paper, published in December, my fear is that it is ersatz decentralisation. Anyone who has served government knows the tell-tale signs of these things. The paper is very good on symbols; a Minister for the Communities is being created, the excellent Mr Greg Clark, for whom I have great admiration-he is an excellent Minister. A new unit has been established in the Cabinet Office, the Cities Policy Unit. We have had a lot of Cabinet Office units of various types in the past. There is a new ministerial group under the Deputy Prime Minister to drive the agenda forward-very good, three cheers for that. It is excellent, if I might say so, that the noble Lord, Lord Shipley, has been recruited as an adviser in this latest drive for greater localism.

There are, however, important gaps in the prospectus, and I would be grateful if the Minister could explain how the Government propose to deal with them. If she is not able to do it in her speech, I very much hope that she will be able to send me a detailed reply. First, we are talking not about full-scale decentralisation but about decentralisation by exception to a limited number of cities. That is clear from paragraph 1.12 of the paper, which declares clearly,

I dare say that Whitehall departments were very insistent on getting that sentence in.

Secondly, while I welcome measures such as the introduction of a single capital pot for participating cities, to an extent that was what the RDAs had as

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well. Some government departments look as if they are not going to play ball with this decentralisation; for instance, the Department for Work and Pensions, where the business of active labour polices to get people into jobs is so important for city development, is keeping its distance, as is BIS on skills. The example of the noble Lord, Lord Shipley, of the experience in the north-east shows how, when you have a nationally run target programme of skills training, it just does not work in terms of regional skill needs.

To me, there is an obscurity about the financing aspects of these proposals. What is the Treasury's position on business rates and tax increment financing? There also seems to be confusion about governance. There are going to be referenda for elected mayors in a lot of these cities-at least we think there are. At the same time, there is a lot of talk in this paper about the role of the local economic partnerships, which are wider than cities. What is the relationship between the LEPs and the mayor? Where is the idea of the "metro mayor"-the mayor for Newcastle or for Greater Manchester, not just for the city, which is a tiny part of the area? There are real questions about how this is going to work and whether it is real decentralisation.

One of the most revealing bits of the paper is figure 1 on page 12, a graph that shows how cities do according to the national income of their countries. The country that has by far the most prosperous cities is Germany, and second is Italy. Why is that? It is because, particularly in Germany, there is a real political decentralisation of power.

We welcome this initiative but we want to know what it really represents. We wish the noble Lord, Lord Shipley, well, but I think he is going to have a mountain to climb if he is going to succeed in his ambitions.

3.13 pm

The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox): My Lords, I am delighted to congratulate my noble friend Lord Storey on securing this debate. He started us off with a wonderful picture of his Liverpool-its past, its present and what I know will be its great future. As I read up on his biog, I see that he served that city for many years as lord mayor and as a councillor for 37 years. It was a hugely successful capital of culture, as we have heard from Cardiff, a city that also bid for that role. So who better to speak for Liverpool than the noble Lord?

I hope to answer as many questions as I can. If I am not able to do so, I hope the noble Lord will understand if I have to write. Many people have spoken and, as I go through, I will mention as much as I can. I always have a sharp intake of breath when the noble Baroness, Lady Sharp, stands up to speak because she is so well informed and I learn so much from her. I can never answer all her questions so I know for sure that I will miss out some of hers, but I thank her very much.

England's cities have always been centres of drive, creativity and initiative. One has to think only of Chamberlain's pioneering leadership in Birmingham or Brunel's vision in transforming the landscape of Bristol. As we have heard so often today, England's

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cities showcase some of our best talent and innovative thinking. We have made a very good start with centres of expertise such as the new MediaCityUK in Greater Manchester, which will promote the growth of the media sector, and Sheffield's centre for advanced manufacturing, where such world-leading firms as Boeing and Rolls-Royce are carrying out cutting edge research. I am sure that it is an ambition shared on all sides of the House that we should work together to give our major cities the best possible opportunities to thrive and gain international significance as economic powerhouses in their own right and their own unique way.

My noble friend Lord Shipley spoke of comparisons with the cities of Germany and France. It is always very useful to look at the cities of Europe in particular to see what we can learn from them. The noble Lord spoke of the core cities amendment, which is now part of the Localism Act, and its creation of a historic opportunity.

The Government's policy towards cities builds on several initiatives already under way to promote local economic growth. Local enterprise partnerships enable civic and private sector leaders to work together to boost local economies, and I acknowledge the excellent work of my colleague in another place, the Minister for Business and Enterprise, Mark Prisk, in driving this agenda forward. Some £765 million has been invested in urban areas through the regional growth fund. Enterprise zones have been created in 24 cities and their wider LEPs, which will generate jobs by reducing barriers to enterprise and providing new fiscal incentives. I am sure we all recognise that the promotion of local economic growth is a fundamental priority at this difficult time.

With 58 per cent of England's population living in cities-74 per cent if you include the wider commuting area-and 61 per cent of jobs based in cities, or 80 per cent including the wider commuting area, our cities are crucial to driving local growth and have tremendous economic potential. All our cities have their individual strengths, which have enabled them to build strong and proud international reputations over the years. The Minister for Cities and my colleague in another place, the right honourable Greg Clark, has shown his appreciation of local concerns and priorities in the way that he has pursued the cities agenda.

My noble friend Lady Randerson spoke of rebalancing our declining cities and asked what we are doing for them. The Government believe that all cities can improve their local environment for growth. The Government's approach focuses on three key themes: shifting power to local communities and businesses; promoting efficient and dynamic markets; and focused investment through the regional growth fund and enterprise zones. The Government's approach to cities will allow local leaders to identify their own priorities and grant them the powers to drive local economic growth in the way that they think best. As my noble friend Lord Storey said, this will be based on unlocking investment and funding, devolving power-yes, certainly that-and good city government.

On business rates, I agree with my noble friends Lady Eaton and Lord Shipley that the Government's plans to localise business rate revenue create a strong

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incentive for growth. We are committed to making this incentive as strong as possible, while ensuring fiscal sustainability.

We can expect to see a fundamental shift in the relationship between national government and the cities, starting with a genuine transfer of power. The provisions set out in the Localism Act provide a concrete example of the Government's commitment to transferring power to the local level.

Let me respond here to my noble friend Lady Randerson on the green investment bank. It was a good try, I thought. As I am sure she will be aware, a clear process has been set out for bidding for the green investment bank location. Cardiff will be able to apply to host it. I am sure other noble Lords will be keen for their local cities to apply, too. However, I commend her for taking the opportunity today to have a go for Cardiff. Someone should open a bottle for her when she gets home tonight.

As my noble friend Lady Sharp noted, evidence suggests that successful decentralisation will be a route towards local economic growth. We share her concern to see a radical change in the power held at local level. My right honourable friend the Minister for Cities and the Deputy Prime Minister launched the document, UnlockingGrowth in Cities, on 8 December. The Deputy Prime Minister spoke on this occasion to encourage cities to be as ambitious as possible in engaging with this agenda. City region leaders will negotiate bespoke deals with the Government, which will give them the capability to do the things they want to do in their own way.

As has been referred to by many noble Lords, we are starting with the eight core cities-the largest cities outside London-and their surrounding areas as represented by the local enterprise partnerships because they have great economic potential which has yet to be fully realised. I say in response to the question asked by the noble Lord, Lord Storey, that deals will be made available to further cities in due course. I can say no more than "in due course" at this stage.

I reassure my noble friend Lady Eaton that our work with Leeds city region includes Bradford and, of course, other towns and cities in that region. I say to the noble Baroness, Lady Randerson, that Cardiff's policy is a devolved matter. As she well knows, it is for the Welsh Assembly to take forward policies to boost growth in Welsh cities, including Cardiff. I strongly support that. I agree that it is important for this Government to ensure that they engage with the devolved Administrations. I know that my right honourable friend in another place, the Secretary of State for Business, met his Welsh counterpart in December to discuss these very issues.

As a result of the deals, cities will have greater freedoms to invest in growth, the power to drive critical infrastructure development and new tools to help people in their area get the skills and jobs that they need. My noble friend Lady Eaton talked about skills and transport in cities. I reassure her that all our discussions with cities include new measures in relation to skills and transport.

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After all, a deal is a two-way process. In return for granting cities new powers and freedoms, we expect them to demonstrate strong, visible and accountable leadership and effective decision-making structures. City leaders will need to work across their economic footprint with representatives of the local enterprise partnerships to attract skilled workers, build infrastructure and boost innovation in order to create vibrant urban environments that people want to work and live in. The Government are committed to working closely with cities in the months and years ahead to help them achieve these goals.

The noble Baroness, Lady Sharp, referred to apprenticeships. We share the interest in increasing apprenticeships. As she will have seen, the Government have put city apprenticeship hubs on the menu of options for cities to consider, as set out in the Unlocking Growth in Cities document that we brought out on 8 December.

The noble Lord, Lord Liddle, talked about austerity and the RDAs. I note his concern. The coalition is working to get the entire UK economy back on track. These measures show that the Government are committed to rebalancing the economy and ensuring that all cities and, indeed, the whole country, can fulfil their potential. The noble Lord also asked about the missing bits of the menu. The menu is illustrative, as the Deputy Prime Minister made clear. We are ready to match the ambition of the "asks" that cities put to us, but it is up to them to decide what their priorities are. This is what this is all about-making sure that the cities themselves will be able to do deals which allow them to run themselves as they see fit to help them become more successful.

The noble Lord, Lord Liddle, also asked about mayors, LEPs and metro mayors. The Government have set out their position on elected mayors. They offer an opportunity for stronger localised governance, but it is for local areas to decide on the governance structure that best suits them. That is something I am sure the Opposition will gradually get used to-the amount of times that this coalition Government will devolve power down to the people who we feel are best suited to deal with local issues.

Success in all this will mean empowered local leaders able to drive real change by looking outwards to the private sector rather than upwards to the Government. Success will mean new partnerships between civic leaders, businesses and local communities, creating further opportunities for investment and growth, and enabling cities to shape their own economic destinies. Success will mean more jobs, better services and an improved quality of life for local people.

In the words of my colleague in another place, the right honourable Greg Clark, in the document Unlocking Growth in Cities, we,

3.25 pm

Lord Storey: My Lords, I thank noble Lords. During the course of this debate, I have been struck by how many common themes there have been. We almost put

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our finger on the issues and problems that need to be addressed. Literally every speaker has raised the same issue.

I should of course have congratulated the noble Baroness, Lady Eaton, on her job as chair of the Local Government Association when there was a real focus on the importance of cities and the shifting of work she was able to do. She rightly said that power should be decentralised to the lowest possible level, and I entirely agree with that.

The noble Lord, Lord Shipley, made an important point about the mismatch of what the private sector needs and how we needed to unlock local skills.

I was shocked at the figure given by the noble Baroness, Lady Randerson-that for every 10 jobs created in London and the south-east, only one is created elsewhere. That is an alarming statistic. I equally agreed with her valid point that it was all very well one city crowing that it has won new inward investment, but that might have been taken from somewhere else. That has often been the story of the past couple of decades. I know that in Liverpool, when we were lucky enough to secure Jaguar, the inward investment moved from the Birmingham area. There have been lots of examples of cities, with government help, having been able to get inward investment but at the expense of other parts of the UK. It was right and important to raise that issue. I am sorry she was disappointed that Liverpool was made the European capital of culture, but I should tell her that we still regard ourselves as the capital of north Wales. We tried to get the Eisteddfod to come to Liverpool but were not successful.

The noble Baroness, Lady Sharp, talked powerfully about the lessons that can be learnt from European cities. Again, we should look closely at that. Those lessons are very plain for us all to see.

I come to the noble Lord, Lord Liddle, and his almost political tour de force. It made me think of when I was first elected as leader of Liverpool City Council and I went to my first core city leaders' meeting in Birmingham-I was the only non-Labour leader there. As I listened to noble Lords' speeches, I thought that those Labour leaders would be shocked that it has taken a coalition Government, 12 years later, to introduce most of the policies they were asking for.

When the noble Lord, Lord Liddle, raises those issues, it gives rise to the question: where was he when the Labour Government did not ensure that decisions were devolved locally but had stringent bidding rounds and ensured competition all the time between local authorities? I must say that I thought that some of the points he made were fair and equitable.

Finally, I thank the noble Baroness, Lady Wilcox, for her response. I am delighted that deals will be made for further cities to take part.

A couple of Members made a point about core cities. The core cities used to have the view that they were self-selecting, which I thought was very unfair. They often turned down the likes of Bradford, perhaps because they see them as competition.

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Perhaps we should have a campaign to stop that self-selection and have a genuine partnership of cities of the United Kingdom.

I thank all Members of the House for their contributions.

Motion agreed.

EUC Report: Internal Security Strategy

The EU Internal Security Strategy

Motion to Take Note

3.32 pm

Moved by Lord Hannay of Chiswick

Lord Hannay of Chiswick: My Lords, the report of the European Union Committee on the European Union's internal security strategy was published on 24 May 2011. I am therefore glad now, after nearly eight months, to have the opportunity to bring it to your Lordships' House for debate as chairman of the Home Affairs Sub-Committee, which conducted the inquiry. However, in doing so, I cannot simply pass over that remarkable-and, in my view-lamentably long delay. If the House wishes to ensure the topicality and relevance of the debates it holds on subjects such as this and reports such as the one we are considering today, it must improve its record on the scheduling of debates.

Internal security is primarily a matter for member states themselves, but the treaty of Lisbon, although reflecting that, for the first time gave the European Union an explicit responsibility by setting up a committee whose prime aim is,

The committee is known as COSI-one of those dreadful acronyms-and I shall have more to say about it in a moment.

The new responsibility of the European Union, although limited, led to the five-year Stockholm programme, which invited both the Council and the Commission,

Both institutions took up the challenge. I hope that I am not being disobliging when I say that the Council strategy, which was agreed in March 2010, was an anodyne document of no great weight. However, in November 2010, the Commission published in response to the Council document what was intended to be an implementing communication called, The EUInternal Security Strategy in Action. That document formed the basis of our inquiry.

Security is a complex subject, and we were fortunate to have as our special adviser Stephen Hawker, whose experience and knowledge of counterterrorism and security issues is so wide that I am not permitted to divulge to the House more about his background. I can, however, say that the committee was extraordinarily grateful for his help.

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In this Parliament, institutions of the European Union tend to come in for blame rather than praise, and that is particularly true of the Commission. I am glad, therefore, to be able to say that the Commission's document was, in the view of the committee, pragmatic and realistic, focusing on five areas where the EU could and should have some real influence. These are: the disruption of international criminal networks; prevention of terrorism; security in cyberspace; improved border management; and increased resilience to crises and disasters-natural disasters, in particular. The document is a first rational attempt to articulate a comprehensive approach to the EU's internal security, and I pay tribute to the impressive work of Commissioner Cecilia Malmström, the Home Affairs Commissioner.

Our inquiry was long and so, I fear, is our report. In this speech I shall concentrate on only a few aspects of it-primarily, not surprisingly, those where we regard the Government's response to be unsatisfactory. However, the Government agreed with many of our recommendations, and I was very grateful, as was the committee, for that. In particular, I was struck by the fact that they firmly endorsed the committee's view that Britain's internal security neither begins nor ends at the water's edge. That kind of conceptual approach is quite important because it rather gives the lie to the suggestion that we can just do this on our own and that will be fine.

The first of the areas where we are a little at odds with the Government in their response relates to cybercrime. No one nowadays doubts the scale of the damage that can be, and is being, done by cybercrime and by attacks on cybersecurity. Of course, much of the work of defending against them is a national responsibility or is being followed up in a military context in NATO. However, the cybercrime element is a bit different. The Commission recommended the setting up of a new cybercrime centre, through which the member states and institutions would be able to build operational and analytical capacity for investigations and for co-operation with international partners. Our witnesses, including the government witnesses, agreed almost without exception that this would be a worthwhile development, as did the committee. We recommended that it should not be a new free-standing institution, which we thought would be wasteful and duplicative, but that it should be located within Europol, which is increasingly becoming a central part of Europe's efforts against various forms of crime and which possesses some of the infrastructure needed. The Government, I am glad to say, agreed on both those points. The disagreement between us comes over the funding.

Cybercrime is a huge cost to all our economies and it cannot be fought without resources, yet that is roughly what the Government would like to do. They are prepared-quite rightly, in my view-to allocate £650 million in new funds to the UK's own national cybersecurity programme but they seem to think that Europol can fund a new EU cybercrime centre out of thin air from its existing budget. The EU's budget framework for the years 2014 to 2020 is something that the Select Committee and its sub-committees are considering again at this moment, and I shall not stray into that wider territory. We are all realistic enough to

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appreciate that overall now is not the time for an increase in the EU budget. However, a reallocation of resources within the budget is another matter. The home affairs budget is actually less than 1 per cent of the total EU budget and will reach only about 1 per cent of the total EU budget if the Commission's proposals for 2013 go through, which they may very possibly not do in the form in which they have been put forward.

I and my committee would argue that it is not really credible for the Government to suggest that the relatively modest cost of setting up the cybercrime centre within Europol cannot be found from other heads of the EU budget. The Government's position is that it has to be found within the justice and home affairs budget, which is not really credible. I hope that the Minister will be able to undertake to look again at that aspect. I am not expecting him to concede the point here and now-I know where the true decisions on these matters are taken-but I hope that it will be looked at again because the suggestion that this can be found within the JHA budget is not very credible.

Mention of Europol brings me to the question of its parliamentary oversight. The treaty of Lisbon introduced the requirement that national parliaments should join with the European Parliament in overseeing the work of Europol. It had been suggested by the Commission, although not in the strategy document that we are debating today, that that should be done by a new and specially constituted body. My committee thought, and repeated in the report, that this could and should be done not by a new specially constituted body but by the joint interparliamentary meetings which already regularly take place between chairs of the home affairs sub-committees or committees of national parliaments and of the European Parliament.

I went to Brussels last October as chairman of the EU Home Affairs Sub-Committee for a meeting of those chairmen and it was hosted by the equivalent committee, the LIBE committee, of the European Parliament. At a session which I chaired, it was agreed that that oversight should be carried out by such existing annual joint interparliamentary committee meetings. The government response did not deal with the issue but I would like to hear from the Minister whether the Government agree that that is a satisfactory way in which to proceed and whether they will do all that they can to ensure that this approach, and not the more cumbersome approach which the commission proposed, is agreed at EU level.

I mentioned earlier the committee called COSI, which can broadly be rendered into normal English as the committee of senior interior ministry officials. Potentially, that is a high-powered body which could, and should, help to co-ordinate and, where appropriate, direct all the European Union's work on internal security. Currently, that work is distributed among a very large number of committees, working groups and working parties. We actually managed to unearth 14 of them which we listed in our report. I do not doubt that there are some lurking in the undergrowth that we may have missed. Much of their work overlaps. Setting up COSI was an opportunity for some, at least, of these bodies to be merged or abolished, but that opportunity

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was not taken. Most of them continue. The Government, who supposedly favour the abolition of otiose bodies, seem lukewarm about our recommendation, telling us only that they would be prepared to consider a case for COSI replacing or overseeing such bodies once it has established itself. That was six months ago. I hope that the Minister can now tell the House that he is prepared to press for COSI to have a more significant co-ordinating function and for some of this plethora of committees to be abolished.

The chairmanship of Council working parties usually rotates with the presidency on a biannual basis. Sometimes that does no harm but the committee felt that, in this sector, with a group of experts like COSI, there was a strong case for a more durable, longer-lasting chairmanship. The Government agreed that members of COSI should be senior, operationally focused officials with authority to commit their national operational resources but they could see the benefit of one of the best qualified of these officials chairing the group for, say, two or three years. That is by no means unknown in European Union practice; it was for many years the way in which the European Union's monetary committee was run, in some years extremely effectively and professionally, by a member of Her Majesty's Treasury. That would be an improvement over the six-month rotation in the chairmanship of that committee. The Government conceded that six-monthly rotation,

but thought this might be mitigated by the adoption of the three-presidency approach, by which three successive presidencies work together. Frankly, mitigation is not quite enough. If a six-monthly rotating chairmanship is detrimental, the Government should seek the agreement of other member states to do away with it and have a more professional approach.

Data protection will shortly be in the news again, when the Commission brings forward its long-awaited proposal for a new directive. This is very relevant to internal security, so much of which depends on the painstaking collection and analysis of personal data. A balance has to be found between the interests of security and those of personal privacy, and this is never easy. It is particularly difficult in the case of the passenger name record data, or PNR: the data on passengers on flights entering or leaving the European Union. Flights from the EU to Australia are already the subject of an agreement which has, in our view, satisfactory data protection provisions. Flights from the EU to the US are the subject of an agreement-the fourth-which has been initialled but is not yet in force. All I can say about that one is that its data protection provisions are marginally better than those in the existing EU-US agreement, which is not saying an awful lot.

Data on flights into the EU are now to be the subject of a directive, not just flights from Australia or from the US. The Government, encouraged by a report which was endorsed by this House, have already opted into the proposal for this directive and I hope that the Minister will confirm that during the course of the negotiations, he will be paying due regard to the importance of the protection of passengers' data-all the more so if, as the Government hope and the

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Committee hopes, too, that directive is extended to cover intra-EU flights, not only flights into the EU from outside.

I cannot conclude without mentioning yet again a question which the House has raised time and again in taking evidence from Ministers and officials in this House, and many times in correspondence with Ministers. I refer to the Government's failure to sign or ratify the Council of Europe convention on money laundering, known as the Warsaw convention. The disruption of international criminal networks is, as I have said, one of the objects of the strategy we were examining and there is no doubt that the tracing and confiscation of the proceeds of crime is one of the most powerful weapons in the armoury of states.

The previous Government undertook to ratify the Warsaw convention early in 2010. For this Government the noble Lord, Lord Henley, who will be replying to this debate, assured the committee only last month that he was pretty sure that the United Kingdom was compliant with the convention, but that the Home Office did not currently have the resources to review this and therefore was not prepared to set a date for signature and ratification. I asked him when the Government would sign the convention, to which he replied,

"I would hope we would do so within the next year or so but I am not going to be any more precise than that".

I hate to say so but he could not have been any less precise, even if he had tried.

A failure to sign one of the major international instruments for combating serious, organised crime does not give the impression of a Government who take the fight against such crime seriously. If we do not sign and ratify such a convention, how can we expect others to do likewise and how can we hope to play a leadership role in the Council of Europe, over whose intergovernmental activities we currently preside? I know that the Minister has already taken one broadside on this subject in the course of Questions in this House today. I am offering him here a somewhat less difficult matter, which does not raise the issue of extraterritoriality which he referred to earlier. It is frankly a little difficult to believe that the amount of resources needed to be quite sure that we are in conformity with a convention, as he is confident that we are, is such an enormous burden that it cannot be undertaken. It is a shame, frankly, that we are not signed up to and ratifying that convention.

This inquiry was one of great interest to the Committee and our report raised a number of serious questions for the Minister to answer. I look forward to hearing his replies. I beg to move.

3.50 pm

Lord Hodgson of Astley Abbotts: My Lords, I am a member of Sub-Committee F. I begin by thanking the noble Lord, Lord Hannay, for his excellent chairmanship of proceedings and for managing to dock our little boat so successfully. I also thank our clerk, Michael Collon, for his indefatigable work in making sure that we stayed on the straight and narrow, and our special adviser, Stephen Hawker. This is a complex and difficult area and without his advice and help we would have floundered.

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I am firmly of the view that national security must be the responsibility of each member state, on two grounds. The first is that in a liberal, plural democracy, the ability and readiness of a country to defend its citizens is the fundamental part of the social contract by which we all coexist. Secondly, and no less importantly, the way that policing takes place is a reflection of history: the historical traditions of a country and the way that its society has developed. Traditions will be quite different from country to country. There is no one-size-fits-all approach.

Nevertheless, in that ghastly and hackneyed phrase, we live increasingly in a global community. The Commission's communication on the EU's internal security strategy, with its focus on the five areas that the noble Lord, Lord Hannay, read out, and which I will not repeat, makes it clear that there is a world dimension to these issues, quite apart from the EU dimension, which we have to take into account. I will repeat his quotation from paragraph 17 of our report, which states:

"The security of the United Kingdom does not begin or end at the water's edge, and cannot be defended independently of the security of other States".

The complexities of trying, for example, to prevent terrorism or disrupt international crime networks are compounded when they are addressed through a multinational organisation such as the EU. Success in the five selected fields will require leadership of the highest quality, providing focus for dedicated and expert resources, deployed consistently over time. This is painstaking work; these are hard yards to gain. My concern is that our report showed that to some extent the EU has so far failed to address the challenges and yardsticks that the approach requires.

I turn first to leadership. As the noble Lord, Lord Hannay, pointed out, we now have the standing committee COSI whose chairmanship rotates every six months, in line with the EU presidency. I urge my noble friend to readdress this point. This is a committee of critical importance, whose chairman has barely got his feet under the table before he is moved on. On that basis we cannot get the consistent and focused leadership of the very expert resources that we need. We need to find a way-I am no expert in the diplomatic niceties of this-to ensure that somebody takes responsibility for a longer period of time. If we heard that one of our largest private companies was rotating its chairmanship every six months, we would think that it had taken leave of its senses.

The membership of COSI seems to be complex and frequently changing. I understand that so far it has not included representatives of FRONTEX or Europol. Given that two of the five objectives of COSI are improved border management and the disruption of international crime networks, not having FRONTEX and Europol representatives on the committee seems at the very least to be counterintuitive. Further down the chain of command, the situation is even more unsatisfactory. As the noble Lord, Lord Hannay, referred to, box 10 on page 51 of our report lists the 14 bodies involved: seven working parties, three working groups, one group, one task force, one committee and one strategic committee. To be candid, this does not give

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me confidence that we will have a joined-up approach because, to be effective in this area, very close attention to tiny details is essential and good communication is no less so. From my point of view, there is a good deal of work to be done on the strategic shape of the architecture of the EU's approach to this very important area, which we have highlighted in our report.

This is all at EU level and, as I have already noted, internal security is a matter for each member state, so, as the noble Lord, Lord Hannay, said, there is also a balance to be struck between, on the one hand, the freedom, privacy and prevention of unnecessary intrusion that the citizen is entitled to enjoy and, on the other, the need for the protection of the citizen. As the work on the EU's internal security strategy develops and gets traction, I hope there will be an important scrutiny role to ensure that this balance is maintained by the European Parliament, national Parliaments and intergovernmental activities and organisations. I hope very much that we will keep our eye firmly on this one, because the creep of intrusion into our individual personal lives on the grounds that national security demands it is very insidious.

The rest of my remarks focus on cyberspace and cybersecurity. On 15 September last year, an article in the Times quoted a Cabinet Office source that last year intellectual property theft cost UK companies £9.2 billion, industrial espionage cost UK plc £7.6 billion, online theft cost business £1.3 billion, blackmail cost business £2.2 billion and identity theft cost consumers £1.7 billion. This is clearly an area that does not respect national boundaries.

However, the way we tackle cybersecurity is made more challenging by three features. First, we all increasingly wish to be in open communication. We wish to do more and more online. We are being encouraged to do more and more online. We believe our prosperity and future growth depend on online communication, so the channels by which the criminal can approach us are widening and broadening all the time.

The second issue is the fear of fraud being published. It is perfectly clear that many firms do not wish the news of a cyberattack to be published. They fear that it may lead to imitative attacks. The knowledge that a firm has had an attack may lead others to try the same approach and, of course, very importantly, it saps public confidence in a firm's reputation, and nowhere is that more important than in financial services. So the second challenge is: how do we make sure that people, firms and financial institutions bring forward the information without fear of disadvantaging themselves?

Thirdly, and finally, what sort of organisation do we need to tackle these types of crimes? We had some powerful evidence about how conventional structures in government and policing are hierarchical. They are age based, and very often they are arts graduate-training based. In the cyber area, the ideal structure is very different. It is not hierarchical at all. It is completely flat. It consists of very much younger people, and it has a physics and engineering-based orientation. That is going to present a real challenge to COSI and other organisations about how you integrate those two very different approaches.

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As far as the EU is concerned there is a further challenge: namely, the variable understanding of the threat and its seriousness. At paragraph 19, we refer to the evidence that we took from William Shapcott, the former director of SitCen. He said:

"You can roughly divide the member states into three groups: those who are threatened and who really understand it. The UK is clearly in that group, and the Germans and the French are as well. Then there is a group that possibly is threatened but maybe doesn't properly register it, and then maybe some that aren't terribly threatened".

He went on to explain that as the threats changed so would the groups, which could learn from one another.

That takes me to the really important point about the establishment of the cybercrime centre as being a means whereby experience, knowledge and information can be shared. I am delighted that the Government have decided that it should not be placed at Heraklion in Crete as part of ENISA. We have kicked poor old ENISA often enough and hard enough. I am delighted that there will not be a new body and I hope very much that it will find its way into Europol because it is, after all, crime that we are talking about.

As part of that, I hope that the Government will give some attention to a sub-theme. In our sub-committee, we have had quite a lot of evidence that in a number of cases bilateral arrangements between individual countries have led to the bypassing of EU institutions. We have heard about it as regards Europol in particular. Therefore, instead of information and intelligence being routed through an EU body, it is done on the basis of relationships between the police forces of individual countries. I do not mind people having bilateral relationships but there should be a discouragement of not making sure that Europol goes into the link. If we have a patchwork quilt of relationships depending on who knows who, who gets on with who and who trusts who, critical issues will get lost and overlooked and their significance will not be understood.

I hope that the Government will make some efforts to encourage, as far as we in this country and other countries are concerned, the use of the valuable resources that will be built up in these EU agencies. It puts a responsibility on the EU agency itself. We had a comment from a Dutchman who said that Europol was like a black box into which you put a comment and nothing came back. There is a responsibility on the agency to respond. It was a fascinating report on a fascinating area.

In my final minute, perhaps I may refer my noble friend to the UK cybersecurity strategy document published in November 2011. It is very interesting and a very good read, and lots of interesting recommendations are listed at the back. It covers nearly all the departments from BIS to DCMS to the Foreign Office to MoD. It has a huge range of responses required from individual government departments. However, there is very little about our relationships with Europe and COSI. There is something but not a lot. I very much hope that the Government will give some weight to developing our European response to these intransigent, intractable and difficult issues. Unless national Governments put some weight behind COSI and bodies like that, there is no hope that we shall be able to attack these extraordinarily challenging crimes and crime networks satisfactorily.

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4.04 pm

Lord Judd: My Lords, I warmly follow the noble Lord, Lord Hodgson of Astley Abbots, in thanking our chairman for his excellent leadership of the committee, for the diligence that he brings to that work and, as I have said before, for the firmness of his guidance. It is very good to have an effective chairman, and one with so much outstanding relevant expertise and experience to bring to bear on the issue with which we are dealing. However, if that word of appreciation is due, so also is one due to our staff, to the clerk and the others who work with the clerk, for helping us to produce useful reports for this House. A word of thanks is also due to the full European Union Select Committee for the support and collaboration that it gives. I know that there is a very good working relationship between the chair of that committee, the noble Lord, Lord Roper, and the chairman of our own Select Committee. That is good, because it helps to take things forward in a constructive way.

The noble Lord referred in his remarks to the interdependent world in which we live. I am absolutely convinced that, from the moment any of us are born, one reality is indisputable: we are born into a totally interdependent world community. This is true of economic and resources realities, and pressingly true of environmental matters, but nowhere is it more true than in the realm of security. There is no way in which we can ensure the security of our people by acting alone. Effective, proven co-operation at the international level is indispensible.

Of course, the European Union provides a very good starting point for that, although-as we say in our report-this co-operation cannot be limited to the European Union. It has to go beyond the European Union into the wider world. It obviously has to be with organisations such as the United Nations, but it also has to be with specific countries such as China, India, Russia and Brazil-all sorts of influential countries on the world scene. However, it is not only with the more influential countries that there must be co-operation. So much of the danger to security comes through, and may originate from, some of the smaller, less significant players in the world, as power politics has come to be seen.

In that context, I am interested and glad that we emphasised early in our report-the chairman of the committee drew attention to this-the importance of there being a good balance between the security measures that are introduced and necessary and an absolute, resolute commitment to preserving those characteristics of our society that make it worth defending. Here I am thinking, of course, of freedom, liberty and the rest. There is a tension here. It is no good pretending that there is not; there is. How we get that right is terribly important.

It is therefore important to see that, if we are going to build a secure world, we have to get as many people as possible feeling directly that they have a vested interest in the stability and security of the society, and the wholesome nature of the society, in which they are living. That is why mistakes, when they occur in member countries of the European Union-absolutely indefensible, sometimes abhorrent mistakes that are a contradiction

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of everything for which we stand-are unforgivable, because of course they play directly into the hands of the extremists and those who would like to undermine our society by giving them rich ammunition for agitation and the rest. That is why we should expect higher standards all the time from those throughout Europe and the world, and certainly in our own country, who are working in the sphere of security.

Of course it is also the interrelationship in security policy between the more formal direct means of security, as we understand that word, and the importance of effective economic and social policies that gives people a stake in the society in which they are living. All those things come together and it is obvious that if we are to tackle them effectively, we have to build increasingly good co-operation and collaboration with fellow members of the European Union and beyond. Our report is really about that.

There is of course one specific area, and the chairman was exceedingly sensible to emphasise this in his words to us today, that brings that home. It is the issue of cyberspace. I do not believe that among the population as a whole there even begins to be an understanding of the significance and potential for what could happen in this context to liberty, freedom and all that goes with it. From that standpoint, the balance between liberty and security is a particularly pressing issue in the realm of cyberspace, as indeed we are beginning to see through the popular press in more limited spheres.

In commending the report to the House, we ought also to bear in mind the indispensable value of the evidence submitted, both written and oral. I hold up as an example the Minister who will reply to this debate. We had an extremely good session with him and we deeply appreciated the evidence that he provided and the spirit in which he entered into the session. A real word of appreciation is important there, because if he is not following things through with his colleagues we are whistling in the dark. That collaboration is essential.

There is one other specific issue to which we drew attention in the report-the strange absence of any reference to the armed services in the report from Europe with which we were dealing. If we are going to get this right, the relationship between all aspects of security and the armed services is tremendously important. We need to look at that and see how that point can be brought to bear. The armed services are increasingly drawn into co-operation with other dimensions to public service in the way in which they help to uphold our society. I hope that the Government will look at this and see how that could be addressed within the context of deliberations in Europe.

Above all, apart from saying what a pleasure it was to work in this committee under the leadership of our chairman, I want to say that we cannot overemphasise the importance of realising that we are simply not a self-contained, isolated island that can look after itself. When we talk to our public servants, I sometimes detect a reluctant culture that somehow or other these international bodies exist and they are working in the realm in which we are working, so we have to work with them. There is a reluctance about being drawn in

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further than absolutely necessary because we really like to do things on our own. That is a hopeless attitude and completely outdated. I have no doubt that the Government as a whole, particularly in the sphere of security, shall be judged in history by our success in helping international institutions, starting with Europe, to be effective.

4.14 pm

Baroness Falkner of Margravine: My Lords, I thank the noble Lord, Lord Hannay of Chiswick, for having finally secured this important debate. I congratulate him on an excellent report. Looking around the Chamber today I see that I am the only person speaking in this debate, apart from the Minister, who is not a member of this committee and therefore did not participate in the report. I therefore feel that I can more sincerely congratulate committee members as I am not in any way back-slapping myself. It is another thoroughly thoughtful contribution to this very important issue-of where the international meets the national and where a state's responsibility to its citizens' security is juxtaposed alongside their fundamental freedoms. It is intrinsic to where we are in today's world.

I welcome the early assertion in the report that recognises that security cannot stop at the water's edge. In the UK's case, we know from our prolonged experience in Northern Ireland, and more recently from among our own diaspora communities, that much support for terrorism can come from overseas. Both bilateral and multilateral co-operation are therefore fundamental to maintaining security.

The report, as the noble Lord, Lord Hannay, said, is wide-ranging and extremely detailed. I just want to pick out a few of the themes. First, in the section on counterterrorism, the report was most interesting on the continuing role of the counterterrorism co-ordinator. I have great personal admiration for the current incumbent, but given the developments that have taken place since 2001, such as 9/11, the Madrid bombings-after which he was appointed-and particularly the adoption of the European Union counterterrorism strategy after 2005, I, too, share the views of committee members that it is extremely difficult to see how we might justify the role. I note the Government's response, and particularly their emphasis on the co-ordinator being the interface between the EU's internal and external policies on terrorism. I noted, too, with some dismay, the report's bleak assessment of the relationship between the European Union and NATO, and certainly agree that that particular relationship needs strengthening. This was particularly brought out by Professor Paul Cornish of Chatham House. Third-country relations are also significant areas for attention and I would urge Her Majesty's Government to encourage the co-ordinator's efforts in this area. These will become ever more important as we come towards the drawdown of the NATO commitment in Afghanistan and, of course, with the increasing rise of extremism in Pakistan.

On radicalisation and the EU strategy, I would go further than the report in suggesting that this area is best left to member states to deal with. The report makes particular reference to the Prime Minister's Munich speech of February 2011 on muscular liberalism. I should say that I am broadly in the PM's camp on

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this one. When I served on Prime Minister Blair's taskforce on Muslim extremism in 2005, it was increasingly clear to us that the drivers and subsequent triggers for extremism had quite a lot to do with the radicalised individual's conception of their own identity, as well as the triggers in the external environment to which they responded through their actions. These factors differ across different diaspora communities and are affected by the environment within the country from which those individuals come at the time. One size certainly does not fit all. For example, those of Pakistani origin in the United Kingdom can have a very different take on things, and on their place within society in this country, than those of Pakistani origin in the United States. Likewise, the Baader-Meinhof gang was a rather different entity from the IRA in the 1970s.

I would firmly plump for subsidiarity in this area and suggest that member states are best placed to design their own deradicalisation programmes. However, voluntary networks should be encouraged, as they already exist very well across academia. An EU institutional-level handbook of actions and experiences would not only have little relevance to national-centric radicalisation but would also duplicate existing work.

I turn to the related area of research and its funding. Noble Lords may well remember the establishment-I think in 2006-of a significant ESRC funding stream for research projects at universities. The programme was called, I think, New Security Challenges. It was run by Professor Stuart Croft at Warwick University and had a wide enough remit to allow for a range of different approaches to research programmes and academic collaboration. In my mind, that programme is a model of how the EU should proceed to set up a network. Yes, I agree that it should be wider than this particular model, but it should be sufficiently focused so as to derive practical know-how for practitioners. I note that several submissions to the committee commented on this and also note that the committee welcomes the creation of an internal security fund. What was not clear from the report, probably due to the timing of it, was whether the next framework programme for research and development will cover the issues to do with co-ordination that Sir Richard Mottram raised in his submission at paragraph 196. I was therefore disappointed that the Government's response, while welcoming the creation of the ISF as an important development, ruled out any additional resources to be dedicated to this area. Has the committee since been updated by the Home Office, as it promised to do in its response to conclusions 252 and 253, as to where the resources for this work may be found?

I turn now to the issue of cybersecurity. The report was written before the London conference of last November, as the noble Lord, Lord Hannay, pointed out, and things have moved on a bit, but the analysis of the importance of the issue and of the need for an appropriate architecture to support work in this area still stand. In particular, given that the technology used for cyberwar and terrorism is often in the hands of state actors, the establishment of an EU cybercrime centre is most welcome and I note that its situation within Europol is both the committee's and the Government's preference. But there is a further important way that the UK can help EU partners; that is where

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some countries have not build up the requisite capacity with national computer emergency response teams. Can the Minister tell the House whether the UK has offered its expertise through its dedicated public sector capability, to assist those states whose public sector has experienced cyberattacks and are not competent to resist them?

Noble Lords will also be aware of how cybercrime plays out in foreign policy through non-state actors. We have a situation where increasing numbers of private sector firms in the UK are targeted as they are in other countries. The noble Lord, Lord Hodgson of Astley Abbotts, raised the issue of how expensive that is. I am one to agree with those experts who advocate a mandatory licensing system for the private sector to ensure that they have adequate levels of protection. Outside the EU, we now have a cyberwar going on in the Middle East, with pro-Palestine groups claiming to be behind the attack on El Al, the Israeli airline's systems and the Tel Aviv stock exchange, while pro-Israeli groups have attacked the Saudi Arabian and Abu Dhabi stock exchanges. As these escalate they pose an economic and security threat not only to the infrastructure of the counties involved but also to wider business and security interests. While acknowledging the seriousness of this kind of threat, it is important to note that both groups are politically motivated, although the actor on the Israeli side clearly takes its name from the Israeli Defence Force, as it calls itself the Israeli Defence Force Team, and it is therefore unclear what the role of the state may be in this case. What is not helpful is that the lsraeli deputy Foreign Minister in describing the attack as "comparable to terrorism" and threatening to respond forcefully, did not take the opportunity to disassociate the IDF from this so-called Team IDF. Israel's neighbours will no doubt draw their own conclusions from that.

The need for international action to help counter these kind of politically motivated threats is as urgent as is the need for action at national level to deal with opposing states' acts, which we are more familiar with. I note that the outcome document for the London conference highlighted:

"The need for governments to act proportionately in cyberspace and in accordance with national and international law".

I hope that all Governments in the Middle East will bear that obligation in mind as they go forward in the current febrile atmosphere.

The London conference also posed some wider international security challenges, covering such questions as: how can problems between states be prevented and mitigated? What lessons can be learnt from other areas of international security and conflict prevention work? How do we develop and apply appropriate principles of behaviour? What are the most appropriate fora to take this debate forward? What tangible steps are Her Majesty's Government taking to move this urgent agenda forward? In particular, do they hope to have more concrete outcomes at the Hungary summit later this year?

My concluding remarks shall be about the remit of the Standing Committee on Operational Co-operation on Internal Security, or COSI, as it is more comfortingly known. COSI's remit is to ensure that operational

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co-operation is promoted and strengthened and to provide a measure of accountability through the Council to the European Parliament and national parliaments. I share the committee's views that it would be extremely beneficial to rationalise the alphabet soup of other bodies also charged with responsibilities in this area, in order that COSI can emerge as the lead organisation. I also share its view that there is little justification for the chairmanship to rotate along with the EU presidency for precisely the reasons given by the noble Lords, Lord Hannay of Chiswick and Lord Hodgson of Astley Abbotts. In order to maintain expertise and consistency, it is fundamental that we have an expert chairmanship and expert membership. I am therefore disappointed in the Government's response, which seems to say that just because we have done it this way with other EU bodies, we will use the same straitjacket this time, too. I argue that the establishment of a new body is precisely when the architecture can and should be improved.

On transparency, the Government's response to the committee's recommendation is, if I might say so, equally mealy-mouthed. While the European Parliament might have received its report after an 18-month period, I am not aware whether the UK Parliament has yet had transmittal of this work. Perhaps the Minister or the chairman of the committee might be able to fill in the blank here when winding up.

The work of the committee and its detailed recommendations have been of the usually high calibre that one expects from their Lordships' European Union scrutiny processes. I do hope that this report continues to inform our thinking around these matters here in the UK and across other EU capitals.

4.25 pm

Lord Mackenzie of Framwellgate: My Lords, I join other noble Lords on the committee in thanking the noble Lord, Lord Hannay, for his excellent chairmanship of the sub-committee. His background and experience made him an ideal chairman to guide the committee through evidence-taking and producing what I believe is a very important report. I am delighted to be speaking as a member of that committee. I also thank the members of the support team, led by Michael Collon, who supported and still support the committee so ably.

Security, unfortunately, is an increasingly important subject touching all our lives, whether at airports, entering government buildings or using public transport. It even touches the parking arrangements in your Lordships' House. Securing the physical safety of their citizens is surely the most important task of any Government and in this modern age, with the world getting smaller through travel and global communications, as other speakers have said, that cannot be achieved unilaterally. It follows, therefore, whatever your views are of the European Union, that increased co-operation between friendly countries is an essential requisite of reducing security risks from those who would do us harm for political, ideological or extreme and fanatical religious reasons. As a person who has been involved in security issues for most of his life-in the police service, with the FBI and now in the private sector-I

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welcome the treaty of Lisbon, which allowed the European Council to adopt and implement an internal security strategy. It is that strategy, which was set out in the Commission communication in November 2010, that we are considering in this debate.

Statistically, the risk of any of us being involved in a life-threatening security incident is very small. However, as somebody once said, politicians tend to use statistics rather like a drunk uses a lamp-post-more for support than illumination. I knew a millionaire who was extremely worried about flying because of the increased security threat. He employed a security consultant to research the chances of his getting on aircraft where there was a bomb. The consultant did his work. He looked at all the flights and all the incidents, and he worked out that there was something like a 5 million:1 chance against being on an aircraft on which there was a bomb. However, the millionaire was not happy and wanted further work done. He wanted to know how he could lengthen the odds even further. The advice came back: "What you have to do is carry a bomb on to a plane yourself in insulated hand luggage". "How will that assist?", he asked. "Well", the consultant said, "the chances of two strangers each having a bomb on the same plane are infinitesimal". That sums up the difficulty with statistics.

The five steps set out in the report are comprehensive, dealing with international crime, the prevention of terrorism, security in cyberspace, improved border management and increased resilience to crises and disasters. Clearly, time will not permit me to cover all five items. I intend to concentrate very briefly on just three: international crime networks, terrorism and cybercrime.

By the nature of the beast, the international criminal knows no boundaries. Anything we can do to disrupt his travel arrangements, his communications or the secreting of his ill gotten gains is a plus. The difficulty at an operational level is that the police and security services have to operate within the law. I have to add that it is proper that they do so. As we have seen in other countries, if state officials are above the law we are all finished. Having said that, for those people who know no rules, we may well have to change our rules.

As my noble friend Lord Judd said, there is a very fine balance to be drawn between the restriction of civil liberties and human rights. After all, one man's right to do something may well be an infringement of his neighbour's liberty not to have to tolerate such behaviour. It is a dilemma that policemen have wrestled with throughout the ages. In this regard, we can deal with international crime and terrorism together. We have to co-operate totally with other right-thinking countries, sharing intelligence where possible, and acting together operationally if required so that there are very few hiding places. If the conspirators cannot communicate with or meet each other-or, in the case of terrorists, train and practise their dark arts-we are succeeding. If the price of freedom is to have surveillance cameras in public places, in some cases it is a price we have to pay. We have seen the success that it reaps, with terrorists, rapists and murderers being brought to justice. They never learn; we still see bank robbers on "Crimewatch" smiling at the camera.

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Modern technology must be used and shared. We all know the value of DNA in bringing terrorists and murderers to justice many years after they thought that they had escaped the long arm of the law. As has been said, we must share these innovations with our law enforcement partners in other jurisdictions. I welcome the report's endorsement of the work of joint investigation teams. This is particularly true when seizing criminal assets and establishing a functioning asset recovery office in each member state. This should be given a higher priority.

I appreciate that it is more difficult to deal with terrorists who are prepared to commit suicide. That is where vigilance and community intelligence are so important, again working together at local, national and international level. That is why the comments about reducing the incidence of stop and search made last week by the new commissioner at Scotland Yard, Bernard Hogan-Howe, are so important. He would make that process more intelligence-led. This is important because it should reduce the alienation of the police within the community they serve, thereby increasing the chances of important intelligence concerning serious crime and terrorism being brought to their attention. In this country we police by consent and we need the support and real assistance of the community, which can greatly help us in dealing with internal security.

The new kid on the block is cybercrime, as been mentioned in every speech. As our report states, the Government are to be congratulated on the priority given to cybercrime in the UK security strategy. As with many things, the European Union is only as strong as its weakest link. However, it is not just the cybersecurity of the member states that is at risk. The Commission itself must realise that its own institutions, networks and agencies are vulnerable too and take the necessary precautions; and, where they fall short, we must assist them.

Overall, I believe that we are heading in the right direction. The EU communication sets out the road map and I believe that our report helps to identify the vehicle on which we should all be climbing. I commend the report to the House.

4.37 pm

Lord Rosser: My Lords, in response to the comment of the noble Baroness, Lady Falkner of Margravine, while I cannot say that I am the third man, I am the third person down to speak in this debate who is not a member of the committee. I share the view of the noble Lord, Lord Hannay of Chiswick, on the lengthy delay in discussing the committee's report, and that that is not a satisfactory situation. Having said that, I doubt that this is the first occasion there has been such a delay.

As has been said, each member state has responsibility for its own national security but the Lisbon treaty enhanced the European role by providing for the creation of a standing committee within the Council whose principal role is to ensure that operational co-operation on internal security is promoted and strengthened within the Union.

As we know, under the 1999 treaty of Amsterdam, work on justice and home affairs matters has been the

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subject of five-year programmes agreed by the European Council, with the most recent being the Stockholm Programme agreed in 2009, which indicated that both the Council and the Commission should define a comprehensive Union internal security strategy.

In early 2010, the Council agreed an internal security strategy for the European Union which was subsequently adopted by the European Council. Not to be outdone, the Commission formulated its own communication on the internal security strategy towards the end of 2010 entitled, The EU Internal Security Strategy in Action: Five StepsTowards a More Secure Europe.

As the noble Lord, Lord Hannay, said, in the report that we are discussing, the committee described the Council strategy as an anodyne document and hardly a strategy at all. In contrast, the committee described the Commission communication as having a practical and pragmatic focus on the five main objectives. They were referred to by the noble Lord and I shall not repeat them.

Accordingly, as the noble Lord said, the European Union sub-committee took this document-namely the Commission communication-as the main focus of its inquiry into the EU internal security strategy. We welcome the committee's report and I wish to refer briefly to one or two points and issues in it.

The report indicates that the Commission's communication will be followed by proposals from the Commission for legislation to implement its objectives. One had already been submitted before the committee's report appeared, and given that we are now some eight months further on, it would be helpful if the Minister could update us as to where we stand in relation to further proposals emanating from the Commission.

The EU Committee comment favourably on the Commission communication as,

and say that they,

That is an important point. The committee was critical of the written evidence received from the Home Office, which the committee regarded as stating that the Government would,

The committee argued that over a five-year programme actions required to safeguard internal security may well move beyond what was originally envisaged, and that therefore each proposal should be assessed on its merits.

In his response, the Parliamentary Under-Secretary for Crime and Security refers to querying the costs of new proposals and goes on to say that ensuring that those proposals fall within the scope of the Stockholm Programme is key to managing the national and EU justice and home affairs budget. I hope that the Minister can provide assurance that despite that comment the Government will nevertheless assess on their merits any proposals that emerge.

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The committee's report also refers to a Commission proposal for a comprehensive data protection framework that was due to be published last year. What is the current position in relation to this Commission proposal?

A further point made by the committee, to which my noble friend Lord Judd referred, was its surprise that there was no reference in the Commission communication to the Armed Forces in relation to civil protection and disaster relief. It is not clear from the written response by the Parliamentary Under-Secretary whether that surprise is shared to any degree by the Government, and perhaps the Minister can provide some clarification on that specific point. It is interesting that one of those giving evidence to the committee expressed the view that this omission was probably due to neurosis within the European Union about military matters.

The committee welcomed the emphasis on cybersecurity in the Commission communication and felt that the EU,

In his response, the Parliamentary Under-Secretary welcomes the committee's view that the EU institutions should take the lead by,

and said that the UK would,

Perhaps the Minister could say whether the Government consider that the EU is doing as much as it should in this field, bearing in mind that what the EU does or does not do could also have implications for our national security as well.

The committee said that the establishment of a cybercrime centre, mentioned by the noble Lords, Lord Hannay of Chiswick and Lord Hodgson of Astley Abbots, would enhance the EU's ability to contribute in this area and that,

The view was also expressed by the committee that,

and that:

"Additional staff and funding will be essential if the Cybercrime Centre ... is to achieve its key aims".

The committee went on to say-and the noble Lord, Lord Hannay, referred to this-that:

"The Government's view that this can be done within existing resources is unrealistic, and inconsistent with their making additional resources available for the United Kingdom's programme".

Is it still the Government's stance that any necessary resources are to be found from within the existing budget? If so, why do they think that that is possible? Have there been any further developments in the creation of the cybercrime centre?

The committee's report contains a large number of conclusions or recommendations. The sub-committee involved, under the chairmanship of the noble Lord, Lord Hannay of Chiswick, has given the issue of the EU internal security strategy the thought that it merits. We should be very grateful for its meticulous and thorough report. Security is an issue of increasing importance and sophistication on the part of those

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trying to safeguard security and those seeking to breach it. As the committee states, security knows no borders, which is a significant reason why the EU has an important role to play.

However, we should also note the warning in the committee's report, repeated by the noble Lord, Lord Hannay of Chiswick, that the Council has an extraordinary number of committees, working groups and other bodies whose tasks overlap and may conflict. As has been said, there is now a new committee with the duty of co-ordinating all the work on internal security. As the sub-committee rightly states, unless it does so, little will be achieved, but that if it does properly fulfil its mandate-or, perhaps, is allowed properly to fulfil its mandate-the EU may play a valuable role in protecting the security of its citizens. One would have thought that the Government would concur with that view. If so, I hope that the Minister can confirm that the Government have that point in mind and are pursuing it within the EU.

We welcome the committee's report. It is an invaluable document. Like the noble Lord, Lord Hannay of Chiswick, I await with interest to hear the Minister's response to the points and questions put to the Government during the debate.

4.46 pm

The Minister of State, Home Office (Lord Henley): My Lords, as the noble Lord, Lord Rosser, put it, a large number of questions have been put to me and I hope to be able to answer as many as possible in the course of my speech.

I am grateful that there is a least one question that I do not have to answer: the question posed at the beginning of his speech by the noble Lord, Lord Mackenzie of Framwellgate, when he talked about the security problems in our car park. That, at least, is not a matter for Her Majesty's Government; we can leave that to the House authorities.

I start by offering my congratulations to the noble Lord, Lord Hannay, on bringing forward the report and for all the work done by his committee. I also offer my apologies-if it is appropriate for me to apologise; I never know whether it is-for the delay between the publication of his report and the day on which it is debated. I think that that is a matter for the usual channels, not me. I see the noble Lord, Lord Roper, nod, but I am sure that he, as chairman of the EU Committee has been pressing as hard as he can to get this, along with a whole host of other valuable reports that his committee has produced, debated in a timely fashion.

The noble Lord, Lord Hannay, said that he wanted to concentrate not so much on the Government's response but on where it had been less than adequate. It would be useful if I could start by saying a little about where the Government and the committee were in agreement. There is much that both the Government and the committee found to commend in the internal security strategy. We came to many of the same positive conclusions, not least that the scope of the ISS and the priorities established therein are the right ones. The Government and the committee found points of agreement throughout the strategy, including, but not

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limited to; support for the establishment of the EU policy cycle; the use of joint investigation teams; the value of the EU passenger name records directive-I note the comments of the noble Lord, Lord Hannay, on that subject; and the role of EUROSUR and FRONTEX in enhancing border security.

Again, like the committee, the Government welcome the priority given to cybersecurity in the strategy. We see that the EU has an important role to play in raising standards in, and awareness around, cybersecurity among member states at both the EU level and-stressing points made by a number of noble Lords-the international level. We know that in security matters of this sort there are no boundaries.

In November, as noble Lords will be aware, my right honourable friend the Foreign Secretary successfully hosted the London conference on cyberspace, and I shall be saying a little more about some of the cybersecurity questions later. Delegates agreed that the immediate next steps must involve taking practical measures to develop a shared understanding of the threats and to agree common approaches and confidence-building measures at an international level.

The Government also find common ground with the committee on a number of cross-cutting issues, such as the safeguarding of fundamental rights. I make it clear that this coalition Government are committed to defending security and defending civil liberties so that the Government infringe less on people's freedoms, while providing the public with effective protection from terrorism and crime. Given the number of EU data-related dossiers which will impact upon security and the need to tackle threats to security while at the same time protecting civil liberties, we would have liked to have seen those issues addressed more directly in the ISS communication. We believe that the alignment of internal and external security policy is also an area where the Government and the committee take a similar position. The Government support the committee's call for closer working between the Commissioner for Home Affairs and the High Representative for Foreign Affairs and Security Policy.

I should like to discuss one or two points that noble Lords raised. I start with the whole question of funding the cybercrime centre, which the noble Lord, Lord Hannay, raised. He asked me to look at this area but I think he accepted, although he was sorry, that it was something that I could not help on directly. He is no doubt right. I am sure we all agree that there are other savings within the EU budget that could be looked at. We could look at the budget of the High Representative herself to see whether more money could come out of that to help with such a centre. However, we understand that the Commission will bring forward a communication later this year regarding setting up the cybercentre, and it remains the Government's view that this should be managed within existing resources. However, the question of where those existing resources come from will obviously have to be discussed at a later stage.

The noble Lord, Lord Hannay, also suggested that oversight of Europol should be carried out by an interparliamentary committee. The Government's view is that Europol now has fairly robust scrutiny and accountability structures in place. We believe that the Europol Council decision, which came into force in

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January 2010, means that the European Parliament can require the Europol director, the chair of the management board and the presidency of the Council to go before it to discuss Europol-related issues. Additional mechanisms are in place that ensure the transparency of Europol as an EU agency. They include the submission of the Europol work programme and annual reports to the European Parliament. That provides a useful job for the European Parliament, and we think that it is something it can probably do effectively. I believe that the committee chaired by the noble Lord, Lord Roper, and its various sub-committees can also scrutinise the activities of Europol with some vigour, as they have done in the past.

My noble friend Lord Hodgson hoped that the Government would make use of the various and valuable resources within the EU agencies themselves. Our position remains that member states can and should do more to share information, not just among EU agencies but among themselves, and to put that at the disposal of Europol. Improving our information-sharing strategy with Europol is very important in terms of influencing the EU intelligence picture at a strategic and operational level. It is important to make the most of Europol's analytical capabilities to ensure that it can identify, for example, key persons of interest and operational opportunities for multilateral co-operation.

I turn to a query raised by the noble Lord, Lord Judd. He expressed some interest in the role of the Armed Forces in EU internal security and the committee's concern that that was an oversight in the communication. We recognise that military assets can play a very significant role in supporting, for example, disaster relief activities, but we also believe that they should be used only as a last resort where there are no civilian alternatives. Decisions in such matters are, we believe, a matter for national authorities acting on a case-by-case basis.

My noble friend Lady Falkner was somewhat concerned about a lack of co-operation between the EU and NATO. I note that concern. We believe that that can be improved and developed, including in new fields such as cybersecurity, which has been raised a great deal. We have pressed both the high representative and the Secretary-General of NATO to encourage further information sharing and increased co-ordination on the ground in all areas between those two organisations.

I turn to structures and, in particular, to the questions relating to COSI which were raised by the noble Lord, Lord Hannay, by my noble friend Lord Hodgson and by other noble Lords. We do not consider that there is a case for the standing committee on operational co-operation on internal security, or COSI-I forget how the noble Lord, Lord Hannay, interpreted those initials-but there are obviously a number of ways in which we can replace all oversight bodies that have a legislative role, such as the Article 36 committee. I want to make it clear to my noble friend Lord Hodgson, who was worried about a lack of representatives from FRONTEX, Europol and others, that my understanding is that representatives from Europol and FRONTEX attend COSI meetings as a matter of course alongside representatives of the other EU and justice and home affairs agencies-for example, Eurojust. It is important that they are there.

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I should also address the question raised by my noble friend Lord Hodgson, the noble Lord, Lord Hannay, and I think by my noble friend Lady Falkner about their concerns about the chairmanship and whether it should rotate. I forget who suggested that they were likely to get a rather mealy-mouthed response from me on this; from her reaction, I suspect it must have been my noble friend Lady Falkner. I understand that it is a working group and subject to the same chairing arrangements as other working groups. It is chaired on the six-monthly rotational basis that works for the Council presidency. That means that we hope we have an incoming, outgoing and current chairman and we hope that they will work together over that 18-month cycle as a troika. I think it was my noble friend who suggested that this might be the opportunity to change those arrangements, but I think for the moment it would probably be best to stick to the arrangements that we have in place for that. I am not sure that the COSI chairmanship would be the right one on which to make such a fundamental change. As regards transparency, again, it operates the same rules as other groups do. In some case-sensitive operational issues these matters can be discussed, which means that certain documents obviously cannot be publicly released. That would have to be handled appropriately, as with all other information.

The last point that I want to deal with is the question of ratifying the Warsaw convention. I appreciate that there might be other points, but time may be beginning to run out. I also appreciate that I came under a certain amount of pressure from the committee when I appeared before it the other day. The noble Lord, Lord Hannay, referred to that and criticised my possibly imprecise remarks on ratification, when I said that I hoped it would happen in a year or so. I think he implied, in Sir Humphrey-speak, that that answer was not really as precise as Ministers ought to give. I have to say that, although one would like to ratify that convention, there are always concerns about ratifying and one has to get these things right.

The noble Lord referred to another convention that I was dealing with at Question Time today. We should always be very careful about any ratification; I do not think that we want to be like those countries which-dare I say it-ratify somewhat lightly, because we should consider the precise implications of ratification. In terms of the convention that I was talking about at Question Time, there are very serious concerns about extraterritorial jurisdiction, which would have a major effect on our own United Kingdom domestic law. We need to consider those carefully before we ratify and the same applies, although it is more a question of resource points, to ratifying the Warsaw convention.

As I said, a number of other issues probably need to be addressed, but time is running on-

Baroness Falkner of Margravine: I fear that the Minister is coming to his concluding comments and I wanted to get in before he sits down concerning the question that I asked about the forward plan, after the London cybersecurity conference of last November. Hungary is due to host the next summit and while I appreciate that he may not have the information to

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hand now, might he be able to write to tell us what tangible steps Her Majesty's Government are taking to implement the recommendations of the London conference?

Lord Henley: My Lords, I have some details somewhere about Hungary. I am not sure that I will be able to help my noble friend at this stage but, if I may, I will write to her in due course. As I said, I feel that I am beginning to run out of time and I am probably keeping the House up later than it ought to be. What I want to make clear is that I will respond to any points that I have not yet answered in due course by letter, but that we will keep the implementation of the EU internal security strategy under review.

As always, we are eternally grateful for the work of our own scrutiny committees: the EU Committee in this House, and all its sub-committees. They do a valuable job, and probably do a better job of scrutiny of EU matters than those of any other Chamber in any other country throughout the EU. On that, they should be congratulated. I also hope that the usual channels-that strange body which the noble Lord, Lord Roper, and I used to be members of many years ago-will take note of all the comments, particularly those of the noble Lord, Lord Hannay, and ensure that in future these matters are debated in a timely fashion, as appropriate.

5.04 pm

Lord Hannay of Chiswick: My Lords, I thank all noble Lords who contributed to this very useful debate. I am particularly grateful to the three members of the sub-committee that I chair who participated in the debate in a singularly apt and helpful manner, but I am grateful also to all other noble Lords. I hope that I will be forgiven if I do not mention everyone, because brevity is the essence of the contribution that I am called on to make at the end of the debate.

I thank the noble Lord, Lord Hodgson, for what he said about cybercrime. He brought a lot of very pertinent evidence to bear and demonstrated that there is a huge cost to all our economies from the-alas-all too successful cybercrime that exists. Therefore, when we come to look at the resources we devote to combating this form of crime, we should bear in mind those massive sums and think about how, not in strictly budgetary terms, they could benefit not only this country but Europe collectively. I am also most grateful for what the noble Lord said about the follow-up to the Foreign Secretary's initiative last November, which the committee warmly welcomed. Perhaps I dare say that we envisaged such a conference before it was even a gleam in the eye of the Foreign Secretary. We had written a report on cybersecurity some time previously, in which we said that we hoped to see the Government taking an initiative to deal with the global issues that the noble Lord, Lord Judd, so wisely put his finger on.

I will make just two points about the reply of the noble Lord, Lord Henley. I am grateful to both noble Lords on the Front Benches for their offer of thanks and support to the committee; it is of great benefit to us. My first point is on the budgetary issue. I will not go any further because the response given today by the

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noble Lord, Lord Henley, was helpful. However, I must draw his attention to an Explanatory Memorandum that his department put its name to recently, which was less helpful than the response that he gave across the Floor of the House this afternoon. I think it was in paragraph 26 of the memorandum-I cite from memory-that the department stated that any increase in the resources needed for, let us say, cybercrime or anything in the justice and home affairs area must be found within that chapter of the budget. That is unbelievably restrictive and completely contrary to the policy that has been pursued by successive British Governments for I do not know how long, which is that we should look for transfers and shifts in the priorities of the budget, most obviously away from excessive expenditure on agriculture, and should focus the budget on higher priority areas.

The answer that the noble Lord gave just now was spot on. My committee is not saying that we should increase the overall resources allocated to the European Union; we are saying that we should reprioritise them. The Minister's answer said precisely that: if savings can be found in other parts of the budget, it will be fine. However, it is not what the Explanatory Memorandum stated. I will not go on any longer because the EU Select Committee that is preparing a further report on the budgetary aspects of the multiannual financial framework will come back to this point in that context, and the Government will have an opportunity to give their considered response. I hope very much that the department for which the noble Lord is responsible will play its modest role in ensuring that it is properly understood that if we say that everything has to be found within individual chapters, it will be a recipe for stasis and for no change at all, and that no other member state will have any incentive to support reductions if resources cannot be moved to higher priority areas.

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I turn finally to the noble Lord's reply on the institutional point. I think that there was a slight misunderstanding. The approach that the EU Select Committee and my sub-committee supported was not to create any new institution. However, we are saddled with the fact that the Lisbon treaty instructs the institutions to provide oversight that brings together national Parliaments and the European Parliament. We are not proposing any shift because these meetings already take place on an annual basis between the chairs of the home affairs committees and the LIBE committee of the Parliament. We are merely suggesting that the Government throw their weight behind somewhat formalising that structure as the basis on which to keep an eye on Frontex, Europol, Eurojust and so on. It is totally cost-effective. It does not cost a penny, and it involves no new institutions. I mention that because I think that the Minister rather implied that we were thinking of something more ambitious. We are not.

I thank all those who participated and thank the Minister for his extremely thoughtful response. I am a little sad about the Warsaw convention, and I still hope that he can find some way to accelerate that. It is quite clearly less difficult than what he was dealing with earlier this afternoon. I previously dealt quite a lot with extraterritorial issues, and I understand that they bristle with difficulties. We are not really talking about that sort of thing in terms of the Warsaw convention, and I hope that he will find some way of moving to ratification of that pretty quickly because I do not think it does our reputation any credit and I do not think it is in the interests of this country that people pick and chose the things that they do or do not ratify.

Motion agreed.

House adjourned at 5.12 pm.

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