We are seeing a higher proportion of disabled workers joining trade unions. I think the House will generally agree that it is not a satisfactory position when at least 50% of people who are disabled are seeking employment. The trade unions play an invaluable role in ensuring that these people are protected, and in achieving the conditions and providing the necessary facilities to enable them to do their work. That not only makes their working lives easier but, I would hope, paves the way for more people who are disabled to come into work. Similarly, a greater proportion of black and ethnic minority workers join trade unions because they also need that extra protection in the workplace, which is very important.

The valuable role that health and safety representatives play has also been emphasised. Not only do they make life safer, in that there are fewer accidents; there is also a benefit to the company in preventing accidents. People take less time off work and work in safer conditions, which in itself makes for a stable workforce, which is of benefit to all. Another valuable role that tribunals play is pressing for better training conditions. Better training conditions mean a better, more skilled and more satisfied workforce who, if they have the qualifications, can advance within the company or leave and join another one. That is very helpful.

Moreover, where companies are in difficulties, trade unions, working together, can bring about positive results. The right reverend Prelate the Bishop of Derby referred to Derby. It is important that we look at the example of Derby because a few years ago, Bombardier—I notice he is nodding his head—was in terrible difficulties and it appeared that the plant was going to close. Fortunately, thanks to good working relations between the management and the trade union representatives, who met regularly, worked together and looked for other opportunities, the plant was saved and redundancies were kept to a minimum. Having suffered a difficult and dangerous blow that could have closed it down, Bombardier is now in a much stronger position, thanks to co-operation between the employers and trade unions. Surely we want to see more of that.

Reference was made to Jaguar Land Rover. Here again, we see the benefits of employers and trade unions working together. I think people in this House, throughout the country and indeed throughout the world will agree that this country is now producing first-class vehicles. Again, that just shows what can be achieved when employers and trade unions co-operate. It is a fact that we get value for money, as I said earlier, from workplace training. It has been established that

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for every pound the Government spend on it, there is an economic return of £9 and, as I say, it leads to enhanced qualifications.

This has been positive debate that takes us forward. It is good that it has emphasised the positive role trade unions can play in co-operation with employers, which benefits not only the company concerned but the economy at large, because there is more spending power. Improved conditions and communication between unions and employers are for the benefit of all. There is a greater need for trade unions than ever before. At a time of economic uncertainty and a lack of job security, I certainly believe, as I think do most people, that there is a great benefit to be derived from people belonging to the trade union movement.

2.18 pm

Lord Suri (Con): My Lords, I thank the noble Lord for securing this debate. Despite working in business for some 50 years, I have never had a unionised workforce, but I have been supplied by, and dealt with, many of them. I can therefore appreciate how they have improved workers’ rights and secured fair pay for those they represent. Indeed, the Labour movement that they led has sired one of the great modern parties of government. It is true that in countries where unions are allowed to operate, wages are higher and workers’ rights are better protected. Nevertheless, in too many cases overly militant unions are damaging to society.

Unlike some noble Lords, I am old enough to remember the winter of discontent. Rubbish was piled to the shoulder in the West End, there was no petrol in the pumps and ambulances were grounded. Of course, this is the most extreme example of unions using their power for bad, but we can see examples of the same militancy today. Speaking as a Londoner, Tube strikes lose this great city up to £10 million a day. The TSSA, the RMT and Unite are not fulfilling their important duty to preserve workers’ freedoms so much as acting as pay lobbies to further raise the wages of their members, which are already far out of step with the restrained rises other workers have seen.

The majority of unions I remember in the 1980s and 1990s were led by sensible moderates, the sort of men and women who helped drag the Labour Party to the political centre and win three elections in a row. Now, they are led by a small elite of self-proclaimed communists, funding parties and activities such as TUSC, to which their members have not consented. Of course, unions have a place in providing a counterbalance to big business and, of course, they should serve as vehicles for progress in the labour market, but they should never be allowed to hold the public to ransom for wage rises way out of kilter with the public and private sectors.

The Trade Union Bill that is being steered through by the Business Secretary will go some way to addressing these problems; it will redirect unions to perform their historical functions, rather than seeing themselves as the Official Opposition.

2.22 pm

Lord Young of Norwood Green (Lab): My Lords, I, too, congratulate my noble friend Lord Foulkes on a tour de force—I mean that genuinely. He gave us the

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historical sweep of the trade union movement and I am truly grateful. I am also grateful for the maiden speeches. I must confess to a slight bias towards that of the noble Baroness, Lady Burt, and her attitude towards industrial relations, rather than the SAS approach of the noble Lord, Lord Robathan. I am grateful to the noble Baroness because she was the first speaker to remind us of a really important example of the British trade union movement: when we needed careful, thoughtful action in that recession period, they negotiated not just a three-day week but an opportunity to retrain and reskill. It was a first-class example. Too often, we forget about that role.

I was thinking about this speech as I walked my dog this morning. The dog did not make a powerful contribution, but he gave me time to think about it. I sometimes wish the history of the trade union movement would be a bit more balanced. Unfortunately, it often focuses on the great struggles, and that is understandable, but in doing so it does not give enough credit, sometimes, to the solid, day-to-day work. I was a young lad of 16 when I managed to get into the General Post Office as a telecom apprentice. One of the first things that happened to me was that I was recruited into the union and I signed a form to join the pension scheme; both took place. I have been involved with trade unions for most of my life, from being what we called a local representative—what this House would know as a shop steward—until I managed, much to my surprise and that of a few others, to be elected general secretary of what was then the National Communications Union in 1989.

Trade unions do a huge amount of work. I did not agree with all his analysis, but I thank the noble Lord, Lord Balfe, for reminding us of the importance of Unionlearn. Of course, trade unions were heavily involved in education before Unionlearn. In fact, as someone who was dragged out of school at 15, I would say that the trade union movement completed my education. My mentor, although he was a member of the Communist Party, gave me a very solid grounding in how to run a branch, how to negotiate and how to write letters to management. I owe a deep debt of gratitude to him and to the trade union movement. Noble Lords may think that the education could have been a bit better, but I am what I am as a result of that involvement in the trade union movement.

I am glad that the right reverend Prelate the Bishop of Derby is back in his seat, because, in talking about modern slavery, he reminded me of my involvement, until very recently, with the Ethical Trading Initiative. Trade unions play a very big role in that, not just highlighting conditions for workers in this country but for workers throughout the world, in supply chains. That is the role of the international trade union movement as well. Trade unions play a very important role in trying to ensure fairness and justice for workers, not just in this country but throughout the world.

I could not help but smile when I listened to my noble friend Lord Griffiths. I am glad he is here. I must admit that my first attraction to the Methodist Church was not quite as pure as the examples he gave. If I recall, it ran the local youth club and my attraction was to table tennis and girls, I have to confess. Nevertheless,

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it played a role in society; my noble friend’s recollection of the importance of the Methodist Church in the origins of trade unionism is something I recognise.

I fear that the forthcoming Trade Union Bill will be a lost opportunity. What should the Government be encouraging? Surely, they should be encouraging more industrial partnership. If we want to improve productivity, improve the skills base in this country and get more apprenticeships, that kind of working together will make a huge contribution. If employers always got it right, why did the Government—I must admit, I was pleasantly surprised—reintroduce a training levy? If all employers were convinced of the benefits of training their workforce, presumably we would not have had to do that. Trade unions can and do play a key role in that area. I urge the Government to think very carefully about what they are doing with this forthcoming Bill. I hope we can encourage some positive things.

I do not pretend that everything the trade unions do has been perfect or that our history has been one long progression of simply fighting injustice. There are examples of where we had to reform our organisations. If I am honest, the union that I first participated in, the Post Office Engineering Union, was a very male-dominated union. It was not until we had a large influx of women members—my noble friend Lady Drake is not here—as a result of an amalgamation that we started to mend our ways. Nevertheless, we have been at the forefront of fighting for equality. We have been at the forefront, also, of fighting against racism; remember the anti-apartheid campaign. We have always been a very positive force in society.

As a trade union movement, we face a challenge. If you look at the demographics of the trade union movement, it is clear that it is skewed towards the older members of our society. We face a challenge in encouraging young people to understand the importance of the benefits of trade unions. Therefore, I will end by saying that I still believe that the role trade unions play is far and away a positive and constructive one, and I urge the Government to utilise that in their legislation. I hope that in that debate we will be able to arrive at a constructive engagement.

2.30 pm

Baroness Prosser (Lab): My Lords, I, too, thank my noble friend Lord Foulkes for putting this debate down. It is both important and hugely timely.

It has already been mentioned that we in the United Kingdom are an unequal society, and that inequality is getting wider. In fact, according to the book The Spirit Level, an academic study of the western world, we are second only to the United States in inequality. As that book points out, that inequality brings with it a society which is out of balance, out of kilter and not happy or cohesive. I fear that the forthcoming Trade Union Bill, should it go through in the way in which it is currently envisaged, will only make matters very much worse.

The debate thus far has pointed out a lot of the things about trade unions which we never hear about. If you believed everything we read in the press or watched on the television, you would think that the trade union movement was a proscribed organisation.

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It has already been mentioned that we have been insulted in the past, and therefore an opportunity to demonstrate the hugely useful and valuable role that unions have played over the years is very welcome.

I will touch on three aspects: education and training, which has already been mentioned quite widely; the international work of unions; and equalities. My noble friend Lord Griffiths put it very succinctly in talking about the work of trade unions as an educator, describing their contribution to the social fabric of society. In the 20 years that I was employed by the Transport and General Workers’ Union as was, I must have seen thousands upon thousands of examples of people going through the union education programme and coming out at the end of it more confident and competent. Of course, that education covered such things as learning about health and safety, legislation which covers workplaces, equalities, how to be a good shop steward or branch secretary—all of that. Also, however, to correct something the noble Lord, Lord Balfe, said, the trade union education hugely covers the whole area of literacy and numeracy. That was started by NUPE, long before Unionlearn came into being. That programme patched up the education gaps suffered by so many people in our society and enabled those older workers to learn and to catch up with their learning in a comfortable and supportive environment.

I can give many examples of the huge number of people I have come across who have moved on up through education, but I will mention just two. A woman who sat on the national women’s committee of the old T&G came from Bristol, worked in Bristol University as a cleaner, and was a single parent. She lost her job because she injured her back. She had already participated in a lot of trade union education and therefore after she had lost her work had the confidence to go on and learn further, and ended up going back to Bristol University as a lecturer. Another women worked in Pendleton Ice Cream outside Liverpool; she was our convenor there and was made redundant when the factory closed. She was another example of someone who rebuilt her confidence on union learning and education; she also went on to become a lecturer. Those are just two tiny examples of my experience of union members who have the capacity and the ability but have never had the opportunity, and the trade union movement is the organisation that gives that opportunity to them.

Unionlearn, as has been said, is a massively successful experiment. It is an organisation funded by government and it pays back to government in spades, as has been mentioned, because of the greater earning power of the workers whom it trains and educates, because of the ability of those workers to participate in increased productivity, and by their spending power. Yet the funding for Unionlearn has been diminished and diminished. It is now hardly able to operate, despite the fact that it is hugely popular with employers as well as employees. Clearly, however, it is not overly popular with the Government.

The second area I will touch on, very quickly, is international work. For 11 years I was chair of the women’s committee of the International Chemical &

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Energy Workers’ Union. The British TUC is the most respected trade union organisation worldwide. It has given training, assistance and confidence to newer organisations that have been set up around the world. The TUC sent massive numbers out to east European countries after the fall of the Iron Curtain, training those workers and union reps on the whole question of democratic structures, how to be a good steward and a good representative. Solidarity, the Polish trade union which of course helped to bring about the fall of the Iron Curtain, was then seen as a great hero—admiration that is ironic from a Government who have always taken a less-than-encouraging approach to the UK trade union movement. After the dreadful tragic collapse of Rana Plaza, who was first on the scene? IndustriALL, the international union, was out there, taking evidence, gathering information to ensure that those damaged workers were able to gain some recompense for what had happened to them.

Finally, I will comment on the whole question of equalities. Unions were the first organisations to identify the use of targets, use reserved seats—when I first joined the TUC in the early 1980s we already had reserved seats for women—and get proportionality on committees, and they work with companies up and down the land enabling those companies to use positive action to bring forward underrepresented groups within their workforces.

I think the word “partnership” has been mentioned only once in this debate, but that is what it is—a partnership between representatives of the workers and the employers, and in good workplaces that partnership brings benefits to all sides. Sometimes unions are described as greedy. As JB Priestley said, there is nothing wrong in asking for the moon, but it is very wrong to just take it.

2.38 pm

Lord Stoneham of Droxford (LD): My Lords, I have always had a great admiration for the political antennae of the noble Lord, Lord Foulkes, and I congratulate him on this debate ahead of what will be quite an interesting debate on the trade union reform Bill. It is therefore useful to have this general debate on the contribution of trade unions in our democracy.

I also congratulate the two maiden speakers, the noble Lord, Lord Robathan, and in particular my noble friend Lady Burt. She is a legend in our party, the Liberal Democrats, for her victory in Solihull and for the 10 years during which she held that seat against all the odds. It is appropriate that this steely Midlander, who is the business spokesman for our party nationally, represents that part of the country which symbolises both the potential and achievement of industrial renaissance in this country with the turnaround of Jaguar Land Rover. We certainly look forward to her contributions in this House.

As a social democrat, I spent a career grappling with change in industry. I also frequently worked for a trade union so I, and these Benches, remain committed to sustaining, improving and supporting the work of trade unions in this country. I pay particular tribute to the excellent speech of the noble Lord, Lord Dykes, which supported the values of trade unions. I agreed with every single word that he said.

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Given that we will be debating the Trade Union Bill, I do not think that this is the moment to go into detail on it, but I will say that these Benches are opposed to the Bill, as we opposed its measures when they were proposed in the coalition. Fundamentally we are opposed to it because we see it as a partisan Bill, both industrially and politically, and because it seeks to further weaken the influence of trade unions when, frankly, they are no longer in a strong position. We think that it is irrelevant to the main economic issues of raising productivity and enhancing the country’s competitive advantage. The noble Lord, Lord Balfe, challenged the Labour Benches on why they had not reformed the Thatcher measures, but I say to him that the very fact that the Labour Government did not change those measures is an argument for now leaving this field well alone.

Trade unions are not perfect—voluntary bodies never are—and I, for one, am deeply depressed by the political and industrial path being taken by the union for which I worked, the National Union of Railwaymen, although I do not think that it is fully representative of the movement. I went to work for that union inspired by what I regard as the most remarkable and brave political speech ever made by a trade union leader. It was made by Sid Weighell at the Labour Party conference in 1978, when he warned the Labour movement of the dangers of not supporting the Labour Government’s pay policy at that time. I was not the most obvious person to go and work for a trade union but I did it because I wanted to do it and because, as somebody who believed in changing management and industry in Britain, I had to understand where they came from.

On freedom of speech, we say that we may not like what people say but we will defend their right to say it, and so it is with trade unions. Despite the frustrations and the disagreements with them that we sometimes have, we will fight to maintain freedom of association to ensure that the rights and interests of employees are properly represented. Indeed, I believe that society will benefit if we do so. In this debate we have heard a number of arguments for and examples of the benefits of trade unions to democracy. I will not go through them all again but I should like to draw out a few, some of which have already been mentioned.

Historically, trade unions have improved the terms and conditions of their members. I say to the House that one of the problems that we now have is that our trade unions are in a weakened position. We are now in a position where the Government have to intervene to try to arrange the living wage so that the state does not subsidise the wages paid by employers. That we are in that position is not a sign of strong trade unionism; it is a sign of weak trade unionism.

I also want to emphasise the point made by the noble Lord, Lord Monks, about boardroom pay and differentials in industry. I worked in a company which was very conscious of what it paid the board and the managers. In fact, I negotiated with the noble Baroness, Lady Dean. Frankly, I could not have faced trade union representatives if I had had a huge bonus or a huge salary increase at a time when we were announcing redundancies. That was how we behaved. It was a

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counterbalance which, to be frank, is lacking in much of industry and employment today, and I think that we miss it.

Historically, trade unions have made a big impact on health and safety. In debates on health and safety, too often we have concerns about regulation. People say that regulation of health and safety is completely impossible. I say that if we had more representatives on the ground, there would be less need for regulation; it would be automatic in industry, and that is a role that trade unions have played in that field.

The noble Lord, Lord Young, said—very potently, I felt—that trade unions have played a huge role in skills and education in this country. They have been very committed to self-education in their own ranks but they have also fought for equality for their members and employees in respect of apprenticeships and training. We are missing that in industry, and we are missing it in terms of the social mobility that trade unions used to produce in their ranks—and still do to a degree, although obviously the numbers have reduced—by bringing people through training and education processes.

Trade unions have also played a very important part in social cohesiveness. Obviously they have been an avenue for grievances and protests, but the involvement of local representatives in the workplace is an important act of citizenship and of commitment to the community and the broader appeal of man. We are missing that with the reduction in the number of those representatives in our workplaces.

It might also be appropriate for somebody outside the Labour Party to comment on the huge role that trade unions have played in various aspects of life—certainly in my generation. First, they saved the Labour Party in the 1980s. I am pleased to see the noble Lord, Lord Kinnock, in his place, because he was assisted by that. But for them, the Labour Party would not have been transformed. Secondly—here, I give due credit to the noble Lord, Lord Monks—trade unions changed the view on Europe inside the Labour Party in the 1980s. But for the commitment to the Social Charter, countering the idea that the EU was a capitalist club, we would not be in the position we are in today with the Labour Party supporting Europe and the Conservative ranks now split. Maybe the Government can learn from that experience—indeed, I think they are doing.

Finally, unions act as a check on management in industry. I worked in the print industry and at times I would complain. We were sometimes too slow to make changes. However, we as management had to work harder, do better and be more progressive to get those changes. Eventually, we did—and we did so in my company by agreement. Similarly, things are now happening in the motor industry. Fifteen years ago, I visited Nissan when it was in its early days, and now it is the most productive plant in Europe. We heard the story of Jaguar Land Rover. None of that would have been possible without the contribution or leadership of the trade unions in those areas. We need to build better, more confident management in dealing with trade unions.

I do not accept that there is not room for the trade unions to modernise and to reach out more. I did not find the turnout of 4.4% in the GMB’s leadership election very encouraging, but falling membership will

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not make unions more representative. Indeed, as the membership falls and unions turn into silos, we will find—unless we try to reverse it—that the unions will be less representative.

Unions have to examine their role but so, too, does management. We have given too much attention to short-term decision-making and there has been an overemphasis on shareholder value. This is a time for the employee stakeholder to have a much more determining role. Trade unions are an essential part of a progressive social democracy and, for the foreseeable future, they will be central to progressive politics in this country.

2.49 pm

Baroness Hayter of Kentish Town (Lab): It is a real pleasure to respond to this debate. First, I welcome the maiden speech of the noble Lord, Lord Robathan—I am sorry that the noble Lord, Lord Lawson of Blaby, was not here to hear it—as well as that of one of the sisters, the noble Baroness, Lady Burt. As the first female chair of the Liberal Democrat parliamentary party and the Government’s ambassador for women in enterprise, she knows well the strength of solidarity and support for others. Secondly, it is a pleasure because we have heard from former leading trade unionists at national and international level with a range of experience. Thirdly, I am pleased to respond to the debate because of the role that unions have played in society for well over a century.

Together with my noble friend Lord Howarth, who is in his place, I produced a book Men Who Made Labour in 2006, the centenary of the parliamentary Labour Party, which was formed by 29 Labour MPs. What was exceptional about those 29 self-educated men, most having left school by the age of 14, was how they found their confidence, their voice, their passion and their ability to speak for others through the union movement. Indeed, some 27 were active trade unionists, and eight were general secretaries of their union. It was their union experience that provided their education but also helped their apprenticeship in forming policy, explaining, negotiating, compromising, taking responsibility, understanding the positions of others and, most of all, seeing that advancing the interests of their members could not be done in the workplace alone but needed political change, whether that was through the introduction of health and safety legislation, school meals, pensions or sick pay. They learned that they could not rely on other parties but needed their own voice in Parliament—hence the Labour Representation Committee, created by the unions in 1900, and then the parliamentary Labour Party in 1906.

The contribution of these trade unionists—at the Versailles peace talks, in establishing the ILO, as Home Secretary or Prime Minister—to our democracy, to creating one of our great political parties and to the well-being of the nation and further afield was astonishing. Immediately after the 1906 election, which saw these trade unionists elected to Parliament, the Archbishop of York, in St Paul’s Cathedral, proclaimed:

“The great … mass of our working folk … has found its voice … Here are the men … who have worked in pit and factory … among the dwellers in our overcrowded cities … These men will

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bring first hand knowledge of the facts of life to … these problems. They will take care that amid all the business of politics ‘the poor shall not always be forgotten’”.

They lived up to that prediction, as did later trade unionists such as Jim Griffiths, the Minister.

Today, we similarly pay tribute to the movement, which really does constitute “the big society”, with over 6 million members plus the wider trade union family made up of their dependants, and also retired members, many of whom serve their community as magistrates, on health or school boards, in charities, as we heard from the right reverend Prelate the Bishop of Derby, and of course here in your Lordships’ House, particularly perhaps by my noble friend Lord Foulkes today.

Interestingly, from my standpoint and, I am sure, that of the noble Baronesses, Lady Burt and Lady Neville-Rolfe, as well as that of my noble friends Lady Prosser and Lady Dean, women now make up the majority of union members. That is vital in an economy where women’s earnings still lag behind men’s, but where the wages of women union members are, on average, 30% higher than those of non-unionised women. As my noble friend Lord Hoyle said, union membership is proportionately higher among black and ethnic-minority workers. When discrimination, and often worse, is faced by these groups, especially at this time, it is a tribute to the trade union movement that it has embraced and incorporated minority groups into this oldest of voluntary organisations. Union organisation has helped women, the disabled and ethnic minorities get a better deal at work.

But union membership is good not just for individuals and their workmates, who also benefit from union organisation, as my noble friend Lady Dean said; the economy also benefits. As with the CBI and the employers’ organisations, as my noble friend Lord Morris said, many employers are supportive of a unionised workforce, particularly with its ability to collaborate on health and safety, productivity and training. Union workplaces are safer, largely due to the thousands of union health and safety reps. As BIS itself has demonstrated, by reducing time lost due to occupational injuries and illnesses, safety reps save taxpayers up to £0.5 billion a year. As we have heard, the motor industry improved as a result of union-employer negotiations over innovation and change, with unions playing a positive role in promoting skills and training. ACAS found that union reps play an important role in improving workforce engagement and morale, which improves productivity and quality of output, as the noble Lord, Lord Dykes, suggested.

So this is not about romantic nostalgia. It is about a modern economy and today’s politics. It is hard to understand why this Government want to shackle trade unions. It will not let them use electronic balloting, even while digital by default is being swept through government service and our welfare state. They want to outlaw good employer-union relations, often established through check-off, by effectively outlawing this in the public sector. Politically, they want to undermine the long-standing, organic relationship that the unions have with the Labour Party, by undermining the political fund system, a system not of secret donations or big money from rich companies or individuals, but a

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system which grew from the very origin of the party. Set up to give a voice in Parliament to working people, it is a system which allows millions of union members to make their small contribution—pennies rather than pounds a week—to keep our democracy vibrant, healthy and representative. Shame on a Government who fear that they cannot defeat their opponents politically and therefore seek to clobber them.

Anyone who believed in a pluralistic, open, big society would champion and cheer on independent workers’ organisations and facilitate the effective and efficient operation of this vital part of civic society. Clearly, the Government have other objectives. We have an opportunity today to champion, pay tribute to and thank the millions of trade unionists who volunteer their time to help their fellow workers, but we also have an opportunity to say to the Government that the unions are not an add-on to society but are part of our civic society. We should be supporting them, not undermining them.

2.58 pm

The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills and Department for Culture, Media and Sport (Baroness Neville-Rolfe) (Con): My Lords, before I respond, I join the House in congratulating my noble friend Lord Robathan and the noble Baroness, Lady Burt, on their excellent maiden speeches. I will not repeat the tributes, in the interests of time, but I am very excited by the wealth of experience that they bring. We know from today that they will hugely improve the quality of discussion in our House.

I am very grateful to the noble Lord, Lord Foulkes, for initiating this debate. I am aware that he has a deep interest in the performance of our economy. I much enjoyed his speech, including his historical perspective. Of course, that was picked up on by so many noble Lords that it would take too long to list them all. However, I should say that I did medieval history for A-level, and I then did industrial relations as my special subject at university. Therefore, I have to say that I am a bit sceptical about some of the comments he made on productivity—the sorts of things he mentioned can actually increase costs and slow necessary change—but it is good to have a debate on these issues in this House.

I should also respond to the noble Lord, Lord Monks. As a south-westerner, I am looking forward to visiting the Tolpuddle flag with him—I suppose that going to see a Tolpuddle flag is the Labour equivalent of seeing etchings.

I am pleased also to talk about unions and their role in the modern economy. We have heard many examples of how unions help working people prosper in our society, in particular in an excellent speech from the right reverend Prelate the Bishop of Derby. I was struck by the parallel that he sought to draw with the church, including the challenge of the non-joining culture. He talked also of good partnership and the importance of stamping out modern slavery. That is an area where the Government, with the help of this House, have made radical changes. From October, the Modern Slavery Act has provided law enforcers with additional tools, including the two new civil orders, and the anti-slavery commissioner. I commend the

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right reverend Prelate’s own contribution in this area, and I was glad to hear also from the noble Lord, Lord Young, on the subject.

This is a free country. Everybody has the right to belong to a trade union. Equally, there is no compulsion in the workplace to do so. Closed shops are a thing of the past. I was glad to hear from my noble friend Lord Balfe about trade unionism in the Conservative Party. I agree with him that there can be value in backing more than one horse. The Government also recognise that trade unions can play a constructive role in developing the economy and, as I know only too well from my experience, in supporting employers in upskilling their staff.

On economic well-being, I should perhaps say to the noble Lord, Lord Monks, that, although he and I are often in agreement—I pay great tribute to the work that he has done in Europe over the years, as well as in the UK—I do not agree with his summary of the position of the UK today. We were the fastest-growing G7 economy in 2014. Our employment rate and our small business creation are the envy of other member states, and we are number two in the INSEAD-WIPO Global Innovation Index.

I turn to the point made so well by the noble Baroness, Lady Burt: the trade unions have played a very important part where industrial restructuring has had to be done. She spoke rightly about the role that they played during Jaguar’s difficulties in Solihull, and the noble Lord, Lord Hoyle, was right to talk about how the success of the modern car industry owes much to good industrial relations. I suppose that it is right to reflect that the current steel crisis is another example of good engagement by the trade unions. Their input in Redcar, in Scunthorpe and in Scotland before, during and after the steel summit in Rotherham last month has been invaluable.

I commend the point made by my noble friend Lord Robathan about his work with the unions in the Ministry of Defence, as I do the efforts of my noble friend Lord De Mauley and the good relations that he had with the trade unions in Defra, using that relationship to solve the perennial problem of dangerous dogs and postal workers. I know that, if he were here, my noble friend Lord Maude would pay tribute to the positive role played by the unions over public sector pension reforms and in the public services forum.

I agree about the long history of unions providing learning for their members. This is important, as the noble Lord, Lord Stoneham, explained so well in a very thoughtful speech. My noble friend Lord Balfe talked about Unionlearn, the learning and skills organisation of the TUC, which is an excellent example of how unions help their members, employers and the country with skills development. Unionlearn has helped engage more than 53 trade unions in more than 700 workplaces. It has helped establish 600 union learning centres, where Unionlearn representatives help those with low literacy. As the noble Baroness, Lady Prosser, said, it also helps older workers, which is a very important point. In the past two years, Unionlearn projects have also helped to recruit and support nearly 15,000 apprentices. My noble friend asked about the Government’s support for Unionlearn. We provided

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the TUC with a grant of £14 million in 2015. It is an important area, and any decision on funding beyond that will of course be subject to the outcome of the spending review.

We have a target of 3 million apprenticeships during this Parliament. Frances O’Grady, the general secretary of the TUC, whom I was lucky enough to meet yesterday, has already said that she sees a role for unions in ensuring the quality of apprenticeships. We welcome this, and the input from the TUC and from the noble Lord, Lord Young of Norwood Green, on the new levy—the noble Lord and I have had many discussions about apprenticeships over the years and the new levy provides opportunities for all of us to contribute.

There are many important examples of where the unions have played a role beyond the direct well-being of their members. I know from experience of retail of the important cultural role that they play in health and safety. That was rightly mentioned by the noble Lord, Lord Morris of Handsworth. Health and safety is very important, and it has improved hugely in my lifetime. I remember health and safety on farms as a young lass; some of it was fairly hairy.

Trade union members also participate in the many voluntary roles which help create cohesive communities—a point that was brought out so well by the right reverend Prelate the Bishop of Derby.

The noble Lord, Lord Foulkes, and the noble Baroness, Lady Hayter, spoke of the gender pay gap and the work of unions over the years in this area. Although there is more to do, it was good to see that the recent 2015 survey of hours and earnings showed that the gender pay gap is at an all-time low. There is now a record number of women-led businesses and, partly as a result of the excellent, business-led work under the noble Lord, Lord Davies of Abersoch, there are now no all-male boards in the FTSE 100. More generally, we are seeking to tackle the root causes that prevent women prospering in the workplace by providing a wider programme of support, introducing 30 hours of free childcare and giving nearly 21 million employees the ability to benefit from flexible working. Our approach is producing results, with an increase of nearly 1 million women in work between May 2010 and August 2015.

On current trade union reform, the noble Lord, Lord Monks, and others were right to say that this debate is a calm curtain-raiser to the Trade Union Bill, which was recently given its First Reading in our House. My noble friend Lord Callanan was right to talk about the consumer view and point to the problems that can be caused by the trade unions.

Lord Lea of Crondall: Before the Minister leaves that point, does she agree with her noble friend Lord Callanan, who said that trade unions by their nature are against the consumer interest by being producers? That is exactly what he said.

Baroness Neville-Rolfe: My Lords, I was about to turn to the point made by the noble Lord, Lord Lea, on this issue. He referred, I believe, to a model of balance between consumer, producer and union interests

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and I share that general aspiration. I believe strongly in the power of well-run businesses, with good workforces, to do good, to serve consumers and to provide the taxes we need to pay for the schools, hospitals and everything else that a modern society requires.

As a parent and a grandparent, I know that when teachers go on strike, children’s education is disrupted and parents need to take time off work to look after their children. When healthcare workers strike, appointments are cancelled and patients do not get the service they deserve. When train, bus or underground workers strike, commuters cannot get to work. Even so, this Government are not seeking to ban strikes. We are introducing thresholds to require a minimum 50% turnout for all strikes, and the support of at least 40% of those entitled to strike in important public services.

I do not agree with the comments made by the noble Lord, Lord Dykes. We must ensure that when strikes take place, particularly strikes that impact on the working families to which he referred, the strikers have the support of a reasonable number of the workforce. As my noble friend Lord de Mauley said, the public sector strikes in 2011 closed 62% of schools in England, and the NHS—I am not sure that he said this—cancelled up to 30,000 routine operations. The Treasury estimated the total impact of these strikes to be some £500 million. So, in reply to the question asked by my noble friend, that is not fair and it is not right.

Nor is it right that in 2014, the NUT closed or partly closed almost 1,500 schools; or that a strike among NHS workers was called by Unite on the basis of the support of only 12% of its members. Similarly, we have examples of strikes called on the basis of out-of-date ballots. For example, a strike undertaken by the NASUWT in October 2013 was based on a ballot mandate from November 2011. That is a difference of almost two years. It cannot be right.

That is why we have introduced the Trade Union Bill, which we will debate shortly. As others have not sought to run through the detail, I shall not do so either. However, I emphasise that the Bill seeks to strike a fair and effective balance between the rights of unions, the needs of employers and the interests of the majority of people who rely on important public services. Our aim is to provide a modern industrial relations framework to better support an effective, collaborative approach—which has been the sense of today’s debate and my own experience—and to resolve industrial disputes.

The Government recognise that trade unions have a valuable role to play in developing our workforce and in ensuring that the vulnerable are able to participate in work. We have heard many good examples of this today. I have stressed the importance of trade unions and why I believe it is right that the legislative framework needs reform. We are seeking through the Trade Union Bill to modernise the relationship between trade unions and their members and to redress the balance between the rights of trade unions and the rights of the general public. These are moderate, necessary and welcome reforms. They do not ban the right to strike and do not weaken the voice of working people or their ability to join trade unions.

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We pledged to undertake these reforms in our manifesto and we have brought the Bill forward as a party that believes in trade unions. We are, as my noble friend Lord Balfe said, proud to win the support of many trade union members at elections. We want trade unions to carry on doing their excellent work in so many areas.

3.15 pm

Lord Foulkes of Cumnock: My Lords, the debate has been much more effective than I had expected—or even hoped—and it has been a pleasure to sit through all of it. Particularly effective were the two contrasting maiden speeches. I would hesitate to question the noble Baroness, Lady Burt—her having been deputy governor of Holloway among her many achievements—but I can assure her that the trade unions are now strongly supportive of mutuals and the Co-operative movement. Apart from that, it was a wonderful speech and we look forward to hearing from her many more times. My old friend, even though he is on the other side of the House, the noble Lord, Lord Robathan—whom my noble friend Lord Young described as having SAS views on the trade union movement—was equally effective. Again, we look forward to many more exciting and interesting contributions from him.

It was interesting that so few Tories participated in the debate. The noble Lords, Lord De Mauley and Lord Suri, did their duty by the Whips and will no doubt be suitably thanked for that. Apart from that, the contribution from the noble Lord, Lord Balfe, was interesting, as usual. He has had an interesting political journey, and it shows. The noble Lord, Lord Dykes, made an excellent contribution. He has had an even more exciting journey. He has moved right around the Chamber but always seems to be in the right place at the end. He certainly was today.

As expected, we had the most magnificent tours de force from the trade union Barons and from the Baronesses. It was interesting that the noble Baroness, Lady Dean, managed to elicit, in an intervention from the noble Lord, Lord Callanan, the real stark face of the Tories as far as this issue is concerned. The noble Baroness, Lady Prosser, rightly reminded us that I had forgotten to mention the wonderful international work of the trade union movement that I know so well. I remember talking to some old friends, trade union activists, who served in the International Brigade in Spain and did a wonderful job. We know what they did in Chile and elsewhere, and that must not be forgotten.

However, with no disrespect to all the other speakers, the first of my two highlights was the speech of the noble Lord, Lord Griffiths of Burry Port, who said that it was his brother who was the soapbox orator. I think of Leslie as the soapbox orator, who was really good at it, as well. The noble Lord made a fantastic, enthusiastic and positive contribution, which I expected. However, what was unexpected was that I, as a heathen, agreed with everything that the right reverend Prelate the Bishop of Derby said. It was an encouraging speech—one of the best in the debate. I have many times spoken about partnership and there is an interesting comparison between the church and the trade union movement. He raised the interesting issue of the non-joining culture, from which all organisations suffer. I

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am hinting to him that that might in itself might be the subject for a debate, because it is a worry for all who are trying to build up democracy.

Overwhelmingly what came through was a recognition of the value of the trade union movement and its positive contribution. As to productivity, which I have studied, there is no doubt that you get better productivity from a happy, contented and organised workforce. I can guarantee that. Many examples and studies that show that.

I welcome the powerful speech of the noble Lord, Lord Stoneham—it was encouraging to hear from the Liberal Democrat Benches their wholehearted support for the trade union movement—together with what my noble friend Lady Hayter said in her restrained but strong way.

I say this to the Minister: I hope she will acknowledge the sincere strength of feeling on the issue of the Trade Union Bill. I hope also she will say to her government colleagues that they are not going to have an easy time in this House when the Bill comes here. Sometimes in this House, we get the feeling that we should ask, “What are we doing here, when all the decisions seem to be made elsewhere?”. I hope she will take back to the people who make the decisions that there is a strong feeling in this place about the value and importance of the trade union movement. As I say, she will not have an easy time of it with the Bill.

I shall finish as I started, by talking about the positive role of the trade union movement within our democracy and our economy. That has been celebrated in this debate. It has been acknowledged time after time in speech after speech from all parts of the House. The trade union movement should be proud of the House of Lords for giving it such a warm welcome and such a great endorsement.

Motion agreed.

Sport: Exclusion of Drugs

Question for Short Debate

3.20 pm

Asked by Lord Addington

To ask Her Majesty’s Government what action they are taking at an international level to maintain high standards by all countries and international sporting organisations in order to ensure the exclusion of drugs from sport.

Lord Addington (LD): My Lords, when a little over a week ago I put down this Question for Short Debate on a topical matter, I had, as always, that slight feeling that the subject would have slipped from the news. Unfortunately, that is not the case. Indeed, this issue has become more relevant than it was when I secured the debate. At that point there had merely been an outcry against Russia, but since then Russia has been banned by the International Association of Athletics Federations, the IAAF. If ever there was a subject that is full of acronyms—and I do not like them—it is this one. Today, five other nations have been declared non-compliant: Argentina, Ukraine, Bolivia, Israel and Andorra—one of the world’s largest nations along with one of its smallest. More worrying still is the list

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of nations that have been placed on a watchlist for non-compliance. The coverage I have seen puts Brazil at the top. Brazil is the nation that will host the next Olympic and Paralympic Games. If anyone is feeling slightly complacent about this, let us look at who is with Brazil on the watchlist: France, Belgium, Greece, Mexico and Spain, four of which are members of the European Union. The international element of this is overwhelming.

I shall return to the original subject. ARD, a German television station, did a wonderful piece of investigative journalism which pointed out the problems in Russia. For this the station should be thanked wholeheartedly by the rest of the world. Indeed, it is a good thing for this House to be able to thank any branch of the press for doing excellent work, and I hope others will follow me in that.

The World Anti-Doping Agency sent in an independent commission to look at Russia. The commission’s report is one of the most depressing documents I have ever had to go through. There is state corruption or state collusion in corruption—a sort of “Everyone else in the world is doing it so you must do it better”—when it comes to doping. Bribes are being made in a system that was corrupt anyway. Noble Lords will know that when they normally read a report, they go through it saying, “This is fine but that is not”. Only around one in 30 lines that I read said that someone was not breaking the rules. It was basically appalling. On the action taken, after the report was published, the only thing the IAAF could do was put a suspension in place. Why does this matter? It matters because sport matters. The Olympics, which people are now saying are tarnished or were sabotaged, may have had some of the shine rubbed off, but that is probably overstating the case. A celebration of sporting activity brings people together.

This scandal may be about athletics, or athletics-led, but if there is a culture of cheating, everything is up for grabs and the whole thing is under threat. We do not think rugby union has any major problems with drugs at the moment, but Russia could have qualified for the last World Cup. However, the whole of Russian sport has now been called into question. Indeed, when we look at the non-compliance list we see that Argentina, which reached the semi-finals of the tournament, is on it. What this means for football and the other major sports, we do not know, but there are major problems in this area.

We should remember that sport is effectively recognised as a kind of “wonder drug” in terms of healthcare. Getting the people of this nation fitter is seen as a way of helping and encouraging them to make themselves healthy and thus save money in the NHS. It does not help if the international example being set by those at the top shows that they have been systematically cheating and so have taken away from the importance of this issue. It just does not work.

What should we be doing? The independent commission was brought in by WADA from the outside to report on these matters. It may be a model that we will have to use again and again. My first real question is: are the Government of the United Kingdom prepared to support and help fund all these steps in the future?

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Something will have to be done in this area. When I looked at it originally, I thought that perhaps we should demand that Russia should pay for the monitoring in the future. It would be a nice idea, would it not? An independent commission, perhaps even a permanent one, is what is needed, or at least it will have to be regularly reconstituted. Also, how are we going to interact with our international partners to make sure that something good comes out of this? Those are very real questions.

We also need to look at what we doing with legislation on the home front. There is a long-running debate around criminalisation: do we criminalise those who are taking part in doping? We should remember that we have had cases of it in our own country. Have the Government looked at the various models which have been put in place elsewhere? Which ones do they think work best? The gut reaction is that “something should be done”. If, however, that is not seen to be the most efficient way forward, should it mean six months in prison as opposed to a four-year ban and a change of career? I do not know which of those would bite harder. What are we doing to support our own agencies and checking to see whether they are able to do their job in the best way possible? If we wish to enjoy the benefits of sport, it is quite clear that we cannot merely leave it to the sporting bodies themselves. They need support and structure from the outside.

The Russian example is one where the state intervenes and condones these practices, at which point everything basically goes to hell. Are we going to intervene to support these independent structures? Also, how are we going to support whistleblowers both here and abroad? How are we going to make sure that someone who is charged with making sure that people are compliant is actually doing that? On reading the report, it is quite clear that no one felt that there was anywhere they could go to report these practices, and that was a huge part of the culture. All small organisations should get involved, along with political parties, sports bodies, the local golf club—you name it—because they all have this problem to a greater or lesser extent. Where can you go and where is it safe to report these practices that is outside the structure you are part of? What are we doing in this area? These are things with which the Government can help, even if only indirectly, and they will be much more efficient if they move forward with friends. We have to co-operate on this both with those we talk to regularly and those we talk to only occasionally. Sport is a forum that has made us regularly come together in the past, and it is where people can bury their differences.

The noble Lord, Lord Bates, has talked about the Olympic truce. Let us take a little of that spirit and carry it on to make sure we maintain the momentum. Can the Government give us some assurances about what they are doing in this area? I ask that because this is what is required. The more I look at this, the more worried I am.

I finally ask: what are we going to do to initialise the problem of accepting that we have ongoing tasks? The noble Viscount may not have that information because I did not give him advance warning of that question. It is clear that things have expanded, but do we have plans to ensure that we take this on for the

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future? Will we be able to institute groups that will lead the athletics and sporting groups into a format where they undertake activity that goes beyond current normal talking? We clearly need that.

I could go into a great more detail about the report. The noble Earl, Lord Courtown, is shaking his head—he is quite wise. I shall end by saying simply that unless we take action now we will throw away something very good, and I do not think that any of us wants to do that.

3.30 pm

Lord Moynihan (Con): My Lords, we might have hoped that the World Anti-Doping Agency—WADA—would have exposed the most recent scandal involving Russia. We might have expected WADA to have welcomed the in-depth news investigative journalism serving the cause of clean athletes. But the reverse is true. It was not WADA; it was the German broadcaster ADR and then the Sunday Times. It was the excellent work of Hajo Sappelt. It was not WADA which broke the BALCO story and exposed Marion Jones, but the law enforcement agencies. It was not WADA but the Sunday Times and the law enforcement agencies which exposed the former era of pervasive drugs in cycling. When they did, the response of sports administrators too often defied belief. They went straight to their default position of blaming the press—a declaration of war against the Sunday Times in athletics, while Craig Reedie continued to praise Russia in his capacity as president of WADA. Why?

The problem is a straightforward conflict of interest. WADA is equally owned by Governments and the IOC. Those IOC members involved see Russia’s electoral power in the world of sports administration wielding a significant influence. The same applies in international sports federations. Where Governments and their sports administrations are one and the same, they risk losing political support if they show determined leadership in the war against drugs wherever they are endemic.

WADA is in need of fundamental and far-reaching reform and Governments have done far too little. Why Governments? Because they are full partners in WADA but their level of representation is often well beneath the seniority in government required to manage this issue, which is now a crisis. The Government pay a significant contribution to WADA, so now is the time for my honourable friend the Minister to call for an independent audit, because it is failing to lead and failing to succeed. WADA was even subject to serious criticism by its own independent commission, led by a former WADA president. The noble Lord, Lord Addington—I am grateful to him for raising the subject—outlined the 11 countries which are currently non-compliant or on a watch list. The dark and dirty underbelly of sport is being laid bare. It is time for sponsors to act. It is time for Governments to act. It is time for sports administrators to act. Despite all the warnings, we hobble from scandal to scandal.

Dick Pound, who headed the independent commission’s first report, concluded that London was sabotaged by the drug cheats. The head of WADA, Craig Reedie, quickly and publicly disagreed with his own independent commission, further compounding the mixed messages coming from WADA. Has he forgotten that clean

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athletes have been denied their medals? Competing chemists’ laboratories work around the clock to boost the chances of their athletes through drug-induced cheating. Now we know that Russia’s endemic corruption sabotaged our Games. Honest would-be champions suffer when the chance to fulfil their Olympic ambitions is stolen from them; when Olympic medals are snatched from their grasp; and when they are robbed not just of Olympic glory but of all the associated rewards they deserve.

The World Anti-Doping Agency boss, David Howman, believes that one in 10 athletes is a drugs cheat—a figure less than that arrived at by the 2015 Dutch National Anti-Doping Agency report, which concluded that 14% to 39% is the best available estimate. David Howman at least had the courage to tell an Australian and New Zealand Sports Law Association conference last month:

“I want to pose the question: should doping be a criminal matter? It is in Italy, and WE think—some of US—that the real deterrent that cheating athletes fear is the fear of going to prison not the fear of being stood down from their sport for a year, two years, four years but a fear of going to prison”.

Yet days later, in the face of a growing interest in legislative proposals for criminalisation of doping in sport around the world, his boss Craig Reedie said that WADA is,

“completely opposed to the criminalisation of athletes”.

We should follow many other countries and consider the criminalisation of doping in sport. I welcome the announcement by the Minister for Sport that this is under review. I wonder whether the Minister here today can update the House on progress in that regard.

As the Russian crisis besetting athletics was breaking, WADA was quick to stand by Russia. The president wrote to Natalia Zhelanova, the Russian anti-doping commissar, stating:

“I wish to make it clear to you and to the Minister that there is no action being taken by WADA that is critical of the efforts which I know have been made, and are being made, to improve anti-doping efforts in Russia”.

WADA, he continued, were,

“pleased that these relationships have survived much of the adverse publicity caused by the ARD television programs (which are likely to continue for some time) … I value the relationships with Minister Mutko and would be grateful if you (Natalia Zhelanova) will inform him that there is no intention in WADA to do anything to affect that relationship”.

How could WADA and the Governments—its members—get the situation so horribly wrong? It is time for Governments to join a call for a full and independent review into both their own and their member state contributions to WADA, and to support the call for far-reaching and much overdue reform. This audit should, please, be led by totally independent lawyers and medics, supported by clean athletes with the skill sets needed to lead the campaign on doping in sport worldwide. It should not be led by people who rely on IOC members and International Sports Federation representatives for their electoral success—for their jobs. Such a soft approach against the country with the highest number of drug cheats in the world beggars belief in the fight on behalf of clean athletes.

Equally serious, another senior member and close friend of the president of WADA, Pat Hickey, who is on the International Olympic Committee’s executive

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board, went public within days of the publication of the damning revelations in the Pound Report, confident that Russia will be back for Rio. Every time that is said by a senior IOC member before action is taken, the compliance bar is being lowered. The principle of zero tolerance is fast becoming a contradiction in terms.

Those in this House who regularly speak in debates on sport look to the Government to ensure that full transparency, accountability and professional management are in place before tax and lottery money is invested. The corridors of sport, I am afraid, are riddled with conflicts of interest. We have our own example. Perhaps the Minister could inform the House what action was taken when Nicole Sapstead, the UK Anti-Doping chief executive, sent emails to the head of the British Olympic Association—I declare an interest, having chaired it in the run-up to London 2012—after an investigation by the Sunday Times revealing widespread blood doping in athletics, stating that,

“we will do everything we can to ensure the focus is on the positive news. The last thing we want is a story like this detracting from the Rio countdown”.

The role of all anti-doping agencies should be wholly, necessarily and exclusively focused on tackling drug abuse in sport. There can never be any other considerations.

It all comes back to those in charge and the urgent need for a step change in the governance of sport both nationally and internationally. Governance is critical. All office holders in international sports organisations should be paid the going rate for their jobs. Conflicts of interest must end. The test used in your Lordships’ House of whether a reasonable person would believe that a conflict existed must apply to all senior sports administrators both nationally and internationally, starting at the top. The moment you choose to be a leading sports administrator, you have to turn away from seeking to make money from sport as a businessman or woman. After all, it is very difficult to substantiate that you are going to spend every waking hour tackling doping in sport if you have a highly paid day job in sport, accountable to your shareholders.

Michael Beloff QC is advising the IAAF and my noble friend Lord Coe. In the light of the current crisis and in the interests of good governance, that advice should be made public. I ask the Minister to seek to obtain that advice and place it in the House Library.

I conclude by giving the reason why I feel so strongly about this. It is because the casualties are the clean sportsmen and sportswomen. Cheating is inimical to the very essence of sport and to its philosophy of team spirit, honesty and loyalty. Cheating, by whatever means, has no place in sport. These cheats have shredded the dreams of clean athletes with every needle they inject. They have destroyed the years of training and competition necessary for a clean athlete to reach the pinnacle of sport.

3.40 pm

Baroness Grey-Thompson (CB): My Lords, I thank the noble Lord, Lord Addington, for this timely debate. I also welcome the Minister to the world of acronyms.

When I see the cases in the press about a sport that I love and a sport I participated in, part of me is hugely disappointed. However, as an ex-athlete and a fan, I

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am also pleased because these issues need to be raised. There have been rumours and speculation, but we cannot act on them; we need cold, hard facts about what is happening in the world of sport, because it has a much greater effect. It affects parents’ choices about which sports they allow their children to do. It affects participation, as the noble Lord, Lord Addington, said. It affects how people view activity. This also has a massive impact on the UK.

Personally, I have a strong view on athletes who are caught cheating. If I had a preference I would ban them from sport for life. I recognise that that is extremely difficult to do, but it is a huge privilege to compete for your country in your sport. A certain responsibility has to go with that. As an athlete, I was on the Whereabouts programme and I was tested. As a young female athlete, providing a sample is hugely daunting. The first time I was called into a test, I did not particularly know what I was about to do. You have to be stripped from your bra to your knees and you have someone watch you give a sample. That is part of your job as an athlete and part of your responsibility. I willingly did it because I really believe that sport at this level has to be clean.

I argued consistently over the years that any lottery-funded athlete should be part of the programme. Although in the early years of lottery funding Paralympic athletes were not on the programme, I am delighted that they now are. One of the misconceptions about disabled athletes is that there is a different list of testing. It is exactly the same. Very few disabled athletes take medication for their condition, but we are subject to exactly the same tests as everyone else.

I declare an interest in anti-doping. I sat on the first UCI investigation into Lance Armstrong, which seemed like a good idea at the time but it was incredibly ill fated. As a fan of cycling, I watched each of Armstrong’s wins. I was amazed. I wore his yellow band, until, at the end of 2004, I was told to take it off by someone I trust in sport. The UCI announced in October 2012 that it would establish a fully independent external commission to investigate the allegations from USADA, the US Anti-Doping Agency. John Coates, the president of the Court of Arbitration for Sport and a senior member of the IOC was asked to set up this commission. I was joined by Sir Philip Otton and Australian lawyer Malcolm Holmes. The plan was that we would have a team of forensic accountants and medical experts who would advise the commission. We were due to hold a two-week hearing. In the end it was a single day, because the UCI, even though it funded it and spent a significant amount of money, refused to hand over a single piece of paper. It quickly became obvious that it had no intention of being involved in the process. Brian Cookson, who stood as president on the platform of sorting out the sport, has since carried out a further investigation.

However, it is not just the athletes taking drugs, but the corruption and everything that goes with it. It is the bribery and the coercion. I have a certain degree of sympathy for the Russian athletes. It would not have been a choice for them; it would have been, “Do this or else”. I also did an investigation for British Athletics when Dwain Chambers came back into the sport after serving a ban period. It was a very messy period. Here

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was a young man who had lots of talent and who had made some really poor choices. Again, I had a huge amount of sympathy for him, but a number of people in the UK knew that he was going into a destructive and suspected environment, but they did not stop him. There was nothing we could do about that.

Not only do I take a tough stance about athletes; it is also about coaches and associated personnel, because rarely do athletes do this on their own. Taking performance-enhancing drugs is relatively easy; they are quite easy to obtain. However, it is understanding the microdosing and how to avoid detection that you need a huge amount of expertise on. It is quite expensive as well.

I was disappointed when the British Olympic Association was forced to change its rule. The BOA stood up very strongly in the world and said, “We do not want to take anyone who served a banned period to the Olympics”, but because of international rules it had to change that. I was disappointed when it went from a four-year ban to a two-year ban—luckily it is going back the other way—because we have to send out this really strong deterrent that taking performance-enhancing drugs in sport is just not the right thing to do.

We found out about the case of BALCO because there was a falling out between Victor Conte—the architect of the drugs—and one of the coaches, Trevor Graham. He coached Marion Jones and Tim Montgomery and was the one who sent the syringe to WADA, which enabled them to develop the tests. We cannot forget that Marion Jones never failed a drugs test. There are other athletes in the world who have and it has been covered up by their federation. This has to stop. We cannot overestimate the challenge that the noble Lord, Lord Coe, is going through, but I believe that you have to be on the inside. There have been rumours around the Russian athletes for a number of years, but you need to have the facts of who has taken drugs.

Just recently, a 17 year-old Chinese athlete, Qing Wenyi, died at a training camp. They believe that that was from state-sponsored drug taking. She will be one of many athletes who we will never hear about, who have no choice about this, but sport is their way to a better life. If it is a choice between taking drugs and potentially ending up in prison, the athletes will make the choice in front of them.

In paralympic sport this is not such an issue, although this week a Russian athlete, Alexander Zverev, has been banned for a nine-month period for taking cannabinoids. It is very expensive to successfully dope competitors involved in paralympic sport, and paralympic sport does not have the money to do that. However, as more money moves into paralympic sport, that may become more of an issue. The issue in paralympic sport is around cheating classification. The difficulty is that athletes are divided into different classes based on their level of impairment. Athletes will fall one side of the line or the other, and it is not as clear cut as just breaking the rules.

On 12 October this year, as reported in Inside the Games, a web-based newsletter, the IPC issued a statement about what it calls intentional manipulation and said that it,

“is in grave danger of undermining the credibility”,

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of paralympic swimming. This statement refers just to swimming but I am sure there are issues in other sports. An email seen by Inside the Games, sent from the IPC chief executive Xavier Gonzalez to national paralympic committee and national federation presidents, outlines the threat posed by intentional manipulation. The email entitled, “Athlete/Support Personnel Conduct during IPC Swimming Classification” states that this is a “serious issue”. The email continues,

“we believe we have witnessed, and have heard of, a number of cases of alleged intentional misrepresentation during the classification evaluation process of athletes”.

This has a massive effect on the sport but did not warrant front page news or much reporting in the sports press. The email continues:

“Wherever IM takes place it strikes at the heart of fair play, threatens the concept of excellence in Para-sport, and goes against the requirements of the IPC Classification Code and the classification rules of IPC Swimming”.

However, there is no penalty. If an athlete gets moved, nothing happens to the country or to the athlete. For me that has serious implications for the future of paralympic sport because some countries will seek to move athletes into a classification which will better aid their performance. I believe that it is a responsibility of sport in the UK to ensure that athletes are correctly classified. We only have to look back to the 2000 Paralympics, when the Spanish basketball team pretended to have learning disabilities. It turned out that most of them were journalists. They cheated the classification with the result that a group of learning disabled athletes got thrown out of the sport. That has a huge impact on the wider sport and is very disappointing.

In this country we have UKAD, which is under the threat of a funding cut. We should ensure that it receives greater support. The noble Lord, Lord Lord Moynihan, was right to talk about WADA’s independence. At the moment it is too closely tied up and it is impossible to find a way through. We have to have an independent body. So my question to the Minister is: can the Government guarantee that appropriate funding will be made available to UKAD to ensure that it is able to do the necessary testing? Will Her Majesty’s Government consider criminalising the use of performance enhancing drugs?

I also believe strongly that athletes should be rehabilitated. We should not just penalise them. But now is the time when we have to take a much tougher stance or this will carry on and in another year, five years or 10 years we will have more front page headlines on this issue and it will never end.

3.50 pm

Lord Thomas of Gresford (LD): My Lords, I thank my noble friend Lord Addington for introducing this debate. He referred briefly to rugby. One of the best moments in the recent Rugby World Cup was when Scotland was playing South Africa at the home of Newcastle United, St James’ Park, and Stuart Hogg, the full back, took a dive to the floor when he was brushed by a South African prop. The Welsh referee, Nigel Owens, told him that he had seen what happened. He said:

“There was nothing wrong with it. Dive like that again and come back here in two weeks and play”,

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soccer. He added, “Not today. Watch it”. There is a difference in culture between sports. Perhaps professional soccer players are extraordinarily fragile in the penalty area. Is it cheating or is it all part of the game?

Rugby has its own problems. It is my experience that violence on the pitch is proportionate to the age of the players: the more veteran the player, the more likely he will commit acts on the field which would have him arrested if he committed them in the street. But, of course, they are protected by the omertà of the team. Players do not want to see policemen on the pitch. I recall one game when a second row in the scrum where I was flanker landed a punch on the opposing prop which broke his jaw. The referee got it wrong and sent our prop off instead of the second row. I put on my professional cap and said to the second row, “Frank, say nothing, don’t admit anything, don’t deny anything”. He was not prosecuted but the player with the broken jaw made an application for criminal injuries compensation. I do not know what happened to it so perhaps that was not the right thing to do.

It is this traditional silence which has protected those high-performance coaches, the so-called sports scientists and sports staff who have engaged in the distribution of prohibited substances to athletes and professional sports players and are undermining the integrity of sport. The noble Baroness, Lady Grey-Thompson, pointed out the pressures on the athletes themselves when they are under this influence.

In May 2006, the Spanish police launched Operation Puerto with the aim of cracking down on doping in sport. It was aimed at cycling, though few were sanctioned out of the dozens implicated. A Mr Fuentes, a former gynaecologist known as Dr Blood, was at the heart of that conspiracy. However, there is no specific crime in Spain for cheating in sport or other sporting fraud. He was in April 2013 given a one-year suspended sentence for endangering public health. Hundreds of blood samples were ordered by the court to be destroyed. Spain had won only four gold medals in 92 years of Olympic competition before the Barcelona Games in 1992. At that event, Spain won 13 gold medals. Dr Blood’s wife, Cristina Perez, an athlete who had been banned for drug offences after the 1988 Olympics, spoke about her husband’s work in the build-up to Barcelona:

“I know what happened in 1992 and I’m a Pandora’s Box that, if opened, could bring down sport. But out of respect for my companions, the people who sacrificed so much, I’m staying quiet, although I could speak out and ruin all those caught up in this little world”.

There it is: silence among the participants.

Other scandals have followed. Marina Hyde, writing in the Guardian in July 2013, put it very well. She said that cheats,

“ruin it for everyone else—participants, spectators—in many and diverse ways. They ruin it for years, for everyone. They turn expert observers into pained inquisitors; they make kids who should be dreamers into cynics; they retain the power to turn age-old human contests into an irrelevance. And ultimately, as the increasingly distrusted spectacles of cycling and sprinting are showing, they pervert the very desirability of being victorious”.

In 2011 the Australian Crime Commission began a project to consider the extent of the use of performance-enhancing and image-enhancing drugs by professional

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athletes in Australia, the size of the market and the extent of organised criminal involvement. It concluded in its report, published in 2013, that there was,

“a culture in some professional sports in Australia of administering untested and experimental substances to athletes in the hope they will provide an advantage in the highly competitive world of professional sport. In some instances, the substances are not yet approved for human use”.

But of course athletes accepted them—under pressure, perhaps, but they accepted them. Such drugs were also being used by sub-elite athletes competing at various levels of competition.

Now we have the report of the independent commission set up by WADA, which makes very depressing reading. The International Association of Athletics Federations, by 22 votes to one, suspended the All-Russia Athletic Federation provisionally and presumably after a hearing will proceed to full suspension. If the findings of the commission are upheld, no amount of assurances for the overhaul of sports governance in Russia or promises of good behaviour for the future should permit Russia to participate in the Rio Olympics. If that means that some Russians who are clean miss out, tough. It is only by peer pressure from such athletes that the culture of doping can be overcome. Nothing could be more disgusting than the soliciting of bribes by senior members of the federation to suppress the positive findings of drug misuse.

The investigation uncovered evidence that the IAAF itself had failed in its duty to ensure,

“the health and wellbeing of the ‘Athletics Family’”.

Instead, it found that,

“there existed a consistent disregard for ethical behaviour and a conspiracy to conduct and conceal corrupt behaviour by particular highly placed members and officials of IAAF”,

and the Russian federation, hence the arrest of the former president. We all should wish the noble Lord, Lord Coe, all the best in trying to clean up the mess. But I am not filled with any confidence by the news last weekend that the IAAF has appointed an inspection team with the terms of reference to,

“verify the reforms programme in Russia to enable the All-Russian Athletics Federation to gain reacceptance for IAAF membership”.

As the noble Lord, Lord Moynihan, pointed out, it is the electoral strength of that country in the governance of sport that no doubt leads to terms of reference such as those.

I am afraid we have reached the stage where the criminal law should be quite explicit about fraud, drugs and match-fixing in sport. The noble Lord, Lord Moynihan, did not refer to the Bill that he introduced in the previous Session, which, like the law of many of the Australian states, makes match-fixing a specific crime. But he has also drafted simple criminal offences in respect of drugs. He handed me a copy of the Bill at the Handa conference we went to recently, and I am very grateful to him. He has two new offences. The first is:

“An athlete is guilty of an offence if he or she knowingly takes a prohibited substance with the intention, or one of the intentions, of enhancing his or her performance”—

simple. Secondly, the Bill said that:

“A person belonging to the entourage of an athlete is guilty of an offence if he or she encourages or assists or hides awareness of the relevant athlete taking a prohibited substance with the intention, or one of the intentions, of enhancing such athlete’s performance”.

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That is the way ahead. The noble Lord’s maximum sentence of two years’ imprisonment was, in my view, far too low when compared with the 10 years that the Australian states have imposed. At the end of the day, it is the clean athletes who suffer from this invasion of their sport and I hope that we will hear from the Minister some positive steps towards dealing with this problem.

4 pm

Lord Collins of Highbury (Lab): My Lords, I, too, thank the noble Lord, Lord Addington, for initiating this incredibly timely and important debate. As we have heard, doping is wrong because it provides athletes with an unfair and fraudulent advantage over their competitors. It can also be harmful to individual athletes and their health. It may also involve associated criminal activity, such as the trafficking of specified substances. As the noble Lord, Lord Moynihan, said, it also undermines the spirit of the sport. It is unethical and contrary to the values of fair play and respect for one’s opponent.

The noble Baroness, Lady Grey-Thompson, reminded us of Lance Armstrong. What I found most shocking about his cheating was the apparent ease with which it was done. Threats of libel action against the media, large sums of money and vested interests all seemed to play their part in keeping the relevant authorities silent. With the report published by the World Anti-Doping Agency on 9 November, all those ingredients appear once again in play. As was highlighted by the noble Lord, Lord Moynihan, would the level of corruption found by the WADA have been uncovered without the original German media investigation? The WADA report said that,

“acceptance of cheating at all levels is widespread”,

in Russia and suggested that neither the Russians’ anti-doping agency nor ARAF, the Russian federation, can be considered anti-doping code-compliant.

The 2012 Olympic Games do not come through this unscathed either. The Russian Sports Minister, Vitaly Mutko, reacted to the possibility that medals won by Russian athletes in London may be taken away by saying that,

“it’s the British system of doping control that operated there”,

under the leadership of the IOC, so our good name will be tarnished. Despite their initial reluctance, as we have heard, the International Association of Athletics Federations council members voted 22 to one in favour of Russia’s athletics federation being provisionally suspended from international competition, including the Olympic Games, for its alleged involvement in widespread doping.

What is perhaps most shocking is that, despite the scale of the allegations, they have been described as only the tip of the iceberg. In backing Russia’s suspension from competition, Ed Warner, the UK Athletics chairman, echoed Dick Pound’s views that there is more to come. As we heard from the noble Lord, Lord Addington, there are four, five, six or more nations with which athletics has a real problem.

The IAAF president, the noble Lord, Lord Coe, told BBC Sport:

“This is a wake-up call for all of us”,

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and that he is wholly,

“focused on the changes that need to be made”.

Although the noble Lord was elected IAAF president only in August, he was vice-president for eight years, and current events make you wonder whether he was asleep on the job. I do not suppose that his being the first chair of FIFA’s ethics committee under Sepp Blatter or his employment by Nike, a company that supplies Russian athletes with their kit, will help people better to understand his judgment. Whatever view you take on these matters, no one can doubt the noble Lord’s obvious integrity, but his judgment must be beyond question as the investigations move forward. The question now is how he can best restore credibility. It is clear that no one within the organisation commands the confidence necessary to introduce transparency and accountability. The noble Lord will therefore need to ensure that at the IAAF he has a competent team of independent people around him able and willing to tackle cheating and corruption without fear or favour. Failure to act decisively will put the reputation of world athletics in grave peril.

Sadly, the implications of the WADA report may not be limited to athletics, with Pound adding that it is not the only sport with a doping problem. Baseball and, as we have heard, cycling, have been beset by doping scandals in recent times, while a corruption crisis still involves football’s world governing body, FIFA. We now have people from the top of football and athletics potentially facing criminal proceedings. One action that the Government must take is to urge the National Crime Agency to investigate whether any crimes have taken place on UK soil.

This is not just about preventing doping in sport. It is clear from these revelations that a culture change is required, which is much more difficult to achieve. Our schools and education are a good starting point, and I ask the Minister whether consideration is being given to the programmes that can be undertaken, starting at the basic level in schools. At the end of the day, I wholeheartedly agree with the position of the noble Lord, Lord Moynihan, about WADA. It needs to be strengthened; that must be a priority and it must be a priority for this Government.

4.07 pm

Viscount Younger of Leckie (Con): My Lords, I begin, as have other noble Lords, by thanking the noble Lord, Lord Addington, for calling this timely debate on an issue that strikes right at the heart of sporting integrity. Like every other sports fan, I was shocked at the conclusions of the independent commission’s report into allegations about Russian athletes. The noble Lord was withering in his comments about its contents, as was the noble Lord, Lord Collins. To find that top athletes whom many look up to are doping is difficult for most people to understand, but for it to be part of a wider-scale, state-sponsored conspiracy is even harder to comprehend.

I will pick up on a number of points made about the German documentary that led to the expose. I strongly agree and accept that the free press and the documentary makers deserve a great amount of credit for their invaluable work. In this regard, credit should

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also go to the

Sunday Times

, which has not only reported on doping but uncovered serious allegations in relation to FIFA. We do not accept or recognise any of the comments made by the Russian Sports Minister who criticised the outcome of the commission.

The report’s findings could read as a work of fiction. However, our experience from the events in cycling during the 1990s and the first decade of this century suggests that the findings in athletics are to be taken very seriously. While we have confidence in the robustness of the anti-doping system in the UK, we should never be complacent. International engagement is important in creating a global level playing field for our athletes to compete on.

It is important at this point that I set out the structure of anti-doping internationally and the level of UK involvement. As the noble Baroness, Lady Grey-Thompson, said, I must apologise for the number of acronyms that I am about to unleash on the House, but this will explain the role of various bodies in being compliant with the World Anti-Doping Agency, or WADA. Established in 2005, UNESCO’s International Convention against Doping in Sport is the primary instrument that underpins governmental support for anti-doping in each signatory state, and is a legally binding framework for Governments to recognise. WADA was established in 1999 and is responsible for developing, implementing and monitoring compliance with the world anti-doping code, known as “the code”, and international standards.

I would like to pick up on some comments made by my noble friend Lord Moynihan on WADA. I take note of the strong criticism that he made of that organisation. He is correct in saying that the Government fund WADA, but we have confidence in the work that it does. The fact that we would not be present here today discussing this important matter had WADA not commissioned the independent report is a moot point to make, but I shall make some further points about WADA later on in my comments.

International sports federations such as the IOC and IAAF are signatories to the code and responsible its implementation and for testing at their international competitions. In addition, national anti-doping organisations such as UK Anti-Doping, or UKAD, are responsible for educating and testing athletes and ensuring that our national governing bodies of sport are compliant with the code. In turn, they are responsible for tackling doping as a condition of membership of their international federation.

The UK’s traditional tough stance on drugs cheats is reflected in the work carried out by UKAD. In the UK, the Government have implemented the UNESCO convention by way of the national anti-doping policy, and task UKAD with delivering key government commitments pursuant to the UNESCO convention. It is pleasing to note that large-scale sporting events in the UK, from London 2012 to Glasgow 2014, and the recent Rugby World Cup, have seen low levels of positive tests. While that is encouraging, we must ensure that we are never complacent in the fight against doping. In 2017, London hosts the Athletics World Championships, and organisers are aiming to put on the cleanest championships ever. Organisers of

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major events can therefore be sure that the robust anti-doping systems used in the UK are a deterrent to athletes who cheat.

I am pleased to say that UKAD is widely viewed as one of the world’s leading national anti-doping organisations. It drives a robust clean sports programme, focusing on testing and sharing intelligence with law-enforcement agencies, as well as its excellent athlete education programme. The noble Baroness, Lady Grey-Thompson, and the noble Lord, Lord Addington, raised the question of the funding of UKAD. It is subject to the Government’s spending review, to be announced on 25 November, but as noble Lords might expect I am unable to comment at this particular time. However, I reassure the House that the Government greatly value the work of UKAD, which has led to it being a world-leading organisation.

I am pleased to confirm that the UK, and our Crown dependencies and overseas territories, which have the UNESCO convention extended to them, are fully compliant with the convention’s commitments. In addition to national commitments, the UK is extremely proactive at international level in combating doping in sport. Of course, this is the essence of this debate. The national anti-doping policy requires UKAD to influence international policy, and conduct international advocacy for doping-free sport. The UK is a member of the bureau that seeks to implement resolutions adopted by UNESCO’s Conference of Parties. The UK is represented at the Council of Europe monitoring group meetings to assess and ensure that implementation of the convention is effective.

The UK also chairs the Council of Europe’s legal issues advisory group. The UK is represented at the ad hoc European committee for the World Anti-Doping Agency, which is known as CAHAMA. It is a forum that looks at the issues concerning relations between the Council of Europe, its member states and WADA and agrees a common European position ahead of meetings of WADA’s foundation board. It is important to note that WADA looks to pair national anti-doping organisations that it feels are underperforming or in need of support and advice with high-performing counterparts. To use a diving analogy, it is akin to a buddy system. For example, UKAD has been asked by WADA to work with its Belarusian counterpart to reach the required standard under the code to become compliant. In a similar vein, King’s College, London, the UK’s WADA-accredited laboratory, shares best practice with laboratories worldwide.

I now to turn to international forums. The UK is a member of international forums such as the Institute of National Anti-Doping Organisations, the International Anti-Doping Arrangement and the International Investors Group. These forums share best practice and support national anti-doping organisations.

I shall now focus on Russia. The reaction to the commission report on state-sponsored doping in Russian athletics has been swift and unequivocal. The IAAF vote to suspend Russian athletes from all competition was unanimous and reflected the worldwide reaction. It was 22 to one, I think. Even President Putin was quick to announce the need for Russia to offer,

“the most … professional cooperation with international anti-doping structures”.

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The noble Lord, Lord Addington, referred to the impact of the Russian findings, and I underline, as I am sure the noble Lord will, that this is not just about Russia cleaning up its practices; it is about all countries, all sports and all athletes not only learning from the commission’s findings but realising that doping in sport, no matter how organised or innocent, will be not tolerated. The noble Lord, Lord Thomas, and the noble Baroness, Lady Grey-Thompson, mentioned that coaches and support staff must be properly monitored and censured just as much as sportsmen.

For the IAAF, my noble friend Lord Coe has already announced that its anti-doping systems will be delivered by an independent body. This is similar to the response of cycling, which now has an independent agency to deliver its anti-doping programme.

The noble Lord, Lord Addington, and my noble friend Lord Moynihan raised the issue of WADA, and I shall revert to it and its tough stance on compliance reporting. In defence of WADA, I point out that it has strengthened its compliance and regulatory functions and as a result last night, as the noble Lord, Lord Addington, said, it declared that six signatory countries were non-compliant with the world anti-doping code: Russia, Andorra, Argentina, Israel, Bolivia and Ukraine. Although this has not been confirmed by WADA, it is reported that Brazil, which is a concern, Belgium, France, Greece, Mexico and Spain have been placed on the watch list. Although this is a concern, decisive action has been taken and should be welcomed.

Criminalising doping in sport was raised by the noble Lords, Lord Addington and Lord Thomas, my noble friend Lord Moynihan and the noble Baroness, Lady Grey-Thompson. My noble friend Lord Moynihan mentioned that the Minister for Sport, Tracey Crouch, is looking very seriously at criminalisation. Her investigation will include looking at the experience of other countries, including Italy and France, which already have legislation. They are a minority of countries, but the Minister for Sport will look at this very seriously to see what lessons can be learned and what might be done.

The noble Lord, Lord Addington, raised an important point about whistleblowing and asked what greater support could be given. WADA announced in its meeting yesterday that it would enhance its whistleblowing process. This will offer greater protection to anonymous sources who wish to come forward. In the UK we also have UK Anti-Doping’s anonymous Report Doping in Sport hotline, which the noble Lord may know about.

My noble friend Lord Moynihan raised the issue of the chief executive of UKAD and commented on the Sunday Times allegations. I point out to him that an investigation is still going on and the outcome should not be prejudged.

There were a number of other questions, but I have run out of time to answer them. I will finish by saying that the UK’s traditional tough stance on doping is still very much in place, and I am proud to say that the UK’s expertise, knowledge and opinion are regularly called upon worldwide. I am equally proud to say that the UK is not complacent about anti-doping, and

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continually engages with the international anti-doping community to learn and improve so that we remain in the vanguard of the fight against doping in sport.

Foreign Ownership of UK Assets

Motion to Take Note

4.20 pm

Moved by Viscount Hanworth

That this House takes note of the sale of United Kingdom assets to foreign ownership and of the effects on such sales of the laws of corporate governance.

Viscount Hanworth (Lab): My Lords, I wish to talk of an enduring problem of the UK economy that is of increasing severity: our inability to pay our way in the world by means of our exports of goods and services. The consequence of this failure is our indebtedness to foreigners, which has resulted in their ownership of an ever-increasing proportion of our capital assets. It is essential that we should understand the causes and consequences of these circumstances. We need to dispel the complacency that has allowed us to reach this state of affairs, and to take action urgently to remedy it.

The UK has an unprecedented deficit in its trade with the rest of the world. The difference in the value of the goods and services that the UK buys from abroad and the value of the goods that it sells to the rest of the world has risen to its highest level as a share of gross domestic product since records began. Since the early 1970s our deficits have been of an increasing magnitude. The last recorded surplus was in 1984, when it was a modest 0.3% of GDP. At present our deficit is running at 6% of our GDP. The period from the end of the Second World War until the 1970s saw trade deficits that were modest by comparison with our recent deficits, yet these years were afflicted by intense anxieties over Britain’s balance of payments. It is remarkable that such anxieties have largely disappeared at a time when the problem has never been more acute.

The reason for the present lack of concern over our trade deficit is that we have found the means of temporarily averting a balance of payments crisis, but these expedients will be the cause of much economic distress in future. We have managed to achieve the necessary balance of payments by selling our assets to foreign owners. This cannot continue indefinitely since the supply of assets for sale is limited. It will eventually be exhausted and we will find ourselves in an acutely impoverished state.

Such sales of our assets are liable to be described, disingenuously and deceptively, as “direct inward foreign investment”. The present Government have declared that Britain is open for business and have congratulated themselves on their success in attracting foreign investment. The much-publicised trade missions of the Chancellor and the Prime Minister to China, India and elsewhere have succeeded not so much in promoting the sale of British goods abroad as in selling the ownership of our economic enterprises. There has been an extraordinary self-deception on the part of the Government in this connection, which, unfortunately, has succeeded in deceiving many others besides.

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It is appropriate at this juncture to note that Britain’s financial sector has been greatly enriched by the business of selling our assets abroad. Each sale commands a sizeable commission. One is therefore likely to find great enthusiasm for so-called inward foreign investment among those who work in the City of London. Moreover, politicians who are allied to the financial interest are unlikely to cast doubt on a strategy that favours inward investment.

Each such inward investment to the UK implies an increment in the demand for the pound on foreign exchange markets. The aggregate effect of this demand has been to raise the value of the pound to a level that has made our manufactured goods too expensive to compete successfully in foreign markets. The result has been not only a reduction in our exports but a long-term decline in our manufacturing sector.

The manufacturing sector, which accounted for 25% of gross domestic product in 1979, now accounts for less than 10%. It now contributes less to our GDP than does our financial sector. The policies that have favoured the financial sector have been to the detriment of the industrial sector and they will eventually be to the detriment of us all. A state has now been reached where the value of UK-owned foreign assets is less than the value of UK assets that are in foreign ownership. The consequence is that there is now a net flow abroad of interest payments, dividends and profits. The net leakage is clearly to our disadvantage. It is associated not only with the outright foreign ownership of UK enterprise but also with the ownership of UK franchises.

Our transport network provides a good example of a UK industry dominated by foreign-owned franchises. Three-quarters of rail franchises in the UK are now owned by foreign state-owned or state-backed rail companies. Prominent among these are the German state-owned company, Deutsche Bahn, and the rail company Abellio, which is the international arm of Nederlandse Spoorwegen, the Dutch national rail company. Foreign, state-owned rail companies are using profits earned by operating franchises in the UK to keep fares down and to support investments in the rail services of their respective countries. Our passengers and our taxpayers are subsidising a system that hands increasing profits to foreign, state-owned train operators, instead of investing them in our railways, as would be the case if they were under UK public ownership.

This phenomenon is also evident throughout our national utilities. The energy companies provide a well-known example. The majority of UK customers, whether domestic consumers or businesses, are supplied by one of four foreign-owned companies: EDF, which is Electricité de France; E.ON and RWE, which are in German ownership; and Iberdrola, a Spanish company. There are substantial repatriations of profits and dividends from the UK companies to their owners abroad.

The recent announcement of deals that have been struck by the Government with EDF and with two Chinese national nuclear corporations to build a new generation of nuclear power stations has filled many commentators with alarm. To secure EDF as a builder, the Government have guaranteed a minimum price for electricity from the Hinkley C nuclear power station

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of £89.50 per megawatt hour for 35 years. This is approximately double the current rate for electricity on the wholesale market. The Government have also provided a guarantee of up to £17 billion that foreign lenders to this infrastructure project will be repaid in full and on time, irrespective of the performance of the project. It is, of course, the taxpayers and the consumers who will fund this largesse.

One is startled to discover how much of Britain’s infrastructure is now in foreign ownership. This includes our seaports, our airports, our power stations, our railways and buses, our water companies and much else besides. Large swathes of our manufacturing industry are also now in foreign ownership. This includes our car industry, our steel industry, our cement manufacturing industry, a large proportion of our food processing industry and so on. Britain’s aerospace industry has been celebrated by politicians as an exemplar of economic and technological success. However, a recent study by Norman Smith and Joseph Wright on mergers and acquisitions in the aerospace supply chain, Losing Control, published by Civitas in June this year, has shown that this industry too is passing into foreign ownership. Of the 155 companies still present in 2014, only a third had avoided takeovers or mergers between 1990 and 2014. Of 101 companies that experienced a change of ownership, over half passed into foreign hands. As the report wryly remarked, a great deal of effort and energy was devoted by managements to pursuing these transactions, generating large fees and commissions that have been paid to bankers, brokers, accountants and solicitors. The report also observes that foreign enterprises have been cherry-picking smaller British aerospace companies that have been in possession of valuable intellectual capital and technical expertise. Few of these companies have survived the takeover.

The truth is that many takeovers have been inimical to the prospects of our industries. Many have been intended, primarily, for the purpose of acquiring our intellectual capital and of limiting competition. This was clearly the case in the bid by the American pharmaceutical company Pfizer for AstraZeneca. The bid was also driven by prospects of cost saving and tax minimisation. It was facilitated, as many other takeovers of British firms have been, by our lax rules of corporate governance that put few impediments in the way of mergers and acquisitions.

The UK has a unique openness to foreign ownership. By contrast, virtually all other developed countries retain the power to block foreign takeovers that are deemed not to be in the national interest. The Committee on Foreign Investment in the United States sits in judgment on attempted takeovers that are thought to have implications for national security. In France, the Government, who do likewise, recently blocked the takeover of the engineering firm Alstom by America’s General Electric. Most recently, the French yogurt maker Danone was protected from an attempted takeover by the Swiss food group Nestlé. I can recall a headline in the financial pages of the Telegraph in 2011 on the occasion of the takeover of Cadbury by the American firm Kraft which declared, correctly, that the French would never have allowed it.

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The availability of British assets to foreign takeover can be seen both as a product of an ideological predisposition and as the result of the influence of some powerful vested interests. The ideological predisposition has favoured the widespread privatisation of industries that were formerly in public ownership. The risible irony is that much of what has been privatised that was previously in public ownership has fallen into the hands of foreign nationalised industries or state-sponsored industries. We have seen that this has been the case throughout our transport network and in our electricity-generating industry. It is also true of our aerospace and defence industries. The Thales Group—or “Groupe Thales”, as it would be in French pronunciation—which has taken ownership of some of the leading UK defence contractors and of a fair proportion of our electronics industry, is a French state-backed company that is partly state-owned.

The City of London has a vested interest in trading financial assets of every description. Our financial sector is no longer devoted to the purpose of raising capital to finance industrial investment. Instead, its main activities are in financial arbitrage and trading. These activities have been stimulated by the remarkable growth of financial credit. As the neglected Kay Review of UK Equity Markets and Long-term Decision Making has testified, the preoccupation with stock market performance has penetrated deeply into the management of UK industry. Many managers have become more interested in pursuing mergers, acquisitions and corporate sales than in pursuing industrial developments. In other words, they have been affected by short-term financial considerations, including the consideration of their own salaries and of the value of their stock options.

Our rules of corporate governance amount to a system of self-regulation by the financial sector. They create few impediments to mergers and acquisitions or to financial trading and do nothing to protect the national interest. They contrast markedly with the rules that prevail in Germany, for example, where there are statutory anti-takeover provisions and where the public and politicians are strongly opposed to hostile takeover bids. German firms that are listed on their stock market are governed both by a management board and by a supervisory board, which must by law comprise a large contingent of the firm’s employees. The supervisory boards act as a restraint on financial activities that might be harmful to the company. It would be greatly to our advantage to adopt a continental model of corporate governance and to replace our unitary boards of directors by a two-tier system.

The difficulties and the failures of our industrial sector are to a great extent due to the power and the influence of our financial sector, whose activities are inimical to a long-term industrial strategy. As I have already emphasised, the sales of our assets to overseas buyers has raised the foreign exchange value of the pound, which has made our manufactured goods uncompetitive in world markets. Ideally, I should like to see the financial sector diminished and its activities restrained. This is unlikely to happen under the present Government. Even a future Government of a different colour should not be relied upon to act effectively against the financial interests.

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However, there is an obvious recourse that could be relied upon to diminish the value of the pound. The central bank, or some other agency, should be charged with purchasing foreign assets when the value of the pound exceeds competitive levels. Such a collection of nationally owned foreign assets is commonly described as a sovereign wealth fund. The money that has been devoted to quantitative easing might have been used for this purpose. Many countries have established sovereign wealth funds for the purpose of limiting the exchange values of their currencies. A leading example is China, which has fostered an export boom based on the cheapness of its goods in its overseas markets.

The idea is not new. Under the gold standard that prevailed throughout the interwar years, gold was purchased by countries whenever it was favourable for them to do so, which was when their currencies were liable to be overvalued in foreign exchange markets. Gold is a sterile metal. By contrast, the assets held within a sovereign wealth fund will generate an income, which could redress the leakage of income that is flowing abroad in the form of profits, dividends and interest payments.

4.35 pm

Lord Desai (Lab): My Lords, we are grateful to my noble friend Lord Hanworth for introducing this topic. I am afraid that I am not at all alarmed by the proposition that he has put before us. I will come to that in a minute but perhaps I may just recall an event many years ago when Peter Shore—later Lord Shore—was at the front of the battleground at the Department for Economic Affairs. He said, “What happened to the balance of payments crisis? Why aren’t we alarmed about whether our balance of payments is in surplus or in deficit? We used to battle month after month over what was going to happen, and the pound was always under threat”. I said, “We are now in a world of flexible exchange rates and we have free capital movements, so movements on the flow account are balanced by movements on the capital account, and therefore you can stop caring about the balance of payments”.

I still believe that that is the right attitude to take. For one thing, it cannot be said that this country is particularly impoverished. We are still in the G7 and, give or take a ranking here or there, we continue to be a rich country. Currently, we happen to be one of the fastest-growing economies among the G7 and our proportion of employment in terms of labour force participation is also one of the highest in Europe. Therefore, we have practically full employment. Of course, the recession was long and the recovery took some time but, compared with the eurozone economies and even to some extent the US economy, we are not doing too badly.

Obviously our manufacturing sector started shrinking more than 25 years ago as soon as the oil shock happened. The manufacturing industries of most European countries reduced in size—it happened in the United States and the UK and so on—but I do not think that is anything to be alarmed about. There is nothing sacrosanct about manufacturing as against anything else. We need to do the things at which we are

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more efficient than the rest of the world and, as long as we can find things at which we are more efficient, we should go on doing them.

There is a long-standing fallacy in this country—going back to Winston Churchill, if not before—that somehow industry is more important than finance. However, few people remember that the UK had a financial revolution a century or more before it had an industrial revolution. The industrial revolution came in in the second half of the 18th century, whereas our financial revolution came about in the late 17th and early 18th centuries. We were able to fight a number of wars, with France and other countries, because the City and our public finances afforded us better financial governance than there was in Europe. I do not think there is any particular virtue in saying that the City is bad and industry is good or that somehow, William Blake notwithstanding, we should have dark, satanic mills and not banks.

The important thing is that the most interesting innovations have happened in the financial sector rather than in the manufacturing sector, at least as far as the UK is concerned. My noble friend himself pointed out that the City has gone on to be a major player in mergers and acquisitions and in a number of intermediary arbitrage activities. That is the nice thing about the City—it moves from one specialisation to another depending on where the demand is.

One paradox is that, if we are in a trade deficit, why is the pound not collapsing? It is argued that the pound is overvalued, but one would like to see more proof of why the pound is believed to be overvalued—overvalued in respect of what? We have a trade deficit and we have financial flows to balance that deficit. The pound is free to float as it likes, and I think it should stay that way, without us getting into pegging it or anything like that. I do not think our exports are low because the pound is overvalued; our exports are probably low because the countries to which we sell are in depression. The whole eurozone is in a state of very low growth. Therefore, it is no wonder our markets are not as buoyant.

For some years now we have been trying to redirect our trade away from the eurozone and into the emerging economies. The visits of the Indian Prime Minister last week and before that the Chinese President are part of the UK’s effort to redirect our trade from the stagnant eurozone to the more dynamic emerging economies, and that is quite right.

My noble friend said it is shocking that various foreigners run our trains and our energy companies. That is fine. But I remember how our car industry came close to complete collapse in the 1970s. Who rescued the car industry? The Japanese. Who is the largest single employer of manufacturing workers? It is Tata Motors, which has rescued Jaguar Land Rover from shut-down. Right now, Jaguar Land Rover is a thriving business, thanks to management from Tata. Its management is a global team, because it also takes support from German, British and American firms.

This is a globalised world. There is no reason why we should settle for fortress Britain, in which only our capital will serve our industry. We have been through

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that, and we lost considerably playing that game. It was precisely because we lost—we were in a dreadful situation in the 1970s; that is all of the 1970s, during both the Conservative and Labour Governments—that we got out of it and decided that there are better ways of making a living than sticking to selling the family silver.

From the point of view of economics, I fail to see the problem here. There are problems as to whether or not we should have a different model of corporate governance, but that is independent of whether foreigners own our industries. All I will say about the continental model of corporate governance is that we are living under the scandal of Volkswagen. I would like to know why corporate governance on the continent failed so abysmally in the case of Volkswagen? We have not had any scandal like that.

There is also the problem of short-termism. Short-termism is not particular to British business; it applies to any business that has equity holders. Of course, some people are now saying that preferable to relying on public equity would be to go to private equity firms. If you are owned by private equity firms, you are free of stock market pressure, and some firms have gone that way. That may be a good recommendation if you want a long-term vision in our economy.

Without being complacent about it, I believe that the UK has always been a trading nation. It has always taken the view that one must not sentimentally stick to national ownership or particular restrictions. We should allow the best companies to provide our services regardless of whether they are British or foreign, just as British companies should be all over the world doing business, as they have done for the past 300 years. We should say, “Let the best people come and provide us with our services, and let the best companies from here provide services elsewhere”. That is as long as our living standards are high and rising and as long as we have an adequate amount of employment in the economy and can make sure that our productivity stays high. I know productivity problems are not particular to the UK; they are to be found all around the western world. A rising standard of living for our people is all that an economy should deliver, regardless of who owns what.

4.47 pm

Baroness Falkner of Margravine (LD): My Lords, I, too, thank the noble Viscount, Lord Hanworth, not just for bringing this important topic to us today but for having covered such a wide expanse in his opening speech. When I was a student at the London School of Economics—I should add hastily that I was a mature student, so the age difference between me and the noble Lord, Lord Desai, is not as great as it might appear when I say that—I used to pop in to listen to the noble Lord’s lectures. They were not part of my major—I was doing international relations—but as a Marxist, which is what he was known as at the time, he presented a clear world view that was entirely contemporary and understood what was happening in the world around us. I wish that he and I were still there, because those were much more interesting days than we find ourselves in today, where there is a much broader consensus in economic theory than there was

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25 years ago. In that sense, the noble Viscount, Lord Hanworth, has made us think about things that in our discussions we almost take for granted and never seem to consider any more.

Let me add my few thoughts on this topic—I am not an expert by any means. The noble Lord, Lord Desai, is right to say, and the noble Viscount, Lord Hanworth, acknowledged it, that we live in a globalised world—we live in an interdependent, globalised world. The EU was quite insightful in the 1950s in seeing that four freedoms were vital to making the single market work, those being labour, goods, services and capital. The underlining issue in this debate is that of capital. I subscribe to the view that the productive use of capital is a common good that underpins all our modern economies. It is so desirable that when we see less developed parts of the world doing less well than they might do given their human capital and resources, it is a dearth of financial capital—investment in infrastructure and so on—that holds them back. Therefore, it is not entirely correct to say that national ownership matters, but rather that it depends on a case-by-case basis on what we are talking about.

For me, there is no reason why the ownership of a company should be an overarching issue, other than—I would add here advisedly—the interests of national security. I interpret national security as including, to some extent, economic security as well. The noble Viscount mentioned the Chinese investment in Hinkley Point, announced only a few weeks ago. That deal will allow for 33% of Hinkley Point to be owned by the Chinese. However, the agreement goes wider because, eventually, Chinese nuclear technology will be approved for use at Bradwell in Essex. In this area, foreign ownership matters because this is not just passive investment. If it were just passive investment and they decided to disinvest, they would sell their ownership in international markets and that would not be a cause for concern. However, there is a cause for concern because the United Kingdom will be the testing ground for Chinese nuclear technology and its regulatory approval in the West. That is a matter of concern. The Chinese have built their nuclear capability sector at breakneck speed. We do not know their sector well enough—there is little transparency in it—and we do not know that we can have complete faith in their safety standards because they are less than entirely transparent. I am not concerned about them coming in with EDF at Hinkley Point but I would be concerned about being the first country in the West to give regulatory approval when it comes to Bradwell in Essex.

On the broader question of ownership, I do not understand why United Kingdom ownership gives more back to a community or a country than foreign ownership. The noble Lord, Lord Desai, mentioned British Leyland versus Nissan, Tata and BMW. I will go further and mention British Airways and its ownership in the past few years of the International Airlines Group. British Airways is the third biggest carrier in Europe and the sixth biggest in the world, and, knowing how the international airline industry has seen consolidation, if it had not made that move I wonder where our national carrier would be. One has to look only at Lufthansa and the parlous state of Air France to know where it might be if it had not made that

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rather bold move. It is also important that British Airways’ International Airlines Group is registered on the London Stock Exchange. So it is not a lose-lose scenario.

In the City of London, this small island has arguably the world’s—the Americans might contest this—biggest financial sector. It has not come about by accident—as the noble Lord, Lord Desai, said, it has been 350 years in the making—because there are things that give the United Kingdom its special place in the financial services industry. These include the rule of law, the reputation of our judicial system, the English language, schools, the good quality of housing, overpriced though it may be, and also culture. It is the cosmopolitanism of London—with its foreign owners, foreign migrants such as myself and so on—that make the City such a success. When I speak to people in the City, I always say to them that the idea they have that they are masters of the universe is completely flawed. It is the enabling environment of London and the United Kingdom—particularly the rule of law—that makes it so attractive.

I have sympathy with the issue of hostile takeovers of our strategic industries. The noble Viscount, Lord Hanworth, is right to raise that. We have to think about what are our strategically important companies. I would say that they are more about intellectual capital, technology and some areas of national security, where I agree with the noble Viscount. When we live in such an interdependent world, it seems rather curious that we are harking back to an era where we, as Brits, would run things better than other people.

I want to push back against the idea that the financial services sector trading in arbitrage, which was selected for particular condemnation by the noble Viscount, Lord Hanworth, is entirely worthless. The extent of our regulation has clearly been insufficient, and I would remind him of who was in government when most of that disaster happened. But a humbling experience for us to reflect on is the daily diet of scandals that are still happening in our financial services industry. The Financial Times today has a story about Barclays and algorithmic trading. We have seen LIBOR, forex and all the other scandals. But again I would say to the noble Viscount that this is not just about United Kingdom financial services companies. Société Générale, Deutsche Bank and a whole lot of others are involved: foreign owners have been right in there with their fingers in the till while British companies may have been as well. I myself worry when our big flagship companies such as HSBC and others think that they might relocate abroad because there may be an environment which is more conducive than having their headquarters here. I am extremely glad that the Government are looking at what needs to be done to keep our flagship companies here.

I also want to touch on the decline of manufacturing, and I agree with the noble Lord, Lord Desai, who said a great deal of what could be said in this debate about how perhaps it is the strength of the pound that is the issue, or the fact that our technology is not good enough so that people do not want to buy our goods. I suggest that the problem we have in the UK is that of a very low savings rate. If you want more investment in the UK, you have to change the culture. We have such

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a low savings rate because we invest so much of our personal wealth in bricks and mortar, so we have a distorted economy. That is probably something that we need to change.

In conclusion, the world is changing and the future lies in technology, robotics, artificial intelligence, and innovations in healthcare, energy and so on. What we should do is not hark back to an era of golden ownership by UK plc, but invest more and more in education, which is the key; in innovation, which is the future; and, where possible, of course, in good ownership of our assets.

4.56 pm

Lord Haskel (Lab): My Lords, my noble friend is concerned about what is happening as the Government withdraw from investing in our essential services and infrastructure, leaving foreign investors and foreign Governments to take their place. What happens when our financial system leaves foreign investors free to acquire our companies? He is concerned about the effect on the balance of trade, on our exchange rate, the security of our strategic services and products, and the development of our own economy. I think he is right to be concerned. He is right because it has got out of balance. I say to my noble friend Lord Desai that it is affecting our economy.

As my noble friend said, our strategic infrastructure is foreign-owned. Ten of the regional water companies in England and Wales are foreign-owned, as are four of the six big energy companies, including much of our nuclear industry. As he told us, so are many British sea ports, airports and, in particular, railway franchises, along with many of our financial institutions, particularly the banks. Some of these strategic utilities are virtual monopolies, with our consumer interests protected only by regulators. Surely foreign ownership must make this a bit more difficult.

Brands are an important national asset. Many have a national identity. Yes, many of our best-known brands are also foreign-owned. In some ways this is fortunate, of course, particularly in the car industry, where most of our well-known brands have survived thanks to Tata Motors of India, and BMW and VW of Germany. Nielsen Research reported last year that of the 150 biggest grocery brands in the UK, only 44 are home owned. As my noble friend said, there was a time when we owned other people’s family silver. Net income from our foreign direct investments used to be 3% or 4% of our gross domestic product. It now looks as though the outflow from foreign-owned utilities and businesses is just about equal to the inflow.

Why is there so much foreign ownership here? The answer lies partly in the Government’s preoccupation with our deficit and the resulting inability to invest in our own strategic infrastructure. The Government of Britain can borrow for decades ahead at low or even negative interest rates to build our own infrastructure and invest in long-term energy projects on extremely favourable terms. But this has been sacrificed in favour of the Government’s economic policy, leaving the deficit to be carried by private sector debt and inward investment.

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With a high proportion of publicly listed companies, it is easy to buy British companies. John Kay, in his report in 2012 and recent book, Other Peoples Money, explains why—how most shareholders are short-term and ready to sell out at a profit; and how most share trading is high-frequency and automatic, or on the own account of the investment banks. They are all traders whose purpose is to drive their short-term expectations into the boardroom so that there are high returns for the shareholders—the culture that the noble Baroness, Lady Falkner, spoke about.

John Kay explains that our financial system tends not to reward management for investing. Management is rewarded for the high share price. There is a good example of this going on right now as we do our weekly shopping. Research has shown that a typical shopping basket in one of the big four supermarket chains can be undercut by up to 20% by the German retailers, Aldi and Lidl. Why? Because they are privately owned and can price more keenly.

Another current example is our aerospace industry—the kind of high-tech industry that the noble Baroness spoke about. It is a vital export business. A Civitas report, mentioned by my noble friend, tells us that the number of companies in this industry whose owners are based abroad has jumped from 14% to 41%. As its report points out, British expertise is being lost overseas and this is reducing the chance of British companies growing into world-class players. They are cherry picked before they have the chance to reach their full potential. Surely this must be damaging to our economy.

As an excellent economist, my noble friend Lord Desai, in the abstract, thinks that this does not matter. It is just the globalised market working. To people working in industry and business, it does because ownership explains why the performance and productivity of many foreign-owned companies in Britain are often much higher than the performance of many British-owned counterparts. Their longer-term strategies have brought a higher order of management skills, more thorough training and better pay for employees than many of their British equivalents. They have introduced know-how and technology that would not have been available to us otherwise. Without them there would have been no volume motor manufacturing industry here.

Then there is the question of ownership of our strategic services and infrastructure. Ownership does matter. The noble Baroness spoke of Hinkley Point. It matters so much that the Chinese participation in Hinkley Point is conditional on the Chinese state being the majority shareholder in subsequent nuclear power plants. Do the Government not recognise this when they see it? No, they are blinded by their perceived need for cash, even when there is a strategic argument for blocking a deal.

My noble friend mentioned the proposed takeover of AstraZeneca by Pfizer, mainly for tax advantage. It was stopped only because of the efforts of the Dutch and Swedish parts of AstraZeneca.

What is the answer? While welcoming foreign investment, how can we achieve a better balance and feel more secure? The real solution of restructuring the finance industry is, of course, too difficult because it will disturb too many vested interests—the influence

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of the financial industry’s money on politics is too well entrenched. Because the finance sector is much used as an instrument of economic policy its interests and opinions take precedence in economic decisions. This has to change. I do not agree with my noble friend Lord Desai. It has become too unbalanced, and equal regard must be given to the interests and opinions of other sectors—of business, of industry. This will help to encourage UK ownership of our strategic assets and their long-term development. Many regulatory agencies seek to pursue the public interest, but their work is limited by a too-prescriptive rulebook. This has to be reviewed, bearing in mind foreign ownership.

The answer also lies in more enlightened business governance. For 20 years, Tomorrow’s Company has promoted the principle of stewardship. These ideas are slowly becoming more accepted. By coincidence, I hosted Tomorrow’s Company’s annual reception here in the Cholmondeley Room yesterday. Several noble Lords were present. We heard how many of our more successful and more progressive businesses are adopting the stewardship form of leadership and governance. I put it to the Minister that if foreign investors were urged, perhaps by regulators, to adopt this form of governance, then we may not only benefit from their management performance, their technology and productivity; we would also feel more secure with the clear purpose, values and collaboration that stewardship brings, and the long-term attitude towards investment and risk. You never know: this culture may bring more British investors and, yes, a Labour Government back into the market.

5.07 pm

Lord Monks (Lab): My Lords, I add my thanks to my noble friend Lord Hanworth for initiating a debate on a very important subject. It deserves a more prominent slot than we have given it. It is a subject to which not enough attention and debate is given. With the different views already expressed, noble Lords have heard some things that are rather close to the heart of the way this country earns its living and whether it is on the right path.

I used to be one of those who did not really mind about foreign ownership. We did not need to bother about it too much. We owned a lot of assets abroad. We were doing quite well out of remittances from those. Companies that were overseas-owned were in many cases rather successful in the UK, providing a lot of employment. As my noble friend Lord Haskel just reminded us, they were in many ways leading on innovation, technology and productivity. The trends have now accelerated. I am much more worried about it than I ever was before. As my noble friend Lord Hanworth pointed out very well, the stark fact is that British companies are being sold off at a higher rate than we acquire assets elsewhere. Worse, there is little sign that the proceeds of this Great British sell-off are going into British business, to grow great new businesses that slot into the spaces that others have departed from. Therefore, this is an extremely important debate. The country has turned a blind eye to it and adopted a rather laissez-faire approach. In some ways that has suppressed creative thought on the issues. What do I mean by that?

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It is interesting to note that last week and previously, this House has spent a considerable amount of time debating national sovereignty. Noble Lords, particularly on the other side of the House, have been “banging on”—to pinch a phrase from the Prime Minister—about that in the context of the EU Referendum Bill for a couple of weeks, and we will spend a lot more time on it in the next 12 months. However, they are talking about sovereignty only in the context of parliamentary sovereignty. They are not debating the business sovereignty that we are talking about today. They are not debating the fact that British businesses are increasingly foreign owned, including those occupying the commanding heights of utilities and key sectors. I am always interested to see whether any of the Europhobes or Eurosceptics say anything about this great sell-off when they go on about sovereignty. We obviously mean different things when we have this discussion.

I believe that EU membership enhances sovereignty, extends influence and boosts our reach on global developments such as trade and the environment. But these are all at risk if our economy becomes more and more anorexic. We have already lost a lot of ground. You cannot say that it is the EU’s fault or it is due to Europe’s sclerosis. It is our fault. Our system is out of step with those of many other countries. Some great and successful British companies—not the flops—have simply vanished into the entrails of foreign companies. However, the car industry has been transformed by foreign ownership, for which I am extremely grateful. By the way, sometimes even smaller companies, such as Pilkington and British Oxygen, have been acquired by foreign owners. I do not recall hearing any murmurs—not even a squeak—from the nationalists about what was going on when Pilkington was bought by the Japanese and British Oxygen by the Germans.

I stress that I am not an economic nationalist or a protectionist. I am grateful to the firms that have come in, particularly the car firms, and many others, for what they have done for the UK. Without that foreign ownership we would not have the industries we have. None the less, why is it that we rely on foreign ownership to control so many of our major industries? Why are there so few UK world-class multinationals, particularly manufacturing multinationals? I say to the noble Lord, Lord Desai, that from the privileged position of the south-east of England it is a lot easier to make the case he did than it would be in the north, where it is much more evident that the great companies have retreated or disappeared and foreign investment has not filled all the gaps, although it has filled some. Some great companies, such as Rolls-Royce and GKN, are obviously exceptions to this but they are not the rule. However, you can see how fragile the situation can become for a great company such as Rolls-Royce when a few things start to go wrong. It is not just Volkswagen that has ethical dilemmas and problems at the moment. We know that some of our companies have problems. The banks have been mentioned and Rolls-Royce is struggling a bit at present.

All the evidence is that, however benevolent foreign-owned companies are, however much they intend to be good corporate citizens, inevitably, the profits tend to fly overseas to where the strategic decisions are taken. Understandably, those who control the companies are

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biased in favour of their own country, city or region, just like we used to be. Now, we lack companies that can do that on any scale outside those in London and the south-east.

Why are we in this position? I tend to agree with the noble Viscount, Lord Hanworth—that a lot of it has to do with the powerful financial services sector, which seems to know a lot more about value extraction than value creation. It is primarily interested in promoting deals—takeovers, flotations, privatisations, restructurings and so on—to earn commissions and fat fees, and the volume of transactions is absolutely everything. The objectives of these deals should be encouraged to be more market share-boosting, rather than for short-term shareholder value extraction. This is deeply inconvenient to many in the City, but those people should reflect on the fact that many acquisitions actually result in a reduction of shareholder value.

Short-term shareholder value has become something of a curse. I note with interest that the boss of General Electric, who invented the term in the 1980s, has repented and recanted and said that it cannot be the sole goal of companies. The financial services world needs to get some new criteria to judge businesses by. I am a strong advocate of market share being one of the features. The pressure to deliver short-term returns provokes risky strategies, almost all linked to deals on acquisitions or restructurings rather than launching fresh major innovations and investments. Linking executive bonuses to short-term shareholder results just intensifies the pressures.

It is a very hard world for British companies, given this financial culture to grow, be successful and thrive. Some have stayed private and have managed to do so: Dyson and JCB are fine examples. Others trust in private equity. Well, good luck to them, I hope it works for them. Others have become and remain plcs, but in that sector you have to be very good to avoid being vulnerable to the prowlers and takeover merchants. Very often, those are people in the City trying to promote somebody to come in and take you over.

Some in government and business have recognised this problem. I pay tribute to Vincent Cable and Paul Polman of Unilever. But most shy away from an issue that is marked “too difficult”. Along with Civitas, I think we should be looking at American anti-takeover statutes and that little poison pill that can prevent a hostile takeover in certain states. We should be looking more at German cross-ownership. I know it used to be called a cartel and perhaps there is a degree of that; none the less, it means that great companies survive bad times. I will say this about Volkswagen: it will survive this very bad time. I was more worried that BP might not survive its very bad time in the Gulf of Mexico in the context of our financial markets. I am also interested in the French and Nordic multiple or weighted voting systems to discourage hostile takeovers. Like the noble Viscount, Lord Hanworth, I am rather a fan of two-tier board structures, with stakeholders involved in the supervisory board.

We are alone in extending the idea of a free market in goods and services—for many people, an act of faith since Cobden and Bright—to a free market in the ownership of companies. We are also alone in confusing

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foreign investment in new plant, such as by Nissan, with hostile takeovers, such as by Pfizer. We know that companies such as Pfizer are very likely to run down the British arm to reduce competition and costs and to extract—that word again—intellectual capital.

This is not an issue that is particularly easy to resolve. I have no simple solutions but, for a start, an anti-hostile takeover law could be extremely useful in trying to shift the cultures in the UK towards longer-term, more sustainable success. After all, that is the kind of company that Tata and the best companies coming into this country are—not short-termist but long-term players. We want more companies of our own like that, so that we are not completely dependent—to the extent that we could become dependent—on foreign ownership. There is nothing wrong with foreign ownership but it does need a sense of proportion.

5.19 pm

Lord Judd (Lab): My Lords, if I am allowed to say so, how good it is to have the experience, wisdom and common sense of the noble Lord, Lord Monks, at our disposal. I enjoyed every word of that speech and found myself relating to it very closely. I thank the noble Viscount, Lord Hanworth, for having introduced this debate today and shared with the House a great deal of the anxiety that is out there among thinking people in our society.

I have had a long association with LSE myself and have always found it enjoyable that we have in our family the noble Lord, Lord Desai. There is never a dull moment; one is never quite sure where he will be coming from intellectually and analytically. I hope he will not think I am pushing it too far if I recall here something he once said to me in a cheerful, exuberant way. He said, “Of course, I am the last Marxist at LSE”. I would say now that he was the first marketeer at LSE and it is very interesting how people make this transition. He is not alone and I suggest to him that it is something about absolutism. I of course come unashamedly from the nonconformist, Fabian tradition, which is all about search. Perhaps I may remind him that the motto of LSE is “Rerum cognoscere causas”—not “Here are all the answers” but “We are looking for what is causing a situation”.

I find it very interesting that there is no shortage of people wanting to come and make their business here or to invest here. But I ask myself, as indeed our noble friend Lord Monks was asking: what lessons have we learnt from how we came here? Some of the lessons do not perhaps lie in the immediate sphere of economics at all. They lie very much in the realm of education, as has been mentioned. There has been a total failure of creativity in Britain, apart from in the arts. In the arts, we lead the world—nobody rivals the United Kingdom in them. But somehow, in the realm of applied knowledge, there has been, as I say, a failure of creativity and the imagination. The failure is not in imagination or creativity but when something goes so far, there is no one who then seizes it and says, “Right, this is where we’re going with it”. We have to get that back.

It is about character building and the rest and, if I am, as an older man, allowed to say so, I am very fearful about that. We have got into a trap of taking a

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completely quantitative approach to education by measuring it all the time, as distinct from asking what it is inspiring and achieving. Originality is not being given enough attention. I am rather worried. I take my family—my children and grandchildren—very seriously. When I see our country basing itself on a future of energy largely generated by nuclear power, I say to myself, “Am I confident about this future?”.

I have nothing but respect for the Chinese. I first went to China in 1956, spent five weeks there and came back deeply impressed. That was before it had broken with Russia. I found myself—perhaps I eagerly sought to be there as a young man—on “In Town Tonight” and was probed about my reactions to China. I said, “It is not communism that worries me about China, it is the nationalism. That country is thinking long, and it is thinking about Chinese influence and predominance in the world”. My goodness, I think very often of the impressions I formed then.

It seems to me that, with all the uncertainties of the politics of the Far East and the Pacific, to have our steel industry to a very large extent dependent on the Far East is—I put it no stronger than this—a rather intriguing situation, and one about which I do not think one can sleep easily at night. I am sure they will make a great success of it in the short term, but who knows what will happen in the long term and where the power lies?

When I was a young MP, I used to see that in my constituency of Portsmouth, because we had been highly dependent on the Navy. Ministry of Defence employment was reducing and we needed another source of industry. Because there had been very high skills in the dockyard, all sorts of industry came along. I saw from practical experience, when times got tough, when the going got hard, which places that industry disappeared from most quickly. We were ancillary, something they had gone for and taken over. They were not rooted in the area.

We have to take that seriously in this situation as well. It is the same with the steel industry. Let me be candid with the House: I have a capitalist wing of my family. A branch of my family dealt in steel—it was not very big, but it was big in steel. Members of my family were terribly interested in developing new types of steel. They were engineers, and they used to travel around the world getting and discussing their orders. They sometimes got pretty sick of doing it, too. What was true about them was that they were part of Sheffield. They had been involved in libraries, wings of hospitals and education, not just to get an advertisement up but because they cared. It was a community.

The other major thing that I wanted to say in this debate—I thank my noble friend for having introduced it—is that what has gone wrong in Britain is that we have allowed ourselves to go down a certain road. I say in all seriousness to my good friend, my noble friend Lord Desai, that he should be careful in separating the economy from the people. I became a member of the party that I am in because I believed that the economy and the people were one and the same thing. We looked at the health of the economy in the long run and at the health and well-being of the people in the long run, and we had a commitment and attachment to the people, which was fundamental. I do not think

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we have that in the direction we have taken. When it comes to the situation in which British managers and workers on a railway being run outstandingly well want to bid because they are told that the line must be privatised but are told that they cannot because they are British—but goodness knows who from abroad is allowed to bid and come in—the situation has gone dangerously barmy, and it is time that we redressed the balance.

5.31 pm

Lord Mendelsohn (Lab): My Lords, I draw attention to my interests in the register. I also earn a living in the corporate finance industry. I start by thanking the noble Viscount, Lord Hanworth, for introducing this interesting debate and for his, as always, extremely thought-provoking contribution. It has been a great pleasure to listen to such a fantastic debate, and it reminds me—a relative newcomer—of the sheer quality present in this House. It also reminds me that I must make sure that I am not a disappointment to my mother when I respond to such high-quality contributions.

I should like to raise a series of issues that touch across the issue of ownership and its consequences and address a complex series of opportunities and challenges that come from the level of foreign ownership—matters that we should be very alive to. It is always difficult to come to a completely full conclusion on these matters. My noble friend Lord Monks raised the issue of potentially restricting hostile takeovers. Of course, one of the great corporate achievements in the United Kingdom was Vodafone’s takeover of Mannesmann, which was a hostile takeover. Many of the problems associated with foreign ownership of companies come from agreed takeovers, so it is very hard to find inherently the right instruments. Of course, we believe in open markets and trade and we understand the benefits of investment and know-how that can come in, and of new business processes and products. We also understand the profile of foreign investment, which is that it is principally about large companies—1% of companies, around 30% of value added. That is also why there is a central importance in our deliberations and in our work to improve the condition of the business environment for small businesses, where foreign ownership is not highly present.

It was a matter of some comment around the general election—I cite an article in the Wall Street Journal—that Britain was becoming very resistant to foreign deals. In fact, it said that barriers were rising, pointing to the climate over a few particular deals, and over the way in which the chief executive of Pfizer, in relation to the AstraZeneca deal, was forced to write to the Prime Minister with a “string of commitments”. It also identified that in March the Department of Energy and Climate Change,

“moved to block Russian oligarch Mikhail Fridman from owning stakes in 12 North Sea gas fields”,

through his investment vehicle. It then said that,

“the boldest move by the UK government against a foreign takeover came just weeks before”,

the general election, when a,

“UK official confirmed that the government had told BP that it would block any sale of the oil company to a foreign company”.

So the pattern is not absolutely clear.

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It does come as some contrast to how the Government have positively encouraged the Chinese investment in Hinkley Point. These issues were ably raised by the noble Baroness, Lady Falkner, the noble Viscount, Lord Hanworth, and by my noble friends Lord Haskel and Lord Judd. There are considerable concerns about the design, the fact that we are going to be the pilot for it and the extraordinarily long-term deal at a very high price. It stands in great contrast to the concern over other matters that this one has gone through in the way and shape that it has.

This raises the central importance of regulation. Regulation is key to these things, and not just to how we deal with the utilities and the protection of service standards and security. It has a central role in how we ensure that these markets, takeovers and other things, and the condition of business itself, are dealt with properly. My noble friend Lord Desai mentioned VW and said that it was a failure of corporate governance. Actually, it was a failure of regulation. It was another example of why trust is an inadequate safety net for business practice. We have to make sure that markets are regulated properly and sensibly, and foreign ownership only increases that challenge.

The Government have a very good record with UK transparency laws. The register of people who exercise significant control, which was introduced by the Small Business, Enterprise and Employment Act, will be implemented this year and will be an important addition to how we manage foreign businesses on our shores.

The method of ownership matters. My noble friend Lord Haskel made a very important point about how it has affected our supermarket sector. It has affected other retailers. Zara has exactly the same condition. All shareholders are not the same. There are differences. Whether companies are private equity or listed, and whether a company has particular return on capital requirements, ownership matters. Perhaps the greatest illustration was during the course of the financial crisis when we saw the impact of deglobalisation—the return of capital and investments to national headquarters and a choking of investment into our country which had tremendous consequences and had to be managed with a great deal of skill.

My noble friend Lord Haskel made a very important point which I am very keen to re-emphasise. Foreign direct investment has huge benefits and is and always was key to our productivity strategy, but, given that foreign-owned company outflows broadly equate to FDI inflows, with all the consequences for trade deficits so ably illustrated by my noble friend Lord Hanworth, it cannot be a useful tool to assist the productivity challenge at this stage. We have to have a more sophisticated approach to foreign direct investment.