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Lord Inglewood: My Lords, I must begin by assuring the noble Lord, Lord Judd, that the IDA and the European Development Fund are matters which are taken separately. The noble Lord is right. Particularly with the benefit of hindsight, both we and, I think, the bank would accept that mistakes have been made in the past in projects which were supported. The kind of points the noble Lord asks about are those which are of the greatest concern to the donors and the bank itself. The working group on poverty reduction has been set up to endeavour to focus attention on the kind of matters to which the noble Lord refers. We have to try both to focus on poverty reduction and at the same time ensure that we have programmes that lead to sustainable development for the future.

Baroness Rawlings: My Lords, may I ask my noble friend to comment on the progress that the IDA and the World Bank are making in constructing bridges with the NGO world, particularly with those in the UK which operate in the developing world?

Lord Inglewood: My Lords, I am very pleased to be able to tell my noble friend that there has recently been a shift in World Bank policy. The bank has now pledged to consult more widely with people affected by its activities in developing countries and with NGOs. That is something we welcome very much. In particular, the NGOs probably make the greatest impact when consulted at an early stage of development projects and policies. That obviously requires trust to be built up. We

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were delighted to learn that the World Bank recently asked the Intermediate Technology Development Group to organise a consultation with European NGOs as part of efforts to develop new policies in support of renewable energy.

Lord Redesdale: My Lords, considering that the Government will be reviewing the IDA before the next replenishment, will they press for a greater proportion of IDA funds to be focused on the least developed countries in Africa?

Lord Inglewood: My Lords, I can only reiterate what I said earlier. It is important that we focus on poverty reduction. Africa is the source of many of the greatest problems.

Viscount Waverley: My Lords, is it not a fact that the Americans are scaling down their contributions to IDA and that that will send conflicting messages to other donor nations when considering their contribution levels?

Lord Inglewood: My Lords, the noble Viscount is right to point out that the United States has fallen behind with its current contributions to the present IDA 10. There is a serious question mark over contributions for IDA 11. Our position is at one with those of the Group of Seven and the communiqué from Halifax. We urge all donor countries promptly to fulfil their commitments to IDA 10 and also to support a significant replenishment through IDA 11 for the next chapter.

Lord Rea: My Lords, with the permission of the House, having inadvertently broken the rules with my earlier intervention, perhaps I may ask the noble Lord whether he is aware that IDA loaned 2.7 billion dollars to the severely indebted low income countries in 1994. Is he further aware that 1.9 billion dollars—that is 70 per cent.—went to cover debt service, leaving only 30 per cent. (0.8 billion dollars) for true development assistance? Is not that a misuse of World Bank funds and not in the spirit of the original Bretton Woods agreement, which aimed to reduce poverty throughout the world?

Lord Inglewood: My Lords, I am not in a position to comment in detail on the interesting point made by the noble Lord, Lord Rea. The Government are concerned on the one hand about problems of debt; on the other, they are very anxious to ensure that debts owed to multilateral institutions are not simply unilaterally rescheduled. For example, a wish to try to get out of this particular conundrum led my right honourable friend the Chancellor of the Exchequer to bring forward proposals whereby some of the gold reserves might be sold and used to generate income in order to help the problems of interest in the kind of circumstances which the noble Lord alludes to.

Lord Judd: My Lords, will the Minister accept that the House finds his remarks about government support for multilateral aid highly encouraging? Will he also accept that they do not sit altogether logically alongside frequent laments by the Government that multilateral aid programmes are undermining bilateral aid programmes? Can the Minister assure the House that at an early

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opportunity there will be a comprehensive statement on the Government's policy towards both bilateral and multilateral programmes and the balance between them? Is not the important point what helps the poor of the world most effectively?

Lord Inglewood: My Lords, of course that is right. It is in order to ensure that we retain a balance between our multilateral commitments and our bilateral aid—which, as the noble Lord will be aware, was recently recognised by the OECD as being among the most effective there is—that we try to ensure that the position will be in equilibrium. If there is to be any major change in these matters, I can assure your Lordships that it will be reported to your Lordships' House.

Scotland: Alternative Forms of Government

3.4 p.m.

Lady Saltoun of Abernethy rose to call attention to the alternatives canvassed for the government of Scotland and to their effect on the future of the United Kingdom; and to move for Papers.

The noble Lady said: My Lords, the menu for the future government of Scotland offers three main choices: first, the present system; secondly, a devolved parliament for all domestic matters within the Union; and, thirdly, outright independence. For nearly 300 years the present system has not served Scotland badly, although there is always room for improvement. Productivity is high; the standard of living has risen dramatically in the past 20 years, and I would be pushed to recognise the country I know in some of the descriptions of her peddled by the advocates of change which suggest a third world country, sunk in grinding poverty under a repressive regime. But the grass on the other side of the fence has always traditionally looked greener.

It is perhaps not surprising that there has been a great resurgence of enthusiasm in Scotland for the concepts of either a devolved parliament within the United Kingdom or for Scotland leaving the Union and becoming once again a separate country. For the past 16 years she has been governed by a Conservative Government, despite having elected a majority of Labour MPs to Parliament. Recent suggestions on the part of the Government that Northern Ireland should have its own assembly have inevitably fuelled the demand for a Scottish parliament. In 1989 the Scottish Constitutional Convention was born in order to formulate proposals for one. It consists of Liberal Democrat and Labour MPs, MEPs, regional and district councillors, and representatives of the trade unions, the Churches and sundry other organisations.

Eventually, it recommended a directly elected parliament responsible for all functions except defence, foreign affairs, central economic and fiscal affairs and social security policy.

That parliament would initially consist of 112 members, 72 being elected on the first-past-the-post system from the present Westminster constituencies; plus 40 additional members elected from party lists, five

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being allocated to each Euro-constituency, in order to bring the party representation more into line with the proportion of votes cast for the various parties in each of those constituencies. Thereafter, an electoral commission would be set up to refine the system and the number of MPs would be increased. A more equal gender balance than obtains at Westminster would be aimed at. Initially, the number of MPs at Westminster would remain at 72, but this number might later be reduced to 55 or 60.

The government of Scotland would be financed by the allocation of all Scottish income tax and all Scottish VAT to the Scottish parliament. Equalisation would continue to be based on needs assessment, starting from the present Barnett formula basis. The Scottish parliament would have the power to vary the income tax rate by up to 3p in the pound for those residing in Scotland. Local government would be financed by a local income tax.

The Scottish parliament would establish a representative office in Brussels to put, clearly and directly, Scottish interests to the European Commission. Scotland would also have representation, through the Scottish parliament, on United Kingdom ministerial delegations to the Council of Ministers.

The vexed West Lothian question would ultimately be solved by giving Northern Ireland, Wales and England, or regions of England, their own parliaments with similar powers, and turning the Westminster Parliament into a federal parliament with a reformed House of Lords. Pending that solution, Scottish MPs at Westminster would continue to vote on English domestic matters, just as the Members of the Stormont Parliament used to do. What seems the obvious solution, that they should simply not be allowed to vote on the domestic affairs of the other three countries, was not considered practical because, for instance, a government with a slender majority might not be able to get their English domestic legislation through in another place without the Scottish vote. There would be no devolved second chamber. It would be a single chamber parliament.

That is a brief resumé of the proposals of the Scottish Constitutional Convention to date. A number of questions pose themselves. Why should social security not be devolved? Surely that is a domestic matter. Is there any reason to suppose that Labour and the Liberal Democrats, who had some difficulty in coming to an agreement (with a dissenting minority) about the initial voting system, would ever agree about the permanent system? The Liberal Democrats want a proportional system which reflects the considerable number of voters who vote for them, but do not see their views reflected in the number of Liberal Democrat MPs elected, whereas Labour favour a first-past-the-post system, which gives them more parliamentary seats than their proportion of the total vote would entitle them to.

They do not agree about the way in which the question of gender balance should be tackled either, Labour wishing to make the 50:50 balance mandatory, regardless of the quality of the MPs on offer, while the Liberal Democrats were opposed to positive discrimination. I am not quite sure whether that

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disagreement has been resolved permanently, but the Constitutional Convention agreed in its October 1994 report to a number of measures designed to make membership of parliament easier for women, combined with a target of, say, a 40 per cent.-plus representation of women and what it describes as a "fair" representation of ethnic minorities within five years of the setting up of the parliament.

Fifty-five or 60 MPs seems an excessive number to continue to represent Scotland at Westminster once so much has been devolved to a Scottish Parliament and would be a source of expense. Perhaps that is to fight for the equalisation payment, which would certainly be at serious risk, for why should the English, Welsh and Irish Members of Parliament agree to subsidise expenditure over which they had no control? With the best will in the world, they would be unlikely to do so, for their voters would not thank them for it.

Turning to the equalisation payment, which bridges the gap between the revenue raised by taxation and the amount of government expenditure in Scotland and which amounted to some £7 billion or £8 billion in 1992-93, if it were to cease, how would the gap be bridged? Three pence on income tax would not even look at it. One penny on income tax raises about £150 million in Scotland—and your Lordships can all do simple arithmetic or little sums on pocket calculators. I wonder whether such costings as have been done take account of the additional cost of 112, and ultimately considerably more, MPs, their salaries, expenses and the cost of administering the Scottish parliament. How will that be paid for other than by raising income tax at once? Surely taxation in Scotland would be higher than elsewhere in the United Kingdom—at any rate until the proposed federal scheme was in place when government would cost more in all regions.

A local income tax was proposed at a time when the poll tax was in place. Is it still envisaged that that will take the place of the community charge?

Has the European Commission in Brussels been consulted about the opening of a Scottish representative office there, and would it be prepared to co-operate with it?

Regarding the "West Lothian" question and the federal solution which the convention proposes to impose upon the United Kingdom, do the English "regions" want their own parliaments? Are they prepared to pay higher taxes for them? What would those "regions" be? Surely they would be quite artificial—and can anything as artificial as they would be have any cohesion? How would the regional boundaries be worked out? Why should the English have a federal system imposed on them to suit the convenience of the Scots?

A report published recently by the Institute of Public Policy Research rejects the federal solution and suggests that Scottish MPs should not be able to vote on English domestic legislation, however inconvenient to the government of the day. What would be the position of Scots Peers in the House of Lords? How could the Secretary of State continue to exist when his job had been taken over by the Scottish parliament? What

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therefore, if any, representation would Scotland have in the Cabinet? Is the Treaty of Union to be amended—or what? Those are just a few of the questions which remain unanswered.

Anyone reading the Scottish National Party's blueprint for an independent Scotland, as set out in its last election manifesto, might be forgiven for thinking that they had happened upon a recipe for Utopia. Everything is going to be perfect for everyone in the best of all possible worlds with guaranteed fundamental rights and liberties for everyone; the outlawing of discrimination on grounds of sex, race, colour, religion, personal beliefs, status or sexual orientation; economic and social rights guaranteed, covering working conditions, retirement pensions, housing, health services, and education; freedom of information except where necessary in the public interest; the right of the Scottish people to sovereignty over their territory and natural resources, recognising the rights and obligations of European Community membership which shall be subject to confirmation by a referendum; the right of Scottish citizenship to all Scottish residents and persons born in Scotland and such others as the parliament of Scotland may prescribe; single chamber government, elected every four years by proportional representation; the head of state to remain the Queen and her successors in a limited and constitutional monarchy until such time as the people of Scotland decide otherwise; supreme judicial power to be vested in the Court of Session and the High Court of the Justiciary, the independence of the justiciary to be guaranteed; the right to vote for all over the age of 16 and provision for the holding of referenda. It is heady stuff.

Along with that manifesto, we have to take Recovery in Scotland—Make it happen now! which details all the wonderful things which the government of an independent Scotland will do to regenerate the economy, create wealth and jobs, build houses, educate children, abolish poverty and improve social security and health care.

Recovery in Scotland has at least been costed, although the costings may be rather optimistic in some cases. For instance, a lot of additional healthcare is to be financed by raising the duty on cigarettes by 19 pence per packet of 20. I suspect that an increase of anything like that magnitude would be self-defeating, because so many people would give up smoking that nothing like the £100 million which the increase was designed to bring in would actually be forthcoming.

The national insurance contribution ceiling is to be abolished, so that (and I have upgraded the figures to today's rates) anyone earning more than £22,880 a year will contribute at the rate of 10 pence in the pound on all their earned income over that figure. Since they will not, as I understand it, receive increased benefits or a pension commensurate with the extra contribution paid, this amounts to an income tax increase of 10 pence in the pound on all earned income in excess of £22,880. Now £22,880 is not a particularly princely salary. It is the kind of salary earned by lower to middle management, which amounts to quite a large number of people, and their pockets are going to be hit—and pretty hard.

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What has not been costed is running Scotland as it is run at present, with the additional expense of an independent parliament, cabinet and ministers, and foreign service, without the equalisation grant. As far as I can make out, the deficit is to be made up in two ways: first, by withdrawal from NATO and the Trident programme and the removal of the Polaris nuclear weapons fleet. The savings from this will be invested in health, housing, education and jobs, but at the same time we shall have strong conventional defence forces, and the cost of those is not mentioned. Secondly, we shall have the benefit of all the North Sea oil revenues from north of the latitude 55 degrees 50, and the combination of those and the savings on defence will plug the gap. In its 1992 budget, the Scottish National Party forecast oil revenues of £9.6 billion over the four years from 1991-92 to 1994-95. After three of those four years, only £3.6 billion has been raised, with only £1.6 billion forecast this year, leaving the small matter of a £4.4 billion shortfall; and in the long term, oil and gas are bound to be diminishing assets.

Many other questions pose themselves. For instance, we are to have a referendum to decide whether to remain in the European Community, but what certainty have we that an independent Scotland is going to be accepted as a member of the Community, or, if she is, what voting rights would she have, and what voting rights would the rump of the United Kingdom have? What about the United Nations Organisation? What about the G7?

An amicable treaty is to be negotiated with the remainder of the UK, giving Scotland the lion's share of what are now the United Kingdom oil revenues. What makes the nationalists think that the rest of the United Kingdom will be prepared to agree to that, let alone do so amicably?

With the equivalent of 10 pence on the income tax for any employee earning over £22,880, and swingeing increases in road fund tax, petrol, wine and cigarette duty, apart from any other additional taxes which have not been mentioned, is there any reason to suppose that many business and professional people would not leave Scotland if it were possible for them to do so?

What other categories of person than those resident or born in Scotland is it envisaged will have Scottish nationality? What about the very many Scots born or resident south of the Border who at present are still Scots? How will this affect, for example, their right to own property in Scotland? What about Orkney and Shetland? They have never been very enthusiastic about becoming part of an independent Scotland and may wish to remain with the rump of the United Kingdom. Some in those islands might wish to become part of Norway, as they once were. What are the long-term prospects of the Queen continuing as Head of State? The Scottish Nationalists always used to be republican. Has this leopard really changed its spots?

Those are just a few of the questions which remain unanswered. What is certain is that the uncertainty as to the future which the possibility of devolution or independence has created is not helpful to the expansion or stability of industry. Let us take note of the effect of the prospect of independence on the economy of Quebec: a flight of capital; an exodus from Montreal of

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corporate headquarters; and a freeze on investment. Any increase in industrial costs which might result from independence would be very damaging indeed, especially to exports, and would lead to firms with bases in England or international firms withdrawing from Scotland.

As regards the devolution proposals of the Scottish Constitutional Convention, many questions relating to taxation, cost and the relationship with Westminster have not been answered. Unless they were to be satisfactorily resolved it would not work, and if a devolved parliament were established and did not work, the result would be an increased demand for independence. The convention sees its proposals as a formula which would save the United Kingdom. If all the four countries comprising the United Kingdom were happy with the federal option and the additional cost of it, and if all the national governments had no tax-raising powers so that no part of the United Kingdom would be more highly taxed than another, it might work. Then there would be the great bonus to the Westminster Parliament of a huge reduction in the volume of legislation and consequently more acceptable hours and working conditions. I should have some sympathy with that concept; I believe that many of us would. As they stand, the constitutional convention's proposals fill me with foreboding. On 8th June the chairman of the Scottish National Party said:


    "Most people recognise that once Scotland starts down the road of constitutional advance, we are unlikely to move backwards".

I fear that he is right.

I do not think that the level of support for political parties promising devolution or independence in their manifestos at a general election should be taken as support for devolution or independence because there are too many other factors influencing the way people vote at general elections. I believe it has also happened that people who voted for the Scottish National Party in an election were horrified later to learn that they had voted for the break-up of the United Kingdom. They thought that they had voted for a devolved parliament. Before any legislation were brought before Parliament all the questions that I have asked and many others would need to be answered satisfactorily, detailed proposals would need to be published, their probable effects considered and a referendum held. If federalism were involved that would need to be done not only in Scotland but throughout the United Kingdom.

I look forward to a very interesting debate and, I hope, to hear answers to some of my questions. I beg to move for Papers.

3.24 p.m.

Lord Campbell of Croy: My Lords, I thank the noble Lady, Lady Saltoun, for the clear and effective way in which she has introduced the debate. It is on proposals for devolution and therefore I shall not speak on independence for Scotland—that is, the break up of the United Kingdom, which is the aim of the Scottish National Party—although one (devolution) could lead to the other if an unstable system, not carefully thought out, were created.

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Proposals for Scotland must also be considered together with their effects on the rest of the United Kingdom. For 40 years or so the idea of Scotland in a federal system in the UK has attracted some support, in particular from the Liberal Democrat Party. If that were for the four parts of the United Kingdom it would be top heavy, England having 10 times the population of any of the other three parts. England would dominate and the United Kingdom could not be a balanced federal country.

It has therefore been proposed that England should be divided into seven or eight regions. That ran into immediate difficulties. I understand that most residents in England do not wish to be split in this way, with regional assemblies artificially created. And why should they be forced to do so? However, most favour more decentralisation, but not through another elected layer of government. The Labour Party's present proposals, as I understand them, would divide England into regions, presumably aiming for some similarity and balance with a parliament in Scotland. However, similarity is obscure because there is doubt about the nature and functions of the regional assemblies.

As recently as last January, a Labour document entitled Renewing Democracy, Rebuilding Communities stated:


    "We should provide for an elected authority for each English region".

However, on 5th March the Leader of the Opposition was reported in Scotland on Sunday as saying:


    "We are not committed to regional assemblies in England".

There have been other conflicting and inconsistent statements. What does the Labour Party propose for England? I hope that we shall hear today from the Opposition Front Bench.

Decentralisation would be favoured by a majority of people in the streets of Manchester or Newcastle if they were questioned by those conducting opinion polls. In Scotland the question put by such people was different. It was: "Do you favour a Scottish assembly?". For some 30 years, about 70 per cent. of the answers were yes. An assembly has been identified with decentralisation and more decisions being taken locally. In Scotland, an assembly and decentralisation have appeared to be synonymous. However, when a particular scheme for an assembly is formulated, wholesale disagreement breaks out; for example, on the extent of its powers and functions, whether it should raise taxes, how it should be elected and whether it should take over some local authority functions.

The Labour Government of 1974-79 experienced that. The assembly in the Scotland Act 1978 was to take over less than half of the functions of the Secretary of State, who would have remained with the Scottish Office. The assembly was to have an executive, so there would have been two executive bodies operating in Scotland causing confusion and creating an arena for conflict. The assembly would not have had tax raising powers. Grants were to be allocated from central government and it could be predicted that there would be continual complaints that they were not enough.

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Another serious flaw in the Scotland Act was that the West Lothian question had not been solved. Perhaps I should remind your Lordships that Scottish MPs at Westminster would have continued to vote on English legislation on subjects which the new assembly would have dealt with in Scotland. The other side of the West Lothian question was: why should they be deprived of the role of legislating on those subjects affecting their Scottish constituencies because assemblymen were dealing with those subjects in Edinburgh?

Although a clumsy system for voting at Westminster was inserted in Section 66 of the 1978 Act, that did not solve the problem. I remind your Lordships that it applied only to Second Readings in another place and prescribed a 14-day period for second thoughts. It was not surprising in the referendum upon that Act that there was only a very small majority in favour of it. The number was well below the required threshold of 40 per cent. Labour Government Cabinet Ministers must have been relieved because to put that Act into effect would have been a nightmare as all the faults and confusion about the new assembly were exposed.

It took four years for that government to produce and put the legislation through Parliament. There are reports now that the present Shadow Cabinet is proposing legislation in the first year of a Parliament, if it wins an election and forms a government. Can that be correct? Four years were needed for a half-baked Scottish Bill in the 1970s. What preparation and consultation does the Labour Party think necessary now for legislation which will apparently also affect England and Wales?

In this debate, each of us is allowed only a limited time and I shall describe very briefly earlier events. The Labour Government proposed a Royal Commission on the constitution of the United Kingdom which was appointed in April 1969. It took four-and-a-half years and reported only four months before the general election was called in 1974 and a change of government occurred. The first chairman of that Royal Commission, the late Lord Crowther, who died soon afterwards in office, told me, as I was Secretary of State for Scotland in 1970, that he hoped that the report would be made within two years of the commission's appointment.

During 1970-73, I had hoped to issue a consultation document on the Home constitutional committee's proposals—anodyne proposals as they were. I was told that the new chairman, the late Lord Kilbrandon, and several members of the commission would resign were I to pre-empt their conclusions by doing so. When the commission reported, there was little time to consider and consult before a Labour Government followed.

The Kilbrandon Royal Commission report suggested that if a Scottish assembly were created, the number of Scottish MPs at Westminster should be reduced so that representation in proportion to population would be the same as in England. That would have brought the present 72 down to fewer than 60 Members. If there were to be a Scottish parliament, would that number be reduced further as in Northern Ireland when there was a parliament there before 1971? The electorate in the constituencies there were deliberately made larger than the average United Kingdom electorates.

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There has been massive administrative devolution in Scotland which is not known or understood everywhere. Several ministries in Whitehall do not have functions in Scotland; for example, the departments dealing with health, environment and education. The departments of the Scottish Office are their equivalents in Scotland.

I have never been negative on the question of arrangements for supervising the administration of the Scottish Office. For example, 33 years ago, when I was Scottish Whip in another place, I offered proposals within government to make changes in the composition of the Scottish Grand Committee and in its scope, procedures and methods, including holding meetings in Scotland. Later, the Scotsman newspaper published a series of articles by me setting out those proposals. I am happy to say today—and agreeably surprised—that all those proposals have now been adopted and are incorporated in the Scottish system working now in the House of Commons.

In any move to create an assembly in Scotland, one factor must be that it is a stable, workable system. If it is not, it will play into the hands of separatists. I urge the opposition parties or any others contemplating constitutional change in relation to the position of Scotland in the United Kingdom to proceed with the greatest care and caution.

3.35 p.m.

Lord Carmichael of Kelvingrove: My Lords, I am sure the whole House will wish to thank the noble Lady, Lady Saltoun, for tabling this Motion. I was rather surprised to see that it referred to,


    "the alternatives canvassed for the government of Scotland"

because I believe that there is only one alternative; that is, devolution. I thank the noble Lady for raising the matter and in particular for the first part of her speech in which she addressed the problems—and there is no doubt they will arise—in evolving a devolved system of government.

I should like to speak fairly briefly on the whole question of what the Government are trying to do. I believe that they are trying to mix up devolution and independence. In the debate in the Scottish Grand Committee of the other place on 17th May, there was, I believe, a quite deliberate attempt to confuse the minds of people and to concentrate only on the question of independence. I agree very largely with what the noble Lady said about total independence.

Some voices cry for an independent Scotland having no direct links with the other parts and countries of the United Kingdom. But all surveys and, much more importantly, election results over the years have shown clearly that although the desire for some form of home rule—however that is defined—is very strong indeed, the demand for complete independence is much weaker.

Let us take the example of the recent by-election in Perth and Kinross. A System 3 poll found that 52 per cent. of those voting Scottish Nationalist rejected the whole idea of independence. In that regard, I disagree with the noble Lady, Lady Saltoun, who said that the people who voted Scottish Nationalist did not know what they were voting for. It is clear from that poll that

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the 52 per cent. who voted Scottish Nationalist and did not agree with independence were simply making an anti-Conservative vote. They considered that to be the best way in which to keep the Conservatives from holding the seat. One must assume that the Scottish National Party will need to hold more than 30 seats in Scotland or receive a very substantial vote before we can accept its claim that the Scottish people want total independence.

I was closely involved in the earlier referendum. I was extremely annoyed with the Member in another place, George Cunningham, who proposed the figure of 40 per cent. It was an almost mischievous proposal to require a 40 per cent. vote—not of those voting but of the entire Scottish electorate—before the devolution proposals which we were putting forward could be accepted.

Noble Lords may recall that at that time the noble Lord, Lord Home, who was and still is held in great respect by most people in Scotland, said definitely, "Do not vote for these proposals. If we form a government, we shall put forward proper proposals for the proper government of Scotland." That was one of the reasons for the large number of abstentions. Noble Lords may recall that 33 per cent. were in favour, 33 per cent. were against and 33 per cent. abstained. I should not have supported any devolution proposals made on that rather shaky basis.

In the course of today's debate, our arguments must focus on devolution and away from separatism. I do not believe for a moment that most Scottish people believe that the total separation of Scotland from the rest of the UK is a possible proposition. I do not believe that it will come to that.

However, if there is a Scottish assembly, which I do want—I expect to hear at some point during today's debate that devolution is the ultimate road, the slippery slope, to independence—and the Scottish people feel their feet and decide democratically and very positively that they want independence, then, much as I deplore it and believe it to be quite wrong in a modern world, who should say that they should not have it if they democratically decide for it, knowing all the pitfalls? I do not see why we should not go forward. But it will not come to that.

Despite the strong sentiments that all of us in Scotland feel for our country, its history and its traditions, we are far too logical a people to pretend to ourselves that the break-up of the United Kingdom could be anything other than a disbenefit to the whole of the UK. Therefore, let us rid ourselves of the dangerous illusion that a totally separate Scotland would be viable or would be workable without having a relationship with the rest of the United Kingdom. The reality is that the Scottish people want much more say in their own affairs. But they have only shown real support for the SNP at by-elections.

One of my honourable friends in the other place, the Member for Dundee East, Mr. John McAllion, has examined the election results since 1979. They are interesting figures. Since that date 288 parliamentary seats have been contested in Scotland. The SNP has won 10 of them; that means that it has actually lost 278. Yet there is no doubting the fact that the SNP makes a good

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deal of noise and that it attracts a certain amount of attention in Scotland. However, I believe that it is a tension caused by frustration because Scotland does not have the power that it really should have. Last year the SNP poll gave the party 32 per cent., a record. However, in the election for unitary authorities in April—in other words, a real election when we were speaking about hard facts and real people were being elected—its vote dropped to 26 per cent.

Noble Lords may feel that I am spending too much time on the question of independence. However, I believe it to be necessary because it is a hindrance to the consideration of the real democratic deficit which we suffer in Scotland. It is easier for the Government to encourage us to chase that will-o'-the-wisp than to accept the obvious fact; namely, that the people of Scotland have elected 49 Labour Members and 10 Liberal Democrats who prominently stood for the policy of devolution.

In a letter to my honourable friend, the Member for Hamilton, the Secretary of State wrote:


    "If the SNP were to secure a majority of Scottish seats at a General Election, then Parliament would have to give consideration to the position of Scotland within the United Kingdom. Following this consideration, it might then be appropriate for discussion to take place which could lead to the electorate of Scotland being consulted in a Referendum".

That "majority" of seats is 37 seats that the Secretary of State says the Scottish Nationalists must get. The people who want devolution are 49 Labour MPs plus nine Liberal Democrats. That is 58 Scottish MPs. Yet we are not given the possibility of having a referendum or anything other than an attempt to smother the whole idea of Scottish independence.

The Secretary of State has been putting out some statements—easily knocked down—to try to avoid the debate about real democratic government for Scotland. Devolution is the only item on the Scottish agenda. I should like to emphasise that fact. I am sorry that the noble Lady who, I thought, started her speech so well, went on, as I said, to chase a will-o'-the-wisp.

I wish to quote briefly from a leader in the Financial Times of Friday, January 13th of this year which talked about devolution. It said:


    "Devolution has a respectable enough international pedigree. Every other large state within the EU has regional government in some form; and while devolved or federal government is not a panacea for inter-regional tension—witness Canada"—

and, of course, the Quebec question about which we have spoken and about which we are all aware—


    "it can help to reduce it. The sustained determination of a large majority of Scots to secure greater autonomy will have to be answered at some stage. Failure to do so could be more dangerous to the union than Labour's relatively modest proposals for devolution. A devolved Parliament would give Scotland one level of Government more than England and Wales, but the number of executive tiers already varies across the UK".

The leader concluded:


    "Such an outcome would have rough edges. So does every workable constitution. Labour must show that it is ready to tackle such anomalies. It also needs to think hard about the desirability of instituting regions in England—a dubious policy which could jeopardise the whole endeavour. Yet Mr. Major's inflexibility on these issues is not an adequate answer to the tensions within the UK".

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Of course, I do not know, but we may not have Mr. Major. I am unaware as to how things are going in another place. However, I believe that we cannot dodge the idea that devolution is firmly on the agenda of the Scottish people.

3.45 p.m.

The Earl of Perth: My Lords, we are all greatly indebted to the noble Lady, Lady Saltoun, for raising the issue today. Indeed, the following two speeches were very impressive: namely, that of the noble Lord, Lord Campbell of Croy, who has great experience in such matters as he was, once upon a time, Secretary of State for Scotland, and therefore knows a great deal about the subject; and also that of the noble Lord, Lord Carmichael. However, it is quite clear from listening to those speeches that many questions are raised to which no one has put forward satisfactory answers. I am not surprised at that because devolution is a most difficult issue.

Perhaps I may start by saying that I am all for the Union. But, having said that, I am equally for the Scots being able to run their own affairs. The problem is how to marry the two concepts. Without endangering the Union, how can we have the Scots saying more and, indeed, deciding on how they want to run their own internal affairs?

Let us go back for a moment to the early days; namely, the time of the Act of Union. The people of Scotland did not want that Act, but those in power, with a suitably sugared pill, let it go through or, in fact, promoted it. For 300 years we have seen the outcome. There have been hiccups: there was the 1715 uprising and there was the one in 1745 which was brutally suppressed. However, after all of that, we had the age of Enlightenment in Scotland when we really did go forward in a great way. Whether it was on philosophy, on economics, on the Industrial Revolution and, above all, whether it was on literature, we showed the great contribution that we could make to the whole of the country's well-being. I stress, "the whole of the country's well-being". Let us also look abroad at, for example, the work of our missionaries and our military. We were a very important element in the Empire.

However, over that latter period the Empire was in decline. That inevitably made people restless. The Scots in particular were more and more anxious to run their own affairs. The first breakthrough, after pressure, came in 1885 when a Secretary for Scotland was announced. Then, to follow what happened afterwards, we had the Secretary of State for Scotland and a Scottish Office, but its evolution was always within—and rightly so—the Union. The Scottish Office power with its block grant grew enormously. Indeed today there are over 5,000 people in the Scottish Office. That is about a third of what one finds in Brussels. Perhaps that makes your Lordships think!

What are we to do? How are we to control that Scottish Office? Of course Ministers and Secretaries of State do their best to consult but they consult the good and the wise whom they know. They do not consult the people and that is our trouble; namely, that the people of Scotland feel—and rightly so—that they do not have

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a say in how they are to be governed. We have seen the result of that in recent elections when, over the past few years, the Conservatives have only had a fraction of the vote but they have decided what is to be done. People do not like that. They do not like a sort of "nanny knows best" rule. I am quite clear myself that we must get away from that and that we must give the people of Scotland a real say in the running of the country.

Many of the matters are already decided and therefore we do not have to worry too much about them. We take it for granted that health, education and everything except social security, foreign affairs and defence will be taken care of in Scotland. Social security, foreign affairs and defence are matters for Whitehall and its Parliament. But how are we to ensure that the Scottish people have a say in their affairs? I am quite clear that the solution which we tried in 1979 was in general right; namely, that there should be a Scottish assembly. The referendum failed for various reasons which have already been explained by the noble Lord, Lord Carmichael, but that was bad luck. The noble Lord, Lord Home, very reasonably said that he was for devolution but that he did not like the Bill. The problem is to find the right Bill. We must make another attempt.

What do I suggest? My next point may have shades of the comments made by the noble Lord, Lord Campbell of Croy. I suggest that we have another Royal Commission because this question is so vitally important to all of us: not only to the people of Scotland but also to the rest of the Union. That Royal Commission should be given an impossible task. If one gives it an impossible task it often succeeds. I have in mind that it should be asked to report within, let us say, 18 months or two years. Much of the work has been done for it by the Scottish Constitutional Convention. The questions in a sense are quite obvious. What is the relationship between a Secretary of State for Scotland and a convenor—I suspect that is what we would call him—of the assembly? What would be their respective powers? How would the voters elect the assembly? Would it be by indirect voting or should we have direct voting? I can think of a multitude of similar questions. However, I do not propose to suggest any answers, otherwise why set up a Royal Commission?

We have heard speakers in this debate say that this is an issue which is of the greatest importance for the whole of the country. It will not go away. If we do not do something now, as I have tried to demonstrate, this matter may well arise in a shape that none of us in this House would like. I have particularly in mind the idea of independence, although I must say, knowing the Scots, I suspect they are much too wise to go along with such an idea. I beg the Government to consider once again setting up a Royal Commission. I ask them to remember the history of evolution over the past 100 years. They must in the end find a solution which satisfies the Scottish people. As I say, let us be given an answer in 18 months, which allows time for some kind of legislation to be introduced by a new government of whatever colour; otherwise I fear, lest Scotland and the Union explode.

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3.55 p.m.

Lord Gray of Contin: My Lords, I join with others of your Lordships' House in thanking the noble Lady, Lady Saltoun, for giving us this opportunity to discuss what is an important subject for Scotland. I also congratulate the noble Lady on launching the debate in such grand style and on giving us such a wide-ranging speech. My only criticism of it is that she said so many things I wanted to say which I must now cut out.

I also enjoyed hearing what the noble Earl, Lord Perth, had to say, although I have some doubts about setting up yet another Royal Commission. In the honourable game of rugby, when a full-back gets in real trouble he kicks for touch. I think that the Secretary of State of whatever government happened to be in power would be accused of kicking for touch if he set up yet another Royal Commission on this subject.

I am a convinced Unionist, a position reached after an initial period of open-mindedness on the subject, followed by a brief sympathy during the late '60s and early '70s for a Scottish assembly of some sort, and my ultimate abandonment of the whole concept in the belief, which I still hold, that there can be no middle way. The alternative to Unionism is separatism, and any intermediate position can only lead ultimately to an independent Scotland. I can see no benefit whatsoever for Scotland in independence, and there are positive disadvantages, as I see it, in the sort of makeshift parliament presently on offer. I see nothing which is not available and attainable through the United Kingdom Parliament.

I do not propose to dwell on the many flaws in the Labour Party policy document A Parliament for Scotland other than to suggest that those proposals have been conceived for all the wrong reasons. They will create a further tier of taxation in Scotland; they will ensure constant friction between Edinburgh and Westminster; they will create aspirations which they will be unable to gratify; they will establish a monster with an insatiable appetite for money, aided and abetted by a membership which will blame Westminster for every defect and imperfection it may encounter in the day to day administration of Scottish government.

This situation will benefit only nationalism. The Scottish National Party need only sit back and wait. All its hopes will be fulfilled, and I predict that if Labour were to win the next election and legislate on the basis of the proposals at present before us, Scotland will be independent within a decade. The frustrations and the bickerings will make that certain and nearly 300 years of one of the greatest unions in history will be shattered. Proposals designed to counter nationalism will serve only to fuel the very fires they seek to quell.

Furthermore, the proposals have other serious consequences for Scotland. The West Lothian question is no nearer to being resolved, and it is inconceivable that the United Kingdom Parliament would continue to accept 72 Scottish Members representing Scottish constituencies to carry out only half or less of their present workload, presumably for the same remuneration, not to mention their ability to vote on English and Welsh matters, while the United Kingdom

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Parliament would lose the opportunity of voting on Scottish Bills. It seems to me that, after a great deal of argument, Scotland might finish up with something like 58 Members instead of 72. The position and authority of the Secretary of State for Scotland would be diluted substantially in Cabinet. All those factors would be to the great disadvantage of Scotland.

The truth of the matter is that Scotland has very little to gain and much to lose from the creation of a parliament in Edinburgh. The unpopularity of the Conservatives and the popularity of Labour for the time being in Scotland has little or nothing to do with the parties' attitudes to Scottish devolution. Instead of promising to legislate for a Scottish parliament in its first year of government, I suggest that Labour would be very much better employed promising a multi-option referendum within the first year. The Times of 11th January 1995, quoted Mr. Tony Blair on the question of a referendum on European matters as saying:


    "Where important constitutional arrangements are at stake the people must have their say".

From the point of view of the people of Scotland, I should have thought that these proposals are vitally important. They concern a constitutional change and there should be an opportunity for the people of Scotland to have their say on the question. I should like to see a referendum that set out three options: the Labour proposals as presented; independence; or the status quo.

It is incumbent on those who seek major constitutional change to spell out in detail the pros and cons of the legislation. The Scottish people should have the full facts explained in detail—the benefits and the disadvantages. Such a major constitutional issue should be separated from the many policies on which a general election is fought, and a proper referendum campaign should be allowed. My assessment has always been that devolution is a media fascination and comes fairly well down the priority list of policies at a general election with most Scots.

There are precedents. We have had four separate referendums on constitutional matters, and the results have not always been predictable. My noble friend Lord Campbell of Croy pointed out that in previous referendums pollsters had frequently assessed support as being somewhere in the region of 75 per cent. However, in the 1979 referendum on devolution, despite opinion poll forecasts suggesting that 80 per cent. of Scots were in favour of a devolved parliament, less than a third of the population voted in favour.

If at the end of such a thorough and in-depth examination of the issues, separate from the distractions of a general election, the people of Scotland selected the route they wish to follow for their future there should be no recriminations. In my view, to proceed without such precautions would be wrong, dangerous and close to treacherous.

4.4 p.m.

The Earl of Mar and Kellie: My Lords, perhaps I may also begin by congratulating my noble kinsman Lady Saltoun of Abernethy for having the wisdom and

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persistence to introduce this debate about the future government of Scotland. It is a most urgent subject in Scotland.

A historical approach is essential to my thinking and relevant to today's situation. In 1603 James VI, King of Scots, succeeded to the throne of England and became executive head of both autonomous states in parallel. He successfully worked with both the English Parliament and the Scottish Parliament. He understood above all that good government of Scotland was direct Scottish government. His successors as kings and queens of Scots understood progressively less about the importance of separate government within their united kingdoms. By the end of the 17th century the misunderstood roles of the twin governments led to confusion, especially as the two countries had adopted different foreign and economic policies.

The debate about the merits of moving to a united and hence international parliament was fought out by those gurus of the time, Andrew Fletcher of Saltoun and John Erskine, Earl of Mar and Principal Secretary. The two usually agreed, but not about this subject. Fletcher of Saltoun said:


    "The Scots deserve no pity if they voluntarily surrender their united and separate interests to the mercy of a united parliament, where the English have so vast a majority. This will be the issue of that darling plea, of being one and not two; it will be turned upon the Scots with a vengeance; and their 45 Scots members may dance around to all eternity, in a trap of their own making".

Fletcher of Saltoun was right about the merry dance, but Mar signed the Union in 1707. He subsequently led a rebellion against it in 1715, a clear assessment of how the Union was not working out. He commented at the time:


    "I was as keen to break it as I was to make it".

Today the majority of the Scottish people consistently vote for parties which promote different foreign and economic policies from those chosen by the vast majority of English voters. Scotland prefers a more communal and democratic approach to the economy and a more internationalist approach in foreign affairs. Meanwhile England prefers a more individualist and nationalist approach. I am very worried by the rise of English nationalism as expressed in the anti-European movement.

Throughout my comparatively short lifetime the party opposite has never held a majority of seats in Scotland, yet we have endured 33 years of minority government in the past 46 years. That democratic deficit, characterised by the 49 Labour seats and the 11 Conservative seats held at present out of a total of 72, points the way forward. Scotland should return to autonomous government within the united kingdoms. As a small nation the Scots would find their place in the world as the 26th economic nation. Only in that way will the Scots be able to eliminate the democratic deficit.

Other devolutionary measures would not lead to a true picture of the political choice of the Scots, for as long as some voters choose to vote SNP, which is a broad pressure group cum political party, we shall not be able to achieve a democratically accurate government for Scotland. That may also be true of the Scottish Conservative and Unionist Party, which will then be

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able to promote Conservative policies for Scotland rather than devoting its energies to defending the Union as it is currently organised. That process will also be assisted by the adoption of proportional representation.

My second reservation over devolutionary measures is that there seems to be little demand for regional government in some parts of England. I fear that that would create an unbalanced tier of government which I believe would lead to endless argument, as has been mentioned by other noble Lords.

This renegotiation of the Union should be entered into willingly and co-operatively. The treaty of 1707 was a freely negotiated settlement voted for by the Scottish Parliament, which adjourned itself for as long as the treaty held. It is a trial marriage. The future treaty must also be freely negotiated. Those negotiations must be conducted in stark contrast to the debate and negotiations in the early part of this century over devolution in Ireland. The intransigence of the British Government led to a war of independence, a truce at the request of the British Government, a grudging and inadequate treaty in 1921, and a brief civil war in the newly established Irish Free State.

The move to the autonomous government of Scotland must be the result of the intellectual decision of the Scottish people. There is no need for violent action to back this claim. I have been saddened by the repeated assertions of visiting Conservative politicians that there is not enough bitterness yet to merit devolution or constitutional change and that the Scots would be better off as minority players in a united parliament situation. This playing of the regrettable "no corpses, no referendum" card sounds a little like the negotiating stance over Ireland in 1921.

On the economic front, I freely acknowledge that initially Scotland would be less well off after splitting with a G7 country. The Scots must weigh up the benefit of subsidy against that of democracy. The challenge that I throw down is that the conversion to small national status would unleash the latent Scottish economic potential and creativity which is being stifled by being the northern and distant branch of British enterprises. Ireland's success within the European Union points the way; and the Irish started off on a much shakier economic footing.

Scotland would definitely wish to maintain its seat in the European Union. As the treaty of 1707 was between equal partners, who is to say that it would not be Scotland which maintains the former British seat?

I conclude my contribution to the debate by confirming that Scotland's future lies in solving the democratic deficit and making its own way into the global economy. This Brito-sceptic position bears no malice towards England, Wales or Northern Ireland. There would be an open European Union border with no barbed wire. I sincerely hope that when the new treaty is being drawn up the negotiations are entered into generously and benevolently by statesmen who can see that our countries have a fine co-operative future ahead. The music will then have stopped for Fletcher of Saltoun's merry dance. The possibility of a British Isles

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Federation, including Ireland, will have become increasingly attractive. That will be the ultimate evolution for our island peoples.

4.14 p.m.

Lord Sanderson of Bowden: My Lords, I, too, should like to pay tribute to the noble Lady, Lady Saltoun of Abernethy, for bringing forward this subject for debate today. I believe that your Lordships' House is a very suitable place to debate calmly and rationally these important issues on a subject that naturally raises the emotions of those of us who care deeply for the future of Scotland within the United Kingdom. I say "within the United Kingdom"; I was interested to hear what the previous speaker said about, presumably, a separate Scotland.

I state at the outset that I do not personally favour a Scottish assembly, not through any doctrinaire view but because I believe that constitutional change can end up in disaster for the very people that it is intended to help. I realise that perhaps my perception is not shared by a very large number of my fellow Scots, but I trust that my views can be considered alongside those who take a different view.

My concern is that in any constitutional change—particularly legislative change—the whole process has to be fair, and be seen to be fair, by all those affected. That is particularly necessary where the nations of Scotland and indeed Wales are numerically so much smaller than their English neighbour. In short, it is essential that no political party or group plays fast and loose with the constitutional base on which the United Kingdom is founded.

The reasons for the desire for a devolved assembly in Scotland, and perhaps in Wales, (although I cannot speak for Wales) are not difficult to find: bringing government nearer to the people; devolving power and law-making from the centre; satisfying the inbuilt nationalism which is in all of us in Scotland—in Scotland's case those feelings are fostered by a period of government by a party whose political strength lies elsewhere—and an aversion to the man from Whitehall who always seems to know best. That is quite apart from anything that might happen on the football pitch or rugby field.

First, I believe that if a law-making assembly is to be long lasting and answerable to the electorate, it must have tax-raising powers. Representation without taxation is not a good democratic recipe.

Secondly, it is difficult to circumscribe the law-making powers of any assembly. Where the United Kingdom and the assembly government in power sing from the same hymn sheet, all can be well and good. But if the opposite were the case—remember, my Lords, that we are considering law-making bodies—that would be totally different from the tensions which can and do exist between local government and national Government.

Thirdly—and in my view this is fundamental to any change—what is offered to the Scots and the Welsh must be offered in equal measure to the English. It is no answer to say that the English do not demand change,

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therefore they need not have it. Their interests should not be ignored, because if we ignore them we do so at our peril. I do not believe that a federal solution can be introduced into the United Kingdom gradually. For devolved government to work it must give each citizen, or the citizen's representative, as nearly as possible equal treatment under the law.

That brings me to my real fear for any lopsided proposals for change. Is it fair and reasonable to expect English Members of Parliament to condone the practice of Scottish MPs at Westminster voting on matters which, by their very nature, are devolved to their own assembly? If regional assemblies, exactly akin to their Scottish and Welsh counterparts, are not proposed then binding arrangements would have to be in place to satisfy the Members representing English constituencies. Will that not lead to first-class and second-class citizens as MPs; or, if not, an undoubted reduction in the power, number and influence of MPs from areas with devolved assemblies? Is that what Scotland and Wales really want—a diminution of their power and influence at the United Kingdom Government level? If this matter is not attended to, there will, I believe, be chaos in another place in the first Session after the Scottish and Welsh assemblies are set up.

Other questions arise which need to be addressed, the most important of which is electoral representation at Westminster as a result of the creation of assemblies; the future arrangements concerning the Callaghan formula for Scottish bloc finance upheld by successive governments; and the role of the Secretary of State for Scotland, who under any such scheme could sit in Cabinet as a Minister without portfolio.

I leave your Lordships with one last thought. No responsible government can be, or is likely to be, popular throughout their tenure of office. That is perfectly clear in history. Labour and Conservative Administrations have suffered equally in this regard.

Looking ahead to a scenario where perhaps a Labour Party, given its strength in the central belt of Scotland, controls a Scottish assembly, and (as is bound to happen at some stage) offends the feelings of the people—that is easily done—what then? Will the protest vote emerge to push the Scottish nation towards a separate Scottish state? The noble Lord, Lord Carmichael of Kelvingrove, does not think so. Alternatively, will the Unionist parties win through? Whichever way, it is a very considerable risk for the people of Scotland.

I hear the siren voices of Scottish businessmen being discounted by supporters of a Scottish assembly. I accept that the arrival of a Scottish assembly is unlikely to bring about immediate change—although it is a great risk. But the scenario which I have just painted will, I believe, bring with it an avalanche of change if there is even a threat of going down the road towards a separate Scotland.

As I said at the beginning of my speech, your Lordships' House is a forum for rational debate. As a businessman and a Scot who has worked all my life in Scotland, I believe in creating the climate where risk and reward can flourish. Scotland, in the industrial sense, is making sustained and steady progress. By inching in a

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well-meaning way towards a separate state, politicians could do long-term damage to our industrial and commercial future. I urge caution on all those who propose change.


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