I should like first to make some general observations.

—  the Honours system exists to reward meritorious service over and above that which is normal;

—  added value in paid employment may merit an Award but simply holding a specific position should never—of itself—do so;

—  no Award should be automatic or "come with the rations" or the system is devalued;

—  Awards should recognise outstanding contributions, self-sacrifice and generosity.

  Although these principles are sound they are difficult to deliver: for example, the fact of appointment to certain posts suggests merit that is likely to be recognised.

  Honours enrich our country and enable special achievement or service to be acknowledged by the Nation. Since levels of contribution differ, Awards need to be at graduated levels to reflect that. This gives rise to the difficulty of ensuring Awards reflect the level of achievement and not the status of the recipient. This must be a subjective judgement and illustrates why the awarding of Honours will always be an art not a science—and will sometimes be controversial.

  But the level of an Award is usually only a minor controversy. A greater controversy can arise over the justification for an Award. This arises generally on two fronts:

(a)

An Honour given as a response to a charitable or public donation. It is clear an Honour should not be "bought" or it cheapens the system. But it is right to consider all the charitable commitments (cash and kind) in making such a decision. This is a very difficult area which is why transparency and independent assessment is essential.

(b)

An Honour as recompense for a Political Donation. This is a charge that is easily made (and has been against all Parties) and hard to disprove. No-one should be excluded simply because they have made a political donation, any more than they should be included for having done so.

  The question that must be addressed in both the above instances is: would the candidate be credible without a donation? Upon that answer the decision can be made.

  Beyond that, the safeguard can only be rigorous scrutiny of nominees by the (Political) Honours Scrutiny Committee or, in the case of nomination to the House of Lords, the House of Lords Appointments Committee. To assuage suspicion, these bodies should be under an obligation to satisfy themselves that an Award was proper and not given for political donations.

  One area where the present system of nomination fails is that it operates too much on a "silo" basis and people whose service stretches across more than one area can often be overlooked. The problem is that none of their individual activities may reach the benchmark for an Award although their cumulative contribution may well do so. As a result they may fall through the net: this is unfair.

  I turn now to some of the specific questions being considered by the Committee.

  Does the United Kingdom need an Honours System at all? Do we need as many Honours as we have now (3,000 per year)? Could we make do with, say, 10 or 100 new Honours each year?

  The great bulk of Honours are MBEs for voluntary or community service. The change I introduced in 1993 increased this by bringing in all those who were formerly awarded BEMs (based on class distinctions). I believe it would be a great mistake to return to a narrow elitist system, which is what is implied by restricting numbers to 10 or 100 per year. That said, the numbers do need reviewing from time to time. Perhaps one should, for example, look at the balance between awards for different activities (eg state servants, private and voluntary sectors).

  What should be done about the Peerage in light of, among other developments, the present proposals to remove all Hereditary Peers from the House of Lords?

  The House of Lords performs a unique function that is qualitatively different from other Upper Chambers or Senates. Its unelected Members have traditionally been distinguished in their own field and, in the majority of cases, bring great experience and expertise to the revision of legislation. This has been generally true both of Party political and Cross Bench appointments. An elected Upper Chamber would not—indeed, could not—achieve this.

  Election to the Lords would change its character. It would, by definition, be far more Party political than the present House. Moreover, elected Members would be more democratically legitimate and, as a result, likely to challenge the Government more ferociously. If the intention is to create a pale reflection of the Commons, then election to the Lords is the right policy. The primacy of the Commons would no longer be unchallenged. If, as I do, one believes the Lords should retain its traditional role as a revising Chamber then it would be far better to retain appointed Members.

  If so, a number of questions arise. How should they be appointed, by whom and in what numbers?

  Should they be Peers or simply acknowledged by the letters "ML" to denote Member of the House of Lords?

  Should appointments be for a fixed period or for life?

  In answering these questions, the primary consideration must be the interests of the legislature. (Peerages are, strictly speaking, appointments to the legislature rather than an Honour.)

  The loss of (almost) all the hereditary peers removes the most independent element from the Lords. The hereditaries owed their membership to birth and not to preferment: they had no obligations, were Members for life, and could be wholly independent.

  That independence was valuable. That suggests Members should be appointed for life or, at the very least, for a lengthy period. At present, Peers can be appointed on political lists submitted by political Parties in a proportion determined by the Government; or by the Prime Minister alone—which is a new innovation; or by the House of Lords Appointments Committee.

  The idea of the Appointment Committee selecting Cross-Bench Peers is sound although the concept of "People's Peers"—which was a spin doctor presentation of their role—left them open to ridicule. The Committee however exists on the whim of the Prime Minister. It would be better if they were put on a statutory basis and the terms of reference approved by Parliament.

  I would suggest too, they be given authority to deal with a lacuna in the present appointments system. The Appointments Committee scrutinise nominees (or self-nominees) but have no power to propose other candidates—I believe they should have such a power. They could then look at gaps in the expertise available to the Lords and seek to fill them.

  I see no advantage in changing the present system of appointment provided there is satisfactory scrutiny of candidates. I would prefer too, to retain Peerages rather than denote Members as "ML".

  Independence is further protected through the membership of Cross-Bench Peers—typically, amongst others, from the Public Service, Universities, Law, Church and Armed Forces. Many of these Members may be irregular attendees but it is their presence that gives the Lords its unusual strength and character.

  One innovation may be worthwhile: to have "voting" and "non-voting" Peers. This would offer flexibility in retaining an equitable balance in membership between the political parties and would offer an option of dealing with the exigencies of extreme ill-health or age. A further advantage would be to enable additional "Cross-Bench" Peers to be appointed who may be very irregular attendees but would be invaluable contributors to debate or specialist Committees.

  Is the award of Honours bound to be subjective—"an art rather than a science" as the Wilson Review puts it?

  I believe so; moreover, trying to make it a science would lead to automaticity which is undesirable.

  What role should be played in the Honours System by peer groups, professional, business and trade union bodies and academic institutions? Should they be asked to provide, monitor and keep up to date the criteria used in recommending candidates for Honours?

  They do, of course, have a right to nominate candidates. But it would be most undesirable if specific bodies had either an absolute or partial veto over recommendations. That said, the views of peer groups are important in identifying merit for dispassionate adjudication.

  What would be the advantages and disadvantages of restricting Honours to those who do voluntary work, either full-time or part-time?

  The voluntary sector was under-recognised for many years. That is why, in 1993, I instituted reforms to "take greater account of the desirability of recognising work in the voluntary sector and service to the community."

  Nonetheless, it would be a nonsense to restrict Honours just to those who do voluntary work. It must be right to recognise exceptional contributions from every field of endeavour.

  The Wilson Review proposes that "in the interests of equity there should be equal access to Honours for all UK citizens". How could this be best achieved?

  As Prime Minister, I tried to address this by opening up nominations by members of the public—but this is only a partial answer. We need also to address issues such as diversity, and the present over-representation of state servants and under-representation of minorities.

  Are the title, and the concept, of an "Order of the British Empire" now outdated, as the Wilson Review suggests? If this is the case, what should replace the old Order—the Order of Britain, the Order of the United Kingdom or some other name? Should titles such as "Dame" and "Sir", "Lord", "Lady", "Baron" etc be abolished?

  I was asked this question by the late John Smith in 1993 and set out a response that I would now qualify.

  I said then:

"His specific questions included, first, why we should retain the title of the `British Empire'. I accept that it is resonant of a previous era, but it has an historical pedigree, is respected and familiar, and I see no advantage or purpose in changing it. I believe that it is more important to review the criteria and eligibility for Awards than to seek new names for them. There is also the practical point that the Order of the British Empire is still in use in a number of Commonwealth countries."

  Although that argument still has force I believe it is now out of date. In order to remove one of the persistent criticisms of the system, I would now be inclined to propose an "Order of British Excellence" with Awards at the level of Companion (ie CBE), Order (OBE) and Member (MBE). This is minimum change for maximum effect. It retains the familiar abbreviations whilst removing reference to an Empire that no longer exists. It does have an awkwardness with Northern Ireland, but no more so than now.

  I see no advantage in abolishing titles such as "Dame" or "Sir". They are identifiably British, acknowledge special achievement, do no harm and much good. Their abolition would simply move towards a drab conformity.

  Is it appropriate that Privy Counsellors should continue to be given the prefix "Right Honourable"?

  I declare an interest but, that noted, I would maintain this tradition.

  Some countries have considered creating single categories of Honours, with no divisions into classes or ranks. Would this be a helpful move, or is it inevitable that, to reflect different levels of achievement and contribution, various levels of Honour are required?

  The experience of other countries is relevant. I recall that Canada tried a single level of Award in 1967 but went back to a three-level Award five years later. Australia and New Zealand have multi-level Awards. So should we.

  What are the effects, if any, of the Honours System on public administration in the UK? Is it a motivating or a demotivating force?

  I can't see how it could possibly be a demotivating force. But I doubt it is the motivating force that is sometimes claimed.

  Is it fair that civil servants, diplomats and those in the armed forces have a much better chance of getting an Honour than other people?

  The historical background to this anomaly is that these Honours are given in the name of the Sovereign and thus, a disproportionate number have gone to those in the service of the Crown. However, this explanation is not a justification.

  One option for the future would be to abolish the special Orders only available to civil servants, military etc (eg Order of the Bath) or to severely cut them back so that Awards are proportionate in number to those offered to other groups.

  I would retain Gallantry Awards and Awards in the personal gift of The Monarch.

  Is there an inevitable conflict of interest when civil servants are the main judges in assessing whether other civil servants receive Honours?

  Assessment for one purpose or another is a routine part of business and civil service life. I am sure the assessment is dispassionate but, not least for perception, I believe there should be greater independent scrutiny of awards to civil servants.

  Should there be an increase in the number of independent outsiders who sit on the Honours Committees? Should the committees be made 100% independent, perhaps by banning all members of such committees from ever receiving an Honour?

  I would welcome a larger number of independent members. But I do not agree that banning members "from ever receiving an Honour" makes any sense. Firstly, it is discriminatory: if someone performs exceptional service, they should be recognised. Second, I know of no reason to suppose that members of Honours Committees have been favoured in the award of Honours.

  An allied question is whether the membership of Honours Committees should be made public. Openness and transparency suggest they should but I would caution against it. In Government, I was shocked at the extent to which a minority of people were prepared to lobby for Honours and, in some cases, at the extent to which they became disaffected if their petition was ignored. Neither the Committee—nor anyone else—should be exposed to such pressure.

  Should people who serve the State and the public well in paid employment be recognised by higher pay rather than the award of Honours?

  An Honour should not be seen as a substitute for low pay. But it is right that those who make an outstanding contribution as State Servants should be eligible for Honours in the same way as everyone else.

  Is the general public aware of the Honours System and the part they could play in it through nominations?

  I'm sure more could be done to promote and publicise this, although my reforms of 1993 have brought about a great increase in Awards resulting from nominations by the public.

  How should awareness of the system be raised?

  Other countries have some sort of emblem that can be worn with ordinary clothes to indicate the award of an Honour. The French have coloured threads sewn into lapels. The Australians have small lapel pins. At the moment, UK Honours can only be displayed when wearing the sort of formal dress that 99.9% of recipients never do. I believe a system that enabled people in ordinary dress to display with pride that they've been the recipient of an Honour would help raise awareness.