Commons Sitting of 5 June 2000

Preamble
The House met at half-past Two o'clock
PRAYERS
[MADAM SPEAKER in the Chair]
Oral Answers to Questions
  DEFENCE
  The Secretary of State was asked?—

  Decommissioning (Warships and Submarines)
  Mr. Gordon Prentice: What his policy is on the decommissioning of warships and submarines that were built less than 20 years ago. [122639]
  The Minister for the Armed Forces (Mr. John Spellar): The life of each vessel is planned carefully at the design and procurement stage, but requirements change over the course of a ship's life and we must maintain an affordable front-line capability to meet the current and predicted strategic requirements.
  Mr. Prentice: Jane's Fighting Ships is not my usual reading, but I found it worrying that the editor of that august manual fired a broadside at the Government, saying that we were flogging off at a knock-down price ships that were perfectly serviceable and were commissioned only 12 or 13 years ago. More worryingly—I cannot believe that this is true—he said that, in the lifetime of the Government,
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  we have failed to order a single warship for construction. I am interested to hear what my hon. Friend the Minister has to say about that.
  Mr. Spellar: During the strategic defence review, it was clear that the requirement for major surface vessels had altered. As a result, six older and, more importantly, less capable vessels were to be replaced by three type 23 frigates. One of the reasons for the delay is that, under the previous Administration—as we and others pointed out at considerable length—the Horizon project was in considerable difficulty. We had to terminate that project and move to the capable type 45, for which we have already awarded the design contract and look forward to awarding the manufacturing contract later this year.
  Mr. Iain Duncan Smith: In 1997, the previous Government left one of the youngest naval fleets that had been available to the Navy since the war; frigates and destroyers at 35 and submarines at 15. Now, we have 27 frigates and destroyers and 10 submarines available to the Navy. The hon. Member for Pendle (Mr. Prentice) referred to the early sell-off of certain ships—"early sell-off" being the key phrase. What new orders for warships have the Government placed since they have been in power?
  Mr. Spellar: It is interesting that the hon. Gentleman has not responded to the point that I made. I will happily quote from the editorial of Jane's Fighting Ships, to which my hon. Friend the Member for Pendle (Mr. Prentice) referred. It stated that the UK
  has finally withdrawn from the always ill-conceived air defence destroyer project with France and Italy, and a new national design has a prime contractor ߪ The hidden cost of a decade—
  I wonder who was in power during that decade—
  of the wrong sort of collaboration lies in the prolonged delays of introducing a modern capability in this most vital of all warfare disciplines.
  That is why the projects are delayed and why we are awarding the design contract. That is why, later this year, we will award the first-of-class contract for the type 45

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  and why we have already awarded the design contracts for the two new aircraft carriers which the hon. Gentleman and his Government did not think to order either.
  Mr. Duncan Smith: We have now had the usual from the Government, which is no answer. I asked a simple question: how many new orders have they placed? As Captain Richard Sharpe, the editor of Jane's Fighting Ships, has said, this represents
  the biggest gap since the days of Henry VIII.
  That is the condemnation of the Government. Given that we are to have fewer ships with less capability—in addition to seamen saying "Bang!" instead of firing real bullets—will the Minister tell us why, at the height of the Kosovo war and with all their cuts planned for the Navy, the Government reduced the budget for the fuel allocation to the fleet by one third?
  Mr. Spellar: The hon. Gentleman may not have noticed that fuel prices were moving at that time. I am surprised that he describes the fleet as less capable, particularly following the fitting of Tomahawk cruise missiles to all British nuclear-powered fleet submarines, which demonstrated their extreme capability during the Kosovo war. I am surprised also that he describes the type 45 as less capable. The previous Government left us with a considerable mess with a project that had been hanging on and which they refused to terminate. This Government had the courage to terminate that agreement with the hon. Gentleman's European allies. As a result, we have now ordered the type 45. The Conservatives left us with a mess, and it is extraordinary that they come here and pontificate in this way.

  Defence Diversification
  Mr. Malcolm Savidge: What progress the Government have made in promoting defence diversification. [122640]
  Laura Moffatt: What progress the Government have made in promoting defence diversification. [122641]
  The Parliamentary Under-Secretary of State for Defence (Dr. Lewis Moonie): We set up the Defence Diversification Agency last year, with a permanent director appointed last summer. The agency is already making a substantial contribution to the transfer of technological know-how between the Ministry of Defence and small to medium-sized businesses. With seven offices already established across the country, and with a further seven to follow later this year, the agency has already handled about 300 company inquiries.
  Mr. Savidge: Apart from the existing Defence Diversification Agency offices in Rosyth, are there any plans to open more offices in Scotland? To what extent is the agency's objective not merely to seek profitable civil spin-offs from military production but to expand our civil production base?
  Dr. Moonie: I am very pleased to be able to inform my hon. Friend that it is our intention to open an office of the DDA in Glasgow before the end of the year, as part of the next phase.
  Mr. Menzies Campbell: Surprise, surprise.
  Dr. Moonie: Indeed.
  Civil spin-offs are a major priority for defence diversification, with a view to securing as much additionality as possible from our defence military production and research.
  Laura Moffatt: As my hon. Friend has already mentioned, small businesses are the most likely to be able to take advantage of technology transfer and to use the Defence Diversification Agency for research. That must certainly be the case in my constituency. What is he doing to target those businesses and ensure that they can take full advantage of the opportunities available?
  Dr. Moonie: We have quite a few initiatives in progress that will be of direct benefit to small businesses. For example, a couple of weeks ago I was fortunate enough to speak at a seminar on opportunities in defence for small and medium-sized companies; we are encouraging secondments from the defence industry to the DDA; we conduct technological roadshows and exhibitions; and business support partnerships have been established, connecting to Business Links, Scottish Enterprise and similar agencies in Northern Ireland and Wales, working in partnership with existing business support networks and initiatives. We believe that an effective working partnership with intermediary business support networks is critical to the success of the Defence Diversification Agency.
  Mr. Edward Leigh: So what is the answer to the question put by my hon. Friend the Member for Chingford and Woodford Green (Mr. Duncan Smith)? Is it true that no ships have been ordered and that sailors now shout "Bang!" instead of using live rounds? Is the idea of the Government's diversification programme to replace offensive weapons with offensive language?
  Dr. Moonie: You will be well aware, Madam Speaker, that I never use offensive language, especially in the House.
  I am very much afraid that I shall have to disappoint the hon. Gentleman. I can add nothing to the full reply that my hon. Friend the Minister for the Armed Forces gave some moments ago.
  Mr. David Heath: Given the enormous importance of the defence industry to the west country and our disproportionate exposure to the sector,

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  how many times have the Minister or his colleagues met representatives of the South-West regional development agency to discuss diversification?
  Dr. Moonie: I have absolutely no idea what my hon. Friends have done, but I have not yet had the opportunity to hold such meetings. Were I to receive an invitation, I would be very happy to meet those people and discuss our plans.
  Mr. Michael Fallon: Can the Minister reassure the House that any proposals for diversification are better thought out than the plans to diversify the Defence Evaluation and Research Agency, which have caused so much uncertainty and hostility among those who work for it, such as the people at Fort Halstead in my constituency? How can the Government be so sure that exactly three quarters of the staff will be diversified to the private sector yet be so hazy on all the details?
  Dr. Moonie: One of the problems with conducting a process openly is that it leads to certain doubts and discussions about what one's plans are and what the results are likely to be. This is a complex process. Of course, the figure of 75 per cent. is an approximate one, but we believe that that proportional split between those to be retained in the agency and those to be privatised is approximately correct, and we will introduce plans to put it into effect later this year.

  RAF Fylingdales
  Mr. Norman Baker: If he will make a statement about the purpose of RAF Fylingdales. [122642]
  The Secretary of State for Defence (Mr. Geoffrey Hoon): RAF Fylingdales provides the United Kingdom with early warning of potential ballistic missile attack against the United Kingdom and western Europe, and the United States with early warning for north America. It has performed that function since 1963.
  Mr. Baker: Does the Minister agree that many people believe it to be foolish and dangerous to allow RAF Fylingdales to be used to make the UK a sitting target by basing a national missile defence system there that will protect US but not UK airspace? Why does he say that the anti-ballistic missile treaty is solely a matter for the parties who have signed it? If UK land is to be used to break that treaty, surely it is a matter for him. Will he confirm that the decision to allow the deployment of the national missile defence system at Fylingdales is a matter for him, and not for the US Government? Will he rule out that deployment today? If not, will he give us a date when the decision will be taken?
  Mr. Hoon: The hon. Gentleman makes a considerable number of points, some of which, I regret to have to tell him, are quite wrong. I will not go through them in detail, save to say that, clearly, if two parties are signatories to a treaty, it is for them, and not any other nation, to interpret it. He is right to this extent: it is for the United Kingdom to decide what should happen at RAF Fylingdales. As yet, there has been no specific request for
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  the use of those facilities from the US, not least because it has made no decision about whether to deploy national missile defence.
  Miss Anne McIntosh: Will the Secretary of State confirm that, if such a request is made, RAF Fylingdales will have to be upgraded to perform that role?
  Mr. Hoon: If such a decision were made by the President of the United States and if, as a result of that decision, a request were made to the United Kingdom for the use of RAF Fylingdales, yes, the facilities would have to be upgraded.

  Battalion Duty
  Mr. Crispin Blunt: How many men were at battalion duty on 15 May with (a) 1 Para, (b) 2 Para and (c) 3 Para. [122643]
  The Minister for the Armed Forces (Mr. John Spellar): The trained strengths of 1 Para, 2 Para and 3 Para as at 1 April 2000—the latest date for which figures are available—were 584, 551 and 620 respectively. These figures are for UK trained army personnel only and include attached arms.
  Mr. Blunt: I take it that that answer does not reflect the deployment to Sierra Leone, which I asked about in a question on 15 May, or the fact that more than a company of the 2nd Battalion, Parachute Regiment, had to reinforce the 1st Battalion, Parachute Regiment, in Sierra Leone. That reflects the woeful state of understrength infantry battalions, not just in the Parachute Regiment but across the board. What does the Minister expect the undermanning to be in the Scottish Division in six months' time? Will he undertake not to try to blame the previous Conservative Government, because Labour has now been in office for more than three years, which is longer than a soldier's standard engagement?
  Mr. Spellar: I am more than happy to blame the Conservative Government, and will continue to do so, for leaving us a deficit of more than 5,000 in the Army. We have had to add 3,000 additional posts to fulfil the strategic defence review and our assessment of the requirement. The total trained strength of the three regular Parachute Battalions is 1,755, and that is 153 higher than at the same time last year. I shall announce later, in answer to other questions, the increase in the Army overall. However, we are not complacent. We are pleased by the levels of recruitment, especially at a time—thanks to the policies of my right hon. Friend the Chancellor of the Exchequer—of record employment. We are considering the issue of retention and we have made some improvements, but we can go much further.
  Mr. Denis MacShane: After the Americans had to scuttle out of Somalia and the French left Brazzaville to burn, is not it a matter of some pride that British paratroopers can go in and restore order in Sierra Leone, working with the United Nations? Is not it a matter of some shame that all the Conservatives can do, having left the Army grievously undermanned for this Government to put right, is to undermine the Army in

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  every way with constant criticisms of what our men are achieving abroad for the Government and for the international community?
  Mr. Spellar: I thank my hon. Friend for that question. In spite of the Opposition's earlier performance, they have improved a little recently, probably in response to the spectacular success of our armed forces and the great national pride that is taken in their performance. As my hon. Friend knows, the Parachute Regiment has returned to the timetable that we initially announced and its job is now being performed, equally professionally, by the Marines. We are proud of them and, in our discussions with our international counterparts, we have learned that they have been impressed by the speed with which our forces reacted and the professionalism with which they perform their jobs.
  Mr. Gerald Howarth: I am glad that the Minister had the opportunity to visit the 1st Battalion, Parachute Regiment, on Thursday morning and to take breakfast with it to congratulate the men on their magnificent achievements in Sierra Leone. I am only sorry that he was not able to inform me in advance, because I would have been happy to have joined him in that trip to my constituency. The Minister will know, from his close connections with that regiment, of the enormous pride that it has, so it is unfortunate that, as my hon. Friend the Member for Reigate (Mr. Blunt) pointed out, the 1st Battalion recently had to be reinforced. I understand that a Gurkha company is also with the Paras. Does the Minister agree that it would be advisable, and beneficial to the Government, if the Parachute Regiment could be brought up to full strength?
  Mr. Spellar: Certainly, the Parachute Regiment is working on that. As the hon. Gentleman knows, there are always more applicants than there are places available, and the training regime is extremely rigorous. When I spoke to officers of the regiment on Saturday, I was pleased to see the work being done to rectify the problem.
  I am sorry that the hon. Gentleman was unable to get a free breakfast on Saturday, and I apologise for the fact that my officials did not notify him of my visit. However, given the speed of the withdrawal of our troops from Freetown, he will understand that the timing of my visit was slightly uncertain until the last moment.
  The hon. Gentleman is right about the skills of the Parachute Regiment. I only wish that he would not overlay the constructive points that he makes with so much carping criticism. Members of the Parachute Regiment are enormously, and justifiably, proud of the role that they played in the crisis.

  KFOR
  Mr. Gordon Marsden: What logistical support his Department is continuing to offer KFOR in Kosovo. [122644]
  The Minister for the Armed Forces (Mr. John Spellar): We have some 650 personnel deployed to provide support for our own forces, including logistic, medical and equipment specialists.
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  In addition, we are providing the commanding officer for KFOR in Macedonia, we are responsible for operations at the airport near Pristina, and we are assisting KFOR with the movement of its personnel and equipment within Kosovo.
  Mr. Marsden: I thank my hon. Friend for that answer. It underlines the nation's great pride in the success of British troops in KFOR in maintaining an even-handed approach in Pristina and in apprehending war criminals in the area. However, does he agree that one of the problems during the conflict was the lack of surveillance and intelligence information on the ground? Will he therefore look at improving our reconnaissance and surveillance capacity as a matter of urgency? That is important, given the local elections to be held in Kosovo in the autumn and the fact that, as is reported in today's edition of The Guardian, moderate Serb leaders have already asked European officials to beef up anti-terrorism measures in Kosovo.
  Mr. Spellar: It is certainly a matter of some pride that the upsurge of insurgency in the Presevo valley has been dealt with very well by allied forces there. My hon. Friend is right to draw attention to the need to support and assess information. We have deployed Phoenix to the area to conduct observation for that reason, and the Astor programme, which the Government have ordered, in due course will enhance enormously our capability in that respect.
  Mr. Menzies Campbell: May I commend the Government on their exercise of open government with regard to today's publication of the report entitled "Kosovo: Lessons from the Crisis"? Is it not clear that many of the shortcomings identified in the report result from systematic reductions in the defence budget dating from about 1989? In truth, when the then Conservative Government made the proposals, neither Labour nor Liberal Democrat Members sought vehemently to oppose them. However, if we are to have an expeditionary strategy and assert the moral obligation to intervene on humanitarian grounds, is it not clear that we must be able to intervene in the first instance with sufficient capability? Also, must not we be able to sustain the forces that we deploy so that they can cope with what, inevitably in some cases, will be a long haul? As long as the shadow of the Chancellor continues to threaten the Ministry of Defence budget, how do the Government think that they will achieve that?
  Mr. Spellar: I am always in favour of pleas from Opposition Members for additional funding, but the right hon. and learned Gentleman's analysis closely resembles that of the strategic defence review. The effectiveness of the SDR was demonstrated clearly in Kosovo, where we were able to respond rapidly. We have also managed to sustain that operation with forces in Bosnia and Kosovo, and they are doing a tremendous job extremely professionally.
  With reference to an earlier question, I should like to point out that, at the same time as running those operations, we were able to intervene in Sierra Leone with spectacular speed—more rapidly, I believe, than almost any other country in the world. Obviously, we need to enhance that capability, which is precisely why my right

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  hon. Friend the Secretary of State has announced the heavy-lift programme, which will start with leasing four C-17 aircraft and include the A400M. Naturally, a programme of that size will have been agreed with the Chancellor and the Treasury. That demonstrates the commitment of all Departments to the implementation of the SDR.
  Mrs. Alice Mahon: Is the Minister aware that German soldiers in Kosovo have been told not to eat local produce after fears that deposits of uranium from NATO's use of depleted uranium might have contaminated the soil? Similarly, there have been reports that the United Nations has warned its officials that the water supply could be contaminated. What warnings have been given to the civilian population and to British troops serving there?
  Mr. Spellar: I have had no indication of any of that. The problems of water supplies are more to do with traditional pollution, which is why our forces have substantial supplies of bottled water. The argument about depleted uranium seems to have been greatly exaggerated. As for pollution, the United Nations investigation demonstrated that most of the problems stemmed from before the military engagement in Kosovo, and are down to the reprehensible policies of the Milosevic regime.
  Mr. Robert Key: Progress in Kosovo for both the military and the civilian populations continues to be hindered by the danger from unexploded ordnance. I understand that there have been 100 deaths and 400 other casualties as a result, many of them, regrettably, from unexploded allied cluster bombs. However, 40 per cent, of the area at risk has still not been cordoned off. Given the Government's commitment to humanitarian de-mining, why did NATO not co-operate with the United Nations mine action co-ordination centre in Pristina, when last August it asked for help in locating cluster bomb drops? Why did Kofi Annan have to write last month begging Lord Robertson for help? Why, after all this time, have only 4 per cent, of the minefields in Bosnia been cleared?
  Mr. Spellar: I should have thought that the hon. Gentleman would be congratulating our forces which, as a priority on entering Kosovo, cleared many public buildings, notably schools, so that some 90 per cent. of children were able to get into their schools. I should have thought that extremely important.
  In Kosovo, we are undertaking, as we do in all countries with similar problems, a lot of work in alerting people—not just our own troops, allied personnel and non-governmental organisations, but the local population—to the dangers of unexploded ordnance. Our troops are also working with local organisations to deal with clearing them. It is a major job, as we have found in all such countries. Indeed, as we all know, even today we are still finding unexploded ordnance in this country. We should recognise the considerable work that has been undertaken to enable Kosovo to return to a degree of normality, rather than simply carp about what still requires to be done.

  Army Strength
  Mr. Owen Paterson: What the current strength is of the Army. [122646]
  The Minister for the Armed Forces (Mr. John Spellar): The current strength of United Kingdom trained Army personnel as at 1 April 2000—the latest figures available—is 96,475, an increase of some 175 since 1 April 1999.
  Mr. Paterson: That answer does not tell us what the adjutant-general told the Select Committee on Defence—that it will take 31 years to reach the target set by the strategic defence review. Will the Minister tell us three practical measures that he has taken that will accelerate this woeful progress?
  Mr. Spellar: Yes, I can tell the hon. Gentleman of more than three practical measures. Let me say first, however, that an increase of 175 is a considerable improvement on previous figures, when there has been a steady run-down of forces numbers. That increase is a movement in the right direction.
  Rightly, we are looking at the problems of retention. Many of those are down to communication with families. That is particularly the case in a time of full employment when other options are available. That is why we increased the time that can be taken to make telephone calls from three to 20 minutes a week. However, there is no point in having additional time if the telephones are not of an adequate quality. That is why we have introduced Project Welcome, which is of enormous benefit to our troops. When I was in Kosovo last week, the improvements were widely recognised. Similarly, in Sierra Leone we responded within two weeks.
  Secondly, there is an increase in leave at the end of an operational tour so that personnel can spend more time with their families. There is also the bonus for those who have been on an extended operational tour. We have seen the introduction of e-mail—[Interruption.] It is interesting that Conservative Members can sit comfortably in the Chamber and be dismissive of improving communications between our service men and women and their families. That will be noted. Our troops work in difficult conditions and do a tremendous job, and Conservative Members could not give a damn.
  Mr. Andrew Miller: My hon. Friend will recall that the Cheshire Regiment was one of the first to go into Bosnia some years ago. At the same time, the Staffordshire Regiment was located in the Dale Army camp in Cheshire. This situation brought to my attention a number of issues that my hon. Friend has raised, and especially the provision of telephones. I am pleased that that particular issue has been addressed.
  The interesting feature in terms of the Staffordshire Regiment was the lack of support that the Army was then receiving in dealing with social problems—for example, children's special requirements. Will my hon. Friend assure me that he is taking action to ensure that there is

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  proper co-ordination so that the social support that Army families are entitled to receive will be available to them, unlike the provision under the previous Administration?
  Mr. Spellar: As I have reported previously, there has been a considerable improvement in a number of areas that have been raised by the Army Families Federation so that we might improve conditions in the United Kingdom and those that apply to overseas postings, especially where the peculiar nature of service life and the demands that we put on service personnel and their families lead to their being disadvantaged when compared with the rest of the community. The feedback is that these improvements are having a considerable impact and beneficial effects on family life for service personnel.
  We recognise that, with our increasingly expeditionary armed forces, television, telephones and e-mail—all of which the Opposition dismiss in their comfort—matter considerably to personnel. These facilities contribute very much to the greater welfare of our forces as part of the welfare package.
  Mr. Edward Garnier: One of the consequences of the historic reduction in the size of the Army is that the Ministry of Defence has been able to dispense with and sell both land and property. One such example in my constituency is the town of South Wigston, where the Ministry, through Defence Estates, is getting rid of some real estate. However, before the contract has been completed, the residential developer has moved on to the site and is destroying trees and woods, for example, much to my concern and that of my constituents. Will the Minister please look into this matter to ensure that the developer is not doing what he should not before he has proper possession of the land? I do not expect the hon. Gentleman to give me a detailed answer now, but I would be most grateful if he wrote to me quickly.
  Mr. Spellar rose—
  Madam Speaker: Order. That question hardly relates to the original Question. Minister, I am sure that you will give not an answer but a commitment to consider the matter. Is that right?
  Mr. Spellar: How Neanderthal are Conservative Members? They have not even heard of e-mail. It would have been helpful to have notice of the supplementary question of the hon. and learned Member for Harborough (Mr. Gamier). However, my hon. Friend the Under-Secretary, who deals with Defence Estates, has taken note of the question. If the hon. and learned Gentleman will provide him with details, my hon. Friend will be more than pleased to take up the matter.

  Nuclear Weapons Proliferation
  Mr. Desmond Swayne: What assessment he has made of the potential threat posed by the proliferation of nuclear weapons. [122647]
  The Secretary of State for Defence (Mr. Geoffrey Hoon): We assess that there is no significant threat to the UK from nuclear weapons at present, but developments continue to be monitored closely. We remain committed
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  to limiting the proliferation of nuclear weapons through our international treaty obligations and national programmes.
  Mr. Swayne: Despite the Secretary of State's assessment of the threat, does he agree that our best deterrent against the aggressive use of nuclear weapons remains our nuclear capability? If so, how does that sit with the policy, to which the Foreign Office has signed up, of a nuclear-free world? Would the Foreign Office policy have delivered the successful conclusion of the cold war?
  Mr. Hoon: I agree, perhaps surprisingly, with the hon. Gentleman's first proposition, but the non-proliferation treaty agreement—the process towards which we conducted negotiations on behalf of the entire Government and into which previous Governments, including the Government that he no doubt supported, entered—is an aspiration; it is not likely to produce results in the short term. Nevertheless, I hope that the entire House would welcome circumstances in which the world was rid of nuclear weapons.
  Ann Clwyd: How concerned is my right hon. Friend, therefore, by reports, chiefly from Richard Butler, the former head of UNSCOM in Iraq, that Saddam Hussein may be starting to rebuild his arsenal of chemical, biological and nuclear weapons?
  Mr. Hoon: The Government are concerned about that, which is why we, together with our allies, have spent so much time trying to achieve an international situation in which Iraq accepts the paramount importance of permitting the inspection of facilities inside Iraq as a means of restoring Iraq to the international community. We have made it clear that an effective inspection regime is a prerequisite of any such restoration.
  Mr. Dafydd Wigley: On what possible moral basis can we argue against the proliferation of nuclear weapons, when we insist on having them ourselves? If the Secretary of State believes in a nuclear-free world, should not the Government give a lead in that direction, as his own leader advocated in the 1980s, when the situation was much more dangerous?
  Mr. Hoon: In the strategic defence review, we carefully set out the importance of nuclear weapons to the United Kingdom, as long as other countries retain them. Nothing has changed in the interim, but in New York the Government, together with other Governments such as that of the United States, recognised that, as an aspiration in a civilised world, it would be sensible—if we could achieve it—to rid the entire world of nuclear weapons.

  Royal Navy Auxiliary Vessels
  Mr. Ben Chapman: When he will announce decisions on orders for auxiliary vessels for the Royal Navy. [1226491
  The Parliamentary Under-Secretary of State for Defence (Dr. Lewis Moonie): An invitation to tender was issued to five UK companies in early April to bid for the contract to supply two alternative landing ships logistic,

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  which will support amphibious operations by carrying troops and their equipment into theatre. We expect to place the contract before the end of this year. In addition, we hope to announce a decision on the provision of a strategic sealift service later this year
  Mr. Chapman: Is my hon. Friend aware that some yards, including Cammell Laird, felt obliged to withdraw from the tendering process for the ALSLs because they thought that the points system did not allow them to compete fairly? Is he satisfied that the tendering process was fair and right? Is he also satisfied that the tendering process for the ro-ro vessels will be equally fair and right, that it will give UK yards every chance to bid successfully for those vessels, and that it will do so equitably between the yards?
  Dr. Moonie: I can confirm that our tendering process is fair and right. It is always disappointing when companies feel unable to remain in the process, but we cannot as a rule devise our specifications on that basis. With regard to roll on/roll off ferries, I confirm that no decision has yet been taken on who will be awarded the contract, and bids from the four consortiums involved are still being assessed by the Ministry of Defence. As my right hon. Friend has already announced, the intention is to place the contract later this year.
  Mr. Nicholas Soames: Is the hon. Gentleman entirely satisfied with the process used by the Ministry of Defence for the tendering for and the procurement of vessels for the hydrographer's department? Will he examine the process, and let me know whether he believes that it was thorough and entirely fair not only to the yards that tendered, but to the owners who wanted to become involved?
  Dr. Moonie: So far as I know, that is the case—but I shall happily consider the matter and write to the hon. Gentleman.
  Mr. Quentin Davies: Can the hon. Gentleman give an example of any other EU or NATO country that has placed orders for naval vessels, naval auxiliary vessels or roll on/roll off ferries with military application—if he can find such an example—other than with their own shipyards?
  Dr. Moonie: It appears that the pro-European member of the Opposition Front-Bench team has caught the disease from the shadow Secretary of State; every time he stands up, he is becoming more anti-European by degrees. I confirm that all ships with a military application are sourced in this country; those without are subjected—as is correct—to the EC tendering process.

  Sierra Leone
  Mr. David Ruffley: What recent representations he has received regarding deployment of United Kingdom armed forces in Sierra Leone. [122650]
  The Secretary of State for Defence (Mr. Geoffrey Hoon): I have received a number of representations from a variety of sources, including right hon. and hon. Members,
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  regarding the deployment of our armed forces in Sierra Leone. I am sure that the House will want to join me in sending congratulations to those members of the forces who have been and continue to be deployed in Sierra Leone, on the skill and professionalism they have shown.
  Mr. Ruffley: I am sure the House will concur with the Secretary of State's views on the excellent job that our service men and women are doing in Sierra Leone.
  Can he tell us how many serving British soldiers are in Sierra Leone at present? Does he believe that he will be able to pull them out by Christmas?
  Mr. Hoon: There are up to 4,000 British forces in and around Sierra Leone—not all of them are deployed on the ground; a number are in ships offshore. I make it clear to the hon. Gentleman that we remain absolutely committed to our timetable for withdrawing the bulk of UK forces currently in Sierra Leone by mid-June.
  Mr. Martin Bell: May I take this opportunity to pay tribute to Kurt Schork? He was a brave and brilliant writer-journalist who was ambushed and killed in Sierra Leone two weeks ago, and his death causes me to wonder whether the Secretary of State is satisfied with the idea that a substantial contingent of troops are out there without any significant armour to protect them.
  Mr. Hoon: I am confident—relying on the military advice that I have received—that the forces deployed in Sierra Leone are appropriate for the job that has been undertaken, and that they continue to undertake.
  Mr. Iain Duncan Smith: Given the nature of recent speculation about changes to the profile of British armed forces in Sierra Leone—especially the idea that 300 Royal Anglians may find themselves substituting in the role currently being undertaken by the Marines—will the Secretary of State take this opportunity categorically to deny that any such deployment is being considered? Does the plan for withdrawal remain that, hopefully—give or take one or two slight problems—the Government will withdraw British troops by mid-June?
  Mr. Hoon: I make it clear, as I did in answer to the substantive question, that we remain absolutely committed to the timetable of withdrawing the bulk of UK forces by the middle of June.
  However, we have always made clear to the Government of Sierra Leone our commitment to training in that country. As long ago as 27 March, the Prime Minister announced longer-term assistance to the Government of Sierra Leone in the form of a UK-led international military advisory and training team. Ultimately, we expect that that training team will consist of about 90 people, with the UK providing half the total. To ensure that the training team gets under way effectively, we are considering deploying a team from the UK for about six weeks from the middle of June. However, I make it clear to the hon. Gentleman that it will not substitute for the Marines in any way; it will provide training.
  Mr. John Swinney: After the Secretary of State's most recent statement to the House

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  on Sierra Leone, has he given any further consideration to the way in which arms can be provided to the Sierra Leone Government without jeopardising matters or intensifying the conflict?
  Mr. Hoon: Further to the answer that I have already given, we have for some time been concerned about the lack of effective training available to the armed forces of the Government of Sierra Leone. It thus follows that, in providing training, we believe it appropriate that those trained troops should have access to weapons. I announced that decision to the House about two weeks ago. If we are providing effective training, it seems sensible that those forces should have weapons to accompany it.

  Smart Procurement
  Mr. Brian Jenkins: What savings have been identified as a result of the smart procurement initiative. [122651]
  The Parliamentary Under-Secretary of State for Defence (Dr. Lewis Moonie): As part of the strategic defence review, we set ourselves a target of saving £2 billion on equipment procurement expenditure over the 10 years to 2007–08 through the introduction of smart procurement. We are on track to achieve that target in that the sum of cost reductions identified and made in successive planning rounds is approaching the £2 billion mark, and, as my right hon. Friend the Secretary of State's announcement last month about the strategic air lift and future missile for the Eurofighter aptly demonstrates, we are delivering the programme set out in the strategic defence review.
  Mr. Jenkins: I thank my hon. Friend for that answer. However, is he aware that, according to the National Audit Office, the Government inherited a cost overrun of £3 billion and a three-year delay in the Ministry of Defence's 25 most expensive projects? When he considers the strategic defence review and present commitments, will he undertake to the country and to our defence services that he will take no advice from the Conservative party, which proved itself incapable of handling the defence finances of this country?
  Dr. Moonie: I share my hon. Friend's shock and dismay at the incompetence of the previous Administration, of which he has given us another dismal example. I certainly agree with him that smart procurement will deliver real savings while preserving our capacity to meet the challenging targets of the strategic defence review.
  Madam Speaker: I call Mr. Bercow.
  Mr. John Bercow: Question 16, Madam Speaker.
  Madam Speaker: I was calling the hon. Gentleman on question 13. I shall call the hon. Member for Lichfield (Mr. Fabricant) instead.
  Mr. Michael Fabricant: Thank you, Madam Speaker. Given that the F22 fighter in the
  16
  United States, which is similar to the Eurofighter, has had to be equipped with a cannon, surely it is not very smart not to fit a gun to the Eurofighter.
  Dr. Moonie: All such decisions are taken on the basis of advice from the armed forces concerned. I agree with you, Madam Speaker, in that I, too, find it difficult to distinguish between those two hon. Gentlemen.
  Madam Speaker: I do not, actually.

  Former Yugoslavia
  Mr. Dale Campbell-Savours: What contribution UK forces are making to security in former Yugoslavia. [122652]
  The Minister for the Armed Forces (Mr. John Spellar): We, together with our partner nations participating in the KFOR mission in Kosovo, face a challenging security situation. Ethnic intimidation and violence continue, albeit often orchestrated by a small number of extremists without the support of the majority of the population. However, British forces, along with our allies and partners in KFOR, are making a major contribution to solving those problems and the security situation is improving. British forces undertake a wide range of tasks designed to reassure and protect minorities while continuing to encourage refugees to return to their homes. They also provide support to non-governmental organisations, international organisations and other governmental bodies throughout Kosovo, helping to secure a safe, multi-ethnic and democratic society. Currently, we have some 3,500 troops in Multinational Brigade Centre in KFOR.
  In Bosnia, SFOR provides a stabilising presence, allowing for civilian reconstruction and the return of refugees and internally displaced persons to a secure and peaceful environment. Currently, we have some 2,700 troops in SFOR, primarily based in Multinational Division South West, and will reduce this to some 2,000 by the end of this year.
  Mr. Campbell-Savours: That was a very interesting answer. Will my hon. Friend pass on the appreciation of the House of Commons, expressed at Question Time today, to all our troops in the former Yugoslavia for the courageous effort that they are making in trying to keep the peace in very difficult conditions? However, will he also tell us whether it is true that some countries are not pulling their weight in terms of protecting the Serbs?
  Mr. Spellar: I shall be pleased to pass on that appreciation. Indeed. I was able to do just that when I met some of our forces in Pristina on Wednesday and Thursday last week They are doing an excellent and professional job and playing a considerable role in many areas to help to reconstruct the country.
  Sometimes, the cause of peace in Kosovo is not best served by the media, which focus very much on the areas in which there are difficulties and ignore the wider picture. Not only are many refugees returning, but there is greater stability, and, equally important, the reconstruction of economic life is taking place. Our forces are playing a major role in helping to reintroduce a proper

  17
  system of law and order. Indeed, 56 MOD police are due to fly out this week to reinforce the international police effort, to which the Royal Ulster Constabulary has already contributed considerably. As my hon. Friend says, we pay tribute to the work being undertaken, but we also recognise that there is some way to go.
  Sir Teddy Taylor: Has the Minister seen any sign that the dwindling band of Serbs in Kosovo is likely to enjoy security and safety after the troops withdrawal?
  Mr. Spellar: First, I must correct the hon. Gentleman, as some Serbs are returning from Serbia, not least because of the problems in that country. When I was in Pristina, it was a pleasure to talk to members of our forces who are playing a significant role in protecting Serbs, both individually and in groups. That situation is not ideal. It is by no means perfect, but it is certainly better than a year or so ago. At the same time, people in that country are starting to establish a pattern of co-existence. As I said in response to the previous question, we should examine positive developments. We should not ignore, underestimate, or fail to take action on negative elements, but we must get them into perspective and achieve a balance.
  Mr. David Winnick: I fully supported the action in Kosovo. Indeed, everything seems to have justified what was done by the international community, which includes this country. Will further action be taken to try to secure protection for those Serbians who are undoubtedly being harassed and persecuted by ethnic Albanians? Does my hon. Friend agree that further arrests of those responsible would give the Serbians far greater confidence that Kosovo is as much their part of the world as it is that of the ethnic Albanians?
  Mr. Spellar: That is very much the message from our forces, who, as I said, are playing a significant role in providing protection. Ultimately, that is not a substitute for a proper system of policing and law and order. We are making a contribution to policing, but penal institutions in Kosovo must be enhanced, and the judicial system must be reinforced. My hon. Friend is right to say that actions outside the law must be arrestable and punishable. Again, I am not saying that we have achieved a perfect solution, but we have made considerable progress.
  Mir. Paul Keetch: I endorse what the hon. Member for Workington (Mr. Campbell-Savours) said about the importance of British forces in the former Yugoslavia. However, does the Minister agree that the situation is still very tense? Last Friday, a car on a British-controlled road just outside Pristina hit a land mine, killing two men and injuring a woman and two young children. What credence does the Minister give to reports from the United States that America may consider withdrawing its troops from Kosovo? Does he agree that the presence of US forces on the ground in Kosovo is an important contribution to KFOR? As we approach the first anniversary of the UN mandate in Kosovo, does he accept that the withdrawal of US troops would send a very bad signal indeed?
  Mr. Spellar: We need to see in place the right number of troops from all countries. We also need a broad spread
  18
  of forces in a range of international operations, and countries must fulfil their commitments. The way in which international forces are working together in Kosovo and Bosnia-Herzegovina is an example of that, and has developed well.
  The hon. Gentleman mentioned the former Yugoslavia, and it is important that we focus on the steady progress in Bosnia-Herzegovina, not least the electoral support for moving away from sectarian parties towards centre parties. A lot of that has been driven by encouraging developments in Croatia, such as the election of a leadership that wants to be part of the European household and consequently is examining how to modernise its own country, and putting considerable pressure on Bosnia-Herzegovina to withdraw support from extremists.
  As has been recognised, all that requires an on-going international presence which, yet again, is having an impact, creating co-existence and starting to encourage those who want to play a positive role in the reconstruction of their countries—as opposed to those who merely seek sectarian division—so that they can start to advance. That is progress, but there is still a long way to go.

  Trident
  Mr. Jeremy Corbyn: What is the total warhead capacity of the Trident fleet. [122654]
  The Secretary of State for Defence (Mr. Geoffrey Hoon): As announced in the strategic defence review, our minimum nuclear deterrent requires a stockpile of fewer than 200 operationally available warheads. The submarine on deterrent patrol carries 48 warheads.
  Mr. Corbyn: Does the Secretary of State accept that even 48 warheads—about half the possible capacity—represent a huge proliferation of weapons compared with the previous Trident submarine system? Does he not follow the thinking of the right hon. Member for Caernarfon (Mr. Wigley) and agree that, having signed up to the principle of nuclear disarmament, we should at least take Trident off patrol, ending the use or consideration of the use of such weapons, so that we may set an example to other countries that are thinking of acquiring or developing nuclear weapons?
  Mr. Hoon: Perhaps my hon. Friend inadvertently referred to Trident when he meant Polaris. Nevertheless, the size of the United Kingdom's minimum deterrent depends not on the size of other nations' arsenals but on the minimum necessary to deter any threat to our vital interest. That was set out in the strategic defence review, and remains the Government's clear position.
  Mr. Julian Brazier: Would the Secretary of State like to reconsider his rather complacent answer about the possible nuclear threat from third-world countries? In view of the first conclusion of the American presidential commission on defence that that country faces a severe potential threat from the nuclear, chemical and biological weapons of third-world countries, is it not time that we thought about some of the other measures that the

  19
  Americans are taking besides Trident—a system of ballistic missile defence and a proper system of civil defence, which has almost disappeared in this country?
  Mr. Hoon: I do not need, at this stage at any rate, to reconsider the answer that I gave only a few moments ago. As I made clear, we keep threats to the United Kingdom under continuous review. A threat consists both of the ability to deliver a ballistic weapon to the UK—capability—and of the intent to do so. We assess, for the moment, that no country in the world has both the capability and the intent to attack the UK with a ballistic weapon.

  Ministerial Discussions (ESDI)
  Mr. John Bercow: What discussions he has had with the French Defence Minister about the European security and defence identity. [122655]
  The Secretary of State for Defence (Mr. Geoffrey Hoon): We continue to make excellent progress on the European defence initiative, in the course of which my ministerial colleagues and I have had several discussions with the French Defence Minister.
  Mr. Bercow: I am grateful to the Secretary of State for that reply, complacent though it was. Given that President Chirac, supported by the Germans, Italians, Portuguese and others, said as recently as 30 May that the development of an EU defence and foreign policy was fundamentally a "political project", and that the American ambassador to NATO has warned that the European
  20
  security and defence identity threatens to damage and rupture NATO, are Ministers just too dozy to perceive the threat that exists, or are they determined to hoodwink the rest of us into thinking that it does not exist?
  Mr. Hoon: It is because we do not see this as a political project that we have concentrated on the question of capabilities. Throughout all the agreements into which we have entered on behalf of the UK, we have emphasised the need to improve Europe's military capability. A number of UK Governments have sought to achieve that, and I am delighted to say that this Government are doing something about it. By improving Europe's military capability, we are not in any sense undermining or weakening NATO, but strengthening its capability. I would have thought that the hon. Gentleman might have been sufficiently awake to realise that.
  Mrs. Gwyneth Dunwoody: If one is to fight successfully in any army, however, should one not be quite clear to whom one owes one's allegiance? Is it not therefore very worrying that the Government should be assuming that it will be possible to create a unified force without accepting the idea of political control over its objectives?
  Mr. Hoon: May I reassure my hon. Friend? None of our proposals contains the slightest suggestion that we are creating a unified force. The proposal that we are dealing with is no different from any of the multinational military organisations that have existed in the past and will continue to exist in future. In reality, each country will, rightly, remain responsible for its own forces, but those forces will operate together in multinational operations.

Point of Order
3.30 pm
Mr. John Bercow: On a point of order, Madam Speaker. Have you received any indication that a Minister from the Department for Education and Employment plans to come to the House to make a statement to clear up the astonishing confusion in the mind of Baroness Jay? You will be aware that on 28 May this year, the noble Baroness said that she had gone to a pretty standard grammar school. Given that it has now been revealed that the school she attended was an independent fee-paying school, she has abused that school, misrepresented her past anti denigrated grammar schools. Do not Ministers have quite a lot of explaining and apologising to do?
Madam Speaker: I have not been informed that any Minister wishes to make a statement today. If the hon. Gentleman has anything to say about a Member of the upper House, he should do so through our usual procedures, by means of the Order Paper.
Mr. Dale Campbell-Savours: Further to that point of order, Madam Speaker. It is usual for Opposition Front Benchers not to abuse the right to raise points of order from the Dispatch Box. As has been said by successive Speakers for many years, it is for Front Benchers to abide by the rules and not abuse them. Will you deprecate what you have just witnessed here in the House of Commons?
Madam Speaker: To the best of my knowledge, Front Benchers do, from time to time, raise points of order with me—but they usually couch those points of order in language that is acceptable to me and to the House. On this occasion, I felt that the comments made by the hon. Member for Buckingham (Mr. Bercow) were not in keeping with those that he has made as a Back Bencher, which are generally interesting; Opposition Front Benchers should take note of my remarks. In addition, if reference is to be made to a Member of the upper House, it is usual to do so by means of the Order Paper, through an early-day motion.

Orders of the Day

  Financial Services and Markets Bill (Supplemental Allocation of Time)
  3.32 pm
  The Economic Secretary to the Treasury (Miss Melanie Johnson): I beg to move,
  That the Order of the House [9th February) be supplemented as follows:

  Lords Amendments
  1. Proceedings on Consideration of Lords Amendments shall be completed at today's sitting and, if not previously concluded, shall be brought to a conclusion at Eleven o'clock.
  2.—(1) This paragraph applies for the purpose of bringing any proceedings to a conclusion in accordance with paragraph 1.

  (2) The Speaker shall first put forthwith any Question which has already been proposed from the Chair and not yet decided.

  (3) If that Question is for the amendment of a Lords Amendment, the Speaker shall then put forthwith—

  (a) the Question on any further Amendment of the Lords Amendment moved by a Minister of the Crown, and

  (b) the Question on any Motion made by a Minister of the Crown, That this House agrees or disagrees with the Lords in the Amendment or (as the case may be) in the Amendment as amended.

  (4) The Speaker shall then put forthwith—

  (a) the Question on any Amendment moved by a Minister of the Crown to a Lords Amendment, and

  (b) the Question on any Motion made by a Minister of the Crown, That this House agrees or disagrees with the Lords in the Amendment or (as the case may be) in the Amendment as amended.

  (5) The Speaker shall then put forthwith the Question on any Motion made by a Minister of the Crown, that this House disagrees with the Lords in a Lords Amendment.

  (6) The Speaker shall then put forthwith the Question, That this House agrees with the Lords in all the remaining Lords Amendments.

  (7) As soon as the House has agreed or disagreed with the Lords in any of their Amendments, or disposed of an Amendment relevant to a Lords Amendment which has been disagreed to, the Speaker shall put forthwith a single Question on any Amendments moved by a Minister of the Crown relevant to the Lords Amendment.

  Subsequent Stages
  3.—(1) The Speaker shall put forthwith the Question on any Motion made by a Minister of the Crown for the consideration forthwith of any further Message from the Lords on the Bill.

  (2) The proceedings on any further Message from the Lords shall, if not previously concluded, be brought to a conclusion one hour after their commencement.

  (3) Sub-paragraphs (4) to (7) apply for the purpose of bringing those proceedings to a conclusion.

  (4) The Speaker shall first put forthwith any Question which has already been proposed from the Chair and not yet decided.

  (5) The Speaker shall then put forthwith the Question on any Motion made by a Minister of the Crown which is related to the Question already proposed from the Chair.

  (6) The Speaker shall then put forthwith the Question on any Motion made by a Minister of the Crown on or relevant to any item.

  (7) The Speaker shall then put forthwith the Question. That this House agrees with the Lords in all the remaining Lords Proposals.

  Reasons Committee
  4. The Speaker shall put forthwith the Question on any Motion made by a Minister of the Crown for the appointment, nomination and quorum of a Committee to draw up Reasons and the appointment of its Chairman.
  5.—(1) A Committee appointed to draw up Reasons shall report before the conclusion of the sitting at which it is appointed.
  (2) Proceedings in the Committee shall, if not previously brought to a conclusion, be brought to a conclusion 30 minutes after their commencement.
  (3) For the purpose of bringing any proceedings to a conclusion in accordance with sub-paragraph (2) the Chairman shall—

  (a) first put forthwith any Question which has already been proposed from the Chair and has not yet been decided; and

  (b) then put forthwith successively Questions on motions which may be made by a Minister of the Crown for assigning a Reason for disagreeing with the Lords in any of their Amendments.

  (4) The proceedings of the Committee shall be reported without any further Question being put.

  Miscellaneous
  6. If the House is adjourned, or the sitting is suspended, before the expiry of the period at the end of which any proceedings are to be brought to a conclusion under this order, no notice shall be required of a Motion made at the next sitting by a Minister of the Crown for varying or supplementing the provisions of this Order.
  7.—(1) In this paragraph "the proceedings" means proceedings on Consideration of Lords Amendments, on any further Message from the Lords on the Bill, on the appointment and quorum of a Committee to draw up Reasons and the Report of such a Committee.

  (2) Standing Order No. 15(1) (Exempted business) shall apply to the proceedings.

  (3) The proceedings shall not be interrupted under any Standing Order relating to the sittings of the House.

  (4) No dilatory Motion with respect to, or in the course of, the proceedings shall be made except by a Minister of the Crown, and the Question on any such Motion shall be put forthwith.

  8. If proceedings on a Motion for the Adjournment of the House would, by virtue of Standing Order No. 24 (Urgent matters), commence at a time when proceedings to which paragraph 7 applies are in progress, proceedings on the Motion shall be postponed to the conclusion of those proceedings.
  Although there have been a good many amendments made to the Bill in another place, we believe that we will be able to give them adequate scrutiny in the course of our extended sitting this evening. The scope of the Bill, like that of our reforms, is unprecedentedly broad and ambitious: in addition to putting in place a single regulator, we are replacing several, complicated systems of statutory regulation with a single legal framework. The result is clearer, better legislation, but the scale of the exercise is, inevitably, extensive. A large number of amendments is to be expected with a Bill of this size and technical complexity.
  Mr. Patrick McLoughlin: Will the Economic Secretary remind the House of the running total so far of Government amendments to this well-thought-out Bill?
  Miss Johnson: I am happy to do that—in fact, I was about to discuss that very topic. However, before I do so, I should like to draw the Opposition's attention to a related matter; they clearly have short memories. The Financial Services Act 1986 was extensively amended during its passage through Parliament, even though it was a much less far-reaching Bill. Unlike the Financial Services and
  24
  Markets Bill, it dealt only with the investment sector and not with banking, building societies, insurance and Lloyd's, yet the Government of the day made 582 amendments to that smaller Bill in the second House.
  It is right that legislation as important as the Financial Services and Markets Bill should be subject to intense scrutiny. Opposition parties tabled almost 1,300 amendments; we have considered those amendments and listened to the arguments put to us in almost 200 hours of parliamentary debate and in wider consultation. That process has been constructive and co-operative in both Houses. There is a consensus on our underlying policy aims, and a shared determination to get the detail right.
  Several improvements were made in the other place, and are explained at some length in explanatory material made available by the Treasury on 24 May, which hon. Members will have had plenty of time to study in advance of today's debate. They should be reassured that we have not introduced new policy in the other place. The majority of our amendments are to meet commitments made in this House, or are in one way or another consequential on changes made before the Bill left this House in February.
  Those changes generally follow up recommendations of the Joint Committee, or respond to developments during the passage of the Bill, notably the stock exchange's decision to demutualise. Some improvements arose out of earlier debates in this House, such as those to the Financial Services Authority's procedures and accountability. Other amendments that had to be made in the other place are purely technical or drafting amendments, such as corrections to definitions.
  The nature of the Bill means that a single, insignificant change may require scores of separate amendments, which I am sure need not detain the House.
  Mr. Eric Forth: What!
  Miss Johnson: I am not sure whether the right hon. Gentleman is asking me a question or making an exclamation.
  Mr. Forth: The Minister has just said that the amendments need not detain the House, as if that were a statement of fact. I suggest that that is a decision for the House to make, not her.
  Miss Johnson: I appreciate that the right hon. Gentleman believes that he is the keeper of the soul of this Chamber, but I reiterate that the nature of the Bill means that a single, insignificant change may require scores of separate amendments. Those amendments are basically the same, so they need not detain the House. That was my point.
  The Government make no apologies for the extent to which the Bill has been improved in the other place. That is how the revising process is supposed to work. I hope that my explanation helps to clarify the nature of the task involved in considering the amendments, and that we can proceed to consider them as expeditiously as possible.
  Mr. Andrew Tyrie: Does the Minister's first experience of taking a Bill through Parliament over the past nine months lead her to conclude that it may have been a good idea if the Government had introduced the Bill in better shape in the first place?
  Miss Johnson: My experience of taking the Bill through Parliament since July last year is that, because of

  25
  the Joint Committee scrutiny of the draft Bill—a process with which the hon. Gentleman will be familiar—we were able to tackle enormously complex subjects. As I explained, the Bill replaces three main separate pieces of legislation and covers a wide range of financial services. It has received the degree of scrutiny that it ought to have received. It has been scrutinised in great detail in this Chamber, in Committee and in the other place, so we have before us a much improved Bill that I believe is now ready to go on to the statute book.
  3.38 pm
  Mr. David Heathcoat-Amory: The Economic Secretary has failed to explain why the Government have tabled almost 700 amendments, new clauses and new schedules at this late stage in the Bill. The volume of amendments that hon. Members will have received from the Vote Office is like a substantial paperback. It runs to more than 90 pages, but none of it has been scrutinised by this House—these amendments have been passed in the other place. The Government are pushing through this paperback under a guillotine in one day.
  The Economic Secretary dismissively said to my right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth) that most of the amendments are trivial and need not detain the House. That is for us to decide. It is not up to a Minister to tell us what we consider important, especially as many Opposition Members have been engaged with the subject for rather longer than the Minister. There have been three ministerial changes since the Bill began its rocky passage through Parliament, but my hon. Friend the Member for East Worthing and Shoreham (Mr. Loughton) and I are two Members who have been present right from the start.
  Mr. Michael Fabricant: My right hon. Friend has served in the Treasury. Does he recall a time when such substantial changes were made to a Bill at such a late stage? Does not this demonstrate—as with the Utilities Bill—that the Bill was ill thought out in the first place?
  Mr. Heathcoat-Amory: Yes. Indeed, I would go further—I think that this Bill bears increasingly little resemblance to the Bill that received a Second Reading last year. It has been constantly redrafted, and that can in no way be described as a response to consultation. Tabling nearly 700 amendments at such a late stage has nothing to do with consultation; it is simply bad legislation. Good legislation is produced when the Government know what they want to do, consult on how to do it and then produce a Bill for consideration by both Houses. As my hon. Friend says, in this case the Government have abused the process by substantially rewriting parts of a Bill. Indeed, in some instances—such as the provisions relating to the new competition regime—they are beginning to amend their own amendments. The Bill is diverging from the measure to which the House thought it was assenting last summer.
  There is no excuse for the guillotine. As the Economic Secretary acknowledged, the Opposition have co-operated fully, and have given the Government no provocation whatever. Why, then, should the Government slam on a guillotine and push through all the Bill's remaining stages in one day? That is no way to treat an industry that employs more than 1 million people and is such an
  26
  enormous foreign exchange earner for the United Kingdom. Many people's livelihoods will be affected by the Bill, and it needs proper, careful scrutiny.
  The casual way in which the Government have treated the House goes back some time. The Bill was published nearly two years ago, and was examined by a joint Lords-Commons Committee chaired by Lord Burns. We supported that procedure. The Government said that they would support most of the Committee's recommendations, and would present a Bill in good order. I attended a meeting of Ministers, parliamentary counsel, draftsmen and House authorities, at which I asked whether the Bill was in a suitable state to be debated and scrutinised by the House of Commons. I was assured that it was in such a state, but I am afraid that that has turned out not to be the case.
  On the basis of those assurances, we allowed the Bill to be carried over from the previous to the current Session. However, the Government not only constantly and consistently amended it in Committee, but tabled more than 300 amendments on Report in the Commons. That is exactly what they are doing today—at a very late stage, they have tabled pages of new amendments that have not been subjected to proper scrutiny in either House.
  Changing a Bill after it has completed the stages that allow proper debate and scrutiny does not constitute consultation. This is now the most amended Bill in the history of the House, I am advised. The Economic Secretary tried to draw a parallel between the Bill and the Financial Services Act 1986. The arithmetic is on our side. Hundreds of amendments of a substantial, not trivial, nature have gone entirely unscrutinised.
  Mr. Tim Loughton: On the comparison with the 1986 Bill, that legislation first regulated the Financial Services Authority. We have had 14 years of experience since then to ensure that the current Bill builds on that experience and gets it right, so it is an even worse scenario that we have more amendments now than we did when we came to the matter afresh in 1986.
  Mr. Heathcoat-Amory: My hon. Friend is right. Given also that the Burns committee looked at the matter and gave the Government a lot of advice and recommendations, there is even less excuse for treating Parliament in this way.
  Two other matters are relevant to the motion. Two additional matters have come up in recent weeks, to which the Government have not fully responded. The first is the proposed merger between the London and Frankfurt stock exchanges. No one from the Government side will tell us how or whether the Financial Services Authority will regulate the merged exchange. It is a very important matter. It is not good enough for the Government, who presumably had warnings of that merger, to have no real response to the question about which rules and regulations will apply to the merged exchange.
  The second matter that has caught the Government on the hop is the issue of the overlap and possible conflict between the Financial Services Authority and the takeover panel during bids and mergers. The Government were defeated on that matter in another place. The amendment inserted there will provide that if the parties to a bid comply with the City code issued by the takeover panel, that will be a defence against allegations of market abuse. In other words, that will provide a safe harbour against market abuse.

  27
  The Financial Services Authority will still be in charge. It will be able to issue the statement and its own code, which provides that safe harbour, and it may include conditions and limitations on it, so it will still be the league regulator, but that is an enormously important issue that has not yet been properly debated in the House. It is made worse by the fact that, instead of accepting that improvement to the Bill in another place, the Government apparently will seek to reverse it. Apparently, they do not like the fact that it is the takeover panel that will determine whether the behaviour of the parties to a bid actually complies with the City code and so gives a safe harbour against market abuse.
  The Lords amendment is a good one because it provides a clear demarcation between the responsibilities of the Financial Services Authority and that of the takeover panel. Without that clear distinction about who does what, there will be endless scope for confusion, delay and litigation during a bid, which will undermine the role and success of the takeover panel. That is acknowledged in all parts.
  It is also rumoured that the Liberal Democrats will collude with the Government in another place in overturning that amendment. If there is any party in the House of Commons that has few credentials for determining the future of the Bill, it is the Liberal Democrats. As my hon. Friends will recollect, the Liberal Democrats failed to provide anyone at all to attend the proceedings of the Standing Committee that considered the Bill. I see that we are now graced by the presence of one Liberal Democrat. I do not recollect him attending any of our previous debates. He has obviously been co-opted at a late stage to try to put up some defence for that collusion, but it is a shabby deal.
  Mr. John Bercow: While listening to my right hon. Friend's honeyed words, I briefly consulted the list of Lords amendments. Is he aware that there are no fewer than 35 groups of amendments and that, even if we were to work on the dubious assumption that the House would not divide on any of them, that would mean an allocation of approximately 12 minutes debating time to each group?
  Mr. Heathcoat-Amory: My hon. Friend is an assiduous parliamentarian, and he has already done some work showing the outrageous nature of this allocation of time motion. He will know that many of these groups of amendments concern very sensitive and contentious issues indeed, such as whether the whole issue of competition has been given adequate prominence in the Bill. There is also the fact that people and market makers can be convicted of market abuse even if they did not intend to commit the offence. That someone can be convicted of something that they did not intend to do is a new and most unwelcome departure in British law.
  Opposition Members have tried in this place, and my noble Friends have tried in another place, to correct and improve those parts of the Bill. Now, however, the debate will be compressed into the space of a few hours.
  Sir Robert Smith: I should like to clarify one point: is the right hon. Gentleman planning on forcing a Division on the Bill?
  Mr. Heathcoat-Amory: The Bill has already received its Second Reading. It is pretty extraordinary that the Liberal Democrat spokesman apparently thinks that we are debating its Second Reading. May I refer him to the Order Paper, which shows that we are debating a guillotine motion? It is that guillotine motion that we shall be opposing.
  The motion is an abuse of the House. The Government should take the Bill away for a proper and full debate on all the outstanding issues, and come back with a properly prepared Bill that the House can consider.
  3.51 pm
  Sir Robert Smith: I should start by correcting my intervention, which was on the allocation of time motion. I simply wanted to clarify whether the official Opposition planned on dividing on that. If they do force a Division on it, at this stage in the debate Liberal Democrat Members would be quite happy to join them in the Lobby, to make it quite clear that allocation of time motions—[Interruption.] Who knows who will join me when the Division Bell goes?
  We are now three years into a Government who were elected after claiming that they wanted to modernise our democracy and the way in which the House does things, such as scrutinising legislation. I do not, however, recognise what is so modern or fundamentally different about this allocation of time motion.
  Mr. Desmond Swayne: Does the hon. Gentleman agree that the motion's modern feature is the fact that the Minister made no case for it whatsoever? She did not address at all why there is a need for a guillotine motion to curtail free speech. That is what was modern about it.
  Sir Robert Smith: That feature has been quite common in this place. The situation in previous Parliaments may have been different from the situation in this one, but, based on my experience of the past few years, that feature has been quite common in this Parliament.
  I am extremely disappointed and concerned that the Government, with such a large majority, are so frightened of debate. If they use their Whips efficiently and effectively, there is not a chance of overturning legislation. Debate is the only instrument available to us to persuade them to reconsider legislation. If legislation is properly scrutinised, there is a chance that Ministers will recognise that it is flawed and requires amendment. Debate also provides an opportunity to those who are outside the House not only to recognise the parts of the legislation that are causing us concern, but to see their concerns expressed in this place.
  A vast number of amendments were made in the other place.
  Mr. Tyrie: If the hon. Gentleman agrees with Conservative Members that the procedures under which the Bill is being examined are pretty disgraceful and

  29
  certainly substandard, why have Liberal Democrat Members done a deal with the Government on a crucial clause? We would have had a chance on that clause if they had not sold out. Why have they sold out to the Government on an issue as fundamental as that of market abuse and the takeover panel?
  Sir Robert Smith: That is a matter for the debate on the Bill. We are currently debating the procedure to consider the Bill and the importance of time being properly and effectively allocated to it in the House.
  The Minister claimed that many of the amendments were minor and consequential. It is open to Ministers to explain all the amendments that they consider to be minor and consequential and let the House make a judgment. An allocation of time motion means that that is highly unlikely.
  The Minister said that we were having an extended sitting. It has been extended from the normal 10 o'clock deadline until 11 o'clock, but the Government have subtracted 45 minutes for the debate on the allocation of time motion, so in reality the sitting has been extended by 15 minutes, which could be taken up by a Division on this motion. We might have only two or three extra minutes over a normal sitting day to consider all these Lords amendments.
  Mr. Bercow: For the House to judge whether there is adequate time for debate, we need to have some idea of the level of contributions that we can expect. Will the hon. Gentleman advise the House—as he has not so far been able to do—whether we shall have contributions from the hon. Members for Gordon (Mr. Bruce), for Kingston and Surbiton (Mr. Davey) and for Twickenham (Dr. Cable)?
  Sir Robert Smith: The hon. Gentleman will have to sit in his place, watch the debates and see who takes part. I do not understand why he needs to know in advance who wishes to take part in the debate. Anyway, it is up to you, Madam Speaker, to decide who takes part in the debate. It is not for any of us to choose. That is probably enough interventions for now.
  The Government also prayed in aid the record of the previous Government, which is a tedious and boring argument. It can place some things in context, but if their aspiration is always just to replicate the record of the previous Government, there was not much point in the electorate turning out at the last election and removing the previous Government from office.
  Time is running out if the Government really want to modernise the House. They cannot do so just by guillotining debates, ignoring arguments and allowing them to go away. They have to look carefully at the procedure of legislative scrutiny. They cannot avoid problems just by tinkering with one or two aspects of the House. That way lies a great danger that, in the frustration of occasionally having to stay up late at night, they will decide to curtail debate without finding other avenues for scrutiny of legislation. If they do not find other avenues, they should be willing to stay up late and accept scrutiny that way.
  The Government should also think about their management of legislation. This is a major Bill that has been heavily amended in the other place. They should ask
  30
  whether they have too much legislation in the pipeline for this year and whether they have managed their priorities right. They talk about wanting to reduce waiting times and end queues in the health service. If they apply the skills that they use in managing legislation here to the health service, I am not optimistic.
  Mr. Nigel Beard: The hon. Gentleman is making great play of the adequacy of the scrutiny. Why, in Committee, did a Liberal Member attend on only two occasions?
  Sir Robert Smith: Presumably there were reasons why my hon. Friend the Member for Twickenham (Mr. Cable) could not be there. The whole House is entitled to scrutinise legislation at this stage. We are not in Committee. The whole House must consider what the other House has done to the Bill. It is up to this House to decide how much time we want to spend on it. The Government should have the confidence to let the House scrutinise the Bill, range freely over it and expose its flaws in debate, rather than trying to rush through it without debate or proper scrutiny. I urge the House to recognise that when we come to vote.
  3.59 pm
  Mr. Eric Forth: This is an example of the Government somehow managing to combine incompetence and arrogance. That might be considered quite an achievement, but we have become rather used to it from them.
  I wanted to give the Minister the benefit of the doubt, so I went through the Government's amendments and tried to spot the trivial ones that she claimed were none of our business and which we should not be so impatient as to want to deliberate. Even giving her the benefit of the doubt and without being an expert on the Bill, in my cursory reading I calculated 80 substantial amendments at the minimum. If that is the case—I suspect that there are more than that—the Government believe that we can deal with them in just over five minutes each.
  That would be bad enough in itself, but I have had a look at the amendments. Amendment No. 61, for example, is one of those to which the Government presumably believe the House should give but five minutes attention. It involves a new clause entitled "Exercise of own-initiative power: procedure" and contains 12 subsections. Amendment No. 82 contains two subsections and nine paragraphs, amendment No. 87 contains 14 subsections, and amendment No. 90 contains 7 subsections. Amendment No. 107, which also caught my eye, seeks to add a new clause entitled "Appointment by competent authority of persons to carry out investigations." That contains considerable detail.
  It is one thing for the Minister to claim in a glib and superficial fashion that we do not need to waste our time on the 675 items of trivia placed by the Government on today's Order Paper, but, even granting her that—which I would be very reluctant to do—she is really saying that this House of Commons should accept a new principle. She is suggesting that we allow ourselves, or that the Government give us, five minutes to consider large and often controversial new measures in a Bill. That is the extent of the Government's arrogance and of their wish to ignore the traditional proceedings of this House and the other place.

  31
  It is a measure of the Government's sheer incompetence that we are faced with the absurd situation that, in this sitting—which can last only until 11 o'clock—we are expected to give the most cursory consideration to law that could affect the livelihoods of hundreds of thousands of people. These are the depths to which the Government have sunk and this is the extent to which they are seeking to minimise or eliminate the role of this House in the legislative process. It is totally unacceptable.
  Mr. Bercow: Does my right hon. Friend agree that one of the reasons that Ministers seem to think that such truncated consideration is adequate is that they believe that unless a Member has sat on the Standing Committee considering a Bill, he or she has a bit of a cheek to try to contribute on Report? Does he agree that they need now to understand what new Ministers in particular have hitherto failed to learn—that the Bill is being reported to the House for proper consideration by it?
  Mr. Forth: Indeed. In addition, there are two Houses of this Parliament, and what one does is properly to be scrutinised by the other. The fact that a matter may have been dealt with in another place—with all of the expertise that resides there—does not mean that this House of Commons can either take that for granted or ignore it. This motion is an outrage and a disgrace, and I hope that the House will reject it.
  4.3 pm
  Mr. Richard Shepherd: There are few points that I wish to make, as the matter has been covered adequately by my right hon. Friends the Members for Wells (Mr. Heathcoat-Amory) and for Bromley and Chislehurst (Mr. Forth) and by the hon. Member for West Aberdeenshire and Kincardine (Sir R. Smith). I was cheered to note that the Liberal Democrats are actually weighing how a procedure motion addresses the issues that we want to address.
  This motion is a product of a rollover process following modernisation. It is an indication that my Front-Bench colleagues agreed to such an arrangement; it could only have gone forward on that basis. Therefore, this is an important process. That the Government are abrogating proper investigation and examination of the many clauses in the Bill is inappropriate and it may discourage my Front-Bench colleagues from ever agreeing to any future rollover. That would be a real loss in terms of the serious consideration over a longer period of detailed and highly complex Bills such as this. The Government should take on board the fact that a guillotine on a rollover that has allowed two parliamentary Sessions to deal with the detail of a Bill is inappropriate.
  My right hon. Friend the Member for Bromley and Chislehurst pointed out that what we shall be debating are Lords amendments. I have been in the House long enough to remember—as you will too, Madam Speaker—when it was unthinkable to guillotine that which came from a Chamber that may not be democratic, but has equal weight in our legislative processes.
  The Government have now guillotined 34 Bills. That is a historic high, and no other Government have ever approached it. Previous Labour Governments since 1945
  32
  seldom used the guillotine, but now there is a crescendo applied to the second Chamber and what it says in its amendments. This guillotine demonstrates the power of a majority to deny freedom of speech. I do not know whether the time is adequate, as the whole debate could implode, but the Government have allowed less than five minutes for each of 80 substantial amendments—again taking the figure supplied by my right hon. Friend—and that is not including votes.
  Parliament should not be muzzled in this way. We have enough bad legislation as it is. Sometimes, Conservative Governments have been hung by having inadequate discussion of detail. This Government should not go down that route, which is a denial of the very purpose and function of this Chamber.
  4.6 pm
  Mr. Howard Flight: The Bill is not exactly the stuff of red-hot party politics. Because of that, and because it affects our biggest industry and the prosperity of the whole of the south-east, the Opposition have endeavoured throughout to be wholly constructive, to get complicated matters legally right and to end up with a piece of legislation that is not damaging to our key industry.
  It is extraordinarily disappointing to me that, when the Treasury is aware that there are many key issues on which we are advised that the Government and their legal advisers have got it wrong, the Government are unwilling to listen further and are railroading this stage through with a guillotine motion.
  It is easy to take for granted the prosperity of the financial services industry of the City of London, but it depends on Britain being highly competitive in terms of tax, regulation and accommodation and staff costs. I am afraid to report that I have encountered several business people in the past few weeks who, having seen the final proposals on market abuse, are considering moving their businesses elsewhere, whether within the European Union or to other major financial centres.
  The Bill comes from the Lords wrong, and we are being
  given inadequate time to consider it in the key areas of the obligation to preserve our international competitiveness, market abuse, proper practice in line with corporate governance required elsewhere, avoiding being ultra vires in respect of the European Court of Human Rights and, indeed, the new situation regarding what is to happen to stock markets. Did the Government even imagine, when rushing through the change of the listing authority from the stock exchange to the Financial Services Authority, the implications if the London stock exchange were to merge?
  I declare an interest as not only the non-executive chairman of a financial services business but probably the only Member of Parliament who has worked in the industry for 30 years. As such, I stand back from the Bill and am seriously concerned that it creates a body that is too powerful and inadequately accountable and that there remain too many areas in which the legal balance is wrong or tilted against the industry.
  It is wrong that the House should have only one evening to go through nearly 700 further amendments. We welcome the amendments that were introduced in response to issues that we raised, but we believe that the Bill remains wrong in certain key areas. That is why I

  33
  oppose the motion. When a piece of key legislation is not right, the House of Commons should have time to get it right.
  4.10 pm
  Miss Melanie Johnson: The importance of the financial services sector is well recognised by the Government, and I trust that the hon. Member for Arundel and South Downs (Mr. Flight) did not wish to imply that the Government do anything other than attach as much importance to that sector as he would claim to do. We believe that the Bill is a crucial part of securing the future of that industry. Without the Bill and the new regulatory arrangements that it will introduce, the future of that industry would increasingly be at risk.
  Hon. Members have raised the issue of scrutiny of the amendments. The right hon. Member for Wells (Mr. Heathcoat-Amory) suggested that the amendments before us today had not received sufficient scrutiny, but they received extensive scrutiny in the other place. Only one additional Government amendment has been tabled for consideration this afternoon.
  Mr. Tyrie: Will the Economic Secretary give way?
  Miss Johnson: No, I have limited time and I wish to—[Interruption.] Hon. Members cannot have it both ways. The right hon. Member for Wells claimed that we faced a paperback of amendments, but the amendments made to the Financial Services Act 1986 in the other place covered some 135 pages, which is more than 40 pages more than the amendments before us today. No difficulties appear to have been experienced as a result of that earlier legislation. It is also important to recognise that 582 amendments were tabled by the then Government to that Act at a comparable stage in 1986.
  Opposition Members have also neglected to mention the fact that there were 1,300 non-Government amendments discussed both here and in the other place. The Opposition have made a lively contribution to the debate and, as a result, in some cases we have tabled Government amendments to implement the changes that the Opposition have requested. The Bill is better as a result. The publication of the amendments on 24 May, and the report of the Bill's progress in the other place, have enabled those hon. Members who wished to do so to take an interest in the amendments long before they came here for debate. I trust that Opposition Members have done so.
  The Opposition argue that we have not accepted their points, but in some cases that is because we do not agree with them, and hours of debate will not change that. In other cases, we have accepted the Opposition's arguments and tabled amendments to that effect. The fact that so many of the Lords amendments were passed with all-party support is further proof that we have listened. That is why they are before the House this afternoon.
  As a result of the scrutiny it has undergone, we have a good Bill. Hon. Members will wish to discuss certain matters during the remaining hours of debate, but I reiterate that many of the amendments before us are purely technical, drafting or consequential on one main change in the Bill. Hon. Members can do the arithmetic on the number of amendments, but their case is not as substantial as they claim. With the possible exception of one area of discussion, I believe that it would be quite
  34
  surprising if I were to hear anything in the Chamber this afternoon that I had not heard several times before, in more than 200 hours of parliamentary scrutiny of the Bill. We have already reached the point where many debates have become exceptionally repetitive.
  I therefore urge the House to accept the supplemental allocation of time motion on the remaining consideration of the Bill.
  Question put:—
  The House divided: Ayes 244, Noes 126.

  Division No. 210]

  [4.15 pm

  AYES

  Ainger, Nick

  Dobbin, Jim

  Ainsworth, Robert (Cov'try NE)

  Donohoe, Brian H

  Alexander, Douglas

  Doran, Frank

  Allen, Graham

  Dowd, Jim

  Armstrong, Rt Hon Ms Hilary

  Drew, David

  Atherton, Ms Candy

  Eagle, Angela (Wallasey)

  Austin, John

  Eagle, Maria (L'pool Garston)

  Battle, John

  Edwards, Huw

  Bayley, Hugh

  Efford, Clive

  Beard, Nigel

  Ellman, Mrs Louise

  Beckett, Rt Hon Mrs Margaret

  Ennis, Jeff

  Begg, Miss Anne

  Field, Rt Hon Frank

  Bell, Stuart (Middlesbrough)

  Fisher, Mark

  Benn, Rt Hon Tony (Chesterfield)

  Fitzpatrick, Jim

  Bennett, Andrew F

  Fitzsimons, Mrs Lorna

  Benton, Joe

  Foster, Michael Jabez (Hastings)

  Berry, Roger

  Foster, Michael J (Worcester)

  Best, Harold

  Gapes, Mike

  Betts, Clive

  Gardiner, Barry

  Blackman, Liz

  George, Bruce (Walsall S)

  Blears, Ms Hazel

  Gerrard, Neil

  Blizzard, Bob

  Gibson, Dr Ian

  Boateng, Rt Hon Paul

  Godman, Dr Norman A

  Borrow, David

  Godsiff, Roger

  Bradley, Keith (Withington)

  Goggins, Paul

  Bradley, Peter (The Wrekin)

  Golding, Mrs Llin

  Brinton, Mrs Helen

  Gordon, Mrs Eileen

  Buck, Ms Karen

  Griffiths, Jane (Reading E)

  Burgon, Colin

  Griffiths, Nigel (Edinburgh S)

  Butler, Mrs Christine

  Grogan, John

  Caborn, Rt Hon Richard

  Gunnell, John

  Campbell, Ronnie (Blyth V)

  Hall, Mike (Weaver Vale)

  Campbell-Savours, Dale

  Hall, Patrick (Bedford)

  Caplin, Ivor

  Hanson, David

  Caton, Martin

  Heal, Mrs Sylvia

  Chapman, Ben (Wirral S)

  Healey, John

  Clark, Rt Hon Dr David (S Shields)

  Heppell, John

  Clark, Paul (Gillingham)

  Hinchliffe, David

  Clarke, Charles (Norwich S)

  Hodge, Ms Margaret

  Clarke, Eric (Midlothian)

  Hoey, Kate

  Clarke, Rt Hon Tom (Coatbridge)

  Hoon, Fit Hon Geoffrey

  Clarke, Tony (Northampton S)

  Hope, Phil

  Clwyd, Ann

  Hopkins, Kelvin

  Coffey, Ms Ann

  Howarth, Alan (Newport E)

  Coleman, Iain

  Howarth, George (Knowsley N)

  Cook, Rt Hon Robin (Livingston)

  Howells, Dr Kim

  Corbett, Robin

  Hughes, Ms Beverley (Stretford)

  Corbyn, Jeremy

  Humble, Mrs Joan

  Cranston, Ross

  Hurst, Alan

  Crausby, David

  Hutton, John

  Cryer, Mrs Ann (Keighley)

  Iddon, Dr Brian

  Cummings, John

  Ingram, Rt Hon Adam

  Cunningham, Jim (Cov'try S)

  Jackson, Ms Glenda (Hampstead)

  Darvill, Keith

  Jackson, Helen (Hillsborough)

  Davey, Valerie (Bristol W)

  Jamieson, David

  Davies, Rt Hon Denzil (Llanelli)

  Jenkins, Brian

  Dean, Mrs Janet

  Johnson, Alan (Hull W & Hessle)

  Denham, John

  Johnson, Miss Melanie (Welwyn Hatfield)

  Dismore, Andrew

  35

  Jones, Rt Hon Barry (Alyn)

  Quin, Rt Hon Ms Joyce

  Jones, Jon Owen (Cardiff C)

  Radice, Rt Hon Giles

  Kaufman, Rt Hon Gerald

  Reed, Andrew (Loughborough)

  Keeble, Ms Sally

  Reid, Rt Hon Dr John (Hamilton N)

  Keen, Ann (Brentford & Isleworth)

  Roche, Mrs Barbara

  Kelly, Ms Ruth

  Rooker, Rt Hon Jeff

  Kemp, Fraser

  Rooney, Terry

  Khabra, Piara S

  Ross, Ernie (Dundee W)

  Kidney, David

  Rowlands, Ted

  King, Andy (Rugby & Kenilworth)

  Roy, Frank

  King, Ms Oona (Bethnal Green)

  Russell, Ms Christine (Chester)

  Kingham, Ms Tess

  Ryan, Ms Joan

  Lawrence, Mrs Jackie

  Salter, Martin

  Laxton, Bob

  Savidge, Malcolm

  Leslie, Christopher

  Sawford, Phil

  Levitt, Tom

  Sedgemore, Brian

  Lewis, Ivan (Bury S)

  Shaw, Jonathan

  Linton, Martin

  Sheldon, Rt Hon Robert

  Lock, David

  Skinner, Dennis

  Love, Andrew

  Smith, Rt Hon Andrew (Oxford E)

  McAvoy, Thomas

  Smith, Angela (Basildon)

  McCabe, Steve

  Smith, Jacqui (Redditch)

  McCartney, Rt Hon Ian (Makerfield)

  Smith, John (Glamorgan)

  Smith, Llew (Blaenau Gwent)

  McDonagh, Siobhain

  Southworth, Ms Helen

  McDonnell, John

  Spellar, John

  McGuire, Mrs Anne

  squire, Ms Rachel

  McIsaac, Shona

  Steinberg, Gerry

  McKenna, Mrs Rosemary

  Stewart, Ian (Eccles)

  McNamara, Kevin

  Stoate, Dr Howard

  McNulty Tony

  Stringer, Graham

  MacShane, Denis

  Stuart, Ms Gisela

  Mactaggart, Fiona

  Sutcliffe, Gerry

  McWalter, Tony

  Taylor Rt Hon Mrs Ann (Dewsbury)

  Marsden, Gordon (Blackpool S)

  Marsden, Paul (Shrewsbury)

  Taylor' Ms Dari (Stockton S)

  Marshall—Andrews, Robert

  Taylor, David (NW Leics)

  Maxton, John

  Thomas, Gareth R (Harrow w)

  Michael, Rt Hon Alun

  Timms, Stephen

  Michie, Bill (Shef'ld Heeley)

  Tipping Paddy

  Miller, Andrew

  Todd, Mark

  Moffatt, Laura

  Touhig, Don

  Moonie, Dr Lewis

  Trickett, Jon

  Moran, Ms Margaret

  Truswell, Paul

  Morely, Elliot

  Turner, Dennis (Wolverh'ton SE)

  Morris, Rt Hon Ms Estelle (B'ham Yardley)

  Turner, Dr Desmond (Kemptown)

  Turner, Neil (Wigan)

  Mudie, George

  Twigg, Derek (Halton)

  Mullin, Chris

  Twigg, Stephen (Enfield)

  Murphy, Jim (Eastwood)

  Walley, Ms Joan

  Murphy, Rt Hon Paul (Torfaen)

  Ward Ms Claire

  Naysmith, Dr Doug

  Wareing, Robert N

  O'Brien, Mike (N Warks)

  White, Brian

  Olner, Bill

  Whitehead, Dr Alan

  O'Neill, Martin

  Williams, Rt Hon Alan (Swansea W)

  Organ, Mrs Diana

  Pearson, Ian

  Williams, Mrs Betty (Conwy)

  Pendry, Tom

  Wills, Michael

  Perham, Ms Linda

  Winnick, David

  Pickthall, Colin

  Winterton, Ms Rosie (Doncaster C)

  Pike, Peter L

  Wood, Mike

  Plaskitt, James

  Woodward, Shaun

  Pond, Chris

  Worthington, Tony

  Pope, Greg

  Wyatt, Derek

  Prentice, Ms Bridget (Lewisham E)

  Tellers for the Ayes:

  Prentice, Gordon (Pendle)

  Mr. David Clelland and

  Purchase, Ken

  Mr. Kevin Hughes

  NOES

  Ainsworth, Peter (E Surrey)

  Beresford, Sir Paul

  Allan, Richard

  Blunt, Crispin

  Amess, David

  Boswell, Tim

  Arbuthnot, Rt Hon James

  Brady, Graham

  Baldry, Tony

  Brand, Dr Peter

  Bell, Martin (Tatton)

  Brazier, Julian

  Bercow, John

  Brooke, Rt Hon Peter

  36

  Browning, Mrs Angela

  MacKay, Rt Hon Andrew

  Bruce, Ian (S Dorset)

  Maclean, Rt Hon David

  Burns, Simon

  McLoughlin, Patrick

  Butterfill, John

  Madel, Sir David

  Campbell, Rt Hon Menzies (NE Fife)

  Major, Rt Hon John

  Mawhinney, Rt Hon Sir Brian

  Clark, Dr Michael (Rayleigh)

  May, Mrs Theresa

  Clarke, Rt Hon Kenneth (Rushcliffe)

  Moss, Malcolm

  Norman, Archie

  Collins, Tim

  O'Brien, Stephen (Eddisbury)

  Cotter, Brian

  Öpik, Lembit

  Cran, James

  Ottaway, Richard

  Curry, Rt Hon David

  Page, Richard

  Davies, Quentin (Grantham)

  Paice, James

  Davis, Rt Hon David (Haltemprice)

  Paterson, Owen

  Day, Stephen

  Pickles, Eric

  Duncan, Alan

  Portillo, Rt Hon Michael

  Duncan Smith, Iain

  Randall, John

  Evans, Nigel

  Redwood, Rt Hon John

  Fabricant, Michael

  Rendel, David

  Fallon, Michael

  Robathan, Andrew

  Fearn, Ronnie

  Robertson, Laurence

  Flight Howard

  Roe, Mrs Marion (Broxbourne)

  Forth, Rt Hon Eric

  Rowe, Andrew (Faversham)

  Foster, Don (Bath)

  Ruffley, David

  Fraser, Christopher

  Russell, Bob (Colchester)

  Gale, Roger

  Sanders, Adrian

  Gillan, Mrs Cheryl

  Sayeed, Jonathan

  Gray James

  Shephard, Rt Hon Mrs Gillian

  Greenway, John

  Shepherd, Richard

  Grieve Dominic

  Simpson, Keith (Mid—Norfolk)

  Hague, Rt Hon William

  Smith, Sir Robert (W Ab'd'ns)

  Hammond, Philip

  Spelman, Mrs Caroline

  Hawkins, Nick

  Spicer, Sir Michael

  Heald, Oliver

  Spring, Richard

  Heath, David (Somerton & Frome)

  Stanley, Rt Hon Sir John

  Heathcoat—Amory, Rt Hon David

  Steen, Anthony

  Horam, John

  Swayne, Desmond

  Howard, Rt Hon Michael

  Swinney, John

  Syms, Robert

  Howarth, Gerald (Aldershot)

  Taylor, Ian (Esher & Walton)

  Jack, Rt Hon Michael

  Taylor John M (Solihull)

  Jenkin, Bernard

  Taylor Matthew (Truro)

  Johnson Smith, Rt Hon Sir Geoffrey

  Taylor Sir Teddy

  Trend Michael

  Keetch, Paul

  Tyrie, Andrew

  Kennedy, Rt Hon Charles (Ross Skye & Inverness W)

  Viggers, Peter

  Wallace, James

  Key, Robert

  Walter, Robert

  King, Rt Hon Tom (Bridgwater)

  wells, Bowen

  Kirkbride, Miss Julie

  Whittingdale, John

  Laing, Mrs Eleanor

  Wigley, Rt Hon Dafydd

  Lansley, Andrew

  Willetts, David

  Letwin, Oliver

  Winterton, Mrs Ann (Congleton)

  Lewis, Dr Julian (New Forest E)

  Yeo, Tim

  Lidington, David

  Young, Rt Hon Sir George

  Lloyd, Rt Hon Sir Peter (Fareham)

  Llwyd, Elfyn

  Tellers for the Noes:

  Loughton, Tim

  Mr. Peter Luff and

  MacGregor, Rt Hon John

  Mr. Geoffrey

  McIntosh, Miss Anne

  Clifton-Brown.

  Question accordingly agreed to.
  Resolved,
  That the Order of the House [9th February] be supplemented as follows:

  Lords Amendments
  1. Proceedings on Consideration of Lords Amendments shall be completed at today's sitting and, if not previously concluded, shall be brought to a conclusion at Eleven o'clock.
  2.—(1) This paragraph applies for the purpose of bringing any proceedings to a conclusion in accordance with paragraph 1.
  (2) The Speaker shall first put forthwith any Question which has already been proposed from the Chair and not yet decided.
  (3) If that Question is for the amendment of a Lords Amendment, the Speaker shall then put forthwith—

  (a) the Question on any further Amendment of the Lords Amendment moved by a Minister of the Crown, and

  (b) the Question on any Motion made by a Minister of the Crown, That this House agrees or disagrees with the Lords in the Amendment or (as the case may be) in the Amendment as amended.

  (4) The Speaker shall then put forthwith—

  (a) the Question on any Amendment moved by a Minister of the Crown to a Lords Amendment, and

  (b) the Question on any Motion made by a Minister of the Crown, That this House agrees or disagrees with the Lords in the Amendment or (as the case may be) in the Amendment as amended.

  (5) The Speaker shall then put forthwith the Question on any Motion made by a Minister of the Crown, that this House disagrees with the Lords in a Lords Amendment.
  (6) The Speaker shall then put forthwith the Question, That this House agrees with the Lords in all the remaining Lords Amendments.
  (7) As soon as the House has agreed or disagreed with the Lords in any of their Amendments, or disposed of an Amendment relevant to a Lords Amendment which has been disagreed to, the Speaker shall put forthwith a single Question on any Amendments moved by a Minister of the Crown relevant to the Lords Amendment.

  Subsequent Stages
  3.—(1) The Speaker shall put forthwith the Question on any Motion made by a Minister of the Crown for the consideration forthwith of any further Message from the Lords on the Bill.

  (2) The proceedings on any further Message from the Lords shall, if not previously concluded, be brought to a conclusion one hour after their commencement.

  (3)Sub-paragraphs (4) to (7) apply for the purpose of bringing those proceedings to a conclusion.

  (4) The Speaker shall first put forthwith any Question which has already been proposed from the Chair and rot yet decided.

  (5) The Speaker shall then put forthwith the Question on any Motion made by a Minister of the Crown which is related to the Question already proposed from the Chair.

  (6) The Speaker shall then put forthwith the Question on any Motion made by a Minister of the Crown on or relevant to any item.

  (7) The Speaker shall then put forthwith the Question, That this House agrees with the Lords in all the remaining Lords Proposals.

  Reasons Committee
  4. The Speaker shall put forthwith the Question on any Motion made by a Minister of the Crown for the appointment, nomination and quorum of a Committee to draw up Reasons and the appointment of its Chairman.
  5.—(1) A Committee appointed to draw up Reasons shall report before the conclusion of the sitting at which it is appointed.
  (2) Proceedings in the Committee shall, if not previously brought to a conclusion, be brought to a conclusion 30 minutes after their commencement.
  (3) For the purpose of bringing any proceedings to a conclusion in accordance with sub-paragraph (2) the Chairman shall—

  (a)first put forthwith any Question which has already been proposed from the Chair and has not yet been decided; and

  (b) then put forthwith successively Questions on motions which may be made by a Minister of the Crown for assigning a Reason for disagreeing with the Lords in any of their Amendments.

  (4) The proceedings of the Committee shall be reported without any further Question being put.

  Miscellaneous
  6. If the House is adjourned, or the sitting is suspended, before the expiry of the period at the end of which any proceedings are to
  38
  be brought to a conclusion under this order, no notice shall be required of a Motion made at the next sitting by a Minister of the Crown for varying or supplementing the provisions of this Order.
  7.—(1) In this paragraph "the proceedings" means proceedings on Consideration of Lords Amendments, on any further Message from the Lords on the Bill, on the appointment and quorum of a Committee to draw up Reasons and the Report of such a Committee.

  (2) Standing Order No. 15(1) (Exempted business) shall apply to the proceedings.

  (3) The proceedings shall not be interrupted under any Standing Order relating to the sittings of the House.

  (4) No dilatory Motion with respect to, or in the course of, the proceedings shall be made except by a Minister of the Crown, and the Question on any such Motion shall be put forthwith.

  8. If proceedings on a Motion for the Adjournment of the House would, by virtue of Standing Order No. 24 (Urgent matters), commence at a time when proceedings to which paragraph 7 applies are in progress, proceedings on the Motion shall be postponed to the conclusion of those proceedings.

  Financial Services and Markets Bill
  Lords amendments considered.
Clause 2

  THE AUTHORITY'S GENERAL DUTIES
  Lords amendment: No. 1, in page 2, line 18, leave out ("any exercise of its general functions") and insert ("anything done in the discharge of those functions").
  4.28 pm
  The Economic Secretary to the Treasury (Miss Melanie Johnson): I beg to move, That this House agrees with the Lords in the said amendment.
  Madam Speaker: With this we may discuss Lords amendments Nos. 7 and 82.
  Miss Johnson: Amendment No. 1 is a technical change to clause 2, which sets out the general duties of the Financial Services Authority. Subsection (2) sets out its regulatory objectives while subsection (3) lists a number of principles to which it must have regard in discharging its general functions. Subsection (3)(f) makes it clear that the authority needs to minimise any adverse effects on competition that may result from its work. The amendment makes it clear that this requirement applies to any action that the authority takes in the discharge of its functions.
  Amendment No. 7 concerns value-for-money reviews. Clause 10 enables the Treasury to appoint an independent person to carry out value-for-money reviews of the FSA in its competent authority function, as well as its other functions under the Bill. The amendment simply makes it clear that under reviews of the authority generally, reviews of the competent authority cannot cover the merits of its general policy or principles but only the competent authority's use of resources in discharging its functions under part VI.
  Amendment No. 82 introduces a new clause after clause 72, requiring the competent authority to have regard to a number of things in discharging its general functions. Those general functions are defined in subsection (2). The new provision is similar to clause 2(3). The requirements of subsection (1) are intended to

  39
  act as constraints on the way in which the competent authority carries out its functions under part VI. Unlike clause 2(3), the new provision does not include a principle on the responsibilities of senior management. The competent authority is not responsible for the conduct of business or the prudential regulation of listed companies.
  Lords amendment agreed to.

Clause 5

  THE PROTECTION OF CONSUMERS
  Lords amendment: No. 2, in page 3, line 16, leave out from ("persons") to end of line 21 and insert ("—

  (a) who are consumers for the purposes of section 129; or

  (b) who, in relation to regulated activities carried on otherwise than by authorised persons, would be consumers for those purposes if the activities were carried on by authorised persons.")

  Miss Melanie Johnson: I beg to move, That this House agrees with the Lords in the said amendment.
  Mr. Deputy Speaker (Sir Alan Haselhurst): With this we may discuss Lords amendments Nos. 4, 5, 8, 51, 52, 154, 156, 237, 238, 240, 410 to 415 and 605.
  Miss Johnson: The amendments fulfil a commitment made in Committee to review the provisions on consumers. When clause 5 was considered in Committee, the hon. Member for Arundel and South Downs (Mr. Flight) said:
  The Bill advances different definitions of consumer, but it would be much simpler if it contained the same definition throughout. I can imagine muddle developing in the future as a result of the different definitions.
  The then Economic Secretary to the Treasury, now the Minister for Small Business and E-Commerce, said:
  we shall consider whether it is possible to have a more consistent definition throughout the Bill. That might be helpful.—[Official Report, Standing Committee A, 15 July 1999; c.205–06.]
  The amendments achieve greater consistency in references to consumers. They include the core definition in clause 129 and will ensure that those using the services offered, both by the appointed representatives of authorised persons and by trustees and those who deal with authorised persons, come within the definition, thereby eliminating potential gaps in coverage.
  The amendments will enable the Financial Services Authority to give appropriate protection to those who use the services of non-authorised persons who nevertheless carry on regulated activities—some lawfully, others unlawfully—such as Lloyd's underwriters, recognised exchanges, clearing houses and persons acting in contravention of the general prohibition.
  As well as introducing greater consistency, the amendments bring greater precision to the definition of consumers. They make it clear that the authority's rule-making powers extend to those whose rights or interests may be adversely affected by the use of services by another person only where that person is acting on their behalf or in a fiduciary capacity in relation to them. The amendments make corresponding changes to the definition of "client" for the purposes of clause 319.
  40
  Minor consumer-related changes to part IV and part XIII will help to meet a commitment given by the Government in Committee to improve and rationalise the supervisory procedures and the authority's decision-making procedures under the Bill more generally.
  Amendments Nos. 51 and 52 deal with part VI and bring the reference to consumers in clause 42 into line with clause 43(1) and 185(1)(c). Amendment No. 240 broadens the category of consumers in whose interests the authority can intervene in the business of an incoming European Economic Area or treaty firm under clause 185. That change will mean that the definition can cover all the consumers and potential consumers of regulated activities. It is necessary to ensure that the authority can act as necessary to avert systemic risks arising from such firms activities.
  Lords amendment agreed to.

  New clause
  Lords amendment: No. 3, after clause 6, to insert the following new clause—Duty of Authority to follow principles of good governance—
  (". In managing its affairs, the Authority must have regard to such generally accepted principles of good corporate governance as it is reasonable to regard as applicable to it.")
  Motion made, and Question proposed, That this House agrees with the Lords in the said amendment.—[Miss Melanie Johnson.]
  Mr. David Heathcoat-Amory: I beg to move an amendment to the Lords amendment, in line 2, leave out from 'to' to end of the Lords Amendment and insert
  all relevant generally accepted principles of good corporate governance and in discharging its functions the Authority must act in a way which is fair, reasonable, open and proportionate'.
  We shall have to be highly selective in speaking to the groups of amendments given the shortage of time, but the House should pause on amendment No. 3 on corporate governance because it raises important issues about how the FSA is run and how we can improve its accountability.
  We have debated that matter previously, but the Government have always been reluctant to ensure that the FSA respects the principles of good governance, even though they urge everyone else to abide by them. For instance, there is general agreement that companies—especially large public companies—should have split chief executive and chairman functions.
  Many other observations have been made under several chairmen. Cadbury, Hampel and Greenbury successively produced codes on good governance, which have been summarised in a combined code of corporate governance. That should also be binding on the FSA. The obvious rejoinder is that, unlike a public company, the FSA does not have shareholders. However, that does not dispose of the matter. The same issues of checks and balances and of accountability apply to the FSA—perhaps with additional force because of the authority's power. The FSA enjoys a high degree of statutory immunity; it will be a rule-making and thus a law-making body. It will be charged with enforcing its own rules, as well as investigating wrongdoing and fining those who transgress those rules. The concentration of executive power in the FSA means that it should abide by those basic rules of good governance.

  41
  That view was taken by several Members in another place. They persuaded the Government to table an amendment to introduce the concept of good governance. However, we believe that it does not go far enough. In relation to the split between the chairman and the chief executive, we should recall the conclusions and recommendations of the Joint Committee chaired by Lord Burns. Paragraph 113 stated that
  in the longer term we recommend that the posts of Chief Executive and Chairman should be separated and that a non-executive Chairman should be appointed. We see advantages in this of limiting the power of and focus on a single individual; enhancing the power of non-executive directors; and ensuring that control of the agenda does not lie exclusively with the executive.
  I agree with those recommendations, although that is not a criticism of the present incumbent at the FSA. That Committee and I have a high regard for the talents of Mr. Davies. We are looking to the future structure—on the ground that Bills are for ever, while incumbents come and go. We want to lay down a structure for the future administration of the FSA.
  We especially want to disperse power within the authority. There is already a sufficient concentration of executive power in the body, which is, after all, only a private company with statutory functions. Power should be dispersed within that company. There is also considerable merit in having one person running the FSA from within, while someone else acts as the public outward face and speaks for the authority in the outside world—a time-consuming job in itself.
  A separate non-executive chairman and chief executive would enhance the role of the latter and would give confidence in the regulating community that complaints would be considered at some remove from the chief executive and his office. Of course, other aspects of the Bill deal with complaints and we shall debate those later. However, splitting those roles would improve and increase confidence in the way that the FSA carries out its statutory functions. The Government have, in principle, adopted the concept of corporate governance, but they have not been persuaded of the merits of splitting the roles.
  Slightly alarmingly, the notes on the Government amendment passed in another place say only that the principles referred to in the amendment
  might include those contained in the Combined Code of the Committee on Corporate Governance.
  Therefore, it is not even clear that the FSA would adopt that combined code. The Government amendment is a watered-down proposal, which our amendment would strengthen. It would also ensure that good governance includes the concept of the authority acting in a way that is
  fair, reasonable, open and proportionate.
  I do not see how the Government could object to that. Indeed, other amendments would insert the concept of reasonableness into the Bill, so our amendment should be unobjectionable.
  The principle of openness should also be more clearly stated in the Bill. The Government do not have a good record on openness. We have already discovered from our consideration in Committee of the Finance Bill that there is a report on tobacco smuggling. The report is familiar to Ministers, but the Government regard it as secret and have failed to publish it, even thought it deals with a matter of public interest. They talk much about transparency
  42
  and openness, but they have delivered little in practice. We want to ensure that the FSA, at least, operates openly when it consults on making or changing rules and across the whole range of its operations.
  Our amendment would strengthen the commitment in the proposed new clause to good governance in the way that I have described. It would provide a stronger steer towards splitting the role of chairman and chief executive and it would ensure that the authority operates in a
  fair, reasonable, open and proportionate
  manner. Those are two modest concepts to tack on to the proposed new clause. I commend our amendment to the House.
  Mr. Howard Flight: I merely wish to ask the Government what they intend by the words that they have used. In the other place, the Opposition's objective was to shift the presumption that the FSA was not required to have a separate chairman and chief executive to the presumption that it would separate the roles. The current arrangements exist essentially because of Mr. Howard Davies.
  The proposed new clause contains the phrase
  as it is reasonable to regard as applicable to it
  and will operate in the context of the rather strange animal that is a private company with a particular statutory function. Given those words, our legal advice is that the presumption would not necessarily be for a proper corporate structure with a separate chairman and chief executive. What is the Government's intention and what do they believe the presumption in the proposed new clause will be?
  It has become clear that, in an increasing number of cases—particularly phase two inspections—FSA teams have acted in a way that has not been reasonable or open. Why should the Government not accept the requirement that the body should act in a way that is
  fair, reasonable, open and proportionate?
  If they cannot accept those broad terms, we should assume that they are happy for it to act in a way that is unfair, unreasonable, closed and disproportionate. As the Minister will be aware, this is not the first time that we have raised the issue of trying to get the corporate governance right. The Government have yet to give a satisfactory explanation of why they are unwilling to accept the general requirement on the regulator's conduct.
  4.45 pm
  Miss Melanie Johnson: I shall first deal with why the Opposition amendment to Lords amendment No. 3 is unacceptable. The Opposition amendment would require the FSA to act in a
  fair, reasonable, open and proportionate
  way in discharging its functions. The Opposition tabled a similar amendment when the Bill was in Committee, and on 8 July my predecessor, now the Minister for Small Business and E-Commerce, explained why it was unnecessary. She said that the FSA must act in a fair, reasonable and proportionate way, discharging its functions in a proper manner. As a body exercising public functions, it is bound to operate in accordance with administrative law and, if it fails to do so, it runs the risk of judicial review. Moreover, as a public authority for the purposes of the Human Rights Act 1998, it will be subject to constraints imposed by that Act.

  43
  Opposition Members may therefore ask why we are rejecting their amendment if, in any event, the FSA is required to act in accordance with it. Accepting the amendment would risk throwing into doubt whether every other public body whose governing legislation did not specify such requirements would be required to act in accordance with those principles. I assume that Opposition Members do not seek such an outcome.
  On openness, we have already put in place a variety of accountability measures and it may be worth while going through some of them quickly. In contrast with the current two-tier system, the FSA will be a single institutional regulator with clear objectives, regulatory principles and governance. However, in relation to procedures, the it will be required to consult, and to give the results of consultation, when making policy or changing rules and guidance. It will publish an annual report and have an open annual meeting. It will be required to provide a cost-benefit analysis of changes to its rules.
  The FSA is also required to set up consumer and practitioner panels as part of its commitment to consult and must consider representations by them. If it disagrees with them, it must give them a written statement of its reasons for doing so. There will be an independent investigator of complaints, who will report publicly, and an independent tribunal to which the FSA's decisions can be referred. I took exception to the remarks of the right hon. Member for Wells (Mr. Heathcoat—Amory) about this Government and openness, as our track record on that is extremely good. Indeed, the track record of the previous Government compares unfavourably with ours. The measures on openness and accountability that I have just outlined speak volumes for our achievements in taking those issues forward.
  Mr. Heathcoat-Amory: If the hon. Lady wishes to live up to her rhetoric, will she explain why the Government are suppressing the report on tobacco smuggling by Mr. Martin Taylor? That report was drawn up at public expense, so why does she not publish it?
  Miss Johnson: I am puzzled, because earlier we heard that there was not enough time to discuss the Bill. The matter raised by the right hon. Gentleman is being discussed at considerable length by members of the Committee considering the Finance Bill. However, he has returned to it, even though it has nothing to do with the issue that we are considering.
  The hon. Member for Arundel and South Downs (Mr. Flight) asked for clarification of the way in which the provision measures up to the principles of corporate governance. Principle A.2 of the combined code on corporate governance states:
  There should be a clear division of responsibilities at the head of the company which will ensure a balance of power and authority, such that no one individual has unfettered powers of decision.
  There is no incompatibility between combining the roles of chairman and chief executive and adherence to that principle of corporate governance. The objective, as the principle makes clear, is to
  ensure a balance of power and authority, such that no one individual has unfettered powers of decision.
  44
  Code provision A.2.1 states:
  A decision to combine the posts of Chairman and Chief Executive Officer in one person should be publicly justified. Whether the posts are held by different people or by the same person, there should be a strong and independent non-Executive element on the Board, with a recognised senior member other than the Chairman to whom concerns can be conveyed.
  The Chairman, Chief Executive and Senior Independent Director should be identified in the Annual Report.
  The FSA complies with all those requirements.
  Public justification is on page 107 of the FSA's annual report. There is a strong and independent non-executive element on the board. Indeed, paragraph 3(1)(a) of schedule 1 specifies that the majority of members of the governing body must be non-executive. Moreover, there is a recognised senior member other than the chairman: the non-executive deputy chairman of the FSA—Stewart Boyd QC. We have repeatedly made clear the important role that we expect him to play on the board.
  The chairman, chief executive and senior independent director are identified in the FSA's annual report. On the latter, page 108 states:
  Stewart Boyd QC acts as the company's lead non-Executive Director".
  In other words, the FSA complies fully with the requirements recommended by the combined code for companies, which combine the role of chairman and chief executive.
  I therefore stress that there is no incompatibility. The proposed structure is the best means of meeting the FSA's objectives of securing clear accountability and of ensuring speed of decision making. I therefore urge the House to agree with the Lords amendment and to oppose the Opposition amendment to it.
  Amendment negatived.
  Lords amendment agreed to.
  Lords amendments Nos. 4 and 5 agreed to.

  New clause
  Lords amendment: No. 6, after clause 9, to insert the following new clause—Duty to consider representations by the Panels—

  (".—(1) This section applies to a representation made, in accordance with arrangements made under section 7, by the Practitioner Panel or by the Consumer Panel.

  (2) The Authority must consider the representation.

  (3) If the Authority disagrees with a view expressed, or proposal made, in the representation, it must give the Panel a statement in writing of its reasons for disagreeing.")

  Motion made, and Question proposed, That this House agrees with the Lords in the said amendment.—[Miss
  Melanie Johnson.]
  Mr. Flight: I beg to move an amendment to the Lords amendment, in line 8, at end insert—
  '(4) The Authority's statement must be published in such manner as the Authority considers appropriate.'.
  The Government tabled the new clause on Third Reading in the other place in response to pressure from Conservative and Liberal Democrat Members. It concerns when the FSA disagrees with the view expressed or the proposal made by the practitioner or consumer panels in representations to the FSA. Under our amendment, the FSA would have to give the relevant panel a written

  45
  statement of its reasons for disagreeing. The Economic Secretary referred to that just a few minutes ago. As presently drafted, it is not clear under the new clause whether the FSA's statement should be made public. Our amendment would make that clear. We understand that the Government confirmed in the other place that such statements would be made public.
  Miss Melanie Johnson: The new clause proposed in Lords amendment No. 6 responds to points raised in another place in connection with representations made to the FSA by the practitioner and consumer panels. In line with suggestions made by Opposition Members, it will improve arrangements for giving feedback to the panels.
  The new clause will require the FSA to consider representations made to it by either panel in accordance with arrangements under clause 7 and, where the FSA disagrees with those representations, to make a written statement of its reasons for disagreeing. The new clause will add, in a structured way, a greater degree of transparency and therefore improves on the arrangements for the panels.
  I was rather surprised to discover that the Opposition had tabled their amendment, especially given that their colleagues in another place welcomed the new clause so warmly—I believe that Lord Kingsland described himself as delighted by it. When the new clause was introduced, Lord Kingsland asked whether reasons given by the FSA would be made public; my noble Friend Lord Bach explained that they would. It is self-evident that if the FSA issues a formal response to a formal representation, by the very act of doing so it puts its reasons into the public domain.
  It is a different matter to require, as the amendment would, that every such response is to be published by the FSA. To do so would be as likely to confuse as to shed light on discussions between the FSA and the panels. For example, it would be odd if the FSA were to publish its response to a representation that had, for whatever reason, not been published in the first place by the panel. Requiring automatic publication, without any regard to the nature of the issue involved, might also involve unnecessary and inappropriate expenditure by the FSA.
  It is quite possible that one of the panels might make a representation to the FSA in connection with a serious flaw or loophole that it had identified in the rules; the FSA might not agree with the panel's proposed solution, in which case it would have to write to the panel to explain why. However, I find it hard to imagine that the FSA, the panels or the vast majority of consumers and practitioners in general would want the existence of such a loophole to be exposed before an appropriate solution had been identified.
  Mr. Flight: Will the Economic Secretary explain clearly what the Government meant by giving a verbal assurance in the other place that the reasons would be made public? Either they will be set out, published and made public, or they will not—I do not understand why the Government appear to want to I have their cake and eat it.
  Miss Johnson: Ultimately, it will be for the panels to decide whether to publish statements made by the FSA when the FSA has decided, for its own reasons, not to do
  46
  so. I have no doubt that both the FSA and the panels will give full and proper consideration on a sensible, case-by-case basis to whether publication is appropriate. I urge the House to accept the new clause and to reject the Opposition amendment.
  Amendment negatived.
  Lords amendment agreed to.
  Lords amendments Nos. 7 and 8 agreed to.

Clause 14

  POWERS OF APPOINTED PERSON AND PROCEDURE
  Lords amendment: No. 9, in page 7, line 8, leave out subsection (4).
  The Financial Secretary to the Treasury (Mr. Stephen Timms): I beg to move, That this House agrees with the Lords in the said amendment.
  Mr. Deputy Speaker: With this we may discuss Lords amendments Nos. 189, 211 to 227, 229 to 233, 265, 266, 269, 314 to 325, 374, 551, 565 and 652.
  Mr. Timms: The main effect of the amendments is to rationalise the treatment in the Bill of legal professional privilege and to strengthen it. The changes are, in part, a response to concerns raised by the Opposition in Committee about the fact that privilege might not be adequately protected in all cases. Therefore, the amendments bring the Bill's definition of legal professional privilege into line with the Police and Criminal Evidence Act 1984. I believe that they will be broadly welcomed.
  At the same time, the amendments consolidate existing provisions of the Bill into a single clause that extends to all the information and document-gathering powers in the Bill. The existing, separate provisions that prevent different powers being used to require a person to disclose or permit the inspection of material that is subject to legal professional privilege are, therefore, made redundant and omitted.
  The amendments also simplify the drafting of clause 159 and other clauses in part XI that deal with the investigation powers of the FSA, and they align the investigation powers under part XVII in respect of collective investment schemes with the main provisions in part XI. I believe that all those amendments will be welcome and I urge the House to agree to them.
  Lords amendment agreed to.

Clause 18

  AUTHORISED PERSONS ACTING WITHOUT PERMISSION
  Lords amendment: No. 10, in page 8, line 19, leave out subsection (2) and insert—
  ("(2) The contravention does not—

  (a) make a person guilty of an offence;

  (b) make any transaction void or unenforceable; or

  (c)(subject to subsection (3)) give rise to any right of action for breach of statutory duty.

  (3) In prescribed cases the contravention is actionable at the suit of a person who suffers loss as a result of the contravention, subject to the defences and other incidents applying to actions for breach of statutory duty.")
  Mr. Deputy Speaker: With this we may discuss Lords amendments Nos. 25 to 29, 33, 35 to 44, 78, 89, 178, 179, 250 and 251.
  5 pm
  Miss Melanie Johnson: I beg to move, That this House agrees with the Lords in the said amendment.
  In the light of points made in this House, particularly by the right hon. and learned Member for North-East Bedfordshire (Sir N. Lyell), and in the other place, the Government have reconsidered the different provisions in the Bill dealing with rights of action and enforcement of agreements.
  The amendments on rights of action fulfil the Government's commitment given in Committee and on Report in this House to review and align the provisions on rights of action. The aim of the Government's amendments is to enable the current pattern of rights of action for rule breaches, as provided for under clauses 62 and 62A of the Financial Services Act 1986, to be reproduced as far as it is possible to do so given the different structure of the Bill in relation to contraventions of requirements imposed under parts IV, X and XIII.
  The amendments will enable the Treasury, subject to Parliament, to give rights of action to private persons if an authorised person has handled client money without the appropriate part IV permission, but not for a breach of a capital requirement or premium income limit imposed under that part. The Treasury will also be able to extend rights of action to non-private persons acting in a fiduciary capacity for a private person.
  Amendments Nos. 89 and 179 are technical improvements that relate to the transfer of the competent authority for listing function from the London stock exchange to the FSA. They ensure that the wording of the Bill properly reflects the fact that the transfer has taken place, but do not alter the basic position that clauses 141 and 142, which deal with rights of action for FSA rules made under part X, do not apply to listing rules.
  The amendments on enforcement of agreements meet Opposition concerns raised in Committee and on Report in this House about the grounds on which agreements entered into in the course of, or as a result of, an unauthorised regulated activity or illegal financial promotion will be enforced.
  As we said we would, we have reflected on those concerns and have tabled amendments that meet directly the points made by the right hon. and learned Member for North-East Bedfordshire and his colleagues. In particular, amendments Nos. 25 to 29, 33 and 38 to 44 introduce a single test for the court to determine whether an agreement is enforceable by considering whether it is just and equitable for it to be enforced.
  The other amendments make technical and drafting improvements. I commend the amendments to the House.
  Lords amendment agreed to.

Clause 19

  RESTRICTIONS ON FINANCIAL PROMOTION
  Lords amendment: No. 11 in, page 8, line 38, at end insert—
  ("(5A) An order under subsection (5) may, in particular, provide that subsection (1) does not apply in relation to communications—
  48

  (a) of a specified description;

  (b) originating in a specified country or territory outside the United Kingdom;

  (c) originating in a country or territory which falls within a specified description of country or territory outside the United Kingdom; or

  (d) originating outside the United Kingdom.

  (5B) The Treasury may by order repeal subsection (3).")
  Mr. Timms: I beg to move, That this House agrees with the Lords in the said amendment.
  Mr. Deputy Speaker: With this we may discuss Lords amendments Nos. 12 to 18, 172 to 174, 272 and 296.
  Mr. Timms: Clause 19 prohibits financial promotion unless the communicator is an authorised person or the promotion is approved by an authorised person. Clause 231 prohibits promotion by authorised persons of collective investment schemes unless the scheme is either authorised or recognised. Both clauses were extensively debated during the Committee stage in this House. The amendments debated in the other place were largely technical, tidying-up amendments made in response to concerns expressed by hon. Members in Committee.
  Amendments to clauses 19 and 231 allow for some exemptions to be made, including exemptions dealing with the territorial scope of each prohibition. Amendments to clause 137(1) on financial promotion rules ensure that the limits of this rule-making power are consistent with the limits on promotions by unauthorised persons. There are also some technical and consequential amendments to clause 19. I commend these amendments to the House.
  Mr. Flight: There were two big issues in this territory. One arose from clause 19 and the issue of the FSA being empowered to regulate cyberspace and anything that could affect a UK person. Our understanding is that the exemptions that have been published achieve what we felt was appropriate to be dealt with in clause 19.
  Secondly, we were particularly concerned that managers of UK-based collective investment schemes who were seeking to market those schemes outside the UK but within EU jurisdiction would be subject to competing regulatory jurisdictions. As the Bill was drafted, they would have been obliged to conform with the FSA's regulations and with those in the jurisdiction in which they were marketing the scheme. Again, we understand that the Government have addressed the issue satisfactorily. I merely ask for confirmation that that is so in both cases.
  Mr. Timms: It is certainly my view that all those concerns have been addressed satisfactorily. I hope that the House agrees.
  Lords amendment agreed to.
  Lords amendments Nos. 12 to 18 agreed to.

Clause 24

  AGREEMENTS MADE BY UNAUTHORISED PERSONS
  Lords amendment: No. 19, in page 10, line 34, leave out ("("the purchaser")")
  Miss Melanie Johnson: I beg to move, That this House agrees with the Lords in the said amendment.
  Mr. Deputy Speaker: With this we may discuss Lords amendments Nos. 20 to 24, 30 to 32, 34, 46 to 48, 53 to 56, 88, 98, 100, 106, 110, 113 to 119, 121, 122, 160 to 167, 190, 191, 260 to 264, 349, 375, 397, 405, 433, 435, 444, 446 to 456, 462 to 484, 536 to 539, 555, 560, 563, 564, 616, 617, 632, 637 to 649, 661, 663, 664 and 672.
  Miss Johnson: This large group of amendments provides a good illustration of the way in which the Bill's drafting has been improved and consistency achieved through technical refinement in another place. It is also an example of the fact that a minor drafting change to improve clarity in a Bill of this complexity can involve dozens of amendments representing absolutely no change in policy.
  I am sad to see that the right hon. Member for Bromley and Chislehurst (Mr. Forth) is no longer present, but I hope that Opposition Members will not be too disappointed if I deal with the amendments fairly briefly. They achieve a number of things. First, they standardise the references in the Bill to the acceptance of deposits. Secondly, they rationalise the references to insurance. Certain amendments correct grammatical errors that we have noticed, insert, correct and delete defined terms, and correct references to other provisions that have somehow become inaccurate. I am happy to acknowledge that some of the amendments reflect points made by the Opposition, who have identified potential shortcomings in the Bill's drafting.
  I am sure that hon. Members do not want me to deal with the amendments individually, despite the exhortations of the right hon. Member for Bromley and Chislehurst. The explanatory notes produced by the Treasury before the recess explain each of them for the benefit of those who are particularly curious.
  Lords amendment agreed to.
  Lords amendments Nos. 20 to 56 agreed to.

Clause 49

  APPLICATIONS UNDER THIS PART
  Lords amendment: No. 57, in page 22, line 28, after ("may") insert ("reasonably").
  Mr. Timms: I beg to move, That this House agrees with the Lords in the said amendment.
  Mr. Deputy Speaker: With this we may discuss Lords amendments Nos. 58, 74, 187, 188, 234, 235, 273, 304, 335, 372, 373, 430.
  Mr. Timms: I will not push my luck too far: I will say a few words on this group.
  50
  The amendments were tabled in response to discussion in Committee and on Report in the House of Commons, where some inconsistencies were identified in the circumstances in which the Bill uses express concepts of reasonableness, for example, in relation to powers of the FSA. We have had some discussion on that point already this afternoon.
  As a matter of administrative law, it is well understood that a body exercising public functions under statute must act "reasonably". That requirement will apply to the FSA, just as it does to other bodies such as the Treasury or the Secretary of State. If the FSA were to act in a way in which no reasonable authority would, that would give rise to a risk of challenge by judicial review.
  Imposing express requirements for the authority to act reasonably in exercising certain powers under the Bill might therefore make little real difference in the way in which the authority was required to act under those clauses, but, at the same time, it might cast doubt on the need for the authority, or indeed other public bodies, to act reasonably in other cases where the requirement to act reasonably was not made explicit.
  We have not sought to impose requirements in the Bill for the FSA to act reasonably in every particular circumstance, but we have tabled amendments to ensure that the Bill contains an express "reasonableness" element in identifying information that the authority may require a person to provide in support of an application. In such cases, it is appropriate to include such express provision because it qualifies the information that the authority can require a person to provide, as opposed to the way in which the authority is required to act.
  Amendment No. 430 differs from the other reasonableness amendments only in that it concerns the powers of an appointed auditor or actuary under clause 331 to require information and explanations from the officers of an authorised person, rather than the powers of the FSA.
  Amendments Nos. 187, 188, 372 and 373 amend clauses 301 and 152. At present, those clauses provide that the Director General of Fair Trading may require a person to produce documents only where they relate to a matter that is relevant to his investigation, but they do not make it clear that the same relevance test applies to a requirement to supply information. The amendments remedy that by applying the same relevance test to both documents and information.
  I believe that the House will see that the Bill as thus amended is consistent in the way that I have described. I commend the amendments to the House.
  Lords amendment agreed to.
  Lords amendment. No. 58 agreed to.

Clause 50

  DETERMINATION OF APPLICATIONS
  Lords amendment: No. 59, in page 23, line 3, leave out subsection (4) and insert—
  ("(4) If the Authority grants an application for, or for variation of, a Part IV permission, it must give the applicant written notice.
  (5) The notice must state the date from which the permission, or the variation, has effect.
  (6) If the Authority proposes—

  51

  (a) to give a Part IV permission but to exercise its power under section 40(6)(a) or (b) or 41(1), or

  (b) to vary a Part IV permission on the application of an authorised person but to exercise its power under any of those provisions (as a result of section 42(5)),

  it must give the applicant a warning notice.
  (7) If the Authority proposes to refuse an application made under this Part, it must (unless subsection (8) applies) give the applicant a warning notice.
  (8) This subsection applies if it appears to the Authority that—

  (a) the applicant is an EEA firm; and

  (b) the application is made with a view to carrying on a regulated activity in a manner in which the applicant is, or would be, entitled to carry on that activity in the exercise of an EEA right whether through a United Kingdom branch or by providing services in the United Kingdom.

  (9) If the Authority decides—

  (a) to give a Part IV permission but to exercise its power under section 40(6)(a) or (b) or 41(1),

  (b) to vary a Part IV permission on the application of an authorised person but to exercise its power under any of those provisions (as a result of section 42(5)), or

  (c) to refuse an application under this Part,

  it must give the applicant a decision notice.")
  Motion made, and Question proposed, That this House agrees with the Lords in the said amendment.—[Mr. Timms.]
  Mr. Deputy Speaker: With this it will be for the convenience of the House to consider an amendment to Lords amendment No. 59, Lords amendments Nos. 60 to 64, 71, 72, 75 to 77, 84 to 87, 97, 101, 102, 134 to 141, 236, 241 to 249, 252 to 254, 274 to 295, 297 to 303, 305 to 313, 393, 398 to 402, 503 to 525, 526, an amendment to Lords amendment No. 526, and Lords amendments Nos. 527 to 533, 546 and 604.
  5.15 pm
  Mr. Flight: Several Government amendments tabled in the other place dealt with procedural matters, particularly in relation to warning, decision and final notices. We view most of those amendments as improvements to the Bill and as having picked up many of the matters raised in this place in Committee. However, in the draftsman's haste to table the amendments, an error seems to have been made in Lords amendment No. 59. That is why we have tabled our amendment to that Lords amendment.
  Clause 50 was substantially redrafted on Report in the other place. It is concerned with the FSA's obligation to determine applications for permission to conduct a regulated activity. However, as drafted it provides that if the FSA proposes, after receiving an application for permission, to impose limitations under paragraph 40(7)(a) on the description of a regulated activity for which application has been made, or a narrower or a wider description under paragraph 40(7)(b), or a requirement under subsection 41(1), the FSA would have to issue the applicant with a warning notice, then a decision notice, and then a final notice. The provision applies even if the applicant, as part of the consideration of his application, requests the FSA to impose the limitation or to include the stated requirement up front.
  Therefore, currently the only alternatives are to go through the warning, decision and final notice procedure—which is surely a waste of everyone's time—or for the applicant to withdraw his application and
  52
  resubmit it in the form acceptable to the FSA. The trouble with the second alternative is that the six-month period for considering applications would start to run in relation to the new application and could put an applicant at considerable disadvantage.
  Therefore, our amendment to Lords amendment No. 59 provides that, if the FSA exercises its powers to impose limitations or specify particular descriptions of regulated activities under paragraphs 40(7)(a) or (b), or includes limitations under subsection 41(1) at the request of the applicant, the warning, decision, and final notice requirements would not apply. It is necessary to cover all the different types of notice, because the applicant may make his request at any stage—for example, after the warning notice has been given, but before a decision notice has been given.
  Our amendment to Lords amendment No. 59 is very technical. However, the Opposition hope that the Government will readily agree to it, on practical grounds. Our amendment to Lords amendment No. 526—which proposes inserting a new clause after clause 376—is more substantial than our previous amendment and designed to prevent the whole Bill hitting the rails in relation to the European convention on human rights.
  The Government have effectively made the European convention, which they clearly support, part of United Kingdom law. The House, too, has broadly indicated its support for the convention. Our amendment is intended to provide for compliance with the convention in relation to the disclosure of evidence to the accused. Other provisions of the Bill are simply not in compliance with the convention, although we have no doubt that the Chancellor of the Exchequer will certify—as required by the Human Rights Act 1998—that the Bill is compatible with the rights granted by the convention.
  We are particularly concerned about two specific matters: the right given to the accused not to have used against him evidence that was extracted from him only under compulsion of law; and the right to legal assistance. The Government have quite rightly provided those protections in the case of market abuse, but have refused to grant them in the case of ordinary disciplinary proceedings. Unfortunately, it is not possible to raise the latter issue now, as to appropriate amendments have been tabled on which to hang a debate on it. That is why our amendment to Lords amendment No. 526 relates only to the disclosure of evidence and does not go any wider. We hope that the Bill will comply with the European convention at least on this issue.
  We have requested repeatedly that the Financial Services Authority should give an accused person all the evidence available to it, even if it is helpful to the accused by showing that he could not have committed the offence. The Government have finally provided for that in certain cases. That is what our amendment is about. The new clause inserted by amendment No. 526 provides for important exceptions from that general principle. First, evidence does not have to be disclosed if it
  has been intercepted in obedience to a warrant issued under any enactment relating to the interception of communications
  or if it is subject to legal privilege. More worryingly, the new clause also allows the FSA to refuse the accused access to particular material if allowing him access
  would not be in the public interest

  53
  or would not be deemed to be fair in the FSA's eyes because of a potential prejudice to someone else's commercial interests.
  In all those cases, the European convention clearly requires the accused to be given access to the material, or at least to other protections in its place. That was the subject of three recent decisions of the European Court of Human Rights in February. All three cases related to the use of public interest immunity certificates by the UK Government. The court held that the withholding of such evidence under those certificates in principle contravened the convention. The court decided that the Government would comply with the convention if it gave the trial judge the withheld evidence, so that he could see its effect and decide for himself whether it should be introduced, or other protections could be provided, in particular giving the accused a summary of what was in the material that was not handed over. That is what we are seeking to achieve with the amendment, which provides that the accused must be told reasons for the refusal—although that is not sufficient.
  The Minister may repeat the Government's objection that the provisions should not apply to civil offences, because the decisions in question relate to criminal cases. We do not believe that that view is legally correct. Both decisions were based on article 6(1) of the European convention, which requires a fair hearing. The court's decision was that the hearing would not be fair if helpful evidence was withheld. Article 6(1) applies to civil as well as criminal offences, although perhaps the fair hearing requirement can be tailored differently in each case. We have received clear legal advice that the requirement in article 6(1) applies to disciplinary proceedings, even when they are treated as civil matters.
  The Minister will be aware that Lord Lester, who is one of the leading authorities on the subject, has written an opinion that was submitted to the Treasury and the Joint Committee. He said that disciplinary proceedings would be treated as proceedings on criminal offences for the purposes of the European convention. If they are not, they are at least quasi-criminal in our view, because the accused could be subject to unlimited fines and perhaps thrown out of the industry. The European Court of Human Rights is more likely to treat the proceedings as if they were criminal, rather than merely civil issues in this context. Quite apart from the European convention, it is a matter of English law that the prosecutor—as the FSA describes itself in the new regime—should give the accused access to all the evidence that it has, even if, or perhaps especially when, it is helpful to the accused.
  There are two key principles. One is the principle of natural justice. The second is the need for the legislation not to be bowled out quickly if it is to be operative. We believe that that will happen unless the Bill addresses the point raised by the amendment.
  Sir Nicholas Lyell: My hon. Friend the Member for Arundel and South Downs (Mr. Flight) has put the points clearly and succinctly on what can be reasonably expected as a matter of legal fairness and in terms of whether or not the Government's proposals comply with article 6 of the European convention on human rights. The question at issue is whether, unless the amendment is accepted, the Government's proposals will give the accused—of whatever name or description—a fair trial.
  54
  It is now fundamental to our law, happily, that where someone is accused of something, those acting as prosecutor should disclose all relevant documents, and should particularly be astute in disclosing any relevant documentation or other information in their possession which would assist the accused. The failure to do that on many occasions in the past underlies a large number of the serious miscarriages of justice with which we have had to wrestle over the past 15 years.
  The FSA will be an extremely powerful body. We do not object to its power—we are raising questions about the manner in which it exercises that power. It is important that these matters of quasi-prosecution-whether they come under a civil or criminal heading—should be conducted with scrupulous fairness. The FSA should follow rules that are likely to lead to fairness in practice.
  I await with interest what the Minister says on the cogent points that my hon. Friend the Member for Arundel and South Downs has made and which I have sought to support.
  Mr. Timms: These amendments fulfil an undertaking that we gave in Committee to table amendments to rationalise the decision-making procedures across the Bill as a whole. They do not just makes things neater and more consistent, but clarify a number of important issues raised during the Bill's passage.
  I wish to refer to the nature of the tribunal. Following our consultation on the Bill in 1998, we amended it to make clearer the first instance nature of the tribunal. However, concern was raised that we had not eliminated all room for doubt, so we have gone further. The amendments to part IX make absolutely explicit the ability of the tribunal to consider any evidence that it considers relevant. The amendments also make it absolutely clear that disciplinary decisions and decisions to withdraw authorisation or approval cannot take effect while the matter is still open to review by the tribunal or higher courts.
  Supervisory decisions, such as the imposition of requirements under part IV while a possible threat to the interests of consumers is evaluated, can take effect before that point—as Opposition Members acknowledged in Committee that they must—but only where the particular grounds for the action justify it taking effect earlier.
  We have replaced the various separate provisions dealing with notices for payment with a single provision in amendment No. 522—a concern raised by Opposition Members. The amendments make clear that the FSA cannot publicise the actions it proposes in warning and decision notices while the matter is open to review. I refer hon. Members to amendment No. 523, as there has been confusion on that point.
  In line with the recommendation of the Joint Committee, publication is generally required when any proposed action does take effect to ensure the necessary degree of transparency. However, information may not be published if that would be unfair or would prejudice the interests of consumers.
  The amendments also include extended provisions, giving rights of access to material held by the FSA in disciplinary-type cases. We have taken on board representations made to us by the Law Society and Opposition Members. These rights would include not only

  55
  the material on which the FSA relied in reaching its decision, but material it considered but did not rely upon, or which it obtained in the course of an investigation into the matter and which it considered may assist the other party.
  Those are generous rights of access, going beyond those generally available in administrative proceedings. They are modelled on those that apply in criminal cases, and we have introduced them for these cases to reflect the wide range of powers and sanctions under the Bill.
  5.30 pm
  Lords amendment No. 101 is a consequential change arising from the transfer of the official listing function. Other amendments in this group are consequential changes arising from the alignment of the sanctions for market abuse under part VIII with those available under parts V and XIV.
  Lords amendments Nos. 134, 135, 137, 138 and 140 make consequential changes to the procedural provisions in part VIII to reflect the wider range of available sanctions.
  I believe that the House will welcome these changes, which show how ready we have been to listen to the points made by the industry, other interested bodies and opposition parties, and how we have worked to improve the Bill at a technical level.
  The amendment to Lords amendment No. 59 is identical to one that was debated in another place and my response will be along similar lines to the points made there.
  When the authority grants a permission or variation in terms that the applicant has requested, that amounts to granting an application so the procedure that applies is the simple written notice procedure under clause 50(4) and not the warning/decision/final notice procedure under clause 50(6)(a).
  That includes requirements imposed on the permission under clause 47 when those requirements are requested by the applicant. When the request is made after the initial application is made but before it is determined, that should not delay the date on which the applicant will be able to benefit from the new permission. Equally, when the applicant asks for permission narrower than that originally sought, there is nothing to prevent the FSA from treating that as an application for the narrower permission and proceeding to grant it through the simple written notice procedure.
  The important point is that the amendment to Lords amendment No. 59 is unnecessary and, moreover, unhelpful because it casts doubt on whether clause 50(4) would apply in that situation. I agree with the hon. Member for Arundel and South Downs (Mr. Flight) that a person should be able to accept the requirements that the FSA proposes to impose if it grants the application. In practice. that will be achieved by the FSA telling the applicant that it is minded to impose a requirement, and the applicant will be able to accept the requirement either by submitting a notice under clause 50(3) withdrawing the application and a new application reflecting the requirements, or by submitting an application under clause 49(2) for a variation along the lines proposed by
  56
  the FSA. In either case, the Bill allows appropriately streamlined procedures to apply, enabling the application to be suitably expedited.
  The substance, although not the precise wording, of the amendment to Lords amendment No. 526 is also familiar from debates in another place. It would require a summary of any material withheld to be given to a person on whom the FSA proposes to impose a penalty. Subsections (2) and (3) of the new clause that amendment No. 526 will introduce will enable the FSA to withhold material in certain circumstances.
  Requiring the FSA to provide a summary of any such evidence would be going too far. Subsections (4) and (5) require notice to be given of the fact that material is being withheld on grounds that it is subject to privilege, or because the FSA has taken the view that access would be unfair or against the public interest. When such a view has been reached, subsection (5) also requires those reasons to be included in the notice. That will enable the person who is subject to the notice to consider whether he should refer the matter to the tribunal, but, in line with the general approach under other legislation, notice will not be given of material that is excluded because it has been intercepted under a warrant or indicates that such a warrant has been issued.
  I should remind the House that the FSA does not itself make use of such warrants, but in the interests of effective co-operation between law enforcement agencies we cannot exclude the possibility that it may have access to such material.
  The summary that the amendment to the Lords amendment would require would appear to have to cover material withheld under any of the cases set out in subsections (2) to (5) of the new clause. It cannot be right that the FSA should give anyone a summary of material that indicates the existence of an interception warrant, material obtained under such a warrant or information that is subject to legal professional privilege, including legal advice, or is subject to public interest immunity—for example, because it suggests the existence of an informer. Even if the amendment applied only to material considered for comparative purposes under subsection (2), it still would not be right.
  To the extent that the consistency of FSA decision-making is properly a matter for public concern, ample material will already be in the public domain on which to judge consistency with the FSA's general policy. The FSA will have to consult on and publish a statement of its policy on financial penalties. It will also publish material on the disciplinary actions it has taken in its annual report each year. That material will also be available to the tribunal, but the primary focus of the tribunal's decision will properly be the merits of the particular case before it. It is the merits of the case against which the proposed penalty must ultimately be judged.
  Hon. Members asked about the position with regard to the European convention. Convention rights will be fully met at the stage at which a reference is made to the tribunal, including rights of access to evidence. That is the fair and impartial tribunal required by article 6, before which, and for the purposes of which, evidence will be disclosed. The new clause introduced by the amendment to amendment No. 526 would go further than we are required to go by the convention and further than it is sensible to go. I hope that the House will resist that amendment.
  Question put, That the amendment to the Lords amendment be made:—
  The House divided: Ayes 141, Noes 250.

  Division No. 211]

  [5.37 pm

  AYES

  Ainsworth, Peter (E Surrey)

  Kennedy, Rt Hon Charles

  Allan, Richard

  (Ross Skye & Inverness W)

  Amess, David

  Key, Robert

  Arbuthnot, Rt Hon James

  King, Rt Hon Tom (Bridgwater)

  Ashdown, Rt Hon Paddy

  Kirkbride, Miss Julie

  Baker, Norman

  Laing, Mrs Eleanor

  Baldry, Tony

  Lansley, Andrew

  Bell, Martin (Tatton)

  Leigh, Edward

  Bercow, John

  Letwin, Oliver

  Beresford, Sir Paul

  Lewis, Dr Julian (New Forest E)

  Blunt, Crispin

  Lidington, David

  Boswell, Tim

  Lilley, Rt Hon Peter

  Brady, Graham

  Lloyd, Rt Hon Sir Peter (Fareham)

  Brand, Dr Peter

  Llwyd, Elfyn

  Brazier, Julian

  Loughton, Tim

  Brooke, Rt Hon Peter

  Lyell, Rt Hon Sir Nicholas

  Browning, Mrs Angela

  MacGregor, Rt Hon John

  Bruce, Ian (S Dorset)

  McIntosh, Miss Anne

  Bums, Simon

  MacKay, Rt Hon Andrew

  Burstow, Paul

  Maclean, Rt Hon David

  Butterfill, John

  McLoughlin, Patrick

  Cable, Dr Vincent

  Madel, Sir David

  Campbell, Rt Hon Menzies (NE Fife)

  Major, Rt Hon John

  Mawhinney, Rt Hon Sir Brian

  Chidgey, David

  May, Mrs Theresa

  Clappison, James

  Moss, Malcolm

  Clark, Dr Michael (Rayleigh)

  Norman, Archie

  Clarke, Rt Hon Kenneth (Rushcliffe)

  Oaten, Mark

  O'Brien, Stephen (Eddisbury)

  Collins, Tim

  Öpik, Lembit

  Cotter, Brian

  Ottaway, Richard

  Cran, James

  Page, Richard

  Curry, Rt Hon David

  Paice, James

  Davies, Quentin (Grantham)

  Paterson, Owen

  Davis, Rt Hon David (Haltemprice)

  Pickles, Eric

  Day, Stephen

  Portillo, Rt Hon Michael

  Dorrell, Rt Hon Stephen

  Randall, John

  Duncan, Alan

  Redwood, Rt Hon John

  Duncan Smith, Iain

  Rendel, David

  Evans, Nigel

  Robathan, Andrew

  Fabricant, Michael

  Robertson, Laurence

  Fallon, Michael

  Roe, Mrs Marion (Broxbourne)

  Fearn, Ronnie

  Rowe, Andrew (Faversham)

  Flight, Howard

  Ruffley, David

  Forth, Rt Hon Eric

  Russell, Bob (Colchester)

  Foster, Don (Bath)

  Sanders, Adrian

  Fowler, Rt Hon Sir Norman

  Sayeed, Jonathan

  Fraser, Christopher

  Shephard, Rt Hon Mrs Gillian

  Gale, Roger

  Shepherd, Richard

  Gill, Christopher

  Simpson, Keith (Mid—Norfolk)

  Gillan, Mrs Cheryl

  Smith, Sir Robert (W Ab'd'ns)

  Gray, James

  Soames, Nicholas

  Greenway, John

  Spelman, Mrs Caroline

  Grieve, Dominic

  Spicer, Sir Michael

  Gummer, Rt Hon John

  Spring, Richard

  Hague, Rt Hon William

  Stanley, Rt Hon Sir John

  Hammond, Philip

  Steen, Anthony

  Hawkins, Nick

  Swayne, Desmond

  Heald, Oliver

  Swinney, John

  Heathcoat—Amory, Rt Hon David

  Syms, Robert

  Horam, John

  Taylor, Ian (Esher & Walton)

  Howard, Rt Hon Michael

  Taylor, John M (Solihull)

  Howarth, Gerald (Aldershot)

  Taylor, Matthew (Truro)

  Jack, Rt Hon Michael

  Taylor, Sir Teddy

  Jenkin, Bernard

  Trend, Michael

  Johnson Smith, Rt Hon Sir Geoffrey

  Tyrie, Andrew

  Viggers, Peter

  Keetch, Paul

  Walter, Robert

  58

  Wells, Bowen

  Yeo, Tim

  Whitney, Sir Raymond

  Young, Rt Hon Sir George

  Whittingdale, John

  Wigley, Rt Hon Dafydd

  Tellers for the Ayes:

  Willetts, David

  Mr. Peter Luff and

  Winterton, Mrs Ann (Congleton)

  Mr. Geoffrey

  Winterton, Nicholas (Macclesfield)

  Clifton-Brown.

  NOES

  Ainger, Nick

  Donohoe, Brian H

  Ainsworth, Robert (Cov'try NE)

  Doran, Frank

  Alexander, Douglas

  Drew, David

  Allen, Graham

  Eagle, Angela (Wallasey)

  Armstrong, Rt Hon Ms Hilary

  Eagle, Maria (L'pool Garston)

  Atherton, Ms Candy

  Edwards, Huw

  Austin, John

  Efford, Clive

  Battle, John

  Ellman, Mrs Louise

  Bayley, Hugh

  Ennis, Jeff

  Beard, Nigel

  Field, Rt Hon Frank

  Beckett, Rt Hon Mrs Margaret

  Fisher, Mark

  Begg, Miss Anne

  Fitzpatrick, Jim

  Bell, Stuart (Middlesbrough)

  Fitzsimons, Mrs Lorna

  Benn, Hilary (Leeds C)

  Foster, Michael Jabez (Hastings)

  Benn, Rt Hon Tony (Chesterfield)

  Foster, Michael J (Worcester)

  Benton, Joe

  Galloway, George

  Berry, Roger

  Gapes, Mike

  Best, Harold

  Gardiner, Barry

  Betts, Clive

  George, Bruce (Walsall S)

  Blackman, Liz

  Gerrard, Neil

  Blears, Ms Hazel

  Gibson, Dr Ian

  Blizzard, Bob

  Godman, Dr Norman A

  Boateng, Rt Hon Paul

  Godsiff, Roger

  Borrow, David

  Goggins, Paul

  Bradley, Keith (Withington)

  Golding, Mrs Llin

  Bradley, Peter (The Wrekin)

  Gordon, Mrs Eileen

  Bradshaw, Ben

  Griffiths, Jane (Reading E)

  Brinton, Mrs Helen

  Griffiths, Nigel (Edinburgh S)

  Brown, Russell (Dumfries)

  Grogan, John

  Buck, Ms Karen

  Gunnell, John

  Burgon, Colin

  Hall, Mike (Weaver Vale)

  Butler, Mrs Christine

  Hall, Patrick (Bedford)

  Campbell, Ronnie (Blyth V)

  Hamilton, Fabian (Leeds NE)

  Campbell—Savours, Dale

  Heal, Mrs Sylvia

  Cann, Jamie

  Healey, John

  Caplin, Ivor

  Henderson, Ivan (Harwich)

  Caton, Martin

  Heppell, John

  Chapman, Ben (Wirral S)

  Hinchliffe, David

  Clark, Rt Hon Dr David (S Shields)

  Hope, Phil

  Clark, Paul (Gillingham)

  Hopkins, Kelvin

  Clarke, Eric (Midlothian)

  Howarth, Alan (Newport E)

  Clarke, Rt Hon Tom (Coatbridge)

  Howarth, George (Knowsley N)

  Clarke, Tony (Northampton S)

  Howells, Dr Kim

  Clelland, David

  Hughes, Kevin (Doncaster N)

  Clwyd, Ann

  Humble, Mrs Joan

  Coffey, Ms Ann

  Hurst, Alan

  Coleman, Iain

  Hutton, John

  Connarty, Michael

  Iddon, Dr Brian

  Corbett, Robin

  Illsley, Eric

  Corbyn, Jeremy

  Jackson, Ms Glenda (Hampstead)

  Cousins, Jim

  Jackson, Helen (Hillsborough)

  Crausby, David

  Jamieson, David

  Cryer, Mrs Ann (Keighley)

  Jenkins, Brian

  Cryer, John (Hornchurch)

  Johnson, Alan (Hull W & Hessle)

  Cunningham, Rt Hon Dr Jack

  Johnson, Miss Melanie

  (Copeland)

  (Welwyn Hatfield)

  Cunningham, Jim (Cov'try S)

  Jones, Rt Hon Barry (Alyn)

  Darvill, Keith

  Jones, Jon Owen (Cardiff C)

  Davey, Valerie (Bristol W)

  Jones, Martyn (Clwyd S)

  Davidson, Ian

  Keeble, Ms Sally

  Davies, Rt Hon Denzil (Llanelli)

  Keen, Alan (Feltham & Heston)

  Davies, Geraint (Croydon C)

  Keen, Ann (Brentford & Isleworth)

  Dawson, Hilton

  Kelly, Ms Ruth

  Dean, Mrs Janet

  Kemp, Fraser

  Denham, John

  Khabra, Piara S

  Dismore, Andrew

  Kidney, David

  Dobbin, Jim

  King, Andy (Rugby & Kenilworth)

  59

  King, Ms Oona (Bethnal Green)

  Ross, Ernie (Dundee W)

  Kingham, Ms Tess

  Rowlands, Ted

  Lawrence, Mrs Jackie

  Roy, Frank

  Laxton, Bob

  Ruddock, Joan

  Leslie, Christopher

  Russell, Ms Christine (Chester)

  Levitt, Tom

  Ryan, Ms Joan

  Lewis, Ivan (Bury S)

  Salter, Martin

  Linton, Martin

  Sarwar, Mohammad

  Lock, David

  Savidge, Malcolm

  Love, Andrew

  Sawford, Phil

  McAvoy, Thomas

  Sedgemore, Brian

  McCabe, Steve

  Shaw, Jonathan

  McDonagh, Siobhain

  Sheldon, Rt Hon Robert

  Macdonald, Calum

  Simpson, Alan (Nottingham S)

  McDonnell, John

  Skinner, Dennis

  McIsaac, Shona

  Smith, Angela (Basildon)

  McKenna, Mrs Rosemary

  Smith, John (Glamorgan)

  McNamara, Kevin

  Smith, Llew (Blaenau Gwent)

  McNulty, Tony

  Soley, Clive

  MacShane, Denis

  Southworth, Ms Helen

  Mactaggart, Fiona

  Steinberg, Gerry

  McWilliam, John

  Stewart, Ian (Eccles)

  Mahon, Mrs Alice

  Stoate, Dr Howard

  Marsden, Gordon (Blackpool S)

  Strang, Rt Hon Dr Gavin

  Marsden, Paul (Shrewsbury)

  Stringer, Graham

  Marshall-Andrews, Robert

  Sutcliffe, Gerry

  Martlew, Eric

  Taylor, Rt Hon Mrs Ann

  Maxton, John

  (Dewsbury)

  Michael, Rt Hon Alun

  Taylor, Ms Dari (Stockton S)

  Michie, Bill (Shef'd Heeley)

  Taylor, David (NW Leics)

  Miller, Andrew

  Temple-Morris, Peter

  Moffatt, Laura

  Thomas, Gareth R (Harrow W)

  Moonie, Dr Lewis

  Timms, Stephen

  Moran, Ms Margaret

  Tipping, Paddy

  Mountford, Kali

  Todd, Mark

  Mudie, George

  Touhig, Don

  Mullin, Chris

  Trickett, Jon

  Murphy, Jim (Eastwood)

  Turner, Dennis (Wolverh'ton SE)

  Murphy, Rt Hon Paul (Torfaen)

  Turner, Dr Desmond (Kemptown)

  Naysmith, Dr Doug

  Turner, Neil (Wigan)

  O'Brien, Mike (N Warks)

  Twigg, Derek (Halton)

  Olner, Bill

  Twigg, Stephen (Enfield)

  O'Neill, Martin

  Tynan, Bill

  Organ, Mrs Diana

  Walley, Ms Joan

  Palmer, Dr Nick

  Ward, Ms Claire

  Pearson, Ian

  Wareing, Robert N

  Pendry, Tom

  White, Brian

  Perham, Ms Linda

  Whitehead, Dr Alan

  Pickthall, Colin

  Williams, Rt Hon Alan

  Pike, Peter L

  (Swansea W)

  Plaskitt, James

  Williams, Mrs Betty (Conwy)

  Pond, Chris

  Wills, Michael

  Pope, Greg

  Winnick, David

  Prentice, Ms Bridget (Lewisham E)

  Winterton, Ms Rosie (Doncaster C)

  Prentice, Gordon (Pendle)

  Wood, Mike

  Purchase, Ken

  Woodward, Shaun

  Quin, Rt Hon Ms Joyce

  Worthington, Tony

  Quinn, Lawrie

  Wyatt, Derek

  Radice, Rt Hon Giles

  Reed, Andrew (Loughborough)

  Tellers for the Noes:

  Reid, Rt Hon Dr John (Hamilton N)

  Mr. Jim Dowd and

  Rooney, Terry

  Mrs. Anne McGuire.

  Question accordingly negatived.
  Lords amendments agreed to.
  Lords amendments Nos. 60 to 64 agreed to.

Clause 55

  PROHIBITION ORDERS
  Lords amendments: No. 65, in page 24, line 24, leave out ("or an exempt person")
  Miss Melanie Johnson: I beg to move, That this House agrees with the Lords in the said amendment.
  Mr. Deputy Speaker: With this we may discuss Lords amendments Nos. 66, 67, 69, 70, 406 to 409, 416 and 417.
  Miss Johnson: Following consultation, part XX was introduced on Report. The amendments debated in another place introduced further necessary refinements to ensure that part XX works properly and in a way that is consistent with the rest of the Bill. It has the effect that certain professional firms which, among other things, are subject to regulation by a designated professional body, and offer financial services as an incidental part of their professional practice, will not require authorisation under the Bill.
  Amendments Nos. 65 to 67 and 69 and 70 will amend clause 55 on prohibition orders so as to enable such an order to be issued, preventing an individual from performing functions in relation to an exempt regulated activity carried on by a professional firm which benefits from the exemption from the general prohibition under part XX.
  As for exempt persons, amendment No. 406 will amend the definition of "exempt regulated activities" in clause 316. The amendment is the first in a package that will enable a professional firm which has the benefit of a part XX exemption also to carry on regulated activities as an exempt person without contravening the general prohibition. Clause 318 sets out the tests which need to be met in order for a professional firm to qualify for the exemption.
  Amendment No. 407 is the second amendment in the package. It means that a professional firm carrying on exempt regulated activities under part XX will not be held to be in breach of a prohibition set out in clause 318(5) where he is also carrying on regulated activities in relation to which he is an exempt person. Amendment No. 408—the third amendment in the package—would amend subsection (7) so that where a professional firm carries on exempt regulated activities under part XX, it may also carry on activities as an exempt person—for instance, as an appointed representative.
  Clause 323 requires the designated professional bodies to make rules designed to ensure that professional firms that benefit from the part XX exemption do not carry on regulated activities that are not complementary to providing particular services to a particular client. Amendment No. 416 completes the picture in relation to professional firms which are also exempt persons. It means that the clause 323 rule-making requirement will not extend to regulated activities conducted by professional firms as exempt persons under the Bill.
  Amendment No. 417 will introduce a new clause into the Bill after clause 323, making it an offence for a person to describe himself as one who has the benefit of the part XX exemption in relation to a particular regulated activity, or
  behaves, or otherwise holds himself out, in a manner which indicates (or which is reasonably likely to be understood as indicating) that he is such a person,
  when he is not. The new clause would create an offence similar to that set out in clause 22, bringing persons who give the impression that they benefit from the provisions

  61
  of part XX when they do not, into line with persons who give the impression that they are authorised or exempt persons when they are not.
  Clause 319 allows the authority to direct that the exemption from the general prohibition is not to apply to certain classes of professional. The authority may exercise this power only where it is satisfied that it is desirable to do so in the interests of clients.
  Amendment No. 409 will require that any direction must be published in the way
  "best calculated to bring it to the attention of the public.
  It will allow the authority to charge a reasonable fee for providing a copy of the direction, and requires it to give without delay a copy of any direction to the Treasury. These requirements ensure consistency between directions given under this clause and those given under clauses 309 and 311, both of which are in respect of Lloyd's.
  Lords amendment agreed to.
  Lords amendments Nos. 66 to 78 agreed to.

Clause 72

  THE COMPETENT AUTHORITY
  Lords amendment: No. 79, in page 33, line 5, leave out ("Stock Exchange") and insert ("Authority")
  Mr. Timms: I beg to move, That this House agrees with the Lords in the said amendment.
  Mr. Deputy Speaker: With this we may discuss Lords amendments Nos. 80, 81, 83, 90 to 96, 99, 104, 105, 107 to 109, 111, 112, 436, 559, 626 to 631 and 633 to 636.
  Mr. Timms: This group of amendments relates to the provisions of part VI, which deals with the listing of securities. They are consequential upon the decision to transfer the competent authority for listing function from the London stock exchange to the FSA.
  The House will recall that when the Bill was originally drafted, the assumption was that the stock exchange would continue as the UK's competent authority. However, in the light of the stock exchange's decision to demutualise and become a for-profit company, which was announced in July 1999, it was inappropriate for it to continue to exercise the public function of competent authority. The FSA has now taken on that role under the Official Listing of Securities (Change of Competent Authority) Regulations 2000, which came into force on 1 May 2000.
  Although the transfer of functions to the FSA has already taken place and is working well, it is clearly necessary that the Bill should also take account of the new arrangements. My hon. Friend the Economic Secretary therefore announced in Committee that we would be bringing forward amendments to that effect in due course. The amendments were made in another place.
  The amendments fall into two categories. Some, such as amendment No. 79, which will replace the words "Stock Exchange" with the word "Authority", are simply drafting changes. However, there is a category of amendments which is intended to provide for how the FSA is to carry out its responsibilities as the competent authority. The key amendment in this respect is amendment No. 626, which will introduce a new schedule
  62
  after schedule 6. That new schedule applies the provisions of the rest of the Bill to the authority, with modifications, when it is exercising the competent authority function. It does not simply apply the entire Bill en bloc to the competent authority because there are differences between the regulatory and listing functions, which it is helpful to allow for in the arrangements that we make.
  So the schedule disapplies clause 7, which places a duty on the FSA to make arrangements for consulting practitioners and consumers. That is not necessary in the context of the competent authority because it already has a listing committee which fulfils that function, and which will continue in existence when the Bill comes into force.
  The remainder of the amendments are very much along the lines that I have described, and I think that they will be broadly welcomed.
  Mr. Flight: The change from the stock exchange to the FSA as the listing authority was debated at considerable length both in Committee and at the time of the relevant order. Many questions were raised. The central issue was how matters would go forward in future. Since then, the proposed merger of the London and Frankfurt stock exchanges has been announced. How are the Government expecting the listing role to work in that context?
  In particular, under the new arrangements, it is envisaged that a continuing, traditional exchange in London will deal with established blue chip companies, and that growth and new economy stocks will be listed in Frankfurt. Do the Government intend the FSA to be the listing authority for such stocks, even if traded in Frankfurt, or do they intend to limit the FSA's role as the listing authority to stocks traded only on the continuing blue chip London stock exchange?
  6 pm
  I understand that the intention is that stocks could be listed by the FSA but traded in Frankfurt. That would give rise to major international problems because pension funds, collective investment schemes and other such vehicles frequently have requirements that securities should be listed and traded at the same recognised stock exchange. Therefore, many United Kingdom stocks could be listed not on the exchange but by the FSA as the listing authority, and traded on a different stock exchange—Frankfurt. That could happen quickly. The fact that Frankfurt is involved in a merger does not cease to make it separate from the London stock exchange. If that were the case, large numbers of stocks would be held illegally in various portfolios around the world.
  Few of us expected the stock exchange proposals to come forth in their current form. The reaction of the members of the stock exchange suggests that the deal may not go ahead in that form, but the possibility that the London and Frankfurt stock exchanges might merge was contemplated when the FSA became the listing authority, and the Government have become involved in the process. It is fine to say that the stock exchanges can do what they want, but the Government clearly have a responsibility because the listing authority—the FSA—is part of the public sector.
  In essence, the mechanism for transferring the team of people and the listing responsibility to the FSA has been provided for under the Bill, the amendments and the exemption order. That mechanism is operating, but a very

  63
  different stock exchange scene could come into play, against which it must interact. Therefore the Government should tell the House how they expect those issues to be addressed so that they do not damage the ability of investors throughout the world to invest in British securities.
  Mr. Tim Loughton: I shall add some questions to those asked by my hon. Friend the Member for Arundel and South Downs (Mr. Flight). The story of the competent authority has been changing fast ever since it was first considered in Committee just after the summer recess. Indeed, we faced a wholly different scenario in Committee when we returned from the summer recess to be told suddenly that the stock exchange would lose its role as the competent listing authority, in favour of the FSA. That news was not heralded before the summer and it was certainly not envisaged by the head of the FSA earlier last year.
  Now—just six or seven months later, as my hon. Friend said—the entire scenario is about to change again because of the proposed tie-up between London and Frankfurt, which, depending on the members of the London stock exchange, may or may not happen, although it has been agreed in Germany. Therefore, we must ask some questions. If that takeover goes ahead, what are the listings standards for the German equivalent of the FSA—the name of which I shall not attempt to pronounce, as some did in Committee.
  Exactly what will be the link between the London and Frankfurt listing authorities? Where will the division of spoils lie, and for which stocks will which body be the competent authority? Are there any implications for alternative investment market stocks remaining with the stock exchange as the competent authority? I have raised those issues many times. If the new technology stocks, of which the AIM has many examples, go to Frankfurt—which seems likely—surely the AIM may go as well, in which case the stock exchange will be left with no listing responsibilities.
  We have asked questions, which were never properly resolved, about the apparent conflict of interest between the FSA acting as the competent listing authority—raking in about £29 million, as the stock exchange did last year—and its power to regulate companies that have obtained a listing, for which they pay a fee to the FSA. The implication is that regulatory standards may be lowered to bring more companies to the market for listing, which will provide more listing revenue. Such conflicts of interests still exist, and are muddied even further by the division of responsibilities between London and Frankfurt.
  I am not entirely clear about what will happen if the merger between London and Frankfurt takes place before NASDAQ comes on the scene. That third suitor waiting at one end of the aisle may change the entire scenario. Given the many changes that have taken place, we deserve a more detailed explanation of exactly what will happen. Companies that want to list need clarity. The regulatory authorities in London and Frankfurt may have different approaches, and we have heard only about the supposed commercial advantages of the merger, not about the effect
  64
  on the companies to be listed, or to which regulatory authority they will be beholden. Will the Minister elaborate further?
  Mr. Timms: The hon. Member for East Worthing and Shoreham (Mr. Loughton) is right about the speed at which the developments have unfolded, but we have no doubt that the provisions relating to the recognition of exchanges can cope with structures such as the proposed international exchanges. We are confident that the recognition requirements for exchanges will be robust enough to cope with issues that may arise because of the operations outside the UK of UK-based exchanges.
  The hon. Members for Arundel and South Downs (Mr. Flight) and for East Worthing and Shoreham asked some detailed questions about the listing regime, but its details are not settled as yet. It would appear that companies will not be forced to give up their current listing, so both markets will be able to trade in the shares of companies operating under different listing regimes. That happens already; overseas companies listed on the London stock exchange do not have to comply with all the listing rules. The differences between UK and German listing regimes may be dealt with under the trading rules set by international exchanges. Those additional requirements may bring the two regimes more into line.
  A misunderstanding may have arisen. The directives require each member state to appoint a competent authority for listing, but there is no requirement that securities have to be listed to be admitted to trade on an exchange. Listing is a seal of approval, ensuring that investors know that the issuers of a security will provide certain information to the markets at prescribed times. It is also an EU-wide concept; an enterprise admitted to listing in one member state can be admitted to trading as a listed security on any stock exchange in any member state. The announced merger would not therefore raise any problems for listing.
  Lords amendment agreed to.
  Lords amendments Nos. 80 to 102 agreed to.

  New clause
  Lords amendment: No. 103, after clause 92, to insert the following new clause—Competition scrutiny—"Competition
  —(1) The Treasury may by order provide for—

  (a) regulating provisions, and

  (b) the practices of the competent authority in exercising its functions under this Part ("practices"),

  to be kept under review,
  (2) Provision made as a result of subsection (1) must require the person responsible for keeping regulating provisions and practices under review to consider—

  (a) whether any regulating provision or practice has a significantly adverse effect on competition; or

  (b) whether two or more regulating provisions or practices taken together have, or a particular combination of regulating provisions and practices has, such an effect.

  (3) An order under this section may include provision corresponding to that made by any provision of Chapter III of Part X.
  (4) Subsection (3) is not to be read as in any way restricting the power conferred by subsection (1).
  (5) Subsections (6) to (8) apply for the purposes of provision made by or under this section.
  (6) Regulating provisions or practices have a significantly adverse effect on competition if—

  (a) they have, or are intended or likely to have, that effect; or

  (b) the effect that they have, or are intended or likely to have, is to require or encourage behaviour which has, or is intended or likely to have, a significantly adverse: effect on competition.

  (7) If regulating provisions or practices have, or are intended or likely to have, the effect of requiring or encouraging exploitation of the strength of a market position they are to be taken to have, or be intended or be likely to have, an adverse effect on competition.
  (8) In determining whether any of the regulating provisions or practices have, or are intended or likely to have, a particular effect, it may be assumed that the persons to whom the provisions concerned are addressed will act in accordance with them.
  (9) "Regulating provisions" means—

  (a) listing rules,

  (b) general guidance given by the competent authority in connection with its functions under this Part.")

  Miss Melanie Johnson: I beg to move, That this House agrees with the Lords in the said amendment.
  Mr. Deputy Speaker (Mr. Michael J. Martin): With this we may discuss Lords amendments Nos. 181, 182 and 183 and the amendment thereto, 184 to 186, 192 to 210, 337, 338, 353 to 371, 376 to 390, 392, 442 and 660.
  Miss Johnson: This group of amendments completes the changes that we made in the House on the competition scrutiny regime for the FSA in the light of the Cruickshank report. The changes made in another place apply to recognised bodies under part XVIII the same scrutiny arrangements as apply to the FSA, and give the Treasury a power under part VI to do likewise for the competent authority listing.
  The headline change is that we have given the Competition Commission an important role in the competition scrutiny arrangements and reduced the scope for Ministers to take a different view from the competition authorities.
  In another place, changes were made to three aspects of the FSA scrutiny arrangements. First, improvements were made to the definition of what the regime was intended to cover. The description of what is bad for competition was revised so as to take the wording away from that used in article 81 of the European treaty. Similar language is, of course, used in chapter I of part I of the Competition Act 1998.
  However, the Competition Act and the treaty are concerned with the behaviour of commercial undertakings. Given that the provisions of part X are concerned with the application of competition controls to the effect of law and practices adopted in the exercise of statutory functions, that language is not appropriate here.
  Amendment No. 183 therefore removes that provision and replaces it with one that refers to
  a significantly adverse effect on competition.
  The amendment will also allow the director general and the commission to look at rules and practices of the authority that require or encourage a person to exploit a strong market position.
  Amendments Nos. 184, 185, 186, 194, 195, 197, 200, 202 and 204 make consequential changes. Amendments Nos. 181 and 182 make further drafting changes clarifying what the authority's regulatory provisions cover and what, therefore, the competition authorities should consider.
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  Secondly, in another place, the exclusion from the Competition Act 1998 was narrowed from things "contemplated" by the FSA's regulatory provisions to those "encouraged" by them. We said that we would narrow the exclusion in response to the Cruickshank report. That is achieved by amendments Nos. 205, 207 and 209.
  Amendments Nos. 206, 208 and 210 remove the exclusion from the Competition Act for things done as a result of the practices of the authority. That is because only the regulating provisions, including guidance, are relevant here.
  6.15 pm
  Sir Nicholas Lyell: I have been following the Minister's argument closely. I think that she is telling us that, as a result of the amendments, the Office of Fair Trading will be able to supervise the FSA in that, if the authority introduces rules that are anti-competitive, the OFT would have some influence. Is that the case?
  Miss Johnson: Yes, but it would be more technically correct to say that the Competition Commission, rather than the OFT, would be in that position.
  The third point is that drafting amendments were made to clause 153 concerning the role of the Competition Commission to bring it into line with similar provisions under the Fair Trading Act 1973. Those were amendments Nos. 192, 193, 196, 198, 199, 201 and 203.
  Amendment No. 103 inserts a new clause after clause 92, giving the Treasury a power to subject the regulating provisions of the competent authority—the listing rules and general guidance it produces—and its practices to a competition scrutiny regime. The Treasury proposes to use that power to create a competition scrutiny regime for the competent authority that is broadly similar to the regime for the FSA—in its role as financial services regulator—as provided for by chapter III of part X. The power will enable the Treasury to provide for exclusions from the provisions of the Competition Act analogous to those for which chapter III of part X makes provision.
  Mr. Andrew Tyrie: The proposed new clause states:
  The Treasury may by order provide for.
  Will the Minister tell us why the wording is not "will by order"? In fact, the subsection provides for matters
  to be kept under review.
  Why has the Treasury been given discretion not to keep matters under review?
  Miss Johnson: Because that is what we wanted the new clause to say—that is the obvious answer. The hon. Gentleman may wish that it said something different, but it says what we want it to say. That seems perfectly reasonable.
  Sir Nicholas Lyell: The point of my earlier question is also relevant to that put by my hon. Friend the Member for Chichester (Mr. Tyrie). I have been much concerned by a questionnaire sent to me by an independent financial adviser—I have passed it to the Minister. It contains 171 detailed questions that have to be answered every month. That will bear heavily on all independent financial

  67
  advisers, but especially heavily on small ones. Under the provisions that the Minister describes, would the Competition Commission be able to intervene to make representations to, or to impose controls on, the FSA in respect of such over-regulatory questionnaires?
  Miss Johnson: Yes, it would be able to do so and that is one way in which the provision may work.
  Before the interventions, I was discussing amendment No. 103. It will insert a new clause after clause 92 that will give the Treasury a power to subject the regulating provisions of the competent authority—that is to say the listing rules and general guidance that it produces—and its practices to a competition scrutiny regime. The Treasury proposes to use that power to create a competition scrutiny regime for the competent authority that is broadly similar to the regime for the authority in its role as financial services regulator.
  Arrangements were made in part XVIII to align the competition scrutiny arrangements for recognised bodies under chapters II and III of part XVIII with those applying to the authority under chapter III of part X and to reflect the fact that it is possible that a recognised body may itself exploit the strength of its market position. The relevant amendments are amendments Nos. 337, 338 and 353 to 371, 377 to 390 and 392. They will broadly align the roles of the director general, the Competition Commission and the Treasury with those provided for in part X in respect of the FSA. The only significant difference, and complication in terms of the drafting, arises from the fact that scrutiny arrangements apply to applicants for recognition as well as to bodies that are already recognised. Obviously, that is not the case with the FSA.
  Amendments Nos. 442 and 660 will introduce a new clause and new schedule respectively that will make provision for the protection of information obtained by the director general and the commission under their powers of competition scrutiny under the Bill. These provisions closely reflect the equivalent provisions on protection of confidential information in section 55 and schedule 11 of the Competition Act 1998. I ask hon. Members to agree to the changes made in another place that align the competition regime for recognised bodies and the competent authority with those that we introduced in this House for the FSA and that make minor improvements to the drafting of the Bill.
  Sir Michael Spicer (West Worcestershire): I have been thinking about the Economic Secretary's answer to the question of my right hon. and learned Friend the Member for North-East Bedfordshire (Sir N. Lyell). If burdens were imposed on a particular sector of the industry, he asked whether that would be a matter for Competition Commission referral to the Office of Fair Trading. She said that it would, but surely, if the burdens were imposed equally on everybody and it was just a matter of internal competition, it would not be a matter for referral. That is why our amendment to amendment No. 183, which distinguishes between internal and external competition, should apply. In the light of the answer to my right hon. and learned Friend's question, it appears that burdens will become anti-competitive only when they are seen to be
  68
  externally anti-competitive in relation to other countries. Therefore, given the amendments that the Government have tabled, the Economic Secretary's answer was wrong.
  Miss Johnson: The hon. Gentleman's interpretation of the question of the right hon. and learned Member for North-East Bedfordshire (Sir N. Lyell) may be no better than mine. We can guess what the right hon. and learned Gentleman's intention was, but perhaps he will confirm that his point was that independent financial advisers, as small businesses, would be disadvantaged in some way. His point was about a level playing field between IFAs and other sectors of the financial services industry and that is different from the one that the hon. Member for West Worcestershire (Sir M. Spicer) has just raised.
  Sir Nicholas Lyell: My question related to the comparative competitive position within the United Kingdom financial services industry. I was concerned that small businesses would find it even more difficult than larger ones to comply with what I regard as over-burdensome regulation. However, there is a second aspect to the issue. If there is over-burdensome regulation in the United Kingdom, it will drive business abroad and disadvantage consumers.
  Miss Johnson: The right hon. and learned Gentleman is right in that regard. However, the hypothesis that he has described will not result from the Bill or from the work of the FSA. Among other things, the authority is bound to try to be proportionate in what it does. We have striven in drawing up the Bill and in our scrutiny of it to make sure that there is a balance between regulation and ensuring that competition is able to flourish. I believe that we have the balance right.
  The Opposition's amendment to amendment No. 183 would insert a reference to
  prejudicing the competitive position of the United Kingdom
  into amendment No. 183, which defines what is meant by
  a significantly adverse effect on competition.
  The amendment is an old favourite. It first appeared in the Bill's Commons Committee stage—we debated it on 9 November 1999—and then regularly reappeared in one form or another in the later stages of the Bill's parliamentary process. The last time that such an amendment made an appearance was on 18 April this year on Report in another place. After the Opposition had heard what my noble Friend Lord McIntosh said, they said that they would examine his remarks and, in the light of them, consider whether to reintroduce the amendment on Third Reading in another place. Given that they did not do that, I thought that we might have seen the last of this matter, but it appears that we need to go over the ground one last time tonight.
  It is hard to think what can be said that has not been said many times before about the relationship between competition and competitiveness, so I shall confine myself to repeating a few general remarks that I made on a previous occasion. I shall explain why the amendment would be undesirable.
  Competition within the UK market and the UK's competitiveness are closely related, but they are nevertheless quite distinct. All regulation has an impact on competition. Regulation involves placing restrictions on who can perform a regulated activity and the way that

  69
  they perform it. No one doubts that an appropriate level of regulation is necessary, but nor can they doubt that too much can be counter-productive. That is why we extended and improved the special competition scrutiny regime for financial services that was first provided for in the Financial Services Act 1986. If the FSA regulates in a way that has a significantly adverse effect on competition, the competition authorities can investigate and, ultimately, the FSA can be directed to change its rules or practices.
  Sir Nicholas Lyell: Will the Economic Secretary clarify whether the competition authorities in this country can intervene if the FSA regulates in a way that damages our international competitiveness, or do the authorities have power only in relation to internal competitiveness?
  Miss Johnson: The best way that I can answer that question is to come to the point that I was just about to make. It deals with the relationship between competition and international competitiveness—an issue that the right hon. and learned Gentleman and the hon. Member for West Worcestershire have raised.
  If the FSA regulates in accordance with its objectives and principles and in a way that does not have a significantly adverse effect on competition, what is there for the competition authorities to examine? I certainly acknowledge that there is the separate issue of the competitive position of the UK, but the problem with the Opposition amendment is that it would introduce that issue into the competition scrutiny regime. The issue is whether the regulatory framework to be set up by the Bill, including its objective and principles, remains the right one in the light of developments in the UK and the world financial markets. That is a legitimate issue, but it is not appropriate for the competition scrutiny regime.
  Ministers will keep the legislation under continual review and, as a part of that process, they will consider its impact on the UK's competitive position. They will be responsible for their policies to Parliament in the usual way. If appropriate, they could decide to commission a review of the impact of the regulatory regime on competition and the competitive position of the UK.
  6.30 pm
  Mr. Tyrie: The Minister is now telling the regulated community and the country that the Treasury may decide to call for a review if things start to go wrong. Why not give them an assurance that, in three years, there will be the review that almost everyone involved in the Bill has called for?
  Miss Johnson: If the issue arose, we would have to consider carefully whether the competition authorities would be the right body to carry out such a review, as suggested by Opposition Members, including the hon. Gentleman.
  Mr. Tyrie: That was not the point that I was making. The Minister is conceding that it is possible that the Government may be wrong on this issue. I am happy to concede that we may be wrong on the issue, but we are not content that the Government should decide whether to have a review in due course, if they feel like it. Surely they should be prepared to commit themselves to re-examining the issue in three years or so in a thorough
  70
  review. If they do that, many of the regulatory community's concerns will be assuaged at a stroke. Will the Minister now give such an undertaking?
  Miss Johnson: Competition policy is about preventing and removing unfair barriers that hinder firms from competing. The Bill's competition provisions are intended to stop the FSA adding to those barriers, except when that is an unavoidable price to be paid for achieving the necessary regulatory purpose. Competition is undoubtedly beneficial to consumers. However, international competitiveness involves the strength and ability of UK industry as a whole to compete and secure business in home and international markets.
  Sir Michael Spicer: Will the Minister give way?
  Miss Johnson: I would like to answer the question asked by the hon. Member for Chichester (Mr. Tyrie), but I should be happy to give way in a moment.
  The regulator's key job is to ensure that regulation in the UK is set at the right level and strikes the right balance between costs and benefits, as I said earlier. To ensure that UK business remains internationally competitive, we must ensure that it keeps costs down and innovation up. In the long term, the best way of doing that is to ensure that it is exposed to vigorous competition at home. On the other hand, the most effective way of restricting competitiveness is to stifle competition at home.
  I do not believe that there is anything between the Opposition and the Government in relation to the importance that we attach to the UK's international competitiveness. However, we differ on the question of who should carry out a review, if appropriate, of the impact of regulation on the UK's competitive position. As I said, the Opposition are arguing that the job should be done by the competition authorities, but we do not want that requirement in the Bill. Of course, Ministers are fully accountable to Parliament, so if in the light of events we decide that a competitiveness review is appropriate, we shall commission one. However, we do not want to hold a review just for the sake of it. I hope that Opposition Members who are arguing—rightly, in this case—that we do not want bureaucracy and red tape for the sake of it, will support the view that we should not commit ourselves to something that may prove to be unnecessary.
  Sir Michael Spicer: The Minister argued that competitiveness concerned the whole industry and its relationship with industries abroad, so was different from competition at home. Does she accept that competition and competitiveness have a much greater link? For example, British Airways' defence against the charge that it had a quasi-monopoly on internal competition was that it had strong competition abroad. Therefore, the argument about competition partly concerns competitiveness, and the two are closely linked, even if they are separate in the Minister's mind. They should be treated as one entity, as, indeed, they are by the Competition Commission and the Office of Fair Trading in competition arguments.
  Miss Johnson: I was arguing that competition and competitiveness are two distinct concepts. None the less, in many ways they are closely related. It is pretty hard to think of a credible example in which the long-term interests of competition and competitiveness point in

  71
  opposite directions. Therefore, by ensuring that internal competition in the UK flourishes, we are addressing international competitiveness to a significant extent. Given the value of the financial services industry to the UK economy and its standing as a contributor, Treasury Ministers in any Government must, at all times, take due regard to ensure that our international competitive edge is maintained. This Government will certainly make sure that that is so in all that they do. I therefore commend most of the amendments, but I oppose the Opposition amendment and ask them not to press it.
  Sir Michael Spicer: Once again, I shall declare an interest as president of the Association of Electricity Producers, in case there is an obscure read-across between what I am going to say about the amendments and the electricity industry.
  Under the previous Conservative Administration, regulation involved moves towards competition. However, under the present Administration, regulation is, by and large, antithetical to competition. There are many examples of that in the FSA and the financial industry, as well as other industries. Indeed, that applies to every major regulator, such as the Rail Regulator, that is concerned with planning and integration, but not competition. The Post Office regulator is concerned about the degree of privatisation. The electricity regulator deals with fuel poverty, Oftel with the full coverage of telecommunications, Ofwat with the environment, and so on.
  In all cases, especially that of the FSA, the regulatory regime is antithetical to competition. Therefore, the role of the Competition Commission, with which the amendments are concerned, together with the role of the Office of Fair Trading and the Director General of Fair Trading is of paramount importance in a discussion of a Labour regulatory Bill. The Lords amendments are therefore extremely important, as is our amendment. Of course, we welcome the sharpening of the competition rules and the restraints on the FSA's role with respect to competition, and that is why we agreed to amendment No. 82, and to clause 72, which certainly sharpened the competitive element in Parliament's instructions to the regulator.
  As has been said already, page after page of the Bill shows that the regulator's basic rules and objectives are antithetical to competition and involve risk aversion. With other members of the Select Committee on the Treasury, some of whom are in the Chamber tonight, I spent a day at the FSA. I was struck by the enormous panoply of bureaucracy and expertise on intervention that was building up in the FSA that was against competition. I am sure members of the other party were also struck by that, but they were happy about it. A mass of economists were there to look in a detailed way at future risk taking by undertakings and to try to second-guess the market, presumably with the aim of introducing rules that are meant to be risk-aversive: anti-competitive. Unless one has risk, one will not have competition; they are two sides of the same coin.
  Mr. Nigel Beard: The essential purpose of the legislation and the Financial Services Authority is to secure the integrity and probity of financial markets in Britain. Without such integrity and
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  probity, immense damage will be done to the competitive position of a major piece of industry in Britain. Is that not the central purpose? Is not the legislation therefore a vital ingredient to our financial industry competing internationally?
  Sir Michael Spicer: The City of London must have been doing something right over the past 20, 30 or 40 years because it happens to be the most successful financial entity in the entire world—bar none. The hon. Gentleman's argument for increased regulation, control and intervention would be stronger were it arguable that the City of London and financial services had not been so highly competitive as to become the largest industry in this country, far overtaking manufacturing, for instance, in the generation of exports and income earned from abroad—not to mention employment. In order to substantiate the case for massively greater intervention of the sort proposed, he must argue that something has been going badly wrong in competition, which manifestly it has not.
  The question is—I suspect that it interests hon. Members on both sides of the House—how we maintain probity and regulation but at the same time ensure that such a vital element of our national economy not only prospers as it has but does so to a greater extent in future. That is why, if there is to be a great panoply of intervention, risk aversion and so-called protection of the consumer, we have at the very least the right to ask that competition safeguards are firmly entrenched in the Bill.
  The Government are arguing that they have achieved such entrenchment on internal competition, but there is a further argument for, as we have been debating, a strong link between internal and external competition. They do not always work quite, as the Minister has said, in the same way. There seems, to Opposition Members at least, to be the need to bolster the requirements on various authorities, including the FSA, to have in mind external competition.
  Although it might be argued that the provision should be inserted in a different part of the Bill, the Government are denying that there should be a countervailing force to all the intervention and further regulation to ensure probity and so on, in order that the panoply of regulatory authorities takes into account the essence of what has made the City of London and the financial services of this country: its high competitiveness.
  The closer that I look at the FSA's powers, potential for intervention and proactive determination to intervene and regulate, the more I am concerned for the future of our financial services. That is why out amendment to Lords amendment No. 183, which would ensure that authorities bear in mind the external competitiveness of the industry, is of such essence and importance.
  6.45 pm
  Mr. Heathcoat-Amory: I am pleased to follow my hon. Friend the Member for West Worcestershire (Sir M. Spicer) because he put his finger on the importance of competition and competitiveness. They are two slightly different concepts. During the passage of the Bill, we have constantly argued that the Government should pay more attention to the vulnerability of the United Kingdom's financial services industry despite its very success, as described by my hon. Friend. He is right that it is Britain's

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  biggest industry. It is a colossal foreign exchange earner. Indeed, without it, we would run a probably unsustainable persistent current account deficit. Precisely because of its success, we can easily become complacent and assume that people coming here to do business—to bank or to buy and sell securities—will go on doing so whatever the conditions. That is a dangerously short-sighted attitude.
  We are lucky in this country because of our location; we are in the right time zone. We are lucky with the English language. We are lucky, too, to be comparatively lightly regulated, although that could easily change. We are therefore highly vulnerable to adverse changes.
  I sometimes think that Labour believes that the City is rather like the Government. Governments, I am afraid, will always be with us because they have the compulsion that comes with having taxation at their disposal. Those trading here, however, cannot so demand revenue; they have to earn it. Therefore, the environment in which they trade is extremely important. The Government set that regulatory environment and we are worried that the regulatory itch is not under sufficient control—that there are not sufficient countervailing forces under the Bill to stop the inevitable tendency of any regulatory regime to grow and expand.
  It is a natural feature of Governments that they will always look for more things to do. It has been said that fish swim, birds fly and regulators regulate. Governments will always find new things to regulate, and Governments come under political pressure to defend consumers, investigate and intervene in markets and to correct real or imaginary deficiencies.
  The problems are evident; one need not look very far to find abandoned centres of markets and vigorous transactions. The art market is a good example. Paris used to be not just the biggest art market in Europe but, following the second world war, the biggest art market in the world. That all went because of bad and short-sighted regulation and an unfavourable tax regime. On the whole, the business came to London, but it is in the process of going to New York for much the same reasons. Owing to changes in value added tax and new levies on the resale of art, our market in art will probably go to the United States.
  I do not want the same to happen to our capital market, but capital, by its very nature, is extremely mobile. Therefore, businesses that depend on very slim margins and small advantages could easily move to other centres that are hungry for such business—not just to the familiar big centres, such as Tokyo and New York, but to places such as Dublin, which is making a strong pitch for this country's business.
  Frankfurt is a topical example. The London and Frankfurt stock exchanges are proposing to merge. The Government seem to have no view on how that is to be regulated, but I can tell them that which centre comes out on top from such a merger will depend very much on tax and regulatory differences. Already, unfortunately, the Government are refusing even to contemplate removing the 0.5 per cent. stamp duty on share transactions in London, which is not levied in Frankfurt. So there is already the clearest possible incentive for business to move to Frankfurt. The Government are being obstinate about that. The same problem might arise from a different regulatory regime. Remarkably, when that issue was raised in another place during discussion of the merger,
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  Lord McIntosh of Haringey, speaking for the Government, said, in essence, that there was no problem. His words were:
  We are talking about two separate exchanges and, although there will need to be co-operation between the FSA and its German counterparts, there are separate regulatory jurisdictions.— [Official Report, House of Lords, 18 May 2000; Vol. 613, c. 373.]
  He was saying that there was to be no merger—that there would still be two exchanges and two regulatory jurisdictions. That will present problems, which might lead to the phenomenon of regulatory arbitrage, whereby firms and transactions migrate to a more favourable regulatory regime.
  That is not an argument for no regulation: everyone agrees that all markets need rules and that those rules have to be simple, understood and properly enforced. However, if we get it wrong and over-regulate, we might find that the merged exchange centres on Germany, not the United Kingdom. For all those reasons, we want to elevate the possibility of examining and, if necessary, taking action in circumstances in which the United Kingdom finds itself at a disadvantage.
  We are well aware that, under clause 2, the FSA already has to
  have regard to ‖ the desirability of maintaining the competitive position of the United Kingdom—
  which is all right, in so far as it goes. However, a requirement to "have regard to" is much weaker than having competition or competitiveness as an objective of the Bill. There are four regulatory objectives but they do not include competition or competitiveness matters, and that is a weakness. Therefore, we have taken the opportunity to suggest that the Director General of Fair Trading should keep such matters under review, which represents only a modest extension of the Government's proposals.
  The relevant part of the Bill has already been amended extensively. The entire competition regime was only introduced on Report in the House of Commons; now, it is being added to and amended. It would not take much to insert a requirement that the Director General of Fair Trading should have regard not only to the possibility of market dominance and abuse, but to the possibility that rulings and statements by the authority might prejudice the competitive position of the United Kingdom. That is what our amendment would achieve.
  Sir Nicholas Lyell: On a point of order, Mr. Deputy Speaker. I am sorry to appear so ignorant, but I am finding it extraordinarily difficult to link the amendments as published with the provisional list of amendments, because the amendments as published do not have any numbers. I do not know how anyone can link them, and I should be grateful for an explanation.
  Mr. Deputy Speaker: There is only one official Opposition amendment under discussion: the amendment to Lords amendment No. 131—[Interruption.]—sorry, I am getting confused too. The Opposition's amendment is to Lords amendment No. 183. All the other amendments are Lords amendments, grouped for the purpose of debate. The amendment to which the Opposition have been referring will not be voted on at this stage, but, for the

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  convenience of the House, it has been grouped for debate now. I hope that the right hon. and learned Gentleman finds that explanation clear.
  Sir Nicholas Lyell: Further to that point of order, Mr. Deputy Speaker. I am genuinely grateful. I gather that one takes the document headed "Consideration of Lords amendments" and attempts to find one that has about it a number that appears in the provisional selection list, and then tries to learn what the amendment to that amendment is.
  Mr. Deputy Speaker: The right hon. and learned Gentleman might recall that, rather than call all the numbers of the amendments in the group, I said that amendment No. 103 had grouped with it amendments that were laid out in the papers before us. Lords amendments are confusing, even to me, but I hope that I have been able to help.
  Mr. Michael Fallon: I might not be any the wiser, Mr. Deputy Speaker, but I certainly feel more intimidated. Nevertheless, I rise to support the amendment in the name of my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory). That is not to say that I am criticising the new clause, which I think is healthy and probably useful, but I do criticise the drafting, which has a last-minute air about it.
  As my hon. Friend the Member for Chichester (Mr. Tyrie) says, subsection (1) of the new clause that would be inserted by Lords amendment No. 103 appears to be almost doubly discretionary, in that the Treasury "may" produce the relevant orders and the individual tasked with carrying out the review "may" then keep the matter under review.
  The Economic Secretary could have cut through the problem if she had been prepared to make the obligation mandatory. I can understand why she does not want to commit the Government to a particular review at particular intervals; that is a matter of dispute between the Opposition and the hon. Lady. However, I do not understand why she will not accept the word "shall" instead of "may", which would make mandatory the duty to keep the issue under review. I assume that the whole question will be kept under review anyway, so I am a little surprised that she will not amend the new clause—she could probably use a manuscript amendment to substitute "shall" for "may". If the problem she refers to is genuine, the solution is equally genuine and the whole process should be made mandatory.
  My hon. Friend the Member for West Worcestershire (Sir M. Spicer) spoke about subsection (2) of the new clause. It is right to say that anyone's view of the effect of competition cannot be entirely insular. I do not understand why the Government want to restrict that view to
  a significantly adverse effect on competition
  domestically. We might hold a view on that matter, but our view might differ, or come to differ, from views held elsewhere in the world, or from views taken of competition as it emerges in other markets and financial centres. It is wrong to box ourselves in.
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  Even if the Economic Secretary will not accept our amendment, she could at least broaden the new clause's definition of "a significantly adverse effect". Why will she not make the provision cover competition nationally and internationally? The insertion of those or similar words, or of some reference to the international marketplace and the significance of our competitive position and our changing competitive relationship with other financial centres, would answer the point. I support the new clause, but it would be improved if our amendment were accepted.
  7 pm
  Mr. Tyrie: I want to have one more go at getting across to the Economic Secretary my point about competition and competitiveness. It will be my last go, both procedurally and for some time, but I feel I must make just one more attempt.
  The Minister should forget competition altogether and think only about competitiveness. Now think about the phrase "economic performance", which means the same. There is a trade-off between too much regulation leading to lower economic performance and not enough regulation also leading to lower economic performance. There is probably only one level of regulation that will give an optimal level of economic performance.
  All markets need regulation. Markets are created by a body of rules. Without rules there are no markets. There is not a free-for-all or a free-market jungle: there is almost always monopoly as a consequence—an insight that Hayek brought to bear. It is important to understand that.
  The key question is, does the optimal level of economic performance coincide with the point at which there is zero regulatory failure? The answer is almost certainly "no". If that is so, there will have to be acceptance of some regulatory failure. Does the regime that the Bill will put in place allow for that? I fear that all the incentives built into the Bill as drafted will result in over-regulation. There is no provision in the objectives of the Bill to take account of economic performance. There will be huge pressure from the Treasury to avoid regulatory failure. There will also be pressure on the FSA from the public and the media whenever there is a regulatory failure. The Opposition amendment is one more attempt, in a specific part of the Bill, to insert the notion of economic performance under the guise of the word "competitiveness".
  Mr. Beard: The hon. Gentleman's thesis is that there is a golden means of regulation that will enhance competitiveness, and that beyond that golden means there will be damaging over-regulation. This issue has been debated at almost every stage, from the Burns committee onwards. The hon. Gentleman makes out that this legislation is over-burdensome. It is always an assertion, and we have been given no facts or evidence to justify that position. Having just repeated the same charge, can he produce evidence that the Bill is over-regulatory? I have seen none.
  Mr. Tyrie: With a Bill that is not yet on the statute book, it is obviously difficult to provide evidence that it will be over-regulatory. I can provide the hon. Gentleman with a wealth of evidence from those who have

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  considered this issue and have given evidence to the Joint Committee, in newspaper articles and on many occasions stating—
  Mr. Beard indicated dissent.
  Mr. Tyrie: The hon. Gentleman shakes his head in denial, but that evidence is on the record. I shall not delay the House further by reading it all out, but almost everyone has said the same thing, which is that the incentives on the FSA will result in over-regulation. My hon. Friend the Member for West Worcestershire (Sir M. Spicer) is on the Treasury Select Committee, and he has told us that he and most members of the Committee came away with the same impression. Wherever one goes, the same message comes across. I am afraid that the hon. Member for Bexleyheath and Crayford (Mr. Beard) has not picked it up yet. Don Cruickshank agrees: his interim report makes the point clearly.
  The hon. Gentleman and his Front-Bench colleagues have not been able to dispute my argument, so we must decide how to counterbalance the urge to over-regulate. There are three possible routes. One is to incorporate a competitiveness objective in clause 2. I shall not go through all the arguments about that again, as we have debated it on many occasions, but the Government rejected it. A second route is to introduce thoroughgoing cost-benefit analysis of every regulation. The Government have set their face firmly against that, too. They have rejected all attempts to put such a provision in the Bill.
  The third possibility is to do what the FSA has decided is the only way forward, which is to publish its own document and accept some regulatory failure, and to move to what it has described as a risk-based approach to regulation. That is all very well under the current FSA headed by a man who seems to be fairly enlightened. What happens when there is a change of leadership? What happens when great pressure builds up on the FSA after a prominent regulatory failure? The Government have not thought about that. They seem to have little grasp of the extent of the pressure that they and the FSA will be under in those circumstances if there is no statutory counterbalance in the Bill to the urge to over-regulate.
  The amendment is a small, last attempt to put back part of what is required to counterbalance an over-regulatory Bill. That counterbalance is crucial. There is only one other respectable route for the Government to take, which is to accept that there should be a thoroughgoing review after a few years to see if they or we were right. Instead, they have said, "Thank you very much, but we don't want to commit ourselves to a review. We don't want to have to wash our dirty linen in public. We don't want to discover later on that we got it wrong." There is no commitment to a thoroughgoing review.
  It is essential to have that counterbalance in the Bill. The Government have not provided it, and unless we get such a commitment I hope that we will divide the House on this amendment.
  Sir Nicholas Lyell: I agree that we must divide the House on this amendment, although it will be a symbolic Division, not merely because the massed ranks of Government supporters will troop into the Lobby against us—we are used to that—but because all we can do at this stage is to table an amendment that highlights rather
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  than solves the problem. The amendment that would solve the problem would be one that made international competitiveness or competitiveness generally one of the statutory objectives. That is not what the key amendment we shall vote on does.
  The Government are in a complete muddle on this matter. If they are not in a muddle, they are deliberately obfuscating. They know what they ought to do, but as is so often the case they will not admit that they have got this wrong, and consequently they will not take steps to put it right. [Interruption.]
  The Government have failed to put right up front in the objectives the fact that over-regulation damages not only internal competitiveness, but international competitiveness. [Interruption.] Why do I say that the Government are obfuscating? Because we know from what the Economic Secretary has told us and from what Howard Davies, when he introduced the FSA document "A new regulator for a new millennium" in January this year—
  Mr. Deputy Speaker: Order. The House must come to order. Many conversations are being held in the Chamber. The right hon. and learned Gentleman is addressing the House.
  Sir Nicholas Lyell: I appreciate that people are coming in hoping that there will be a vote fairly soon. It is always difficult to hold the House's attention under those circumstances.
  The Economic Secretary said on this very matter of competition that the FSA was bound to try to be proportionate and to balance regulation and competition. I am quite sure that what she meant by competition when she said that was competitiveness—she would have been right if she meant that, which I think she did. She did not mean balanced regulation and competition in the technical senses of most of the activities of the competition authority.
  In the document "A new regulator for a new millennium", which was published this January, the FSA said of itself that it
  must take into account the international mobility of much financial business and must avoid damaging the competitive position of the UK—which works to the advantage of consumers as well as markets."
  My right hon. and hon. Friends and I have been saying that until we are blue in the face. We are very glad to know that the Government recognise the truth of what we have said; what we criticise is their failure to do the right thing about it. Even at this late stage, the Government are not amending the Bill sensibly. Amending it sensibly would involve putting the point that we have made upfront, and making it clear to the FSA that one of its principal objectives was to do what it knows it is essential that it should do.
  I support the amendment. It is a half measure, but at least—by means of the competition authority—it pushes the regulatory authorities slightly further in the right direction, although it shows a tendency to muddle their functions. I do not know what Sir Christopher Bellamy, the president of the Competition Commission, is to make of his role. I know Sir Christopher to be both a very experienced competition lawyer and an extremely skilful judge, recently returned from Luxembourg. I believe that he will do his wise best: I believe that when he finds

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  that FSA activities are pushing us away from international competitiveness, he will be able to say so clearly enough to encourage the authority to try to mend its ways. That, however, is like trying to steer a horse and cart from behind without reins. It is much better to lead from the front, with the right objectives.
  I support what our amendments seek to do, but, even at this eleven-and-a-halfth hour, I ask the Government to think again about the fundamental issue.
  Mr. Flight: Yet again, the Government fail to accept that we live in a global world. Employers in London—in the financial services industry and the institutional marketplace—are international players: their headquarters are in Germany, America, Hong Kong and all over the place. We have taken a leaf out of the Chancellor's book when his party was in opposition, and been to see them all. They told us, as one might expect, "If this happens we will operate from New York, or from somewhere else." They run their businesses in a global fashion.
  It is absurd to enact legislation, in 2000, that pretends that global competitiveness does not matter. It is the most important single factor.
  Hitherto, the Government have refused to act on the ground that the Office of Fair Trading has not been equipped, for some reason, to keep an eye on global competitiveness. It can hardly be a difficult task to equip the OFT for the purpose. As it happens, the FSA is so equipped, and has done its best, but without any mandate.
  It must come as no surprise that we have been banging on about this throughout the Bill's passage so far. Unless the necessary provision is written into the legislation, the poor chaps running the FSA, who must be given legal briefing, will not be able to give proper attention to it: they will have to override all sorts of other things. I warn the Government that, unless the problem is dealt with, huge mistakes will be made in crucial areas. I am thinking of market abuse, for instance. Business will go to other centres, and there will be a massive loss of jobs.
  In the last 30 years, the City of London was revived—by, I might add, a Labour Government who introduced the right law when the equivalent of the withholding tax obtained. America, foolishly, had an interest equalisation tax; we allowed tax-free Euro-banking here, and hence got all the global dollar deposit business. What the Government did then led, almost by accident, to a recovery in London, because they got the fiscal regime right. If we do not get the competitive regulatory regime right now, down it will go again. I am very upset by the present Government's refusal to address this central issue.
  7.15 pm
  Miss Melanie Johnson: I have heard nothing new this evening, but I appreciate the reiteration by some hon. Members of points that they had already made. I particularly appreciated what was said by the hon. Member for Chichester (Mr. Tyrie). As my hon. Friend the Member for Bexleyheath and Crayford (Mr. Beard) suggested, one reason why the hon. Gentleman's arguments did not make more progress was his lack of evidence in their favour.
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  Let us remind ourselves of what the Bill says. Opposition Members have made passing reference to its content.
  Mr. Tyrie: Will the Minister give way?
  Miss Johnson: I will, briefly.
  Mr. Tyrie: May I read this into the record?
  I am concerned that there will inevitably be a tendency to err on the side of reducing the risks of the regulator at the expense of the regulated. The FSA and its chairman will probably be judged harshly if there is even modest wrongdoing that escapes their gaze.
  I could quote dozens of examples from people who have given clear evidence proving that the Minister is mistaken, but you, Mr. Deputy Speaker, would prevent me from doing so. It is nonsense to suggest that the Government have not been told about the position, and that there is no evidence; there is ample evidence.
  Miss Johnson: I believe that the hon. Gentleman was reading from his own book. Let me return to the Bill, because it is the Bill with which we are concerned. Clause 2(3)(e) states—
  Mr. Tyrie: Will the Minister give way?
  Miss Johnson: No. I want to make some progress.
  Mr. Tyrie rose—
  Miss Johnson: I will give way very briefly.
  Mr. Tyrie: Although I was quoting from my book, I was quoting someone else's words. I was quoting the words of the chief executive of Britain's largest pension fund, Hermes, Alastair Ross Goobey.
  Miss Johnson: Right.
  Clause 2(3)(e) states—[Interruption.]
  Mr. Deputy Speaker: Order. The Minister is addressing the House. Conversations should not be taking place.
  Miss Johnson: As Opposition Members have raised a number of points, I assume that they will be interested in responses to those points.
  Clause 2(3)(e) states that the FSA must have regard to
  the international character of financial services and markets and the desirability of maintaining the competitive position of the United Kingdom.
  That is a duty that the Bill places on the FSA. Opposition Members have given scant recognition to the force of the requirement, and to its exact wording.
  We are not, as some Opposition Members have suggested, interested in increased regulation; we are interested in better regulation, which is very different. We are interested in maintaining the right balance between consumers and risk. I took the point made by a number of Opposition Members that it was a question of balance. We strongly agree that this is a question of balancing the various aspects of the issue, and securing regulation at the right point. However, the fact that it is a question of

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  balance does not mean that anything in the Bill will damage competition; quite the reverse. We want to ensure that the balance continues to be right, but it needs to be right for consumers as well.
  I hesitate to mention the words "pensions mis-selling" here, because Opposition Members seem to have forgotten that it existed, but there was pensions mis-selling, and there have been significant failures in regulatory regimes. The issues must be addressed genuinely, and they are being addressed. However, there have also been changes in the way in which financial services business is done. For example, many organisations that used to provide just one aspect of financial services now provide several, including banking insurance. The existence of a single regulator will provide the right flexibility, and a single reference point reflecting the changed nature of financial services in the United Kingdom.
  If we do not make these changes, we shall be in danger of doing what Opposition Members say they want to avoid. We shall be in danger of slipping behind in the international competitiveness stakes, and failing to move ahead in a way that will ensure our continuing leadership in financial services in what the hon. Member for Arundel and South Downs (Mr. Flight) rightly described as a global economy and a global marketplace. I would have thought that there was ample evidence. If I had more time, I would be happy to spend a long time citing the many pieces of evidence that the Government are at the forefront of recognising the fact that we are in a global economy.
  It is important that we get the balance right. A bad balance is poor ground to grow a flourishing financial services industry. The document entitled, "A new regulator for the new millennium", to which the right hon. and learned Member for North-East Bedfordshire (Sir N. Lyell) referred, does indeed strive to carry that forward in terms of the practicalities that the FSA will face in conducting its regulations. That document has been extremely well received. It is an indication that the FSA is getting the balance right and is working in the way in which the Bill anticipates it will. The Bill puts in place an improved and extended competition scrutiny regime that ensures that there are external checks to ensure that the FSA gets that balance right. I commend the amendments, with the exception of the one tabled by the Opposition, to the House.
  Lords amendment agreed to.
  Lords amendments Nos. 104 to 126 agreed to.

Clause 109

  MARKET ABUSE
  Lords amendment: No. 127, in page 51, line 18, leave out subsection (3).
  Miss Melanie Johnson: I beg to move, That this House agrees with the Lords in the said amendment.
  Mr. Deputy Speaker: With this we may discuss Lords amendments Nos. 128 to 130, 131 and the amendment thereto, 132, 133, 142, 143, 180 and the Government motion to disagree and Government amendment (a) in lieu and amendment (b) in lieu, 228, 487, 488, 489 and the amendment thereto and 490 to 501.
  Miss Johnson: This group of amendments covers a number of different points relating to the market abuse
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  arrangements introduced by the Bill. It contains some relatively minor improvements to the market abuse provisions, which I will describe briefly. We can then debate the specific questions of the takeover panel and the amendments tabled by the Opposition to the Lords amendments.
  Before discussing the detail of the Lord amendments, it is important to remind ourselves why the Government have introduced part VIII. The new market abuse regime has been recognised to be an important addition to the regulator's armoury to tackle abuse of the financial markets. It closes a gap in the protections for markets, allowing the regulator to take action against anyone, regulated or unregulated, who abuses the markets. Having well-regulated, fair and efficient financial markets is in all our interests.
  I said when the Bill left the House that we had no intention of changing the substance of the market abuse provisions, which are effective and fair. I did say, however, that we might look at whether any further, more technical changes were necessary.
  Noble Lords in another place supported the aim of the new regime and understood the arguments for our approach. Relatively minor but none the less important improvements were made in another place on a few fronts. I ask hon. Members to agree that those amendments should be part of the Bill.
  The first improves the protections available for those who have reasonable grounds for believing that their behaviour is not market abuse, or who take care to avoid engaging in market abuse. We introduced protections along those lines in Standing Committee. The effect of amendments Nos. 127 and 131 is to improve those protections. Rather than being things to which regard must be had in determining whether behaviour amounts to market abuse, the amendments mean that the FSA cannot impose a penalty for market abuse if, having heard representations, it is satisfied on reasonable grounds that someone had reasonable grounds for their belief or exercised due diligence. That is, of course, something that the tribunal can review.
  Sir Nicholas Lyell: The Minister might perhaps clarify the following matter. She has pointed out that, in another place, amendments were accepted that put the burden of proof on the defendant in market abuse cases. Is it still the case that one can be found guilty of market abuse without having intended to abuse the market? If that is the case and if the burden is put on the defendant, is that in conformity with the European convention on human rights?
  Miss Johnson: May I answer the right hon. and learned Gentleman's question in a moment? The answer to his first point is yes, but I should like to answer his second point in a little more detail in a moment.
  To maintain the high degree of transparency provided for in the Bill, amendment No. 133 places a duty on the authority to include in the statement issued under clause 114 on the imposition and amount of penalties, indications of the circumstances in which it will be satisfied that a person comes within the proposed safe harbours in clause 113. Amendments Nos. 489 and 496 introduce those protections into the restitution provisions as well. Amendments Nos. 490 to 493 and 497 to 501 make consequential drafting changes.

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  The other change made in another place in the area of protections was to provide that behaviour does not amount to market abuse if it conforms with rules specified by the FSA. The effect of the safe harbour put into clause 109 in Standing Committee was too uncertain in that it provided a safe harbour for behaviour that conforms with any of the FSA's rules. The provision would have extended to all rules, even completely unrelated ones. That was going too far and could have had uncertain and random effects.
  7.30 pm
  The second set of changes concerned the alignment of the provisions on sanctions for abuse with those in parts V and XIV. Under the Bill as it left the Commons, the FSA could not make a public statement about someone as an alternative to imposing a penalty. Lords amendment No. 132 corrects that anomaly. Lords amendment No. 228 provides that a statement obtained under compulsory powers from a person cannot be used in proceedings against that person to make a public statement that he has engaged in market abuse.
  The third set of changes involved ensuring that the provisions on those who require or encourage others to engage in abuse work as intended. The changes involved two features. The first entailed closing a potential loophole by which those who required or encouraged others to engage in abuse could escape sanction by using an unwitting third party to perform their abuse for them. Lords amendments Nos. 129 and 130 achieve that objective.
  The second feature concerned restitution. The need for the change arises from the fact that someone who requires or encourages another to engage in abuse is not, under the Bill's definitions, said to be engaging in abuse. Consequently, the restitution provisions do not bite on such a person whereas, clearly, they should. Lords amendments Nos. 487, 488, 494 and 495 correct that.
  The Opposition have tabled a couple of amendments—to Lords amendments Nos. 131 and 489—and I shall happily respond to their points. The amendments are very similar in form. The first is intended to extend the protection that is offered by clause 113 in relation to the imposition of penalties for market abuse, and the second is intended to have an equivalent effect on clause 370, which deals with restitution for market abuse.
  The first part of each of the Opposition's amendments—that is, paragraph (c)—would provide that penalties or restitution were not payable if a person engaging in behaviour that was likely to give a regular user of the market a false or misleading impression did not intend to give such an impression or was not reckless about whether he might give anyone such a false or misleading impression.
  It is difficult to see why such amendment is thought to be necessary, given that amendments made in another place would have the effect that the FSA cannot impose a penalty if there are reasonable grounds for it to be satisfied either that the person concerned believed on reasonable grounds that his behaviour did not amount to market abuse or that he took all reasonable precautions and exercised all due diligence to avoid engaging in
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  market abuse. We believe that the tests of reasonable belief and due diligence—not the tests of intent and recklessness, which the Opposition amendments would add—are the right ones.
  Sir Nicholas Lyell: Does the Minister recognise that she is saying that she is reversing the burden of proof?
  Miss Johnson: I do not recognise that, but, as I just said to the right hon. and learned Gentleman, I am happy to come back to the point in a moment. I think that the point he has just made is linked to the one that he made earlier.
  As I said, we believe that reasonable belief and due diligence are the right tests, and that intent and recklessness—which is the force of the Opposition's amendments—are not the right tests. Let us suppose, for example, that we are dealing with a person who, not having bothered to make the inquiries that a reasonable person would have done, engages in behaviour that misleads the markets. It would be quite wrong for such a person to be given a blanket protection from the consequences of his actions, viewed from his own perspective.
  The appropriate question is not what a person thinks about his own actions—which, obviously, could vary widely between individuals, depending on their level of knowledge and experience—but whether the person can show reasonable grounds for believing that his action would not be regarded as abusive by a reasonable person who uses the market regularly, or that he took the precautions and displayed the diligence that a reasonable person would expect. Those are clear and proper protections.
  Conversely, the Opposition's amendments would significantly weaken the new market abuse regime. As the Opposition in another place did not return with amendments of that type on Third Reading, I had assumed that, at long last, this particular set of coach and horses had been put back in the stable; obviously I was wrong.
  Sir Nicholas Lyell: Why is this particular set of coach and horses so different from, for example, the situation in trading standards? In trading standards legislation, one is not guilty of misleading the market unless one intended to do so. Why should such intent not have to be present in financial services?
  Miss Johnson: I am not an expert on trading standards matters. I am also not quite clear that that comparison is one that we need to take on board now. However, as the right hon. and learned Gentleman is seeking an answer to his question on intent, perhaps I can return to that and say that intent is not a feature of the mischief of market abuse—the markets can be damaged regardless of someone's intent. The burden of proof rests with the FSA, which has to prove that someone has engaged in abuse.
  We have addressed the issue of whether the protections that we have introduced—which require people to demonstrate that they are covered by them—might be regarded as shifting the burden of proof, and we have concluded that they do not. The Bill is in conformity with

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  the requirements of the European convention on human rights, and we are confident that there has been no change in that position.
  Sir Nicholas Lyell: Could the Minister give just a short explanation of what the FSA has to prove to demonstrate that there has been market abuse? Could she give just one short example?
  Miss Johnson: That is pretty difficult to do. What will damage a particular market depends on the standards expected of that market. That is the point of the regular user test. In certain circumstances, abuse might or might not involve a mental element. However, it is pretty hard for me to say what those circumstances might be. It is really a question for the users of the various markets to be covered by the regime.
  Accepting a blanket exemption for behaviour that is not intended to distort the market would make it impossible to take action against behaviour that may damage a market in certain circumstances. It would be reckless to make such a change. If we went down the path that I think the right hon. and learned Gentleman is advocating, it would be very difficult in various ways to pursue market abuse.
  Sir Nicholas Lyell rose—
  Miss Johnson: I shall give way on this matter one more time.
  Sir Nicholas Lyell: I am very grateful to the Minister. Are there not two defences for the financial public—the civil defence and the criminal defence? Someone who is damaged by market abuse can seek compensation and restitution, and such action does not require the same burden of proof as action against someone who is to be prosecuted for a crime of market abuse. Does the Minister not recognise those differences? Do they not have exact parallels in trading standards generally, and in the case of someone who has taken away someone else's goods in circumstances that might be a civil tort, but not a criminal wrong?
  Miss Johnson: The right hon. and learned Gentleman causes me some concern. Market abuse is a civil offence, and I am not quite sure where the criminal part of his distinction enters into the matter. My understanding is that, in United Kingdom law as proposed in the Bill, market abuse is not a criminal matter. He seemed to connect market abuse and criminality.
  Sir Nicholas Lyell: Am I not right in thinking that market abuse can lead to very large penalties?
  Miss Johnson: Yes, it can lead to large penalties, but that does not necessarily make it a criminal matter. In UK law, market abuse is a civil offence, not a criminal one.
  Sir Nicholas Lyell: The Minister cannot simply say that market abuse is called a civil offence when it has effectively criminal penalties, including unlimited fines. She cannot, like Humpty Dumpty, make words mean what she wants them to mean to that extent. Surely she recognises that the European Court of Human Rights will
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  regard such behaviour as criminal. Perhaps she could take some advice and explain later how the Bill conforms with the convention.
  Miss Johnson: The Bill does conform. I said that market abuse was a civil offence under UK law. It may be construed as a criminal offence under the ECHR requirements, but it is a civil offence in the UK. The UK regime is non-criminal. We have introduced various protections that would be appropriate if a case was considered as a criminal matter under the ECHR only because we want to be as safe and circumspect as possible. I repeat, it is a civil offence under UK law.
  The amendments also deal with market abuse by firms when control of information rules—or so-called Chinese walls—are in operation. We are well aware that appropriate protection needs to be provided. That is the point of clause 109(9), as amended. We could specify in the Bill the situation set out in the Opposition amendment, but we think that it is better to leave it to the FSA, which will have discretion to make control of information rules. It will do so and work is in hand, but the legal position, as now, is that it does not have to. Putting explicit safe harbours in the Bill rather than leaving it to the FSA to decide when safe harbours should apply would not change the position, as we shall be able to do under clause 109. Be that as it may, the point of our approach is to provide flexibility, because the FSA may want to form a safe harbour from market abuse in other areas. The obvious example is price stabilisation rules.
  The FSA will have to consult on all its rules. In doing so, it may identify situations in which further protection is warranted. Equally, it may conclude that it does not want to give protection in all circumstances to everything that is done in accordance with permissive rules. Let us remember that the unscrupulous are very good at exploiting loopholes. The better approach is to leave it to the FSA to consider on a rule-by-rule basis, having regard to consultation responses.
  Sir Michael Spicer: I am getting very confused. During her interesting exchange with my right hon. and learned Friend the Member for North-East Bedfordshire (Sir N. Lyell), the Minister said that although market abuse was a civil matter in this country, it would be treated as a criminal matter under European law. Is she saying that corpus juris has arrived already? Some of us fear that it might, but the Government's official position was that it would never arise. Will she clear that up? It would be very serious if a matter were treated under civil law here and under criminal law in Europe.
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  Miss Johnson: I did not intend to give the impression that a criminal regime would apply under the ECHR. I intended to make it plain that we have built all possible safeguards into the Bill, including establishing the independent tribunal, to ensure that every safeguard is afforded to anybody against whom a charge of market abuse is made. The Government gave extensive evidence to the Joint Committee a considerable time ago, explaining in detail our reasoning and conclusions on reporting on compliance with the convention. I am sure that the right hon. and learned Member for North-East Bedfordshire (Sir N. Lyell) is familiar with that evidence and it would be helpful for him to look at it again.

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  I was proposing to turn to the role of the takeover panel in cases of market abuse.
  Mr. Loughton: The Minister is going back to the Burns committee, where we heard clear evidence from Lord Lester and other highly learned professionals in the area. They gave clear warnings that the clause contravenes article 6 of the European convention on human rights. Those fears have not been assuaged by the changes that have been made. Treasury solicitors had to admit that European law in this area comes about only by precedent and there are no precedents yet to suggest that the Bill will not conflict with the ECHR. How can the Minister explain that?
  Miss Johnson: As I am sure that the hon. Gentleman is well aware, different evidence was given to the Joint Committee by different legal experts. We are content that there is no problem with the market abuse regime in relation to the ECHR. That point was made on our behalf in the evidence.
  Mr. Loughton: Even though one of her predecessors was in charge of the Bill at the time, the Minister must admit that the Treasury's solicitor, who brought along an expert in European law, told us that it was not clear that the Bill was not in breach of the convention, because European law is built up from precedent and there is no precedent yet. She cannot give us an assurance.
  Miss Johnson: The Bill is ECHR-compliant. There is no problem with the market abuse regime in that context.
  Mr. Beard: The hon. Member for East Worthing and Shoreham (Mr. Loughton) has only half represented the evidence that was given to the Burns committee. I do not want to repeat all the evidence, but the conclusion was that the market abuses that were subject to relatively moderate penalties would be consistent with the convention if they went by civil procedures and levels of proof, but, as the penalties became larger, a criminal procedure would be necessary. The Bill as amended reflects that. Lord Lester's opinion was not the only one given. As the penalties are graduated, there is a need to move to criminal procedure. That is what my hon. Friend is saying.
  Miss Johnson: I am grateful to my hon. Friend for confirming my points. He was a member of the Joint Committee and was present when the discussions took place.
  The role of the takeover panel on cases of market abuse will also be of considerable interest to the House. There is much common ground on these issues. It is a common aim across the House to ensure that takeovers continue to be regulated in the same speedy and effective manner as they currently are. At the same time, the new market abuse regime needs to work as effectively and coherently as possible to prevent and deal with abuse of the financial markets. Those aims are not at issue, but how we achieve them is.
  Lest there should be any misunderstanding, let me make it clear that we support the takeover panel. Its work in regulating the conduct and process of takeovers is
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  important for the effective and efficient operation of capital markets and for the protection of shareholders. We are in no doubt about that.
  We also believe that it is vital that our financial markets are protected from the effects of market abuse, wherever and whenever it occurs. That is why we have introduced the new market abuse regime. Well-regulated markets attract business, which is good for the market, good for investors and good for the economy.
  We do not think that these two aims are in conflict in any way. Clearly, market abuse—indeed, very serious market abuse—can occur during takeovers. It is important that proper procedures and arrangements are in place between the FSA and the takeover panel. We do not want unnecessary duplication or to create unnecessary uncertainty or the risk of tactical litigation in this sphere. We take the practical arrangements seriously. The FSA and the panel are working on operating agreements and setting out formal mechanisms for liaison and information sharing, similar to those that the FSA is working on with the investment exchanges.
  The FSA and the panel are also drawing up policy statements concerning the circumstances in which the FSA or the panel would take the lead. As Lord Saatchi said in another place, the best solution is an agreement on a sensible modus operandi. We are of the view that the FSA will be able to adopt robust policy statements which mean that it will only take action against market abuse which occurs during a takeover in exceptional circumstances.
  Of course people can seek judicial review if the FSA declines to take action, but as long as the FSA acts reasonably it has nothing to fear. The courts have been very clear that they will not generally intervene during the course of a takeover. Why would we expect the courts to take a different view depending on whether it was the panel that was being reviewed or the FSA?
  Even if judicial review were sought, that would not cause problems for the timing of takeovers—the issue about which the panel is concerned. If the FSA does get involved, it will only do so to deal with any market abuse that has occurred or is likely to occur. There is no reason to expect it to impact on the timetable. We think that the procedures and arrangements that the panel and FSA are working on will ensure that problems do not arise, but we have accepted the need for what I might call a safety valve.
  Our amendment, like the amendment passed in another place, will allow the FSA to provide a safe harbour for behaviour in conformity with the City code produced by the takeover panel. However, there is a crucial difference between our amendment and Lords amendment No. 180.
  Under our amendment, the decision whether behaviour amounts to market abuse will always rest with the statutory regulator, the FSA, and, ultimately, the independent tribunal to be established under the Bill. Under the amendment made in another place, there would be circumstances in which that decision would in substance rest with the takeover panel. By providing a safe harbour for behaviour which, in the panel's opinion, conforms with the code, the amendment gives the panel the power to determine that a person has not engaged in market abuse.
  The issue we face is in some ways a narrow one, but it is extremely important. Where market abuse takes place during a takeover, should the ultimate decision on whether

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  action should be taken rest with the statutory regulator, the FSA, and the tribunal or the non-statutory takeover panel? I think that the answer is equally straightforward. In what I would expect to be the very rare event of a disagreement between the FSA and the panel, it must be right that the last word should rest with the statutory regulator and the independent tribunal to be established under the Bill.
  Mr. Flight: Under Lords amendment No. 180, the last word rests with the FSA in relation to market abuse, except for the specific territory covered by the code. Any other area in which market abuse might be committed, or where the FSA might sniff out market abuse, is entirely a role for the FSA—even while a bid is taking place.
  Miss Johnson: The hon. Gentleman has made exactly the same point as me, although his "except" is the important point. That is the difference. It is not a big difference, but it is important to realise that we have set up a regime that is supposed to have a single definition of market abuse, to be accountable, to be statutorily underpinned and to have reference to an independent tribunal. The hon. Gentleman, with his "except", would transfer some things into an arena where none of that provision was in place.
  If amendment No. 180 were allowed to remain part of the Bill—I will encourage the House to remove it—I believe that there would be important consequences, particularly in terms of the European convention on human rights, that were not appreciated by those who drafted the amendment. Giving the panel a determinative role in the question whether particular behaviour amounted to market abuse would, in effect, give it statutory functions. These functions would involve the determination of civil rights and even, possibly, criminal charges under the convention.
  Throughout the passage of the Bill, Opposition Members have insisted, rightly, that in exercising such functions the FSA should be subject to comprehensive accountability arrangements, and that there should be the safeguard of full access to an independent tribunal for those accused of market abuse. We have ensured that the market abuse regime is fair, transparent and certain, with appropriate safeguards set out in the Bill. These include those safeguards to ensure compliance with the European convention on human rights that are needed where a body has a role in determining civil rights and criminal liabilities.
  That does not mean that we are questioning the arrangements for the accountability of the panel in the usual context in which it operates. It simply means that those arrangements are not appropriate in this context. They were never designed to deal with the determination of whether market abuse has occurred in terms of part VIII of the Bill. Against that background, I am pleased that the Opposition appear to have had second thoughts, although, for reasons that I will explain, we cannot agree to their proposed substitute.
  I refer now to Government amendment (a). If the problems which people have argued might arise do arise, the Government amendment in lieu of amendment No. 180 provides a proper and adequate mechanism for dealing with them. The FSA will, with the approval of the Treasury, be able to provide for safe harbours for all or
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  part of the City code produced by the panel. In giving such approval, the Treasury would, of course, be answerable to Parliament.
  Our amendment is very similar to the amendment that Lord McIntosh tabled in another place on Third Reading, and which Lord Donaldson described as achieving "all that is necessary". However, we have given careful thought to concerns expressed about it in another place by both Conservatives and Liberal Democrats.
  We have listened to those concerns and, as a result, the amendment has been further improved. As my noble friend Lord McIntosh said in another place:
  Given … the nature of the code and the panel's role in interpreting and applying it, I would naturally expect the FSA to take the panel's view before it decided whether behaviour fell within the safe harbour which the Government amendment would enable it to provide. It would be very foolish if it did not … I would expect the tribunal and, if the matter came before them, the higher courts, to attach due weight to the panel's views in accordance with established case law.—[Official Report, House of Lords, 18 May 2000; Vol. 613, c. 403.]
  The Conservative spokesman in another place, Lord Kingsland, made it clear that he would have been willing to support our amendment had we been willing to refer expressly to the City code as applied by the takeover panel. That reflects the concern, which we fully understand, that in looking at safe harbours provided by the City code, the FSA should not be able simply to impose its own interpretation, but should, in essence, be guided by the panel's interpretation.
  The FSA will have arrangements for ensuring that the panel's views on whether behaviour is in conformity with the City code are sought and listened to. The panel's views will not be—and, for reasons I have explained, cannot be—determinative in law. However, they will be highly persuasive. Subsection (4) underlines this and, I hope, provides additional reassurance.
  The FSA will be under a statutory duty to keep itself informed of the way in which the panel interprets and administers the relevant provisions of the code and, it follows, fully reflect that in its decisions about whether to act in cases of possible market abuse arising in a takeover.
  That is the right result. To go further would be to go too far in terms of making the panel the final arbiter as regards market abuse in this area. Our amendment will ensure that if problems do arise in this area—we are confident they will not—adequate and effective safe harbours can be provided without compromising the position of the panel or the single statutory regulator, the FSA.
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  We cannot accept amendment (b) in lieu of Lords amendment No. 180. It is based closely on the so-called gatekeeper amendment which Lord McIntosh described in another place as
  the worst of all the amendments before us.— [Official Report, House of Lords, 18 May 2000; Vol. 613, c. 414.]
  The amendment would prevent the FSA from acting during a takeover unless it was given permission to do so by the takeover panel, a non-statutory body. I recognise that the prohibition would be temporary, in the sense that it would last only as long as the takeover was in progress.

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  I also note that a new provision has been added requiring the panel to co-operate with the FSA in the ensuing period, although I doubt whether that adds much, since—
  Sir Nicholas Lyell: On a point of order, Mr. Deputy Speaker. I apologise for asking again. I seek clarification. To which amendment are we referring?
  Mr. Deputy Speaker: It is not for the Chair to advise the right hon. and learned Gentleman which amendment is being referred to. I have called Lords amendment No. 127, and we are discussing it along with all the other amendments that are grouped with it on the selection list. It is not for the Chair to advise on what amendments are under discussion. The Chair is confused enough as it is.
  Miss Johnson: I hesitate to disagree with you, Mr. Deputy Speaker, but I am not confused at all. I am completely clear about what we are discussing. Having said that, however, I seem to have lost my place in my notes.
  I note the new provision requiring the panel to co-operate with the FSA in the ensuing period, but I doubt whether that will add much, because that is the kind of behaviour that one would expect of a body in the panel's position when dealing with a statutory regulator.
  On the other hand, I note the blanket nature of the prohibition. It would apply to each and every one of the FSA's powers, not just those in relation to market abuse. It would apply to market abuse of all kinds, no matter how trivial or how serious, and to any action instigated during the course of a takeover, regardless of whether it was likely to disrupt the timetable of the bid. I cannot believe that the Conservative party really wants the FSA to be hamstrung in that way.
  I believe that it would be a mistake for the Bill to contain a provision that hands over the powers of the statutory regulator in the area of market abuse to a non-statutory regulator that is not subject to the same checks and balances. We expect the FSA to adopt a general policy of not intervening in a way that could disrupt the course of a takeover bid. That will be part of the sensible administrative arrangements to be put in place with the panel. However, it is not impossible to imagine circumstances in which an exception might need to be made—for example, if the regulator became aware of serious market manipulation that it, but not the panel, was in a position to do something about.
  As a matter of principle, it would be wrong to fetter the discretion of the statutory regulator in the way contemplated by amendment (b). I commend Government amendment (a) in lieu of Lords amendment No. 180 to the House and urge the House to reject amendment (b).
  Mr. Heathcoat-Amory: This is a very large group of amendments and has inevitably caused some confusion. It may be of assistance if I speak only to the issues concerning the takeover panel, and my hon. Friend the Member for Arundel and South Downs (Mr. Flight) deals with the other amendments.
  The key issue concerns the possible conflict—and certainly overlap—between the jurisdictions of the Financial Services Authority and the takeover panel,
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  which the Government have not satisfactorily addressed. One of the City of London's great advantages is that it offers certainty, speed and flexibility in dealing with takeovers and mergers. In a previous debate, we discussed whether the United Kingdom, and London in particular, can hold its own in an international market. I believe that it can if it holds on to its traditional flexibilities in dealing with mergers and bids. That is important internationally and for the dynamism of the United Kingdom market. We have here something very precious.
  The FSA is charged with dealing with market abuse and the takeover panel regulates mergers and bids. The Economic Secretary praised the takeover panel and said that she did not want to do anything to damage it. It has indeed been a success story. It was established in 1968 and is widely admired. The panel itself has raised directly with the Treasury serious concerns about the Bill, and I do not believe that she gave an adequate response.
  The danger of overlap occurs in several areas. It must be objectionable in principle for someone to be vulnerable to double jeopardy. Someone abiding by one set of rules, published by the takeover panel, should not be vulnerable in relation to a second set of rules, published by a second regulator.
  It must be bad for the market for uncertainties to develop about which regulator is responsible in each individual case. For instance, it would be dangerous if the FSA said that certain behaviour during a bid was abusive and the takeover panel said that it was not. Who would decide the outcome? If the matter went to appeal, it would certainly be very embarrassing if the court had to arbitrate between two different regulatory bodies. It is bad for the City and for the regulatory regime itself to have the possibility of conflict and overlap.
  It must be recognised that parties to a bid can themselves seek to manipulate the regulatory process. Tactical litigation can be launched by the object of a bid in order to frustrate the whole process. The scope for that will be immeasurably greater if that party can appeal to the FSA outside the traditional authority of the takeover panel.
  The Economic Secretary seemed simply to deny that there was such a problem. She suggested that any involvement of the FSA would not affect the timetable of a bid, and would not delay it because the action would simply be aimed at the market abuse. That view demonstrates ignorance of how bids progress. For instance, under the takeover code, a bidder usually has to complete the process within 60 days, or the bid lapses. So there is a limited time for the bid to be declared unconditional.
  One can imagine a situation in which a hostile bidder for another company publishes a document in order to persuade independent shareholders to accept the bid. The hostile bidder might do that just before the expiry of the 60-day period. The target company might complain that the document was misleading in several material respects. At present, that issue would be considered immediately by the takeover panel, which has a reputation for dealing with such matters efficiently and swiftly, so the bid could proceed if the allegation were groundless.
  However, under the Bill, the target company would be able to bring in the FSA to determine whether the behaviour in question was market abusive, and that would introduce a most unwelcome delay. Indeed, if that

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  happened, the takeover panel might have to agree to extend the bid deadline, or, even more damagingly, one of the companies concerned could apply for judicial review, if the FSA refused to examine the issues and the particulars of the case. If that led to an injunction, it would cause unwelcome delay as well as introducing new and expensive litigation into a process that, until now, has always been dealt with swiftly and efficiently.
  The Minister has not dealt with the point about delay and expense. However, she did recognise that the problem might exist. That is why, in the other place, my noble Friends succeeded in passing amendment No. 180, which would provide a safe harbour. It would provide that, in a bid situation, if those concerned conformed to the City code as published by the takeover panel, that would be a safe harbour against allegations of market abuse. It is also important to recognise that, despite that provision, the FSA would remain the lead regulator and would be able to include conditions and limitations on the effect of that safe harbour. It would be the FSA that would issue a statement, modified as necessary, indicating conformity with the City code that would be a safe harbour against market abuse.
  Mr. Nicholas Soames (Mid-Sussex): I declare an interest in that I advise a number of companies in the City. Does my right hon. Friend agree that anything that undermines the exceptional speed and efficiency of the way in which the takeover panel works will undermine the position of London as the capital market centre of the world?
  Mr. Heathcoat-Amory: My hon. Friend is right. It is not always understood how fast moving such bids can be. Decisions sometimes have to be taken within hours, and that cannot be done if parties to the bid could appeal to another regulator, or to a court for judicial review, which might then lead to an injunction and all the consequential delays and expense. That would undermine London's premier position as a centre in which such business can be done expeditiously and economically.
  The Minister is worried about Lords amendment No. 180, because—she says—it gives too much authority to the takeover panel. It is true that Lords amendment No. 180 would give the panel the job of determining whether certain behaviour is in conformity with the City code. That is a sensible demarcation between the responsibilities of the FSA and those of the takeover panel. The FSA would still be the lead regulator and it would issue the first statement about whether the safe harbour existed. Under subsection (3) of the new clause, it would also be able to include conditions and limitations on that safe harbour.
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  My hon. Friend the Member for Arundel and South Downs pointed out in an intervention that the FSA will still be able to regulate and pursue market abuse outside the City code. It would not be delegating the whole issue of market abuse to the takeover panel.
  We were somewhat at a loss to understand exactly what the Government object to in Lords amendment No. 180. In response, they have tabled Government amendment (a) in lieu, which would provide that the FSA must keep itself informed of the way in which the panel interprets and
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  administers the relevant provisions of the City code. In other words, the panel would not decide whether behaviour was in conformity with the code, because the authority would do that after discussions with the panel.
  The Government's response is hopelessly flabby and inadequate. It would create no demarcation of responsibility or any jurisdictional boundary between the FSA and the takeover panel, because discussions would take place anyway. No one supposes that the authority and the panel would not keep each other informed, so Government amendment (a) in lieu would add nothing. However, it would still leave the FSA with the responsibility to take action over market abuse during a bid. If it had that power and responsibility, and did not exercise it, it would be vulnerable to judicial review.
  It is no good having some modus operandi or self-denying ordinance whereby the authority says that normally it would leave the decision to the takeover panel. That would not wash in court. The target of a bid would allege market abuse and would ask the FSA to investigate the circumstances. If it refused, it would be vulnerable to judicial review. The FSA would always have to consider whether to exercise its powers in each case. The very fact that it would have to consider the issue would introduce a most undesirable element of delay.
  The Government are apparently determined not to accept Lords amendment No. 180, but I have said enough to show that their alternative—which was apparently cooked up with the Liberal Democrats—is not a compromise but a dangerous alternative. It would leave in place the overlap between the authority and the panel, and deal a grievous blow to the United Kingdom as a place to do business. I hope that the rumours about the Liberal Democrats are not true, although they caved in on the issue in the other place. The Liberal Democrats in their places tonight owe it to the House to explain why they have had a change of heart on the issue.
  Our alternative to Government amendment (a) in lieu is amendment (b) in lieu. If the Government are determined to overturn Lords amendment No. 180, our alternative would be superior to theirs, and achieve the same objectives by another route. It draws on the Datafin court case of 1986, in which the Court of Appeal ruled that the takeover panel was subject to judicial review, but that the court would not normally interfere while a bid was taking place.
  Our amendment (b) in lieu proposes that the FSA step back from a bid process while it is in progress. Provided that the takeover panel agreed, the authority would be prevented from exercising its market abuse powers. The new element in the amendment was also tabled in another place but was not pressed to a Division. It would ensure that the takeover panel notified the FSA about any suspected market abuse, and co-operated fully in any subsequent action by the authority.
  Crucially, under the amendment, the takeover panel would not decide what constituted market abuse. That decision would remain with the FSA but, in line with the Datafin case, the matter would be dealt with only after the bid had taken place. That alternative approach does not provide a safe harbour, but is another way to deal with the same problem. If the Government persist in overturning Lords amendment No. 180, our amendment would certainly be superior to theirs.
  Sir Nicholas Lyell: I shall be brief. This is a highly technical subject and I shall focus on what I consider to

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  be the key elements, for fear of getting something wrong, and in order to help myself—if no one else—to see the wood for the trees.
  Two matters are being debated in connection with the amendment. The first is the role of the takeover panel, as opposed to that of the FSA, in relation to takeovers, especially where the question of market abuse arises. The second is market abuse—which the Economic Secretary sometimes calls an offence and sometimes a purely civil matter—and whether it should involve criminal intent on the part of the alleged market abuser.
  I have read Government amendment (a) in lieu, and believe that it is all a question of the Government trying to retain control and the whip hand in all circumstances. I hope that they recognise that, in practice, the takeover panel organises takeovers exceptionally well, and that it is necessary for it be in command of events when it is supervising a takeover. The panel's ability to supervise and control takeovers has won worldwide admiration over the past 20 or more years. I think that the Government accept that. However, although they are not content to leave matters as they are, their amendment (a) in lieu is the nearest that they dare go towards doing just that.
  The amendment suggests that the last word in a takeover should be returned to the FSA. However, subsection (2) of their proposed new clause states:
  But the Treasury's approval is required before any such provision may be included in the Authority's code.
  The Minister smiles quietly at that; I am sure that her officials have told her that the Treasury must have final control over such matters. However, the amendment also provides that the FSA may include in its code an element that makes it clear that the City code—drafted and controlled by the takeover panel—shall apply to takeovers.
  Subsection (3) is another delightful and revealing provision. It states:
  If the Authority's code includes provisions of a kind authorised by subsection (1)—
  that is, if the authority's code states that the City takeover panel's code shall apply—
  the Authority must keep itself informed of the way in which the Panel on Takeovers and Mergers interprets and administers the relevant provisions of the City Code.
  Goody, goody. I am glad that the authority will be required, by statute, to tell itself that it should know what it is talking about before it exercises any administrative function.
  I have never seen such a provision before, but perhaps the Economic Secretary will refer to a precedent. If she does not, perhaps we can pop this precedent into other Bills as the months go by—but I do not wish to be flippant. The key point is who should have the whip hand and real control in the organisation of takeovers. The sensible and simple option is proposed in Lords amendment No. 180, which states, fairly and squarely, that the takeover panel should have control. It leaves the matter at that.
  If the Government amendment is accepted, I hope that the Government will promptly take the option that they have left open and hand back effective control to the City takeover panel. However, it would be better to stick to the amendment passed in the House of Lords.
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  The second question that we are debating is whether the offence of market abuse should require intent. The FSA is entitled to impose unlimited financial penalties for market abuse, so under any reasonable interpretation, it is bound to be construed, here and in Strasbourg, as a criminal offence. If that were recognised, the Bill would be a great deal simpler, as intent would be expected and required.
  The FSA seems to consider that it is difficult to convict anyone of market abuse. In the same way, it has turned out to be pretty difficult to convict people of insider trading, which is a very common form of market abuse. However, the FSA does not need the powers contained in the Bill, as not many prosecutions in this area are to be expected.
  The Bill establishes an offence—civil or criminal—of market abuse. It provides that the FSA, after consultation, will draw up a code to describe what constitutes market abuse. A penalty will be incurred by anyone who commits market abuse.
  I hope that in most situations, if not all, the FSA would be able to draw up a description of the types of market abuse that it wished to avoid. Rightly, it does not consider that it would have too much difficulty with that. I do not see, either, that there should be too much difficulty in convicting any experienced operator in the market who deliberately abused the market. It would be much healthier if that were considered the normal approach to take, just as it is in other questions of trading standards.
  The Bill deals with trading in financial services. The market in financial services is no different from the markets in washing machines or motor cars. We are talking about practices that would amount to abuse of that market. For instance, it is a classic abuse of the motor vehicle market to change a car's recorded mileage—to "clock" the car. Proving that abuse, too, requires proof that the person involved intended to carry out the abuse. It is usually easy to show intention, because when there are prosecutions, the people involved have usually done the same thing to scores or hundreds, if not thousands, of cars, and someone has picked them up.
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  In serious cases of market abuse, one would expect conduct that was obviously intended to mislead the market, and lead people up the garden path, on the part of an experienced operator. It would not be too difficult to get a jury to convict. In my long experience of the Serious Fraud Office, the one element in the system that seldom causes any problem is the jury. If the Financial Services Authority tells 12 good men and women and true about a piece of crookery carried out by Mr. X or company Y, putting it in straightforward terms, and the jury is shown the facts, they will be ready to convict.
  The object of criminal offences, or offences in general, is not principally to convict the one or two people who are prosecuted but to act as a deterrent to the market and to set limits and boundaries. It is far more sensible to do that in a straightforward and up-front way than in a very complicated way.
  I said that I would try not to let my speech get too complicated. However, in the provisions that follow clauses 109 and 110, which I think were probably introduced by the Government in another place,

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  with agreement, such an offence starts off being described as civil. To try and get it past Strasbourg, an elaborate system is set up whereby in order to impose a penalty, one has to apply to a tribunal or the courts. The Bill is trying to set up by the back door a court system that would be much better set up by the front door.
  The Government want to get the Bill on to the statute book. However, they have got this bit of it wrong; they should have been straightforward. I think that it is a good idea for a code to set out what constitutes market abuse. If the Government had brought that about, it would not be too difficult to secure convictions—but the very elaborate system set out in these provisions will go wrong. I advise the Government not to go further down that route, and, in so far as it is open to them on the amendments under consideration tonight, to correct the position.
  Mr. Flight: May I first briefly comment on the code and the panel? However, as my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) said, I intend essentially to speak about intent in relation to market abuse.
  I wish to report to our Liberal Democrat friends in particular the comments of Patrick Drayton, the head of the takeover panel, on the amendment. He says that the panel does not feel that the revised amendment addresses any of the concerns that it expressed in relation to the original. Government amendment, and that subsection (3) does not address its concerns about the amendment raised in the note that it issued.
  It remains the case, under the revised amendment, that the question of whether behaviour complies with the code and hence qualifies as a "safe harbour" would fall to be determined by the FSA in the first instance. That gives rise to—this is the whole problem—the potential for different interpretations of the takeover code, with messy consequences. It will cause uncertainty while the FSA decides whether it agrees with the panel. Disagreeing will have serious consequences for the reputation of each regulator. It may impact adversely on the panel's ability to interpret the takeover code flexibly, and parties may wish to seek clearance on interpretations of the code from the panel and the FSA.
  The key problem is that the Government amendment does not sort out who is in charge of a bid situation. What weight would the FSA attach to an interpretation or practice of the panel that is notified to it under subsection (3)? What would happen if the FSA disagreed with an interpretation or practice?
  Given the effort that the Government are putting into this, I assume that it is not their intent to accept the European Union directive on takeovers and mergers. Under the directive, the panel and the code would be things of the past, and mergers would be governed by statutory arrangements, with a great deal less flexibility.
  I should like to have a last go at intent. My right hon. and learned Friend the Member for North-East Bedfordshire (Sir N. Lyell) made the key point that, sooner or later, whether from the EU or elsewhere, the courts will determine that the offence is criminal, and intent will have to be given voice. I repeat the earlier point that, although the Government have said that it is impossible to give intent a voice, there has been no problem in the United States with the Securities and
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  Exchange Commission defining intent in relation to market abuse and what to look for as evidence of intent. Indeed, there are some provisions for doing just that.
  Our attempt, in the amendment, is limited to the single limb of market abuse, consisting of giving a false or misleading impression. This is our last opportunity to include the principle of intent clearly into the Bill. For an innocent man or woman to suffer merely because someone misinterpreted what they said must be wrong. Individuals may not realise that what they said could be misleading or misunderstood. This is particularly relevant in a bid situation, when either side may make announcements.
  The Minister seemed to misinterpret our amendment, which relates to amendment No. 131 to clause 113. Under our amendment, even though a person has committed market abuse, the FSA cannot impose a penalty in certain circumstances. If those circumstances are satisfied, the FSA can neither impose a penalty on the abuser nor issue a public censure. That will also be the position in relation to the requirement to pay compensation. We welcome both those concessions, which resulted from an undertaking given to the Joint Committee, but we would be grateful if the Minister would explain what happens in relation to market abuse. For example, is it treated as a disciplinary offence for an authorised firm or approved person? If that is the position, we would like to know that the FSA cannot impose a penalty under the disciplinary procedures.
  The amendment would extend the exemption from a fine in two different ways. The first is to provide that a penalty cannot be imposed where the person concerned has not intended to give a false or misleading impression. That follows the criteria for the criminal offence of making misleading statements, which come within section 47 of the Financial Services Act 1986 and which are replicated in the Bill.
  If somebody did not intend to give anyone a false or misleading impression and cannot be blamed for failing to realise that he might, it is surely too much of a nanny state and too unfair to subject him to any fine. The Bill provides already that the FSA's policy on fining must take into account when deciding on the size of the penalty whether the behaviour was deliberate or reckless. In that sense, the Bill demonstrates—intention is the key point—that recklessness can be recognised when it occurs. It follows that it is plain wrong to make somebody liable to a fine if he could not be expected to say something different from that which he said.
  The second part of the amendment, on which I think the Minister did not comment, relates to Chinese walls. It is straightforward. As everyone will be aware, the Chinese wall is a concept within one financial services group to keep entirely separate corporate finance activity and the goings on in that area. The Government indicated in Committee in this place that, if a person employed by a firm on one side of the Chinese wall were to create a misleading impression because he did not know what was known by employees of the firm on the other side of the wall, that firm could not be guilty of market abuse. That is an important point that needs to appear in the Bill. It should not be left to the FSA to make a ruling.
  The Government have amended the Bill to provide expressly, in the context of the criminal offence of making a misleading statement, that firms should not be guilty if

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  they were using an effective Chinese wall. That should therefore be spelt out expressly in the context of market abuse. We proposed a similar amendment in another place, and Lord McIntosh expressed surprise that we wanted a Chinese wall defence for individuals. The amendment before us makes our position clear.
  We have suggested also an anti-avoidance provision, which would mean that the firm could still be guilty of market abuse if an individual on one side of the wall who is in possession of information tells someone on the other side of the wall to engage in the relevant behaviour, even though he does not tell him the nature of the information. Due to the speed with which we have had to table amendments, we have omitted a couple of words, which are "or requested" in addition to the requirement to engage.
  As appears from amendment No. 128, the Government have amended the clause in another place in a way that we consider to be inappropriate. As a result of previous pressure on our part, the Minister agreed to introduce a provision that behaviour does not amount to market abuse if it conforms with the FSA rules. That appeared in clause 109 before it was amended in another place. As amendment No. 128 makes clear, the safe harbour for compliance with FSA rules now applies only if the rule includes an expressed provision that "behaviour conforming" does not amount to market abuse.
  That leaves at large the possibility that compliance with other FSA rules may be viewed as market abuse, and that firms could be in a difficult position if they do what the FSA rules tell them. They could still find themselves engaging in market abuse. I cannot believe that the Government intended that to be the position. When we last debated the issue, we felt that we had resolved it.
  We understand that the Government are afraid that a comprehensive safe harbour will validate market abuse, which is not supposed to come within it. Let us say that the rules provide that there should be best execution—that is buying or selling shares at the best price—and the firm concerned complies with that obligation but does so in a trade that in itself amounts to market abuse.
  In the Government's view, the safe harbour for behaviour conforming to FSA rules will mean that a firm cannot be guilty of market abuse in those circumstances. That is a wrong interpretation; the rules do not require insider dealing to have taken place, and it cannot therefore conform with them. Firms need to know that they will not run the risk of being accused of market abuse if they do what the FSA rulebook tells them. Therefore, amendment No. 128 must be disagreed to. Similar amendments apply to restitution and clause 489.
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  Dr. Vincent Cable: Several references have been made to my colleagues in the other place. Indeed, we have people there who are experienced City practitioners and lawyers. I am neither, but I shall try to interpret their approach to the problem that was brought to their attention by the takeover panel, which, as has been generally observed, was concerned about the way in which its practices should be properly incorporated into the Bill, and by independent investors who have been effectively protected by the way in which it operated.
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  Two essential problems have been adequately described. The first is duplication and overlap between the market abuse investigations and the work of the takeover panel and its City code, and the other is fairness, which the right hon. Member for Wells (Mr. Heathcoat-Amory) explained at some length. The principle of fairness means that a company that has complied in good faith with the takeover code should not be subject separately to a market abuse investigation—the problem of double jeopardy.
  Our understanding is that that problem has been adequately taken on board. The Government have accepted the thrust of the criticism from the Opposition and the City that a safe harbour should be explicit in the Bill for companies that comply with the City code. Therefore, the basic point about unfairness has been adequately addressed, but that leaves a residual problem: how to deal with conflicting judgments. In other words, there can be different interpretations of compliance with the City code and its overlap with market abuse. That problem constitutes a narrow area of disagreement that still remains.
  The broad proposition that guided debate in the other place was summarised by Lord Donaldson—a Cross-Bench peer, not part of the party politics on the matter. He said:
  My Lords, I take it that it has been generally agreed that, as a general proposition, in principle the views of the FSA on these matters should prevail over those of the Takeover Panel.—[Official Report, House of Lords, 18 May 2000; Vol. 613, c. 406.]
  If there is a conflict of jurisdiction and a choice has to be made, the FSA should prevail. The amendments make that clear so that the uncertainty and ambiguity about which Conservative Members have expressed concern do not arise. However, in the view of peers and the takeover panel, the interests of the panel and its operation should be properly recognised.
  Our understanding is that the reference to the panel's need to keep itself informed of how it interprets and administers the provisions is sufficient. That may be flabby language, as the right hon. Member for Wells said, but it represents an attempt to find a form of words in which the FSA's primacy is clearly accepted and in which the need to make cross-reference to the code is recognised. The peers' judgment was that there was no need to raise further objections because the fairness point had been accepted, the jurisdiction had been clearly defined and the work of the takeover panel had been incorporated. Therefore, 90 per cent. of the objections of those who were concerned with code and the takeover panel had been met.
  Mr. Loughton: I have a few brief comments in support of Opposition amendment (b) in preference to the Government's ham -fisted effort amendment (a). I take it that the Liberals support the Government's amendment as they seem to have done some strange deal in another place.
  The panel of takeovers and mergers, which has had a good track record for more than 32 years, is under attack from the Government. Can the Minister give me any example from those 32 years of when the panel would have done its job better, or of when it failed in its job because it did not have another authority—such as the FSA—constantly looking over its shoulder or because

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  such an authority was in competition with the regulation that the panel was trying to impose? If the Government get their way, there will be a severe case of too many cooks spoiling the broth.
  It is not only Opposition Members who say that; the takeover panel itself expressed serious concern—even after the Government cobbled together their new amendments. My hon. Friend the Member for Arundel and South Downs (Mr. Flight) quoted Patrick Drayton, the director general, whose comments on the amendment are littered with warnings of the uncertainty that will be caused. Mr. Drayton warns that the UK system will become slow and over-regulated. The uncertainty will have serious consequences for the reputation of each regulator.
  Those are serious words from an organisation that has acquitted itself exceedingly well in the conduct of takeovers and mergers in the City of London for the past 32 years. My right hon. and learned Friend the Member for North-East Bedfordshire (Sir N. Lyell) has an understanding of the legal implications of the measure that is infinitely superior to that of the rest of us—as the Minister found to her cost. As he pointed out, it comes down to a question of control. The Government are obsessed that the FSA should keep control in that matter and that they should keep control of the FSA, even though there is the prospect of a serious clash—potential double jeopardy, as my right hon. Friend the Member for Wells said earlier.
  Why do the Government want to denigrate the success of the panel by causing confusion as to its future role? The panel has been successful because it offers speed, certainty and flexibility in takeovers. In Committee and subsequently, Government Members gave as a reason for not splitting the roles of the chairman and chief executive of the whole authority the need to act swiftly when there were potential cases of market abuse or other issues that required action. Some of the fastest-moving aspects of the financial services industry relate to the mergers of large firms in a highly cut-throat and competitive market. They are playing for large stakes; huge fees are involved for an enormous phalanx of professionals in the City and abroad.
  The reason for the great success of the takeover panel is that it exists in a spirit of co-operation with the people it supposedly regulates; it relies on a huge reputation for integrity in the City of London. This is a case of "If it ain't broke, don't fix it." Would the takeover of Mannesmann by Vodafone or the merger under way between Glaxo and SmithKline Beecham have happened as smoothly—especially as there were other suitors on the horizon—if organisations other than the takeover panel had been involved? The panel has a clearly defined code of conduct for such matters, but what would have happened if another authority had had a look-in at the feast? We know that one large takeover—the merger between British Airways and American Airlines—was frustrated because of excessive regulation, especially in Europe and America. The whole deal was called off.
  There is potential for extra confusion as a result of the Government's proposals to replace the Lords amendment. We desperately need to be able to take decisions quickly. Two decision-making bodies might come up with two different decisions. That must take longer than if just one were involved and it would materially affect the outcome of any takeover that may be taking place.
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  We also need to be assured that the FSA is capable of working within the tight time scales within which the takeover panel operates; it usually makes a ruling within 60 days. If the Government amendment is accepted, the panel's decisions will no longer be final. However, we need the certainty that any decision will be final. The amendment will deter co-operation between takeover partners and the takeover panel, because the partners might fear that they may be implicated in market abuse. There will be great confusion as to whose interpretation of the takeover code is conclusive. Will it be the interpretation of the takeover panel or that of the FSA?
  My biggest fear has already been mentioned. There is a real threat that parties could deliberately drag the FSA into their attempt to frustrate a bid. They could use that as a spoiling tactic to sabotage a takeover. In the world of takeovers and mergers, an unwilling party who is the subject of a takeover bid has an incentive to do just that.
  All that confusion will replace the well-versed certainty and successful track record of the takeover panel. Extra overlap, over-complication and uncertainty all amount to over-regulation. As we have found out during its passage through Parliament in the past two years, that is what the Bill is all about.
  What are the compensating benefits of the additional powers that the FSA will have to stick its nose into takeover panel territory? Where has the panel gone wrong? What will be better as a result of the new role that is proposed? Our amendment (b) would not mean that all powers would be given exclusively to the takeover panel. The amendment contains the phrase:
  Except at the request of …
  If the panel deems it appropriate, it could call in the FSA at an early stage. The matter would be left to the discretion of the panel; our amendment would not give it powers wholeheartedly and irreversibly. The panel would co-operate with the FSA, but it needs to be clear who has the upper hand during a sensitive takeover bid.
  As my right hon. and learned Friend the Member for North-East Bedfordshire pointed out, our amendment contrasts with the meaningless waffle in Government amendment (a) which states that
  the Authority must keep itself informed.
  What does that mean? It means that, if a large multinational company is trying to make a friendly merger with, or a hostile takeover of, another large company, certainty and clarity will go out of the window. Only by accepting amendment (b) can we restore the credibility, confidence and clarity that the City so desperately needs and that will be such an important part of its continued success.
  Miss Melanie Johnson: I shall deal first with the takeover panel and return to the other points later.
  The hon. Member for Twickenham (Dr. Cable) is no longer here as he has had to go home because of a family illness. However, he rightly sketched out the two issues involved and pointed out that the remaining problem was overlap. He explained what would happen if there were conflict. It is interesting that the right hon. and learned Member for North-East Bedfordshire (Sir N. Lyell) admitted that overlap would not often occur. The implication of his remarks was that it would, as we believe, occur rarely. It will certainly be a rare event, so

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  the question is who, ultimately, will determine an issue if there is any dispute about it which relates to market abuse. We say, as we have always said, that the FSA must take such decisions at it is the statutory regulator and the accountable body. People have recourse to definitions of market abuse in the Bill and to the independent tribunal. Those matters contribute to the provision on the work of the market abuse regime and stop it being something that it should not be.
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  Sir Nicholas Lyell: Perhaps I did not make myself clear, but the hon. Lady has taken one part of my speech and transferred it to another. I said that there would not be many prosecutions for market abuse, which is entirely different from the turmoil that can be created by players in the market seeking to frustrate takeovers by contrasting the views of the FSA with those of the takeover panel. I certainly did not say that that would not be frequent. My hon. Friends frequently make the important point that it is one of the dangers of the current position, about which the takeover panel rightly warns.
  Miss Johnson: I apologise if I misunderstood the right hon. and learned Gentleman. None the less, we believe that such disputes will be rare. We can be persuaded to believe that, because so far there have been few problems with judicial review—even though there is currently an overlap between the regulatory regime and the takeover panel's code, and between that code and the criminal offences of insider dealing, market manipulation and misleading statements and practices.
  Those overlaps could be used in the takeover process in the same way that Opposition Members and the takeover panel worry that they could be used in the market abuse regime. To date, people have not sought to frustrate takeover bids by such means. The only thing that will change after the introduction of the new market abuse regime is the potential degree of overlap, not its nature or form.
  It is hard to see how involving the FSA will have any impact on the bid's timetable. That is the panel's main concern, but no one has given a plausible explanation of the way in which that might occur. The panel said that it is worried about injunctions for market abuse, but they would be aimed at the abuse, not the merits or otherwise of the bid, and would not interfere in the takeover process. Indeed, under current provisions there has been no interference in the overlap between the takeover panel and certain areas of legislation.
  I therefore presume that no has ever pressed the FSA to seek injunctions under section 61 of the Financial Services Act 1986 alleging possible breach of the market manipulation offence. That course is open to people who are in the process of takeovers, but to my knowledge it has never been taken.
  Mr. Loughton: Surely there could be real change to the timetable for a bid if it became known that the FSA was looking into market abuse regulations. Acceptances of a takeover would inevitably fall off so that, at the first acceptance date, the required number of acceptances would not be forthcoming and the bid would be pushed
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  further back. Indeed, a takeover could be suspended if it was surrounded by uncertainty caused by the FSA, which would surely affect the timetable.
  Miss Johnson: The hon. Gentleman used the word "surely", but he did not give any reasons why that situation should arise. Concern has been expressed that the courts will force the FSA to intervene. However, it has a stated policy of not seeking to intervene, except in exceptional circumstances. As Lord McIntosh explained in another place, it is clear to us, as it is to the FSA, that it could adopt a policy of not intervening where it thought that it was being dragged in for tactical reasons. There is no reason for it not to take that course of action. It is clear that it could adopt a policy of leaving it to the panel to take action where it is satisfied that the panel can deal with the mischief adequately.
  Mr. Heathcoat-Amory: Did not the hon. Lady listen to my points about that? She is just reading out her brief without responding to the points that we have made. The authority's self-denying ordinance will not work. If it has the ability to intervene, it is vulnerable to a judicial proceeding that requires it to intervene. It is no good the Minister simply saying that the FSA may decide that, in general, it will not intervene. Provided that it has the power to do so, it will have to examine the circumstances when it is requested to do so, and that will cause the delay and the possibility of litigation about which we have been complaining.
  Miss Johnson: I do not know who is not listening to whom. I have just explained that although there is already a significant overlap in legislation which could cause people to interfere in the work of the takeover panel—as the right hon. Gentleman fears might occur—that course of action has not been taken. So, there is no reason to believe that it will be taken any more often in the case of market abuse than it has in matters that might be more vigorously pursued and which certainly count as more serious legally.
  Mr. Tyrie: If what the Minister says is correct, she is effectively stating that there will be no overall effect on takeover practice as a consequence of the Government's decisions and this legislation. Is that her view? Does she expect no change in the number of takeovers?
  Miss Johnson: I expect that the FSA and the takeover panel will need to work closely together to sort out the practical arrangements. Indeed, they are in the process of doing so. Those practical arrangements need to be sorted out, but I expect very little or no change in the takeover panel's ability to work. As I said in my opening remarks, none of us differs in the objective. The only question is how best to achieve it given the problems lucidly set out by the hon. Member for Twickenham.
  Mr. Tyrie: I was trying to draw out the Minister on the point made by my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory). He said that the threat of judicial review could generate a change in behaviour and that that would lead to a change in the number of takeovers that eventually go through. Is it the Minister's considered view that there will be no change in behaviour and in the number of takeovers as a consequence?
  Miss Johnson: I think that I have already answered that point. The right hon. Member for Wells

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  (Mr. Heathcoat-Amory) touched on the Datafin case. I cannot recall his exact remarks, but that case obviously formed the basis of the position that the courts have adopted on judicial interference in takeovers. As a result, the courts may not look kindly on parties to a bid and others involved in the bid seeking to circumvent such an approach.
  Again, I refer Opposition Members to the remarks of Lord Donaldson. He said that the amendment that we tabled in the Lords, which was very similar to the slightly enhanced one before us, was all that was necessary. He has had a considerable amount to do with these matters. If we are seeking legal justification for which way things are likely to go, Lord Donaldson's views are important and should be taken into account.
  Questions were asked about the way in which safe harbour would work in relation to the existing takeover panel provision. Part of Lords amendment No. 180 states:
  "the opinion of the panel" includes any revised opinion formed by the Panel as a result of any further consideration
  in conformity with the City code
  as applied by the Panel and as amended from time to time by the Panel.
  Therefore, in respect of takeovers, the panel would be able to say what is not market abuse. The crux of the issue is the fuss that would have arisen had we said that market abuse is whatever the FSA says it is, and that, at least in respect of takeovers, the FSA can change its mind case by case, without consulting anyone or being accountable to anyone. Had we made such proposals, extreme concerns would, rightly, have been expressed in Committee, in the House of Commons and in another place.
  There are practical problems with the Lords amendment which have not been properly thought through. In addition, there are significant differences between Lords amendment No. 180 and the Opposition amendment in lieu, and I am not clear which is the preferred approach. The two amendments would not have the same force. The Lords amendment makes no provision for a gatekeeper role, which arises in the amendment in lieu. I am not clear how the Opposition want to pursue their case.
  The right hon. and learned Member for North-East Bedfordshire asked about the takeover panel and the precedents for subsection (3) of the Government's proposed new clause, and he said that the provision is unusual. I refer him to clauses 307 and 316 of the Bill as it stands, which relate to Lloyd's and the designated professional bodies.
  The hon. Member for Arundel and South Downs (Mr. Flight) asked precisely what weight the FSA would attach to the panel's rulings. We expect the FSA to attach considerable weight to them. The panel's view will be highly persuasive in takeover matters. If disagreement arises, we believe that, as the statutory regulator in respect of market abuse, the FSA's view should be the determining view; however, we also believe that disagreement is most unlikely in such cases.
  We have spent a long time debating the ingredients of a good market abuse regime—one in which people clearly understand the definition of market abuse, the means by
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  which that definition has been reached, what safe harbours exist in respect of market abuse and, therefore, how they can comply with the regime and so ensure that they do not engage in market abuse. Such provisions will be considerably undermined if we accept the Lords amendment or the Opposition's amendment in lieu, as to do so would leave many issues open to further debate. In addition, there would be not one but two bodies with effective responsibility in respect of market abuse; it is easy to foresee the consequences of that.
  The right hon. and learned Member for North-East Bedfordshire also raised the issue of the European convention on human rights. The ECHR institutions regard the classification of provisions in national law as not conclusive in respect of our categorisation for convention purposes. A person who engages in market abuse will not commit an offence under UK law and will not have a criminal record. That is an important point to emphasise. Intent is not a necessary element of a criminal offence, as I am sure I do not need to point out to the right hon. and learned Gentleman.
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  The provisions of the Bill are compatible with the European convention on human rights. They were compatible with article 6 relating to civil matters before the Joint Committee deliberated, but the changes made after the Joint Committee will provide the additional safeguards required in the regime if it were found to be criminal. Those extra safeguards make it absolutely sure that people will have recourse to the elements that will make the provision compliant with the European convention.
  A number of offences contain no element of intent. That point was raised by the right hon. Member for Wells. I refer to section 4 of the Financial Services Act 1986, which covers investment business without authorisation, about which a similar point may be made.
  The key differences between us are small. It is worth while running through the differences between the Lords amendments and the Opposition amendments. The amendment carried in the Lords is concerned with safe harbours and allows the FSA to provide a safe harbour for behaviour when the panel thinks it is in conformity with the code, whereas the Opposition amendment before us would provide a gatekeeper to enforcement action and would prevent the FSA from taking any action during a takeover unless the panel requested it to do so.
  I have outlined why I believe that the arrangements that we have put in place for the takeover panel are the rights ones. We accept that there is a difficulty to be dealt with. We believe that we have dealt with it properly and in a way that maintains the coherence and integrity of the market abuse regime while allowing the takeover panel to continue its work, as we expect it to do, in dealing rapidly and effectively with takeovers. That is what we believe will be the upshot of the support that I hope the House will give to our amendment.
  Lords amendment agreed to.
  Lords amendments Nos. 128 to 130 agreed to.

  Clause 113
  POWER TO IMPOSE PENALTIES IN CASES OF MARKET ABUSE
  Lords amendment: No. 131, in page 54, line 6, at end insert—
  ("( ) But the Authority may not impose a penalty on a person if, having considered any representations made to it in response to a warning notice, there are reasonable grounds for it to be satisfied that—

  (a) he believed, on reasonable grounds, that his behaviour did not fall within paragraph (a) or (b) of subsection (1); or

  (b) he took all reasonable precautions and exercised all due diligence to avoid behaving in a way which fell within paragraph (a) or (b) of that subsection.")

  Amendment proposed to the Lords amendment: in
  line 9, after final 'subsection', insert '; or—

  (c) he did not intend to give anyone a false or misleading impression falling within section 109(2)(b) and in engaging in the relevant behaviour he was not reckless as to whether he might give anyone that false or misleading impression; or

  (d) where the relevant behaviour fell within section 109(21(b) and was engaged in by a person other than an individual, the impression given by his behaviour was misleading only because of information which the individual who engaged in that behaviour on his behalf did not know about and that individual was an individual to whom subsection ( ) applies.

  ( ) This subsection applies to an individual if the information was withheld from him in circumstances permitted by control of information rules and he was not directly or indirectly required to engage in that behaviour by a person who did know the information.'.—[Mr. Heathcoat-Amoryl
  Question put, That the amendment to the Lords amendment be made:—
  The House divided: Ayes 112, Noes 301.

  Division No. 212]

  [9.19 pm

  AYES

  Ainsworth, Peter (E Surrey)

  Fraser, Christopher

  Arbuthnot, Rt Hon James

  Gale, Roger

  Baldry, Tony

  Gill, Christopher

  Bercow, John

  Gillan, Mrs Cheryl

  Beresford, Sir Paul

  Gray, James

  Blunt, Crispin

  Grieve, Dominic

  Boswell, Tim

  Gummer, Rt Hon John

  Bottomley, Peter (Worthing W)

  Hammond, Philip

  Bottomley, Rt Hon Mrs Virginia

  Hawkins, Nick

  Brady, Graham

  Heald, Oliver

  Brazier, Julian

  Heathcoat—Amory, Rt Hon David

  Brooke, Rt Hon Peter

  Hogg, Rt Hon Douglas

  Browning, Mrs Angela

  Horam, John

  Bruce, Ian (S Dorset)

  Howard, Rt Hon Michael

  Burns, Simon

  Howarth, Gerald (Aldershot)

  Butterfill, John

  Jack, Rt Hon Michael

  Cash, William

  Jenkin, Bernard

  Clappison, James

  Key, Robert

  Collins, Tim

  King, Rt Hon Tom (Bridgwater)

  Cran, James

  Laing, Mrs Eleanor

  Curry, Rt Hon David

  Lansley, Andrew

  Davies, Quentin (Grantham)

  Leigh, Edward

  Day, Stephen

  Letwin, Oliver

  Duncan Smith, Iain

  Lewis, Dr Julian (New Forest E)

  Evans, Nigel

  Lidington, David

  Faber, David

  Lloyd, Rt Hon Sir Peter (Fareham)

  Fabricant, Michael

  Loughton, Tim

  Fallon, Michael

  Lyell, Rt Hon Sir Nicholas

  Flight, Howard

  MacGregor, Rt Hon John

  Forth, Rt Hon Eric

  McIntosh, Miss Anne

  Fowler, Rt Hon Sir Norman

  Maclean, Rt Hon David

  Fox, Dr Liam

  McLoughlin, Patrick

  108

  Madel, Sir David

  Spicer, Sir Michael

  Mates, Michael

  Spring, Richard

  Mawhinney, Rt Hon Sir Brian

  Stanley, Rt Hon Sir John

  May, Mrs Theresa

  Swayne, Desmond

  Moss, Malcolm

  Syms, Robert

  Nicholls, Patrick

  Tapsell, Sir Peter

  O'Brien, Stephen (Eddisbury)

  Taylor, Ian (Esher & Walton)

  Ottaway, Richard

  Taylor, John M (Solihull)

  Page, Richard

  Taylor, Sir Teddy

  Paice James

  Tredinnick, David

  Paterson, Owen

  Trend, Michael

  Pickles, Eric

  Tyrie, Andrew

  Portillo, Rt Hon Michael

  Viggers, Peter

  Randall, John

  Walter, Robert

  Redwood, Rt Hon John

  Wells, Bowen

  Robathan, Andrew

  Whitney, Sir Raymond

  Robertson, Laurence

  Whittingdale, John

  Roe, Mrs Marion (Broxbourne)

  Willetts, David

  Rowe, Andrew (Faversham)

  Winterton, Mrs Ann (Congleton)

  Ruffley, David

  Winterton, Nicholas (Macclesfield)

  Sayeed, Jonathan

  Yeo, Tim

  Shephard, Rt Hon Mrs Gillian

  Young, Rt Hon Sir George

  Shepherd, Richard

  Tellers for the Ayes:

  Simpson, Keith (Mid—Norfolk)

  Mr. Geoffrey Clifton-Brown

  Soames, Nicholas

  and

  Spelman, Mrs Caroline

  Mr. Peter Luff.

  NOES

  Adams, Mrs Irene (Paisley N)

  Caton, Martin

  Ainger, Nick

  Chapman, Ben (Wirral S)

  Ainsworth, Robert (Cov'try NE)

  Clapham, Michael

  Alexander, Douglas

  Clark, Rt Hon Dr David (S Shields)

  Allen, Graham

  Clark, Paul (Gillingham)

  Anderson, Janet (Rossendale)

  Clarke, Charles (Norwich S)

  Armstrong, Rt Hon Ms Hilary

  Clarke, Eric (Midlothian)

  Ashdown, Rt Hon Paddy

  Clarke, Rt Hon Tom (Coatbridge)

  Atherton, Ms Candy

  Clarke, Tony (Northampton S)

  Austin, John

  Clelland, David

  Battle, John

  Clwyd, Ann

  Bayley, Hugh

  Coffey, Ms Ann

  Beard, Nigel

  Coleman, lain

  Beckett, Rt Hon Mrs Margaret

  Connarty, Michael

  Begg, Miss Anne

  Cook, Frank (Stockton N)

  Bell, Martin (Tatton)

  Corbett, Robin

  Benn, Hilary (Leeds C)

  Cotter, Brian

  Benn, Rt Hon Tony (Chesterfield)

  Cousins, Jim

  Bennett, Andrew F

  Crausby, David

  Benton, Joe

  Cryer, Mrs Ann (Keighley)

  Bermingham, Gerald

  Cryer, John (Hornchurch)

  Berry, Roger

  Cummings, John

  Best, Harold

  Cunningham, Rt Hon Dr Jack

  Betts, Clive

  (Copeland)

  Blackman, Liz

  Cunningham, Jim (Cov'try S)

  Blears, Ms Hazel

  Darvill, Keith

  Blizzard, Bob

  Davey, Valerie (Bristol W)

  Boateng, Rt Hon Paul

  Davidson, Ian

  Borrow, David

  Davies, Rt Hon Denzil (Llanelli)

  Bradley, Keith (Withington)

  Davies, Geraint (Croydon C)

  Bradley, Peter (The Wrekin)

  Dawson, Hilton

  Bradshaw, Ben

  Dean, Mrs Janet

  Brinton, Mrs Helen

  Denham, John

  Brown, Russell (Dumfries)

  Dismore, Andrew

  Buck, Ms Karen

  Dobbin, Jim

  Burgon, Colin

  Donohoe, Brian H

  Burstow, Paul

  Doran, Frank

  Butler, Mrs Christine

  Dowd, Jim

  Byers, Rt Hon Stephen

  Drew, David

  Caborn, Rt Hon Richard

  Eagle, Maria (L'pool Garston)

  Campbell, Rt Hon Menzies

  Edwards, Huw

  (NE Fife)

  Efford, Clive

  Campbell, Ronnie (Blyth V)

  Ellman, Mrs Louise

  Campbell—Savours, Dale

  Ennis, Jeff

  Cann, Jamie

  Field, Rt Hon Frank

  Caplin, Ivor

  Fisher, Mark

  Casale, Roger

  Fitzpatrick, Jim

  109

  Fitzsimons, Mrs Lorna

  Love, Andrew

  Foster, Michael Jabez (Hastings)

  McAvoy, Thomas

  Foster, Michael J (Worcester)

  McCabe, Steve

  Foulkes, George

  McCartney, Rt Hon Ian

  Galloway, George

  (Makerfield)

  Gapes, Mike

  McDonagh, Siobhain

  Gardiner, Barry

  Macdonald, Calum

  George, Bruce (Walsall S)

  McDonnell, John

  Gerrard, Neil

  McGuire, Mrs Anne

  Gibson, Dr Ian

  McIsaac, Shona

  Godman, Dr Norman A

  McKenna, Mrs Rosemary

  Godsiff, Roger

  McNamara, Kevin

  Goggins, Paul

  McNulty, Tony

  Golding, Mrs Llin

  Mactaggart, Fiona

  Gordon, Mrs Eileen

  McWilliam, John

  Griffiths, Jane (Reading E)

  Mahon, Mrs Alice

  Griffiths, Nigel (Edinburgh S)

  Marsden, Gordon (Blackpool S)

  Grocott, Bruce

  Marsden, Paul (Shrewsbury)

  Grogan, John

  Martlew, Eric

  Gunnell, John

  Maxton, John

  Hain, Peter

  Meacher, Rt Hon Michael

  Hall, Patrick (Bedford)

  Michael, Rt Hon Alun

  Hamilton, Fabian (Leeds NE)

  Michie, Bill (Shef'ld Heeley)

  Hanson, David

  Miller, Andrew

  Harman, Rt Hon Ms Harriet

  Moffatt, Laura

  Heal, Mrs Sylvia

  Moonie, Dr Lewis

  Healey, John

  Moran, Ms Margaret

  Heath, David (Somerton & Frome)

  Morley, Elliot

  Henderson, Ivan (Harwich)

  Morris, Rt Hon Ms Estelle

  Heppell, John

  (B'ham Yardley)

  Hinchliffe, David

  Morris, Rt Hon Sir John(Aberavon)

  Hodge, Ms Margaret

  Hoey, Kate

  Mountford, Kali

  Hoon, Rt Hon Geoffrey

  Mowlam, Rt Hon Marjorie

  Hope, Phil

  Mudie, George

  Hopkins, Kelvin

  Mullin, Chris

  Howarth, George (Knowsley N)

  Murphy, Jim (Eastwood)

  Howells, Dr Kim

  Murphy, Rt Hon Paul (Torfaen)

  Hughes, Ms Beverley (Stretford)

  Naysmith, Dr Doug

  Hughes, Kevin (Doncaster N)

  Oaten, Mark

  Humble, Mrs Joan

  O'Brien, Mike (N Warks)

  Hurst, Alan

  Olner, Bill

  Hutton, John

  Öpik, Lembit

  Iddon, Dr Brian

  Organ, Mrs Diana

  Illsley, Eric

  Palmer, Dr Nick

  Ingram, Rt Hon Adam

  Pearson, Ian

  Jackson, Ms Glenda (Hampstead)

  Pendry, Tom

  Jackson, Helen (Hillsborough)

  Perham, Ms Linda

  Jamieson, David

  Pickthall, Colin

  Jenkins, Brian

  Pike, Peter L

  Johnson, Alan (Hull W & Hessle)

  Plaskitt, James

  Johnson, Miss Melanie

  Pollard, Kerry

  (Welwyn Hatfield)

  Pond, Chris

  Jones, Rt Hon Barry (Alyn)

  Pound, Stephen

  Jones, Jon Owen (Cardiff C)

  Prentice, Ms Bridget (Lewisham E)

  Jones, Dr Lynne (Selly Oak)

  Prentice, Gordon (Pendle)

  Jones, Martyn (Clwyd S)

  Prescott, Rt Hon John

  Keeble, Ms Sally

  Purchase, Ken

  Keen, Alan (Feltham & Heston)

  Quin, Rt Hon Ms Joyce

  Keen, Ann (Brentford & Isleworth)

  Quinn, Lawrie

  Keetch, Paul

  Reed, Andrew (Loughborough)

  Kemp, Fraser

  Reid, Rt Hon Dr John (Hamilton N)

  Khabra, Piara S

  Rendel, David

  Kidney, David

  Roche, Mrs Barbara

  Kilfoyle, Peter

  Rooker, Rt Hon Jeff

  King, Andy (Rugby & Kenilworth)

  Rooney, Terry

  King, Ms Oona (Bethnal Green)

  Ross, Ernie (Dundee W)

  Kirkwood, Archy

  Rowlands, Ted

  Lawrences, Mrs Jackie

  Roy, Frank

  Laxton, Bob

  Ruddock, Joan

  Lepper, David

  Russell, Bob (Colchester)

  Leslie, Christopher

  Russell, Ms Christine (Chester)

  Levitt, Tom

  Ryan, Ms Joan

  Lewis, Ivan (Bury S)

  Salter, Martin

  Linton, Martin

  Sanders, Adrian

  Llwyd, Elfyn

  Sarwar, Mohammad

  110

  Savidge, Malcolm

  Todd, Mark

  Sawford, Phil

  Touhig, Don

  Sedgemore, Brian

  Trickett, Jon

  Shaw, Jonathan

  Turner, Dennis (Wolverh'ton SE)

  Simpson, Alan (Nottingham S)

  Turner, Dr Desmond (Kemptown)

  Singh, Marsha

  Turner, Dr George (NW Norfolk)

  Skinner, Dennis

  Turner, Neil (Wigan)

  Smith, Rt Hon Andrew (Oxford E)

  Twigg, Derek (Halton)

  Smith, Angela (Basildon)

  Twigg, Stephen (Enfield)

  Smith, John (Glamorgan)

  Tyler, Paul

  Smith, Llew (Blaenau Gwent)

  Tynan, Bill

  Smith, Sir Robert (W Ab'd'ns)

  Walley, Ms Joan

  Soley, Clive

  Ward Ms Claire

  Southworth, Ms Helen

  Wareing, Robert N

  Spellar, John

  White, Brian

  Squire, Ms Rachel

  Whitehead, Dr Alan

  Steinberg, Gerry

  Wicks, Malcolm

  Stewart, Ian (Eccles)

  Wllliams, Rt Hon Alan

  Stoate, Dr Howard

  (Swansea)

  Strang, Rt Hon Dr Gavin

  Williams, Alan W (E Carmarthen)

  Stringer, Graham

  Williams, Mrs Betty (Conwy)

  Stunell, Andrew

  Wills, Phil

  Sutcliffe, Gerry

  Wills, Michael

  Swmney, John

  Winnick, David

  Taylor, Rt Hon Mrs Ann

  Winterton, Ms Rosie (Doncaster C)

  (Dewsbury)

  Wood, Mike

  Taylor, Ms Dari (Stockton S)

  Woodward, Shaun

  Taylor, David (NW Leics)

  Woolas, Phil

  Temple-Morris, Peter

  Worthington, Tony

  Thomas, Gareth R (Harrow W)

  Wright, Anthony D (Gt Yarmouth)

  Thomas, Simon (Ceredigion)

  Tellers for the Noes:

  Timms, Stephen

  Mr. Greg Pope and

  Tipping, Paddy

  Mr. Mike Hall.

  Question accordingly negatived.
  Lords amendment agreed to.
  Lords amendments Nos. 132 to 179 agreed to.

  New Clause
  Lords amendment: No. 180, after clause 149, to insert the following new clause—Market abuse: behaviour conforming with City Code—
  ("CHAPTER IIA
  POLICIES RELATING TO TAKEOVER REGULATION
  .—(1) Subject to subsections (2) and (3), the Authority is authorised to include in the code issued under section 110 a statement that behaviour of a person which is in conformity with the City Code does not amount to market abuse.
  (2) Subsection (1) does not apply in respect of behaviour which satisfies the condition in section 109(2)(a).
  (3) statement made under subsection (1) may include such conditions and limitations as the Authority considers appropriate, including conditions and limitations specifying the behaviour and the persons covered by the statement.
  (4) The Authority may at any time alter or replace any statement made under subsection (1).
  (5) If a person behaves in a way which fulfils the requirements of any statement included pursuant to subsection (1) in the code issued under section 110, that behaviour of his is to be taken, for the purposes of this Act, as not amounting to market abuse.
  (6) In this section—
  "behaviour of a person which is in conformity with the City Code" means behaviour of a person which in the opinion of the Panel conforms with the responsibilities imposed on that person by the City Code;
  "the opinion of the Panel" includes any revised opinion formed by the Panel as a result of any further consideration;
  "City Code" means the City Code on Takeovers and Mergers issued by the Panel as applied by the Panel and as amended from time to time by the Panel;
  "the Panel" means the Panel on Takeovers and Mergers.")
  Motion made, and Question put, That this House disagrees with the Lords in the said amendment.—[Mr. Jamieson.]
  The House divided: Ayes 304, Noes 110.

  Division No. 213]

  [9.35 pm

  AYES

  Adams, Mrs Irene (Paisley N)

  Cunningham, Rt Hon Dr Jack

  Ainger, Nick

  (Copeland)

  Ainsworth, Robert (Cov'try NE)

  Cunningham, Jim (Cov'try S)

  Alexander, Douglas

  Darvill, Keith

  Allen, Graham

  Davey, Valerie (Bristol W)

  Anderson, Janet (Rossendale)

  Davidson, Ian

  Armstrong, Rt Hon Ms Hilary

  Davies, Rt Hon Denzil (Llanelli)

  Ashdown, Rt Hon Paddy

  Davies, Geraint (Croydon C)

  Atherton, Ms Candy

  Dawson, Hilton

  Austin, John

  Dean, Mrs Janet

  Battle, John

  Denham, John

  Bayley, Hugh

  Dismore, Andrew

  Beard, Nigel

  Dobbin, Jim

  Beckett, Rt Hon Mrs Margaret

  Donohoe, Brian H

  Begg, Miss Anne

  Doran, Frank

  Bell, Martin (Tatton)

  Dowd, Jim

  Benn, Hilary (Leeds C)

  Drew, David

  Benn, Rt Hon Tony (Chesterfield)

  Eagle, Maria (L'pool Garston)

  Bennett, Andrew F

  Edwards, Huw

  Benton, Joe

  Efford, Clive

  Bermingham, Gerald

  Ellman, Mrs Louise

  Berry, Roger

  Ennis, Jeff

  Best, Harold

  Field, Rt Hon Frank

  Blackman, Liz

  Fisher, Mark

  Blears, Ms Hazel

  Fitzpatrick, Jim

  Blizzard, Bob

  Fitzsimons, Mrs Loma

  Boateng, Rt Hon Paul

  Foster, Michael Jabez (Hastings)

  Borrow, David

  Foster, Michael J (Worcester)

  Bradley, Keith (Withington)

  Foulkes, George

  Bradley, Peter (The Wrekin)

  Galloway, George

  Bradshaw, Ben

  Gapes, Mike

  Brinton, Mrs Helen

  Gardiner, Barry

  Brown, Russell (Dumfries)

  George, Bruce (Walsall S)

  Buck, Ms Karen

  Gerrard, Neil

  Burgon, Colin

  Gibson, Dr Ian

  Burstow, Paul

  Godman, Dr Norman A

  Butler, Mrs Christine

  Godsiff, Roger

  Byers, Rt Hon Stephen

  Goggins, Paul

  Cabom, Rt Hon Richard

  Golding, Mrs Llin

  Campbell, Rt Hon Menzies

  Gordon, Mrs Eileen

  (NE Fife)

  Griffiths, Jane (Reading E)

  Campbell, Ronnie (Blyth V)

  Griffiths, Nigel (Edinburgh S)

  Campbell-Savours, Dale

  Grocott, Bruce

  Cann, Jamie

  Grogan, John

  Caplin, Ivor

  Gunnell, John

  Casale, Roger

  Hain, Peter

  Caton, Martin

  Hall, Patrick (Bedford)

  Chapman, Ben (Wirral S)

  Hamilton, Fabian (Leeds NE)

  Clapham, Michael

  Hanson, David

  Clark, Rt Hon Dr David (S Shields)

  Harman, Rt Hon Ms Harriet

  Clark, Paul (Gillingham)

  Heal, Mrs Sylvia

  Clarke, Charles (Norwich S)

  Healey, John

  Clarke, Eric (Midlothian)

  Heath, David (Somerton & Frome)

  Clarke, Rt Hon Tom (Coatbridge)

  Henderson, Ivan (Harwich)

  Clarke, Tony (Northampton S)

  Heppell, John

  Clelland, David

  Hinchliffe, David

  Clwyd, Ann

  Hodge, Ms Margaret

  Coffey, Ms Ann

  Hoey, Kate

  Coleman, lain

  Hoon, Rt Hon Geoffrey

  Connarty, Michael

  Hope, Phil

  Cook, Frank (Stockton N)

  Hopkins, Kelvin

  Corbett, Robin

  Howarth, George (Knowsley N)

  Cotter, Brian

  Howells, Dr Kim

  Cousins, Jim

  Hughes, Ms Beverley (Stretford)

  Crausby, David

  Hughes, Kevin (Doncaster N)

  Cryer, Mrs Ann (Keighley)

  Humble, Mrs Joan

  Cryer, John (Hornchurch)

  Hurst, Alan

  Cummings, John

  Hutton, John

  112

  Iddon, Dr Brian

  Olner, Bill

  Illsley, Eric

  O'Neill, Martin

  Ingram, Rt Hon Adam

  Öpik, Lembit

  Jackson, Ms Glenda (Hampstead)

  Organ, Mrs Diana

  Jackson, Helen (Hillsborough)

  Palmer, Dr Nick

  Jamieson, David

  Pearson, Ian

  Jenkins, Brian

  Pendry, Tom

  Johnson, Alan (Hull W & Hessle)

  Perham, Ms Linda

  Johnson, Miss Melanie

  Pickthall, Colin

  (Welwyn Hatfield)

  Pike, Peter L

  Jones, Rt Hon Barry (Alyn)

  Plaskitt, James

  Jones, Jon Owen (Cardiff C)

  Pollard, Kerry

  Jones, Dr Lynne (Selly Oak)

  Pond, Chris

  Jones, Martyn (Clwyd S)

  Pope, Greg

  Keeble, Ms Sally

  Pound, Stephen

  Keen, Alan (Feltham & Heston)

  Prentice, Ms Bridget (Lewisham E)

  Keen, Ann (Brentford & Isleworth)

  Prentice, Gordon (Pendle)

  Keetch, Paul

  Prescott, Rt Hon John

  Kemp, Fraser

  Purchase, Ken

  Khabra, Piara S

  Quin, Rt Hon Ms Joyce

  Kidney, David

  Quinn, Lawrie

  Kilfoyle, Peter

  Reed, Andrew (Loughborough)

  King, Andy (Rugby & Kenilworth)

  Reid, Rt Hon Dr John (Hamilton N)

  King, Ms Oona (Bethnal Green)

  Rendel, David

  Kirkwood, Archy

  Roche, Mrs Barbara

  Ladyman, Dr Stephen

  Rooker, Rt Hon Jeff

  Lawrence, Mrs Jackie

  Rooney, Terry

  Laxton, Bob

  Ross, Ernie (Dundee W)

  Lepper, David

  Rowlands, Ted

  Leslie, Christopher

  Roy, Frank

  Levitt, Tom

  Ruddock, Joan

  Lewis, Ivan (Bury S)

  Russell, Bob (Colchester)

  Linton, Martin

  Russell, Ms Christine (Chester)

  Llwyd, Elfyn

  Ryan, Ms Joan

  Lock, David

  Salter, Martin

  Love, Andrew

  Sanders, Adrian

  McAvoy, Thomas

  Sarwar, Mohammad

  McCabe, Steve

  Savidge, Malcolm

  McCartney, Rt Hon Ian

  Sawford, Phil

  (Makerfield)

  Sedgemore, Brian

  McDonagh, Siobhain

  Shaw, Jonathan

  Macdonald, Calum

  Simpson, Alan (Nottingham S)

  McDonnell, John

  Singh, Marsha

  McGuire, Mrs Anne

  Skinner, Dennis

  Mclsaac, Shona

  Smith, Rt Hon Andrew (Oxford E)

  McKenna, Mrs Rosemary

  Smith, Angela (Basildon)

  McNamara, Kevin

  Smith, John (Glamorgan)

  McNulty, Tony

  Smith, Llew (Blaenau Gwent)

  Mactaggart, Fiona

  Smith, Sir Robert (W Ab'd'ns)

  McWilliam, John

  Soley, Clive

  Mahon, Mrs Alice

  Southworth, Ms Helen

  Marsden, Gordon (Blackpool S)

  Spellar, John

  Marsden, Paul (Shrewsbury)

  Squire, Ms Rachel

  Martlew, Eric

  Steinberg, Gerry

  Maxton, John

  Stewart, Ian (Eccles)

  Meacher, Rt Hon Michael

  Stoate, Dr Howard

  Michael, Rt Hon Alun

  Strang, Rt Hon Dr Gavin

  Michie, Bill (Shef'ld Heeley)

  Stringer, Graham

  Miller, Andrew

  Stunell, Andrew

  Moffatt, Laura

  Sutcliffe, Gerry

  Moonie, Dr Lewis

  Swinney, John

  Moran, Ms Margaret

  Taylor, Rt Hon Mrs Ann

  Morley, Elliot

  (Dewsbury)

  Morris, Rt Hon Ms Estelle

  Taylor, Ms Dari (Stockton S)

  (B'ham Yardley)

  Taylor, David (NW Leics)

  Morris, Rt Hon Sir John

  Temple-Morris, Peter

  (Aberavon)

  Thomas, Gareth R (Harrow W)

  Mountford, Kali

  Thomas, Simon (Ceredigion)

  Mowlam, Rt Hon Marjorie

  Timms, Stephen

  Mudie, George

  Tipping, Paddy

  Mullin, Chris

  Todd, Mark

  Murphy, Jim (Eastwood)

  Touhig, Don

  Murphy, Rt Hon Paul (Torfaen)

  Trickett, Jon

  Naysmith, Dr Doug

  Turner, Dennis (Wolverh'ton SE)

  Oaten, Mark

  Turner, Dr Desmond (Kemptown)

  O'Brien, Mike (N Warks)

  Turner, Dr George (NW Norfolk)

  113

  Turner, Neil (Wigan)

  Williams, Mrs Betty (Conwy)

  Twigg, Derek (Halton)

  Willis, Phil

  Twigg, Stephen (Enfield)

  Wills, Michael

  Tyler, Paul

  Winnick, David

  Tynan, Bill

  Winterton, Ms Rosie (Doncaster C)

  Walley, Ms Joan

  Wood, Mike

  Ward, Ms Claire

  Woodward, Shaun

  Wareing, Robert N

  Woolas, Phil

  White, Brian

  Worthington, Tony

  Whitehead, Dr Alan

  Wright, Anthony D (Gt Yarmouth)

  Wicks, Malcolm

  Williams, Rt Hon Alan

  Tellers for the Ayes:

  (Swansea W)

  Mr. Clive Betts and

  Williams, Alan W (E Carmarthen)

  Mr. Mike Hall.

  NOES

  Ainsworth, Peter (E Surrey)

  Lyell, Rt Hon Sir Nicholas

  Arbuthnot, Rt Hon James

  MacGregor, Rt Hon John

  Baldry, Tony

  McIntosh, Miss Anne

  Bercow, John

  Maclean, Rt Hon David

  Beresford, Sir Paul

  McLoughlin, Patrick

  Blunt, Crispin

  Madel, Sir David

  Boswell, Tim

  Mates, Michael

  Bottomley, Peter (Worthing W)

  Maude, Rt Hon Francis

  Bottomley, Rt Hon Mrs Virginia

  Mawhinney, Rt Hon Sir Brian

  Brady, Graham

  May, Mrs Theresa

  Brazier, Julian

  Moss, Malcolm

  Brooke, Rt Hon Peter

  Nicholls, Patrick

  Browning, Mrs Angela

  O'Brien, Stephen (Eddisbury)

  Bruce, Ian (S Dorset)

  Ottaway, Richard

  Bums, Simon

  Page, Richard

  Butterfill, John

  Paice, James

  Cash, William

  Paterson, Owen

  Clappison, James

  Pickles, Eric

  Clifton-Brown, Geoffrey

  Portillo, Rt Hon Michael

  Collins, Tim

  Randall, John

  Cran, James

  Redwood, Rt Hon John

  Davies, Quentin (Grantham)

  Robathan, Andrew

  Day, Stephen

  Robertson, Laurence

  Duncan Smith, lain

  Roe, Mrs Marion (Broxbourne)

  Evans, Nigel

  Rowe, Andrew (Faversham)

  Faber, David

  Ruffley, David

  Fabricant, Michael

  Shephard, Rt Hon Mrs Gillian

  Fallon, Michael

  Shepherd, Richard

  Flight, Howard

  Simpson, Keith (Mid-Norfolk)

  Forth, Rt Hon Eric

  Soames, Nicholas

  Fowler, Rt Hon Sir Norman

  Spelman, Mrs Caroline

  Fox, Dr Liam

  Spicer, Sir Michael

  Fraser, Christopher

  Spring, Richard

  Gale, Roger

  Stanley, Rt Hon Sir John

  Gill, Christopher

  Steen, Antnony

  Gillan, Mrs Cheryl

  Swayne, Desmond

  Gray, James

  Syms, Robert

  Grieve, Dominic

  Tapsell, Sir Peter

  Hammond, Philip

  Taylor, Ian (Esher & Walton)

  Hawkins, Nick

  Taylor, John M (Solihull)

  Heald, Oliver

  Tredinnick David

  Heathcoat-Amory, Rt Hon David

  Trend, Michael

  Hogg, Rt Hon Douglas

  Tyrie, Andrew

  Horam, John

  Viggers, Peter

  Howard, Rt Hon Michael

  Walter, Robert

  Howarth, Gerald (Aldershot)

  Wells, Bowen

  Jack, Rt Hon Michael

  Whitney, Sir Raymond

  Jenkin, Bernard

  Whittingdale, John

  Key, Robert

  Widdecombe, Rt Hon Miss Ann

  King, Rt Hon Tom (Bridgwater)

  Willetts, David

  Lansley, Andrew

  Winterton, Mrs Ann (Congleton)

  Leigh, Edward

  Winterton, Nicholas (Macclesfield)

  Letwin, Oliver

  Young, Rt Hon Sir George

  Lewis, Dr Julian (New Forest E)

  Lidington, David

  Tellers for the Noes:

  Lloyd, Rt Hon Sir Peter (Fareham)

  Mrs. Eleanor Laing and

  Loughton, Tim

  Mr. Peter Luff.

  Question accordingly agreed to.
  Motion made, and Question put, That amendment (a) in lieu of Lords amendment No. 180 be made.— [Mr. Timms.]
  The House divided: Ayes 302, Noes 110.

  Division No. 214]

  [9.48 pm

  AYES

  Adams, Mrs Irene (Paisley N)

  Cummings, John

  Ainger, Nick

  Cunningham, Rt Hon Dr Jack (Copeland)

  Ainsworth, Robert (Cov'try NE)

  Alexander, Douglas

  Cunningham, Jim (Cov'try S)

  Anderson, Janet (Rossendale)

  Darvill, Keith

  Armstrong, Rt Hon Ms Hilary

  Davey, Valerie (Bristol W)

  Ashdown, Rt Hon Paddy

  Davidson, Ian

  Atherton, Ms Candy

  Davies, Rt Hon Denzil (Llanelli)

  Austin, John

  Davies, Geraint (Croydon C)

  Battle, John

  Dawson, Hilton

  Bayley, Hugh

  Dean, Mrs Janet

  Beard, Nigel

  Denham, John

  Beckett, Rt Hon Mrs Margaret

  Dismore, Andrew

  Begg, Miss Anne

  Dobbin, Jim

  Bell, Martin (Tatton)

  Donohoe, Brian H

  Benn, Hilary (Leeds C)

  Doran, Frank

  Benn, Rt Hon Tony (Chesterfield)

  Dowd, Jim

  Bennett, Andrew F

  Drew, David

  Benton, Joe

  Eagle, Maria (L'pool Garston)

  Bermingham, Gerald

  Edwards, Huw

  Berry, Roger

  Efford, Clive

  Best, Harold

  Ellman, Mrs Louise

  Blackman, Liz

  Ennis, Jeff

  Blears, Ms Hazel

  Field, Rt Hon Frank

  Blizzard, Bob

  Fisher, Mark

  Boateng, Rt Hon Paul

  Fitzpatrick, Jim

  Borrow, David

  Foster, Michael Jabez (Hastings)

  Bradley, Keith (Withington)

  Foster, Michael J (Worcester)

  Bradley, Peter (The Wrekin)

  Foulkes, George

  Bradshaw, Ben

  Galloway, George

  Brinton, Mrs Helen

  Gapes, Mike

  Brown, Russell (Dumfries)

  Gardiner, Barry

  Buck, Ms Karen

  Gerrard, Neil

  Burgon, Colin

  Gibson, Dr Ian

  Burstow, Paul

  Godman, Dr Norman A

  Butler, Mrs Christine

  Godsiff, Roger

  Byers, Rt Hon Stephen

  Goggins, Paul

  Caborn, Rt Hon Richard

  Golding, Mrs Llin

  Campbell, Rt Hon Menzies (NE Fife)

  Gordon, Mrs Eileen

  Griffiths, Jane (Reading E)

  Campbell, Ronnie (Blyth V)

  Griffiths, Nigel (Edinburgh S)

  Campbell-Savours, Dale

  Grocott, Bruce

  Cann, Jamie

  Grogan, John

  Caplin, Ivor

  Gunnell, John

  Casale, Roger

  Hain, Peter

  Caton, Martin

  Hall, Mike (Weaver Vale)

  Chapman, Ben (Wirral S)

  Hall, Patrick (Bedford)

  Clapham, Michael

  Hamilton, Fabian (Leeds NE)

  Clark, Rt Hon Dr David (S Shields)

  Hanson, David

  Clark, Paul (Gillingham)

  Harman, Rt Hon Ms Harriet

  Clarke, Charles (Norwich S)

  Harvey, Nick

  Clarke, Eric (Midlothian)

  Heal, Mrs Sylvia

  Clarke, Rt Hon Tom (Coatbridge)

  Healey, John

  Clarke, Tony (Northampton S)

  Heath, David (Somerton & Frome)

  Clelland, David

  Henderson, Ivan (Harwich)

  Clwyd, Ann

  Heppell, John

  Coffey, Ms Ann

  Hinchliffe, David

  Coleman, lain

  Hodge, Ms Margaret

  Connarty, Michael

  Hoey, Kate

  Cook, Frank (Stockton N)

  Hoon, Rt Hon Geoffrey

  Corbett, Robin

  Hope, Phil

  Cotter, Brian

  Hopkins, Kelvin

  Cousins, Jim

  Howarth, George (Knowsley N)

  Crausby, David

  Howells, Dr Kim

  Cryer, Mrs Ann (Keighley)

  Hughes, Ms Beverley (Stretford)

  Cryer, John (Homchurch)

  Hughes, Kevin (Doncaster N)

  115

  Humble, Mrs Joan

  Naysmith, Dr Doug

  Hurst, Alan

  O'Brien, Mike (N Warks)

  Hutton, John

  Olner, Bill

  Iddon, Dr Brian

  O'Neill, Martin

  Illsley, Eric

  Öpik, Lembit

  Ingram, Rt Hon Adam

  Organ, Mrs Diana

  Jackson, Ms Glenda (Hampstead)

  Palmer, Dr Nick

  Jackson, Helen (Hillsborough)

  Pearson, Ian

  Jamieson, David

  Pendry, Tom

  Jenkins, Brian

  Perham, Ms Linda

  Johnson, Alan (Hull W & Hessle)

  Pickthall, Colin

  Johnson, Miss Melanie

  Pike, Peter L

  (Welwyn Hatfield)

  Plaskitt, James

  Jones, Rt Hon Barry (Alyn)

  Pollard, Kerry

  Jones, Jon Owen (Cardiff C)

  Pond, Chris

  Jones, Dr Lynne (Selly Oak)

  Pope, Greg

  Jones, Martyn (Clwyd S)

  Pound, Stephen

  Keeble, Ms Sally

  Prentice, Ms Bridget (Lewisham E)

  Keen, Alan (Feltham & Heston)

  Prentice, Gordon (Pendle)

  Keen, Ann (Brentford & Isleworth)

  Prescott, Rt Hon John

  Keetch, Paul

  Purchase, Ken

  Kemp, Fraser

  Quin, Rt Hon Ms Joyce

  Khabra, Piara S

  Quinn, Lawrie

  Kidney, David

  Reed, Andrew (Loughborough)

  Kilfoyle, Peter

  Reid, Rt Hon Dr John (Hamilton N)

  King, Andy (Rugby & Kenilworth)

  Rendel, David

  King, Ms Oona (Bethnal Green)

  Roche, Mrs Barbara

  Kirkwood, Archy

  Rooker, Rt Hon Jeff

  Ladyman, Dr Stephen

  Rooney, Terry

  Lawrence, Mrs Jackie

  Ross, Emie (Dundee W)

  Laxton, Bob

  Rowlands, Ted

  Lepper, David

  Roy, Frank

  Leslie, Christopher

  Ruddock, Joan

  Levitt, Tom

  Russell, Bob (Colchester)

  Lewis, Ivan (Bury S)

  Russell, Ms Christine (Chester)

  Linton, Martin

  Ryan, Ms Joan

  Llwyd, Elfyn

  Salter, Martin

  Lock, David

  Sanders, Adrian

  Love, Andrew

  Sarwar, Mohammad

  McAvoy, Thomas

  Savidge, Malcolm

  McCabe, Steve

  Sawford, Phil

  McCartney, Rt Hon Ian

  Sedgemore, Brian

  (Makerfield)

  Shaw, Jonathan

  McDonagh, Siobhain

  Simpson, Alan (Nottingham S)

  Macdonald, Calum

  Singh, Marsha

  McDonnell, John

  Skinner, Dennis

  McGuire, Mrs Anne

  Smith, Rt Hon Andrew (Oxford E)

  McIsaac, Shona

  Smith, Angela (Basildon)

  McKenna, Mrs Rosemary

  Smith, John (Glamorgan)

  McNamara, Kevin

  Smith, Llew (Blaenau Gwent)

  McNulty, Tony

  Smith, Sir Robert (W Ab'd'ns)

  Mactaggart, Fiona

  Soley, Clive

  McWilliam, John

  Southworth, Ms Helen

  Mahon, Mrs Alice

  Spellar, John

  Marsden, Gordon (Blackpool S)

  Squire, Ms Rachel

  Marsden, Paul (Shrewsbury)

  Steinberg, Gerry

  Martlew, Eric

  Stewart, Ian (Eccles)

  Maxton, John

  Stoate, Dr Howard

  Meacher, Rt Hon Michael

  Strang, Rt Hon Dr Gavin

  Michael, Rt Hon Alun

  Stringer, Graham

  Michie, Bill (Shef'ld Heeley)

  Stunell, Andrew

  Miller, Andrew

  Sutcliffe, Gerry

  Moffatt, Laura

  Swinney, John

  Moonie, Dr Lewis

  Taylor, Rt Hon Mrs Ann

  Moran, Ms Margaret

  (Dewsbury)

  Morley, Elliot

  Taylor, Ms Dari (Stockton S)

  Morris, Rt Hon Ms Estelle

  Taylor, David (NW Leics)

  (B'ham Yardley)

  Temple-Morris, Peter

  Morris, Rt Hon Sir John

  Thomas, Gareth R (Harrow W)

  (Aberavon)

  Thomas, Simon (Ceredigion)

  Mountford, Kali

  Timms, Stephen

  Mowlam, Rt Hon Marjorie

  Tipping, Paddy

  Mudie, George

  Todd, Mark

  Mullin, Chris

  Touhig, Don

  Murphy, Jim (Eastwood)

  Trickett, Jon

  Murphy, Rt Hon Paul (Torfaen)

  Turner, Dennis (Wolverh'ton SE)

  116

  Turner, Dr Desmond (Kemptown)

  Williams, Alan W (E Carmarthen)

  Turner, Dr George (NW Norfolk)

  Williams, Mrs Betty (Conwy)

  Turner, Neil (Wigan)

  Willis, Phil

  Twigg, Derek (Halton)

  Wills, Michael

  Twigg, Stephen (Enfield)

  Winnick, David

  Tyler, Paul

  Winterton, Ms Rosie (Doncaster C)

  Tynan, Bill

  Wood, Mike

  Walley, Ms Joan

  Woodward, Shaun

  Ward, Ms Claire

  Woolas, Phil

  Wareing, Robert N

  Worthington, Tony

  White, Brian

  Wright, Anthony D (Gt Yarmouth)

  Whitehead, Dr Alan

  Wicks, Malcolm

  Tellers for the Ayes:

  Williams, Rt Hon Alan

  Mr. Clive Betts and

  (Swansea W)

  Mr. Graham Allen.

  NOES

  Ainsworth, Peter (E Surrey)

  MacGregor, Rt Hon John

  Arbuthnot, Rt Hon James

  Mclntosh, Miss Anne

  Baldry, Tony

  Maclean, Rt Hon David

  Bercow, John

  McLoughlin, Patrick

  Beresford, Sir Paul

  Madel, Sir David

  Blunt, Crispin

  Mates, Michael

  Boswell, Tim

  Maude, Rt Hon Francis

  Bottomley, Peter (Worthing W)

  Mawhinney, Rt Hon Sir Brian

  Bottomley, Rt Hon Mrs Virginia

  May, Mrs Theresa

  Brady, Graham

  Moss, Malcolm

  Brazier, Julian

  O'Brien, Stephen (Eddisbury)

  Brooke, Rt Hon Peter

  Ottaway, Richard

  Browning, Mrs Angela

  Page Richard

  Bruce, Ian (S Dorset)

  Paice, James

  Burns, Simon

  Paterson, Owen

  Butterfill, John

  Pickles, Eric

  Cash, William

  Portillo, Rt Hon Michael

  Clappison, James

  Randall, John

  Collins, Tim

  Redwood, Rt Hon John

  Cran, James

  Robathan, Andrew

  Davies, Quentin (Grantham)

  Robertson, Laurence

  Day, Stephen

  Roe Marion (Broxbourne)

  Duncan Smith, lain

  Rowe, Andrew (Faversham)

  Evans, Nigel

  Ruffley, David

  Faber, David

  Shephard, Rt Hon Mrs Gillian

  Fallon, Michael

  Shepherd, Richard

  Flight Howard

  Simpson, Keith (Mid-Norfolk)

  Forth, Rt Hon Eric

  Soames, Nicholas

  Fowler, Rt Hon Sir Norman

  Spelman, Mrs Caroline

  Fox, Dr Liam

  Spicer, Sir Michael

  Fraser, Christopher

  Spring, Richard

  Gale, Roger

  Stanley, Rt Hon Sir John

  Gill, Christopher

  Steen, Anthony

  Gillan, Mrs Cheryl

  Swayne, Desmond

  Gray, James

  Syms, Robert

  Grieve, Dominic

  Tapsell, Sir Peter

  Hammond, Philip

  Taylor, Ian (Esher & Walton)

  Hawkins, Nick

  Taylor, John M (Solihull)

  Heald, Oliver

  Taylor, Sir Teddy

  Heathcoat-Amory, Rt Hon David

  Tredinnick, David

  Hogg, Rt Hon Douglas

  Trend, Michael

  Horam, John

  Tyrie, Andrew

  Howard, Rt Hon Michael

  Viggers, Peter

  Howarth, Gerald (Aldershot)

  Walter, Robert

  Jack, Rt Hon Michael

  Wells, Bowen

  Jenkin, Bernard

  Whitney, Sir Raymond

  Key, Robert

  Whittingdale, John

  King, Rt Hon Tom (Bridgwater)

  Widdecombe, Rt Hon Miss Ann

  Laing, Mrs Eleanor

  Willetts, David

  Lansley, Andrew

  Winterton, Mrs Ann (Congleton)

  Leigh, Edward

  Winterton, Nicholas (Macclesfield)

  Letwin, Oliver

  Young, Rt Hon Sir George

  Lewis, Dr Julian (New Forest E)

  Lidington, David

  Tellers for the Noes:

  Lloyd, Rt Hon Sir Peter (Fareham)

  Mr. Geoffrey Clifton-Brown

  Loughton, Tim

  and

  Lyell, Rt Hon Sir Nicholas

  Mr. Peter Luff.

  Question accordingly agreed to.
  Lords amendment: No. 181 and 182 agred to.

Clause 150

  INTERPRETATION
  Lords amendment: No. 183, in page 70, line 28, leave out from ("a") to end of line 30 and insert
  ("significantly adverse effect on competition
  if—

  (a) they have, or are intended or likely to have, that effect; or

  (b) the effect that they have, or are intended to have, is to require or encourage behaviour which has, or is intended or likely to have, a significantly adverse effect on competition.

  ( ) If regulating provisions or practices have, or are intended or likely to have, the effect of requiring or encouraging exploitation of the strength of a market position they are to be taken, for the purposes of this Chapter, to have an adverse effect on competition.")
  Amendment proposed to the Lords amendment: after "position", insert ', or of prejudicing the competitive position of the United Kingdom,'.—[Mr. Heathcoat-Amory.]
  Question put, That the amendment to the Lords amendment be made:—
  The House divided: Ayes 129, Noes 283.

  Division No. 215]

  [10.1 pm

  AYES

  Ainsworth, Peter (E Surrey)

  Gray, James

  Arbuthnot, Rt Hon James

  Greenway, John

  Ashdown, Rt Hon Paddy

  Grieve, Dominic

  Baldry, Tony

  Hammond, Philip

  Bell, Martin (Tatton)

  Harvey, Nick

  Bercow, John

  Hawkins, Nick

  Beresford, Sir Paul

  Heald, Oliver

  Blunt, Crispin

  Heath, David (Somerton & Frome)

  Boswell, Tim

  Heathcoat-Amory, Rt Hon David

  Bottomley, Peter (Worthing W)

  Hogg, Rt Hon Douglas

  Bottomley, Rt Hon Mrs Virginia

  Horam, John

  Brady, Graham

  Howard, Rt Hon Michael

  Brazier, Julian

  Howarth, Gerald (Aldershot)

  Brooke, Rt Hon Peter

  Jack, Rt Hon Michael

  Browning, Mrs Angela

  Jenkin, Bernard

  Bruce, Ian (S Dorset)

  Keetch, Paul

  Burnett, John

  Key, Robert

  Bums, Simon

  King, Rt Hon Tom (Bridgwater)

  Burstow, Paul

  Kirkwood, Archy

  Butterfill, John

  Laing, Mrs Eleanor

  Campbell, Rt Hon Menzies (NEFife)

  Lansley, Andrew

  Leigh, Edward

  Cash, William

  Letwin, Oliver

  Clappison, James

  Lewis, Dr Julian (New Forest E)

  Clarke, Rt Hon Kenneth (Rushcliffe)

  Lidington, David

  Uoyd, Rt Hon Sir Peter (Fareham)

  Collins, Tim

  Loughton, Tim

  Cran, James

  Lyell, Rt Hon Sir Nicholas

  Davies, Quentin (Grantham)

  MacGregor, Rt Hon John

  Day, Stephen

  Mclntosh, Miss Anne

  Duncan Smith, lain

  Maclean, Rt Hon David

  Evans, Nigel

  McLoughlin, Patrick

  Faber, David

  Madel, Sir David

  Fabricant, Michael

  Mates, Michael

  Fallon, Michael

  Maude, Rt Hon Francis

  Flight, Howard

  Mawhinney, Rt Hon Sir Brian

  Forth, Rt Hon Eric

  May, Mrs Theresa

  Fowler, Rt Hon Sir Norman

  Moss, Malcolm

  Fox, Dr Liam

  Nicholls, Patrick

  Fraser, Christopher

  O'Brien, Stephen (Eddisbury)

  Gale, Roger

  Öpik, Lemoit

  Gill, Christopher

  Ottaway, Richard

  Gillan, Mrs Cheryl

  Page, Richard

  118

  Paice, James

  Swayne, Desmond

  Paterson, Owen

  Syms, Robert

  Pickles, Eric

  Tapsell, Sir Peter

  Portillo, Rt Hon Michael

  Taylor, Ian (Esher & Walton)

  Randall, John

  Taylor, John M (Solihull)

  Redwood, Rt Hon John

  Taylor, Sir Teddy

  Rendel, David

  Tredinnick, David

  Robathan, Andrew

  Trend, Michael

  Robertson, Laurence

  Tyler, Paul

  Roe, Mrs Marion (Broxbourne)

  Tyrie, Andrew

  Ruffley, David

  Viggers, Peter

  Russell, Bob (Colchester)

  Walter, Robert

  Sanders, Adrian

  Wells, Bowen

  Shephard, Rt Hon Mrs Gillian

  Whitney, Sir Raymond

  Shepherd, Richard

  Whittingdale, John

  Simpson, Keith (Mid—Norfolk)

  Widdecombe, Rt Hon Miss Ann

  Smith, Sir Robert (W Ab'd'ns)

  Willetts David

  Soames, Nicholas

  Willis, Phil

  Spelman, Mrs Caroline

  Winterton, Mrs Ann (Congleton)

  Spicer, Sir Michael

  Winterton, Nicholas (Macclesfield)

  Spring, Richard

  Young, Rt Hon Sir George

  Stanley, Rt Hon Sir John

  Steen, Anthony

  Tellers for the Ayes:

  Stunell, Andrew

  Mr. Peter Luff and

  Mr. Geoffrey Clifton-Brown.

  NOES

  Adams, Mrs Irene (Paisley N)

  Clelland, David

  Ainger, Nick

  Clwyd, Ann

  Ainsworth, Robert (Cov'try NE)

  Coffey, Ms Ann

  Alexander, Douglas

  Coleman, lain

  Anderson, Janet (Rossendale)

  Connarty, Michael

  Armstrong, Rt Hon Ms Hilary

  Cook, Frank (Stockton N)

  Atherton, Ms Candy

  Corbett, Robin

  Austin, John

  Cousins, Jim

  Battle, John

  Crausby, David

  Bayley, Hugh

  Cryer, Mrs Ann (Keighley)

  Beard, Nigel

  Cryer, John (Hornchurch)

  Beckett, Rt Hon Mrs Margaret

  Cummings, John

  Begg, Miss Anne

  Cunningham, Rt Hon Dr Jack (Copeland)

  Benn, Hilary (Leeds C)

  Benn, Rt Hon Tony (Chesterfield)

  Cunningham, Jim (Cov'try S)

  Bennett, Andrew F

  Darvill, Keith

  Benton, Joe

  Davey, Valerie (Bristol W)

  Bermingham, Gerald

  Davidson, Ian

  Berry, Roger

  Davies, Rt Hon Denzil (Llanelli)

  Best, Harold

  Davies, Geraint (Croydon C)

  Blackman, Liz

  Dawson, Hilton

  Blears, Ms Hazel

  Dean, Mrs Janet

  Blizzard, Bob

  Denham, John

  Boateng, Rt Hon Paul

  Dismore, Andrew

  Borrow, David

  Dobbin, Jim

  Bradley, Keith (Withington)

  Donohoe, Brian H

  Bradley, Peter (The Wrekin)

  Doran, Frank

  Bradshaw, Ben

  Dowd, Jim

  Brinton, Mrs Helen

  Drew, David

  Brown, Russell (Dumfries)

  Eagle, Maria (L'pool Garston)

  Buck, Ms Karen

  Edwards, Huw

  Burgon, Colin

  Eftord, Clive

  Butler, Mrs Christine

  Ellman, Mrs Louise

  Byers, Rt Hon Stephen

  Ennis, Jeff

  Cabom, Rt Hon Richard

  Field, Rt Hon Frank

  Campbell, Ronnie (Blyth V)

  Fisher, Mark

  Campbell—Savours, Dale

  Fitzpatrick, Jim

  Cann, Jamie

  Foster, Michael Jabez (Hastings)

  Caplin, Ivor

  Foster, Michael J (Worcester)

  Casale, Roger

  Foulkes, George

  Caton, Martin

  Galloway, George

  Chapman, Ben (Wirral S)

  Gapes, Mike

  Clapham, Michael

  Gardiner, Barry

  Clark, Rt Hon Dr David (S Shields)

  George, Bruce (Walsall S)

  Clark, Paul (Gillingham)

  Gerrard, Neil

  Clarke, Charles (Norwich S)

  Gibson, Dr Ian

  Clarke, Eric (Midlothian)

  Godman, Dr Norman A

  Clarke, Rt Hon Tom (Coatbridge)

  Godsiff, Roger

  Clarke, Tony (Northampton S)

  Goggins, Paul

  119

  Golding, Mrs Llin

  Mahon, Mrs Alice

  Gordon, Mrs Eileen

  Marsden, Gordon (Blackpool S)

  Griffiths, Jane (Reading E)

  Marsden, Paul (Shrewsbury)

  Griffiths, Nigel (Edinburgh S)

  Martlew, Eric

  Grocott, Bruce

  Maxton, John

  Grogan, John

  Meacher, Rt Hon Michael

  Hain, Peter

  Michael, Rt Hon Alun

  Hall, Mike (Weaver Vale)

  Michie, Bill (Shef'ld Heeley)

  Hall, Patrick (Bedford)

  Miller, Andrew

  Hamilton, Fabian (Leeds NE)

  Moffatt, Laura

  Hanson, David

  Moonie, Dr Lewis

  Heal, Mrs Sylvia

  Moran, Ms Margaret

  Healey, John

  Motley, Elliot

  Henderson, Ivan (Harwich)

  Morris, Rt Hon Ms Estelle (B'ham Yardley)

  Heppell, John

  Hinchliffe, David

  Morris, Rt Hon Sir John (Aberavon)

  Hodge, Ms Margaret

  Hoey, Kate

  Mountford, Kali

  Hoon, Rt Hon Geoffrey

  Mowlam, Rt Hon Marjorie

  Hope, Phil

  Mudie, George

  Hopkins, Kelvin

  Mullin, Chris

  Howarth, George (Knowsley N)

  Murphy, Jim (Eastwood)

  Howells, Dr Kim

  Murphy, Rt Hon Paul (Torfaen)

  Hughes, Ms Beverley (Stretford)

  Naysmith, Dr Doug

  Hughes, Kevin (Doncaster N)

  O'Brien, Mike (N Warks)

  Humble, Mrs Joan

  Olner, Bill

  Hurst, Alan

  O'Neill, Martin

  Hutton, John

  Organ, Mrs Diana

  Iddon, Dr Brian

  Palmer, Dr Nick

  Illsley, Eric

  Pearson, Ian

  Ingram, Rt Hon Adam

  Pendry, Tom

  Jackson, Ms Glenda (Hampstead)

  Perham, Ms Linda

  Jackson, Helen (Hillsborough)

  Pickthall, Colin

  Jamieson, David

  Pike, Peter L

  Jenkins, Brian

  Plaskitt, James

  Johnson, Alan (Hull W & Hessle)

  Pollard, Kerry

  Johnson, Miss Melanie

  Pond, Chris

  (Welwyn Hatfield)

  Pope, Greg

  Jones, Rt Hon Barry (Alyn)

  Pound, Stephen

  Jones, Jon Owen (Cardiff C)

  Prentice, Ms Bridget (Lewisham E)

  Jones, Dr Lynne (Selly Oak)

  Prentice, Gordon (Pendle)

  Jones, Martyn (Clwyd S)

  Prescott, Rt Hon John

  Keeble, Ms Sally

  Purchase, Ken

  Keen, Alan (Feltham & Heston)

  Quin, Rt Hon Ms Joyce

  Keen, Ann (Brentford & Isleworth)

  Quinn, Lawrie

  Kemp, Fraser

  Reed, Andrew (Loughborough)

  Khabra, Piara S

  Reid, Rt Hon Dr John (Hamilton N)

  Kidney, David

  Roche, Mrs Barbara

  Kilfoyle, Peter

  Rooker, Rt Hon Jeff

  King, Andy (Rugby & Kenilworth)

  Rooney, Terry

  King, Ms Oona (Bethnal Green)

  Ross, Ernie (Dundee W)

  Ladyman, Dr Stephen

  Rowlands, Ted

  Lawrence, Mrs Jackie

  Roy, Frank

  Laxton, Bob

  Ruddock, Joan

  Lepper, David

  Russell, Ms Christine (Chester)

  Leslie, Christopher

  Ryan, Ms Joan

  Levitt, Tom

  Salter, Martin

  Lewis, Ivan (Bury S)

  Sarwar, Mohammad

  Linton, Martin

  Savidge, Malcolm

  Llwyd, Elfyn

  Sawford, Phil

  Lock, David

  Sedgemore, Brian

  Love, Andrew

  Shaw, Jonathan

  McAvoy, Thomas

  Simpson, Alan (Nottingham S)

  McCabe, Steve

  Singh, Marsha

  McCartney, Rt Hon Ian

  Skinner, Dennis

  (Makerfield)

  Smith, Rt Hon Andrew (Oxford E)

  McDonagh, Siobhain

  Smith, Angela (Basildon)

  Macdonald, Calum

  Smith, John (Glamorgan)

  McDonnell, John

  Smith, Llew (Blaenau Gwent)

  McGuire, Mrs Anne

  Soley, Clive

  McIsaac, Shona

  Southworth, Ms Helen

  McKenna, Mrs Rosemary

  Spellar, John

  McNamara, Kevin

  Squire, Ms Rachel

  McNulty, Tony

  Steinberg, Gerry

  Mactaggart, Fiona

  Stewart, Ian (Eccles)

  McWilliam, John

  Stoate, Dr Howard

  120

  Strang, Rt Hon Dr Gavin

  Tynan, Bill

  Stringer, Graham

  Walley, Ms Joan

  Sutcliffe, Gerry

  Ward, Ms Claire

  Swinney, John

  Wareing, Robert N

  Taylor, Rt Hon Mrs Ann (Dewsbury)

  White, Brian

  Whitehead, Dr Alan

  Taylor, Ms Dari (Stockton S)

  Wicks, Malcolm

  Taylor, David (NW Leics)

  Williams, Rt Hon Alan (Swansea W)

  Temple-Morris, Peter

  Thomas, Gareth R (Harrow W)

  Williams, Alan W (E Carmarthen)

  Thomas, Simon (Ceredigion)

  Williams, Mrs Betty (Conwy)

  Timms, Stephen

  Wills, Michael

  Tipping, Paddy

  Winnick, David

  Todd, Mark

  Winterton, Ms Rosie (Doncaster C)

  Touhig, Don

  Wood, Mike

  Trickett, Jon

  Woodward, Shaun

  Turner, Dennis (Wolverth'ton SE)

  Worthington, Tony

  Turner, Dr Desmond (Kemptown)

  Wright, Anthony D (Gt Yarmouth)

  Turner, Dr George (NW Norfolk)

  Turner, Neil (Wigan)

  Tellers for the Noes:

  Twigg, Derek (Halton)

  Mr. Clive Betts and

  Twigg, Stephen (Enfield)

  Mr. Graham Allen.

  Question accordingly negatived.
  Lords amendment agreed to.
  Lords amendments Nos. 183 to 267 agreed to.

Clause 223

  AWARDS
  Lords Amendment: No. 268, in page 115, line 1, leave out from ("for") to ("of') in line 4 and insert ("—

  (a) financial loss; or

  (b) any other loss, or any damage,")

  10.15 pm
  Mr. Timms: I beg to move, That this House agrees with the Lords in the said amendment.
  The amendment is technical; it clarifies subsection (3) of clause 223 and results from concerns raised on Report in another place that the provision might be open to misinterpretation. There was concern that the subsection might be read as requiring the ombudsman to try to construct hypothetical contracts, or to award compensation according to whether there had been a breach of an actual contract.
  In fact, the provision was only ever intended to set out the type of loss or damage for which the ombudsman could make awards. To require the ombudsman to make awards based on actual or hypothetical contracts would contradict the principle set out in clause 222 that cases should be determined on the basis of what is
  fair and reasonable in all the circumstances.
  The amendment puts matters beyond doubt. It recasts subsection (3) so that the reference to awards of a kind a court could make for breach of contract is replaced by a more straightforward distinction between financial loss and other loss or damage "of a specified kind". I commend the amendment to the House.
  Mr. Flight: I raise one point for clarification. The ombudsman schemes allow consumers redress to the courts if they are not happy with the scheme, with a three-year time limit from when they first raise a matter. In several cases, the Personal Investment Authority ombudsman took at least two years to address a matter and time ran out, so the issue is whether the three-year

  121
  period should run from the time of the first referral or whether the time taken by the ombudsman should be excluded when calculating the three-year period.
  Mr. Timms: The standard limitation period is, of course, six years, although it can vary according to the type of case and according to judicial discretion. If a lengthy complaint was before the ombudsman and a statute bar appeared on the horizon, it would be up to the consumer to institute protective court proceedings to ensure that the limitation period did not run out. Perhaps I could provide the hon. Gentleman with further information to resolve the question that he raises.
  Lords amendment agreed to.
  Lords amendment No. 269 agreed to.

  New clause
  Lords amendment: No. 270, after clause 229, to insert the following new clause—Open-ended investment companies—
  (".—(1) In this Part "an open-ended investment company" means a collective investment scheme which satisfies both the property condition and the investment condition.
  (2) The property condition is that the property belongs beneficially to, and is managed by or on behalf of, a body corporate ("BC") having as its purpose the investment of its funds with the aim of—

  (a) spreading investment risk; and

  (b) giving its members the benefit of the results of the management of those funds by or on behalf of that body.

  (3) The investment condition is that, in relation to BC, a reasonable investor would, if he were to participate in the scheme—

  (a) expect that he would be able to realize, within a period appearing to him to be reasonable, his investment in the scheme (represented, at any given time, by the value of shares in, or securities of, BC held by him as a participant in the scheme); and

  (b) be satisfied that his investment would be realised on a basis calculated wholly or mainly by reference to the value of property in respect of which the scheme makes arrangements

  (4) In determining whether the investment condition is satisfied, no account is to be taken of any actual or potential redemption or repurchase of shares or securities under—

  (a) Chapter VII of Part V of the Companies Act 1985;

  (b) Chapter VII of Part VI of the Companies (Northern Ireland) Order 1986;

  (c) corresponding provisions in force in another EEA State; or

  (d) provisions in force in a country or territory other than an EEA state which the Treasury have, by order, designated as corresponding provisions.

  (5) The Treasury may by order amend the definition of "an open-ended investment company" for the purposes of this Part.")
  Motion made, and Question proposed, That this House agrees with the Lords in the said amendment.—[Miss Melanie Johnson.]
  Mr. Deputy Speaker: With this we may discuss amendments (a) and (b) thereto and Lords amendments Nos. 271 and 558.
  Mr. Flight: The new clause that will be inserted in the Bill by amendment No. 270 is technical, but it is important for domestic and international funds. Domestically, it will govern the regulations to which the fund vehicle is subject and whether that is prospectus law or the marketing of collective investment schemes. For
  122
  companies established outside the UK, it will determine the tax regime that will apply. Therefore, accuracy and clarity of definition are important.
  The new clause provides that a company will be open-ended only if it satisfies the two conditions—the property and investment conditions—that are set out in the Bill, and amendments (a) and (b) relate to the investment condition. Under subsection (3) of the proposed new clause the investment condition will be satisfied if a reasonable investor is able to realise his investment within a reasonable period. Our amendments would sharpen up that test.
  Under amendment (a), a company will not be open-ended if the investor can receive his money back on the liquidation of the company, but the Government's definition does not appear intended to include a liquidation. A company's byelaws often provide that it is to be wound up at a specified later date, so someone who becomes an investor close to that later date could be deemed to be able to realise his investment within a reasonably short period. Therefore, different categories of open or closed-ended could apply, depending on when different investors invest in a fund.
  Amendment (b) would impose important restrictions on what is meant by realising an investment. As it stands, the condition will be satisfied, as is normally the case, if shares are transferable and the investor knows that he can sell his shares to someone else. It would be wrong to treat a company as open-ended for that reason. Our amendment uses the words in the undertakings for collective investment in transferable securities directive which allows cross-border marketing within the European Union of certain classes of collective investment scheme. That wording also appears in the Financial Services Act 1986 and it should continue to be used. The concept of an open-ended company relates to one that can buy back its shares and our wording covers that.
  It is wrong to provide for a company to be open-ended if the expectation is that the investment can be realised within a reasonable period. We thought about submitting a specific definition of time although we did not wish to undo the constructive negotiations that are taking place between the Treasury and the industry. However, it will be useful for the FSA to specify what "reasonable" means so that there is clarity. That is particularly important for non-UK funds where an unknown change in the tax position could have a material effect on UK investors.
  For example, if the rules of a fund provide for a right of redemption to arise one year down the line and the fund manager thinks that that is outside the reasonable period required by investor conditions, he will proceed on the basis that the company is not an open-ended investment company and therefore not a collective investment scheme. If the regulator or tax inspector takes a different view, there will be conflict and a tremendous tax row.
  I raised this issue in Committee, but there is still a lack of clarity in the Bill. What would happen if one investor says that the period is reasonable and another says that it is not? The fund could be open-ended if it followed the advice of one and closed-ended if it followed the advice of the other.

  123
  There might be scope to address the issue by FSA regulation, but it would be helpful if the Government could tell us that they are committed to tidying up these loose ends and potential conflicts.
  Miss Melanie Johnson: Amendment (a) seeks to specify the time at which the expectation of the reasonable investor whom we have postulated for the purposes of the investment condition leg of the OEIC definition should be assessed. It proposes that the assessment should take place when the investor decides to participate in the scheme.
  The Government have stressed the importance of flexibility in all the debates on the definition of an OEIC. By defining an OEIC in the Bill and introducing regulations governing their incorporation and operation, we are facilitating important developments in the UK collective investment schemes industry, and it is essential that we do not stifle future innovation by being overly prescriptive in framing the definition. Indeed, when the Government introduced the current definition, the Opposition's spokesman in another place welcomed it as providing
  a much more flexible and forward-looking definition of open-ended investment schemes.—[Official Report, House of Lords, 30 March 2000; Vol. 611, c. 942.]
  The Opposition amendment would introduce an element of ambiguity that is absent from the definition. To specify
  the time he decides to participate in the scheme
  begs the question whether that is when the investor makes his decision or when he will participate, which could be some time later than his decision.
  Any words specifying a particular time are unnecessary because it is clear that the relevant time of the assessment to be made by the hypothetical investor is immediately prior to hypothetical participation in the scheme. The fact that the investor and his investment are hypothetical means that the idea of him deciding to participate is the wrong approach to the point. The proposition needs to expressed in conditional language—hence
  if he were to participate…
  The fact that the investor is hypothetical also ensures that the test is flexible. It is a test that can be applied from time to time to allow for the possibility that a closed-ended company can become open-ended and vice versa, on account of significant changes to the way in which the operation of the company and its constitution are structured which push the company over the boundary between the two types. The test has been put together with the need to accommodate changes specifically in mind. This is a dynamic industry—we must have a dynamic definition.
  Mr. Tyrie: To be perfectly honest, I have not got a clue what the Minister is on about. I may be alone in that, but for my benefit at least, will she summarise in plain English what she is trying to say?
  Miss Johnson: I shall endeavour to do so. There are two types of investment companies—open-ended and closed-ended—and both need to be clearly defined. Schemes can move between one arrangement and the
  124
  other, depending on how quickly they can be realised. That point was made by the hon. Member for Arundel and South Downs (Mr. Flight). We want a definition that is flexible but not unduly ambiguous, and we are concerned that the Opposition amendment would introduce ambiguity that is absent from our present definition.
  Mr. Flight: Our particular concern is that under the present arrangements a scheme can be open-ended and closed-ended at the same time, depending on when an investor invests.
  Miss Johnson: I am not sure whether the hon. Gentleman's point relates to liquidation, with which I am about to deal. I am puzzled by his remark, which does not square with what I understood to be the effect of the Opposition amendment. It is clear that under the hon. Gentleman's proposal the test would exclude a company that was about to go into liquidation. We are talking about a reasonable investor. Someone who invests in a company knowing that it is about to be liquidated—and, for all he knows, it may be an insolvent liquidation—is not a reasonable investor That is a question of common sense. The same goes for the other exclusions: a reasonable investor would not invest in the expectation that the company was going to default.
  Mr. Flight: Many closed-ended investment companies provide that their life will end by liquidation at a certain date. If an investor, who may or may not be fully aware of that provision, invests within six months of that date, his investment will have a life of only six months and will then be liquidated, so he could be judgeable as investing in an open-ended company. That situation particularly applies to closed-ended non-UK funds. That has tax consequences because his investment, which he thought was to be in a closed-ended fund, becomes open-ended and does not have distributing status. The investor thus ends up with an income tax bill on the total return rather than capital gains tax as he expected, so the matter is one of liquidation in the context of closed-ended funds that end their life in the liquidation of assets.
  10.30 pm
  Miss Johnson: The answer to that point is that we emphasised when we introduced the definition that its aim and effect is to cover companies that look, to a reasonable investor, like open-ended collective investment schemes. I appreciate that the hon. Gentleman is alleging that a closed-ended scheme looks like an open-ended one if it is approaching liquidation, but that is not our understanding of the way in which it would be regarded.
  The investor's expectations could involve consideration of when he would be able to invest in the company and when, having done so, he would be able to realise his investment. A reasonable investor's overall expectations of potential investment in a company when its status with respect to the definition is being judged will determine whether it meets the definition. The matter is therefore definitional rather than one of proximity to liquidation.
  Amendment (b) specifies what is meant by "realise his investment". The effect would be to limit realisation to the repurchase or redemption of the shares or their sale on an investment exchange arranged by the company.

  125
  That would be an unacceptable limitation on the means by which an investor can realise his investment. It would prevent the development of OEICs allowing realisation by other means in certain circumstances and thus restrict the types of OIECs that the Government, the FSA and industry may in future want to be made available.
  In another place, the Opposition expressed interest in the definition allowing
  scope for a wider range of authorised funds which are intended for domestic consumption—[Official Report, House of Lords, 30 March 2000; Vol. 611, c. 943.]
  The amendment would run counter to future efforts to do precisely that.
  Similar companies established outside the UK must be capable of coming within the definition. For example, companies may have a mixture of shares—some redeemable, some not. Those partly open-ended, partly closed-ended companies enable investors to realise their investments without having their shares redeemed, repurchased or sold, perhaps by raising loan funds to pass on to investors who want to realise their investments.
  In such a case, the hypothetical reasonable investor should look at the company as a whole. He will think to himself, "If I invest in this body, would I expect to be able to realise my investment and be satisfied that the value would, on the whole, be calculated in the specified way?" If the answer is yes, the company should fall within the definition. Amendment (b) would preclude that.
  However, I reassure Opposition Members that the forms of realisation that they specify are covered by the current definition. With that, and my earlier comments, I hope that they will find it possible to withdraw the
  amendment.
  Mr. Flight: We had not intended to put the issue to the vote; it is highly technical. I believe that the Government's intent is bona fide, but there are still some problems. Perhaps we might discuss the matter, as it is purely an industry one. The broad intent must be clarity for an investor in assessing whether he is investing in an open-ended or closed-ended company. We do not wish to press our amendment to the vote.
  Lords amendment agreed to.
  Lords amendments Nos. 271 to 442 agreed to.

  New Clause
  Lords amendment: No. 443, after clause 342, to insert the following new clause—Authority's duty to co-operate with others—
  .—(1)The Authority must take such steps as it considers appropriate to co-operate with other persons (whether in the United Kingdom or elsewhere) who have functions—

  (a) similar to those of the Authority; or

  (b) in relation to the prevention or detection of financial crime.

  (2) Co-operation may include the sharing of information which the Authority is not prevented from disclosing.
  (3)"Financial crime" has the same meaning as in section 6.")
  Motion made, and Question proposed, That this House agrees with the Lords in the said amendment.—[Miss Melanie Johnson.]
  Mr. Heathcoat-Amory: I have a question or two about the new clause that the amendment would insert. It would
  126
  place on the authority an obligation to co-operate and share information with
  other persons (whether in the United Kingdom or elsewhere).
  What restrictions are placed on that? For example, is it envisaged that the authority will share information with private investigators, or will disclosure be confined to the public sector? As it stands, the only restriction is that the persons to whom information will be given must be connected with the prevention or detection of financial crime. That is a wide definition. Many bodies and people could claim to be preventing or detecting crime, but it would nevertheless be unwise to share information with them.
  Will information be provided only on a reciprocal basis? Otherwise, we could disclose information to parties, particularly in other countries, without any reciprocal arrangement—they may have banking secrecy laws, for instance. I believe it wrong for this to be a one-way street. Perhaps the Minister could enlighten us a little about how the new clause will operate.
  Mr. John Butterfill: In her response, will the Minister say what the definition of "crime" will be? What may be a crime in this country may not be a crime in some other regulatory regime, and vice versa. What will be the test of what amounts to a financial crime? Will any other jurisdiction that may have a completely different definition of crime be able to request this information from us, even though the act concerned may not be a criminal act in this country?
  Miss Melanie Johnson: The right hon. Member for Wells (Mr. Heathcoat-Amory) asked to whom disclosure may be made. I refer to the restrictions contained in part XXIII, which will apply in this case as elsewhere. Financial crime is defined in clause 6(3), and that definition of crime is to be understood in this context.
  I hope that that answers the points raised, but if the right hon. Member for Wells or the hon. Member for Bournemouth, West (Mr. Butterfill) have further queries I shall undertake to write to them, as there is no amendment on that subject.
  Mr. Heathcoat-Amory: With the leave of the House, Mr. Deputy Speaker. I am grateful to the Minister for her offer to write to us. She clearly does not have the information that we requested. She points me to other provisions in the Bill, but it would have helped if she had answered the questions that my hon. Friend and I asked. I think that we will take up her offer to enlighten us by correspondence.
  I am slightly surprised that the Government, having tabled amendments at this very late stage, apparently do not have the answers to our questions at their fingertips. We are trying to be sparing with our questions, given the short time we have in which to debate these important amendments. When we alight on something of more general interest, it would assist if we could have immediate answers.
  10.45 pm
  Miss Johnson: I thought that I had in outline answered both the main points that the right hon. Gentleman and his hon. Friend made. I offered to write to them only in the event of their wanting more detail on those outlines—

  127
  if, indeed, there is more to be said. I am happy to supply more information, but I believe that they have had a basic answer to both points.
  Lords amendment agreed to.
  Lords amendments Nos. 444 to 588 agreed to.

Schedule 1

  THE FINANCIAL SERVICES AUTHORITY
  Lords amendment: No. 589, in page 219, line 8, leave out sub-paragraph (4) and insert—
  ("(4) in a case where the investigator—

  (a) has reported that a complaint is well-founded, or

  (b) has criticised the Authority in his report,

  the investigator may include in his report a recommendation to the Authority that it takes steps to remedy the matter complained of including, if appropriate, by making an ex-gratia payment.")
  Motion made, and Question proposed, That this House agrees with the Lords in the said amendment.—[Miss
  Melanie Johnson.]
  Mr. Deputy Speaker: With this it will be convenient to discuss the amendment thereto and Lords amendments Nos. 590 and 591.
  Mr. Flight: The issue raised by Lords amendment No. 589 and our amendment to it is one of the most important outstanding issues. Given the virtual legal immunity enjoyed by the FSA, it is essential that there should be a full, clear and open complaints scheme. The Government accepted Lords amendment No. 589 in the other place; our amendment to that amendment was, I believe, supported in the Lords, but was not actually tabled.
  To put it simply, our amendment proposes that the investigator should be able, if he sees fit, to investigate complaints, whether or not the FSA has recommended him so to do. It also proposes that the complaints scheme should confer on the investigator the power to recommend to the authority, as he sees fit, appropriate compensatory payments or any other remedies. Together with Lords amendment No. 589, it would give an independent complaints investigator the power to look into complaints and recommend appropriate redress, fairly and without being leant on by the FSA.
  Miss Melanie Johnson: I can be brief. I am grateful to Opposition Members for seeking to restore the safeguard that seemed to have been unwittingly removed during debate in the other place on amendment No. 589. We are happy to support the amendment to the amendment, which, as the hon. Gentleman says, restores one of the safeguards of the investigator's independence.
  Lords amendment and amendment thereto agreed to.
  Lords amendments Nos. 590 and 591 agreed to.

Schedule 3

  EEA PASSPORT RIGHTS
  Lords amendment: No. 592, in page 229, leave out line 19 to 23 and insert—
  ("12.—(1)Once an EEA firm which is seeking to establish a branch in the United Kingdom in exercise of an EEA right satisfies the establishment conditions, it qualifies for authorisation
  (2) Once an EEA firm which is seeking to provide services in the United Kingdom in exercise of an EEA right satisfies the service conditions, it")
  Motion made, and question proposed, That this House agrees with the Lords in the said amendment.—[Miss Melanie Johnson.]
  Mr. Deputy Speaker: With this we may discuss Lords amendments Nos. 593, 594 and the amendment thereto, 595 to 603 and 606 to 615.
  Mr. Flight: We come to a subject beloved at the Committee stage: the territory of European Union passporting. Our amendment relates to the use of the incoming single European passport by non-United Kingdom firms that are passporting into the UK under EU law, and schedule 3, which reflects that.
  Amendment No. 594 as it stands is helpful, but we fear that it gives rise to some possible confusions, which our amendment seeks to prevent. Amendment No. 594 looks at the position of a European Economic Area firm that wants to do business under its passport, but that does not comply with the notification requirements imposed by schedule 3. The amendment tries to lessen the consequences of that failure by the passporting firm by providing that, although it is as a result unauthorised, its contracts will not be unenforceable, even though otherwise they would be. One of the reasons why we feel that it is desirable to be sensitive in this area and in the case of EEA firms using the passport where technical breaches are committed, is that the more aggressive our treatment of EEA firms here, the worse our firms are likely to find European regulators treat them about Europe.
  Our amendment tries to prevent the confusion that is likely to arise from amendment No. 594. The question of enforceability arises under the sections listed in amendment No. 594 only if the firm is not authorised under the legislation. The policy, which is the same as the policy that we adopted in the Financial Services Act 1986, is that an authorised firm will not be committing a criminal offence if it acts outside its permitted business, although private investors who suffer as a result can sue the firm for compensation. Accordingly, the sections listed apply only in relation to a firm that is not authorised.
  A firm can, however, be authorised under the legislation as a result of the normal authorisation process—getting permission under part IV—for some regulated activities, even though it wants to use the passport for others. Most firms may try to do that because the passport is by no means comprehensive. Therefore, the first change to Lords amendment No. 594 would ensure that the paragraph applies initially only to a firm that is not an authorised person, albeit in relation to non-passported activities.

  129
  The second change that we propose making to Lords amendment No. 594 is to provide that the disapplication of the unenforceability provision should apply only in relation to passported activities. The Lords amendment provides that the unenforceability provisions do not apply to an agreement entered into by the firm. The firm may enter into other agreements, and not only into agreements covered by the passport. The Lords amendment therefore provides that any agreement entered into by the firm is covered.
  Accordingly, the unenforceability provisions would not apply even in the case of agreements that had nothing at all to do with the passport. Although we support the unenforceability provisions already made in the 1986 Act, we would not like what is admittedly a helpful amendment to have that potentially undesirable result.
  The subject—like that of the EEA passporting territory—is extremely technical and obscure, and we had hoped that, by now, it had been entirely put to bed. However, if Ministers are not willing to accept our amendment to Lords amendment No. 594, an unsatisfactory situation will develop in a territory in which many British businesses are EU-EEA passported.
  Miss Melanie Johnson: In the course of our debates, we have given much further thought to the enforcement provisions, and we have made various amendments to meet the concerns expressed by Opposition Members and by their colleagues in another place. We have also reconsidered their application in this context, but concluded that their amendment is probably disproportionate and possibly discriminatory.
  If an outgoing United Kingdom authorised person conducts activities covered by the relevant directive in another European economic area state without having gone through the relevant procedures, the Bill would not render unenforceable transactions effected by that person in the course of conducting those activities. Therefore, to apply the enforcement of agreements provisions to incoming firms that fail to follow the proper procedures might be discriminatory.
  The new paragraph that we propose to insert after paragraph 15 therefore disapplies clauses 24, 25 and 27 in relation to any agreement entered into by an EEA firm in the course of, or any agreement entered into by an authorised person as a result of, regulated activity conducted without the relevant procedures having been completed.
  Conversely, the Opposition amendment would apply the non-enforcement provisions of those clauses in most circumstances. Although I am not sure that that is the intention, use of the term "permitted activity" might be intended to narrow the paragraph's effect to activities covered by the directives, rather than to any regulated activity. However, if that is the intention, it does not work.
  The definitions of "permitted activity" in paragraphs 13 and 14 are related to the activities specified in the "consent notices" provided for in those paragraphs. A "permitted activity" is therefore only an activity for which notification has been received by the FSA from the home state regulator or the firm concerned. The effect of the Opposition amendment would be to disapply the non-enforcement clauses only when the home state regulator or the firm concerned has begun the procedure which leads up to the firm qualifying for authorisation.
  130
  However, it is just as necessary to cover cases in which that first step has not been taken as well as cases in which it has been taken.
  Additionally, the Opposition amendment simply would not work in certain cases. A credit institution, for example, that wishes to do business on a services basis only has to give a notice of intention. Once it has given such a notice, it qualifies for authorisation. The Opposition amendment would apply to a credit institution that has not given a notice of intention, but would define that institution's "permitted activities" in terms that depend upon it having given a notice of intention. That does not make sense.
  The Opposition amendment—for reasons that I do not quite understand—also fails to deal with the effect of the provisions of clause 27. As I explained, we believe that the amendments made in another place are necessary if the UK is not to be open to charges of discrimination. We also believe that the Opposition's amendment is inconsistent with that and is defective in any event. For that reason, I hope that they will withdraw it, but if they do not, I urge the House to vote against it.
  It being Eleven o'clock, MR. DEPUTY SPEAKER put the remaining Questions required to be put at that hour, pursuant to Order [this day].
  Lords amendment No. 592 agreed to.
  Question put, That this House agrees with the Lords in the remaining Lords amendments:—
  The House divided: Ayes 287, Noes 114.

  Division No. 216]

  [11.1 pm

  AYES

  Adams, Mrs Irene (Paisley N)

  Cann, Jamie

  Ainger, Nick

  Caplin, Ivor

  Allen, Graham

  Casale, Roger

  Anderson, Janet (Rossendale)

  Caton, Martin

  Atherton, Ms Candy

  Chapman, Ben (Wirral S)

  Austin, John

  Clapham, Michael

  Battle, John

  Clark, Rt Hon Dr David (S Shields)

  Bayley, Hugh

  Clark, Paul (Gillingham)

  Beard, Nigel

  Clarke, Charles (Norwich S)

  Begg, Miss Anne

  Clarke, Eric (Midlothian)

  Benn, Hilary (Leeds C)

  Clarke, Rt Hon Tom (Coatbridge)

  Benn, Rt Hon Tony (Chesterfield)

  Clarke, Tony (Northampton S)

  Bennett, Andrew F

  Clelland, David

  Benton, Joe

  Clwyd, Ann

  Bermingham, Gerald

  Coffey, Ms Ann

  Berry, Roger

  Coleman, lain

  Best, Harold

  Connarty, Michael

  Blackman, Liz

  Cook, Frank (Stockton N)

  Blears, Ms Hazel

  Corbett, Robin

  Blizzard, Bob

  Corbyn, Jeremy

  Boateng, Rt Hon Paul

  Cotter, Brian

  Borrow, David

  Cousins, Jim

  Bradley, Keith (Withington)

  Crausby, David

  Bradley, Peter (The Wrekin)

  Cryer, Mrs Ann (Keighley)

  Bradshaw, Ben

  Cryer, John (Hornchurch)

  Brand, Dr Peter

  Cummings, John

  Brinton, Mrs Helen

  Cunningham, Rt Hon Dr Jack (Copeland)

  Brown, Russell (Dumfries)

  Buck, Ms Karen

  Cunningham, Jim (Cov'try S)

  Burgon, Colin

  Darvill, Keith

  Burstow, Paul

  Davey, Valerie (Bristol W)

  Butler, Mrs Christine

  Davidson, Ian

  Byers, Rt Hon Stephen

  Davies, Rt Hon Denzil (Llanelli)

  Cabom, Rt Hon Richard

  Davies, Geraint (Croydon C)

  Campbell, Rt Hon Menzies (NE Fife)

  Dawson, Hilton

  Dean, Mrs Janet

  Campbell—Savours, Dale

  Denham, John

  131

  Dismore, Andrew

  King, Ms Oona (Bethnal Green)

  Dobbin, Jim

  Kirkwood, Archy

  Donohoe, Brian H

  Ladyman, Dr Stephen

  Doran, Frank

  Lawrence, Mrs Jackie

  Dowd, Jim

  Laxton, Bob

  Drew, David

  Lepper, David

  Eagle, Maria (L'pool Garston)

  Leslie, Christopher

  Edwards, Huw

  Levitt, Tom

  Efford, Clive

  Lewis, Ivan (Bury S)

  Ellman, Mrs Louise

  Linton, Martin

  Ennis, Jeff

  Llwyd, Elfyn

  Feam, Ronnie

  Lock, David

  Field, Rt Hon Frank

  Love, Andrew

  Fisher, Mark

  McAvoy, Thomas

  Fitzpatrick, Jim

  McCabe, Steve

  Foster, Michael J (Worcester)

  McCartney, Rt Hon Ian (Makerfield)

  Foulkes, George

  Galloway, George

  McDonagh, Siobhain

  Gardiner, Barry

  Macdonald, Calum

  Gerrard, Neil

  McDonnell, John

  Gibson, Dr Ian

  McGuire, Mrs Anne

  Gilroy, Mrs Linda

  McIsaac, Shona

  Godman, Dr Norman A

  McKenna, Mrs Rosemary

  Godsiff, Roger

  McNamara, Kevin

  Goggins, Paul

  McNulty, Tony

  Golding, Mrs Llin

  MacShane, Denis

  Gordon, Mrs Eileen

  Mactaggart, Fiona

  Griffiths, Jane (Reading E)

  McWilliam, John

  Griffiths, Nigel (Edinburgh S)

  Mahon, Mrs Alice

  Grocott, Bruce

  Marsden, Gordon (Blackpool S)

  Grogan, John

  Marsden, Paul (Shrewsbury)

  Hain, Peter

  Martlew, Eric

  Hall, Mike (Weaver Vale)

  Maxton, John

  Hall, Patrick (Bedford)

  Meacher, Rt Hon Michael

  Hamilton, Fabian (Leeds NE)

  Michael, Rt Hon Alun

  Hanson, David

  Michie, Bill (Shef'ld Heeley)

  Heal, Mrs Sylvia

  Miller, Andrew

  Healey, John

  Moffatt, Laura

  Heath, David (Somerton & Frome)

  Moonie, Dr Lewis

  Henderson, Ivan (Harwich)

  Moran, Ms Margaret

  Heppell, John

  Morley, Elliot

  Hinchliffe, David

  Mountford, Kali

  Hodge, Ms Margaret

  Mowlam, Rt Hon Marjorie

  Hoey, Kate

  Mudie, George

  Hoon, Rt Hon Geoffrey

  Mullin, Chris

  Hope, Phil

  Murphy, Jim (Eastwood)

  Hopkins, Kelvin

  Murphy, Rt Hon Paul (Torfaen)

  Howarth, George (Knowsley N)

  Naysmith, Dr Doug

  Howells, Dr Kim

  O'Brien, Mike (N Warks)

  Hughes, Kevin (Doncaster N)

  Olner, Bill

  Humble, Mrs Joan

  Organ, Mrs Diana

  Hurst, Alan

  Palmer, Dr Nick

  Hutton, John

  Pearson, Ian

  Iddon, Dr Brian

  Pendry, Tom

  Illsley, Eric

  Perham, Ms Linda

  Ingram, Rt Hon Adam

  Pickthall, Colin

  Jackson, Ms Glenda (Hampstead)

  Pike, Peter L

  Jackson, Helen (Hillsborough)

  Plaskitt, James

  Jamieson, David

  Pollard, Kerry

  Jenkins, Brian

  Pond, Chris

  Johnson, Alan (Hull W & Hessle)

  Pope, Greg

  Johnson, Miss Melanie (Welwyn Hatfield)

  Pound, Stephen

  Prentice, Ms Bridget (Lewisham E)

  Jones, Rt Hon Barry (Alyn)

  Prentice, Gordon (Pendle)

  Jones, Jon Owen (Cardiff C)

  Prescott, Rt Hon John

  Jones, Dr Lynne (Selly Oak)

  Purchase, Ken

  Jones, Martyn (Clwyd S)

  Quinn, Lawrie

  Keeble, Ms Sally

  Radice, Rt Hon Giles

  Keen, Alan (Feltham & Heston)

  Reed, Andrew (Loughborough)

  Keen, Ann (Brentford & Isleworth)

  Reid, Rt Hon Dr John (Hamilton N)

  Keetch, Paul

  Rendel, David

  Kemp, Fraser

  Roche, Mrs Barbara

  Khabra, Piara S

  Rooker, Rt Hon Jeff

  Kidney, David

  Rooney, Terry

  Kilfoyle, Peter

  Ross, Ernie (Dundee W)

  King, Andy (Rugby & Kenilworth)

  Rowlands, Ted

  132

  Roy, Frank

  Thomas, Gareth R (Harrow W)

  Ruddock, Joan

  Thomas, Simon (Ceredigion)

  Russell, Bob (Colchester)

  Timms, Stephen

  Russell, Ms Christine (Chester)

  Tipping, Paddy

  Ryan, Ms Joan

  Todd, Mark

  Salter, Martin

  Touhig, Don

  Sanders, Adrian

  Trickett, Jon

  Sarwar, Mohammad

  Turner, Dennis (Wolverh'ton SE)

  Savidge, Malcolm

  Turner, Dr Desmond (Kemptown)

  Sawford, Phil

  Turner, Dr George (NW Norfolk)

  Sedgemore, Brian

  Turner, Neil (Wigan)

  Shaw, Jonathan

  Twigg, Derek (Halton)

  Simpson, Alan (Nottingham S)

  Twigg, Stephen (Enfield)

  Singh, Marsha

  Tyler, Paul

  Skinner, Dennis

  Tynan, Bill

  Smith, Rt Hon Andrew (Oxford E)

  Walley, Ms Joan

  Smith, Angela (Basildon)

  Ward, Ms Claire

  Smith, John (Glamorgan)

  Wareing, Robert N

  Smith, Llew (Blaenau Gwent)

  White, Brian

  Soley Clive

  Whitehead, Dr Alan

  Southworth, Ms Helen

  Williams, Rt Hon Alan (Swansea W)

  Spellar John

  Steinberg, Gerry

  Williams, Alan W (E Carmarthen)

  Stewart, Ian (Eccles)

  Williams, Mrs Betty (Conwy)

  Stoate, Dr Howard

  Wills, Michael

  Strang, Rt Hon Dr Gavin

  Winnick, David

  Stringer, Graham

  Winterton, Ms Rosie (Doncaster C)

  Stunell, Andrew

  Wood, Mike

  Sutcliffe, Gerry

  Woodward, Shaun

  Swinney, John

  Woolas, Phil

  Taylor, Rt Hon Mrs Ann (Dewsbury)

  Worthington, Tony

  Wright, Anthony D (Gt Yarmouth)

  Taylor, Ms Dari (Stockton S)

  Tellers for the Ayes:

  Taylor, David (NW Leics)

  Mr. Robert Ainsworth and

  Temple-Morris, Peter

  Mr. Clive Betts.

  NOES

  Ainsworth, Peter (E Surrey)

  Grieve, Dominic

  Amess, David

  Hammond, Philip

  Arbuthnot, Rt Hon James

  Hawkins, Nick

  Baldry, Tony

  Heald, Oliver

  Bercow, John

  Heathcoat-Amory, Rt Hon David

  Beresford, Sir Paul

  Hogg, Rt Hon Douglas

  Blunt, Crispin

  Horam, John

  Boswell, Tim

  Howard, Rt Hon Michael

  Bottomley, Peter (Worthing W)

  Howarth, Gerald (Aldershot)

  Bottomley, Rt Hon Mrs Virginia

  Jack, Rt Hon Michael

  Brady, Graham

  Jenkin, Bernard

  Brazier, Julian

  Key, Robert

  Brooke, Rt Hon Peter

  King, Rt Hon Tom (Bridgwater)

  Browning, Mrs Angela

  Laing, Mrs Eleanor

  Bruce, Ian (S Dorset)

  Lansley, Andrew

  Bums, Simon

  Leigh, Edward

  Butterfill, John

  Letwin, Oliver

  Cash, William

  Lewis, Dr Julian (New Forest E)

  Clappison, James

  Lidington, David

  Collins, Tim

  Lloyd, Rt Hon Sir Peter (Fareham)

  Cran, James

  Loughton, Tim

  Davies, Quentin (Grantham)

  Luff, Peter

  Day, Stephen

  Lyell, Rt Hon Sir Nicholas

  Duncan Smith, lain

  MacGregor, Rt Hon John

  Evans, Nigel

  Mclntosh, Miss Anne

  Faber, David

  Maclean, Rt Hon David

  Fabricant, Michael

  McLoughlin, Patrick

  Fallon, Michael

  Madel, Sir David

  Flight, Howard

  Mates, Michael

  Forth, Rt Hon Eric

  Maude, Rt Hon Francis

  Fowler, Rt Hon Sir Norman

  Mawhinney, Rt Hon Sir Brian

  Fox, Dr Liam

  May, Mrs Theresa

  Fraser, Christopher

  Moss, Malcolm

  Gale, Roger

  Nicholls, Patrick

  Gill, Christopher

  Norman, Archie

  Gillan, Mrs Cheryl

  O'Brien, Stephen (Eddisbury)

  Gray, James

  Ottaway, Richard

  Greenway, John

  Page, Richard

  133

  Paice, James

  Taylor, Ian (Esher & Walton)

  Paterson, Owen

  Taylor, John M (Solihull)

  Pickles, Eric

  Taylor, Sir Teddy

  Portillo, Rt Hon Michael

  Tredinnick, David

  Redwood, Rt Hon John

  Trend, Michael

  Robathan, Andrew

  Tyrie, Andrew

  Robertson, Laurence

  Viggers, Peter

  Roe, Mrs Marion (Broxbourne)

  Walter, Robert

  Ruffley, David

  Wells, Bowen

  Shepherd, Rt Hon Mrs Gillian

  Whitney, Sir Raymond

  Shepherd, Richard

  Whittingdale, John

  Simpson, Keith (Mid-Norfolk)

  Widdecombe, Rt Hon Miss Ann

  Soames, Nicholas

  Willetts, David

  Spelman, Mrs Caroline

  Winterton, Mrs Ann (Congleton)

  Spicer, Sir Michael

  Winterton, Nicholas (Macclesfield)

  Spring, Richard

  Yeo, Tim

  Stanley, Rt Hon Sir John

  Young, Rt Hon Sir George

  Steen, Anthony

  Tellers for the Noes:

  Swayne, Desmond

  Mr. Geoffrey Clifton-Brown

  Syms, Robert

  and

  Tapsell, Sir Peter

  Mr. John Randall.

  Question accordingly agreed to.

  SECTION 5 OF THE EUROPEAN COMMUNITIES (AMENDMENT) ACT 1993)
  Motion made, and Question put forthwith, pursuant to Standing Order No. 118 (6) and Order [11 May],
  That this House takes note with approval of the Government's assessment as set out in Financial Statement and Budget Report 2000–01 and the Economic and Fiscal Strategy Report 2000–01 for the purposes of section 5 of the European Communities (Amendment) Act 1993.—[Mr. Clelland.]
  Question accordingly agreed to.

Post Offices (Sutton and Cheam)
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Clelland.]
11.13 pm
Mr. Paul Burstow: I am very pleased to have the opportunity to debate this subject. I sought the debate because sub-postmasters in my constituency have genuine concern and anxiety about their very future. I hope that some of their concerns can be aired through this debate and that the Minister will be able to go some way towards allaying them.
Like many hon. Members, I was greatly impressed by the lobby of Parliament organised by the National Federation of Sub-Postmasters on 12 April. Before the lobby, I undertook a survey of the 16 sub-post offices in my constituency, to test the pulse and see what the views and concerns were. I found a group of hard-headed, realistic business men and women who were struggling to survive and keep their businesses as going concerns. Many of them have seen the value of their assets collapse, and it is getting harder and harder for them to make a decent return on the investment and commitment that they have made to providing a postal service.
Over the past 10 years, my constituency has lost four Crown post offices, in Sutton, Cheam village, North Cheam and Worcester Park, although I concede that they were all lost during the previous Conservative Government's term in office. Fortunately, those post offices were replaced by agency post offices, but those business men and women who took on those agencies now find that the investment and commitment they put in are beginning to turn sour.
What those business men and women need, and what my constituents expect, is the Government to act to protect the sub-post office network. As things stand, the switch from pension book to credit transfer will mean that at least one in three of the 16 sub-post offices in my constituency will be under threat, because more than 40 per cent. of their business comes from work for the Benefits Agency. When the Government tabled their amendment to the Postal Services Bill earlier this year to empower the Secretary of State to introduce a subsidy scheme for the public post offices, that initiative was generally welcomed. The Government have recognised the need for some action.
The Government's acceptance that they had a role to play in securing the future of the network was welcome. I read with great interest the Minister's recent speech to the conference of the National Federation of Sub-Postmasters. It was an under-reported speech and I could find only one article in the national press that did any justice to it. I was not present, but on the subject of closures, the text of the speech read:
unless we find a lasting solution that is acceptable across Government; finds favour with the Post Office; and offers your members a secure future—it won't be the last.
The Minister was right when he said that and a consensus must be found that secures the network not on the basis of a narrow financial assessment, but on a wider appreciation of the social and economic value of the sub-post office network.
The national federation has described its members as the general practitioners of government. They are a one-stop shop for Government services and much

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potential exists for the development of that role with the expansion of e-government. However, the network is not just a group of small business men and women struggling to make an honest return; it also plays a vital role in sustaining the vitality and viability of smaller, more marginal shopping parades. The closure of sub-post offices can create a domino effect, with other businesses suffering the knock-on consequences of a loss of trade, following the demise of their local sub-post office.
I have already referred to the uncertainty felt by sub-postmasters in my constituency. It could even be described as a crisis of confidence. Only last week I learned that the sub-post office on the London road in North Cheam is due to close on 7 June. It will close its doors because the temporary sub-postmaster has resigned and nobody has expressed any interest in taking on the agency permanently. That post office provides an important service to residents in the Cheam Park Farm and Brocks estate. Its closure will leave many of my constituents, especially the elderly and disabled, with the prospect of a long walk or bus journey to the next nearest sub-post office at Stonecot Hill or the Queen Vic in the North Cheam district centre.
One of the greatest strengths of the network is its accessibility. In my constituency, the local branch of Age Concern contacted my office in the past day or so to express its concern about the closure. The Post Office retail network manager for the area, Elaine Wright, has told me that the Post Office is trying hard to restore services to the locality as soon as possible. I know that the Government are committed to convenient access to all post offices—as the Minister told the national federation at its conference in Bournemouth—and I hope that the Minister will do all that he can to ensure that the restoration of that particular sub-post office is carried through expeditiously and is seen as a top priority by the Post Office.
The closure of sub-post offices contributes to the growing financial exclusion suffered by pensioners and people in other low-income groups. The decision to press ahead with plans to pay pensions and benefits directly into bank accounts from 2003 makes the search for the lasting solution to which the Minister referred even more urgent.
Post Office network managing director Dave Miller told the National Federation of Sub-Postmasters conference that the decision to proceed with direct payments to bank accounts would take away something like a third of the income of Post Office Counters Ltd., and reduce customer visits by almost a half. Ministers have been at pains to reassure sub-postmasters that claimants would be able to draw cash out of post offices, but post offices—and Post Office Counters Ltd.—are still waiting to hear how that will happen in practice. The Minister's conference speech does not make it clear how the Government intend to proceed.
Clearly, although there is no coercion, there is undoubtedly Government encouragement for the way in which the Benefits Agency offers to pay benefits, which leads people to see automatic credit transfer as the only option available. It is important to make it clear that a choice does remain, and to show how it will be secured in the long run. People need to know that there is a choice about how they can gain access to their pensions and benefits entitlements, but it is also important to make it
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clear how an exclusive payments system at post offices will mean that people who cannot have or do not want bank accounts can get their money.
Sutton and Cheam is neither rural nor urban, but suburban. Its leafy image of wealth and affluence masks many pockets of deprivation. It also hides the fact that a growing number of elderly people are often asset rich—in that they own a home—but are income poor.
I said that the Minister's speech did not attract much press comment. However, The Guardian of 17 May carried a report by Patrick Wintour. Its introductory paragraph rang alarm bells for me when it stated:
Tony Blair is planning to pour cash into inner-city and rural post offices to protect them from the impact of a huge loss of revenue caused by the automation of benefits payments.
That might be considered to be a good introduction to an article on this matter, but it mentioned inner-city and rural post offices. The article went on to mention the Minister's speech, which I rude a point of reading in preparation for this debate.
In his speech, the Minister shared with sub-postmasters some of the highlights of the performance and innovation unit's examination of the network. It is clear that rural post offices have a place in the Government's plans, as do offices in deprived urban areas, but what about suburban post offices? Where does that network fit into the Government's plans? It did not feature in the Minister's conference speech and, given the content of the various speeches made in the House on the matter, it is not clear that that question has been addressed.
Do the Government accept that sub-post offices in my constituency, and other suburban post offices, have an important role to play and are an important part of the fabric of the local community? They need a clear and unambiguous guarantee that they will not be left out in the cold.
The Minister has talked in the past of the need for the post office network to achieve a soft landing. The previous Government's desire to privatise the Post Office meant that a better analogy would have been with the landing made by a kamikaze pilot. Under that Government's stewardship, nearly 4,500 post offices closed, but the achievement of a soft landing now will require a comprehensive and fair package that supports the whole network.
The lobby on 12 April demonstrated the strength of feeling on this matter, as the Minister recognised. Many of my constituents signed petitions organised by the sub-postmasters, and I shall be presenting 4,500 additional signatures later this week to the House. Those signatures came from customers of sub-postmasters and also from the Sutton seniors forum in my constituency. I know, from talking to members of that forum, that they feel strongly that the network must be safeguarded.
I hope, for the sake of residents in my constituency, particularly on the Brocks estate, and for many others in Sutton and Cheam, that suburban post offices will continue to feature on the Government's agenda, along with those in deprived urban areas and rural post offices. I hope that the Minister can give us some reassurance on those points.
11.25 pm
The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Alan Johnson): I congratulate the hon. Member for Sutton and Cheam (Mr. Burstow) on securing the debate tonight. I have listened carefully to his speech, and welcome the opportunity to respond to the issues and the points that he raised. The House has not exactly been bereft of debates on the Post Office network—this is one of many to which I have responded, and I doubt whether anything that I say tonight will be fresh and new. However, it is important to emphasise the Government's position with regard to this important matter.
The concerns voiced by the hon. Gentleman centre on the future of the network and the move to the payment of benefits and pensions by automated credit transfer. He also made an important point about the suburban network, and I hope that I can give him some reassurance about that.
The future of the post office network is a matter of public concern in all communities, irrespective of whether they are urban or rural. The challenges facing the network are of interest to all of us. That was demonstrated on 12 April, with the presentation of a record-breaking petition to No. 10 Downing street, which contained more than 3 million signatures. In addition, the network has been extensively debated in the House. As the hon. Gentleman said, the focus of this concern is the progressive migration, over a two-year period, of state benefit payments to ACT as the norm.
The hon. Gentleman also made the point that the network has been declining for some years. He said that four Crown post offices were converted in his constituency. This Government, of course, placed a moratorium on Crown post office closures, so that we could have a proper appraisal of the system. I understand that an office that had been converted to sub-post office status in the high street in Sutton has now been re-converted to a branch office. That suggests that the review of the system has been fruitful. Indeed, in last year's White Paper, we said that 15 per cent. of all transactions will go through Crown post offices, so a flagship of Crown post offices will remain.
The harsh reality is that, despite its many strengths and its importance to the community, the network has not modernised sufficiently over the past 20 years to respond to, and keep pace with, social, economic and technological changes. The previous Government had a well-intentioned plan to computerise the network with the benefit payment card. It was a private finance initiative project. The key objectives of the contract were to automate the network and provide the Benefits Agency with a computerised service.
The contract was for only eight 5 years—it was never going to be a permanent solution. Shortly after we came into office, it was clear that the project had run into significant problems. By late 1997, the project was incurring substantial cost over-runs and would have come into service some three years later than planned.
We knew that we could not go on against that background. We concluded that changes had to be made, and took the tough decisions necessary to get that project back on track. Our decision was to get Horizon working as a simple public procurement, and that has been very
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successful. We are converting 300 offices a week. This huge network will be completely online and computerised by the spring of 2001.
The argument about ACT, as I have mentioned many times in the House, has been a constant problem. I said at the conference that the National Federation of Sub-Postmasters rallied in the early 1980s when the previous Government introduced ACT for the first time, and it rallied in the early 1990s when ACT was extended to cover other benefit payments. If we do not solve that problem, once and for all, in a way that suits the Benefits Agency, the network, the Post Office and sub-postmasters and sub-postmistresses, we will not have a lasting solution. The move to ACT is accelerating; 500,000 more people are voluntarily having benefits paid into ACT every year, and that number will grow as a new generation used to cashless pay reach pensionable age. We have to resolve that problem.
We must also ensure that the solution deals with how people access their cash once it has been transmitted by ACT. It would benefit no one if the Post Office ignored customer preferences, and the NFSP certainly does not believe that it would. The organisation is not comprised of luddites, and it has raised real concerns that we are trying to tackle constructively. The solutions that we have identified must concentrate on allowing people to access their cash in a modernised network that can thrive, rather than simply survive, clinging on by its fingernails, as has been the case for too much of the past. We need to change that for the 21st century.
The emerging vision that I unveiled at the NFSP conference contained three specific opportunities—in financial services, in e-commerce and in Government services. Important initiatives can be taken, and when the policy and innovation unit report is published shortly, I hope that that emerging vision will be one that both sides of the House can sign up to as a way forward for the Post Office.
On financial services, the Post Office has done well at developing new lines of business. Contracts with institutions including the Co-operative bank, Lloyds-TSB and, most recently, Barclays allow people to access their bank accounts through the post office network. I hope that the incentive of the Horizon automation platform, which reduces the cost to the banks of transactions made across post office counters, will encourage banks to extend that situation to cover many more accounts.
Our arrangements with the high street banks do not by any means cover the sizeable group of customers—three and a half million—who have no form of traditional bank account. We welcome the Post Office's work in developing a universal bank. In his Budget speech, my right hon. Friend the Chancellor invited the banks to work with the Post Office to offer not just a substitute distribution network, but a basic banking service to all.
A universal bank in partnership with the banks could help address the problems of financial exclusion. It would greatly reduce the number of people who do not have a bank account. More importantly, it would provide a post office-based solution, allowing a post office card to replace benefit books, allowing people to access bank accounts and pay bills—as many pensioners, particularly the elderly, like to do when they draw their pensions across post office counters. It could meet our clear pledge that, even after the move to ACT, any customer who

139
wants to access benefits or a pension across a post office counter in cash, undiluted by bank charges, should be able to do so. The Post Office is well placed to expand its role in financial services, both in social banking and as a substitute distribution system for the high street banks.
Despite the recent boom and almost immediate gloom in the dot.com sector, there is a wide consensus that e-commerce will be a major growth area over the next few years. The Post Office must think creatively about how to take advantage of the opportunities that that offers. Many people will order goods across the internet, but will not be at home to receive them. Post offices could become places where many customers can order and pay for goods over the internet, and where they can collect the products.
On Government services, the reach of the post offices, which are ubiquitous, makes the network a major national asset. Millions of people already see post offices as places in which to do Government business. There is potential to build on. We are also looking at the role post offices may be able to play in the Government's crusade to bring internet access to all by 2005.
The Government, the Post Office and sub-postmasters will need to work with the private sector, especially the high street banks, to turn that vision into a reality. We want Post Office management to forge a strong future in diversified lines of business. Some of that has started, but there is much still to do. We want rapid movement on that matter.
The contribution of sub-postmasters, which is recognised as one of the greatest strengths of the network, could be utilised more, so that sub-postmasters continue to provide the crucial service of running shops and post offices in many areas that have few or no other facilities. The dedication of sub-postmasters will be essential if we are to unlock and build on the potential of the network.
However, we in Government also have to play our part. We are already investing £500 million to computerise the network. The issues raised in the debate highlight the range of problems of managing and maintaining a retail network of more than 18,000 post offices.
The hon. Gentleman referred to North Cheam sub-post office, which unfortunately had to close on Wednesday because the temporary sub-postmaster had resigned. I am not sure why, but I am aware that sub-postmasters and mistresses resign for a range of reasons. Sometimes they want to retire and the post office is in their private home. Many sub-postmasters and sub-postmistresses—especially the elderly ones—are resigning as computerisation comes on line. However, whatever the reason, the Post Office goes to enormous lengths to keep a service running.
I assure the hon. Gentleman that I will ensure that every effort is made in that case. I am informed by the Post Office that it is intended to restore the service in north Cheam as soon as possible. I shall certainly keep an eye on the matter.
140
Although the Post Office network management might not get everything right all the time, they remain strongly committed to maintaining post office counter service provision wherever possible—often with considerable ingenuity; we should not allow ourselves to forget that.
I do not know where The Guardian reporter found the information in his first paragraph about lots of cash being put into inner-city and rural post offices. We included a subsidy clause in the Postal Services Bill, because, in a measure that will remain on the statute book for a generation, it would be remiss of us not to include at least a safety net, in case subsidy was necessary. As the hon. Gentleman was kind enough to mention, that is a clear demonstration of our determination to support the network.
No one wants subsidy to be the answer; we want transactions. We want the Post Office network to be a going commercial concern. We need to ensure that business flows across the counters in order to meet that objective.
However, we are committed to protecting and modernising the rural network. The reason for the emphasis on that network and the need for post offices in socially deprived areas is that, at present, those offices are cross subsidised within the network—more heavily used offices subsidise those that are used less frequently. That has been true for many years.
The focus on rural and deprived urban areas does not mean that we are not equally committed to the rest of the network. Indeed, we believe that there could be bigger and brighter post offices in suburban areas. The NFSP accepts that many post offices are not pleasant places to visit. We could improve the accommodation; this review offers us an important focal point.
We are looking to work with the NFSP and with the Post Office to reinvent and modernise the network. We are committed to ensuring convenient access to all post offices. We are prepared to define what we mean by a nationwide network of post offices—unlike the previous Government, who talked about achieving that while closing half the network. We are looking to define what is meant by such a network through access criteria.
I set out the Government's emerging vision for the network at the conference of the National Federation of Sub-Postmasters on 16 May and the performance and innovation unit report will be published shortly. It will provide the platform for us to take the vision forward, so that we have a network equipped for the 21st century and that is able to provide a secure future for sub-post offices and the communities that rely so heavily upon them. That includes post offices in Sutton and Cheam. They provide a valuable service and are part of the social fabric of this country. This Government are pledged to protect them.
Question put and agreed to.
Adjourned accordingly at twenty minutes to Twelve midnight.