Commons Sitting of 17 June 2002

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

    Military Police (Aldermaston)
    Mr. David Rendel: If he will make a statement on levels of overtime working by military police officers at AWE Aldermaston in the last 12 months. [58670]
    The Parliamentary Under-Secretary of State for Defence (Dr. Lewis Moonie): There are no military police officers stationed at AWE Aldermaston. However, Ministry of Defence police are stationed there, and during the calendar month of May 2002, 9,837 overtime hours were worked.
    Mr. Rendel: I hope that the Minister agrees that an excessive amount of overtime seems to have been worked at Aldermaston in recent years. Given what happened on 11 September last year and the extra concerns that people living around Aldermaston have that a similar attack might be launched against the site, I hope that the hon.
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    Gentleman will also agree that it is important that we reduce the amount of overtime being worked. If not, some of the people there, who are working almost double time in the most excessive cases, will not be fit to do the job of carrying a gun and guarding such an important site.
    Dr. Moonie: I agree with the hon. Gentleman that excessive overtime is undesirable. Overtime hours at AWE Aldermaston have traditionally been higher than the force average because of the underbearing of officers at that establishment. However, I am sure that he will pleased to know that I plan to post 31 recruits into that station, effective from 9 September 2002, joining four who were posted in recently. A further intake of recruits is scheduled for September 2002 and a number of those probationers are expected to be posted to AWE Aldermaston.
    Jeremy Corbyn: Has the Minister been able to make any assessment of the likely costs of overtime at the establishment if stories in The Observer yesterday are correct that a nuclear weapons factory is to be established at Aldermaston in the near future? If that is so, will there be a statement and debate in the House before such an important decision is taken?
    Dr. Moonie: I am happy to say that the statements were incorrect. Work is going on at Aldermaston, of which we have made no secret, to maintain the reliability of our nuclear deterrent, as we are faced with the fact that we no longer test these weapons. Anything else in the story was, I am afraid, entirely fanciful.
    Mr. Paul Keetch: Given the concerns raised by my hon. Friend the Member for Newbury (Mr. Rendel) about security at Aldermaston, can the Minister confirm that the reports raised in The Observer yesterday were not new but simply a rehash of what was already known? Given that the Government's current policy on the security of bases is to parcel out security away from the military police such as those who guard Aldermaston either to the military provost guard service

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    or private security companies, does the hon. Gentleman agree that that policy is now untenable? Is it not the case that the British people might begin to question the commitment of troops overseas in the war against terrorism if we cannot guarantee security at our own nuclear installations?
    Dr. Moonie: It is interesting that a party that gave us precious little help when we were trying to extend the powers of the Ministry of Defence police should now attempt to criticise us—on entirely spurious grounds, I may add—for the way in which they work. We need no lessons from the Liberal Democrat party nor, for that matter, from Greenpeace on the level of security that we maintain at our establishments—which, I can assure the hon. Gentleman, are robust.
    Mrs. Ann Cryer: Does my hon. Friend appreciate that many Labour Members will be disappointed by his comment regarding Aldermaston and further developments of nuclear weapons? Does he also appreciate that this is hardly the right message to send to Pakistan and India at the moment?
    Dr. Moonie: I point out again that there is no new development of nuclear weapons going on at Aldermaston. We are ensuring that our nuclear deterrent is reliable and capable of being deployed. That involves a great deal of careful work to ensure that there is no chance of having to go back to testing the weapons physically. I should have thought that my hon. Friend would agree with us on that point.

    Nepal
    Mr. Bill O'Brien: What discussions he had with the Prime Minister of Nepal on his recent visit to the UK on the question of military help to Nepal; and if he will make a statement. [58671]
    The Minister of State for Defence (Mr. Adam Ingram): Prime Minister Deuba of Nepal called on my right hon. Friends the Prime Minister and the Secretary of State for International Development and myself on 13 May. Mr. Deuba outlined the current situation in Nepal and said that poverty reduction was their overall priority, including health, education, and provision of water. He stated that Nepal needed assistance in three areas: economic development, security and the mobilisation of international support for Nepal. On the security front, it was acknowledged that Nepal needed help in logistics and communications.
    The Nepalese Prime Minister was advised that the United Kingdom will be hosting a conference in London this month, with the aim of bringing together the international community to agree a common strategy of support for Nepal. This will address security concerns as well as the political and developmental challenges facing Nepal.
    Mr. O'Brien: I thank my right hon. Friend for his reply. Nepal is a good ally of the United Kingdom—for many years, the sons of Nepal have been recruited into the Gurkha regiment and are now recognised as the finest fighters in the world. Nepal re-established its democracy in 1990. Does my right hon. Friend acknowledge that
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    during his visit to the UK, Prime Minister Deuba outlined the internal problems that Nepal is having with the Maoist terrorists and requested help in the form of training their forces as well as providing helicopters and other technical equipment? Does my right hon. Friend accept that much more needs to be done if we are to help Nepal defend its villages from terrorists? What more help can we give to ensure that democracy and freedom apply in all the villages in Nepal?
    Mr. Ingram: I thank my hon. Friend for that question. He is right to highlight the good support that we have received from Nepal and our good relationship with that country over many, many years. The Gurkha regiments have served with distinction in every theatre in which they have been involved, from the Falkland Islands to current operations in Bosnia.
    My hon. Friend asks what more can be done: in my answer, I set out the range of efforts that we are making. The intergovernmental and international conference later this month will consider additional ways in which we can give assistance to that troubled country in its efforts to take on the insurgents to whom he referred.
    Patrick Mercer: May I join the Minister in paying tribute to the record of Gurkha soldiers, in particular the Gurkha Rifles, especially in the light of the recent anniversaries of the triumphs in the Falklands? However, when Nepal is in such need of our help, will the Minister tell us why the first Gurkha reinforcement company has been disbanded, why the second one will be disbanded next year and why the third and final Gurkha reinforcement company will be disbanded the year after next?
    Mr. Ingram: I have set out all the areas in which we seek to give assistance to Nepal and, in terms of the strength of the British Army, they are kept constantly under review. I am happy to set out at length for the hon. Gentleman the reasons why those changes have taken place.
    Mr. Gerald Howarth: In the Minister's discussions with the Prime Minister of Nepal about possible military assistance to help to defeat the Maoist guerrilla campaign that seeks to destroy democracy in Nepal, did the Government again raise the question of the welfare of ex-British Army Gurkhas in Nepal? For example, did the right hon. Gentleman discuss how Britain might help to end the intimidation and extortion to which some of those loyal former servants of the Crown have been subjected by the Gurkha Army Ex-Servicemen's Association—a Marxist-Leninist organisation which speaks only for a small minority of former British Army soldiers and whose claim against the British Government for discrimination is being advocated by the wife of our Prime Minister?
    Mr. Ingram: On the latter point, the hon. Gentleman will be aware of the way in which members of this country's legal profession are allocated work. If he is asking for a change in that, he should be raising the matter with a different Minister—if that is his point of view—although I suspect that some of his hon. Friends may be somewhat reluctant to make a change.

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    In respect of the kernel of the hon. Gentleman's argument, that point diminished a good question. There are serious and important issues that we have to address and, yes, in passing, some of them were touched on by the Prime Minister—in relation to the in-country issues in respect of the Gurkhas who served with us with distinction. In my earlier response, I set out the various ways in which we are taking forward those matters and they may, of course, be raised at the intergovernmental international conference later this month.

    Aircraft Carriers
    Chris Grayling: If he will make a statement on the replacement of the Royal Navy's carriers. [58672]
    The Parliamentary Under-Secretary of State for Defence (Dr. Lewis Moonie): The CVF—carrier vessel (future)—project is progressing well and we remain fully committed to it as part of our extensive programme of new naval shipbuilding. It remains our plan to replace the existing Invincible class carriers with two new, larger and much more capable carriers that will enter service in 2012 and 2015 respectively. Risk reduction and design work on CVF is well advanced. Early next year, we expect to be in a position to select a preferred prime contractor from the two consortiums currently competing, and to approve investment for the build programme at the end of 2003.
    Chris Grayling: Does the Minister plan to sell the current HMS Invincible—perhaps to India—to help pay the bill, and if so. when?
    Dr. Moonie: Under current plans, Invincible will remain in service until at least 2010. I can assure the hon. Gentleman that no discussions have taken place with anybody about the sale of any of our carriers.
    David Cairns: May I draw my hon. Friend's attention to the bid by BAE Marine Systems to build the new carriers on the Clyde and, in particular, the envisaged use of Inch Green dry dock in Greenock? He will be aware that that is one of the most advanced dry docks and deep-water births in Europe and that it pioneered the welding together of mass hulls of ships in the early 1970s, with oil tankers. So may I tell him that, at Greenock, we have a readily available work force, the facilities and the experience, and all we need now are the orders?
    Dr. Moonie: My hon. Friend will know that I am well aware of the quality of shipbuilding available on the Clyde, particularly in his constituency. It is however still too early in the programme for us to assess the full impact that CVF will have on shipbuilding jobs; what I can say, of course, is that it remains a tremendous opportunity for shipyards throughout the United Kingdom.
    Mr. James Gray: The House will be very glad to hear the Minister's reassurance to my hon. Friend the Member for Epsom and Ewell (Chris Grayling) that he has no plans to sell. HMS Invincible to the Indians, or indeed to anyone else, but I am just a shade puzzled
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    by an article in The Sunday Times, dated 2 June. Under the headline "Aircraft carrier on sale to India", it went on to tell us that
    "the aircraft carrier, along with naval Sea Harrier jets to fly from it, is top of Delhi's…shopping list…
    MoD officials have discussed with their Indian counterparts the possibility of selling the ship, which would help to pay for Britain's two new replacement 'super-carriers'."
    That might just be a bit of froth were it not for the fact that it was written by none other than James Clark, the paper's defence correspondent, who, a few weeks previously, had been appointed as the new spin doctor in the Ministry of Defence. Will the Minister now care to tell the House whether or not he is correct in saying that he has no plans to sell Invincible, or whether his spin doctor is correct in saying that the Government do?
    Dr. Moonie: I have already set out the Government's position very clearly, and I am not used to having my word questioned in the House. All I can say to the hon. Gentleman, to try to lighten the blow, is that I am often puzzled by some of the stories that appear in The Sunday Times.
    Mr. John McFall: The Minister will be aware of the quality of the work force at the Clyde submarine base and the need to ensure the capacity of that base continues. Given that considerable changes have been taking place in the past few months and that the work force need to look forward to stability in the base's capacity, will he tell us how the contract for Astute class submarines will be awarded?
    Dr. Moonie: I am well aware of my hon. Friend's interest in such issues, but I am unable at present to give him any further enlightenment on the basing of the Astute class submarines.
    Mr. Edward Garnier: What will the replacement carriers be carrying?
    Dr. Moonie: Oddly enough, things that fly. The primary aircraft will be the future joint combat aircraft. The Lockheed Martin joint strike fighter has been identified as the aircraft with the best potential to fill that role. The ships will also carry maritime airborne surveillance and control aircraft and helicopters from all three services in a variety of roles.

    Pilot Recruitment
    Mr. Desmond Swayne: What recent progress he has made with recruiting additional pilots. [58673]
    The Minister of State for Defence (Mr. Adam Ingram):Armed forces' recruitment of pilots is such that, in financial year 2001–02, the recruiting exceeded demanding targets. We are on course to meet fully the pilot recruitment target for this year.
    Mr. Swayne: Why have the Government reduced the trained requirement for the Royal Air Force from 54,530 to 49,990 since the strategic defence review?
    Mr. Ingram: Of course, manning and training requirements are constantly kept under review. We face a

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    number of issues, one of which is, of course, recruitment. I have said in answering the hon. Gentleman's specific question—in which I would have thought he had an interest, but clearly not—recruiting is very high for pilots. We are addressing retention with a wide range of measures, and already the indications are that they will prove successful, but only time will tell just how successful.
    Angus Robertson: Will the Minister consider using additional resources, possibly raised from the commercial use of RAF bases, to help in the retention and training of pilots? Will he perhaps consider instructing RAF Strike Command to widen its ongoing feasibility study into this issue to include RAF Kinloss in my constituency? That would not only offer a possible new revenue stream to help in the retention and training of pilots, but boost desperately needed commercial landing options in the north of Scotland.
    Mr. Ingram: The hon. Gentleman will be aware that we are considering the use of such airfields, but the primacy would be in terms of strategic and military usage. It would be wrong to rule out any option that would enable best use of our existing assets, but that must not undermine or work against that which we ask our armed forces to deliver from those bases.

    A340 Air Tanker
    Mr. Ben Chapman: If he will make a statement on the A340 Air Tanker. [58674]
    The Parliamentary Under-Secretary of State for Defence (Dr. Lewis Moonie): The future strategic tanker aircraft is planned to replace our current air-to-air refuelling fleet. Two consortiums have submitted bids for this prospective private finance initiative project: AirTanker Ltd., which has proposed the use of Airbus A330 aircraft; and the Tanker Transport Service Company Ltd., which has proposed Boeing 767 aircraft.
    I can also announce to the House that having considered the progress made with both consortiums in contract negotiations, it is clear that more time will be required to complete these complex discussions. As a result, we have decided to delay introduction of the PFI service from 2007 to 2008.
    Mr. Chapman: My hon. Friend will understand that these are uncertain times for the aerospace industry. May I therefore express regret on behalf of my constituents who work at Broughton, however understandable the reasons for the delay in going ahead with the project? Will my hon. Friend tell me when he expects to make an announcement on preferred bidder status? Will he assure me that, when he examines the bids, he will consider value for money over the whole PFI period and not just the initial capital costs?
    Dr. Moonie: We are committed to pursuing a PFI solution to the FSTA requirement as long as it provides the required operational capability at best value for money. The project is currently in a competitive assessment phase. This is one of the largest and most innovative PFIs currently being considered by my Department, and it is small wonder, given its complexity,
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    that it is taking the companies bidding longer than we first expected to come forward with detailed proposals. I assure my hon. Friend, however, that we shall consider those very carefully, and that, whatever solution we arrive at to this requirement, we will ensure that it provides the best answer to our needs.
    Mr. John Wilkinson: May I point out to the Under-Secretary that new aircraft, in the form of the A330 200 series, would offer by far the best option, both industrially and technically, inasmuch as they would be new aeroplanes as opposed to refurbished old Boeing 767s? They are appropriate for the proven drogue system, with a drogue under each wing to refuel two aircraft at a time, and have a bigger fuel uplift, too. From every point of view, therefore, they would be the superior option.
    Dr. Moonie: The hon. Gentleman makes a fair point. What we are concerned with, however, is arriving at the best solution overall. The requirement will be intended to fly for something like 27 or 28 years. It is therefore absolutely crucial that we get it right before we embark on what, as I have said, will be one of the most expensive projects in which we have been involved.

    Sierra Leone
    Mike Gapes: What recent assessment he has made of the security situation in Sierra Leone; and if he will make a statement. [58675]
    The Minister of State for Defence (Mr. Adam Ingram): The security situation in Sierra Leone since the holding of credible and peaceful presidential and parliamentary elections on 14 May has been encouraging. Our forces have played an important role in restoring stability, through their programme of advice, training and support to the Sierra Leone armed forces and Ministry of Defence. There is much work still to do, however, if we are to achieve our objectives of developing a professional, effective and accountable armed forces and MOD, which are sustainable without substantial external assistance. The UK-led international military advisory and training team will, therefore, continue to help build the capacity of the Sierra Leone armed forces and MOD over the longer term.
    Mike Gapes: May I congratulate my right hon. Friend and his colleagues on the decisive action that our Government took two years ago to defend and secure democracy in Sierra Leone? May I also congratulate our armed forces on the work that they have been doing there? Will he indicate further how long it will take before we can be absolutely confident that this job is fully completed?
    Mr. Ingram: My hon. Friend is right to give plaudits to our armed forces. The United Nations force—UNAMSIL—has 17,500 men in the country and it has also played a role.
    We are only a month away from the elections that took place on 14 May and we have to make a proper security assessment. That is currently being done. The best outcome would be for Sierra Leone to become safe enough for us to seek a reduction in the number of our

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    forces and then seek their withdrawal. However, as I said, IMATT, which is British led, will continue its work in the longer term. Clearly, it will play a role in the key issues of rebuilding the Sierra Leone army and providing back-up to the MOD in that country.
    Hugh Robertson: Does the Minister agree with the assessment of many of those who have served in Sierra Leone that there can be no long-term settlement to the troubles of that country until all the diamond mines are returned to Government control? Does he agree with that assessment? If so, what are the British Government doing about it?
    Mr. Ingram: That question moves away from the military role that our armed forces and the MOD will play in all that. There are key components in making that country whole again and gaining control of one of the key—perhaps the key—drivers of the economy is paramount. We have to consider the way in which that can be best achieved.
    Mr. Bernard Jenkin: I am bound to say that the diamond mines have an impact on the security situation in Sierra Leone. They underline the heavy commitment that we may have to make if the situation in Sierra Leone deteriorates again.
    The Army's commitments remain heavy and yet there is growing speculation that the Secretary of State will shortly announce cuts in the target size of the Army. Will the Government take this opportunity to end the speculation and reaffirm their commitment to a fully trained Army strength of 108,500, as set out in the 1998 strategic defence review, so that we can fulfil commitments such as that in Sierra Leone?
    Mr. Ingram: We fulfil our commitments everywhere our people are asked to be deployed. I remind the hon. Gentleman that the leader of the Conservative party—when he had the role that the hon. Gentleman now undertakes—criticised what we were doing in Macedonia. He said that it was a step too far and that we could not deliver our objectives in 30 days and get out within that time frame. We did that, because of the capabilities and the planning of the military chiefs who deploy our people. We are more than satisfied that we can continue to meet our commitments. Clearly all commitments and the capability in reaching strength have to be kept under review, because we have to seek to meet the targets that we set. That is our objective.
    In relation to the hon. Gentleman's first point, I answered the question about the security element of the diamond areas—not diamond mines—and I said that that was a key component. He clearly did not listen to my answer.
    Mr. Jenkin: I remind the Minister that the original commitment to Sierra Leone was for a few months but, years later, we are still there. He also declined to recommit to the SDR target of 108,500 and, in fact, the figures published at the end of last month show an Army trained strength of only 100,900 and that the Government are working to a reduced target of 107,900. Why have the Government secretly abandoned the 108,500 target set in
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    1998 and how will he achieve any target given that Labour has managed to add a net total of merely 30 men to Army manpower over the past four years?
    Mr. Ingram: A number of points are raised within that question. I know that it is not the place of the hon. Gentleman to give answers at the Dispatch Box, but if he is suggesting that we should not have continued to deliver in Sierra Leone because of all the other elements that he brought into play—the implication of his question is that we should withdraw because of manning strengths or if the situation deteriorates—I would like to debate that matter with him. There is no SDR target with the figure that he quoted. He has got that wrong as well.
    Mr. Jenkin: The adjutant-general told the Select Committee on 1 November 2000:
    "The figure we are working to is 108,500".
    The Minister is saying that that figure has been abandoned. How can we maintain operations in places such as Sierra Leone when the Government are quietly abandoning their recruitment and retention targets?
    The 1998 strategic defence review said:
    "Overstretch is trying to do too much with too little manpower…additional pressures from persistent overstretch contribute to higher exit rates from the Armed Forces."
    It promised
    "to improve recruitment and retention so that our units are properly manned",
    boasting:
    "That era of decline is behind us."
    Is it not the truth that the Government have completely failed to deliver Labour's promises on recruitment and retention in the armed forces? Overall manning is being cut; defence equipment programmes are being delayed or cancelled; ships are being scrapped or sold; Tornado and Sea Harrier quadrons are being—
    Mr. Speaker: Order. The question is too long.
    Mr. Ingram: I do not know which question the hon. Gentleman wants me to answer—[HON. MEMBERS: "All of them."] Well, I shall try to do that, but certainly not at the Dispatch Box now.
    Mr. Speaker: Order. Just answer the question on Sierra Leone.
    Mr. Ingram: The hon. Gentleman asked many questions; I am not sure, however, that there was one on Sierra Leone. He just kept dropping in those two words to demonstrate a relationship with his set question.
    The figure that the hon. Gentleman quoted on the SDR was a notional figure. It is not the figure on which the working assumption has been based. If he reads parliamentary answers to parliamentary questions, he will discover the precise figures. I cannot give them off the top of my head, but I shall write to him with all the information that is on the public record.
    The hon. Gentleman did not say—I never expected him to—what he would do in Sierra Leone. As I understand it, he is saying that there should be a very considerable increase in Tory defence expenditure. He has not given a figure, however, and perhaps he can help us on that.

    NBC Missile Threat
    Mr. Tony Lloyd: What recent assessment he has made of the threat to the UK of a missile strike containing (a) biological, (b) chemical and (c) nuclear warheads. [58678]
    The Secretary of State for Defence (Mr. Geoffrey Hoon): We take very seriously the ambitions of certain states to acquire weapons of mass destruction and the means to deliver them. We recognise that some states of concern may already be capable of targeting United Kingdom forces deployed in areas close to them and of targeting the territory of some of our friends and allies.
    However, we assess that there is currently no significant threat of a ballistic missile strike against the mainland of the United Kingdom delivering biological, chemical or nuclear warheads, but we do continue to monitor developments very closely, particularly as they might affect deployed British forces.
    Mr. Lloyd: Will my right hon. Friend confirm the long-standing view of successive British Governments, both Conservative and Labour, that we would not use nuclear weapons in a pre-emptive strike? Does he agree that as far as biological and chemical weapons go, the establishment of a proper control and inspection regime should be at the top of the world's agenda and that those countries, such as the United States, that sabotage that kind of regime put not only themselves at risk, but the rest of us as well?
    Mr. Hoon: I can confirm that there has been no change in the essential rules that we follow on the use of nuclear weapons. I have made it clear before how important it is to recognise that they would be used only in what are described as extreme conditions of self-defence. I want to emphasise that it does not help the deterrent effect of nuclear weapons to spell out precisely what those circumstances might be. I can stress, however, that nuclear weapons would be used proportionately and consistently with our obligations in international law.
    Mr. Andrew Robathan: Given the historic agreement between Russia and NATO, does the Secretary of State support the US decision to withdraw from the anti-ballistic missile treaty last December, or does he support the Labour Members who have been criticising it so much?
    Mr. Hoon: As I have consistently said to the House, the ABM treaty is a matter between the parties: the United States and, formerly, the Soviet Union, now its successor state, Russia. In those circumstances, it is not a matter for the British Government to make observations about the appropriateness or otherwise of that treaty having come to an end. However, the fact that there is now an agreement to effect a very substantial reduction in the offensive weapons systems available to both Russia and the US must be cause for congratulation, and it is a great success.
    Mr. Malcolm Savidge: Both the MOD's White Paper and the national intelligence estimate to the US Senate conclude that the missile threat is very remote compared with the threat posed by smuggled
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    weapons of mass destruction. Our Chief of the Defence Staff and his predecessor are among the many experts who have expressed doubts about missile defence. Does my right hon. Friend agree that it would be wise to base British defence policy on military intelligence, on intelligence in a broader sense and on British interests, and not on a desire to appease the obsessions of the US Republican hawks?
    Mr. Hoon: If my hon. Friend was referring, as I think he was, to the prospect of the United Kingdom becoming involved in missile defence, I am sure that he knows my answer better than I do. For the avoidance of doubt, I shall repeat it: we have not been asked to participate in any such system, and unless and until we are, our position remains that we wait to see what system the US decides on.
    I do not think that my hon. Friend's initial analogy is appropriate. Even if I accepted his argument as being true, it is not appropriate to say that simply because there is a greater threat, we should avoid taking defensive measures against the lesser threat.
    David Burnside: The Secretary of State will agree that the assessment of any threat to the United Kingdom from any source depends heavily on the competence of our intelligence services—MI5, MI6 and our Army special forces. Is he aware that a deliberate black propaganda campaign is being carried out by a number of newspapers and by a television programme, to be shown later this week, to blacken the reputation of special forces who have served in Northern Ireland—the same special forces who served in Afghanistan? What is the Ministry of Defence doing in a proactive, positive way—
    Mr. Speaker: Order. The hon. Gentleman's question is far too wide.

    Form 680 Procedure
    Norman Lamb: If he will make a statement on the F680 procedure. [58679]
    The Parliamentary Under. Secretary of State for Defence (Dr. Lewis Moonie): The MOD form 680 procedure allows defence exporters voluntarily to seek preliminary Government advice at the marketing stage on the likely prospects for eventual approval of an export licence. The procedure is also the mechanism by which the MOD authorises the release of United Kingdom classified military information in support of marketing activity.
    Our export controls are greatly strengthened if our exporters market and promote their products responsibly and have the information necessary to do so. The procedure does not exempt industry from the need to apply for an export licence, but it does provide an indication of whether a licence is likely to be issued. It saves industry time, money and potential embarrassment in pursuing export prospects for which a licence is not likely to be issued. Licences are still decided on a case-by-case basis as each application is submitted.
    Norman Lamb: May I ask the Secretary of State about the use of this procedure in relation to the sale of the

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    air traffic control system to Tanzania? The preliminary clearance under the procedure was given in August 1997 without any consultation with, or even the knowledge of, the Department for International Development. On the basis of that preliminary clearance, BAE Systems entered a binding contract with the Tanzanian Government; Barclays provided a soft loan; approximately $15 million was paid over and most of the equipment was built, thereby presenting the Secretary of State for Trade and Industry with a fait accompli when it came to deciding the export licence application. Is that how the F680 procedure is supposed to operate, and if so, is not there a need for urgent reform? Does the right hon. Gentleman agree that preliminary clearance—
    Mr. Speaker: Order.
    Dr. Moonie: The assessment took place in July 1997, as the hon. Gentleman said. Sustainable development was not a specific factor to be taken into account when considering F680 applications, although the impact on the economy of the recipient country was. Anything else in his question is a matter between the company that sold the equipment and the Tanzanian Government who bought it, not a matter for the Ministry of Defence. As I said, we do not give clearance: we give guidance.

    Wind Farms
    Ms Julia Drown: If he will make a statement on the grounds on which his Department opposes wind farm planning applications. [58680]
    The Parliamentary Under-Secretary of State for Defence (Dr. Lewis Moonie): Every proposal is considered individually. The criteria for that case-by-case consideration is that of the effect of the development on the ability to train our pilots safely, and on operational capability. The Ministry of Defence is also mindful of the potential impact on microwave link communication and Met Office radars.
    The presence of wind turbines in most areas of the United Kingdom would present no difficulty to low-flying aircraft, and those and other naturally tall structures are taken into account as part of routine planning. In certain circumstances, wind turbines have the potential to affect radar adversely. Research is currently under way with the Department of Trade and Industry into the impact of wind farms on radar.
    The three specially designated tactical training areas are located in central Wales, northern Scotland and the border area of northern England and southern Scotland. Within those areas, military fast jets may fly at 100 ft. There are clearly specific considerations to be taken into account in those areas.
    Ms Drown: I thank the Minister for that reply. Whereas the Ministry of Defence has objected to nearly half the applications for wind farms in this country, there are 6,000 wind farms in Denmark, none of which has been objected to on the ground that radar might be interfered with. Given that the Government need to increase renewable energy drastically if we are to meet our Kyoto
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    targets, will he try to learn lessons from the Danes so that the Ministry of Defence is not such an obstruction to the Government meeting their environmental targets?
    Dr. Moonie: I am not sure about lessons from the Danes. One lesson that I might take from them is that they build their windmills in flat areas similar to the countryside around Swindon rather than on hill crests in Scotland, where they would impinge on the environment in which I like to take my leisure.
    We give careful consideration to such developments and we do not object to proposals lightly. In fact, we are carrying out further research to see whether we might narrow the areas that give rise to objections. However, I repeat the truism that in low-flying tactical training areas, where aircraft fly as low as 100 ft, structures that may be 200 or 300 ft high are not likely to be welcome.
    Mr. Henry Bellingham: Is the Minister aware that aircraft, especially from RAF Marham, regularly fly very low over the north-west part of my constituency and across the Wash? Is he aware that there is a planning application for a number of wind turbines onshore, in the area around Hunstanton, and that another has been submitted for 60 turbines offshore in the Wash, very near the RAF bombing range? What is his view, especially on the latter application and its potential effect on the viability of that bombing range?
    Dr. Moonie: I cannot say that I have looked into the bombing range, although given the number of precision munitions that we buy nowadays, we might be able to build closer to it than we could in the past. Of the 18 offshore applications received so far, we have objected to five. That shows that we take seriously our role as a Government who are trying to support renewable energy.

    NATO-Russian Relations
    Hugh Bayley: If he will make a statement on the relationship between NATO and Russia. [58681]
    The Secretary of State for Defence (Mr. Geoffrey Hoon): Last month saw an historic transformation of the NATO-Russia relationship, with the first meeting at the Rome summit of the new NATO-Russia Council. That is a major step towards the alliance's long-standing goal of building a secure, co-operative and democratic Euro-Atlantic area. We welcome the very positive approach that has been adopted by Russia in establishing the NRC, and all allies look forward to working with Russian colleagues as equal partners in areas of common interest.
    Hugh Bayley: I welcome closer co-operation with Russia on security matters, but I have two questions for the Secretary of State. If Russia were to be attacked by another country, would the NRC be convened immediately, and what obligations, if any, would NATO have to go to Russia's defence?
    Mr. Hoon: There is no specific agreement to cover either of those eventualities; I can see no specific reason why it would be necessary to convene an NRC meeting in the event of Russia being attacked, but if the existing members of the council judge that useful and appropriate,

    15
    that could well occur in appropriate circumstances. Similarly, the article 5 guarantee only affects members of the NATO alliance, and so does not apply to the NATO-Russia Council.
    Dr. Julian Lewis: Clearly, the warming of relations between Russia and NATO is critical at a time when we face the threat of international terrorism on an unprecedented scale. However, does the Secretary of State agree that it is also important to remember that NATO is first and foremost a military alliance? While welcoming former adversaries into association with NATO, we must also bear it in mind that, should democracy in Russia take a backward step, our arrangements should not compromise the ability of the original NATO countries to defend themselves.
    Mr. Hoon: That must be right. However, it is equally right to pursue the opportunity for closer co-operation between NATO and Russia, not least because it flowed from the appalling events of 11 September. Specifically, there is an agreement to discuss techniques and measures to deal with global terrorism, which must be welcome to all concerned.
    Mr. John Smith: Given the formation of the NATO-Russia Council and the likelihood of a large increase in NATO membership at the Prague summit at the end of the year, has my right hon. Friend made an assessment of the need to change the decision-making structures of NATO in the interests of security and military efficiency?
    Mr. Hoon: NATO's specific decision-making structures must remain a consensus of all member states. However, the United Kingdom strongly supports the need to look again at the way in which NATO reaches its decisions and the alliance's bureaucratic supporting structure. That should follow any enlargement, should it occur at Prague.

    Defence Diversification Agency
    Mr. Simon Thomas: What opportunities he has examined for a future role for the Defence Diversification Agency at Aberporth. [58682]
    The Parliamentary Under-Secretary of State for Defence (Dr. Lewis Moonie): The Defence Diversification Agency has held a number of discussions about its role at Aberporth, where it currently provides a part-time technology diversification manager. The post is funded by the Welsh Development Agency, which recently invited us to make a proposal for expanding the service, as we shall now do.
    Mr. Thomas: I thank the Minister for his reply. He will know of the difficulties caused by the withdrawal of funding for MOD apprenticeships at Aberporth earlier this year, but he may not be aware of the threat to 450 jobs at Dewhurst in Cardigan. Does he therefore agree that the progression of the Aberporth scheme under the technology diversification manager is essential to realise its assets and that the appointment of a full-time manager would help enormously in that task? Will he work with
    16
    QinetiQ, the private company, and his colleagues in the Wales Office to realise the aim of diversification and new technology jobs at Aberporth?
    Dr. Moonie: I pay tribute to the interest and application that the hon. Gentleman has devoted to the issue as the local Member. An approach by the Welsh Development Agency to the Defence Diversification Agency indicates that the organisation is held in high regard locally. Although the DDA has not been operational for long, the signs are that it will be remarkably successful in bringing technology into the MOD and spreading it out. We will take every possible step to ensure that the proposal proceeds.

    Middle East
    Mr. Andrew Stunell: What recent assessments he has received of the availability of UK ground forces for operations in the middle east. [58683]
    The Secretary of State for Defence (Mr. Geoffrey Hoon): We have long recognised that our national interests are directly affected by events right across the middle east. We therefore continue to place high priority on our ability to project and sustain power in the region. As part of its routine planning work, the Ministry of Defence keeps a range of military options under review. Exercise Saif Sareea 2 in Oman towards the end of last year, for example, clearly demonstrated our ability to deploy UK ground forces over long distances and to sustain them there.
    Mr. Stunell: May I direct the Secretary of State's attention to Iraq? Is he aware that US officials are now saying that the air strikes in the no-fly zone are no longer primarily aimed at humanitarian objectives, but are directed at opening up the capacity for more widespread bombing in Iraq? Bearing in mind the US President's policy of taking out Saddam Hussein, can the Secretary of State say whether UK forces are to be deployed in pursuit of that policy?
    Mr. Hoon: I do not accept the hon. Gentleman's premise. The air strikes are self-defence against attacks on our aircraft and on coalition aircraft patrolling the no-fly zone, so their primary purpose is to defend aircrew and their aircraft against those attacks. The humanitarian purpose of having planes patrolling the no-fly zone continues.
    Mr. Brian Jenkins: May I direct my right hon. Friend's mind to the situation in the middle east regarding Palestine and Israel? If British troops are to be used in some form of peacekeeping force in that situation, will he give an absolute assurance that they will go in only with a United Nations mandate and to uphold United Nations resolutions?
    Mr. Hoon: In order for there to be a peacekeeping force, there has to be peace. I assure my hon. Friend that the United Kingdom Government will continue their efforts to bring about a peaceful situation in that difficult part of the world, but until that situation arises, his question is somewhat premature
    Mr. Mark Prisk: In the event of a deployment in the middle east, would British troops, like our American allies, enjoy the protection of theatre missile defence systems?
    Mr. Hoon: The hon. Gentleman deliberately keeps his question as vague as possible. He refers to a deployment in the middle east, which is a very large region. Of course, as no theatre missile defence system is readily available to any forces deployed anywhere in that region, I can only say that that would not yet be available to the United Kingdom.

    Equal Opportunities
    Fiona Mactaggart: If he will make a statement on equal opportunities in the armed forces. [58684]
    The Minister of State for Defence (Mr. Adam Ingram): A new diversity policy has recently been agreed for the armed forces. The policy seeks to build on existing equal opportunities policies and practices. The aim is to create an organisational culture that values individuals from diverse backgrounds, treats all personnel fairly and with respect, and recognises the importance of their contribution to operational capability.
    Fiona Mactaggart: Did my right hon. Friend see any black faces during the trooping of the colour ceremony? I am afraid that I did not, which made me anxious that it is possible that the elite regiments of the British Army are failing to recruit from all the communities that make up Great Britain. If that is the case, what action will he take to ensure that every Briton has an equal chance to be a soldier in every regiment of our armed forces?
    Mr. Ingram: Unlike my hon. Friend, I did not see the trooping of the colour, but perhaps I should explain why: I was in the Falkland Islands representing Her Majesty's Government at the liberation day commemorative parade in Port Stanley, where the armed forces were given the freedom of the islands. I will try to seek a specific answer to her question and find out whether people from the ethnic communities were in the parade but not shown on television, but I think that the implication of that question is a slur on all the efforts that have been made not only by the Government, but by all armed forces representatives who seek strenuously to encourage an increase in recruitment from the ethnic communities in this country. Indeed, the targets that we have set are very challenging, and although we have not met them, the progress is very encouraging indeed.
    Mr. Andrew Robathan: May I assure the Minister that there are black faces in all the regiments of the Foot Guards—or certainly most of them? I know because I have seen them. For the avoidance of doubt, will he reaffirm that the important thing about the armed forces is that they are good at defending this country, and not that somebody is ticking off the number of people with black faces or brown faces, or whatever other sort of people there might be?
    Mr. Ingram: I agree with the hon. Gentleman's underlying view. I think that we should view the armed
    18
    forces in a holistic way, in terms of what they are asked to do and the way in which they deliver. We ask a lot of them and they deliver to a very high extent, irrespective of their ethnic background.

    Afghanistan
    Ann Clwyd: Whether the international security assistance force has helped with humanitarian aid missions in Afghanistan; and if he will make a statement. [58685]
    The Secretary of State for Defence (Mr. Geoffrey Hoon): The primary role of the international security assistance force—ISAF—is to help the Interim Administration to maintain security in Kabul and its surrounding areas, but national contingents within ISAF have also been involved in a number of humanitarian projects. United Kingdom service personnel, in conjunction with the Department for International Development, have contributed to the rebuilding of Kabul's education system through helping with repairs to its schools. ISAF has also on occasion responded to critical emergencies to help to save lives. There has been no expansion in ISAF's mission as defined in the authorising United Nations Security Council resolutions.
    Ann Clwyd: As my right hon. Friend knows, the security situation inside the country is worrying many people, especially as reports from Human Rights Watch and others say that troops attached to the warlords are running wild around the country, creating a climate of fear and instability. As peace is very tenuous in Afghanistan, many people believe that it is important that disarmament take place as soon as possible and that ISAF's capability be expanded. That was the view of the Government, and they argued in favour of it. Is it still possible that ISAF's role can be extended outside Kabul into the rest of the country so that the peace that exists there now, slight though it is, can be strengthened?
    Mr. Hoon: It is important to present a balanced picture of what is happening in Afghanistan. Although my hon. Friend is right to draw attention to tensions caused by the continuing existence of well-armed rival factions, it is equally important to put into the balance the fact that there is an extremely successful Loya Jirga process that has built on efforts right across the country—that is, regional meetings ultimately leading to the present meeting in Kabul. Informed observers tell me that that demonstrates the Afghan people's determination to rebuild their country and to take the opportunity that has been provided to them.
    I do not particularly recognise my hon. Friend's description of the situation around the country, but she is right to draw attention to the need to continue to have regard to it. I gave examples of where ISAF has, through its national contingents, operated outside Kabul, and I am sure that in such humanitarian circumstances that will continue.

    QinetiQ
    Mr. Peter Luff: If he will make a statement on progress on the privatisation of QinetiQ. [58686]
    The Parliamentary Under-Secretary of State for Defence (Dr. Lewis Moonie): Since the vesting of QinetiQ

    19
    as a company on 1 July last year, work has concentrated on preparing the company for sale, options for which were through flotation or strategic partnership. Although flotation had always been our preferred route, following a comprehensive review of the available options for the transaction route and timing in conjunction with specialist advisers and QinetiQ's senior management, we decided that the strategic partner route offers the best potential for a transaction in 2002, offers value to the taxpayer and meets our objective of a successful public private partnership. I informed the House of that on 6 March.
    Mr. Luff: May I seek an assurance from the Minister that in the run-up to privatisation the Government are not seeking to maximise the short-term value of the company's property portfolio? Specifically, will he assure me that he is putting QinetiQ under no pressure whatsoever to sell land at Throckmorton to the Home Office for use as an asylum accommodation centre? That would be likely to prejudice the site's long-term value as it develops into a science park, following the great success of the science park at Malvern.
    Dr. Moonie: On the hon. Gentleman's general point, I assure him that a strategic partner such as we envisage would work closely with QinetiQ and contribute significantly to growing the overall value of its business, from which the taxpayer would benefit through the Ministry of Defence's initial retention of a significant financial interest in the company. The MOD will also retain a special share as a means of protecting United Kingdom defence and security interests.
    On property, the management of the property portfolio is a matter for QinetiQ. I assure the hon. Gentleman that there has been no pressure from my office, nor, to my knowledge, from any other in the Ministry of Defence, as regards any sale prospect.

    Brigadier Roger Lane
    Mr. Harold Best: If he will make a statement on the circumstances surrounding the transfer of Brigadier Roger Lane to other duties. [58687]
    The Secretary of State for Defence (Mr. Geoffrey Hoon): The decision that Brigadier Jim Dutton should succeed Brigadier Roger Lane as commander 3 Commando Brigade in April 2002 was taken by the First Sea Lord in July 2001, as part of the normal appointing process for senior officers in the naval service. Ministers were not involved and would not expect to be because it was a routine changeover at one-star level.
    Brigadier Lane was in command of operations in Afghanistan in April 2002, and the Chief of the Defence Staff and the First Sea Lord therefore decided that the planned handover should be delayed. It will now take place after the operations have been completed.
    I retain complete confidence in Brigadier Lane.
    Mr. Best: If the succession to Brigadier Lane was conducted in the manner described, why does my right hon. Friend believe that the media made such a fuss?
    Mr. Hoon: That is clearly a matter for them, but I was surprised by the story that began the so-called controversy. It suggested that I faced mounting pressure to sack the Royal Marines commander in Afghanistan. That could not have been true because there was no such pressure. At least, if it existed, I was not aware of it.
    Mr. Geoffrey Clifton-Brown: Why did the Secretary of State tolerate a situation whereby officials in his Department were criticising a serving officer, who, as the right hon. Gentleman well knows, has no opportunity to answer any criticism? Will he ensure that that never happens again while he is in charge?
    Mr. Hoon: Let me make it clear that no Minister in the Ministry of Defence tolerates any such briefings by officials in the Department. If the hon. Gentleman has any specific examples of such briefings, I assure him that I shall investigate them fully if he makes them known to me.
    Hugh Robertson: On a point of order, Mr. Speaker. I wish to correct the misapprehension given by the hon. Member for Slough (Fiona Mactaggart)—
    Mr. Speaker: Order. The hon. Gentleman cannot extend Question Time by raising points of order.

Orders of the Day
  Enterprise Bill
    2ND ALLOTTED DAY
    As amended in the Standing Committee, further considered.
    2ND ALLOTTED DAY
      Schedule 13

        LISTED DIRECTIVES
        3.32 pm
        The Parliamentary Under-Secretary of State for Trade and Industry (Miss Melanie Johnson): I beg to move amendment No. 380, in page 239, line 40, at end insert—
        '8A Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market ("Directive on electronic commerce").'
        Mr. Speaker: With this it will be convenient to discuss the following: Amendment No. 195, in clause 204, page 147, line 4, after '(2)', add 'or (2A) or (2B)'.
        No. 196, in page 147, line 26, at end add—
        '(2A) An act or omission or course of conduct falls within this subsection if it amounts to the abuse by the person in question ("the supplier") of his superior knowledge or bargaining strength so that he:

        (a) unfairly induces consumers to enter into transactions which are not the result of free and informed decisions; or

        (b) unfairly hinders consumers from enforcing rights under any consumer transaction.

        (2B) In considering whether an act, omission or course of conduct amounts to an abuse under subsection 2A, the court shall take into account all the circumstances, including the nature of the goods or services in question, the nature and extent of any commitments undertaken by the consumers in question and any lack of good faith on the part of the supplier, and the court may have regard to:

        (a) any representation made by the supplier, or failure to disclose information, which unreasonably prevents consumers from making adequate price or value comparisons between competing suppliers;

        (b) any exploitation by the supplier of consumers' inability to make free and informed decisions, or to enforce rights under contracts, because of physical or mental infirmity, inability to understand the language of the transaction or other vulnerability;

        (c) any failure by the supplier to comply with a consumer code of practice (as defined in section 8(4) of this Act) which he claims to follow;

        (d) any act or omission by the supplier which causes any unreasonable expense of time or money by consumers pursuing legitimate complaints or rights under contracts entered into with the supplier; and

        (e) any failure to keep consumers reasonably informed about matters relating to a contract for supply of services, or which might affect a decision whether or not to change suppliers.'.

        Government amendment No. 375.
        Amendment No. 373, in clause 208, page 150, line 18, after 'a', insert 'domestic or a'.
        Government amendments Nos. 376 to 379.
        Miss Johnson: Consumer protection, apart from consumer safety in relation to goods, is a devolved matter
        22
        in Northern Ireland. The Belfast agreement gives the Northern Ireland Assembly the authority to pass primary legislation in Northern Ireland on devolved matters, subject to the Assembly's option to seek to include Northern Ireland provisions in United Kingdom-wide legislation, especially on devolved issues when parity is normally maintained.
        The option was discussed in the Northern Ireland Assembly on 5 June when the Assembly agreed the motion:
        "That this Assembly endorses the principle of extending the consumer protection measures in the Enterprise Bill to Northern Ireland".
        The Assembly agreed that such an extension is the best way to ensure that Northern Ireland consumers are not disadvantaged through their standards of protection when compared with consumers in England, Scotland and Wales.
        Clause 273 means that part 8 already extends to Northern Ireland, but amendments Nos. 375, 376 and 379 are necessary to make appropriate provision.
        I shall not go into detail about the amendments unless hon. Members wish me to do so. Amendments Nos. 375, 376 and 379 apply to Northern Ireland. The others are much more technical, and I do not believe it is necessary to go through them unless hon. Members seek clarification.
        Mr. Nigel Waterson: I am grateful to the Minister for the quick guide to Government amendments. I agree that they are either consequential and minor or have the effect that she described. Amendment No. 378 is significant because it updates the definition of an associate. She was good enough to write to me about that and explain the reason for it. We therefore have no difficulty with it. I shall leave Liberal Democrat Members to speak about amendment No. 373. I principally want to speak about amendments Nos. 195 and 196. Unless the Minister has a concession up her sleeve, I intend to press amendment No. 196 to a Division.
        Consumer protection is very much Tory territory. It was mapped out by the Conservative Government in the 1970s, and in particular by the then Sir Geoffrey Howe, in the fair trading legislation of that time. I even played a modest walk-on role, by helping to write a pamphlet, published in 1972, called "Square Deal for Consumers", when I was a very young, obscure, research assistant. Now I am an equally obscure middle-aged Front-Bench spokesman, and it is amazing to see what has happened in the intervening 30 years—except to my career, of course.
        The principle behind our legislation in the 1970s was clear, and the view of our party has not changed since then. It is that consumers do best when markets are working properly and fairly. Not even Adam Smith took the view—although it is often ascribed to him—that markets could be completely unregulated. That translates neatly into my party's current approach, which is to try to help the vulnerable, right across the policy spectrum. In this instance, the vulnerable are consumers. That is in contrast to this Government's actions, which are those of a party dedicated to helping not the vulnerable but its cronies and its donors. We dealt with that matter to a great extent on Thursday in the context of the Express Newspapers Group takeover, however, and I do not wish to reopen that discussion today.

        23
        The problem is that we have moved on since the 1970s. The need for consumer protection has moved on as well, and it keeps changing. That is why we are rightly revisiting the fair trading legislation, and why the Government are, sadly, missing this moving target. We heard many examples of this in Committee, but I shall resist the temptation to return to them on Report. I shall, however, cite just two which are indicative of the evidence that we have received from the National Association of Citizens Advice Bureaux, the National Consumer Council, the Consumers Association and many other organisations, about the scams and abuses that our constituents are having to deal with in the early part of this century as opposed to the 1970s.
        One good example is so-called holiday clubs. The abuse of time-shares became apparent and was tackled some years ago. That is why many of the same personalities are now involved in so-called holiday clubs. As an observer of these matters, I find it difficult to see the difference between the two, although some of the current literature supporting holiday clubs carries a large disclaimer on the front saying, "This is not a time-share". But, of course, in many ways, they are.
        Many of the abuses and many of the personnel have been carried forward from the old time-share cons to the so-called holiday clubs. In the last few weeks alone, we have read of one fraudster involved in time-shares and holiday clubs who had to pay some £36 million in compensation to his victims, and of another who was recently brutally murdered—or committed suicide, depending on one's view of events—in Spain. In that example, the law has slowly caught up with time-shares, only to find that these activities are now carrying on under a different name, largely outside the scope of the law. Moreover, I do not believe that they will be affected by the provisions in the Bill.
        Another good example, of which we heard evidence in Committee, is high-pressure sales techniques in people's homes—often those of the elderly and frail. Age Concern produced an excellent report on this issue recently. The existing rules can easily be subverted by an individual being manoeuvred into inviting a salesman to visit them in their own home. In that way, the requirement for a seven-day cooling-off period and other regulations that would normally apply can be avoided. We heard an example of a lady who had had a salesman sitting in her home for five hours until she eventually signed on the dotted line to buy a very expensive orthopaedic chair that she probably did not need in the first place.
        There are various ways of approaching this matter to ensure that the Bill will bite on these and the many other abuses that we debated in Committee. In Committee I tabled amendments Nos. 46 and 47, which were subtly different from these amendments but were part of the attempt to establish a general duty not to trade unfairly. As I think I conceded at the time, the terms of those amendments were quite wide; that is why we have now tabled amendments Nos. 195 and 196.
        We must strike a balance between ensuring that there is some predictability, so that burdens are not placed on reputable businesses, and making the provisions flexible enough to catch the fraudsters and con artists who move on rapidly when the law is changed£as has happened in
        24
        the case of time-shares—to another scam that is subtly different but outside the law. If we continue along the road that the Government seem intent on taking, the law will always trail behind some of the cleverer fraudsters.
        In its briefing for the Bill, the Confederation of British Industry made clear its opposition to a clause providing a general duty in regard to unfair trading. It felt that such matters should be clearly identified and defined. It referred to discussions taking place in the European Union, with the aim of establishing a pan-European approach. It said:
        "This has been criticised by the CBI and other business associations across other Member States as raising many practical and legal issues. It is premature to be considering such a clause in the context of national legislation at this stage, when there is wide ranging debate on the issue in the EU."
        We rely very much on the views of the main consumer protection organisations, however—particularly the National Consumer Council, to which I pay tribute for its substantial efforts in briefing, I am sure, not just the Opposition but the Government at both ministerial and official levels, in an attempt to deal with the problem. If we do not deal with it, we shall be passing legislation—with the best intentions in the world; I do not question the Government's intentions for a moment, at least in regard to this part of the Bill—that will not make life any better for the victims of scams.
        The National Consumer Council thinks it important
        "to stress the need for some flexible legislation to deal with new unfair trading practices as they emerge, particularly as Part 2 of the Fair Trading Act is being repealed in Clause 10 of this Bill."
        It has taken on board some of the points made in Committee on the earlier, more broadly drafted amendments. I suppose that that is how the system should work, ideally. It wants the new amendments
        "to demonstrate that there is more than one way to produce a generally-worded, open textured approach to achieve a 'general duty'."
        It says that the amendments
        "use the concept of a disparity in bargaining position".
        The NCC says, with some justification, that that is not a novel idea in English law. There has been legislation of that kind for some time—for example, the Unfair Contract Terms Act 1977, which contains a different set of rules and a different burden of proof, depending on whether a transaction is between two businesses or between a business and a consumer.
        The NCC says that amendment No. 196
        "broadens the definition of a domestic infringement to include abuse of a bargaining position by a supplier in its dealings with a consumer, pursuing consumers to enter into transactions or hindering them from enforcing their consumer rights.
        2B elaborates on the definition of abuse and sets out the factors which a court shall take into account."
        It refers to good faith, the nature of goods and services being supplied, the
        "extent of any commitments to the consumer"
        and
        "any exploitation of the consumer's inability to make free and informed decisions or enforce his rights due to vulnerability".
        It gives the example of physical infirmity.
        I do not think that the NCC and I are saying for a moment that this is the ultimate set of amendments with which to deal with the problem. We are saying that we

        25
        have taken on board some of the criticisms made in Committee by the Minister and others and tried to produce a more rigorous definition. It is entirely open to her to concede the principle and say that the Government will consider carefully how to produce the same result in a way that is better drafted. That would avoid a Division.
        3.45 pm
        The NCC says that Kent county council is having a problem with itinerant tarmacadam merchants. I wondered where they had gone. They have tarmacadamed a large proportion of my constituency over the years, and now they have clearly moved on to Kent. This typical scam is especially serious in areas with a high proportion of elderly people. These characters turn up and talk people into having their drives tarmacadamed unnecessarily. They do the work shoddily and then demand more than they original contracted for. The NCC says that a general power would deal with that problem.
        The NCC also describes how these matters are approached in the European Union and the United States of America. Very recently, the Commission issued a communication outlining key issues for a framework directive based on the wider concept of fair commercial practices, rather than on misleading practices. It suggests four possible categories: a prohibition on businesses engaging in commercial practices that mislead or are likely to mislead the consumer; a duty to disclose to the consumer all material information that is likely to affect the consumer's decisions; a prohibition on the use of physical force, harassment, coercion or undue influence; and effective information disclosure and complaints handling in the after-sales period. It also proposes, as a side issue, that the framework directive would be covered by the injunctions directive, so that such practices could be tackled quickly and effectively.
        That approach may go too far for our purposes, and any solution that we come up with here will not simply be grafted on to a European directive; it must be properly bedded in English law. I repeat, however, that such concepts are not unfamiliar in legislation and regulations covering unfair contract terms, for example.
        The United States Federal Trade Commission takes a somewhat similar view. It has a double mandate, to ensure fairness in competition and fairness in commercial practices in the interests of the consumer. That is not dissimilar from the approach that we are suggesting. Recently, the FTC took a case against Budget, which was apparently renting out cars that had been subject to recall notices. Consumers were not adequately informed about the risks or how to avoid injury.
        Not surprisingly, the NCC argues that business should not he overly worried about these measures, because good businesses will benefit from measures that stamp out unfair competition from those who use unfair practices.
        Another part of the Bill scraps part II of the Fair Trading Act 1973, which has fallen into relative disuse, largely because of the procedural problems that it poses. In principle, and in its day, however, it allowed the Secretary of State to prohibit a novel unfair practice that harmed the interests of consumers. Certainly, we need to extend protection, not to reduce it. The NCC cites the Consumer Transactions (Restrictions on Statements) Order 1976, prohibiting notices misleading consumers about their rights under the Sale of Goods Acts, such as no returns or no refunds for sales goods.
        26
        That takes us back to the essential difficulty with what the Government are trying to do. Of course we welcome the extension of stop now orders and the provisions on enforcement, but the legislation has to make a difference and it is no earthly good simply making it easier to enforce existing legislation. There is a large body of malpractices, abuses and, frankly, scams out there, which form a regular part of all our mailbags. They simply will not be tackled by this legislation as it stands.
        I have given the example of the unsolicited visit versus the solicited one—a narrow distinction that can make all the difference. Those who invite a salesperson in are not covered; they do not enjoy protections such as the cooling-off period. That is a perfect example of how, over the years, tricksters and downright criminals have developed a fine ability to get round current law by making minor adjustments to the way they do their business.
        Unless the law can get ahead of such fraudsters, rather than constantly banging along in their wake, I cannot see how we can clamp down properly on what the NCC and other bodies call shark practices. Indeed, we can all commend and support its "shark practices" campaign. The NCC's latest press release states that, according to its research,
        "Fewer than one in…ten consumers think businesses do their best to treat customers fairly and a third"—
        a staggering figure—
        "say they have been treated unfairly in the last two years."
        As Deirdre Hutton, chairman of the NCC, states:
        "The Bill is very welcome and will do a great deal to increase consumer protection. But there will still be gaps in the coverage of the law that will allow shark practices to slip through."
        We agree, which is why we have tabled the amendments.
        I stress that the amendments are new. We and the NCC have taken the trouble to narrow their wording as much as possible, but we will in no way get upset if the Minister thinks that the drafting could be improved. All that we need is an assurance that she agrees with what we are trying to achieve, and that—perhaps in the Lords—the Government will produce specific amendments to deal with these precise issues. However, unless she gives clear undertakings and makes clear promises in response to these amendments, I intend to divide the House.
        Mr. Alistair Carmichael: Amendment No. 373, which is in my name and those of my colleagues, is short and technical, and deals with an issue on which we would not seek to divide the House. However, I would welcome the Minister's explanation as to why paragraph (b) refers to
        "conduct which constitutes a Community infringement",
        but not to conduct that constitutes a domestic infringement. That seems a simple point of consistency, and if the Government have chosen to be inconsistent, it is incumbent on them to explain why.
        The Liberal Democrats broadly support the thrust of amendments Nos. 195 and 196. The hon. Member for Eastbourne (Mr. Waterson) comprehensively outlined the thinking behind them, and on this occasion I am pleased to associate myself with the bulk of his comments, particularly those relating to the NCC, which offered invaluable assistance to me and my colleagues in Standing Committee. The more I consider the consequences of

        27
        repealing part II of the Fair Trading Act 1973, the more I recognise the need for protections such as those offered in the amendments.
        My experiences as a solicitor in private practice and since becoming a Member of this House have shown me that, after a contract has been perfected, the struggle between the consumer and the supplier is very unequal. I have seen many examples of it causing great distress to some of the most vulnerable people in our society. Elderly people, perhaps for reasons of politeness, are not prepared to show pushy salesmen the door. However, as the hon. Member for Eastbourne said, if they invite them in, they thereby forgo even the benefit of the small protection that the law currently offers.
        The fraudster will always stay one step ahead, no matter how inventive or ingenious we are in the protections that we seek to give the consumer. The fraudster will always try to find some way to negate the work that we do here. My experience is that two main types of fraudsters are operating. The hon. Gentleman mentioned the drive tarmacadamers. I am alarmed to hear that they have moved from Eastbourne to Kent, but I am somewhat comforted by the thought that if they are on a northward march we have some time to go before we have to suffer them north of the Pentland firth. In the meantime, I hope that we will be able to put the necessary protections in place.
        At the other end of the spectrum is the large commercial organisation that operates by sending a targeted sales force to people's homes and having them sign up on the spot to something that they subsequently are not able to honour. My experience of that was prior to the election, when I wished to install double glazing in my house in Aberdeenshire before selling it. The sales techniques of the double glazing companies were remarkable. I could not believe the number of salesmen who came to the house while I was away politicking in the northern isles and who told my wife that they could not enter into a contract unless her husband was home. That was all the more remarkable because anyone who knows the Carmichael household will know that the soft touch was the one in the northern isles, not the one who had to stay at home.
        I have given one small example of the techniques used by such companies. The most vulnerable individuals need some protection from the worst excesses. I hope that the Minister will give us some assurance that the necessary protections, which would be the teeth of the Bill, will be given serious consideration in the other place. The amendments tabled by the Conservatives have our support and the blessing of the NCC. Their acceptance would be an important signal from the Government that they are prepared to protect the rights of vulnerable individuals in their homes.
        Mr. Mark Field: I wish to speak briefly in support of my hon. Friend the Member for Eastbourne (Mr. Waterson) and the amendments he has tabled. I hope that the Minister will consider the points that he made. When all is said and done, I suspect that we do not disagree on much. We had a robust debate on the issues in Committee, but it was also a friendly debate. I know that the Minister has received briefings similar to those we have had, both from consumer bodies and from business representatives
        28
        I am a little less idealistic than my hon. Friend about our ability to change the law for ever more. I fear that whatever changes are made, there are some who will always look for loopholes. Both my hon. Friend the Member for Eastbourne and the hon. Member for Orkney and Shetland (Mr. Carmichael) made it quite clear that there are a number of rogue traders who will abuse any loopholes in the law.
        4 pm
        My hon. Friend the Member for Eastbourne referred to the comments of the CBI, which acts on behalf of business organisations. It has opposed the concept of unfair trading on the basis that it is insufficiently well targeted and gives rise to a degree of legal uncertainty. Having crossed the Rubicon and decided to go ahead with some degree of unfair trading in the Bill, we should ensure that these provisions have some teeth. Our main concern is that we would quickly find that protection of the consumer under the Bill proved illusory. For that reason, we are keen to press amendments Nos. 195 and 196 to a Division.
        Reference was made earlier to the Unfair Contract Terms Act 1977. It has worked very well for the past quarter of a century; under its terms, individuals are, by necessity, treated differently from businesses. The concept is that in any trading bargain there could be a disaggregation between the bargaining powers of a large or even a small business and an individual who may be subjected to a doorstep sale or one by mail.
        There has been no feeling that the 1977 Act should be repealed and no concerns about its provisions. There is, therefore, an acceptance of the potential inequality of bargaining power that needs to be entrenched within the law. Amendments Nos. 195 and 196 do not seem to go much further than the Government have been willing to go to date. They would ensure, as far as possible, a culture of fairness and fair trading between businesses that will also allow consumers a fair share of any resulting benefit, as the NCC has pointed out.
        The last thing that any Government want, when putting new legislation on the statute book, is many hundreds or thousands of claims. It has been made quite clear that the unfair practice envisaged in our amendments would have to affect a group of consumers before any action could be taken. In other words, an individual could not clog up the legal system.
        I shall be interested to hear what the Minister has to say in this regard. I agree with all Opposition Members who have spoken so far that the amendments require further buffing up. We would be comfortable with the Minister reconsidering the wording and finalising it before the Bill goes to another place. I hope that she will not only answer some of these points but go some way to ensuring that this very important procedural protection is included in the Bill.
        Mr. Michael Weir: I support amendment No. 196, tabled by the hon. Member for Eastbourne (Mr. Waterson). If he cares to push it to a vote, we will support him in the Division Lobby.
        I was interested in the comments of the hon. Member for Orkney and Shetland (Mr. Carmichael). If I were him, I would not be too sure about the tarmacadamers; they have reached from Eastbourne up to Angus. I have often

        29
        had them at my door, along with people wanting to cut my trees, install double glazing and paint my windows. I suppose that that may say more about the state of my house than anything else.
        The hon. Member for Eastbourne slightly undersold amendment No. 196. It seems to me that his amendment would lay down certain principles for deciding whether an action had been unfair. That is important because, as has already been pointed out, changes can occur rapidly—con men have a habit of getting around regulations quickly.
        Like the hon. Member for Orkney and Shetland, I was a solicitor in private practice prior to my election to this place, and often came across the problems of victims—especially elderly people—of power salesmen who came to their door. One very elderly client of mine, sadly now deceased, was subject to periods of confusion and I was constantly having to extricate her from contracts that she had signed after the visits of salesmen who had persuaded her to buy all sorts of strange and wonderful things of which she had no need and which she would never have bought in normal circumstances.
        Some of the worst offenders were the privatised utility companies; salesmen constantly tried to persuade people—especially the elderly—to change their electricity and gas suppliers. Those salesmen often used methods involving extreme pressure. On one occasion, I went home from my office at lunchtime to find one of those people on my doorstep trying to convince my wife. In my brief conversation with him, he told me three things about the contract that he was trying to sell that I knew were untrue.
        That salesman was quickly shown the door, but many elderly people are not able to do that. The client to whom I referred earlier changed her electricity supplier and then became utterly confused about who she was getting her electricity from. Worse than that, however, because she had changed to a gas company, the electricity company salesman appeared at her door a couple of weeks later trying to persuade her to change to that supplier. The matter went on and on and the poor lady got into an utter fankle. I had to sort it out and get her back to suppliers that she could recognise and understand.
        That situation arose because people are allowed to engage in that type of doorstep selling. Although amendment No. 196 is not perfect, it would go some way towards laying down principles that a court could consider in dealing with such techniques. If we are too restrictive, it will be easier for con men to get around the regulations. General principles allow the courts more latitude to interpret actions as they occur.
        Mr. Tony McWalter: The general debate on amendment No. 196 was conducted in a fairly laid-back way by the hon. Member for Eastbourne (Mr. Waterson), who suggested that if there was general Labour support for the aims of his proposal, he would not divide the House. I hope that he does not do so, as his proposal could almost be described as a wrecking amendment.
        We all understand and accept that a number of people suffer from high-pressure salesmanship. There are a huge number of victims, so it is right to do what we can to protect people. However, once we make high-pressure
        30
        salesmanship illegal, we might begin to bring the process into disrepute—a law that applies almost all the time is difficult to apply at any particular time.
        Subsection (a) states that a person must not unfairly induce
        "consumers to enter into transactions which are not the result of free and informed decisions."
        Let us consider that in relation to decisions about purchasing a holiday on the basis of brochures which, as we all know, bear little relation to the actual circumstances that obtain at the holiday resort. It is understood that a certain distortion is part of holiday companies' modus operandi. That is a form of high-pressure salesmanship, but it does not typically result in people complaining bitterly when the resort turns out to be more overcrowded than expected, with fewer loungers, less clean water—or the sewage being used to water the plants, as was my experience at one holiday venue—and so on.
        Mr. Waterson: I am grateful to the hon. Gentleman for giving us all a sneak preview of his holiday plans, but how would he approach the case, raised in the NCC's briefing, of the holiday brochure that quite truthfully said that the holiday hotel was 25 metres from the beach, but sadly did not mention that there was a motorway in between?
        Mr. McWalter: I am grateful to the hon. Gentleman for his intervention. We could probably all exchange enjoyable anecdotes about these matters. Clearly, there is deception, but the issue is at what stage that deception becomes more than something that could be addressed by a compensatory payment from the holiday company if it were a member of the Association of British Travel Agents. At what stage do we move from an informal framework for resolving bitter disappointment at the quality of the venue to requiring the power to take strong legal action? That is my worry with amendment No. 196.
        One needs to understand what would count as an informed decision. There is an onus on consumers at least to conduct their proceedings as wisely as possible. I understand that the current framework could be much extended, and I agree with the hon. Member for Eastbourne, who made this point in Committee, that selling people products in their own homes is perhaps not so much high-pressure salesmanship as almost putting the seller in such a dominant position that gainsaying the transaction is not feasible. If we can somehow produce a form of words that would prevent that, we might perhaps have an amendment that would be worth pressing to a Division.
        Many decisions that people currently take are not fully informed, but informed enough, and many of them are not free, but free enough. If we try to elaborate too strongly in general terms on whether there is a legal right to take such matters to the Office of Fair Trading or others, there is a real danger that we could end up with a completely unworkable law. I suspect that the Opposition know that amendment No. 196, which they drafted, would be unworkable. However, the motives behind it are good and it would be sensible not to divide the House but to engage in what I hope would be constructive discussions.
        To revert to a theme to which I have referred several times in these discussions, one has to try to make clear to what extent we should seek to combat unfair trading under

        31
        the Bill and to what extent we should bear in mind the fact that there would be huge repercussions for the rest of the law, including the criminal law, in trying to tackle some of the other issues that result in people trading not just unfairly but viciously.
        I hear what hon. Members have said about the tarmacadam merchants. Funnily enough, they have even appeared in Hemel Hempstead. One of the things that I have been trying to do is to get the Treasury to break down the barriers between Customs and Excise and the Inland Revenue. It is clear that much of the activity that goes on is illegal under current tax law, but we have an absurd situation in which information is insufficiently shared between two departments of the Treasury. Consequently, just when it might become apparent that a driveway layer is in breach of his obligations under Customs and Excise regulations, corroboration is needed from the Inland Revenue—whose records are completely different—and nothing gets done.
        4.15 pm
        People who are quite sophisticated, at least in terms of having no fixed abode and having other mechanisms for evasion, end up not being brought to book even though there are laws which should bring them to book and which if implemented would result in their no longer being in business. We must therefore try to ensure that the framework of law outside this Bill—which, after all, is important in promoting and setting a framework for fair enterprise—also delivers an appropriate range of laws to combat various kinds of malpractice.
        Having spoken so far in favour of the Government's line, I want to conclude my remarks—this may not surprise those few Members who are present—by saying that I am reluctant to support Government amendment No. 380 as I understand it. I am worried about it on two grounds. First, it refers to directive 2000/31/EC. I have not been able to get hold of that document. It is not in the Vote Office, and I feel reluctant to nod such matters through. I should also be grateful if the Minister confirmed whether the directive—which I have not read, but which I have read about—says, for instance, that there is potential for considerable interference with what one might call domestic communications of an electronic character. Will the Minister reassure me that that is not involved in directive 2000/31/EC?
        Miss Melanie Johnson: If I may, I shall start in roughly reverse order, and deal with the two other amendments outside the issue of the general duty to trade fairly or not to trade unfairly, and the issues raised in the substantive part of the debate this afternoon.
        Amendment No. 373—as the hon. Member for Orkney and Shetland (Mr. Carmichael) raised the question—would enable an enforcer to make an application for an enforcement order against a person who it believed was likely to engage in conduct that would constitute a domestic infringement. That is already the case in respect of community infringements, as we believe that that is a requirement of the injunctions directive. Officials have discussed this matter with the Office of Fair Trading and the Local Authorities Co-ordinating Body on Regulatory Services—formerly the Local Authorities Co-ordinating
        32
        Body on Trading Standards. Although I fully understand the argument in favour, we have not yet been provided with sufficient convincing cases in which it might be used to merit extending the scope of domestic infringements in this way. A power to prevent infringements before they occur is likely to be the most useful in advertising, where a single misleading advertisement has the potential to harm a large number of consumers. That would be a community infringement. As I mentioned, the Bill gives enforcers the powers to take action to stop likely community infringements—if necessary, by applying for an interim enforcement order. I hope that that addresses the hon. Gentleman's point.
        Before I deal with the wider issues, I shall deal with the anxieties of my hon. Friend the Member for Hemel Hempstead (Mr. McWalter) about amendment No. 380. The amendment seeks to add the e-commerce directive to schedule 13, which lists the individual EC directives to which the definition of a community infringement in clause 205 applies. This is required by the EC injunctions directive. My Department's consultation on the extension of the stop now regulations to cover the e-commerce directive ends on 5 July. Regulations implementing the other provisions of the directive will be made shortly. I am not sure what my hon. Friend's anxiety is, but I hope that my explanation will have allayed it.
        I now come to the substantive debate and to amendments Nos. 195 and 196. They would enable enforcement action to be taken against some conduct that may be unfair but that is not currently unlawful. We debated the issue at length in Committee, and the amendments that we debated then were modelled on the approach taken in the Unfair Terms in Consumer Contracts Regulations, and contained an indicative list of conduct that may be but is not necessarily held to be unfair.
        The amendments seek to achieve a similar result by preventing suppliers from unfairly taking advantage of their superior knowledge and bargaining strength vis-a-vis the consumer. We all recognise the imbalance in the relationship and several Members have referred to it. The nature of the conduct that would be covered by this wording would be fairly limited, but I appreciate that, as some Members have acknowledged, it is the principle of the general duty that they wish to debate. I shall therefore consider that point.
        I certainly agree that businesses should not abuse their superior bargaining position to take unfair advantage of consumers. Indeed, businesses that treat their customers honestly and fairly are much more likely to prosper by building up a loyal customer base. The hon. Member for Cities of London and Westminster (Mr. Field) made the point that he thought that there was not much between us on this issue, and he is entirely right. The question is how to achieve the goal that many of us share. Like the hon. Gentleman, I recognise that business has some concerns.
        I also accept that a small number of unscrupulous traders take a much more short-sighted view of their customers than do decent businesses. However, as I have told hon. Members before, I am not convinced that enshrining in the Bill a general duty not to trade unfairly is the best way of ensuring that consumers receive a fair deal. I shall explain why that is so and what I propose to do next.

        33
        We already have a well-established and comprehensive framework of consumer protection legislation which on the face of it would appear to cover many of the cases that hon. Members have mentioned. I cannot go through all of them because, although the Whip to whom I spoke was happy for me to speak for a few minutes, he was unhappy at the prospect of my going on for three hours. I have therefore eschewed that course of action.
        Mr. Waterson: I can assist the Under-Secretary. Presumably she wants to avoid spending a quarter of an hour or more having one or more Divisions. That consideration might weigh in her discussions with the Whip.
        Miss Johnson: I appreciate what the hon. Gentleman said earlier.
        Several big issues are involved, one of which is how we define fair or unfair. There is much work to be done on that and it is by no means obvious that enshrining such terms in the Bill is a straightforward process that would make the provision and the definitions of fair and unfair clear to all and sundry.
        We also face substantial considerations involving practicality. I shall touch on a few of the examples cited in which it is obvious that recourse is currently available, because that directly touches on the issue of practicality. Practicality involves enforcement, and many pieces of legislation impact on the cases about which Members have rightly said something should be done; I agree with them entirely on that. However, it can in practice be difficult to prove that pressured selling has taken place, for example, and in many cases it might be more sensible to improve the enforcement of existing legislation. We need to consider the evidence and the extent of the problems before we rush into legislating.
        The hon. Member for Eastbourne (Mr. Waterson) referred to the Kent county council itinerant tarmackers who have passed through everyone's constituency. Indeed, like my hon. Friend the Member for Hemel Hempstead (Mr. McWalter), my constituency in Hertfordshire is also plagued by such people.
        Mr. Mark Field: Perhaps I should point out that the streets of my constituency are paved with gold. There is no risk of tarmackers coming to Cities of London and Westminster.
        Miss Melanie Johnson: There are many opportunities for a riposte to that, but in the spirit of a more consensual debate, I will not take them.
        The doorstep selling regulations provide a seven-day cooling-off period if a visit is unsolicited. Builders are required to carry out work with reasonable care and skill under section 13 of the Supply of Goods and Services Act 1982. Taking money for little or no work is covered by obtaining property by deception under the Theft Acts. We are also building up a quality mark scheme for reputable builders and tradesmen. There are a number of recourses. It is therefore a matter of what the consumer does to enforce legislation, and that would be the case were we to broaden the measure or not.
        On the Trade Commission case and the hiring out of unsafe cars, in the UK that would be a breach of a term of contract, implied by statute, that a car should be of a satisfactory quality and fit for its purpose. That problem would he covered by part 8.
        34
        I am trying to illustrate the difficulties with some cases before setting out our approach. In relation to the elderly lady cited by the hon. Member for Eastbourne—it could, of course, have been an elderly gentleman, but for some reason it never is, although I am sure they are just as frail—because the visit was unsolicited it would be covered by the doorstep selling regulations, with the statutory cooling-off period and cancellation rights. The same cooling-off period would apply if the consumer had agreed to a visit from a salesperson as a result of an unsolicited visit or call.
        Mr. Waterson: To save the Minister time, the point is that what typically happens is that the elderly lady—as she said, elderly gentlemen do not seem to feature in such stories—fills out and sends in a coupon in, say, Saga Magazine, a perfectly reputable publication, and that is construed as an invitation to the salesman to visit her. As the visit is not unsolicited, it is outside the protection to which the Minister referred.
        Miss Johnson: I do not want to give too much complicated legal advice from the Dispatch Box for fear of coming up against the lawyers when I leave the Chamber. Obviously issues arise if someone buys something that they have not requested or set out to buy in the first place. That was cited in a number of examples. If people request a home visit for one product but are sold something else, they are also covered by the doorstep selling regulations.
        Mr. Carmichael: I am listening to the Minister and wondering how anyone could possibly think that there is a problem, but we all know from our constituency experience and the experience of bodies such as the NCC that there is. I suggest that, rather than dealing with it through subordinate legislation such as that described by the Minister, it would be infinitely preferable to establish general broad principles capable of definition and enforcement by the courts, and that is what the Conservative amendments would do.
        4.30 pm
        Miss Johnson: I am not trying to suggest that there are no problems, and I shall go on to make points which will, hopefully, help the hon. Gentleman. I was illustrating the fact there are practical difficulties in some of these cases. Many of the problems faced by consumers are already covered in consumer protection legislation, and the difficulties arise in awareness of the law, in enforcement and in the empowerment of the consumer to secure enforcement through the appropriate route.
        I shall not take up the time of the House by going through all the examples given by the hon. Member for Eastbourne, but he mentioned the time-share directive, and asked whether time spent on a canal houseboat is covered. There are provisions covering such arrangements, and in further discussions with the European Commission we shall seek to extend the directive to time-shares of less than three years' duration and time on canal houseboats. Because many people spend their holidays abroad rather than in the UK—many in other EU member states or areas covered by EU legislation—it is important that we look to the European dimension of all these matters.

        35
        Having said all that, it is important that we look again at the question of what we should do next. Policies for any new laws should be founded in fact and on a robust evidence base to ensure that they address issues of significant consumer detriment in a way that existing legislation does not.
        It is important that new legislation should not create undue or unnecessary burdens on business, and I know that some hon. Members are concerned about that. For that reason, I have decided that the next step should be to invite key stakeholders from consumer groups, enforcers and business to a seminar with me in the summer. I want to use that occasion to look in more detail at the cases cited by consumer organisations in support of a general duty to trade fairly or not to trade unfairly—the very cases that hon. Members have raised in the House. Once I have a clearer picture of the problems, I shall consider what further action would be appropriate. At the moment, however, because many of the problems concern infringement and enforcement, we are in danger of simply legislating without giving consumers more effective recourse to the law.
        I agree with hon. Members on both sides of the House that there are issues that need to be addressed. We agree that the consumer needs to be protected, and we share the same ends. However, I also agree with the hon. Members for Cities of London and Westminster and for Orkney and Shetland that the law will never catch up with the fraudster. That, I am afraid, is almost bound to be the case, but it is incumbent on the Government to do our very best to make sure that the law works as effectively as possible for consumers. There is already a great deal of consumer protection legislation, and if we can identify genuine loopholes, where problems exist that do not arise from enforcement, and tackle them separately, I will be happy to have further meetings with all the interested parties to see what steps would be most appropriate.
        Mr. Waterson rose—
        Mr. Deputy Speaker (Sir Alan Haselhurst): Order. The hon. Gentleman does not have a right of reply.
        Mr. Waterson: With the leave of the House, Mr. Deputy Speaker.
        Mr. Deputy Speaker: If the hon. Gentleman wants to indicate whether he will press amendment No. 196 to a vote, he may do so, but a speech would not conform to the convention of the House. I ask him to understand that if one Member who has tabled an amendment seeks the leave of the House to speak, other Members may feel that they have the same entitlement.
        Mr. Waterson: I am grateful to you, Mr. Deputy Speaker. I shall speak strictly on the basis you set out, but I thought it might be worth outlining my approach to the amendments, especially amendment No. 196, on which I said that I might seek to divide the House.
        Our amendment is not a wrecking amendment, as the hon. Member for Hemel Hempstead (Mr. McWalter) claimed it was. It is a genuine attempt—our second—to deal with a practical problem. Our aim is not to ban
        36
        high-pressure salesmen, as he put it, but to deal with situations in which there is an imbalance in the bargaining positions of the parties.
        The Minister was rather fatalistic. Rather like Stanley Baldwin, who said in the 1930s that the bomber would always get through, in her final remarks she seemed to suggest that the fraudster would always get away with it, no matter how much we tried.
        Miss Melanie Johnson: The hon. Gentleman has gained a mistaken impression. As I think the hon. Members for Cities of London and Westminster (Mr. Field) and for Orkney and Shetland (Mr. Carmichael) would agree, although it is impossible to close for ever every possible avenue that fraudsters might find or invent for themselves, it is incumbent on the Government to give the consumer as much ready protection as possible. It is our intention to do that, and I believe that the hon. Member for Eastbourne (Mr. Waterson) shares that intention.
        Mr. Waterson: Let me put it another way. This is not a situation in which the best should be the enemy of the good. If there are things the Minister can do that would cause an immediate improvement in the position of consumers, albeit without closing every conceivable loophole, those things should be welcomed and pressed forward with.
        Mr. Carmichael: Does the hon. Gentleman agree with me that the best way to deal with future loopholes—if I can put it like that—is to construct a framework that is based on principle? That principle can be applied to future cases, and the effect is simply to extend the principle. The alternative is a narrow, legalistic approach wherein the remedy precedes the right.
        Mr. Waterson: I agree, with one proviso, which I am sure the hon. Gentleman accepts, which is that that framework should be firmly bedded in the structure of our existing legal system.
        The Minister touched on the difficulties of defining fair and unfair, but I thought that I had explained where the concept of fairness had already appeared in legislation and had not caused any great difficulties. She talked about difficulties of definition and of practicality and enforcement, although she agreed that something should be done.
        The Minister appears to think that the matter is more one of improving enforcement of existing legislation—no one could disagree with her on the need for that—but the key point is that many of the scams are simply outside the scope of existing legislation. It does not matter how much effort is put into enforcing existing legislation if the scams are outside it. I commend to her the report by Age Concern on the sale of assistive products, which documents a great many cases—almost invariably involving elderly ladies—which arise almost daily.
        Finally, the hon. Lady said that she sought to extend the time share directive. My point is that by the time that directive has been extended, the tricksters and fraudsters will be doing something else just as damaging to consumers under a different label.
        What can the Minister offer us? An invitation to a seminar—at least I hope that I am included on the guest list. If the Minister invites me, I shall be delighted to

        37
        attend. In the meantime, the fact that all she has in mind is a seminar suggests that her Department's thinking has not moved on. On that basis, I shall press amendment No. 196 to a Division.
        Amendment agreed to.

      Clause 204

        DOMESTIC INFRINGEMENTS
        Amendment proposed: No. 196, in page 147, line 26, at end add—
        '(2A) An act or omission or course of conduct falls within this subsection if it amounts to the abuse by the person in question ("the supplier") of his superior knowledge or bargaining strength so that he:

        (a) unfairly induces consumers to enter into transactions which are not the result of free and informed decisions; or

        (b) unfairly hinders consumers from enforcing rights under any consumer transaction.

        (2B)In considering whether an act, omission or course of conduct amounts to an abuse under subsection 2A, the court shall take into account all the circumstances, including the nature of the goods or services in question, the nature and extent of any commitments undertaken by the consumers in question and any lack of good faith on the part of the supplier, and the court may have regard to:

        (a) any representation made by the supplier, or failure to disclose information, which unreasonably prevents consumers from making adequate price or value comparisons between competing suppliers;

        (b) any exploitation by the supplier of consumers' inability to make free and informed decisions, or to enforce rights under contracts, because of physical or mental infirmity, inability to understand the language of the transaction or other vulnerability;

        (c) any failure by the supplier to comply with a consumer code of practice (as defined in section 8(4) of this Act) which he claims to follow;

        (d) any act or omission by the supplier which causes any unreasonable expense of time or money by consumers pursuing legitimate complaints or rights under contracts entered into with the supplier; and

        (e) any failure to keep consumers reasonably informed about matters relating to a contract for supply of services, or which might affect a decision whether or not to change suppliers.'.—[Mr. Waterson.]

        Question put, That the amendment be made:—
        The House divided: Ayes 148, Noes 258.

        Division No. 275]

        [4.39 pm

        AYES

        Ainsworth, Peter (E Surrey)

        Brady, Graham

        Amess, David

        Brazier, Julian

        Ancram, Rt Hon Michael

        Breed, Colin

        Atkinson, David (Bour'mth E)

        Browning, Mrs Angela

        Atkinson, Peter (Hexham)

        Bruce, Malcolm

        Bacon, Richard

        Burnett, John

        Baker, Norman

        Burns, Simon

        Baldry, Tony

        Burstow, Paul

        Barker, Gregory

        Butterfill, John

        Barrett, John

        Calton, Mrs Patsy

        Bellingham, Henry

        Cameron, David

        Bercow, John

        Carmichael, Alistair

        Beresford, Sir Paul

        Chidgey, David

        Boswell, Tim

        Clarke, Rt Hon Kenneth (Rushcliffe)

        Bottomley, Peter (Worthing W)

        Clifton—Brown, Geoffrey

        Collins, Tim

        38

        Cormack, Sir Patrick

        May, Mrs Theresa

        Cotter, Brian

        Mercer, Patrick

        Curry, Rt Hon David

        Mitchell, Andrew (Sutton Coldfield)

        Davey, Edward (Kingston)

        Moore, Michael

        Davies, Quentin (Grantham)

        Moss, Malcolm

        Davis, Rt Hon David (Haltemprice)

        Murrison, Dr Andrew

        Duncan, Alan (Rutland & Melton)

        O'Brien, Stephen (Eddisbury)

        Duncan, Peter (Galloway)

        Osborne, George (Tatton)

        Duncan Smith, Rt Hon Iain

        Ottaway, Richard

        Evans, Nigel

        Page, Richard

        Fallon, Michael

        Paice, James

        Field, Mark (Cities of London)

        Paterson, Owen

        Flight, Howard

        Pickles, Eric

        Flook, Adrian

        Portillo, Rt Hon Michael

        Forth, Rt Hon Eric

        Prisk, Mark

        Foster, Don (Bath)

        Pugh, Dr John

        Fox, Dr Liam

        Redwood, Rt Hon John

        Francois, Mark

        Rendel, David

        Gale, Roger

        Robathan, Andrew

        Garnier, Edward

        Robertson, Angus (Moray)

        Gibb, Nick

        Robertson, Hugh (Faversham)

        Gidley, Sandra

        Robertson, Laurence (Tewk'b'ry)

        Gillan, Mrs Cheryl

        Roe, Mrs Marion

        Gray, James

        Rosindell, Andrew

        Grayling, Chris

        Russell, Bob (Colchester)

        Greenway, John

        Sanders, Adrian

        Grieve, Dominic

        Sayeed, Jonathan

        Hague, Rt Hon William

        Simmonds, Mark

        Hammond, Philip

        Simpson, Keith (Mid—Norfolk)

        Hawkins, Nick

        Spelman, Mrs Caroline

        Hayes, John

        Spink, Bob

        Heath, David

        Spring, Richard

        Hoban, Mark

        Stanley, Rt Hon Sir John

        Hogg, Rt Hon Douglas

        Streeter, Gary

        Horam, John

        Stunell, Andrew

        Howard, Rt Hon Michael

        Swire, Hugo

        Howarth, Gerald (Aldershot)

        Syms, Robert

        Hughes, Simon (Southwark N)

        Tapsell, Sir Peter

        Jack, Rt Hon Michael

        Taylor, Ian (Esher & Walton)

        Jackson, Robert (Wantage)

        Taylor, John (Solihull)

        Jenkin, Bernard

        Taylor, Matthew (Truro)

        Johnson, Boris (Henley)

        Taylor, Sir Teddy

        Keetch, Paul

        Thomas, Simon (Ceredigion)

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

        Thurso, John

        Tredinnick, David

        Key, Robert

        Trend, Michael

        Laing, Mrs Eleanor

        Turner, Andrew (Isle of Wight)

        Lamb, Norman

        Tyrie, Andrew

        Laws, David

        Walter, Robert

        Leigh, Edward

        Waterson, Nigel

        Letwin, Oliver

        Weir, Michael

        Lewis, Dr Julian (New Forest E)

        Whittingdale, John

        Lidington, David

        Widdecombe, Rt Hon Miss Ann

        Lilley, Rt Hon Peter

        Wiggin, Bill

        Loughton, Tim

        Wilkinson, John

        Luff, Peter

        Willetts, David

        MacKay, Rt Hon Andrew

        Winterton, Nicholas (Macclesfield)

        Maclean, Rt Hon David

        McLoughlin, Patrick

        Tellers for the Ayes:

        Malins, Humfrey

        Mr. Charles Hendry and

        Maude, Rt Hon Francis

        Mr. Desmond Swayne.

        NOES

        Abbott, Ms Diane

        Baird, Vera

        Adams, Mrs Irene (Paisley N)

        Banks, Tony

        Ainger, Nick

        Barnes, Harry

        Ainsworth, Bob (Cov'try NE)

        Bayley, Hugh

        Alexander, Douglas

        Benn, Hilary

        Allen, Graham

        Benton, Joe

        Anderson, Rt Hon Donald (Swansea E)

        Best, Harold

        Blackman, Liz

        Armstrong, Rt Hon Ms Hilary

        Blears, Ms Hazel

        Atherton, Ms Candy

        Blizzard, Bob

        Atkins, Charlotte

        Borrow, David

        Austin, John

        Bradley, Rt Hon Keith (Withington)

        Bailey, Adrian

        Bradley, Peter (The Wrekin)

        39

        Bradshaw, Ben

        Havard, Dai

        Brown, Rt Hon Nicholas (Newcastle E & Wallsend)

        Healey, John

        Henderson, Doug (Newcastle N)

        Brown, Russell (Dumfries)

        Henderson, Ivan (Harwich)

        Burgon, Colin

        Hepburn, Stephen

        Byers, Rt Hon Stephen

        Heppell, John

        Cairns, David

        Hesford, Stephen

        Campbell. Alan (Tynemouth)

        Hewitt, Rt Hon Ms Patricia

        Campbell, Mrs Anne (C'bridge)

        Hill, Keith

        Campbell, Ronnie (Blyth V)

        Hoey, Kate

        Caplin, Ivor

        Hope, Phil

        Casale, Roger

        Hopkins, Kelvin

        Cawsey, Ian

        Howarth, George (Knowsley N)

        Challen, Colin

        Hughes, Beverley (Stretford)

        Chapman, Ben (Wirral S)

        Hurst, Alan

        Clapham, Michael

        Iddon, Dr Brian

        Clark, Paul (Gillingham)

        Illsley, Eric

        Clarke, Rt Hon Tom (Coatbridge)

        Ingram, Rt Hon Adam

        Clelland, David

        Irranca—Davies, Huw

        Clwyd, Ann

        Jackson, Glenda (Hampstead)

        Coaker, Vernon

        Jackson, Helen (Hillsborough)

        Coffey, Ms Ann

        Jenkins, Brian

        Coleman, Iain

        Johnson, Miss Melanie (Welwyn Hatfield)

        Colman, Tony

        Cook, Frank (Stockton N)

        Jones, Helen (Warrington N)

        Cook, Rt Hon Robin (Livingston)

        Jones, Lynne (Selly Oak)

        Cooper, Yvette

        Joyce, Eric

        Corston, Jean

        Keeble, Ms Sally

        Cox, Tom

        Keen, Ann (Brentford & Isleworth)

        Cranston, Ross

        Kelly, Ruth

        Cryer, Mrs Ann (Keighley)

        Kemp, Fraser

        Cryer, John (Hornchurch)

        Khabra, Piara S

        Cunningham, Jim (Cov'try S)

        Kidney, David

        Cunningham, Tony (Workington)

        Kilfoyle, Peter

        Darling, Rt Hon Alistair

        King, Andy (Rugby & Kenilworth)

        Davidson, Ian

        Ladyman, Dr Stephen

        Davies, Rt Hon Denzil (Llanelli)

        Lawrence, Mrs Jackie

        Davies, Geraint (Croydon C)

        Lepper, David

        Davis, Rt Hon Terry (B'ham Hodge H)

        Leslie, Christopher

        Levitt, Tom

        Dawson, Hilton

        Lewis, Ivan (Bury S)

        Dean, Mrs Janet

        Lewis, Terry (Worsley)

        Dhanda, Parmjit

        Linton, Martin

        Dowd, Jim

        Lloyd, Tony

        Drown, Ms Julia

        Love, Andrew

        Dunwoody, Mrs Gwyneth

        Lucas, Ian

        Eagle, Angela (Wallasey)

        Luke, Iain

        Eagle, Maria (L'pool Garston)

        McCabe, Stephen

        Edwards, Huw

        McCafferty, Chris

        Efford, Clive

        McCartney, Rt Hon Ian

        Ennis, Jeff

        McDonagh, Siobhain

        Etherington, Bill

        McDonnell, John

        Farrelly, Paul

        McIsaac, Shona

        Field, Rt Hon Frank (Birkenhead)

        McKechin, Ann

        Fisher, Mark

        Mackinlay, Andrew

        Fitzpatrick, Jim

        McNamara, Kevin

        Fitzsimons, Mrs Lorna

        MacShane, Denis

        Flint, Caroline

        McWalter, Tony

        Flynn, Paul

        McWilliam, John

        Foster, Michael (Worcester)

        Mahmood, Khalid

        Foster, Michael Jabez (Hastings)

        Mahon, Mrs Alice

        Foulkes, George

        Mallaber, Judy

        Gapes, Mike

        Mandelson, Rt Hon Peter

        Gardiner, Barry

        Mann, John

        Gerrard, Neil

        Marsden, Gordon (Blackpool S)

        Gibson, Dr Ian

        Marshall, David (Shettleston)

        Gilroy, Linda

        Marshall, Jim (Leicester S)

        Goggins, Paul

        Martlew, Eric

        Griffiths, Jane (Reading E)

        Merron, Gillian

        Griffiths, Nigel (Edinburgh S)

        Michael, Rt Hon Alun

        Griffiths, Win (Bridgend)

        Miliband, David

        Hall, Mike (Weaver Vale)

        Miller, Andrew

        Hall, Patrick (Bedford)

        Moffatt, Laura

        Hamilton, David (Midlothian)

        Mole, Chris

        Hanson, David

        Moonie, Dr Lewis

        Harris, Tom (Glasgow Cathcart)

        Moran, Margaret

        40

        Mountford, Kali

        Smith, Llew (Blaenau Gwent)

        Mullin, Chris

        Soley, Clive

        Munn, Ms Meg

        Southworth, Helen

        O'Brien, Bill (Normanton)

        Starkey, Dr Phyllis

        O'Brien, Mike (N Warks)

        Steinberg, Gerry

        O'Hara, Edward

        Stewart, Ian (Eccles)

        Olner, Bill

        Stinchcombe, Paul

        Organ, Diana

        Stoate, Dr Howard

        Osborne, Sandra (Ayr)

        Stringer, Graham

        Palmer, Dr Nick

        Sutcliffe, Gerry

        Picking, Anne

        Tami, Mark

        Pickthall, Colin

        Taylor, Ms Dari (Stockton S)

        Pike, Peter

        Thomas. Gareth R (Harrow W)

        Plaskitt, James

        Tipping, Paddy

        Pond, Chris

        Todd, Mark

        Pope, Greg

        Trickett, Jon

        Pound, Stephen

        Truswell, Paul

        Prentice, Ms Bridget (Lewisham E)

        Turner, Dennis (Wolverh'ton SE)

        Primarolo, Dawn

        Turner, Dr Desmond (Kemptown)

        Purchase, Ken

        Turner, Neil (Wigan)

        Quinn, Lawrie

        Vaz, Keith

        Rammell, Bill

        Vis, Dr Rudi

        Raynsford, Rt Hon Nick

        Walley, Ms Joan

        Reed, Andy (Loughborough)

        Ward, Ms Claire

        Robertson, John (Glasgow Anniesland)

        Wareing, Robert N

        Watson, Tom

        Robinson, Geoffrey (Cov'try NW)

        Watts, David

        Roche, Mrs Barbara

        White, Brian

        Rooney, Terry

        Whitehead, Dr Alan

        Ruddock, Joan

        Williams, Rt Hon Alan (Swansea W)

        Ryan, Joan

        Salter, Martin

        Williams, Mrs Betty (Conwy)

        Sarwar, Mohammad

        Wills, Michael

        Savidge, Malcolm

        Winnick, David

        Sedgemore, Brian

        Wood, Mike

        Shaw, Jonathan

        Woodward, Shaun

        Sheerman, Barry

        Woolas, Phil

        Sheridan, Jim

        Worthington, Tony

        Simon, Siôn

        Wray, James

        Singh, Marsha

        Wright, Anthony D (Gt Yarmouth)

        Skinner, Dennis

        Wright, David (Telford)

        Smith, Angela (Basildon)

        Smith, Rt Hon Chris (Islington S)

        Tellers for the Noes:

        Smith, Geraldine (Morecambe)

        Mr. Ian Pearson and

        Smith, John (Glamorgan)

        Derek Twigg.

        Question accordingly negatived.

      Clause 206

        ENFORCERS
        Amendment made: No. 375, in page 148, line 27, at end insert—
        '(c) the Department of Enterprise, Trade and Investment Northern Ireland.'—[Miss Melanie Johnson.]

      Clause 208
        APPLICATIONS
        Amendment made: No. 376, in page 150, line 29, after "Wales" insert "or Northern Ireland".—[Miss Melanie Johnson.]
      Clause 210

        ENFORCEMENT ORDERS
        Amendment made: No. 377, in page 151, line 32, leave out "that subsection" and insert—
        'subsection (3) of that section'.—[Miss Melanie Johnson.]

      Clause 215

        BODIES CORPORATE: ACCESSORIES
        Amendment made: No. 378, in page 156, line 12, leave out subsection (10) and insert—
        '(10) A person is an associate of an individual if—

        (a) he is the spouse of the individual;

        (b) he is a relative of the individual;

        (c) he is a relative of the individual's spouse;

        (d) he is the spouse of a relative of the individual;

        (e) he is the spouse of a relative of the individual's spouse;

        (f) he lives in the same household as the individual otherwise than merely because he or the individual is the other's employer, tenant, lodger or boarder;

        (g) he is a relative of a person who is an associate of the individual by virtue of paragraph (f);

        (h) he has at some time in the past fallen within any of paragraphs (a) to (g).

        (11) A person is also an associate of—

        (a) an individual with whom he is in partnership;

        (b) an individual who is an associate of the individual mentioned in paragraph (a);

        (c) a body corporate if he is a controller of it or he is an associate of a person who is a controller of the body corporate.

        (12) A body corporate is an associate of another body corporate if—

        (a) the same person is a controller of both;

        (b) a person is a controller of one and persons who are his associates are controllers of the other;

        (c) a person is a controller of one and he and persons who are his associates are controllers of the other;

        (d) a group of two or more persons is a controller of each company and the groups consist of the same persons;

        (e) a group of two or more persons is a controller of each company and the groups may be regarded as consisting of the same persons by treating (in one or more cases) a member of either group as replaced by a person of whom he is an associate.

        (13) A relative is a brother, sister, uncle, aunt, nephew, niece, lineal ancestor or lineal descendant.'—[Miss Melanie Johnson.]

      Clause 221

        EVIDENCE
        Amendment made: No. 379, in page 158, line 25, at end insert—
        '(c) section 7 of the Civil Evidence Act (Northern Ireland) 1971 (c. 36 (N.I.)) (corresponding provision in Northern Ireland).'—[Miss Melanie Johnson.]

      New clause 6

        BANKRUPT'S HOME
        '(1) The following shall be inserted after section 283 of the Insolvency Act 1986 (definition of bankrupt's estate)—
        "283A Bankrupt's home ceasing to form part of estate
        (1) This section applies where property comprised in the bankrupt's estate consists of an interest in a dwelling-house which at the date of the bankruptcy was the bankrupt's sole or principal residence.
        (2) At the end of the period of three years beginning with the date of the bankruptcy the interest mentioned in subsection (1) shall—

        (a) cease to be comprised in the bankrupt's estate, and

        (b) vest in the bankrupt (without conveyance, assignment or transfer).

        (3) Subsection (2) shall not apply if during the period mentioned in that subsection—

        (a) the trustee realises the interest mentioned in subsection (1),

        (b) the trustee applies for an order for sale in respect of the dwelling-house,

        (c) the trustee applies for an order for possession of the dwelling-house,

        (d) the trustee applies for an order under section 313 in Chapter IV in respect of that interest, or

        (e) the trustee and the bankrupt agree that the bankrupt shall incur a specified liability to his estate (with or without the addition of interest from the date of the agreement) in consideration of which the interest mentioned in subsection (1) shall cease to form part of the estate.

        (4) Where an application of a kind described in subsection (3)(b) to (d) is made during the period mentioned in subsection (2) and is dismissed, unless the court orders otherwise the interest to which the application relates shall on the dismissal of the application—

        (a) cease to be comprised in the bankrupt's estate, and

        (b) vest in the bankrupt (without conveyance, assignment or transfer).

        (5) If the bankrupt does not inform the trustee or the official receiver of his interest in a property before the end of the period of three months beginning with the date of the bankruptcy, the period of three years mentioned in subsection (2)—

        (a) shall not begin with the date of the bankruptcy, but

        (b) shall begin with the date on which the trustee or official receiver becomes aware of the bankrupt's interest.

        (6) The court may substitute for the period of three years mentioned in subsection (2) a longer period—

        (a) in prescribed circumstances, and

        (b) in such other circumstances as the court thinks appropriate.

        (7) The rules may make provision for this section to have effect with the substitution of a shorter period for the period of three years mentioned in subsection (2) in specified circumstances (which may be described by reference to action to be taken by a trustee in bankruptcy).
        (8) The rules may also, in particular. make provision—

        (a) requiring or enabling the trustee of a bankrupt's estate to give notice that this section applies or does not apply;

        (b) about the effect of a notice under paragraph (a);

        (c) requiring the trustee of a bankrupt's estate to make an application to the Chief Land Registrar.

        (9) Rules under subsection (8)(b) may, in particular—

        (a) disapply this section;

        (b) enable a court to disapply this section;

        (c) make provision in consequence of a disapplication of this section;

        (d) enable a court to make provision in consequence of a disapplication of this section;

        (e) make provision (which may include provision conferring jurisdiction on a court or tribunal) about compensation."

        (2) Section 313 of the Insolvency Act 1986 (c. 45) (charge on bankrupt's home) shall be amended as follows—

        (a) in subsection (2) for ", up to the value from time to time of the property secured," substitute ", up to the charged value from time to time,", and

        (b) after subsection (2) insert—

        "(2A) In subsection (2) the charged value means—

        43

        (a) the amount specified in the charging order as the value of the bankrupt's interest in the property at the date of the order, plus

        (b) interest on that amount from the date of the charging order at the prescribed rate.

        (2B) In determining the value of an interest for the purposes of this section the court shall disregard any matter which it is required to disregard by the rules."
        (3) The following shall be inserted after section 313 of that Act—
        "313A Low value home: application for sale, possession or charge
        (1) This section applies where—

        (a) property comprised in the bankrupt's estate consists of an interest in a dwelling-house which at the date of the bankruptcy was the bankrupt's sole or principal residence, and

        (b) the trustee applies for an order for the sale of the property, for an order for possession of the property or for an order under section 313 in respect of the property.

        (2) The court shall dismiss the application if the value of the interest is below the amount prescribed for the purposes of this subsection.
        (3) In determining the value of an interest for the purposes of this section the court shall disregard any matter which it is required to disregard by the order which prescribes the amount for the purposes of subsection (2)."
        (4) The following shall be inserted after section 307(2)(a) of the Insolvency Act 1986 (c. 45) (after-acquired property: exclusions)—
        "(aa) any property vesting in the bankrupt by virtue of section 283A in Chapter II,".
        (5) In section 384(2) of that Act (prescribed amounts) after "section 273;" insert—
        "section 313A;".
        (6) In section 418(1) of that Act (monetary limits in bankruptcy) after the entry for section 273 insert—
        section 313A (value of property below which application for sale, possession or charge to be dismissed):".
        (7) In subsection (8)—

        (a) "pre-commencement bankrupt" means an individual who is adjudged bankrupt on a petition presented before subsection (1) above comes into force, and

        (b) "the transitional period" is the period of three years beginning with the date on which subsection (1) above comes into force.

        (8) If a pre-commencement bankrupt's estate includes an interest in a dwelling-house which at the date of the bankruptcy was his sole or principal residence, at the end of the transitional period that interest shall—

        (a) cease to be comprised in the estate, and

        (b) vest in the bankrupt (without conveyance, assignment or transfer).

        (9) But subsection (8) shall not apply if before or during the transitional period—

        (a) any of the events mentioned in section 283A(3) of the Insolvency Act 1986 (c.45) (inserted by subsection (1) above) occurs in relation to the interest or the dwelling-house, or

        the trustee obtains any order of a court, or makes any agreement with the bankrupt, in respect of the interest or the dwelling-house.

        (10) Section 283A(4) of that Act shall apply to an application made during the transitional period in relation to a pre-commencement bankrupt as it applies to an application made during the period mentioned in section 283A(2).'.—[Miss Melanie Johnson.]
        Brought up, and read the First time.
        Miss Melanie Johnson: I beg to move, That the clause be read a Second time.
        New clause 6 was tabled to fulfil a commitment made in Committee to my hon. Friend the Member for South Ribble (Mr. Borrow), who had tabled his own new clause to deal with situations where the bankrupt's family home remains liable for sale by the trustee, and indeed is sometimes sold by him, long after the bankrupt has been discharged. The current provisions can lead to some harsh outcomes and perceived unfairness, and my hon. Friend mentioned representations from a wide range of organizations—including the Insolvency Practices Council, the Bankruptcy Advisory Service and the Association of Business Recovery Professionals—seeking clarification and a change to the law. The hon. Member for Huntingdon (Mr. Djanogly) also spoke in Committee in favour of change.
        My hon. Friend accepted that his new clause may not have been perfectly drafted and withdrew it on our undertaking further to consider the issue of the family home. New clause 6 provides for more equitable treatment of the family home in bankruptcy. The home will continue to vest on bankruptcy in the bankrupt's estate, as it does now, but the clause provides a three-year period during which the trustee must act. If he does not do so, the family home reverts to the bankrupt at the end of that period. The clause provides for extending that period in special circumstances, but that will be the exception rather than the norm.
        We believe that all the relevant provisions will result in a much fairer regime. They will provide some certainty to the bankrupt, the trustee and the creditors about the time scale, which is currently open ended, for dealing with the family home. They will create a balance between the interests of the bankrupt and his or her family and the creditors. In a minority of cases, that balance can currently unfairly favour the interests of creditors, and the provisions will help lift the stigma of bankruptcy.
        In considering the matter further, we have concluded that those who are bankrupt when the new provisions come into force should also benefit. There seems no sound reason why that should not happen, especially since they feel the unfair effects of the current law. The new clause therefore contains transitional provisions.
        The provision is detailed because it deals with a complex subject. Nevertheless, we believe that it will create a reasonable balance between the interests of creditors, by providing ample time for the disposal by the trustee of the bankrupt's interest in his or her sole and principal residence in the most appropriate manner, and those of bankrupts and their dependents, by providing a degree of finality about the time scale in which their interests in their homes will be tackled.
        I ask hon. Members to support the new clause.
        Mr. Waterson: I am grateful to the Minister for explaining the thinking behind the new clause. As she rightly says, it is based on a similar amendment which the hon. Member for South Ribble (Mr. Borrow) tabled in Committee. As she also said, a central reason for the new

        45
        clause is removing the stigma of bankruptcy. The Opposition and the Government differ sharply on the matter. As the Minister knows from our Committee proceedings, we have genuine anxieties about whether removing the stigma to the extent for which the Bill provides is commendable. We have examined in some detail experience in the USA, Hong Kong and Scotland to ascertain what has happened in other parts of the world where similar proposals pertain.
        Mr. McWalter: The hon. Gentleman mentions removing the stigma on bankrupts. Does he accept that the new clause would remove it from some but possibly make it worse for those whom one might regard as maleficent bankrupts?
        Mr. Waterson: Clearly, it affects bankrupts who have a substantial asset in the form of a home in which they live. However, I am sure that the hon. Gentleman and the Minister accept that the new clause is part of the general philosophy of the provisions that we are considering: removing the stigma of bankruptcy, and making it easier for people to become bankrupt and come out of bankruptcy. The argument for that is based on the unsustainable proposition of culpable and non-culpable bankrupts. We do not accept that, and we have argued for a third category: the pathological optimists, who do not mean any harm but leave a trail of debt and destruction.
        It is instructive to examine the Minister's initial reaction to what was new clause 12, which the hon. Member for South Ribble tabled in Committee. She did not greet it with special enthusiasm,
        "as it can lead to a certain rough justice in practice and is not entirely compatible with 'A Fresh Start'"—[Official Report, Standing Committee B, 16 May 2002; c. 714.]
        "A Fresh Start" is the title of the White Paper, and the Minister herself made those remarks.
        In Committee, we covered the point that English law makes no distinction between personal and corporate insolvency. We know that after the changes in the law in the USA, 1.5 million bankruptcies a year there have nothing to do with business. The vast proportion constitute consumers who are wiping out consumer—usually credit card—debt. We must be under no illusions about the provision being directed at individuals who run up personal credit bills. In many cases, the only asset available to their creditors will be the remaining equity in their homes. With the current explosion in consumer credit, this problem is likely to get worse rather than better.
        5 pm
        In addition, another part of the Bill contributes to the problem that will arise from new clause 6. That involves the more limited time that will be available to investigate bankrupts and their assets before they are discharged from bankruptcy. We shall investigate this matter in greater detail under the eighth group of amendments. The Bill sets out a period of 12 months, but makes it clear that, for many bankrupts, that will he the upper ceiling, and that they will come out of bankruptcy well within the 12-month period. One of the arguments against the three-year period relates to whether the ownership of a property comes to light in a reasonable time, and I shall come to that in a minute. We want to ensure that, in introducing these changes—which must all be taken together—we do not produce a kind of rogue's charter.
        46
        I am sure that the Minister will concede that excluding a bankrupt's home in certain circumstances is a major issue in this legislation, and the proposal has been introduced very much at the last minute. I concede that there was a discussion based on the new clause tabled in Committee by the hon. Member for South Ribble, although, as I recall, that came towards the end of the Committee's deliberations. The Minister, having promised to come back to us on this matter, has, indeed, produced the Government's own new clause. This has come at a very late stage in relation to our discussions on the Bill last Thursday and today.
        There are two aspects to the Government's rather detailed new clause. The first issue relates to a bankrupt's sole or principal residence being returned to them, in principle, after three years. The second issue—to which the Minister did not, perhaps, devote as much time as she should have—involves the provision about low-value homes. Subsection (3) of the new clause proposes that, when a bankrupt's sole or principal residence is involved, and a trustee applies for an order for the sale or possession of the property, or
        "for an order under section 313 in respect of the property",
        "The court shall dismiss the application if the value of the interest is below the amount prescribed for the purposes of this subsection."
        That is quite a dramatic departure, even from the debate that we had in Committee. As I read that paragraph, it seems to be saying that properties below a certain value will be exempt from the bankruptcy process in any event. Presumably, it leaves the fixing of the value—the so-called low value—to regulation. It would be interesting to hear more of the Minister's thinking about what kind of low value we are talking about.
        This measure has the potential to be extremely divisive across the country. How is this low value to be established? Judged by London standards, properties in some parts of the country have a very low value indeed, but only on a comparative basis. What attempts, if any, have been made to consult insolvency practitioners, consumer bodies or the credit industry on the effects of this and the earlier part of the new clause? What is the thinking behind this development concerning low-value properties? How is that term to be defined? What is the basis for it? This provision goes significantly beyond the debate that we had in Committee, and it would be interesting to know precisely what the departmental thinking behind it is.
        These major concerns are borne out by a letter that was sent to the Minister by an anonymous insolvency practitioner, a copy of which was also sent to me. This person has practised as an insolvency practitioner for many years, and used to work for the Insolvency Service. His first point was that he was unsure when the three-year period would begin to run. As I read the new clause, it would seem to begin when the bankruptcy starts. The gentleman to whom I refer, however, points out that it might make more sense if the three years ran from when the trustee became aware of the existence of the property.
        Miss Melanie Johnson: Subsection (5) states that if the bankrupt does not notify the official receiver or the trustee of the property, the three-year period will be extended.
        Mr. Waterson: That is very helpful.

        47
        As I am sure the Minister will accept, it is not unknown for a bankrupt to hide his interest in a property. This is not a situation in which all or even most bankrupts rush to declare all their assets at the beginning of a bankruptcy.
        The gentleman I mentioned writes:
        "What the government appears to be saying to unscrupulous or feckless/reckless bankrupts… is that if you risk, in the main, other people's money and if you are lucky enough for the equity in your house to increase…that windfall benefit will be yours rather than your long suffering creditors', the government needless to say being one of the larger losers. This doesn't encourage enterprise, but a bunch of gamblers gambling recklessly with other people's money."
        Before proceeding, the Minister should at least ask the insolvency profession whether hers is a sensible approach.
        We are prepared to concede that, if there is some unfairness, it could be argued that it is experienced by the bankrupt's spouse rather than the bankrupt if he or she has not been kept fully informed. The hon. Member for South Ribble said, not unreasonably, that it was a shock for someone, having initially kept his home, to use it some years later during a bankruptcy; but I understand that that has been addressed for some years by the Insolvency Service itself.
        The bankrupt and/or his or her spouse is given the opportunity, in the event of negative or limited positive equity, to purchase the property for a nominal sum—usually £1—with legal costs of no more than £230. It is difficult to believe that the bankrupt or spouse could not raise that kind of money if the offer were made in the usual way. However, the gentleman's letter continues:
        "I have seen many cases working for an Insolvency Practitioner, where there are many unanswered letters on file from the Official Receiver, to the bankrupt offering to sell his interest in the property for a nominal sum. I have looked at the file of one bankrupt where there were no less than 6 letters on file from the Official Receiver commencing within weeks of the Bankruptcy".
        The problem seems, however, not to relate so much to the matrimonial home with negative or very limited equity. Any bankrupt with any sense should accept the terms routinely offered. I am told that the practical problem for trustees is dealing with cases in which the bankrupt's share of the equity is perhaps between £2,500 and £10,000, and it is beyond the ability of the bankrupt or his spouse to borrow that sum, but uneconomic for the trustee—in terms of his own fees—to pursue the matter through the courts.
        As for bargaining with the bankrupt, the trustee would not give up the potential right to sell the matrimonial home as a way of ensuring a more satisfactory result in terms of the bankruptcy overall. One of the aims of new clause 6 is to prevent such pressure from being exerted on a bankrupt who may be less than willing to volunteer assets or payments to satisfy creditors.
        One answer proposed by our anonymous correspondent is that the Insolvency Service should review its files far more regularly, not just when the assets fall into its lap—usually when the bankrupt wants to sell or remortgage his home. He says:
        "in my experience this is the most common way insolvency practitioners get appointed."
        He says, in conclusion:
        "There is a cheap and effective way for many bankrupts/spouses to protect their homes, the fact that the way has not been taken is normally the ostrich response of many bankrupts and the fact it takes
        48
        some years to discover is due at best to the under resourced and under trained Insolvency Service, at worst due to their inability to apply or understand their own procedures."
        On any view, this provision must shift the balance of power between creditors and debtors. It is bound to have a knock-on effect on the credit industry, quite apart from the effects, which we discussed at length in Committee and will discuss at length again today, of other provisions relating, in particular, to personal insolvency. It is important that Ministers and officials consult fully before proceeding with the proposals, because the ghost at the banquet—the law of unintended consequences—is bound to arise again here, as sure as eggs is eggs. As the Opposition, we must at least try to guard against that.
        With all due respect to the hon. Member for South Ribble, who advanced arguments that were sometimes simple and emotional, there is always another side to the question. It is important that the Government do not rush to try to right an apparent injustice, when the real injustice is often the one visited on creditors, who may be not banks or credit companies but simply other individuals, family or friends, who have advanced money to a bankrupt. All too often, the lender of last resort is a close family member or friend.
        Mr. David Borrow: I welcome the new clause. I am extremely grateful that the Minister delivered on the promise made in Committee. The new clause is long and complex, because this is a complex and difficult area of law, but the principles are simple, to echo the word used by the hon. Member for Eastbourne (Mr. Waterson). When a person goes bankrupt, it is reasonable for the creditors to be able to get access to all the assets, but we are talking not about assets but about a family home in which there is no interest, or only marginal interest, at the time of bankruptcy.
        The new clause means that the creditors must, within three years, either take possession of the property and dispose of it or allow the bankrupt to continue to own it so that equity builds up, either by an increase in its value or by a lessening of the mortgage debt. If the house were a moveable chattel, it would be sold and the value would be distributed among the creditors, but at the time of bankruptcy there is nothing for the creditors to get hold of, because it does not exist.
        Under the current law, the value in the property that is built up, through hard work and paying off the mortgage and through changes in the property's value after the bankrupt is discharged, can end up being distributed to the creditors a decade or more later, when any other asset belonging to the bankrupt at the time of bankruptcy would already have been sold and distributed.
        In my view, it is important to be able to say that, once a bankrupt has been discharged, a line has been drawn under the matter and he can get on with his life, build up equity in the home and anticipate being able to retire with a property that has been bought and paid for. Under the current law, that may not happen. The hon. Member for Eastbourne asked about what happens if the family home does not come to the attention of the trustee at the time of bankruptcy, but that point is adequately dealt with in new clause 6, which points out that the three-year period begins when the property's existence comes to the attention of the trustee.

        49
        5.15 pm
        This is a modest but important new clause for certain people. I welcome its introduction by my hon. Friend the Minister, and the fact that her officials have found time to ensure its correct drafting. I hope that the House will accept it.
        Mr. Mark Field: I accept the points made by the hon. Member for South Ribble (Mr. Borrow) today and in Committee. It seems unusual and perhaps unfair on a bankrupt to be left in limbo for such a period, particularly in cases where the matrimonial home is clearly part of the bankrupt's estate when proceedings begin, and the risk of needing to sell it off to pay the bankrupt's debts is therefore small or non-existent. Such uncertainty would be especially unfair on the bankrupt's spouse and children, for example. However, there are also concerns—articulated well by my hon. Friend the Member for Eastbourne (Mr. Waterson)—about stigma and the position of creditors. In tabling this and other provisions, the position of creditors has perhaps been forgotten, or at least downgraded somewhat.
        Although I appreciate that the same could be said of any arbitrary time limit, my concern about a strict three-year limit is that it might be deemed necessary to sell the bankrupt's home—to realise perhaps only a relatively small proportion of the equity—at a difficult time in the property market. I am a relatively new MP, with 12 and a half months' experience in this place, but those who were MPs during the mid-1990s will be familiar with stories of individuals who, on becoming bankrupt, had their property taken over by the mortgage company or building society, and sold for a very low value. Any arbitrary time limit such as that proposed involves the inevitable risk that the property will have to be sold at a time disadvantageous to the bankrupt. Notwithstanding the level of discretion provided by the clause, such risk remains.
        Mr. Waterson: Although the Minister rightly pointed out that a court can apply a period longer than three years, under subsection (7) it is possible, in principle, for a period of less than three years to be applied.
        Mr. Field: I fully appreciate that there is flexibility, but if the clause is too flexible, it risks going against the grain of the intended aim of achieving some certainty. Such certainty is necessary in the light of the concerns of the bankrupt, and particularly of the state, about housing any dependants.
        It seems that the new clause will ultimately be accepted, and instinctive support does indeed exist on both sides of the House for some of the aims of the hon. Member for South Ribble and the Government. I hope, however, that thought will be given to the underlying concern that it might be made far too easy to apply for individual bankruptcies. The real risk of this clause and other clauses is that the interests of creditors will be undermined.
        We will no doubt brandish statistics later in the debate, but newspapers have recently reported that significant numbers of graduates leave university with large personal debts. They may not have the benefit of owning property, but such debts could lead to less of a stigma for being bankrupt, and students with large debts may go into bankruptcy at an early stage in order to draw a line under
        50
        them. As I have said, the fear is that the interests of creditors—as my hon. Friend the Member for Eastbourne pointed out, the creditor of last resort is all too often friends and family—will be undermined by allowing further rights to those with debts.
        I hope that the Minister will be able to provide some assurances on the points that have been made. Given the debate that we had in Committee, we can understand why the new clause is considered a good idea, but we are worried that creditors' interests will be downgraded in some way and that the strict time limits—notwithstanding the potential for some flexibility—will cause grave injustices. Examples of such injustices will no doubt have a high profile press coverage, and that will not do any of us any credit. We may find that the good intentions behind the clause will be undermined by the reality.
        Mr. McWalter: I congratulate my hon. Friends the Member for South Ribble (Mr. Borrow) and the Minister on the new clause. It will significantly strengthen the Bill in terms of trying to promote a culture of enterprise. People will have greater opportunities to set up businesses—to implement a business idea—without risking all the assets that they have accumulated before setting out on a venture that will always be hazardous and difficult, no matter what the Government do. People who try to develop new businesses will always win the respect of Members of Parliament.
        The new clause exposes again the fault line between the Government and the Opposition. The Opposition say that they do not support the idea that one can distinguish between bankrupts who are benign and those who are malign. Of course, the third category of serial optimist—or people who might be described as reckless—will come to the attention of the courts after the first or second reckless venture. In such cases, the courts would begin to think that such persons were malign.
        Mr. Field: The legislation on individual bankruptcy and, to an extent, corporate insolvency is predicated on the basis that some bankrupts and insolvent companies are good and some are bad. However, does the hon. Gentleman agree that there are shades of grey? We are concerned that the Government's approach is naive. The issue therefore should be dealt with as a matter of fact, rather than of strict law.
        Mr. McWalter: I agree with the hon. Gentleman. It is a matter of shades of grey and difficult decisions need to be made about whether somebody who has left a lot of creditors in the lurch is so culpable that they should face a long period of imprisonment or be banned from being a company director. In other cases, people might go bankrupt because someone defaulted on a large debt that was owed to them, so it was no fault of theirs—especially if the default was unforeseeable. There is a spectrum of cases and it is ultimately for the courts to decide some of them.
        Under the new clause, it must be decided whether someone is malign or benign. People heading for bankruptcy can do everything possible to salt away resources so that when they go bankrupt and default on their obligations to their creditors, they can live off the fat of the resources that they have salted away. I have come across a case in my constituency of someone making extraordinary payments into a pension plan which can be

        51
        drawn down early so that he can live high on the hog while the enterprises of many of his creditors are significantly diminished. That is a malign case.
        Similarly, people can vest in their property a significant amount of resources that they should have been paying out on the bills to those who supplied commodities and services to their companies. However, new clause 6 caters for that eventuality. Someone may develop a significant capital in a property that is in council tax band H, for example, at the same time as they have been defaulting on their obligations, and if the company and its directors fail to take account of the process of giving an early warning and indicating to the authorities that they will have difficulty in meeting their obligations, I am sure that when the trustee applies for an order for sale in respect of the dwelling house, it will be granted. That is the process envisaged by the new clause.
        Of course, much of the time, people genuinely have a single dwelling house—a principal residence—where not only they but their family and children live. Under the old regime, that asset is taken away and it falls to the state to house the family and children. These days, it is difficult for local authorities to respond positively in those circumstances. I agree with the hon. Member for Cities of London and Westminster (Mr. Field) about grey areas, but if we assume that the person has built up an inordinate amount of capital as a result of malign activities, it is ultimately for the courts to decide on which side of the line they fall. Have they built up that capital while failing to co-operate with the authorities? Some cases might be difficult to decide. Sometimes the order for sale will be granted because it will be reasonable to expect the family to rehouse itself in a lower value property, paid for out of residual assets.
        5.30 pm
        Mr. Waterson: Does the hon. Gentleman at least accept my concern that, in other parts of the Bill, the actual period for investigation and then discharge of a bankrupt could be much less even than 12 months? Given existing pressure on the relevant resources, that could mean that if the information that a property was not the sole, but could be the principal, residence, was not volunteered, that asset might not be available at all for the satisfaction of the creditors due to the dishonesty of the bankrupt and the lack of proper investigation by the trustee.
        Mr. McWalter: I thank the hon. Gentleman for that intervention. Where there is non-disclosure, the person is automatically in danger of instantly being labelled a malign bankrupt; because of the failure to disclose, the kind of protection for the principal home envisaged in the new clause would not apply. Such behaviour would thus immediately constitute a prima facie case for the person not benefiting from the provision.
        Mr. Waterson: The hon. Gentleman is generous in giving way to me again. The point I was trying to make was that the non-disclosure might remain undiscovered—although the hon. Gentleman is right about the effects, if it was discovered.
        Mr. McWalter: I accept what the hon. Gentleman says, although if it became clear at a later stage that
        52
        someone had failed to disclose, other statutes might be applicable, depending on the precise nature of the non-disclosure; for instance, the Proceeds of Crime Bill might apply.
        Mr. Ken Purchase: Although I have huge sympathy with the new clause in its widest sense because it will bring a little more justice in those situations, on the narrow point that my hon. Friend makes about malignity and non-malignity, does he agree that determining between the two would be an enormous task to give anyone? Within that narrow context, does he agree that a person who fails to keep themselves fully and properly informed of good business practice might as well be acting malignly if it leads to the difficulties that we are discussing?
        Mr. McWalter: As always, my hon. Friend makes a substantive point: someone might fail to co-operate in disclosing their difficulties meeting their obligations because they simply do not know that to do so could result in those difficulties being obviated. That raises interesting questions about the custodians of that process, although insolvency practitioners increasingly seek such changes in the law. When a person makes an initial approach to such a practitioner, they will rapidly be made aware of the arrangements whereby they could be assisted to discharge their obligations to their creditors.
        To return to the point that I was making, the procedure admits of coping with two very different kinds of case, and even with the slightly in-between grey cases on which Opposition Members are especially keen. The result of the change—for which I have already commended my hon. Friend the Under-Secretary of State for Trade and Industry—would be that people could think about setting up a business without its threatening the welfare of their family. That would be a marvellous change for the business culture of this country and I sincerely hope that we can make the provision work.
        I accept the point made by my hon. Friend the Member for Wolverhampton, North-East (Mr. Purchase) that its implementation will require extremely good communication between the Government and business, hopefully, for instance, through the agency of the Small Business Service. We should try to ensure that it becomes a prime agency for helping businesses that experience the sort of difficulties to which he adverted.
        Mr. Carmichael: I shall not detain the House long. I have already given hon. Members the benefit of the Presbyterian perspective and stigma in Committee, and I do not intend to rehearse it again. However, as the hon. Member for Cities of London and Westminster (Mr. Field) has said, this is a question of shades of grey, and even in the Church of Scotland, we recognise shades of grey.
        Mr. Purchase: Does the hon. Gentleman speak for the Wee Frees?
        Mr. Carmichael: I cannot speak for the Wee Frees; I am not one of them.
        The hon. Member for Eastbourne (Mr. Waterson) said that he was aware of difficulties in other jurisdictions, including Scotland. I am not, in all honesty, aware of a great groundswell of opinion among insolvency

        53
        practitioners or others in Scotland seeking the sort of changes that he seeks to promote. Unless he can supply us with more concrete examples, I wonder about the extent to which he perhaps seeks to manufacture a problem that does not exist.
        I had some difficulty in reconciling the hon. Gentleman's remarks and, indeed, those of his colleague, the hon. Member for Cities of London and Westminster, with those made by those on the Government Benches. When all else fails on these occasions, my approach is always to read the amendment, and it seems to me that the new clause was being painted rather blacker than necessary.
        The hon. Member for Cities of London and Westminster says that the application should be a matter of fact, rather than of law. Indeed, if one has regard to the terms of the new clause, that is, in fact, the case. We are dealing with a number of instances in which discretion will be given to trustees, and we hope that that discretion will be excised responsibly and properly on the basis of the information available to them at any given time. Indeed, in the circumstances, I would go so far as to say that the trustees will be best qualified to judge the appropriate application.
        Discretion is the important aspect. As the hon. Member for Hemel Hempstead (Mr. McWalter) said, where someone seeks to avoid disclosure, it is highly likely that the trustee will regard that as an act that would divest the individuals concerned of the protection provided under new clause 6. In other words, they would not be protected by it. On balance, the Government's approach is correct.
        I have only one concern, which has not yet been properly aired: low-value homes. I want to hear more from the Minister about how those proposals will work and how the variation in property prices will be accommodated. In certain parts of my constituency, two or three-bedroom cottages can still be bought for £10,000 or £15,000.
        Mr. Purchase: Are they in a nice part of the hon. Gentleman's constituency?
        Mr. Carmichael: The hon. Gentleman should be aware that there are no nasty parts of Shetland. If he has learned nothing else in past eight weeks, I have surely taught him that much.
        The situation in Shetland is very different from that which pertains in other parts of the country, and I wonder just how that circle will be squared. I would want to hear rather greater assurance from the Government that those concerns have been met before we rush headlong into the difficulties that I have outlined.
        Miss Melanie Johnson: On a few occasions, I wonder whether all hon. Members have listened carefully to what is said in the opening remarks. I thought that I had sketched out very clearly the fact that there are two situations. I refer in particular to the comments made by the hon. Member for Eastbourne (Mr. Waterson) in his opening remarks. The new clause is intended to deal with uncertainty and variation and to achieve a balance. I thought that I had emphasised those points in my opening remarks, but I obviously failed in several regards and I shall endeavour to set the record straight.
        54
        First, let us be absolutely clear that the new clause does not exclude the family home in any sense. Were there to be a failure to disclose the existence of a family home, it would be an offence under the Insolvency Act 1986, and it would be taken into consideration by the courts. If there is equity in the property, the creditors will get the benefit of it. The effect of the new clause is that the trustee must act within three years. That is the core and central purpose of the new clause, albeit, as Members have recognised, a lengthy and complicated way of achieving it. It responds to a significant number of views that were expressed. Again, the hon. Member for Eastbourne questioned the views of the insolvency profession.
        Mr. Borrow: I am sure that my hon. Friend has received a great many representations on this matter. Is she in the same position as me, however, in that the only hostile representation that I have received was from the anonymous insolvency practitioner? Does she regard anonymous representations as I do, and give very little weight to them?
        Miss Johnson: Indeed. I have not seen the anonymous representation, as I suspect that it is hard to answer such an anonymous representation. It has not come to my attention, although the hon. Member for Eastbourne has raised it in his remarks.
        I should like to set the record straight. On the issue of the matrimonial home, the Insolvency Practices Council said:
        "It is accepted there are many different circumstances affecting the value of the equity and the potential value to the bankruptcy estate. When should a decision be taken on realisation? At present some of the variations do not seem to be soundly based."
        The Bankruptcy Advisory Service said:
        "We continue to hear from people who were bankrupt some years ago and who have not taken steps to secure their home from any action by their Official Receiver/Trustee in Bankruptcy. Now years later, they find that the property has increased in value and their regular mortgage repayments have reduced the borrowing, putting substantial equity in the property for the Official Receiver/Trustee to claim".
        Clearly, a balance must be struck, which is why the opportunity is provided of three years in which to take the property into account. My hon. Friend the Member for Dudley, South (Mr. Pearson), who cannot contribute to our debate, commented to me earlier that he has a constituent—the wife of a bankrupt—for whom this is an issue after 13 years of bankruptcy. Clearly, these issues can cause considerable distress when they crop up much later.
        The Association of Business Recovery Professionals also commented:
        "This is the concern, which has been identified…about variations in practice between trustees in bankruptcy in how they deal with the matrimonial home, and a perceived unfairness in selling the home many years after the bankrupt's discharge."
        As my hon. Friend the Member for South Ribble (Mr. Borrow) recognises, all those groups, unlike the single anonymous contributor, represent a wide range of practitioner views. Indeed, they recognise that there is a problem of exactly the kind that the Government seek to address with the new clause.
        Mr. Mark Field: I thank the Minister for clarifying the issue in part. To achieve the goal of certainty, which I

        55
        fully appreciate— many Members have constituents who have been left in limbo for 10 or 15 years with debt hanging over them and the worry of the matrimonial home being sold—was thought given to allowing the trustee to put a charge on the matrimonial home? That charge would be for a set amount of money after three years, five years or whatever period. That would not necessarily take the whole home outside the confines of bankruptcy but it would provide a second mortgage that could be reclaimed when the property was sold.
        5.45 pm
        Miss Johnson: Consideration was given to that and several other possibilities. We thought that there were considerable practical difficulties with such a suggestion and that it might have a downside for creditors. Although it is realistic to say that the home should be taken into consideration within the three-year period and that vesting should take place, it might be better for creditors if it is disposed of a year down the line. That seems perfectly reasonable. However, it is not reasonable for the issue to arise 10 or 15 years later or for the home not to be recognised as an asset earlier.
        We have tried to seek a balance. The distinctions between benign and malign or recklessness and bad luck do not come into play; it is a question of how the home is dealt with in the bankruptcy. We seek certainty while giving the trustees time to achieve a good realisation of the assets for the creditors. It is important that a time scale exists, which is why we have chosen the period of three years and tabled new clause 6.
        Mr. Waterson: May I urge the Under-Secretary not to be so quick to dismiss the comments of the anonymous correspondent? I could understand that if his comments were in capital letters and green ink and liberally sprinkled with four-letter words. However, they seem closely argued and based on long experience of how things work. Does she accept or reject the practical points that he makes? She cannot get away with merely saying that, because the comments are anonymous, she does not need to deal with them. Does she accept the central thesis that there are any number of reasons for a delay in a home becoming available as an asset in a bankruptcy?
        Miss Johnson: Of course there are a number of reasons for delay, but I have made it clear that the new clause already recognises that point. It is reflected in its drafting and in the provisions that will be made if it becomes a part of the Bill.
        The hon. Member for Orkney and Shetland (Mr. Carmichael) said that the issue of low-value properties was of particular concern to him, and the hon. Member for Eastbourne said that it was among his list of concerns. It may be a high or low-value property, but the degree of equity in it is a separate matter. The provision will therefore deal with cases in which there is little or no equity in the property and the cost of disposal may be disproportionate in relation to the funds that could be realised for the estate by the property's sale. The provision will not apply in every case, only when there is an application for a charging order or an order for sale.
        56
        The value will be set in the light of extensive consultation with interested parties, which is the point made by the hon. Member for Eastbourne. There will be extensive consultation, and our intention is to make that clear in rules; it is not an appropriate matter for primary legislation, not least because of the changes that occur to the way in which the property market works. Equity in housing may or may not exist.
        Mr. Carmichael: I am grateful to the Under-Secretary for that clarification, but the amount of equity in a property will largely depend on the health of the property market in a particular area. Although I appreciate the point that it is not necessarily a question of the value of the property itself, there will still be great disparities between different parts of the nation.
        Miss Johnson: I accept that. We are all aware of the huge disparities. Indeed, those hon. Members who are in the Chamber represent constituencies with wildly differing house prices. The important consideration, however, is that we tease out in discussion how the rule will work and what figure should be used. For that reason. we believe that it is not appropriate to include it in the Bill. Instead, we should return to it in more detail after consultation.
        The new clause does not encourage people to gamble with other people's money. I thought that that suggestion was beneath the hon. Member for Eastbourne. II is patently about providing a degree of certainty and balance that is currently missing. Many professionals in the insolvency sector recognise that it would be desirable to address that problem. It would make things fairer because a balance needs to be struck. The new clause will do that and it merits the support of the House.
        Question put and agreed to.
        Clause read a Second time, and added to the Bill.

      New Clause 2

        FEES: FURTHER PROVISION
        '.—The following shall be inserted after section 415(3) of the Insolvency Act 1986 (Fees orders (individual insolvency proceedings in England and Wales))—
        "(3A) An order under this section shall provide for:

        (a) exemption from any fees payable under this section by applicants who, at the time when a fee would otherwise be payable. are in receipt of income support, income-based jobseekers allowance, working families tax credit or disabled persons tax credit (working tax credit and pension tax credit from April 2003) and any other benefit that the Secretary of State may by order specify;

        (b) remission of all or part of any fees payable under this section where the Secretary of State considers that the payment of any fees payable under this section would, owing to the exceptional circumstances of the particular case, cause undue financial hardship;

        (c) a reduction in the fees payable under this section where:

        (i) two or more people live in the same household petition for bankruptcy at the same time, and

        (ii) they are jointly and severally liable for at least one debt in both petitions;

        (d) payment of any fees payable under this section by instalments.".'—[Mr. Waterson.]

        Brought up, and read the First time.
        Mr. Waterson: I beg to move, That the clause be read a Second time.

        57
        The subject of the new clause is, in part, a re-run of a debate in Committee. We did not get a satisfactory answer from the Minister then and I hope that our luck will be better today.
        The aims of the new clause are fairly straightforward. It is based on briefing material and a draft amendment produced by the National Association of Citizens Advice Bureaux, which has wide experience of advising people with debt problems. By the standards of some bankrupts whom we have vilified, some people have modest debts, but they still have no way of paying them off in a reasonable working life. It may not matter for our purposes whether they are benign or malign bankrupts or would-be bankrupts, to use the terminology of the hon. Member for Hemel Hempstead (Mr. McWalter); what matters is that they simply cannot afford to go bankrupt, even if their citizens advice bureau or Member of Parliament advises them that that would be in their best interests. We are not claiming that bankruptcy should never happen and is not appropriate. In some cases, it is the best, if not the only, option.
        I hope that the new clause is clear. First, it would remove financial exclusion from bankruptcy for people on means-tested benefits and tax credits by exempting them from paying court and deposit fees. Secondly, it would help people on low incomes to pay those fees by allowing for remission of all or part of those fees and providing for payment by instalments. Thirdly, it attempts to deal with the situation when both people in a couple find it appropriate to apply for bankruptcy at the same time. All that is against the background of an enormous growth in the financial advice given by citizens advice bureaux. They have seen a 39 per cent. increase in consumer credit debt problems in the past four years alone. Last year, they advised on debt and equivalent problems totalling £1.2 billion, so they know what they are talking about.
        Almost by definition, citizens advice bureaux advise people who perhaps cannot afford to, or would not usually see, an accountant or an insolvency practitioner but who are at their wits' end because they cannot find a way through the debts that they have accumulated. For many people whom they advise, bankruptcy is the only way to obtain a fresh start. They also say that the administration order process in the county court does not apply if someone owes more than £5,000 or has debts that are not the subject of county court judgments.
        Typically, citizens advice bureaux advise people who have debts of £10,000 or more, and I gave one of their worst examples of that in Committee. A local authority tenant, who was employed, managed to run up debts of £33,000. She went to the CAB after considering committing suicide and being depressed about the problem. It advised her that bankruptcy was the best option because otherwise it would take her at least 20 years to repay the debts. The official receiver decided not to make an income payment order or to sell any of her goods. In that legitimate case, a weight was lifted off the shoulders of that lady who, for whatever reason, ran up debts that she had no way of repaying. Another CAB in Sussex dealt with a case in which a £5,000 loan grew to more than £18,000. That caused enormous stress and again the person involved was advised to go bankrupt.
        NACAB makes the point that in England, Wales and Northern Ireland—as opposed to Scotland, where it is much cheaper—it costs £370 to go bankrupt. We are in cloud cuckoo land if we think that the people we are
        58
        talking about can find that amount of available cash. NACAB gives examples of people who have had to borrow money from family or friends simply to pay the fee to go bankrupt. A recent legal case of R v. Lord Chancellor ex parte Lightfoot attempted to deal with that problem in the courts, although it was unsuccessful.
        The Minister gave part of the answer in Committee. She said that some debtors can seek a waiver or reduction of the £120 court fee. As the hon. Member for North-East Derbyshire (Mr. Barnes) and I made clear, that still leaves £250 that is not covered by the waiver provisions. The Minister was uncharacteristically unsympathetic to the proposal. She stated that waiving all the fees in hardship cases would not be justified and
        "that all the costs of case administration would have to be met from other sources."
        I am not clear how the fees are decided. Are they meant to represent the costs of administering the average case? The Minister might not know off the top of her head, but presumably there is some attempt to relate one to the other.
        The hon. Lady went on to say:
        "we do not believe that general taxation should pay for people to enter bankruptcy when they may have taken on debts irresponsibly."
        They might have taken on debts irresponsibly, but they might also be part of the benign category of bankrupts or would-be bankrupts who got into that state through no fault of their own. She dismissed the entire group of potential bankrupts a little too lightly.
        The Minister also said that
        "a person's entry into bankruptcy is not a right, and should be considered very much a last resort."—[Official Report, Standing Committee B, 14 May 2002; c. 693.]
        It is a last resort for the people we are talking about, but there may be much more serious consequences for them if it is not available simply because they cannot afford the fees and court costs.
        My final suggestion in Committee, before giving up and promising to raise the matter on Report, was that there may be some merit in reconsidering the £5,000 limit for the county court provisions. The Minister was good enough to say that she would reflect on that point, so let us hope that she has done so and that she has proposals to change the situation.
        I stress once more that we are talking about a not insignificant number of people who are excluded from the bankruptcy process for one reason—they simply cannot raise the money to pay the costs necessary to start bankruptcy proceedings, even when they have been advised by organisations such as citizens advice bureaux that it is the appropriate course of action and, in some cases, the only way out of their debt problems. We were disappointed when the Minister was somewhat unsympathetic in Committee; I hope that she will be more sympathetic today.
        6 pm
        Mr. Carmichael: I am pleased to support the new clause in the name of the hon. Member for Eastbourne (Mr. Waterson). I am aware from my casework experience that this is a problem, even north of the border, where, as he says, the fees are more lenient. It seems absurd that, for lack of ready money, people cannot afford to make themselves bankrupt when it is manifestly the only course

        59
        of action open to them. The Government's attitude on this point strikes me as being not only less than helpful but inconsistent with their approach to the rest of the Bill. We have just acknowledged that in some circumstances it is right that creditors should be left unsatisfied, but in the next breath we seem to be saying that the Government must always get their pound of flesh in the form of administrative fees.
        The new clause is tightly drawn and it would mean that people could get to the starting gate. The hon. Gentleman referred to the remarks made by the Minister in Committee to the effect that bankruptcy is not a right. That question is ultimately determined by the courts, and it is wrong that access to that determination should be based on one's ability to come up with ready cash.
        Mr. Mark Field: I want to say a few words in support of the comments made by my hon. Friend the Member for Eastbourne (Mr. Waterson) and the hon. Member for Orkney and Shetland (Mr. Carmichael). It strikes me as odd that when we are trying to diminish the stigma of bankruptcy—the Minister will appreciate that there are, at least among Members on this side of the House, shades of opinion about the desirability of that aim—we are also making it ever more difficult for people to go into bankruptcy if they lack the relatively modest sums required.
        I hope that the Minister will think twice. The new clause is tightly drawn and there is no great risk of its being abused. The advice that many hon. Members have received from citizens advice bureaux throughout the country is that the measure would not cost the Treasury huge sums, but it would be a sensible move, given the plan to ease the bankruptcy procedure. I hope that the Minister will have given some thought to the comments made in Committee and here today, and that she will be able to give us some comfort about the concerns that we have expressed.
        Miss Melanie Johnson: Our debate has clearly shown the importance with which hon. Members regard the issues raised by new clause 2. The costs of entry into bankruptcy were also raised on Second Reading by my hon. Friend the Member for South Ribble (Mr. Borrow), and a new clause identical to this one was tabled by the hon. Member for Eastbourne (Mr. Waterson) in Committee. In addition, NACAB has briefed extensively on this point, as a result of which the Government have received a number of letters from hon. Members. I therefore welcome the opportunity to discuss the issue and the points covered by the new clause.
        Before I do so, however, I must say that I am bemused by the arguments advanced by the hon. Member for Eastbourne in support of the new clause, especially in light of his arguments about new clause 6. On the one hand, he argued on Second Reading and in Committee that we are being too soft on bankrupts and opening the floodgates to more consumer bankruptcy. Indeed, he was hot on that trail only moments ago. On the other hand, he has tabled this new clause, so that those who are unable to make any contribution to creditors will be able to enter bankruptcy and wipe the slate clean.
        As the House will be aware, bankruptcy is not the only method of dealing with debts; nor, depending on the circumstances of the case, does bankruptcy necessarily
        60
        provide the best outcomes for both the debtor and the creditor. I point out also that the courts have found that a person's entry into bankruptcy is not a right. The hon. Gentleman referred to the case of R v. Lord Chancellor ex parte Lightfoot, saying that the law would not help on this point, but the Court of Appeal held that the requirement to pay a deposit did not unlawfully restrict any fundamental right of access to the courts. Bankruptcy should be considered as a last resort; indeed, I thought that that was what Conservative Members were arguing. On this occasion they seem to be arguing that bankruptcy is too difficult for many people, and should be made easier, even though they may have no resources for creditors to access.
        There are several other routes available to individuals with financial problems, many of which do not require a deposit. Many individuals can, and do, apply to the county court for administration orders and discharge their liabilities through monthly payments, which are set at a level that the individual can afford. More than 7,500 debtors took advantage of that route in 2001. Additionally, growing numbers of individuals with debt problems seek advice and assistance from organisations in the voluntary sector such as the Consumer Credit Counselling Service and Paylink. Those organisations will administer debt repayment plans on behalf of debtors at no cost to the debtor, the administration cost being met by creditors who agree to forgo a proportion of new debt. Several of them offer repayment plans of as little as £1 per week.
        In considering changes to the arrangements for bankruptcy, account must be taken of the impact on creditors' interests, and that is my concern in considering the new clause. That point is particularly important in considering any proposal to reduce or waive entry costs in hardship cases. The bankruptcy entry deposit defrays part of the costs of administering the case. The deposit does not cover the full economic costs of administering the case, and any reduction in the deposit would mean that a greater proportion of the costs of case administration would have to be met from elsewhere, which would lead to lower returns to creditors.
        The level of the deposit and fees are set through secondary legislation. It is therefore unnecessary and unduly inflexible to deal with the matter in the Bill. We recognise that this is an issue of concern, but it is also a complex matter. In considering the need for changes, it would be necessary to ensure that there is a continuing balance between the interests of the debtors and creditors. We believe that the current arrangements strike the correct balance, whereas the new clause would not.
        To answer the specific point on deposits raised by the hon. Member for Orkney and Shetland (Mr. Carmichael), none of the individual insolvency provisions, nor those on fees and deposits, applies north of the border. I hope that that helps him.
        The current arrangements strike the right balance, and I ask the hon. Member for Eastbourne to withdraw the motion. If he does not, and in view of the fairly fundamental inconsistency in the Opposition's approach to these matters, I shall ask the House to oppose the new clause.
        Mr. Waterson: The Minister has scored a spectacular own goal. I might as easily describe her extremely tough

        61
        and Gradgrind-like attitude to the new clause as wholly inconsistent with her attitude to the new clause relating to bankrupts' homes. She takes a stern line now—although perhaps I should be grateful that she has not invited me to a seminar on the issue. I thought I had made it clear that I was talking about people for whom bankruptcy is indeed the last resort, and that the only thing that keeps them from it is an inability to raise the money for the fees that have to be paid if they are to become bankrupt.
        There is a way forward that does not involve the complication from which the hon. Lady shies away. I raised it in Committee and the Minister promised to reflect on it; I repeated it in my speech moving the new clause, but the Minister signally failed to touch on it in her reply. That way forward is to do something about the £5,000 limit that applies in the county court, which may have become outdated.
        Miss Johnson: I should have addressed that point and I apologise for not doing so. The hon. Gentleman asked in Committee whether there might be some merit in reconsidering the upper limit of £5,000 of total debts that currently applies for the purpose of qualifying for a county court administration order, and I said that I would reflect on it.
        Such matters are for my right hon. and learned Friend the Lord Chancellor to decide. His review of the enforcement of civil court judgments includes reform of county court administration orders. The Government are considering a range of options, both court based and non-court based. We do not intend to take any interim measures such as increasing the scope of the existing county court administration orders scheme, including increasing the limit, before we have considered the options for reform in that wider context. I hope that the hon. Gentleman appreciates that that is the sensible setting for further consideration of the issues.
        Mr. Waterson: I am grateful for that, and I suppose it does make sense that the matter is to be considered in a broader context. I am moderately delighted that it has not been lost sight of altogether.
        The Minister is taking an unnecessarily stern line. We know the sort of people that the provision covers—they are the sort of people described in NACAB's extensive briefing. I am sorry that the Government are not prepared to be more flexible; despite that, I beg to ask leave to withdraw the motion.
        Motion and clause, by leave, withdrawn.

      Schedule 16

        SCHEDULE B1 TO INSOLVENCY ACT 1986
        Mr. Waterson: I beg to move amendment No. 79, in page 243, line 13, after "company", insert—
        'and the whole or part of its business'.
        Mr. Deputy Speaker: With this it will be convenient to discuss the following amendments: No. 80, in page 243, line 14, after "not", insert "in his opinion".
        No. 81, in page 243, line 18, after "not", insert "in his opinion".
        No. 82, in page 256, line 22, leave out "28 days" and insert "three months".
        62
        No. 410, in page 264, line 17, leave out from beginning to end of line 13 on page 265.
        Mr. Waterson: It is fair to say that the amendments—with one exception, or perhaps with none—were tabled at the relevant points of Committee proceedings. However, we continue to feel strongly about the issues with which they deal.
        Amendment No. 79—in Committee, amendment No. 403—is supported by the CBI. The CBI makes the point, which was repeated by Opposition Members throughout Committee stage—much good it did us—that we should not be in the business of rescuing empty vessels, or companies as such; rather, we should be in the business of rescuing businesses. The distinction is subtle, but important. If a company has ceased trading, there is little point in rescuing it just for the sake of it. The Minister will recognise that the amendment echoes section 8 of the Insolvency Act 1986. It would make it abundantly clear that preserving and protecting businesses and enabling them to survive is the first priority.
        6.15 pm
        Amendments Nos. 80 and 81, which go together, would ensure that what matters at the end of the day is a judgment based on the professional knowledge and experience of the insolvency practitioner. As I said in Committee, although I do not want to labour the point, the aim is to avoid unhelpful disputes. I could not understand why the Minister in the Committee was not prepared to accept the relevant amendment, although I think it was another Minister who dealt with that part of the Bill; perhaps we shall be able to sneak it past the Minister here today.
        Amendment No. 82 is somewhat symbolic. It is part of our effort to get it across to the Government that those who practise in insolvency are extremely nervous about—if not downright dismissive of—the time limits set out in the Bill. We were assured that the Bill in all its detail, including the provisions on insolvency, was widely consulted on before it saw the light of day. However, as the shoals of briefings and proposed amendments came pouring in from insolvency practitioners and others involved in insolvency, it became clear that either the consultation had not been clear or comprehensive enough, or the views expressed had not been heeded.
        In Committee, I quoted one organisation that described the time limits as "preposterous". We do not believe that the time limits can be adhered to. It is all very well to say that extensions can be applied for, so it does not really matter, but that process will itself clog up the system. We did not have a satisfactory answer to that amendment in Committee, but that might again be attributable to the fact that it was another Minister who dealt with it there—a Minister who has now gone on to glory elsewhere in the Government.
        Amendment No. 410 is supported by the CBI. The CBI feels strongly—strongly enough to ask us to press the amendment again on Report after doing so in Committee—that there should be no restriction on the length of time an administration can last; hence the CBI would have us remove paragraphs 75 to 77 in their entirety from schedule 16. Paragraph 78 will ensure that administrators will remain, as they are now, duty bound to seek orders terminating the administration in the event

        63
        either that the purpose is fully achieved, or that it becomes clear that the purpose cannot be achieved. Paragraph 78 is perfectly acceptable both to the Opposition and to the CBI. If creditors believe that an administrator is delaying matters—something which I suspect happens only rarely—the creditors have plentiful remedies available to them. However, once the administration procedure has started, it should continue for as long as it needs to. Any attempt to cap its duration is bound to be arbitrary, and may well lead to lots of applications for extensions.
        I doubt that the provisions in the Bill have a friend in the world. The CBI is not the only organisation to have condemned them—they have been condemned by just about everybody who has any practical experience of handling trading insolvency. If the Government are intent on imposing a cap, we and the CBI urge them to allow a period of at least one year, but it would be better if there were no cap at all. After Committee stage, we remain far from convinced that a cap is needed. There is none at the moment, and the system seems to work satisfactorily in that respect. I urge the House to accept the amendments.
        Mr. Carmichael: It is unfortunate that we are again rehearsing a debate that we had in Committee, but the argument advanced by the hon. Member for Eastbourne (Mr. Waterson) on the need for the amendments is a good one. I hope that the Government will take on board the force of that argument.
        I can see no particular reason why we are so desperate to rescue companies when, as the hon. Gentleman said, that is a fairly meaningless term. That seems to run contrary to the Government's approach in much of the Bill, where they speak about wanting to keep or foster the culture of enterprise and avoid unnecessary administration or bankruptcy. We should look at the business itself rather than the legal entity. On amendment No. 80, we should rely on the administrator's exercise of professional judgment and not encourage a rush to litigation, which is the inevitable consequence of the clause as currently framed. Amendment No. 82 deals with the problem of indecent haste. I am sure that administrators will not drag their heels, so we are putting unnecessary pressure on them by setting a time limit of 28 days. A similar argument applies to the ending of time limits in amendment No. 410. The CBI and others have made good sound arguments which reflect experience, or the practicalities, to use the Minister's own words. The Government should give greater weight to them than appears to have been the case.
        Miss Melanie Johnson: Amendment No. 79 specifies that the first objective of administration is to rescue a company and all or part of its business. As the Minister of State, Cabinet Office made clear in Committee—I am sure that he did so and assure the hon. Member for Eastbourne that I am aware of what was said in Committee—that is the clear intention behind the new purpose. The hon. Gentleman and I are in agreement that there is no sense in the administrator trying to rescue companies that are empty shells, particularly if he or she could get a better deal for creditors by selling its constituent businesses as going concerns. To "rescue the company" self-evidently means to rescue it as a going concern, with all or much of its business intact.
        64
        The courts will take a practical line in interpreting the purpose. I draw hon. Members' attention to the explanatory notes, which say that
        "company rescue in the context of the clause means the company continuing as a going concern with all or a significant part of its business…For the purpose of these clauses, a proposal that would result in a shell company remaining would not be considered a rescue."
        Mr. Carmichael: When the Minister makes such statements about the courts' interpretation, she is almost inviting the judiciary to make a contrary interpretation. We are dealing with common purpose, so does she not accept that that is better expressed in the amendments' wording?
        Miss Johnson: The Bill was drafted by draftsmen who are familiar with what the courts are likely to do with the Bill's wording. Our aim is exactly the same as Opposition Members', so the amendment is not necessary. I hope that they understand the Government's position, as they allege they did not before. I hope that they realise that we agree utterly about the meaning of the provision; we believe it means what it says. but they would like more specific wording.
        Amendments Nos. 80 and 81 deal with the test of what is "reasonably practicable", which governs the administrator's choice of objectives. They seek to qualify that test by specifying that it means "reasonably practicable" in the opinion of the administrator. Again, there is no disagreement between Opposition Members and the Government about that principle, but we diverge about the way in which the Bill will work in practice. The administrator is the person on the ground who is in possession of all the facts and is best placed to determine whether a particular course of action is reasonably practicable or not on the basis of his or her experience and professional judgment. It is not the courts' practice to second-guess administrators' commercial judgment in such cases, so we do not expect the provisions to be interpreted in that way; my hon. Friend the Minister of State, Cabinet Office said so in Committee. I therefore believe that the amendments are unnecessary.
        Amendment No. 82 deals with one of the new time scales introduced in the revised administration procedure. The Bill requires the administrator to send a copy of proposals to creditors within 28 days' of his or her appointment; the amendment would extend that period to three months. Again, the issue was debated extensively in Committee, when we explained that the new time limits for administration would provide greater certainty to creditors and would help to make the procedure more accessible to small firms, for which the costs of running a lengthy administration can be a considerable barrier against entering the administration procedure. In conjunction with changes introduced elsewhere in the legislation, administration will become more accessible and attractive. Cases going into administration will become smaller and more straightforward, and the new time scales will prove more than adequate for them.
        For larger and more complex cases for which the administrator needs more time, there are provisions to enable him or her to extend the time periods either by creditor consent for specified periods or with the permission of the court for whatever period the court thinks fit. The time limits in the Bill are rightly stringent

        65
        to increase certainty and accessibility for companies and creditors, but the process is sufficiently flexible, particularly because of the provisions for extension, to ensure that it can be adapted to meet the needs of particular cases. I therefore hope that I have persuaded the hon. Member for Eastbourne to withdraw his amendment.
        Mr. Waterson: I am not wholly convinced, but in the interests of making progress, I beg to ask leave to withdraw the amendment.
        Amendment, by leave, withdrawn.
        Miss Johnson: I beg to move amendment No. 99, in page 243, line 34, after "96", insert "and 99 to 101A".
        Madam Deputy Speaker (Sylvia Heal): With this it will be convenient to take Government amendments Nos. 100 and 101, 324 to 326, 102 to 104, 327 and 105, 106 to 124, 328, 125, 329, 126, 330, 331 and 127, 332 to 345, 128, 346, 129 and 347, 130 to 133, 348 and 134, 349 to 353, 140, 354 and 355.
        Miss Johnson: It will be a relief to everyone in the Chamber, not least yourself, Madam Deputy Speaker, that these amendments are mostly technical and consequential. They do not deal with fundamental policy, so I do not propose to deal with them one by one. They will, however, ensure that the revised administration procedure works effectively. They are consequential amendments to the existing provisions of the Insolvency Act 1986 and other measures, and are necessary as a result of the proposed changes to the administration procedure. I do not propose to speak about them in detail, but if hon. Members would like me to address a particular amendment, I am happy to do so.
        A number of Government amendments have been tabled in response to points raised by hon. Members in Committee. Having listened to what they said, we agreed to go away and consider certain matters further. I am pleased to say that a number of the amendments were tabled as a result of that discussion, and I hope that hon. Members will agree that they make useful improvements and support them accordingly.
        I should like briefly to address Government amendment No. 101, which will ensure that the special insolvency provisions that apply to financial services businesses, including banks and insurance companies, under part XXIV of the Financial Services and Markets Act 2000, continue to have affect. I think that that is probably the only amendment that is worth mentioning at this early stage.
        I hope that hon. Members will support the amendments.
        6.30 pm
        Mr. Waterson: You will be relieved to hear, Madam Deputy Speaker, that I certainly do not want the Minister to deal with the amendments in any detail. I am grateful to her for acknowledging that a number of them arose from points made by the official Opposition in Committee. It would be positively churlish of us to speak at any length to the amendments, let alone press them to a Division.
        Mr. Mark Field: I, too, should like to express my support for many of the amendments that have been tabled as a result of the various Committee discussions. In particular, given the importance of the insurance sector in my constituency, I welcome Government amendment No. 101, to which the Minister specifically referred.
        I want to make a few brief comments, partly in relation to a briefing that may bring to light one or two slight concerns about administration. I apologise to the Minister for not mentioning the matter to her already, but as I received the briefing earlier today, I have not had an opportunity to do so. She may wish to return to the subject at a later stage. Indeed, I would be happy to deal with it in that spirit.
        More generally, before we consign the concept of administrative receivership to the annals of insolvency and company law history, I point out that it has been improved as a very quick, cheap and often effective means of allowing a business to be sold without interference from either companies or creditors. Many of us have recognised that the potentially unfettered power of secured creditors to appoint receivers has sometimes made them insufficiently accountable to other creditors. Such concern was expressed in Committee and is addressed by one or two of the amendments. It seemed to us that such appointments could put paid to other potential rescue plans. Clearly, the Bill seeks to water down some of those powers in an insolvency situation. One of the anxieties in Committee was to ensure for all creditors and classes of creditors as great a degree of certainty as possible as to replacement.
        As I said, I should like to address a specific concern to which I have been alerted by a constituent, an international bank, in relation to the commercial property market. The briefing that I received states that there has been some anxiety about the
        "potential knock on effects to the UK property market",
        which is at a tentative stage in the economic cycle as it is,
        "of the changes proposed in the Enterprise Bill and particularly the proposal to dispense with the concept of administrative receivership."
        I hope that the Minister and other hon. Members will forgive me if I now quote a little more extensively from the briefing, which obviously deals with a somewhat technical matter. It goes on to state:
        "The vast majority of commercial property refurbishment/ regeneration and development finance is structured nowadays using as a borrowing vehicle a special purpose company, the only assets of which are the project being financed."
        That runs slightly counter to the concerns expressed in the debate about the previous clause, when we wanted to stress that it is all too often forgotten that it is not a company, but a business, that is being maintained. In this case, however, it is a special purpose vehicle company that may run the risk of insolvency procedure and it will wish to ensure proper safeguards. The special purpose vehicles typically have no employees.
        The briefing goes on to state:
        "It is important from a funder's point of view to be able to have step in rights and to be able to appoint an administrative receiver",
        which must be done rapidly where there are potential difficulties. It also states:
        "This enables the lender, in the event of financial difficulty, quickly to take control of the project, retain contractors and sub-contractors before they walk away"—

        67
        under the doubtless fairly stringent terms of their own agreement—
        "and ultimately to build out the project to completion. Invariably this is the only way to maximise the benefit to the general creditors of the company."
        The concern is that the abolition of administrative receivership runs the risk of increasing the level of commercial uncertainty. In a slightly more uncertain property market—I suspect that the entire property sector will face such a market during the next few years—the abolition will
        "inevitably lead to an increase in cost for borrowers".
        Even more catastrophically, in relation to some of the projects that are being put into place, the abolition will also lead to a withdrawal of funding by the banking system. Of course, that would especially affect more marginal projects. That is a concern for me in central London, but I am sure that my concern is shared in all corners of the United Kingdom. It is feared that the consequences will be a reduction of refurbishment and regeneration, as well as in development funding, in the commercial property sector. That is especially important in relation to various central Government proposals to ensure substantial development on brownfield sites. Clearly, all of us who represent urban or suburban seats are keen to encourage such development.
        The briefing also states:
        "We understand the reasons for the introduction of the Enterprise Bill and believe that the commercial property market will suffer, even though the intentions of the Bill are not aimed particularly at commercial property."
        I understand that the Department has been lobbied for
        "a carve out in the proposals for commercial property finance transactions that would otherwise fall within the definition of project finance."
        Again, that was discussed at some length when we considered some of the schedules in Committee. As the Minister will know, an exception has been created for projects where the debt is in excess of £50 million. As I have indicated, however, the difficulty with that provision in relation to specific property finance is that the threshold is way too high for the small special purpose vehicles that are being created. In relation to certain property finance transactions, might it be possible to introduce a lower threshold of, say, £5 million to £10 million? I know that that proposal was discussed tangentially in Committee, but it strikes me that a major area of Government policy is involved, especially in relation to regeneration and refurbishment projects. We run the risk of causing such projects to fall outside the protection that would otherwise be provided in the proposed administration procedure.
        I appreciate that the Minister may not have had full notice of those issues, although I suspect that the Department has been subject to various lobbying in recent weeks and months. I would be happy for her to deal with the matter in a written response, if that is necessary, but I wanted to put it on record and felt that now was the most appropriate stage in today's discussions at which to raise it.
        Miss Melanie Johnson: Indeed, those subjects have been much discussed and there has been considerable liaison between Departments and with interested parties about appropriate provisions in respect of property
        68
        development. I do not believe that a bespoke exception is necessary. As the hon. Member for Cities of London and Westminster (Mr. Field) remarked, the definition in the Bill is wide enough to include any project company that incurs a debt of at least £50 million and over which there are step-in rights. That is the case regardless of the reason why the project in question has been set up.
        I heard what the hon. Member for Cities of London and Westminster said about special purpose vehicles of £10 million in value, but it seems a little unusual, especially in the context of our earlier remarks about property values in central London. I am listening to what the hon. Gentleman has to say and I should be grateful if he would furnish me with some further details about the background. I shall certainly consider the matter further, but I do not currently believe that it necessary to introduce any further provision. I shall undertake to look further at any evidence that he submits to me.
        Amendment agreed to.
        Amendments made: No. 100, in page 243, line 34, leave out "the replacement of" and insert "replacement and additional".
        No. 101, in page 243, line 41, at end insert—
        '7A (1) A person may not be appointed as administrator of a company which—

        (a) has a liability in respect of a deposit which it accepted in accordance with the Banking Act 1979 (c. 37) or 1987 (c. 22), but

        (b) is not an authorised deposit taker.

        (2) A person may not be appointed as administrator of a company which effects or carries out contracts of insurance.
        (3) But sub-paragraph (2) does not apply to a company which—

        (a) is exempt from the general prohibition in relation to effecting or carrying out contracts of insurance, or

        (b) is an authorised deposit taker effecting or carrying out contracts of insurance in the course of a banking business.

        (4) In this paragraph—
        "authorised deposit taker" means a person with permission under Part IV of the Financial Services and Markets Act 2000 (c. 8) to accept deposits, and
        "the general prohibition" has the meaning given by section 19 of that Act.
        (5) This paragraph shall be construed in accordance with—

        (a) section 22 of the Financial Services and Markets Act 2000 (classes of regulated activity and categories of investment),

        (b) any relevant order under that section, and

        (c) Schedule 2 to that Act (regulated activities).'.

        No. 324, in page 245, line 36, after "unless", insert—

        '(a)'.

        No. 325, in page 245, line 38, at end insert—
        ',or

        (b) the holder of any prior floating charge which satisfies paragraph 12(2) has consented in writing to the making of the appointment.'.

        No. 326, in page 253, line 31, at end insert—
        '(1A) This paragraph also applies from the time when a copy of notice of intention to appoint an administrator under paragraph 12 is filed with the court until—

        (a) the appointment of the administrator takes effect, or

        (b) the period of five business days beginning with the date of filing expires without an administrator having been appointed.

        (1B) Sub-paragraph (1A) has effect in relation to a notice of intention to appoint only if it is in the prescribed form.'.
        No. 102, in page 254, line 20, at end insert "and".
        No. 103, in page 254, line 21, leave out from "letter," to end of line 23.
        No. 104, in page 261, line 1, leave out sub-paragraph (2) and insert—
        '(2) If the court gives directions to the administrator of a company in connection with any aspect of his management of the company's affairs, business or property, the administrator shall comply with the directions.'.
        No. 327, in page 261, line 34, leave out "charge" and insert "security".
        No. 105, in page 263, line 26, leave out "section 4" and insert "Part I".
        No. 106, in page 264, line 36, leave out paragraph (b) and insert—

        '(b) if the company has unsecured debts, creditors whose debts amount to more than 50% of the company's unsecured debts, disregarding debts of any creditor who does not respond to an invitation to give or withhold consent.'.

        No. 107, in page 264, line 42, after first "of", insert—
        '(i)'.
        No. 108, in page 264, line 43, leave out "and of" and insert", and
        (ii)'.
        No. 109, in page 264, line 43, leave out "at least" and insert "more than".
        No. 110, in page 264, line 44, leave out "total".
        No. 111, in page 264, line 44, at end insert—
        ',disregarding debts of any creditor who does not respond to an invitation to give or withhold consent.'.
        No. 112, in page 267, line 6, leave out paragraph (a) and insert—

        '(a) that the total amount which each secured creditor of the company is likely to receive has been paid to him or set aside for him,'.

        No. 113, in page 267, line 9, leave out "has been or".
        No. 114, in page 267, line 28, leave out "98" and insert "84".
        No. 115, in page 269, line 35, after "where", insert—
        '(a)'.
        No. 116, in page 269, line 35, at end insert—

        '(b) the court is satisfied that the creditors' committee or a remaining administrator is not taking reasonable steps to make a replacement, or

        (c) the court is satisfied that for another reason it is right for the application to be made.'.

        No. 117, in page 269, line 36, leave out—
        'by the holder of a qualifying floating charge he'
        and insert—
        'the holder of the floating charge by virtue of which the appointment was made'.
        No. 118, in page 271, line 4, leave out paragraphs (a) and (b) and insert—

        '(a) in the case of an administrator who dies, on the filing with the court of notice of his death,

        (b) in the case of an administrator appointed under paragraph 12 or 20, at a time appointed by resolution of the creditors' committee or, if there is no committee, by resolution of the creditors, or

        (c) in any case, at a time specified by the court.

        () For the purpose of the application of sub-paragraph (2)(b) in a case where the administrator has made a statement under paragraph 50(1)(b), a resolution shall be taken as passed if (and only if) passed with the approval of—

        (a) each secured creditor of the company, or

        (b) if the administrator has made a distribution to preferential creditors or thinks that a distribution may be made to preferential creditors—

        (i) each secured creditor of the company, and

        (ii) preferential creditors whose debts amount to more than 50% of the preferential debts of the company, disregarding debts of any creditor who does not respond to an invitation to give or withhold approval.'.

        No. 119, in page 272, line 43, at end insert—
        '101A (1) Where a company is in administration, a person may be appointed to act as administrator jointly or concurrently with the person or persons acting as the administrator of the company.
        (2) Where a company entered administration by administration order, an appointment under sub-paragraph (1) must be made by the court on the application of—

        (a) a person or group listed in paragraph 10(1)(a) to (e), or

        (b) the person or persons acting as the administrator of the company.

        (3) Where a company entered administration by virtue of an appointment under paragraph 12, an appointment under sub-paragraph (1) must be made by—

        (a) the holder of the floating charge by virtue of which the appointment was made, or

        (b) the court on the application of the person or persons acting as the administrator of the company.

        (4) Where a company entered administration by virtue of an appointment under paragraph 20(1), an appointment under sub-paragraph (1) above must be made either by the court on the application of the person or persons acting as the administrator of the company or—

        (a) by the company, and

        (b) with the consent of each person who is the holder of a qualifying floating charge in respect of the company's property or, where consent is withheld, with the permission of the court.

        (5) Where a company entered administration by virtue of an appointment under paragraph 20(2), an appointment under sub-paragraph (1) must be made either by the court on the application of the person or persons acting as the administrator of the company or—

        (a) by the directors of the company, and

        (b) with the consent of each person who is the holder of a qualifying floating charge in respect of the company's property or, where consent is withheld, with the permission of the court.

        (6) An appointment under sub-paragraph (1) may be made only with the consent of the person or persons acting as the administrator of the company.'.
        No. 120, in page 274, line 3, leave out paragraph (b) and insert—

        '(b) if the company has unsecured debts, creditors whose debts amount to more than 50% of the company's unsecured debts, disregarding debts of any creditor who does not respond to an invitation to give or withhold consent.'.

        No. 121, in page 274, line 9, after first "of", insert—
        '(i)'.
        No. 123, in page 274, line 10, leave out "at least" and insert "more than".
        No. 122, in page 274, line 10, leave out "and of" and insert", and
        (ii)'.
        No. 124, in page 274, line 11, at end insert—
        ',disregarding debts of any creditor who does not respond to an invitation to give or withhold consent.'.
        No. 328, in page 274, line 37, at end insert—
        '"company" includes a company which may enter administration by virtue of Article 3 of the EC Regulation,"'.—[Miss Melanie Johnson.]

      Schedule 17
        ADMINISTRATION: MINOR AND CONSEQUENTIAL AMENDMENTS
        Amendments made: No. 125, in page 276, line 17, at end insert—
        ADMINISTRATION: MINOR AND CONSEQUENTIAL AMENDMENTS

          'General
          A1 In any instrument made before section 242(1) to (3) of this Act comes into force—

          (a) a reference to the making of an administration order shall be treated as including a reference to the appointment of an administrator under paragraph 12 or 20 of Schedule B1 to the Insolvency Act 1986 (c. 45) (inserted by section 242(2) of this Act), and

          a reference to making an application for an administration order by petition shall be treated as including a reference to making an administration application under that Schedule, appointing an administrator under paragraph 12 or 20 of that Schedule or giving notice under paragraph 13 or 24 of that Schedule.'.

          No. 329, in page 276, line 35, at end insert—
          '5A In section 652B(3) (duty when applying to strike off defunct company) for paragraph (c) substitute—

          "(c) the company is in administration under Part II of that Act;

          (ca) an application to the court for an administration order in respect of the company has been made and not finally dealt with or withdrawn;

          (cb) a copy of notice of intention to appoint an administrator of the company under paragraph 12 of Schedule B1 to that Act has been filed with the court and neither of the events mentioned in paragraph 42(1A)(a) and (b) of that Schedule has occurred;

          (cc) a copy of notice of intention to appoint an administrator of the company under paragraph 20 of that Schedule has been filed with the court and neither of the events mentioned in paragraph 42(2)(a) and (b) of that Schedule has occurred;"'.

          5B In section 652C(4) (director's duty following application to strike off defunct company) for paragraph (d) substitute—

          "(d) an application to the court for an administration order in respect of the company is made under paragraph 10 of Schedule B1 to that Act;

          (da) an administrator is appointed in respect of the company under paragraph 12 or 20 of that Schedule;

          (db) a copy of notice of intention to appoint an administrator of the company under paragraph 12 or 20 of that Schedule is filed with the court;"'.

          No. 126, in page 277, line 29, at end insert—
          '12A After section 129(1) (commencement of winding up) insert—
          "(1A) Where the court makes a winding-up order by virtue of paragraph 11(1)(e) of Schedule B1, the winding up is deemed to commence on the making of the order."'.
          No. 330, in page 278, line 24, at end insert "copy of a".
          No. 331, in page 278, line 26, after "paragraph", insert "12 or".
          No. 127, in page 278, line 29, after "(3)(a)", insert", (aa)".
          No. 332, in page 278, line 36, after "paragraph", insert "12 or".
          No. 333, in page 278, line 37, leave out from first "of" to "the" in line 38 and insert—
          'a copy of a notice of intention to appoint under that paragraph, the date on which the copy of'.
          No. 334, in page 278, line 44, after "liquidation", insert—
          'either following conversion of administration into winding up by virtue of Article 37 of the EC Regulation or'.
          No. 335, in page 279, line 1, after "or", insert "a copy of the".
          No. 336, in page 279, line 13, leave out paragraph (c) and insert—

          "(c) a copy of a notice of intention to appoint an administrator under paragraph 12 or 20 of Schedule B1 has been filed,"'.

          No. 337, in page 279, line 24, leave out paragraph (c) and insert—

          "(c) a copy of a notice of intention to appoint an administrator under paragraph 12 or 20 of Schedule B1 has been filed,"'.

          No. 338, in page 280, line 4, at end insert "copy of".
          No. 339, in page 280, line 6, after "paragraph", insert "12 or".
          No. 340, in page 280, line 15, after "paragraph", insert "12 or".
          No. 341, in page 280, line 16, leave out from first "of" to "the" in line 17 and insert—
          'a copy of notice of intention to appoint under that paragraph, the date on which the copy of'.
          No. 342, in page 280, line 32, leave out "After subsection (2) add" and insert "For subsection (3) substitute".
          No. 343, in page 280, line 35, after first "of", insert—
          '(a)'.
          No. 344, in page 280, line 35, at end insert—
          ', or

          (b) an order made following conversion of administration or a voluntary arrangement into winding up by virtue of Article 37 of the EC Regulation.'.

          No. 345, in page 280, leave out line 36 and insert—
          '(1) Section 387 (preferential debts: "the relevant date") shall be amended as follows.
          (2) In subsection (2) for paragraphs (a) and (b) substitute—

          "(a) if the company is in administration, the date on which it entered administration, and

          (b) if the company is not in administration, the date of the approval of the voluntary arrangement."

          (3) In subsection (3)—

          (a) in paragraphs (aa) and (ab) for "the date of the making of the administration order" substitute "the date on which the company entered administration",

          (b) after paragraph (b) insert—

          "(ba) if the case does not fall within paragraph (a), (aa), (ab) or (b) and the company is being wound up following administration pursuant to paragraph 82 of Schedule B 1, the relevant date is the date on which the company entered administration;", and

          (c) in paragraph (c) for "paragraph (a), (aa), (ab) or (b)" substitute "paragraph (a), (aa), (ab), (b) or (ba)".

          After subsection (3)'.
          No. 128, in page 280, line 40, at end insert—
          '30A In section 422 (power to apply first Group of Parts to banks, &c.) for subsection (1) substitute—
          "(1) The Secretary of State may by order made with the concurrence of the Treasury and after consultation with the Financial Services Authority provide that specified provisions in the first Group of Parts shall apply with specified modifications in relation to any person who—

          (a) has a liability in respect of a deposit which he accepted in accordance with the Banking Act 1979 (c. 37) or 1987 (c. 22), but

          (b) does not have permission under Part IV of the Financial Services and Markets Act 2000 (c. 8) (administration) to accept deposits.

          (1A) Subsection (1)(b) shall be construed in accordance with—

          (a) section 22 of the Financial Services and Markets Act 2000 (classes of regulated activity and categories of investment),

          (b) any relevant order under that section, and

          (c) Schedule 2 to that Act (regulated activities)."'.

          No. 346, in page 283, line 26, at end insert—
          '38A In section 158 (modification of insolvency law)—

          (a) in subsection (3) for paragraph (b) substitute—

          "(b) the application for an administration order or the presentation of a winding-up petition or the passing of a resolution for voluntary winding up,", and

          (b) after subsection (3) insert—

          "(3A) In subsection (3)(b) the reference to an application for an administration order shall be taken to include a reference to—

          (a) in a case where an administrator is appointed under paragraph 12 or 20 of Schedule B1 to the Insolvency Act 1986 (appointment by floating charge holder, company or directors) following filing with the court of a copy of a notice of intention to appoint under that paragraph, the filing of the copy of the notice, and

          (b) in a case where an administrator is appointed under either of those paragraphs without a copy of a notice of intention to appoint having been filed with the court, the appointment of the administrator."'.

          No. 129, in page 283, line 29, leave out "41(6) (including" and insert—
          '40 or 41 (including paragraph 41(6)'.
          No. 347, in page 283, line 30, at end insert—
          '39A After section 167(1) (application by exchange or clearing house to Secretary of State about taking default proceedings) insert—
          "(1A) In subsection (1) a reference to an administration order shall be taken to include a reference to the appointment of an administrator under—

          (a) paragraph 12 of Schedule B1 to the Insolvency Act 1986 (c. 45) (appointment by holder of qualifying floating charge), or

          (b) paragraph 20 of that Schedule (appointment by company or directors)."'.

          No. 130, in page 283, line 35, after "41(2)" insert "and (3)".
          No. 131, in page 283, line 35, at end insert "or repossession of goods)".
          No. 132, in page 283, line 38, leave out "and 70" and insert", 70 and 71".
          No. 133, in page 283, line 39, after "charged", insert "or hire-purchase".
          No. 348, in page 283, line 42, at end insert—
          '(3) In subsection (2) for "an administration order has been made or a petition for an administration order has been presented" substitute "the occurrence of an event to which subsection (2A) applies".
          (4) After subsection (2) insert—
          "(2A) This subsection applies to—

          (a) making an administration application under paragraph 10 of Schedule B1 to the Insolvency Act 1986,

          (b) appointing an administrator under paragraph 12 or 20 of that Schedule (appointment by floating charge holder, company or directors),

          (c) filing with the court a copy of notice of intention to appoint an administrator under either of those paragraphs."'.

          No. 134, in page 284, line 12, at end insert—

          'Employment Rights Act 1996 (c. 18)
          41A (1) The Employment Rights Act 1996 shall be amended as follows.
          (2) In section 166(7) (application by employee for payment by Secretary of State)—

          (a) in paragraph (a) omit "or an administration order", and

          (b) after paragraph (a) insert—

          "(aa) if the company is in administration for the purposes of the Insolvency Act 1986,".

          (3) In section 183(3)(a) (insolvency of employer)—

          (a) in paragraph (a) omit "or an administration order", and

          (b) after paragraph (a) insert—

          "(aa) if the company is in administration for the purposes of the Insolvency Act 1986,".

          (4) Omit section 189(4) (transfer to Secretary of State of rights and remedies: priority of preferential debts).'.
          No. 349, in page 284, leave out lines 17 to 24 and insert—
          '(7) Subsections (8) and (9) apply in relation to the reference in subsection (3) to applying for an administration order.
          (8) In a case where an administrator is appointed under paragraph 12 or 20 of Schedule B1 to the Insolvency Act 1986 (appointment by floating charge holder, company or directors)—

          (a) the reference includes a reference to appointing an administrator under that paragraph, and

          (b) in respect of an appointment under either of those paragraphs the reference to the applicant shall be taken as a reference to the person making the appointment.

          (9) In a case where a copy of a notice of intention to appoint an administrator under either of those paragraphs is filed with the court—

          (a) the reference shall be taken to include a reference to the filing of the copy of the notice, and

          (b) in respect of the filing of a copy of a notice of intention to appoint under either of those paragraphs the reference to the applicant shall be taken as a reference to the person giving the notice.'.

          No. 350, in page 284, line 28, leave out "applying for" and insert "the making of".
          No. 351, in page 284, line 37, leave out "In section 215(3)" and insert "Section 215".
          No. 352, in page 284, line 38, after "insolvency)", insert—
          'shall be amended as follows.
          (2) In subsection (3)'.
          No. 353, in page 284, line 41, at end insert—
          '(3) After subsection (3) insert—
          "(3A) In subsection (3) the reference to making an administration application includes a reference to—

          (a) appointing an administrator under paragraph 12 or 20 of Schedule B1 to the 1986 Act, or

          (b) filing with the court a copy of notice of intention to appoint an administrator under either of those paragraphs."'.

          No. 140, in page 284, line 41, at end insert—
          '46A For section 359 (administration order) substitute—
          "359 Administration order
          (1) The Authority may make an administration application under Schedule B1 to the 1986 Act (or present a petition under Article 22 of the 1989 Order) in relation to a company or insolvent partnership which—

          (a) is or has been an authorised person,

          (b) is or has been an appointed representative, or

          (c) is carrying on or has carried on a regulated activity in contravention of the general prohibition.

          (2) Subsection (3) applies in relation to an administration application made (or a petition presented) by the Authority by virtue of this section.
          (3) Any of the following shall be treated for the purpose of paragraph 9(a) of Schedule B1 to the 1986 Act (or Article 21(1)(a) of the 1989 Order) as unable to pay its debts—

          (a) a company or partnership in default on an obligation to pay a sum due and payable under an agreement, and

          (b) an authorised deposit taker in default on an obligation to pay a sum due and payable in respect of a relevant deposit.

          (4) In this section—
          "agreement" means an agreement the making or performance of which constitutes or is part of a regulated activity carried on by the company or partnership,
          "authorised deposit taker" means a person with a Part IV permission to accept deposits (but not a person who has a Part IV permission to accept deposits only for the purpose of carrying on another regulated activity in accordance with that permission),
          "company" means a company—

          (a) in respect of which an administrator may be appointed under Schedule B1 to the 1986 Act, or

          (b) to which Article 21 of the 1989 Order applies, and

          "relevant deposit" shall, ignoring any restriction on the meaning of deposit arising from the identity of the person making the deposit, be construed in accordance with—

          (a) section 22,

          (b) any relevant order under that section, and

          (c) Schedule 2.

          (5) The definition of "authorised deposit taker" in subsection (4) shall be construed in accordance with—

          (a) section 22,

          (b) any relevant order under that section, and

          (c) Schedule 2."'.

          No. 354, in page 285, line 21, after "to", insert—
          '(a)'.
          No. 355, in page 285, line 24, after "(c).",", insert "or

          (b) the filing with the court of a copy of notice of intention to appoint an administrator under either of those paragraphs."'.—[Miss Melanie Johnson.]

      Clause 244

        PROHIBITION OF APPOINTMENT OF ADMINISTRATIVE RECEIVER
        Amendments made: No. 321, in page 169, line 10, leave out—
        'or is expected to incur'
        and insert—
        ', or when the agreement was entered into was expected to incur,'.
        No. 322, in page 170, line 11, leave out—
        'a project company incurs or is expected to incur'
        and insert—
        'under an agreement relating to the project a project company incurs, or when the agreement is entered into is expected to incur,'.—[Miss Melanie Johnson.]
        Mr. Waterson: I beg to move amendment No. 13, in page 170, line 27, at end insert—
        '72FA Sixth exception: Registered Social Landlords
        1. Section 72A does not prevent the appointment of an administrative receiver of a company which is a registered social landlord at the time of the appointment.
        2. Section 72A does not prevent the appointment of an administrative receiver of a company which, at the time of the creation of the relevant qualifying floating charge, was either:

        (a) a registered social landlord; or

        (b) a housing association registered as such in the register previously maintained pursuant to Part I of the Housing Associations Act 1985.

        3. In subsections (1) and (2) "registered social landlord" means a body registered as a social landlord pursuant to section 3 of the Housing Act 1985 or, as the case may be, section 57 of the Housing (Scotland) Act 2001.'.
        Madam Deputy Speaker: With this it will be convenient to discuss the following amendments: No. 318, in clause 249, page 173, line 25, at the end insert—
        'other than a society which is, or at any time has been, a registered social landlord or a housing association registered as such in the register previously maintained pursuant to Part 1 of the Housing Associations Act 1985.'.
        No. 319, in page 173, line 37, at the end insert—
        '(2A) In sub-section (1) "registered social landlord" means a body registered as a social landlord pursuant to section 3 of the Housing Act 1996 or, as the case may be, section 57 of the Housing (Scotland) Act 2001.'.
        Mr. Waterson: The amendments involve serious issues affecting the social housing sector. They were initially proposed by the Council of Mortgage Lenders, which has been working closely on the matter with the National Housing Federation. Let me say immediately that there is a typographical error in amendment No. 13, which should read, "Housing Act 1996", not "Housing Act 1985". If the Minister were to accept the amendment, I am sure that it would not be beyond the wit of the parliamentary draftsmen to correct that minor error.
        All three amendments concern registered social landlords, 85 per cent. of which, according to the National Housing Federation, are also industrial and provident societies. Amendment No. 13 would exempt lenders to registered social landlords—RSLs—that are companies from the prohibition on appointing an administrative receiver. It would amend the clause, giving the Secretary

        77
        of State power by order to provide for administration to apply to industrial and provident societies. In a nutshell, it would preserve the current position.
        Some £25 billion has been lent to RSLs—mainly housing associations—for new build, repair and improvement to social housing. As I said, the vast majority of RSLs are also I and Ps—I hope that this will come out all right in Hansard. There is a trend for newer RSLs to be established as companies, especially those involved in large-scale voluntary stock transfers. Unsurprisingly, the availability of competitively priced private loan finance is crucial to the Government's target of achieving the decent homes standard within 10 years. I can speak with a little authority about that, having been a shadow housing Minister in a previous incarnation. If the Minister is in favour of joined-up Government, I am sure that she will want to listen carefully to the rationale behind the amendments.
        6.45 pm
        The briefing from the Council of Mortgage Lenders states:
        "The proposals in the Enterprise Bill strike a serious blow at the social housing finance market at a time when it is already under pressure."
        It continues:
        "Under the 1996 Housing Act, the Housing Corporation has the power to create a 28-day moratorium for all creditors that will allow the opportunity to rescue the RSL if possible and to protect the interests of tenants."
        On that basis, the impetus towards company rescue offered by administration already exists in the sector in a different form and should not be duplicated. The briefing goes on to say:
        "The Bill as it stands creates a serious anomaly in that clause 244(1) 72B exempts the capital markets from the abolition of administrative receivership. The capital markets are significant lenders to the RSL sector and this exemption thus creates a situation where different secured lenders to the same RSL can have different rights, a situation likely to cause significant uncertainty and to make retail mortgage lenders more cautious about assisting higher risk or ailing RSLs."
        The CML believes that there will be three major consequences of abolishing the right to appoint an administrative receiver to an RSL that is a company—first, the cost of borrowing will go up because lenders will re-evaluate the risk and insist on more security; secondly, some projects may become unfundable because of their higher risk profile; and thirdly, retail lenders' present willingness to work with the Housing Corporation to assist RSLs in difficulties will be curtailed owing to the possibility that the capital markets will still be able to appoint an administrative receiver and thus be in a stronger position to realise their security in the event of default.
        Amendment No. 318 would amend clause 249, which was added to the Bill in Committee and gives the Secretary of State power to bring in an administration regime for industrial and provident societies. At present, 85 per cent. of registered social landlords are in that category. The Council of Mortgage Lenders observes that
        "this proposal potentially presents a significantly larger threat than those measures relating to companies."
        It also points out that variations on these proposals were suggested on no fewer than three occasions during the 1990s but were abandoned after proper consultation because of their likely effect on the social housing finance market.
        78
        At present, there is no power to appoint an administrative receiver in respect of an industrial and provident society, but lenders can, using their status as fixed charge holders, appoint a receiver under contract offering similar advantages. The introduction of administration to I and Ps will cut across that right. The CML says:
        "The effects of this proposal will be similar to those for companies, though on a larger scale"—
        that is, more expensive borrowing, projects less fundable and a less sympathetic approach to the rescue of RSLs. It continues:
        "An additional important consequence however will be that lenders will be forced to secure all loans via floating charges…in order to gain the right to an administrator. This will cause major and ongoing disruption and expense to RSLs and lenders alike."
        The National Housing Federation issued a briefing on similar terms. It represents about 1,400 not-for-profit housing organisations, which between them own or manage about 1.8 million homes in England alone. Of the change to the Bill made in Committee, it states that
        "this amendment could have an immediate and extremely damaging impact on the provision of decent, affordable housing."
        The briefing refers to the suggestion that has been made, following consultation, that RSLs might be exempted from clause 249 provisions by order. However,
        "there is significant concern that just the possibility of these changes to insolvency law will be enough to damage lender confidence."
        It asks for support for the amendments and states:
        "The Government must not wait for secondary legislation".
        Yet again, it has fallen to the official Opposition to raise the genuine concerns of bodies out there in the real world. In this case, they are perhaps more significant than any, given their responsibility for a vast amount of social housing. From the point of view of the National Housing Federation, the amendments are necessary and helpful. It is difficult to understand how the Government could resist them. Indeed, it appears that we have already amended the Bill too much by including clause 249. I commend the amendments to the House.
        Miss Melanie Johnson: Amendment No. 13 would provide a general exemption from the prohibition on the appointment of an administrative receiver over a registered social landlord. That would apply to RSLs that are companies and industrial and provident societies—the large majority—which can technically be subject to a floating charge. However, lenders do not insist on making such charges since the property is entirely land, and industrial and provident societies cannot be subject to administration.
        The arguments for a special exemption seem to be based on the cost and availability of finance. Indeed, the hon. Member for Eastbourne (Mr. Waterson) emphasised that. We have listened carefully to the arguments, but we are not persuaded that there is a case for exemption for that group of lenders.
        Our proposals for prohibiting administrative receivership in favour of a streamlined administration procedure will strike a fair balance between creditors and debtors. They will not affect the rights of lenders to make a floating charge, but will simply provide for its exercise through a fairer, collective framework. The new administration procedure offers flexibility, speed and adequate safeguards for the interests of floating charge

        79
        holders. Lenders to RSLs that are companies and already subject to administration and administrative receivership through their charges have nothing to fear from the proposals.
        Let me consider amendments Nos. 318 and 319. They would remove RSLs that are industrial and provident societies from the power in clause 249 to extend administration to industrial and provident societies. I know that representatives and advisers of RSLs in that sector are worried that the power in clause 249 to extend administration to industrial and provident societies in the social housing sector could, if exercised, have an adverse impact on it. They fear that the administration moratorium may interfere with the existing arrangements under the Housing Act 1996, which already provides for a moratorium in the case of a registered social landlord in financial difficulties.
        The Government would not wish to use the enabling power to extend administration to parts of the industrial and provident sector where it would be contrary to its interests to do so. Equally, we want to seek a broad range of views and do not want to rush into any decisions. Any exercise of the power will be made following full consultation, when that important issue will be examined with others that affect the whole industrial and provident sector. I assure the Opposition that we appreciate the subject's importance.
        Mr. Gareth Thomas: Will my hon. Friend give way?
        Miss Johnson: I shall indeed give way to my hon. Friend, who had something to do with clause 249.
        Mr. Thomas: I am grateful to my hon. Friend for listening so sympathetically to the anxieties that were raised with her and her officials and with me, as the mover of clause 249. Although full consultation is clearly necessary, I urge her not to draw back from using clause 249 to extend the Bill's insolvency law provisions to industrial and provident societies. In the past, such societies have had to go into liquidation because the measure's sensible powers were not available to them. The last thing we want is to deprive industrial and provident societies of that power.
        Miss Johnson: I am grateful to my hon. Friend for his intervention, and for his continuing interest in and support for the clause that he originally tabled in Committee. I am sure that he appreciates that we do not want to take action that is contrary to the interests of any part of the industrial and provident sector. I know that his purpose in tabling the clause was to help parts of that sector in the way he mentioned. We need to maintain his objective and the overall aim of doing nothing to damage the sector; I know that he is sympathetic to that. I simply emphasise that we shall consult and examine the matter and that we will not rush into decisions. We do not want to do anything that is contrary to the sector's interests.
        Dr. John Pugh: If we are to take the assurance of full consultation seriously, and it happened now, interested parties would clearly say, "Accept the Opposition amendment." They have examined and
        80
        understood what is before them; they are reasonably good judges of their interests. If full consultation means anything, we should harken to the amendment.
        Miss Johnson: I understand the hon. Gentleman's point, but he is not right. As a member of the Committee, he appreciates that clause 249 was included in the Bill relatively late. There has not therefore been the same opportunity for dialogue with the social housing sector and bodies that represent its interests. We believe that further consideration of the issues that the sector raises will give it an opportunity of making its views known at an appropriate time to the appropriate Department. I understand that certain matters may need to be tackled and I accept that we may need to consider that, but the amendments would not ensure that we reached the right answer by the quickest route. I know that the hon. Gentleman wants to achieve that when he urges us to accept the amendment.
        In the light of my comments and assurances, I ask the hon. Member for Eastbourne to withdraw the amendment.
        Mr. Waterson: I am grateful to the Minister for saying that she appreciates the seriousness that the social housing sector attaches to the issues that we are considering and for her comment that she wants to consult. Given that she appreciates the seriousness of the matter, I hope that we can assume that the consultation will proceed briskly and that action will ensue if the result is the one predicted by the hon. Member for Southport (Dr. Pugh). I am sure that he is right.
        The subject is serious, and I do not want to divide the House on it. I simply emphasise the comments of the Council of Mortgage Lenders and the National Housing Federation, which feel strongly about the matter because it could cause them major problems.
        Mr. Mark Field: I am sure that my hon. Friend has it in mind that the availability of competitively priced private loan finance is crucial to the sector, especially in central London. I do not say that with purely constituency interests at heart. If we run the risk, there may be further unintended consequences. The Mayor of London has already insisted on a minimum of 50 per cent. social housing in new developments. That will drive developers away from developments in much of London. In the worst-case scenario that my hon. Friend has portrayed, we run a risk of unintended consequences for a sector that will go through some difficult times in the next couple of years—
        Madam Deputy Speaker: Order. That intervention is rather lengthy. I call Mr. Waterson.
        Mr. Waterson: I get my hon. Friend's drift. If I have not, I am sure that the Minister has. It is possible to square the circle by satisfying the social housing organisations and not undermining the amendment that the hon. Member for Harrow, West (Mr. Thomas) tabled in Committee. That has attractions for the main stream of industrial and provident societies, and he obviously speaks from knowledge. However, a serious problem clearly exists. We are happy to leave it with the Minister and hope that consultation takes place shortly.

        81
        I beg to ask leave to withdraw the amendment.
        Amendment, by leave, withdrawn.

      Schedule 18

        SCHEDULE 2A TO INSOLVENCY ACT 1986
        Amendments made: No. 356, in page 287, line 34, after 'a' insert—
        'person who is, when the agreement mentioned in section 72B(1) is entered into, a'.
        No. 357, in page 287, line 34, after 'individual' insert—
        'in relation to a communication'.
        No. 358, in page 287, line 37, leave out 'and'
        No. 359, in page 287, line 38, after 'a' insert—
        'person who is, when the agreement mentioned in section 72B(1) is entered into, a'.
        No. 360, in page 287, line 38, after 'investor' insert—
        'in relation to a communication'.
        No. 361, in page 287, line 39, at end insert—
        ',and
        () a person in a State other than the United Kingdom who under the law of that State is not prohibited from investing in bonds or commercial paper.'.
        No. 362, in page 287, line 45, at end insert—
        () For the purposes of sub-paragraph (1)—

        (a) in applying article 19(5) of the Financial Promotion Order for the purposes of sub-paragraph (1)(a)—

        (i) in article 19(5)(b), ignore the words after "exempt person",

        (ii) in article l9(5)(c)(i), for the words from "the controlled activity" to the end substitute "a controlled activity", and

        (iii) in article 19(5)(e) ignore the words from "where the communication" to the end, and

        (b) in applying article 49(2) of that order for the purposes of sub-paragraph (1)(c), ignore article 49(2)(e).'.

        No. 363, in page 288, line 2, leave out—
        'section 72B and paragraph 1 of'
        and insert—
        'sections 72B and 72E and'.
        No. 364, in page 288, line 18, leave out 'contractual entitlement' and insert 'entitlement under an agreement'.
        No. 365, in page 288, line 19, leave out 'contractual responsibility' and insert 'responsibility under an agreement'.
        No. 366, in page 288, line 28, leave out 'contractual responsibility' and insert 'responsibility under an agreement'.
        No. 367, in page 288, line 31, leave out 'or'.
        No. 368, in page 288, line 33, at end insert—
        ',or
        (e) it is the holding company of a company within any of paragraphs (a) to (d).'.
        No. 369, in page 288, line 35, after '(d),', insert—
        'or is within sub-paragraph (1)(e),'.
        No. 370, in page 288, line 36, leave out from 'performs' to end of line 37 and insert—
        'a function which is not—

        (i) within sub-paragraph (1)(a) to (d),

        (ii) related to a function within sub-paragraph (1)(a) to (d), or

        (iii) related to the project.'.—[Mr. Pearson.]

        7 pm
        Madam Deputy Speaker: We now come to amendments Nos. 83 and 84.
        Mr. Waterson: I shall try to deal with these amendments fairly briefly, as they were debated in Committee. They relate to the abolition of Crown preference. Lest anyone should accuse me of looking a gift horse in the mouth, let me say that we unreservedly welcome the scrapping of Crown preference. The demands of the Inland Revenue and Customs and Excise have often been a malign factor in the dying days of a business, particularly a small business, and the removal of this preference can only be a good thing. It has been welcomed in all quarters. As I recall, the amount in question is about £80 million, but the measure is welcome none the less, particularly for small businesses.
        As I have said before, the Chancellor's fingerprints are all over this Bill, even if it is nominally a DTI measure. He has a habit of giving with one hand and taking away with the other—hence amendments Nos. 83 and 84. Although we are abolishing the Crown's preferential rights to the debts listed in clause 245(1), we are not scrapping the DTI's subrogated preferential rights in respect of salary and wage arrears.
        Miss Melanie Johnson: May I make it clear that we have already debated and accepted amendments Nos. 134 and 137, which remove the Secretary of State's right to be paid in priority to any preferential claims lodged in insolvency proceedings by former employees, which is what these amendments also seek to achieve?
        Mr. Waterson: I am looking at the response from the hon. Lady's fellow Minister in Committee, and he seemed not to accept those amendments, and to insist that the Secretary of State should be able to step into a former employee's shoes.
        Miss Johnson: Perhaps I can clarify this. Amendment No. 137 was taken on Thursday, and amendment No. 134 was in an earlier group. Both amendments have the same effect as amendments Nos. 83 and 84. We said that we would reconsider the issues, so I therefore believe that these amendments are no longer necessary.
        Mr. Waterson: I am grateful to the Minister for that response. I shall immediately turn, on a sixpence, and express my pleasure and surprise in equal measure that the Government have accepted the argument. They were certainly fighting a doughty rearguard action on it in Committee, although I exempt the hon. Lady from any blame for that. It is extremely good news that, yet again, common sense has prevailed. I can only put that down to the detailed and energetic scrutiny that the official Opposition have applied to the Bill. It would, therefore, be quite churlish of me not to seek leave to withdraw the amendments—
        Madam Deputy Speaker: Order. The hon. Gentleman has not formally moved the amendments, so need not formally withdraw them.
        Mr. Mark Field: I wonder whether I might be able to say a few words on these amendments?
        Madam Deputy Speaker: I think, from what the hon. Member for Eastbourne (Mr. Waterson) was saying, that he has not moved the amendment formally, so it would be inappropriate to make any comments.

      Clause 246
        UNSECURED CREDITORS
        Amendment made: No. 98, in page 172, leave out lines 32 to 34.—[Mr. Pearson.]
      Clause 250

        DURATION OF BANKRUPTCY
        Mr. Waterson: I beg to move amendment No. 85, in page 174, leave out line 12 and insert—

        '(a) in the case of an individual whose bankruptcy arises from the closure of a business or trade established or operated by that individual, one year beginning with the date on which the bankruptcy commences: and

        (b) in cases not falling within subsection 1(a):

        (i) where a certificate for the summary administration of the bankrupt's estate has been issued and is not revoked before the bankrupt's discharge, two years beginning with the date on which the bankruptcy commences; and

        (ii) in any other case, three years beginning with the date on which the bankruptcy commences'.

        Madam Deputy Speaker: With this it will be convenient to discuss the following: Amendment No. 86, in page 174, leave out lines 13 to 16.
        Government amendment No. 371.
        Amendment No. 87, in schedule 20, page 292, line 32, after "knew", insert—
        'or ought to have known'.
        Amendment No. 88, in clause 252, page 175, leave out lines 18 and 19.
        Amendment No. 411, in clause 253, page 175, line 38, leave out from beginning to end of line 2 on page 176 and insert—
        '(6) An incomes payment order must specify the period during which it is to have effect which period may end after the discharge of the bankrupt.'.
        Amendment No. 412, in clause 254, page 176, leave out lines 30 to 34 and insert—
        '(5) An income payments agreement must specify the period during which it is to have effect which period may end after the discharge of the bankrupt.'
        Mr. Waterson: No doubt the Minister will intervene if any of these amendments have already been accepted by the Government, although I somehow doubt that that is the case. I shall speak mainly to amendments Nos. 85 and 86. Government Amendment No. 371 and our amendment No. 87 are basically identical, which seems to suggest another acceptance by the Government of our ideas.
        Miss Melanie Johnson: In the spirit of my regularly helping the hon. Gentleman, I can confirm that that is the case.
        Mr. Waterson: Splendid. Even I managed to notice that. Our amendment No. 88 basically repeats what is in amendment No. 86. I shall deal with amendments Nos. 411 and 412 later.
        We touched on the distinction between business and consumer bankruptcies—a term which does not exist in the Bill—in Committee, but it is sufficiently important to
        84
        return to it on Report. In Committee, the Minister rejected our amendment seeking separate discharge periods for business and consumer bankrupts, saying that it was impossible to disentangle business and consumer debts. The experience in the USA, when the rules were changed in a similar fashion, was that there was an explosion in the number of consumer bankruptcies—people who had run up too many credit card debts, or whatever—and a slight reduction in the number of strictly corporate insolvencies. We take the view, as does the Consumer Credit Association, among others, that it would make enormous sense to try to find a way of separating out the two, so that we can test the Government's intentions.
        We are told that the reasoning behind the Bill is to encourage a culture of entrepreneurial activity and risk taking. The difficulty with that is that, whatever the result might be in the corporate sector, all the changes in the rules would have to apply in equal measure to personal, consumer-type bankruptcies. If, however, we could apply a longer period of time to the duration of individual bankruptcies—with all the consequences that would follow—and single out the very sector that the Government are trying to help, that is, corporate bankruptcies, presumably we should be doing everyone a service.
        We are not necessarily suggesting that these amendments represent the best provisions that can be achieved. It is certainly open to the parliamentary draftsmen to come up with something better. The model that the Consumer Credit Association has put forward, which we are happy to adopt, contains proposals that
        "the debtor states, in the bankruptcy application form, if he is in business;
        making a false or misleading statement would be an offence;
        creditors have a right to challenge the debtor's statement. Most would be able to do so on the basis of information in their own customer databases;
        if so challenged, the debtor must produce evidence that he was in business. Even those who have not kept formal accounts should be able to do so, by producing, for example, an appointment book or purchase receipts or tax return."
        That seems to be a commonsense approach, because it is actually quite difficult in real life for someone to pretend not to be in business when they really are. The Consumer Credit Association goes on to state:
        "On that basis, there would be no need to disentangle individual debts. Anyone in business would benefit from the shorter discharge period, whether or not they also have consumer debts. But the credit industry would also have the important safeguard of being able to challenge those applicants whom it believes are not genuinely running a business. In this way, those looking to abuse the system…could be deterred."
        Abuse in these circumstances can work in two ways; it can damage the credit industry, and it can also damage other consumers.
        I want to ask the Minister two or three specific questions, given that, for these purposes, we accept the Government's basic premise, which is that the aim of these far-reaching changes in insolvency law is to encourage entrepreneurs to go out, start a business and take the risk of it failing through no fault of their own.
        Is the Minister prepared to accept the amendments as they stand, or to return with amendments of her own? Will she at least indicate her view on the principle? If not, will she consider returning with proposals if, as we predict, there is an explosion in the number of consumers,

        85
        rather than businesses, seeking bankruptcy? Does she accept as a matter of principle that people with only consumer debts should not be able to benefit from the short discharge period enjoyed by entrepreneurs—for the straightforward reason that the only purpose of that is to encourage entrepreneurs to take risks? If she believes that those with only consumer debts should also enjoy the shorter discharge period, what benefits does she think that will bring to the economy and, indeed, to consumers?
        In Committee, it was argued that there was no solid or practical way of distinguishing between business and consumer debtors. In consultation with the consumer credit industry, we have come up with what we consider to be a reasonably watertight solution, but we need to know not just the Minister's problems with the drafting of the amendment but whether she has any problem with the principle.
        Amendment No. 86 also returns to an argument we had in Committee, but it too is extremely important. The aim is to ensure that the official receiver conducts a proper investigation in the case of each bankrupt. Without that there would be a real risk of, in effect, rubber-stamping of bankruptcies—first because the period involved could be much shorter even than 12 months, and secondly because we can expect an explosion in the number of cases to be considered.
        According to PricewaterhouseCoopers,
        "Warnings should be heeded from America, where a more friendly attitude towards consumer debt has led to a bankruptcy rate which is about 10 times the rate in the UK in relation to population"—
        and we all know about the enormous increase in consumer debt in this country.
        I do not want to go into too much detail, but I think that the Government are still in denial over important points of principle. We raised three of them in Committee. First, should stigma be attached to personal bankruptcy? Secondly, what would the effects in the real world be? Would we end up with a rogues' charter? Thirdly, would resources be available to deal with those effects? We feel that the best way of testing what the Government are really trying to do is to offer them a straightforward, practical way of distinguishing between business and consumer debtors.
        We have received representations from MBNA Europe Bank Ltd, which represents more than 13 per cent. of the UK credit card market and has more than £6 billion in outstanding loans. It is very concerned about the experience of the United States, and how it would apply here. It says
        "In the US…it requires on average 33 debtors who pay their debts to cover the cost of one debtor that defaults. In practice, personal insolvency costs every US household $400 per annum in higher prices for goods and services".
        It calculates that there
        "will be a minimum of an additional 15—20 per cent. increase on existing bankruptcy levels"
        if the Bill is passed unamended.
        We heard all the arguments in Committee about the likely effect not only on the industry but on borrowers. We discussed whether it would be more difficult for people to borrow money, and whether—as happened in the United States—we would see the emergence of a predatory part of the lending industry, preying on people
        86
        who could obtain no credit anywhere else, charging high levels of interest and generally making those people's circumstances much worse in the long run.
        My hon. Friend the Member for Cities of London and Westminster (Mr. Field) mentioned student loans. An article in the April edition of Credit Today states:
        "Government plans to introduce commercial rate loans for better off students may be shelved because of fears the debt would be uncollectable".
        It says that the Department for Education and Skills is currently examining the position, and adds that a spokesman for the Department
        "told Credit Today: 'We will be putting plans out for consultation later in the year. We are aware that if a student is declared bankrupt they will not have to pay back their student loan and are looking at the impact this might have for student loan legislation…
        Borrowers who entered higher education prior to 1998 will be able to escape repayments by making themselves bankrupt…credit manager of Cornwall County Council, which processes student loan applications, claims students will have nothing to lose by going bankrupt because few are homeowners.
        'I am concerned the student loans system would become so open to abuse it becomes impossible and this would herald a return to the grant system which would be administered by us in local government,' he said."
        7.15 pm
        Those are just some examples of what we think might result from the proposed changes, across the board. There are a number of possible ways of dealing with them. We have suggested amendments involving a minimum bankruptcy period of a year, for example. There would, of course, be a full investigation in each case. One solution, however, would be a separation between business and consumer debtors.
        Amendments Nos. 411 and 412, concerning income payments orders, are strongly supported by the CBI—which, indeed, proposed them in the first place—and are supported particularly by CBI members in the consumer finance industry. They specify a maximum of three years for the duration of an income payments order or income payments agreement. There is no clear or sensible objective reason for the limitation, says the CBI, which thinks that the duration is best left to the court's discretion. Why should an extraneous limit be placed on the period? The CBI says that the amendments are driven by the simple rule that when a debtor can pay, he should pay.
        The Minister has talked a great deal about striking a balance, but I think we are in danger of shifting the balance dramatically between debtor and creditor. As I have said, we should not think just about the consumer credit industry, although naturally there will be consequences: if the number of bankruptcies and uncollected debts rises, banks and other lending institutions wil have to make adjustments accordingly, and it will become more difficult for the very people who find it hardest to raise money to obtain credit. As I have said, however, we should always remember the creditors who are not lending institutions—friends and family, for instance, who would suffer far more proportionally than such institutions if someone were unable or unwilling to pay debts.

        87
        I make no apology for raising again issues that were raised in Committee. We do not think that the Government have taken them seriously enough.
        Dr. Pugh: The debate has been dogged by the tendency of many people to regard bankrupts as a homogeneous group. The thrust of the Bill is that they are not. Some people lose money through no fault of their own—for instance, the thousands of victims of the Wall street crash. Not all of them were foolish; many were just downright unfortunate. It has been said that we should distinguish between the reckless, the foolish, the careless and the negligent, but of course there are many shades of grey.
        If we look at the whole picture, we see that there is a simple view throughout the House—that, from the moral point of view, not everyone merits the same treatment. What has dogged both sides today, however, is the question whether it is possible to distinguish between the categories. The hon. Member for Eastbourne (Mr. Waterson), indeed, asked whether we should differentiate. Was it worth while? I should have thought that the Tory answer would be no—that there should be no distinction between those who are bankrupt through no fault of their own and those who have lost their money, and other people's money, through negligence of one kind or another. It has been argued that there would be practical difficulties and dangerous consequences and that it would not be worth the candle—that the benefits of better enterprise and greater social justice that the Act was meant to ensure would not outweigh the snags.
        The argument of the hon. Member for Eastbourne was reasonably consistent with that, in that he seemed to suggest that differentiation was not possible, but now he is arguing that it is possible to differentiate the consumer bankrupt and the business bankrupt. That differentiation is apparently practical, worth while, in line with the overall objectives of the legislation and not dangerous. He has effectively reversed his arguments.
        A consistent view, which the Minister may be tempted to take, is that it is certainly possible to distinguish between bankrupts. If we can differentiate those who have been reckless and those who have been unfortunate in pursuing a business enterprise, it is surely not beyond the wit of man to differentiate those whose bankruptcy is largely the effect of bad consumer spending patterns and those who have suffered from unfortunate business dealing. It would certainly be legitimate for the Minister to consider whether the amendment is worth pursuing.
        Miss Melanie Johnson: We tabled Government amendment No. 371 in response to points made by the hon. Member for Cities of London and Westminster (Mr. Field) in Committee. It extends slightly the grounds for courts to consider hearing a bankruptcy restriction order application. It takes on board the point about ensuring that the BRO regime has similar grounds to those for wrongful trading for limited companies in section 214 of the Insolvency Act 1986. I hope that the House will support it.
        Amendments Nos. 411 and 412 are designed to ensure that an income payments order or agreement can run for any period, potentially until all the bankrupt's liabilities are discharged. I said in Committee—I have heard nothing
        88
        today to change this view—that it is right for bankrupts who are able to make contributions from their income to be required to do so, but setting a three-year limit to the agreement recognises that there must be a balance between the benefits brought to the creditors and the rehabilitation of the individual bankrupt. Currently, IPOs tend to run until discharge—about three years—and it would hardly be fair or consistent with the Government's aim of helping bankrupts to make a fresh start if we imposed a far more stringent regime, as could be the case under the amendments.
        The provisions in the Bill make it clear that the Government support the principle of "can pay, should pay" for bankrupts. The amendments could result in IPOs and IPAs lasting longer than is reasonable. If the intention is to ensure that bankrupts with a high potential future income—for example, those in the professions—make payments to the estate, the amendments are misguided, because they could make all bankrupts entering into IPOs or IPAs subject to the longer time scale. If a debtor wants to make payments for a period beyond the three years provided for in clauses 253 and 254, it would be more appropriate to use the individual voluntary arrangement regime, which would allow flexibility in setting out a programme of payments that is acceptable to the creditors.
        Amendment No. 85 was debated at length in Committee, and again today. I remain unconvinced of the case for drawing a distinction between business and consumer bankruptcies for the purposes of discharge. It has been suggested that without such a distinction there is likely to be an increase in bankruptcies brought about by a headlong rush of consumers seeking to take advantage of some perceived easy ride. There is no reason to believe that consumers would act in that way. Bankruptcy is not an easy option, and in some respects the new regime makes it more rather than less severe.
        As my hon. Friend the Member for Hemel Hempstead (Mr. McWalter) said, there is a difference here. In particular, the proposals contain no changes to the assets that will be included in the estate on the making of a bankruptcy order and they do not shorten the period over which the bankrupt is liable to make payments out of income. The proposals make it easier for the trustee to ensure that the bankrupt makes payments out of future income by introducing income payments agreements. Consumers who behave recklessly or dishonestly run the risk of being subject to a bankruptcy restriction order for a longer period than the current discharge period and may damage their credit rating. I do not think that the majority of consumers are as short-sighted as some Opposition Members would have us believe.
        The hon. Member for Eastbourne briefly regaled us with the position in the United States, but the comparison with the US is not a valid one. There are many differences between our proposals and the US regime. In the US, there is no real concept of a discharge period and individuals can opt either for an asset-based regime under chapter 7 or for an income-based regime under chapter 13, depending on their circumstances and what would be better for them. There is no investigation to speak of in the US. Our proposals do not allow debtors to choose the option that suits them best. If they can pay, they should pay. We also provide for proper investigation into misconduct and for effective sanctions where necessary. For those reasons, we do not think that bankruptcies here will reach levels equivalent to those in the US. There are significant differences.

        89
        We believe that the aim of reducing bankruptcy should apply to the majority of bankrupts, regardless of whether they are in business, where no misconduct or criminal behaviour has been identified. People can have bad luck in their personal lives—the unexpected loss of a job or the breakdown of a personal relationship can often lead to financial problems. The advice agencies all say that those are major reasons why people find themselves in that position. Such people are as entitled to a fresh start as a business person would be under parallel circumstances. It would not be fair or equitable to stigmatise them through a tougher regime.
        Dr. Pugh: Although we may not want to distinguish in moral terms, surely the object of the Bill is to make business bankruptcy less of a problem, rather than to deal with consumer bankruptcy. There is a distinction. When the Bill was conceived, there was no thought of making it easier for people to overspend.
        Miss Johnson: We are trying to make it easier to distinguish in both areas between those who face bankruptcy unexpectedly, through no fault of their own, and those who have behaved recklessly or wantonly. The distinction suggested in the amendment is entirely artificial, and we think that it would be unworkable in practice. The experience of the official receiver shows that the self-employed do not operate their business and professional lives in conveniently separate compartments—as we discussed at length in Committee, they are often inextricably linked.
        For all those reasons, I do not believe that the amendments would work well or that we should accept them. I hope that hon. Members will not press them to a vote.
        Amendment No. 86 was also discussed at considerable length in Committee. We do not support it, as it would effectively continue the one-size-fits-all approach. As I said in Committee, early discharge will occur only in straightforward cases where debtors co-operate with the official receiver. In cases where the administrative work is complete and the issue of public protection does not arise, there is no merit in preventing bankrupts from getting through the process as quickly as possible, or in not helping them to promote rehabilitation of their financial affairs. In almost all cases, such administrative work will be completed in under a year. One exception might be cases where the bankrupt has failed to co-operate fully with the official receiver. Such individuals would be subject to the suspension of discharge provisions, and would not be discharged until they have co-operated fully. Similarly, in most cases an investigation decision is made in the first few months after the bankruptcy order. Again, if investigation matters are outstanding. there will be no discharge within the 12-month period.
        7.30 pm
        Amendment No. 88 was also considered at length in Committee. The Bill will remove provisions relating to summary bankruptcy and introduce instead a general discretion for the official receiver to investigate cases as he or she sees fit. This is not a new concept. Sections of the Insolvency Act 1986 dealing with summary bankruptcy currently provide that, in cases involving unsecured liabilities of less than £20,000, the official
        90
        receiver need only investigate if he or she sees fit. The advantage of the Bill's proposal is that resources can be used more effectively by looking at each case on its merits, rather than on the current basis of an arbitrary financial limit. The amendment would require an in-depth investigation in all cases, including those currently dealt with under the summary regime. It would therefore seek, for no good reason, to engage the official receiver in investigating cases that do not involve issues of public protection or criminal behaviour. That is at odds with the professed concern of Opposition Members to ensure that the official receiver is properly resourced to carry out his or her functions.
        Finally, amendment No. 87, about which I have already spoken, is very similar to Government amendment No. 371.
        Mr. Waterson: The Minister's response to amendment No. 85, which deals with the distinction between business and consumer bankruptcies, was extremely revealing. As I predicted, she mentioned the practicalities and difficulties involved. We are prepared to concede that such problems exist, and I am sure that they can be addressed. However, so far as the principle is concerned, she made it entirely clear that there is no intention to distinguish between business and consumer bankruptcies. That seems to undermine one of the few bases on which the word "enterprise" is justified as forming part of the Bill's title. This part of the Bill has consistently been spun over many months as a means of encouraging entrepreneurs. It is not supposed to encourage people to spend far too much on their credit cards, only to find that they cannot pay their debts.
        The Minister is of course right to say that the analogy with America is not completely on all fours—no comparison between countries ever is. Major differences exist, but it is clear that a system that makes it easier to become bankrupt, and which removes the associated stigma, will lead to a very large growth in the number of bankruptcies. I challenge the Minister to say that her Department firmly predicts that the passage of the Bill as it stands will not lead to a very substantial increase in bankruptcies.
        There is a clear conceptual problem. The Government have rowed back from the suggestion that they are trying to encourage entrepreneurs. I am happy to leave the practicalities of the amendments to parliamentary draftsmen, so long as the Minister is prepared to accept the principle behind them. However, as was underlined by the hon. Member for Southport (Dr. Pugh), it is clear that the Government's commitment to that principle is only skin deep. They do not care that, in fact, many more consumer bankrupts than business bankrupts will be drawn into the system. I suspect that, in practice, the impact on entrepreneurs will be largely negligible. The only effect will probably be that people will escape the net simply because far more bankruptcies will have to be processed. There will be insufficient resources, and the period of examination of bankrupts' assets will again be foreshortened by other provisions in the Bill.
        I was very disappointed by what the Minister had to say, but in a sense I was heartened. Her comments support the point that I argued consistently throughout the Bill's passage: that, as the Confederation of British Industry said, the name "Enterprise Bill" is a complete misnomer. However, having made those points, I beg to ask leave to withdraw the amendment.
        Amendment, by leave, withdrawn.

      Schedule 20

        SCHEDULE 4A TO INSOLVENCY ACT 1986
        Amendment made: No. 371, in page 292, line 32, leave out "himself to be" and insert—
        'or ought to have known that he was'.—[Miss Melanie Johnson.]

      Clause 259

        DISQUALIFICATION FROM OFFICE: PARLIAMENT
        Mr. Waterson: I beg to move amendment No. 76, in page 177, line 32, leave out clause 259.
        I was hoping that the Chamber would fill up at this point, and it has: my right hon. Friend the Member for Wokingham (Mr. Redwood) has appeared. Given that the amendment would delete the clause that deals with the disqualification from office of Members of Parliament as a result of bankruptcy, I thought that more Members of Parliament might have an interest in it, but apparently they do not.
        The Government are trying to ensure that, under the new regime, Members of Parliament—and, indeed, local councillors and various other office holders—can be elected and retain office, even if they become bankrupt. If they become subject to a bankruptcy restriction order—in other words, if they are one of those culpable bankrupts whom we hear so much about—the same consequences will be visited on them as are currently visited on them if they become bankrupt. We tested that proposition in Committee for two broad reasons. First, in the real world, can one distinguish, in this or any other context, between two neat categories—culpable, malign bankrupts, and non—culpable, benign bankrupts—even assuming that the stretched resources of the Insolvency Service allow it so to differentiate?
        Secondly, should there be a different and somewhat higher test for Members of Parliament? Are the Government really arguing that benign, blundering but basically honest Members of Parliament who have been unlucky in business or in their purchases should not suffer some kind of disadvantage as a result of going bankrupt? I take the view that there should be a higher test for Members of Parliament. Even in the case of "bad luck" bankrupts, their being unwise enough to go bankrupt should be sufficient—as is the currently the case—to justify their disqualification. That is to say nothing of whether we want a Member of Parliament to continue to serve who may have been a rogue, and who recklessly or intentionally left behind debts.
        Of course, we have had our share of rogue Members who have gone bankrupt and left behind financial responsibilities. Robert Maxwell, the former Member for Buckingham, and John Stonehouse are two names that come to mind, but it has happened fairly regularly for some 200 years. Indeed, Spencer Perceval, the only British Prime Minister ever to be assassinated, was shot in the House of Commons by a bankrupt called Bellingham—a direct antecedent of my hon. Friend the Member for North-West Norfolk (Mr. Bellingham).
        Even if a "bad luck"—to use the Minister's expression—bankrupt Member of Parliament satisfied all creditors, in this age of intrusive media interest in almost every aspect of our humdrum, mundane lives, the matter would doubtless end up in the public domain. Leaving
        92
        aside the question of whether the hapless Member had in fact run up such debts in their own constituency—an action that would be unwise—the matter would come out sooner or later, at least in the constituency. Is it really the business of the House of Commons to tell our constituents that no stigma should be attached to being bankrupted for any reason if one is a Member of Parliament or wishes to be one? It is all right for us to tell the rest of the population that they need no longer feel any stigma, but how can we tell them how they should view a Member of Parliament or would-be Member who is in the same position?
        As I said in Committee, the proposals assume that bankruptcy has no victims. I make no apology for repeating what I have said today: leaving aside the damage caused to business and the credit industry, many bankrupts leave debts payable to their immediate family and friends. They may even leave friends or relations to go bankrupt themselves as a result, Is it really the Government's view that Members of Parliament—or anyone else—can be wholly innocent when they become bankrupt?
        The British population are possessed of a greater wisdom. I do not mean that wisdom that has sent every Member here—that goes without saying—but if an MP has been injudicious enough to run up debts that cannot be paid, leaving many people out of pocket, it is arguable that such a person should not be entrusted with representing constituents' interests. I admit that there, but for the grace of God, go I. Any one of us could make an unfortunate investment, such as in a home in our constituency, because MPs can be subject to bad luck as much as anyone else. However, we must think carefully about whether we should change the rules for ourselves. People expect a higher standard from a Member of Parliament, or someone who seeks to be a Member of Parliament, and there is a strong argument that the current rules should continue to apply.
        If the Government are intent on changing the rules for everyone else, because they think that it will encourage entrepreneurial spirit or will be redistributive—whatever their real motives are—they can make it easier for the rest of population to go bankrupt and come out of bankruptcy, and they can remove the stigma. However, no matter how much law we pass here, an MP who becomes bankrupt or a candidate who has been bankrupt will still have a stigma attached to them, and I see no particular problem with that. People will have to weigh up the character and abilities of such a person—including, perhaps, the level of gullibility—before deciding who should represent them in this place. The Government have yet to make out a case, in Committee or elsewhere, for this change in the law.
        Miss Melanie Johnson: Amendment No. 76 seeks to maintain the status quo regarding the bankruptcy disqualification of Members. However, under the Bill it would not be possible to do so, because if a Member were subject to a bankruptcy restrictions order, he or she would not be disqualified. The hon. Member for Eastbourne (Mr. Waterson) does not appear to have realised the implications of his amendment, although it may be only a probing amendment. Those subject to BROs would not be disqualified, but they are exactly the people who we are saying are the most serious bankrupts and who will be subject to a much more rigorous regime under the Bill

        93
        than under existing bankruptcy provisions. I hope that the hon. Gentleman will take that point to heart, because his allegations that our changes to the regime are always in favour of leniency are growing a little stale. In truth, the BRO provision will make bankruptcy a suitably serious matter in the appropriate cases.
        The last bankruptcy disqualification of a sitting Member of Parliament was in the late 1920s, notwithstanding the more recent names that the hon. Gentleman mentioned. Such disqualification is unusual, but that is not to say that we should not have provision to cover it. Section 427 of the Insolvency Act 1986 currently provides that a person who becomes bankrupt in England and Wales, or Northern Ireland, or has his estate sequestered in Scotland, is disqualified from being elected to this House or sitting or voting in either House or Committee of either House.
        7.45 pm
        Mr. Waterson: I appreciate the practical point that the Minister has just made, but she must also remember that we are talking about people who might wish to put themselves forward for election to Parliament who currently would not be allowed to do so. The issue would not arise for sitting Members, but would for those who wish to stand and would be allowed to do so, even though they were bankrupt.
        Miss Johnson: Former members of the Committee will remember that my hon. Friend the Member for North-East Derbyshire (Mr. Barnes) provided some illuminating insights as to the history of the disqualification of Members and, in particular, whether it is right that somebody who is bankrupt should be disqualified from standing for election to Parliament. I have written to my hon. Friend and other former Committee members confirming that the Bill as currently drafted will enable a person who becomes bankrupt but is not subject to a BRO to be elected to and to participate in this House, but that if a person subject to a BRO were to be elected, the return would be void. However, it is very unlikely that a person subject to a BRO would be chosen as a candidate.
        Under section 427 of the 1986 Act, a Member of Parliament would be able to continue to undertake constituency work. However, if after six months he or she remained bankrupt or sequestrated, his or her seat would be vacated. We recognise that arrangements relating to the conduct of Members of Parliament are a matter for Parliament itself to determine and not the Government alone. Therefore, the proposals in the Bill were the result of discussion between the Lord President of the Council and the Chairman of the Standards and Privileges Committee.
        The right hon. Member for North-West Hampshire (Sir George Young) confirmed that against the background of the Government's objectives it would no longer be appropriate for a Member who becomes bankrupt to be disqualified from sitting or voting, and nor would it be fair to the constituents. The Standards and Privileges Committee also felt that if a Member becomes subject to a bankruptcy restrictions order or an interim order, his or her seat should be vacated. By the same token, only bankrupts subject to a BRO or an interim BRO should be disqualified from election to the House.
        The Government are grateful for the Committee's consideration of this matter and accept its advice, which is reflected in clause 259. That position was supported
        94
        by some of my hon. Friends who spoke to the issue in Committee. The clause also disqualifies a member of the other place who is subject to a BRO, or interim order, from sitting and voting.
        Initially, the proposals will apply only to those persons made bankrupt in England and Wales. That is because Scotland and Northern Ireland have their own devolved individual insolvency regimes and until such time as they are amended, Members sequestrated in Scotland or made bankrupt in Northern Ireland will continue to be subject to the current arrangements.
        I do not need to go into more detail about the arrangements for the devolved Administrations, but we should recognise that we currently have a lower standard than some other areas because a Member is allowed a six-month period of grace to get either an annulment or a discharge before he or she has to vacate their seat. In other areas, there is no such grace period and disqualification has immediate effect. To leave things as they are, as the amendment advocates, and to take no action against Members who are subject to a BRO would widen that disparity even further. We would be faced with the perverse possibility that bankrupt Members could have to vacate their seats after six months, but could stand for election again and be returned even after their discharge even though they were subject to a BRO.
        We should bring the provisions on Members into line with what will happen elsewhere. The order-making power in clause 261 will allow unnecessary bankruptcy disqualifications to be removed or amended. It is already clear that a number of restrictions on bankrupts will be replaced by restrictions on persons subject to a BRO. That is what we will be doing for Members in clause 259.
        I will not be accepting amendment No. 76 which would have some. perhaps unintended, undesirable consequences. I believe that the moves that we are making are in the right direction, although the Government entirely accept that this is a matter for this House.
        Mr. Waterson: I was merely trying to put the principle before the House. The Minister referred to a probing amendment, and if ever there was one, this was it. I still believe that those outside the House will not look kindly on us giving ourselves this exemption. The Minister has rightly pointed out some practical difficulties and, given her full explanation on at least two occasions, I beg to ask leave to withdraw the amendment.
        Amendment, by leave, withdrawn.

      Clause 263

        FEES
        Amendment made: No. 323, in page 181, line 10, leave out "or cancel recognition" and insert—
        'recognition, or revoke an order of recognition under section 391(1) by a further order,'.—[Miss Melanie Johnson.]

      Schedule 24
        TRANSITIONAL AND TRANSITORY PROVISIONS AND SAVINGS
        Amendments made: No. 374, in page 304, line 10, at end insert—
        TRANSITIONAL AND TRANSITORY PROVISIONS AND SAVINGS

          'Designation orders under Schedule 4 to the 1998 Act
          '(1) Subject to sub-paragraph (2), the repeals made by section 200 do not affect—

          95

          (a) the operation of Schedule 4 to the 1998 Act in relation to any application for designation of a professional rule which is made before the commencement date;

          (b) the operation of section 3(1)(d) of and Schedule 4 to the 1998 Act in relation to any designation effected by an order made before the commencement date or on an application mentioned in paragraph (a).

          (2) No designation order (whenever made) shall have any effect in relation to any period of time after the end of the transitional period.
          (3) Subject to sub-paragraph (2) a designation order may be made after the end of the transitional period on an application mentioned in sub-paragraph (1)(a).
          (4) For the purposes of this paragraph—
          "commencement date" means the day on which section 200 comes into force;
          "designation" means designation under paragraph 2 of Schedule 4 to the 1998 Act; and
          "the transitional period" means the period of three months beginning with the commencement date.'.
          No. 188, in page 304, line 6, at end insert—
          '8A. Any person who is a member of the Competition Commission appeal panel (but not a member of the panel of chairmen) immediately before the commencement of section 12 is on that date to become a member of the Competition Appeal Tribunal, on such terms and for such a period as the Secretary of State may determine.
          8B Any member of the Competition Commission appeal panel who is, immediately before the commencement of section 12, a member of the panel of chairmen under paragraph 26 of Schedule 7 to the 1998 Act is on that date to become a chairman of the Competition Appeal Tribunal, on such terms and for such a period as the Lord Chancellor may determine.
          8C Nothing in paragraph 7, 8, 8A or 8B applies to any person who, before the commencement of section 12, gives notice to the Secretary of State stating that he does not wish that paragraph to apply to him.'.—[Miss Melanie Johnson.]

      Schedule 25
        MINOR AND CONSEQUENTIAL AMENDMENTS
        Amendments made: No. 382, in page 304, line 17, at end insert—
        MINOR AND CONSEQUENTIAL AMENDMENTS

          'Registered Designs Act 1949 (c. 88)
          A1 (1) The Registered Designs Act 1949 is amended as follows.
          (2) In section 11A(1) (powers exercisable in consequence of report of Competition Commission), paragraphs (a) and (b) shall cease to have effect.
          (3) After section 11A there is inserted—
          "11AB Powers exercisable following merger and market investigations
          (1) Subsection (2) below applies where—

          (a) section 40(2), 54(2), 65(6), 72(2), 80(2), 132(2), 141(2) or 154(2) of, or paragraph 5(2) or 10(2) of Schedule 7 to, the Enterprise Act 2002 (powers to take remedial action following merger or market investigations) applies;

          (b) the Competition Commission or (as the case may be) the Secretary of State considers that it would he appropriate to make an application under this section for the purpose of remedying, mitigating or preventing a matter which cannot be dealt with under the enactment concerned; and

          (c) the matter concerned involves conditions in licences granted in respect of a registered design by its proprietor restricting the use of the design by the licensee or the right of the proprietor to grant other licences.

          (2) The Competition Commission or (as the case may be) the Secretary of State may apply to the registrar to take action under this section.
          (3) Before making an application the Competition Commission or (as the case may be) the Secretary of State shall publish, in such manner as it or he thinks appropriate, a notice describing the nature of the proposed application and shall consider any representations which may be made within 30 days of such publication by persons whose interests appear to it or him to be affected.
          (4) The registrar may. if it appears to him on an application under this section that the application is made in accordance with this section, by order cancel or modify any condition concerned of the kind mentioned in subsection (1)(c) above.
          (5) An appeal lies from any order of the registrar under this section.
          (6) References in section 34, 35, 46, 62, 128 or 135 of the Enterprise Act 2002 (questions to be decided by the Competition Commission in its reports) to taking action under section 40(2), 54. 65, 132 or 141 shall include references to taking action under subsection (2) above.
          (7) An order made by virtue of this section in consequence of action under subsection (2) above where an enactment mentioned in subsection (1)(a) above applies shall be treated, for the purposes of sections 88(3), 89(1)(a), 156(1) and 160(3) of the Enterprise Act 2002 (duties to register and keep under review enforcement orders etc.), as if it were made under the relevant power in Part 3 or (as the case may be) 4 of that Act to make an enforcement order (within the meaning of the Part concerned)."'.
          No. 383, in page:304, line 19, at end insert—
          '(1A) In section 19A (action following report by Commission)—
          (a) for subsection (1) there is substituted—
          "(1) Subsection (2) applies in any of the following cases.
          (1A) The first case is where section 132(2) of the Enterprise Act 2002 (duty to remedy adverse effects following market investigation reference) applies and whatever is to be remedied, mitigated or prevented relates to any provision of a scheme or any act or omission of a board administering a scheme.
          (1B) The second case is where section 141(2) of the Enterprise Act 2002 (duty to remedy adverse effects in public interest cases) applies and whatever its to be remedied, mitigated or prevented relates to any provision of a scheme or any act or omission of a board administering a scheme.
          (1C) The third case is where—

          (a) a report of the Competition Commission under section 11 of the Competition Act 1980 (c.21) (references of public bodies etc.), as laid before Parliament, contains conclusions to the effect that—

          (i) certain matters indicated in the report operate against the public interest, and

          (ii) those matters consist of or include any provision of a scheme or any act or omission of a board administering a scheme, and

          (b) none of the conclusions is to be disregarded by virtue of section 11C(3) of that Act (requirement for two—thirds majority).";

          (b) in subsection (2)—

          (i) the words from the beginning of the subsection to "this section" shall cease to have effect;

          (b) for the words from "those conclusions" to the end of the subsection there is substituted "a report of a committee of investigation had contained the conclusion that the provision of the scheme in question, or the act or omission in question, is contrary to the interests of consumers of the regulated product";

          (c) after subsection (2) there is inserted—

          "(3) An order made by virtue of this section in a case mentioned in subsection (1A) or (1B) shall be treated, for the purposes of sections 156(1) and 160(3) of the Enterprise Act 2002 (duties to

          97
          register and keep under review enforcement orders etc.), as if it were made under the relevant power in Part 4 of that Act to make an enforcement order (within the meaning of that Part).".
          (1B) For the purposes of the Scotland Act 1998 (c. 46) the amendments made by sub-paragraph (1A) shall be taken to be pre-commencement enactments within the meaning of that Act.'.
          No. 384, in page 308, line 44, at end insert—

          'Patents Act 1977 (c. 37)
          6A (1) The Patents Act 1977 is amended as follows.
          (2) After section 50 there is inserted—
          "50A Powers exercisable following merger and market investigations
          (1) Subsection (2) below applies where—

          (a) section 40(2), 54(2), 65(6), 72(2), 80(2), 132(2), 141(2) or 154(2) of, or paragraph 5(2) or 10(2) of Schedule 7 to, the Enterprise Act 2002 (powers to take remedial action following merger or market investigations) applies;

          (b) the Competition Commission or (as the case may be) the Secretary of State considers that it would be appropriate to make an application under this section for the purpose of remedying. mitigating or preventing a matter which cannot be dealt with under the enactment concerned; and

          (c) the matter concerned involves—

          (i) conditions in licences granted under a patent by its proprietor restricting the use of the invention by the licensee or the right of the proprietor to grant other licences; or

          (ii) a refusal by the proprietor of a patent to grant licences on reasonable terms.

          (2) The Competition Commission or (as the case may be) the Secretary of State may apply to the comptroller to take action under this section
          (3) Before making an application the Competition Commission or (as the case may be) the Secretary of State shall publish, in such manner as it or he thinks appropriate, a notice describing the nature of the proposed application and shall consider any representations which may be made within 30 days of such publication by persons whose interests appear to it or him to be affected.
          (4) The comptroller may. if it appears to him on an application under this section that the application is made in accordance with this section, by order cancel or modify any condition concerned of the kind mentioned in subsection (1)(c)(i) above or may, instead or in addition, make an entry in the register to the effect that licences under the patent are to be available as of right.
          (5) References in section 34, 35, 46, 62, 128 or 135 of the Enterprise Act 2002 (questions to be decided by the Competition Commission in its reports) to taking action under section 40(2), 54, 65, 132 or 141 shall include references to taking action under subsection (2) above.
          (6) Action taken by virtue of subsection (4) above in consequence of an application under subsection (2) above where an enactment mentioned in subsection (1)(a) above applies shall be treated, for the purposes of sections 88(3), 89(1)(a), 156(1) and 160(3) of the Enterprise Act 2002 (duties to register and keep under review enforcement orders etc.), as if it were the making of an enforcement order (within the meaning of the Part concerned) under the relevant power in Part 3 or (as the case may be) 4 of that Act."
          (3) In section 51(1) (powers exercisable in consequence of report of Competition Commission), paragraphs (a) and (b) shall cease to have effect.
          (4) In section 53(2) (statements in certain reports of the Competition Commission to be prima facie evidence of the matters stated) after "1980" there is inserted "or published under Part 3 or 4 of the Enterprise Act 2002".'.
          No. 385, in page 314, line 6, leave out ", (4) and (5)" and insert "and (4)".
          No. 386, in page 314, line 6, at end insert—
          98

          '(b) in subsection (4), for the words "against the public interest" there is substituted "inappropriate";

          (c) for subsection (5) there is substituted—

          "(5) In deciding what is inappropriate for the purposes of subsection (4) the Secretary of State shall have regard to the considerations mentioned in section 238 of the Enterprise Act 2002."'.
          No. 189, in page 314, line 16, after "(6)", insert "or 111(3)(b) or (4)(b)".
          No. 190, in page 314, line 17, after "11B(1)(c)", insert "or (f)'.—
          No. 387, in page 314, line 38, at end insert—
          '(10) For the purposes of the Scotland Act 1998 (c. 46) the amendments made by this paragraph shall be taken to be pre-commencement enactments within the meaning of that Act.'.
          No. 388, in page 314, line 42, at end insert—

          'Agricultural Marketing (Northern Ireland) Order 1982 (S.I. 1982/1080 (N.I. 12)
          9A (1) The Agricultural Marketing (Northern Ireland) Order 1982 is amended as follows.
          (2) For article 23 (action following report by Commission) there is substituted—
          "23 Action following report by Competition Commission
          (1) Paragraph (5) applies in any of the following cases.
          (2) The first case is where section 132(2) of the Enterprise Act 2002 (duty to remedy adverse effects following market investigation reference) applies and whatever is to be remedied, mitigated or prevented relates to any provision of a scheme or any act or omission of a hoard administering a scheme.
          (3) The second case is where section 141(2) of the Enterprise Act 2002 (duty to remedy adverse effects in public interest cases) applies and whatever is to be remedied, mitigated or prevented relates to any provision of a scheme or any act or omission of a board administering a scheme.
          (4) The third case is where—

          (a) a report of the Competition Commission under section 11 of the Competition Act 1980 (c. 21) (references of public bodies etc.), as laid before Parliament, contains conclusions to the effect that—

          (i) certain matters indicated in the report operate against the public interest, and

          (ii) those matters consist of or include any provision of a scheme or any act or omission of a board administering a scheme, and

          (b) none of the conclusions is to be disregarded by virtue of section 11C(3) of that Act (requirement for two-thirds majority).

          (5) The Department shall have the like power to make orders under Article 22 as if a report of a committee of investigation had contained the conclusion that the provision of the scheme in question, or the act or omission in question, is contrary to the interests of consumers of the regulated product.
          (6) An order made by virtue of this Article in a case falling within paragraph (2) or (3) shall be treated, for the purposes of sections 156(1) and 160(3) of the Enterprise Act 2002 (duties to register and keep under review enforcement orders etc.), as if it were made under the relevant power in Part 4 of that Act to make an enforcement order (within the meaning of that Part)."
          (3) In article 42 (action following report by Commission)—
          (a) for paragraph (1) there is substituted—
          "(1) Paragraph (1D) applies in any of the following cases.
          (1A) The first case is where section 132(2) of the Enterprise Act 2002 (duty to remedy adverse effects following market investigation reference) applies and whatever is to be remedied, mitigated or prevented relates to any provision of a scheme or any act or omission of a board administering a scheme.
          (1B) The second case is where section 141(2) of the Enterprise Act 2002 (duty to remedy adverse effects in public interest cases) applies and whatever is to be remedied, mitigated or prevented relates to any provision of a scheme or any act or omission of a board administering a scheme.
          (1C) The third case is where—

          (a) a report of the Competition Commission under section 11 of the Competition Act 1980 (c. 21) (references of public bodies etc.), as laid before Parliament, contains conclusions to the effect that—

          (i) certain matters indicated in the report operate against the public interest, and

          (ii) those matters consist of or include any provision of a scheme or any act or omission of a board administering a scheme, and

          (b) none of the conclusions is to be disregarded by virtue of section 11C(3) of that Act (requirement for two-thirds majority).

          (1D) The Department, if it thinks fit so to do—

          (a) may by order make such amendments in the scheme as it considers necessary or expedient for the purpose of rectifying the matter;

          (b) may by order revoke the scheme;

          (c) in the event of the matter being one which it is within the power of the board to rectify, may by order direct the board to take such steps to rectify the matter as may be specified in the order, and thereupon it shall be the duty of the hoard forthwith to comply with the order.";

          (b) in paragraph (2) for "paragraph (1)" there is substituted "paragraph (1D)";

          (c) in paragraph (3) for "paragraph (1)(b)(iii)" there substituted "paragraph (1D)(c)";

          (d) in paragraph (5)—

          (i) for "paragraph (1)(i) or (iii)" there is substituted "paragraph (1D)(a) or (c)";

          (ii) for "paragraph (1)(ii)" there is substituted "paragraph (1D)(b)";

          (e) after paragraph (5) there is inserted—

          "(5A) Any order made under this Article in a case falling within paragraph (1A) or (1B) shall be treated, for the purposes of sections 156(1) and 160(3) of the Enterprise Act 2002 (duties to register and keep under review enforcement orders etc.), as if it were made under the relevant power in Part 4 of that Act to make an enforcement order (within the meaning of that Part)."'.
          No. 389, in page 315, line 3, at end insert—
          '(2A) In section 13 (licence modification references to Commission), subsections (9) and (9A) shall cease to have effect.
          (2B) After section 13 there is inserted—
          "13A References under section 13: time limits
          (1) Every reference under section 13 above shall specify a period (not longer than six months beginning with the date of the reference) within which a report on the reference is to be made.
          (2) A report of the Commission on a reference under section 13 above shall not have effect (and no action shall be taken in relation to it under section 15 below) unless the report is made before the end of the period specified in the reference or such further period (if any) as may be allowed by the Director under subsection (3) below.
          (3) The Director may, if he has received representations on the subject from the Commission and is satisfied that there are special reasons why the report cannot be made within the period specified in the reference, extend that period by no more than six months.
          (4) No more than one extension is possible under subsection (3) above in relation to the same reference.
          (5) The Director shall, in the case of an extension made by him under subsection (3) above—

          (a) publish that extension in such manner as he considers appropriate for the purpose of bringing it to the attention of persons likely to be affected by it; and

          (b) in the case of a licence granted to a particular person, send to that person a copy of what has been published by him under paragraph (a) above.

          13B References under section 13: powers of investigation
          (1) The following sections of Part 3 of the Enterprise Act 2002 shall apply, with the modifications mentioned in subsections (2) and (3) below, for the purposes of references under section 13 above as they apply for the purposes of references under that Part—

          (a) section 106 (attendance of witnesses and production of documents etc.);

          (b) section 107 (enforcement of powers under section 106: general);

          (c) section 108 (penalties);

          (d) section 109 (penalties: main procedural requirements);

          (e) section 110 (payments and interest by instalments);

          (f) section 111 (appeals in relation to penalties);

          (g) section 112 (recovery of penalties); and

          (h) section 113 (statement of policy).

          (2) Section 107 shall, in its application by virtue of subsection (1) above, have effect as if—

          (a) subsection (2) were omitted; and

          (b) in subsection (9) the words from "or section" to "section 64(3))" were omitted.

          (3) Section 108(5)(b)(ii) shall, in its application by virtue of subsection (1) above, have effect as if for the words from "the latest" to the end there were substituted "the day on which the report of the Commission on the reference concerned is published."
          (2C) In section 14 (reports on licence modification references)—

          (a) after subsection (1) there is inserted—

          "(1A) For the purposes of section 15 below, a conclusion contained in a report of the Commission is to be disregarded if the conclusion is not that of at least two-thirds of the members of the group constituted in connection with the reference concerned in pursuance of paragraph 15 of Schedule 7 to the Competition Act 1998.
          (1B) If a member of a group so constituted disagrees with any conclusions contained in a report made on a reference under section 13 above as the conclusions of the Commission, the report shall, if the member so wishes, include a statement of his disagreement and of his reasons for disagreeing.";

          (b) for subsection (3) there is substituted—

          "(3) For the purposes of the law relating to defamation, absolute privilege attaches to any report made by the Commission on a reference under section 13 above.
          (3A) In making any report on a reference under section 13 above the Commission must have regard to the following considerations before disclosing any information.
          (3B) The first consideration is the need to exclude from disclosure (so far as practicable) any information whose disclosure the Commission thinks is contrary to the public interest.
          (3C) The second consideration is the need to exclude from disclosure (so far as practicable)—

          (a) commercial information whose disclosure the Commission thinks might significantly harm the legitimate business interests of the undertaking to which it relates, or

          (b) information relating to the private affairs of an individual whose disclosure the Commission thinks might significantly harm the individual's interests.

          (3D) The third consideration is the extent to which the disclosure of the information mentioned in subsection (3C)(a) or (b) is necessary for the purposes of the report."'.
          No. 390, in page 316, line 42, leave out from beginning to end of line 2 on page 317.
          No. 391, in page 317, line 9, at end insert—

          'Copyright, Designs and Patents Act 1988 (c. 48)
          15A (1) The Copyright, Designs and Patents Act 1988 is amended as follows.
          (2) In section 144 (powers exercisable in consequence of report of Commission) for subsections (1) and (2) there is substituted—
          "(1) Subsection (1A) applies where whatever needs to be remedied, mitigated or prevented by the Secretary of State or (as the case may be) the Competition Commission under section 12(5) of the Competition Act 1980 or section 40(2), 54(2), 65(6), 72(2), 80(2). 132(2), 141(2) or 154(2) of, or paragraph 5(2) or 10(2) of Schedule 7 to, the Enterprise Act 2002 (powers to take remedial action following references to the Commission in connection with public bodies and certain other persons, mergers or market investigations) consists of or includes—

          (a) conditions in licences granted by the owner of copyright in a work restricting the use of the work by the licensee or the right of the copyright owner to grant other licences; or

          a refusal of a copyright owner to grant licences on reasonable terms.

          (1A) The powers conferred by Schedule 8 to the Enterprise Act 2002 include power to cancel or modify those conditions and, instead or in addition, to provide that licences in respect of the copyright shall be available as of right.
          (2) The references to anything permitted by Schedule 8 to the Enterprise Act 2002 in section 12(5A) of the Competition Act 1980 and in sections 72(4)(a), 80(4)(a), 81(2)(a), 86(1), 154(4)(a), 155(3)(a) and 158(1) of, and paragraphs 5, 10 and 11 of Schedule 7 to, the Act of 2002 shall be construed accordingly."
          (3) In section 144(3)—

          (a) for "A Minister" there is substituted "The Secretary of State or (as the case may be) the Competition Commission";

          (b) after "he" there is inserted "or it".'.

          No. 392, in page 318, line 38, at end insert—

          '(f) paragraph 8 (exemption from monopoly provisions) shall cease to have effect.'.

          No. 393, in page 322, line 47, at end insert—
          ';

          (ii) sub-paragraphs (7) and (7A) shall cease to have effect;

          (da) after paragraph 4 there is inserted—

          Further provision about references under paragraph 4
          4A (1) The following sections of Part 3 of the Enterprise Act 2002 shall apply, with the modifications mentioned in sub-paragraphs (2) and (3), for the purposes of references under paragraph 4 as they apply for the purposes of references under that Part—

          (a) section 106 (attendance of witnesses and production of documents etc.);

          (b) section 107 (enforcement of powers under section 106: general);

          (c) section 108 (penalties);

          (d) section 109 (penalties: main procedural requirements);

          (e) section 110 (payments and interest by instalments);

          (f) section 111 (appeals in relation to penalties);

          (g) section 112 (recovery of penalties); and

          (h) section 113 (statement of policy).

          (2) Section 107 shall, in its application by virtue of sub-paragraph (1), have effect as if—

          (a) subsection (2) were omitted; and

          (b) in subsection (9) the words from "or section" to "section 64(3))" were omitted.

          (3) Section 108(5)(b)(ii) shall, in its application by virtue of sub-paragraph (1), have effect as if for the words from "the latest" to the end there were substituted "the day on which the report of the Commission on the reference concerned is published.";
          (db) in paragraph 5—

          (i) for "Director" (in each place) there is substituted "OFT";

          (iii) sub-paragraph (5) shall cease to have effect;

          (iii) after sub-paragraph (5) there is inserted—

          "(5A) For the purposes of paragraph 6, a conclusion contained in a report of the Competition Commission is to be disregarded if the conclusion is not that of at least two-thirds of the members of the group constituted in connection with the reference concerned in pursuance of paragraph 15 of Schedule 7 to the Competition Act 1998.
          (5B) If a member of a group so constituted disagrees with any conclusions contained in a report made on a reference under paragraph 4 as the conclusions of the Competition Commission, the report shall, if the member so wishes, include a statement of his disagreement and of his reasons for disagreeing.
          (5C) For the purposes of the law relating to defamation, absolute privilege attaches to any report made by the Competition Commission on a reference under paragraph 4.
          (5D) In making any report on a reference under paragraph 4 the Competition Commission must have regard to the following considerations before disclosing any information.
          (5E) The first consideration is the need to exclude from disclosure (so far as practicable) any information whose disclosure the Competition Commission thinks is contrary to the public interest.
          (5F) The second consideration is the need to exclude from disclosure (so far as practicable)—

          (a) commercial information whose disclosure the Competition Commission thinks might significantly harm the legitimate business interests of the undertaking to which it relates, or

          (b) information relating to the private affairs of an individual whose disclosure the Competition Commission thinks might significantly harm the individual's interests.

          (5G) The third consideration is the extent to which the disclosure of the information mentioned in sub-paragraph (5F)(a) or (b) is necessary for the purposes of the report.".'
          No. 394, in page 323, line 1, leave out "paragraphs 5 and" and insert "paragraph".
          No. 395, in page 323, leave out line 11 and insert—

          (iii)sub-paragraphs (3) and (4) shall cease to have effect;

          (ga) after paragraph 8 there is inserted—

          Enforcement
          8A (1) The court may, on an application by the OFT, enquire into whether any person ("the defaulter") has refused or otherwise failed, without reasonable excuse, to comply with a notice under paragraph 8(1).
          (2) An application under sub-paragraph (1) shall include details of the possible failure which the OFT considers has occurred.
          (3) In enquiring into a case under sub—paragraph (1), the court shall hear any witness who may be produced against or on behalf of the defaulter and any statement which may be offered in defence.
          (4) Sub-paragraphs (5) and (6) apply where the court is satisfied, after hearing any witnesses and statements as mentioned in sub-paragraph (3), that the defaulter has refused or otherwise failed, without reasonable excuse, to comply with the notice under paragraph 8(1).
          (5) The court may punish the defaulter as it would have been able to punish him had he been guilty of contempt of court.
          (6) Where the defaulter is a body corporate, the court may punish any director or officer of the defaulter as it would have been able to punish that director or officer had the director or officer been guilty of contempt of court.
          (7) In this section "the court"—

          (a) in relation to England and Wales or Northern Ireland, means the High Court, and

          (b) in relation to Scotland, means the Court of Session.

          8B (1) A person commits an offence if he intentionally alters, suppresses or destroys a document which he has been required to produce by a notice under paragraph 8(1).
          (2) A person who commits an offence under sub-paragraph (1) shall be liable—

          (a) on summary conviction, to a fine not exceeding the statutory maximum;

          (b) on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine or to both.

          False or misleading information
          8C (1) A person commits an offence if—

          (a) he supplies any information to the OFT or the Competition Commission in connection with any of their functions under this Schedule;

          (b) the information is false or misleading in a material respect; and

          (c) he knows that it is false or misleading in a material respect or is reckless as to whether it is false or misleading in a material respect.

          (2) A person commits an offence if he—

          (a) supplies any information to another person which he knows to be false or misleading in a material respect; or

          (b) recklessly supplies any information to another person which is false or misleading in a material respect;

          knowing that the information is to be used for the purpose of supplying information to the OFT or the Competition Commission in connection with any of their functions under this Schedule.

          (3) A person who commits an offence under sub-paragraph (1) or (2) shall be liable—

          (a) on summary conviction, to a fine not exceeding the statutory maximum;

          (b) on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine or to both.".'

          No. 396, in page 325, line 16, at end insert—

          'Osteopaths Act 1993 (c. 21)
          25A (1) The Osteopaths Act 1993 is amended as follows.
          (2) In section 33(2) (competition and anti-competitive practices)—

          (a) for the words from the beginning to "orders)" there is substituted "Schedule 8 to the Enterprise Act 2002 (provision that may be contained in enforcement orders)";

          (b) for "a competition" there is substituted "an enforcement".

          (3) After section 33(2) there is inserted—
          "(2A) The references to anything permitted by Schedule 8 to the Enterprise Act 2002 in sections 154(4)(a), 155(3)(a) and 158(1) of that Act shall be construed accordingly."
          (4) In section 33(3), for "A competition" there is substituted "An enforcement"
          (5) For section 33(4) there is substituted—
          "(4) In this section "an enforcement order" means an order under—

          (a) section 154 of the Enterprise Act 2002 (orders following failure to fulfil final undertakings); or

          (b) section 155 of that Act (final orders following market investigation reports).".

          (6) For section 33(5) there is substituted—
          "(5) For the purposes of an enforcement order section 83(3) of the Enterprise Act 2002 as applied by section 158(2)(a) of that Act (power to apply orders to existing agreements) shall have effect in relation to a regulatory provision as it has effect in relation to an agreement."'.
          No. 397, in page 325, line 19, after "Regulator)" insert "—

          (a) in subsection (2)(a), the words from "in cases where" to "market" shall cease to have effect;

          (b) '.

          No. 398, in page 325, line 21, at end insert—
          ';

          (c) subsection (8) shall cease to have effect.'.

          No. 399, in page 326, line 17, at end insert—

          'Chiropractors Act 1994 (c. 17)
          26A (1) The Chiropractors Act 1994 is amended as follows.
          (2) In section 33(2) (competition and anti-competitive practices)—

          (a) for the words from the beginning to "orders)" there is substituted "Schedule 8 to the Enterprise Act 2002 (provision that may be contained in enforcement orders)";

          (b) for "a competition" there is substituted "an enforcement".

          (3) After section 33(2) there is inserted—
          "(2A) The references to anything permitted by Schedule 8 to the Enterprise Act 2002 in sections 154(4)(a), 155(3)(a) and 158(1) of that Act shall be construed accordingly."
          (4) In section 33(3), for "A competition" there is substituted "An enforcement".
          (5) For section 33(4) there is substituted—
          "(4) In this section "an enforcement order" means an order under—

          (a) section 154 of the Enterprise Act 2002 (orders following failure to fulfil final undertakings); or

          (b) section 155 of that Act (final orders following market investigation reports).".

          (6) For section 33(5) there is substituted—
          "(5) For the purposes of an enforcement order section 83(3) of the Enterprise Act 2002 as applied by section 158(2)(a) of that Act (power to apply orders to existing agreements) shall have effect in relation to a regulatory provision as it has effect in relation to an agreement."'.
          No. 400, in page 327, line 20, leave out sub-paragraph (4).—[Miss Melanie Johnson.]

      Schedule 26

        REPEALS AND REVOCATIONS
        Amendments made: No. 401, in page 338, line 20, at end insert—
        'Registered Designs Act 1949 (c. 88)
        In section 11A(1), paragraphs (a) and (b).'.
        No. 402, in page 338, line 20, at end insert—
        Agricultural Marketing Act 1958 (c.47)
        In section 19A(2), the words from the beginning of the subsection to "this section".'.
        No. 403, in page 339, line 19, in column 2 at end insert—
        Section 84'.
        No. 404, in page 339, line 46, in column 2 at beginning insert—
        'In section 51(1), paragraphs (a) and (b).'.
        No. 405, in page 340, line 4, leave out", (4) and (5)" and insert "and (4)".
        No. 406, in page 340, line 14, in column 2 at beginning insert—
        'In section 13, subsections (9) and (9A).'
        No. 301, in page 340, line 31, in column 2 at beginning insert—
        'In section 54, subsection (3).'
        No. 135, in page 341, line 46, after "In", insert "Schedule 29, in".
        No. 136, in page 341, line 47, at end insert—
        'Criminal Justice Act 1988 (c. 33)
        Section 62(2)(a).'.
        No. 407, in page 342, line 12, in column 2 at end insert—
        'In Schedule 14, paragraph 8'.
        No. 408, in page 342, line 19, after "4," insert—
        ', in paragraph 4, sub-paragraphs (7) and (7A), in paragraph 5, sub-paragraph (5), in paragraph 8, sub-paragraphs (3) and (4) and'.
        No. 192, in page 342, line 47, leave out "and (2)" and insert "to (3)".
        No. 409, in page 342, line 48, in column 2 at beginning insert—
        'In section 4, in subsection (2)(a), the words from "in cases where" to "market", and subsection (8).'
        No. 193, in page 343, line 11, after "(1)" insert "and (2)".
        No. 302, in page 343, line 21, in column 2 at beginning insert—
        'In Article 45, paragraph (3).'
        No. 194, in page 343, line 26, after "(1)" insert "and (2)".
        No. 137, in page 343, line 26, at end insert—
        'Employment Rights Act 1996 (c. 18)
        In sections 166(7)(a) and 183(3)(a), the words "or an administration order."
        Section 189(4).'.
        No. 191, in page 344, line 16, after "2(1)(a)", insert ", (3)(a)".
        No. 303, in page 344, leave out line 29.—
        No. 138, in page 345, line 8, at end insert—
        'Finance Act 2000 (c. 17)
        In Schedule 7, paragraphs 2 and 3.'.
        No. 139, in page 345, line 35, at end insert—
        'Finance Act 2001 (c. 9)
        In Schedule 5, paragraphs 17(1) and (2) and 18.'.
        No. 381, in page 345, line 37, at end insert—
        'Stop Now Orders (E.C. Directive) Regulations 2001 (S.I. 2001/1422)—[Miss Melanie Johnson.]
        The whole Regulations.'

      Clause 272

        COMMENCEMENT
        Mr. Waterson: I beg to move amendment No. 91, in page 184, line 4, at end add—
        '(2) Parts 3, 4, 5, 6 and 7 of this Act shall not come into force before 1st March 2005'.
        I shall speak briefly to the amendment. We discussed this in Committee but, given our slightly truncated debates last Thursday, I still think it is worth debating the amendment, which would ensure that parts 3, 4, 5, 6 and 7 of the Bill, once enacted, do not come into force before 1 March 2005.
        I am sure that it is rare to propose amendments to the commencement provisions in a Bill. However, we have received very strong lobbying from the CBI and other organisations which feel quite aggrieved, not unreasonably, that we are revisiting competition law only a very short time after the Competition Act 1998, which was described at the time as the state-of-the-art measure on competition, and an even shorter time after the Act came into effect. We believe that there is a symbolic importance in suggesting that there should be a moratorium before the new provisions on competition come into force.
        I am sure that Members want to get on to Third Reading, so I will desist from going through all the provisions that are being proposed on competition matters. We had some debate on it last Thursday. However, this seems eccentric for two reasons—first, it will place extra burdens on business because companies will have to become au fait with these new competition provisions very soon after doing so in respect of the 1998 Act.
        Secondly, it was clear from our deliberations in Committee that on certain key issues the regime in this country and the European Union would be moving in opposite directions. That is very unfortunate; there is no doubt that the European regime for competition is developing, and developing quite fast. Again, there seemed to us to be great sense in waiting to see how that regime, to which British companies are subject, developed before committing ourselves to further changes in competition law. That is the purpose of the amendment, and I commend it to the House.
        Mr. Carmichael: I can probably beat the hon. Member for Eastbourne (Mr. Waterson) for brevity. I believe that

        107
        there is some force in what he says. I feel as if passing competition legislation is almost like buying a new computer—by the time everything is installed and all the games are up and running, it is obsolete and something better has come on the market. [Interruption.] Or, indeed, as my hon. Friend the Member for Southport (Dr. Pugh) says, it has crashed.
        I am not convinced that the length of the delay envisaged in the amendment is desirable, but as I have said on a number of occasions in Committee, there is a good reason for having a period of mature reflection on the progress of the Competition Act, which is of two years' vintage only. Before the Bill comes into force in its entirety, it might be possible to commence introducing some of the provisions over a longer period of time.
        Miss Johnson: In the interests of brevity, I will not go over all the reasons why we propose to have the Bill. Its provisions build on those of the 1998 Act. There is no real reason for delaying it, as the amendment proposes, until at least 1 March 2005. It would be unusual for the House to introduce legislation, support it and then suggest that it needs to be delayed for so long.
        I set out the rationale for each of the reforms on Second Reading and in Committee. Merger and market reforms will depoliticise the process; they will improve the clarity of the framework for decisions and the predictability of the decisions made under it. The introduction of an offence for cartels will create a real deterrent against individuals who enter into cartels, and the effect will be fewer cartels. The civil regime introduced by the 1998 Act imposes civil fines on companies but it does not deter individuals in this way.
        I do not believe that there are any grounds for delaying the introduction of this package of important reforms, and I urge the hon. Gentleman to withdraw the amendment.
        Mr. Waterson: I beg to ask leave to withdraw the amendment.
        Amendment, by leave, withdrawn.
        Order for Third Reading read.
        7.57 pm
        Miss Melanie Johnson: I beg to move, That the Bill be now read the Third time.
        I thank hon. Members for their valuable contributions to our debates on the Bill, not only on Report but on Second Reading and in Committee. The Bill is set to go on to the other place in even better shape, I believe, than it was on its introduction. That is due to the diligence that many Members of the House have demonstrated in scrutinising the Bill. I am particularly grateful for the constructive approach of Opposition Members to the Bill, their support for the majority of the measures and their determination to improve it.
        Hon. Members have asked how much of a difference the proposals will make to people's lives in practice; they have sought reassurance that the Bill will not create new burdens on business and have asked whether sufficient resources will be available to back up the new powers in the Bill. I have sought to reassure them on these points throughout the passage of the Bill and will do so again this evening.
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        There remains a productivity gap with our key competitors—France, Germany and the United States. My Department's No. 1 public service agreement target is to tackle this productivity gap. The measures in the Bill will boost productivity through promoting stronger competition and an enterprise culture. They will make a real difference to people's lives. It is no wonder, then, that the Bill has wide support. The Federation of Small Businesses says:
        "We do not see anything controversial in these proposals and would urge all party support and speedy implementation through Parliament".
        Sheila McKechnie of the Consumers Association said that the measures will
        "put an end to the billions lost to consumers each year from rogue traders".
        Digby Jones of the CBI expressed support for the Bill "in the round" and said that
        "we value a very tough competitive regime because it will enhance productivity".
        The Bill has also received support from leading competition experts such as Michael Porter and Irwin Stelzer, from the British Chambers of Commerce and other consumer organisations.
        Mr. John Redwood: If competition is so good, why are hon. Lady's Government delaying its introduction in the Post Office?
        Miss Johnson: My right hon. Friend the Secretary of State for Trade and Industry recently made a statement on the Post Office and we are trying to ensure that the Post Office has a secure future. That is not a matter for the Bill, which does not need to deal directly with issues of enterprise and productivity in the Post Office, as they are being fully addressed elsewhere. Indeed, it could be said that insufficient action by the Conservative Government meant that the future of the Post Office was not what it would have been had the organisation been suitably released from the constrictions under which it worked at that time.
        The result of our extensive consultation on the Bill is a measure that reforms existing regulatory frameworks for the better. For example, there will be better competition regulation. By removing from Ministers decisions on mergers and market investigations, we are removing a layer of regulation and streamlining the regime. We are ensuring that decisions are taken by competition experts, free from short-term political pressures. By ensuring that those decisions are taken on the basis of a competition test, rather than a public interest test, we are improving the clarity of the framework for decisions and the predictability of the decisions made under it.
        Opposition Members have expressed concerns about the manner in which the Office of Fair Trading will investigate markets. The OFT threshold for making references will be no lower than at present. The OFT will naturally want to concentrate its resources on the most serious cases. It will certainly not be in the OFT's interests to refer markets for detailed investigation unless there is a reasonable prospect that the Competition Commission will make an adverse finding. That has not happened in the past, and I cannot envisage its happening in the future.

        109
        Some forms of anti-competitive behaviour, specifically hard-core cartels, are highly damaging to consumers and a major drain on the world economy. Those are serious economic crimes and that is why the Bill provides for a criminal offence with the possibility of a maximum five-year criminal sentence.
        The Competition Act 1998 already provides civil fines against firms, as I said a moment ago. However, to prevent the formation of hard-core cartels, we need to create real deterrents for individuals. Cartels operate undercover and are notoriously difficult to detect. That is why we are providing for tough but appropriate and proportionate investigatory powers, with significant safeguards.
        As well as benefiting from stronger competition, consumers will benefit from effective consumer protection. The stop now orders, introduced last year for certain aspects of consumer protection, were widely welcomed by consumer organisations. The Bill will extend that protection to other sectors—especially the service sector—where consumers' interests are harmed by traders not meeting their legal obligations. The new framework will work better for consumers and for business.
        We have heard several calls for the Bill to include a general duty not to trade unfairly. I agree that businesses should trade fairly. but I am not convinced that enshrining a general principle of that kind in legislation is necessarily the best way forward. Policies must be founded on a robust evidence base to ensure that they are effective and necessary, do not place undue burdens on business and serve the purpose of protecting the consumer—the overriding reason for those aspects of the Bill. That is why I shall invite key stakeholders to a seminar to explore their concerns with me in more depth. In the light of that seminar, I shall assess the case for further action.
        If we are to build a truly enterprising economy, we must ensure that our insolvency regime supports rather than stifles the development and growth of new businesses. The Bill will deliver that support while striking a balance between the interests of creditors, companies and the public.
        In providing early discharge for those who have failed through no fault of their own and by introducing a more stringent regime for the rest, we are drawing a clear distinction between the culpable and the non-culpable. That is vital if we are to move away from our current one-size-fits-all approach to bankruptcy which is inappropriate and unfair.
        On earlier occasions and, indeed, this evening, some hon. Members have said that bankruptcy will become an easy option. That is a cynical argument that has no basis in fact. Debtors who can pay should pay and will pay. Trustees will be entitled to realise the same assets and income as they do at present, and that is why we are introducing bankruptcy orders for protection against the most reckless and dishonest people. However, we also believe that the consequences of bankruptcy should reflect the circumstances of the case.
        As well as encouraging individual enterprise, we want to ensure that companies facing financial difficulties do not go to the wall unnecessarily. That is why we are restricting the use of administrative receivership and creating a new streamlined administration procedure with a clearer purpose and clear time scales. The procedure
        110
        will focus on company rescue and better returns for the company's creditors as a whole. We will also ensure that the interests of all creditors are taken into account.
        The measures in the Bill are radical and bold, but based on careful consultation. We have developed them to strike the right balance and to reform the existing framework of regulation for the better—without creating additional regulations for business. We will provide the necessary resources to ensure that the measures are effective. Together, the package of reforms will make a real difference to this nation's prosperity and I commend the Bill to the House.
        8.6 pm
        Mr. Waterson: One might think that it was difficult to say anything new about the Bill by this stage, but I shall do my best—as the Minister and I prepare to stagger back to our respective corners to receive the ministrations of our managers.
        We have been considering a long and detailed Bill: 274 clauses and 26 schedules. As I have said before, much of it is common ground. To call it an Enterprise Bill is puzzling, as it is a collection of different Bills—some of which contained sensible provisions—which have somehow become attached to one another. That makes it all the more surprising that the Government wanted to rush it through in such a hurry. I have already referred to the fact that we scarcely had time to draw breath between the coming into force of the Competition Act 1998 and the introduction of these new provisions and their effect on business.
        Last Thursday, we managed to avoid any debate of cartels—which are, as the Minister explained, an important aspect of the measure—or market investigations, and there was precious little debate of mergers. That is extraordinary, because it is not as though there were massive party political differences on the entirety of the Bill, although there are some differences between us here and there which we have tried to bring to the fore. There has been relentless pressure to push the measure through. The point that I made on Thursday bears repetition: many people apart from ourselves will have to grapple with the complexities in the Bill when it becomes law.
        I am still mystified that the Bill was not considered appropriate for pre-legislative scrutiny, as that would have created an opportunity to deal with many of the practical and technical objections that we have tried to raise in our role as the official Opposition. However, in fairness to the Government, several of our amendments were accepted and the Government have introduced some amendments based on our proposals.
        I want to deal with some of the broad issues in the Bill. We welcome, of course, the formal recognition by statute of the ending of political interference by Ministers in decisions on takeovers and mergers. However, as I have explained previously, in theory, that should not make a vast difference to individual cases; since the Tebbit guidelines, Ministers have on the whole adopted that approach—a self-denying ordinance.
        I hope that the provisions mean what they say. because the Government have fought like tigers to retain not only a provision about the public interest but also one that allows them to expand the definition of public interest by regulation. They assure us that they do not envisage

        111
        circumstances in which they might do so, but let us hope that the House can hold a debate, which is as full as the rules allow, if and when the Government want to expand that definition.
        I hope that shabby episodes of the sort that we debated on Thursday—the way in which the takeover of Express Newspapers Group by Mr. Desmond's companies was handled by the then Secretary of State—will be a thing of the past. There are still some major unanswered questions about that whole episode, not least about the precise criteria adopted by the then Secretary of State in making his decision on what the Office of Fair Trading called the non-competition issues. Fortunately, the Opposition are not alone in wishing to get to the bottom of those questions. A large and growing number of Labour Members would also like to know on what basis that decision was made and why it was followed only a few days later by a substantial donation to the Labour party.
        Of course we welcome the strengthening of the competition regime, although we expressed our concerns in Committee about the apparent divergence between the new regime under the Bill and what is happening in the European Union. That will create extra problems for businesses, and it is completely at odds with this Government's attitude when the Competition Act 1998 was being debated. They then took the view that one should not be able to get a cigarette paper between what was happening in Europe and what was happening in this country. I wonder why.
        The issue of criminalising cartels is great for a headline, but not much else. In Committee, we heard about the EU's express reservations about our moving in that direction if it is not doing so. There were concerns about how whistleblowers will be treated in practice and whether they will feel able to come forward if they know that criminal sanctions may await them. There were also concerns about the effect on investigations and, crucially, the effect on exchanging information between our regime and that in Europe or those in countries without express criminal sanctions.
        We discussed those countries that very rarely used criminal sanctions even though they were on their statute books. It was interesting that our debate on that subject occurred precisely at the time of the result in the Sotheby's cartel trial. Mr. Alfred Taubman was sentenced to a period in Club Fed, whereas Sir Anthony Tennant will not be subject to criminal sanctions, let alone imprisonment, so long as he does not set foot in America.
        In practice, will the directors of major companies be less willing to err or cross the line because criminal sanctions exist? Their existence does not seem to have affected Mr. Alfred Taubman in America, and they will not have the desired effect here. The proposal is a bit of gesture politics, but it will have a serious practical effect on the efficacy of investigations in this country.
        We could have had a substantial debate on market investigations if we had had enough time last Thursday. The Government have failed to strike the balance between the need for proper investigations and the extra burdens to be placed on business by the various types of investigations that the OFT will be able to conduct with its new powers, functions and resources. The Government even resisted our modest amendment to place in the
        112
        OFT's annual report an assessment of the cost to business of the investigations that it carried out in the preceding year.
        Of course what really beggars belief is the fact that the regulatory impact assessment of the Bill itself concluded that there would be no effect on business if those provisions were placed on the statue book. I find that very difficult to believe, and have done throughout the proceedings on the Bill.
        On consumer protection, we broadly welcome extending stop now orders, introducing super-complaints and the OFT's powers and functions, but we remain disappointed, as do many consumer organisations, that the Government have not been prepared to grasp the nettle of creating a general power to deal with the sort of scams, frauds and abuses that I described earlier today in the debate on those provisions. Despite the Bill's reaching the statute book, it is clear that many of those activities will continue unabated simply because the fraudsters are one step ahead of the law and the Government.
        We debated the insolvency provisions at length today. Of course we welcome the abolition of Crown preference. That must be a practical and sensible step. We have significant reservations about the Government's attempts to remove or certainly to reduce the stigma of bankruptcy. It is absolutely impossible to understand how a genuine judgment can be made between culpable and non-culpable bankrupts. Not only do we believe that there is a third category of what I call pathological optimists, but the fact is that it will be very difficult to make those judgments, particularly as the period will be reduced to 12 months or less; as there will be no formal requirement on the official receiver to investigate all cases; and as the Insolvency Service's resources will be stretched to breaking point.
        That would be bad enough with the existing number of bankruptcies, which has been steadily rising over the years, but we have predicted—the Government have not challenged this—that there will be a significant increase in the number of bankruptcies following the introduction of the provisions. In fact, we go further than that: there will be an explosion in the number of bankruptcies, as happened when similar measures were put into effect in the United States.
        What blows out of the water any pretence that the Government have that the Bill is really about enterprise is the Minister's admission that she sees no theoretical reason to differentiate the length of the bankruptcy period for business and consumer bankrupts. She also made the separate assertion—it was perfectly open for her to do so—that it was difficult and impracticable to make that distinction. It will not be very long before the resources available to deal with the growing number of personal consumer bankruptcies in this country will become obviously inadequate.
        The real problem with the Bill is that it has absolutely nothing whatever to do with enterprise, for we are debating it against a background of understandably deteriorating relations between the Government and industry and business. Britain is now 16th in the world competitiveness league tables. Ernst and Young's latest report shows that 52 per cent. of those asked—the sort of entrepreneurs to whom the Government like to feel they are close—thought that the Government gave low priority to entrepreneurship, and a staggering 1 per cent. thought

        113
        that they gave it high priority. Even if the Government do not understand what they are trying to do, business men and women do.
        The Minister quoted the Federation of Small Businesses, but it also had this to say:
        "All the welcome measures have been undone by the increase in National insurance. For three million self-employed workers, it will mean increases in tax…it is a tragedy that the Chancellor has decided that the self-employed will also pay higher National Insurance Contributions".
        The Independent—not exactly a sub-department of central office—said this about the Bill:
        "these are largely candy floss measures which fail to address the main problem facing Britain's enterprise economy—namely the growing burden of regulation, especially as it concerns the labour force…the Government's pro-business agenda is at odds with its social objectives, for business will always do best if the Government simply gets out of its way."
        However, the Government simply and fundamentally fail to understand how business and entrepreneurial activity work. They simply do not understand. When we come right down to it, it is difficult to disagree with the CBI's judgment that the Bill's title is something of a misnomer.
        8.19 pm
        Mr. Carmichael: It is an unexpected pleasure for me to address the House on Third Reading and from this position in the Chamber. Hon. Members will be aware that my hon. Friend the Member for Twickenham (Dr. Cable) usually leads for the Liberal Democrat party on such occasions. Unfortunately, he has been on unavoidable business elsewhere today, and I suspect that he has been caught out by our alacrity and great progress in finishing our debates on Report as early as we did.
        If my short speech in this debate is punctuated by a series of dull thuds, I can probably account for that by saying that it is the sound of senior members of the leader's office and the Whips Office throwing themselves out of high windows when they see my name on the monitor at this stage in the proceedings. What I am about to say may or may not he party policy; I merely ask Members not to assume that I say it simply because of where I am standing. The absence of my hon. Friend the Member for Twickenham has given me my big chance, however, which I shall take with all the skill and precision of an Irish footballer taking a penalty—[Laughter.] As a Scotsman, I feel that I am one of the few people in the Chamber in a position to make fun of anybody else's soccer skills.
        On Second Reading, the Liberal Democrats' position was that we agreed with much of the philosophy behind the Bill, and we recognised the contribution that the principles of competition could make to the development of a culture of entrepreneurship. That was our approach throughout the Committee stage and on Report. As is the case with all parties, we will not be forcing a Division on the Bill. We wish it good progress in another place.
        This is the second Bill on which I have served in Standing Committee since I came to the House last year. Again, I was impressed at the manner in which the issues raised were dealt with. I pay particular tribute to the Under-Secretary and her colleague, the then Minister for E-Commerce and Competitiveness, who has been made Minister of State, Cabinet Office in the meantime. I also pay tribute, despite our occasional differences, to the
        114
        contribution made to the debate by the hon. Member for Eastbourne (Mr. Waterson), who was always well briefed and put his points with force and eloquence, and to my absent hon. Friend the Member for Twickenham.
        My view of this Enterprise Bill—I wonder whether it might please the hon. Member for Eastbourne were a small amendment made to its title at a later stage, as I suspect that it would save us all a lot of grief—is that it is all right as far as it goes. The Government's approach to competition as presented in the Bill, however, lacks a little imagination. It seems to be driven by a conventional and—dare I say it?—conservative view of competition and what it can achieve. As we have tried to suggest in Committee and on the Floor of the House, it seems that it will not allow sufficiently for concerns to be addressed in relation to local monopolies, for example.
        It also seems that the Labour party has a remarkable ideological commitment to competition as a tool of economic management, about which I am surprised and disappointed, as it is a one-size-fits-all approach. There are parts of the country, one of which I represent, where competition alone will not be enough. There is still a role for the Government in economic management. Clearly, they will not have the primary role, but were Governments simply to say, "That is a matter for the market to take care of, and we are not going to deal with it", that would be an abdication of part of the responsibility that voters feel that they entrust to us. The more we abdicate our responsibilities, the more disengaged we will become from our electorate.
        I was disappointed that the amendments tabled by the hon. Member for North-East Derbyshire (Mr. Barnes)—who, I am pleased to see, is now in his place—were not given a fairer wind. I was pleased that Liberal Democrats were able to support them. On Thursday last week, my hon. Friend the Member for Southport (Dr. Pugh) suggested that the hon. Member for North-East Derbyshire was trying to smuggle in social revolution by the back door. It is difficult to see the hon. Member for North-East Derbyshire, who is one of the most thoughtful and, at least in his delivery, gentle Members of the House, cast in the role of the foot-in-the-door salesmen whom we were so deprecating earlier today. If he was seeking to use the Bill as a tool for social change however, more power to his elbow. My hon. Friend the Member for Twickenham made the point that the need for accountability underpinned his amendments; it is all very well for Government to use competition as they do but, at the end of the day, there must still be political input. The amendment seeking to introduce the public interest to the considerations underpinning the Bill would have been a useful reinstatement of that accountability. The Bill is the poorer for not having it.
        The right hon. Member for Wokingham (Mr. Redwood) offered earlier the example of Consignia and the Post Office. Why, he asked, if the Government are in favour of competition, are they delaying its introduction in the Post Office? I would hope that the answer to that is obvious to all Members of the House. It would be an absolute disaster if unlimited competition were introduced to the Post Office. The universal service obligation would disappear like snow off a dike. That ideologically driven approach to competition, which accepts no role for the state, is very dangerous.
        Mr. Redwood: Does the hon. Gentleman not know that the introduction of competition to postal services is a

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        requirement under European law, and a very good European policy? Is he saying that he is not a good European? What will he do about the fact that he is at variance with a decision already taken by the European Union?
        Madam Deputy Speaker: Order. I remind all hon. Members that, on Third Reading, we should be discussing the content of this Bill.
        Mr. Carmichael: Indeed, Madam Deputy Speaker. It is for others to decide whether I am a good European. I merely point out to the right hon. Member for Wokingham that he poses a different question, because the European proposals for postal services liberalisation operate to a different time scale, and he was asking why the Government were delaying it. It is therefore not the same point.
        Unfortunately, we did not discuss the operation of cartels on Report. I am comfortable in principle with the criminalisation of cartels. I have severe reservations, however, about the practical aspects of their prosecution. Were I still in practice as a solicitor, I would much prefer to defend a client on a charge under the cartel offence provisions than to try to gain a prosecution.
        I regret that we were not able to make more progress today in relation to the protection of consumers. I welcome, as far as it goes, the Under-Secretary's commitment to a seminar on this issue. I hope that it will produce some inspiration for her, as I feel that that has been slightly lacking.
        The amendments tabled by the hon. Member for Eastbourne, although he slightly undersold them, sought to introduce a system based on certain principles. I suggested to him that the great attraction of such a system was that principles are there for application by the court, and that they can be interpreted to defeat new forms of the old evil or mischief. His response was that, as long as that was consistent with current law, that was fine. In Scotland, of course, which has a principle-based system, that is entirely consistent with our current law. Had we never departed from the true principles of Roman law that underpin Scots law, I suspect that we might not be in the mess that we are in today.
        In Committee and on Report, the Government made several concessions which I welcome. One of my constant refrains in Committee was that not sufficient account had been taken of what is, in many respects, a distinctly Scottish position. It remains my impression that the Scottish position has simply fallen off the radar screen for a number of Whitehall Departments since devolution. In many respects, the Bill forcefully illustrates the need for that to change.
        A great many reserve powers remain at Westminster and they will have a direct impact on Scots law. To that extent, I am grateful for the help that I have had in the deliberations on the Bill from members of the Law Society of Scotland and the Institute of Chartered Accountants in Scotland. I place my gratitude to them on the record. However, if future Bills of this sort do not take on board the Scottish position at an earlier stage, that will be very dangerous for the Union.
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        Although good progress has been made, a lot more could be done. I shall watch the Bill's further progress in the other place with interest, but I am more than pleased to give it the good wishes of the Liberal Democrats as it leaves the House tonight.
        8.31 pm
        Mr. Redwood: I have declared my interests in the register.
        I welcome the Government's conversion to the idea that competition is a good thing, but my worry is that the Bill is exceedingly schizophrenic. Provisions in it rightly say that competition is the way to produce lower prices, more choice, better innovation and better standards of service; the Bill also says that, wherever possible, we need to find better ways of enforcing that competition message. I entirely agree. However, when we look at the Government's practice in the sectors that they regulate, control and own, we see that they practise the opposite of what they preach. If the Bill becomes an Act, it will allow them to carry on merrily in their bad old ways. It will be a question of "do as I tell you, not as I do".
        The Bill will tell the competitive private sector that it needs to be even more virtuous in believing in the benefits of competition, and it will impose even stronger penalties on any director or business person who does not behave and does not understand the need to avoid price rigging, monopoly practice and damaging activities vis-à-vis the market. Yet the Government, in their policies towards regulated businesses, will often move in exactly the opposite direction. The Bill, if passed in its current shape, will allow them to carry on doing just that.
        As a former Minister with responsibility for competition, I very well remember attempting to enforce the Tebbit doctrine on the private sector on behalf of the then Secretary of State. I attempted to liberalise and open up those parts of the public and regulated monopoly sectors that needed liberalising, to start to spread some of the benefits of competition to those sectors. For example, we liberalised telecommunications and the results were astonishingly good. I am pleased that the Government do not wish to reverse that. We have much more service, innovation, capacity and choice, and much lower prices, as a result of the liberalisation of telecommunications. Why are the Government therefore unwilling to learn those lessons when it comes to sectors such as the railways, the provision of road space or postal services? If anything, it seems that they are trying to move in the opposite direction.
        When I was the Minister responsible for competition, I accepted fully that it was my duty and that of the Secretary of State to come to the House when necessary to explain our activities. I saw nothing wrong with that. However, I have worries about the Bill if the Government are to use the creation of an independent Competition Commission as an excuse to avoid coming to the House to talk about the most sensitive and important business issues that might come up.
        I hope that Ministers will recognise that, even if they have delegated more of their authority and power through the Bill to more independent bodies, they will still feel that they have to explain to the House of Commons if things go wrong or are contentious, or if people on either side of the House feel that the decisions taken by that independent body are not right, just, fair or in the wider

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        national interest. It is most important in a democratic society that still pays salaries to many people in the Department of Trade and Industry that we should have the right of access to Ministers even if, under the Bill, some of their activities will be delegated.
        I remember that there were occasions when Conservative Members, let alone the then Opposition, rightly wanted to expose to scrutiny and debate the decisions that I and the then Secretary of State had taken in rather tricky merger cases. We had deliberately applied the Tebbit doctrine and tried to provide a fair and sensible regime. However, on occasion, the results seemed perverse to people with constituency interests, with worries about jobs or with other public considerations. It was therefore our duty to come to the House to explain why we had come to the view that we had taken. I hope that we shall still have access to Ministers when difficult decisions are taken under the new regime.
        When I was able to work through and with the then Government to liberalise things, it was my experience that liberalisation always yielded much better results. That is why I find the present Government's schizophrenia as regards competition surprising and worrying. For example, transport is covered by the regulation provisions of the Bill, but the Government take a divergent approach to different parts of that sector.
        The Government are proud of following a strongly pro-competitive approach to air travel services. They promote more competitive airlines, they welcome ever cheaper fares and the additional services offered by low-cost airlines, and they are vigilant about ensuring that the major players do not have an unreasonable advantage. If they do, the Government may even intervene to move against those who they think have an unreasonable advantage, so as to open up the market to a wider number of players. I fully welcome that. It has brought visible benefits and means that many people can go to exotic destinations to which they could not have afforded to travel 10 or 15 years ago. An explosion in jobs, success and prosperity has followed on the back of that obviously competitive market working well, with the encouragement of Her Majesty's Government.
        Why then is the railway industry treated so differently that the Government want to take away the rather modest elements of competition that the previous Government introduced? The Government do not appear to want to strengthen them and take them further in the way they wish to in other sectors. Why do they want only one train operating company to go into each London terminus? Given the strong statements in the Bill about the advantages of competition, it will be a great pity if and when the Government decide to use the obvious windows in the regulated provisions to allow a restriction of the competition and choice going into each major London terminus. For reasons that we do not understand, they think that that is better for this industry, even though it demonstrably does not work in any other industry where monopoly or cartel has been allowed. Their approach is clearly against the spirit of the general thrust of the Bill.
        Why are there no worries about the monopoly over the railway network—Railtrack itself—when the Government support the opening of other networks and encourage competitive challenges to them in much more interesting ways? Why do the Government seem not even to be keen to encourage proper competition for proposals to replace Railtrack in administration with something rather better?
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        They have come up with the monopoly solution that Railtrack should become a company limited by guarantee, a vehicle not before attempted on such a scale for anything so heroic without first encouraging proper debate and proper canvassing of the marketplace to determine what alternative options might produce a better result under a more competitive challenge. Why do the Government fully support a monopoly canal system entirely under their control? Have they not noticed that that system has continued to decline, with its high prices and inability to attract any commercial use of the assets? Things might be different under a competitive challenge in the private sector.
        In the case of road transport, why are the Government keen on promoting ever more competition for the provision of road vehicles? Although I welcome that—it is producing phenomenal choice and lower prices—when it comes to the provision of road capacity, we have to face a solemn public monopoly that never builds any roads. Indeed, it seems to be proud of the fact that there are not enough roads and then blames the people who want to use them for the fact that the roads are so awful. The Government go even further by encouraging a reduction in road space from the limited amount that is available by a stunning array of road works, impediments, chicanes, blocks, humps and traffic lights that ensure people cannot use the network properly.
        When I challenged the Minister on postal competition, she said she could not understand what it had to do with either the fundamental purpose of her Department, as she called it, of improving British productivity, or the Bill, but it is central to both issues. Postal competition is clearly governed by the Bill because it has to exempt restricted competition areas, such as post or road supply, thus showing that the Government clearly want to exempt themselves from the competition that they urge on everyone else.
        The Minister should also understand that getting more competitive postal services or, for that matter, a much better road and rail system, is fundamental to raising British output and productivity. Does she not understand that some of the main problems holding Britain back from achieving even higher levels of prosperity, productivity and commercial success are the services that are delivered as monopolies by the state in the public sector? What are we worst at? Roads and railway lines, and they were provided by the state for most of the last century. Railway lines are even going to be provided badly again by the state through the administration and then the back-door renationalisation of the company limited by guarantee—technically a private sector company, but I am sure a pensioner of the state in all but name.
        The Government are finding it difficult to provide health services as a centralised planned monopoly, however much money they tip in. There is a shortage of supply and people are not happy with the service. We notice that the Government have considerable difficulties in supplying a high-quality education service to the standards everyone would like, because once again they wish to frustrate choice. They do not want parents to have a real choice of school and are not prepared to expand the more popular schools so that they can give places to the children of parents who seek them.
        David Winnick: Does the right hon. Gentleman advocate dismantling the national health service?
        Mr. Redwood: No. I have set out my views on the NHS at considerable length in print and the hon. Gentleman is welcome to read them. I suspect that I would be out of order if I wandered too far into the bigger health debate under the pretext of the Third Reading of this Bill. My point is that people are not offered a choice in those great public services, which are either removed from the Bill or, in the case of the regulated monopolies and regulated public enterprises, are covered by it but differently from anything else in the private competitive enterprise sector.
        The aim of the Department of Trade and Industry—raising productivity and getting us up to the standards of the best in the world—is thoroughly laudable. I also agree that the prime method of sharpening competition even further, as recommended in the Bill, is the natural way to bring that about, because it will happen by the activities of people competing in the marketplace. However, the Government must think again on those parts of the economy that are Government owned, Government monopolies, or regulated in a way that makes them into cartels.
        The Government should tell the House why they are deliberately trying to limit competition in the railways, where it is only just beginning to emerge, by reducing the number of companies offering services. They must tell us why they are not prepared to try out competition in a range of other public sector areas. They must also tell us why the areas in Britain that are furthest behind our foreign competitors are practically all in services and goods that are supplied by the public sector, usually through a monopoly, a cartel or a heavily hedged-about operation in which the Government are directly involved.
        It is well known that the Government are the biggest monopoly in the country and that the Chancellor of the Exchequer is the biggest exploiter of monopoly in the country through his phenomenal powers to tax, with occasional support from people in this House. He is certainly not shy about proving beyond doubt that monopolies with too much power always overcharge and always deliver a lousy service for the money that they charge. We have seen that in the huge increase in taxation and the lack of improvement in public services.
        We should also note—this is entirely relevant to the Bill—that in the most crucial ways of improving our productivity and business success, such as our transport and postal services, the Government do not practise what they preach: far from it. Instead, they are moving in the wrong direction by going towards monopoly cartel and protection and further away from the competitive model, which would produce better results.
        Mr. Deputy Speaker (Sir Alan Haselhurst): Order. I am sorry to interrupt the right hon. Gentleman. I have allowed him a little scope, but I must remind him that on Third Reading we should he discussing the contents of the Bill, and he is tending to make remarks that would have been more suitable for Second Reading.
        Mr. Redwood: I am very grateful for your guidance, Mr. Deputy Speaker.
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        I welcome the Bill's thrust towards more competition in the private sector, but I do not like the possibility that Ministers will use the Bill as an excuse to evade proper accountability to the House on difficult business issues. I certainly do not like the different treatment for the regulated businesses, because I believe that the Government will use that route to develop their public enterprises in a less competitive direction, which will be deeply damaging to overall productivity and to the success of the freely traded competitive sector, which in turn has to rely on many of those crucial public enterprises. For that reason, I do not welcome the Bill. It comes too fast on the heels of the Competition Act 1998.
        The Bill seems to avoid the obvious point made by my Front-Bench colleagues, which is that we are, for these purposes, a vassal state. We are primarily under a European competition regime, which has been considerably strengthened in recent years. It is therefore strange to see the Government wandering further away from the European regime in this Bill, so shortly after the passage of the 1998 Act, when we were told that it was crucial to follow that regime in every twist and turn and that that was the sole purpose of the Act. Indeed, we were told that so perfectly had the Act mimicked the European system that we were in sync, and Europe would take most of the big decisions.
        Apparently, that is not so. That shows that old Labour is beginning to come back, and it wants certain regulatory and monopoly activities to move in the other direction.
        David Winnick: I would hope so.
        Mr. Redwood: I am pleased to see that there are hon. Members present, representing old Labour, who know that they are on a roll. This Parliament is much more interesting because there are lively Back Benchers behind what was new Labour and is now rather tired-looking old Labour. It is now having to recognise that there are many people in the party who want to go in a rather different direction from the punk-Thatcherism that is sometimes sketched out by the right hon. Member for Hartlepool (Mr. Mandelson) and others.
        I cannot say that I welcome the Bill. It is bizarre because it does not recognise European realities; it is dangerous because of the way in which it treats regulated monopolies. Let us hope that it at least increases competition in what remains of the free trading sector, because that would be a modest advance.
        8.47 pm
        Mr. Mark Field: It is a great pleasure to follow my right hon. Friend the Member for Wokingham (Mr. Redwood), who took what I hope he will forgive me for describing as a broad-brush approach to many of the issues.
        One of the difficulties of having been in Committee and having gone through the mill on the Bill, as I have with several other hon. Members present, is that sometimes one cannot see the wood for the trees. I certainly do not think that my right hon. Friend could be accused of that. He made valid points about a range of competition issues, not least on the clear dichotomy between public sector and private sector competition. As he pointed out, it is clear that the Bill has several intentions that many Conservative Members would

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        support as they affect competition in the private sector, but it is a shame that they have not been replicated for our public sector monopolies. I also share a number of the concerns expressed about accountability, and I shall turn to those in a moment.
        Many of the Bill's provisions are positive reforms that will receive support from the Conservative party, and I understand that we will not be voting against Third Reading. However, it seems that it will have little effect on the British enterprise culture as long as the Government continue their policies of high tax and over-regulation. The Government seem to think that they can pick winners. An example is their help for the small business sector. I accept that they have been positive about entrepreneurialism, particularly in the capital gains tax regime that they have put into place over the past four or five years. However, the main effect of the policies, as we have seen from the Finance Bill, which is currently in Committee, is to encourage expensive avoidance measures and complicate the entire commercial framework.
        Returning to competition, the Government are proposing ferocious new criminal powers. Those were brought into being under the Competition Act—even though it became an Act in 1998, many of its provisions came into effect only 18 months or two years ago. The Government's approach appears to be confused, but the penalties are draconian. Perhaps, as we have argued both today and in Committee, there should be a more meaningful assessment of the impact of the 1998 Act before we go though another set of wholesale changes.
        My view is that the super-complaints procedure epitomises some of the worst aspects of what we might suffer in coming years. I am not convinced that Ministers will not utilise the spurious elements of consumer protection to undermine business certainty and add to commercial costs. When he was Secretary of State for Trade and Industry, the right hon. Member for Tyneside, North (Mr. Byers) conducted a misguided and cynical campaign against supermarkets as part of the "Rip-off Britain" campaign in 1999. I am glad that that has been put to one side.
        One of the concerns expressed about many of the competition and Office of Fair Trading aspects of the Bill is that there will be insufficient accountability in the House. I have made it clear that I have some sympathy with the idea that certain competition decisions should have a political element, although I know that that view is no longer in vogue on either the Opposition or the Government Front Bench. It strikes me as invidious that decisions might all too often be made behind closed doors, with Ministers making representations away from Parliament, with the consumer none the wiser and no better off.
        On bankruptcy, especially individual bankruptcy, there have been several debates on the way in which the Government seek to remove the stigma of bankruptcy. There are real dangers in their approach—dangers that we have articulated repeatedly. One need only look at the United States experience in the past decade or so of consumer-led bankruptcies. My main concern is not merely that the Bill will adversely affect a range of lending institutions, but that smaller businesses, which will be the main creditors in such cases, are the most likely to suffer from the relaxation of the personal bankruptcy rules. We fear that in the next few years we
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        will receive significant representations from the very small businesses that are supposed to benefit from the Bill, but that are the worst to suffer from aspects of its insolvency provisions.
        When the Government introduced the Bill, they referred to a regulatory impact assessment. With a wry smile, one reads that, in terms of the impact on businesses, the overall costs arising from the competition and consumer reforms would be neutral, and that the insolvency reforms and proposals on the employment of insolvency practitioners would have only a minor impact on business. One has to be somewhat cynical about the assertion that business will pay nothing directly.
        We were told that there would be costs for Government—both sides of the House were approving of the fact that £70 million to £100 million a year was likely to be lost from the Government purse because of the changes to the Crown preference rules. We broadly support those changes, despite the concerns articulated by hon. Members on both sides about the fact that many small businesses find that the Government, in the form of the Inland Revenue or Customs and Excise, are often able to take a moderate view of debts built up when a business encounters difficulties during the early years of its existence, whereas the ending of Crown preference might mean that those institutions now try to get their money sooner, not later, rather than risk losing out entirely if bankruptcy results.
        Apparently, the Bill will impose no costs on consumers. However, if our worst fears are realised and businesses have additional costs, undoubtedly consumers will suffer, because businesses will to a large extent pass on those costs to consumers where they can. We will have to wait to see the longer-term overall costs and benefits. I think I speak for many Opposition Members in saying that I support a number of provisions in the Bill which, however, is not simply an enterprise Bill, but an enterprise and regulation Bill. In the context of enterprise, we must ensure that we have proper scrutiny in the House of competition policy, which is inevitably political with a small "p" and always controversial. However, I hope that the Minister will reflect on the matter tonight, when the Bill becomes an Act, and as business develops in different ways in future. I wish the Minister godspeed in getting the legislation onto the statute book; I hope that she retains an open mind about the things that we have discussed tonight which we will no doubt continue to discuss both when statutory instruments are introduced and on the Floor of the House in the months and years ahead.
        8.55 pm
        Mr. Harry Barnes: I wish to make two small points. First, I thank the Liberal Democrat spokesman—a temporary spokesman on this issue—for his kind remarks, which I shall spread across north Derbyshire so that people will be aware that there is at least some appreciation of the matters that I sought to propound on Thursday. Secondly, I wish to pick up a point made by the hon. Member for Eastbourne (Mr. Waterson) which he also made in Committee. He talked about pathological optimists, a phrase that I shall use in a different context.
        I am still trying to appeal to the Government to take into account public interest considerations and perhaps I am a pathological optimist to believe that they will

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        introduce such measures in the Lords. However, strong representations have been made which have been only partly heard in the Chamber. The TUC and major trade unions are greatly concerned about the withdrawal of public interest considerations which, indeed, they want to expand. Instead of being enabling measures, as they were in the Fair Trading Act 1973, they should be matters which we should be obliged to instigate and act upon. The least that we can do is to try to hold on to what was introduced under the Heath Government in 1973. It seems that new Labour will not go beyond that stage, but as it becomes more mature, I hope that it will take into account the points that I have made. However, I am sorry that the Government have lost interest in the public interest.
        8.58 pm
        Mr. McWalter: I want to say something about a defining characteristic of the Bill. A lot of people complain that the Bill is not quite there and say that things are missing from it. For example, it does not include anything to contradict the assertion of the hon. Member for Orkney and Shetland (Mr. Carmichael) that we are introducing a Tebbit doctrine for the unalloyed operation of competition as an economic force. One of the great strengths of the Bill is its provisions on anti-competitive practices, including stop now orders and the attempt to try to produce a culture in which people challenge an existing business regime to develop new enterprises that produce services and goods in new ways. It is a jewel within a crown, as it were—[Interruption.] No doubt, this is a popular analogy in jubilee year. The crown itself is the raft of policies that the Government are introducing, not to produce Tebbitised competition, but to produce fair competition.
        I think that that is tremendously important, because fair competition is not achieved only by introducing a measure such as the Bill. Among other things, it is achieved by bearing down on enterprises that cheat. That is the case whether they cheat their customers—there is a strong desire to ensure that consumer law is amplified and improved—or whether they cheat the environment, by polluting it, or their workers, by underpaying them. The Government have introduced legislation to try to ensure that companies cannot cheat their workers too much. They cannot do so, for example, in respect of the minimum wage and the right to be recognised by a trade union. The effect is to create an environment that makes competition between companies fairer than it would ever have been under a Tebbitised doctrine. So the first thing that the Bill does is contribute to an environment in which entrepreneurial activity is given a genuine boost, and that is how it should be read.
        The second issue is what the Bill does not do, in terms of the contribution of the right hon. Member for Wokingham (Mr. Redwood): it does not propose in a Tebbit or Redwood way that competition is the answer to every economic puzzle. It manifestly is not the answer. For example, to cite the recent report of the Select Committee on Science and Technology, of which I
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        happen to be a member, it is clear that to establish wave and tidal power systems that achieve non-carboniferous energy generation, there may be a need for a time scale of, say, 50 years, and an investment plan far exceeding anything that the normal market would be willing to produce and develop. That is a role for Government as assuredly as the delivery of health services to people who are poverty stricken is a function for Government.
        Let us be clear: the Bill is saying not that every economic problem has a competitive answer, but that where competitive elements are possible, they should be fostered, encouraged and nourished. For instance, if the Government start along the path of major long-term investment in wave and tidal power, and start to issue many subcontracts as part of that grand scheme, it would be utterly inappropriate for them to try to cosset and keep to themselves all those contracts and all that activity, ingenuity and capital. It would be absolutely right for them to try to find partners, in whatever sector, and whether that involved other countries, companies and so on, to bring forward such a project as effectively as possible.
        The Bill does not do what some hon. Members—they include the hon. Member for Orkney and Shetland, in his way, and some Labour Members—have suggested, and propose an agreement with my right hon. Friend the Member for Hartlepool (Mr. Mandelson), who said that we are all Thatcherites now. If the Bill is read as a component of a strategy for fostering business and enterprise, but one that does that in a way that maximises social responsibility and uses appropriate economic instruments for the multifarious economic problems with which this country and its people are faced, I believe that it should be very much welcomed by all hon. Members.
        Question put and agreed to.
        Bill accordingly read the Third time, and passed.

      DELEGATED LEGISLATION
      Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation),
      DELEGATED LEGISLATION

        FEES AND CHARGES
        That the draft Consular Fees Act 1980 (Fees) Order 2002, which was laid before this House on 13th May, be approved.—[Mr. Jim Murphy.]
        Question agreed to.

      BUSINESS OF THE HOUSE
      Ordered,
      That, at the sitting on Wednesday 19th June, the Speaker shall put the Questions necessary to dispose of proceedings on the Motion in the name of Mr. Robin Cook relating to House of Lords Reform (Joint Committee) not later than three hours after the commencement of proceedings on the Motion; such Questions shall include the Questions on any Amendments selected by the Speaker which may then be moved; the Questions may be decided, though opposed, after the expiration of the time for opposed business and the Order of 28th June 2001 relating to deferred Divisions shall not apply to them.—[Mr. Jim Murphy.]

  House of Lords Reform
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Jim Murphy.]
  9.5 pm
  Mr. Eric Joyce: One of the more enduring legacies among many that the Government will pass on to future generations will be their constitutional reform programme, which has achieved a great deal to date and is an evolving process that continues apace. The Scottish Parliament, the Welsh Assembly and the Northern Ireland Assembly have been considerable successes in their own way. There have been significant teething difficulties in some respects, but by and large the great majority of people who live in those parts of the United Kingdom believe them to be considerable successes. The roll-out of regional democracy looks set to continue in England, both through new mayoral elections and the introduction, I hope, of regional assemblies.
  At a different level of government, there is a need to reform the House of Lords, and that, too, is moving ahead apace. I want to stress why House of Lords reform must take place in a way that is complementary to, not competitive with, the roll-out of regional assemblies and subsidiarity across the United Kingdom. A couple of months ago, my right hon. Friend the Leader of the House took part in a conference in London on that subject organised by the Scottish Forum for Modern Government. The matter has been the subject of some discussion, but I want to air one or two points that I fear otherwise might not see the light of day.
  The first of those points is timing. Notwithstanding the work of the Joint Committee of both Houses that will be formed this week, we seem to be moving towards a timetable for Lords reform that suggests that the new-look Chamber could be in place at the time of the next general election, if not before. That would mean a Bill passing through this House in 2003 or 2004. If it is decided that the second Chamber should have a directly elected element of as much as 50 per cent., and assuming that the Lords Chamber is around the same size as this one, about 300 newly elected Members of the Lords would take their seats following an election in 2005 or 2006. That timetable would run virtually concurrently with the roll-out of regional assemblies, where regions chose to have them. It could therefore reasonably be assumed that the two processes would influence each other—positively or negatively, depending on how they are carried out.
  It is important to bear in mind the fact that the level of representation on putative regional assemblies, if they were to operate at about the same level as the Greater London Assembly, could be lower than the level that each region would provide to a reformed House of Lords through elected Members under a 50 per cent. election plan. It can be predicted that some political and media interests will campaign for a no vote, presenting new political jobs as a jamboree for the regional political classes. In view of that, there is a fairly strong risk that the creation of 30 or 40 new political jobs in each region will have a seriously detrimental effect on the results of referendums on regional assemblies that would probably be taking place at around the same time.
  It is worth considering two points in more detail. It is likely that payments for new, elected Members of the Lords will be lower than for full-time Members
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  of Parliament. The Government and the Public Administration Committee have presented arguments on that. However reimbursement, remuneration or payment is structured, it will probably be more attractive than that for a councillor. It may even compete with being a member of a regional assembly when and if assemblies are established in different parts of the country.
  The Public Administration Committee suggested that, in view of greater journey times and distances and the possible higher administrative costs of travelling from Scotland or the north-east, the total package for a Scottish Member of the second Chamber could exceed £30,000. I believe that the figure would be more, given that flights would cost approximately £10,000 for a weekly attender.
  It will be hard to argue that the new appointments are meaningful and valuable but to pay a daily rate that is substantially lower than that of non-departmental public bodies. That problem must be solved. The Senior Salaries Review Body would probably recommend a sum that approached that offered by non-departmental public bodies: perhaps £200 or £300 a day. Perhaps the figure would be half that, but it would still be significant.
  Regardless of the rate and the costs of the current system, the fact that £1 million per annum or more has been committed to a new layer of regional party politicians would make winning a referendum on a new regional assembly harder work than it would otherwise be. That is possibly a fatal blow to assemblies, for which polling suggests a tight result. The problem would be exacerbated by the almost inevitable compensation that would have to be paid to current life peers who would have to leave the Chamber to keep the numbers manageable under a plan to elect 50 per cent. or more. I presume that the public would prefer that money to be spent on public services such as health and education.
  I have not heard the second point that I want to stress in a debate on reforming the Lords until now. It is the function of the other Chamber. I have read the Government's comments and those of the Public Administration Committee. I have also read previous debates. Perhaps hon. Members will make similar comments later about clearly defining powers. One could say that the other Chamber is primarily for revision and scrutiny. That is all very well, but unintended and unforeseen consequences may ensue from immediately having a substantially elected element of new Members of another Chamber. I want to illustrate that through my experience and that of my colleagues in the context of otherwise successful devolution in Scotland.
  Some list Members of the Scottish Parliament have taken on roles as shadow constituency MSPs in ways that people did not foresee when the Scotland Act 1998 was passed. I suspect that some of the same practices would operate in a Lords or a senate, or whatever the second Chamber happened to be called. I believe that many practices would be imported. Let me refer to a couple that happen regularly in Scotland and perhaps in Wales and Northern Ireland.
  In Scotland, a d'Hondt system was used to provide proportionality in the legislature. Hon. Members were elected through that system to provide fairness when passing legislation; they did not have a constituency role. Indeed, many who were elected as list Members stood unsuccessfully for constituencies. In almost all cases, list MSPs have set themselves up as shadow constituency

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  MSPs. When I conduct my weekly surgeries, I see posters for "your local MSP". They do not refer to the local constituency MSP, but the list MSP who is working the patch. Indeed, Opposition list Members divide up each region according to their own party's political interests and work that patch. I suspect that that activity was not foreseen, and it could easily be replicated by a substantially elected membership of the other place, if such there were to be.
  People sometimes say to me that there would be a limit to what people could do if they were elected to the other Chamber, because they would have a clearly delineated function, and if they stepped outside that they would be slapped down. In fact, it is not as simple as that. For example, I have a large Child Support Agency office in my constituency, which looks after the north and Scotland. I recently paid a visit to the parliamentary questions section of the agency, and was told that quite a high proportion of the work that is referred to it came from MPs. I said, "Surely it is all referred by MPs, as it is a reserved area", but I discovered that that is not the case. MSPs can put in cases to the CSA and are treated in the same way as MPs. I presume that there is a good reason for that, and that it has something to do with the fact that a CSA case will often dovetail with issues relating to social services, housing and so on. That might well be the reason for that working practice having developed, but the fact remains that that movement across a boundary was not foreseen.
  Mr. Russell Brown: My hon. Friend makes an important point. In such circumstances, he and an MSP might end up pursuing the same case, which could lead to correspondence being duplicated or triplicated, because everyone wants in on the act. I agree that the issue is likely to be compounded by an elected second Chamber.
  Mr. Joyce: My hon. Friend is quite right. Of course, the public have a right to go to whichever elected representative they think appropriate. It is then efficient for that representative to point the constituent in the direction of the person who can best help them. People often come to Members of Parliament with housing issues, for example, and it is much more efficient gently to direct them towards the appropriate councillor, and to help whenever possible with any related issues.
  In Scotland, that does not always work as efficiently as it might, but I would stress that that is a matter of the whole process bedding in. We must not be depressed about looking towards the future, because the reality is that things are getting tidier, more efficient and more effective all the time. Scotland has learned a great deal in the last couple of years, and I suspect that, when a few more years have passed, these issues will dovetail and work quite well. The question is how quickly that learning process takes place, and how quickly we introduce an element of democratisation—in this case, to the other Chamber.
  If there were to be a substantially elected second Chamber, a substantial chunk of its Members would still not be able to ensure proper proportionality for Scotland. That is a reason to commend the idea of an elected component, because it will enable us to ensure that different parts of the country are properly represented.
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  Before the last reform of the House of Lords—the temporary reform, if I may call it that—there was a system that ensured a certain number of Scottish peers. In fact, there were too many, and they held a ballot to see which ones would come down. Under an appointment-only system, we would not be able to guarantee proper representation for the regions, so that commends an element of election. Not all my similar-thinking colleagues agree with that, but it is important to have that relationship with the regions, and it is therefore important to have an elected element. That proportionality remains distinctly important.
  I shall conclude my remarks, because one or two of my colleagues might wish to speak. My intention tonight is not to say that the roll-out of devolution in Scotland has been anything other than a considerable success—quite the contrary. My intention is to convey the point that the speed at which we introduce what could be described as democratisation to the Lords is something about which we must be extremely careful. If we get it wrong—if we do it too quickly—that could have an impact on another important element in the roll-out of constitutional reform across the country.
  Mr. Stephen McCabe: My hon. Friend mentioned possible duplication. Surely there is a requirement for representation to address different functions, roles and responsibilities. There is no evidence that the public want to pay for duplication of representation.
  Has my hon. Friend given any thought to the size of a second Chamber? The White Paper on regional assemblies recommended a standard size of between 25 and 30 members per region.
  Mr. Joyce: Those are both important points. I can see that a second Chamber could have a function, although there are a number of alternative models. Regional assemblies, the Scottish Parliament, the Welsh Assembly and the Northern Ireland Assembly would provide scope for a scrutiny function that would not involve a second Chamber. It would be possible to have a unicameral system here that would broadly work.
  I agree with the Government that, given our tradition and our constitution, it makes sense to have a revising Chamber here; but, as my hon. Friend says, the case still needs to be justified. If we are not careful, we may end up simply duplicating what goes on elsewhere. We want regional assemblies to have a meaningful function, rather than being merely talking shops.
  As for my hon. Friend's second point, I understand that the regional assemblies will have about the same number of members as the Greater London Assembly. My concern about the roll-out of democratisation of the Lords revolves around that. As I said at the outset, there might well be more representatives from a region in a reformed House of Lords than there would be in a regional assembly. There could be competition for appointments between the same types of people. There is a grave danger that if we bring in too many elected peers in the first instance—I think 50 per cent. is too large a proportion; in the first instance there should be about 20 per cent.—we will create a hostile, or at least negative, environment for a referendum. Such hostility might be stoked by a hostile media, or people might simply be fed up with the idea of elections, knowing that there would be elections for the Lords.

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  I think that the best idea is to adopt the Government's original recommendation of about 20 per cent. for one full term—to "suck it and see", and then decide whether the experiment has been a success and whether further democratisation is needed in the light of the roll-out in the regions. We should evaluate the first four years of the experiment before considering its expansion.
  9.23 pm
  Mike Gapes: I congratulate my hon. Friend the Member for Falkirk, West (Mr. Joyce) on his choice of subject, and on his interesting speech.
  I go further than my hon. Friend in my anxiety about the possible consequences of what could be called the ultra-democrat or deadlock-democrat approach to reform of the House of Lords. I do not think we need two elected Chambers or one elected and one substantially elected Chamber, because we could, by accident, find ourselves with an unworkable political system.
  From time to time there have been power struggles between the lower and upper Houses in Germany, because they are elected on a different basis. Eventually it has been difficult to get Budgets through, for example. There have also been power struggles in other countries between first and second Chambers.
  I agree with my hon. Friend about the need to consider carefully the implications of the proposals. The Government made various proposals and then we had the Wakeham recommendations, but I do not think that Wakeham seriously considered the best option, with the second Chamber acting as the cement that holds together the United Kingdom. I agree, too, that we must recognise that devolution makes a difference.
  My preference would be for a small second Chamber of perhaps a maximum of 100 Members, made up of indirectly elected Members of the Northern Ireland Assembly, the Scottish Parliament, the Welsh Assembly and the English counties, initially, or the regions, when that system is established. It would not have to meet continuously, as in the present system, but could assemble on a regular programmed basis to bring together the institutions of the devolved United Kingdom to act as a constitutional safeguard and revising Chamber to air issues of concern to all parts of the country, in conjunction with the driving democratic force of this Chamber. Anything else would be dangerous.
  I am a democrat. I believe that we should get rid of all aristocratic influences in politics, whether direct or indirect. I am also against a new aristocracy being established, based on influence and friendship. That is always the danger when people are appointed to any organisation, whatever the motives. We should have a legitimate second Chamber that can question Ministers, but my preference would be for all Ministers to he elected Members of this House, although they could appear before Committees or the plenary session of the upper Chamber, whatever we call it—senate, second Chamber—which would act as a cement to bring together our democratic institutions.
  Similarly, no judges or Law Lords should be members of the second Chamber by right, nor should we have any bishops—although I understand that that is controversial. We should have a Chamber that reflects the diversity of the United Kingdom by indirect election from the regions and Parliaments within our UK structure. In that way,
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  we could act as a modern, efficient Parliament and, for the first time in our history, we would be able to say that we live in a real democracy, not a quasi-democracy, which is what we have today.
  9.28 pm
  The Parliamentary Secretary, Privy Council Office (Mr. Ben Bradshaw): I congratulate my hon. Friend the Member for Falkirk, West (Mr. Joyce) on securing the debate and giving me an early opportunity to discuss reform of the House of Lords. I thank him for putting his concerns on the record.
  It may be helpful if I set the current debate in some historical context. The Government embarked on the process of House of Lords reform in the last Parliament. My hon. Friend was not a Member at that time, but I am sure he recalls that, with the enacting of the House of Lords Act 1999, the Government removed nine tenths of the hereditary peers.
  We proceeded with Lords reform in two stages, because experience had shown us that trying to do it in one stage had never worked. We need to finish now what we started then, but we should never forget that the 1999 Act was a historic achievement in its own right.
  Our White Paper of November last year followed on from the royal commission report of January 2000, and both exercises prompted widespread discussion—inside this House and beyond. The public consultation on the White Paper received more than 1,000 responses, including 112 written responses from Members of this House. In addition, we received a thoughtful report from the Public Administration Select Committee, the members of which must be congratulated on preparing a significant piece of work in such a short time. All those contributions are valuable and will inform the next stage of reform, as will this evening's contributions.
  As my hon. Friend knows, the Government have decided that the search for consensus can best be pursued through a Joint Committee of both Houses. Its first job will be to prepare options for the Chamber's composition, which will be considered in each House on free votes. The terms of reference for the Joint Committee have already been debated in the other place, and will be debated in this House on Wednesday.
  Some people have claimed that the Joint Committee is a way of allowing the momentum for reform to run out, but that is not so. The Government want reform to proceed as quickly as possible. Nobody should pretend that major parliamentary reform is easy, but this Government have a strong record of modernising our democratic institutions, as the Public Administration Committee's report acknowledged.
  It has also been suggested that the establishment of the Joint Committee shows that our earlier initiatives have been wasted. I reject that analysis completely. The royal commission, the White Paper and the public debate that they generated are valuable contributions. They provide a baseline of knowledge and discussion that is vital to making progress, and I am sure that they will be an important source for the Joint Committee. Although differences of opinion remain, important agreement on some fundamentals has also emerged from these debates, and I will say a little more about that later. Where disagreement remains, it primarily concerns the composition of the second Chamber.

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  The Government's proposal for a Joint Committee has been widely welcomed, but in that regard I am left in some difficulty in replying to the debate. The Government have made it clear that we should not seek undue influence over the Joint Committee's deliberations, so it would be inappropriate for me to offer a detailed policy statement on where the Government think the answer might lie. What I can do, however, is to set out some areas in which the general thrust of public comment seems to be in agreement.
  Let me start with the question of elected Members. I do not wish to make any statement that could be construed as "steering" the Joint Committee, but I hope that my hon. Friend will not mind my pointing out that, in the light of the debates in this House, the responses to the public consultation, the Public Administration Committee's report and numerous opinion polls, his solutions—if not his concerns—put him in the minority. I remind him that 89 per cent. of respondents to the consultation favoured a largely or wholly elected upper House. More than half the world's second Chambers are wholly elected, and a significant proportion of the rest are largely elected.
  Like my hon. Friend the Member for Falkirk, West, my hon. Friend the Member for Ilford, South (Mike Gapes) expressed the concern that creating a large number of elected Members of the Lords would undermine the role of this House. However, many who responded to our recent consultation said that such fears are overstated. As my right hon. Friend the Leader of the House said of the second Chamber in his statement of 13 May:
  "There is, we believe, a consensus that its main role should continue to be that of a revising, scrutinising and deliberative assembly, with the power to delay, but not to…veto, legislation."
  The powers of the second Chamber are already set down in the Parliament Acts of 1911 and 1949, and are strictly limited in statute. There seems to be a general consensus that they are about right as they are. It will of course be up to the Joint Committee to decide whether it concurs with that belief or whether it wants to propose some change, but we must remember that the powers of the second Chamber cannot be altered without the express approval of this House through legislation.
  In his statement on 13 May, my right hon. Friend went on:
  "There is, we believe, broad agreement that the Commons should retain its role as the pre-eminent Chamber and that the test for any Government should continue to be whether it can command a majority in the House of Commons."—[Official Report, 13 May 2002; Vol. 388. c. 517.]
  There has been no suggestion, from any quarter, that that fundamental constitutional principle should change.
  I would also draw the attention of my hon. Friend the Member for Falkirk, West to some of the other modern democracies that include significant numbers of elected Members in their second Chambers. In Australia, Japan, South Africa, India, Spain, France, Austria and Ireland, to name but a few, the Government continue to be responsible only to the lower House. Various restrictions apply to the powers of the second Chamber over
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  legislation—from a short delay to a veto power. The choice depends not on whether the Chamber is elected but on the political traditions of that particular country. How we manage such relationships within the British tradition is no doubt something that the Joint Committee will wish to consider.
  I believe, as does my right hon. Friend the Leader of the House, that it is an important principle for the two Houses of this Parliament to remain distinct in order that each can make its own contribution. There are other factors that the Joint Committee may wish to consider to allow that. For example, both the royal commission and the White Paper proposed long terms of office for Members, which would reduce the immediacy of any mandate. That was supported both by the consultation in general and by the Public Administration Committee. Similarly, elections in tranches—so that not all elected Members enter the Chamber at once—would enable the upper House to include a democratically elected element without ever giving it an equal or greater mandate than this place enjoys.
  My hon. Friend raised some other specific issues that I shall try to address, with the caveat that they will be matters for the Joint Committee and that it would be rash to make too many assumptions about the timing and the make-up of the Chamber after reform. My hon. Friend mentioned timing and said that he understood the reform would be on the statute book in time for the next general election. The only comment that has been made on the record on that point was when my right hon. Friend said that he hopes that the issue will be dealt with in this Parliament. I am sure that the House and the members of the Joint Committee will have heard what my hon. Friend said about his fears about clashing with the roll-out of regional assemblies. If that might be a problem, I am sure that the Committee would wish to avoid it.
  My hon. Friend seemed to assume that the upper House would be about the same size as the House of Lords is now. Few other people think that, and my hon. Friend the Member for Ilford, South went to the other extreme by suggesting a membership limited to 100. The figure mentioned by the PAC was 350, but a coalition is building around the need for a Chamber smaller than the current one. The roll-out of elected Members—if that is what is decided—would be gradual, because of the need to reduce the overall membership at the same time. The problems that my hon. Friend the Member for Falkirk, West mentioned about competition for money and talent—in Scotland in particular—will therefore not be a problem.
  On regional representation and obtaining a good cross-section from Scotland, the PAC report and previous reports all came to the conclusion that large electoral areas, if not regions, would be needed. Scotland might even constitute one electoral region, which would make it possible to obtain a good cross-section from Scotland for any elected element. Those reports are already in the public domain.
  In its deliberations, the Joint Committee will also want to bear in mind the risk raised by my hon. Friend of a possible clash between the work of constituency MPs and MSPs and Members of a reformed upper House. I do not think that that is a danger but it is certainly something of which members of the Joint Committee will be cognisant.
  The Joint Committee will also want to consider the options for including an appointed element in the new second Chamber. Most Members of the House accept that

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  there are good arguments for including some appointed Members, as that would add expertise to the House and the ability to include Members who are independent of any political party. The inclusion of appointed Members would also be an additional reinforcement of the greater legitimacy and democratic mandate that this place enjoys.
  The terms of reference for the Joint Committee which the Lords have proposed to us, and which we shall debate on Wednesday, reflect the importance of the issues raised by my hon. Friend. The Committee is specifically charged to consider the second Chamber
  "and its role and authority within the context of Parliament as a whole, having regard in particular to the impact which any proposed changes would have on the existing preeminence of the House of Commons".
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  My hon. Friends can thus be assured that we share the same objective. I am confident that there are various ways in which their concerns can be addressed, and I think that we all look forward to hearing the Joint Committee's proposals.
  My hon. Friend the Member for Falkirk, West has done the House a service in drawing attention to some of the difficult aspects of how best to sustain the proper relationship between this House and a reformed and, we hope, reinvigorated second Chamber. I am sure that when the Joint Committee is appointed, as I hope it will be in the very near future, it, too, will note with interest the points that have been made here tonight.
  Question put and agreed to.
  Adjourned accordingly at nineteen minutes to Ten o'clock.