Lords Sitting of 13 May 1986

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Gloucester.

Profit-sharing Schemes
Lord Sandys: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what consultations they intend to institute about the extension of profit-sharing schemes, and what is the likely timetable for such consultations.
The Secretary of State for Employment (Lord Young of Graffham): My Lords, the preliminary discussions with employers and others foreshadowed in the Budget speech of my right honourable friend the Chancellor of the Exchequer should be completed by the summer. If reactions are sufficiently encouraging as to the practicalities and the potential benefits to the economy, the intention would be to issue a consultation document before the Summer Recess containing detailed proposals for a scheme for tax relief to encourage profit sharing.
Lord Sandys: My Lords, I thank my noble friend for that very encouraging reply. Can he assure the House that the document will include profit sharing within the industrial sector and perhaps linked also to other factors?
Lord Young of Graffham: My Lords, I am grateful to my noble friend. As I see it, there are three stages. First, we must see what are the initial reactions before a decision is taken to issue a consultation document. Then the consultation document will be issued and we shall see what happens as a result of the consequent discussions. After that my right honourable friend the Chancellor will make up his mind as to the steps he wishes to take; but I hope very much that what my noble friend mentions will be included.
Lord Barnett: My Lords, does the noble Lord the Minister recall the Chancellor's first Budget, in which he made what he thought was to be a strong case for fiscal neutrality; that is to say, company directors should not have complex matters intervening in their decision-making processes and they should not be burdened with tax incentives, which he sought to remove? Is it now the Chancellor's case, or the Government's case, that the principle of tax neutrality has been dropped or that it is different as between individuals and companies?
Lord Young of Graffham: My Lords, I am very appreciative of the noble Lord's memory, which goes back a long way and covers many Budget speeches. I think what the Chancellor is really doing is seeing whether there is a way in which we can encourage
1030
profit sharing so as to ensure that all sides of industry work together. That is a motive which has everything to commend it and if it requires a tax incentive for the first few years to introduce it, then so be it.
Lord Barnett: My Lords, is the noble Lord suggesting that this tax incentive will be for only a few years, or has the principle really changed?
Lord Young of Graffham: My Lords, I am suggesting that we have preliminary consultations; then we go for a consultative document; and then we see what reception we get. As in all things, it is as well to get to the end of the road before we judge what the whole matter is worth.
Lord Diamond: My Lords, can the noble Lord tell us the extent of the consultations; that is, with which bodies they will be held?
Lord Young of Graffham: My Lords, that will depend on the results of the preliminary consultations which are now taking place. If we want adequate consultation to take place, we must do two things. First, we must see what are the preliminary reactions and, secondly, my right honourable friend the Chancellor must make up his mind as to which bodies he will consult. The proposal yesterday met with a receptive response and I had hoped that your Lordships would be as receptive as the CBI and the TUC. If there is anything in this world that we must do, it is to accept change; we must not always be reactionary.
Lord Renton: My Lords, does not the remarkable success of the Government's policy in reducing the rate of inflation augur well for the outcome of these matters which have been mentioned?
Lord Young of Graffham: My Lords, I hope very much that the remarkable success of the Government's economic policies will augur well for the success of this proposal, as it will for all the matters on which the Government are engaged.
Lord Molloy: My Lords, is the noble Lord the Minister aware that it was in this country that the pioneers of the principle of profit sharing really established themselves? Would he not think it sensible and good to seek advice and guidance from the British co-operative movement, who were the authors of the entire principle in the whole wide world?
Lord Young of Graffham: My Lords, I have not the slightest doubt that my right honourable friend the Chancellor will go to the co-operative movement.
Lord Winstanley: My Lords, I welcome the Government's intention to give assistance in this form to this particular group of workers. However, will the noble Lord the Minister accept that if the Government do that—which we would welcome—they will then have an obligation to do something comparable for workers in the public sector such as nurses, firemen and prison officers, whose organisations cannot conceivably make any profits for them to share in?
Lord Young of Graffham: My Lords, I think we are looking at two entirely separate matters. We are looking at proposals for profit sharing which are first being put out for preliminary discussion so as to find a way in which workers, management and all industry can share future profits, perhaps in an effort to break the spiral of paying ourselves too much money. I must point out that of all the industrialised nations we have the worst record for paying ourselves above the going rate of inflation. I hope very much that the results of this proposal will bring to an end the 80-year period in which in industry the spirit has often been one of confrontation and not co-operation. That is an outcome we should all like to see.
Lord Boyd-Carpenter: My Lords, is the three-year limit on the duration of tax concessions absolutely firm, or will that point be included in the consultation process?
Lord Young of Graffham: My Lords, at the moment we are at the very early stage. I suspect that everything will be involved in the consultation process.
Lord Kilmarnock: My Lords, would the noble Lord not agree that proposals very similar to this were advanced in the Liberal yellow book of 1928? Have not the Government taken rather a long time to catch up?
Lord Young of Graffham: My Lords, I bow to the noble Lord's knowledge of the Liberal yellow book.
Lord Stallard: My Lords, will the TUC be involved in the preliminary consultation process?
Lord Young of Graffham: My Lords, yes; all parties will be.
Lord Peyton of Yeovil: My Lords, may I ask my noble friend to take care that this excellent idea is not buried under the tombstone of cumbersome procedures and tiresome restrictions?
Lord Young of Graffham: Yes, my Lords.
Lord Hatch of Lusby: My Lords, is the noble Lord not misleading the House on this issue? Was it not clear in the Chancellor's speech last night that he was not talking about profit-sharing? He was talking about dividing the wage between a basic wage and a supplement which would vary according to the profits declared by the company in any year. There was no question whatever that the profits themselves would be shared among the workers.
Lord Young of Graffham: My Lords, I am afraid that I fail to follow the noble Lord's question. I would merely say that I am not in any way misleading your Lordships' House.
Viscount Massereene and Ferrard: My Lords, may I ask my noble friend the Minister whether those sharing in the profits will also share in the losses if something goes wrong?
Lord Young of Graffham: My Lords, the essence of profit sharing is that it will be just that—sharing in the profits and also sharing in any resultant losses.
Lord Williams of Elvel: My Lords, will the noble Lord confirm that in its note to the National Economic Development Council the Treasury pointed out that the definition of "profit-linked income" would have to go down as far as the business and profit centre? If so, will he agree that this procedure involves the publication to interested parties, like employees, of disaggregated profit and loss statements for businesses and profit centres? Will he accept that this goes far beyond the present practice and present requirement? Will he also agree that some noble Lords opposite might well worry about the ability of management to manage in those circumstances?
Lord Young of Graffham: My Lords, I suspect that the result of the consultative process will be that in talking about profit-sharing we shall be talking about profit-sharing within particular profit centres and that means going down to particular profit centres. But I hope that no one on my side of the House, or anyone in your Lordships' Chamber for that matter, need worry about the future ability of managers to manage.
Lord Rochester: My Lords, what is the noble Lord's response to the criticism that the Government's proposals fail to make adequate provision for employees to receive information on matters of concern to them as employees, or to be consulted when decisions affecting their interests are taken?
Lord Young of Graffham: My Lords, we are at a very preliminary stage indeed, and I think it would be as well to see whether it goes further and, when it goes further, to look at the results of these consultations before we start looking at detail.
Lord Hatch of Lusby: My Lords, the noble Lord did not understand my question. May I ask him to consult with his right honourable friend the Chancellor of the Exchequer, who last night on television quite clearly described his proposals as not profit sharing? He described his proposals as a basic wage plus a supplement that would vary according to profits. But he made it quite clear that this was not a scheme in which profits themselves would be used for that supplement.
Lord Young of Graffham: My Lords, the noble Lord, Lord Hatch of Lusby, has described a classic profit sharing arrangement in which workers share, in addition to their wage, a formula based upon the amount of the profits. It is not in that sense an actual share in the profits. It is an accretion to them. I fail to see the distinction. I think the noble Lord is wrong in saying that I have misled the House. I also think he is wrong in persisting with this point.

European Community: UK Payments
2.46 p.m.
Baroness Elliot of Harwood: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government how payments to the EC have changed in real terms since 1979 and how this change compares with the period 1974 to 1979.
Lord Young of Graffham: My Lords, our net contribution to the Community in 1985 was £1,871 million, which was, for a number of special factors, unusually and regrettably high. It compares with a figure for 1979 of £1,571 million in 1985 prices. The equivalent figure for 1974 was £98 million. Our net contribution over the years 1974–1979 was, of course, reduced by the effects of the transitional financial arrangements applying for the first few years after accession. I have arranged for a table showing our annual net contributions to the Community Budget since 1974 to be published in the Official Report.
Following is the table referred to:

Current prices

1985 prices

1974

29

98

1975

-56

-155

1976

167

402

1977

369

780

1978

822

1,561

1979

947

1,571

1980

706

977

1981

397

491

1982

606

698

1983

647

709

1984

656

689

1985

1,871

[1,871]

Baroness Elliot of Harwood: My Lords, I thank the Minister very much for that reply. I take it that the effort of Her Majesty's Government to keep EC expenditure under control is one of their major objectives at the present time.
Lord Young of Graffham: Yes, my Lords. Last year the contribution we made to the Community was unfortunately and regrettably high. That was because of the non-receipt, or the delayed receipt, of our 1984 abatement, and other matters as well. But for those adjustments, the normal contribution would have been substantially lower.
Lord Sandys: My Lords, does my noble friend agree that the message from the table of figures which he has kindly said he will place in the Official Report is that the contribution would have been so much greater had measures not been taken by Her Majesty's Government?
Lord Young of Graffham: My Lords, there I must agree wholeheartedly with the noble Lord.
Lord Diamond: My Lords, am I not right in assuming from one reference in the reply of the noble Lord the Minister that the table will be based both on current prices and on real terms?
Lord Young of Graffham: My Lords, it will be based on current prices and on 1985 prices.
Lord Barnett: My Lords, is the Minister not a little foolish to take too much party political credit for having reduced the net budget contributions, given that, despite all the juggling with figures which he announced initially, in 1985 the net contribution was substantially higher than it had ever been? Would it not be better if we concentrated on trying to obtain major changes in the agriculture budget, which would generally help this country and indeed the Community?
Lord Young of Graffham: My Lords, I have no doubt that adjustments should be made to the agriculture budget. But I would be failing in my position in the House if I did not point out to your Lordships that, if we had made the adjustments which we should have received—and which were received a few days later—the contribution last year would have been lower in real terms that the contribution for 1978.

Maudsley Hospital
2.49 p.m.
Lord Campbell of Croy: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will take action to preserve essential functions and services at the Maudsley Hospital in any reorganisation that may be in prospect.
The Parliamentary Under-Secretary of State, Department of Health and Social Security (Baroness Trumpington): My Lords, I understand that the special health authority which manages the Maudsley and the Associated Bethlem Royal Hospital has over-spent its budget and has recently made proposals designed to contain this over-spending. I am also aware of the concern that has been expressed by members of the public, the press, staff and patients about some of these proposals, but I must emphasise that proposals for rationalisation of clinical services are still in the process of discussion.
Lord Campbell of Croy: My Lords, I am grateful to my noble friend for her reply. Bearing in mind the enlightening series of articles in The Times newspaper earlier this year on mental illness and on schizophrenia in particular, will she try to ensure that the unsurpassed work that has been carried out by this hospital continues without interruption or limitation?
Baroness Trumpington: My Lords, the services provided at the Maudsley and Royal Bethlem Hospitals are of national, indeed international, importance. It is a centre of excellence and we are anxious to see the further development of its role both as a provider of services and in support of the excellent teaching and research functions of the associated Institute of Psychiatry. The Government have no plans to alter the status of this or any other of the postgraduate special health authorities.
Lord Ennals: My Lords, I greatly welcome the statement just made by the noble Baroness concerning

1035
the value of this great centre of excellence, the Maudsley Hospital. However, is she aware that the proposed cuts in clinical services are precisely in those categories which the Government claim to give highest priorities—disturbed adolescents, mentally ill children, drug addicts, alcoholics, and those suffering from brain damage and cancer of the brain? Is she aware that these cuts in clinical services will also have a great effect on research and on training? Does she not feel that the department must stop this happening; otherwise we shall see another centre of excellence cease to be a world-wide centre of excellence?
Baroness Trumpington: My Lords, with regard to the curtailment of services, I understand that no decisions have yet been made except in the case of neurosurgery, where short-term closures have been agreed on an experimental basis. For the information of the House I would point out that I understand that at its meeting last night the SHA decided on the first phase of a series of measures and will enter into discussions with staff on a second phase of measures to be introduced in the months to come. The authority has also expressed the wish to discuss its future financial allocations with my right honourable friend the Parliamentary Under-Secretary of State of Health. He will be visiting the hospitals later this week.
Lord Ennals: My Lords, the noble Baroness referred to other fields but can she explain why there seems to be no change in neurosurgery? I understand from my visit to the Maudsley yesterday that there has been an increase of 250 per cent. in the waiting lists for beds in the neurological unit. Some of those are extremely urgent cases. Surely that ought to be included among the issues that should be postponed. Is she aware that it is not only the Maudsley that is in peril? If she looks at this evening's Standard, she will see that the main teaching hospitals in Britain are also in peril.
Baroness Trumpington: My Lords, with regard to neurosurgery, the noble Lord will recall that I have just said that no decisions were made on curtailment of services except in the case of neurosurgery, where short-term closures have been agreed. The valuable neurological services provided by the Maudsley on behalf of the South-East Thames region and others will continue at the present level while future services are examined. The consultant neurosurgeons have given an assurance that the closure of the unit now proposed for six weeks in the summer and two weeks at Christmas will not affect patient services, but this will be closely monitored by the SHA. I am assured that alternative arrangements will be made for any emergency arising during the closure period.

UK Pensioners in Canada: Convention
2.54 p.m.
Lord Stallard: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what is their understanding of the amount of money which the
1036
Canadian Government would make available under a reciprocal agreement with the United Kingdom on pensions upratings, and the purposes to which it would be put.
Baroness Trumpington: My Lords, the Canadian Government would make available an amount of money which in 1983 they estimated at 21½ million dollars a year. At present only residence in Canada is counted for Canadian old-age security benefits. The Canadian Government would modify the residence test to the advantage of people in or from the United Kingdom.
Lord Stallard: My Lords, I thank the noble Baroness for that disappointing and tired old reply—the same reply we have had for many years now. Does she accept that the Canadian Government are prepared to put in the 21.5 million dollars as soon as an agreement can be reached with the United Kingdom Government to pay the initial index-linked uprating that is necessary? Can she explain, because I fail to understand it, why it is possible to come to arrangements with Austria, Israel, Turkey, the United States, Yugoslavia, Cyprus, the Bermudas and 21 other Commonwealth and non-Commonwealth countries and yet not come to an agreement with Canada, which is more than willing to reach such an agreement and has made such a genuine and generous offer in order to get this off the ground?
Baroness Trumpington: My Lords, your Lordships will have to forgive the length of my reply to that rather long question. In principle the Government accept the case for a comprehensive social security convention with Canada which would enable increases in pensions to be paid. The problem is one of cost. With regard to the money which the Canadian Government quoted as being available in 1983, I understand that the 21½ million dollars is made up of 13 million dollars for people in Canada and 8½ million dollars for people in the United Kingdom. The money would not come to the United Kingdom Exchequer and would not affect the amount which we should have to find out of social security funds in order to finance the uprating.
With regard to the deals which we made with other countries which were reached in the 1950s and 1960s, there is little doubt that had it been possible around that time to reach a similar agreement with Canada, we should have done so. We offered it in 1972, but the Canadian authorities were unable to negotiate with us at that time. Financial constraints in the United Kingdom then tightened.
Baroness Jeger: My Lords, is the noble Baroness saying to the House that only the question of cost is inhibiting some solution to this problem? If so, can she explain why arrangements were made with 26 other countries which made no contribution at all to help? There is a great feeling among elderly United Kingdom citizens who have gone to Canada. Many of them—widows and widowers—have gone to live with their married sons or daughters, have made a home there, and they save the DHSS a great deal of money by doing so.
Baroness Trumpington: My Lords, with regard to costs, the initial cost to the United Kingdom based on the number of pensions at December 1985–56,451—would be about £4·8 million a year. The ultimate cost would be more than £35 million a year. These estimates are based on the number of pensioners at the end of 1985 and November 1985 rates of benefit. We cannot at present commit resources on this scale. With regard to agreements with other countries, I have previously answered that point.
Baroness Fisher of Rednal: My Lords, the noble Baroness gave us a figure for 1972. Can she give us more up-to-date information on when she feels there will be a settlement of this injustice?
Baroness Trumpington: My Lords, I think the noble Baroness may have misunderstood me. The year 1972 was the year when we offered an agreement to the Canadian Government, who were then not able to come to an agreement with us because at that time they did not have the power to do so. Since then our financial situation has tightened.
Lord Carmichael of Kelvingrove: My Lords, is the noble Baroness aware that I have had correspondence from people in Canada who in addition to feeling let down by not being given increments from the United Kingdom are concerned about the great delay in even the existing pension being sent to them, in some areas a delay of four or five weeks? They have been in contact with Newcastle but they have not been able to get an improvement. Will the noble Baroness please look into this to see whether anything can be done so that pensions can be paid at the proper time?
Baroness Trumpington: Gladly, my Lords.
Lord Hatch of Lusby: My Lords, is the noble Baroness not aware that there are many old people, as has been described by my noble friend, who have moved to Canada during their pensionable years to live with relatives and who are being denied their rightful pensions? When the noble Baroness talks about a cost to the Government, is it not the case that those old people have been contributing to their pensions all their working lives and that it is their money that is due to them and not Government money?
Baroness Trumpington: My Lords, the noble Lord knows that there is not a pot of money sitting there, waiting to be paid to pensioners. He should know that the money paid by people in work goes to pay the pensioners now. The agreements that were made with other countries were made made at a time when this country could afford more money going out and when there were fewer pensioners. The situation has now changed.
Lord Stallard: My Lords, I return to the original Answer of the noble Baroness, when she mentioned 1983. That was the year when our Prime Minister agreed with Prime Minister Trudeau that the matter was urgent and the Government of the noble Baroness had accepted the principle of the reciprocal arrangement. What has happened since then?
1038
When the noble Baroness quotes a figure of £35 million, she is doing what has been done in every reply that we have had to this question; she is misleading the House. We are not asking for the total uprating and retrospective payment of all increases to all pensioners; that is the £35 million. We are asking simply for increases, as and when they become due, to be paid to those people in Canada who qualify for them. That is reflected in the figure of £4·5 million maximum that the noble Baroness mentioned later.
Baroness Trumpington: My Lords, I merely repeat what I said earlier: that the problem is one of cost. Officials of my department are in close touch with Canadian officials to bring the terms of a suitable convention as near completion as possible, as soon as possible.

Business
3.1 p.m.
Lord Denham: My Lords, at a convenient moment after 3.30 this afternoon my noble friend Lord Swinton will, with the leave of the House, repeat in the form of a Statement the Answer to a Private Notice Question in another place on the interim settlement of the teachers' pay dispute.

Insolvency Bill [H.L.]
The Lord Chancellor (Lord Hailsham of Saint Marylebone): My Lords, I beg to introduce a Bill to consolidate the enactments relating to company insolvency and winding up (including the winding up of companies that are not insolvent, and of unregistered companies); enactments relating to the insolvency and bankruptcy of individuals; and other enactments bearing on those two subject matters, including the functions and qualification of insolvency practitioners, the public administration of insolvency, the penalisation and redress of malpractice and wrongdoing, and the avoidance of certain transactions at an undervalue. I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read a first time.—(The Lord Chancellor.)
On Question, Bill read a first time, and to be printed.

Company Directors Disqualification Bill [H.L.]
The Lord Chancellor: My Lords, I beg to introduce a Bill to consolidate certain enactments relating to the disqualification of persons from being directors of companies, and from being otherwise concerned with a company's affairs. I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read a first time.—(The Lord Chancellor.)
On Question, Bill read a first time, and to be printed.

Isle of Wight Bill
Read a third time, and passed, and returned to the Commons with amendments.
Ullapool Harbour Order Confirmation Bill
Considered on Report.
Industrial Training Bill
Read a third time, and passed.

Latent Damage Bill [H.L.]
3.5 p.m.
The Lord Chancellor: My Lords, I beg to move that this Bill be now read a third time.
Moved, That the Bill be now read a third time.—(The Lord Chancellor.)
Lord Broxbourne: My Lords, perhaps I may venture to say a few words at this stage, having in effect given notice of my intention to do so at the Report stage of the Bill. I then respectfully requested that further consideration be given to various aspects of the Bill, in particular the two aspects in the amendments moved by the noble Lord, Lord Hacking, which were designed to take account of the special position of the construction industry in regard to the so-called long stop provision and the starting date thereof.
Nevertheless, the arguments failed to find favour at that stage, although there was, as noble Lords may recall, a responsible body of opinion—I think, informed opinion in the main—that was in favour of a revision of the Bill in accordance with the noble Lord's amendments. There being no amendments tabled for Third Reading, the Bill will now go to another place in its present state.
I hope that that will not prevent a further consideration by Ministers for which I asked at Report stage. I said on Report that there seemed to be a case for such consideration, and I also asked whether the noble and learned Lord on the Woolsack would be good enough to give further and better particulars of the list of supporters of the 15-year period that he cited at col. 128 of Hansard for 8th April, and give an indication of whether their support precluded an option of the 12-year period.
Following my intervention at Report stage, I have been favoured with several communications from organisations both in the construction industry and interested in the subject matter of the Bill. Among them was the Building Employers Confederation, who state inter alia in the letter that they wrote to me, that:
"In the list of bodies identified by the Lord Chancellor during the debate in Committee as supporting a 15-year long stop period, reference is made to the BEC. I do not know why this is the case because in all our communications with the Law Reform Committee we have always expressed our dislike for a 15-year period although subject to that, we have broadly expressed approval for the Lord Chancellor's proposals".
1040
Others who have been good enough to send me their views are the Royal Institute of British Architects, the Association of Consulting Engineers, the British Property Federation, and, through the RIBA, the Institution of Civil Engineers. Two points have impressed me in the communications that I have received. The first is the congruity of view between, on the one hand, those who represent the construction industry and, on the other, those who represent the building owner; that is to say, the potential plaintiff seeking remedies under the Bill. This, I would respectfully suggest, weakens the point made by the noble and learned Lord as to the assumed contrast between what he called extremely well organised, articulate bodies—meaning, thereby, the potential defendants—and unfortunate victims who are not an identifiable body.
I submit that this is at best an over-simplification since members of the professional bodies are the agents, possessing great skill, expertise and dedication, of the building owner or client; for example, the members of the Royal Institute of British Architects in building contract cases and the Institution of Civil Engineers in civil engineering contract cases. The British Property Federation also represents those who own property, either for occupation or for investment, and that organisation told me that it was the federation that obtained the agreement between the construction industry and the professional bodies for a 12-year compromise period specified in the amendment of the noble Lord, Lord Hacking.
Indeed, the Institution of Civil Engineers wrote to Ministers in the Department of the Environment expressing disappointment at the refusal to take matters further with the Lord Chancellor. Its disappointment was the keener because of an earlier indication that agreement would gain ministerial support. The agreement was reached with some difficulty and not without some sacrifice of the special interests of the parties arriving at the agreement. However, although agreement was reached, support for it was not forthcoming.
The second salient point which has impressed me following the communications which I have received since the Report stage is that the congruity of view to which I have referred derives from an acceptance of the practicalities of the situation. In particular it derives from the imperative necessity, as I submit it to be, of making the limitation period neither so long nor so imprecise as to make insurance impracticable. The absence of certainty has led to great difficulty in getting inurance cover in this sphere. Without insurance cover a successful plaintiff may well, in the end, whistle for his damages.
The problem of obtaining appropriate indemnity assurance for professional services has, I am informed, recently been brought to the attention of Ministers. Nevertheless, its implications for this Bill have apparently not been absorbed or taken into account. This is a flaw in the Bill. It is a patent rather than a latent defect in a Bill of good intent derived from a report of so distinguished a committee. It will go to the other place in its present form and there, it is to be hoped, it will be improved, because its present form is imperfect.

1041
However, if it is to be improved in the other place, realistically one must accept that it can only be by Government amendment and with Government support. That is the effect of what has been called the elected dictatorship. The noble and learned Lord on the Woolsack may indeed recall the phrase which, in spite of the efforts of some, still is with us today. Therefore, I ask Ministers not at this stage to close their minds. I ask them to consider the matter afresh without obstinate precommitment. I ask them to have regard to the congruity of view obtaining among the informed and the concerned. Finally, I ask Ministers to introduce certainty and practicality for the benefit of all and to the detriment of none.
3.15 p.m.
Lord Hacking: My Lords, in rising to address the House on Third Reading of the Bill I willingly repeat the thanks that I gave to the noble and learned Lord on Second Reading. I willingly repeat my thanks to the noble and learned Lord for bringing this Bill before the House and I also willingly repeat my thanks to the noble and learned Lord for the courteous, conscientious and extensive consultations which were carried out by his officials. I thank too the Government for agreeing to take a short postponement of Third Reading to enable me to return from the United States of America to participate on Third Reading.
While repeating those thanks—and I should be happy to repeat them in more fulsome terms—I believe that these extensive consultations which have been carried out by the Government have had an unfortunate consequence. I believe that they have produced in the Government a belief that no further revisions to this wholly technical Bill were either necessary or desirable. Hence, the 15 amendments which were moved in Committee, in some of which I participated, and the six amendments which were moved on Report were—
Lord Lloyd of Kilgerran: My Lords, I am sorry to interrupt the noble Lord, but, having regard to the acoustics of this House, I find it difficult to hear at this distance what the noble Lord is saying.
Lord Hacking: My Lords, I do not think it would be the wish of this House for me to bellow but if I position myself in a location nearer to a microphone perhaps that will deal with the problem of the acoustics and with the problem of some noble Lords at the other end of the Chamber who are unable to hear me.
I was referring to the Committee and Report stages and reminding your Lordships that the 15 amendments which were moved in Committee and the six amendments moved on Report were all rejected by the Government, although several of them were only drafting amendments and although some were suggested by professional bodies, such as the Law Society, whose only desire was to improve the terms of the Bill and to clarify its intent. Indeed, these consultations—and the findings of the Law Reform Committee—were often used by the Government as a reason for this House not exercising, on this Bill, its right to act as a revising Chamber. I think that was regrettable because almost all who were consulted
1042
reached their position on the balance of argument. Indeed, that is how the Law Reform Committee reached many of its conclusions, having considered the arguments on one side and the arguments on the other side, it then, on balance, reached the recommendations that it did.
Thus, while it can be said that the principles of the Bill are supported by all those whom the Government consulted, I do not think it can be said that a uniform blessing has been given to the drafting of this Bill. I refer to consultations carried out with the Law Society, the Bar Council, the Official Referees and the Society of Construction Law. Each and every one of those bodies, while supporting the principles of the Bill and while supporting the Bill as a whole, had reservations in one place or another about the drafting of the Bill.
Out of our discussions and debates I believe one major defect has emerged. That defect was highlighted in the representations made by the construction and building industries. Indeed, the nonsense is that this Bill will have its greatest use in activities in the building and construction industries—as was recognised by the Law Reform Committee. Therefore in practical terms the Bill should be made to work for the building and construction industries.
Yet many—old and new—difficulties still exist. I refer to the uncertainties over the accrual of the cause of action—the uncertainties of the test of Pirelli of "significant damage" and the difficulties of actions accruing in tort and contract at different times. I refer to the "knowledge" tests in Section 14A and the activating event for the long stop period, which is to be found in Section 14B.
Already there is an enormous amount of litigation arising out of uncertainties in our law as applied to the building and construction industries. Your Lordships may remember that, as I mentioned in the debate we held on 10th February, there has been a doubling of the number of cases in the Official Referee's Court every five years. Indeed, for the period between 1976 and 1982, the number of cases taken by the Official Referee's Court doubled exactly. Again, as I mentioned in the debate on the 10th February, records of the Royal Institute of British Architects show that the number of claims in 1978 relating to the building industries was 200 and in 1982 there were 500, which, if my arithmetic is correct, is an increase of 125 per cent. Therefore, I think it should be a matter of considerable concern that all the major institutions in the building and construction industries have expressed dissatisfaction with the terms of the Bill.
Though the noble Lord, Lord Broxbourne, has already referred to some of these institutions, I should like to draw your Lordships' attention more precisely to those institutions which have expressly stated dissatisfaction with the drafting of this Bill. I refer to the Royal Institute of British Architects, the Royal Institute of Chartered Surveyors, the Institution of Civil Engineers, the Institution of Structural Engineers and, with those, the Institution of Mechanical Engineering, the Institution of Electrical Engineering and the Institution of Chemical Engineering. I refer to the Association of Consulting Engineers, to the Federation of Civil Engineering Contractors And the Building Employers' Confederation, which was one of

1043
the institutions mentioned by the noble Lord, Lord Broxbourne. Finally, as did the noble Lord, Lord Broxbourne, I refer to the British Property Federation, which is not on the side of the defendants but on the clients' side. I should like to quote from a recent letter that was written by the Director General of the British Property Federation to the Minister for Housing, Urban Affairs and Construction, where it is said:
"We are the clients. The British Property Federation represents the great majority of developers—property companies, banks, insurance companies, contractors, shopping chains and so on … Our fear is that the proposals in the Bill will involve litigation about whether a case is time-barred or not, in other words, litigation about whether litigation can start. This is nonsense".
So it is on both sides of the industry that concern has been expressed and it has not simply come from the potential defendants as opposed to potential plaintiffs. I think it is right that your Lordships take note that these industries play a very important part in our economy. I take but one example, from the Association of Consulting Engineers, whose members are currently responsible for overseas currency earnings of £560 million per annum, which is about one third of the earning power of our banks. I believe that their voices should be heard in this Bill and in other measures. They should be heard when they speak of increasing exposure to liability, increasing exposure to litigation, loss of recruitment and the cost of insurance. Not long ago the noble and learned Lord, Lord Hailsham, gave a passionate address in which he referred to the eroding position of the professions. I can do no better than adopt the words that the noble and learned Lord used in his address at the Fourth Rivers Lecture to the Institute of Chartered Secretaries and Administrators. I referred to this at the Report stage, as your Lordships may remember. Referring to the professions, the noble and learned Lord said:
"we suffer a deliberate denigration of our ideals, and a continuous progressive and increasingly rapid diminution in our standards of life".
Then the noble and learned Lord spoke of the dangers:
"There is the danger from government. There is the danger from corporations, private and public. There is the danger from organised labour. Each and all of these influences is gradually encroaching on the integrity and independence of the professions".
He then summed up in this way:
"It is time that we came to look at one another and recognise in one another persons who are suffering from the same pressures, and who all need allies not simply to secure personal survival but to ensure the continuance of standards in society without which independent and honourable professions cannot continue to exist".
That is the worry that the professions see over this Bill and that is why, if satisfaction cannot be achieved in this Bill, the professions in the building and construction industries will be seeking again the leave of your Lordships' House for their case to be heard.
Lord Lloyd of Kilgerran: My Lords, it is with great reluctance that I intervene at this stage, but to preface my short speech I should like to make an apology to the noble Lord, Lord Broxbourne, because I missed the first three or four minutes of his speech.
The Lord Chancellor: What a loss.
Lord Lloyd of Kilgerran: My Lords, I did not hear the aside from the noble and learned Lord, the Lord Chancellor, who is sitting on the Woolsack. But never in the history of your Lordships' House has a Member had such a good excuse as I have for being late. Contentedly reading the Latent Damage Bill, I was sitting in a stationary taxi on Waterloo Bridge when it was run into by a bus. I hope your Lordships will not suggest that there is some confusion in my mind as a result of that transport difficulty—although confusion developed afterwards on Waterloo Bridge in trying to decide where the fault lay. Fortunately, I had my card with me. I produced it and everyone almost knelt down, understanding that I should be a truthful witness.
I suppose it is inevitable that the noble Lord, Lord Broxbourne, in his splendid speech, which I support, should forget one matter, and that is that I wrote a letter to him. He referred to a number of letters but not to the letter in which I suggested something that could take place at Third Reading. He and I could not agree, however, on the right course to adopt.
In concluding my short but I hope sincere and very cogent observations at this stage, may I say that I agree with the noble Lord. If I may use the happy phraseology of the noble Lord, Lord Broxbourne, the congruity of view arises from the practicality of the situation. I do not want to waste your Lordships' time just now, but I myself have had a large number of letters from people who are dealing with the practicalities of the situation arising over the inadequacy of this Bill for the construction industry.
3.30 p.m.
Lord Howie of Troon: My Lords, I rise to support the noble Lord, Lord Broxbourne, and other noble Lords who have spoken in criticism of this Bill, as I did during its earlier stages. Noble Lords will remember that we had a considerable amount of discussion on the question of the long stop and on the difficulties which arise from determining the exact date of the breach of duty upon which the long stop depends. There was also a great deal of discussion on the uncertainty to which these problems gave rise.
Noble Lords may recall that at the Report stage I argued that the long stop provisions introduced under the Bill were no more certain than is the present law. My arguments are recorded in the Official Report for 28th April last, col. 23, so I shall not repeat them here in detail. But on that occasion I quoted the Law Reform Committee's criticism of the difficulty in fixing the time of damage under the present legal position and I quoted the committee's description of that task as being "time-consuming, expensive and sometimes impossible".
I then went on to say in reference to the proposed breach of duty (I am quoting now from col. 23):
"In fact, the breach of duty can only be determined if the courts are asked to perform time-consuming, expensive and sometimes impossible tasks of ascertaining exactly when it occurred. I suggest to your Lordships that if that could not be justified in connection with the time of actual damage, I do not see how it can be justified in terms of the breach of duty. The committee criticised the uncertainty in one case but the Bill keeps it in the other".
Unfortunately those arguments were not replied to in the course of the Report stage debate. They still appear

1045
sound to me, and I should like to have the views of the noble and learned Lord the Lord Chancellor on them before we end the debate today.
There is one other matter that the noble and learned Lord the Lord Chancellor raised more than once during the earlier debates on the Bill, and that was the quite proper matter of the injustices that might be faced by clients under the proposed amendments which we moved and which were later withdrawn. I have a copy of the letter to John Patten, to which the noble Lord, Lord Hacking, referred earlier, and the important point in it is the one that he made: namely, that it came from the British Property Federation, which said, "We are the clients". He quoted part of the letter, and I do not intend to repeat that, but at the end of the letter the director general of the federation, writing to the Minister, says:
"If this means a slight reduction in the overall period within which claims can be made"—
referring to the length of the long stop—
"then the client is prepared to accept that. His paramount aim is to obtain the greater certainty and reduction of litigation that would result from one unequivocable date".
The client there is agreeing with the arguments which we put forward from the point of view of the builder who would be the defendant in any litigation.
The last matter to which I wish to refer today is this. During the discussion of one of the amendments of the noble Lord, Lord Hacking, at Report stage, the noble and learned Lord the Lord Chancellor (I thought rather chastising us) said that if we proceeded with the amendments that,
"might lead to the foundering of the whole Bill, and they might lose their long stop altogether"—
suggesting to us that the other place might throw it out. That remark can be found in col. 33 of the Official Report for 28th April.
Since then I have discussed the matter with a number of people in the construction industry. Their response to that implied threat is interesting. "So what?", they say to me. "Since the provisions for the long stop are every bit as uncertain as the existing law is, why go to the bother of changing it?" I do not suggest to the noble and learned Lord the Lord Chancellor that he should throw out the Bill at Third Reading instead of sending it on to the other place, but that is what the people to whom I spoke suggested to me. If the Bill were to be dropped or thrown out in another place, architects, consultants and builders feel that they would be no worse off than if the Bill went through. Right or wrong, that is how they feel.
What arises from our lengthy discussions is that not quite enough consideration has yet been given to the spirit and the strength underlying the amendments that we put forward. I earnestly beg the noble and learned Lord to think carefully about this matter before the Bill goes to another place.
Lord Silkin of Dulwich: My Lords, I begin by expressing sympathy at least from this side of the House with the noble Lord, Lord Lloyd of Kilgerran, and the hope that no latent defect results from the unhappy events that took place on Waterloo Bridge.
In the speech that I made on the Bill on Second Reading I concluded by saying that it seemed to me
1046
that the Bill was extremely valuable and I commended it to the House. My understanding of the speeches that were made on that occasion was and remains that that was the view of Members of the House generally. I hardly knew the Bill—and it has been altered not at all—in the speeches today, although it is the same Bill that we debated on 17th March. I took the trouble a moment ago, for example, to look back at what the noble Lord, Lord Hacking, said:
"I welcome this Bill for several reasons. First of all, I welcome it because it produces justice for plaintiffs, whether inarticulate or articulate".
He went on to say:
"I also welcome the Bill on behalf of defendants because it does fairness to them".—[Official Report, 17/3/86; col. 803.]
I do not know why the same Bill has suddenly become so monstrously unfair in the meantime, as it is sought to persuade us.
I had the temerity to move an amendment which, had it been accepted, would have provided to the courts a power to extend the long stop. That is something that I do not think would have been done very often, but it seemed to me that there was something to be said for the power being provided. Although I did not pursue it on that occasion, I am bound to say that if there was any suggestion of the long stop being reduced in time, there would be a much stronger argument for the introduction in another place of some such qualification in similar terms to the power granted to the courts in relation to personal injuries—which I hope the noble Lord, Lord Lloyd of Kilgerran, will not need the benefit of in due course.
The points that have been made forcibly during the course of this afternoon were considered by the Law Reform Committee over the four years of its life. The question of insurance was considered. I have no doubt that all the bodies that were enumerated by the noble Lords, Lord Broxbourne and Lord Hacking, had, and doubtless took, the opportunity of giving their strong views on the sort of points that have been advanced today. As the noble and learned Lord the Lord Chancellor said in the Second Reading and in other debates, at the end of the day the committee reached what no doubt was a compromise hut one which was intended to produce the fairness to both sides of which the noble Lord, Lord Hacking, expressed appreciation in his speech on Second Reading.
Whatever may be the view—and one can understand it—of highly interested parties, such as the professions of architect and so on that have been referred to, one has to bear in mind that in this Bill we are dealing with the situation of a person who has suffered loss as the result of a wrong done to him by some other person. Prima facie, in that situation that person should be compensated, but that right to compensation has traditionally for all kinds of reasons been restricted by the necessity for some form of limitation. It should not be restricted too far or we deprive a person who should have a remedy of that particular remedy.
It is in that context that the Law Reform Committee sought to balance the various claims and reached the conclusions which until now have been accepted by the House. I hope that they will continue to be

1047
accepted even though they do not go so far as I should have liked to go, and hence I have put down the amendment. I believe that the compromise was a fair one. I hope that the noble and learned Lord the Lord Chancellor will continue to be firm against any derogation from it and earn the pair of white gloves which he has at the moment.
Lord Denning: My Lords, I wish to say a word of welcome to the Bill, which I feel is necessary given the state of the law before the Bill was introduced. It deals with cases where, for instance, a house has been built on rubbishy foundations and the owner or occupier does not get to know of the damage until years afterwards when the house begins to crack and fall down.
Before a case called Pirelli, which was decided in the House of Lords, the courts had been working on a good line—time did not run against the man who owned or occupied the house until he discovered the damage or could with reasonable diligence have discovered it. That good development was halted by a decision of your Lordships' House in the Pirelli case where it was said that that test was not correct and that we should go from the time that the damage occurred even though the person did not know of the damage or could not have discovered it. My noble and learned friend the Lord Chancellor said that that was a matter that should be considered by the Law Commission, and it was.
Under the chairmanship of the noble and learned Lord, Lord Scarman, the committee produced a first class report. I wish that it had gone wider. I wish that it had applied not only in actions of negligence but when a duty of care had been broken with regard to contract and a statutory duty. My noble and learned friend Lord Scarman thought that that would be too adventurous. I think perhaps he was right to limit the matter as it has been. Although we tried one or two amendments, I hope that the Bill will have a good passage through both Houses and come into law. It deals with a much-needed reform.
3.45 p.m.
The Lord Chancellor: My Lords, I am grateful to all those who have taken part in the Third Reading debate. I should be doing the House a disservice if I merely repeated the arguments that I put forward on Second Reading, in Committee and on Report, especially in the light of the two last speeches from the noble and learned Lord, Lord Silkin, and my noble and learned friend Lord Denning which summarised in a compendious form the case that I was trying to put. It is basically that this is a Law Reform Committee Bill. It is not, as it were, a main Government programme Bill. It is based upon the report of the noble and learned Lord, Lord Scarman, and his friends. After four years of deliberation, they dealt with the problem which my noble and learned friend on the Cross-Benches has just adumbrated.
The Bill does two things and two things only. The first is to give a plaintiff who may have suffered damage without his knowledge and which was beyond his power of discovery, a further period within which
1048
to obtain his rights and to bring an action for something which somebody else has done wrong or for negligence.
I have been in touch with the noble and learned Lord in the course of the Bill but for reasons which are probably understood by a number of your Lordships he was unable to attend after Second Reading. It was recognised by the noble and learned Lord, Lord Scarman, and his friends that under the existing law, as it is unaltered, an architect, a consulting engineer or whoever, could find himself liable for damages for negligence long after the period during which he could be expected to reply to the claim.
Various points of detail have been raised, but they are all Committee points which were dealt with in detail in Committee and on Report. In the end, it was recognised that the only way to deal with the matter was to fix a long stop, as it is called, beyond which the architect or whoever could not be sued, subject of course to the provision for fraud or deliberate concealment. Those are the only things that the Bill does. Some 140 organisations or individuals were consulted at length. There was a further consultation period by departments, including mine, during which I think about 74 comments were received. Those long stop figures were included.
I disagree with only one remark, which fell from the noble Lord, Lord Howie of Troon who described me as issuing a threat. I issued no threat at any stage. What I said was said by one of my predecessors, Lord Campbell, that law reform is by consent or not at all. What I have said is that I have a slot in the Government's programme for what is in effect the Bill of the noble and learned Lord, Lord Scarman, on the assurance, which I received from the Opposition and others, that this is an uncontroversial Bill. If it is to take a great deal of time, it will founder. That is not a threat. It is a statement of fact.
There has been a highly organised and concerted assault on the long stop provision basically by persons who want to shorten it in one way or another. It has also been extraordinarily misleading in some ways—for instance only last week or thereabouts, there was a letter in The Times from a responsible figure who said that the cost of insurance was
"spiralling rapidly in anticipation of the extended long stop period".
In fact of course there is no extended long stop period. The long stop period is a protection which has never existed before.
That brings me to a remark made by my noble friend Lord Broxbourne, who said that a defect of the Bill was that it did not deal with insurance. I thought that I had made it plain on Second Reading that insurance is the subject of a separate initiative by the National Economic Development Office and therefore has no place in the Bill. In so far as the Bill affects the ability of a potential defendant to insure, it is assisted by the long stop which never existed before. If it does not affect the insurance premium it has neither effect for good or bad, but in so far as the Bill can affect it, the existence of a long stop must make it easier to insure.
I have said all that I have to say about the Bill. I solemnly say to those who have criticised the details of the Bill that law reform is either by consent or not at

1049
all. This is a Bill for which I have obtained Government time, and it therefore forms part of the Government programme. It is not a programme Bill in the ordinary sense. It is an attempt to improve the law in the respects brilliantly summarised by my noble and learned friend Lord Denning. I am glad to find that on the Opposition Benches, at least, there is comprehension of that fact.
On Question, Bill read a third time.
The Lord Chancellor: My Lords, I beg to move that this Bill do now pass.
Moved, That the Bill do now pass.—(The Lord Chancellor.)
On Question, Bill passed, and sent to the Commons.

Teachers' Pay: Interim Settlement
3.50 p.m.
The Earl of Swinton: My Lords, with the leave of the House, I shall now repeat in the form of a Statement the answer to a Private Notice Question that is being given in another place on the interim settlement of the teachers' pay dispute. The Statement is as follows:
"Last Friday, the Burnham Primary and Secondary Committee agreed to increase teachers' salaries in England and Wales from 1st April 1986 by 5·5 per cent. or £520, whichever is the greater. This agreement was reached following undertakings to the management panel from all the teacher associations represented on the teachers' panel. First, the entire teachers' panel has given an assurance that there will be a return to peace and calm in our schools immediately. Secondly, the entire teachers' panel notes and supports the ACAS talks and will co-operate in every respect. Thirdly, the teachers' panel agrees that the payment at 1st April 1986 is without prejudice to any subsequent consideration by Burnham in the light of progress in the ongoing talks embracing all the aspects being discussed under the aegis of ACAS.
"This settlement clears the way for constructive discussion and negotiation under the leadership of the panel appointed by ACAS. It does not prejudge the outcome of the ACAS process and it is to that exercise that teachers, employers and the Government must look for a satisfactory longer-term outcome to the complex issues raised by the recent dispute. I very much welcome the fact that the National Union of Teachers, which represents a substantial group of teachers in our schools, will now play a full part. We must all welcome the assurances now given about the immediate return to peace and calm in our schools.
"The ACAS-led negotiations are addressing a range of issues—pay levels and structures, teachers' duties, teacher appraisal and career development and future negotiating machinery. Clearly, no Secretary of State can commit government in advance to the outcome of such an exercise. But I do wish the talks well and hope that they can result in satisfactory resolution of the fundamental problems arising from the present pay structure, the lack of definition about teachers' professional obligations,
1050
and performance appraisal and career development. The Government will consider the conclusions carefully and fully when those are available."
My Lords, that concludes the Statement.
Lord Irving of Dartford: My Lords, is the noble Earl aware that my colleagues and I on this side of the House welcome the settlement very warmly indeed? It arose from a meeting initiated by my colleague in another place, Mr. Giles Radice, between the NUT and the local authority representatives. We are grateful to him for his efforts. Does the noble Earl realise that this is only a beginning and that if the Government are to bring a lasting peace—a peace that we all want very badly—to our schools, they will have to find more money than the amount promised last year of £400 million a year for four years?
Will the Government ensure that the hints this weekend by Mr. John Biffen and Mr. Nigel Lawson that we need to spend more money on education are translated as quickly as possible into cash? Will the Minister also agree that all the innovations proposed by the Secretary of State, including appraisal, can only be achieved with the co-operation of teachers? Will he mark his determination to seek that co-operation by withdrawing Clause 37 of the Education Bill on appraisal with its implication of coercion if he cannot negotiate it freely?
Lord Ritchie of Dundee: My Lords, I should also like from these Benches to thank the noble Earl for repeating the Statement. It is indeed welcome news that an interim settlement has been reached. It is particularly welcome that the National Union of Teachers has accepted it and will henceforth take part in the important discussions with ACAS. It is good also that an undertaking has been given that there will be no further disruption in schools while deliberations with ACAS are continuing. It looks, at last, as though there is light at the end of the tunnel in respect of a desperately damaging situation in our schools with the prospect of a solution being found perhaps by the end of the summer.
I should like to repeat the suggestion made by the noble Lord from the Labour Benches that the Government should consider withdrawing Clause 37 as a matter of diplomacy. One of the four working groups with ACAS is specifically preoccupied with the appraisal of teachers. It seems to me that it might be a diplomatic move to withdraw this proposal of reserve powers from the Secretary of State at this moment until the matter has been thoroughly discussed and agreement reached in the ACAS deliberations. That is all I wish to say. I thank the Minister again and welcome the good news.
The Earl of Swinton: My Lords, I am very grateful for the manner in which both the noble Lords, Lord Irving of Dartford and Lord Ritchie of Dundee, have received the Statement. The noble Lord, Lord Irving, asked whether the Government would make immediate extra finance available. I am afraid that they will not. Friday's settlement did not purport to satisfy the Government's conditions for extra resources. It was made clear to local authority employers in advance of last Friday's Burnham

1051
meeting that no extra resources would be made available by the Government at this time. Nonetheless, they chose to reach the settlement of last Friday. I am glad that the noble Lord pointed out that everything is much better done by co-operation. I can only echo that.
The noble Lord asked whether I would show a sign of goodwill by announcing immediately that we would withdraw Clause 37 of the Bill currently in progress through your Lordships' House. That was echoed by the noble Lord, Lord Ritchie of Dundee. As I made clear over and over again at Committee stage of the Bill, this was always supposed to be a long stop—a very long stop—in case agreement is not reached. These talks are going on. They will go on for some time. With the best will in the world, there is absolutely no guarantee that a satisfactory result will come out of it. I cannot therefore given an undertaking. This is, as I say, a long stop. We must try to have it in the Bill, arranged as a long stop.
Lord Beloff: My Lords, everyone will feel the general relief that must be felt thoughout the country, particularly by parents, at the ending of this dispute, even though someone with as suspicious a mind as I have may think that its timing and the collaboration of Mr. Radice are not wholly to be disregarded in their political effects. I should like to ask my noble friend a question relating particularly to his reply about further resources. Does not the whole history of this dispute show once again the illogicality of a system in which an important body of people—namely, the teachers—are employed by one lot of people, the local authorities, and, in the end, paid for by central government? Is it not time that this anomaly was removed and that the teaching force, as in all other European countries, became direct employees of the Government, who actually pay them?
The Earl of Swinton: No, my Lords, I am afraid that I cannot agree with my noble friend. The whole point is that the teachers are employed and paid for by the local authorities.
Lord Taylor of Blackburn: My Lords, I have listened to what the noble Earl had to say regarding goodwill and give and take on both sides. Is he prepared to go back to his right honourable friend and ask him whether he would now be prepared to postpone the sitting of the GCE examination rather than rush it through at this stage?
The Earl of Swinton: My Lords, again, I cannot give that undertaking. I am of course aware that both the NUT and NAS/UWT regard the introduction of the GCSE as a separate matter from the pay dispute. In saying to the noble Lord, Lord Taylor of Blackburn, that I am not prepared to go back to my right honourable friend and ask him to postpone this, I understand that my right honourable friend is very willing to receive from the teachers' organisations any further and detailed comments they may have about preparation for, and funding of, the GCSE. We stand ready to consider these matters further.
Baroness Phillips: My Lords, is the Minister aware that many of us will regard this amount which has been given, we assume as an interim arrangement, as a very meagre contribution to a great profession? Since we shall again be asked to consider the high increases to be awarded to judges, civil servants, admirals and various other persons of that kind, I hope that this is not going to be the end of the story and that there will be a real increase of some meaning to the teaching profession when these talks conclude.
The Earl of Swinton: My Lords, I should not have thought that this was a mean settlement. It is a settlement that has been agreed by the teachers and their employers, as I understand it, unanimously. I think that everybody is fairly satisfied with it.
Lord Kilmarnock: My Lords, I hope that I was right in understanding the noble Earl to say that the Government would listen to representations from the local authority associations on adequate funding for the implementation of the GCSE. Will that include sufficient provision for the in-service training that will be necessary for that purpose?
The Earl of Swinton: My Lords, a lot of money is already going in. I think that the noble Lord got slightly muddled. I said that we would listen to the teachers on this, but of course we are also prepared to meet the local authority employers if they have any worries and concerns about it.
Lord Irving of Dartford: My Lords, will the noble Earl bear in mind that all the parties to this unhappy situation have a chance for a new start and that it would be very sad indeed if the Government, by failing to respond with some cash, were to set back the whole enterprise in a way that would be damaging to everybody—schools, children and parents?
The Earl of Swinton: My Lords, I just cannot accept that. I have said that it was made quite clear to the local authority employers in advance of last Friday's Burnham meeting that no extra resources would be made available by the Government on this last occasion. They have made what the noble Baroness, Lady Phillips, has said is a mean offer. But they have put it forward and it is up to the local authorities to meet the cost of the settlement from within their budgets.

Housing (Scotland) Bill
4.2 p.m.
Report received.
Clause 1 [Extension of right to purchase and of "secure tenancy"]:
Lord Carmichael of Kelvingrove Lord Carmichael of Kelvingrove moved Amendment No. 1:
Page 1, line 9, at end insert—
(" ( ) In section 1(11) of that Act after paragraph (c) there shall be inserted the following paragraph—
"(d) where the landlord of a dwelling house is a registered housing association within the meaning of the Housing Association Act 1985 and the housing association total stock is less than 250 dwellings;".")
The noble Lord said: My Lords, I make no apologies for bringing forward as Amendment No. 1 an amendment almost identical to one that was discussed in Committee. I want to make a final plea to the Minister, while hoping that he will have looked very carefully at the debate we had in Committee. He will have been aware of the very widespread view that was obvious then, particularly among Scottish Peers, about the importance of this amendment. As I say, I hope that at his leisure he has studied that debate and has gained some appreciation of the uniqueness of the Scottish community-based housing associations—I emphasise, community-based housing associations.
I make no apology for trying to get special treatment for these associations. In the old areas of the country and in the big cities, one of which I represented, we owe them an enormous debt. To digress slightly, before the advent of the associations—which were the result of enlightened thinking on housing generally and desperation over housing generally—the planners wanted to demolish acres and acres of that area of Glasgow called Partick and they finally did demolish acres of another area called Maryhill and many other parts of the city. But the housing associations, based on the caring, concerned and energetic local people, with little experience, got to work and helped in the rejuvenation of these run-down city areas.
The confidence in the whole areas increased. As I said at Second Reading, we reached the situation where the building societies, which previously had marked lines round certain parts of the inner cities within which no loans would be possible, began to rub out those lines so that it became possible in these rehabilitation areas for people to get loans to buy privately-owned houses. This was a great boost to the whole area. The building societies were a great help and new owner-occupiers were able to move in.
We ask in the amendment specifically for the smaller associations to be exempt from the right to buy. The noble Earl, Lord Dundee, speaking at the Committee stage gave figures for the Scottish community-based housing associations. In Scotland we have 195 associations with 25,000 houses. That is an average of 128 houses per association. I know that averages are very wild, but they give an indication that when you are looking at Scotland and think of the Scottish housing associations you are dealing with a quite different sort of animal from the English associations. There are 2,450 associations in England owning something around half a million houses. This gives an average of 204 houses per association. But, as I have said, averages are dangerous things to play with; for in Scotland there are 30 associations which have under 50 houses and 53 associations which have fewer than 250 houses.
As to these small associations particularly—since I believe that the Minister has possibly closed his mind to the idea of any exemptions for the larger associations—any loss of housing stock would in many cases cause them to become unviable. We are talking about associations with a very small number of houses. Not only would that affect their viability. As to whatever was left of the housing stock that was available to the associations, available for people who were involved in providing houses to rent at reasonable and just rents, people who had given
1054
enormous amounts of their time, energy and ability would just lose interest in the whole association. I believe they would not accept the fact that the result of all their time, sweat and labour was suddenly taken out of the rental market.
With great seriousness I ask the Minister to look at this particular problem. As I say, I have no apologies for bringing it back. I think the results of the last discussion that we had on this, and the widespread support that it received, should be enough to make the Minister think again. I hope that he has done so in the period since the Second Reading. I beg to move.
Lord Mackie of Benshie: My Lords, I do not think there is a great deal more to be said about this, except that I hope the Minister has had second thoughts. The case has been put from all parts of the House and put very reasonably. We are talking about 5,000 houses and not about a tremendous amount. We are not breaching any principle. In fact, we are making the principle sounder by providing for exceptions. All reasonable people will realise that there are exceptions to every rule; and I am sure that the Government are much more reasonable than they were a few days ago.
Perhaps the Minister will open his heart and listen to the arguments and give way on this small point which, nevertheless, as the noble Lord, Lord Carmichael, has said, will make a tremendous difference to a whole lot of public-spirited people who are working very hard for an objective which only a short time ago was praised by the Secretary of State. He then spoke very much about the success of community housing associations. I do not think that this is the time to ruin them. I hope that the Minister will discard the brief that he is looking at so intently and give way with the good grace of which he is capable.
The Earl of Dundee: My Lords, I should like to support the remarks of the noble Lord, Lord Carmichael, and the noble Lord, Lord Mackie of Benshie. I believe that the amendment offers necessary protection to small rural housing associations without going against the principle of the Bill. Would not my noble friend the Minister agree that such a balance would be particularly evident if tenants of the small housing associations concerned were entitled to buy at discounted terms elsewhere? Yet why should it be necessary to protect small and rural housing associations at all; or conversely, if there is no attempt to protect them, what effect will that have on various considerations, including unit management costs, the continuing willingness of local voluntary management committees and related employment opportunities?
Would my noble friend not accept that it is in fact those aspects which stand to suffer and therefore that protection should be given in this case?
The Minister of State, Scottish Office (Lord Gray of Contin): My Lords, I have listened very carefully to what has been said by all noble Lords who have participated in this debate. The noble Lord, Lord Carmichael, pleaded with me to think again. He hopes that I read the record and that I may be persuaded by what is revealed there and also by what has been said here today. However, I would remind the noble Lord that I listened very carefully at the Committee stage

1055
and that the Committee, on a Division, rejected this very amendment. However, I have no complaints at all about the noble Lord bringing it back. I would, perhaps, have been particularly willing to be persuaded had compelling new arguments been put forward, but I am afraid that that is not the case. Just as my brief is the same as it was at the Committee stage, so the arguments put forward are identical to those which were put forward at the Committee stage. Therefore I am afraid that I am not persuaded by anything which has been said.
I told your Lordships on the previous occasion that we are not, by and large, breaking new ground in introducing a right to buy for housing association tenants in Scotland, but we are extending to additonal categories of tenant an already very successful policy which has been widely welcomed. The right to buy was not applied to housing association tenants under the 1980 Act, but since then housing associations have grown in number and they have matured. They now hold a sizeable stock of houses which have been provided with public money—a point which we must never forget—and it is difficult to justify continuing to exclude their tenants from rights which are enjoyed by tenants in the public sector in Scotland and by tenants of housing associations elsewhere in Great Britain. It would be clearly unjust to deny tenants the opportunity to purchase their homes simply because their associations owned a particular number of houses, and I am in no doubt that it would be regarded as very unfair by the tenants concerned.
The main argument advanced against applying the right to buy to smaller associations is that sales would affect their viability. I have to say that, because management allowances are paid on a unit basis, viability—provided overheads are also in proportion to the stock—is not related to the size of the association. If, particularly where stock numbers are low, even prudent management cannot prevent a genuine revenue deficit, there are avenues through which it may seek assistance to meet that deficit.
Nor do I accept that the right to buy will pose significant administrative problems for smaller associations. Indeed, there may be some advantages in sales, albeit small, in that the net proceeds of any sale will be used first to repay any outstanding loan and housing association grant on the house; but where the sale proceeds exceed the amount required to satisfy this, the surplus will accrue to the association itself.
Finally, I doubt that the right to buy will impair the development of associations. The suggestion, which has been made in the past, that newly-formed associations seeking to build up their stocks to a reasonable level will have that objective defeated by a rush of right to buy applications is, I feel, an exaggeration—indeed, a distortion. I find it difficult to believe that a new association, operating proper allocations policies, would find within its initial tenants a high proportion of tenants both willing and able to buy.
All in all, I do not believe that the amendment would serve any purpose other than to alienate the tenants concerned. I invite the noble Lord to withdraw the amendment.
4.15 p.m.
Lord Mackie of Benshie: My Lords, before the Minister sits down, will he tell me how a smaller association with one permanent employee can cut its overheads if half of its houses are sold?
Lord Gray of Contin: My Lords, I am not suggesting that a particular association with one permanent employee would have a great deal of scope for cutting its overheads. However, there are other associations with rather more, who would have scope.
The Earl of Selkirk: My Lords, perhaps I may make a few comments. I am perhaps not surprised to hear what my noble friend has said. There was a striking lack of novelty in the remarks which he made. However, what is being put forward is an effective suggestion. The general view is that unless there are about 250 houses, the cost of management is excessive. Indeed, that is recognised in England because extra allowances are provided for the management costs of the smaller associations or societies. Therefore I should have thought that allowing the societies to have up to 250 houses was an economical way of using public money. Indeed, the noble Lord has an advantage in this respect. If any society goes above 250, they will be free to purchase. However, as it is, we are undermining to some degree the efficiency which those organisations can achieve.
The noble Lord talked about it being unfair. He talked about the right to buy. It is far more unfair not to have accommodation at all. I suggest to the noble Lord that this slightly political shout of "right to buy" is rather like the Americans saying "Life, liberty and the pursuit of happiness", as if that were the principle upon which life existed. It is not. At present, according to figures which I think were put forward by the Government, there are about 17,000 people who are homeless. Those people are far more important than the odd person who wants to buy.
As I have said previously, home ownership is going ahead very well. I cannot be accused of not being in favour of home ownership. I have been with the building societies for some 20 years doing what I can in some way to raise the standard. Now nearly two-thirds of the population of this country own their homes. The need today is different: we need rented property, and the noble Lord knows that perfectly well. That is the real need which we must face.
I am sorry to have to say that the noble Lord has not been very kind either today or in the Bill to the work that housing associations are doing. There was no consultation at all before the Bill came forward. The noble Lord talks about abuses. Is he able to tell me now of any abuse that has taken place by a charitable organisation either in Scotland or in England? Those are deprecating words which are unfortunate.
We are not satisfied with what we have heard. We run into danger when we constantly change housing policy. Any worthwhile housing policy must operate for some 20 years or more. However, the Government come in and are obsessed with some idea. I ask the noble Lord to think very hard about this matter. This is a mild measure which could be accepted without any difficulty.
Lord Wilson of Langside: My Lords, unhappily I was unable to be present either during Second Reading or at the Committee stage of this not unimportant Bill. I must say that I came here this afternoon expecting a sympathetic, warm and more considered response to a number of amendments which have been put down, including the present amendment. I found the Minister's reply not only to the presentation of the amendment by the noble Lord, Lord Carmichael of Kelvingrove, but also to the question asked by my noble friend Lord Mackie of Benshie a moment or two ago, profoundly unconvincing and certainly disappointing. It suggests to me, if I may say so without offence, that the Minister is unwilling to open, as the noble Lord, Lord Mackie of Benshie, hoped he might, either his heart or his mind to this matter which is so important to the housing associations.
Lord Gray of Contin: My Lords, by leave of the House may I make one or two comments on points made since I last spoke. I fully appreciate the great interest that my noble friend Lord Selkirk has always taken in housing associations. I know that on this issue he speaks from the heart. But that does not change the position. He, probably inadvertently is seeking to deprive genuine people who might wish to own their own homes of that right. This is already available to those who live in local authority houses, perhaps in the next street, and it seems to me outrageous that people in this House, of all places, should try to deprive those who seek to own their own homes of the right to do so.
I should like perhaps to correct my noble friend on one point of detail. I think he said—and he will correct me if I am wrong—that two-thirds of the people in this country own their own homes. That is certainly not the case in Scotland; I only wish that it were so. The figure is nothing approaching two-thirds. The noble Earl also made the point about small associations and deficits. If deficits occur, they can be remedied through revenue deficit grant. No association should run into trouble as a consequence of sales alone.
Perhaps I may add to what I have said already to the noble Lord, Lord Mackie of Benshie, who asked me about how savings could be made with a small association with only one employee. It might be possible—I am not saying that it necessarily would be—that they could share staff with other associations, or use the agency services of associations. That might be a possibility.
I do not think that we are going to move very far in our views on this. People have taken up fairly entrenched positions. However, before the noble Lord, Lord Carmichael, winds up I should like to say that the truth of the matter is that Ministers have been expressing concern about the operation of the voluntary code at regular intervals over a number of years. In a speech to the federation's annual conference in June 1982 my honourable friend the then Minister for Housing in Scotland expressed disappointment with the progress that had been made in implementing the voluntary code and warned the movement that it was essential for associations to adopt a positive stance in their sales policy. He subsequently discussed this matter with the federation when he met its representatives in January, 1983.
1058
No, my Lords, there are involved people who wish, and who might wish, to own their own homes, and I think it totally wrong of us in this House to try to deprive them of this privilege.
The Earl of Selkirk: My Lords, may I remind the noble Lord that in the autumn of 1984 the then Secretary of State stated that the voluntary code was working very well indeed?
Lord Mackie of Benshie: My Lords, may I also remind the Minister that his indignation at our seeking to deprive people of this advantage is really somewhat synthetic, as all we are doing is proposing exceptions to the rule? The Government themselves have already allowed exceptions in the case of the charitable associations and many others where, for example, there is a contract to live in a house. All these are exceptions. We are not abrogating the principle but only making sensible exceptions.
Lord Carmichael of Kelvingrove: My Lords, I was disappointed at the Minister's reply—he will not be surprised to hear that—when he said things such as that the selling off of houses will not impair the viability of the associations. When it is realised that we are looking at housing associations with less than 250 houses I do not think that he is right at all. I cannot believe that small associations, particularly the ones mentioned earlier—and the figures were given by the noble Earl, Lord Dundee, at the last stage of this Bill—such as the 30 associations with less than 50 houses would not be affected. If these houses begin to be unavailable because people buy them, obviously that will be important. But even more important than the stock of houses will be the effect on people who have given their time to set up the associations to try to save a bit of their community.
We must register our feelings in the House. We have lost the big right-to-buy argument on association houses, but we have listened to the small associations and put down these amendments. I feel that your Lordships should listen to them as well and I therefore ask for your views by putting the matter to the vote.
4.27 p.m.
On Question, Whether the said amendment (No. 1) shall be agreed to?
Their Lordships divided: Contents, 112; Not-Contents, 97.

DIVISION NO. 1

CONTENTS

Airedale, L.

Carmichael of Kelvingrove, L.

Amherst, E.

Chitnis, L.

Ampthill, L.

Cledwyn of Penrhos, L.

Ardwick, L.

David, B.

Attlee, E.

Davies of Penrhys, L.

Aylestone, L.

Dean of Beswick, L.

Banks, L.

Denington, B.

Barnett, L.

Diamond, L.

Blease, L.

Donaldson of Kingsbridge, L.

Boston of Faversham, L.

Dundee, E.

Bottomley, L.

Elwyn-Jones, L.

Brooks of Tremorfa, L.

Ennals, L.

Bruce of Donington, L.

Ezra, L.

Caradon, L.

Falkland, V.

1059

Fisher of Rednal, B.

Parry, L.

Gallacher, L.

Perry of Walton, L.

Galpern, L.

Perth, E.

Gladwyn, L.

Phillips, B.

Glenamara, L.

Pitt of Hampstead, L.

Graham of Edmonton, L.

Ponsonby of Shulbrede, L. [Teller.]

Grey, E.

Grimond, L.

Prys-Davies, L.

Hampton, L.

Ritchie of Dundee, L.

Hanworth, V.

Rochester, L.

Harris of Greenwich, L.

Seear, B.

Hatch of Lusby, L.

Seebohm, L.

Hayter, L.

Selkirk, E.

Heycock, L.

Serota, B.

Hirshfield, L.

Shaughnessy, L.

Hooson, L.

Shepherd, L.

Houghton of Sowerby, L.

Silkin of Dulwich, L.

Hunt, L.

Simon, V.

Hutchinson of Lullington, L.

Soper, L.

Hylton-Foster, B.

Stallard, L.

Irving of Dartford, L.

Stedman, B.

Jacques, L.

Stewart of Fulham, L.

Jeger, B.

Stoddart of Swindon, L.

Jenkins of Putney, L.

Strathcona and Mount Royal, L.

Kennet, L.

Kilbracken, L.

Tanlaw, L.

Kilmarnock, L.

Taylor of Blackburn, L.

Kintore, E.

Taylor of Gryfe, L.

Kirkhill, L.

Taylor of Mansfield, L.

Lauderdale, E.

Tordoff, L. [Teller.]

Listowel, E.

Turner of Camden, B.

Llewelyn-Davies of Hastoe, B.

Underhill, L.

Lloyd of Hampstead, L.

Wallace of Coslany, L.

Lloyd of Kilgerran, L.

Walston, L.

Longford, E.

Wells-Pestell, L.

Mackie of Benshie, L.

Whaddon, L.

McNair, L.

White, B.

Mar, C.

Williams of Elvel, L.

Mayhew, L.

Wilson of Langside, L.

Mishcon, L.

Winchilsea and Nottingham, E.

Molloy, L.

Munster, E.

Winstanley, L.

Nicol, B.

Winterbottom, L.

Oram, L.

NOT-CONTENTS

Alexander of Tunis, E.

Gisborough, L.

Allerton, L.

Glenarthur, L.

Alport, L.

Gray of Contin, L.

Auckland, L.

Gridley, L.

Bauer, L.

Hives, L.

Beaverbrook, L.

Hooper, B.

Belhaven and Stenton, L.

Inglewood, L.

Beloff, L.

Kimball, L.

Belstead, L.

Kimberley, E.

Bessborough, E.

Kinnaird, L.

Boyd-Carpenter, L.

Lane-Fox, B.

Brabazon of Tara, L.

Layton, L.

Brougham and Vaux, L.

Long, V.

Caithness, E.

Lucas of Chilworth, L.

Cameron of Lochbroom, L.

Lyell, L.

Campbell of Alloway, L.

McAlpine of Moffat, L.

Carnegy of Lour, B.

McFadzean, L.

Cawley, L.

Macleod of Borve, B.

Cayzer, L.

Mancroft, L.

Constantine of Stanmore, L.

Margadale, L.

Cox, B.

Massereene and Ferrard, V.

Craigavon, V.

Maude of Stratford-upon-Avon, L.

Cromartie, E.

Cross, V.

Melville, V.

Cullen of Ashbourne, L.

Merrivale, L.

Davidson, V.

Mersey, V.

De Freyne, L.

Mottistone, L.

Denham, L. [Teller.]

Mowbray and Stourton, L.

Derwent, L.

Murton of Lindisfarne, L.

Digby, L.

Norrie, L.

Drumalbyn, L.

Orkney, E.

Ellenborough, L.

Pender, L.

Elliot of Harwood, B.

Peyton of Yeovil, L.

Elton, L.

Portland, D.

Fortescue, E.

Rankeillour, L.

Gainford, L.

Renton, L.

1060

Rodney, L.

Swinton, E. [Teller.]

St. Aldwyn, E.

Terrington, L.

Saint Brides, L.

Teviot, L.

St. Davids, V.

Thorneycroft, L.

Sandford, L.

Trumpington, B.

Sandys, L.

Ullswater, V.

Sempill, Ly.

Vaux of Harrowden, L.

Shannon, E.

Vickers, B.

Sharples, B.

Vivian, L.

Slim, V.

Westbury, L.

Soames, L.

Wynford, L.

Stodart of Leaston, L.

Young, B.

Sudeley, L.

Zouche of Haryngworth, L.

Resolved in the affirmative, and amendment agreed to accordingly.
4.35 p.m.
Clause 2 [Increased discount where dwelling-house purchased is a flat]:
Lord Carmichael of Kelvingrove Lord Carmichael of Kelvingrove moved Amendment No. 2:
Page 2, line 24, at end insert ("and unless owned by a community based housing association as defined by the Housing Associations Act 1985")
The noble Lord said: My Lords, with this amendment it would be perhaps convenient to take Amendment No. 3. I should point out that unless I am wrong in my reading of the Bill, I think there has been a printing mistake and Amendment No. 2 should read "page 2, line 24" and not "line 20".
The amendment concerns discounts to encourage tenants to purchase these properties. I thank the Minister for giving me some of the figures he promised last time. Through no fault of his (for I know that the pressure is very great) I received them only today. I should like to make one comment on the figures. I was concerned about having the figures for flats and maisonettes with lifts and the high-rise flats. Out of the total of 78,000 houses sold up to December 1985 the number given by the Minister for flats and maisonettes that require access by lifts was only 235, which is a very tiny percentage as the Minister will agree.
I cannot accept that maisonettes with a lift are related in any way to high rise flats. There are very many relatively low rise, with two, three or four storeys, many of them built for older people, which have lifts. That proves the point that the houses that are selling are the semi-detached and the terraced houses. Out of the total of 78,000 houses, 68,000 of them are semi-detached or terraced.
My point about the housing association inner area houses is that it is really not necessary to give tenants a large discount to encourage the purchase of the older property. There is plenty of housing available in many of these areas. They have become more desirable partly because of the work of the housing associations. In some areas I know prices are higher than the prices advised by the district valuer for these houses. These are houses with vacant possession, with no discount; and there is still a very great demand for them.
There is no need to go to the length of giving for this type of house the same kind of discount that the Minister believes is necessary. I agree with him that if we decide on a policy of selling for some of our multi-storey flats, we would need to give very high discounts. I feel it is unnecessary to give these discounts, and I

1061
hope that houses and flats of more than four storeys will be exempted from the Bill; and also houses owned by housing associations, the vast mass of which are low rise, with three or four storeys if one includes the ground floor.
The Minister made a point in his speech on 28th April to which I feel I should refer. He said with some indignation, which I always like to see from him:
"I sometimes despair when I hear noble Lords on the other side talk about people who wish to buy their houses in such terms: whenever the houses are bought they are going to be allowed to get into a state of disrepair. That is what they suggest, but nothing could be further from the truth"—[Official Report, 28/4/86; col. 86.]
I really feel that if the Minister has not observed this he could not have been associated with the problems that many people find themselves faced with, especially in the inner-city areas (though it could happen anywhere), particularly concerning the tenement type of property. The housing associations are faced with many problems when people purchase houses, using just about all the capital they have. It is not wilful neglect; it is not something that they want to do. They are not saying, "We will just forget about repairs". The fact is that they are frequently greatly stretched. They may reach a point where perhaps there is illness in the family or unemployment or a reduction of earnings. Probably the worst thing of all is when people retire and suddenly find that their income has fallen. I can assure the noble Lord, from the many surgeries that I had, that terror hits people who have bought their own house and who find that in their retirement they get large bills which they just cannot cope with.
What tends to happen is that there is neglect of repairs to the fabric. The houses may look very good and people may go to a lot of trouble to make the appearance good, but sometimes they just cannot afford the kind of money that is required for fabric repairs. I was not criticising them in any way. It is just a statement of fact: this becomes too much for many people. The Minister should know that, as regards old property in Scotland, had it not been for various governments bringing forward repair grants to owner-occupiers we would now be in a very sad state. Therefore I want to clear up that point.
The Minister may think I am being unfair. I am sure that he did not mean to be unkind but he seemed to suggest that I and one or two of my noble friends were making a statement that when people bought their own houses they just ignored them and were feckless. We were saying that repairs are frequently left because the money is just not there to be used. I hope I have cleared that up and that the Minister will think very carefully about these two amendments. Though they are much the same as the amendments which were put forward last time, there is at least a new element in that the Minister was kind enough to write to me and give a little more information, part of which I have digested. I shall look at the rest of it some time later. I beg to move.
4.45 p.m.
Lord Gray of Contin: My Lords, may I first of all reassure the noble Lord, Lord Carmichael, that of course anything I said was not in any way intended personally? I was generalising because it comes across,
1062
whether or not that is the intention, from many Labour spokesmen throughout the country that they are implying that maintenance will not be maintained in privately-owned housing to the standard which has in the past been maintained where there has been either a local authority or a housing association involvement. However, I fully accept the noble Lord's explanation and perhaps I may add that it will be open to new owners to invite the housing associations to continue to factor the block for them, if that is the wish of those who make their own purchases.
The effect of this amendment would be to deny to a particular group of tenants the same discount entitlement as is available to local authorities and other housing association tenants living in similar properties. I have again listened very carefully to what the noble Lord has had to say but I really do not think his arguments are sustainable. He has said that the majority of such flats will be tenement properties, and that is true. It may well be true that community-based housing associations own a substantial stock of those, but so also do local authorities and other associations. In Glasgow, for example, I pointed out previously, and I repeat for the benefit of your Lordships, that the district council holds some 5,500 flats in pre-1919 tenements, some 2,500 of which have been rehabilitated.
The argument that housing association flats are likely to have been recently refurbished and will therefore be more attractive to purchasers is difficult to sustain, given that the experience among local authorities has been that flats of all types have sold markedly less well than other houses. That is not so much because the tenants do not like their flats as because they are apprehensive about the associated responsibilities and costs—which the noble Lord was highlighting—such as for common repairs, which go with the purchase of a flat. There is no reason to suppose that those views will not be shared equally by housing association tenants.
However, I believe that this argument is largely irrelevant. The principle of discount is a central feature of the right to buy scheme. The basic discount reflects the fact that the house or flat is being sold with a sitting tenant; and thereafter additional discount is granted, reflecting the tenant's tenure of publicly-funded housing. To argue that tenants living in flats owned by community-based housing associations (towards 18,000 houses) should not be entitled to the same discount as other flat dwellers because their flats are likely to prove more popular, is to misunderstand totally why a discount is given in the first place.
The noble Lord's amendment also raises a problem of definition. No one has yet come up with an acceptable definition of "community-based association", and I note that the noble Lord has not attempted it today.
In the light of those considerations, I do not believe that there is any case for different discounts being applied purely on the basis of whether the activities of the landlord of a particular flat are confined to a particular community. The discount reflects the fact that the house is being sold with the sitting tenant and also the period of time over which that tenant has been contributing towards the cost of publicly-funded

1063
housing. In view of my comments, I wonder whether the noble Lord would be prepared to withdraw his amendment.
Lord Carmichael of Kelvingrove: My Lords, I have listened with great care to what the Minister has said. I was rather surprised that he could not find a definition for "community-based associations"—not because I have one that I can pluck out of the air. It is one of those things that I always thought I knew what it was but may be rather like a camel—you know what it is and you can describe it but that is about all. I am sure that we could find a definition. I could have understood that there might be problems about defining what actually constitutes four-storey property; there could be problems there. I am disappointed that the Minister has not taken this point.
I can thoroughly appreciate, as I said earlier, the question of large discounts for multi-storey flats. There are problems associated with them of which we are all reasonably well aware; but as regards the relatively low four in a block type, I was rather surprised at the figure that he gave. From local experience that I have, I am trying to work out the reasons why they have been slow to sell. I do not believe there is any comparison at all. Taking both ends of the scale—the three and four-storey housing association house or the old city improvement houses in parts of the central areas and the 32-storey blocks in a certain part of Glasgow or the 28-storey blocks you have in other parts of the country—I do not see any association whatever with them. However, I appreciate that it is unlikely that we would be able to get much further with the Minister on this particular amendment. Therefore I thank him for what he has said and I will with great care read the information that he has given. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 3 not moved.]
Lord Gray of Contin Lord Gray of Contin moved Amendment No. 4:
After clause 9, insert the following new clause:
("Removal of restriction on security of tenure.
. In Schedule Ito the 1980 Act, paragraph 1 (tenancy not to be secure tenancy if for period exceeding 20 years) shall cease to have effect.").
The noble Lord said: My Lords, it might be for the convenience of the House if I take Amendments Nos. 12 and 13 along with Government Amendment No. 4. Amendments Nos. 4 and 13 repeal paragraph 1 of Schedule 1 to the Tenants' Rights, Etc. (Scotland) Act 1980. At present paragraph 1 of Schedule 1 has the effect of providing that a tenancy shall not be a secure tenancy—and therefore the tenant does not have the right to buy—if it is for a period of more than 20 years. These amendments provide that in future tenants who have such long leases will nevertheless be secure tenants and will enjoy the other rights which go with security, including the right to buy, no matter whether they entered into their long lease before or after the date when this Bill comes into effect.
Amendment No. 12 is a saving amendment to avoid any potential conflict of statutory provisions. It provides that nothing in the Land Tenure Reform
1064
(Scotland) Act 1974 shall prevent a tenancy being a secure tenancy under the 1980 Tenants' Rights, Etc. (Scotland) Act, but equally nothing in the 1980 Act shall prevent the granting of a decree of removing under Section 9(1) of the 1974 Act.
If I may explain in a little more detail, the reason for excluding tenancies of more than 20 years from the right to buy in 1980 was that such leases were thought to be closer to the concept in English law of leasehold purchase than to the tenancy as it is normally understood. However, this does not in itself appear to be a very strong argument for excluding such tenancies. It was thought in 1980 that there would be very few, if any, local authority tenants who held their tenancies on leases of more than 20 years and that the creation of any new tenancies on such a basis was virtually excluded by the Land Tenure Reform (Scotland) Act 1974. However, Section 8, when read in conjunction with Section 9 of the 1974 Act, does not wholly rule out the possibility of long leases for residential property, although these are voidable by the landlord.
Within the past few weeks it has come to our attention that Central Regional Council has been seeking to persuade its tenants, who it should be remembered do not at present have security of tenure, to enter into 21-year leases or else to buy their property at a 10 per cent. discount. The purpose is plain. It is to prevent these tenants from having security of tenure and the right to buy at full discount when this Bill comes into force.
On the face of it Section 8 of the 1974 Act, which provides that it shall be a condition of every long lease that no part of the property shall be used as a private dwellinghouse, should rule out the council offering a long lease on houses which have clearly been, and are to continue to be, residential properties. I believe therefore that the tenants affected could pursue in the courts with reasonable prospects of success an action on the grounds that the council is acting unreasonably in seeking to have them sign long leases.
These amendments demonstrate the Government's determination that regional council tenants shall have the right to buy where their houses are not essential for operational purposes at discounts equivalent to those enjoyed by other public sector tenants. The action of central region illustrates the deep-seated opposition of certain councils to the idea of selling at discount and demonstrates why the provisions of this Bill are necessary. I commend these amendments to the House. My Lords, I beg to move.
Lord Carmichael of Kelvingrove: My Lords, there is little in the Government's views on this matter to which we could honestly object, though we object to the general principle. Since we were talking earlier about definitions, may I ask whether there is a definition of what used to be called an essential worker, someone who had to have accommodation close to his work? The noble Lord may remember that on one of the earlier Scottish Bills we discussed education property in island communities, and I think we had to win a vote in order to get the accommodation of the Government, so that a house necessary for educational purposes on an island was not able to

1065
be sold. I wonder whether in this case there is a simple definition.
The Minister will no doubt be aware of the rather interesting amendment which the noble Lord, Lord Mackie of Benshie, has put down for consideration later. But there must be a definition somewhere of an essential local authority worker who must have a house close to his work. There is a desire on the part of most employees, who were previously always considered to have a tied house, not to have a tied house now. I rather agree with that, because I have never liked the idea of a tied house, though I accept that it is sometimes essential. I shall be very grateful if the Minister can give us the definition.
The Earl of Selkirk: My Lords, may I ask one question? I believe that long leases are not very common in Scotland, but does my noble friend have any idea how many there are? I imagine that the number is pretty small. May I continue the point which the noble Lord, Lord Carmichael, raised? I see in one of the many useful pieces of paper which my noble friend has been good enough to send me these words:
"Any house let to an employee of the landlord as a condition of his employment".
Is that in any way undermined by the amendment, and how is a condition of employment created? Is it simply a matter of putting it into the lease? Can anybody lay down a condition? Is that condition in any way undermined by the amendment which my noble friend has moved?
Lord Gray of Contin: My Lords, by leave of the House perhaps I may deal with those points. The noble Lord, Lord Carmichael, asked me about the definition of essential workers. Essential workers are not defined as such, but Schedule 1 to the 1980 Act as amended by the Bill excluded many houses required for operational purposes which, in essence, is the same thing. My noble friend Lord Selkirk asked me about long leases, and he is correct in saying that they are relatively rare. Central Region, is, I believe, trying to issue long leases to between 100 and 150 tenants. My noble friend also asked me about the provision,
"as a condition of his employment".
This is not affected by the present amendment.
On Question, amendment agreed to.
Clause 13 [Payments etc. in community-based housing associations]:
Lord Carmichael of Kelvingrove Lord Carmichael of Kelvingrove moved Amendment No. 5:
Page 10, line 37, leave out paragraph (b) and insert—
(" (b) the granting of a tenancy of a dwelling to a person described in subsection (2) below who is not an employee or the close relative of an employee of the association; but only if granting of the tenancy is made under the published rules required under the Housing Associations Act 1980.").
The noble Lord said: My Lords, this is an amendment to which we and, in particular, housing associations attach considerable importance. We share the Government's concern over committee members benefiting from the very fact of their membership of an association's committee. We believe that the
1066
Government are basically correct in being concerned about this matter. The general public would he very rightly annoyed if there was any thought of queue jumping. Nobody wishes this, least of all the people in housing associations. Nevertheless, as the Bill is at present worded, there is an element of unfairness.
I should like to give an example. A close relative living outside an association's area may wish to be housed in an association house. The person mad have left that area, which was his home territory, in order to get accommodation when he married, but always wanted to return. This is very common. People frequently want to return to where they came from. It would be impossible for the person to get a house in a housing association area from an association if a relative of his was a member of the committee or had been a member of the committee less than 12 months previously. This is putting a punishing penalty on people's voluntary contribution to the associations.
5 p.m.
Conversely, a son or daughter of a committee member resident in the family home may be given a tenancy but—and this is another anomaly—if this son or daughter moved across the boundary of the immediate area, for however short a period, he or she would be barred from tenancy if their parents or close relatives were members of the committee of the association.
These restrictions apply only to housing associations. They do not apply to local authorities. I accept the fact that there are strict regulations in local authorities. I know that in my own local authority there is a special review in the case of any house given to a member of the local authority's immediate family. This is looked at by a special committee. But we have rules for the housing associations as well. We have a code of practice and a code of conduct for the housing associations. There are plenty of checks and regulations to prevent abuse where a close relative is a member of the association committee
People who get involved in housing associations put a lot of energy and enthusiasm into the work. The present proposals are deeply resented. I have had a fair amount of mail on this matter and certainly I have had representations at home. People have been working for many years in the associations. Before they began to see the fruits of their labours and gain some satisfaction from it, they worked because they wanted to do it for the area. They now find that by their participation and continued membership of the association committees they are penalising their children and close relatives. It is wrong that the children should be penalised for their public spirit.
Lord Gray of Contin: My Lords, before the noble Lord continues perhaps he will clear up a point for me. My list indicates that we are considering Amendments Nos. 5 and 6 together. Is that correct?
Lord Carmichael of Kelvingrove: Yes, my Lords; I am sorry. Perhaps I should have started by saying that. I am now going to deal very briefly with Amendment No. 6. This is the amendment of the noble Lord. Lord Mackie of Benshie, and he will speak to that.

1067
We are talking about lay members, unpaid voluntary members of the associations. We are not speaking about employees of the associations, because they have a relationship to the associations slightly different from the lay members. Staff members are employed but they are tied to the association not by their residence but by their employment. It would perhaps be stretching things a little too much if they had the same rights as the voluntary members of the association. They do not need to live in the area, whereas in almost all cases voluntary members are in the association because they live in the area, because they want to live in the area and because they want to improve the area.
All questions of tenancy must be within the published rules of the association. The Minister is familiar with the type of energetic people who become involved in these associations. He will know that they themselves will be capable of not breaking the rules or not allowing anybody else to break the rules. If the rules are known to the public, many of them will know what is happening in confined areas and will be good watchdogs. I hope that the Minister will look at this amendment, which from the point of view of the driving force of many of these associations is very important. I beg to move.
Lord Mackie of Benshie: My Lords, as we are speaking to Amendments Nos. 5 and 6, perhaps I may say frankly that I accept that Amendment No. 5 is probably slightly better than Amendment No. 6. But there are arguments on both sides and I think that the prohibition is far too strict. It does not apply in the case of local councils that own houses, so why should it apply to housing associations? I do not really know. If anything, the committee of a local housing association will be infinitely stricter in examining the claims of relatives than the people employed by a large council. The committee will know more about them, and I should say that in nearly every case an application will be scrutinised much more closely if it is from a relation of an employee or of a committee member than if there is no such connection. That is normally the way it works with a voluntary association.
Many ludicrous examples have been given to us. We have a nice one here about a housing association which employed a relief warden in Corstorphine. The mother-in-law lived in Forfar and applied for a place in a sheltered housing scheme run by the same housing association. She was a native of Forfar and there was no other suitable sheltered housing. As her surname was different from that of her daughter-in-law it was by accident that the relationship was discovered. Under this legislation she could not get a place. There are many other rather ludicrous examples of the same kind of thing.
I have another example which is particularly applicable to both these amendments. A person who would have been quite excellent on a committee was asked to join it but refused because her parents had had their name down for a house with the association for many years. If she joined the committee they would be debarred from obtaining a house. It is quite possible, particularly with regard to housing associations, to devise any number of safeguards
1068
against the form of corruption of which I know we have had examples in council housing in Scotland and elsewhere. It is much less likely in a housing association. To quote the Minister's own argument, how appalling it is that we should deny the relations of voluntary workers the same privilege that we do not deny to the relations of councillors. It is quite illogical. I have much pleasure in supporting Amendment No. 5 and in recommending Amendment No. 6.
The Earl of Selkirk: My Lords, I should like to support what has been said on this subject by the noble Lord, Lord Carmichael. I think that there is someone in the Scottish Office who has a gift for insulting housing associations. People have written to me and said that they are greatly insulted by the words of this clause. I really do not see why it is necessary. It is common knowledge—I think my noble friend knows it—that members of a committee have resigned because if they did not do so some relative of theirs could not get a house.
As I understand it, at the present time virtually all housing associations have long lists of applicants. Most of the housing associations have closed their lists because they cannot take any more. The applicants are examined closely. They are given points. Those arrangements are approved by the housing associations, which also approve the rules by which people are allowed into houses. I really do not see why this kind of regulation should be laid down by statute.
It is not for me to encourage the Scottish Office to make regulations. I have expressed my view frequently on that subject on other occasions. Surely this is a case of a code being required that can be reasonably altered to fit the circumstances. For example, I may ask what is meant by a "close relative"; at what point does a cousin become a close relative? Is it when he is once removed, or twice removed? It is a phrase that I can see being discussed at great length in the High Court in Scotland. I do not know any legal definition of that phrase.
Frankly, I would like to see Clause 13 right out of the Bill. I do not disapprove of what the noble Lord has said. I would like to see that clause replaced by a code that can be adjusted and—something that a statute cannot be—a code of honour. A code of honour is something that cannot be put into a statute. I should like to see this clause taken right out of the Bill and replaced by a provision, in simpler language, that will be applicable to the situation.
I readily understand the desire of the Scottish Office that there should be no hanky-panky. Incidentally, has there been any abuse? Has any abuse been reported? Everything goes to the Housing Corporation and such a report could be available to the noble Lord so that he would know. So far as I know, there has been no abuse whatsoever during the last 10 or 20 years during which such organisations have been in operation. Clause 13 has been of great annoyance to many people. It is unnecessary, and I believe that the matter could be very much more easily placed within a code that stated precisely what is wanted.
Lord Gray of Contin: My Lords, your Lordships will be aware that the allocation of publicly-funded housing is an area that is wide open to

1069]
accusations—justified or otherwise—of injustice and preferential treatment, whether the authority concerned is a housing association or another housing body. Housing associations are particularly susceptible to such accusations, since there is a connection between the authority granting the tenancy and the individual receiving it. The allocation of tenancies was one of the factors that persuaded the Government to introduce in 1980 the restrictions now contained in Section 15 of the Housing Associations Act 1985.
Those restrictions preclude a housing association from granting any payment (other than those specified in Section 15(2)) or any benefit to a person who is a committee member, officer or employee, or has held such a position within the preceding 12 months, or to the close relatives of such persons. They are designed to ensure that decisions on the use of public funds are taken in a fair and proper manner and that there is no question—real or implied—of a conflict of interest for officers and committee members. The practices that led to the introduction of those restrictions were not universal and they had little impact in Scotland; but there was sufficient evidence of abuse and uncertainty to justify the action taken.
The measures introduced in 1980 were correct, justified and have worked well but Ministers were persuaded that they posed particular problems for community-based housing associations in Scotland. Those stem from the way in which committee members of such associations and their relatives live, more often than not, in the area in which the association works. That means that the development programmes of those associations almost inevitably come to have a direct effect on the houses of committee members and their relatives. Clause 13 seeks to reduce the restrictions by permitting associations to acquire houses from those people in the course of rehabilitation projects and to grant tenancies to them. Those are the two areas where the problems are particularly acute and where they differ materially from those experienced by housing associations generally.
I will have something to say about the detail of the noble Lord's amendment in a moment, but it would enable community-based housing associations to grant tenancies to committee members, officers and their relatives who were not currently resident in the area. While that would undoubtedly facilitate the return of such people to the community from which they might have moved—or been obliged to move—some time ago, I have to say that I see this as a distinctly different category of allocation from those provided for in paragraph (b) of the new Clause 15A. The same arguments about the direct effect of the development programme on their homes do not apply and, without that distinction, they are not in a materially different position from the committee members of any other housing association. There is certainly no operational need or difficulty related to equity here.
5.15 p.m.
The amendment of the noble Lord, Lord Mackie of Benshie, to which the noble Lord spoke, is very similar and perhaps I may comment upon it. Section 15 of the
1070
Housing Associations Act 1985 (formerly Schedule 16 to the Housing Act 1980) precludes a housing association from granting any payment, other than those specified, or any benefit to a person who is a committee member, officer or employee, or has held such a position within the preceding 12 months. The bar extends to close relatives of such persons and businesses in which such persons have a personal interest. That restriction was introduced in 1980 as a result of indications of abuse (albeit not in Scotland) of the more relaxed arrangements then applying and as a safeguard against the possibility of similar occurrences in the future.
Ministers have recognised for some time that the current legislation affects community-based housing associations particularly because of the congruence of the area of operation of such associations with the area of residence of the bulk of the management committee and voluntary officers. The renovation programmes of such associations will therefore touch on the interests of their committee members, voluntary officers, or their relatives who are resident in houses which may be affected by the programme. In that situation there is a clear need, on grounds of equity, for the association to be able to buy a house from, and offer a tenancy to, those people when their existing houses are directly affected. Clause 13 of the Bill gives associations that ability and makes allowance for people who have moved out of the area recently, or on a temporary basis.
I recognise that there will be occasions when voluntary officers and committee members of housing associations and their close relatives feel that they are disadvantaged in comparison with members of the general public on account of those provisions. But housing associations, in common with all organisations which receive substantial sums of public funds, must be seen to be fully accountable for their actions and be above any suspicion.
I cannot accept the amendment proposed by, the noble Lord, Lord Mackie of Benshie, since I believe that the sensible controls introduced in 1980 would be seriously eroded by it. I believe that Clause 13 deals with the two distinct problems facing community-based housing associations, which are unique to them, in a way that they will welcome. The fact that the legislation takes precautions against abuse does not of course, carry any implications, whatsoever that abuse is taking place. I make that absolutely clear. Indeed, I wish to reaffirm the Government's confidence in and, indeed, gratitude to all those who work for the betterment of Scottish housing through voluntary effort.
I return to the amendment of the noble Lord, Lord Carmichael. The amendment could not be accepted even if I was of a mind to do so, because in its present form it is technically flawed. The new sub-paragraph (b) that is seeks to substitute in place of the existing terms of the proposed Section 15(A)(1)(b) of the 1985 Act, begins in line 37 of the Bill and not in line 27 as stated in the amendment. More importantly, it is the Tenants' Rights, Etc (Scotland) Act 1980, not the Housing Associations Act 1980, that requires housing associations to publish the rules that they adopt in considering the admission of applicants to housing lists, priority of allocation of dwellinghouses, transfer

1071
of tenants to houses owned by other bodies, and exchanges of houses. Moreover, the Housing Associations Act was enacted by Parliament in 1985 and not in 1980. I know that the noble Lord will realise that I am not nit picking or trying to be difficult, and acknowledge that such a flaw is not something that could be accepted.
One or two quick points were made which I shall now deal with. My noble friend Lord Selkirk spoke about a code. There has been abuse in England. A code would not provide a sufficient safeguard for public funds, nor real accountability. We take the view—and, on reflection, I do not think my noble friend will disagree—that it is essential that people who are engaging voluntarily in these activities should be protected. What we are seeking to do we see as a protection much more than as a special discipline for the effect suggested.
My noble friend also asked about the definition of "close relative". There is no statutory definition. Such a definition would perhaps create as many uncertainties and anamolies as it would resolve, but I do not believe any of us need to think very long or hard to define "close relatives" within our own minds.
The noble Lord, Lord Carmichael, said that restrictions do not apply to local authorities. As the noble Lord said, local authorities have very strict rules to prevent abuse. In addition, local authority members are accountable directly to the electorate.
In view of the defects in Amendment No. 5 and for the reasons I have outlined regarding Amendment No. 6, perhaps the noble Lord will be prepared to withdraw the amendment.
Lord Carmichael of Kelvingrove: My Lords, I am grateful to the Minister for that reply, and particularly for pointing out my mistake in the wording of the amendment. I shall certainly look at that with great care. Obviously it is not an amendment that could be accepted in its present form, but I give notice to the Minister that I shall pursue the matter.
I can see the Minister's problem. He is definitely trying to be honest about how houses are allocated. I am not being personal, but it seems to go back to the fact that we do not trust too much people who are in housing. All of us who have had experience know that the temptations of being able to help people—close relatives or whoever—are very great. With local authorities there have been all sorts of wild accusations in that regard, but considering the thousands and thousands of local authority houses let over the past 20 years it is remarkable how few dishonesties have been brought to light, or which have actually occurred.
I am very much persuaded by the noble Earl, Lord Selkirk, on the question of a code of practice. I hope the Minister will pay a great deal of attention to that proposal. This provision is causing offence among many people in the housing associations. I have had a number of letters from people who are giving up this work, as have other noble Lords. We must have better objective criteria than at present we have been told about, and a code of practice might provide that. For instance, in many cases people have friends to whom they are much closer than they are to their so-
1072
called—by any definition—close relatives. I am sure this applies to all of us. I seldom see some of my close relatives and no doubt keep a good relationship with them because of that. There is a temptation with very close friends; and therefore we must provide something which is objective. It is quite wrong, with all the wit of the Minister and his colleagues in the Scottish Office, that we cannot provide some sort of code of practice that will help to get over this sticky problem. It is a human problem, not a political one.
I hope that the Minister will take seriously what has been said in this debate. For the sake of the people who approach me, I shall find it impossible to allow this to go through without at least registering a protest on Third Reading if the Minister is not able to offer us something.
The Earl of Selkirk: My Lords, before the noble Lord withdraws his amendment, I should like to be quite certain of what I heard my noble friend say: that there is no report of abuse in the housing associations in Scotland. Can I be quite clear that that is what my noble friend said?
Lord Gray of Contin: Yes, my Lords; I indicated to my noble friend that there had been abuse in England but that there had not been abuse in Scotland. My noble friend heard me correctly.
The Earl of Selkirk: My Lords, I thank my noble friend.
Lord Carmichael of Kelvingrove: My Lords, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 6 not moved.]
Lord Carmichael of Kelvingrove Lord Carmichael of Kelvingrove moved Amendment No. 7:
After Clause 17, insert the following new clause:
("Scottish Housing Advisory Committee.
. There shall be appointed by the Secretary of State a committee to advise him on Scottish housing. The committee to be known as the Scottish Housing Advisory Committee shall consider the problems related to housing in Scotland and make recommendations to the Secretary of State. The subjects studied and reported on shall be at the request or with the approval of the Secretary of State. Its reports shall be made to the Secretary of State and shall be published.").
The noble Lord said: My Lords, this amendment was tabled in Committee and withdrawn because of pressure of time. The idea behind it is that we do not seem to be very good in Scotland—and this goes across the party spectrum—at anticipating housing needs and planning far enough ahead in a coherent way for housing problems. We tend perhaps to be a little airy-fairy and put the right solutions in the back of an envelope when in opposition—this applies to both sides—and do not think them out as well as we ought to.
The amendment, therefore, takes the opportunity of this Bill to propose that a group of people, who will have varied experience, be set up as the Scottish Housing Advisory Committee. I am not speaking of a highly paid group of experts, a quango, sitting permanently. I am talking about a group of part-time

1073
people—perhaps with a small secretariat—who would be able to assist the Secretary of State to look at housing across the whole spectrum in Scotland.
This would be an outside advisory body, not tied to the Scottish Office or to the Scottish Home and Health Department, taking the long view on demographic, economic and other tendencies of the population of Scotland generally. It would look at housing stock and at the future of housing stock, its state of repair, age, value of refurbishment, and all such factors. The group would be working for the Secretary of State either at high pressure or, at other times, perhaps at a slightly more leisurely pace.
The proposal is based to some extent on the debt we owe to the Cullingworth report from which so much of our housing thinking has come. The Cullingworth report was produced in 1967, which is nearly 20 years ago. The Minister, who has been very closely involved in these matters for a long time now, will no doubt pay tribute to the work of Cullingworth and will realise that many of the things we are doing in housing now is due to Cullingworth. I notice from my copy of the Cullingworth report how far back it goes. It cost 10s. 6d. in 1967, which is a long time ago. We are still using it fundamentally. It was this report which sparked us off. We should consider whether we need another Cullingworth report.
I suggest that the Minister should take away this amendment and consider the possibility of setting up a small Scottish housing advisory committee to look at the problem in a general way, and also recommend to the Secretary of State that a more powerful and a deeper study of Scottish housing problems should be made. This proposal is made in a non-party spirit. I beg to move.
5.30 p.m.
Lord Taylor of Gryfe: My Lords, I should like very much to support the amendment in the name of the noble Lord, Lord Carmichael of Kelvingrove. I realise that in their election manifesto the Government at one stage promised the abolition of quangos, or at least a reduction, and they have had some success in that regard. However, some quangos are of great value. They enable the Government to tap the knowledge and resources of people who would not normally be elected by the political processes of local authority elections.
I regard the housing problem of Scotland as of such significance that the Government would do well to call on the knowledge and experience that is available in this field, and which is concerned to offer them advice. There are plenty of precedents. For example, the Government obtain valuable advice from the Economic Committee. Some of us were members of that committee some years ago when we helped to guide the Secretary of State for Scotland—or at least offered advice to him—on Scotland's economic problems.
The housing problem is a very important one, as the Minister well knows, and involves the whole problem of urban renewal. The fact is that the Scottish housing scene is now entirely different from what it was, say, 20 or 30 years ago when there was a sharp division between those on one side of the political fence who
1074
were all in favour of building local authority housing, and those on the other side who preferred the extension of private ownership of housing. For example, as a result of the examination of this Bill, the great variety of different systems used in running housing estates has become apparent. We see that there are housing associations and that many local authority estates are now divided between private ownership and local authority rented property. I think that developing a sensible and worthwhile housing policy can make some contribution to Scotland's welfare.
I must say that following the local authority elections last week I doubt whether there is any one local authority in Scotland on which the Government have a majority. There may be a small one which the noble Baroness, Lady Carnegy, may know about, but I suspect that the entire body of local authority representatives is opposed to the Government. When such a thing happens, entrenched attitudes for and against the Government tend to develop in politics.
The noble Lord, Lord Carmichael, suggested that this matter should be taken out of the area of political confrontation. He suggested that we should look at this great social problem of urban renewal and the deterioration of the housing stock in cities such as Glasgow with the benefit of a housing advisory committee If I were the Secretary of State for Scotland I should welcome very much my ability to call on the experience of some people who are not involved in the day-to-day conflict of local authority versus government politics. I very much support this amendment and I hope that it finds acceptance in the same spirit with which it was moved by the noble Lord, Lord Carmichael.
The Earl of Selkirk: My Lords, I should like to support what the noble Lord has said. If we look back 65 years to when for the first time the Government of this country began to make themselves responsible for housing, I think we should not regard this programme as very successful. I think that most of us would be disappointed that during the whole of that period we were not more successful in clearing out the debris from the centre of our cities.
What is the reason for that? It was touched upon by the noble Lord, Lord Carmichael. When any party is in opposition it thinks about housing and devises a plan. Sometimes it is a wild plan and sometimes it is a good plan. However, the point is that if a housing plan is changed every four or five years it will never work properly. A housing plan must work for a steady 20 years before one can say whether it is good or bad. I believe that something such as is now proposed, a continuing body that reviews housing (which is inevitably intensely political) over a wider and broader atmosphere would be of enormous help to the Secretary of State and would be of exceptional help to this country in keeping the essentials straight. I shall say a little more about this subject presently, but I believe that this suggestion should not be turned down lightheartedly. I am given to understand that there was a housing advisory council until about 1980, though I am not quite sure. I think that this proposal should not be thrown aside as just offering a wild quango. There is room here for a broad non-political policy which could he of lasting benefit to this country.
The Earl of Kintore: My Lords, I should like to support this idea but I would point out that it sometimes takes five or six years to put in the services required for houses. Wild ideas about building houses here, there and everywhere are very apt to come out, but this pays no regard to the services and the cost of putting in those services, which is a very great fraction of the total cost. I think that this is an excellent idea but that services should very definitely be considered.
Lord Gray of Contin: My Lords, I have listened with great care to the noble Lord, Lord Carmichael, and I am afraid that I do not find his arguments convincing. When noble Lords have heard what I have to say I think that they will agree with me. I also listened very carefully to the noble Lord, Lord Taylor of Gryfe, who is certainly not without experience in these matters, and again I think that some of the points he made are worth commenting upon. I shall do so in a moment or two.
The Housing (Scotland) Acts between 1935 and 1980 required the Secretary of State to appoint a committee such as is suggested here. Section 75 of the Tenants' Rights, Etc. (Scotland) Act 1980—my noble friend is perfectly correct—abolished the requirement in Section 167 of the Housing (Scotland) Act 1966. What is proposed in the new clause that is before us would more or less take us back to the position before 1980.
I accept that the new clause proposed would leave to the Secretary of State the decision on what the new committee would study, and thus the new body's powers would be less wide than those of its predecessor. This restriction, however, to some extent highlights, I believe, why a reactivated Scottish housing advisory committee is unnecessary. The Secretary of State can, and indeed does, take steps to seek advice on current topics of housing interest without the need for a statutory committee and the administrative back-up which this requires.
Let us look for a moment at what happened in the 1970s. The then committee met very infrequently indeed during that decade, under both Conservative and Labour administration. Indeed, for a time between July 1977 and March 1978 the membership term of members of the committee had expired, and the then Labour Government had not seen fit to make new appointments. So during that period the committee could not meet. Moreover, much of the best output of the committee in its pre-1980 incarnation was the production of reports on current issues. Those reports emanated largely from subcommittees set up for the purpose which consisted largely of co-opted members. They were therefore virtually ad hoc committees.
In 1980 the Government took the view that the sensible way to deal with pressing problems of public importance was to set up ad hoc inquiries, and that remains their view. I believe that the arguments deployed then are at least as strong now. Since 1980 we have seen the Select Committee on Scottish Affairs look at housing (for example, condensation and dampness), and if there was felt to be a need for it to study other housing problems, it could of course do so. Furthermore, since 1980 the system of consultations between the Secretary of State and CoSLA has greatly
1076
developed. The Minister for local government and the environment meets CoSLA's housing committee twice annually, primarily to discuss housing support grant matters. However, these discussions traditionally extend much more widely into any aspect of housing which the convention wishes to cover. The Secretary of State is therefore kept very closely in touch with the views of local authorities and the issues of the day generally.
We do not need an additional quango and its attendant bureaucracy. We do not need to have a statutory body advise the Secretary of State. There are many and varied sources of advice available to Ministers. If there are gaps, ad hoc committees can be formed. It is better, however, to disband these committees when their work is complete, rather than to have a standing body.
The noble Lord, Lord Carmichael, spoke about anticipation of housing needs and problems and the housing plan system under which local authorities, in consultation with other organisations like the Scottish Special Housing Association, set out their priorities for housing provision at regular four-yearly intervals. I believe that that is an effective means to anticipate housing needs and problems. I do not believe that we need a seperate committee—an extra structure—on top of that.
The noble Lord, Lord Taylor Gryfe, spoke of the wide range of expertise that could be brought in to advise the Secretary of State on housing policy. I do not disagree with that, but that wide range of expertise is there anyway. Indeed, there was the distinguished membership of the Scottish Housing Advisory Committee prior to 1980, but, as I outlined a little earlier, although it was distinguished, it was not active.
I accept the suggestion in the spirit in which it is made; it is purely non-political. But I do not think that it would be an improvement on what is available to the Secretary of State at the moment, particularly with the Select Committee system that we have in operation which has the power to look at pretty well anything that it wants within Scotland and with the facility for ad hoc committees to be set up from time to time for various purposes. I think that the position is well taken care of, and I ask the noble Lord to withdraw his amendment.
Lord Carmichael of Kelvingrove: My Lords, the Minister will realise that I am a little disappointed with his reply. He said that the Secretary of State had plenty of expertise to help him look at current problems. We are not desperately concerned about that. We know that there is plenty of expertise to look at current problems, but frequently a solution is found that is neither long term nor lasting, nor even at the end of the day economic. The matters that concern me are, for instance, the replacement of about 16,000 houses a year in order just to stand still, let alone build for new stock.
The noble Earl, Lord Selkirk, took up the point that I made about the quick work done by one political party, with a change of plans by the next. He said that housing was a highly political subject and we cannot put an end to that. By and large, I suggest that it is the money aspect that is highly political. There is plenty of scope for a purely technical and sociological

1077
consideration of the massive housing problems. Whatever government happen to be in power could then decide their priorities within the plan. That is not a perfect solution, and there would be ragged edges, but that is roughly the way that I see it.
I was not calling for a permanent quango with a large staff. I suggested a much smaller group. After a preliminary or pilot scheme to look at the long-term prospect for Scotland and Scottish housing, the Secretary of State may think that deeper consideration of the housing problem and the way to give people decent accommodation is required. I am disappointed with the Minister's reply. I hope that this is the beginning of a long struggle to set up an organisation to establish long-term future planning for Scottish housing. I should be only too pleased to participate in the struggle towards a more rational look at housing policy. In the meantime, however, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
5.45 p.m.
Lord Mackie of Benshie Lord Mackie of Benshie moved Amendment No. 8:
After Clause 19, insert the following new clause:
("Functions of local authorities with respect to persons who are homeless or threatened with homelessness.
Amendment to Housing (Homeless Persons) Act 1977
.—(1) The Housing (Homeless Persons) Act 1977 shall be amended in accordance with the following provisions of this section.
(2) In section 1(2) (homeless persons and persons threatened with homelessness) after paragraph (c) there shall be inserted the following paragraph—
"(d) it does not provide the ordinary facilities of a residence and it is inappropriate for his needs, or it is unreasonable for him to continue to live in it".
(3) In section 4 (duties of housing authorities to homeless persons and persons threatened with homelessness) after subsection (6) there shall be inserted the following subsection—
"(7) Where a local authority has a duty under (4) and (5) above either to secure that accommodation does not cease to be available or to secure that accommodation becomes available for the applicant 'accommodation' shall be defined as a separate dwelling house that shall conform to section 89 of the Housing (Scotland) Act 1966 and section 14 of the Housing (Scotland) Act 1974."
(4) In section 21 (citation and extent) after subsection (4) there shall be inserted the following subsection—
"(5) Sections 1(2)(d) and 4(7) shall extend only to Scotland."
The noble Lord said: My Lords, this amendment stands in my name and that of the noble Lord, Lord Carmichael. This matter was brought to our attention by Shelter in Scotland. We are trying by this amendment to put right in Scotland at least an extraordinary situation that has arisen by a legal judgment of your Lordships' House. It has given the word "accommodation" a definition which apparently means accommodation and little else. That has done a great deal of damage to the Housing (Homeless Persons) Act 1977, although the judgment was given no doubt absolutely correctly. We should like to insert a new clause so that in Scotland the Act can operate as it did before that decision.
I must say a little about the decision. The Puhlhofer family and their two children lived at a guesthouse in one room which contained a single bed, a double bed, a baby's cradle, a dressing table, a pram and a sterilising unit. There were no cooking or washing
1078
facilities in the room, and the three bathrooms in the guesthouse were shared by 36 people. The Puhlhofers had to eat out and to wash their clothes in a launderette, and it all had to be paid for from £78 per week state benefit.
The judgment, which was supported by all the noble and learned Lords who were sitting, stated that that was accommodation and that the local authority had no need to rehouse or otherwise assist the family. "Accommodation" needs to be defined rather more widely in the Act. In Scotland we have an opportunity to put that right. The judgment states:
"it might in certain circumstances be unfit for human habitation for the purposes of Part II of the Housing Act 1957 or might involve overcrowding within the meaning of Part IV".
A legal definition has been given that makes nonsense of the Act that was passed in 1977 for the benefit of homeless people.
I do not think that I need say much more at this time as a number of other noble Lords will speak on the matter. This is a chance at least in Scotland to put right a terrible anomaly. Apparently accommodation even worse than that described would not make people homeless. I am sure that in common sense sour Lordships will agree that a change in the law is necessary. We have a chance to do that here. I hope that the Minister will give us a proper reply, as he may be becoming more reasonable. I am sure that he will want to make up for his terrible Freudian slip when he asked the noble Lord, Lord Carmichael, to withdraw his—that is, the noble Lord the Minister's—amendment. This would be a suitable chance for urn to make up for that. I beg to move.
Lord Elwyn-Jones: My Lords, I rise to support the amendment. The case in question arose from proceedings by way of judicial review of a decision of the Hillingdon Council. The noble Lord, Lord Mackie, has described the conditions in the accommodation that was provided for the family of four. They had one room. Unfortunately, we are not told the size of the room. Their sole provision was a double bed for the husband and wife, a single bed for the four-year old baby, and a baby's cradle. The remainder of the provisions were a dressing table, a pram and a steriliser unit. The family had no cooking or washing facilities, as the facts show. There were three bathrooms in the guest house which accommodated 36 people. The conditions were of the utmost squalor, and inevitably so. The family had to eat out and use the launderette for their washing. The expense of doing those things absorbed their state benefit of £78 a week.
The noble and learned Lords who determined the case had of course to interpret the Housing (Homeless Persons) Act 1977 as they found it. It was not accommodation in any real, acceptable sense of modern living conditions. "Accommodation" is not defined in the Act and now is the opportunity for the House to put the matter right by attempting a definition of "homelessness' which would enable a family to apply for accommodation and would impose an obligation upon the local authority to treat it as homeless and place the local authority under an obligation to find accommodation.

1079
What is proposed in the amendment is that there should be inserted in the definition of "homelessness" the words that the accommodation:
"does not provide the ordinary facilities of a residence and it is inappropriate for his needs, or it is unreasonable for him to continue to live in it."
If those tests were applied to the facts of the case, I submit that a court would inevitably say that that was a homeless family which should have proper provision made for it. Parliament now has an opportunity to put the law right in that regard.
The Law Lords have to apply the law as they find it. They unanimously found and came to the conclusion that the noble and learned Lord, Lord Mackie—he sounded so learned in his discourse that the compliment fell easily from my lips—described. The Law Lords came to the conclusion that in the interpretation of the language of the Act, that family could not be described as homeless within the meaning of the Housing (Homeless Persons) Act or be entitled to look to a local authority for accommodation. If that decision were applied generally it would be a mask for a great deal of genuine, hopeless homelessness. I think therefore that this is a good opportunity to put the matter right.
I do not know where the matter stood in another place. The eminent and highly reputable newspaper the Scotsman reports:
"The Scottish Housing Minister, Mr. Michael Ancram, is considering the impact of this ruling and deciding whether or not he should amend the homeless persons Act in such a way as to restore its original intentions."
We take hope from that observation that the sympathetic heart and mind of the noble Lord the Minister will move in a similar direction and reform the law to make it more suitable and civilised for the homeless persons of Scotland so that they too may receive proper shelter and accommodation.
Lord Gray of Contin: My Lords, the noble Lord, Lord Mackie, used all his powers of persuasion, even to the extent of suggesting that I make good an earlier error and accept this amendment, and the noble and learned Lord, Lord Elwyn-Jones, also used all his legal techniques to try and persuade me. I can tell noble Lords that I am not beyond being persuaded on this issue which is causing a great deal of anxiety to many people.
The new clause seeks to amend the Housing (Homeless Persons) Act 1977 to take account of the alleged implications of the Law Lords' recent judgment. The noble and learned Lord, Lord Elwyn-Jones, commented on the matter. As I understand it, the noble and learned Lord, Lord Brightman, in his judgment did not say that any accommodation would be adequate to render the applicant outside the scope of the Housing (Homeless Pesons) Act. As I recall it, he said that the accommodation would have to be capable of accommodating. There is still an element of discretion to be exercised by the local authority. I do not want noble Lords to think that I am nit-picking, because this is an important matter, but where we are suggesting a change in the law I know that your Lordships would be as anxious as I am that we get it right.
Lord Elwyn-Jones: My Lords, the mere physical capacity to accommodate those four people—a room in which they could all be contained—we submit is not a proper test of whether it is a home and prevents them from being called homeless. That is the snag.
Lord Gray of Contin: My Lords, yes, I take the point which the noble and learned Lord made. As noble Lords may be aware, the matter was raised when the Bill had its Report stage in another place early in March. It is also a matter which I understand is of some concern to Shelter which has been in correspondence with us on the point. When the matter was raised with us two months ago, we indicated that we wished to take it away for further consideration and advice. In the interim, we have been looking closely at the implications of the judgment and we shall be writing shortly to Shelter to let it know of our conclusions.
Having considered the implications of the judgment carefully, we have come to the conclusion that it would be premature to consider the possibility of amendments to the Housing (Homeless Persons) Act unless and until it is demonstrated that local authorities are taking a different approach to the discharge of their responsibilities to homeless people. Accordingly, we shall monitor the position through the regular quarterly statistics and other information that comes to hand. We should, of course, welcome any supplementary evidence which Shelter or any other voluntary body may care to submit to us.
I do not know whether the noble Lord, Lord Carmichael, has had an opportunity to consult the local authorities about his proposal. If he has, it may be interesting to hear their views. Having said that, I have also to deal with the technical difficulty of the amendment. Indeed, I believe that it would achieve quite the opposite effect to that which the noble Lord has in mind. This is because the amendment says that,
" 'accommodation' shall be defined as a separate dwelling house that shall conform to section 89 of the Housing (Scotland) Act 1966".
However, Section 89 of the 1966 Act defines a house that is overcrowded. The amendment is therefore saying that the accommodation shall be overcrowded. Presumably, what is intended is that the accommodation should not be overcrowded as defined in Section 89. But this is not what the amendment says. The noble Lord will appreciate that it would be wrong for me to encourage him to move forward with it. In the circumstances, particularly with regard to the technical defects of the amendment, I wonder whether I may ask the noble Lord to withdraw it. Your Lordships will probably wish to consider the matter a little further. All of us, I believe, seek to move forward in the best possible way here. Certainly our advice at the moment is that we should go with care.
6 p.m.
Lord Carmichael of Kelvingrove: My Lords, I can certainly understand the Minister's problem here. I am, of course, aware, too, of the other problems that have been faced by local authorities since the Act was originally put on the statute book. This case has shown a gross mistake in the Act. There is no question of the Law Lords doing other than what was absolutely

1081
correct from the point of view of the sheer definition of accommodation. However, the decision in this case has been much tighter than anyone has envisaged. According to the papers that I have before me, the noble and learned Lord, Lord Denning, and the noble and learned Lord, Lord Wheatley, before appeal, took much the same view—what I would perhaps call the commonsense view taken by the rest of us.
It was arising from the gross anomaly that appeared following the highest legal interpretation of the Act that this amendment was put down. I accept that it will not meet the Minister's needs. Having also read what was stated by Mr. Ancram in another place, I realise that it must be withdrawn, although that is not my job. The amendment was moved by the noble Lord, Lord Mackie of Benshie. We are therefore aware of the problem. Nevertheless, we are now at the Report stage in the House of Lords. This matter first appeared at the Committee stage in the House of Commons. It has been pushed back and forth since then. We want reassurance that some action will be seen either at Third Reading or in another place when the Bill goes back there for consideration of the amendments that we have made.
Lord Stodart of Leaston: My Lords, I found a little discouraging my noble friend's remarks about monitoring by the local authorities. This could seem to take us into the far distance. I was hoping, having heard the facts of what seems to be an extremely strong case for the amendment, that my noble friend would be able to go as far as saying that his ministerial colleagues would come to a conclusion before the Bill has its Third Reading.
Lord Mackie of Benshie: I am extremely disappointed in the Minister. I shall not mince my words. It is scandalous, when the evidence is clear and following the feeling expressed in the House, that he should not promise to consider the arguments and to bring forward an amendment that is technically correct. Here we have a case in which a local authority has already gone to the House of Lords and has taken advantage to appeal when it is obvious to everyone in the House that there is gross overcrowding and that the accommodation is grossly unfit for a family to live in. For the Minister to say that he wants to test it further shows an insensitivity that I did not think him capable of. I shall certainly withdraw the amendment. There will, I trust, be two amendments put forward at Third Reading. Certainly there will be one from myself and my noble friends on this side. I hope and trust that the Government will also have the good sense to put one forward. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Deputy Speaker (Lord Wells-Pestell): My Lords, in calling Amendment No. 9 of the noble Earl, Lord Selkirk, I have to point out to your Lordships that if the amendment is agreed to, I cannot call Amendment No. 10.
Schedule 1 [Amendment 1980 Act]:
The Earl of Selkirk The Earl of Selkirk moved Amendment No. 9:
Page 21, line 51, leave out from beginning to end of line i2 on page 22 and insert—

("(i) the rules of the landlord, registered in teens of sections 9 or 10 (registration of rules) of the Industrial and Provident Societies Act 1965, are such as would admit of a claim for, and a grant of, exemption from tax under section 360(1) of the Income and Corporation Taxes Act 1970 (special exemptions for charities); and

(ii) such exemption has been granted (whether or not retrospectively) and is in force; or")

The noble Earl said: My Lords, in this very obscure Bill and this even more obscure schedule a fundamental change is sought to be brought out. It seeks to say that at no time in the future will it he practical to form a charitable housing association in Scotland. The reason is simple. If such a charitable association were formed, it would be compelled under the Bill to sell at a discount. I shall read from an Inland Revenue letter about what happens when you sell at discount. This is a communication following a society's request for advice about its charitable position. As there are no charity commissioners in Scotland, direct contact has to be made with the Inland Revenue. The Inland Revenue claims branch states:
"In response to the two points raised by you, the Inland Revenue Department would have no objection to such sales so long as the sales are at not less than market value".
This means that if any charity accepts a sale at discount, it ceases to be a charity. As, under the Bill, they have an obligation to do so, this means that if they refused to sell, they would be hauled before the court and made to sell. The effect, hidden in a distant schedule that should, to my mind, have formed a major part of the Bill, is that no future housing charity will be formed in Scotland. This is a serious matter. No one will make a private donation to anything except a charity. This is therefore cutting off any sort of assistance from the outside.
I was struck by the opening words of my noble friend on Second Reading that the Bill contains no new principle. Has the noble Lord never studied how the Housing Corporation started? It was way back in 1961, with a further development in 1964, until it finally became a big organisation in 1974. It was clearly laid down that the aim was houses and hostels to let. What are the Government doing? They are arranging to sell these properties—the very opposite to the purpose for which the Housing Corporation was formed. It represents a complete turn round of policy. It is the sort of situation—I say this with great respect to the noble Lord, Lord Carmichael—in which an advisory council would say, "You cannot turn housing policies upside down and expect nothing to happen". This is breaking the basis on which the policy was established. Noble Lords may recall the words spoken by Mr. Crosland—that it was intolerable that the country should only have a choice between owner occupation and council houses. What has happened? The noble Lord replies that we spent £600 million on the corporation last year. He did not mention that this was across Great Britain, not just Scotland.
We are building the equivalent in Scotland of about 3,000 houses a year. In an answer given to me by the

1083
noble Lord, Lord Elton, it was said that since 1979 we had lost 400,000 houses to let. If you built 3,000 houses for 130 years you would get to something like 400,000. The purpose of this Bill has been completely twisted. The Government have tried to make one thing matter—the right to buy. We must recognise that it is the better-off people who can buy and that there are many who can never even hope or look to buy. They are the people who need our attention above all else. Anyone who has seen a housing association at work knows the quality of the work. The associations have done things, for instance in tenement houses in Scotland, which the local authorities have failed to do and could not do. But the housing associations did them on a smaller scale with the utmost success and they should remain able to do them.
I was at Leith last weekend, talking to one of the household managers. He knows quite a bit about it. He said, "I am staggered at the number of people who want rented property". That is the position. Their numbers are enormous; and they will not be able to buy. That is why I object to selling houses which were originally built and intended, under the housing corporation, for rented property.
He went on to say something else which I thought was strange. He said: "Those who own flats come to me and say, 'Will you please buy them? We'd rather be renting property. We can't afford the charge'." We must face the fact that there is an increasing number of people who are unable to face the mortgage charge. That is a regrettable feature, because 20 years ago the number of people who failed to pay the charge was statistically unpresentable due to the fact that it was so small. It has grown recently, To my mind, it is not wise or proper to offer too much encouragement to people to take on too heavy a burden.
There is another matter. What about the racket? I wonder whether your Lordships realise what is offered by the Government. You build a house, you put in a tenant for a preliminary period of two years; he then buys the house at half price. He lives there for three years and then probably sells it at three times the price that he gave for it. People who are more interested in money than in houses already have cottoned on to this system. They are starting already. I have been told of four or five instances where this has already happened.
There is no queue waiting to buy houses. You can get a mortgage straightaway today. Of course you have to pay the full amount; I quite agree. But queues exist, so far as I know, in every housing association in Scotland. At every one there are 50, 100 or perhaps 1,000 waiting to come in. That is what they want; that is what the country wants. If I may say so, that is really the popular thing that the Government should do. Popularity is not something to be ignored entirely; and it would be quite wrong to do so. I ask for a very small item. I am not asking the Government to change their whole policy, but let us please keep the charitable houses as such—the houses which deal with charitable purposes and which are accepted by the Inland Revenue as charitable. Let those people buy who really want to buy—and there are many. I do not want to discourage them. They can get houses without difficulty. But do not let them take houses away from
1084
the number which are specially required for people for rent.
There is one statement about which I must reproach the noble Lord. He said that charity is a device to avoid selling. Please let us hear the noble Lord repudiate that statement. It was not his fault; it was no doubt part of the brief that was given to him somewhere in the depths of the Scottish Office. But it is a wicked statement which should never have been made. I beg to move.
6.15 p.m.
Lord Carmichael of Kelvingrove: My Lords, I should like briefly to say something on this point. The noble Earl, Lord Selkirk, has made a powerful case. The point he made that worried me most was that if charities were selling off their houses, if they were forced to do so because they were being asked by the tenants, there would be no incentive for anyone thereafter to buy blocks or build blocks for charities. One housing charity—I do not know the status of it but I have some association with it—is Christian Action. It has a very special kind of use for its houses. It is not just a case of trying to solve someone's housing problem. It uses its houses to try to solve a much wider problem than just the housing problem—a much wider family problem. Its houses, I should think, are really worth much more to it than they are to any one individual family.
I think that the Government must look very carefully at the whole question of charitable status—obviously at a charity such as Christian Action which is already established but also at any new group that may come along; perhaps a specific group dealing with alcoholics or with another form of the Link project. They would not be able to do it because they would not have the status and certainly they would not raise the money if people thought they were going to recondition property which, in a couple of years, would be bought by whoever was put into it. I hope that the Minister has a good answer to this problem. I think that we are all grateful at least for his extension to November 1985 in Amendment No. 10. It is a good effort but it is not really quite enough. We want something a little more permanent than that.
Lord Mackie of Benshie: My Lords, I think that the logic of this amendment is inescapable. Nobody really can foresee the future so far and so clearly as to say that there will not arise a cast-iron case for a charity to deal with a hundred different kinds of needs in housing. Certainly no charity could possibly embark on their schemes if they knew that these houses would be bought under this Act by the tenants after a certain time. I think the logic is there. The Government have given way; and when I say they have given way I mean that they have very sensibly taken it up to 1985. The charity can be examined with great care and I think it is absolutely logical that you cannot prevent a charity from doing good in the future in the housing field.
The Earl of Perth: My Lords, the noble Lord, Lord Mackie of Benshie, said the Government have given way. I am afraid that I cannot go along with that. I support wholly the reasons that the noble Earl, Lord Selkirk, has given for his amendment. I recall that at

1085
the Committee stage I moved an amendment asking that the date be removed because it seemed to me that to withdraw the right of any philanthropist in the future to help set up a charitable housing association was something which was totally wrong. The noble Lord, Lord Gray, the Minister, speaking in Committee—and I refer to col. 114 of the Official Report of 28th April last—said:
"To make such a broad exemption"—
that is, for charitable housing—
"would open the way to what would be no more than a device to avoid the right-to-buy provisions".
I find that that remark is really one that should not be made. It is allowed to England and Wales but not to Scotland. Is the noble Lord seriously saying that we will cheat but that the English and the Welsh will not? I find that this is something which should not be said by a Minister. After all, he is a Minister—often a very good one—for Scottish affairs. At the same time, he went on to say that it is all right if there are special needs. It will extend very substantially to those charitable associations that would be eligible; but not to all of them. The noble Lord admits that any new charitable association in Scotland would lose its charitable tax status if the stock was eligible for the right to buy. This is a tragic example of going halfway to meet what we want. I very much hope that the House will go along with the noble Earl and his amendment.
I am not sure whether I should bring personal considerations into the matter, but I came down from Scotland this afternoon for this one purpose; for this one amendment. It happens that today is also my birthday. If the amendment is accepted, I shall have had the best birthday present possible!
Baroness Carnegy of Lour: My Lords, before the Minister replies, perhaps I may say that we require an explanation from him about why the Government are arguing that, whereas tenants should have the same rights in Scotland as they do in England to buy their houses, it should be less possible in Scotland to set up a charitable housing association than it is in England. Why should we be denied that right just because the definition of a charity and the way in which a charity is established, is different? If there are technical problems, then we must hear about them and think about how they can be overcome.
My noble friend Lord Selkirk has made a major point. It is a completely different one from the general housing association point where the tenant's right to buy is, to my mind, the overriding consideration. We are thinking about a very particular field of charitable activity and it is something about which I am sure Members of your Lordships' House feel the same concerning Scotland as they do for England. I hope the Minister will give us a very detailed reply.
Lord Gray of Contin: My Lords, I shall certainly give a detailed reply if that is the wish of the House. However, perhaps I may first deal with one or two of the points raised by the noble Earl, Lord Selkirk. With this amendment we enter a field in which emotions have run high. Noble Lords have spoken both here and in Committee in terms which imply that the present
1086
Bill will damage housing associations' work for the most needy sections of the population. We have considered the effect of the right to buy on the housing association movement most carefully, and the Bill now before your Lordships with Amendment No. 10, which I shall be moving shortly, makes provision for exemption for the vast majority of cases where the right to buy would not be appropriate.
The noble Earl, Lord Selkirk, made one or two statements which I think I must correct. He said for example, that tenants can buy recently-built houses at half price. That is simply not so. Discount is restricted on newly-built or modernised houses to prevent their sale at less than the landlord's debt in providing the house. The noble Earl also raised the question of rented versus owner-occupier property. People ho can and want to buy should be able to do so. The resources released can be used to provide houses for renting. The noble Earl also suggested that people are selling in order to realise profits on houses bought under the right to buy. We have absolutely no evidence from our research or otherwise that people are exercising the right to buy for that purpose.
I also suggest that the argument that right-to-buy sales would have a serious effect on the rental stock has been advanced since legislation was first introduced in 1980 to give secure tenants in the public sector the right to purchase their homes. However, it is not borne out by the facts. The research report Council House Sales in Scotland, published in May 1985, found that the vast majority of tenants who bought their houses did so because they wished to continue living in them, and only 2 per cent. of buyers quoted the ability to move subsequently as one of the reasons for buying. Very few houses would therefore have become available for re-let in the normal course of events even if they had remained in public sector stock.
There is no reason to believe that the position will be materially different in the housing association field, especially since associations are expected to work in consultation with local authorities in allocating tenancies. However, many houses provided by housing associations are for people for whom more care is needed. They may be old, or disabled in some way. They may be younger, just starting out and still requiring a caring environment. In all these areas, housing associations operate with tremendous success and I pay tribute to them. Many of these associations operate on a charitable basis which gives them a variety of benefits. They gain exemption from liability to tax; local authorities may reduce or disapply their rates and perhaps most important they can receive charitable funds as donations from benefactors or other charities. The Bill exempts charitable housing associations from the right to buy with one or two minor restrictions, and these I shall come to in a moment or two.
The other criteria in the Bill—the requirement to have obtained charitable tax status—is designed to prevent the abuse of new associations being formed expressly to escape the right to buy. We recognise that new associations, whose activities will deal with the disadvantaged will be formed, and will need to he formed, and for them charitable status would be appropriate. For them the wide range of exemptions related to stock—those houses specially adapted or in

1087
the integrated care schemes introduced in this Bill—should enable them to obtain charitable tax status.
We must remember that the houses owned by charitable associations are often no different at all from neighbouring houses which may be owned by the district council, the Scottish Special Housing Association, non-charitable associations or even owner-occupied houses. Local authorities have rights of nomination of tenants to housing associations in their areas. So a person applying for a council house may instead be allocated an association house—and as I have said that might be the same kind as the council would have given him. We must therefore be wary of assuming that we know what a house belonging to a charitable housing association and its tenant happen to look like.
We must remember, too, that the housing association movement is dynamic. The picture painted of associations being brought to their knees by sales is simply not realistic. Sales of the kinds of house held by associations normally thought of as charitable will not be high because the tenants, the beneficiaries of charity (and I make this point particularly for my noble friend Lord Selkirk), will not have the means to buy. However, they must feel equal to their fellows. They must have the right to buy. Why—because they do not have the means at the time—should they be deprived of the right which is available to neighbours a street or two streets away? Where a sale occurs, associations must see that as another person helped on their way by the intervention of the association, and the resources released can go back to help another.
However, the crucial matter is this. Let us look at the scene which might result from this amendment being carried. A large number of tenants would lose the right to buy, a right which they had come to expect. We would have to give serious consideration to the scheme known as HOTCHA, which stands for Home Ownership for Tenants of Charitable Housing Associations. This scheme, which operates now in England and Wales, is a cumbersone one. In principle, a tenant who cannot buy his own home because his landlord is a charitable housing association is assisted to buy a house owned by another non-charitable housing association. Because that would deplete the resources of the non-charitable association, and because the charitable one cannot recompense the selling one, it would be necessary for the Government to pay housing association grant to the selling association. This money would have to come from the overall allocation to the movement and would reduce the work which could be done. HOTCHA operates in England, and considerable sums of money are involved; but there are still many tenants who wish to buy who cannot do so until further grant can be found. Such a scheme will be necessary in due course for those associations in Scotland already exempted. But those associations at present have a relatively low proportion of tenants wishing to buy.
6.30 p.m.
The overall level of resources may not matter immediately to individual associations. They believe
1088
that if they can gain exemption from the right to buy then life can go on as before. I have to say that this seems doubtful. This is important.
Associations have had a very free hand in determining the kinds of project they take on and the tenants they aim to provide for. As a result, we have had some very imaginative projects of the type we have discussed at earlier stages. Other associations have moved into the general needs field under the advantages of charitable status. But if the right to buy is not to apply to such houses I doubt very much whether the Housing Corporation would be able to continue funding their development. At the moment the corporation has a considerable degree of discretion in such matters: I can envisage that their approved development programme might come under much closer scrutiny to ensure the proper targeting of resources. This amendment will not preserve the status quo; it will jeopardise the continued successful development of a vital sector of the movement.
Charitable housing associations play, and will continue to play, an important part in the spectrum of housing provision in Scotland. But to do so their work must be of a nature that is readily understandable as charitable. I am sure that those who desperately need the kind of care and protection which the movement can provide will not understand how families on good incomes living in houses provided by, for example, the largest housing association in Scotland can need charity. That association has a stock of 2,100 houses, over 1,800 of which are general needs houses. We can quibble about numbers, but the charitable status of this association must rest on just 140 special needs houses they own.
The rest are houses no different from any other ordinary public sector houses. If those houses are sold, the resources released might solve the housing problem of the disadvantaged man and give him the housing rights many others now enjoy. We are anxious to protect the legitimate interests of the charitable housing association and we believe that the Bill does so for the great majority.
The noble Baroness, Lady Carnegy, raised a question which had been raised by the noble Earl, Lord Perth. I am sure that I speak for everybody in the House when I extend to him our warmest good wishes on this, his birthday. I am sorry that he seeks such an unusual—and I hope unattainable—birthday present. However, I shall do my best to try to persuade him that a celebratory refreshment with me on the success against the amendment might be more appropriate.
The noble Baroness asked about Scotland and England. In Scotland housing associations have developed since 1980 when the right to buy was first introduced; but they have developed separately from their counterparts in England who have been subject to the right to buy since 1980. The charities legislation is different north and south of the Border. Charities in England are controlled by the Charity Commissioners under the Charities Act 1960, and there is no equivalent legislation in Scotland. The reasons for there being no Scottish Act are not now clear. We would need a major Bill for which there is no clear need. It is only on occasions like this that we come across instances where such a piece of legislation would be useful.

1089
The noble Baroness also asked why there is no room for future charitable associations. I accept the noble Baroness's concern that there should be scope for future charitable housing associations to be formed. This is something that I am prepared to consider, but at the moment I must try to persuade your Lordships that I feel that the amendment proposed by the noble Earl, Lord Selkirk, if accepted by the House would have serious implications, and ones which I am sure many of the housing associations would not seek.
I have tried to explain why this would be so. I am not persuaded by the arguments that the noble Earl has put forward, although I realise that, with his great experience in this subject, he seeks improvement. I am not persuaded that the way he is approaching this Bill at this stage would achieve the improvement that he seeks.
Lord Grimond: My Lords, I do not know what effect that answer will have on the noble Earl, Lord Selkirk, who made such a powerful speech in moving this amendment. No doubt his clearer mind than mine will have understood what the Minister is saying. I have been left in considerable doubt. At one point I thought that the Minister more or less categorically said that there is no reason in the future why more charitable housing associations should not be formed. But then in answer to the noble Baroness who speaks from the other side of the House he said that he would look at this matter again.
Can the noble Lord tell us whether it is his view that the Bill, as drafted at present, will prevent the formation of further charitable associations, or does he take the view that they can be formed despite the Bill? This would seem to be an extremely important matter raised by the noble Earl, Lord Selkirk, who told us that in his view it would be impossible in the future to form these associations.
There is another point on which I am not sure about the Government's attitude. I should have thought that it is now apparent that there is a great need in Scotland, and indeed all over Britain, for more accommodation to rent. Up to a certain point, I am in favour of local authorities selling houses. However for various reasons, and reasons of a quite wide spectrum it is generally agreed that there is now—and this point was made forcefully by the noble Earl—a great need for more rented accommodation. Do the Government share that view? If they share it, do they think that the Bill as it stands is going to encourage it? These are two fundamental matters, and I am not clear what the answer of the Government so far has been.
The Earl of Selkirk: My Lords, we must try not to be emotional about this. It worries my noble friend. We must be very matter of fact and down to earth when we are talking about this. The most interesting thing was something that my noble friend did not say. He did not mention the fact that the Housing Corporation had been turned upside down; that the purposes for which it was originally formed had disappeared. The noble Lord does not want it. All he wants is housing ownership. I have already said that house ownership is going ahead extremely well. What we need is rented accommodation.
1090
As the noble Lord has said—and he let the cat out of the bag—he is angry, or his office is, with one housing association, the Link. The Link will sell as much as you like, my Lords; but it does not sell at a discount because it has ceased to be a charity. That is something that we should not allow to affect every other housing association in the country. It is totally unnecessary. There are plenty of ways of dealing with the Link. They can deal with the HOTCHA system (which is quite satisfactory) if they want to, as the noble Lord said himself. I am delighted that he mentioned it, because it is an important system.
I do not think that we, as a House, can agree that no future charitable housing association can practically he formed. The noble Lord, Lord Grimond, asked that question. The answer is that of course you can form a charity if you like; but you will not get very far because in a short time you will be made to sell your houses at a discount. You will then cease to be a charity. If you refuse to do that you will be run into the courts. I think that is a wrong principle. From the beginning it has always been regarded that charity is an integral part of the welfare state. It is now and it always will be. I beg to move.
6.40 p.m.
On Question, Whether the said amendment (No. 9) shall be agreed to?
Their Lordships divided: Contents, 117; Not-Contents, 76.

DIVISION NO. 2

CONTENTS

Airedale, L.

Graham of Edmonton, L.

Amherst, E.

Grey, E.

Ampthill, L.

Grimond, L.

Ardwick, L.

Hampton, L.

Atholl, D.

Hanworth, V.

Attlee, E.

Harris of Greenwich, L.

Bernstein, L.

Hatch of Lusby, L.

Birk, B.

Henderson of Brompton, L.

Blease, L.

Hertford, M.

Boston of Faversham, L.

Heycock, L.

Briginshaw, L.

Hirshfield, L.

Brooks of Tremorfa, L.

Hylton-Foster, B.

Caradon, L.

Irving of Dartford, L.

Carmichael of Kelvingrove, L. [Teller.]

Jacques, L.

Jeger, B.

Carnegy of Lour, B.

Jenkins of Putney, L.

Chitnis, L.

Kennet, L.

Cledwyn of Penrhos, L.

Kilbracken, L.

Coleraine, L.

Kilmarnock, L.

Craigavon, V.

Kinloss, Ly.

Craigmyle, L.

Kinnaird, L.

Crawshaw of Aintree, L.

Kinnoull, E.

Cromartie, E.

Kintore, E.

David, B.

Kirkhill, L.

Davies of Penrhys, L.

Lauderdale, E.

Dean of Beswick, L.

Lovell-Davis, L.

Denington, B.

Mackie of Benshie, L.

Diamond, L.

MacLehose of Beoch, L.

Donoughue, L.

McNair, L.

Elliot of Harwood, B.

Mar, C.

Elwyn-Jones, L.

Mishcon, L.

Ennals, L.

Molloy, L.

Ewart-Biggs, B.

Mulley, L.

Faithfull, B.

Munster, E.

Falkender, B.

Napier and Ettrick, L.

Gallacher, L.

Newall, L.

Galpern, L.

Nicol, B.

Gardner of Parkes, B.

Norrie, L.

Glenamara, L.

Northfield, L.

1091

Oram, L.

Stoddart of Swindon, L.

Parry, L.

Strabolgi, L.

Perth, E.

Swinfen, L.

Pitt of Hampstead, L.

Taylor of Blackburn, L.

Ponsonby of Shulbrede, L.

Taylor of Gryfe, L.

Rhodes, L.

Taylor of Mansfield, L.

Richardson, L.

Tonypandy, V.

Ritchie of Dundee, L.

Tordoff, L.

Rochester, L.

Turner of Camden, B.

Russell of Liverpool, L.

Underhill, L.

Seear, B.

Vaux of Harrowden, L.

Seebohm, L.

Wells-Pestell, L.

Selkirk, E. [Teller.]

Whaddon, L.

Serota, B.

White, B.

Shannon, E.

Wigoder, L.

Shaughnessy, L.

Wilson of Langside, L.

Shepherd, L.

Wilson of Rievaulx, L.

Simon, V.

Winchilsea and Nottingham, E.

Stedman, B.

Stewart of Fulham, L.

Young of Dartington, L.

Stodart of Leaston, L.

NOT-CONTENTS

Allerton, L.

Layton, L.

Ashbourne, L.

Lindsey and Abingdon, E.

Bauer, L.

Long, V.

Belhaven and Stenton, L.

Lucas of Chilworth, L.

Beloff, L.

Lyell, L.

Belstead, L.

McAlpine of West Green, L.

Birdwood, L.

McFadzean, L.

Boyd-Carpenter, L.

Macleod of Borve, B.

Brabazon of Tara, L.

Mancroft, L.

Brougham and Vaux, L.

Margadale, L.

Broxbourne, L.

Marley, L.

Caithness, E.

Marshall of Leeds, L.

Cameron of Lochbroom, L.

Maude of Stratford-upon-Avon, L.

Campbell of Alloway, L.

Cathcart, E.

Merrivale, L.

Cox, B.

Mersey, V.

Cullen of Ashbourne, L.

Mottistone, L.

Davidson, V.

Murton of Lindisfarne, L.

Denham, L. [Teller.]

Onslow, E.

Drumalbyn, L.

Orkney, E.

Elliott of Morpeth, L.

Orr-Ewing, L.

Elton, L.

Pender, L.

Fraser of Kilmorack, L.

Portland, D.

Geddes, L.

Rankeillour, L.

Glenarthur, L.

Renton, L.

Gray of Contin, L.

Renwick, L.

Grimston of Westbury, L.

St. Aldwyn, E.

Hailsham of Saint Marylebone, L.

St. Davids, V.

Sharples, B.

Harris of High Cross, L.

Sudeley, L.

Harvington, L.

Swinton, E. [Teller.]

Hives, L.

Teynham, L.

Holderness, L.

Tranmire, L.

Hooper, B.

Ullswater, V.

Inglewood, L.

Vickers, B.

Kaberry of Adel, L.

Vivian, L.

Kimball, L.

Whitelaw, V.

Kimberley, E.

Wynford, L.

Lane-Fox, B.

Young of Graffham, L.

Resolved in the affirmative, and amendment agreed to accordingly.
[Amendment No. 10 not moved.]
6.49 p.m.
Lord Mackie of Benshie Lord Mackie of Benshie moved Amendment No. 11:
Page 29, leave out lines 38 to 48 and insert—
(" (b) section 10(2)(i) of this Act and—

(i) the tenant is a member of a Fire Brigade, maintained in pursuance of the Fire Services Act 1947, who occupies the dwelling house in consequence of a condition in his contract of employment that he live in close proximity to a particular fire station; or

1092

(ii) in a case where (i) above does not apply the tenant is let the dwelling house expressly on a temporary basis pending its being required for the purposes of such a Fire Brigade; or

(iii) in any case, where the dwelling house is held by the Fire Authority for the operational purposes of its functions and is required for the accommodation of a person who is or will be employed by the Fire Authority for those purposes and the Chief Fire Office has issued a certificate in writing to that effect to the tenant.")

The noble Lord said: My Lords, the Minister will be relieved to hear that I want information and that no more virtue will be forced upon him today. The fact is that certain provisions have been made for the Islands authorities which should apply to the Highland areas and perhaps to the Borders as well. I put down this amendment which applies to the fire brigade officers, but it applies also to police houses, certainly to teachers' houses and to a number of other people. These houses are very often not let as tied houses without rent, but simply are available as ordinary authority houses to essential people such as fire brigade officiers, teachers and the police. They are essential to the running of the communities, and it is true that the Act says that the following are exempt: a member of a fire brigade who occupies a dwelling house in consequence of a condition of this contract of employment that he live in close proximity to a particular fire station. In actual fact in a Highland region there is no such contract of employment. The same applies, of course, to the other people I mentioned.
I do not want to labour this. I think the Minister understands perfectly that it is very important for the Highland region and indeed for the Borders. I should like an explanation from him as to how he thinks the situation would be overcome if members of the fire brigade, the police or teachers actually had a right to buy these houses, which are kept in order to attract new applicants for these very necessary posts. I beg to move.
Lord Gray of Contin: My Lords, in this Bill we are extending security of tenure and the right to buy to tenants of regional authorities, including police and fire authorities. When this Bill had its Report stage in another place, however, concern was expressed on behalf of the Highlands and Islands Fire Board that our proposals to exclude houses required for the purpose of a fire authority might still not be sufficient to enable the board to refuse applications by certain officers in locations where the board felt it would be difficult to make available suitable replacement housing. I may say that this was the first we had heard of these anxieties, but we undertook to look into them carefully to see whether any further amendment to the Bill was needed.
We looked into the matter very carefully. On investigation it turned out that they were in fact only five houses in the Highlands and Islands area about which the board felt concern. They are not houses which the board is required to provide. Furthermore, they are in centres of population such as Invergordon, Kirkwall and Stornoway. They are not in isolated locations. However, having taken advice, it is our view that if the board were faced with an application to buy one of these five houses it might refuse the application on the ground that the officer required to occupy the

1093
house as a condition of his own employment and that therefore the house was excluded under Schedule 1 to the 1980 Act.
My honourable friend the Minister for Local Government and the Environment, Mr. Ancram, wrote on the 25th April to Members who had intervened in the debate in another place, setting out these conclusions. I believe therefore that the noble Lord's amendment is unnecessary. It is also, I must say, unwelcome. It would give a public authority whose tenants are being given security and the right to buy under this Bill the power to revoke those rights simply by writing to the tenant and telling him that he is not a secure tenant. In my view, this would make a nonsense of what we are trying to do in the present Bill. It would be tantamount to saying to the tenant, "We will give you certain rights to buy but only if your landlord says you may." That does not appear to me to be any advance on the present position.
In conclusion, I repeat that the Bill makes provision to exclude houses let to serving fire officers in connection with their employment or in other circumstances where they may be required by fire authorities. We have looked very carefully into the particular concerns of the Highlands and Islands Fire Board, but have concluded that they are unfounded. In the light of this explanation, I trust the noble Lord will accept that his amendment is unnecessary and will agree to withdraw it.
Lord Mackie of Benshie: My Lords, the explanation is a little like the curate's egg: good in parts. I think the Minister has had enough of a bashing, so I will consider his reply and in the meantime beg leave to withdraw my amendment.
Amendment, by leave, withdrawn.
Schedule 2 [Minor and Consequential Amendments]:
Lord Gray of Contin Lord Gray of Contin moved Amendment No. 12:
Page 30, line 43, at end insert—
(" The Land Tenure Reform (Scotland) Act 1974 (c. 38)
. In section 8(7) of the Land Tenure Reform (Scotland) Act 1974 (saving)—

(a) for the words "1971" there shall be substituted the words "1984 or a secure tenancy within the meaning of the Tenants' Rights, Etc. (Scotland) Act 1980"; and

(b) for the words "that Act" there shall be substituted the words "either of those Acts".")

The noble Lord said: My Lords, I beg to move this amendment formally. I have already spoken to it.
On Question, amendment agreed to.
Schedule 3 [Repeals]:
Lord Gray of Contin Lord Gray of Contin moved Amendment No. 13:
Page 32, line 30, column 3, at end insert ("In Schedule 1, paragraph 1.")
The noble Lord said: My Lords, I beg to move this amendment formally. I have already spoken to it.
On Question, amendment agreed to.

Drug Trafficking Offences Bill
6.56 p.m.
Report received.
Clause 1 [Confiscation orders]:
The Parliamentary Under-Secretary of State, home Office (Lord Glenarthur)The Parliamentary Under-Secretary of State, home Office (Lord Glenarthur) moved Amendment No. 1:
Page 2, line 14, leave out (" (other than the payment of costs)")
The noble Lord said: My Lords, I beg to move Amendment No. 1 and at the same time perhaps I may speak to Amendments Nos. 27 and 67. These amendments deal with costs. The amendment to Clause 1 will enable the Crown Court to take account of the extent to which an offender's assets have been reduced by a confiscation order before deciding how much he is able to pay or contribute towards prosecution costs. Of course if he still retains substantial assets then it is right that he should pay or contribute towards these costs, as with any other type of offender, but where most of his property has been confiscated it would be wrong to assess his proper contribution to costs as if he were still a very wealthy man. He might be saddled with an order he simply could not pay.
The amendment to Clause 6 specifies more precisely which parts of the Powers of the Criminal Courts Act 1973 apply to the sums realised under a confiscation order. The amendments to Clause 12 provide for the receiver to be paid from the proceeds of confiscation and, where the prosecution have paid him something on account, for the prosecution to be reimbursed. This links with the new clause to be added after Clause 14, which specifies that the prosecution can pay the receiver where no sum is available from assets. I beg to move.
On Question, amendment agreed to.
7 p.m.
Lord Glenarthur Lord Glenarthur moved Amendments Nos. 2 and 3:
Page 3, leave out lines 12 to 14 and insert ("the values of the payments or other rewards").
Page 4, line 3, leave out subsection (5).
The noble Lord said: My Lords, I beg to move Amendments Nos. 2 and 3 en bloc and with them to take a rather long list of amendments. These are Amendments Nos. 5, 8 to 10, 13, 15 to 26, 31, 35, 38, 41 to 46, 49, 52 to 58, 63, 65, 70, 72, 73 and 79. I think that this substantial number of amendments can be usefully discussed together. Although they affect a variety of clauses, they all concern two issues—property in the hands of third parties and, related to that, the way in which the courts will assess the amount to be recovered under a confiscation order.
I think that I can be reasonably brief. The amendments replace the concept of property available in respect of the defendant by that of realisable property. This will include any property held by the defendant, and any held by a third party to whom he had made what is termed a gift caught by the Act: that is, property transferred for significantly less than full value. The amount to be recovered from the third parties will be no more than the net value of the gifts—the difference between the value of the property they received and any consideration they gave. But

1095
restraint and confiscation will not be limited to those assets which have actually been received from the trafficker. I believe that that represents a valuable tightening up of the provisions of the Bill.
The second element in this batch of amendments consists of changes proposed to the way in which the courts will determine the amount to be recovered under a confiscation order and are intended to fulfil a commitment given by my honourable friend the Parliamentary Under-Secretary of State in another place. The batch of amendments will enable the courts to take as the value of the proceeds of drug trafficking either the value of any payments or rewards at the time they were received, with an adjustment for inflation, or, if the trafficker still holds the assets or property acquired with them, their current value, whichever is the greater.
Where a gift or its value is to be recovered from a third party, the courts will apply a similar method of assessment. This will ensure that neither the trafficker nor his associates are able to retain the benefit of substantial increases in the value of property directly or indirectly acquired with the proceeds of drug trafficking. If the trafficker has spent his proceeds, or the associate his gift, and there are insufficient alternative assets available to make up for the money which has disappeared, the Bill makes provision in Clause 4(3) for the amount of the confiscation order to be limited accordingly. I hope that that has been an adequate explanation of what is intended by these amendments. I beg to move.
Lord Mishcon: My Lords, the noble Lord the Minister very courteously wrote to me, to the noble Lord, Lord Hooson, and to the noble Lord, Lord Harris, with a very full explanation of the basis for these amendments. He gave us time to reflect upon them and we certainly agree with them.
On Question, amendments agreed to.
Clause 3 [Statements relating to drug trafficking]:
Viscount Davidson Viscount Davidson moved Amendment No. 4:
Page 4, line 15, leave out ("prosecuting authority") and insert ("prosecutor").
The noble Viscount said: My Lords, in moving this amendment it may be convenient to discuss also Amendments Nos. 6, 7, 30, 33, 51, 91 and 111. There are a number of references throughout the Bill to the prosecuting authority. It is the prosecuting authority, for example, which must apply for a restraint or charging order, or seek the appointment of a receiver to realise a convicted trafficker's assets. We believe it would be better to use the word "prosecutor" to make it clear that we are including in the term the person with day-to-day responsibility for prosecuting the case and not the authority ultimately responsible. This terminology is also in line with that used in other statutes. I beg to move.
On Question, amendment agreed to.
Lord Glenarthur Lord Glenarthur moved Amendments Nos. 5 to 10:
Page 5, line 5, leave out ("from property available in respect of the defendant").
Page 5, line 7, leave out ("prosecuting authority" and insert ("prosecutor").
Page 5, line 10, leave out ("prosecuting authority") and insert ("prosecutor").
Clause 4, page 5, line 26, leave out ("from the property available in respect of the defendant").
Clause 4, page 5, line 32, leave out ("from the property available in respect of the defendant").
Clause 5, page 5, line 38, leave out from beginning to end of line 14 on page 6 and insert—
("(1) In this Act, "realisable property" means, subject to subsection (2) below—

(a) any property held by the defendant, and

(b) any property held by a person to whom the defendant has directly or indirectly made a gift caught by this Act.

(2) Property isnot realisable property if").
The noble Lord said: My Lords, I have already spoken to most of these amendments with Amendments Nos. 2 to 3, and my noble friend Lord Davidson has discussed Nos. 6 and 7. I beg to move Amendments Nos. 5 to 10 en bloc.
On Question, amendments agreed to.
Clause 5 [Confiscation orders: definition of terms]:
The Lord Advocate (Lord Cameron of Lochbroom)The Lord Advocate (Lord Cameron of Lochbroom) moved Amendments Nos. 11 and 12:
Page 6, line 16, leave out ("or").
Page 6, line 18, at end insert ("; or
(c) an order under section 223 or 436 of the Criminal Procedure (Scotland) Act 1975 (forfeiture of property)").
The noble and learned Lord said: My Lords, these amendments are the first of a series of Scottish amendments to the Bill which I propose to move today. It may therefore be to the benefit of the House if I explain the general purpose of all the amendments in my name at this stage. As your Lordships will recognise, this Bill builds on established features of the English legal system, particularly in relation to the law on receivers and charging orders, in a way which cannot readily be transplanted to Scotland. It is therefore impracticable simply to extend this Bill to Scotland. My right honourable friend the Secretary of State for Scotland has already announced his intention to introduce separate Scottish legislation at the earliest opportunity.
However, in order to avoid the undesirable situation by which Scotland might become a haven for the assets of drug traffickers operating in England and Wales, we propose that the provisions in the present Bill should be extended to Scotland so far as is necessary to ensure effective cross-Border enforcement of orders under the Bill; and the amendments which I shall be moving today are directed to that end.
The most important effects of the amendments are that orders made by the High Court in England and Wales will be recognised as having effect in relation to assets in Scotland and if registered in the Court of Sessions—that is, the supreme civil court in Scotland—will be enforced by that court. Receivers appointed under the Bill will be able to exercise their powers in Scotland, and the police in Scotland will be given the same powers as the English police to obtain information about assets where a court has authorised that. That will enable them to assist the English police as required and also to pursue their own inquiries into drug trafficking more effectively.
I must apologise to the House for bringing these amendments forward at this stage of the prceedings on the Bill, but since the amendments are technically rather complex because of the difficulties inherent in relating the two different legal systems to each other, their preparation has been no easy task.
Amendments Nos. 11 and 12, which I am now moving, concern the matter of forfeiture. The criminal courts in Scotland have general powers to order that property used in committing an offence may be forfeited on conviction. These amendments ensure that any property which already stands forfeit under those provisions will not be regarded as realisable for the satisfaction of a confiscation order imposed by an English court. I beg to move.
Lord Mishcon: My Lords, may I say at once that I appreciate fully the reasons for the amendments that are now before us. It would indeed be very invidious if it were possible for a drug trafficker to make off with his proceeds by removing them north of the Border and with this Bill, which we hope will soon become an Act, not enforceable over the Border. The only matter that I want to raise from the point of view of tidiness is this. The noble and learned Lord talked in terms of fresh Scottish legislation coming before us. We will then presumably have this Act with part of the provisions and another Act dealing with the whole of the provisions that relate to Scotland. Has the noble and learned Lord given any thought to the possibility that in that Act the provisions of this Bill will be incorporated and will be cancelled in this legislation? Otherwise we are going to have two Acts which relate to Scotland and the dichotomy is a little untidy.
Lord Cameron of Lochbroom: My Lords, perhaps I should say that the separate Scottish legislation will be intended to give the Scottish courts powers similar to those which under this Bill are given to the English courts. The purpose of the amendments to this Bill is to allow English orders to become effective in Scotland. Any separate Scottish legislation would, I am sure, have similar cross-Border enforcement for Scottish orders so far as concerns assets which may be in England and Wales. So the two would, I suggest—we shall obviously have to wait and see the legislation which comes forward—be able to run in train. It may be that there will be one or two amendments, and as to that I can give no undertaking at all at present. But I have noted what the noble Lord opposite has said.
On Question, amendments agreed to.
Lord Glenarthur Lord Glenarthur moved Amendment No. 13:
Page 6, line 20, leave out subsection (3).
The noble Lord said: My Lords, this amendment is consequential. I beg to move.
On Question, amendment agreed to.
Lord Glenarthur Lord Glenarthur moved Amendment No. 14:
Page 6, line 32, leave out subsection (4).
The noble Lord said: My Lords, Amendment No. 14, and Amendment No. 133 which is connected with it, are drafting amendments. I beg to move Amendment No. 14.
On Question, amendment agreed to.
Lord Glenarthur Lord Glenarthur moved Amendments Nos. 15 to 27:
Page 6, line 41, leave out subsection (5).
Page 7, line 1, at beginning insert ("For the purposes of sections 3 and 4 of this Act").
Page 7, line 2, leave out ("from the property available in respect of the defendant").
Page 7, line 4, leave out ("of all such property at that time") and insert ("at that time of all the realisable property held by the defendant").
Page 7, line 8, at end insert—
("together with the total of the values at that time of all gifts caught by this Act").
Page 7, line 9, leave out from beginning to end of line 11 and insert ("Subject to the following provisions of this section, for the purposes of this Act the value of property (other than cash) in relation to any person holding the property—

(a) where any other person holds an interest in the property, is").

Page 7, line 12, leave out ("relevant") and insert ("first mentioned person's beneficial").
Page 7, line 15, leave out ("the relevant") and insert ("that").
Page 7, line 17, leave out ("the value of property (other than cash)").
Page 7, line 18, at end insert—
("(7A) Subject to subsection (11) below, references in this Act to the value at any time ("the material time") of a gift caught by this Act or of any payment or reward are references to—

(a) the value of the gift, payment or reward to the recipient when he received it adjusted to take account of subsequent changes in the value of money, or

(b) where subsection (7B) below applies, the value there mentioned,

whichever is the greater.
(7B) Subject to subsection (11) below, if at the material time the recipient holds—

(a) the property which he received (not being cash), or

(b) property which, in whole or in part, directly or indirectly represents in his hands the property which he received,

the value referred to in subsection (7A)(b) above is the value to him at the material time of the property mentioned in paragraph (a) above or, as the case may be, of the property mentioned in paragraph (b) above so far as it so represents the property which he received, but disregarding in either case any charging order.").
Page 7, line 19, leave out ("that subsection") and insert ("subsection (6) above").
Page 7, line 44, at end insert—
("(10) A gift (including a gift made before the commencement of section 1 of this Act) is caught by this Act if—

(a) it was made by the defendant at any time since the beginning of the period of six years ending when the proceedings were instituted against him, or

(b) it was made by the defendant at any time and was a gift of property—

(i) received by the defendant in connection with drug trafficking carried on by him or another, or

(ii) which in whole or in part directly or indirectly represented in the defendant's hands property received by him in that connection.

(11) For the purposes of this Act—

(a) the circumstances in which the defendant is to be treated as making a gift include those where he transfers property to another person directly or indirectly for a consideration the value of which is significantly less than the value of the consideration provided by the defendant, and

(b) in those circumstances, the preceding provisions of this section shall apply as if the defendant had made a gift of such share in the property as bears to the whole property the same proportion as the difference between the values referred to in paragraph (a) above bears to the value of the consideration provided by the defendant.").

Clause 6, page 8, line 2, leave out ("and 32") and insert ("(1) to (3C) and 32(1) and (2)").
The noble Lord said: My Lords, these amendments are consequential on Amendments Nos. 2 and 3. I beg to move.
On Question, amendments agreed to.
Clause 7 [Cases in which restraint orders and charging orders may be made]:
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 28:
Page 10, line 1, leave out ("and 9") and insert ("9 and [Inhibition and arrestment in Scotland])".
The noble and learned Lord said: My Lords, the effect of this amendment is simply to ensure that the interpretations of terms contained in subsection (3) of Clause 7 will apply to the new clause on inhibition and arrestment in Scotland which is to be inserted after Clause 15. I beg to move.
On Question, amendment agreed to.
Lord Glenarthur Lord Glenarthur moved Amendment No. 29:
Page 10, line 2, leave out ("by virtue only of subsection (2) above") and insert ("before proceedings have been instituted").
The noble Lord said: My Lords, Amendment No. 29 is a drafting amendment. I beg to move.
On Question, amendment agreed to.
Viscount Davidson Viscount Davidson moved Amendments Nos. 30 and 31:
Page 10, line 7, leave out ("prosecuting authority") and insert ("prosecutor").
Page 10, line 11, leave out ("property available in respect of the defendant") and insert ("realisable property").
The noble Viscount said: My Lords, these amendments have already been spoken to. I beg to move.
On Question, amendments agreed to.
Clause 8 [Restraint orders]:
Viscount Davidson Viscount Davidson moved Amendment No. 32:
Page 10, line 20, leave out subsection (1) and insert—
("(1) The High Court may by order (in this Act referred to as a "restraint order") prohibit any person from dealing with any realisable property, subject to such conditions and exceptions as may be specified in the order.
(1A) A restraint order may apply—

(a) to all realisable property held by a specified person, whether the property is described in the order or not, and

b) to realisable property held by a specified person, being property transferred to him after the making of the order.

(1B) This section shall not have effect in relation to any property for the time being subject to a charge under section 9 of this Act.").
The noble Viscount said: My Lords, in speaking to this amendment it may also be convenient to discuss Amendments Nos. 33, 36, 37, 39 and 40. These amendments are designed to clarify the operation of the restraint powers provided by Clause 8. The proposed revision of subsection (1) makes it clear that, if it thinks it appropriate, the High Court can make a blanket restraint order in respect of a named person which would cover all his realisable property without specifying particular assets in the order.
That might be a suitable course in the case of a wealthy trafficker whose assets were still being investigated at the time the restraint order was made. It would ensure that as assets were discovered by the receiver or other investigators they would be restrained without the delay which seeking a new restraint order would require. Such a blanket order would also cover property which might be acquired by the person specified after the restraint order had been made.
Amendment No. 32, a further consequential amendment to subsection (5)(a), ensures that police and customs officers in Scotland will be able to seize property which is subject to a restraint order in order to prevent its removal from Great Britain. I believe that both these amendments will be helpful to the High Court in exercising its restraint powers. I beg to move.
On Question, amendment agreed to.
Viscount Davidson Viscount Davidson moved Amendment No. 33:
Page 10, line 27, leave out ("prosecuting authority") and insert ("prosecutor")
The noble Viscount said: My Lords, I have just spoken to this amendment. I beg to move.
On Question, amendment agreed to.
Lord Glenarthur Lord Glenarthur moved Amendment No. 34:
Page 10, leave out line 35.
The noble Lord said: My Lords, it may be for the convenience of your Lordships if I speak also to Amendment No. 47.
At present the Bill provides for the High Court to vary a restraint or charging order only on the application of the holder of the affected property. However, we believe on reflection that this limitation might well work against the objective of ensuring that the assets needed to satisfy the confiscation order remain available for realisation. If, for example, the prosecution has initially underestimated the value of a gift made by the defendant to a third party, it ought to be able to apply to the High Court for a variation in a restraint or charging order so that the true value of the gift can be secured. Unless it can do so the trafficker's relative or friend might enjoy a substantial bonus.
Similarly, some new property not covered by that described in the first order might be discovered and the original order could be varied to enable it to cover the newly found property. These amendments are therefore in line with the other provisions in the Bill designed to ensure that assets do not escape the confiscation net. I beg to move.
On Question, amendment agreed to.
Lord Glenarthur Lord Glenarthur moved Amendments Nos. 35 to 47:
Page 10, line 41, leave out from ("any") to ("and") in line 43 and insert ("realisable property")
Page 11, line 8, leave out ("subsection (1) above") and insert ("this section")
Page 11, line 8, leave out from ("property") to end of line 9 and insert ("held by any person includes (without prejudice to the generality of the expression)—

(a) where a debt is owed to that person, making a payment to any person in reduction of the amount of the debt, and

(b) removing the property from Great Britain.

(5A) Where the ")
Page 11, line 11, leave out ("property available in respect of the defendant") and insert ("realisable property")
Page 11, line 12, leave out ("the jurisdiction") and insert ("Great Britain").
Page 11, line 14, leave out ("5") and insert ("5A")
Page 11, line 16, leave out ("property available in respect of the defendant") and insert ("realisable property")
Page 11, line 18, leave out from ("Crown") to end of line 21 and insert—

("(a) where a confiscation order has not been made, of an amount equal to the value from time to time of the property charged, and

(b) in any other case, of an amount not exceeding the amount payable under the confiscation order.").

Page 11, line 23, leave out ("property available in respect of the defendant") and insert ("realisable property").
Page 11, line 27, leave out ("prosecuting authority") and insert ("prosecutor").
Page 11, line 33, leave out from ("any") to end of line 34 and insert ("interest in realisable property, being an interest held beneficially by the defendant or by a person to whom the defendant has directly or indirectly made a gift caught by this Act").
Page 11, line 38, leave out ("property available in respect of the defendant") and insert ("realisable property").
Page 12, line 18, leave out from ("may") to ("make") in line 19.
On Question, amendments agreed to.
Clause 10 [Charging orders: supplementary provisions]:
Viscount Davidson Viscount Davidson moved Amendment No. 48:
Page 12, line 32, at end insert—
("(2A) Where a charging order has been registered under section 6 of the Land Charges Act 1972, subsection (4) of that section (effect of non-registration of writs and orders registrable under that section) shall not apply to an order appointing a receiver made in pursuance of the charging order.").
The noble Viscount said: My Lords, in speaking to this amendment it may also be convenient to discuss Amendments Nos. 50 and 135. These are purely technical amendments relating to the operation of charging orders under the Bill and involve no changes of any substance. The purpose of the amendment to Clause 10 is to ensure that an order appointing a receiver in pursuance of a charging order remains in force where land which is the subject of the order changes hands. Without such provision an order appointing the receiver would be void against the purchaser in the event of a failure to register the change of ownership as required by the Land Charges Act 1972. The amendment to Clause 31 makes a minor consequential amendment to the Land Registration Act 1925. I beg to move.
On Question, amendment agreed to.
Lord Glenarthur Lord Glenarthur moved amendments Nos. 49 to 58:
Page 12, line 37, leave out ("relevant") and insert ("beneficial").
Page 12, leave out lines 39 to 42.
Clause 11, page 13, line 21, leave out ("prosecuting authority") and insert ("prosecutor").
Page 13, line 24, leave out ("the property available in respect of the defendant") and insert ("realisable property").
Page 13, line 30, leave out ("property available in respect of the defendant") and insert ("realisable property").
Page 13, line 33, leave out ("property available in respect of the defendant") and insert ("realisable property").
Page 13, line 39, leave out ("property available in respect of the defendant") and insert ("realisable property").
Page 13, line 42, leave out ("property available in respect of the defendant") and insert ("realisable property").
Page 14, line 2, leave out ("property available in respect of the defendant") and insert ("realisable property").
Page 14, line 3, leave out ("relevant interest") and insert ("beneficial interest held by the defendant or, as the case may be, the recipient of a gift caught by this Act").
The noble Lord said: My Lords, these amendments are consequential. I beg to move.
On Question, amendments agreed to.
Viscount Davidson Viscount Davidson moved Amendment No. 59
Page 14, line 10, leave out ("subsections") and insert ("subsection (3)(a)").
The noble Viscount said: My Lords, I believe that I can explain the purpose of this amendment quite briefly. Clause 11(8) as presently drafted provides for holders of property liable to confiscation to make representations to the High Court before their property is realised. We believe that that right to make representations should be extended so that those whose property is subject to a charging order cat) be heard before the charge is enforced. That seems Only just. I beg to move.
On Question, amendment agreed to.
Clause 12 [Application of proceeds of realisation and other sums]:
Lord Glenarthur Lord Glenarthur moved Amendment No. 60:
Page 14, line 13, at beginning insert ("Subject to subsection (2) below").
The noble Lord said: My Lords, with Amendment No. 60 I should like, with the leave of your Lordships, to speak to Amendments Nos. 61, 62, 64 and 66. The first four amendments to Clause 12 are merely drafting amendments designed to tidy up the wording of subsection (1). The final amendment, however, arises from an important point which was raised by the noble Lord, Lord Mishcon, in Committee. He proposed that the High Court should be required to hear representations from the offender before giving directions as to the distribution of any surplus cash left in the hands of the receiver after the confiscation order had been satisfied in full.
I expressed some reservations about that proposal because it meant that the offender would be placed in a special position to influence the distribution of surplus cash that represented the proceeds of realisation from other people's property as well as his own. Having looked at the matter again, I hope that I can meet the concern of the noble Lord, and indeed the concern of others, by proposing that any person who held property that has been realised for the purpose of satisfying the confiscation order should have a reasonable opportunity to make representations to the court before any surplus cash is distributed. I hope that meets the concerns of the noble Lord. Lord Mishcon.
Lord Mishcon: My Lords, I think that the amendment now before us is indeed an improvement on the one that I suggested. I readily accept it. I am most grateful for the most gracious way it has been dealt with.
On Question, amendment agreed to.
Lord Glenarthur Lord Glenarthur moved Amendment No. 61:
Page 14, line 17, leave out from ("Act") to end of line 20.
On Question, amendment agreed to.
Lord Glenarthur Lord Glenarthur moved Amendment No. 62:
Page 14, line 23, leave out from ("Act") to ("and") in line 25.
On Question, amendment agreed to.
Lord Glenarthur Lord Glenarthur moved Amendments Nos. 63 to 67:
Page 14, line 26, leave out ("available in respect of the defendant") and insert ("held by the defendant").
Page 14, line 28, leave out ("subject to subsection (2) below") and insert ("after such payments (if any) as the High Court may direct have been made out of those sums").
Page 14, line 34, leave out ("was property available in respect of the defendant") and insert ("has been realised under this Act").
Page 14, line 37, at end insert ("after giving a reasonable opportunity for such persons to make representations to the court").
Page 14, line 38, leave out subsection (3) and insert—
("(3) The receipt of any sum by a justices' clerk on account of an amount payable under a confiscation order shall reduce the amount so payable, but the sum shall be applied as follows:—

(a) if paid by a receiver under subsection (1) above, it shall first be applied in payment of his remuneration and expenses,

(b) subject to paragraph (a) above, it shall be applied in reimbursement of any sums paid by the prosecutor under section (Receivers: supplementary provisions) (2) of this Act,

and the balance shall be treated for the purposes of section 61 of the Justices of the Peace Act 1979 (application of fines, etc.) as if it were a fine imposed by a magistrates' court.
In this subsection, "justices' clerk" has the same meaning as in the Justices of the Peace Act 1979.").
The noble Lord said: My Lords, these amendments are consequential. I beg to move.
On Question, amendments agreed to.
Clause 13 [Exercise of powers by High Court or receiver]:
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 68:
Page 15, line 7, after ("Act") insert ("or on the Court of Session by sections [Recognition and enforcement in Scotland of orders and functions under sections 8, 11, 12 and 23], [Scotland: supplementary] and [Inhibitions and arrestments in Scotland] of this Act.").
The noble and learned Lord said: My Lords, Clause 13 lays down the way in which the High Court or receiver appointed under the Bill should exercise the powers granted to them by the Bill. The purpose of the amendment is to make a modification to the clause, to enable it to apply also to procedures under the Bill in Scotland. The amendment accordingly inserts references to the powers of the Court of Session under the Bill. I beg to move.
On Question, amendment agreed to.
Lord Glenarthur Lord Glenarthur moved Amendment No. 69:
Page 15, line 10, leave out subsection (2) and insert—
("(2) Subject to the following provisions of this section, the powers shall be exercised with a view to making available for satisfying the confiscation order or, as the case may be, any confiscation order that may be made in the defendant's case the value for the time being of realisable property held by any person by the realisation of such property.
(2A) In the case of realisable property held by a person to whom the defendant has directly or indirectly made a gift caught by this Act, the powers shall be exercised with a view to realising no more than the value for the time being of the gift.
(2B) The powers shall be exercised with a view to allowing any person other than the defendant or the recipient of any such gift to retain or recover the value of any property held by him.
(2C) An order may be made or other action taken in respect of a debt owed by the Crown.").
The noble Lord said: My Lords, Clause 13(2) sets out the guiding principles that are to govern the exercise of restraint, charging and realisation powers under the Bill. This amendment seeks to clarify that guidance in the light of other changes with regard to those who have received gifts from the defendant. The changes suggested to the opening part of the subsection are purely drafting changes, reflecting the new terminology now adopted elsewhere in the Bill, but subsections (2A) and (2B) now differentiate between the two separate categories of third parties; those who have received property from the defendant for less than full value and those who happen to own only a part share in property which, for reasons that are nothing to do with them, is subject to realisation under the Bill.
Restraint, charging and realisation powers are to be exercised in respect of recipients of gifts with a view to recovering no more than the current value of the gift, but any of their assets may be confiscated for that purpose. Those third parties who have not received property from the defendant for less than full value are treated differently. Although they may find that property in which they have a joint interest with the defendant or another having to be realised to satisfy a confiscation order, in those circumstances the third party will be allowed to retain or recover the value of his property.
I ought to mention here that the High Court can give directions as to the order in which property is to be realised. It would therefore be open to the court to direct that property in which an innocent third party has an interest should be realised only after the property held by the defendant, legitimately or illegitimately obtained, has been realised.
The proposed subsection (2C) introduces a new element into the Bill by specifying that debts owed by the Crown are subject to restraint and realisation under the Bill. That will ensure that funds in, for example, National Savings will be as accessible to the courts as is money placed in a bank or building society. I beg to move.
On Question, amendment agreed to.
Lord Glenarthur Lord Glenarthur moved Amendment No. 70:
Page 15, line 20, leave out ("any other person") and insert ("of the recipient of any such gift").
The noble Lord said: My Lords, this is a consequential amendment. I beg to move.
On Question, amendment agreed to.
Lord Glenarthur Lord Glenarthur moved Amendment No. 71:
Page 15, line 22, leave out subsection (4).
The noble Lord said: My Lords, with the leave of the House, I will speak also to Amendments Nos. 74, 75 and 76. We thought it right in preparing this Bill that account should be taken of the possibility that assets belonging to a trafficker might be tied up in bankruptcy proceedings at the time when the confiscation order is made against him, or when a restraint order is made. The way in which the Bill at present deals with the matter is this.
Clause 5(4) provides that the Crown Court should take account of such assets when determining the amount of the confiscation order. That will ensure that

1105
if assets eventually become available notwithstanding the bankruptcy proceedings, then they can be confiscated. But Clause 13 (4) provides that no action should be taken to realise such property until bankruptcy proceedings are concluded. That means that provided the bankruptcy proceedings have already reached a stage at which it plainly would be unreasonable to give priority to confiscation over the demands of the insolvency procedure, the latter will have priority.
However, once the creditors have been satisfied, any remaining property would be realised to meet the confiscation order. Under recent changes in insolvency law, property vests in a trustee only at a very late stage in the proceedings. In particular, it may do so some time after a bankruptcy order is actually made. Looking at the matter again in the light of the new system, we believe it would be reasonable to bring forward to some extent the point at which we accord creditors in insolvency priority over the restraining and confiscation procedures set out in the Bill. We believe that the right point is the making of the bankruptcy order rather than when the assets vest in a trustee. The amendments are designed to achieve that end.
We are considering whether further amendments are required to deal with the liquidation of companies as opposed to individual insolvencies. If so, then I will seek to bring such amendments forward for consideration on Third Reading. I beg to move.
Lord Mishcon: My Lords, in case any noble Lords should think that these technical amendments are coming before the House very late, there are two points I should like to make in fairness. First, those of us who have been particularly interested in this Bill have again received explanations before the amendment came before the House today which have proved most helpful. Secondly, it must be borne in mind—and I may be referring to this point hereafter—that this Bill is a real precedent in our legislation in respect of confiscation and dealing with proceeds. Therefore, a heavy burden has fallen upon those who are guiding the Minister. We appreciate the reason why these technical amendments have, possibly, come before the House at an unusually late point.
Lord Harris of Greenwich: My Lords, I think that I would agree with what has been said by the noble Lord, Lord Mishcon. Confronted with 140 amendments to a Government Bill, it is appropriate to say something about them. I join with the noble Lord in thanking the Minister for having written to us with an explanation what were the Government's intentions in the series of amendments that we are now discussing. Having said that, I very much regret that some of those amendments have arrived relatively late in the day and that some are starred Government amendments.
Bluntly, we should not be having starred Government amendments after a substantial gap between the Committee and Report stages. However, I do not wish in any way to subtract from what has been said by the noble Lord, Lord Mishcon. We are much appreciative of the explanation that has been
1106
given. However, I think that we might in future have longer notice of the amendments that are tabled.
Lord Glenarthur: My Lords, I am grateful to both noble Lords for their comments on the way that we have tried to take this matter forward. I apologise for some amendments being so late, but some are extremely technical. They have required extensive consultations within Government, and outside. That is why, regrettably, even with the long period that has elapsed since the Committee stage, it has not been possible to bring them forward earlier. I only wish that it had been possible.
On Question, amendment agreed to.
7.30 p.m.
Lord Glenarthur Lord Glenarthur moved Amendments No. 72 to 76:
Page 15, line 24, leave out subsection (5).
Clause 14, page 15, line 28, leave out ("property available in respect of the defendant") and insert ("realisable property").
Page 15, line 34, leave out from beginning to ("the") and insert ("realisable property held by a person who has been adjudged bankrupt or whose estate has been sequestrated").
Page 15, line 35, leave out from ("which") to ("may") in line 36 and insert ("any property held by him").
After Clause 14, insert the following new clause:
("Bankruptcy of defendant etc.
.—(1) Where a person who holds realisable property is adjudged bankrupt—

(a) property for the time being subject to a restraint order made before the order adjudging him bankrupt, and

(b) any proceeds of property realised by virtue of section 8(4) or 11(5) or (6) of this Act for the time being in the hands of a receiver appointed under section 8 or 11 of this Act,

is excluded from the bankrupt's estate for the purposes of Part III of the Insolvency Act 1985.
(2) Where a person has been adjudged bankrupt, the powers conferred on the High Court by sections 8 to 12 of this Act or on a receiver so appointed or on the Court of Session by section [Recognition and enforcement in Scotland of orders and functions under sections 8, 11, 12 and 23], [Scotland: supplementary] and [Inhibitions and arrestments in Scotland] shall not be exercised in relation to—

(a) property for the time being comprised in the bankrupt's estate for the purposes of that Part,

(b) property in respect of which his trustee in bankruptcy may (without leave of court) serve a notice under section 154 or 155 of that Act (after-acquired property and tools, clothes etc. exceeding value of reasonable replacement), and

(c) property which is to be applied for the benefit of creditors of the bankrupt by virtue of a condition imposed under section 127(2)(c) of that Act.

(3) Nothing in that Act shall be taken as restricting, or enabling the restriction of, the exercise of the those powers.
(4) Subsection (2) above does not affect the enforcement of a charging order—

(a) made before the order adjudging the person bankrupt, or

(b) on property which was subject to a restraint order when the order adjudging him bankrupt was made.

(5) Where, in the case of a debtor, an interim receiver stands appointed under section 133 of that Act and any property of the debtor is subject to a restraint order—

(a) the powers conferred on the receiver by virtue of that Act do not apply to property for the time being subject to the restraint order,

(b) section 134(6) of that Act (receiver's immunity), as it applies to the receiver by virtue of section 133(3) of that Act, shall have effect in relation to such property as if references to such property were substituted for references to property which is not comprised in the bankrupt's estate, and

(c) any such property in the hands of the receiver shall be dealt with in such manner as the High Court may direct.

(6) Where a person is adjudged bankrupt and has directly or indirectly made a gift caught by this Act—

(a) no order shall be made under section 174 or 21 2 of that Act (avoidance of certain transactions) in respect of the

1107
making of the gift at any time when proceedings for a drug trafficking offence have been instituted against him and have not been concluded or when property of the person to whom the gift was made is subject to a restraint order or charging order, and

(b) any order made under either of those sections after the conclusion of the proceedings shall take into account any realisation under this Act of property held by the person to whom the gift was made.

(7) In any case in which a petition in bankruptcy is presented, or a receiving order or adjudication in bankruptcy is made, before the date on which Part III of that Act comes into force, this section has effect with the following modifications—

(a) for references to the bankrupt's estate for the purposes of Part III of the Insolvency Act 1985 there are substituted references to the property of the bankrupt for the purposes of the Bankruptcy Act 1914.

(b) for references to the Act of 1985 and sections 127(2)(c), 133, 174 and 212 of that Act there are respectively substituted references to the Act of 1914 and to sections 26(2), 8, 27 and 42 of that Act,

(c) the references in subsection (5) to an interim receiver appointed as there mentioned include, where a receiving order has been made, a reference to the receiver constituted by virtue of section 7 of the Act of 1914, and

(d) subsections (2)(b) and (5)(a) and (b) are omitted.")

The noble Lord said: My Lords, these amendments are consequential and I beg to move them en bloc.
On Question, amendments agreed to.
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 77:
After Clause 14, insert the following new clause:
("Sequestration in Scotland of defendant etc.
.—(1) Where the estate of a person who holds realisable property is sequestrated—

(a) property for the time being subject to a restraint order made before the award of sequestration, and

(b) any proceeds of property realised by virtue of section 8(4) or 11(5) or (6) of this Act for the time being in the hands of a receiver appointed under section 8 or 11 of this Act,

is excluded from the debtor's estate for the purposes of the Bankruptcy (Scotland) Act 1985.
(2) Where an award of sequestration has been made, the powers conferred on the High Court by sections 8 to 12 of this Act or on a receiver so appointed or on the Court of Session by section [Recognition and enforcement in Scotland of orders and functions under sections 8, 11, 12 and 23], [Scotland: supplementary] and [Inhibitions and arrestments in Scotland] shall not be exercised in relation to—

(a) property comprised in the whole estate of the debtor within the meaning of section 31(8) of that Act,

(b) any income of the debtor which has been odered, under subsection (2) of section 32 of that Act, to be paid to the permanent trustee or any estate which, under subsection (6) of that section, vests in the permanent trustee.

(3) Nothing in that Act shall be taken as restricting, or enabling the restriction of, the exercise of those powers.
(4) Subsection (2) above does not affect the enforcement of a charging order—

(a) made before the award of sequestration, or

(b) on property which was subject to a restraint order when the award of sequestration was made.

(5) Where, during the period before sequestration is awarded, an interim trustee stands appointed under the proviso to section 13(1) of that Act and any property in the debtor's estate is subject to a restraint order—

(a) the powers conferred on the trustee by virtue of that Act do not apply to property for the time being subject to the restraint order,

(b) the trustee, if he seizes or disposes of any property for the time being subject to the restraint order and, when he does so, believes and has reasonable grounds for believing that he is entitled (whether in pursuance of an order of a court or otherwise) to do so—

(i) shall not (except insofar as the same has been caused by his negligence) be liable to any person in respect of any
1108
loss or damage resulting from his seizure or disposal of the property; and

(ii) shall have a lien on the property, or the proceeds of its sale for such of the expenses of the sequestration as were incurred in connection with the seizure or disposal, and

(c) any such property in the hands of the trustee shall be dealt with in such manner as the High Court may direct.

(6) Where the estate of a person is sequestrated and he has directly or indirectly made a gift caught by this Act—

(a) no decree shall be granted under section 34 or 36 of that Act (gratuitous alienations and unfair preferences) in respect of the making of the gift at any time when proceedings for a drug trafficking offence have been instituted against him and have not been concluded or when property of the person to whom the gift was made is subject to a restraint order or charging order, and

(b) any decree made under either of those sections after the conclusion of the proceedings shall take into account any realisation under this Act of property held by the person to whom the gift was made.")

The noble and learned Lord said: My Lords, this new clause regulates the relationship between the provisions of this Bill and Scottish sequestrations in the same way as the preceding new clause in Amendment No. 76 regulates the relationship with English bankruptcies. This is necessary because the Bill extends to property in Scotland and because Scottish bankruptcies extend to property in England.
As I said, the relationship between the provisions of the Bill and the sequestrations under Scots law is regulated in exactly the same way as the Bill will now regulate the relationship with English bankruptcies. The basic policy is that once property has been made subject to a restraint order it cannot subsequently be sequestrated. Conversely, once property has been sequestrated it will not be possible to restrain and realise it under the provisions of this Bill.
If your Lordships wish, I can expand a little on the subsections but otherwise I beg to move.
On Question, amendment agreed to.
Viscount Davidson Viscount Davidson moved Amendment No. 78:
After Clause 14, insert the following new clause:
("Receivers: supplementary provisions.
.—(1) Where a receiver appointed under section 8 or 11 of this Act or in pursuance of a charging order takes any action—

(a) in relation to property which is not realisable property, being action which he would be entitled to take if it were such property,

(b) believing, and having reasonable grounds for believing, that he is entitled to take that action in relation to that property,

he shall not be liable to any person in respect of any loss or damage resulting from his action except in so far as the loss or damage is caused by his negligence.
(2) Any amount due in respect of the remuneration and expenses of a receiver so appointed shall, if no sum is available to be applied in payment of it under section 12(3)(a) of this Act, be paid by the prosecutor or, in a case where proceedings for a drug trafficking offence are not instituted, by the person on whose application the receiver was appointed.").
The noble Viscount said: My Lords, this new clause contains supplementary provisions relating to receivers who are appointed by the courts in connection with restraint or realisation of assets. Subsection (1) protects the receiver from liability in respect of loss or damage resulting from action he takes in relation to property which turns out not to be realisable property, provided he believes on reasonable grounds that he is entitled to take such action and does not act negligently.
This provision is intended to cover cases where the receiver acts against property which he believes reasonably, but in the event erroneously, to be realisable property. Of course, the holder of such property would be entitled to receive the proceeds of the realisation. I believe that such a provision is essential if the receiver is to be able to discharge his statutory duties speedily and effectively.
Your Lordships will recall that Clause 12(3), as amended, provides for the receiver's costs to be met out of confiscated assets. This will only be possible in cases where a confiscation order is imposed and the proceeds of realisation are sufficient to meet the receiver's costs in full. There will be other cases where the receiver is appointed but the defendant is acquitted or sufficient proceeds are realised. The amendment we propose provides that in such cases the receiver's costs, or the balance of them, shall be paid by the prosecutor. I beg to move.
On Question, amendment agreed to.
Clause 15 [Compensation]:
Lord Glenarthur Lord Glenarthur moved Amendment No. 79:
Page 16, line 25, leave out ("property available in respect of the defendant") and insert ("realisable property").
The noble Lord said: My Lords, this is a consequential amendment. I beg to move.
On Question, amendment agreed to.
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 80:
Page 16, line 40, leave out from ("or) to ("or) in line 42 and insert ("the Court of Session under section [Recognition and enforcement in Scotland of orders and functions under sections 8, 11, 12 and 23], [Scotland: supplementary] or [Inhibitions and arrestments in Scotland].").
The noble and learned Lord said: My Lords, this is purely a drafting amendment consequential upon the proposed deletion of Clause 16 from the Bill and the insertion of new clauses dealing with enforcement in Scotland of orders under the Bill. I beg to move.
On Question, amendment agreed to.
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 81:
After Clause 15, insert the following new clause:
("Recognition and enforcement in Scotland of orders and functions under sections 8, 11, 12 and 23.
.—(1) An order to which this section applies shall, subject to this section and section [Scotland: supplementary] of this Act, have effect in the law of Scotland but shall be enforced in Scotland only in accordance with this section and that section.
(2) A receiver's functions under or for the purposes of section 8, 11 or 12 of this Act shall, subject to this section and section [Scotland: supplementary] of this Act, have effect in the law of Scotland.
(3) If an order to which this section applies is registered under this section—

(a) the Court of Session shall have, in relation to its enforcement, the same power;

(b) proceedings for or with respect to its enforcement may be taken; and

(c) proceedings for or with respect to any contravention of such an order (whether before or after such registration) may be taken

as if the order had originally been made in that Court.
(4) Nothing in this section enables any provision of an order which empowers a receiver to do anything in Scotland under section 11(3)(a) of this Act to have effect in the law of Scotland.
(5) The orders to which this section applies are orders of the High Court—

(a) made under section 8, 11, 12 or 23 of this Act;

(b) relating to the exercise by that Court of its powers under those sections; or

(c) relating to receivers in the performance of their functions under sections 8, 11 or 12 of this Act,

but not including an order in proceedings for enforcement of any such order.
(6) References in this section to an order under section 8 of this Act include references to a discharge under section 7(4) of this Act of such an order.
(7) In this section and in sections [Scotland: supplementary] and [Proof in Scotland of High Court Orders], "order" means any order, direction or judgment (by whatever name called)
(8) Nothing in any order of the High Court under section 11(6) of this Act prejudices any enactment or rule of law in respect of the recording of deeds relating to heritable property in Scotland or the registration of interests therein.").
The noble and learned Lord said: My Lords, this is one of the new clauses. It provides for recognition and enforcement in Scotland of orders made in England by the High Court under the terms of this Bill. It provides that such orders will be given effect in Scotland and will be enforceable in the same way as orders made by the Court of Session once they have been registered in that court. This general pattern of automatic recognition and enforcement upon registration is precedented in the European Judgments Convention and in the Civil Jurisdiction and Judgments Act 1982. The clause also makes clear that receivers appointed under the terms of the Bill can exercise their functions in Scotland.
I shall be happy to explain in more detail if any of your Lordships wish; otherwise I beg to move.
On Question, amendment agreed to.
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 82:
After Clause 15, insert the following new clause:
("Scotland: supplementary.
.—(1) The Court of Session shall, on application made to it in accordance with rules of court for registration of an order to which section [Recognition and enforcement in Scotland of orders and functions under sections 8, 11, 12 and 23] applies, direct that the order shall, in accordance with such rules, be registered in that Court.
(2) Subsections (1) and (3) of section [Recognition and enforcement in Scotland of orders and functions under sections 8, 11, 12 and 23] of this Act and subsection (1) above are subject to any provision made by rules of court—

(a) as to the manner in which and conditions subject to which orders to which that section applies are to be enforced in Scotland;

(b) for the sisting of proceedings for enforcement of such an order;

(c) for the modification or cancellation of the registration of such an order if the order is modified or revoked or ceases to have effect.

(3) This section and section [Recognition and enforcement in Scotland of orders and functions under sections 8, 11, 12 and 23] are without prejudice to any enactment or rule of law as to the effect of notice or the want of it in relation to orders of ihe High Court.
(4) The Court of Session shall have the like power to make an order under section 1 of the Administration of Justice (Scotland) Act 1972 (extended power to order inspection of documents etc.) in relation to proceedings brought or likely to be brought under this Act in the High Court as if those proceedings had been brought or were likely to be brought in the Court of Session.
(5) The Court of Session may, additionally, for the purpose of—

(a) assisting the achievement in Scotland of the purposes of orders to which section [Recognition and enforcement in Scotland of orders and functions under sections 8, 11, 12 and 23] of this Act applies; or

(b) assisting receivers performing functions there under or for the purposes of section 8, 11 or 12 of this Act.

make such orders and do otherwise as seems to it appropriate.")
The noble and learned Lord said: My Lords, this clause contains certain supplementary provisions which will assist the Court of Session to carry out its role in relation to cross-Border enforcement of the Bill's provisions. I beg to move.
On Question, amendment agreed to.
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 83:
After Clause 15, insert the following new clause:
("Inhibition and arrestment of property in Scotland.
.—(1) On the application of the prosecutor, the Court of Session may, in respect of any property in Scotland, being property to which a restraint order registered in that Court relates—

(a) where the property is heritable, grant warrant for inhibition in respect of the property against any person with an interest in it; or

(b) where the property is moveable and would, if the person entitled to it were a debtor, be arrestable property grant warrant for arrestment of the property,

and on the grant of such a warrant the enactments and rules of law relating to inhibition and arrestment shall, subject to the provisions of this section, apply respectively as if the warrant had been granted on the dependence of an action for debt at the instance of the prosecutor against the person against whom the warrant for inhibition is granted or, as the case may be, whose property falls to be arrested.
(2) Section 155 of the Titles to Land Consolidation (Scotland) Act 1868 (effective date of inhibitions) shall apply in relation to an inhibition proceeding upon a warrant under this section.
(3) In the application of section 158 of the said Act of 1868 (recall of inhibitions) to an inhibition proceeding upon a warrant under this section, the references to a particular Lord Ordinary in the Court of Session shall be construed as reference to any such Lord Ordinary.
(4) Any power of the Court of Session to recall, loose or restrict inhibitions or arrestments shall, in relation to an inhibition or arrestment proceeding upon a warrant under this section and without prejudice to any other consideration lawfully applying to the exercise of the power, be exercised with a view to achieving the purposes specified in section 13 of this Act.
(5) The Court of Session shall have power to restrict the effect of an inhibition proceeding upon a warrant under this section to particular property.
(6) The fact that such an inhibition or arrestment has been executed as respects any property shall not prejudice the exercise of a receiver's powers under or for the purposes of section 8, 11 or 12 of this Act in respect of that property.
(7) An inhibition or arrestment under this section shall cease to have effect upon the restraint order to which it relates ceasing to have effect, and, where an inhibition ceases to have effect, it shall thereupon be the duty of the prosecutor to discharge it.").
The noble and learned Lord said: My Lords, this new clause gives power to the Court of Session to grant warrant for the inhibition or the arrestment of property in Scotland which is the subject of a restraint order imposed by the High Court in England and which has been registered in the Court of Session.
Inhibition and arrestment are measures of preventing the disposal of property which are peculiar to civil procedure and are effective against heritable and moveable property, respectively. They will represent useful weapons in the armoury of the courts
1112
in attacking the profits of drug trafficking crime. I beg to move.
On Question, amendment agreed to.
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 84:
After Clause 15, insert the following new clause:
("Proof in Scotland of High Court Orders.
.—(1) A document purporting to be a copy of an order under or for the purposes of this Act by the High Court and to be certified as such by a proper officer of that Court shall, in Scotland, be sufficient evidence of the order.").
The noble and learned Lord said: My Lords, the purpose of this new clause is to specify that a certified copy of an order made by the High Court in England would be sufficient evidence of the order in Scotland. This is necessary in particular to enable the procedure for registration in the Court of Session to be carried out. I beg to move.
On Question, amendment agreed to.
Clause 16 [Enforcement of orders in Scotland]:
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment No. 85:
Leave out Clause 16.
The noble and learned Lord said: My Lords, this is consequential upon the introduction of the new clauses which make it unnecessary to retain Clause 16 in the Bill. I beg to move.
On Question, amendment agreed to.
Clause 17 [Assisting another to retain the benefit of drug trafficking]:
Lord Glenarthur Lord Glenarthur moved Amendment No. 86:
Page 17, line 38, at beginning insert ("Subject to subsection (2A) below").
The noble Lord said: My Lords, with the leave of the House, I shall speak also to Amendments Nos. 89 and 90. These amendments are designed to implement the recommendation put forward by the Select Committee on Home Affairs in another place that banks should be given statutory protection against actions for breach of confidence if they volunteer to the authorities suspicions that a client's finances appear to be connected with drug trafficking.
The noble and learned Lord, Lord Denning, tabled an amendment on this matter in Committee but withdrew it pending the outcome of our consultations with the banks about the Select Committee's recommendation. I know that the idea found a good deal of sympathy among your Lordships. Indeed, we are indebted to your Lordships for the proposals put forward first by the noble and learned Lord and supported by others. Some of the features in those amendments will be apparent in the amendment now before us.
I am pleased to report that the banks were very positive in their response to the recommendation made by the Select Committee. The proposed subsection (2A) of Clause 17 is intended to give them statutory protection from any action for breach of confidence or duty arising out of their contractual obligations to their clients. However, in considering

1113
these issues we agreed with the noble and learned Lord, Lord Denning, that there was no reason to confine the protection to banks. Like him, we wish to include other financial institutions such as building societies. Indeed, we wish to go wider and cover all who might develop suspicions that a person's finances were connected with drug trafficking but might at present feel inhibited by their contractual obligations from disclosing such suspicions. This would include not only those who handle the suspect funds but others such as auditors, accountants and employees who might notice something suspicious about the way funds were handled without themselves being involved.
When we considered this matter during Committee there was some discussion as to the appropriate rank of officer to whom information ought to be disclosed. The Government have looked at this question with very great care and have taken the view that it is unnecessary to impose any restriction here. Some people might feel more ready to disclose their suspicions if they could approach an officer with whom they have had some previous contact. The amendment therefore just refers to "a constable", which, by virtue of Clause 30, includes an officer of Customs and Excise.
The noble and learned Lord, Lord Denning, in the amendment that I mentioned earlier, suggested that financial institutions should have protection not only for their disclosure but for any action subsequently taken on the directions of the police. Though we were uneasy about the concept of the police giving directions to the banks, we could see very strong advantages in the banks and others being able to continue to handle a suspected trafficker's account, with the knowledge of the police or Customs, while his activities were being investigated.
The difficulty is that Clause 17 as presently drafted effectively prevents that. Once a bank's suspicions had been aroused, it would have little option but to close the suspect's account; otherwise, inevitably it would at some point commit the laundering offence. But closing the account would warn the client that he was under suspicion. The amendment would thus allow a person or institution to continue to handle the suspected trafficker's money provided that the police or Customs had been or were immediately to be informed.
I believe that these new provisions will be of considerable assistance to the investigating authorities and I am most grateful to the noble and learned Lord who sadly is not in his place tonight for his initiative in raising this matter of co-operation between the financial institutions and those investigating drug trafficking. I beg to move.
Lord Mishcon: My Lords, perhaps I may make the position of those sitting on these Benches absolutely clear. From the very start of this legislation—and indeed before it—we were committed to doing all that we possibly could to assist the Government in dealing with this notoriously evil trade. Were it in connection with any other matter at all I should hesitate before coming to this Dispatch Box and saying on behalf of my noble friends that we agree to a statutory provision which is absolutely unprecedented in our criminal law.
1114
It literally means anyone. It is not even limited to a bank. It covers an employee under a contract of service which, if not expressly then by implication, says, stipulates or implies that that employee has to be loyal to his employer and does not disclose his employer's secrets; or a bank, which shares the sacred relationship that has existed over the centuries between bank and customer. All that goes out of the window of our law—if I may put it that way. In its place, if somebody has a reasonable belief that the proceeds at which he is looking—whether he is concerned with them as an accountant, auditor, bank, building society or post office—have something to do with drug trafficking, then he can inform an officer of the law. That is whether the officer is a police constable or a Customs official. If he has a reasonable belief, he will be exonerated from any contractual obligation or any confidential obligation.
I am making this utterance very seriously because it ought to be on the record. I hope that your Lordships will agree with this amendment; but I hope that it will be recorded in our Official Report for all time that this House has not allowed this amendment to become a precedent, whether in revenue law or in any other aspect of our criminal law, to a like provision.
These are exceptional circumstances, because our country—and indeed lands beyond our country—are threatened with this absolute plague, and we have to deal with it exceptionally as we have dealt with terrorism. However, this is not to be an open invitation to have these provisions copied hereafter.
7.45 p.m.
Lord Harris of Greenwich: My Lords, I should like to begin by expressing the regret of the noble and learned Lord, Lord Denning, that he is unable to be present today. As the noble Lord, Lord Glenarthur, has said, this was an amendment that was put down by the noble and learned Lord and supported from these Benches. Unhappily, the noble and learned Lord has an engagement which made it impossible for him to be with your Lordships, though he wants to reassure the Minister that he will do his best to be present on the Third Reading of this Bill and in the interval between now and then he will wish to consider the terms of this particular amendment, in order to ensure that as far as he is concerned in his view it is wholly adequate for its purpose.
Having said that, perhaps I may say, with respect to the noble Lord, Lord Mishcon—whose views on this matter I share almost completely—I am afraid that on this particular occasion I am unable to agree with him. As I think he recognises, I hope that this provision will indeed provide a precedent for further action in this area. I hope to explain why, in my view,it would be impossible to limit a provision of this sort to drug trafficking; to explain why that is so; and to express my concern that the amendment deals exclusively with the issue of drug trafficking. It does so for the simple reason that that is the issue covered by the Long Title of the Bill.

1115
Amendment No. 89 deals with the situation in which:
"a person discloses to a constable a suspicion or belief that any funds or investments are derived from or used in connection with drug trafficking".
But how does the bank manager or the manager of a building society know or have an honest belief that this money in fact relates to drug trafficking?
Indeed, what happens when he is confronted with a customer or client who comes in and deposits a large sum of money? Not so long ago in a bank in this city a sum of several hundred thousand pounds was passed over the counter in used £5 and £10 notes, and of course there was no disclosure made to anyone. The reasons why there was no disclosure was because of the principle of confidentiality. The matter only arose later as a result of subsequent police inquiries.
In the future, if a bank manager suspects that the person concerned has criminal connections, then he will have to ask himself the further question: "Do I believe that this money is part of a laundering deal in relation exclusively to drug trafficking?" He will only be protected if he forms that belief, but how in fact will the bank manager form that view? He may believe that it arises from serious crime but how will he know that it is drug trafficking?
I want to know from the Minister something which is exactly the reverse of what the noble Lord, Lord Mishcon, has asked for. Is the Minister prepared to give some form of undertaking that the Government are prepared to look at applying provisions of this character to other serious criminal offences?
I must explain why that is necessary. First, I think that it is an illusion to imagine that drug trafficking can be treated as an isolated crime: it cannot. If one asks any senior police officer with experience in this area in this country, in any other part of Western Europe or in the United States, he will say that we are confronted with the existence of highly sophisticated criminal syndicates. The operators move effortlessly from one form of serious crime to another: from drug trafficking to armed robbery, from counterfeit currency operations to large-scale fraud and then back again to drug trafficking. As I indicated, in a recent case—and there are no doubt plenty of other examples—a large sum of money was passed over the counter of a bank in London in what subsequently became clear were highly suspicious circumstances.
I repeat that what I want explained by the noble Lord, Lord Glenarthur, is how the bank manager can satisfactorily answer the question to himself, not that the money arises from a crime but that it arises in circumstances making it likely that it relates exclusively to drug trafficking. If he says that the Government are taking this step at the moment because this is a Bill dealing with drug trafficking but that they will apply the provision more widely to a limited category of serious offences when we come to the Criminal Justice Bill which will be before us in the next Session of Parliament, that would be an adequate answer. But if he says that the provision will relate exclusively to drug trafficking and there is no thought in the Government's mind at the moment that in the short term they will extend it, I must tell him that this
1116
amendment will have remarkably little effect. The bank manager will never be able satisfactorily to persuade himself that sums of money paid over in highly suspicious circumstances relate exclusively to drug trafficking. That is an issue that I very much hope he will answer today.
Arising directly from that point, the noble Lord, Lord Glenarthur, said that there had been discussions and negotiations (and obviously that is so) with the banks and no doubt with the building societies too. They have agreed, of course, that they will implement such a provision, but how do they intend to monitor it and police it themselves? That raises complicated questions regarding the management of financial institutions. How will they deal with that?
Lastly—and the Minister and I have been in correspondence on this matter fairly recently—there is the question of how the legislation will apply to the Channel Islands and the Isle of Man. As he knows from the correspondence, a major criminal investigation is taking place in the Isle of Man at the moment which has direct implications for banks in this country, in the United States and in the British Virgin Islands. He indicated in his letter what the insular authorities propose to do, but I should be grateful if he would repeat that this afternoon because it is desirable to have it on the record.
I do not propose to repeat the arguments that we had on the last occasion. As the noble Lord knows, neither the noble and learned Lord, Lord Denning, nor I are convinced that the voluntary system by itself will work. We welcome the move in the direction that is now being taken, but in our view it is considerably less than half a loaf.
As the noble and learned Lord and I pointed out at the Committee stage, the situation in the United States is quite different. Under the terms of their bank secrecy legislation there is a requirement that banks in the United States should disclose any payment of over 10,000 dollars paid across the counter. The noble Lord, Lord Glenarthur, explained why the Government at the moment were not prepared to move in that direction, though his colleague, the Parliamentary Under-Secretary, has indicated that there might be movement in the future; and that we welcome. But the American authorities—and this comes back to the point of substance—do not apply their legislation and direct it exclusively against drug traffickers. That is what we are doing in this Bill so far as the banks and financial institutions are concerned.
At first sight—and one has only had the opportunity to consider the matter over the past 24 hours—it seems to me a matter of serious concern that at the moment the Bill is drafted in this form. If it is to be effective and if banks are to be encouraged to disclose such information when they entertain substantial suspicion, what a number of us are concerned about is that they will be inhibited from disclosing it because the new clause is drawn in such a way that they will be protected only if they form an honest belief that the money that is being paid across the counter is basically the proceeds of drug trafficking. For the life of me, I do not see how they can possibly entertain that belief.
Lord Glenarthur: My Lords, I note the comments made by both noble Lords about the amendment. I

1117
particularly note the remarks of the noble Lord, Lord Mishcon, when he wanted to get on record the fact that we were dealing with a measure, as has been said on many occasions, of unusual character because it is dealing with a peculiarly vile trade. I fully understand his concern about that and also his hope that the measure would not be extended to other sorts of crime, though the noble Lord, Lord Harris, did not agree with him.
Let me start by answering the first question of the noble Lord, Lord Harris, and then come back to the point raised by the noble Lord, Lord Mishcon, in greater detail. It may be difficult for the bank to establish that money is money from drug proceeds in the absence of express information or knowledge about the suspect or his associates. But in some cases the information, or indeed circumstantial evidence, may be available. Furthermore, the bank can disclose a suspicion. Certainly that information or evidence is not needed in order for the protection offered by the amendment to apply.
There will be cases in which a bank suspects that money is the proceeds of crime but cannot say whether it is the proceeds of drug trafficking. In order to avoid the possibility of the laundering offence being committed the bank would be wise to proceed on the basis that it is drugs money, and the new protection would extend to it if it did. Although one cannot guarantee it, if the banks follow the procedure that I have outlined not only are they protected to that extent but they will also have a pretty good idea that that is where the money has come from.
8 p.m.
That leads me to the point raised by the noble Lord, Lord Mishcon, and argued against by the noble Lord, Lord Harris, that that proposal should not be extended in any other circumstances or, if it were, it would be a matter which would be debated hotly. I have no doubt that if it were to come forward in any other matter, that is what would happen and the noble Lord would state his ground clearly.
I shall bear in mind what the noble Lord, Lord Mishcon, says. I do not suppose that he would expect me to say otherwise. I shall have to balance that by saying that I shall bear in mind clearly what the noble Lord, Lord Harris, has said. There does not seem to be anything else that I can say because nothing has yet appeared which has that measure contained in it.
Lord Mishcon: My Lords, I interrupt only to ask the noble Lord whether he could make a clear statement for the record that the Government understand perfectly well that this is an exceptional power in exceptional circumstances. That is all I ask for.
Lord Glenarthur: My Lords, I can say that it is an exceptional power and the circumstances are exceptional. I can also say that from time to time other exceptional circumstances arise but I cannot say precisely what they will be.
As to how the banks will monitor the disclosure system, the banks have been extremely positive in their response to the Home Affairs Committee recommendations. I am sure that they want the system
1118
to work effectively. Monitoring arrangements must primarily be a matter for the banks. I do not think that the noble Lord would expect otherwise. We could discuss the whole question of monitoring with them, and that may well be the sensible way to proceed.
As for the Channel Islands, the Home Office has kept the island authorities in close touch with the Government's reasoning behind the Bill. The islands have all given assurances that they will enact parallel legislation to ensure that so far as possible they are not used as havens for the movement of drugs or the proceeds of drugs. To that end, Orders in Council for each of the islands will be drafted as soon as the Bill has been debated by Parliament, to apply similar provisions in the islands to allow for reciprocity among the respective jurisdictions.
In the meantime, I understand that there is close co-operation between enforcement agencies here and in the islands. I saw evidence of that at the end of last year on all matters concerning drugs. There is no doubt that the islands are determined that their position as offshore finance centres should not be exploited for the laundering of money derived from drug trafficking. I hope that that gives the noble Lord the reassurance for which he is looking.
On Question, amendment agreed to.
Viscount Davidson Viscount Davidson moved Amendment No. 87:
Page 18, line 6, leave out ("or having reasonable grounds to suspect").
The noble Viscount said: My Lords, some concern was expressed in another place about the formulation of the laundering offence and, in particular, about the implications for honest bank staff who might inadvertently find themselves handling the proceeds of drug trafficking. The Government gave careful consideration to the appropriate mental element of the offence when preparing the legislation and proposed that the launderer should have to act knowing or suspecting or having reasonable grounds to suspect that the person he was assisting was or had been involved in drug trafficking.
The objective test of, "having reasonable grounds to suspect" was included because we wanted to ensure that a person would not escape conviction by turning a blind eye to circumstances which should have aroused his suspicion. However, in the light of the concern expressed in another place and in view of the seriousness of the offence and the severity of its penalties, we have concluded on reflection that it would be right to omit that objective test so that the prosecution will now have to establish actual knowledge or suspicion on the part of the defendant. It would not be right to leave open the possibility of punishing mere inadvertence. I beg to move.
Lord Mishcon: My Lords, this is a very appropriate amendment.
On Question, amendment agreed to.
Viscount Davidson Viscount Davidson moved Amendment No. 88:
Page 18, line 11, after ("which") insert ("in whole or in part").
The noble Viscount said: My Lords, Clause 17(2) provides that the laundering offence will be committed

1119
not only where the property handled is itself the proceeds of drug trafficking but when it represents such proceeds directly or indirectly in the hands of the trafficker. However, property is often acquired with funds from a variety of sources. A particular asset may therefore be acquired partly with the proceeds of drug trafficking and partly from other funds. This amendment will ensure that a person can be proceeded against for the laundering offence where it can be shown that the property handled was at least partly acquired by the trafficker from the proceeds of drug trafficking. I beg to move.
On Question, amendment agreed to.
Lord Glenarthur Lord Glenarthur moved Amendments Nos. 89 to 91:
Page 18, line 13, at end insert—
("(2A) Where a person discloses to a constable a suspicion or belief that any funds or investments are derived from or used in connection with drug trafficking or any matter on which such a suspicion or belief is based—

(a) the disclosure shall not be treated as a breach of any restriction upon the disclosure of information imposed by contract, and

(b) if he does any act in contravention of subsection (1) above and the disclosure relates to the arrangement concerned, he does not commit an offence under this section if the disclosure is made in accordance with this paragraph, that is—

(i) it is made before he does the act concerned, being an act done with the consent of the constable, or

(ii) it is made after he does the act, but is made on his initiative and as soon as it is reasonable for him to make it.").

Page 18, line 22, at end insert—
("or

(c) that—

(i) he intended to disclose to a constable such a suspicion, belief or matter as is mentioned in subsection (2A) above in relation to the arrangement, but

(ii) there is reasonable excuse for his failure to make disclosure in accordance with subsection (2A)(b) above.").

Clause 19, page 20, line 39, leave out ("prosecuting authority") and insert ("prosecutor").
On Question, amendments agreed to.
Clause 20 [Order to make evidence available]:
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment Nos. 92 to 102:
Page 21, line 13, after ("constable") insert ("or, in Scotland, the procurator fiscal").
Page 21, line 14 after ("judge") insert ("or, in Scotland, the sheriff").
Page 21, line 17, after ("judge") insert ("or, as the case may be, the sheriff").
Page 21, line 26, after ("judge") insert ("or, as the case may be, the sheriff").
Page 22, line 9, after ("judge") insert ("or, as the case may be, the sheriff").
Page 22, line 11, after ("constable") insert ("or, in Scotland, the procurator fiscal").
Page 22, line 14, after ("Rules") insert ("or, as respects Scotland, rules of court").
Page 22, line 18, after ("order") insert ("or a Circuit judge").
Clause 21, page 22, line 37, after ("constable") insert ("or, in Scotland, the procurator fiscal").
Clause 21, line 38, after ("judge") insert ("or, in Scotland, the sheriff").
Clause 21, line 40, after ("judge") insert ("or, as the case may be, the sheriff").
The noble and learned Lord said: My Lords, the amendments make the adaptations to Clauses 20 to 22 that are necessary for their operation in Scotland in order to ensure that investigations into drug trafficking can be pursued effectively throughout Great Britain. It is necessary to ensure that the Scottish authorities are equipped with adequate powers to undertake any investigations required.
The amendments to Clauses 20 and 21 contained in Amendments Nos. 92 to 102 will therefore enable the procurator fiscal to apply to a sheriff for an order to make information available to the police or for a warrant empowering the police to search for material if that is necessary in connection with an investigation into drug trafficking. This statutory provision is required because the existing common law powers of the police in Scotland would be unlikely to enable such wide investigations to be made at a sufficiently early stage in the investigation.
It is of course essential in cases of suspected drug trafficking that the police should be able to act at an early stage not only to gather information which may be needed as evidence in the proceedings but to identify assets which may need to be made subject to restraint orders.
The amendment to Clause 22 and Amendment No. 109 provide Scottish definitions for certain terms used in Clauses 20 and 21. As it stands, Clause 22 applies definitions of terms by reference to the Police and Criminal Evidence Act 1984 and that Act does not extend to Scotland.
The only point that I would raise on this matter is that we have not attempted to provide an exclusion equivalent to "excluded material" for there appears to be no similar exclusion at common law in Scotland for police powers of search. It seems inappropriate therefore to provide one especially for the purposes of these provisions. I would therefore, with the leave of the House, beg to move Amendments Nos. 92 to 102.
On Question, amendments agreed to.
Viscount Davidson Viscount Davidson moved Amendments Nos. 103 to 107:
Page 22, line 45, at end insert—
("(b) that the conditions in subsection (2A) below are fulfilled, or
(c) that the conditions in subsection (3) below are fulfilled.
(2A) The conditions referred to in subsection (2)(b) above are—

(a) that there are reasonable grounds for suspecting that a specified person has carried on or has benefited from drug trafficking, and").

Page 23, line 1, leave out ("subsection (3) of that section") and insert ("section 20(4)(6) and (c) of this Act").
Page 23, line 2, leave out ("but") and insert ("and (c)").
Page 23, line 14, leave out from ("material") to end of line 15.
Page 23, line 16, leave out ("Those conditions") and insert ("The conditions referred to in subsection (2)(c) above").
The noble Viscount said: My Lords, these are all drafting amendments. I beg to move.
On Question, amendments agreed to.
Clause 22 [Sections 20 and 21: supplementary provisions, 1985]:
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendment Nos. 108 and 109:
Page 24, line 10, at beginning insert ("Subject to subsection (3) below,").
Page 24, line 12, at end insert—
(" (3) As respects Scotland, in sections 20 and 21 of this Act the references to excluded material shall be omitted and—
"items subject to legal professional privilege" means—

(a) communications between a professional legal adviser and his client;

(b) communications made in connection with or in contemplation of legal proceedings and for the purposes of these proceedings,

being communications which would in legal proceedings be protected from disclosure by virtue of any rule of law relating to the confidentiality of communications; and
"premises" includes any place and, in particular includes—

(a) any vehicle, vessel, aircraft or hovercraft;

(b) any offshore installation within the meaning of section 1 of the Mineral Workings (Offshore Installations) Act 1971: and

(c) any tent or movable structure."

The noble and learned Lord said: My Lords, I have spoken to this amendment and Amendment No. 109. I beg to move the amendments.
On Question, amendments agreed to.
Clause 23 [Disclosure of information held by government departments]:
Lord Glenarthur Lord Glenarthur moved Amendment No. 110:
Page 24, line 13, leave out from ("below") to ("the") in line 15.
The noble Lord said: My Lords, with the leave of the House, I should like also to speak to Amendments Nos. 112 to 119. This group of amendments relates to procedures set out in Clause 23 for the High Court to order the disclosure of information held by government departments. At present, such an order can only be made after proceedings have been instituted against a person for a drug trafficking offence. One of the purposes for which disclosure may he required is to facilitate the restraint of the suspect's assets. As a result of amendments to the Bill in another place, the High Court in certain circumstances will be able to make a restraint order before proceedings have been instituted. In such cases it would be convenient if the High Court was able to hear applications for disclosure of information at the same time. The proposed amendments will enable it to do so.
As presently drafted, the Bill allows the High Court to order material to be disclosed direct to the receiver or to authorise disclosure to the prosecuting authority but contains no guidance on the circumstances in which the receiver or prosecutor may in turn disclose that material to others. The amendments that we propose seek to set out the circumstances in which receivers or prosecutors can pass on information disclosed to them under Clause 23. First, the High Court will have to give the department concerned the opportunity to make representations before it authorises the disclosure of material to the receiver. The receiver will then be able to make further disclosure to the extent necessary for the exercise of his functions under the Act.
Where the court has authorised disclosure to the prosecutor, the information may be further disclosed for the purposes of functions relating to drug trafficking. This is intended to allow the disclosure of information that might be useful to the police or Customs in connection with a drug trafficking investigation whether or not that investigation relates to the same case. The change proposed to subsection (7) would bring the obligation imposed on the person who receives the order for disclosure into line with equivalent provisions in other recent legislation, notably Section 197 of the Insolvency Act 1985. I believe that these amendments serve an important purpose by clarifying the way in which the procedure set out in Clause 23 is to operate and the purposes for which the information obtained is to be used. I beg to move.
On Question, amendment agreed to.
Viscount Davidson Viscount Davidson moved Amendment No. 111:
Page 24, line 16, leave out ("prosecuting authority") and insert ("prosecutor").
The noble Viscount said: My Lords this amendment is consequential on Amendment No. 4. I beg to move.
On Question, amendment agreed to.
Lord Glenarthur Lord Glenarthur moved Amendments Nos. 112 to 119:
Page 24, leave out lines 19 and 20 and insert ("produced to the court within such period as the court may specify.
(1A) The power to make an order under subsection (1) above is exercisable if—

(a) the powers conferred on the court by sections 8(1) and 9(1) of this Act are exercisable by virtue of subsection (1) of section 7 of this Act, or

(b) those powers are exercisable by virtue of subsection (2) of that section and the court has made a restraint or charging order which has not been discharged;

but where the power to make an order under subsection (1) above is exercisable by virtue only of paragraph (b) above, subsection (3) of section 7 of this Act shall apply for the purposes of this section as it applies for the purposes of sections 8 and 9 of this Act.").
Page 24, line 33, leave out ("disclosure") and insert ("production").
Page 24, line 37, leave out ("disclosure") and insert ("production").
Page 24, line 38, leave out ("disclosure") and insert ("material").
Page 24, line 38, after ("to") insert ("contain information that would").
Page 24, line 40, leave out from ("appointed") to end of line 7 on page 25 and insert (under sections 8 or 11 of this Act or in pursuance of a charging order.
(4) The court may by order authorise the disclosure to such a receiver of any material produced under subsection (1) above or any part of such material; but the court shall not make an order under this subsection unless a reasonable opportunity has been given for an officer of the department to make representations to the court.
(5) Material disclosed in pursuance of an order under subsection (4) above may, subject to any conditions continued in the order, be further disclosed for the purposes of the functions under this Act of the receiver or the Crown Court.
(5A) The court may by order authorise the disclosure to a person mentioned in subsection (5B) below of any material produced under subsection (1) above or any part of such material; but the court shall not make an order under this subsection unless").
Page 25, line 13, at end insert—
(" (5B) The persons referred to in subsection (5A) above are—

(a) any member of a police force,

(b) any member of the Crown Prosecution Service, and

1123

(c) any officer within the meaning of the Customs and Excise Management Act 1979.

(5C) Material disclosed in pursuance of an order under subsection (5A) above may, subject to any conditions contained in the order, be further disclosed for the purposes of functions relating to drug trafficking.
(5D) Material may be produced or disclosed in pursuance of this section notwithstanding any obligation as to secrecy or other restriction upon the disclosure of information imposed by statute or otherwise.").
Page 25, line 22, leave out subsection (7) and insert—
(" (7) the person on whom such an order is served—

(a) shall take all reasonable steps to bring it to the attention of the officer concerned, and

(b) if the order is not brought to that officer's attention within the period referred to in subsection (1) above, shall report the reasons for the failure to the court:

and it shall also be the duty of any other officer of the department in receipt of the order to take such steps as are mentioned in paragraph (a) above.").
On Question, amendments agreed to.
Clause 26 [Prohibition of supply etc. of articles for administering controlled drugs]:
Lord Glenarthur Lord Glenarthur moved Amendments Nos. 120 to 124:
Page 27, line 9, after ("used") insert ("in circumstances where the administration is unlawful").
Page 27, line 13, leave out from beginning to ("the") in line 17 and insert—
(" (3) A person who supplies or offers to supply any article which may be used to prepare a controlled drug for administration by any person to himself or another believing that the article is to be so used in circumstances where the administration is unlawful is guilty of an offence.
(3A) For the purposes of this section, any administration of a controlled drug is unlawful except.
(a)").
Page 27, line 20, leave out ("would not be") and insert ("is not").
Page 27, line 22, leave out ("in").
Page 27, line 25, leave out ("would not be") and insert ("is not").
The noble Lord said: My Lords, in moving these amendments en bloc it may be convenient to your Lordships if I speak also to Amendment No. 140. Clause 26 makes it an offence to supply items that are to be used for the administration of a controlled drug. During discussion of this clause in Committee, I mentioned that my right honourable friend the Home Secretary was considering the possibility of extending the scope of the new offence to cover items used to prepare drugs for administration as well as those used simply for administering the drugs. I was grateful for the support that a number of your Lordships expressed for the idea of extending the new offence in this way. I should now like to propose that we do indeed extend the scope of Clause 26 to cover items used in preparing controlled drugs for administration.
As I said in Committee, the cocaine kits which were the immediate cause of public concern usually contain only one item that is used for administering the drug. All the others are used for preparing it. If that one item were to be removed from the kit and sold separately, it would be possible to offer for sale a cocaine preparation kit that would be just as repugnant as the cocaine kits themselves. The burden will of course remain on the prosecution to prove that the supplier believed that the articles he was selling would be used in connection with drug misuse in order to safeguard the position of honest shopkeepers. The draft clause adopted in
1124
Committee provided a defence for a supplier who believed on reasonable grounds that the items he was supplying would be used for medical purposes.
We are concerned that putting the onus on the defendant to show that he held such a belief would cause difficulties for those who make or distribute equipment commonly used in the lawful preparation of a controlled drug. A manufacturer or wholesaler particularly would have no belief about the ultimate use of any individual item supplied by him. So the defence would be difficult to establish. We are therefore now proposing that the burden should be on the prosecution to establish that the article was supplied in the belief that the ensuing administration of the drug would be unlawful. Where the articles in question are cocaine kits and similar items, such belief should not be difficult for the prosecution to establish because such items are unlikely to be used for medical purposes. I beg to move.
Lord Mishcon: My Lords, these are sensible and useful amendments.
On Question, amendments agreed to.
Lord Glenarthur Lord Glenarthur moved Amendment No. 125:
After Clause 26, insert the following new clause:
("Power to inspect Land Register etc.
.—(1) The Chief Land Registrar (in this section referred to as "the registrar") shall, on an application under subsection (2) or (4) below made in relation to a person specified in the application or to property so specified, provide the applicant with any information kept by the registrar under the Land Registration Act 1925 which relates to the person or property so specified.
(2) An application may be made by—

(a) any police officer not below the rank of superintendent.

(b) any Crown Prosecutor, or

(c) any person commissioned by the Commissioners of Customs and Excise not below the rank of senior executive officer,

and on an application under this subsection an appropriate certificate shall be given to the registrar.
(3) In subsection (2) above, "appropriate certificate" means a certificate—

(a) that there are reasonable grounds for suspecting that there is information kept by the registrar which is likely to be of substantial value (whether by itself or together with other information) to an investigation into drug trafficking, or

(b) that—

(i) a person specified in the certificate has committed or there are reasonable grounds for suspecting that a person so specified has committed a drug trafficking offence, and

(ii) there are reasonable grounds for suspecting that there is information kept by the registrar which is likely to be of substantial value (whether by itself or together with other information) to an investigation into whether the person so specified has benefited from drug trafficking or in facilitating the recovery of the value of his proceeds of drug trafficking.

(4) An application may be made by a receiver appointed under section 8 or 11 of this Act and on an application under this subsection there shall be given to the registrar—

(a) a document certified by the proper officer of the court to be a true copy of the order appointing the receiver, and

(b) a certificate that there are reasonable grounds for suspecting that there is information kept by the registrar which is likely to facilitate the exercise of the powers conferred on the receiver in respect of the person or property specified in the application.

(5) The reference in subsection (1) above to the provision of information is a reference to its provision in documentary form.").
The noble Lord said: My Lords, the Bill contains a number of provisions designed to help trace and

1125
recover the proceeds of drug trafficking. This proposed new clause adds to them. Information held by the Land Registry may well be helpful in identifying the assets of drug traffickers. The police and the Crown Prosecution Service may already obtain access to such information for the purposes of investigating crime and recovering stolen property. This clause extends those powers to officers of Customs and Excise where the investigation relates to drug trafficking and also to receivers appointed under the Bill where the information is likely to help them in the restraint or realisation of a trafficker's assets. The proposed new clause provides one more way in which the extent of the trafficker's property can be ascertained. It will therefore contribute to the effectiveness of the confiscation order. I beg to move.
8.15 p.m.
Lord Mishcon: My Lords, I shall not detain the House, but it is remarkable to me that whereas this confidential information by bankers and other financial institutions can be given to a constable, when one wants to make an application to the chief land registrar for a copy of entries it cannot be made by anyone below the rank of superintendent. I merely smile and sit down.
On Question, amendment agreed to.
Clause 30 [Interpretation]:
Lord Glenarthur Lord Glenarthur moved Amendments Nos. 126 and 127:
Page 28, leave out lines 15 to 18.
Page 28, leave out lines 23 and 24.
The noble Lord said: My Lords, in moving these two amendments en bloc I should like to speak also to Amendments Nos. 130, 131, 132 and 134. These amendments relate to the interpretation clause of the Bill. In part, they are consequential on the amendments agreed earlier and introduce various new terms to the clause. We are also proposing the insertion of a list of expressions used in the Bill which we hope will provide clear signposting round this complex legislation.
On Question, amendments agreed to.
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendments Nos. 128 and 129:
Page 29, line 41, after ("personal") insert (", heritable or movable").
Page 29, line 42, after ("intangible") insert ("or incorporeal").
The noble and learned Lord said: My Lords, these two amendments provide the necessary modifications to the definition of property in the Bill to take account of the terminology of Scots law. I beg to move.
On Question, amendments agreed to.
Lord Glenarthur Lord Glenarthur moved Amendments Nos. 130 to 135:
Page 29, leave out lines 43 and 44.
Page 30, leave out lines 1 to 3.
Page 30,leave out lines 4 to 7 and insert—
("(1A) The expressions listed in the left hand column below are respectively defined or (as the case may be) fall to be
1126
construed in accordance with the provisions of this Act listed in the right hand column in relation to those expressions.

Expression

Relevant provisions

Benefited from drug trafficking

Section 1(3)

Charging order

Section 9(2)

Confiscation order

Section 1(8)

Dealing with property

Section 8(5)

Defendant

Section 1(8)

Gift caught by this Act

Section 5(10)

Making a gift

Section 5(11)

Proceeds of drug trafficking

Section 2(1)(a)

Realisable property

Section 5(1)

Restraint order

Section 8(1)

Value of gift, payment or reward

Section 5

Value of proceeds of drug trafficking

Section 2(1)(b)

Value of property

Section 5(7).").

Page 30, line 22, at end insert—
("(6A) References to property held by a person include a reference to property vested in his trustee in bankruptcy, permanent or interim trustee within the meaning of the Bankruptcy (Scotland) Act 1985 or liquidator.
(6B) References to an interest held by a person beneficially in property include a reference to an interest which would be held by him beneficially if the property were not so vested.").
Page 30, line 26, leave out subsection (8).
Clause 31, page 31, line 36, at end insert—
("(1A) In section 49(1)(g) of the Land Registration Act 1925 (protection of certain interests by notice) after "Charging Orders Act 1979" there is inserted "or the Drug Trafficking Offences Act 1986.")
The noble Lord said: My Lords, these amend ments are consequential. I beg to move.
On Question, amendments agreed to.
Clause 31 [Minor amendments]:
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendments Nos. 136 and 137:
Page 31, line 41, at end insert—
("(2A) After subsection (4) of section 18 of the Civil Jurisdiction and Judgements Act 1982 there is inserted the following subsection—
"(4A) This section does not apply as respects the enforcement in Scotland of orders made by the High Court in England and Wales under or for the purposes of the Drug Trafficking Offences Act 1986." ").
Page 32, line 4, at end insert—
("(4) Section 55(1) of the Bankruptcy (Scotland) Act 1985 (discharge of debtor not to release him from liabilities in respect of fines etc.) shall have effect as if the reference to a fine included a reference to a confiscation order").
The noble and learned Lord said: My Lords, these two amendments make minor adjustments to existing legislation applying to Scotland consequential upon the provisions of the Bill. I beg to move.
On Question, amendments agreed to.
Clause 32 [Short title, commencement and extent]:
Lord Cameron of Lochbroom Lord Cameron of Lochbroom moved Amendments Nos. 138 and 139:
Page 32, leave out line 14 and insert—
("(4) This Act has effect in Scotland as follows—

(a) sections 8 (but not subsection (5A) or (6)), 11, 12 and 23 (but not subsection (5D), (6) or (7)) extend also to Scotland, but only as provided by sections [Recognition and enforcement in Scotland of orders and functions under sections 8, 11, 12 and 23] and [Scotland: supplementary] of this Act;

(b)

section 8(5A) and (6);

section 13;

1127

sections [Bankruptcy of defendant etc.] and [Sequestration in Scotland of defendant etc.];

section [Receivers: supplementary provisions] (1);

sections 20 to 22;

section 23(5D), (6) and (7);

section 26;

section 30, so far as relating to other provisions of this Act extending to Scotland;

section 31(2), (2A) and (4); and

this section, so far as relating to other provisions of this Act extending to Scotland,

extend also to Scotland.

(c) sections [Recognition and enforcement in Scotland of orders and functions under sections 8, 11, 12 and 23], [Scotland: supplementary], [Inhibition and arrestment in Scotland] and [Proof in Scotland of High Court order] extend to Scotland only.

(5)").
Page 32, line 15, leave out ("Scotland and").
The noble and learned Lord said: My Lords, these two amendments apply to the extent clause of the Bill specifying the provisions of the Bill that apply to Scotland.
I should like to point out that in one respect these amendments are now incomplete. The House has agreed today to insert a new subsection (2A) into Clause 17, sub-paragraph (ii) of which protects from actions for breach of confidence persons who disclose their suspicions that funds or investments are derived from drug trafficking. I would wish that the paragraph—I think it is paragraph (a)—be extended to Scotland. With the permission of the House, the necessary additional amendment will be tabled for Third Reading. I move the two Amendments Nos. 138 and 139 en bloc.
Lord Harris of Greenwich: My Lords, since we are coming to the end of our proceedings, may I ask an wholly unreasonable question, for which I shall not ask for an answer tonight? As these provisions are being extended to Scotland, I cannot recall whether we have discussed the situation in relation to Northern Ireland banks. I do not press the point tonight but no doubt the matter is being looked at and no doubt it has already been dealt with.
Lord Glenarthur: My Lords, so far as Northern Ireland is concerned, Section 26 extends the relevant provisions of the Act to Northern Ireland. I had better let the noble Lord have details. But I believe that it does.
On Question, amendment agreed to.
In the Title
Lord Glenarthur Lord Glenarthur moved Amendment No. 140:
Line 5, after ("drugs") insert ("or used to prepare a controlled drug for adminstration").
The noble Lord said: My Lords, last but not least and definitely consequential, I beg to move.
On Question, amendment agreed to.

Exeter City Council Bill [H.L.]
Committed to an Unopposed Bill Committee.
Ipswich Port Authority Bill
Brought from the Commons; read a first time, and referred to the Examiners.

Gull Island Protection Bill [H.L.]
Returned from the Commons agreed to with an amendment; the amendment considered and agreed to.
House adjourned at twenty-two minutes past eight o'clock.