Lords Sitting of 23 April 1990

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

Education Reform Act: Opting Out
Lord Gainford Lord Gainford asked Her Majesty's Government:
How many schools have opted out of local authority control since the passing of the Education Reform Act 1988.
Baroness Blatch: My Lords, my right honourable friend the Secretary of State for Education and Science has approved 36 of the 47 proposals for grant-maintained status which have so far reached him for decision. More schools have now been approved for grant-maintained status than the number of secondary schools in over half of English LEAs. Some 18 schools were in being last September and there are now 28 such schools. A further eight will open in September and a further 12 proposals have been published and will reach Ministers for decision in a few weeks' time. A further five more proposals are awaited following parental ballots which have gone in favour of grant-maintained status. In total ballots have taken place in 84 schools, of whch 64 have voted in favour of grant-maintained status and 20 have voted against.
Lord Gainford: My Lords, I thank my noble friend the Minister for that Answer, which gave many useful figures. Is she aware that the Shadow Secretary of Education and Science in another place has declared that a future Labour Government would abolish grant-maintained schools? That would thus rob parents of the choice of grant-maintained education for their children.
Baroness Blatch: My Lords, yesterday I heard the Shadow Secretary for Education declare that that was the intention of the Labour Party. However, it would be difficult to square with the idea that people should have a choice in these matters. We would certainly oppose any denial of choice.
Lord Taylor of Blackburn: My Lords, I wish to ask the Minister a non-political question. Can she give us a geographical breakdown of where these schools which have opted out are?
Baroness Blatch: No, my Lords, not without notice. However, the information regarding which schools have opted out and where they are situated is available. I can send the noble Lord a list of the schools if he wishes it.
Baroness Cox: My Lords, does my noble friend agree that the track record of the 20 or so grant-maintained schools that are already up and running; is extremely good and that they are popular with parents? Can she give some indication of the
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extent to which these grant-maintained schools are oversubscribed?
Baroness Blatch: My Lords, it is of course early days yet but certainly all the signs are encouraging. It is right to say that in every single case applications for places at the grant-maintained schools are substantially greater than in previous years. In most cases applications have increased by 40 or 50 per cent.
Lord Ritchie of Dundee: My Lords, is it not the case that a great majority, if not all, of the schools which have opted out of local authority control were threatened with closure, and that is the main reason for their decision?
Baroness Blatch: My Lords, that is not the case. It is certainly true that some of the schools which have opted out have been threatened with amalgamation or closure, but only 40 per cent. of the 36 schools which have been approved for opting out were scheduled for closure by their LEAs at the time of the parental ballot. Of those schools only three of the 18 schools where ballots have been held but where decisions have not yet been taken were scheduled for closure at the time of the ballots.
Lord Molloy: My Lords, the noble Baroness said that the Government would like to see parents sending their children to the school of their choice. Where that choice may be inhibited or prevented by lack of funds for travel or fees, do the Government intend to help such parents who wish to make a choice but who will need extra money to fulfil it?
Baroness Blatch: My Lords, the principle of choice is a real one, but as regards giving every single child in the country the finance to attend the school of his parents' choice, within certain constraints parents have the widest possible practicable choice. However, specific rules are set down as regards providing transport for pupils. It is not open to all children to have transport to any school of their parents' choice.
Baroness David: My Lords, is it not a fact that under the grant-maintained schools finance regulations 1990 grant-maintained schools are likely to receive 15 to 26 per cent. more in financial terms than if they had remained LEA maintained schools under local financial management?
Baroness Blatch: My Lords, the noble Baroness is correct in that assumption. The 15 per cent. figure that she mentioned refers to central costs for running education. When a school becomes grant-maintained, it receives a percentage of its bureaucratic costs from the authority. On average that amounts to about 15 per cent. of its direct running costs.
Lord Dean of Beswick: My Lords, is the Minister aware that in the area of Tameside in Greater Manchester where I live, only one school has opted out of local authority control? That school in Audenshaw has received over £½ million in direct

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grant from the Government for the current financial year whereas the rest of the schools in Tameside have received some £1-2 or £1-4 million in total. Does not the Minister consider that that clearly indicates some form of bribery for schools to opt out when they receive such preferential financial treatment?
Baroness Blatch: My Lords, I do not accept that this matter represents a form of bribery. I know that the grant-maintained sector, which is growing all the time, obtains a proportion of the capital moneys which are available to schools. Many schools which are not grant-maintained will have received large sums of money, such as the sum mentioned by the noble Lord. I cannot comment specifically on the case of Audenshaw except to say that the school is proving a great success and is very popular with the children within that area.
Lord Peston: My Lords, I think that I heard the noble Baroness say that the basis for grant-maintained schools was the exercise of choice by parents. Will the noble Baroness tell noble Lords what view the Government take when that choice is exercised on the basis of racial prejudice?
Baroness Blatch: My Lords, it would be precipitate of me to make a statement before the Parliamentary Question is answered later today in another place. However, I can say that the choice of school to which to send their children is one that should be exercised fully by all parents. I am not prepared to comment specifically as to whether or not that choice is made on the basis of race. I believe that the principle of being able to choose the school to which one sends one's children should be upheld so far as is practicable.
Lord Peston: My Lords, I do not like to press the point and I was not aware of a Question on the subject. However, I asked the noble Baroness point blank to take a view on the exercise of racial prejudice. Am I right in thinking from her answer that the Government do not care in the slightest whether or not parents choose to send their children to particular schools on the basis of racial prejudice?
Baroness Blatch: My Lords, that is not an interpretation that I accept. If parents do not wish their child to go to a particular school, for whatever reason —and it may be that they do not have to give a reason for choosing a school though I prefer to think of it as a positive rather than a negative choice in favour of a particular school —then I believe that that choice should be upheld. The alternative would be to legislate for parents not to make a choice and to have a category of reasons for doing so.
Lord Tordoff: My Lords, the noble Baroness is saying, is she not, that the Government are prepared to sustain such a choice made on racial grounds?
Noble Lords: No!
Baroness Blatch: My Lords, I did not say that. It is not a good interpretation of what I said.
Noble Lords: Hear, hear!
Baroness David: My Lords, do the Government agree that taking grant-maintained status lifts the "dead hand" of a local education authority from the life of a school—a statement with which the Secretary of State for Education said in the other place he agreed? That seems a very unfortunate thing for him to have said.
Baroness Blatch: My Lords, I believe very sincerely that it frees schools from the dead hand of local authorities. I have spent a good deal of my time in committees dealing with operational matters affecting schools. Schools should not have to wait for a local education authority committee to determine operational matters affecting them. It should be for the school head, staff, governors and parents to make operational decisions.
Lord Ritchie of Dundee: My Lords, has the Minister heard, as I have, that in the case of the grant-maintained schools the dead hand of the local authority is replaced by the dead hand of the Department of Education and Science?
Baroness Blatch: My Lords, the thrust of the Education Reform Act is to pass operational decision-making to school level. I support that. I believe that there are some very real examples of the effect of the dead hand of the local authority. I prefer to see the local authority working alongside schools, being supportive and advising but not becoming involved in the operation of the schools.

North Wales: Storm Damage Assistance
2.46 p.m.
Lord Dean of Beswick Lord Dean of Beswick asked Her Majesty's Government:
What financial assistance has so far been made available to Towyn and other northern Wales coastal areas in connection with recent storm and flood damage.
The Minister of State, Department of Trade and Industry (Lord Trefgarne): My Lords, my right honourable friend the Secretary of State for Wales has already announced that the Bellwin scheme of special financial assistance will apply to all eligible expenditure incurred by local authorities in dealing with this emergency. Exceptionally, grant will be paid at a rate of 85 per cent.
Her Majesty's Government have also made a contribution of £150,000 to the disaster funds. This is the first time that such a contribution has been made to funds for disasters that did not involve loss of life. The European Community has donated the sum of £111,500.
In addition, special assistance is being given by my right honourable friend to farmers affected.
Lord Dean of Beswick: My Lords, I am grateful to the Minister for that reply and for the help that has already been given, which has been greatly appreciated. However, is the Minister not aware that, apart from the fact that there was no loss of life, this particular area of Wales was struck by a calamity of enormous dimensions? While the Minister has said that the Government have applied the Bellwin scheme does he accept that the Bellwin scheme, admirable though it is, is in no way sufficient to meet the needs of those affected by such an incident? Is he aware, for example, that before the local authority could benefit from the Bellwin scheme it had to raise £800,000 of its own money? Will the Minister ask the Secretary of State for Wales to try to pump money into the area in order to avoid the need for the local authority to find that £800,000? Will he ask his right honourable friend to make that money available immediately because the need is urgent and great?
Lord Trefgarne: My Lords, I am not sure whether the noble Lord fully appreciates the extent of the help that has been given. The grant of 85 per cent. of the emergency expenditure which will be provided under the Bellwin formula is more in percentage terms than is usually provided under that formula. It is likely to amount to between £4 million and £5 million, depending on precisely what the expenditure turns out to be. I do not believe that that is an inconsiderable contribution; nor is the contribution to the disaster funds to which I also referred.
Lord Cledwyn of Penrhos: My Lords, while I appreciate the assistance that has been given by the Government and other sources, does the noble Lord not agree that this was a major tragedy affecting several thousand people and more than 3,000 properties and that 5,000 people were evacuated from their homes and put into emergency centres? Would he agree with me that a very warm tribute is due to the local authorities, the police and voluntary organisations for the magnificent way in which they responded to what was a major crisis?
Secondly, can the Minister say how many people are still in emergency centres in the area? What is the final estimate of the cost of damage? Would he not agree that it is far in excess of any estimate under the Bellwin formula or any other assistance from the EC —namely, in the region of £8 million? Will he say what further assistance the Government will give to try to resolve that great problem?
Lord Trefgarne: My Lords, I certainly agree with the first part of the noble Lord's supplementary question. It was an appalling catastrophe for the area concerned and the emergency services responded splendidly. If I may say so, I think that the Government responded splendidly too.
The local authorities estimate their expenditure at something in the order of £5 million, although it is too early to produce a precise estimate because some of the work is not yet complete, as the noble Lord will be aware. The Government have undertaken, in accordance with the Bellwin formula, to provide no
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less than 85 per cent. of that expenditure and, in addition, have made the other specific contributions to which I referred. I also referred earlier to the special help that we have provided to some farmers, particularly those whose land was affected by salt water. I understand that that land needs special treatment to bring it back into proper use.
Lord Cledwyn of Penrhos: My Lords, let me clarify the position for the sake of the people of the area. Am I right in understanding that, under the Bellwin formula, if the total estimated cost is in the region of £5 million, in effect 85 per cent. of that sum will be found to assist the area? Is that the position?
Lord Trefgarne: Yes, my Lords, in so far as the expenditure to which the noble Lord referred falls within the Bellwin definition.
Lord Tordoff: My Lords, will the noble Lord respond to the question of the noble Lord the Leader of the Opposition regarding the number of people who have been able to return to their homes? My understanding—perhaps the noble Lord will correct me if I am wrong—is that only 50 per cent. of people are as yet back in their homes. Is he further aware that difficulties are arising for those people who are only partly covered by insurance? Those who are not covered by insurance appear to be able to obtain money from the local authorities while those who are partly but not fully covered are unable to obtain anything. Will he comment on that point?
Lord Trefgarne: My Lords, I shall deal with all the points. I apologise for not answering the point raised by the noble Lord the Leader of the Opposition. I am advised that about 500 people are still in temporary accommodation following the events of February and that work clearly still needs to be done on the houses belonging to those people before they can return to them. As I think is well known, many of those living in that part of the country are elderly and retired people who, for obvious reasons, choose to live in bungalows. Bungalows are particularly subject to flooding when such events occur. The people concerned have therefore been very adversely affected. The noble Lord is quite right. There were rather more people than we should have wished who were not adequately covered by insurance, either with no insurance or inadequate insurance. The special disaster contributions to which I referred will be specifically aimed at helping those people.
Lord Dean of Beswick: My Lords, will the noble Lord clarify the point that I raised? I still do not understand his answer to the second part of my question. The county council officer who is dealing with the matter and to whom I spoke said that it was necessary for the council, through rates or a precept, to raise £800,000 before it qualifies for the Bellwin formula. Is that correct? If it is correct, will the noble Lord waive the requirement given the urgent situation in the area?
Lord Trefgarne: My Lords, that would mean raising the Bellwin percentage to 100 per cent. from 85 per cent. As I understand it, under the Bellwin

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formula, local authorities must provide the product of a penny rate from their own resources before they qualify for Bellwin payments, as the noble Lord rightly said. I believe that that is a right and proper arrangement. All prudent local authorities should make some provision for disasters of that kind, although it is recognised that they cannot be expected to make 100 per cent. provision. That is why the Bellwin formula exists.

Unleaded Petrol
2.56 p.m.
Lord Brougham and Vaux Lord Brougham and Vaux asked Her Majesty's Government:
What is the most recent figure available for sales of unleaded petrol.
The Parliamentary Under-Secretary of State, Department of the Environment (Lord Hesketh): My Lords, unleaded petrol sales, indicated by Customs and Excise figures for the amount of unleaded petrol cleared from bonded warehouses, were 786 million litres in the month up to 14th March. That represents 30-6 per cent. of total petrol sales.
Lord Brougham and Vaux: My Lords, I thank my noble friend for that informative reply. Will he say how that figure compares with sales of unleaded petrol two years ago and what reduction in the amount of lead in the atmosphere has taken place since 1989?
Lord Hesketh: My Lords, the uptake of unleaded petrol in the past 18 months has risen from 2 per cent. to the figure that I quoted to my noble friend; namely, some 30-6 per cent. I do not have the figure since 1989, but since 1985-88—these are the most recent figures for the amount of lead in the atmosphere—there has been a fall of some 53 per cent.
Lord Mcintosh of Haringey: My Lords, will the Minister take this opportunity to dispel the cynical rumour that, when a satisfactory level of unleaded petrol has been achieved, the excise duty will be put up again?
Lord Hesketh: Far from that, my Lords, the recent Budget increased the differential for the third successive time, which I am sure shows the Chancellor's intention.
Viscount Montgomery of Alamein: My Lords, given that all new cars are manufactured to operate on unleaded petrol, will my noble friend say what percentage of the existing vehicle fleet in this country is capable of being altered to take unleaded petrol?
Lord Hesketh: My Lords, a substantial number of vehicles can be converted. They are all to be found listed in a copy of Adjust to Unleaded. It is a substantial list. So, if my noble friend finds it acceptable, I shall post him a copy.
Lord Brougham and Vaux: My Lords, will my noble friend tell me how many garages throughout the United Kingdom are now able to sell unleaded petrol?
Lord Hesketh: My Lords, out of some 20,100 stations, approximately 18,200 now sell unleaded petrol.

Council House Building: Finance
2.58 p.m.
Lord Jay Lord Jay asked Her Majesty's Government;
Whether they propose to permit local authorities to invest as much of their capital receipts as they wish in building new low-cost homes to let.
Lord Hesketh: My Lords, any government has to control gross public spending, including spending from receipts, in order to regulate the national economy. Allowing those local authorities who happen to have a lot of receipts to spend more would mean cutting expenditure in areas of more acute need. The aim of our reforms of the use of receipts is to enable us more effectively to target resources on those areas in greatest need.
Lord Jay: My Lords, what possible good reason can there be for preventing authorities from using their own funds to build low-cost housing, which everyone agrees is one of our most acute social needs at present?
Lord Hesketh: My Lords, I am sure that, with his experience, the noble Lord, Lord Jay, is more aware than I am of the importance for any government to control the gross figure for public expenditure. It is well worth remembering that the latest available figure for the current level of local authority housing debt is some £29-54 billion.
Lord Molloy: My Lords, is the Minister saying that the Government lay greater emphasis on saving money and reducing costs than on reducing the massive number of homeless families in this country?
Lord Hesketh: My Lords, I am sure that the noble Lord, Lord Molloy, is aware of the Government's most recent initiative of increasing expenditure for homelessness by some £250 million. He will also be aware that the Government are increasing the expenditure by housing associations to some £138 million in 1991-92.
Lord Stoddart of Swindon: My Lords, is the noble Lord aware that one of the arguments that the Government always used for selling council houses was that selling them would enable local authorities to build more houses for rent with the proceeds of those sales? What has happened to that argument?
Lord Hesketh: My Lords, 25 per cent. of the receipts are still available to do exactly that. However, as a result of capital reforms that we introduced in last year's Bill, we have been able

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substantially to increase HIP allocations from a third to two thirds on the basis of targeting. The provision of housing and the requirements for the provision of housing vary greatly between regions. That is why we have been able to improve the targeting to those areas which need it most.
Lord Wallace of Coslany: My Lords, will the Minister give us advice that is a little more sensible? Is he aware that thousands of young couples who want to get married but who wish to avoid unnecessary expenditure in buying a house are desperately searching for houses to let? Does he agree that there is a shortage of such accommodation throughout the country, that the situation is becoming critical and that something should be done about it?
Lord Hesketh: My Lords, in recent years the Government have increased finance beyond the traditional figures of local authority provision and that provided by housing associations. We believe that the changes that took place in the Budget with regard to the business expansion scheme will provide in the first 12 months a further 7,000 units to be available under assured tenancies. Those are extremely important. At the moment there are only two types of housing. We have to follow the success that has been achieved in the United States, West Germany and France, which has a socialist administration. There, 30 per cent. of the population are in private rented accommodation. That was destroyed in this country over a period of 50 years.
Lord Mellish: My Lords, is the Minister aware that Southwark Council is owed £32 million in rent arrears.? I assume that some action will be taken to get back some of that money. Can the Government confirm that the council will be able to spend the money on new housing?
Lord Hesketh: My Lords, the rules are different for revenue and capital. As I pointed out earlier, if there were a reduction of debt, which relates to the 75 per cent. that is held back, that would improve the financial position of the council.
Lord Dean of Beswick: My Lords, does the Minister agree that the true Answer lies in the replies that have quite recently been given by Ministers from the Dispatch Box to the effect that the Government no longer consider local authorities as bulk builders of accommodation to let? Is he aware that the Government's target of 80,000 such properties to be built over the next three years, 17,500 of them in the first 12 months, is already falling short? If my information is correct, that target will be over 2,000 units short. Can he say whether it is true that some of the money allocated has more or less been allowed on pawn from the Housing Corporation, which now finds itself in extreme difficulty? Does he agree that it looks as though the whole programme will literally be off gear and well below what the Government intended? In view of the urgent need will the Government allow local authorities with capital receipts to get on with building this type of housing?
Lord Hesketh: My Lords, the Government have no desire other than to improve the quality and supply of housing. As the noble Lord will know, and I have said it before in this House, the Government see the local authorities as enablers in housing. They are spending very considerable sums of money but they also wish to broaden the spread of housing. They are also desirous that the money spent on housing should produce quality rather than result in the tragedies —because that is the only way that one can describe them —seen in some of the great cities of this country.
Lord Dean of Beswick: My Lords, I am sorry to come back so quickly. Only a few weeks ago at the Dispatch Box the noble Lord said—and other Ministers have repeated quite categorically—that the Government no longer see local authorities as building houses in bulk for letting to people at the bottom end of the social scale. Is that true or not?
Lord Hesketh: My Lords, local authorities already own a vast store of local authority housing. The noble Lord asks me how we see the future. The future that we see is one where there is a spread; one in which there is a ladder that goes from the simplest to the less simple accommodation, and also across a spectrum of cost, so that people can have an aspiration which can be satisfied to rent a house that is other than an ordinary local authority dwelling.
Lord Milverton: My Lords, is my noble friend saying that the Government are aware of a need for far more low cost housing? There are many people like myself—and others have also said this—who see such a need. Are Her Majesty's Government awake to the necessity to meet the need for low cost housing for the many people who desperately require and wish for it?
Lord Hesketh: My Lords, the Government are certainly aware of the need. That is why they introduced the special increase of some £250 million for the homeless. There is also another factor. If we consider rural housing, where there are equally difficult problems although of a different nature, it is clear that one of the most difficult things to obtain is planning permission in order to provide that accommodation.
Lord Jay: My Lords, does the Minister agree that it would be better to have a little more consumer choice and allow local authorities to spend their own money as they wish?
Lord Hesketh: My Lords, the Government are entirely in favour of consumer choice but they do not believe that the local authorities' money is in fact their money; it is the taxpayers' money.

Pucklechurch Remand Centre: Disturbances
3.5 p.m.
Lord Harris of Greenwich: My Lords, I beg leave to ask a Private Notice Question, of which I have

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given the Government notice; namely, to ask Her Majesty's Government whether they will make a Statement on the disturbances at Her Majesty's prison at Pucklechurch.
The Minister of State, Home Office (Earl Ferrers): My Lords, at about seven o'clock yesterday evening an officer in the male part of the Pucklechurch Remand Centre, which housed some 125 male young offender remand prisoners, was overpowered and his keys taken. He was quickly rescued by other staff but inmates meanwhile used the keys to unlock other accommodation. Control of the male wings was temporarily lost.
Contingency plans were activated and staff were drafted in from other establishments in the South West. Police were deployed outside the perimeter and there have been no escapes. Fire and ambulance services were also in attendance.
At the same time the 44 female inmates who were held in a separate part of the remand centre were moved out for their own safety. They are being moved to Holloway after being held initially in Crown Court and police cells locally.
Prison officers regained control of parts of the centre during the course of the night and morning and within the past couple of hours control of the whole of the remand centre has been re-established and all prisoners are now back in detention.
My right honourable friend has called for a report on the scale of the injuries which were incurred. I understand that there was no particular information suggesting that such an incident was being planned, nor is there any information at present to indicate why it took place. The disturbance will fall within the ambit of Lord Justice Woolf s terms of reference.
Lord Harris of Greenwich: My Lords, I thank the noble Earl for that reply. Does he agree that this appears to be yet another copycat incident following the disturbances at Strangeways Prison, Manchester? Perhaps I may ask him a number of specific questions. I realise that the governor and his staff have only just recovered possession. How much accommodation at Pucklechurch appears to have been lost and therefore necessitates the removal of a significant number of the prison's population to other establishments?
Secondly, is he aware that the transfer of over 40 women prisoners from this establishment to Holloway will further worsen the very unsatisfactory conditions that exist at Holloway? Perhaps I may say that we are all greatly relieved that possession of the prison has quickly been regained by the staff and that not many members of staff appear to have been injured. Nevertheless, will he ensure that those who have been injured receive—I am sure from all Members of the House —a message to wish them a speedy recovery?
Earl Ferrers: My Lords, I agree with the noble Lord that on the face of it it looks as though this is a copycat incident. He aked me how much accommodation has been lost but I cannot tell him
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that at the moment. He will understand that we have only recently regained control of the premises.
It is perfectly true that if you transfer 44 women to another prison, it is bound to have an effect on the prison population of that establishment. Our hope is that it will be as short-lived as possible.
I cannot tell the noble Lord how many people have been injured. I think it is fairly certain that some people have been injured, probably both prison officers and prisoners. However, I cannot give him the information that he requires because I am afraid I do not have it. I shall certainly ensure that the prison officers who have been injured receive the message which the noble Lord wished me to convey.
Lord Mishcon: My Lords, perhaps the noble Earl will take it as understood that we on these Benches decry rioting and behaviour of that kind at any prison. We certainly join in with the sympathy that has been expressed for prison officers who have to undergo that kind of treatment yet again. Does the Minister agree that since the Strangeways incident rioting has taken place in the following prisons—I regret having to read out the list but the House ought to be aware of it: Brixton, Bristol, Cardiff, Castington, Dartmoor, Hull, Kirkham, Lindholme, Long Lartin, Manchester, Pentonville, Swansea, Stoke Heath and Verne? Without claiming that my observations were anything other than common sense, perhaps I may remind the Minister of the words that I ventured to use on 5th April on the matter of Strangeways Prison. As I said from these Benches on the occasion of the last Statement:
"My fear is that copycat episodes may occur in various prisons around the country. I hope that what I have ventured to say about flexibility and taking into account warnings and the possibility of copycat exercises, will result in adequate staffing arrangements being made to ensure that the dreadful events that have occurred recently do not occur elsewhere". [Official Report, 5/4/90; col. 1521.]
Is the Minister aware that in an interview on Radio 4 at one o'clock today a member of the prison visitors at Pucklechurch, a Mrs. Cooper, said that there was understaffing at Pucklechurch? Will the Government please realise that it is a crisis situation and that the one thing that they can do about it is to ensure that there is adequate staffing at prisons in order to deal with our huge prison population? On any basis it is the largest in Europe. Turkey has even beaten us now. Will the Government realise that we have reached a state of crisis and that they must have a policy with regard to it?
Earl Ferrers: My Lords, of course I accept from the noble Lord, Lord Mishcon, that he decries rioting as much as anyone else. I wholly understand that. He repeated his fear, which he expressed some time ago, that "copycats" may occur elsewhere. That is one of the dangers that we all have to recognise. Once something happens it is always possible that there will be something else. The noble Lord referred to the staffing level. I did not hear Radio 4 at one o'clock because I was preparing myself for the questions that the noble Lord, Lord Mishcon, might ask me. I did not suppose that that would be one.
There has been a very considerable increase in staffing. The total number of prison officers has been

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increased by over 3,000 in the past three years. The complement at Pucklechurch should have been 122; there were 113. Clearly all these matters will have to be taken into considerable account. It would be irresponsible of me to go into them in great detail now. However, the terms of reference of Lord Justice Woolf are to inquire into the events leading up to the serious disturbances in Her Majesty's Prison at Manchester and thereafter in other prison establishments in England and Wales. Clearly this outbreak, like the others, will fall within the terms of reference of Lord Justice Woolf He will obviously wish to take into account whether or not there have been "copycats", and, if so, why; and he may make such suggestions as he thinks fit. However, it is clearly a very serious matter.
3.15 p.m.
Lord Renton: My Lords, with regard to policy, should we not remember that several years ago the Government started on the largest prison building programme of this century? Indeed, it was even larger than the one under Mr. R. A. Butler 30 years ago. Successive Conservative Governments, with the aid of legislation by Parliament, have introduced a policy of non-custodial sentences. Is it not right to bear in mind in favour of the Government that their policies have been on the right lines and that this is just an unfortunate series of events which has overtaken them?
Earl Ferrers: My Lords, I am most grateful to my noble friend for that intervention. He is absolutely right. It is an unfortunate set of circumstances but none the more serious for that. However, he is right to draw attention to what the Government have done. Out of a total of 28 new prisons in the programme upon which we are embarking—which is the largest prison building programme this century—eight new prisons are already opened, 14 are at various stages of design and construction and two are planned for building to begin in 1991 and 1993. That leaves a balance of four prisons whose locations and commencement date for construction have yet to be decided.
The building programme has produced 2,000 places over the past two years and is set to add a further 1,660 places in the current year, 1990-91; 7,000 places are currently under construction at new establishments.
The expenditure on the prison service rose by 58 per cent. in real terms between 1978 and 1988. The current financial provision for 1989-90 is for £ 1,140 million, which represents a 20 per cent. increase in real terms over the 1988-89 outturn of £902 million. A very great deal is therefore being done.
I am grateful to my noble friend for explaining and reminding the House that, even though such expenditure is made, it cannot necessarily deny the possibility of such outbreaks taking place.
Baroness Seear: My Lords, I understand that these are all remand prisoners. That means that none has been sentenced and some have not been tried. Will the noble Earl tell us how many bail hostel places are available in the area? I am sure that the noble
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Lord will agree that the less one concentrates such people in one place the better it is for the maintenance of order. If some of those people could have been distributed in bail hostels, we might have avoided the outbreak.
Earl Ferrers: My Lords, the noble Baroness is entirely right. I cannot tell her how many bail hostel places there are in that area. However, over the next three years 500 new bail hostel places are being provided which ought to help to allay the situation.
Lord Cledwyn of Penrhos: My Lords, following my noble friend's constructive remarks about the series of disquieting outbreaks that has taken place in a large number of prisons, is it not also significant that the policy of a number of governors in relation to the outbreaks has been different, and that that is a matter which is causing some concern—it may be unnecessarily—among members of the public? Will the policies of the governors towards outbreaks of various kinds—and inevitably the response can be different for various reasons—be a matter of which Lord Justice Woolf will take account in his inquiry?
Earl Ferrers: My Lords, that will certainly fall within the terms of Lord Justice Woolfs remit. It will be up to him to determine how to translate those terms of reference. The noble Lord is right in saying that different positions and different places require different treatment. But Lord Justice Woolfs remit is to consider the cause of all these outbreaks, what could have been done and what should be done in the future to prevent them. Obviously such consideration will fall within his terms of reference.
Baroness Macleod of Borve: My Lords, in view of the figures that the noble Earl has given us about the extra number of places in our prisons, is he satisfied that the prison service is taking on and encouraging a sufficient number of prison officers to staff the prisons?
Earl Ferrers: My Lords, perhaps I may suggest that we do not enter into a general debate on prisons. However, I can assure my noble friend that a great many more prison officers have been taken on recently and it is intended that more be taken on in the near future.
Lord Molloy: My Lords, the noble Earl may have mentioned this point but I should like to be certain about it. Will representatives of the Prison Officers' Association give evidence to the inquiry?
Earl Ferrers: My Lords, I cannot give the noble Lord the answer. I assume that if the association wishes to make any representations it will contact Lord Justice Woolf and indicate that fact.
Lord Donaldson of Kingsbridge: My Lords, I must repeat the comment which has been made a thousand times by everyone interested in the subject. We believe that the Government are spending far too much money on building new prisons and far too little money in putting right the appalling conditions in existing prisons.
Earl Ferrers: My Lords, that is the conundrum in which we perpetually find ourselves. Not long ago the noble Lord was giving the Government stick for having an insufficient number of prisons. The noble Lord will not ask me to quote Hansard; if I have misquoted him I apologise. However, many noble Lords have previously said that we have not spent enough money on providing new prisons. We have spent a great deal of money doing so. I agree with the noble Lord that, as the prison population is falling, the time may have come to deflect some of the anticipated expenditure on new buildings towards refurbishing the old buildings.
Lord Stoddart of Swindon: My Lords, is the Minister aware that among the public there is a general feeling that the prisons are now in a state of sheer anarchy; that we are a laughing stock abroad; and that the situation has been brought about by the timorous incompetence of the present Government? They appear to be afraid to act in the face of rioting prisoners. Can the Minister tell the House how many more riots we must have and in which prisons before the Government will take proper action to bring them and the situation at Strangeways to an end?
Earl Ferrers: My Lords, I am surprised by the noble Lord's response. He said that the Government have been timorous and incompetent.
Lord Stoddart of Swindon: Yes.
Earl Ferrers: The noble Lord has repeated that—
Lord Stoddart of Swindon: Yes, I did.
Earl Ferrers: The noble Lord has now repeated his view for the second time. I do not accept it in the slightest. He knows full well that the best way of dealing with the matter is to improve the prison situation and the prisons and to increase the number of prison officers. That we have done.
I believe that the noble Lord wishes to see a right battle royal in the prisons. That is not the course which the Government have thought it appropriate to take. There are those who believe that such a course should have been taken. The Government took the view that in order to avoid bloodshed and damage which may otherwise occur it is right to try to bring the disruptions to an end as peacefully as possible.
Lord Mishcon: My Lords, I hope that my noble friend Lord Stoddart will forgive me if I dissociate myself from the remarks that he made with great sincerity but not with great wisdom.
Noble Lords: Oh!
Lord Mishcon: My Lords, I read to the House details of the copycat incidents which have taken place. Are the Government saying that before we have a policy for dealing with the critical situation we must wait for Lord Justice Woolf's report? Do not the Government have every annual report of all chief inspectors of prisons detailing the terrible
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situations there? If we must wait for the report before a policy is founded upon known facts and experience will the Minister say that it is expected before the next list I read is double the length?
Earl Ferrers: My Lords, the noble Lord, Lord Mishcon, has made a serious point; he read out an impressive but disagreeable list. Until the incidents at Strangeways the situation was improving. There was increased capacity in the prisons; a reduction in overcrowding; and the re-establishment of punishment within the community. The number of prisoners in a cell was being reduced and during the past 10 years we spent £1,000 million on capital expenditure. All that was producing results, but now we have experienced the recent fearful events.
In the short term I have the greatest confidence in the professionalism of members of the prison service. All prison governors are now alert to the possibility that other incidents may occur. In the long term we look to the report of Lord Justice Woolf. However, I should be wrong in giving the noble Lord or the House the impression that we shall wait for the report before taking any measures. It is up to each governor to assess the situation in his prison and to take any necessary action. I cannot tell the noble Lord whether that will result in more outbreaks.
Lord Mishcon: My Lords, in view of the critical situation, I asked the Minister when the report is expected to be published.
Earl Ferrers: My Lords, I cannot tell the noble Lord when the report will be published.
Baroness Blackstone: My Lords, is the Minister aware that a substantial number of prisoners are still being locked up for 23 hours a day, including those in brand new prisons? In the circumstances is it surprising that the frustration that builds up among prisoners—in particular among young men on remand who should never be in prison in the first place—leads to riots? When will the Government do something to improve prison regimes and to reduce the number of people who should never be in prison in the first place?
Earl Ferrers: My Lords, we are in danger of the Statement on Pucklechurch Remand Centre turning into a debate on the prison system as a whole. I have tried to explain what has been done and the fact that the Government are seized of the real problems. We have done a great deal but now is not the time to debate the genuine concerns of a general nature about the prison service.
Noble Lords: Hear, hear! Next business.
Baroness Phillips: My Lords, can the Government make a protest to the media which is making heroes of such prisoners and causing copycat outbreaks in other prisons? There must be some way in which we can stop the nonsense which we see on our screens and read in our newspapers.
Earl Ferrers: My Lords, simple questions are always the most difficult to answer. I am sure that

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the noble Baroness knows it would be improper for the Government to request any form of censorship in the media. The noble Baroness shakes her head but that is what she is asking for. The Government cannot ask the media not to report what they believe to be of national interest. However, many people would be highly gratified if the media would stop reporting such incidents for the reasons which the noble Baroness has in mind. Others may consider it to be a restriction of the flow of information and against the national interest.
Viscount Whitelaw: My Lords, is my noble friend aware that those of us who for many years had the responsibility of dealing with the prisons regret the long nature of these exchanges and the tone which appears to suggest that anyone in any particular party can be in a position to throw stones at anyone else about the conduct of the prison system? I feel intensely humble about what I tried to do; I believe that my predecessors and successors as Home Secretary feel the same. I hope that we can conduct our affairs as regards the prisons and these dangerous situations in the knowledge that we are all guilty. What is happening today is a result of this country's failure as regards prisons not for 10 or 20 years, but over 30, 50 or 60 years. It would be better if we acknowledged that and tried to deal with the situation together on that basis.
Noble Lords: Hear, hear.
Earl Ferrers: My Lords, I am grateful to my noble friend Lord Whitelaw who was a most distinguished Home Secretary. He is right in saying that everyone connected with the prison service feels humble about what they can do to correct the situation. Members of all parties will realise that it is difficult and that we can only do our best. It is too easy to say what should have been done and what is left to be done. One docs not always realise what has been done to improve the situation. I agree with my noble friend in saying that none of us can be proud of the position now or in the past.
Lord Harris of Greenwich: My Lords, I agree with the noble Earl's last two sentences. Although understanding the reasons for the question by the noble Lord, Lord Mishcon, some of us would be very concerned indeed were any form of urgent timetable to be applied to Lord Justice Woolf's inquiry. Clearly he has a number of major issues at which to look and I believe it would be a profound mistake were he to be pressed for even the most admirable of reasons into delivering an early report.
Secondly, although the noble Earl has rightly related most of his replies to the situation at Pucklechurch, in the light of some things which have been said both here and outside the House, is he aware that many of us have great admiration for Mr. O'Friel, the governor of Strangeways, who has had to deal with an immensely difficult situation and has handled himself admirably despite some exceptionally unfair attacks by the media?
Earl Ferrers: My Lords, I agree with the noble Lord, Lord Harris of Greenwich, that it would be a
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pity if Lord Justice Woolf were to find himself under any specific pressure to come up with a quick answer. It is important to get the right answer when it comes.
I am grateful to the noble Lord for his remarks about the governor of Strangeways. The governor has been in a particularly difficult and uncomfortable position. He has been under the spotlight of the media and has conducted himself with great dignity. I am grateful to the noble Lord for his support.

Education (Student Loans) Bill
3.32 p.m.
The Lord Privy Seal (Lord Belstead): My Lords, I beg to move that the Commons reasons and amendment be now considered.
Moved, That the Commons reasons and amendment be now considered. —(Lord Belstead.)
On Question, Motion agreed to.
COMMONS REASONS FOR DISAGREEING TO CERTAIN OF THE LORDS AMENDMENTS AND COMMONS AMENDMENT IN LIEU OF ONE OF THE LORDS AMENDMENTS
[References are to HL Bill 35 as first printed by the Lords, The Commons reasons and amendment are printed in italics.]
LORDS AMENDMENT
1 Clause 1, page 2, line 18, at end insert:
"(7) A draft of the first regulations to be made under this section or Schedule 2 to this Act shall be laid before each House of Parliament; and if either House of Parliament passes a resolution requiring the draft to be amended the Secretary of State shall withdraw the draft and shall prepare a draft in substitution for the one which is withdrawn.
(8) No resolution shall be passed by either House of Parliament under subsection (7) above in respect of a draft after the expiration of the period of 40 days beginning with the day on which a copy of the draft was laid before that House; but for the purposes of this subsection no account shall be taken of any time during which Parliament is dissolved or prorogued or during which both Houses are adjourned for more than four days.
(9) If, on the expiry of the period of 40 days mentioned in subsection (8) above, no resolution requiring amendment of the regulations has been passed by either House of Parliament, the darft shall not come into force until it has been approved by resolution of both Houses of Parliament.
(10) Where the Secretary of State withdraws a draft under subsection (7) above, he shall lay an amended draft before Parliament and the amended draft shall not come into force until it has been approved by resolution of both Houses of Parliament."
2 The Commons disagreed to this amendment for the following reason —
Because it would unacceptably delay the implementation of the student loans scheme.
MOTION MOVED ON CONSIDERATION OF COMMONS REASON
2A Earl Russell 2A Earl Russell rose to move, That the House do insist on their amendment numbered 1 to which the Commons have disagreed for the reason numbered 2.
The noble Earl said: My Lords, I first tabled this amendment because it appeared to a number of noble Lords on both sides of the House that the form of this Bill was somewhat unusual. I remember very well my noble friend Lord Addington saying in the debate on the humble Address that when he first collected the Bill from the Printed Paper Office he

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thought that the middle had fallen out of it. The House may recall also the remarks by the noble Lord, Lord Beloff, on the same day and those of the noble Lord, Lord Rippon of Hexham, on 21st December.
Those remarks concerned the form rather than the substance of the Bill. In the long term one might be more concerned about defects in form than defects in substance. If this House should pass a bad Bill, it would not be the first time in the history of Parliament that that had been done. Also, I fear that there will be many more. However, if Parliament passes a Bill which is defective in form, it is setting a precedent which may be harmful to the drafting of many future Bills. A bad precedent may be worse than a bad Bill.
As my honourable friend Mr. Beith remarked, this Bill consists of almost nothing but the power to make regulations. That fact inevitably restricts any parliamentary contribution to the necessary revision and scrutiny of any such measure.
I know that there has been improvement in that respect. I warmly welcome the amendment moved by the noble Baroness, Lady Young, whose success delighted me. That ensures that Parliament will have the power to debate regulations made under this Bill. However, although I welcome that, with respect, it is not enough by itself. This House is a revising Chamber. Its revising functions are properly exercised by means of amendment. That is the jewel in the crown of the powers of this House. In normal circumstances this House does not amend regulations.
Therefore, we have here an exceptional Bill and an amendment moved in the opinion that the Bill was exceptional and because it was exceptional. The Secretary of State has made some objections to this procedure. He pointed out that numerous amendments had been tabled and debated at great length. Of course, that is true. However, with respect, I believe that it was because the Bill was so difficult to amend that the process took so long. I am vividly reminded of the phrase used by the noble Lord, Lord Kilmarnock, on Second Reading about the difficulty of making amendments purchase on the slippery surfaces of this Bill because in many cases what people wanted to amend was not even mentioned in the Bill itself. Noble Lords tried to table amendments to get at a point at all sorts of different places in the Bill. Therefore, not for the first time in the history of Parliament, attempts to save time resulted in taking up more of it. Therefore the fact that a lot of amendments were tabled does not prove that the Bill was in a satisfactory form to be amended.
The Government also say —and I am sure that we shall hear it again in a few moments—that they have committed themselves to monitoring the progress of the legislation. One must welcome that as far as it goes, but, judging by the repeated promises which we have heard to monitor the Social Security Act 1986, one feels the need to say that monitoring one's own work is usually a rather less searching procedure than having it monitored with assistance from other people.
In fact, if we go on passing Bills like this, that will put the process of parliamentary government into jeopardy. Indeed, it will at least threaten honouring in the breach as well as in the observance the basic principle that in this country the government do not make the law and Parliament does. In this country, we do not have legislation by ministerial decree. It is not enough to have consultation about legislation in the process of debate on regulations under the affirmative resolution procedure, welcome though that is. This House is not a press conference but has revising powers, and they matter.
Of course, it is important to say that powers such as are specified in this amendment should not be used lightly, wantonly or ill-advisedly. They should not be made a general and normal method of scrutinising regulations. There is a proper place for enabling legislation and it must be accepted that, with the passage of time, that place grows. As there is more business, it is inevitable that more will go into regulations.
What many of us deplore is putting, in effect, the body of the Bill into regulations. The point of this amendment is that if the Government put the Bill into regulations, then we may use this procedure in order to treat the regulations as if they were a Bill.
The procedure used in this amendment is laid down on page 546 of Erskine May. It has been there for a long time and has been used in exceptional circumstances when it was felt that there was a need for it. My honourable friend Mr. Beith drew attention to the fact that he had used the powers to amend regulations under the Census Act 1920. A similar procedure is used under the Emergency Powers Act 1920. If your Lordships look at the list drawn up by the Joint Committee on Delegated Legislation, you will see that there is a clustering of uses of that power, round about the 1920s, when there was a particularly intense concern about the growth of enabling legislation.
In the past year we have heard such concern repeated many times in this House. It seems to me appropriate that as it returns so we should turn to the procedure which is the appropriate way to deal with the matter. It is one of the glories of parliamentary procedure that, like the common law, it tends to produce for each mischief an appropriate remedy. We have here unusual mischief but I believe we have set out in Erskine May a perfectly appropriate remedy and I think that this is a proper occasion for its use.
If we insist on this amendment there will be a number of beneficial effects. As my honourable friend Mr. Beith suggested, it will mean that the regulations are better drafted. Regulations drafted in the knowledge that either House of Parliament may table a Motion to amend them will be drafted with a good deal of care. It is possible, as my honourable friend also pointed out, that some of the amendments could be government amendments. It is not unknown for governments to need to have second thoughts. There has been a need for such thoughts on this Bill. If the provisions of the Consumer Credit Act 1974 had been thought of just two weeks later than they were, one could imagine a situation in which Ministers may have been very

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glad of a power to amend their own regulations. In fact it could have been of considerable convenience to them.
The important point is that if we insist on the amendment we shall be avoiding a future mischief; we shall be avoiding the suggestion that this is a proper way of legislating which can be used in the future. That is a great deal more important than any of the specific provisions in the Bill under discussion. The principle of parliamentary scrutiny of legislation is one of which we should not let go lightly.
There will be some discussion on whether we should insist on an amendment in the face of the opposition of another place. We have done so before. The last time was barely over a year ago with regard to eye tests. It is a power which has been freshly pushed to a Division. It is not a power which has been out of use for any length of time. There is some similarity between the position, functions and powers of this House and those of another place in the early years of the 17th century. The purpose of both Houses is to provide a check on the basic principle of the legitimacy of the constitution. That is a very difficult job; it is also a very necessary one.
The point that power corrupts does not wither by reputation. Power needs to be checked, but that is also very difficult, particularly because our power of parliamentary scrutiny is held by the grant and sufferance of those whom it is designed to check. That means that the powers that we have are as they were spelt out by another place. There are limits within which we must very carefully stay because basically our title to do anything is that the elected Chamber has willed to give us that power. However, so long as it has done so we should have no compunction about exercising that power.
We have a trust for the elected Chamber to revise legislation and ensure that it is properly and democratically conducted. In discharge of that trust we should insist on this amendment. I beg to move.
Moved, That the House do insist on their amendment numbered 1 to which the Commons have disagreed for the reason numbered 2. —(Earl Russell.)
3.45 p.m.
Baroness Young: My Lords, I listened very carefully to the noble Earl. Before attending the House this afternoon I took the opportunity to reread what he said at Report stage when this matter was debated. He referred to the amendment which I moved, which was supported by my noble friend Lord Rippon of Hexham and the noble and learned Lord, Lord Simon of Glaisdale, and to which the Government agreed. He welcomed it, as I think the whole House did; it was a major improvement to the Bill.
I very much agree with the noble Earl concerning the importance of the House of Lords as an amending Chamber. A great many amendments have been tabled and for a Bill of this length and size a great many have been accepted, not only the one that I moved but the amendment relating to the increase of the access funds, which is of immense value. That reflects great credit on your Lordships' House and
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the expertise that it brings to these matters. It is therefore right to set this issue in its context.
As the noble Earl also said, the Government have said repeatedly that the legislation will be monitored. I do not think that this is an exact analogy with the Social Security Bill. Social security legislation is vastly wider and more complex. I have no doubt that whatever may or may not be the case we are addressing a very articulate and vocal audience who are concerned with the Bill. They will certainly be able to make their views clear as the legislation is put into effect. We shall then know exactly how it is working out.
There seem to me to be two specific objections to accepting the Motion of the noble Earl to insist on the amendment. The first is that, were the House to amend the regulations and the Bill were to go back to another place, as inevitably it would, we would not know whether another place would agree with the regulations. That would produce a situtation of dispute between the two Houses. I am by no means a constitutional expert, but I am not at all clear as to whether there is any satisfactory way of resolving such a dispute.
However, I suspect that it is the second objection made by another place which is important, that is,
"Because it would unacceptably delay the implementation of the student loans scheme".
The amendment imposes a delay of 40 days during which draft regulations can be made. If then an amendment were to be passed, that too would be subject to 40 days' delay and there could then be another amendment subject to 40 days' delay. That situation could go on indefinitely. I am sure the noble Earl will say that that is not the intention and I do not suggest that it is, but the truth is that that is how it would be seen to work in practice. It would therefore have the effect of negating the Bill altogether.
The noble Earl might like to consider that that would produce considerable constitutional difficulty in the future or on any other legislation. I speak as a former Leader of your Lordships' House when I say that it is very important that the proprieties between this House and another place are carefully maintained. In those circumstances, when your Lordships have already included in the Bill a number of important amendments, to insist on something which will unquestionably lead to delay, even if not indefinite delay, opens up a very major new principle. As the noble Earl indicated, that principle has not been used for 70 years and that suggests that there are very good reasons why it has not been used for 70 years. It could produce severe difficulties between the two Houses.
Earl Russell: My Lords, if the noble Baroness will forgive me, I did not say that this procedure had not been used for 70 years. It was last used in the Education (Scotland) Act 1962.
Baroness Young: My Lords, I beg the noble Earl's pardon; I misheard what he said. The fact is that allowing the amendment would be an unfortunate course upon which to embark. I hope, as I am sure he will, that when my noble friend the Leader of the

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House replies to the debate he will fully set out the constitutional position so that we may be sure about it. I hope that the House does not insist on the amendment; that we stand by the amendment that has been agreed and leave the position as it is.
Lord Simon of Glaisdale: My Lords, there were two powerful reasons which spoke in favour of the amendment moved by the noble Earl that I confess caused me to favour it at the time. The first was that this is in a sense an enabling Bill. The noble Earl has dealt with that cogently today and there is no need to expatiate on it. However, I do not believe that your Lordships' disapprobation of a Bill of this type —a disapprobation that has been clearly voiced in all parts of the House—need be vindicated by this unusual provision which has many disadvantages.
The second reason was that your Lordships accept—or at any rate are said to accept—the convention whereby we do not vote against a statutory instrument. In my view, it is by alteration of that convention, which does not really bear much examination and which is in any case a weak convention, by deciding that your Lordships should exercise your undoubted powers to vote against subordinate legislation, that this matter is best resolved.
In saying that, I do not altogether agree with all the reasons put forward in another place for disagreeing with your Lordships' amendment. I agree that delay would be involved and that is a powerful reason in the way that it was put by the noble Baroness, Lady Young. However, I venture to disagree that it would lead to an unresolvable conflict between the two Houses. This procedure has been used before. As Erskine May states, a procedure needs to be in each case evolved to resolve any difference between the two Houses.
That was done, for example, on the pre-war India Acts when proceeding through this House by way of a Select Committee and in the other place. The problem is no more difficult than any situation where the two Houses disagree. In the end, if it cannot be resolved in any other way, a joint committee of the two Houses is appointed to argue out the matter.
The other argument on delay, even though in some respects I thought it was exaggerated in the other place, has some cogency. If some other means can be found to meet the point made by the noble Earl then, in my respectful submission, it should be used. That other means is that your Lordships should unhesitatingly, as I said, assume your Lordships' undoubted right to vote against subordinate legislation.
There are a number of reasons why that; convention is not particularly convincing. In the first place, it does not bear much constitutional sense. The proper analogy, surely, is that if your Lordships should vote against subordinate legislation it should, on analogy with the Parliament Act, be open to the other place, after the lapse of one year, to present it again for your Lordships' consideration. That is the correct constitutional analogy.
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The second reason is that this is a weak convention. Your Lordships know very well that conventions of the constitution, which are far more important in our constitutional system than the legal rules, can vary considerably in strength. For example, there is the convention that has been observed for well over 150 years that noble Lords who are lay people do not interfere with a report of the Appellate Committee. Not even the noble Lord the Government Chief Whip removes his iron fist from his velvet glove to beckon forward a majority to vote down a recommendation of the Appellate Committee which is inimical, as it often can be, to the Government. Nor indeed, for that matter, do Lords of Appeal who have not heard the argument interfere with a recommendation of the Appellate Committee. That is a very powerful convention.
The reason why it is powerful appears from another convention from the other side of the Atlantic. It was a convention from the very start of the United States that the President should not enjoy more than two terms in office. That convention was observed right up to our own time. It was powerful enough to prevent President Grant standing for a third term. However, that convention did not prevent Roosevelt from standing for a third and, indeed, a fourth term. It was vindicated, as any strong convention will be, by subsequent legislative action. The United States Congress subsequently enacted legislation, as your Lordships know, that no President should enjoy more than two terms in office.
A very weak convention was the convention that when a party was defeated at the polls the government should immediately resign. That was entirely consonant with the legal theory of the constitution whereby Parliament is supreme. That was observed right up to the end of the last century. Disraeli and Gladstone both resigned on being defeated at the polls. In other words, they were following the political sovereignty of the electorate. However, in 1923, when there was a hung Parliament, Baldwin met Parliament before resigning. He was defeated in Parliament. It seems to me that if we should have, as is likely, another hung Parliament the Prime Minister of the day would be well justified in meeting Parliament before resigning. In other words, that convention, like the one in question on affirmative resolutions and subordinate legislation in general, so far as your Lordships' voting is concerned is a weak convention to be applied when it is convenient. In fact, it has not been invariably applied.
Your Lordships voted against the Rhodesia sanctions order. It was withdrawn and re-presented in a not very seriously amended form. In my respectful submission this problem that the noble Earl has so cogently identified would be far better dealt with by your Lordships asserting that you are no longer bound by a convention that does not carry any conviction; namely, not to vote against subordinate legislation.
The noble Earl, Lord Caithness, appeared to concede that when the noble Earl moved his original amendment. I hope that the Lord Privy Seal will indicate in his reply that there is no reason why,

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whenever it is convenient and should your Lordships wish it, your Lordships should not vote against any subordinate legislation that is presented for consideration. That seems to me far more convenient as a means of achieving what the noble Earl wishes to achieve, but I cannot at this stage—however initially attracted I was to it—vote in favour of what he proposes.
4 p.m.
Lord Butterworth: My Lords, whatever view we take, it seems clear from everything that has been said today that a convention has been developed to regulate procedure in relation to statutory instruments. Over a long period of time there has been a continuous move to prevent the chaos that would result from the creation of different forms of statutory instruments to meet particular situations. The Statutory Instruments Act 1946 made the most determined effort to introduce general provisions for statutory instruments, to promote uniformity of procedure and avert the chaos which might otherwise result.
In order to achieve this generality of practice in dealing with regulations, one of the most important rules is that while each House can, by the appropriate procedure, reject a statutory instrument, it cannot amend it except in rare circumstances where that amendment is authorised by the parent Act.
It is quite clear that power can be taken to do this. The interesting point is that it has very rarely been applied. As the noble Earl, Lord Russell, explained, there was a group of such provisions way back in 1920: the Emergency Powers Act 1920, Section 2(4) which has now been repealed; and, as the noble Earl mentioned, the Census Act 1920, Section 1(2).
It does not seem to me appropriate that this House should use a precedent which has been so rarely applied. We should this afternoon abide by the general principle. The Government have sufficiently recognised the importance of this legislation by agreeing that the regulations shall be subject to the affirmative resolution. Therefore I do not believe that we should precipitate a division of view with the other place by seeking to extend the effect of an affirmative resolution by exceptionally attempting to give both Houses the power to amend these regulations.
Baroness Seear: My Lords, there is no question whatever that we have a right to insist on this amendment. It is within the constitutional position of the House that this should be done. The special reason that we on these Benches take such a strong line on the Bill is the nature of the Bill itself and also the importance of the matter which is left to be dealt with in regulations. Therefore we believe that it is extremely important. As the noble Earl, Lord Russell said, if we are to use our amending powers properly—which is the purpose of this House—we cannot do so in a Bill which contains so little that effective amendment is almost impossible.
The noble and learned Lord, Lord Simon of Glaisdale, with his great constitutional knowledge, has made it quite clear it is within our powers to do this. As I understand it, his reason for not supporting
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the amendment was a purely practical one—the problem of delay. Some of us think that this ill thought out provision might be improved by some degree of delay. We have never understood why there was such a tremendous hurry to bring in student loans by October, ill thought out and ill prepared as the legislation has been.
Despite what the noble Lord, Lord Butterworth, said, I accept that in his lucid explanation the noble and learned Lord, Lord Simon, has provided us with a second line of defence of the weakness of the convention. If, contrary to what I hope, my noble friend's amendment is not accepted, I put the House on notice now that I have not the slightest doubt that we on these Benches will take advantage of the lead given by the noble and learned Lord, Lord Simon of Glaisdale, to recognise the weakness of the convention and to act accordingly when regulations come.
I am not greatly impressed by the fact that the amendment of the noble Baroness, Lady Young, was accepted, valuable though that amendment was. We must remind ourselves that it applies only to the first round of regulations. That leaves a very great deal still to be settled without parliamentary control by the exercise of executive power. Throughout recent months we have repeatedly complained about the excessive extent to which the Government use regulations where, in our view, primary legislation is required, and therefore grossly diminish parliamentary control over the Executive. That must be fought and fought again.
Lord Renton: My Lords, the statement by the noble Baroness that your Lordships have the right to insist on the amendment is one which I think needs to be qualified. True, we have the right to ask another place to think again. However, I should have thought that the constitutional position is that another place must have the last word in the matter. So long as we understand that, the noble Baroness's word "insist" might be accepted for the time being. Does she wish to intervene?
Baroness Seear: My Lords, only to say that I accept the correction from the noble Lord. I mean our right to return the amendment to the Commons for further consideration.
Lord Renton: My Lords, speaking for myself I hope that we do not ask another place to think again about this. We debated it fully when the Bill was before us on the first occasion. We have had the advantage of further opinions expressed for and against the amendment this afternoon. I should have thought that the right course for us now is to say that the Commons amendment should be accepted. I speak as one who wants the Bill. I do not wish for delay. Therefore I think that the crux of the matter is as expressed in the Commons reason that:
"it would unacceptably delay the implementation of the student loans scheme".
I do not wish to see the scheme delayed. That is the principal reason for agreeing with the Commons—accepting their disagreement on this amendment.

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However, I have listened with great interest to what the noble and learned Lord, Lord Simon, and others have said regarding what he called the weak convention of the constitution that your Lordships do not reject statutory instruments, with or without amendment—and it is rare that we have the opportunity to amend. I believe that is a convention which we should not lightly attempt to change. If it were to be changed, I think it should be changed in a more general context rather than for the purposes of this Bill.
Lord Beloff: My Lords, as some people may believe, I differ from my noble friend who has just spoken in that I have never wished to see this Bill operational. I still prefer that it should be delayed in the hope that even at the last possible moment the Government will see the folly of their ways.
On the consitutional issue now before us I would make one specific point in adhering to my general view, which I think is the view of all noble Lords, that we should as rarely as possible challenge the legislative authority of another place.
This is a very special case because when our amendments, which were considerable and important, went back to another place a proper opportunity was not given to debate them. A guillotine —a timetable —was imposed. I know from Members of another place that there was considerable objection to the way in which the Government's objections to the Lords' amendments were railroaded through. It was just another example of what we have witnessed again and again in the passage of this Bill —an extraordinary determination to push things through as rapidly as possible, where necessary in defiance of accepted conventions. Therefore it seems to me that on this occasion and for that reason we are not bound by what I would normally regard as the binding convention to agree at the first opportunity with the Commons reason.
I have only one other point to make in respect of which I crave illumination. I am not clear that there is a real distinction between the view expressed by the noble and learned Lord, Lord Simon of Glaisdale, and the amendment supported by the noble Earl, Lord Russell. The amendment does not suggest that we would engage ourselves in the arduous business of amending regulations, which in their nature would be long, complicated and so on, but merely that the House would have an opportunity to suggest that the Secretary of State amend the regulations in the light of whatever considerations had been adduced either in this House or elsewhere and brought to his notice. I cannot see that it is very different to say that we should ask to have the statutory instrument amended, and that we should, as the noble Lord, Lord Simon of Glaisdale, suggests, simply reject it outright. I should be glad to be informed on that point.
Lord Boyd-Carpenter: My Lords, we have had a long and, constitutionally, very interesting discussion on this amendment. But one curious feature will have struck a number of noble Lords.
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The very interesting question of our powers in respect of statutory instruments has been raised. However, it is notable, if one looks at the Marshalled List, that it was not apparently on any such ground that another place rejected our amendment. It is stated very plainly, "The Commons disagree to this amendment for the following reason: Because it would unacceptably delay the implementation of the student loans scheme". That is the reason stated by another place for rejecting the amendment which your Lordships put into the Bill. It is therefore surely on those grounds that one ought to consider the matter.
I have a great deal of sympathy with my noble and learned friend Lord Simon of Glaisdale and his attitude to voting on statutory instruments. The present so-called constitutional position is quite unsatisfactory and will need to be reviewed. But, with respect, it does not arise today. We have before us a simple issue. Is what your Lordships considered an improvement to the Bill to be rejected because, if it remained in the Bill, it would unacceptably delay the progress of the Bill? With some Bills with which your Lordships deal the question of time is urgent. I refer to the Bills of an annual nature which have to be through if the constitutional machinery of the country is to work. That, with respect, does not apply to this measure.
I commented at an earlier stage on the apparent urgency from the Government's point of view of getting this measure through. I have frankly been puzzled. Your Lordships may recall that, so far from achieving any reduction in public expenditure, the Bill will, if it becomes law, for the first 10 years or so actually produce an increase in public expenditure. Therefore, from a public expenditure point of view, the urgency which the Government seem to attach to it seems a little difficult to follow. But the question for your Lordships is the question which the Commons posed to us. Does the urgency, real or supposed, of getting this measure into law so that it will operate this autumn counterbalance the very interesting argument as to what would be a good procedure to be followed in future?
The procedure set out in your Lordships' amendment applies beyond the time when any question of delaying the putting of the Bill into operation arises. Therefore, what the House is being asked to do, as I understand it, is, on the grounds of supposed urgency, abandon the proposals which, in the view certainly of some of us, would have made the Bill somewhat more acceptable not merely in its first phase but later on. It is therefore very much a matter for your Lordships. I shall be interested, as I am sure all noble Lords will be, to hear my noble friend the Leader of the House indicate what is the degree of urgency which makes the sacrifice of what must be assumed to be a better procedure worthwhile in the interests of saving time.
4.15 p.m.
Lord Belstead: My Lords, at the Report stage of the Bill the Government accepted the principle of an amendment which had been previously moved by my noble friend Lady Young. It provided that when the regulations were first made to establish

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the student loan scheme those regulations would be subject to the affirmative resolution procedure. It was a significant change to the Bill as we had received it from another place, and, understandably, it is fair for me to claim that the amendment for the affirmative resolution procedure was welcomed on all sides of the House. However, the first amendment on the Marshalled List today, on which the noble Earl, lord Russell, has moved a Motion to insist, would enable either House to vote to amend the regulations. The Secretary of State would then have to prepare new regulations and bring them back for approval again.
Under the affirmative procedure, if either House were to vote against regulations—that is as far as I am prepared to go this afternoon in respect of the noble and learned Lord, Lord Simon of Glaisdale—the Secretary of State would also have to take the regulations away, return with fresh regulations and seek approval once more. And so to that extent the first amendment does not add a very great deal to the Bill. But I think that the noble and learned Lord, Lord Simon of Glaisdale, was absolutely correct to say that the amendment is a most unusual provision. It would add a serious complication. Under the amendment, what is to happen if one House proposes an amendment which conflicts with an amendment proposed by the other House? Whose views would take precedence?
In moving that the House should insist on the amendment the noble Earl referred to Erskine May. What the noble Earl did not say was that Erskine May makes it quite clear that some kind of machinery would have to be improvised to resolve such disagreement between the two Houses. There is a further problem. The amendment imposes a delay of 40 days during which the draft regulations can be amended. But, as my noble friend Lady Young quite rightly said, the procedure goes a good deal further. If an amendment were to be passed during the 40-day period, fresh regulations must be presented, another 40-day period would begin and more amendments could be made.
Therefore, I put it to your Lordships that Amendment No. 1 has constitutional implications because the process of amendment and representation could continue indefinitely. The noble and learned Lord, Lord Simon of Glaisdale, advised in his most interesting speech that if put to it the two Houses could sort out the matter. However, I am bound to say that the noble Earl, Lord Russell, in moving the amendment has not offered any machinery for resolving the problem of conflicting amendments. My response to my noble friend Lord Boyd-Carpenter is that it is hardly surprising that another place has given "unacceptable delay" as its reason for disagreement, although I should say that it could mean the prospect of almost indefinite delay.
My noble friend Lord Beloff complained that the Lords' amendments were, so to speak, railroaded through the other place. As I understand it, that was one of the grounds why he felt he would wish to vote for the amendment. I should point out to your Lordships that as six hours were given for consideration of the Lords' amendments in another place—and I am happy to say that 14 of them
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were accepted —and this particular amendment was debated for close on an hour, I do not exactly agree with my noble friend.
The Government have tried to be as reasonable as possible in the matter. We have shown our willingness to agree to affirmative resolution and that is now on the face of the Bill. It was most warmly welcomed by your Lordships. But this amendment could carry it with the very unwelcome risk of conflict between the two Houses. That is something we should not be in the business of provoking during the final stages of the Bill.
I therefore hope that the noble Earl will not press his Motion (2A) to insist upon Amendment No. 1. However, in the event that he does so, I must ask your Lordships to oppose the Motion.
Lord Cledwyn of Penrhos: My Lords, before the noble Lord sits down, I think that it would be of interest to the House if he could say whether he believes that the delay which another place has described as "unacceptable" would in fact be in breach of the 1911 Act as amended by the 1948 Act?
Lord Belstead: My Lords, I do not think that either I or another place has suggested any such thing. In answering my noble friend Lord Boyd-Carpenter I merely put my own construction on the words "unacceptable delay", which have been used by another place.
Earl Russell: My Lords, we have had a very interesting and excellent debate, to which I have listened with great care. The noble Lord, Lord Boyd-Carpenter, put his finger on the key issue: is this to be regarded as "unacceptable delay" and, if so, for what reason? I entirely accept what the Secretary of State said. Since the Bill has been through both Houses, the student loans scheme should come into operation at the earliest practical moment. However, in my view the adjective contained in that statement deserves weight as well as the noun. The question as to what is the earliest moment which is practical is one on which others as well as the Secretary of State may be entitled to an opinion.
The Department of Education and Science is a department which has shown some signs over the past two or three years of being inclined to be in a hurry. If we reflect on some of the other measures emanating from that department which have been before the Chamber, they have on occasion been measures where the department itself might have benefited from some delay. Delay is not always automatically bad if it can lead to an improvement in the measures presented so as to make them more capable of working. On reading the Secretary of State's remarks on this amendment made in another place, I was a little surprised that he alluded to "this i unnecessary and wasteful process of amendment". I shall not enlarge upon those words, but I shall say that, in deciding whether an amendment is either unnecessary or wasteful, the Secretary of State was setting himself up as judge and jury in his own court. Of course he thinks that his Bill is properly drafted; indeed, he would not have put it forward if he had

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not thought so. But it is a question upon which the ultimate authority lies with the two Houses of Parliament.
The noble Lord the Leader of the House called me to task for not quoting the words of Erskine May: namely, that, where the Houses disagree, machinery must be evolved for reconciling the differences. I used those words when I originally moved the amendment. I refrained from so doing on this occasion simply out of a desire not to waste your Lordships' time by repeating myself I agree that there must be a machinery for reconciling the differences, but, as I understand it, the procedure is no different from that used on any occasion when this House or another place chooses to insist upon an amendment. Procedure exists for dealing with the situation. If one says that one cannot have two Houses expressing opinions because they might disagree, in the end that is either a nugatory argument or an argument for single chamber government, which I would regret.
I listened with a great deal of care and interest to the remarks made by the noble and learned Lord, Lord Simon of Glaisdale. I entirely agree with what he said about a weak convention. I think that the time will come when the convention of not voting against statutory instruments will have to be broken, as indeed it has been 20 times since 1968. It is a convention which has already been very much honoured in the breach. Since 23rd November last I have wondered a great deal whether that was the correct route to use on this occasion. I have been in two minds about that for some time. What made me decide, tentatively I admit, to prefer this procedure which I am now defending, is the fact that very often this House makes some of its most valuable contributions by changing small points. The House has a very good eye for small points.
The procedure for voting against the whole body of regulations because you want to change small items in them is inevitably a cumbersome one. I thought—possibly wrongly; but the view is not an indefensible one—that the procedure suggested in the amendment had the advantage of being rather less cumbersome and of producing rather less reproach to regulations which after all might be 95 per cent. competently drafted and questionable in only 5 per cent. I should be sorry to see a situation where we could not improve the 5 per cent. because we did not want to cast too much doubt on the 95 per cent. The noble Lord, Lord Butterworth, said that this was a rare precedent. It is; it is a rare Bill. If one thing matters to me more than another in all this it is the hope that it will remain so.
As I said, I listened with a great deal of care to all the remarks which have been made. However, I have not heard anything which makes me think that I should change my mind. Therefore, I ask the House to insist on their amendment to which the Commons have disagreed.
4.28 p.m.
The Chairman of Committees: My Lords, the Question is that the House do insist upon their
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Amendment No. 1 to which the Commons have disagreed for reason numbered 2?
Their Lordships divided: Contents, 68; Not-Contents, 119.

DIVISION NO. 1

CONTENTS

Addington, L.

Kilmarnock, L.

Adrian, L.

Kirkwood, L.

Airedale, L.

Lawrence, L.

Aylestone, L.

Leatherland, L.

Beloff, L. [Teller.]

Lloyd of Kilgerran, L.

Blackstone, B.

Mais, L.

Blease, L.

Meston, L.

Bonham-Carter, L.

Molloy, L.

Bruce of Donington, L.

Monson, L.

Butterfield, L.

Mulley, L.

Carter, L.

Nicol, B.

Cobbold, L.

Phillips, B.

Dacre of Glanton, L.

Porritt, L.

David, B.

Ritchie of Dundee, L.

Davies of Penrhys, L.

Rochester, L.

Donaldson of Kingsbridge, L.

Russell, E.

Ely, M.

Russell of Liverpool, L.

Ezra, L.

Sainsbury, L.

Falkland, V.

Seear, B.

Flowers, L.

Shaughnessy, L.

Foot, L.

Stedman, B.

Galpem, L.

Stoddart of Swindon, L.

Gladwyn, L.

Strabolgi, L.

Graham of Edmonton, L.

Thomson of Monifieth, L.

Grey, E.

Tordoff, L. [Teller.]

Hampton, L.

Turner of Camden, B.

Hanworth, V.

Wallace of Coslany, L.

Harris of Greenwich, L.

Walston, L.

Hayter, L.

Wedderbum of Charlton, L.

Hunt, L.

Wigoder, L.

Hutchinson of Lullington, L.

Wilberforce, L.

Jeger, B.

Willis, L.

Jenkins of Putney, L.

Winchilsea and Nottingham, E.

Kearton, L.

Kilbracken, L.

NOT-CONTENTS

Airey of Abingdon, B.

Elliott of Morpeth, L.

Aldington, L.

Erroll of Hale, L.

Alexander of Tunis, E.

Fanshawe of Richmond, L.

Allerton, L.

Ferrers, E.

Annaly, L.

Forbes, L.

Arran, E.

Eraser of Kilmorack, L.

Balfour, E.

Gainford, L.

Belhaven and Stenton, L.

Gardner of Parkes, B.

Bellwin, L.

Geddes, L.

Belstead, L.

Gray of Contin, L.

Blatch, B.

Gridley, L.

Blyth, L.

Havers, L.

Boardman, L.

Henderson of Brompton, L.

Brabazon of Tara, L.

Henley, L.

Brougham and Vaux, L.

Hesketh, L.

Butterworth, L.

Hirshfield, L.

Campbell of Alloway, L.

Hives, L.

Campbell of Croy, L.

Hood, V.

Carnegy of Lour, B.

Hooper, B.

Carnock, L.

Hylton-Foster, B.

Cockfield, L.

Johnston of Rockport, L.

Colville of Culross, V.

Joseph, L.

Constantine of Stanmore, L.

Kimball, L.

Cottesloe, L.

Lauderdale, E.

Cox, B.

Liverpool, E.

Crickhowell, L.

Long, V.

Cullen of Ashbourne, L.

Lyell, L.

Daventry, V.

McColl of Dulwich, L.

Davidson, V. [Teller.]

Mackay of Clashfem, L.

Denham, L. [Teller.]

Macleod of Borve, B.

Eden of Winton, L.

Malmesbury, E.

Elibank, L.

Manton, L.

Ellenborough, L.

Margadale, L.

Elliot of Harwood, B.

Marsh, L.

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Massereene and Ferrard, V.

Sempill, Ly.

Merrivale, L.

Simon of Glaisdale, L.

Mersey, V.

Skelmersdale, L.

Milverton, L.

Strathcarron, L.

Montgomery of Alamein, V.

Strathclyde, L.

Mountevans, L.

Strathcona and Mount Royal, L.

Munster, E.

Murton of Lindisfame, L.

Strathmore and Kinghome, E.

Nathan, L.

Nelson E.

Strathspey, L.

Norfolk, D.

Sudeley, L.

Norrie, L.

Swansea, L.

Nugent of Guildford, L.

Swinton, E.

Onslow, E.

Terrington, L.

Orkney, E.

Teviot, L.

Orr-Ewing, L.

Thomas of Gwydir, L.

Pender. L.

Tranmire, L.

Portsmouth, E.

Trefgame, L.

Pym, L.

Trumpington, B.

Reay, L.

Ullswater, V.

Renton, L.

Vaux of Harrowden, L.

Renwick, L.

Vinson, L.

Richardson, L.

Westbury, L.

Romney, E.

Whitelaw, V.

St. Davids, V.

Wise, L.

Sanderson of Bowden, L.

Young, B.

Selkirk, E.

Resolved in the negative, and Motion disagreed to accordingly.
4.38 p.m.
Lord Belstead: My Lords, I beg to move that the House do not insist on their Amendment No. 1 to which the Commons have disagreed for the reason numbered 2.
On Question, Motion agreed to.
LORDS AMENDMENT
3 Schedule 2, page 3, line 40, at end insert:
"(1A) No student in receipt of a loan payable in accordance with regulations made under this paragraph shall be ineligible for Housing Benefit during his period as a student whether as a consequence of such regulations or of the provisions of or regulations made under this or any other enactment."
4 The Commons disagreed to this amendment for the following reason—
Because it involves a charge on the public revenue and the Commons do not offer any further reasons, trusting that the above reason may be deemed sufficient.
Lord Belstead: My Lords, I beg to move that the House do not insist on their Amendment No. 3 to which the Commons have disagreed for the reason numbered 4. With your Lordships' agreement, at the same time I should like to speak to Amendment No. 7 with reason numbered 8.
The amendments passed by your Lordships at Report stage of the Bill would prevent students in receipt of a loan or attending a post-graduate course being disentitled from housing benefit. The reason for the other place disagreeing to both the amendments—that is, Amendments Nos. 3 and 7 —is that of privilege. Because another place has asserted its financial privilege I believe it would be wrong for your Lordships' House to insist on these amendments.
I trust that your Lordships will acquit me of discourtesy if I advance no other reason in support of the Motion than that I am now making. In saying that I do not wish to prevent any noble Lord
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discussing the subject of the amendments, but our decision at the end of the debate should be reached on one ground alone. That ground can best be set out by quoting the Companion to Standing Orders, which reads on page 122:
"If the Commons disagree to a Lords amendment which infringes their financial privileges, the disagreement is made on the ground of privilege alone …. In such cases the Lords do not insist on their amendment".
Your Lordships will recall that when these amendments were discussed on Report my noble friend Lord Caithness advanced arguments against them and the House rejected those arguments. I wish to emphasise that your Lordships' House was entirely within its rights to do so. Indeed the Companion to the Standing Orders also makes it quite clear that each House is the guardian of its own privileges. It alone may invoke those privileges, and until either House does so the other House is free to act as it thinks fit.
However, on this occasion another place has now invoked its financial privilege. Therefore, although I am advising your Lordships that these two amendments should now be decided on the single point of financial privilege asserted by another place, I firmly believe that, procedurally, your Lordships' House has exercised its powers hitherto absolutely correctly. Your Lordships have asked another place to think again about a provision in this Bill and another place has done so. Members in another place have confirmed their original decision and have concluded that this is an area of policy which, by long constitutional practice, belongs to them alone. I beg to move.
Moved, That the House do not insist on their Amendment No. 3, to which the Commons have disagreed for the reason numbered 4.—(Lord Belstead.)
Lord Adrian: My Lords, I do not propose to question the decision of Mr. Speaker on the two amendments concerning housing benefit. I fully understand that his decision was in accordance with precedent. However, I am relieved to discover that your Lordships' House did not act beyond its appropriate powers in attempting to prevent the removal of housing benefit for students. Nevertheless your Lordships' House was persuaded to exert its influence in order to retain the existing entitlement to housing benefit for students and for graduate students. One may wonder how wise it was to prevent another place from reconsidering the issues in the light of your Lordships' arguments and their decision. At the very least I believe it looked as if the Government were fearful that the arguments of your Lordships might have carried weight in another place as well as here. However, we shall never know whether that is the case because another place has not been allowed to reconsider the issue.
One should always hesitate before accusing Her Majesty's Government of high-handedness. However, I must confess to hesitating less and less in respect of the present Government. But what other accusation can one make of a government who deny another place the right to discuss and reject arguments that have been successfully made in this House?

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The wider world will not take great interest in constitutional and technical niceties but it will look more directly at the consequences of this unhappy incident. Your Lordships' amendments on housing benefit gave the Government the opportunity to enlarge their loans scheme. At present it is one which in due course will relieve the Government and better-off parents of a large part of their obligation to help with student maintenance. If the Government had accepted your Lordships' amendments, the loans proposals would have continued to do that, but there would also have been continuing specific help for students who had to live in expensive accommodation. In respect of the last rejected amendment, there would also have been help for graduate students who are not eligible for the loans scheme.
The Government have now made it plain that their principal aim is to diminish the parental obligation for maintenance and to transfer a substantial part of the parental contribution as well as the Government's maintenance grant to graduates by imposing a charge on their future earnings. Indeed the Government see no reason to continue with the existing targeted housing benefit for graduate students, or indeed for any students whose accommodation is costly. It is to be discontinued in favour of the more meagre resources provided by the access funds. However, the doubling of the access funds will make a partial contribution to that problem.
Some 20 years ago this country was considered to be one which had an outstandingly well trained post doctoral research manpower. A substantial number of excellent industrial research facilities was set up in the UK. This is or was especially true in the pharmaceutical industry where major companies are frequently multinationals. Today I am afraid that the perception of that industry is one of increasing difficulty in recruiting research staff of adequate calibre. That is certainly in accordance with the experience of universities which have found that fewer able students now want to train for research careers. Other countries are now seen as better bets as regards providing new industrial laboratories.
Students themselves, and perhaps equally importantly industry, dependent as it is on well-trained and high calibre research staff, will not misunderstand the Government's thinking and the hidden and perhaps partly subconscious thoughts that have informed so much of their advocacy of this Bill. It will be seen that the Government's support of increased access—we have to realise that is only relatively recent —is only halfhearted. They will be the end but not the means. It appears that the Government are more concerned with and are doing more to help the finances of the children of social groups one, two and three. They appear to consider that graduate students, who will be tomorrow's research workers and tomorrow's university staff, can fend for themselves on the grounds that they had better get used now to the poor rewards that they will receive in the future.
4.45 p.m.
Lord Boyd-Carpenter: My Lords, it is beyond dispute that where Members of another place claim privilege because an amendment carried by your Lordships' House imposes a charge, their word has to stand. However, I rise simply to ask my noble friend to give an explanation of the circumstances in which that process has occurred in this case. As I understand it, housing benefit is still payable to students and will remain so, at least until this Bill becomes law. If that is so, it does not seem to me self-evident that the action of your Lordships' House in taking out of the Bill something which takes away that right necessarily impinges upon the privilege of the House of Commons.
As I understand it, the effect of your Lordships' amendment is simply to retain the status quo and not to impose a charge where none exists at present. I have not had time to look up the precedents and it may well be the case that my noble friend can demonstrate that to take away something which otherwise was going to reduce a charge amounts to imposing a charge. However, I would say to my noble friend that that is not self-evident. As I understand it, all that your Lordships' amendment sought to do was to preserve the status quo and not to impose a new and additional charge. If that is correct, perhaps my noble friend can tell me whether there is any precedent for that situation being treated as the basis of a claim for House of Commons privilege.
Lord Henderson of Brompton: My Lords, I wish to speak briefly at this stage partly because of the fact that the propriety of proceedings in another place has been questioned. First, I should say that I entirely agree with the substance of the speech made by my noble friend Lord Adrian. I voted with the majority in the House in the clear conviction that the House had a right to vote as it did. However, I must unfortunately disagree with the first remarks of my noble friend Lord Adrian when he blamed the Government for disallowing discussion on this subject in the House of Commons. It had nothing to do with the Government. It was the Speaker's decision entirely and the Speaker's decisions cannot be questioned.
I point out to the noble Lord, Lord Boyd-Carpenter, that in Commons Hansard of 4th April, at col. 1261, the Speaker reconsidered his decision and gave the reasons why he stood by his decision. I do not need to repeat the reasons. They are there for all to read. I do not wish to defend the Speaker in any way but his decision to invoke Standing Order No. 76 cannot be challenged in this House. In general it is not appropriate for either House to question the proceedings in the other place.
Lord Renton: My Lords, before the noble Lord sits down, can he confirm my recollection that any question of privilege of the kind that we are discussing is a matter for the decision of the Speaker and he has the last word?
Lord Henderson of Brompton: My Lords, yes. I entirely agree with what the noble Lord has said. He has reiterated what I have just said.

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Perhaps I may take the opportunity to say a very brief word about the discussion on the previous amendment, in which I failed to intervene. However, I find it relevant now. The noble Lord, Lord Renton, said that it was a convention that in an exchange between these two Houses the House of Commons had the last word. I know of no such convention.
I also wish to say the same of the speech of the noble Lord, Lord Beloff. He indicated that it was normally the case and amounted to a convention that this House agreed with the House of Commons when There was an exchange between the two Houses. That is not correct. I may add that I have reservations about all of the speeches in the previous discussion except those of the noble Baroness, Lady Young, and the noble Lord the Leader of the House. I agreed with every word they said.
Lord Adrian: My Lords, before the noble Lord sits down, perhaps I may say that he has just very kindly put me in excellent company since he had reservations about my speech and all the other speeches. I was aware of the point that he made and I apologise if I made any implications about the Speaker. I did not intend to do so.
Lond Peston: My Lords, perhaps I may thank the noble Lord the Leader of the House for his original statement on these matters. In particular I thank him for reassuring the House that we followed the correct procedure at all times in dealing with the amendment. As the author of the amendment, I was always worried about whether the amendment was procedurally correct. I was amazed that at no point did it turn out to be procedurally incorrect and I was delighted that we accepted it.
I do not suggest that we should go against the Speaker's ruling. It would be entirely wrong for your Lordships to do so. However, I should like to make one or two other points which may be helpful. One is that the regulations dealing with the eligibility of students, and particularly postgraduate students, for housing benefit are not part of the Bill. They will be introduced as regulations in the ordinary way. Therefore there will be an opportunity to debate them. The suggestion that the other place has been prevented from debating these matters is incorrect. Perhaps the noble Lord the Leader of the House, who knows the rules, can confirm that.
My second point—and I say this not entirely to make mischief—is that the Government are not obliged even at this late stage to exclude students, and particularly postgraduate students, from eligibility for housing benefit. We have passed our amendment. The other place was not prevented from knowing what that amendment was and is perfectly well aware of our views, and of most enlightened opinion on the matter. It is still possible for the Government to decide not to go along this route. Perhaps the Government will listen to the cogent remarks of the noble Lord, Lord Adrian, in particular with regard to postgraduate students, for whom the matter is of overwhelming significance. Even at this stage, and even if they continue to follow the line that they say they are following, it would be possible for the Government not to proceed with the
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proposed ineligibility regulations, particularly regarding postgraduate students.
I do not at this point accept that all is lost. As the noble Lord, Lord Boyd-Carpenter, said, even on the question of the Bill itself the Government do not have to race ahead. Even if the Bill becomes law the Government could still reconsider. I therefore conclude by saying that this is an excellent example of your Lordships' House doing precisely the job which justifies its existence—namely, exercising its power to clarify an issue, to put the arguments clearly and to carry an amendment on the issue under consideration. Honourable Members and right honourable Members in the other place were given every opportunity to learn our views. They will still have the opportunity to debate them. In particular, the Government still have the opportunity to see sense on the matter and not to proceed further.
I have taken the opportunity to add a few words to the debate. I should like to end by saying that of course one must accept the Speaker's ruling and that is that.
Baroness Young: My Lords, I should simply like to add my support for the last remark of the noble Lord, Lord Peston, regarding the importance of standing by the ruling of Mr. Speaker. Were your Lordships' House to question that ruling not only should we find ourselves constitutionally very incorrect but it would also make the workings of Parliament impossible were we to conduct ourselves in that way.
I listened with great interest to my noble friend Lord Boyd-Carpenter, who made a rather beguiling speech setting out what he has always believed to be the substance of the matter. For my own part I believe that in view of the Speaker's ruling it would be quite improper to discuss the substance of the amendment. I do not intend to do so. I strongly suspect that my noble friend the Leader of the House will feel that he cannot do so either.
I was immensely flattered that the noble Lord, Lord Henderson, felt that my earlier remarks were correct. However, I believe that there are certain constitutional issues which it is extremely important that we in this House should observe. Tempting as it is to stray outside those constitutional procedures it would be a mistake to do so. It would be seen not only to be wrong constitutionally but also to make relationships between your Lordships' House and another place impossible in the future. For that reason I recognise that we should not insist on the amendment.
Earl Russell: My Lords, I hasten to reassure the noble Baroness, Lady Young, and the noble Lord, Lord Henderson of Brompton, that I should not for one moment dream of questioning the Speaker's ruling, either on grounds of authority or on grounds of competence.
I am interested chiefly in understanding precisely what it is that Mr. Speaker has said in order not to fall foul of any such ruling in future. Like the noble Lord, Lord Boyd-Carpenter, I had believed that we were covered by the principle of Erskine May that

347
one does not require a new money resolution to continue an existing charge.
Lord Henderson of Brompton: My Lords, perhaps the noble Earl will give way. Perhaps I can discourage him from proceeding with what appears to be criticism of the Speaker of another place. I believe that it is highly unwise to do so. I should hate to move that anybody should be no longer heard in this House but I should have thought that it was not advisable to criticise the Speaker. I beg the noble Earl to desist from doing so.
Lord Russell: My Lords, perhaps I may reassure the noble Lord most urgently that my next sentence was going to be in full agreement with Mr. Speaker, as was everything else that I intended to say. I was merely interested in what exactly it was that Mr. Speaker said. He said that Lords amendments were not covered by the money resolution in respect of the Bill. He also said that they would have been out of order if they had been moved in another place. That is rather more far-reaching than the simple matter of the ordinary Commons financial privilege, which is a door on which we may knock and another place may open if it chooses.
If I understand Mr. Speaker right —and I hope to be put right if I do not —he said that we were doing this on the wrong Bill. If that is so, I simply wish to say that I regret that it was so and to ask whether I am correct in understanding that what Mr. Speaker has said is not meant to discourage us from raising the matter in another place where it is covered by an appropriate money resolution.
Before leaving the subject, I should like to say that this matter will come before us again. I regret the policy that the Government are following. They have their sums wrong. They think that they are increasing the amount of money available for student support. In fact, they are reducing it.
5 p.m.
Lord Harmar-Nicholls: My Lords, is there any way of preventing this from happening again in the future? The problem that we are now discussing and upon which my noble friend the Leader of the House based his speech in moving the amendment arose from the fact that the Bill started in this House and we had no way of knowing what the reaction of the Speaker and his advisers would be.
I agree with the noble Lord, Lord Peston. He said that he had his doubts as to whether we were within our rights when we discussed the matter and I must confess that I did too. Is there no way that my noble friend can ensure that on similar occasions in the future, when a Bill starts in this House and we do not have the benefit of Mr. Speaker's decision because he is not here, we avoid the risk of a possible clash between the two Houses?
Lord Simon of Glaisdale: My Lords, I find myself in entire agreement on the substance of what your Lordships, including my noble friend Lord Adrian, did at Report stage with regard to graduate students. However, it seems to me quite unarguable that the
348
decision of the Speaker on whether to apply a standing order of another place cannot possibly be questioned in your Lordships' House.
I merely add that there is a certain amount of euphemism in this matter. The noble Lord the Lord Privy Seal talked of asking the other place to think again as we often do. But it is no such thing. The decision is purely that of the Government. If they had wished to accept my noble friend's amendment, the Government could perfectly well have tabled a supplementary financial resolution.
In these circumstances it is pure euphemism to speak of the other place being asked to think again, particularly in this case when it was given no opportunity to express any view at all. It is the Government who make the decison and it would be very much better for constitutional reality if we recognised that.
Lord Belstead: My Lords, before briefly replying to the debate, I should like to refer once again to the right of your Lordships' House to ask another place —if I may use the expression after the speech of the noble and learned Lord —to think again. Your Lordships do that on many Bills and, as I said on the first amendment, a good many amendments to the Bill have been accepted by the House of Commons. After the speech of the noble Lord, Lord Adrian, I felt slightly embarrassed. Perhaps I sounded a little pompous when I spoke at the beginning of the exchange talking about the procedural rectitude of this House, but I thought that I should put on record that my understanding and the advice that I received are that we have done everything right, even though life has not been made easy for the Government. It is our constitutional duty to revise and therefore to send amendments back to another place.
However, the Commons has now disagreed with Amendments Nos. 3 and 7 on the grounds of financial privilege. My noble friend Lord Boyd-Carpenter asked if I would explain the circumstances of the claim for financial privilege. I must not attempt to look behind the Speaker's ruling. I simple record that, at col 1261 of the Commons Hansard of 4th April, Mr. Speaker reiterated that the ground for disagreement was that both amendments are not covered by the money resolution in respect of the Bill. In the face of that claim of financial privilege, our Companion says that the Lords do not insist on their amendment. I therefore ask noble Lords not to insist on Amendment No. 3, which the Commons have disagreed to for the reason numbered 4.
On Question, Motion agreed to.
LORDS AMENDMENT
5 Schedule 2, page 4, line 10, at end insert:
"(4) Regulations made under this paragraph shall allow special conditions to be set in respect of repayment of loans for disabled students or graduates."
6 The Commons disgreed to this amendment but proposed the following amendment in lieu thereof—
Page 3, line 40, at end insert —
"(B) Regulations under sub-paragraph (1)(b) above shall make such separate provisions as the Secretary of State considers appropriate with respect to the repayment of loans by borrowers who are disabled."
Baroness Blatch: My Lords, I beg to move that the House do not insist on their Amendment No. 5 to which the Commons have disagreed and do agree with the Commons in their Amendment No. 6 in lieu thereof.
The amendment which left this House was disagreed to in another place. However, those in another place have proposed a slightly different amendment which has much the same effect. This is a government amendment. The Government accept the principle of the amendment made at Third Reading in this House, and their alternative is essentially tidying up to ensure that the change to the Bill more effectively expresses noble Lords' intentions.
Both amendments are intended to give the force of primary legislation to the requirement that disabled people repaying loans should have their particular circumstances considered. My right honourable friend explained in another place that there are weaknesses in the drafting of the amendment inserted by this House. The government amendment rectifies those faults. The original amendment did not, for example, clearly impose a duty on the Secretary of State, although that was what noble Lords no doubt intended, and the government amendment does so. The government amendment also removes the reference to students who will not be repaying loans and substitutes the reference to borrowers. It makes clear that it is the regulations themselves which should contain that separate provision for the disabled.
The Government have already announced on 19th March that there will be special repayment arrangements for disabled borrowers. Those arrangements take the form of a disregard of disability-related benefits for the purpose of assessing a disabled graduate's income for deferment.
That provision will be implemented under the government amendment. It will be included in regulations subject initially to the affirmative resolution procedure. The amendment is therefore a safeguard ensuring the continued provision of special arrangements but not necessarily identical ones.
Moved, That the House do not insist on their Amendment No. 5 to which the Commons have disagreed and do agree with the Commons in their Amendment No. 6 in lieu thereof.—(Baroness Blatch.)
Lord Henderson of Brompton: My Lords, perhaps I may express a word of gratitude to the noble Baroness for what she has said. I entirely agree that the form of words which the Government propose and which are now before the House are an improvement on the form of words which I moved in this House. I am grateful to the Government for acceding to the amendment and improving on its wording.
Perhaps I may ask one question. I regret that I have not given the noble Baroness notice, but the matter was raised in the House by, I think, the noble Earl, Lord Russell. Will the Government consider
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making provision in the regulations for those who are subsequently disabled? When they are graduates and subsequently become disabled, it may be very hard for them to repay the loan. That provision should be considered by the Government and, if possible, incorporated in the amendment which covers the special conditions for disabled students regarding repayment of their loans.
Baroness Phillips: My Lords, perhaps I may first say that my remarks are not intended to reflect on the other place, the Speaker or anyone else. I wish no discourtesy to the other place. But I also want my remarks on record. It seems that one cannot make even a simple speech now without being accused of discourtesy to the other place. I wish that those in the other place were as careful about what they say about this Chamber. I read Hansard and no doubt we could challenge them at some time, but that too would probably be out of order.
I merely want to ask the Minister to explain what is different about the amendment put forward by the Government which they have rewritten because it concerns money. Is there any reason why the other one could not have been rewritten and presented by the Government?
Lord Addington: My Lords, I am very glad that the Government have at least accepted the principle behind the amendment that was agreed by this House. I am also pleased that they have now decided to take into account the great variety of students and of repayment systems. I hope that any further and subsequent consideration of the Bill and its consequences will take into account that one does not necessarily have to be disabled to receive such special consideration. I hope this means that other aspects of the Bill will be considered in a wide and open manner.
Baroness Blatch: My Lords, I am grateful for most of the comments that have been made in this short discussion. Perhaps I may first answer the query of the noble Baroness. I gave two reasons for the minor but important changes. First, a requirement is put very specifically on the Secretary of State each year to carry out the requirement to give special consideration. Secondly, the original amendment was rather restrictive in that it referred only to students. It is important to refer to borrowers who may be disabled. That simply widens the category of people. I hope that the noble Lord, Lord Henderson, accepts that these are tidying up changes.
With regard to the noble Lord's specific question about graduates who become disabled, I am assured that they will receive special consideration. I believe that the spirit, and specific objectives, of the original amendment of the noble Lord, Lord Henderson, have been met by this amendment.
I should like to assure the House that the Government are committed to including in regulations special arrangements for repayment by disabled people. We accept the concern that specific reference should be made to that on the face of the Bill. Therefore we are willing to comply with the intention behind the amendment passed in this

351
Chamber, subject only to the minor changes that I have outlined.
I commend the Government's amendment to the House. In the light of those comments I hope that the noble Lord, Lord Henderson, will also accept it.
On Question, Motion agreed to.
LORDS AMENDMENT
7 Schedule 2, page 4, line 10, at end insert:
"(4) No student attending a course of supervision in connection with a postgraduate degree who is for any period of such study not in receipt of a loan payable in accordance with regulations made under sub-paragraph (1) above shall be ineligible for Housing Benefit during that period whether as a consequence of such regulations or of the provisions of or regulations made under this or other enactment."
8 The Commons disagreed to this amendment for the following reason —
Because it involves a charge on the public revenue and the Commons do not offer any further reason, trusting that the above reason may be deemed sufficient.
Lord Belstead: My Lords, I beg to move formally that the House do not insist on their Amendment No. 7.
Moved, That the House do not insist on their Amendment No. 7 to which the Commons have disagreed for the reason numbered 8.—[Lord Belstead).
On Question, Motion agreed to.

Landlord and Tenant (Licensed Premises) Bill
5.14 p.m.
Lord Trefgarne: My Lords, I beg to move that the House do now resolve itself into Committee on this Bill. In so moving, I should like to explain why a government amendment that I had intended to table is not on the Marshalled List today. In my speech in which I moved the Second Reading of the Bill on 22nd March I stated that the Government intended to bring forward an amendment to provide that special arrangements for compensation should apply during the period of adjustment to a more open market.
I have to tell your Lordships that when my officials came to table that amendment on my behalf last week, they were advised by the House authorities that it was outside the rules of relevance with regard to the Bill and ought not to be tabled. I myself was abroad on official business at the time. Therefore, I returned to find that an amendment which I had undertaken to bring forward at the Committee stage of the Bill today in the event could not be moved.
I am now considering urgently what is the right way forward in these circumstances. I shall come back to the Chamber on this point at the next stage of the Bill. In the meantime I beg to move.
Moved, That the House do now resolve itself into Committee.—(Lord Trefgarne.)
Lord Williams of Elvel: My Lords, the noble Lord, Lord Trefgarne, will realise that he has put the Chamber in an extremely difficult position. On 22nd March at Second Reading there was a clear and unequivocal undertaking from the Minister that he would bring forward the amendment that he described. It is the normal procedure in this House that such amendments would be tabled for consideration at the Committee stage.
As he said, the Minister found himself unable to fulfil his undertaking. We must assume—and I do so—that he made that undertaking in good faith. We must also assume as a working hypothesis that the Minister is not a half-wit and that he had been properly advised on the undertaking that he gave. Neverthless, the Government have failed to bring forward the amendment that we were promised. That raises several important issues.
First, there is the importance of the matter for tenants of licensed properties which are dealt with under the Bill. They have been relying on the Government to bring forward an amendment. They have argued the case in another place, and indeed here, and I imagine that the Government accepted their arguments. So they are relying on the Government to bring forward a proper amendment.
At a time when the industry is being substantially reorganised, as I said during the Second Reading debate, it is correct and proper that the Government should give consideration to those tenants who may in some way be unfairly dislodged, at least during the interim period. Obviously we should like that consideration to be extended beyond the interim period. Nevertheless, the Government promised us an interim period.
The Long Title of the Bill is narrowly drawn. We took advice on whether or not the amendments that we proposed were in order. No doubt our advice was the same as that given to the Government; namely, that our amendments—apart from the one that I have put down on the Marshalled List today—were out of order.
The Government have one last chance. The Minister must fulfil his undertaking. If not, I must tell him that we believe that the Bill should be withdrawn and the Government should re-submit a Bill which will have a proper Long Title. That will allow the noble Lord to fulfil his undertaking and in addition enable us to discuss all the matters that were debated at Second Reading, given a wider scope for the Bill. If that undertaking is honoured on Report, as the Minister suggests, I shall argue that the matter is so important that Report procedures for the Minister's amendment—and we accept that he gives us the assurance in good faith that he will bring it forward on Report—are not possible. The matter is such that it cannot be considered on Report procedures and we shall wish to have a full Committee-style discussion on that amendment. Indeed, if the scope of the Bill is widened and our amendments, which I foreshadowed at Second Reading, become in order, we shall wish to have a recommitment of the Bill and we give no undertaking as to timetable.
However, if the Minister cannot meet his obligations at Report stage—I am sorry if this is a

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matter of amusement to the noble Lord but it is a matter of great seriousness to this Chamber—and if the Bill is withdrawn and resubmitted in a different form, then from the Opposition I shall undertake to give all aid to the Government. We do not oppose the principle of the Bill, as I explained on Second Reading. We shall undertake to give all aid with the new Bill provided certain conditions are met on the timetable and we shall do our best to make sure that it goes through expeditiously.
Finally, it appears to be another case where DTI Ministers have made another foul up. I look very closely at the noble Lord. I refer to examples such as House of Fraser, the Iraqi supergun, Barlow Clowes, and Rover—the list is becoming endless. I very much hope that this time the noble Lord will get his act together and make sure that we are satisfied that the undertakings he made solemnly to this House at Second Reading are met.
The Viscount of Falkland: My Lords, we do not wish to follow with further chastisement to the noble Lord along the lines given by the noble Lord, Lord Williams of Elvel.
We are extremely disappointed by the outcome of the Bill; and the limitations that have been put upon us and upon other noble Lords. We should like to have pursued an amendment that dealt with contracting out. Where contracting out is permitted, we believe that many of the measures that were seen to be recessary by the Monopolies and Mergers Commission will not be able to be introduced.
That fact affects the whole point of the Bill. How the Government will get themselves out of this position is a matter of some curiosity to us. However, we agree with the noble Lord, Lord Williams, that it is vital that something be done. If the only way forward is to produce a No. 2 Bill, I hope that the noble Lord, Lord Trefgarne, through the usual channels will get together with the Opposition parties in order to move quickly. In the meantime, we look forward to hearing what is to be done.
Lord Kimball: My Lords, I hope that my noble friend will realise that there are those of us on this side of the House who do not share the view of the noble Lord, Lord Williams, that the Bill is a mistake. The Bill is perfectly correctly drafted for what it was intended to provide.
Lord Williams of Elvel: My Lords, perhaps I may intervene at this point. I stated at Second Reading that the Opposition welcomed the Bill. We had certain reservations about it, but we welcomed the principle of the Bill. We do not think that it is a mistake.
Our problem is that the Government, in the form of the noble Lord, Lord Trefgarne, undertook to introduce certain amendments. Those would normally have been introduced at Committee. That has not been done. That is our difficulty.
Lord Kimball: My Lords, the noble Lord, Lord Williams, does not seem to realise that there are many on this side of the House to which those amendments are not acceptable and who do not feel
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that a compensation clause is necessary. That goes one further step down the road of destroying the proper, commercial relationship between the brewer and his tenant. I shall be extremely disappointed if we see that Bill amended. It is quite excellent. It is a one-purpose Bill in which compensation plays no part whatsoever. My noble friend cannot expect any co-operation from many on this side of the House if he brings back another Bill to introduce a matter that most of us feel is quite unnecessary and which we do not wish to be added to the Bill.
We are perfectly happy with the Bill as it now stands. We shall co-operate in any way. I cannot say the same if we advance down the road of an unnecessary compensation clause. As I understand it, it is not a question of withdrawing the Bill in this House. It will have to go to another place and go through all its stages there. There will not be time to complete it. The sensible thing is to realise that for once the Government have made an error in promising compensation. They cannot deliver it. We had better get on with the Bill and see whether a compensation clause is necessary at a later stage.
Lord Tordoff: My Lords, I hope that the noble Lord will not pursue that line. The Government have made a promise to the House and through apparent inadvertence I hope rather than conspiracy are unable to bring an amendment forward. I hope the noble Lord is not suggesting that the Government should hide behind that inadvertence in order to fail to meet a promise to this House. The problem is not to do with the Bill but with propriety in your Lordships' House.
Lord Williams of Elvel: My Lords, if I may respond to the noble Lord, Lord Kimball, the noble Lord, Lord Tordoff, is quite right. Given that the Government made their undertaking in good faith, will they now honour it?
Lord Trefgarne: My Lords, with the agreement of your Lordships, perhaps I may now bring the debate to a conclusion. I wish to make it quite clear that I had every intention of tabling an amendment, and instructed my officials so to do. When they arrived at the Public Bill Office, they were told that the amendment was not within the scope of the Bill and could not therefore be tabled in accordance with their advice. I very much regret that; but that is the fact of the matter. I undertake to consider very carefully what has been said during the debate and to do my best to resolve the matter between now and the next stage.
Lord Williams of Elvel: My Lords, will the noble Lord give us an undertaking that on Report he will produce a solution to the dilemma?
Lord Trefgarne: My Lords, I certainly shall if I possibly can. If not, I shall have to be in touch with the noble Lord.
On Question, Motion agreed to.
House in Committee accordingly.
[The LORD MURTON OF LINDISFARNE in the Chair.]
Clause 1 [Licensed premises: application of Landlord and Tenant Act 1954, Part II]:
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 1:
Page 1, line 15, leave out ("1992") and insert ("1990").
The noble Lord said: It may be for the convenience of the Committee if I speak also to Amendments Nos. 2, 4 and 5 since they address the same point.
It was a matter that I raised on Second Reading. It relates to the interim period that the Bill as presently drafted prescribes for protection for tenants. In other words, if the Bill is passed without amendment, the tenants who are not protected up to 1992 remain unprotected. But if my amendment is accepted, the provisions of the Bill —in other words, the repeal of the section of the Landlord and Tenant Act with which we now know the Bill is concerned—will apply earlier than would otherwise be the case.
That has been a matter of contention both here and in another place. The problem is that the Government seem to assume that tenancies are on a three-year rolling period without notice. In most tenancies there is a notice period of 12 months. At any moment the landlord can give notice that the 12 month period will now apply and that therefore the tenancy after that notice will come to an end. Tenants may be on a three year rent cycle but not on a three year period of notice to quit; they may be on a 12 month period of notice to quit. The longer the period before the implementation of the Act (as it will be), the more tenants will lose their pubs.
I should not like Members of the Committee to feel that it is an unimportant matter. As I said at Second Reading, we are now in the process of a clear and substantial reorganisation of both the brewing industry (in the sense of brewing beer) and the retail industry (regarding selling beer). We have had, for instance, only recently the situation where the Scottish and Newcastle company have sold some 250 pubs in order to come below the 2,000 limit that the Government have set. The pubs have been bought by a variety of owners. Scottish and Newcastle was an excellent landlord, as I understand it. But it has sold its pubs to other landlords. While in some cases the various codes of practice involved have been accepted, and the provisions of the agreement have not been challenged, in other cases that is not so. Although Scottish and Newcastle originally said that the purchasers would have to comply with the Brewers Society code of practice, that has not been written into the sale agreement on these pubs. One new owner within two or three weeks offered the public house to a tenant at twice the original purchase price on the understanding that that was now the new value and that the tenant was no longer protected. If the Grand Met/Courage deal is agreed approximately 1,500 public houses will be sold. Again, there is no guarantee that there will be any protection for the tenants and their future is uncertain.
As Members of the Committee will be aware, in another place and on Second Reading we argued for the tenant's right to buy but that was not accepted by the Government. We are fearful that in the interim period tenants will remain unprotected in the case of a sale.
As always the Government have taken the line that they wish to be fair as between the landlord and the tenant. As always we have argued that there is not a level playing field; that the balance is in favour of the brewers and the subsequent owners of the pubs. Therefore, the tenants need more protection than is provided in the Bill as drafted.
The current situation is causing uncertainty in the trade. That is bad for tenants and customers alike. I beg to move.
5.30 p.m.
The Viscount of Falkland: We have considerable sympathy with the reasons for the amendments as put forward by the noble Lord, Lord Williams of Elvel. No doubt there is a danger of the scenario that he described and a number of tenants may be put under notice in the interim period. Nevertheless, the new tenants will immediately fall within the Act. We are faced with choosing the lesser of two evils; that of retrospective legislation and the threat of notice hanging over a number of tenants before the end of the three-year tenancy.
We believe that in a difficult situation the Government have struck the balance about right in setting the date at 1992. Although we recognise the unsatisfactory aspects that have been outlined we cannot support an amendment which introduces retrospective legislation because that is bad in principle.
Lord Trefgarne: The Government take the view that the amendments would involve too great a departure from the principle that we should not arbitrarily change the basis of existing agreements. In recent years the most common form of pub tenancy has been the three-year agreement. If the amendments were accepted all such tenancies entered into since July 1987 would be brought within the framework of the 1954 Act. In other words, some two-thirds of current agreements would be affected and put on a basis which neither landlord nor tenant could have anticipated at the outset. In general the Government do not believe that agreements entered into on a particular basis should have that basis changed unless there are very good reasons.
The approach that we have sought in the Bill is to leave the great bulk of existing agreements unaffected. Two categories of agreements will have their basis changed by the Bill. First, any agreements entered into since 10th July 1989 will have statutory protection from commencement. Following the Government's announcement on that date of their intention to legislate, it is clear that parties to such agreements will know that the 1954 Act might apply to their tenancies and will apply if the legislation is passed. Secondly, any old tenancies entered into before 10th July 1989 or of longer term which still exist on 11th July 1992 will by that date be brought within the 1954 Act. Such tenancies will be in the minority; perhaps only 10 per cent. of brewer-owned premises. In those circumstances the Government believe that it is right that tenants should be protected within a reasonable timescale. They will thus be able to exercise their new rights to buy products outside the tie without fear of repercussion on their security of tenure.

357
On the grounds of equity, however, the number of landlords faced with such changes in the basis for their agreements should be kept as small as possible. For those reasons I cannot commend the amendments to the Committee. I hope that the arguments will find favour with Members and that the noble Lord will not press his amendments.
Lord Williams of Elvel: I am grateful to the Minister for his reply and for stating what was known to be the Government's view. I take issue with the noble Viscount, Lord Falkland. I do not believe that I am proposing anything which could conceivably be interpreted as retrospective legislation.
The Minister said that the Government do not wish arbitrarily to change agreements. However, agreements are arbitrarily being changed. When Scottish and Newcastle sells its public houses to various entrepreneurs, or when in the future Grand Met sells many more public houses to all kinds of entrepreneurs, the agreements into which the tenants thought they were entering in good faith—that is, before the announcement of the provisions of the Bill and the report of the Monopolies and Mergers Commission whose conclusions were partly endorsed by the Government—will be changed. I am arguing that the Government and Parliament in its consideration of the Bill should ensure that the tenants have the protection that will apply to new tenancies after 1992.
I do not believe that the Minister has made out a proper case for the Government's view and I wish to seek the opinion of the Committee.
5.37 p.m.
On Question, whether the said amendment (No. 1) shall be agreed to?
Their Lordships divided: Contents, 42; Not-Contents, 120.

DIVISION NO. 2

CONTENTS

Annan, L.

Jeger, B.

Barnett, L.

Jenkins of Putney, L.

Birk, B.

Kilbracken, L.

Blease, L.

Kirkhill, L.

Brooks of Tremorfa, L.

Listowel, E.

Bruce of Donington, L.

Llewelyn-Davies of Hastoe, B.

Carmichael of Kelvingrove, L.

Mason of Barnsley, L.

Carter, L.

Murray of Epping Forest, L.

Cledwyn of Penrhos, L.

Nicol, B.

Cocks of Hartcliffe, L,

Pitt of Hampstead, L.

David, B.

Ponsonby of Shulbrede, L. [Teller.]

Davies of Penrhys, L.

Dean of Beswick, L.

Prys-Davies, L.

Dormand of Easington, L.

Rea, L.

Ennals, L.

Soper, L.

Ewart-Biggs, B.

Strabolgi, L.

Gallacher, L. [Teller]

Taylor of Blackburn, L.

Graham of Edmonton, L.

Turner of Camden, B.

Hatch of Lusby, L.

Underbill, L.

Hirshfield. L.

White, B.

Hughes, L.

Williams of Elvel, L.

Jay, L.

358

NOT-CONTENTS

Abinger, L.

Lauderdale, E.

Addington, L.

Lawrence, L.

Airedale, L.

Liverpool, E.

Aldington, L.

Lloyd of Kilgerran, L.

Allerton, L.

Long, V.

Ampthill, L.

Mackay of Clashfcrn, L.

Arran, E.

Macleod of Borve, B.

Aylestone, L.

Malmesbury, E.

Balfour, E.

Margadale, L.

Belhaven and Stenton, L.

Merrivale, L.

Bellwin, L.

Mersey, V.

Beloff, L.

Meston, L.

Belstead, L.

Mills. V.

Bethell L.

Montgomery of Alamein, V.

Blatch,B.

Mottistone, L.

Blyth, L.

Mountevans, L.

Bonham-Carter, L.

Munster, E.

Boyd-Carpenter, L.

Murton of Lindisfarne, L.

Brabazon of Tara, L.

Nelson, E.

Broadbridge, L.

Nome, L.

Brocket, L.

Onslow, E.

Brookes, L.

Orkney, E.

Brougham and Vaux, L.

Orr-Ewing, L.

Butterworth, L.

Park of Monmouth, B.

Campbell of Alloway, L.

Pender, L.

Campbell of Croy, L.

Platt of Writtle, B.

Carnegy of Lour, B.

Porritt, L.

Carnock, L.

Pym. L.

Cobbold, L.

Reay, L.

Colnbrook, L.

Renton, L.

Constantine of Stanmore, L.

Rochester, L.

Cottesloe, L.

Romney, E.

Cox, B.

Ross of Newport, L.

Crickhowell, L.

Russell, E.

Dacre of Glanton, L.

St. Davids, V.

Daventry, V.

Sanderson of Bowden, L.

Davidson, V. [Teller.]

Seear, B.

Denham, L. [Teller.]

Sharpies, B.

Derwent L.

Stedman, B.

Eden of Winton, L.

Strathcarron, L.

Elibank, L.

Strathclyde, L.

Elton, L.

Strathcona and Mount Royal, L.

Ezra, L.

Falkland, V.

Strathmore and Kinghome, E.

Ferrers E.

Eraser of Kilmorack, L.

Sudeley, L.

Gardner of Parkes, B.

Swinfen, L.

Greenway, L.

Swinton, E.

Grey, E.

Thomas of Gwydir, L.

Gridley, L.

Tordoff, L.

Hanworth, V.

Tranmire, L.

Harris of Greenwich, L.

Trefgame, L.

Henley, L.

Trumpington, B.

Hesketh, L.

Ullswater, V.

Hives, L.

Vaux of Harrowden, L.

Hooper, B.

Vinson, L.

Hunt, L.

Westbury, L.

Hutchinson of Lullington, L.

Winchilsea and Nottingham, E.

Hylton-Foster, B.

Johnston of Rockport, L.

Wise, L.

Killearn, L.

Young, B.

Kimball, L.

Resolved in the negative, and amendment disagreed to accordingly.
5.45 p.m.
[Amendment No. 2 not moved.]
Lord Trefgame Lord Trefgame moved Amendment No. 3:
Page 1, line 18, at end insert ("and section 24(3)(b) of the 1954 Act (which, in certain cases, preserves the effect of a notice to quit given in respect of a tenancy which becomes one to which Part II of the 1954 Act applies) shall not have effect in the case of a tenancy which becomes one to which that Part applies by virtue of this subsection.").
The noble Lord said: This is a technical amendment. Its purpose is to remove any doubt

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there may be about how the Bill operates on tenancies which are brought within the 1954 Act when there is already a notice to quit outstanding.
Section 24(3)(b) of the 1954 Act deals with a situation in which a tenancy comes within the provisions of the Act for the first time but where a notice to quit has already been served by a landlord. Its intention was to cover circumstances such as those in which a premises changed use; for example, from residential to business use.
It has, however, been brought to our attention that this section of the 1954 Act could be construed also to cover a situation where a tenancy came within the provisions of the 1954 Act for the first time by virtue of the Bill. If so, some landlords could defeat the protection afforded by the 1954 Act by serving notices to quit.
The amendment would prevent this by making it explicit that Section 24(3)(b) of the 1954 Act would not apply where tenancies were brought within the 1952 Act by virtue of the Bill. Landlords can, however, commence the statutory procedure for ending the tenancy where it expires shortly after 11th July 1992. I beg to move.
Lord Williams of Elvel: We support this amendment. We think it rectifies a defect in the Bill. Perhaps it would have been courteous of the Minister to recognise the role of the lawyers of the National Licensed Victuallers Association in bringing the defect to the attention of the department. I am glad that the Government have accepted their point of view and have moved this amendment. We support it.
Lord Trefgarne: If I have omitted to offer praise where it is due, I hasten to rectify that.
On Question, amendment agreed to.
[Amendments Nos. 4 and 5 not moved.]
Clause 1, as amended, agreed to.
Remaining clause agreed to.
House resumed: Bill reported with an amendment.

Property Services Agency and Crown Suppliers Bill
5.49 p.m.
Lord Hesketh: My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, That the House do now resolve itself into Committee. —(Lord Hesketh.)
On Question, Motion agreed to.
House in Committee accordingly.
[The LORD MURTON OF LINDISFARNE in the Chair.]
Clause 1 [Transfer of Property Services Agency and Crown Suppliers]:
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 1:
Page 1, line 5, leave out ("or schemes").
The noble Lord said: The amendment is perfectly straightforward and is designed to invite the Minister to say a little more than has hitherto been said in another place or by the Minister on Second Reading about the future plans of the Government.
The Committee should be reminded that although the Bill might appear to come within the Government's macro-scheme of privatisation, it could not possibly be seen as meriting stature with many other schemes. The Minister should know —he will be well advised —that there are tens of thousands of individuals who are very deeply concerned with regard to the Government's intentions. I invite the Government to comment on the tenor of the amendments that my colleague and I intend to move so that we can be better prepared for the next stage of the Bill. We are deeply worried by the refusal of the Government and the Minister to give satisfactory answers to perfectly straightforward questions.
The Minister is aware that the PSA has more than 20,000 employees and is responsible for work worth more than £3 billion. It is the largest design, building and maintenance organisation in the UK. Amendment No. 1 seeks to prevent the Government from breaking up the PSA in one way or another. I note from my papers that the former Permanent Secretary, Sir Gordon Manzie —whose name will be frequently mentioned tonight—told the PSA staff that the strong preference is to maintain the PSA as a single organisation and to sell it as a single organisation. The amendment seeks to come down on the side of Sir Gordon Manzie and invites the Government not to do otherwise.
The Government should be reminded that there are many ways in which the PSA, organised albeit in a different form in the future, still has a very important job to do for the nation. One can take the analogy of many large businesses, for instance the banks, the brewers and many other large organisations. They maintain in-house departments which are designed to carry out much of the work which the PSA is able to do and has demonstrated that it is able to do; it is a centralised in-house design and building organisation. We cannot see any sense in the Government not accepting the amendment.
I will mention one point, touched upon by many amendments. That is the unique calibre of the staff of the PSA. One of the prime reasons why people of such skill, experience and expertise stay with the PSA is because it provides the opportunity to work in a large vertically integrated organisation. The Government have acknowledged that the PSA's only real asset is the professional skill of its technical staff; without that, the organisation is nothing. We believe that the Government are treating very shabbily not merely those people with special skills, but uniformly all those who are currently civil servants. The sad fact is that many people are caught between the devil and the deep blue sea. They want to know precisely what the terms and conditions for

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the protection of their future will be after the given date. I am told that over 600 key staff have already indicated their feelings regarding the Government's attitude by voting with their feet; they are leaving the organisation. That is a tragedy. There will be set up small partnerships and consultancies which will begin to nibble away at the manner in which the PSA has been organised—I am not against reorganisation —so as to provide the kind of services that it does.
The Minister has a good opportunity to reassure people outside the Committee by speaking to this amendment. It is not the kind of amendment I should necessarily press, but it is a good amendment to get these debates off to a sensible start. I beg to move.
Lord Hesketh: I sense that Amendment No. 1 is a mischievous amendment—if it could be so described —designed to compel the Government to sell the PSA and TCS as a single entity. In practice it will delay the sale of the TCS. As the noble Lord is aware, that matter is already under way. The Committee is aware that the competition for the sale of the TCS in up to three parts has begun and is expected to be completed this year. It would be premature at this stage to settle the form in which the PSA should be sold, including whether it is to be sold as a single unit or in parts. That sale will not be before October 1992 at the earliest. But as with the TCS, decisions will take account of the return for the taxpayer, the future of the businesses, and, most importantly, the interests of the staff.
The amendment would place unnecessary and unacceptable restrictions on the timing and the method of the privatisations and would not benefit the taxpayer, the organisations or their staff It may be that some form of division will be to the benefit of the employees. I suggest that flexibility is the answer rather than the rigid structure proposed by the amendment. I urge your Lordships to reject it.
Lord Graham of Edmonton: Marvellous, my Lords! The Minister comes to the Committee and says that because matters have already proceeded in accordance with the Bill, the Committee is almost acting ultra vires in seeking to amend the Bill to exclude the actions which the Government have precipitously set in train. That is nonsense.
We know of the determination of the Government, the Minister and his colleagues to carry out their intentions regarding this small but very important element of the public sector. When the noble Lord says that he wants maximum flexibility and, using a phrase, I believe, which should stick in his craw, that he intends to do the best for the employees in this matter, all I can say on their behalf is that you could have fooled them. Much of what the Minister and his colleagues have said up to now has made them very fearful of what will happen.
The Minister must be aware that this is our only chance to act. The Bill is before the House at Committee stage for the first time. There will be a Report stage and Third Reading at which other amendments can be tabled. The Minister is quite right that there is a long timescale, but he and his
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colleagues should understand that there are men, women, families and communities who are very concerned. There are some communities where the PSA and the Crown Suppliers provide, if not the major source of employment, then certainly a major source of employment, in that community or town.
The Minister says that the amendment is mischievous. In the sense that it is pointed and pertinent I suppose that it is. When he says that it is designed to keep those two organisations as one, he is absolutely right. The Government certainly did not say anything through the Minister's short response to indicate to those outside the Chamber, who are anxiously listening, and who will read with care what has been said, that there has been any progress in the Government's attitude towards not only the PSA, but the people who work with it. I know that those people will study very carefully what the Minister said. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
6 p.m.
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 2:
Page 1, line 7, leave out ("and liabilities") and insert ("liabilities and business").
The noble Lord said: In moving this amendment, I speak also to Amendments Nos. 3, 4, 5 and 11, which are all related to the same theme. These amendments are some of the most important that we shall deal with tonight.
In our view, the Government are guilty of trying to foist a con trick not just on the people who work in the industry and in the department but on the public. There is a pretence that certain central government activities will be sold while retaining for all practical purposes those same activities in government, albeit diffused between departments.
The purpose of the amendments is simply to say that the PSA's business as such will not be sold but merely that the assets, rights and liabilities are to be disposed of We are already aware of the mix of private and public provision that exists, not just in this Government but throughout central and local government. I am told that over 70 per cent. of the PSA's design work is put out to the private sector. The PSA's role is that of a skilled intermediary between government departments and private design practice. The mini-PSAs which now operate in many departments undertake the same functions as were previously exercised on behalf of the department by the PSA itself. The phrase "to untie" various government departments—untie them from the central agency—has, of course, become fashionable.
At the mini-PSA currently being set up at the Ministry of Defence at Sutton Coldfield there are 250 design staff, many recruited from the PSA, who will be employed to oversee the commissioning of MoD design work and to manage projects. There is no point in the Government denying that that is a mini-PSA by calling the Sutton Coldfield set-up an intelligent customer facility. It is marvellous how the Government can dream up euphemisms to cover over the true position.
Numerous other examples exist. Until recently the PSA advised the National Physical Laboratory at Teddington on its maintenance needs. The PSA inspected the site, drew up maintenance schedules and specifications and placed contracts for private sector building contractors to execute the subsequent work. The NPL has recently employed its own technical staff in about the same numbers and grades as the PSA and they now do the same work direct. The PSA staff used to act as an intelligent customer facility for NPL but NPL now has its own technical staff and can act as an intelligent customer itself. When the PSA is sold off, this part of its business activity will not be sold but will remain with the Government. There are other illustrations of the way in which that is done.
We have to be exceedingly careful and clear as to what it is we are asking the Minister to do. We already have illustrations where non-PSA employees or a non-PSA nexus has been used in providing facilities. For example, at Rampton Hospital heavy electrical equipment was installed by private contractors without reference to the PSA. When it was switched on, it overloaded the system and major circuitry was blown. Rampton is a high security hospital. No one knows whether the electrical security system was disabled, because the incident was hushed up. That is a good example of the dangers inherent in allowing non-technical staff to take technical decisions.
A major redesign of Skills House in Sheffield was undertaken without reference to the PSA. At the annual inspection of the premises the PSA discovered that the refurbishments had dangerously overloaded the floors. The bar, leisure and restaurant facilities at the MSC headquarters at Moorfoot were modernised without reference to the PSA and a new suspended ceiling built which completely covered the ventilation ducts, with the obvious serious threat to health and safety.
The Minister may say that those are isolated cases but, if he does, I have a dozen other illustrations up my sleeve. In response to the pained look on the face of the noble Lord, Lord Glenarthur, I do not intend to cite all those 12 or 15 examples. However, it is important for the Minister and his colleagues to answer the charges we are making. The actions and policies of the Government may well look good on paper, but we believe that one of the objectives is to reduce the number of people who claim to be civil servants. When the PSA and the Crown Suppliers are privatised the total number of civil servants will be reduced, thereby assisting the Government to maintain one of its original shibboleths.
In practice we are referring to a very real danger and to damage which can be done not just to working conditions but to the public. The illustrations I have given, and those that I could give, refer to the kind of properties on which the PSA has a fine record in regard to design, management and monitoring but which are being put at risk. I beg to move.
Lord Reay: We do not believe that the addition of the word "business" at various places in Clauses 1 and 2 would add anything of significance to the Bill
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or that it is necessary for the Secretary of State to have explicit power to certify the drawings, designs, etc., which will be the sole property of the PSA or TCS.
As the Committee will know, employees are given important safeguards in relation to the continuity of employment and the terms and conditions of employment by the regulations known as TUPE. TUPE, however, only applies to commercial undertakings, which for these purposes include the PSA and the Crown Suppliers. The question is not whether they are currently making a profit or loss or whether, with regard to the PSA, they have commercial accounting systems. What does matter is the nature of the organisations' activities. Both the PSA and TCS provide services in direct competition with companies in the private sector.
The Committee may be aware that the Solicitor General attended the Committee in another place to answer certain legal questions. One of these was whether TUPE would apply to the proposed sales. His answer was unequivocal. He said:
"I have no doubt whatsoever that they constitute undertakings that are in the nature of a commercial venture for the purposes of the regulations".
So far as Amendment No. 5 is concerned, the Bill already includes powers, in subsection 1(2) and in paragraph 1 of the schedule, for the Secretary of State to certify what has been vested by virtue of a scheme under subsection 1(1). He will, therefore, quite properly have discretion about which items of intellectual property, all of which is presently Crown copyright, should be transferred under the scheme. The Bill therefore covers the same ground as the amendment was seeking to cover.
I understand that the formulation used in the Bill—namely, "property, rights and liabilities"—is the normal way to describe the assets of an undertaking. No convincing reason, in our opinion, has been advanced for making a change. We suggest that it would be confusing, and therefore bad law, to use a different formulation. As I have indicated, we have in any case very firm legal advice that the staff of both PSA and TCS will have the benefit of the safeguards of TUPE.
The noble Lord, Lord Graham of Edmonton, referred to possible mini-PSAs. Clearly departments will be closely aware of the need to achieve value for money and to keep their procurement organisation to the bare minimum. Any idea that government departments were running their own mini-PSAs or TCSs and neglecting to get work done by an open and competitive process would soon run into trouble with the NAO and the Select Committee from another place, as well as from the Minister responsible for the department. For those reasons, I hope that the Committee will agree that the amendments are unnecessary.
Lord Graham of Edmonton: I am grateful to the Minister for the care that he has taken to give me a full answer. However, in doing so he poses a number of questions. He tells me that the Government are on firm ground in respect of the cover or provisions of TUPE '81 in this matter. We shall be coming head-on to what I maintain and hope to prove: that

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the ruling is in direct contradiction to the existing EC directive. The Government will be well advised to exercise the utmost caution in relying on TUPE '81. It is all very well doing so when it can be interpreted to suit the political imperatives of the Government. However, there is more to it than that.
The Minister also stated that the departments of state which have hitherto used the PSA would be well advised to look carefully at the extent to which they create their own mini-PSAs inside their departments. The Government ought to recognise, when the Minister used the phrase that staffing would need to be down to the bare minimum, that we are not talking about just any commercial undertaking; we are talking about the security of the realm. The work that the PSA has done, is doing and I hope will continue to do, is not merely commercial by any standard. As we move to the next amendment which relates to Northern Ireland, we find that there are aspects of the responsibilities of the PSA and conditions under which it works which cannot be made comparable to those anywhere else. I fear that in the Bill and in their response the Government are refusing to acknowledge the special—if not unique—nature of the PSA. More important, they are refusing to acknowledge the work of the PSA in looking after national assets.
Again the Minister has made a case which will be examined by those employed in the departments outside the House in order to see whether we wish to return with other amendments at a later stage. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 3 to 5 not moved.]
6.15 p.m.
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 6:
Page 1, line 28, at end insert:
("( ) Mo arrangement shall be converted into a contract under this section until the National Audit Office has certified that good value for money will thereby be obtained.").
The noble Lord said: The amendment relates to the point that the Minister made—good value for money. I should like him to tell the Committee a little more about the part that he envisages that the National Audit Office has played in these affairs. We are far from convinced that some of the deals that have been done by the Government are satisfactory. I live in Enfield and I remember the sale of the small arms factories very well. Regularly in the House and in the other place we hear illustrations of cases in which the Government divested themselves of hitherto public assets in a manner which is a scandal and a disgrace.
Will the Minister tell us what steps he will take to avoid the wrath of the National Audit Office? We do not wish to find that the horse bolted before the stable door was locked and organisations like British Aerospace laughed all the way to the bank. That firm bought the Royal Ordnance factories from the Government and it found that it had a goldmine. Hundreds, if not thousands, of acres of land had not been properly valued. I should like the Minister to tell us a little more about the steps that the Government have in mind.
I hope he will not say, "These are early days, it is a long time yet. We haven't got the flesh on the bones; we have a lot of consultation to do". Tonight is the opportunity for the Committee to put to the Minister our fears and worries. I beg to move.
Lord Hesketh: TCS and PSA have many assets but I can assure the Committee that hundreds of thousands of acres are not included.
I should explain briefly to Members of the Committee the purpose of subsection (3). Government departments in a legal sense are one and indivisible. They are all emanations of the Crown. The Crown clearly cannot contract with itself. Nevertheless, government departments frequently conduct business with one another in ways and on terms which in the private sector, or between governmental and non-governmental bodies, would amount to enforceable contracts.
When the Property Services Agency and the Crown Suppliers become companies, many of the arrangements that exist between them and their customer departments will have to be converted into contracts. This can be done in two ways. Either contracts between the transferee companies and government departments can be signed after incorporation, or, where more convenient, the provisions of subsection (3) can be used. Not all the informal arrangements existing at present will be suitable for conversion into formal contracts and in those cases new contracts will have to be negotiated. Customer departments will of course be fully consulted about these matters, and about the rights and liabilities to be imposed under subsection (3).
It is possible to suggest that this subsection is a device to allow the Government to give the TCS and the PSA lucrative contracts in some underhand way to the detriment of the Government's objective to seek value for money in procurement. I can assure the Committee that that is not the intention of the Government. It is for departments to decide what agreements they should enter into with PSA or TCS. They will make that decision as customers looking to secure their best advantage. The Government would not wish them to do anything other than that. I can also say that the subsection will not be used in any way to avoid competition that would otherwise have been required by European Community law.
Members of the Committee will be aware that the National Audit Office has very wide powers to scrutinise the activities of government departments and, if it thinks necessary, to report on these to Parliament. I do not believe that this addition to their powers is necessary for them to discharge these obligations effectively in relation to government departments dealing with PSA and TCS. Responsibility for obtaining value for money from PSA and other suppliers already rests with the accounting officers of client departments, and they are answerable to Parliament for the way in which they discharge this responsibility.
It will be for the NAO to scrutinise the arrangements that are being or have been entered into by client departments. The appropriate Select Committee in another place may then want to examine their accounting officers in the usual way.

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The effect of the amendment would be to make NAO responsible for making judgments for which individual departments should be responsible. Furthermore, to the extent that NAO are not equipped to undertake this function, the whole process of privatisation would be held up. I yield to none in my desire to secure value for money. But the way to do so is to put the responsibility firmly on client departments and to call them to account for the way in which they exercise it. That is the reason why I urge the Committee to resist the amendment of the noble Lord, Lord Graham.
Lord Dean of Beswick: I rise briefly on a couple of points which have been touched on. The Minister made great play of the National Audit Office being something of a watchdog. Of course it is; but it is only able to give views on events that have happened. My noble friend Lord Graham referred to British Aerospace and the sale of Rover. All those who listened to our exchanges at the time of the sale know that things went on which were not in accord with what one could call fair dealing and proper public accountability. I understand that the issue has still not been resolved.
The Minister will understand that some of us take with more than a grain of salt the view that he has expressed on behalf of the Government. No explanation has been given as to why the exercise should be taking place anyway. No one has published statistics or overwhelming evidence of where the PSA has let the nation down in the past. It has had its flaws in the same way as any other business organisation. A case was reported only this morning of a local authority that has sold off hospital services. There is evidence that the people who were deemed to be good enough to take charge of the operation are providing an inferior service. If that is the Government's intention, they should say so.
It is rather strange that Sir Gordon Manzie, who was originally sent to the PSA to sort it out in certain financial respects, now appears to be heading those who will take control of the out-of-house organisation. If that is not negotiating with oneself I do not know what is. I cannot find any other explanation. The head person of a publicly owned organisation should not be negotiating the terms for the disposal of its assets, however it is done, and should not be indicated as being in charge of its reception into the private sector. Is that an example of fair dealing? The Government should not expect us to fall for that one. Those are very dubious actions indeed.
The person who starts to organise the exercise would be rather stupid, knowing what was really the Government's intention when he was first sent there, not to organise it on behalf of those he will represent. He may be the chief benefactor himself in the business sense. I take with a grain of salt the claim that the National Audit Office will safeguard the interest of the taxpayer. By the time the matter reached the National Audit Office and the Select Committee of another place the problem would have occurred. The National Audit Office does not make decisions in advance. It is a watchdog. But in some
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respects, because of the way the Government behave, it is a rather toothless watchdog. Nothing happens.
It is not the first time that mistakes have been made by the Government. I am looking forward to the first case of an overwhelmingly good deal being done on behalf of the taxpayer when parts of the public sector are privatised. More evidence is being produced of pubhc assets being sold off with the taxpayer receiving a bad deal.
Lord Graham of Edmonton: My noble friend makes pertinent points to which it is clear the Minister is impervious. We shall return to Sir Gordon Manzie later on. The Minister's notes have been well prepared. We read the Guardian as well. It is a sad fact that the Government look at these matters in one way. They are punitive in the manner in which they look upon their responsibilities towards their employees. Once that responsibility has passed out of their control the terms under which it has been passed out of their control will become a matter of history.
These matters have a habit of reappearing. The Minister has tried to be helpful and he may very well have been helpful. My colleagues outside will read what he has said. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 7:
Page 1, Line 29, leave out subsection (4).
The noble Lord said: I shall speak at the same time to Amendment No. 31. I have already made a passing reference to the significance of Northern Ireland in this context. I have the honour to speak on Northern Ireland affairs from my party's Front Bench. I have been to Northern Ireland and I try to brief myself on what is going on there. But I rely heavily on the Committee stage report of proceedings in another place.
On 11th January Mr. Eddie McGrady, the honourable Member for South Down, spoke to this amendment. He did not say anything which the Minister, who, I repeat, is always well briefed and wordly wise in these matters, does not already know. He referred to the terrible situation that exists in Northern Ireland. I met Eddie McGrady before he became a Member of another place. I respect him highly. He has long experience in politics, not least in the housing executive. What he says is chilling to someone like me who does not live in Northern Ireland, I understand and sympathise with people, including Ministers, who have to deal with these problems. I shall read a little of Mr. McGrady's speech. It gives a little of the flavour of the danger the Government may find themselves in. At col. 71 of the Committee stage report on 11th January he said:
"The larger part of Belfast is divided into three spheres of influence. One area is controlled by provisional IRA, a second area by the loyalist Ulster defence association and a third area by the official IRA which could roughly be described as the Republican Marxist element in the Republican movement. It is well known both to the Government and to the security forces that contracts and employment in those three areas are governed by those three bodies. They decide who is allowed to tender, to contract and to work".
That does not go on in the rest of the United Kingdom. It is a special reason why Northern Ireland should be treated differently in this matter. It would be treated specially if it were excluded from the provisions of the Bill.
Mr. McGrady went on to say that,
"contractual prices in Northern Ireland are automatically loaded by"
6.30 p.m.
Lord Hesketh: I interrupt the noble Lord merely to draw the attention of the Committee to the fact that it is not the tradition of this Chamber to quote in a current Session from what has been said by a Member in another place.
Lord Graham of Edmonton: I acknowledge that fact. The words were so familiar to me that I thought I had heard them a long time ago. However, I am now reminded that they were spoken only this Session. I do not need the words other than as an aide memoire. Mr. McGrady told the Committee in another place that it is normally understood that building prices and contracts are overloaded by 20 per cent. Why are they normally 20 per cent. higher than anywhere else? It is because there is a need to pay "hush money", blackmail and contributions both by the company and by the individuals. He went on to say that it is not merely the company or the business which pays; the individual workers are also called upon to do so.
Mr. McGrady continued to give illustrations whereby companies that are fearful of either losing their business, their limbs or their lives go out of their way to ensure that statements appear in public print which they hope will indicate to the forces and the powers that be—we know that it is not the Government—that they have nothing whatever to do with government contracts. When we look at the situation of companies, we are also looking at security and safety. However, we shall discuss that aspect when we come to Amendment No. 9, which deals directly with security.
A very pertinent and poignant point was made by Mr. McGrady when he spoke in another place. He drew upon the fact that civil servants as such seem to escape as a class of people; they seem to escape the opprobrium of the men of violence from wherever they come. In other words, civil servants by the nature of their work, and possibly also because of the psyche of the Northern Ireland people, are treated differently. They are not seen as part and parcel of the battles.
My amendment seeks to give the Government an opportunity to exclude from the provisions of the Bill the references to "a Northern Ireland department". I believe that that is fair. I very much hope that the Government do not wish to carry this on their shoulders, along with all the other problems and burdens that they have in Northern Ireland —and I respect that situation —because there is no necessity for it.
In his first reply the Minister relied upon flexibility, timing and reconsideration. I think that this is an amendment which he could take away and
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reconsider. He could return to the matter at a later stage to see whether it is possible to find a means of excluding Northern Ireland. The Province is an important part of the United Kingdom. However, I cannot see what magic plan or what major piece of legislation would be materially affected if the mention of Northern Ireland was removed from the provisions of the Bill. I beg to move.
Lord Hesketh: The Opposition have already argued in another place that the Act should not relate to work which the PSA undertakes in Northern Ireland. They have made much of security, as if the mere mention of the word settles the issue beyond further argument. But the question is much more complex than that. The Government have already made it clear that they will not do anything that is contrary to national security. If the PSA undertakes any activities in Northern Ireland that on the advice of the security authorities would be prejudiced or put at risk by privatisation, those activities will remain the Government's responsibility. Security in Northern Ireland, as elsewhere, is the responsibility of the customer who commissions the work, not of the PSA. Further, the PSA undertakes work in Northern Ireland which is not related to the security services.
Amendment No. 31 would delete Clause 6(2), which extends the Bill to Northern Ireland and to work in Northern Ireland. Work in Northern Ireland represents a considerable proportion of the PSA's business, and Northern Ireland will offer important opportunities for the company to expand its markets. The PSA undertakes work in Northern Ireland for the Northern Ireland departments—environment, transport and agriculture—and maintains Hillsborough Castle. It could well in the new competitive world which it now faces offer a competitive service in other fields.
Given the assurances the Government have given about security, we do not believe that there are grounds for arbitrarily depriving an incorporated PSA of this part of its business. No decisions have yet been taken, or need yet to be taken, about how much of the PSA's current work ought to be retained in government. There is no reason why the Bill should exclude Northern Ireland from its coverage and possibly hinder the development of part of the PSA's and TCS's business. We believe that the amendment is one which will not assist and it is one which we resist.
I turn now to Amendment No. 7, which would prevent Clause 1(3) from being used to convert into contracts administrative arrangements between TCS, or the PSA, and Northern Ireland departments. Both TCS and the PSA are able to do work for Northern Ireland departments now, and we see no reason why they should be hindered from doing so in the future. Without the provisions of subsection (4), administrative arrangements with a Northern Ireland department could not be converted into contracts under subsection (3), though it would be possible for new contracts to be negotiated outside the terms of the clause.
The matter is currently under consideration by the Ministry of Defence, the PSA and Property Holdings

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acting as the vendors. I should reiterate that the key fact about security is that it is the customer who is in charge. To give an example, it would thus be the responsibility of the MoD if it required work to be carried out by the PSA in Northern Ireland or anywhere else where there may be a risk of terrorism, be it in Germany or the United Kingdom, to decide such matters. It is up to the customer to define the requirements for security, not the PSA. That is where we believe the misunderstanding lies. That is why we resist the amendment.
Lord Dean of Beswick: Before the Minister sits down, I must say I am surprised, as perhaps are other noble Lords, that at this late stage of the Bill no real hard discussions have taken place with the MoD. I should have thought that the department is now in a position to say what it thinks is desirable and undesirable. It would be a most peculiar situation if talks were set to take place in the short time which is left; indeed, we are talking about a matter of weeks in which this Bill has completed its passage through both Chambers.
I should have thought that the views of the MoD would have been sought some time ago, bearing in mind that whatever the Government decide for the PSA in Northern Ireland—that is, how it is fragmented —it will still be the role of the defence forces to guard the population of Northern Ireland, even those who work for the new companies which the Government expect to emerge from this piece of legislation. Therefore, while the Minister may not wish to answer at this point, I should have thought that he could give some indication that the discussions with the MoD will be serious and meaningful and that they will not take place when it is too late to alter the Bill.
Lord Hesketh: I am more than happy to answer the point. The PSA is essentially a service organisation; it provides integrated services. Thus each contract and each job will require a new assessment. It will be an ongoing discussion where it provides services to any customer, whether it be the MoD which may present a higher risk in Northern Ireland than the Department of Agriculture. As each service contract is provided and each turnkey project is dealt with, at the start of the analysis of each project there will be an assessment made by the customer, together with the PSA if it is the service provider, and others. If you go down the tree you must look at the position of the contractors which the PSA may have selected to come in to carry out the contract and at what the position is as regards security in each case. At the end of the day the responsibility must rest at the top, with the customer, which, if it was the MoD in Northern Ireland, would be the MoD.
Lord Dean of Beswick: I think that the Minister is trying to make a bad case. If we consider the history of what this Government have done, they have in some respects totally rejected the advice of highly qualified professionals at the Ministry of Defence.
I can remember proceedings taking place in this Chamber when former defence chiefs of staff
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strongly advised that the Government should not privatise the Royal Ordnance Factory and that we should keep under our control a large section of the government-owned logistic provisions and factories for the sake of national security. Unfortunately, the Government chose to reject that idea completely. Why should Members of the Committee from other parties who do not support the Government on this have any more reason now to think that the action proposed in the present Bill will be successful and in the interests of the people? It certainly has not been so in the past.
Lord Hesketh: At the risk of boring Members of the Committee, the argument which the noble Lord, Lord Dean, put forward may be attractive on the surface. He gave the example of the ROF, but there is a further example: in a modem society communications are vitally important, and one could use the same argument about British Telecom and say that that also should remain within the state sector for the purposes of security.
Lord Dean of Beswick: I am not against that.
Lord Graham of Edmonton: I am sorry that the Minister cannot on behalf of the Government agree with a reasonable case—that is, that Northern Ireland is a special case. The Minister is saying that those elements of a special nature will be taken into account by the commissioning government department when it consults in detail with the PSA.
I believe that the Government are not fully aware of the nature of life in Northern Ireland. No master plan would be damaged if Northern Ireland were excluded from the Bill. The Minister talked in terms of the PSA. It is not just a question of the PSA but of the elements of the PSA which become privatised. In my view, no master plan would be materially damaged if Northern Ireland were excluded. But I do not think the Minister will say any more, so I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 8:
Page 2, line 8, at end insert ("No day shall be specified under this section before a 5 per cent. surplus on net assets is returned in six consecutive audited commercial accounts,").
The noble Lord said: I beg to move Amendment No. 8. This goes to the heart of a great worry of the Government. They have said more than once that they are concerned about the timetable and about getting on with the job. However, the employees in the departments are concerned about the shape and state of what is to be sold on or flogged off by the Government in due course. The Government know that the ability to attract good employers who are willing to invest large sums of money in taking over the privatised sectors depends upon the health of the department at the time. Without going too closely into figures, because they change, the manner in which the Government have deliberately run down the department has caused a change in the viability of the PSA in recent years. This amendment simply says that there shall be no progress in these matters

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until the people who are looking at the asset are satisfied that what they are buying is something with a proven., recent. successful track record.
6.45 p.m.
Lord Hesketh: These amendments would prevent the incorporation of the PSA or TCS and their sale to purchasers until certain conditions relating to profitability, the availability of accounts and the valuation of shares have been met. Amendment No. 8 would delay the incorporation of the PSA until at least 1996, since it does not yet have audited accounts. The TCS did not meet the criterion, on a current cost basis, in the 12 months ending 31st December 1988, the last year for which results are available. So for the TCS, too, the delay would be considerable. To decide now to delay privatisation of either the PSA or the TCS to this extent would not be sensible.
In some ways noble Lords opposite seem to be trying to have it both ways, on the one hand protesting that they wish to protect the taxpayer by preventing the Government from selling off assets at less than their true value, while in the debate on this amendment they insist that if the PSA and TCS are not profitable they should not be sold and instead kept by the Government at the taxpayer's expense.
It is the Government's belief that both organisations will benefit from privatisation sooner rather th in later. Government departments are now untied from the use of the services of the PSA and TCS and will be seeking competition by obtaining competitive tenders from them and from private sector firms for future work.
If the PSA or TCS are to have full access to, and be able to compete effectively within, wider markets, they must have the full freedom of the private sector available to them at the earliest opportunity. We have been prepared to allow some limited freedom to the PSA and TCS to operate in private markets as a preliminary to their early privatisation. But these freedoms ought not to be extended too far in advance of incorporation because the Civil Service is not a suitable place for an organisation engaged in full-scale business activities. Early privatisation is therefore desirable if either organisation is to flourish. In addition, for the TCS the sale competition has been launched following a significant period of preparing the organisation for sale. Further delay would create uncertainties and jeopardise the future of the business. I suggest that this could be a loss both to the organisation and to the employees.
Amendment No. 29 would prevent the TCS trading fund from being wound up and its liabilities written off until is had operated at the proposed level of profit for three consecutive years. That is just as unacceptable as the previous amendment, for the same reasons. The main point is that we believe the TCS, like the PSA, will operate more effectively and profitably in the private sector. It is potential profitability, rather than actual profitability, which is important for the timing of the sales. Again, we resist the amendment.
The effect of amendment No. 26 is to prevent the sale of the PSA or TCS companies until the shares
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have been valued, and until six years' accounts are available. The TCS already has full commercial accounts capable of meeting the requirements of the Companies Acts and Statements of Standard Accounting Practice issued by the main accountancy bodies. The PSA is in the process of introducing them. The accounting systems will be capable recording balance sheet values and charging depreciation to profit and loss accounts, and will be subject to proper commercial audit. They will be perfectly adequate for the Government as vendor, and for prospective purchasers, in valuing the business activities of those two organisations.
But the value of both organisations will be based on bidders' assessments of their future profitability when they are freed from public sector constraints. That is something on which bidders will have to make up their own minds. It would be foolish in the extreme for the Government to publish their own assessment of the value of the businesses as a going concern before the sale took place. That would effectively set a ceiling on the purchase price, which I am sure is not what this Committee would intend. Thus we resist these three amendments.
Lord Graham of Edmonton: First, I apologise, as I should have made reference to the amendments additional to the one that I moved. The Minister was quite right to speak to the other two, and I am grateful.
I am intrigued, as I believe are many outside the Chamber, that hitherto it has almost been a cardinal point of principle that no element of the public sector shall be removed from that sector and sold unless it is possible to sell it to the best advantage. I should like the Minister to tell us what advice has been received, and what consultation has taken place and with whom, to satisfy him that the best possible price will be given by the market when these assets are put on the market. I am not as experienced as many others in this Chamber, but I should have thought that before someone buys something he should look not only at what it is doing now and might do in the future but at what it has done in the past.
If the Minister does not consider that the timescale that we have suggested is sensible or acceptable, he must surely agree that an element of our argument is acceptable. The evil day is merely put off until our measure is complied with. I make no bones about the fact that one of the motives we have in moving amendments of this kind is to provide time for the matter to be considered sensibly. We believe that the present situation will be seen as nonsense.
I hope the Minister can tell the Committee what advice he has received from those who are responsible for giving advice to the Government. I am referring to merchant bankers and people in the City who make a lucrative living from advising the Government on the means and the methods whereby dealings of this nature are carried out. The Minister may well tell the Committee that he is satisfied with things as they stand. I have no doubt that he is satisfied that the provisions of the Bill are beneficial. However, I hope that if that is the case, he will at least take the noble Lord, Lord Dean, and me into

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his confidence and tell us why he believes the Government will obtain the best price for these organisations.
Lord Hesketh: The answer is fairly straightforward. As the noble Lord, Lord Graham, is well aware, most of the previous privatisations were not of service organisations. However, these two bodies are essentially service organisations. They will be judged on their perceived ability. I hope that anyone who is interested in TCS—and as the noble Lord, Lord Graham, is aware, we are a considerable way from privatisation of the PSA and it will not occur before 1992—will take into account the glowing references that the noble Lord made earlier this afternoon.
Plenty of service organisations have been sold into the private sector. They were assessed on their potential. I said earlier that we did not wish to suggest a figure in this case which is then considered to be the limit. A figure is reached by considering the organisation itself, the people involved in it and the advice of those who have advised the Government on the matter. In the case of TCS the Government have received advice from Samuel Montagu. We have also received advice with regard to the PSA from Price Waterhouse. In the case of the PSA, we shall continue to take further advice. However, I must stress that we are selling service operations here. Prospective purchasers will assess them on the ability of the staff of those organisations.
Lord Graham of Edmonton: I am grateful to the Minister for his remarks. However, if a potential purchaser considers these organisations are worth buying, why on earth do the Government not consider that it would be a good thing to keep them within the public domain? The Government appear to be following their doctrinaire philosophy of selling into the private domain as many public sector bodies as possible. They wish to do that regardless of whether the public sector bodies are in the public domain because of the national interest or because of national security or other considerations.
The Minister has not assuaged some of my worries. However, he has gone some way to indicate that some advice has been taken and that the best terms will be obtained. That is one side of the matter, but the other side of the matter that we shall consider when we reach Clauses 2 and 3 is the impact upon the present employees of the PSA and TCS of being transferred into the private sector, if that option is open to them. However, I am grateful to the Minister and I shall read his remarks. I may return to the matter at a later stage; but, in the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 9:
Page 2, line 12, at end insert:
("(8) Without prejudice to the generality of subsections (1) and (2) above, no part of the business of the Property Services Agency or the Crown Suppliers which is referrable to national security interests shall be included in any scheme under this section; and the Schedule to this Act shall apply.").
The noble Lord said: This amendment concerns the national interest and national security. I hope that the Minister will deal with one or two points that were not raised in the short debate on Northern Ireland. I hope that he will deal particularly with the interests of foreign governments regarding the privatisation of some of the services which they share and enjoy as a result of existing arrangements. The United States Government are opposed to having a privatised PSA manage the design and maintenance of their UK bases. Before the point is made that they will get rid of that worry by removing their bases, I should state that the US Government have hitherto been satisfied with the arrangements and the services that they have enjoyed under the PSA. The German Government are reported to be insisting that only civil servants should manage the design and maintenance of bases on German soil. In whatever ultimate shape the PSA emerges when the dust dies down, that matter will still be relevant.
We read in the press of the various ways in which companies are formed and employees are shuffled sideways and management seek to avoid all kinds of responsibilities. In this case there is the genuine point not just of serving our allies but also of protecting our own interests. When national security interests are involved, they should be paramount. The amendment states:
"Without prejudice to the generality of subsections (1) and (2) above, no part of the business of the Property Services Agency or the Crown Suppliers which is referrable to national security interests shall be included in any scheme under this section".
The Minister may say that we are only seeking to retain parts of the two bodies concerned. That may be the case, but we are talking about parts of national security. The Government would show their flexibility and common sense if they responded helpfully to the points that I have made. I beg to move.
Lord Hesketh: I have already assured the Committee that the Government will not privatise any activities which, on the advice of the security authorities, would thereby be prejudiced or put at risk. But this amendment would go far wider and exclude all work related to national security, whether or not there were any good security reasons for doing so. The amendment may reflect a misunderstanding about the nature of the PSA's security responsibilities and the respective roles of Government and their contractors. The amendment may also reflect a presumption that the public sector has a monopoly of trust in security matters.
Any client of the PSA or TCS has the responsibility for setting security standards. Although the PSA and TCS conduct sensitive business for the MoD and other government departments, that does not imply that they are responsible for determining the security requirements. It is, and will remain, the responsibility of client departments to assess the level and nature of the threat and to decide what type of protection is needed. That is true, for example, in relation to the weapon resistance of hardened aircraft shelters and the physical protection of Downing Street. The task of the PSA and TCS is to provide the buildings, facilities or equipment required by clients and to do so in accordance with

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the requirements—such as for security—specified by them.
The client also has responsibility for security clearances of staff and contractors. To ensure that sensitive information does not get into the wrong hands, ihe PSA and TCS, like all government departments and many private sector contractors (for example, in defence procurement), have arrangements for staff to be security cleared. More rigorous clearances may be required for the most sensitive work.
There is a wide range of private sector consultants who ha\e for many years been carrying out many aspects of design on sensitive projects. Almost all the PSA's work of construction is done by private contractors. For example the main radioactive liquid treatment plant at Aldermaston and the floating jetty for Trident submarines at Coulport were designed and built by the private sector. All the staff involved were security cleared in the same way and no security distinction was made between design work done by private consultants and that done by civil servants.
Therefore, when PSA and TCS are privatised they will be in exactly the same position as the consultants with whom they will be competing for work. Their staff will be vetted in the same way as the staff of private consultants at present. It is the client, not the consultant or contractor, who settles the security regime which is to be followed in each individual contract. Their requirements will depend on the nature of the work.
The noble Lord, Lord Graham of Edmonton, raised the position with regard to the United States. I am very surprised that Members on the Bench opposite should decide that the Government's policy regarding the privatisation of the PSA should be decided on the basis of what a foreign power believes is right and proper. I must remind the noble Lord that security is the responsibility of the client —whether it is the MoD, the United States Air Force or the Ministry of Agriculture. It is the client who decides the level of security which is appropriate, not the PSA or any other contractor in the same: position carrying out a similar job.
7 p.m.
Lord Graham of Edmonton: Can the Minister confirm that what I said was correct? Have the US Government and the German Government expressed reservations? The Minister made a fair point when he said that their reservations may be groundless. However, it would be helpful to the Committee to know—regardless of what the Minister has said and of the Government's interpretation of the situation—whether those governments have, as my papers tell me, expressed reservations about the change.
The Minister has said that the client, who in the case of American bases is the American Government, has been happy to work through the Crown Suppliers and the Property Services Agency but may decide in future not to do so. He is saying that it is up to the American Government. Can the Minister help us?
Lord Hesketh: The first point to make absolutely clear is that the situation regarding responsibility for security which will pertain in the future is exactly the same as the situation which pertains today in terms of the decision-making process. Because of the changes which are implied, particularly in the case of the PSA—and I remind the noble Lord, Lord Graham, that we are speaking of no sooner than 1992 —discussions are taking place now between the United States Air Force and the MoD. In the case of Germany there is a government-to-government agreement. Because there is to be a change in the future and the PSA will no longer be a government agency, discussions are also taking place with the German Government.
Lord Graham of Edmonton: The Minister has neatly sidestepped my question as to whether reservations have been raised. The fact that discussions are taking place is one thing. However, the Minister has told us that security will be the subject of negotiations which are now taking place. The Minister knows that civil servants are bound by commitments, by the Official Secrets Act and in many other ways which could very well be sidestepped or watered down if the people in charge were not bound in that way. There will be thousands of civil servants, members of the various trade unions concerned, who hold in their heads, as well as in their files, priceless national secrets which they guard jealously and which are the property of the Government. Those individuals have access to, and are privy to, a great deal of information which is priceless in the context of security.
The American and German governments are entitled to be gravely concerned about the possibility that in future they would be dealing with people who were not bound by the same oaths and commitments as civil servants. However, the Minister has tried to be helpful. We shall look at what he has said. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Dean of Beswick Lord Dean of Beswick moved Amendment No. 10:
Page 2, line 12, at end insert:
("(8) A scheme under this section shall contain a provision that there should be a period of not less than three months for consultation and agreement on employment terms and conditions at transfer between the transferee and the employee's trade unions. This period shall commence from the date of announcement of the agreed purchaser.").
The noble Lord said: It has become the practice recently in privatisations to allow a period for consultation of only one month from the date of announcing the name of the agreed purchaser to the transfer of staff. Given the complex issues of securing from the contractor agreements regarding the transfer details and discussing and issuing individual terms of employment to the staff, we believe the period of one month to be unreasonable and unrealistic. It is a departure from the timetable used in the transfer of management in the Royal Naval Dockyards and the sale of the Royal Ordnance Factories.
We argue, therefore, that a minimum of three months should be provided from the date of the

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naming of the contractor and advising the recognised trade unions of that name. We can see no commercial detriment arising out of this proposal. I beg to move.
Lord Reay: Amendment No. 10 seeks to incorporate into the Bill a requirement for consultation on employment terms and conditions. In our view adequate provisions are already included in TUPE which apply automatically to the transfers of PSA and TCS without the need for a specific provision in the Bill.
The Committee will be aware that Regulation 10 of TUPE imposes very detailed duties on employers to inform and consult trade union representatives about proposals involving the transfer of an undertaking. It is, of course, important that staffs trade union representatives should be given information about any measures that are proposed to be taken which affect them. TUPE requires that the unions should be properly consulted. Regulation 10(6) places a duty on employers to consider representations made by the unions, to reply to them and to give reasons if any representations are rejected. There is, therefore, no question of the unions being by-passed or ignored.
The unions have been told that the Government will aim to complete those consultations within 28 days of announcing who the purchaser will be. Whether that will be possible will depend on the nature and complexity of the issues which are the subject of the consultations. The Government have, however, already given an undertaking to the unions concerned that sufficient time will be allowed for proper consultations as required by TUPE. We accept that in the event that may take longer than 28 days, but in our view it would not be realistic to extend the period of consultation to a minimum of three months, nor to require the unions' agreement to the proposal as envisaged in the amendment. It would not in our view be in the interests of the businesses, the staff or the purchasers. Giving the unions a specific power to delay or veto the privatisations would serve only to help competitors and to damage the businesses and the staffs future in the private sector.
In summary, the Government do not regard it as helpful or necessary to incorporate into the Bill detailed consultation provisions which are more demanding and protracted than those already required under TUPE. I hope, therefore, that the Committee will reject the amendment.
Lord Graham of Edmonton: The Minister relies very heavily on TUPE 1981. He would be wise not do so because we intend to challenge it on a number of points in later amendments.
It is very sad that the Government say, in response to a very reasonable request and in the light of modem industrial relations, that people who are to be transferred from good employment with good conditions and faced with being employed by somebody unknown should have only 28 days in order to form a judgment.
The Minister knows that most trade unions—and the trade unions involved here are no
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exception—have smartened up their act very well in recent years in forming their intelligence on the nature of businesses. Their research is considerable. They will want time to form a judgment as to what they will advise their members to do.
Let me give the Minister an illustration of what is happening. I have here a letter from the London group committee of the Amalgamated Industrial Employees Side Association of the Whitley Committee relating to an event which is germane to our discussion tonight. It relates to redundancies in the Teddington district and states:
"You will be aware that the contract for the DTI National Physical Laboratory at Teddington has been awarded to Serco Gifford. As a result 44 DEL posts have been declared redundant. The terms of redundancy were negotiated and joint agreement was reached at a local Teddington District Whitley extraordinary meeting on 21st February 1990. Subsequently, on 5th March 1990, management sought to alter the agreement without negotiation. The London Industrial Whitley Group Committee discussed the Teddington District case at an extraordinary meeting held on 8th March and 12th March 1990. At the 12th March meeting the Director, London Region DOE/PSA, Mr. Giles Hopkinson, agreed that 43 of the 44 postholders would be treated under the Regulations for Industrial Employees' Chapter 14.40. The other post to be resolved locally. On the 16th March 1990, Teddington staff were informed locally that the 12th March 1990 agreement at Group level with the London Region Director was not going to be adhered to and that no compensation was to be paid to any of the 44 persons involved in the redundancy situation".
There is more to come. The Minister gets the flavour of why the employees are unhappy if they are to be increasingly faced with that kind of situation. All they are saying is, "Give us a little more time". The Minister says that if more than 28 days are required more time will be given, but the pressure is on. Why does the Minister not accede to the trade unions' request in that one little sphere? They are not arguing policy or principle; they are arguing about the ability to protect their members in such a situation as I have described to the Committee which could well become increasingly prevalent. Their claims are reasonable.
Lord Reay: I believe that I gave the arguments when I spoke earlier. The main point is that the Government will allow a reasonable length of time for the necessary consultations. We have given an assurance that we hope that that will be within a period of one month. If it is necessary to continue it beyond that, we shall be willing to do that, but we cannot agree to be tied down in advance to a particular timetable.
Lord Dean of Beswick: Before the Minister sits down, I must say that I am puzzled by one of his remarks. He said that, if the period were extended to three months, it may well put the purchaser at a commercial disadvantage compared with other people. I cannot recall whether the Minister used the word competitor, but I assume that that is what he meant. How could that happen when the terms regarding purchase and ownership have already been decided? I do not relate the two ideas, unless the Minister is saying that the new owner will lower working conditions for his staff so that he can compete with other people in the future. What did the Minister mean? I cannot relate the two ideas. They can have nothing to do with commercial

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viability and competition when the purchaser has already been decided.
Lord Reay: There may well be circumstances in which it would be possible to complete all the agreemsnts within the 28-day period. In such a situation, it cannot be to the advantage of the company to delay privatisation any longer.
Lord Rochester: Before the noble Lord, Lord Dean, determines what he will do about the amendment, perhaps I may say a few words. As I understand it, the amendment seeks not only consultation but agreement on employment terms and conditions. Is the noble Lord saying that before a scheme can be introduced under this section there should not only be consultation but that the terms and conditions of employment should be agreed by the trade unions?
Lord Dean of Beswick: The Ministers appear to be nodding their heads, so I think the noble Lord has got it quite right. However, having heard the Minister's reply to both myself and the noble Lord on the Liberal Benches, we should look at what he meant. It is mad to try to proceed on this basis. It does not augur well for future industrial relations for whoever becomes the owner. The whole matter may be in conflict with EC and ILO views. However, I do not propose to press the amendment tonight, although we shall certainly come back to it at a later stage. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 1 agreed to.
Clause 2 [Transferred staff]:
[Amendment No. 11 not moved.]
7.15 p.m.
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 12:
Page 2, line 20, leave out paragraph (a) and insert:
("(a) this shall be regarded for the purposes of any scheme under the Superannuation Act 1972 as compulsory early retirement or compulsory early severance;").
The noble Lord said: We are moving on to what we consider to be a crucial clause and crucial issues. Ministers in another place—I exonerate the Ministers here—have made puzzling statements concerning the manner in which those who are affected by possible redundancy will fare under the arrangements.
The Minister, Mr. Patten, and his colleague, Mr. Chope, have sought to reassure union members and employees that they will not be detrimentally affected, but they have used differing words. They have used such words as "comparable" and "mirror" which have caused confusion. The aim of these amendments and others, particularly Amendment No. 14, is to encourage the Minister to tell us a little more. For instance, when the noble Lord, Lord Trefgarne, dealt with the Dockyard Services Bill, with which I dealt on this side, he said in respect of the principal civil service pension scheme and transfer regulations:
"It is, however, the Government's intention to set up pension schemes, one at each dockyard, which transferred staff will join
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and which will, as far as possible, replicate the provisions of the PCSPS in terms of rules and benefits, including index linking".—[Official Report, 25/4/86; col. 1389].
We want the Minister to assuage employees' fears that they will not be detrimentally affected if they are transferred out of employment. The Explanatory and Financial Memorandum to the Bill states:
"Clause 2 provides that any member of staff of the Property Services Agency or The Crown Suppliers whose employment is automatically transferred to a new employer will not be entitled to redundancy compensation".
We heard the Minister plead in aid advice that he had received from the Law Officers in another place that in effect that was correct. We are however very uneasy.
In moving Amendment No. 12 I shall also speak to Amendment No. 13. I shall leave discussion of the major matters that I want to raise in regard to the EC directive until we reach Amendment No. 14. I shall be grateful if the Minister will deal with Amendments Nos. 12 and 13 separately.
The terms are fairly well known. The manner in which individuals are affected are very well understood. I should like to give the Committee an illustration of that effect. I have the permission of the individual concerned to quote his present arrangements and the likely situation that will occur. It concerns a Mr. Roger Stirland, chairman of the IPMS, PSA branch, TCS section. He says:
"I joined the service on 1st April 1974 … giving me 16 years service in total. I was bom on 24th December, 1950, therefore my age is now 39. I have been a diabetic on insulin for 35 years and was subject to a Civil Service medical before being offered an established post as a PTO IV F&E in Nottingham.
For the past seven years I have been receiving treatment for retinopathy on both my eyes. This condition is as a result of having diabetes for a long period; the treatment is an attempt to prevent total blindness which without treatment would have occurred about four years ago. The treatment itself causes the weakening of the sight and there is the strong possibility that my sight will in the future become so impaired as to prevent me carrying on with my work; also a total loss of sight in one or both eyes could take place at any time.
So what would I get from the PCSPS if this happened tomorrow? My service of 16 years would be enhanced by 6·66 years giving a total of 22·66 years. My last year's earnings should come to £15,500. That, divided by one-eightieth, would give a figure of £193·75. The immediate annual pension would then be £193·75 multiplied by 22·66 which would equal £4,390·38. This would attract full index linking to the cost of living index. The lump sum paid immediately would be £4,390·38 multiplied by 3 less the widow's pension contribution on the added years which would be £1,548·45, leaving a lump sum payable of £11,622.
To calculate the total benefits payable and their worth to me over the next 20 years I have allowed an average annual cost of living pension increase of only 5 per cent. On the lump sum I have allowed for an average annual investment income of again only 5 per cent. This gives the following results. Annual pension payment increased by cost of living paid over 20 years gives a total of £145,172. Lump sum payment invested over the 20 years would, with compound interest, rise to £171,076. This shows that the minimum level of benefit I would expect from the PSCPS over the next 20 years until my normal civil service retirement age would be £316,248.
By forcing myself out of the Civil Service against my will I will lose my entitlement to the ill health retirement benefits under the Principal Civil Service Pension Scheme. How will the Government guarantee that I will not be disadvantaged as a result of this privatisation?"
I shall be grateful if the Minister can satisfy Mr. Stirland as well as this Chamber. I beg to move.
Lord Hesketh: I am not sure that I shall be able to provide an instantaneous response to the particular circumstances mentioned by the noble Lord. I know that in his generous way he will want a very full response by Report stage, which would be entirely reasonable.
The effect of both the amendments would be to delete the existing paragraph (a) of subsection (2) and to substitute a provision whereby staff would effectively be regarded as having been compulsorily retired and entitled to the benefits under the PCSPS that flow from that.
As I have already explained in relation to earlier amendments, the Transfer of Undertakings (Protection of Employment) Regulations 1981 will apply to the privatisation of the PSA and the TCS and will safeguard the staffs terms and conditions of employment. The transfer of these organisations out of the Civil Service will mean that the staff can no longer be members of the Principal Civil Service Pension Scheme. The termination of their membership would trigger automatically the staffs right to redundancy compensation, even though they will retain their jobs on the same conditions of service.
I am sure that the Committee will agree that the payment of redundancy compensation in these circumstances would be rather strange. It is precisely that anomaly which subsection (2) seeks to rectify. That is why paragraph (a) contains standard provisions which have appeared in all recent legislation concerned with the privatisation of organisations whose employees are members of the Principal Civil Service Pension Scheme. Amendments Nos. 12 and 13, if adopted, would simply introduce into the legislation the strange situation which I have described.
Amendment No. 13 would result in redundancy compensation for staff transferring with their jobs. It also proposes that any questions of contractual rights and obligations arising under Section 1 of the Superannuation Act 1972 should be referred to the ombudsman for pensions. Schedule 3 to the Social Security Bill 1990, which is currently before this Chamber, provides for the establishment of this post. As I understand it, on his appointment the ombudsman will have extensive powers to deal with matters of maladministration and to deal with matters of fact and law. If that Bill is enacted, and the ombudsman for pensions is appointed, it will be open to any individual to seek to have questions on contractual rights and obligations considered by him. That will be provided for automatically in the social security legislation and we believe that to reiterate it here in this Bill would be superfluous.
On the basis of those remarks, I hope that the noble Lord will see fit to withdraw the amendment.
Lord Graham of Edmonton: We shall need to read what the Minister said. Time and again it comes back to the fact that the Government have failed to satisfy us, or to satisfy the trade unions who represent many thousands of members, with the explanations given. I have quoted one individual's situation. I shall be mentioning one other case before the debate ends this evening. There are dozens of anxious
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people who can see that in practice they will be damaged. If they were to be transferred from one government department to another, that in itself would be traumatic but at least they would be kept within the family, as it were. The Government propose to transfer them out of the family.
I do not for one moment subscribe to the view that there has in any way been ultra-protection. I have read out figures. Those are the kinds of circumstances that prevail in many cases.
However, when someone such as Sir Gordon Manzie is able to have his release from employment facilitated and the terms under which he left the Government's employment enhanced and when his prospects, to which he has been privy and of which he has been aware for many months, have been the subject of the personal intervention of the Prime Minister—or so I understand from the press—then I believe that the Minister can understand very well why the ordinary individual whose salary might be £8,000, £9,000 or £10,000 should feel just a little aggrieved. Some individuals are able to look after themselves very well; in the case of others it is left to the power and the advocacy of their trade unions to try to get marginally better terms than the Government have introduced. I believe that the Minister's answers will be considered with great care by those outside the Chamber. I may return to the issue at a later stage.
Amendment, by leave, withdrawn.
[Amendment No. 13 not moved.]
7.30 p.m.
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 14:
Page 2, leave out lines 23 and 24 and insert:
("(b) Article 3(2) of the Business Transfer Directive (No. 77/187) shall have effect in relation to the agreed redundancy procedures applicable to a person employed in that service").
The noble Lord said: The Business Transfer Directive (No. 77/187) states at Article 3(2):
"Following the transfer within the meaning of Article 1(1), the transferee shall continue to observe the terms and conditions agreed in any collective agreement on the same terms applicable to the transferor under that agreement, until the date of termination or expiry of the collective agreement or the entry into force or application of another collective agreement".
The trade unions in PSA and TCS have collective agreements relating to redundancies and to the procedures which shall apply in relation to redundancies.
Although I am not in difficulty, I believe that the Government are. Clause 2(2)(b) is objectionable, first because it violates EC Council Directive 77/187, thereby placing the UK in breach of its obligations under the Treaty of Rome; and, secondly, because it flouts two principles of responsible industrial practice which the directive seeks to enforce. The first is that the transfer of an undertaking shall not be used as an excuse for depriving employees of that undertaking of the rights and benefits they enjoyed before the transfer; and, secondly, that any necessary change following the transfer of an undertaking shall be negotiated —and I repeat the word "negotiated"—and not imposed unilaterally.
The stated purpose of the directive is to bring about,
"the approximation of the laws of the Member States relating to the safeguarding of employees' rights in the event of transfer of undertakings or businesses or parts of businesses".
I refer the Committee to the preamble to the directive. Article 1(2) states that, "a transfer" includes any legal transfer or merger.
Two of the cardinal provisions of the directive are that on the transfer of an undertaking an employee employed in that undertaking is automatically assigned on his existing terms and conditions into the employment of the transferee. That is Article 3(1). Secondly, following the transfer, the transferee employer must continue to observe the terms and conditions contained in any collective agreement applicable to the transferor until the collective agreement expires or is renegotiated. That is Article 3(2).
Member states can limit the period following the transfer within which collective agreements must be observed, but the period must be not less than one year following the transfer. That is Article 3(2). They cannot limit the period for which a transferred employee will continue to enjoy the terms and conditions of the contract of employment which has been automatically assigned upon the transfer. If the transferee wants to change the terms of an individual contract of employment, he must negotiate—I repeat, "negotiate" —the changes with the employee. The directive does not empower member states to create exceptions to these rules for particular transfers or kinds of transfer. If there is a transfer of an undertaking within the meaning of the directive, that is the end of the matter. Articles 3(1) and 3(2) must be observed.
Member states were obliged to bring into effect the laws, regulations and administrative provisions needed to comply with this directive within two years of its notification (see Article 8). In order to secure compliance on the part of the UK, the Transfer of Undertakings (Protection of Employment) Regulations 1981 S.I. 1794 were introduced. Because the directive stipulated that the principle must apply to every legal transfer, the regulations apply,
"Whether the transfer is effected by sale or by some other disposition or by operation of law".
That is Regulation 3(2).
Clause 2(2) of the Bill plainly assumes that a transfer scheme under Section 1(1) will or may constitute a transfer of an undertaking. It goes on to provide in Clause 2(2)(b) that,
"none of the agreed redundancy procedures applicable",
to an (employee prior to the transfer shall apply after the transfer. It therefore derogates from the regulations and more importantly, from the directive. That is because it means that where an agreed redundancy procedure has become part of an individual's contract of employment (expressly or by implication) he will cease to enjoy that benefit upon being transferred. That is a plain violation of Article 3(1). Secondly, even if the agreed redundancy procedures are not incorporated into individual contracts of employment and exist only as collective
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agreements, they cease to apply immediately after the transfer. They do not continue to be effective for the minimum period of one year prescribed by Article 3(2) of the directive.
One legal consequence would be that the UK would be in breach of its obligations under the Treaty of Rome and could be brought before the European Court of Justice by the EC Commission on account of treaty violation.
A second legal consequence would be to open a Pandora's Box of uncertainty. That is because an individual suing or being sued by the transferee employer in the British courts could seek to argue that the directive has "direct effect" under Community law, and that the British courts should therefore ignore Section 2(2)(b) as being in conflict with the individual's rights under European law. The circumstances in which a directive ay be relied upon in this way before national courts is a vexed question of Community law. But is s clear that the argument is in principle open where the individual is seeking to enforce the directive against the state.
Whether an undertaking transferred by the Property Services Agency or Crown Suppliers is "the state" for this purpose is itself uncertain. However, in the Foster v. British Gas case currently before the European Court of Justice, the European Commission has submitted that "privatised" bodies can or do constitute part of "the state". Suffice to say, that if Clause 2(2)(b) remains, it can only create uncertainty as to the legal position of individuals affected.
The violation of the directive represented by Clause 2(2)(b) would not be merely technical in character. It offends the central purpose of the directive, which is to ensure that the transfer of the undertaking should not be treated as good reason for detracting from the rights and benefits of employees who have served the undertaking; and, secondly, that a transferee employer who finds the terms he has inherited to be inconvenient should look to negotiation with the staff and not impose new terms unilaterally.
The justification for Clause 2(2)(b) is hard to seek. Clearly the view cannot have been taken that a scheme transfer would necessarily be outside the definition of a "transfer of an undertaking". Clause 2(2) clearly assumes the contrary. Similarly Clause 2(2)(b) cannot be intended simply to ensure than an employee will not enjoy redundancy procedures at the point of transfer to the privatised body. The effect of the regulations is that he does not become redundant at the transfer, so that the redundancy procedure would not be triggered at this point in any event.
The only explanation which remains is that the existing redundancy procedures were thought to be inconvenient for prospective transferees. But to give effect to any such concerns is to fly in the face of the whole objective of the directive. The new employers should negotiate change. They should not be in a position to impose it.
I apologise to the Committee for taking the care that I believe this Chamber will recognise that I have taken in order to be well prepared to deal with a

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central point of concern to the employees who are affected.
I make the point to the Minister in all seriousness. Although earlier the noble Lord, Lord Reay, said that the Government had taken advice, I should be happy if in the light of the legal opinion that I have given to the Committee the Minister will look at the matter again. I shall not press the amendment to a Division but it would be helpful to those outside the Committee if the Minister could indicate that he has seized the gravamen of my argument and will look at the matter again. I beg to move.
Lord Hesketh: It may be helpful if I begin by explaining the background to Clause 2(2). It was designed to ensure that the transfer of the PSA and the TCS to the private sector did not result in the staff being regarded as redundant.
The Committee will know that TUPE ensures that the staff enjoy continuity of employment. But because of the way in which the Civil Service pension scheme is drafted, when civil servants' membership of the scheme is terminated by their transfer to the new companies the pension scheme would treat them as having retired on grounds of redundancy. That would be patently absurd and would give civil servants an unfair advantage over other employees. It would result in them retaining their employment with the transferee on their existing terms and conditions, as a result of TUPE, while being compensated by the transferor as though they had been made redundant.
Clause 2(2), therefore, seeks to deal with this anomaly. Paragraph (a) prevents the payment of redundancy compensation to staff who transfer to the purchasers' employment by providing that they are not to be treated as having retired on redundancy. Paragraph (b) relates to the agreements that departments have with trade unions representing civil servants about the way in which any redundancies among the staff should be dealt with. As I have explained, since the proposed transfers of the staff are not redundancies, it is important to avoid any confusion about whether the departmental redundancy agreements should be activated.
These agreements have two main purposes. First, when a department finds that it has surplus staff the agreements set out a range of measures designed to avoid the necessity of making any staff redundant. These include measures that the department with the surplus can take, such as the discharge of casual staff and calling for volunteers for early retirement. But they also include measures affecting other government departments such as limiting or suspending recruitment throughout the Civil Service and transferring surplus staff to other departments with vacancies. The second purpose is to set out arrangements for the selection of individuals for discharge in the event that a department declares posts to be redundant. However, as I have said, the staff of the TCS and PSA are not in any event being made redundant, so these procedures should not apply to them.
Therefore it would not be acceptable to the Government for Clause 2(2)(b) to be deleted. If the
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Committee passes this amendment some confusion could be caused. It might be thought that the redundancy selection procedures could apply to deciding which staff transferred. As I have explained, they should not do so because the staff are not being made redundant. Clearly uncertainty about the transfer would not be in the interests of the staff or of the organisations themselves.
Finally, Clause 2(2) is well precedented. It has appeared in virtually the same form in all recent legislation. The noble Lord, Lord Graham, raised the issue of the effect that Clause 2(2)(b) might have in reletion to the procedures that would be applied if there was a need to make staff redundant following their transfer to the new employment. There are substantial parts of the Civil Service agreements which could not survive a transfer to the private sector. I am thinking here of the parts of the agreements which have service-wide implications. Clearly a private sector organisation could no longer have links with the Civil Service in dealing with any surplus staff. But I accept that there are parts of these agreements which would be capable of transfer. For the reasons I have explained, the amendment would not be acceptable to the Government. But I have taken note of the noble Lord's point and I undertake to consider it before the Bill completes its passage through this Chamber.
7.45 p.m.
Lord Graham of Edmonton: I am grateful to the Minister for his concluding remarks. We are puzzled by the fact that those remarks and the Bill's provisions cease to have effect in respect of the new employer on day 2. On day 1 the employment is transferred, no redundancy is paid and the employees are in the hands of employers, who may not be good. The Minister will not be surprised to be told that not only are there bad employers but there are those who have fallen on hard times.
At present men and women employed in the public sector enjoy good terms and conditions negotiated for them by their trade unions. These conditions were given to them sometimes grudgingly, by governments of the day. If Clause 2(2)(b) remains unaltered the conditions of employment will be to their detriment. I have taken care to obtain a legal opinion which has some force, as those outside the House will understand. Whether it prevails is another matter. If it does not prevail the consequences could be serious for the Government and the individuals concerned.
1 referred to the dockyards Bill. During our debates on the way in which TUPE '81 affected the dockyards the noble and learned Lord, Lord Denning, said:
"The Government have amended the provision substantially, but I still think that it is very difficult to follow. That is why I suggest that the provision should be left out and instead there should be inserted the subsection which I suggested originally at the Committee stage. It reads:
'The provision of European Community Law contained in Council Directive 77/187 shall apply to the transfer of the dockyard undertaking to another company; and shall take precedence over any regulation or enactment which fails to implement the Directive correctly'".—[Official Report, 27/6/86; col. 545.]

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The amendment was lost and the Government's view prevailed. Hence, we are now in the present situation. I believe that they are using a false analogy based upon a weak premise. Although the Transfer of Undertakings (Protection of Employment) Regulations 1981 are good they do not of themselves give any authority by which the Secretary of State can transfer the qualified service employees without their consent from the service of the Crown to the service of any other employer. That proposition was contained in the amendment moved by the noble and learned Lord, Lord Denning, in 1986, and it has force in respect of the present debate.
My purpose has been served. I have made my case and the Minister has given the Committee a fair answer. He said that before the Bill reaches its concluding stages he will advise me what, if anything, he is able to do or say which will allow me to take appropriate action in the concluding stages. I am grateful to him and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 15:
Page 2, line 24, at end insert:
("( ) No person shall be transferred by this section other than by mutual consent.").
The noble Lord said: The amendment is simple to understand and it is important. It is clear that there will be redundancies from within the Civil Service. There will also be terms and conditions of transfer, but some employees will not wish to move. In such circumstances one may talk about voluntary and compulsory redundancy.
We are saying that no person should be transferred other than by mutual consent. That means that terms will be reached under which the transfer shall take place. That is the raison d'être of industrial relations. Therefore, this is not a threat, a promise or a question of being mulish or digging in one's toes. If the Government are serious about their industrial relations nexus, then they should be prepared to accept this amendment. I beg to move.
Lord Hesketh: I do not deny that the staff of PSA and TCS face a period of considerable change. But it has been made very clear both to this Chamber and another place that so far as concerns their terms and conditions of service, the staff will not be disadvantaged by the privatisations.
Even so, I accept that some staff may not wish to move into the private sector and would rather stay within the Civil Service. The Government have already taken some measures, in relation to TCS, to ensure that the staff have as much choice as possible, consistent with the objective of a successful privatisation. But I am sure that Members of the Committee will agree that if the privatisation is to succeed, TCS must be staffed properly. In particular, it cannot be deprived of all its expert staff.
During 1989, administrative and ancillary employees in TCS were asked whether they wished to volunteer for secondment with the new owner. The staff in those grades are generalists and represent
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about half of the 1,100 then employed by TCS. Almost 70 per cent. of those eligible volunteered for secondment, and will remain civil servants during their secondment period. They will also be free to accept permanent offers of employment by the new owner. Those not offered permanent posts, and those who do not wish to accept them, will be offered alternative civil service posts. Of those staff offered secondment, those who opted not to be seconded are being moved to other civil service posts before the sale takes place.
TCS has decided to make a significant reduction in the number of its furnishing professional staff As a result, nearly 100 staff are being given the opportunity to retire early on favourable terms.
It was not possible to offer secondment to the professional and industrial staff in TCS because there was no certainty of finding alternative Civil Service posts for all those who might have wanted I them. Instead, these staff have been given an undertaking that they will be given an opportunity to state their preferences about whether they wish to remain in the Civil Service or to move into the private sector. This is likely to be when the terms on offer from the purchaser are known. Management have already given a commitment to use their best endeavours to meet such staff preferences, bearing in mind the needs of the TCS business and the availability of other posts.
So far I have confined myself to TCS, where the sale is more advanced. It is impossible to be as specific about PSA staff at this stage, not simply because the sale is still some way off, but also because there are far greater numbers involved: there are 22,000 PSA employees in the UK. However, I can assure the Committee that the Government are conscious of the need to take account of the wishes of PSA staff, so far as it is possible without jeopardising the viability of the organisation in the private sector.
The Government intend to establish the preferences of PSA's staff and to fill posts there with staff who wish to stay with it as it moves into the private sector. A booklet has recently been issued to all PSA's non-industrial staff asking them to record their preferences. It is clear that changing workloads within PSA as a consequence of untying, and the drive for greater efficiency will mean that alternative postings will need to be sought for significant numbers of PSA staff in any event. As the opportunity arises, we intend to post out as many as possible of those who wish to move to alternative Civil Service posts.
However, it would be wrong to leave the Committee with the impression that there can be any guarantee that the preferences of all such staff can be met either within the PSA or elsewhere within the Civil Service, or that natural wastage will be sufficient to cope with any surplus.
The amendment involves the concept of mutual consent. I take that to mean the consent of the new owners of the PSA and the TCS as well as the individual members of staff It may be that Members of the Committee opposite consider that there is less likelihood of members of staff being made redundant

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after the sales if the new owners have reached the decision in each case as to whether or not they wish to employ them. I cannot accept those arguments on the principle nor, even more importantly, as a practicality. The issue of principle is that staff have the benefit and safeguards provided by TUPE. It seems to me wholly wrong that the purchasers of the PSA and the TCS should be able to override the provisions of TUPE by being allowed to pick and choose who should transfer.
Members of the Committee will know that the Government made a small amendment to the Bill on Report in another place to remove any doubt that there may have been that the new owners could pick and choose their staff. That change was pressed on the Government by the Opposition, but this amendment is wholly inconsistent with that. As a matter of practicality, I do not see how an employer can be expected to reach decisions about 22,000 individual members of staff within the PSA. For those reasons, we resist the amendment.
Lord Graham of Edmonton: The new employer would not have to deal with 22,000. The Minister has already gone through a range of ways in which the numbers likely to feel aggrieved or disadvantaged could be substantially reduced. The trade union negotiators are realistic men and women. They will not unnecessarily stand out for a benefit or an advantage for a handful of their members who it is felt are acting unreasonably. However, the Minister should not equate someone who does not wish to be transferred or made redundant with being unreasonable. We are not talking about the Minister's livelihood or mine or that of any other Member of the Committee. We are talking about people with responsibilities who have mortgage payments to meet.
I should like to share the confidence of the Minister that a new employer will be as reasonable and sensible as he indicates to the Committee. I fear that the new employer, whether or not he has a good bargain, will be proved to be less willing to take into account the range of matters which are currently part of the conditions under which civil servants work. However, I do not believe that we shall make any progress this evening. I shall read what the Minister has said and I shall take advice upon it. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 16:
Page 2, line 24, at end insert:
("( ) The benefits for early retirement of redundancy, inefficiency and limited efficiency grounds shall be underwitten by Treasury funds.").
The noble Lord said: In moving this amendment, I shall speak also to Amendments Nos. 17, 18, 21, 23, and 30. This group of amendments invites the Government to be generous and helpful. Sadly, there will be people who cannot be taken on and who will be passed over for whom retirement will need to be sought. As an act of good faith we are inviting the Government to say that the public purse, which
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has hitherto been well served by those people will underwrite any payments.
I am under no illusion—as I am sure is the case with the Minister—that we are talking about potentially large sums of money. However, in practice those figures will not be too great. The other amendments in this group relate to the same kind of nexus. For the avoidance of doubt, these amendments deal with this and any subsequent transfer because the Minister will be aware that once the employee has left the protection of public employment, then all sorts of things can happen to him.
This is the time when people like myself, who seek to represent the views of those who sought my assistance, face the Government with the realities of the situation. It is also the time when those outside the Committee expect to receive confirmation that their case has been made. I do not put too fine an edge on it. We saw what happened in previous situations. The Royal small arms factory was given all kinds of assurances by the Member of Parliament and others. There were assurances by many people. Unfortunately, once the ordnance factories were sold to British Aerospace there was a change in the plans. Redundancies and closures took place; it was a very unhappy situation. I say that having been the local Member of Parliament at the time.
It is no good wringing our hands after the event. The Minister must reassure people who at the moment are fearful. The Minister has said more than once tonight that he hopes to reach agreement with the trade unions. He used a phrase at which I smiled. It led the Committee to believe that negotiations with the trade unions were without blemish. I can say to the Minister that the trade union negotiators are a very unhappy group of people at the present time. He may give them some reassurance when he responds to the amendment. I beg to move.
8 p.m.
Lord Hesketh: These six amendments all relate to the redundancy terms for the staff transferred to the new PSA and TCS companies. They seek to do two things: first, to provide the transferred staff with the same benefits they have at present; and secondly, to provide for the protection of those benefits by means of a Treasury guarantee, a special fund to pay benefits or by dedicating assets to underwrite the payments.
Amendments Nos. 18 and 21 appear to duplicate one another, as to a certain extent do Amendments Nos. 16 and 21. The latter amendment refers to pensions as well as redundancy. There is a separate group of amendments on pensions and, with the Committee's leave, I will deal with that part of Amendment No. 23 when we consider the relevant amendments.
I should like to deal first with redundancy terms. The Government have already said categorically, and I am happy to repeat the assurance to the Committee, that arrangements will be made to ensure that, after privatisation, redundancy terms will be identical, as far as possible, to those the staff have at present. There is only one respect in which the redundancy terms may not be identical to Civil

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Service terms. Some staff, on being made redundant by the Civil Service, would be entitled to the immediate payment of their pension lump sum. Whether staff made redundant after privatisation receive any immediate pension lump sum will depend on a complex of circumstances. The arrangements we are proposing, however, will ensure that the staff will, if necessary, receive a payment which compensates them for deferment of the lump sum that they would have received had they remained civil servants.
Amendments Nos. 17 and 21 use the words "comparable" and "equivalent" respectively in relation to redundancy terms. As I have indicated, we shall be arranging for the staff to be given redundancy provisions which are virtually identical to those they have at present. That seems more beneficial than what is being proposed in these amendments. I do not believe, however, that it is necessary or indeed desirable to include provisions in the Bill to this effect. There are two reasons for this. First, the approach that the Government are adopting on redundancy provisions is in compliance with their obligations to the European Community, and it is not necessary to repeat those obligations in the Bill. Secondly, the redundancy terms are complex, and providing fully for them in the Bill would considerably and unnecessarily lengthen and complicate the Bill. No such measures have been included in previous privatisations, all of which have been carried through with proper protection of staff interests. I am quite satisfied that the staffs redundancy rights will be fully protected in these privatisations also by the measures the Government are proposing.
I should like to turn now to the question of the security of any redundancy payments made after the privatisations. Members of the Committee proposing Amendments Nos. 16 and 23 argued that there should be some form of guarantee that, if the new owner defaults on his obligations, the payments will be made from public funds. The trade unions representing the staff of PSA and TCS have already made representations to the Government about that.
Those representations are being considered, but I should perhaps say to the Committee that I am doubtful about the case for guarantees. There has, in effect, only been one occasion when such a guarantee has been given. That was the Devonport dockyard; it was considered right to give a guarantee in that case because of government decisions to reduce the workload there which would lead directly to redundancies. Guarantees were not given in the case of the other dockyards, or for any other privatisation. Generally, privatisation policy entails a clean break between the privatised entity and the Government so as to ensure that the new company competes on equal terms in the private sector.
In running the sale competition for TCS —and this will also apply when we come to sell PSA —we have had regard to the importance of selling to a purchaser who demonstrates a commitment and ability to consolidate and develop the business. We shall also seek to ensure that the purchaser has the necessary; resources to run the business successfully. This will mean that if, at some future date, it should prove
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necessary for some of the staff to be made redundant, the company should be able to do so on the basis of the terms I have explained without threatening the viability of the business.
I quite accept that a purchaser may wish to propose changes to the redundancy terms, or indeed to other terms and conditions of employment. That will be a matter for negotiation between the employer and the staff, or their trade union representatives. I can reassure the Committee that an employer cannot force his staff to accept inferior terms and conditions of employment.
In summary I ask the House to reject all six of these amendments. As I have set out to explain, the Government will ensure that the staff have redundancy terms which are identical, as far as possible, to those they have at present. The question of guarantees of those terms is under consideration, but such a guarantee is unprecedented in a privatisation of this kind and it is unlikely that the Government will accede to the unions' requests. We believe that the interests of the staff, in relation to redundancy, will be properly safeguarded by the measures I have described.
I hope that the noble Lord, Lord Graham of Edmonton, will consider my remarks and withdraw the amendment.
Lord Graham of Edmonton: I am grateful to the Minister for the care he has taken in preparing himself but having listened very carefully to what he said, it is very confusing. The words that I used to describe what the trade unions want: not "broadly comparable", but "comparable"; not identical "as far as possible", but "identical".
I understand that the Minister is saying that there may be some difficulty in carrying out the amendments; the difficulty is finding the money. However, the Minister should understand that Mr. Brown, who is employed in a responsible post and is paid a fair wage—shall we say £13,000 or £14,000—is very concerned when this hoo-hah is going on with regard to the change. He recognises that there will be a different climate because he will not be in the public sector but in the private sector. He is asking whether he can be assured that the benefits for which he has been paying will be transferred with him. As the Minister knows, any wage structure which an employee enjoys is cushioned and conditioned by the fact that other things such as redundancy, enhanced redundancy schemes, sick pay or early retirement are all part of the wages and conditions of the employee. He wants them carried forward.
I accept that negotiations are going on. Earlier in the debate I referred to Sir Gordon Manzie, the former chief executive of the Property Services Agency. He has not had any problems concerning what would happen to him when he reached the end of his employment. His employment was facilitated into early retirement with very generous terms. That is the man to whom the employees of the PSA looked for the past number of years to protect their interests. He did not need any advice on how to protect his own interest. He received a £66,000 per year salary—not £10,000 or £12,000—and he retired

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with a £33,000 per year index-linked pension and a £100,000 lump sum. Good luck to him! Those were no doubt part of his conditions of pay. The employees who may be forced willy-nilly to go elsewhere do not want a job which might pay £250,000 per year for a two-day week, which is what the newspaper tells me Sir Gordon will receive. They only want that which they already enjoy.
I am careful with my words. I do not want to denigrate the conditions that the Government have seen fit to provide for their employees until now: they are neither generous nor parsimonious; they are fair, they are negotiated. In the same way as Sir Gordon Manzie has looked after his own interests, we are asking that someone should look after the interests of employees who served under him.
This is one of those situations where the Minister has said as much as he can. I am not privy to any detail of the discussions. I say that absolutely honestly. I shall be guided by the employees' representatives outside this Chamber. However, I have to tell the Minister that there is no point in using such phrases as "unique", "one-off, "innovation" or "creating new conditions". It is as a result of trade unionists' experience with previous privatisations that they take their current attitudes. They have already been over similar ground. It is because they are unhappy with the way other privatisations have been handled that they want to introduce these ameliorations. However, I am grateful to the Minister, and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 17 and 18 not moved.]
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 19:
Page 2, line 24, at end insert:
("( ) No person shall be transferred under subsection (2) above unless his interests in respect of rights conferring immediate or prospective entitlement to invalidity benefits and old age benefits, including survivors benefits are protected. This protection shall include —

(a) the provision of benefits comparable to the benefits provided by the Principal Civil Service Pension Scheme; and

(b) the index linking of benefits identical to the Principal Civil Service Pension Scheme; and

(c) either contribution rates identical to the Principal Civil Service Pension Scheme or full compensation in lieu thereof").

The noble Lord said: I am sure that the Minister has a brief headed "resist". I should be grateful if he could tell us what it says in response to this amendment. I beg to move.
8.15 p.m.
Lord Hesketh: My Lords, I never like to think that the Government give the longest reply at the Dispatch Box but I have done a considerable amount of research into this subject which I feel may be of assistance and I hope not too boring for the noble Lord.
Lord Graham of Edmonton: I thank the Minister.
Lord Hesketh: I should like to begin by explaining the Government's proposals for pensions in relation to these two privatisations. Both the PSA and the TCS are commercial undertakings to which the Transfer of Undertakings (Protection of Employment) Regulations 1981 will apply. These are known as TUPE. TUPE will ensure that when the undertakings are sold, the staff's contracts of employment are not terminated by the transfer of the undertakings. The regulations will further ensure that the staffs terms and conditions of employment remain unchanged. The single exception is that occupational pension schemes are excluded from the transfer. In this respect TUPE is fully consistent with the European Community's Acquired Rights Directive. Nevertheless, employees are protected by United Kingdom employment law and might be able to claim that they have been unfairly dismissed if after the transfer the pension provisions offered by the new owner are not broadly comparable with their existing pension provisions.
In the sale of the TCS we have said to prospective purchasers that we shall expect them to offer pension terms broadly comparable to the PCSPS. There may of course be a different mix of benefits; for example, a higher pension and a lower lump sum. The proposals submitted are being analysed by the Government Actuary to determine whether they are broadly comparable with the PCSPS. Pension proposals will be an important factor in the Government's assessment of the bids for the business. In the case of the TCS we cannot compel prospective purchasers to offer a particular scheme. They are likely to want the TCS employees to join the existing company scheme.
If the purchaser's scheme is assessed as not being broadly comparable, ways will be found to make up any disadvantage. The Government would seek in negotiations with the purchaser to improve the pension terms or to improve other terms and conditions of employment. As a last resort, if these routes proved impossible we would compensate the staff for any pensions disadvantage. In that way we would ensure both that the staff were fully protected and that the Government complied with their obligations.
The sale of the PSA may proceed in the same way as for the TCS, in which case the arrangements for dealing with pensions will also be similar. It is probable, however, that the PSA will be incorporated and would then trade as a wholly-owned government company. If so, the staff of the PSA will cease to be members of the PCSPS on the date they are transferred to the government-owned company. A new pension scheme would need to be available for the staff to join from that point and it would be the responsibility of the Government to set it up. In doing so the Government would consult appropriate advisers, including the Government Actuary. The scheme may not be identical to the PCSPS—for example, it would probably be a contributory scheme—but the aim would be to create a scheme with a package of benefits broadly comparable with those of the PCSPS. When the company is later sold, the purchaser would acquire the shares of the company. He would simply inherit the then existing pension arrangements and would be bound by them.

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I now turn to the four amendments relating to pensions. Amendments Nos. 22 and 19 both refer to the provision of comparable pensions. Amendment No. 24 refers to equivalent pensions. I have already explained the legal background to the Committee and also set out the Government's proposals. In both privatisations we shall be seeking to achieve broad comparability. Assurances have been given in another place, and I am happy to repeat them to the Committee, that the Government will ensure in relation to their overall terms and conditions of service that the staff do not suffer any disadvantage as a result of the sales.
These amendments also deal with one or two other matters and I now refer to them. Amendment No. 22 refers to the initial transfer and to any subsequent transfer. The protection which United Kingdom employment law provides will apply in any case and I see no need for a special provision of the kind proposed in the amendment.
Amendment No. 24 would make it necessary for changes to a pension scheme to be subject to negotiation and agreement with the trade unions. The Government will be consulting the trade unions about the proposed pension arrangements. Once the new pension arrangements are put in place it will be for individual members of staff to decide whether they wish to join that scheme and also whether they wish to transfer any benefits they have accrued in the PCSPS to it. Once that scheme is running the employer may only make changes to it with the agreement of the members. Again, therefore, this is not a matter which requires specific legislative provisions.
Amendment No. 19 refers to index-linking and to contribution rates. I have already explained the Government's approach to comparability, but it would simply not be practical to approach the task in the way envisaged by this amendment. The amendment would require index linking and contribution rates to be identical to those already in the PCSPS. These are important matters but in the Government's view they need to be assessed as part of the overall pension scheme.
Amendment No. 25 would introduce a new clause which would allow staff who have contracted to buy added years from the PCSPS to continue to do so. As the Committee will be aware, the staff of the PSA and the TCS will cease to be members of the PCSPS when they are transferred to the new companies. It would not in the Government's view be reasonable, or indeed possible, to make an exception in relation to the purchase of added years. In common with their ordinary benefits, staff will have the choice either of freezing any added years or transferring their benefits to the purchaser's pension scheme. Therefore, the value of any added years purchased up to the date of the sale will not be lost. It is also expected that the purchaser's scheme will have its own arrangements for enhancement which members can take advantage of if they wish.
Finally, I refer to Amendment No. 23 which is principally about guaranteeing redundancy compensation, but I believe we have already debated this point.
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On the basis of those remarks, and I apologise if they were too lengthy for the Committee, I ask the noble Lord, Lord Graham, to consider withdrawing his amendment.
Lord Dean of Beswick: I should like to make one or two observations on what the Minister has said. I think he agrees that his comments were somewhat long and involved and they need to be looked at in detail by noble Lords and by the people affected before reaching any conclusions on the actual meaning.
However, a thread running through the Minister's comments appears to cross the Government's avowed intention. A major feature of the Government's platform, and one has to say that they have had much success with it, is the so-called giving the unions back to the members and setting the unions free. From what the Minister said, while many of the points he made may well be acceptable and be thought to be reasonable, it comes across clearly to me as a former active shop floor trade unionist that there are very few negotiations at present taking place with the trade unionists and their leaders who are involved in this dispute. I think that it is almost the Government saying what the negotiations will be.
This is a strong argument. I have an idea of the course my noble friend will take with these amendments. Probably he will do the same as he has done with previous amendments earlier in the evening. If these negotiations are to be accepted by the members of trade unions, to have any real chance of success and to get the show properly on the road it should in my opinion be the trade union representatives, not the Government who should undertake this. There is far too much involvement of the Government in this matter.
Lord Graham of Edmonton: Without wishing to give any offence, I fear that the Minister has been advised that because consultations have taken place or meetings have been arranged, ipso facto, agreement has been reached. The Minister must understand that the trade unions tell us that they are very unhappy about the manner in which the Government are handling the provision of the Bill which transfers people out of government employment into public employment.
The adviser to the Minister can probably spot each amendment and say which trade union has proposed it. I am prepared to acknowledge that we would not have spent any of the time which we have spent tonight on the political aspects of the Bill —and that has been a minor point on industrial relations—without the advice of the trade unions. They have not proposed these amendments because they wish to write amendments and briefs, print articles and hold public rallies and meetings. They are very unhappy. All that we can do is to inform the Minister that against that background he will be telling the Committee not that all is well but that he is doing as well as he can.
Colleagues of the Minister have used the words—though not tonight—that the terms will mirror those enjoyed at present. All the employees

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want is the same. They do not want euphemisms, adjectives that can be interpreted or misinterpreted. They do not want something that is broadly like something else or virtually the same. They want the same.
I can understand the Minister telling us that there are problems. Frankly, the biggest problem is how the Government weight the debt or potential debt of the new employer in such a way that it will be less attractive and not be sold. The Minister told us that there would be a comparable package. I speak as someone with a little experience but nothing like that of those from the trade unions who are advising me. Some elements of the package will obviously change: the Minister talked in terms of some being less and some more. Can he tell us that, although there will be changes that will suit the Minister and the prospective purchaser, at the end of the day the package will have to be broadly acceptable to the trade unions?
If the Minister is telling us that there will be changes in a number of facets which are mentioned in the amendment—invalidity benefits, old-age benefits, survivors' benefits, index linking, contribution rates, the pension scheme, redundancies—I can understand that. Can he tell us that he will not be satisfied unless the prospective new employer comes up with a package which is acceptable not just to him but also to the trade unions? I fear from previous experience that the new employer will seek to obtain the minimum terms, which may be the minimum terms acceptable to the Minister but not to the trade unions.
The Minister used another phrase, "suffer no disadvantage". It was the intention of the Government that the package should be such that employees would suffer no disadvantage. Do we understand from that that, if the trade unions demonstrate that people are suffering disadvantage, the Minister will not approve the terms in the package?
Lord Hesketh: The first and most important point is that I can repeat the last of the several undertakings that I gave in my first reply. As a last resort, if these routes proved impossible, we should compensate the staff for any pensions disadvantage. That states the Government's position very clearly.
However, it is perfectly possible that at the end of the day the trade unions may say, "That is not good enough because the real desire we have is not to go out at all". In those circumstances I cannot provide the answer that the noble Lord, Lord Graham of Edmonton, wishes.
Lord Graham of Edmonton: I understand that. Of course governments have the absolute right in pursuit of their policy and politics to say, "This is what we intend to do". There is no argument, I am not arguing about that. We are talking in terms of a realistic trade union negotiator recognising that the Government have rights as well as anybody else. He will look objectively at the package which he has to sell to his members. I do not speak in a pejorative sense: he has to avoid difficulties at a certain stage.
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It will not be in the interests of the employees to create difficulties which are unjust or unworthy. I can envisage a circumstance in which the trade union negotiator is told by his members that the terms of sale which he is trying to sell to them do not add up to a reasonable package. However, I believe that the Minister has said all that he can tonight. I beg leave to withdraw the amendment. Amendment, by leave, withdrawn.
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 20:
Page 2, line 24, at end insert:
("( ) No member of the executive, administrative and support staff shall transfer unless he or she has previously consented to do so in writing.").
The noble Lord said: This amendment stands in the names of my noble friend Lord Dean and myself. It has a familiar ring to the argument that we went through about consent. It is worded slightly differently:
"No member of the executive, administrative and support staff shall transfer unless he or she has previously consented to do so in writing".
There are very good reasons why this grade or these grades are singled out. The short answer is that there is an anticipated diminishing need for the skills of executive, administrative and support staff over the next two to three years. Such staff who have no building skills are career civil servants. They will be required to effect the PSA's transition from vote accounted government department to commercially accounted building firm. Once that work is complete, they face redundancy.
Both the National Union of Civil and Public Servants and the First Division Association estimate that between 70 and 80 per cent. of the 5,000 staff in the executive, administrative and support groups have no long-term future with PSA plc. Privately, PSA's senior managers concede that such estimates are realistic. The transition from government department to plc to which I refer is not merely a matter of introducing and proving new computer systems but of devising, deciding on, introducing and testing new procedures, codes and guides across the PSA, together with staff retraining and communications.
At the same time, the new business will be feeling its way in a highly competitive market. It does not expect to retain all its existing workload in the short or medium term or expect to balance this loss by winning new work. In consequence, after the transitional work is complete and the transitional period is over, staff face redundancy. I do not believe that the Committee would wish to pass a Bill which condemns loyal and hardworking civil servants to this fate. I believe that in those circumstances it would be immoral.
When the staff became aware of what the Government had in store for them, they quite naturally began to protest. As a response to one of the protests, Christopher Chope, the Parliamentary Under-Secretary, caused a general letter to be sent to employees who had raised those concerns. It read:
"If there are individual staff who are particularly concerned to remain in the public sector then there may be opportunities of posts in other departments before privatisation, which is still at least two to three years away".
I am told that the Minister has gone back on his word. Can the noble Lord help us tonight by responding to the words of Mr Chope? Both Mr. Chope and the PSA's top managers are pressing the Cabinet for permission to implement quickly one of the provisions of the Bill. They wish to set the PSA up as a government-owned company—a so-called Go-co —as early as possible, perhaps as early as 1st April next year. On that day therefore all PSA staff will cease to be civil servants and will become company employees.
It will not be possible over the next 12 to 18 months to relocate all those who wish to leave the PSA for other Civil Service work and effect the transition and continue to manage business. The transition will take some two to three years to complete. Executive staff will be forced out of the Civil Service once the Go-co is formed. Since they will be required only in the short term they face redundancy thereafter. It is not only immoral but will be very costly indeed. Making staff redundant during the period of the Go-co will be a burden on the taxpayer running into many millions of pounds. It is crazy to waste taxpayers' money in this way when the overwhelming majority of the staff could be found jobs in other government departments. Many of them have skills which are in short supply in other departments—skills in accountancy, information technology, contracts, training, personnel and so on.
The new owners of the PSA who are likely to be its senior managers are not concerned at the redundancy costs involved. That is because the Bill before us allows the Government to write off all Go-co debts and liabilities before the sale of shares at the end of 1992. Therefore the new owners will not inherit the redundancy debt but the taxpayer will. It is unnecessary because there is a means by which such staff could continue their Civil Service careers and willingly help the PSA effect a successful transition. That way is through secondment.
Secondment has been proposed by the National Union of Civil and Public Servants. It is an eminently sensible solution to a very real problem. It provides staff with a risk-free opportunity to work for PSA Go-co, and perhaps PSA plc, with a return ticket to the Civil Service when they are no longer required. It provides the PSA, its senior managers and Ministers with willing, well motivated staff using their skills to help the PSA prepare for and begin life in the commercial world. It would save perhaps millions of pounds of taxpayers' money because when staff were no longer needed they would in the main return to Civil Service jobs and not receive redundancy payments.
I have to tell the Committee that when executive, administrative and support staff in the Crown Suppliers were offered secondment about 70 per cent. decided to volunteer. For that reason the Government will not be using the Transfer of Undertakings and Protection of Employment Regulations to force these staff, who make up 50 per cent. of the Crown Suppliers' workforce, into the private sector.
Does the Minister wish for dogmatic reasons to move people out of the service and not offer them
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a ticket back no matter what the consequences? My honourable friend in another place, Mr. Tam Dalyell, described those moves as callous and barbarian. I do not wish to see this Chamber go down that route. The amendment affects a different group of people, who can be assisted in the way that I have suggested. I beg to move.
8.30 p.m.
Lord Hesketh: I do not deny that the staff of the PSA and the TCS face a period of considerable change and upheaval. But it has been made very clear both in this Chamber and in another place that, as concerns their terms and conditions of service, the staff will not be disadvantaged by the privatisations.
Even so, I accept that some staff may not wish to move into the private sector and would rather stay within the Civil Service. The Government have already taken some measures in relation to the TCS to ensure that the staff have as much choice as possible consistent with the objective of a successful privatisation. But I am sure that the Committee will agree that if the privatisation is to succeed the TCS must be staffed properly. In particular, it cannot be deprived of all its expert staff.
During 1989, administrative and ancillary employees in the TCS were asked whether they wished to volunteer for secondment with the new owner. The staff in these grades are generalists and represent about half of the 1,100 employed by the TCS. Almost 70 per cent. of those eligible volunteered for secondment and will remain civil servants during their secondment period. They will also be free to accept permanent offers of employment by the new owner. Those not offered permanent posts and those who do not wish to accept them will be offered alternative Civil Service posts. Of those staff offered secondment, those who opted not to be seconded are being moved to other Civil Service posts before the sale takes place. The TCS has decided to make a significant reduction in the number of its furnishing professional staff As a result, nearly 100 staff are being given the opportunity to retire early on favourable terms.
It was not possible to offer secondment to the professional and industrial statT in the TCS because there was no certainty of finding alternative Civil Service posts for all those who might have wanted them. Instead, these staff have been given an undertaking that they will be given an opportunity to state their preferences about whether they wish to remain in the Civil Service or to move into the private sector. This is likely to be when the terms on offer from the purchaser are known. Management has already given a commitment to use its best endeavours to meet such staff preferences, bearing in mind the needs of the TCS business and the availability of other posts.
So far I have confined myself to the TCS, where the sale is more advanced. It is impossible to be as specific about PSA staff at this stage, not simply because the sale is still some way off but also because far greater numbers are involved: there are 22,000 PSA employees in the United Kingdom. However, I can assure the Committee that the Government are conscious of the need to take account of the

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wishes of PSA staff as far as it is possible without jeopardising the viability of the organisation in the private sector.
The Government intend to establish the preferences of PSA's staff and to fill posts there with staff who wish to stay with it as it moves into the private sector. A booklet has recently been issued to the PSA's non-industrial staff asking them to record their preferences. It is clear that changing workloads within the PSA as a consequence of untying and the drive for greater efficiency will mean that alternative postings will need to be sought for significant numbers of PSA staff in any event. As the opportunity arises, we intend to post out as many as possible of those who wish to move to alternative Civil Service posts.
But it would be wrong to leave the impression that there can be any guarantee that the preferences of all such staff can be met either within the PSA or elsewhere within the Civil Service or that natural wastage will be sufficient to cope with any surplus. While no guarantees can be given to staff who wish to remain within the PSA, it is nevertheless clear that many of the staff who wish to return to the Civil Service after the creation of the Go-co and after privatisation may apply for jobs in other government departments. Subject to their past records and their current skills matching departments' requirements, their applications are likely to be sympathetically considered.
I apologise for having repeated the remarks I made earlier. On the basis of what I have just said, I hope that the noble Lord may be able to consider his position.
Lord Graham of Edmonton: I am once more grateful to the Minister for the care he has taken. Hundreds of thousands, if not millions, of people are employed by the Government. A small group of highly trained and experienced people is referred to in this amendment. I know that people sometimes fail to get a job because they are too well qualified. We are talking here of people who want to stay in the public service and who recognise that there will not be a place for them in a slimmed-down PSA.
They are genuinely willing to move. I have always understood that part of the conditions of service of civil servants is that they must be willing and able to move. We are not talking about someone who says that because he lives in Hackney, Bromley or Enfield he will not take a job that means that he will have to move. That situation would certainly be outwith redundancy terms.
Again, I think that the Minister has shown some sympathy with the points which I have made. He repeated that employees will not be disadvantaged. I very much hope that his optimism is not misplaced. We shall read with care what he said and we may return to the matter at a later stage. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 21 to 24 not moved.]
Clause 2 agreed to.
[Amendment No. 25 not moved.]
Clause 3 [Transferee companies]:
[Amendment No. 26 not moved.]
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 27:
Page 3, line 15, at end insert:
("( ) The Secretary of State shall not exercise any powers under this section unless the Property Services Agency or the Crown Suppliers is maintained as a national network.").
The noble Lord said: The purpose of this amendment is to seek to maintain the unity of the PSA to ensure that it is not privatised until it is commercially viable. The amendments to Clause 3 refer to the transfer of the existing safety requirements of the public sector into the private sector. Earlier amendments to Clause 1 related to the tentative way in which the privatised PSA will move. We are sensitive to the fact that the Government intend to privatise the PSA in April of next year and at that point we shall have very little work to consider.
As late as February of last year Mr. Christopher Chope was telling Parliament that it would not be right to sell the PSA until a sufficient track record of profitable commercial operation was established. I should like the Minister to tell us what has happened since that time. I beg to move.
Lord Reay: As I understand it, the purpose of this amendment is to prevent changes to the existing pattern of the PSA and TCS offices. In our view the amendment would place unacceptable restrictions upon the commercial management of the businesses. This would be damaging to both the organisations and their staff. The amendment might also rule out the separate privatisation of any division or region of the businesses if that was thought to be most appropriate.
To insist on a national network would, in the Government's view, prevent the businesses from evolving to take account of changes in the market and in the customer base already taking place. I have no doubt that both organisations will wish to compete, and compete vigorously, for business. But that does not mean that they should necessarily compete for business in every part of the country, or that they should maintain their existing pattern of offices. Such restrictions on their freedom of action could not be tolerated by commercial organisations, which must be free to decide where to establish premises and where to concentrate activities. The businesses which make up the PSA services and the Crown Suppliers have provided services to the public sector throughout the United Kingdom. I expect that their successors will wish to continue to do so. In our view, however, it would be wrong to impose on them a rigid framework. I hope, therefore, that the noble Lord will decide to withdraw the amendment.
Lord Graham of Edmonton: The words,
"it would be wrong to impose on them a rigid framework",
ring in my ears. It all depends on whether the "rigid framework" which the Minister is invited to impose is acceptable to us. We are most unhappy that at the end of the day we shall see a dissolution of what

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hitherto has been a proud and successful public service department. There is no doubting the fact that it is the Government's intention to dissolve this fine public servant and fine public service.
All the movements made, which have been presaged in this Bill and in statements, will mean that we shall cease to have access as of right in the public sector to the expertise, the knowledge and the intelligence which has been built up by so many good public servants over the years. It is a tragedy. However, it appears that the Government will not be moved. I shall take advice on the matter and may return to it at a later stage. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 3 agreed to.
Clause 4 [Winding up of Crown Suppliers trading fund]:
8.45 p.m.
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 28:
Page 3, line 36, leave out from ("to") end of line 37 and insert ("affirmative resolution of both Houses of Parliament").
The noble Lord said: The purpose of this amendment is, as is well understood by those who follow such matters, to ensure that Parliament has the Opportunity to consider the detail of what the Government propose. The amendment is necessary because of the extreme vagueness of the Government's plans and because of the particular nature of this privatisation.
There are two main arguments for the amendment. First, Clause 1 reveals that the Government have no clear idea about how the PSA and TCS will be privatised. They cannot say whether the PSA will be sold as one business or as several; indeed, the Minister has repeated that fact tonight. Further, they have no idea whether the PSA is saleable because they have no firm evidence. In my view, the privatisation is proposed to advance the ideology of the Government.
There has been no study commissioned to ascertain whether privatisation is feasible because the previous surveys and inquiries which were carried out turned out to be definintely against the thrust of the present legislation. Therefore it is right that Parliament is assured of an opportunity to consider the detail of the Government's plans.
Secondly, the Government have failed to give any firm assurance about the way in which staff interests will be protected. I exonerate the Minister from this, as I sense that he has a genuine understanding of the anxieties which I have raised. But we nevertheless believe that the detail for which I am asking in respect of such matters should be given to the Committee before we let the matter through. In effect, this amendment concerns the affirmative resolution procedure. I beg to move.
Lord Hesketh: As the noble Lord, Lord Graham, said, this concerns the affirmative resolution procedure. I am only sorry that my noble friend Lord Boyd-Carpenter is not present in the Chamber
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to rehearse the arguments, which he could do so much more lucidly than I, as to why we should not accept this amendment.
Members of the Committee will be aware that the purpose of Clause 4 is for the Secretary of State to wind up the Crown Suppliers' trading fund, including the power to write off any outstanding debt. The clause also refers to public dividend capital. TCS does not at present have any such capital and it is not proposed that any should be credited to the fund in the period remaining until privatisation.
NLF debt will not transfer from the trading fund to the TCS company. The proceeds of sale will, therefore, be applied to repay the debt. If the proceeds from the sale exceed the outstanding NLF debt, the balance will be surrendered to the Consolidated Fund. If however there is a shortfall, part of the NLF debt will have to be written off Subsection 1(a) allows for this. A key factor as to whether there will need to be debt write-off will be the treatment of Wellington House, whose value is considerably in excess of the outstanding debt. If the freehold of Wellington House is not sold with the business, it may be necessary for there to be some debt write-off. But the Government would then have retained the asset of Wellington House, so this would be an accounting adjustment.
Subsection (4), to which amendment 28 relates, proposes that an order under this clause would be subject to the negative resolution procedure. This amendment would change the procedure to an affirmative resolution of both Houses.
I have explained that the purpose of an order under Clause 4 would be perfectly straightforward, and I do not believe it would be right to burden your Lordships' House with it, unless, when the order is tabled, it is believed that it raises issues of principle. That is why the Government have proposed the negative resolution procedure. I invite your Lordships to confirm that approach and hope that the noble Lord, Lord Graham, will see fit to withdraw his amendment.
Lord Graham of Edmonton: As the noble Lord said, the noble Lord, Lord Boyd-Carpenter, is not in favour of the affirmative resolution procedure during the lifetime of this Government. We shall see what his views are in a little while when the Government changes. I am certain that he will see a great deal of merit in inviting the Government, if they have nothing to hide, to come before the House of their own volition.
I understand the powers of the negative resolution procedure; but simply to say to the Committee, "We are now satisfied that we have got it right and we want your approval" is unsatisfactory. I do not cast any aspersions on the Minister or his colleagues by using such a clumsy phrase as "anything to hide"; but it would be an assurance to those outside this Chamber whose livelihoods and communities are at stake if they were satisfied that when all the negotiations have taken place, when everything has been considered, the Government will come back and say, "These are the details, the nitty-gritty". But

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the Government are not willing to do that. I believe it is to their detriment, and it will make those outside this Chamber a little more uneasy.
In concluding the debate, the Minister has been very fair to the Committee and to me tonight. He has given a lot of information and at the next stage of the Bill I am certain that there will be some business to be done, but what it will be I am not in a position to say. I am grateful to the Minister for the way in which he has responded to my requests for information tonight. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 29 not moved]
Clause 4 agreed to.
Clause 5 [Expenses and receipts]:
[Amendment No. 30 not moved.]
Clause 5 agreed to.
Clause 6 [Short title and extent]:
[Amendment No. 31 not moved.]
Clause 6 agreed to.
Schedules agreed to.
House resumed: Bill reported without amendment.

Money Laundering Convictions
8.55 p.m.
Lord Harris of Greenwich Lord Harris of Greenwich rose to ask Her Majesty's Government whether Treasury Ministers propose to discuss with the Governor of the Bank of England the recent conviction of subsidiaries of the Bank of Credit and Commerce International on money laundering charges in the United States Federal Court in Florida.
The noble Lord said: My Lords, I think the House was looking forward to having the opportunity of listening to the one Treasury Minister who sits in this House replying to the debate. Indeed, this debate was arranged through the usual channels. Only earlier this evening I heard that the noble Earl, Lord Caithness, would not be here. I regret to say that he did not give me any explanation for that. It is extremely unfortunate, to put it no higher, that a Treasury Minister who has some responsibility for these matters is not in his place. What is even more surprising is that the noble Earl should not be here given the fact that when the matter was raised through oral Questions he—inadvertently, I am sure—seriously misled the House in his reply. The noble Earl has subsequently made no effort to correct the record; I find it even odder therefore that he is not here today to explain why it was that he misled the House on that occasion.
Perhaps I may now turn to the issue which is raised in the Question. I believe that it is a matter of some importance. It relates to money laundering by a bank which trades in the United Kingdom. The bank, the Bank of Credit and Commerce International, admitted in the Federal Court in Tampa, Florida, after plea-bargaining negotiations
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with the federal authorities, that two of its wholly owned subsidiaries had indeed been guilty of such offences. As a result the federal authorities confiscated 14-8 million dollars of the bank's assets, representing laundered money which had been passed through the bank's accounts.
The proceedings in the United States followed a long investigation by the US customs authorities in which the British customs played a part. We learn that as a result of an Answer to a parliamentary Question given by the Chancellor of the Exchequer in the House of Commons. I understand that what happened was that under-cover customs agents posing as money launderers were told at a meeting which was taped that there was an inner circle of highly placed officials inside the bank who could be trusted to carry out the business of laundering the proceeds of cocaine sales.
One of the more significant issues which arose in Florida related to the former dictator of Panama, General Noriega, who was said to have used that bank, together with others, to launder the millions of dollars paid to him by major drug traffickers.
The Assistant United States Attorney, who was prosecuting in the case, indicated that the authorities had tapes of many other meetings and telephone calls in Florida, Paris and London, recording no less than 18 separate conversations during which officials of the Bank of Credit and Commerce International openly discussed the laundering of drug money on behalf of the Medellin drug cartel.
The admissions made by the bank following that investigation, and made to the federal judge, could hardly have been more damaging to the bank's reputation. Here was the world's fifth largest private bank, an institution with 424 offices in 73 countries, pleading guilty to the gravest charges of impropriety levelled against any bank since the inception of the campaign in the United States against the international drug traffickers.
I turn now to the response of the British authorities to the situation. I accept at once and indeed welcome the steps that have been taken by the Government to deal with international money laundering. It is an issue which lies at the very heart of the struggle against the threat of the international cocaine and heroin barons.
I also welcome the publication last week of the report of the Financial Action Task Force which was established after the Group of Seven meeting in Paris. I believe that the Prime Minister put this matter correctly when she dealt with the threat that was posed to our society by drug smugglers at the world ministerial drugs conference in London on 9th April. She spoke of,
"the insidious threat to our way of life from drugs and from the evils they bring in their wake: disease, corruption, violence, crime, breaking up families and destroying young lives".
I believe that that in no way exaggerates the threat that is posed to the world community and to the United Kingdom in particular. This country faces an exceptionally serious situation, the gravity of which is still not appreciated by some of our fellow citizens.
I believe that a great deal has been done by the Government, the police, the customs and many

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others to deal with the threat. Unhappily, there is still not a great deal of evidence that we are succeeding. Tonight we are discussing one element of that threat; namely, money laundering and the conduct of one bank which operates in the United Kingdom.
Before I return to the conduct of that bank, I believe it is right to remind the House of what the Home Affairs Committee of the House of Commons had to say about the dimensions of the scale of money laundering in the United Kingdom. In its seventh report at paragraph 20 the committee stated:
"The National Drugs Intelligence Co-ordinator (NDIC) estimated that there is at least £1,800 million derived from drug trafficking in the United Kingdom. In its written memorandum, the NDIU noted that such vast amounts of money circulating within the legitimate banking system may have a destabilising effect on smaller financial institutions. The NDIC also indicated that, despite the Drug Trafficking Offences Act 1986, the United Kingdom continued to be a major centre for money laundering. Indeed, he said that the United Kingdom was 'regarded by the United States, Canada and some others as an offshore banking system' ".
I find that a most disturbing statement, coming as it does from the most senior police officer in this country who is responsible for dealing with the threat posed by the international drug traffickers. I fear that our problems are sometimes not made a great deal easier by the attitude of the Bank of England in this matter. Again I shall quote from the report of the Home Affairs Committee of the House of Commons. At paragraph 80 it states:
"The difficulties in securing convictions for money laundering offences raise the question of whether changes to the law are required. In the light of the dangers in Britain being perceived in North America as 'an offshore banking system' referred to by the NDIC, we asked the Bank of England and the Committee of London and Scottish Bankers how they believed the law against money laundering could be strengthened. We were extremely concerned that neither body, with their considerable combined expertise of the financial world, were able to propose any changes to the law in response to the scale of the threat facing the financial system. If bodies such as the Bank of England and the Committee of London and Scottish Bankers are as passive as appears to be the case in responding to the significant threat facing financial institutions from money laundering, the Government must take the initiative".
I find the relationship between the statement that I quoted from the national drugs intelligence co-ordinator and that judgment by the Home Affairs Committee of the House of Commons rather striking. I fear that it indicates a degree of complacency and a desire not to rock the boat which are worrying. I believe that such attitudes impede the work of those who are responsible for enforcing the criminal law and also those who have the responsibility of considering whether there should be changes in our criminal law. I must admit that that does not fill me with total unqualified confidence that the Bank of England is necessarily being sufficiently rigorous in dealing with the representatives of the Bank of Credit and Commerce International in London following the prosecution in Florida.
I accept at once that I may be being unfair to the Bank of England. That is certainly not my purpose, but the Bank can hardly be surprised that there is a suspicion abroad, not least in the United States, that it sometimes does not have a great deal of enthusiasm for firm action in matters of this kind, When I pressed the noble Earl, Lord Caithness, on
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19th March to tell us what action the Bank of England proposed to take concerning the BCCI following its conviction in Florida, he said, at col. 6 of Hansard, that,
"the confidentiality requirements of Part V of the Banking Act 1987 prevent the Government from commenting on a general point relating to the Bank of England".
A few moments later he told us that were he to do so he could face a term of two years' imprisonment or a fine. He added:
"Perhaps the noble Lord would like that, but I would not".
When challenged about the accuracy of the statement that he had just made to the House the noble Earl, Lord Caithness, said:
"Noble Lords opposite may be right, but that is my advice".
We are in a position to reassure the absent noble Earl. I have no desire, and I am sure that no other noble Lord has any desire, to cause him to be sent to prison. As we all know from recent experience the prisons are fairly crowded in any event. However, as I hope the noble Earl's advisers will by now have told him, no one can be prosecuted for anything which is said in this Chamber or that of the House of Commons—unless the Government propose to repeal the Bill of Rights. I assume that that is not part of their policy.
I hope that the absent noble Earl, freed from his fears about imprisonment, will be able to help the House rather more than he did on 19th March, through his representative the noble Lord, Lord Henley, who has had the misfortune to pick up his brief at a very late stage.
First, does the noble Lord representing the Government on this occasion agree that the Banking Act requires banks operating in this country to conduct their business in a prudent manner and with integrity? That, I believe, is a requirement of the statute. Secondly, does he agree that the Bank of England has to satisfy itself that owners and controllers are fit and proper persons?
Perhaps I may put this point. These are not matters, I can reassure the noble Lord, of confidentiality referred to in Part V of the Banking Act. The question is a simple one. Is the Bank of England satisfied that in relation to the BCCI the answer to both those questions is yes? Indeed, it would be astonishing were the answer to be anything other than an unqualified yes. Presumably, were it not, the Bank of England would already have taken some action.
Next, and this issue is referred to directly in the Question on the Order Paper before the House, has the Chancellor or any of his ministerial colleagues raised the issue of the operation of the BCCI in London with the Governor of the Bank of England following the bank's conviction in Florida? If, as we are told repeatedly, Ministers are prepared to take any action to drive the leaders of the drug industry out of business, is it conceivable that Ministers have not even bothered to mention the case—I repeat, the largest and most serious case to come before the federal courts in the United States in relation to money laundering offences—to the Governor of the Bank of England?
Of course the Governor is not a free and independent spirit. He is directly accountable to the

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Chancellor of the Exchequer for his actions. What many of us want to know is whether the matter has been raised with the Governor. I hope that tonight we shall receive a clear and unequivocal answer to that question.
I also hope that we shall not receive any further suggestions that this is not in any way a matter for Ministers. Quite apart from anything else, that does not have to be true. Under Section 80 of the Banking Act the Treasury may, after consulting the Bank of England, by regulation impose on overseas institutions such requirements as the Treasury may consider appropriate. The power could hardly be wider.
The debate this evening relates to a matter of high public importance. We are discussing a scandal. We are examining the conduct of a bank with considerable power and influence which has been convicted, through its subsidiaries, in the criminal courts of the United States of grave offences against the world community. We are asking Ministers to assure themselves and Parliament that all appropriate steps are being taken by the British regulatory authority —the Bank of England —to deal with this bank, operating as it does on a considerable scale in the United Kingdom.
Finally, I turn to the Prime Minister's speech on 9th April. She said this:
"The coming decade has been proclaimed as the United Nations decade against drug abuse. This must not be just a label or a slogan. It must represent our united will and determination to prosecute the campaign against drugs".
That statement represents our views. I hope that the noble Lord who is to reply on behalf of the Government will be able to demonstrate, not by rhetoric but by action, that it is also the will of the Chancellor of the Exchequer.
9.15 p.m.
Lord Bruce of Donington: My Lords, the House will be grateful to the noble Lord, Lord Harris of Grenwich, for having put down this Unstarred Question which, as he said, raises matters of considerable importance not only to the banking community but to the nation as a whole.
Like the noble Lord, I very much regret that the noble Earl, Lord Caithness, is unable to be with us this evening. As the noble Lord pointed out, this matter involves the Treasury itself by virtue of its position vis-à-vis the Bank of England where under Section 4 of the original Act it has powers to give general direction. It is not, at any rate as yet, an independent bank; it is the Government's bank and is answerable to the Government themselves.
Moreover, the Government, and particularly the Treasury, have another responsibility in relation to drug trafficking under the provisions of the Drug Trafficking Offences Act 1986 where they are responsible for the suitable deployment and actions of the Customs and Excise. There can be no doubt therefore as to the Government's involvement.
The noble Earl would have known that much wider questions concerning money laundering would be raised in the debate than just the recent case in
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the United States involving the Bank of Credit and Commerce International. He must have know that after a recent meeting of bankers belonging to the Group of Seven a task force was set up to investigate the question of money laundering. A copy of the report, which was published only on 18th April, came into my possession today, since when I have had an opportunity to examine it. The noble Lord, Lord Harris, does not err in the slightest when he points out the gravity of the question of money laundering in the international banking community.
This Unstarred Question raises the position of a particular bank, the Bank of Credit and Commerce International, whose headquarters are in Luxembourg but which operates out of Leadenhall Street. It employs 600 people and has 43 branches in the United Kingdom. I am not sure about the status of the Leadenhall establishment or its branches in relation to the Bank of England and regulations laid down under the Banking Act. It is one of those matters on which the noble Earl, Lord Caithness, could have been questioned. However, the question of the credibility of the bank has by inference been raised in the nature of the Question put down by the noble Lord, Lord Harris.
Here I wish to utter a word of caution. When the affairs of an institution or a named body are discussed, particularly within the privileges of Parliament, it is necessary that one proceeds with great caution before passing judgment on the ostensible conduct of the body concerned, which in this case is the BCCI. I have had the opportunity of examining at some length the press reports that have appeared in various reputable sections of the press, including the Financial Times, the Observer, the Economist and the Daily Telegraph, which have set out their accounts of what happened in Tampa, Florida, and have given, at any rate by inference, their judgment upon those events. I have been in Parliament long enough to know that just as trial by television is dangerous, so is trial by the press.
So far, for reasons that are unknown to me but are not necessarily disreputable, the Bank of Credit and Commerce International has not seen fit to rebut some of the more colourful accounts that have been given of the proceedings at Tampa and the attitude of the US authorities that have appeared in the press. However, I think it is true to say that in so far as BCCI was concerned, under the essential terms of the settlement arrived at in Tampa of some £14-5 million—I invite the House to take note of that figure in view of the figures that I shall give later—and under the terms of plea bargaining, which, mercifully, is so far unknown in the United Kingdom, all charges against the parent company, BCCI Holdings, and BCC's Colombian subsidiary, Banco de Credito y Comercio de Colombia, have been dismissed and all drug trafficking charges against the bank entities which were completely without foundation have also been dismissed. One does not gather that from reading the press reports.
Money laundering is a very complex operation and, believe it or not, it is very difficult to trace. The United States has adopted one measure—with or without success, I do not know—of insisting on the monitoring of every bank transaction in excess of

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10,000 dollars, which is checked through a vast computer network. But essentially money laundering is composed of three stages. First, there is the placement side of the transaction, which means collecting together, centrally or regionally, funds accumulated by the drug barons and main dealers, who then proceed to take it through a second stage which is called layering.
I appreciate that noble Lords are not involved in drug trafficking and therefore will not appreciate the significance of those terms. In essence layering means collecting together moneys of a different currency and distributing or changing that money widely over a series of bureaux de change where, as noble lords will know, currencies of all kinds can be obtained. For example, dollars can be taken into 1,000 or even 2,000 bureaux de change which can be found quite widely in the United States and elsewhere. One can then obtain pounds, Swiss francs, French francs, pesetas, escudos, marks or whatever. Those different currencies are collected together and one goes on to the next stage of money laundering, which s called integration. That means that the various lots of currencies gathered together can then be converted into either property or other assets with an appearance of legitimacy—or sometimes actual legitimacy—or else can be deposited in various banks in different currencies.
It is most difficult for any bank purely by the inspection of accounts—and the banks in the United Kingdom, including BCCI, have computer screens to check accounts—and a matter of some complexity, bearing in mind that these transactions are often accomplished with the speed of light, to determine whether a certain transaction in a particular type of currency is likely to be associated with drug money laundering. The problems facing any bank, let alone BCCI, are therefore considerable.
As I mentioned to your Lordships, the Government and the Bank of England took the very sensible step at the meeting of the G7 group of bankers of initiating a task force to investigate the question and to report in detail. I have not had the opportunity of reading the annexures to the report. I have read the entire report. However, I can tell noble Lords that the task force came to the conclusion that the total amount of money from drugs available for laundering amounted to 84 billion dollars, of which the amount under plea bargaining admitted by BCCI amounts, if my arithmetic is correct, to 0-00017 per cent. of the total available for laundering.
I accept immediately the assertion of the noble Lord, Lord Harris, that the problem is widespread. But in proportion, the amount—under plea bargaining, the somewhat unique conditions available in the United States, and with the political pressures available in the United States—is a very small amount of the total involved.
Much has been said about BCCI in the various journals that I have mentioned. I have no connection with BCCI. I know none of its directors. I do not bank there. I do not have even a credit card there or anything of that kind. However, since, if I may say so, it is part of my profession, I have looked
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through these documents with what I hope your Lordships may feel has been a professional eye. I have the accounts of BCCI for the year ended 31st December 1988, which were signed by Price Waterhouse as auditors on 11th April 1989.1 assume that presently a further set of accounts for 1989 will become available. I do not complain that they are likely to be issued slightly later than those for 1988. However, it is quite clear from those accounts that the bank has a very considerable gross turnover of some 2 billion dollars. It has assets of 20 billion dollars, of which the unusually high proportion of 47 per cent. of assets is liquid. It has total reserves of 1-5 billion dollars. It has increased very rapidly over the past four or five years.
From other sources—notably by perusal of Congress records—I have been able to find that BCCI was of considerable assistance to the former President of the United States, President Carter, in setting up a network of banks especially founded to enable the developing countries to conduct banking transactions with one another. That has been singularly successful. In spite of being one of the five large private banks to which the noble Lord quite correctly referred, BCCI has not been involved to any great extent in the disastrous third world indebtedness with all the problems that have arisen as a consequence. Those are problems that lie very heavily at the door of some banks that have so far not attracted any attention, and probably quite rightly so, in connection with drug money laundering.
We have a bank which, on the face of its balance sheet audited by a renowned British firm of chartered accountants and in the main founded with the approval of the former President of the United States, President Carter, who spoke highly of it, is caught up in a scandal involving 000017 per cent. of the estimated total of the world's drug money now being laundered. Indeed, it does not seek to escape the liability of its servants lower down the scale.
In answer to the noble Lord, Lord Harris, I suggest that it is proper that the Government should have conversations with those in the Bank of England about BCCI and the remainder of the money. According to United States authorities, a large proportion of that is swishing round in the British banking system; it is not in Tampa but in London. We should be grateful if, in the absence of his noble friend Lord Caithness, the Minister would indicate what conversations are taking place along those general lines.
At the Vienna Conference in 1988 the laundering of drug money was discussed. Approximately 80 nations signed the convention but before it can come into operation it must be ratified by 20 of the countries concerned. So far only four countries have done so, and I regret to say that they do not include the United Kingdom. The countries which have ratified the convention are China, the Bahamas, Nigeria and Senegal. I believe that if Her Majesty's Government wish to press forward with the recommendations set out in the Vienna Convention—which were fortified in the report of the task force set up by G7 —they would be wise to ratify it forthwith. They should come to the House

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with a full explanation of the reasons why they seek Parliament's approval for the ratification of the convention.
The Question tabled by the noble Lord, Lord Harris, for which my party is deeply grateful, raises questions which go far beyond the matter of BCCL They go into practically every nook and cranny of the banking system in the United Kingdom and in Europe. The House will wish to hear about the actions which the Government and the Bank of England propose to take in order to pursue the matter with greater resolution than has so far appeared. They must not be diverted from the essential and mammoth task—and it will be difficult to accomplish —by press reports of an action which took place in Tampa dealing, in my view unjustly, with one single bank and company.
9.34 p.m.
Lord Callaghan of Cardiff: My Lords, perhaps I may intervene briefly. The noble Lord, Lord Harris, raised an important Question about the dreadful activities relating to drug money and the way in which huge sums are laundered. However, perhaps I may say that my noble friend Lord Bruce of Donington hit the nail on the head when he spoke of the ease with which those transations can be laundered—if that is the word—and the difficulties of the banks in keeping up with what is happening in the millions of transactions which take place every day.
I am not at all sure that I would not be right if I said, quite apart from the particular bank mentioned in this Unstarred Question, that there are other people in the City of London and outside of it who are saying quietly to themselves, "There but for the grace of God go I" —not because of ill-will or malevolence but because of the very formidable difficulties which exist in that field. My noble friend Lord Bruce of Donington has outlined some of those.
The noble Lord, Lord Harris, said that he did not wish to be unfair to the Governor of the Bank of England. I hope also that he does not intend to be unfair to the Bank of Credit and Commerce International. Unlike my noble friend Lord Bruce, I happen to know the directors. I was introduced to them through President Carter at a dinner given for him in London some years ago. I was immediately impressed by the quality of the president of the bank. Unfortunately, a year ago he was struck down by a stroke and a heart attack and has been unable to operate since that time.
His philosophy is one which, if carried into his operations, I find wholly admirable, as I believe would the noble Lord, Lord Harris. In my capacity as a trustee of a very large charitable organisation into which I do not wish to go in any detail, I have been struck by the immense generosity of the leaders of the Bank of Credit and Commmerce International in that sphere. They have been so generous because of their philosophy and for no other reason.
When the noble Lord, Lord Harris, asks whether they are fit and proper people to take charge of this bank, I can only say to him and to your Lordships
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that from my knowledge of the president of the bank, of the chief executive and two others whom I know—and that is the limit of my knowledge of the bank—I have no hesitation in saying that in my judgment they are certainly people of the highest integrity and probity. I feel that I should put that on record from my knowledge of them.
I add that ha'porth as I am probably one of the few people in the Chamber who know them. As my noble friend Lord Bruce of Donington said, it is true that they are rather secretive. That is not only because this is a private bank but is also because of a different culture. In every sense it is an international bank—and I shall say a few words about that later—in a great many countries. I have no detailed knowledge of their operations and do not wish to know them. I only know them in a sideways manner because one talks about all sorts of things when one is discussing one's major interests. What struck me about their philosophy and approach, which was new, was that because of their culture they are not used to disclosing their innermost thoughts very clearly. That is perhaps a proper tradition in banking circles. However, I was struck by the fact that the purpose which they carried out was to finance trade between third world countries. That struck me as being a very desirable objective and one which should be encouraged. Also, perhaps I may say that that is of benefit to the City of London.
The noble Lord, Lord Harris, asked how the Bank of England is going to deal with this bank. I am not sure what he meant by that. However, I know how I should like to deal with it. This international bank does not really have a proper home. I should like to deal with the bank by bringing it under the close surveillance and supervision of the Bank of England. The noble Lord, Lord Harris, nods his head, so I assume that he does not disagree with me.
The alternative would be to drive it out of London, as I understand it has been driven out of Florida as a result of this conviction by a subsidiary of the bank. That would be wrong for a number of reasons.
To put it at its highest, it would be wrong because this very large bank, operating in so many countries, the trustee and holder of such tremendous funds, should not be driven from pillar to post. The assets of its customers are too important for that. It would be a very serious matter if that were to happen. The bank also brings considerable advantage to the City of London, if under proper supervision and control in the normal way.
I hope that Treasury Ministers will discuss this matter with the Governor of the Bank of England. I agree that there is no reason why a Chancellor of the Exchequer cannot raise any issue with the Governor of the Bank of England if he wishes to do so. I certainly used to talk about a great many things. I hope he will discuss this matter. I hope he will say that this is a very important bank which, in my judgment (and I can go no further than that), has very high standards. The people whom I know in the bank are men of propriety and integrity. We should like to see the bank brought properly under the control of the Bank of England in the same way

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as other banks which operate in the City of London. That would be the best solution.
That is all I wish to say. In some ways there has been a campaign against the bank, a political campaign in its broadest sense—not a party political campaign. It is a bank which is rather strange to the City of London. We all know that the City of London sometimes finds it difficult to absorb people who have a slightly different philosophy from the way in which the City operates. When they are accepted, they are embraced and become part of the family.
The purpose and philosophy of the bank are honourable, and those who are at the head of it are fit and proper people to control it. It should be brought within the embrace of the City of London. It could become a great strength without losing its international reputation and spread, which is perhaps wider than most of the banks that operate out of the City of London.
9.42 p.m.
The Parliamentary Under-Secretary of State, Department of Social Security (Lord Henley): My Lords, perhaps I may begin by apologising to the noble Lords, Lord Harris and Lord Bruce, for the absence of my noble friend the Paymaster General. As noble Lords are probably aware, he is at the ECOFIN Council today and, sadly, is unable to be here. I should stress, as my noble friends from these Benches stressed earlier, that all noble Lords speaking from the Dispatch Box speak on behalf of the Government. The fact that my noble friend is absent is not necessarily relevant.
I start by dealing with a point made by the noble Lord, Lord Harris. He implied that my noble friend the Paymaster General had misled the House. As a matter of policy Ministers always regard themselves as bound by the confidentiality of provisions of the banking Act and would not disclose information subject to those confidentiality restraints.
Lord Harris of Greenwich: My Lords, that does not deal with the point at all. The noble Earl told us that, were he to answer the question put to him, he may be subject to a term of imprisonment. He said it twice. Is the noble Lord apologising on behalf of the noble Earl for having inadvertently misled the House, or is he seriously suggesting that the noble Earl could have been sentenced to imprisonment for answering the questions put to him from these and other Benches?
Lord Henley: My Lords, I shall repeat what I said. As a matter of policy Ministers regard themselves as being bound by the confidentiality provisions. I shall certainly pass on the comments of the noble Lord, Lord Harris, to my noble friend. If he wishes to comment on them, no doubt he will.
Lord Harris of Greenwich: My Lords, the noble Lord is not doing himself justice. He has been asked specifically whether a Minister of the Crown, answering a question in this House, could lay himself open to criminal prosecution and imprisonment. Is the answer to that question yes or no?
Lord Henley: My Lords, I have already answered that question. I repeat the answer I gave. Ministers always feel themselves bound by the confidentiality provisions and it would be wrong to break that binding. As I said, I shall certainly pass on the remarks of the noble Lord to my noble friend the Paymaster General.
The noble Lord, Lord Harris, asks whether Treasury Ministers propose to discuss with the Governor of the Bank of England the Bank of Credit and Commerce International's recent acceptance of liability in connection with money laundering charges brought before the United States Federal Court in Florida. Before replying to this question I should like to make two general points about the statutory basis for banking supervision.
The first point concerns allocation of responsibilities. Under the Banking Act 1987, responsibility for the authorisation and supervision of banks is a matter for the Bank of England within a clear statutory framework defined in the Act and is not a matter for the Government. So, for example, it is for the Bank of England to decide whether a bank's directors, controllers and managers are "fit and proper", to use the words of the Act, and whether its business is "conducted in a prudent manner" and with "integrity and skill". It was a deliberate choice when the 1987 Act was drafted to impose these responsibilities clearly and unequivocally on the Bank of England; and rightly so. It follows that supervisory judgments and decisions affecting the UK operations of the Bank of Credit and Commerce International, in line with those affecting any other authorised institution, are for the Bank of England to take and the Government have no locus to intervene.
My second general point concerns confidentiality, which was referred to by the noble Lord, Lord Harris. As my noble friend the Paymaster General explained to the House on 19th March in reply to a Question from the noble Lord, there are strict confidentiality constraints on the disclosure by the Bank of England of supervisory information relating to individual institutions. The 1987 Act provides that with certain exceptions the Bank of England may not disclose or make public confidential information about an institution without that institution's consent; and there are provisions to the same effect in the European banking legislation.
Perhaps I might explain the importance of protecting the confidentiality of banking supervisory information. The Banking Act gives the Bank of England wide-ranging powers to demand highly sensitive commercial information from individual banks for supervisory purposes. It is only right and proper that that information is fully protected under the law. It is essential for the effective operation of the supervisory system, not least in order to encourage a climate in which people are willing to volunteer information and speak freely with the supervisors. Moreover, it allows any corrective action which may be needed to be taken in good order in the interests of safeguarding the interests of depositors, which noble Lords know is the primary purpose of the Act. It is difficult to think of circumstances where the interests of depositors were

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served by potentially destabilising publicity regarding an authorised institution.
However, as I have indicated, it has always been acknowledged that there must be exceptions in the interests of effective supervision. Therefore, the Act provides for the Bank of England to exchange confidential information with other supervisory authorities where necessary. It also allows the Bank of England to discuss supervisory issues with the Treasury in certain well-defined circumstances. Specifically, the Act does not preclude the disclosure by the Bank of England of information to the Treasury if disclosure appears to the Bank to be desirable or expedient in the interests of depositors or in the public interest.
Lord Bruce of Donington: My Lords, I take it that the noble Lord is aware of the provision in Section 4 of the Bank of England Act 1946 which was not in any way repealed by the Banking Act 1987. I quote from Section 4(1):
"The Treasury may from time to time give such directions to the Bank as, after consultation with the Governor of the Bank, they think necessary in the public interest".
Lord Henley: My Lords, I repeat what I said as regards the 1987 Act. As the noble Lord will know, it is later than the Act to which he referred. Specifically the Act does not preclude the disclosure by the Bank of England of information to the Treasury if disclosure—and here I accept that possibly I misread the word "preclude" and said something different—does not preclude the disclosure by the Bank of England of information to the Treasury if disclosure appears to the Bank to be desirable or expedient in the interests of the depositors or in the public interest. I thank the noble Lord for that correction. I suspect that it was misreading on my part.
The important points to recognise about the disclosure of supervisory information to the Treasury are that the powers are highly restrictive and that discretion on whether to disclose such information rests with the Bank of England. This is of course consistent with the fact that it is the Bank and not the Government that is responsible for supervising individual banks, as I have already explained. But in these circumstances the Treasury is bound by the same confidentiality restrictions as the Bank. I cannot discuss such information publicly, nor can my colleagues who are Treasury Ministers; and nor would noble Lords wish me to do so once they consider the implications fully.
None of this inhibits the Treasury from taking the initiative in approaching the Bank of England if there are issues of policy arising from the affairs of individual banks, either singly or collectively. Naturally the Treasury maintains close contacts with the Bank of England on any issue which has been a matter of parliamentary or public concern.
Against this background I now turn to the specific Question of the noble Lord, Lord Harris, about discussions between the Government and the Bank of England concerning the Bank of Credit and Commerce International. It is important to keep in
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mind that the trial —and noble Lords have referred to this—of a number of BCCI's employees in the United States continues. One employee in London is awaiting trial in September for an alleged offence under the Drug Trafficking Offences Act 1986, to which the noble Lord, Lord Bruce, referred. The matter is accordingly sub judice.
It should also be borne in mind that there are substantial differences between the United States law of vicarious corporate liability and the English law of corporate liability. In the United States, if an employee commits a crime in the course of his employment while exercising the authority, real or apparent, vested in him by a corporation and the criminal act was done, at least in part, to the benefit of the corporation, however small that benefit might be, the corporation is also guilty of the offence. It is not a defence for the corporation that the employee acted outside the policies of the corporation. The knowledge of individual employees acting within the scope of their employment may be imputed to the corporation. Under English law the employees would need to form part of the directing mind of the corporation in order for a charge to be brought against it.
I hope that in the light of this and the general points which I have made about the statutory position, the House will appreciate the constraints on what I have to say about the role of the Bank of England in the supervision of the BCCI.
Lord Callaghan of Cardiff: My Lords, will the noble Lord allow me to intervene? Am I correct in understanding what he is saying about United States law to mean that the president of the bank in London and the chief executives in London could be held to be guilty of an offence under United States law if any employee in Florida were to commit an offence against United States law of which they were entirely ignorant?
Lord Henley: Certainly, my Lords, the law is different in America. As I understand it—I do not know how much criminal law the noble Lords knows—in England for a criminal offence to be committed there has to be the mens rea, the guilty act.
Lord Callaghan of Cardiff: My Lords, the guilty mind. I thank the noble Lord; I do know that much.
Lord Henley: My Lords, yes, the guilty mind. Under American law, that mens rea can be imputed to the corporation merely by the act of the employee, although that employee is not what in England would be called part of the directing mind of the company. So in America there is a much stricter interpretation of what is the guilt implied or imputed, the guilty mind imputed to the company. I should not like to comment on the noble Lord's question about the English directors apropos America, but certainly there is a much tighter definition of corporate liability in America.
Lord Bruce of Donington: My Lords, I am grateful to the noble Lord for giving way. I should like to

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clarify the point raised by my noble friend Lord Callaghan. Is it not a fact that, despite the difference between American law and British law, which the noble Lord has perfectly adequately conveyed, in the American court BCCI was acquitted as a corporation of any offence?
Lord Henley: My Lords, I am not sure that the noble Lord is correct. My understanding is that in the case in Florida BCCI as a corporation pleaded guilty to some of the charges. Is that what the noble Lord is referring to?
Lord Bruce of Donington: My Lords, it pleaded guilty to the charges that were brought against its employees as such, but not as a corporate entity, as I understand it.
Lord Henley: My Lords, no doubt I shall have to write to the noble Lord. My understanding is that it pleaded quilty as a corporation and as such accepted its criminal responsibility. The case would be different in England, but obviously I cannot comment on specific cases. There is a difference between English law and American law on the liability of corporations.
Perhaps I should explain something of the structure of the group. The holding company and one of the two main banking subsidiaries of the BCC group are incorporated in Luxembourg and the latter's banking activities are subject to the supervision of the authorities there. The other main banking subsidiary is incorporated in the Cayman Islands and is the responsibility of the local supervisory authority. The United Kingdom banking activies of the Luxembourg-incorporated bank are supervised by the Bank of England. Overall supervision of the group is carried out by a college of supervisors, with representatives from a number of countries in which the group has operations. Nevertheless—and here I come to the noble Lord's actual Question—I can say that Treasury officials have been in touch with the Bank of England to emphasise to it the degree of public concern about the case, not least that expressed by noble Lords, and to ask it to take full account of the concern in its continued supervision of BCCI. The Bank of England has confirmed that it is doing this and will continue to do so.
I should like to turn to the broader question of action against drug money laundering. I am glad that the noble Lord, Lord Harris, welcomes the Government's action in this field. The Government treat the threat of drug money laundering as a matter of serious concern and have already introduced a number of significant measures to address it. Internationally, the United Kingdom is playing a leading role in taking measures against money laundering and we have been very active in developing international co-operation. The Drug Trafficking Offences Act 1986 created a drug money laundering offence—assisting another to obtain the
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benefit of drug trafficking—subject to strict penalties, strengthened the powers of enforcement agencies and provided for financial institutions to report suspicious transactions to Customs and police officers.
More recently we have brought forward measures which will further strengthen these powers by enabling the United Kingdom to ratify the United Nations Convention—the Vienna Convention to which the noble Lord referred—on Illicit Traffic in Narcotic Drugs and Psychotropic Substances of December 1988. We are also providing for Customs officers and the police to detain cash at the border where they have reasonable grounds to suspect that it is connected with drug trafficking.
Internationally, a high level of co-operation already exists between enforcement authorities in the United Kingdom and other countries. The United Kingdom participated fully in the Financial Action Task Force which was established with representatives from 15 major countries following the Paris Economic Summit last July to recommend improvements to measures against money laundering. The task force has completed its report, which was published, as the noble Lord said, on 19th April. The Government have endorsed its recommendations. Our priority now is to implement the recommendations and press other participating countries to do likewise. The United Kingdom has also concluded bilateral agreements or arrangements with 13 countries to trace, freeze and confiscate the proceeds of drug trafficking. An Order in Council to implement those agreements has been laid before Parliament. Further such agreements are currently under negotiation.
However, action is not confined to the Government alone. The Bank of England has acted to remind banking institutions of their duties under statute and their responsibility to adopt policies to deter money laundering. It has indicated that it expects banks to adhere to the principles of the Basle statement on money laundering which has been endorsed by the governors of central banks in G10 countries. It has also made clear that failure to install or maintain adequate systems to cope with money laundering will be taken into account in its consideration of whether an institution continues to meet the criteria for authorisation.
Following on from this, the Bank has decided that it is appropriate to commission reports on this specific aspect of systems and control under Section 39(1)(b) of the Banking Act—that is, using reporting accountants—from authorised institutions in the 1990 round. Parallel action has been taken by the Building Societies Commission in respect of building societies which have identical repsonsibilities under the Drug Trafficking Offences Act.
Together with the government departments involved, the Bank of England played an active role in the work of the task force and has subsequently been instrumental in setting up and chairing a joint working group of banks, building societies and law

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enforcement agencies to implement the task force's recommendations as they affect deposit-taking financial institutions.
In the light of these remarks, I hope that noble Lords will acknowledge the seriousness with which the Government and the Bank of England view the problem of money laundering and the firm action which we are taking to curb it.

Smith Kline & French Laboratories, Australia and Menley & James, Australia Bill [H.L.]
Committed to an Unopposed Bill Committee.
House adjourned at two minutes past ten o'clock.