Lords Sitting of 18 January 1993

Preamble
Reassembling after the Christmas Recess, the House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Chichester.

Channel Tunnel: Anti-Rabies Measures
Lord Boyd-Carpenter Lord Boyd-Carpenter asked Her Majesty's Government:
What action they are taking to prevent the introduction of rabies into the United Kingdom through the Channel Tunnel.
The Minister of State, Department of Transport (The Earl of Caithness): My Lords, animal health controls at the Channel Tunnel and its terminals are and will be just as strict as those presently in force at the sea ports and airports. In addition, the Channel Tunnel concessionaires have established a number of preventative measures to stop wild animals straying into the tunnel, and more will be put in place once the tunnel is operational.
Lord Boyd-Carpenter: My Lords, I thank my noble friend for that Answer, but is he aware of the fact that, by providing open physical access, the tunnel is in a different position from those points of entry where there is access by sea or air? Are Her Majesty's Government conscious of that difference and of the need, therefore, to take far greater precautions at the entrance to the tunnel than at other points of entry into this country?
The Earl of Caithness: My Lords, it is for that very reason that we are taking additional measures. There will be three lines of defence: there will be a main perimeter fence, a secure boundary, and an electric system all the way round the interior of the tunnel to try to prevent animals entering. There will also be baited traps throughout the tunnel system.
Lord Clinton-Davis: My Lords, I am sure that the Minister will view with approbation the fact that the House would welcome the strongest possible measures. The three lines of defence seem to be encouraging. I only hope that they will not trap any human beings. However, can the Minister say whether there is to be any removal of the requirement in respect of quarantine for domestic dogs? I understand that the Government have said that that matter is under consideration. Is it still under consideration and, if so, when can we expect a response?
The Earl of Caithness: My Lords, that is an important point. I can assure the House that quarantine remains where there is any risk of importing disease.
Lord Beloff: My Lords, does my noble friend agree that there is at least an equal, if not a greater, danger
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from boozy day-trippers to Calais bringing back domestic pets now that apparently there are no controls whatever at the ports?
The Earl of Caithness: My Lords, there will he plenty of control at the ports—whether they be sea ports, airports, or the Channel Tunnel ports. I am sure that my noble friend recognises that if people wish to take their pets abroad—and I hope that they do not bring them back the same day—they are able to do that at the moment.

NACAB Report: Consumer Credit
2.40 p.m.
Lord Ashley of Stoke Lord Ashley of Stoke asked Her Majesty's Government:
Whether they will discuss with the National Association of Citizens Advice Bureaux the practices of the credit industry following the publication of its report on the problems of 1,782,000 of their clients who sought advice on consumer and debt matters in the year ending April 1992.
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Baroness Denton of Wakefield): My Lords, I shall be pleased to discuss this matter with the National Association of Citizens Advice Bureaux if it wishes to do so.
Lord Ashley of Stoke: My Lords, although I welcome the Minister's Answer, is she aware that this report reveals the extent to which very poor people are cruelly exploited by extortionate rates of interest while trying to cope with very low and inadequate incomes? In one case mentioned in the report the rate of interest was 972 per cent. As a result, people slide from poverty into penury. When the Minister has these discussions, will she suggest that action is taken against the sort of pressure that is exerted by some of the banks and against some of the very unfair practices that exist?
Baroness Denton of Wakefield: My Lords, I agree with the noble Lord that it is the people at the bottom of the income scale who suffer most from this problem. The Consumer Credit Act contains provisions to allow the courts to reopen extortionate credit bargains. In producing his report, the Director General of Fair Trading emphasised that it was important that we publicise that fact as much as possible.
Lord Ennals: My Lords, does the Minister accept that an increasing number of people are using credit as a sort of sticking plaster for quite inadequate benefits? Is she satisfied that the Consumer Credit Act really does give the sort of protection that is needed for some of these people who seem to me not to be protected? Will she raise this issue when she meets the National Association of Citizens Advice Bureaux?
Baroness Denton of Wakefield: My Lords, I am pleased to reassure the noble Lord that I shall, of course, cover those subjects. I quote from the report of the Director General of Fair Trading. He said:
"Most credit for most consumers most of the time causes no problems".
It is multiple debt that causes problems. Perhaps I should add that the 1.8 million cases referred to in the NACAB report are inquiries. The Policy Studies Institute has shown that half a million households have three or more debts. Those are the ones that we should be looking at.
Lord Bruce of Donington: My Lords, will the Government give some consideration to the possible re-enactment of the main provisions of the Moneylenders Act 1927, the repeal of which by the Consumer Credit Act left some very considerable gaps? Is the Minister aware that in the pre-war years the provisions of, in particular, Section 6 of the Moneylenders Act 1927, which are not currently in force today, proved a considerable check against illicit credit, undue pressure and all the evils that come from unrestricted money lending?
Baroness Denton of Wakefield: My Lords, I repeat that most credit does not cause problems; 85 per cent. of credit relates to mortgages. However, I agree with the noble Lord that there is work to do on the Consumer Credit Act. As soon legislative time is available we will do it.
Lord Mishcon: My Lords, when the Minister sees representatives of the National Association of Citizens Advice Bureaux will she take the opportunity to express the admiration of the House for the work that they do? Will she also say how generous the Government will be in their grants to the organisation?
Baroness Denton of Wakefield: My Lords, I welcome any opportunity to praise the work of the citizens advice bureaux. They provide help which would be sadly missed if they did not exist. Obviously I cannot prophesy future income, but in the past we have managed to ensure real-term growth in their income.
Lord Peston: My Lords, I thank the Minister for saying that she is willing to see representatives of the CAB. But does she agree that, although the problems involve a minority of borrowers, that is the characteristic of problems generally in our society? It is always the minority about which we are worried; but that does not make the situation less important. If anything, it makes it more important. The Consumer Credit Act goes back to 1974. It was drafted well ahead of the great boom in borrowing that took place in the 1980s. Do I understand her to say that she and her department are at least open to considering possible reform of or amendment to that Act when legislative time can be found?
Baroness Denton of Wakefield: My Lords, yes.

Social Security Fraud
2.45 p.m.
Lord Benson Lord Benson asked Her Majesty's Government:
In the light of the announcement by the Secretary of State for Social Security on 9th December 1992 that he expected to save about £1 billion next year by the elimination of fraud, for how many years has fraud on this scale existed.
The Parliamentary Under-Secretary of State, Department of Social Security (Lord Henley): My Lords, fraud appears to have been increasing in recent years. Benefit savings achieved by our fraud investigators have trebled over the past six years. We hope to reach a target of £460 million in the current year. We believe total fraud to be still higher which is why we have a new target of savings of £1 billion for 1993–94.
Lord Benson: My Lords, does the Minister agree that the individuals in the DSS who have acquiesced in that enormous misuse of public funds should now be identified and prevented from holding office under the Government in future?
Lord Henley: My Lords, I do not accept what the noble Lord has to say. What I am trying to make clear is that we place a very high priority on the detection of fraud, the deterrence of fraud, the recovery of overpayment of fraudulently paid money and prosecution where it is relevant. It is very, very difficult ever to estimate the extent of fraud within the social security system. While we place a high priority on deterring it and detecting it, we also wish to administer the benefits system in the best manner possible to make it accessible to all those legitimately entitled to their benefits.
Baroness Faithfull: My Lords, I agree with the noble Lord, Lord Benson, about fraud. Is my noble friend sure that social security offices are staffed adequately, with people adequately trained to do the job?
Lord Henley: My Lords, yes. We had some 2,853 people in the year 1991–92 employed on fraud work in our local offices up and down the country. We certainly intend to offer more specialist training to those fraud staff and greater training to people, for example, within the Post Office who help to administer benefits on our behalf. We hope by that means to increase quite dramatically the amount of money to be recovered.
Baroness Hollis of Heigham: My Lords, none of us condones fraud. But following what the Minister has just said, the number of people prosecuted last year for DSS fraud fell by almost a half. We all know that the social security legislation is complex and that both benefits staff and claimants make innocent mistakes. How much of last year's putative savings of £427 million were due to the recovery of payments made as a result of innocent error as opposed to overpayments made as a result of fraud? Secondly, does he agree that the latest government figures suggest that in 1988–89

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some £1.6 billion of benefit money went unclaimed? In the light of that, while the Minister rightly pursues those who claim what they are not entitled to, will he pursue with equal vigour those who do not claim that to which they are entitled?
Lord Henley: My Lords, the take-up of benefits is entirely another question. In passing, I should point out to the noble Baroness that £9 out of £10 gets through to individual claimants. We certainly intend, as I said earlier, to deal with fraud as an important priority. We intend to see that taxpayers' money goes to the right people. We intend to ensure that benefit gets to the appropriate claimants. As I said, £9 out of £10 already does.
The noble Baroness asked how much of the £427 million was money actually recovered. I am afraid that we do not have figures on the amount of money recovered, but we intend, as I said earlier, to continue to pursue fraud with the utmost vigour. We think that we have enough staff to do that.
Baroness Hollis of Heigham: My Lords, will the Minister amplify his answer? How much of the £427 million recovered was money obtained by fraud as opposed to overpayments made as a result of innocent errors by staff and claimants?
Lord Henley: My Lords, all that money is fraud. We do not give separate figures for money recovered. I cannot give separate figures showing whether money is fraudulently overpaid, innocently overpaid or the result of official error. The £427 million is largely a notional figure produced as a result of multiplying the weekly benefit savings identified by the number of weeks it is estimated that people would have been overpaid.
Baroness Hollis of Heigham: My Lords, does the Minister accept that of that £427 million he cannot tell how much relates to fraud and how much relates to honest mistakes?
Lord Henley: My Lords, all that figure relates to fraud. I am not giving a figure for the recovery of moneys which were overpaid as a result of official error or an innocent error by the individual concerned.
Lord Stoddart of Swindon: My Lords, bearing in mind that it is estimated that more than £4 billion is lost as a result of tax evasion, will the Minister assure the House that the Government will also pursue tax evaders with the utmost vigour?
Lord Henley: My Lords, the noble Lord will accept that that is a totally different question and one to which he knows the answer. Clearly the Government pursue those who evade taxes in the same way as they pursue those who try to gain benefits fraudulently.

Regimental Bands
2.50 p.m.
Lord Vivian Lord Vivian asked Her Majesty's Government:
Whether they will ensure the future of regimental bands in view of unit medical cover currently provided by regimental bandsmen.
The Parliamentary Under-Secretary of State, Ministry of Defence (Viscount Cranborne): My Lords, the future structure of bands in the Army is at present under review. A number of options are being considered but it would be wrong for me to anticipate the outcome.
Lord Vivian: My Lords, I thank my noble friend for that Answer. Does he agree that the Government are fully committed to the preservation of the regimental system; and would not the removal of regimental bands indicate that they are changing their present policy? Secondly, does my noble friend agree that the abolition of regimental bands will mean that a number of trained soldiers will be denied valuable field training experience because, when regiments leave their barracks in order to train, those trained soldiers will have to stay behind to carry out barrack security duties currently undertaken by regimental bandsmen?
Viscount Cranborne: My Lords, I am delighted to give my noble friend the assurance about the regimental system which he seeks. All Ministers in the Ministry of Defence and members of the Army Board have repeatedly given that assurance. It gives me great pleasure to give a similar assurance to my noble friend today. Furthermore, I can reassure him that the review process will take full account of the additional duties undertaken by bandsmen; for instance, medical and security tasks and how they can be fulfilled in the most cost-effective way. My noble friend may agree that it would be unwise of me to anticipate the results of the review and answer a hypothetical question.
Lord Hailsham of Saint Marylebone: My Lords, will my noble friend confirm that when the regiments in question are engaged in operational duties it is still Army practice to look to the personnel of the regimental bands for stretcher bearers?
Viscount Cranborne: My Lords, my noble and learned friend knows that in wartime bandsmen have a task as medical orderlies and that that task is still part of their duties. However, I must point out that that task is not fulfilled during the course of their duty in Northern Ireland.
Lord Trefgarne: My Lords, will the review to which my noble friend referred include examination of the arrangements for training military bandsmen, in particular the three training establishments where that takes place, no doubt using a considerable amount of scarce resources?
Viscount Cranborne: My Lords, I thank my noble friend for his question, conscious as I am of his considerable knowledge and experience of these matters. Yes, indeed, the future of the training schools

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is being kept under active review and will form part of the review to which I have referred. I can only repeat that no decision has yet been taken.
Lord Donaldson of Kingsbridge: My Lords, will the Minister confirm my memory that the Government spend more money on regimental bands than, through the Arts Council or in any other way, on any other form of music?
Viscount Cranborne: My Lords, I am ashamed to admit to your Lordships that I have not yet indulged in making comparisons with my right honourable friend the Secretary of State for National Heritage in respect of how much he spends on music. The approximate cost of Army bands for this year, including capitation, is anticipated to be £50 million. I must point out that that considerable amount of money has to be examined in the light of the reduction in the overall military forces. As many of your Lordships have pointed out, manpower is a continuing issue which we keep under review. We are well aware of the importance of ensuring that we have adequate numbers of operational soldiers over and above bandsmen.
Lord Grimond: My Lords, I greatly admire military bands, but does the Minister not agree that the fact that they provide stretcher bearers is a slightly eccentric reason for keeping them?
Viscount Cranborne: My Lords, no doubt the noble Lord is a better judge than I of the eccentricity of others. The review is couched in less subjective terms than he suggests. The results will be entirely pragmatic and will attempt to take account not only of the future of Army manpower as a whole but of the most cost-effective way of maintaining the morale which bands undoubtedly provide to the military man during the execution of his duties.
Lord Williams of Elvel: My Lords, will the Minister confirm that the five bands of the Foot Guards and the mounted band of the Household Cavalry are not threatened by the proposals because they constitute state bands which perform public duties? If that is the case, does it mean that all other regimental bands are not state bands?
Viscount Cranborne: My Lords, I am constantly astonished by the remarkable authority with which the noble Lord informs your Lordships of the true state of affairs in my department. He and other noble Lords will not expect me to anticipate the results of the review today. However, I give an undertaking to your Lordships' House that as soon as a decision is taken I shall make an announcement in an appropriate form.
Viscount Allenby of Megiddo: My Lords, will the Minister assure the House that in the review to which he has referred there is no intention of reducing the number of territorial and other reserve force bands which play such an important part in recruitment to
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those forces? They often supplement the bands of the regular forces and it is important that that should continue.
Viscount Cranborne: My Lords, I confirm that the present review does not count within its remit the status of Territorial Army bands. As far as my department is concerned their status will remain the same for the foreseeable future.
Lord Mackie of Benshie: My Lords, did the Minister's answer to the noble Lord, Lord Williams, mean that the noble Lord was correct in saying that the Household Cavalry band and the band of the Foot Guards will not be subject to review?
Viscount Cranborne: My Lords, I apologise for not having made my reply clear. However, much as the noble Lord tries, I hope that I shall be able to withstand his blandishments and ask him, as I asked the noble Lord, Lord Williams, to wait until the completion of the review to hear my announcement.

Business
2.59 p.m.
Lord Hesketh: My Lords, at a convenient moment after 3.30 p.m. my noble friend Lord Cranborne will, with the leave of the House, repeat a Statement that is to be made in another place on Iraq.

Asylum and Immigration Appeals Bill
Brought from the Commons on Wednesday last and printed pursuant to Standing Order 48; read a first time.

Agriculture Bill [H.L.]
The Parliamentary Secretary, Ministry of Agriculture, Fisheries and Food (Earl Howe): My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That the amendments for the Report stage be marshalled and considered in the following order—

Clauses 1 to 3,

Schedule 1,

Clauses 4 to 11,

Schedule 2,

Clauses 12 to 25,

Schedule 3,

Clauses 26 to 32,

Schedule 4,

Clauses 33 to 55,

Schedule 5,

Clause 56.—(Earl Howe.)

On Question, Motion agreed to.

British Coal and British Rail (Transfer Proposals) Bill
3.1 p.m.
Read a third time.
Clause 1 [Power to act in relation to proposals for transfer of functions, property etc.]:
Lord Donoughue Lord Donoughue moved Amendment No. 1:
Page 1, line 10, after ("include") insert ("providing subsection (1B) below has been satisfied").
The noble Lord said: My Lords, for the convenience of the House, in moving this amendment I shall speak also to Amendment No. 5.
This is the only amendment which we move on the coal aspect of the Bill. However, it absorbs new and important developments which have taken place since Committee stage. Therefore I trust that the House will allow me to explain in a little detail why the amendment is proposed and what it seeks to achieve.
The amendment seeks to ensure that in future decisions on the destiny of the British coal industry observe two procedural aspects: to proceed with due consultation with the relevant parties according to agreed procedures; and to proceed with independent scrutiny of the facts, the figures and analysis in the decision-making. That approach is not new; we have pressed consistently for that on this side of the House. In the big debate on 19th October our Motion specifically called for such independence of review. The House voted to agree that Motion by a comfortable majority with support from all sides, including government supporters. In Committee I moved amendments raising those issues, especially relating to due consultation.
Throughout that time the Government have resisted such pressures. They refused to set up a formal independent inquiry into the coal industry and I shall say more on that later. They instituted an internal review but not a proper independent inquiry which this House demanded. They rejected criticisms that the DTI and British Coal had ignored and breached the laws in agreed procedures relating to due consultation on pit closures. I argued that in Committee and it was rejected.
There has recently been a most important development. The courts, represented by Lord Justice Glidewell and Mr. Justice Hidden, announced their judicial verdict since we went into Recess and since the Committee stage. That verdict was given in the Recess and was entangled in the Christmas diversions and it may be that some noble Lords did not have the opportunity to study it. Certainly this is the first time that this House has had a chance to consider that judgment.
It was a devastating judgment. I cannot recall a time when a government department, a Secretary of State and a public corporation were judged to be so wrong doing. The judgment also supports our case as previously put, and as put in this amendment.
For the assistance of the House, I shall summarise briefly the judgment of 21st December of Lord Justice Glidewell and Mr. Justice Hidden. It concluded that the decisions of the Secretary of State for trade and
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British Coal—namely, on 13th October to close 31 collieries and on 19th October to close 10 and to review the other 31—were unlawful, and that the Secretary of State was ultra vires in his actions and decisions. The judgment stated that the decision was made without any consultation with the unions and so was in breach of Section 99 of the Employment Protection Act 1975, now Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992. The decision seemed also to be in breach of Article 2 of 1975 Directive No. 75 of the European Council.
It states that the Secretary of State and British Coal deprived the trade unions and workforce of a legitimate expectation that the modified colliery review procedure would be followed and also that the decision to close the 10 pits without any independent scrutiny was "irrational". The court concluded also that British Coal and the Secretary of State should not reach a final decision on closures until, first, the review procedure had been completed; and, secondly:
"some form of independent scrutiny had been followed in relation to each of the collieries".
The judgment states that the court is very anxious about what happens now. It ruled that:
"What is needed is the rapid addition of some independent scrutiny".
I repeat, "some independent scrutiny". The court had in its possession knowledge of the actions which the Government had taken and clearly did not consider them to be sufficiently independent. Lord Justice Glidewell concluded that the decisions of 13th and 19th October were quashed.
What an incredible indictment and what a humiliation that is for the Government, the department and British Coal! The Secretary of State and British Coal were deemed by distinguished judges to have acted, "unlawfully," "ultra vires" and, "irrationally". The judgment states categorically that the Government joined with British Coal in flagrantly breaching British law, a European directive and the coal industry's long-established consultative process.
I wonder how noble Lords on all Benches feel about that. I am sure that everyone will agree that it is not a matter of pride. I have no recollection of such a powerful judicial condemnation of any government and their advisers.
My Lords, what do we conclude? I believe that we are perfectly justified in concluding, first, that in the area of consultation, which is the first area mentioned in the amendment, the Government and British Coal cannot be sufficiently trusted to obey the law or follow agreed industry procedures. Those rights and obligations in relation to consultation must be guaranteed and entrenched. In my view I should add that that will relate to safety as well as to closures because there are further signs in British Coal's submission to the coal review that it proposes to alter safety standards but it has not consulted the unions on that. That is what this amendment seeks to achieve and I do not see how the Government, given their record, recent history and the court's judgment, can resist that.
The Minister may argue that since November the consultative procedures have been followed in relation

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to closures. I must advise the House to view that with scepticism. Since the court's judgment quashing the decisions, there are no valid closure decisions in existence on which to consult. The Government and British Coal have been found guilty of abusing the consultative process and cannot be trusted to use it properly in the future. Those processes are not being properly followed now. The amendment seeks to correct that situation in future in relation to the coal industry by entrenching and guaranteeing the proper conduct of due consultative procedures. That is consultation.
The second aspect of our amendment concerns independent scrutiny. The court judgment pronounced that what was needed was,
"the rapid addition of some independent scrutiny."
The House, and much outside opinion, has also called for that, and this amendment seeks to address that factor.
The Government have admittedly—and we always attempt to be fair when we can—made some gestures in this direction. I should like briefly to explain why we think that they are not enough. The first gesture—it is really more than a gesture because we welcomed it—is the Government's own review of the coal industry. That is welcome because it has opened up the energy debate. But it is not an independent review. It is an internal review, and the Government have chosen to ignore the vote in this House calling for an independent review.
The Secretary of State has repeatedly stated in the past that he finds the arguments for closures compelling. He has not, to my knowledge, retracted that. The Prime Minister said the same on television, and to my knowledge he has not retracted that. The official advisers within the department are still the same people who drafted electricity privatisation in such a way that the market was structured, tilted, to exclude coal. They have prejudged the issue. We have no evidence that they have changed their minds, and there has been no White Paper so far.
Two Select Committees in another place are due to report—the Trade and Industry Committee and the Employment Committee. We welcome that and look forward to those reports. They are independent, although of course they contain government supporters. However, they are not permanently reviewing the future of the coal industry in the way that we believe is required; nor are the Government committed to accepting their conclusions.
Here I should like to say a few words about Boyds, the American consultants. We have heard that the company was appointed as consultants in response to the court's view that an independent scrutiny was required. The Secretary of State and the Department announced that, in response to the court's judgment, they were appointing Boyds to report on the closure of the 10 doomed pits. Since then we have also read that that decision has been retracted; that it has not been appointed. It would be helpful if the Minister would clarify the position on the appointment of Boyds. Has that company been appointed in response to the court's request for independent scrutiny, or has there
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been another U-turn? It was appointed and then dismissed, or was it never appointed at all? The attempt to appoint Boyds, whether or not it still holds, is significant because it demonstrates that the Government do not yet understand or accept the concept of independent scrutiny as has been put forward here and supported by the court. Boyds is not independent; it is closely associated with the earlier policies that led to the closure decision.
I should like to restate what the judge said. He said that it is for British Coal and the unions to decide how such an independent scrutiny should be conducted. He said that not only should there be an independent scrutiny—and we have stated that Boyds is not independent—but he stated explicitly that the unions should be involved in that decision. The unions were not consulted on who should do it and how the independent scrutiny would be conducted before that announcement. So there was yet another arbitrary, one-sided decision to appoint Boyds as the independent scrutiny. That was in breach of the industry's consultation obligations, in defiance of the court's decision, and in defiance of the decision that it should be done jointly with the unions.
We have neither due consultation nor sufficient independent scrutiny. Those are two crucial factors necessary for future decision-making in the coal industry, and which have been called for by the court, by those who work in the industry, by most independent outside commentators, and by many in this House. This amendment seeks to provide just that, and to provide it on a consensual basis by agreement among all interested parties to secure an agreed future for this industry. It is a necessary protection against the kind of arbitrary, doctrinaire, ill-considered and lack of consultative decision-making from which the industry has recently suffered. The amendment seeks to ensure that such decision-making will be based on an objective and fair analysis of the facts and is figures, and is taken within the rational framework of a coherent energy strategy.
That is what the British coal industry needs and deserves but has not recently experienced: independent scrutiny, coherent analysis, due consultation, and decisions within the law of the land. I trust that the Minister will accept that as being in everyone's interest. I also trust that we will not just have nit-picking on the mere words of the amendment. I hope it will be accepted that the basic principles of independence and consultation will be incorporated in the Bill. I beg to move.
3.15 p.m.
Lord Ezra: My Lords, I should like to support the amendment moved by the noble Lord, Lord Donoughue, for a number of reasons. First, he was right to draw our attention to the important developments that took place while this House was in Recess and to the judgment of the court on 21st December. This immediately followed events that took place on 13th October when the Government's original announcement was made and then the amended announcement on 19th October. It is right

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therefore that this opportunity should be seized to emphasise the fundamental issues raised in that judgment.
Let me deal first with the consultative procedure. One of the most important traditions established since the enactment of the Coal Industry Act 1946 was the progressive development of consultation, particularly with regard to the key, very human and often emotional issue of colliery closures. During the time that I was in the Coal Board we took immense pains in preparing the case, with technical assessment of the remaining reserves and of the difficulties in mining those reserves if we were of that opinion. I can remember, when particularly difficult closures were being considered, that presentations were made by a team to the full board before they went down to the colliery to make the presentation. On some occasions we invited Members of Parliament from the various parties to come so that they could also be apprised of the issues involved, and the reasons that had led us, as managers trying to do what was in the best interests of the industry, to our conclusions.
That was an important tradition, established over many years. The saddest part of the most recent developments was the Government's announcement about the closures on 13th October, which seemed to set aside entirely this great tradition of consultation. Therefore, at the very least we need to be reassured that that will be restored, that from now on no pits will be closed without the full consultative procedures taking place, and indeed that that will be the procedure to be adopted whoever might end up owning these pits. We also have to think about the future. That can be put down as a condition in the licence to mine the coal from the pits that may or may not be sold to other parties.
As to the independent review procedure on which the noble Lord, Lord Donoughue, also laid emphasis, the House barely needs to be reminded that a majority of your Lordships were in favour of such an independent review and independent approach. I believe that the views then expressed by a majority, and carried by a majority vote, should be endorsed by the procedures to be adopted from now on.
A great difficulty has been created by what happened on 13th October. The concern of all of us in the House must surely be to find a fair and reasonable way out of that difficulty. I believe that the amendment so ably moved by the noble Lord, Lord Donoughue, presents a way of dealing with one of the most important aspects of that difficulty.
Lord Clinton-Davis: My Lords, I wish to raise two quite separate points which were not raised by my noble friend Lord Donoughue in his absolutely brilliant introductory speech. The first relates to coal and the second to the relationship between coal and rail. As far as I understand the position, British Coal has complained that coal imported from non-European Community countries amounts to dumping in a number of respects. I believe that the allegations relate to Colombian coal, where child labour is widely used, and to South African coal, where exploitation of another kind takes place. My understanding is that the Commission has declined to take action. I wonder
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whether the Minister can confirm or deny that position. If the Commission has declined to take action where the Coal Board believes that a strong case has been made out, will the Minister indicate whether the board and/or the Government have it in mind to take proceedings against the Commission as regards its failure to act?
My second point concerns the relationship between the freight transport movements of British Rail and the closure programme of British Coal. Have the Government taken into account the relationship between those two industries in that regard? That is not an unreasonable question to ask because the Government have set about this hybrid procedure to deal with the two industries. That was undertaken very unwisely, but none the less my question is relevant. It is rendered even more relevant by the fact that Sir Bob Reid, giving evidence before the House of Commons Select Committee on Employment, indicated that British Rail's profit from coal was substantial. He said according to a report in the press that the,
"latest figures for transporting bulk goods, including coal, disclose a turnover of £505 million and an operating profit of £67.5 million … the only way to offset these losses would be for the Government to increase its subsidy to BR, or a fare increase".
He also said that if British Coal's current plans were to be undertaken 1,151 employees would have to be made redundant as far as the railways are concerned, and they would come mainly from staff operating the system from pithead to power stations. He indicated that eventual job losses could reach about 2,770 over four years. He also made a remarkable comment when he said that he, as chairman of British Rail, was given no warning of the announcement made by British Coal. Those are serious matters. What I and the House will want to know is whether those factors were taken into account by the Government in the assessments they undertook.
Baroness Denton of Wakefield: My Lords, the noble Lord, Lord Donoughue, has introduced into this debate the judgment of Lord Justice Glidewell and Mr. Justice Hidden on the colliery closure decisions announced on 13th and 19th October. Despite the eloquent case made by the noble Lord at no point can I see that it has any relevance to the Bill which we are considering today. This Bill and the closure decisions are entirely separate subjects. They are both important subjects. In case recent festivities have affected the memories of noble Lords, I should remind the House of the purpose of our deliberations on this Bill. We are here to give a Third Reading to a Bill whose purpose is to allow two corporations to make preparations for privatisation. That is a narrow technical purpose but one which is of vital importance to the two corporations.
Without this Bill British Coal and British Rail would be severely handicapped as regards contributing to and commenting on plans for privatisation. However, I must respond to the noble Lord, Lord Donoughue, in view of the nature of the points he made despite their lack of relevance to this Bill. My right honourable friend the President of the Board of Trade has noted the judgment of the court on these cases and in the light of that judgment has appointed

729
Boyds—this has been mentioned—which is an internationally renowned firm of mining consultants, to produce an independent report on the 10 pits. I noted but did not understand the noble Lord's comment that previous knowledge reduces independence. The matter we are discussing is a separate exercise from the report on the 21 pits. It is of course for British Coal and the mining unions to decide whether the appointment of Boyds meets the needs of the case.
Lord Donoughue: My Lords, I must refer to my comments on Boyds in questioning the true independence of that firm. Will the Minister tell us who paid Boyds for its previous advice and involvement in the department's policy making?
Baroness Denton of Wakefield: My Lords, I do not believe that the matter of who paid a consultant is relevant to that consultant's independence. I emphasise again that it is for British Coal and the mining unions to decide whether the appointment of Boyds meets the need for an independent element as suggested by the court. I emphasise to noble Lords that the appointment by the President of the Board of Trade is not intended in any way to pre-empt the outcome of the discussions between British Coal and the unions on the procedure which they should now follow. However, the Government hope that British Coal and the unions will view this appointment as a helpful step which introduces an appropriate independent element and that they will agree to make use of it.
British Coal and the unions will be given the opportunity to make representations to Boyds before the draft report is produced. They will also be able to accompany Boyds on the latter's pit visits. My right honourable friend has asked Boyds to arrange for the mining unions and British Coal to receive copies of the report in draft and has also asked Boyds to receive their comments. He will require Boyds to take into account those comments in finalising its report. It will of course be for Boyds to decide on the final content of its report as it is essential for all concerned that the report should be independent.
My right honourable friend proposes to publish Boyds's final report. No final decisions will be taken on closing the 10 pits until the consultation process has been completed, Boyds has reported on the 10 pits and Parliament has had the chance to debate the coal review White Paper and the report of the Trade and Industry Select Committee. Those are not gestures. I believe that they demonstrate that the Government take the judgment of the court very seriously.
In addition to those developments in relation to the 10 pits, noble Lords will also appreciate that the review of the future of the 21 pits proposed for closure in October currently being undertaken is deep and wide-ranging. Evidence has been received from over 300 organisations and individuals. All the evidence has been passed to the Trade and Industry Select Committee and made publicly available except in cases where those submitting it have asked that it should not be. The Government will be publishing a
730
number of studies commissioned from independent consultants. The Trade and Industry and Employment Select Committees are conducting their own independent inquiries. There will be a White Paper, which the Government hope to publish as soon as possible next month and which this House and another place will have an opportunity to debate. As your Lordships will know from earlier stages of the Bill, no decision will be taken on the timing of coal privatisation legislation until after those debates.
If the amendment is an attempt to inject a further element of review covering essentially the same ground as the coal review, the two Select Committees and the Boyds study of the 10 pits, then it would serve little purpose other than to postpone the important decisions which must be reached to end the uncertainty currently facing both British Coal and the miners and to delay British Coal's ability to make plans to improve productivity and reduce costs in order to secure the largest possible share of the market.
Further, if the amendment merely seeks to add an independent process of scrutiny to any possible pit closures, then again it would serve little purpose in the light of the way British Coal has responded to the observations of Lord Justice Glidewell. Again, it would continue the uncertainty facing British Coal and its employees.
It would appear from the amendment that, if the Secretary of State made a proposal to British Coal which included the possibility of the closure of a colliery, then before British Coal could consider that proposal there would be an independent inquiry chaired by a person appointed jointly by my right honourable friend the President of the Board of Trade, British Coal and the relevant trade unions. Colliery closures are not proposed by the Secretary of State to British Coal but are a management matter for British Coal under its statutory duties and functions. They are therefore proposed by British Coal and are subject to obligations to consult in relation to proposed redundancies. The powers of the Bill, which concern the facilitating of privatisation, are not related to British Coal's ability in law to propose colliery closures. Therefore, the amendment would probably not bite on the colliery closure proposals as intended.
The noble Lord asked whether the appointment of Boyds had been confirmed. The appointment of Boyds resulted from remarks by Lord Justice Glidewell that that might provide the way forward, although it was recognised that agreement on that form of scrutiny was a matter for British Coal and the unions.
I turn now to the question asked by the noble Lord, Lord Clinton-Davis, in relation to dumping. As he well knows, it is for the European Commission to decide whether complaints, including that made by British Coal, merit further investigation. The Government expect the Commission to take its responsibilities in this area seriously and therefore to consider the complaint seriously. I understand that the Commission has not yet reached a decision on

731
whether to open an investigation. The Government have told the Commission that they have no objection to a formal investigation being started.
I shall leave it to my noble friend to comment in detail on any matters concerning British Rail's case in respect of freight, but obviously that is part of the review.
I hope that the noble Lords recognise that the amendment is not appropriate for the Bill and would continue the uncertainty which surrounds the coal industry. It would have a damaging effect on the ability of British Coal to contribute to the privatisation process which is the main purpose of the part of the Bill relating to coal. I hope that I have answered the questions raised by the noble Lord and that he will be encouraged to withdraw the amendment.
3.30 p.m.
Lord Dormand of Easington: My Lords, before the noble Baroness sits down will she deal with the point which arises from her statement that the Government will not consider the closure of any pits until the Boyds report has been received and considered? Is she aware—I am sure that she is—that in some cases, including at least one of the 10 pits, miners are going to the pits but are being refused employment even though they are being paid? Can one think of anything more ludicrous than to have miners at a pit and yet not to produce coal? If the noble Baroness and her colleagues think that that is not relevant to the Bill, they must be living in cloud-cuckoo-land. She ought to deal with that specific issue because the matters which my noble friend Lord Donoughue raised indicate a flagrant disregard of the decision of the court. As I have said before in this Chamber, if a pit is not worked it very soon crumbles and production at that pit may be stopped for ever. These points ought to be dealt with in detail now.
Baroness Denton of Wakefield: My Lords, I must inform the noble Lord, Lord Dormand, that, as he will know, that is a matter for British Coal. However, I do not believe that there is anything in the judgment which requires coaling in the 10 pits to recommence while consultation takes place.
Lord Donoughue: My Lords, I thank the Minister for what she said. Some of it was quite stunning. To suggest that with a few amendments we on this side of the House have created uncertainty in the coal industry is breathtaking. In the creation of uncertainty in an industry we all bow to the Government and the department. I bow to the Minister.
Baroness Denton of Wakefield: My Lords, I thank the noble Lord for allowing me to intervene. I did not say that the noble Lords had caused the uncertainty. I stressed that continuing that uncertainty would not be helpful to the future of the industry or to the people who work in it.
Lord Donoughue: My Lords, I do not believe that that is an adequate response to what we propose. The statement that the Bill has no relevance to the other wider matters which we have raised is also stunning.
732
One cannot detach the Bill and its proposals for privatisation from British Coal's proposals for pit closures. They are interrelated. Nothing that the Minister has said has given the assurance which we sought. It is not a question of uncertainty but of continuing consultation and continuing independent scrutiny. None of that is guaranteed. Therefore we must test the opinion of the House.
3.39 p.m.
On Question, Whether the said amendment (No. 1) shall be agreed to?
Their Lordships divided Contents, 110; Not-Contents, 133.

Division No. 1

CONTENTS

Airedale, L.

John-Mackie, L.

Ardwick, L.

Judd, L.

Ashley of Stoke, L.

Kennet, L.

Attlee, E.

Kilbracken, L.

Beaumont, of Whitley, L.

Listowel, E.

Blackstone, B.

Llewelyn-Davies of Hastoe, B.

Bonham-Carter, L.

Lockwood, B.

Boston of Faversham, L.

Longford, E.

Bottomley, L.

Lovell-Davis, L.

Brimelow, L.

Macaulay of Bragar, L.

Brooks of Tremorfa, L.

McCarthy, L.

Bruce of Donington, L.

McIntosh of Haringey, L.

Carmichael of Kelvingrove, L.

Mackie of Benshie, L.

Carter, L.

McNair, L.

Castle of Blackburn, B.

Mallalieu, B.

Cledwyn of Penrhos, L.

Mason of Barnsley, L.

Clinton-Davis, L.

Milner of Leeds, L.

Cocks of Hartcliffe, L.

Monkswell, L.

David, B.

Morris of Castle Morris, L.

Dean of Beswick, L.

Murray of Epping Forest, L.

Donaldson of Kingsbridge, L.

Nicol, B.

Donoughue, L.

Northfield, L.

Dormand of Easington, L.

Ogmore, L.

Ewing of Kirkford, L.

Peston, L.

Ezra, L.

Pitt of Hampstead, L.

Falkender, B.

Plant of Highfleld, L.

Falkland, V.

Ponsonby of Shulbrede, L.

Fisher of Rednal, B.

Prys-Davies, L.

Fitt, L.

Rea, L.

Foot, L.

Richard, L.

Gallacher, L.

Ritchie of Dundee, L.

Galpern, L.

Robson of Kiddington, B.

Geraint, L.

Rochester, L.

Gladwyn, L.

Sainsbury, L.

Graham of Edmonton, L. [Teller.]

Seear, B.

Sefton of Garston, L.

Greenhill of Harrow, L.

Serota, B.

Grey, E.

Shackleton, L.

Hamwee, B.

Shaughnessy, L.

Hanworth, V.

Shepherd, L.

Harris of Greenwich, L.

Stallard, L.

Hayter, L.

Stedman, B.

Healey, L.

Stoddart of Swindon, L.

Hilton of Eggardon, B.

Strabolgi, L.

Hirshfield, L.

Taylor of Blackburn, L.

Hollick, L.

Taylor of Gryfe, L.

Hollis of Heigham, B.

Tordoff, L. [Teller.]

Holme of Cheltenham, L.

Turner of Camden, B.

Hooson, L.

Underhill, L.

Howie of Troon, L.

Wallace of Coslany, L.

Hughes, L.

Wedderburn of Charlton, L.

Hunt, L.

White, B.

Jacques, L.

Williams of Elvel, L.

Jay, L.

Wilson of Rievaulx, L.

Jay of Paddington, B.

Winchilsea and Nottingham, E.

Jeger, B.

733

NOT-CONTENTS

Addison, V.

Hood, V.

Alexander of Tunis, E.

Hothfield, L.

Allenby of Megiddo, V.

Howe, E.

Archer of Weston-Super-Mare, L.

Hylton-Foster, B.

Ironside, L.

Arran, E.

Johnston of Rockport, L.

Astor, V.

Kimball, L.

Auckland, L.

Kinnoull, E.

Belhaven and Stenton, L.

Knollys, V.

Beloff, L.

Lindsey and Abingdon, E.

Bessborough, E.

Liverpool, E.

Blatch, B.

Lloyd-George of Dwyfor, E.

Blyth, L.

Long, V.

Boardman, L.

Lyell, L.

Borthwick, L.

Mackay of Ardbrecknish, L.

Boyd-Carpenter, L.

Mackay of Clashfern, L.

Brabazon of Tara, L.

Macleod of Borve, B.

Braine of Wheatley, L.

Malmesbury, E.

Butterworth, L.

Manchester, D.

Cadman, L.

Mancroft, L.

Caithness, E.

Margadale, L.

Campbell of Alloway, L.

Marlesford, L.

Campbell of Croy, L.

Merrivale, L.

Carnegy of Lour, B.

Mersey, V.

Carnock, L.

Monk Bretton, L.

Cayzer, L.

Morris, L.

Charteris of Amisfield, L.

Mountevans, L.

Chelmsford, V.

Moyne, L.

Clanwilliam, E.

Munster, E.

Cochrane of Cults, L.

Nelson, E.

Cockfield, L.

Norfolk, D.

Constantine of Stanmore, L.

Norrie, L.

Cox, B.

O'Cathain, B.

Craigavon, V.

Orkney, E.

Cranborne, V.

Orr-Ewing, L.

Cullen of Ashbourne, L.

Palmer, L.

Cumberlege, B.

Pender, L.

Dacre of Glanton, L.

Platt of Writtle, B.

Davidson, V.

Plummer of St. Marylebone, L.

De Freyne, L.

Pym, L.

Denham, L.

Quinton, L.

Denton of Wakefield, B.

Rodger of Earlsferry, L.

Eccles of Moulton, B.

Romney, E.

Effingham, E.

St. Davids, V.

Elles, B.

Selborne, E.

Elliot of Harwood, B.

Shannon, E.

Elliott of Morpeth, L.

Simon of Glaisdale, L.

Elton, L.

Strange, B.

Erne, E.

Strathcarron, L.

Erroll of Hale, L.

Strathclyde, L.

Faithfull, B.

Strathmore and Kinghorne, E. [Teller.]

Flather, B.

Fraser of Carmyllie, L.

Sudeley, L.

Fraser of Kilmorack, L.

Terrington, L.

Gainford, L.

Teviot, L.

Geddes, L.

Thomas of Gwydir, L.

Goschen, V.

Trefgarne, L.

Greenway, L.

Trumpington, B.

Gridley, L.

Ullswater, V.

Hailsham of Saint Marylebone, L.

Vaux of Harrowden, L.

Vivian, L.

Harding of Petherton, L.

Wakeham, L.

Harmar-Nicholls, L.

Walker of Worcester, L.

Hayhoe, L.

Westbury, L.

Henley, L.

Wharton, B.

Hesketh, L. [Teller.]

Wolfson, L.

Hives, L.

Wynford, L.

Holderness, L.

Young, B.

Resolved in the negative, and amendment disagreed to accordingly.
3.48 p.m.
Lord Clinton-Davis Lord Clinton-Davis moved Amendment No. 2:
Page 1, line 10, after ("include") insert ("providing subsection (1C) below has been satisfied").
The noble Lord said: My Lords, it may be for the convenience of the House if we discuss Amendment No. 6 with Amendment No. 2.
The effect of the amendments is to debar the use of powers under the Bill relating to British Rail pending the publication of reports on the effects of proposals by the Transport Select Committee and the chairman of British Rail. I justify the amendment on two grounds. The first is the growing confusion and uncertainty about the nature and likely effects of the Government's proposals. Hardly a day passes without some changes being announced. On 8th December it was announced in the Financial Times that the Government had given the clearest indication that they were prepared to bend their rail privatisation plans to make them more attractive to would-be train operators.
The article said that the Government:
"might be ready to drop its insistence on open access and allow operators effective monopolies on some lines, particularly British Rail's Network SouthEast commuter routes".
It is extraordinary that this fundamental point should be suddenly slipped in, although the Minister may say, "Well, it hasn't happened; it's just faulty reporting in the Financial Times". If that is right, then there it is. But if in fact there is substance to that report, it indicates how the Government have not thought their way through these issues.
The second point has been the absence, so far as concerns the Government's plans, of a full and open debate. If we take those points together, I believe that they reinforce the need for a fundamental review of what it is that the Government propose. The Transport Select Committee and the chairman of British Rail are well placed to be able to contribute to a review of this kind. I pray that in aid of one of the points to which I drew attention in the intervention that I made and which did not produce any reply of substance from the Minister's noble friend.
Regarding the uncertainty, I have no doubt that the Minister will say that we should await the publication of the Bill. As I understand it, that is imminent. That is not a proper response because it highlights the dangers of proceeding with poorly worked out, inadequately discussed proposals. The amendments will at least ensure that the powers in the Bill could not be used until a more open and orderly debate had taken place.
I believe that the chairman of the Transport Select Committee has made out the case for the amendments. Indeed, it has been corroborated by the reply that he received to a letter he wrote on 25th November to the Secretary of State for Transport. Following the publication of the Green Paper on the BBC by the Government, Mr. Adley wrote in the following terms:
"The Green paper is remarkable for the way in which it sets out a variety of options in a reasonably objective way, illustrating the practical advantages and disadvantages of each. There will now be a five months' consultation period. There is not even mention of legislation at this stage, let alone a detailed timetable for it".
He went on to ask whether any lessons might usefully be gleaned from the approach that had occurred in

735
relation to the BBC as concerns the rail privatisation proposals. The Secretary of State replied on 14th December:
"BR privatisation—and the ways of achieving it—have been discussed since 1988 and formed part of our manifesto commitments at the election. I think we owed it to the public to make clear the broad principles which we see governing the privatisation of BR and we did it as soon as we could after much thought by publishing the white paper in July. But we have not made up our minds on every detail. That is why we have issued—and will issue—various further documents about the way in which we think our proposals should he implemented".
That response ignores the fact that the debate which occurred between 1988 and the date upon which the White Paper was published was simply based on press reports, speculation and not on any Green Paper or a formal statement of the Government's views.
The letter also overlooked the difficulties that have arisen as a result of what I might call the "drip feed" of consultation documents. We have had one or two already. We are promised, I think, eight in all. What is required is a comprehensive view of the Government's proposals on which a full and open public debate might take place.
One aspect of the Government's proposals which is coming under increasing criticism is the proposal for the establishment of a track authority. Indeed, the Transport Select Committee has focused very much on that issue. But the Secretary of State has acknowledged in the debate which took place in another place on 12th January that this is, "at the heart of our proposals". That was the term he used. But how important is that heart in reality? Mr. Roger Freeman, winding up the debate, said that the Government,
"do not rule out the possibility of what we call vertical franchising".—[Official Report, Commons, 12/1/93; col. 863.]
The Secretary of State said at col. 795:
"In other areas of transport, we do not generally expect the provider of services to run the infrastructure as well. Therefore, the split between Railtrack and rail services is well precedented".
But Mr. Roger Freeman said at col. 863:
"In certain cases, it may make a lot of sense for franchisees to control the signalling and infrastructure—subject, of course, to the freeholding interest of Railtrack".
I think that there is an element of confusion between those two approaches.
Then there is the whole question of franchising to which I have already referred. The White Paper and the franchising document made it clear that the Government envisaged no protection from competition for companies operating franchised services. That has been widely criticised and potential franchisees have made it abundantly clear that it could well undermine the whole concept of franchising.
Therefore, in the light of that anxiety, there have been indications that the Government were reconsidering their position. But again in a further round of correspondence with the chairman of the Transport Select Committee, Mr. Roger Freeman indicated that the Government had not reached the view that franchising and open access are incompatible. His letter dated 7th December goes on to refer to problems in relation to track and station capacity in London. It ignores the key issue of whether franchising can work in a fully competitive environment.
Whether we are talking about whatever alias for these proposals the Government choose—privatisation, semi-privatisation or commercialisation (the term changes almost weekly, if not daily)—it is clear that a large number of issues require continuing open debate. That should happen before the Bill is debated. It has happened elsewhere in other respects. It is to the advantage of Parliament and of the community as a whole and it is certainly to the advantage of the future of the British railway system, and it should happen before the powers in the Bill are used. I beg to move.
The Earl of Caithness: My Lords, in wishing the noble Lord, Lord Clinton-Davis, and the rest of the House a happy new year, may I suggest to the noble Lord one new year's resolution? It is not to believe everything that he reads in the press with the addiction that he has done in the past.
The Bill before us empowers BR to act in relation to proposals put to it by the Secretary of State. We look forward to BR being able to play its full part in the preparation for privatisation. BR's input will be important. The amendments tabled by the noble Lord would prevent BR from doing anything under the powers which this Bill confers on it in response to a proposal from my right honourable friend until such time as both the Transport Select Committee in another place and the chairman of British Rail have published reports setting out their reactions to that proposal.
Although I am sure that the whole House listened carefully to what the noble Lord said, I should not be surprised if the House found it as difficult as I to understand the reasoning behind the amendment. Let me turn first to the Transport Select Committee. As your Lordships will be aware, that committee is conducting an inquiry into the Government's rail privatisation proposals. This has been under way for some time and my right honourable friend has given evidence to the committee. The work of the Select Committee will provide valuable input into Parliament's consideration of the main privatisation Bill and into the further development and implementation of the proposals once the legislative framework is in place. However, nothing would be gained by preventing BR from making its input until such time as the Select Committee had produced its report.
The noble Lord's amendment also suggests that further work by BR should not proceed until a report on the effects of the proposals has been published by the chairman of British Rail. The ability of the chairman to produce a considered report may to some extent be constrained until the Bill before us is enacted. But my right honourable friend has discussed our proposals with the chairman on numerous occasions. We have kept the chairman abreast of developments in the proposals and BR is ready to make its full contribution. This will be needed during the passage of the main privatisation Bill and the period of implementation thereafter. The chairman of BR has also given evidence to the Select Committee which will no doubt he reflected in its report. But why

737
stop BR from playing its full part until its chairman has published a report? I am sure the House will agree that there can be no sense in that.
Let me repeat what I have said many times on this Bill. The objective of our privatisation proposals is to improve the quality of service to rail customers. We have published our proposals in the White Paper and in subsequent policy and consultation documents. Perhaps I might add that the noble Lord, Lord Clinton-Davis, criticised us for having what he called a drip-feed of consultation papers. He would be far more vociferous if we had not put out the consultation papers and had held them up until the last one had been prepared. He would have rightly said that the Government were withholding the information that they had. We have been absolutely honest in putting out the consultation papers as soon as they have been received. Yes, there are more to be delivered to the Government; yes, there are more for the House and everyone else to see. But as soon as we get them it is right that we make them available, as we have done in the past.
We believe that our proposals are the right way forward. We have welcomed the widespread debate which they have initiated and which will no doubt continue during the consideration of the main privatisation Bill in Parliament and on into the implementation of our proposals. All the views that we have received have helped contribute to the refinement of our proposals. I am sure noble Lords would agree that there has been no shortage of opportunities both here and in another place, or in outside debates, to consider the proposals that we have had.
We look forward to the contribution to the current debate which will be made by the Transport Select Committee and to our continuing discussions with the chairman of British Rail. I am sure the House will agree that preventing British Rail from making its full contribution would serve to hinder rather than help the process of further development of our proposals.
Lord Clinton-Davis: My Lords, I do not find that reply at all convincing. The Minister chided me for having some assiduity about press reports. I am not alone in that in this country nowadays. Certainly I asked him whether there was any truth in the matter. Is it not a perfectly reasonable point to make when so reputable a newspaper as the Financial Times draws attention to this matter? The Minister has said that there is no truth in it. But I rely far more on statements that have been made by the Secretary of State and the Minister of State in another place and in correspondence. I would claim that there is a great deal of doubt in the light of that and of the conflicts that have arisen between the statements made by both of them. It requires the Government to be far clearer in their thinking about what they are proposing.
The Minister said that the Government's objective is to improve the quality of service. It is the objective of us all. It is the way they are going about it that will produce a negative effect. That is a matter for the debate that will take place later this afternoon.
738
The Minister said that I would be more critical of the Government if they had not been forthcoming with consultation papers. I suppose there is some truth in that. Yes, I would. But he misses the whole point of my argument, which is that consultation should have taken place on the basis of a Green Paper, not the shrivelled White Paper that they ultimately produced —which was not in time for the debates in another place—which casts very little light on the Government's proposals. They should have enabled a full public debate to have taken place inside and outside this House because it is a matter of serious importance.
Then the Minister said—somewhat in conflict with his earlier remarks—that there had been no shortage of opportunities to consider the proposals in this place during the currency of the Bill. Every opportunity has been taken. There has not been a debate when either the noble Baroness or the noble Earl has not said that this was not a suitable vehicle for discussing the probing amendments—amendments which reflected very great concern on our part—and we should wait for the main Bill. They justify the rather unattractive and uninformative answers that they give on that score. Then the Minister says that there is no shortage of opportunities to consider the proposals. I do not believe that the Minister has responded properly to the case that we have made and I must therefore test the opinion of the House.
4.6 p.m.
On Question, Whether the said amendment (No. 2) shall be agreed to?
Their Lordships divided Contents, 103; Not-Contents, 137.

Division No. 2

CONTENTS

Addington, L.

Hamwee, B.

Ardwick, L.

Hanworth, V.

Ashley of Stoke, L.

Harris of Greenwich, L.

Attlee, E.

Hayter, L.

Beaumont of Whitley, L.

Healey, L.

Blackstone, B.

Hilton of Eggardon, B.

Bonham-Carter, L.

Hollick, L.

Boston of Faversham, L.

Hollis of Heigham, B. [Teller.]

Brimelow, L.

Holme of Cheltenham, L.

Bruce of Donington, L.

Hooson, L.

Carmichael of Kelvingrove, L.

Howie of Troon, L.

Carter, L.

Hughes, L.

Castle of Blackburn, B.

Hunt, L.

Cledwyn of Penrhos, L.

Jacques, L.

Clinton-Davis, L.

Jay, L.

Cocks of Hartcliffe, L.

Jay of Paddington, B.

David, B.

Jeger, B.

Dean of Beswick, L.

John-Mackie, L.

Donaldson of Kingsbridge, L.

Judd, L.

Donoughue, L.

Kennet, L.

Dormand of Easington, L.

Kilbracken, L.

Ennals, L.

Kinloss, Ly.

Ewing of Kirkford, L.

Listowel, E.

Ezra, L.

Llewelyn-Davies of Hastoe, B.

Falkender, B.

Lockwood, B.

Falkland, V.

Longford, E.

Foot, L.

Lovell-Davis, L.

Gallacher, L.

Macaulay of Bragar, L.

Galpern, L.

McCarthy, L.

Geraint, L.

McIntosh of Haringey, L.

Gladwyn, L.

Mackie of Benshie, L.

Graham of Edmonton, L. [Teller.]

McNair, L.

Mallalieu, B.

Grey, E.

Mason of Barnsley, L.

739

Milner of Leeds, L.

Shackleton, L.

Morris of Castle Morris, L.

Shepherd, L.

Nicol, B.

Stallard, L.

Northfield, L.

Stoddart of Swindon, L.

Ogmore, L.

Strabolgi, L.

Peston, L.

Taylor of Blackburn, L.

Pitt of Hampstead, L.

Taylor of Gryfe, L.

Plant of Highfield, L.

Tordoff, L.

Ponsonby of Shulbrede, L.

Turner of Camden, B.

Prys-Davies, L.

Underhill, L.

Rea, L.

Wallace of Coslany, L.

Richard, L.

Wedderburn of Charlton, L.

Ritchie of Dundee, L.

White, B.

Robson of Kiddington, B.

Williams of Elvel, L.

Rochester, L.

Williams of Mostyn, L.

Sainsbury, L.

Wilson of Rievaulx, L.

Seear, B.

Winchilsea and Nottingham, E

Serota, B.

Young of Dartington, L.

NOT-CONTENTS

Aldington, L.

Hayhoe, L.

Allen of Abbeydale, L.

Henley, L.

Allenby of Megiddo, V.

Hesketh, L. [Teller.]

Archer of Weston-Super-Mare, L.

Hives, L.

Holderness, L.

Arran, E.

Hood, V.

Astor, V.

Hooper, B.

Auckland, L.

Hothfield, L.

Belhaven and Stenton, L.

Howe, E.

Beloff, L.

Hylton-Foster, B.

Bessborough, E.

Ironside, L.

Birdwood, L.

Johnston of Rockport, L.

Blyth, L.

Kenilworth, L.

Boardman, L.

Kimball, L.

Borthwick, L.

Knollys, V.

Boyd-Carpenter, L.

Lane of Horsell, L.

Brabazon of Tara, L.

Lauderdale, E.

Braine of Wheatley, L.

Leigh, L.

Brigstocke, B.

Lindsey and Abingdon, E.

Broadbridge, L.

Liverpool, E.

Butterworth, L.

Lloyd-George of Dwyfor, E.

Cadman, L.

Long, V.

Caithness, E.

Lyell, L.

Campbell of Alloway, L.

Mackay of Ardbrecknish, L.

Campbell of Croy, L.

Mackay of Clashfern, L.

Carnegy of Lour, B.

Macleod of Borve, B.

Carnock, L.

Margadale, L.

Charteris of Amisfield, L.

Marlesford, L.

Chelmsford, V.

Merrivale, L.

Clanwilliam, E.

Mersey, V.

Cochrane of Cults, L.

Milverton, L.

Constantine of Stanmore, L.

Monk Bretton, L.

Cox, B.

Morris, L.

Craigavon, V.

Mountevans, L.

Cranborne, V.

Moyne, L.

Cullen of Ashbourne, L.

Munster, E.

Cumberlege, B.

Nelson, E.

Dacre of Glanton, L.

Norfolk, D.

Davidson, V.

Norrie, L.

De Freyne, L.

O'Cathain, B.

Denham, L.

Orkney, E.

Denton of Wakefield, B.

Orr-Ewing, L.

Eccles of Moulton, B.

Oxfuird, V.

Effingham, E.

Palmer, L.

Elles, B.

Pender, L.

Elliot of Harwood, B.

Platt of Writtle, B.

Elliott of Morpeth, L.

Plummer of St. Marylebone, L.

Erne, E.

Porritt, L.

Faithfull, B.

Prentice, L.

Finsberg, L.

Pym, L.

Flather, B.

Quinton, L.

Fraser of Carmyllie, L.

Rankeillour, L.

Fraser of Kilmorack, L.

Reading, M.

Gainford, L.

Richardson, L.

Geddes, L.

Rodger of Earlsferry, L.

Goschen, V.

Romney, E.

Gridley, L.

St. Davids, V.

Hailsham of Saint Marylebone, L.

Selborne, E.

Simon of Glaisdale, L.

Harmar-Nicholls, L.

Stedman, B.

740

Strange, B.

Ullswater, V.

Strathclyde, L.

Vaux of Harrowden, L.

Strathmore and Kinghorne, E. [Teller.]

Vivian, L.

Wakeham, L.

Sudeley, L.

Westbury, L.

Swansea, L.

Wharton, B.

Terrington, L.

Wolfson, L.

Teviot, L.

Wyatt of Weeford, L.

Thomas of Gwydir, L.

Wynford, L.

Trumpington, B.

Young, B.

Resolved in the negative, and amendment disagreed to accordingly.

Iraq: Coalition Action
4.15 p.m.
Viscount Cranborne: My Lords, with the leave of the House, I shall repeat a Statement being made in another place this afternoon by my right honourable friend the Secretary of State for Defence. The Statement is as follows:
"Yesterday and earlier today the coalition took further military action against Iraq. There were a number of separate operations.
"At 0845 hours GMT today, four RAF Tornado GR1 aircraft and two Victor tankers took part in a further coalition operation, involving over 40 US, British and French aircraft, against Iraqi air defence facilities and command and control facilities in southern Iraq, which had continued to pose a threat to coalition aircraft in the no-fly zone. Attacks were also carried out to suppress air defence installations which threatened the security of coalition aircraft participating in the operation. All coalition aircraft and aircrew returned safely.
"Four RAF aircraft participated in the attack against an air defence operations centre at A1 Najaf. Two Tornado GR1 aircraft were to use 10001b laser guided bombs against targets designated by the TIALD pods, carried by the other two aircraft. One of the Tornados was unable clearly to identify the target and did not release its weapons in order to avoid the possibility of causing civilian casualties or damage to other buildings in the area. However, the other Tornado successfully completed the attack.
"Like the operation on 13th January, this action was taken in self defence to ensure the safety of coalition aircraft patrolling the no-fly zone below the 32nd parallel in support of UNSCR 688. This was a follow-up to the action taken on 13th January. Early indications are that further significant damage has been inflicted on Iraq's residual air defences in the southern no-fly zone. Assessment of the results is continuing.
"This followed action in the latter part of yesterday when cruise missiles, launched from the US Navy ships in the region, attacked a facility connected with the Iraqi weapons of mass destruction programme. The early indications are that the facility was extensively damaged. This action was taken to ensure that Iraq complies with its mandatory obligations under UNSCR 687 and related resolutions. Iraq has committed a number of material breaches of UNSCR 687 and wilfully

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ignored the warnings given by the Security Council and the US, UK, France and Russia on 11th and 14th January respectively.
"There has also been a number of incidents in the northern no-fly zone. On 17th January, an Iraqi fighter aircraft violated the no-fly zone in the north of Iraq. The Iraqi aircraft was engaged and shot down by coalition aircraft. In addition, coalition aircraft were illuminated by Iraqi air defence radars on a number of occasions in the last few days, including an RAF Jaguar on 16th January. This was in violation of the coalition demarche of 14th April 1992, which warned Iraq against a number of specific actions which would be taken as indicators of hostile intent. Following one such incident an SA-6 battery was attacked on 17th January by coalition aircraft armed with the high speed anti-radiation missile (HARM). Initial damage assessments indicate that the SAM system was put out of action. Iraqi air defence radars were again attacked using HARM on 18th January.
"These coalition actions have clearly demonstrated to the Iraqis the seriousness of our demand that Iraq should comply with UN resolutions and our continuing determination to maintain the no-fly zones in the North and South of Iraq. If the Iraqis still refuse to comply with United Nations resolutions the Government will not shirk from considering the need for further action in consultation with coalition partners.
"The House would not wish me to conclude without expressing again our appreciation of the continuing efforts of our servicemen and women serving in the Gulf. They can be assured that they enjoy the wholehearted support of the vast majority in this House and of the British public at large." My Lords, that concludes the Statement.
4.21 p.m.
Lord Williams of Elvel: My Lords, the House is grateful to the noble Viscount for repeating the Statement made in another place and I, from these Benches, wholeheartedly endorse what the Government, and indeed the noble Viscount, said in appreciation of the servicemen and women serving in the Gulf. We have nothing but the highest admiration for people of this country working in difficult circumstances. We also support action in no-fly zones. It is essential that the Kurds and the Shias are protected from what threatens to be genocide by the Iraqi Government.
Beyond that I enter one or two important caveats. We understand that last Wednesday's attack was within the terms of UN Resolution 687. As such, we are reassured. But there is no point in that reassurance if such actions lead to full-scale war. I hope that the noble Viscount will bear that in mind when he replies. I will come to the upshot later in my questions to the noble Viscount.
My questions are as follows. Are the US Government now going a bit too far? Are we going beyond what was decided by the United Nations Security Council? Are we in danger of losing the
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ultimate authority that those actions must have, not of one country alone but of the international community as represented by the United Nations? Who are the members of the coalition referred to on many occasions in the Statement? Is it the same coalition as operated in what was known as the "Gulf War"? In other words, are the Syrians involved? Are the Saudi Arabians involved? Who are the people involved in the coalition?
Next, by what authority did President Bush decree a missile attack on an installation in Iraq, outside the no-fly zones? Was it by reference to some United Nations resolution about which we have not yet heard? How did that missile attack result in the apparent destruction of the al-Rashid Hotel in the centre of Baghdad which housed foreign journalists? Was that a mistake? We all know that Tomahawk cruise missile guidance systems are not entirely reliable. In the Government's view, was it an anti-aircraft missile which fell in the wrong place? What is the truth of that matter?
We all understand that President Bush wants to go out on a fine and heroic note. But does that fine and heroic note have to implicate British servicemen flying British planes in a dangerous area? Should not the whole matter be taken back to the Security Council for full debate so that we can obtain proper authority for further action, if any is needed?
Lord Bonham-Carter: My Lords, I thank the noble Viscount for repeating the Statement made by his right honourable friend in another place. I associate those of us on these Benches with the tribute rightly paid to our servicemen and women in the Gulf area. On behalf of my colleagues I should say that I do not expect the Government to receive a blank cheque from any Opposition party to indulge in operations of this kind. We must be satisfied that such operations are justified by reference to three criteria.
First, we must be satisfied on the principle of proportionality; that is, that the action we take is related to the offence committed—put crudely, that the punishment fits the crime. Secondly, we must be satisfied that there is agreement between all our partners in the coalition. That is an important point and one with which I am in agreement with the noble Lord, Lord Williams of Elvel. Thirdly, it must be abundantly clear that we are acting and seen to be acting as an instrument of the United Nations and in accordance with international law.
It is the second of those conditions which worries me. I am not at all sure that our actions can have the full assent and support of some of our partners in the coalition. Indeed, one knows that it places a strain on, for example, the Syrians and the Saudis to remain with us. It is crucially important that we maintain their support in the whole affair.
I have a further reservation that in all these matters the purpose and object of our policy should be clear in the mind of our Government and that of the United States in particular. It is not enough to give the obvious answer that all we are trying to do is secure compliance with the Security Council resolution. We must consider the wider implications of our policy. Perhaps this is not the time at which to do that and the

743
matter should be the subject of a wider debate. However, is it or is it not the policy of the United States to overthrow the Iraqi Government? If it is not, we must tread extremely carefully. If it is, is this the most efficient way to do it? If so, will that lead to the break-up of Iraq and thereby have serious consequences throughout the Middle East? Further, is the object of our policy clear to the Iraqis? If it is not, it will not succeed.
Those are questions which must be addressed even though they cannot be fully answered this afternoon. Therefore, while in general I support the measures designed to secure compliance with the Security Council resolutions, we must be sure that those resolutions justify the actions we take.
Viscount Cranborne: My Lords, I am particularly grateful for the remarks of the noble Lords, Lord Williams and Lord Bonham-Carter, about the quality of the service of our servicemen during the course of these operations. Those remarks will be read with appreciation by the servicemen concerned.
The noble Lord, Lord Williams, asked whether this action will lead to full-scale war, and in that context both he and the noble Lord, Lord Bonham-Carter, directly and by implication, asked what was the purpose of our policy. In the first instance, the purpose of our policy was indeed reflected in the two principal Security Council resolutions, 687 and 688, under which we are acting as part of the coalition. I shall come to the membership of the coalition in a moment. Those resolutions—especially Resolution 688 —were passed with the objective of trying to ensure some degree of protection against the terrible things the Iraqi Government were doing to the Shi'ite population, particularly in the marshes of southern Iraq, and also to the Kurds north of the 36th parallel. Therefore I suggest that we have a clear policy and a limited policy and I hope your Lordships will agree that, in view of the clarity of that objective and its limited nature, the response has so far been restrained and proportionate to the objective I have described.
In that context it is important that we should be clear what the United Nations Secretariat itself feels about whether the coalition has acted under adequate authority. I should like to quote the Secretary-General himself, who said on 14th January:
"The raid yesterday, and the forces that carried out the raid, have received a mandate from the Security Council, according to Resolution 678, and the cause of the raid was the violation by Iraq of Resolution 687 concerning the cease-fire. So, as Secretary-General of the United Nations, I can say that this action was taken and conforms to the resolutions of the Security Council and conforms to the Charter of the United Nations".
I think your Lordships will agree that that adds considerably to the assurances that we have endeavoured to give in respect of authority. It may also help if I assure your Lordships, in the context of who the coalition is, that there has been constant consultation by the United States not only with the participants in the present action—the French and the British—but also with other prominent members of the coalition forces that took part in the Gulf War two years ago.
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The noble Lord, Lord Williams, also asked about the incident at the al-Rashid Hotel. I am not in a position as yet to give a definitive answer to the important question which he asked. All I can say is that there are two ways of looking at it. Either a Cruise missile, which, contrary to what the noble Lord said, has a reputation for being one of the more accurate weapons of modern warfare—the noble Lord may shake his head but many experts would disagree with him—went between 13 and 18 kilometres off course; alternatively, your Lordships may feel that it was remarkably convenient that the most public building in Iraq so far as concerns foreign correspondents was the subject of an attack and an explosion. I do not comment on what actually happened. We are endeavouring to address ourselves to that as a matter of urgency. I shall be happy to answer any of your Lordships' questions on this subject as soon as I am in a position to do so.
The noble Lord, Lord Bonham-Carter, set out certain criteria. I have endeavoured to answer at least the last two of the criteria which he enunciated. So far as concerns his first one, I refer him to the noble Lord, Lord Williams, who himself, by implication, said that we were not yet engaged in a full-scale war. I hope that it will not be necessary to do so.
4.36 p.m.
Lord Boyd-Carpenter: My Lords, is my noble friend aware that in the present troubled state of the world many of us find it enormously encouraging that this country should be acting in collaboration with the United States, France and Russia? That combination has great potential for maintaining the peace of the world and is a rather gratifying outcome of this very difficult situation. Is he also aware of the feeling of many of us that, if action had not been taken in the face of Saddam Hussein's defiance of the United Nations' decision, the good effects of the action taken earlier and of the war which we fought would have been largely offset, and that therefore it was essential that firm action should have been taken?
Finally, I add my own profoundly moved admiration for the gallantry and determination of our own forces acting in a dangerous situation in a distant part of the world and maintaining the highest standards of British arms.
Viscount Cranborne: My Lords, I am most grateful to my noble friend for what he has said, particularly for his final remarks. We try to protect our forces, as I am sure my noble friend knows, as far as is possible. Yet he equally well knows that the duty of servicemen is to fight when absolutely necessary. I wholly agree with him—and here I return to a question from the noble Lord, Lord Williams, which I did not fully answer—that it is eminently in the interests of this country to take part in the operations that are going on in Iraq. I have no doubt at all that the servicemen taking part in those operations are well aware of the geo-political imperatives that make that so. I agree with my noble friend that it is extremely gratifying that the collaboration that the founding fathers of the United Nations envisaged in London and San

745
Francisco at the end of the Second World War is finally beginning, particularly in view of the extremely gratifying—I use my noble friend's word—approval of Russia as the fourth member of the Security Council for our demarche.
Lord Ennals: My Lords, it will not be my intention to criticise the policies of Her Majesty's Government and I pay tribute to the work of those who have been involved in this conflict. But in supporting my noble friend on the Front Bench I express a concern about where this takes us. I recognise that there have been severe breaches of Security Council Resolutions 687 and 688 and I note the statements made by the Secretary-General. However, does it not seem to the Minister that when the Security Council passes resolutions it is not for a group of countries to determine how to react if those resolutions are not carried out? Would it not be preferable to return to the Security Council in order to get a further mandate?
The Minister simply referred to the three members of the coalition, but does he accept that considerable strains are now being placed on some of the other members of the coalition who were involved in the Gulf War? One is Russia, one is Egypt and another is Syria. We could list them. As this might go on week after week, are there not real dangers that there will be further infringements of the Security Council resolution? Would it not be wiser now to return to the Security Council and to get its backing rather than risk the danger of a very important coalition, with a very important objective, getting itself into the sort of difficulties that I have outlined?
Viscount Cranborne: My Lords, I have already quoted the remarks made by the Secretary-General of the United Nations on 14th January and I shall certainly not weary your Lordships by repeating what I quoted a few moments ago. I shall say merely that he is satisfied—as we are satisfied—that we are operating well within the existing authority and that what is at stake here is the authority of the United Nations itself. The noble Lord, Lord Ennals, is far too experienced in international affairs not to have at his fingertips the extraordinary and growing list of violations (which amount to a series of defiances) by Iraq of a number of Security Council resolutions. He will know that Iraq has refused to co-operate with UN inspectors on searches for weapons of mass destruction—which are themselves undoubtedly one of the greatest threats to peace in the post-cold war world. Iraq has refused to allow UN inspectors to use their own aircraft to, from and within Iraq itself—and the noble Lord will know the dangers of that. And so on and so forth —I could go on with a list, but I shall not weary the House.
We are perfectly satisfied that we have that authority and if it becomes clear that that authority needs renewing, refreshing or extending, we shall have no hesitation in going back to the Security Council. We are fully confident that we have its backing and that we will have its backing when and if the time comes. Perhaps the noble Lord will allow me to suggest this to him: I did not refer only to three members of the coalition. He will be aware that not
746
only is Russia a permanent member of the Security Council, but that there are a number of other members of the coalition whose active support and encouragement has been essential in order to make sure that this operation is possible at all. I refer particularly to members in that part of the world.
Lord Hailsham of Saint Marylebone: My Lords, is it not entirely consistent with what my noble friend has said that we should remember at all times that these actions arose out of something which called into question the whole efficacy of the United Nations; namely, the deliberate and wholly illegal obliteration of one member of the United Nations by another in total defiance of the United Nations' charter, and that if we showed any faint heartedness in this respect at this stage in time, the good work which we did two years ago would be entirely lost?
Viscount Cranborne: My Lords, I am extremely grateful to my noble and learned friend and can add nothing to what he has just said.
Lord Ewing of Kirkford: My Lords, the tributes to the troops who are involved in these actions are very generous and I am sure that they will be well received, especially by the families of those troops. However, is the Minister aware of the cases that were widely publicised in the press at the weekend and that the financial entitlements that were due to the dependants of those troops who were tragically killed in the Gulf War two years ago have still not been paid? While tributes are all right and very acceptable, tragically, they do not pay the mortgage or feed the children. Will the Minister agree to look into this problem? Although I do not expect him to give me an answer off the cuff because it is a very important matter, I hope that he will write to me and explain exactly what is going on in relation to the dependants of the troops who were tragically killed in the Gulf War two years ago.
Viscount Cranborne: My Lords, I am extremely grateful to the noble Lord. Again, this is a matter in which I have taken some interest in the past few weeks and months. The noble Lord will know that the Gulf Trust is about to be wound up and that over £3 million was subscribed to it by a generous public. Many grants have already been made although there are still some outstanding claims which are being addressed not only by the trust, but by what I might call their "residual legatees", which are the three main service charities. In so far as I am able, I shall certainly be happy to give chapter and verse to the noble Lord, and I accept with pleasure his kind offer that I should write to him. However, perhaps I may advise him that there have been a number of disagreements about who is entitled to what, as is always the case, however undesirable, when large sums of money are at stake. The objective of the Ministry of Defence and certainly of the independent trustees of the Gulf Trust—and I must stress to the noble Lord that they are independent—has been to make sure that there is as equitable and as rapid a distribution as possible. That is still our objective in spite of it being over two years since the end of the Gulf War.
Lord Beloff: My Lords, I wonder whether I may return to a point which I think is very important and which was raised originally by the noble Lord, Lord Bonham-Carter. My noble friend the Minister rightly says that our servicemen are convinced of the justice of the cause and of its concern to this country, but they must also be concerned that what is being done is likely to bring about the desired result. We are told that these are efforts to persuade the present regime in Iraq both to observe the conditions of the cease-fire and to cease the persecution of the Shi'as and the Kurds, but everything that has come out of Iraq during these events suggests that there is not the slightest intention or willingness on the part of the Iraqi regime to consider either of these since Iraq denies both any special status for its minorities (and with it the idea of the no-fly zone) and that the United Nations has the rights of intervention on which we are acting.
If it is not possible to persuade the present government in Iraq, one is faced—is one not?—with the proposition that was advanced by the noble Lord, Lord Bonham-Carter; namely, is it our intention to see that this regime falls? That is a very serious issue, but unless we know what the objective is (and unless it is an objective that we can see can be reached), is it fair to ask our gallant servicemen to risk their lives further?
Viscount Cranborne: My Lords, if I may be impertinent for a moment, perhaps I may say that the noble Lord, Lord Beloff, always asks extremely pertinent questions. He will know as well as I do that on the question of the nature, membership and complexion of any future government of Iraq, the "standard reply" (if I may put it like that) up to now has been that this is a matter for the Iraqi people. I am sure that the noble Lord will not expect me to add to that standard reply this afternoon.
However, I can say that short of that there is undoubtedly, as I have already tried to explain to the noble Lords, Lord Williams of Elvel and Lord Bonham-Carter, a narrower objective which is certainly in itself worthy of putting our servicemen's lives at risk for. It is, first of all, to make sure that Iraq is not tempted yet again to transgress and violate the borders of Kuwait. We know that there have been rather curious activities in the past few weeks in that regard. However, as a result of the pressure that the coalition has applied to the Iraqi Government, those activities have ceased for the moment and the appropriate withdrawals have taken place.
In addition there are the humanitarian considerations which arise out of the extraordinary activities of the Iraqi Government—in the north against the Kurds and in the south against the Shi'as. That in itself is reason enough for us to take the action that we have and justification enough for the SC resolutions that I have mentioned.
Baroness Robson of Kiddington: My Lords, does the Minister accept that it was with great relief that we heard his quotation from the statement made by the Secretary-General on the 14th of this month when he said that the coalition was acting within United
748
Nations resolutions? Will the Minister tell us what has been the Secretary-General's reaction to the attack on the military installations on the outskirts of Baghdad?
Viscount Cranborne: My Lords, I am afraid that I cannot supply the noble Baroness with an answer as satisfactory as the one I gave to the noble Lord, Lord Williams. Although I cannot supply her with a verbatim quotation, we are in constant touch with the United Nations secretariat, and our understanding so far is that it is satisfied with the legality and authority we have to carry out that action.
Lord Clark of Kempston: My Lords, I urge my noble friend to resist the blandishments of noble Lords opposite to return to the United Nations. It is obvious that the allies are working within United Nations resolutions. Returning to the United Nations would merely delay matters and give Saddam Hussein a little more breathing space to enable him to continue to persecute the Kurds and the Shi'as. Surely we should continue with the present policy and not necessarily return to the United Nations?
Viscount Cranborne: My Lords, I am grateful to my noble friend. In rather less noble fashion, I suspect that Saddam Hussein has probably not read of the actions—my noble and learned friend Lord Hailsham will be able to help me with this—of Quintus Fabius Maximus Cunctator. I suspect that he is at least a spiritual friend in the strategic sphere of that eminent Roman general. One of the results of his cut-and-run tactics has been to make it more difficult for the United Nations and the coalition forces to know when to strike. There comes a moment when we can delay no longer. We should be playing his game if we tried to delay any operation in the way that some noble Lords opposite appear to be suggesting.
Lord Ashley of Stoke: My Lords, is the Minister aware that I support the action that has been taken? However, does he agree that the action of the pilot who refused to fire his ammunition because he was afraid of killing civilians was admirable? He showed determination while risking his life and then refused to fire in case there were civilian casualties. Should not that attitude—determination plus restraint—be the hallmark of the operation?
Viscount Cranborne: My Lords, I am most grateful to the noble Lord and wholly agree with him. As I said in the Statement, there were two pilots in Tornados at the target. The one who failed to discharge his bombs for the reasons given by the noble Lord was the first to attack. The second pilot discharged his bombs, and, as far as we know, hit his target. The two aeroplanes then went round again to ensure that they had hit the target and that there had been no mistake. Unfortunately it was difficult to see because of the amount of dust in the area at the time.
Lord Archer of Weston-Super-Mare: My Lords, is my noble friend aware that Mr. Basahni and Mr. Telebahni are immensely grateful to the allies for keeping to Resolutions 687 and 688, whatever the word "allies" means, because for them that is their life every day? Will he never forget that the majority of the

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Iraqi people are good people who live in daily fear of an evil man? If ever we give up that resolve, that evil man will kill innocent Kurds and Shi'as, whatever we say in this House or any other place.
Viscount Cranborne: My Lords, I am of course grateful to my noble friend for what he has said in drawing our attention to the plight of the Kurds. I am sure that your Lordships are aware that the Iraqi Government continue an economic blockade of northern Iraq. As a result, the United Nations, supported by Western donors including this country, is mounting a major humanitarian operation there. For the past several weeks the Iraqis have been harassing United Nations convoys. They have planted bombs and obstructed the issue of travel permits for Iraqi Government-controlled territory. We deplore such harassment. Of course we support fully the United Nations efforts to ensure that humanitarian efforts get through. As I am sure my noble friend is aware, we are committed to protecting the Kurds in northern Iraq through the northern no-fly zone. He will also know that it was with considerable pleasure we registered the fact that on Christmas Eve the Turkish National Assembly renewed Operation Provide Comfort, which I hope my noble friend's Kurdish friends will also take as evidence of our commitment to help them.
Lord Finsberg: My Lords—
Viscount St. Davids: My Lords, the allotted 20 minutes has now elapsed. I suggest that we continue with the business on the Order Paper.

British Coal and British Rail (Transfer Proposals) Bill
4.56 p.m.
Proceedings after Third Reading resumed on Clause 1.
Lord Clinton-Davis Lord Clinton-Davis moved Amendment No. 3:
Page 1, line 10, after ("power") insert ("subject to subsection (1A) below").
The noble Lord said: My Lords, it may be for the convenience of the House if we take also Amendment No. 4. This is a matter which we touched upon in an earlier debate. The issue was to be dealt with in further consultations, as the Minister said at the time. It is important that we return to it, because my understanding is that the consultations have not yet been completed. In effect, we are seeking to probe further. We do not intend to divide on the issue so everyone who is not directly affected by or interested in the issue can go home.
The strict purpose of the amendments is to exclude from the Bill's provisions any actions concerning rail services supported by a PTE. It is of course important to probe the implications of the Government's proposals for rail services in metropolitan areas outside London.
PTAs and PTEs—together with British Rail in respect of rail services—have responsibility for public
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transport in their areas. Local rail services are operated by regional railways, but the PTAs and PTEs say where they should operate and provide the financial support required for them. The amendments are prompted by the continuing uncertainty over the future important role of the PTAs and PTEs and the importance of local rail services. They are critically important to enable metropolitan authorities to contribute towards a reduction in the impact of urban transport on the environment. They are also important for a number of other reasons, not least the retention of a clear and decisive local interest in relation to those rail operations.
It is interesting to note that, in a number of discussions on rail privatisation generally that have taken place, the Prime Minister himself has indicated his support for action to create a local and regional identity for rail operations and operators. That strong regional identity, even though he may not be entirely aware of it, is clear in relation to the services supported by the PTAs and the PTEs. It is clear in relation to the network of services provided, even the publicity which they promote, and in the frequent use of distinctive local livery.
Since we previously debated the issue a joint publication has been issued by the regional railways and the AMA, of which I am current president and of which my noble friend Lord Underhill was president until November last year. The document is entitled Signals for a Better Future. It gives emphasis to the significance of the partnership which exists between local government and British Rail, with its impact on the economy and the environmental quality of the metropolitan areas.
I shall précis the report's conclusion. The argument is that the document presents rail as one of a number of cogs in the local and regional transport machine but a vitally important cog. The conclusion states:
"An important benefit of the partnership between regional railways and local government is that railways are looked at alongside other aspects of transport policy. The result is a coherent and cost-effective strategy".
I made that point during our discussions on an amendment tabled at an earlier stage of the Bill.
It is important to note that those are the views of the regional railways and not only of the AMA. What do the regional railways bring to the situation? As rail operators they bring considerable professionalism and expertise. In conjunction with local highway and planning authorities the PTAs and the PTEs have the ability to determine appropriate rail investment and support in the context of the overall transport needs of the areas for which they are responsible and their accountability to local taxpayers. There is a close working relationship with the regional railways and each PTA and PTE. The PTAs and PTEs can monitor the standard of service provided and take action where appropriate. All those factors have been proved to be efficient and to work to the advantage of the local communities and regions. So why place all that in jeopardy? The system has not been proved to be found wanting and the Government have yet to make out their case.
There is considerable anxiety that the benefits of the current arrangements will he lost as a result of the

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Government's proposals. At best the PTAs and the PTEs will be obliged to cope with a more bureaucratic regime with less direct control over the rail operator. A relationship will be based on contractual lines alone rather than on a common policy goal. At worst, the quality, the scope and the cost of urban transport systems, in particular those affecting rail services, could suffer as a result of the new access and charging regime.
When the issue was discussed in Committee the noble Earl said:
"the PTAs and PTEs will continue to be responsible for specifying the services to be provided in their areas. Services will continue to be run under contract, initially by BR. The franchising authority, taking the PTA/PTE specification, will be responsible for franchising those services to private sector operators".—[Official Report, 1/12/92; col. 1285.]
We said that we were not satisfied with that, and some improvement has since been made by the Secretary of State.
The issue was raised further by my honourable friend John Prescott. He wrote to the Secretary of State, who stated that the PTEs would be jointly involved with the franchising authority in specifying and letting any franchise contract covering services for which they are responsible. He went further than the noble Earl was able to go and I am glad that he did so. I do not blame the noble Earl because he must take instructions on these issues from the Secretary of State. Of course the Secretary of State was talking about an involvement in letting. Unfortunately, that does not close down other areas of uncertainty.
We agree with the AMA and the regional railways that the successes which were set out in the document to which I have referred should be built on. The PTAs and the PTEs should be able to participate in decisions taken by the franchising authority as to how Section 20 services should be grouped in a franchise and about the scope of the business to be franchised. That goes further than the vague phrase "involvement in letting".
They should be able to participate in the short-listing of respondents to invitations of interest in franchises and the assessment of any repackaging proposals. They should be able to participate in negotiations between the franchising authority, Railtrack and the regulator relating to train paths, timetables and so on. The PTAs and the PTEs should be able to specify in detail the services which they wish to support and determine precisely how they feature in franchises. They should be able to determine all fares and the services which they subsidise. They should be able to set performance standards for services which they support, monitor performance on those services and, where appropriate, impose penalties. They should be able to participate in decisions on any service developments and enhancements relating to services which they support. They should have a right of appeal against any decision taken by the franchising authority or Railtrack affecting local rail services. We also take the view that they should have a financial guarantee via the Section 20 bolt-on for any commitments entered into as a result of the inclusion of local rail services in a franchise.
We ask the Government to specify where they stand on those issues because there is a lack of clarity. Is the Minister in a position to explain in more detail than he was able in Committee how under their proposals the Government see the role and responsibility of the PTAs and the PTEs relating to rail services? I beg to move.
Lord Teviot: My Lords, in Committee I discussed with my noble friend the bureaucracy of the system. He told me implicitly—and I believe him—that bureaucracy will not occur and everything will be straightened out. We must wait for the main Bill. However, I wish to address your Lordships on a new issue.
My right honourable friend the Prime Minister has declared that he wishes to see railways with a clear local identity. I agree with that implicitly. The only railways which have a local identity at present are the local passenger transport executive networks in the metropolitan areas. The trains and the stations have their own livery and are marketed as a local network. That has been achieved because the passenger transport authorities and the passenger transport executives are already effective as a franchising authority.
I wish to ensure that their role is in no way diminished by denationalisation. The creation of the franchising authority as a separate body could cut across the direct relationship between the PTAs and the PTEs, which pay for local services, and the railway which provides them. I see no reason for the intervention of the franchising authority, which already has a successful relationship.
Lord Underhill: My Lords, perhaps I may comment briefly on the speech made by my noble friend on the Front Bench. He has made out a powerful case for the amendment which also stands in my name. As my noble friend said, since we last discussed this matter there has been the publication of the joint report by the Association of Metropolitan Authorities and the regional railways. We did not have that when this matter was discussed previously. That document not only praises the work which has been done, but it sets out in complete detail the various schemes carried through by each of the PTAs and the PTEs. I hope that the Minister will take that into consideration when he replies.
In addition, paragraph 39 of the White Paper published in July went out of its way to stress how much the valuable co-operation of the PTAs, the PTEs and the railways was appreciated. I hope that the Minister will keep those two points firmly in mind when he replies because that co-operation between those bodies and the railways system is vital. Nothing should be done to impair that for the future.
The Earl of Caithness: My Lords, first, perhaps I may say how nice it is to welcome the noble Lord, Lord Underhill. We have debated transport matters on many occasions in the past and I am delighted by his intervention today. We shall consider carefully the representations made to us and study them with great care.

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The Bill before us enables BR and British Coal to act in relation to proposals put forward by the Secretary of State. The effect of the amendment is to reverse that in one area. It seeks to preclude BR from acting in relation to any proposal which might have the effect of disturbing existing Section 20 agreements between PTEs and BR. I am sure that the House will agree that to put an arbitrary constraint on what proposals BR may act in relation to is quite wrong.
As the noble Lord, Lord Clinton-Davis, reminds us, we discussed the position of the PTAs and the PTEs in Committee. At that time the noble Lord tabled amendments which sought to impose a duty on BR to consult PTAs and PTEs about any proposals put to it which related to Section 20 agreements. This amendment would preclude BR from doing anything in respect of any such proposal. I am sure that the House will agree that the whole matter has become rather contradictory and confusing. Nevertheless, I understand, given the noble Lord's position as president of the AMA, that the noble Lord, Lord Clinton-Davis, takes a keen interest in the position of the PTEs and PTAs in that regard and that he intends to probe government policy.
In doing so, the noble Lord mentioned the uncertainty of our policy towards PTAs and PTEs. I have found that rather surprising because we have made very clear our policy toward the future involvement of the PTAs and PTEs in the procurement and specification of railway services in their areas. Our proposal is that the PTAs should continue to set the policy for local rail services in their areas, that the services should continue to be specified and subsidised, where necessary, by the PTEs, and that the PTEs should be jointly involved with the franchising authority in specifying and granting any franchise contract covering services for which they are responsible.
I believe that that answers many of the questions and worries expressed by the noble Lord, Lord Clinton-Davis. I hope also that that will give some reassurance to my noble friend Lord Teviot. I took a careful note of what he said and would wish to study that in the Official Report.
Clearly there will need to be some changes to existing arrangements under Section 20 of the 1968 Act, not least because it will in future be private sector franchisees, rather than BR, which provide services for the PTAs and PTEs. It will therefore, inevitably, be necessary for us to look, with BR and with the PTAs/PTEs themselves, at the Section 20 agreements the PTEs have with BR, to see what needs to be done to ensure that services can continue to run smoothly in PTE areas.
If the railway network fitted neatly within PTA boundaries, it might be easier to argue that each PTA should be made a local franchise authority. However, as I know my noble friend Lord Teviot knows, that is not the case. Many of the trains which serve PTA passengers run beyond a single PTA area. It would not be sensible, operationally, to think of letting franchises covering only parts of a service. Provisions
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will be included in the main privatisation Bill to give effect to our proposals. Therefore, we shall have many opportunities to consider those at a later stage.
5.15 p.m.
Lord Clinton-Davis: My Lords, I thank the noble Earl for his reply. I shall certainly consider that. I have already indicated that the amendment aims to probe the matter further. Equally, I hope that the Government will pay careful attention to the points which I have raised in today's debate and which I am sure will be reiterated to him in the further consultations which will take place—if not with him then with the Secretary of State in the not too distant future.
I am not at all satisfied that there is a strong case made out by the Minister to change the situation. That is the burden of the argument raised by the noble Lord, Lord Teviot. The burden is on the Government; it is not on us. It remains for them to substantiate the case which I do not believe they have done so far. However, this has been a useful exchange and I hope that it will provide a good basis for further discussions which will take place and that the Government may yet come to the conclusion that the wider role of the PTAs and PTEs, which I describe in my earlier remarks, is consistent with their programme. In those circumstances, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 4 to 6 not moved]
The Earl of Caithness: My Lords, I beg to move that the Bill do now pass.
Moved, That the Bill do now pass.—(The Earl of Caithness).
Lord Clinton-Davis: My Lords, it is rather strange that the Government have been in such haste to enact this Bill. They are unable to wait for the report of the Select Committee in another place which is inquiring into pit closures, although that is imminent. They are unable to wait for the interim report of the transport Select Committee on privatisation in another place which is due this week. It is odd that that should be the case because the Secretary of State revealed recently that it would take 12 years to complete the privatisation process, semi-privatisation, commercialisation or call it what you will. I noted, however, that in our debate on 15th December, the noble Earl, Lord Caithness, said that this was a genuine privatisation proposal so that he has nailed his colours to that particular mast.
Whenever we have sought to probe the Government's intentions in detail, whenever we have sought to establish vital safeguards through the amendments which we have proposed, as I said earlier, we have been told repeatedly that this Bill is the wrong vehicle. The vehicular argument is the one often used by Ministers in distress. We are told that it is merely a Bill to enable British Rail and British Coal to prepare for privatisation, to secure advice, and so on.
I submit that equally repeatedly the Government have missed these essential points. In order to carry

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out their functions properly, those advising the nationalised industries need to form a sensible assessment of the assets and liabilities of those industries. They need to understand the implications of the proposals. It is not only noble Lords on this side of the House who suggest that there is a lack of clarity in the Government's proposals. The CBI has said that the proposals lack clarity and detail. How is it therefore that those advisers can undertake their tasks with the care which is required?
The noble Lords, Lord Ridley and Lord Young, and the noble Viscount, Lord Whitelaw, who have hitherto been very strong proponents of the concept of general privatisation, have questioned the desirability and practicability of these proposals. I also say that this House should have been much more privy to the thinking of the Government—if in fact one can so dignify what is going on in their minds—and therefore the amendments that we have put down, which have sometimes been wrongly characterised as wrecking or inappropriate by Ministers, have not yielded the information to which we were entitled. I grant the Ministers that there have been exceptions to that. They have chosen to be more forthcoming about some things rather than others.
The other matter to which I want to refer at the outset of my remarks is that it was extremely unwise —I hope it will not constitute a precedent—for these two industries, separate interests and separate concerns, to be taken together in this Bill. I remember that the noble Lord, Lord Boyd-Carpenter, raised one or two question marks about that in an earlier debate, and he was right. I hope that the Government will say that it will not be repeated.
One other matter that relates to the issues raised by my noble friend Lord Donoughue earlier concerns consultation. The issue that was raised by my noble friend is relevant to all areas of consultation undertaken by this Government. Their bona fides are in doubt. That has been made clear as a result of this extraordinarily trenchant judgment on the part of Lord Justice Glidewell.
It is interesting to note that on 1st December (at col. 1275 of Hansard) the noble Earl, Lord Caithness, just a few days before that judgment, said:
"These amendments refer to consultation, but I do not think this is something that needs to be imposed on either British Rail or British Coal because they will be fully aware of their obligations in this respect".
He went on:
"Let me reassure the Committee that we too are aware of the importance of consultation".
That was not the view taken by Lord Justice Glidewell. The Minister ought to reflect further on what he had to say on that occasion.
I do not propose to say much more about coal, except to ask the noble Earl to answer the question I put to his noble friend, who then passed the question on to him in the earlier debate. I hope the noble Earl will take that up. I think he has forgotten it. If the noble Earl indicates that he can remember the point then I need not reiterate it. I see that he does.
I turn now to the rail issues in relation to this Bill. We have urged the Government to think about an integrated transport policy. It would be nice to think
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of this Government embracing a sensible transport policy. In a sense it would of course require them to cross the Rubicon, but the trouble is that they would not have the infrastructure or the transport to do that, and that constitutes something of a problem.
It was only after the Bill had reached its Committee stage in this place that the Government issued their White Paper. But it was not as something that cast a great deal of illumination on the way in which they propose to deal with the myriad problems that they have created for themselves; and it is odd that it should have taken so long after the Bill had been introduced in another place for the Government to deign to do that. Of course when it comes to coal they have not done it even now. What they did was to declare a variety of objectives consonant with their prejudices and then endeavoured later on to tack on the reasons for undertaking that course. It is an unconvincing exercise that has been widely condemned in the serious press and by a number of their own supporters, as I have already indicated.
What all of us want to see is a British railway system that functions as a national service and an efficient and safe service of high quality, with profitable services helping to maintain the less profitable ones. Cross-subsidisation is an integral part of any transport system if a network service, and one which in part operates as a social service, is to be maintained, and as a service too that contributes to a sensible and integrated transport system and environmental policy. We are not just after a change of livery or televisions being on trains. It is a fundamentally different approach.
We recognise that there is a need to inject private capital into the system. It is done in France. It is done elsewhere. It should be done on a wider basis than it is currently done in this country. There is nothing wrong with importing experience and expertise from the private sector into British Rail management. These matters are critically important to aid investment and to help to sustain the railway manufacturing industry, which currently is in dire straits. I want to come back to that later.
Against that background it is fascinating that, in contrast with every other privatisation introduced by this Government, where the White Papers or Green Papers have always given emphasis to the question of greater investment, the framework element of investment has been singularly missing. It is dealt with rather casually in the White Paper in paragraphs 42 and 43 in relation only to infrastructure. Yet there is a massive investment famine so far as railways are concerned.
I referred in an earlier debate to a report that had been commissioned by Transport 2000 through its very respectable consultants, Steer Davis Gleave. That report concluded:
"There will be a risk of further reduction in investment for a number of reasons: fragmented decision-making between Railtrack and train operators; difficulties in buying or leasing rolling stock; higher track charges, especially for freight; and conflicts between franchising passenger services and allowing open access to the tracks".

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These are charges that have been made not only by me, as the Minister well knows, but by many others, and which have never properly been refuted by the Government.
Despite the investment problem the autumn spending statement projects spending in grants and loans halving over the next three years. It has been reported—and perhaps the Minister will comment on this specifically; I hope it is not true—that even the £150 million that has been allowed for leasing new trains cannot be taken up because British Rail cannot afford the repayments.
There is uncertainty too over the unnecessary diversion of privatisation, which is already causing the situation to deteriorate much further. The lack of any framework for new investment and for co-ordinating electrification or signalling schemes between Railtrack and different train operators will almost ineluctably lead to further serious decline in the quality and perhaps even the quantity of rail services. What we need is a huge change of priorities in our transport investment expenditure—moving a good deal from road to rail—particularly in the light of this Government's environmental objectives, which are hardly mentioned in relation to the White Paper.
I turn then to the question of network benefits. Despite assertions to the contrary, there is no evidence at all that the Government intend to protect the network benefits that prevail at the moment. Will the Minister give an undertaking that there will be statutory protection for a national timetable and for national information systems? Will he give assurances that railcards and other network fares schemes will be retained? What will he say, if anything, about discount through tickets? Those are important as 40 per cent. of current rail journeys are made on discount fares or railcards which would involve more than one franchisee. Will those be protected? I am not speaking merely of protecting through tickets at standard fares. My understanding is that the Government assert that no protection is required because these measures are in "the interests of operators". However, bus deregulation—that is hardly a good precedent for privatisation of the railways —has established that network information and fares schemes are not in the market interest. For example, Manchester Metrolink, which is a privately run train scheme in Manchester, has already decided that it wants to have nothing to do with British Rail national timetables.
There is another problem in this regard. The regulator's remit is to promote competition and to protect network benefits. Unless this is clarified we could find a situation where agreements on timetables, connecting trains, information and fares between different companies could be debarred altogether as being anti-competitive. That is precisely what happened in the bus industry as a result of the intervention of the Office of Fair Trading.
I come next to the question of bureaucracy and the lack of accountability. I realise a lack of accountability may have certain attractions for this Government. My noble friend Lord Cocks referred to this point forcefully on Second Reading. He may well wish to
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say something more about that. There is a proliferation of different authorities and the scope for buck-passing and indeed for legal argument will be immense.
As regards track charges, we have no idea what will be required in this regard. I believe that Railtrack is supposed to make a return on assets of 8 per cent. Will this operate as an incentive to disinvest and to close lines? Freight trains at present pay only marginal costs when sharing track with passenger trains and the same applies to local trains using InterCity track. Do the Government have any plans to protect this system? If not, under the new regime we could easily see costs rising for these services, leading to higher subsidies, higher fares and higher charges or—the alternative is stark—reduced services.
Most track investment is expected to be financed through the charges according to the Government, but they pay no attention to the fact that competition from other modes of transport—the railways do not represent a monopoly—will mean that railways will be further prejudiced. The only way out of this problem would be for the railways to be treated on the same basis as roads. However, the Government show no inclination of doing that.
A track charges regime is crucial to the future of freight. Freight is disappearing because of BR's objectives requiring rail freight to be profitable. Other areas which will be left to the operators will include staffing on stations and making trains and stations more accessible and safer. If they find that economies in these areas are required because they will not be given priority, the outlook for passengers will be very bad. As regards investment, network benefits, the organisation of the regime, charges, freight and passenger needs, huge problems persist. Those problems have not been addressed either in the documents issued by the Government hitherto or, what is more relevant, in the debates we have had.
I referred earlier to the railway supply industry which is in crisis. There are 9,000 jobs at stake. Because of investment problems British Rail is placing no new orders. Without orders at home the prospect of winning overseas orders is virtually non-existent. There are doubts now as to whether this industry can survive beyond 1994. Will the Government stand idly by and allow this vital industry to go to the wall?
My next point has been referred to on previous occasions. To use the expression of Lord Justice Glidewell it is a wholly irrational decision on the part of the Government to refuse to allow British Rail, with its expertise and experience, to bid for franchises. That makes no sense whatsoever. It is not just noble Lords on these Benches who have raised this matter. Many other independent people have also raised it.
In my first conclusion I refer to the questions of which I gave the Minister notice earlier today. However, I have raised these points in previous debates and I have not yet received a reply from him. On 15th December at col. 512 of the Official Report I asked the Minister to inquire into a point which excluded British Rail from being able to tender. I asked the Minister whether that would infringe Community law. He promised to look into the matter.

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What is the position? Is there a possible contravention of Community law here or not? If he says there is not, I should like to know why not.
There is also the matter of the EC acquired rights directive to which I referred on 30th November at col. 1239 of the Official Report. I asked the Minister what effect that directive would have as regards workers changing employment from a public utility to a privatised company. I drew attention to a recent ruling in the European Court of Justice to the effect that the United Kingdom regulations implementing the directive were inadequate. The regulations restricted the protection to workers in commercial ventures. The European Court of Justice decided that was unlawful. The Government had claimed wrongly that the regulations had always covered the public sector. What is the position on that matter now? The Minister has had a long time to consider both those points and I hope he will comment on them this afternoon.
I am glad to see the report issued by the Health and Safety Executive. I am also glad that the Minister in another place—I believe it was the Secretary of State —indicated that the Government accepted all the proposals. The Health and Safety Executive is, however, saying in effect that a more dangerous system could be introduced on privatisation unless the Government control the position carefully. Why countenance such a change at all if it contains any major risk?
We believe that privatisation may lead, and indeed is likely to lead, to much higher fares and will damage accessibility and levels of service. We believe in a united, unified network for passengers. We also believe that there needs to be a sustained investment in expansion, in the modernisation of trains and in infrastructure. We believe it is important that improvements and not cuts in services should be made. That is what the nation is really looking for but the Government have not begun to make out the case for change.
I now come to my final conclusion. I wish to thank all the local authority bodies, trade unions, consumer bodies, transport industries, transport interests and others who have given us such important support throughout the passage of this Bill. I wish to thank our own researchers in this place and our own Back-Benchers in this House for the help they have given to us throughout the course of the Bill. Even though we have often fundamentally disagreed with the Ministers I thank them for the courtesy they have yielded to us. Above all, I thank my noble friend Lord Donoughue for his constant support and help—I hope it has been mutual —in the work we have undertaken during the course of this Bill.
5.30 p.m.
Lord Boyd-Carpenter: My Lords, I find myself in a position of some emotion at this stage of this Bill for the following reason. Unlike a certain number of noble Lords, I was in this Chamber—then another place—when the measures were carried which nationalised both the railways and the coal industry. I recall with a measure of pleasure the fact that on
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both those occasions I ventured to warn the House —that is, the other place—that that was a disastrous decision that would in due course have to be reversed.
Therefore it gives me some pleasure that we have now reached the stage at which Her Majesty's Government are asking the industries concerned to undertake work in preparation for denationalisation. That shows that if one waits long enough one generally achieves a satisfactory outcome, although in this case I had to wait a long time.
I hope that the noble Lord, Lord Clinton-Davis, will not regard it as offensive if I say that many of his, as always, well argued points will have to be dealt with, and which will no doubt be deployed and will have to be answered, when the denationalisation Bills come before your Lordships' House. However, it seems to me that at this stage there is comparatively little obligation on Her Majesty's Government to answer those save to say, as I would venture to say, that they are all matters which the industries have to consider now under the duties which are being imposed on them, and that your Lordships will certainly have to consider them when the privatisation measures appear.
Lord Clinton-Davis: My Lords, I thank the noble Lord for allowing me to intervene. As he knows, I always enjoy his contributions. If there is a great deal of doubt, uncertainty and lack of clarity—to use the CBI's term—about the proposals, that does not help the professional advisers who are supposed to advise British Coal and British Rail during their consideration of the ways in which privatisation may take place.
Lord Boyd-Carpenter: My Lords, I agree entirely. There are serious points which will have to be considered. However, it is surely not the noble Lord's argument that at this stage of the Bill, when we are considering the Motion that the Bill do now pass, that the whole procedure of asking the authorities for those industries to consider the steps that need to be taken for denationalisation should suddenly be dropped. It is quite clear that everyone's mind is now directed towards the serious problems which arise in connection with denationalisation, particularly in connection with the railways.
We have reached a stage at which it is surely right to ask the industries concerned to think about the matter and to give the Government, the country and your Lordships' House their views as to the problems. When the Bill to privatise the industries comes before your Lordships' House, we should then consider the arguments and come to a decision whether those arguments should prevail. I always listen to the noble Lord's arguments with interest; but I suggest with great respect that at this stage to deploy a great deal of argument against privatisation will not be of great assistance. It will not assist this House and will certainly not assist the industries concerned.
I shall not say anything about the coal industry. For reasons with which your Lordships are familiar that is becoming quite a small industry, and whatever happens I am afraid it will become smaller. However, the rail privatisation will be a matter of great practical importance.

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There is one problem which I hope the railways board will consider. As a frequent rail traveller, I know that British Rail seems to have lost the concern that it used to have for the well-being of passengers. If one travels by British Rail, one finds a certain detachment towards the interests and comfort of passengers. That is quite different from what one finds if one travels by air and from the care which the airlines take of their passengers. I have some experience of that because, as your Lordships may recall, I was chairman of the Civil Aviation Authority and I studied how the airlines worked. There is also much more concern for the comfort and well-being of passengers on coaches on the roads.
If one travels through Paddington Station, as I frequently do, one is left standing in a large, chairless arena, almost always waiting for the time when a train is due to depart to be indicated before one can proceed towards the platform. There is an atmosphere which suggests that British Rail does not care much for the comfort or well-being of its passengers.
5.45 p.m.
Lord Taylor of Gryfe: My Lords, what right does the noble Lord have to make such generalisations about British Rail services? I speak as a former member of the board and someone who travels 500 miles from Scotland to London every week and 500 miles back again. My experience is totally at variance with the generalisations which have been made against British Rail personnel.
Lord Boyd-Carpenter: My Lords, I am very glad that the noble Lord travels comfortably. I should hate to think of his doing anything else. I can only speak from my own experience. I mention in particular the experience of those who have to use what used to be the old Great Western system. At one time, under private enterprise, that was probably the best and most comfortable section of the railway system. Now there is not only a very low standard of efficiency in which punctuality is virtually unknown, but there also seems to be a disregard for the comfort of passengers. I do not think that that is unique to the western section of the network. I think that it is certainly true of the southern section. I believe that the noble Lord is right and that some of the lines to Scotland still retain some of the old approach to the care of passengers; but I assure the noble Lord that that is not the general experience. It is, alas!, not generally the case.
It is very important that an organisation which has to cope with passengers should have some concept of care for them and should demonstrate that care. It is only in that way that traffic will be built up in the way that we all want to see it built up.
I do not think that we shall achieve that under public ownership. Once all those in an organisation, from the board at the top to the most junior person working at the lower levels, realise that in the future their living depends on satisfying the needs and wishes of the public, there is a much greater chance of having a system which will be efficient in itself and in due course will become reasonably profitable.
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I leave this thought with your Lordships. One has to induce a commercial approach in British Rail, a desire to attract custom and to interest the public in British Rail, and one must induce an interest in the public. In order to achieve that I believe that some form of privatisation is necessary.
The precise form of privatisation is a difficult question. No one who has studied the matter believes for a moment that privatising British Rail will be anything like as easy as was the privatisation of a good many other organisations. The fact that there is only one railway track will be a factor of special difficulty. There will be very real problems, which I know your Lordships will discuss fully when the privatisation Bill comes before this House.
However, we are not there yet. We have only reached the stage of considering the Government's extremely sensible proposal that the board should be asked to consider what action should be taken preparatory to privatisation; and that in the light of that consideration the Government should come to a decision as to what is to be put into the privatisation Bill. When that Bill is considered, I am perfectly certain that we shall have vigorous controversy. However, I am also sure that we shall be discussing a Bill of the very greatest practical importance to this country.
No one can travel by rail, as the noble Lord opposite states he does, without being worried by the weaknesses of the system. The noble Lord, Lord Clinton-Davis, referred to the cancellation of various proposals. There was the announcement in the press recently that proposals for additional safety expenditure had been postponed. Those are real problems which indicate that the present system is unsatisfactory and requires to be changed.
The substance of the changes will be a matter for the next Bill. I hope and believe that they will be sensible. I hope and believe too that they will centre on the ordinary, commercial approach of a satisfied customer holding and supporting a satisfactory organisation. In considering the duties which we are imposing on it by this measure, I hope that the board will have that approach very much in mind.
Lord Howie of Troon: My Lords, I do not wholly recognise the picture of Paddington Station, if I heard the noble Lord aright. I find it far from cheerless. It has been refurbished and painted. Its general aura of cheerfulness has been greatly increased. It contains a statue—although it is not a good one—commemorating Isambard Kingdom Brunel. If the noble Lord has been as miserable, as he seems to have been at Paddington Station, he could always have gone into the hotel where happiness can be purchased quite readily.
However, I wish to make this point on the privatisation of British Rail. I draw attention again to an objection which I have made previously in the House. It is about the proposal to create a track authority as opposed to the authorities with which we are familiar. I have cited how the railways began in the early part of the 19th century with a track authority with franchisees on the Kilmarnock and Troon line in 1812, on the Stockton and Darlington line in 1825,

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and on other railways at about the same time. The modern method of running a railway was devised in 1830 on the Manchester and Liverpool railway. By comparison with the track authority system which had been used in the earlier railway systems, the modern method was quickly shown to be preferable. Indeed two Select Committees of this House demonstrated that quite clearly in the 1840s or thereabouts.
I believe that we make a mistake in returning to a track authority system. Nowhere else on earth is such a system used to any great extent. I know that little bits exist here and there on Amtrak. I know that the Swedish railways run a small part of their system in that way. Such a system would be a sizable error. I sincerely hope that the Government will have second, third or even fourth thoughts before they embark on that mistaken path.
The Government's proposals in the Bill for the coal industry are part of a strategy. They are an economic strategy extending their ideology of privatisation. However, they are not an energy strategy. That gives me great disquiet. An energy strategy, rather than an economic or financial strategy, is required which is aimed at energy and practised through reorganising the coal and other energy industries.
I make two points. The first is a brief quotation from a paper which has been sent to me from the Management Centre at the University of Bradford. It is a paper by Jonathan and Ruth Winterton on the strategic implications of proposed colliery closures. The quotation itself cites Schumacher in 1960 when he was the economic adviser to the National Coal Board. What Schumacher said is extremely interesting and should be reflected upon. He stated:
"The concepts of 'economic' and 'uneconomic' cannot be applied to the extraction of non-renewable resources without very great caution… To eliminate the losing factory means the elimination of waste. But to close the losing colliery means merely to change the time sequence in which finite resources are being used… It is a policy of doubtful wisdom and questionable morality for this generation to take all its best resources and leave for its children only the worst. But it is surely a criminal policy"—
that perhaps goes a little far; "mistaken" would be a better word—
"if, in addition, we wilfully sterilize, abandon, and thereby ruin such relatively inferior resources as we ourselves have opened up but do not care to utilize".
I do not wish to stress that point any further.
The economic strategy on energy seems to me improper in one specific sense. The problems of the coal industry in relation to electricity arise because we now use gas as a secondary rather than a primary fuel. I regard that as inherently wrong. I speak with the background not of an economist or a chartered accountant, but of an engineer. We have a duty upon us to utilise finite resources to their best capacity. That does not mean merely their cheapest capacity. If we have an energy resource, it is incumbent upon us to use that energy resource in such a way that we obtain the maximum efficiency from it; that we produce the most energy—it can never be 100 per cent.—from the fuel at our disposal.
So far as I can make out, if natural gas is used to make electricity a secondary fuel, we achieve about 30 per cent. efficiency from it on a good day. On the other
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hand, if gas is used directly we achieve at least 60 per cent. efficiency or rather more. By using gas to produce electricity, we throw away 30 per cent. of its thermal efficiency. That might make economic sense to a chartered accountant but it does not make sense to anyone who believes that when we are dealing with a finite resource we should use it to its best advantage.
The Government's policy in regard to rail privatisation by the track authority is mistaken. The Government's insistence on utilising gas as a secondary rather than a primary fuel is also mistaken. Beyond that, the Government are probably doing a good enough job.
6 p.m.
Lord Ezra: My Lords, we have been debating a technical Bill with a limited objective, as the noble Lord, Lord Boyd-Carpenter, reminded us. It was nevertheless to be expected, as the subject of the Bill was the privatisation of two major enterprises, that a number of major issues should have been raised. I am sure that that did not come as a surprise to noble Lords on the Front Bench opposite.
I wish to start by expressing my appreciation of the way in which Ministers dealt with matters, sometimes at considerable length. It was most helpful to us, even though we did not entirely obtain the answers we wished.
I am at one with the noble Lord, Lord Clinton-Davis, when he regrets that the two industries are being dealt with in one Bill. In my opinion, this led to a most untidy debate; we dodged about from one issue to the next, half on one, half on the other. Sometimes issues were linked, sometimes they were not. It would surely have served the Government's purpose far better if we had separated the two entirely so that those who participated in the railways debate would have been people who knew about the railways and those on coal would have been people who knew about coal.
Furthermore, I am in serious doubt as to whether the coal part of the Bill should have been brought forward at this time. We have been told repeatedly that the reason is that without this Bill empowering the managements of rail and coal to consider privatisation and employ consultants there would be no powers for them to do so. I am afraid that I cannot accept that. If the noble Earl and the noble Baroness will kindly look up the Coal Industry Nationalisation Act 1946, they will find that it is a remarkably short Act. As the noble Lord, Lord Boyd-Carpenter, will, I am sure, recall, it empowered the board to do all those things which it considered to be right in the interests of the industry. With a prospective Act of privatisation, surely if it were put to legal experts they would be empowered under that Act to have a serious look at the implications of privatisation. Therefore, in my opinion, this does not add anything to the powers that the board already has.
Furthermore, there should have been a delay because of all that has happened since we had our Second Reading on 16th July. When after the Summer Recess we moved on 30th November to the Committee stage much had happened. Again, I feel

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that it would have served the Government's interests far better if the present problems over the coal industry had been dealt with and then the Bill had been introduced. We should then at least have known what the background was against which a possible privatisation measure was to be introduced. Thus we have had an untidy and difficult debate over an issue which should have been relatively straightforward and simple.
During the course of that debate, as I mentioned, the Government commented on a number of issues raised. I should like to itemise the major issues which I think were raised and on which the Government gave varying degrees of assurances as concerns the coal industry. I shall naturally look forward to seeing those assurances carried out, as I am sure that they will be, when we see an eventual privatisation measure.
The issues include pensions. Everyone agrees—the Government totally agree—that particularly for coal they are a vital issue because half a million people are involved in pensions which they either now receive or which have been deferred because of the rapid closure of the industry.
We were also given assurances on safety that high standards would be maintained, whatever changes in ownership took place. On research, we were assured that vital research, particularly on clean coal technology, would be continued. We were assured that the high environmental standards which are enjoyed at present in the coal industry in its nationalised form would be continued, although the issue that seemed to me to remain in doubt was whose was the responsibility for the environmental impact of previous mining operations. At the moment that responsibility rests with British Coal. With whom it would rest when the assets are sold to some third party remains to be determined.
On concessionary coal, we were given a formal assurance that it would be continued. We were told that the coal industry social welfare organisation would continue. We were given general assurances on redundancy payments for future closures. Today we discussed consultative procedures, particularly in relation to closures. That is quite an important list.
If all those matters are introduced, as I am sure they will be, in the proposed privatisation legislation, it might be difficult for some to visualise how a third party could do any better with all those obligations than the present management. Therefore we shall have to see how, with all those restraints and obligations, nevertheless the transfer of ownership could be considered worth while. That is a question to which we shall come later.
I wish to conclude by saying that we shall obviously return to this on several occasions. We shall debate the whole coal issue again when we have received the forthcoming White Paper. We shall look at it again when we have the proposed legislation.
I end with a plea. I made this request at the time of the Second Reading and repeat it now: I hope that before the Government put their proposals for the privatisation of coal forward in the form of legislation
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they will let us have a White Paper as they did in the case of the railways. Then we shall be able to debate it fully before we reach the legislative stage.
Lord Mason of Barnsley: My Lords, I am pleased to follow my noble friend Lord Ezra, especially as I wish to deal solely with the coal industry. I am totally opposed to the Bill. I find it unbelievable that a government could seriously contemplate introducing a Bill which paves the way to privatise the coal industry when the energy industries, by the Government's making, are in such turmoil. Every sector—gas, nuclear power, electricity and coal—is unsure of its future, a turbulence created by the political stupidity of the President of the Board of Trade. His statement of 31 pit closures caused shock waves throughout the country. It was shocking and politically naive, with no Cabinet consultation and totally disregarding the rules of pit closures and of government legislation. It is inconceivable that one Minister could make so many mistakes, create a people's revolt, with national demonstrations, and be proved to be so utterly wrong. One wonders how he has survived. In any case, confidence in the man will never be the same.
The Government have been plotting and planning the rapid run-down of the coal industry in recent years, hoping to leave a rump of highly profitable pits for the privateers. For example, recent government legislation has given the open-cast coal mining industry the right to expand production from 15 million tonnes per year to 25 million tonnes. The extra 10 million tonnes of output would close 10 pits.
The Government gave the signal to the energy industry that coal could be imported without any restriction on tonnage. Therefore we now have 12 million tonnes of cheap coal coming through the ports of Britain. Much of it is quarried coal, open-cast coal, lignite, brown coal, some based on cheap labour and some tonnage subsidised. There is no doubt that it is unfair competition against the British coal industry. That affects another 12 pits.
The Government are continuing to import French nuclear power. It is equivalent to the annual output of five coal mines. Then there was the decision to allow North Sea gas to be burned in our power stations—a premium fuel in preference to British Coal's power station coal. Every conversion to gas or a new gas station cuts back the demand for power station coal.
What is also most galling is that it is publicly known —and the European Commission is aware of it—that the German deep-mined coal industry is heavily subsidised. Where are the British Government's protests? The Germans survive with subsidies while our own industry is being sabotaged by a series of deliberate government measures designed to create a privateers' paradise in the energy market.
Expanding opencast coal mining means the loss of 10 pits; cheap coal imports (12 million tonnes) loses another 12 pits; French nuclear power is equivalent to five pits. Twenty-seven coal mines have been closed or are closing as a result. There is also the fact that with the imports of fuel from abroad, we are constantly adding to our unemployment figures. We are importing unemployment: 17,000 jobs are going with

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those coal mines alone from the imports of coal and nuclear power from France. And there are the knock-on effects from the loss of 35,000 jobs. We are also concerned about the future security of coal supplies.
In the haste to prepare for the privatisation of the coal industry, the Chairman of British Coal presented a plan to the President of the Board of Trade to close 31 pits—two-thirds of the industry—leaving 20 coal mines. Perhaps a dozen might survive at the end of the century. To shut them down in a mad rush, contrary to all the rules, with the 90-day consultative and review period totally ignored, was dictatorial and bombastic. But it has turned out to be an act of the worst political ineptitude in parliamentary history. Were these acts not all a preparation for privatisation? Just a handful of pits were to remain, having weeded out the uneconomic and the marginal coal mines; also having rigged the market.
There has been a further humiliation for the Government, as referred to in my noble friend Lord Donoughue's opening remarks. Eight coal miners with the National Union of Mineworkers and with the National Association of Colliery Overmen, Deputies and Shotfirers and the Union of Democratic Mineworkers challenged in court the Heseltine Statement. A judgment was delivered ruling that decisions by Heseltine and British Coal were unlawful. They were made without any consultation with the unions and were in breach of Section 99 of the Employment Protection Act 1975, and from October 16th 1992 of Section 188 of the Trade Union and Labour Relations (Consolidated) Act 1992. It was stated that the decision to close the first 10 pits without any independent scrutiny was irrational. Mr Justice Hidden made it clear that these problems had to be resolved within the law and not outside it. The whole episode was an unlawful act.
With all this going on, British Coal's blunders, ministerial misjudgments and illegal acts by Ministers, should a Bill be going through this House? Should this happen when there is so much uncertainty about the coal industry's future, and while numerous committees of inquiry are sitting: the Select Committee on Employment, the Select Committee on Trade and Industry, the John Boyds American consultative inquiry, the Government's internal inquiry and the eventual White Paper? It is nonsense to move a Bill through this House at this stage with all these inquiries going on and as yet no conclusions. There has been an independent report from the European Parliament's public policy advisers stating that the Government's controversial plan to close 31 mines is based on short-term thinking. The consultants calculate that production costs for Britain's deep mines could be cut by a quarter on average over the next few years as new technology is exploited, making British coal cheaper than the upper price band on the world market. A premium to ensure security of supplies would make it cheaper still.
I believe that the series of reports which we are awaiting will come to similar conclusions. Therefore, in the light of this series of government blunders, mistakes, misjudgments, illegal acts over the coal
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industry and the unease throughout the energy sector, how can this House give this Bill its blessing today? I do not believe that it should, and the Bill should be thrown out.
6.15 p.m.
Lord Underhill: My Lords, at the Second Reading of this Bill I was given the responsibility of making the opening speech in opposition to the proposals in the Bill. By Second Reading on 13th July we had not received the White Paper. We went very hurriedly into the Committee stage and subsequently the Report stage.
At Second Reading I said that this Bill had all the hallmarks of the Government's obsession with privatisation. Nothing said during the whole passage of this Bill, including the speech of the noble Lord, Lord Boyd-Carpenter, has removed the view that I held at Second Reading. When eventually we had the White Paper, it was clear that there were many blanks and that the Government did not know how they were going to proceed with the steps of privatisation. Perhaps I may say—this point will come out when we have the Bill before us—that the real issue is modernisation with adequate finance, not privatisation. We have been told time and again—and it has been repeated this afternoon—that this Bill does not give British Coal or British Rail powers to implement privatisation. What it does is give them the power to consider these proposals and make preparations for privatisation.
I listened very carefully to the noble Lord, Lord Boyd-Carpenter. He said that discussions that are taking place will help decide what is to be put in the Bill. Now we are told—and on this occasion I am prepared to believe the press because there must be some government leakages—that the Bill is to he published soon: this Friday. If the present Bill, which empowers discussions to take place and proposals to come forward, has not yet been approved, how the devil can the privatisation Bill be published this week? We have not yet passed this Bill which gives powers for the discussions to take place. If discussions have taken place, what consideration has been given to the various points raised by Members, including two Members of your Lordships' House on the Conservative side who expressed great anxiety over the Government's proposals? What view has been held by the umbrella organisation for some 80 user-groups which have expressed worry over the proposals for privatisation?
The Government have said that the proposals being brought forward in the Bill will bring in management skills. I believe that nothing can replace the skills of railway management which exist in British Rail today. It is not just my view. Paragraph 3 of the White Paper pays tribute to the progress made by British Rail and notes that the efficiency of British Rail compares very favourably with other European railways. Later on the Secretary of State, at Second Reading in the other place, went on to pay a tribute to the dedicated management and workforce of British Rail.
The suggested management skill to be brought in over and above the railway skills that exist now in

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British Rail is to be supplemented by a very involved bureaucracy. I shall not go into all the details; but various authorities, we are told, are going to be established, presumably by the Bill. They will arise from discussions with British Rail. Yet the discussions with British Rail are supposed to be encouraged and developed as a result of passing this Bill this afternoon. We understand that decisions about what will be the various bureaucracies have already been taken. Yet this Bill has not been passed. We understand that certain people have been approached as appointees to the various authorities. Names have even been mentioned. Yet the Bill has not been passed today. It has not had Royal Assent. If the discussions could take place on all these things now, why do we have this Bill? We have wasted a few weeks. If the Bill is necessary, why are such decisions being taken now?
I should like to supplement one or two of the points made by my noble friend Lord Clinton-Davis. In relation to British Rail bids for franchises should not be permitted. The Government must explain the reason for that decision, particularly as we have been told that one of the major purposes of the Bill is to develop competition. I am sure that noble Lords would welcome an answer to that question before the Bill is placed before us.
Competition will take place when bids for franchises are made, in the same cockeyed way as the Government introduced competition for franchises in commercial television. Where will competition take place if the services and lines are franchised? There will not be one company competing with another company; there will be a complete break-up of the rail network. It would have made sense if the Government had decided to privatise the entire network, but for the reasons explained in the White Paper that was considered to be financially impossible. Therefore the British Rail network will be completely broken. Applications for franchises will only be made by companies that expect to make a profit on a particular service. The Minister for Transport, Mr. Roger Freeman, has made it clear that those services which do not make a profit will be run by British Rail. After the profitable ones have been taken away it will be more difficult to run the unprofitable services.
The Bill demonstrates the illogical thinking of the Government. I should like the noble Earl to explain why discussions are now taking place when the passage of the Bill has not been completed.
Lord Cocks of Hartcliffe: My Lords, in July during Second Reading of the Bill I raised the question of the regulators and how each successive privatisation adds to the army of regulators and how, with the best will in the world, they are bound to develop group behaviour. Competition will develop between them; there will be a career structure and there will be various pressures upon them. I asked the question: who will regulate the regulators? Here we are, six months on: there has been no discussion of that issue in Committee or on Report and the role of the regulators has hardly been mentioned.
My noble friend Lord Donoughue on 13th November mentioned the dilatoriness of the electricity
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regulator in regard to the economics of gas-fired power stations, the regional electricity companies and the contributions that have been made to the current problems in the coal industry.
My noble friend Lord Clinton-Davis on another occasion raised the subject of the advertisement that was issued by the Department of Transport for the post of regulator, which stated, "knowledge of public transport not essential". I do not make too much of that point, having been previously involved in a very minor way with the appointment of government Ministers to some departmental briefs.
No serious discussion about the matter has taken place. Some noble Lords were lucky enough to have points that they raised on Second Reading taken into account by the Government; I have had no such joy.
There is growing concern about the group behaviour. I illustrated my remarks on Second Reading by mentioning the photographs that appeared in the annual reports. There is further evidence about regulators developing group behaviour. The Independent on Sunday issued 1993 resolutions from local government, Whitehall and the utilities. The regulators of the utilities would be very peculiar if they did not get on the blower to each other and say, "I have had the Independent on; what will you say?" The gas regulator's resolution was,
"To get the best deal possible for British Gas customers".
Then he adds a personal note. The Director-General of Ofwat stated that his resolution was:
"To keep prices down for customers, quality up, and the water companies on their toes".
That is a public school phrase if ever I heard one. The resolution of the Director-General of Oftel was:
"To strive to ensure that more and more customers can choose telephone services that they want, and have the information on which to base their choice.
There is no contribution from the electricity regulator. He possibly had cold feet because he has received a bit of a caning recently. However, there are substitute remarks from the Electricity Association and Nuclear Electric with which I need not weary the House.
That range of remarks can at best be said to be populist and at the worst sycophantic to the customers because I always understood that the question of regulation was about balance. The customers should be taken into account but there are other matters to be considered. The investors in the industry, Britain's industrial base, and the economic well-being of the nation should be considered much more by the regulators.
There is a growing awareness of that issue. The chairman of British Telecom, Iain Vallance, recently predicted the breakdown of regulation. He stated that such was the complexity and sophistication of some industries now that the question of regulating them was getting well beyond comprehension. His view was that the structure would break down. If that view is correct, then it is an extremely serious matter that should be examined before it gets out of hand. Further evidence appears from a report which recently appeared from the European Policy Forum, dealing

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with the question of the future of industry regulation in the United Kingdom. It reached the conclusion that there was,
"an urgent need for reform of the regulatory system in order to create a stable environment within which the management of the utilities could manage, the investors can invest without unexpected and unexplained reductions in their expected wealth and consumers could be protected from high prices and poor service".
The matter was further aired in an editorial in the Financial Times that was headed "Reviewing the Regulators". The article began by saying that the time is ripe for reviewing the British system of regulating privatised utilities. It mentioned various issues that needed attention and stated that the clearest issue is accountability; that too often the process by which regulators reach their decisions is opaque; and that they are insufficiently accountable. It called for a thorough review which needed to be carried out openly and independently.
Finally, I should like to say to the Government that this is an issue that will not go away. The opportunity to explore it during the passage of the Bill has been wasted. I hope that the Government will consider that it is an issue that requires urgent consideration before further Bills are presented.
6.30 p.m.
Lord Donoughue: My Lords, the Bill has provided a fascinating and educational experience for me, if I may be excused for opening on a personal note. It is the first time that I have taken a Bill, or part of it, from the Front Bench and I begin by thanking the House for its tolerance and forbearance whenever my inexperience showed.
It was fascinating for a number of reasons. First, it was a hybrid Bill. On that point I immediately support what was said by my noble friend Lord Clinton-Davis and the noble Lord, Lord Ezra. That was not a good idea. It caused us a lot of trouble, as I imagine it did all sides of the House. In fact, the proposed privatisations of coal and rail have little in common. One is a domestic service and the other an industry based on an internationally traded commodity. We saw different people with different experiences who were interested in and wished to contribute to totally different aspects of the Bill. It was quite a muddle. I trust that the Government will not repeat that exercise in confusion.
Secondly, the Bill was introduced without a White Paper on coal and proceeded before the imminent review and Select Committee reports. That did and still does astonish me. Is it perhaps because in a White Paper the Government would have to set out their energy policy, and perhaps they do not have one? From that policy vacuum many of the Government's problems in the coal area arose. We hope that the promised review will finally produce a statement of coherent energy strategy; but we wait to see.
Thirdly, the Bill became a trial run for the real privatisation Bill still to come. I felt that that produced an imbalance in our respective approaches across the Dispatch Box. To the Government it was a small, narrow, technical Bill simply paving the way forward. To the Opposition, naturally—and I believe to many
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Cross-Benchers in this House and possibly to many people in the country—the Bill raised all the basic issues and principles concerned with privatisation. The Government tried to avoid and deflect those arguments at this stage. But I believe that it was right for us to raise those issues now, especially as there was no White Paper on coal. It should even prove helpful to the Government in marking out the nature and boundaries of the debate to come. However, we need more information from the Government; we need statements of their energy strategy and the role of coal within it. To conduct the passage of the Bill without that was ultimately indefensible.
A further striking aspect of the Bill's voyage, and to me the most curious—referred to by my noble friend Lord Mason—was the extent to which it was pushed through unchanged. All amendments were rejected. There was no modification in the approach or tone from the government side. They were totally unresponsive to, as though totally unaware of, the near-revolution of opinion occurring outside the walls of this House and indeed throughout the country.
Between the Second Reading of the Bill in July and today's Third Reading the Government have been forced to withdraw the Committee stage in this House and abandon or postpone their closure programme before the imminent threat of defeat in another place. They were heavily defeated in this House on coal policy. They have been forced to set up several reviews into virtually every aspect of their energy policy. They have effectively conceded that their electricity privatisation was disastrously misconceived and executed.
The Government's energy policy has been denounced as wrong by virtually all the media and industry commentators. The Secretary of State and British Coal have unprecedentedly been found guilty in a court of law of breaching the law, of acting ultra vires and acting irrationally. As my noble friend Lord Mason said, there has been a near-revolt in British non-violent style. In a way the earth has moved. Yet, the department and Ministers have not moved at all on the Bill. It is as though the House were totally blithely unaware of what was happening in the real world outside. The Bill was pushed ahead during all those eruptions but not a single word was changed; there was not the slightest modulation of tone. As we saw today, there were no concessions on due consultation or independent scrutiny as we and the courts demand. I find that striking and curious. I fear that it suggests a mixture of complacency and arrogance within the department which is not attractive and I suspect is politically dangerous for those making policies in their cocooned departmental bunker.
As the noble Lord, Lord Ezra, said, the Bill should have been postponed until the policy background was clear. Whether we shall ever see the two ill-begotten privatisation Bills for which this measure prepares the way, in whatever form, remains to be seen. I hope not. I believe that one can state with confidence that there is no widespread demand for them in the country or, I suspect, in the Conservative Party. What are they? They are the fag-ends of Thatcherism; the last least

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rational, least justified gestures to the dying dogma. But if the Government obstinately persist, they should be in no doubt that we from this side will resist with the utmost vigour. We will scrutinise with the greatest vigour the Government's proposals on the specific points we raised at Committee stage, which were excellently summarised by the noble Lord, Lord Ezra. I refer to pensions, safety, consultation, environmental obligations, and so forth. We shall return to those again.
I conclude with one of many pleasant courtesies in this House; that is, thanking those who have helped us during the course of the Bill. My noble friend Lord Clinton-Davis has already mentioned some and I endorse his comments. I thank him personally for his kindness and wisdom in guiding a raw apprentice such as myself. I thank also Robert McGeachy, our research assistant, who worked enormously hard to provide briefing in what was a constantly-changing environment, and those within the coal industry who unstintingly gave of their time to provide facts and figures and briefing when they were heavily engaged elsewhere.
I thank the staff of the House who assisted us in drafting amendments, where sometimes much skill and imagination was required to relate them to the legislative text. I thank also my noble friends for supporting us in speeches and Divisions, and especially in the fine speeches we heard this evening from my noble friends Lord Mason, Lord Underhill, Lord Kirkhill and Lord Cocks. The same thanks go to noble Lords on the Liberal Democrat Benches for their support. I particularly thank the noble Lord, Lord Ezra, whose modesty and charm disguise immense expertise in this area. Working with him, as we occasionally do across the gangway, has been a particular pleasure. I thank those on the Cross-Benches and those Conservative supporters who expressed sympathy for our case and especially those who voted with us on 19th October to defeat the Government. It was not actually a legislative stage of the Bill, but surely historically it was a political part of it.
I am also most happy to thank the Minister handling the coal side, the noble Baroness, Lady Denton, for her courtesy and helpfulness, which made my first legislative experience a pleasure. I referred to the fact that occasionally on these Benches we stretched the discussion to the limits of the Bill, raising issues which linked to the privatisation still to come. It was characteristically courteous of the noble Baroness to accept that with such good humour and she did her best to answer our questions. Of course, it was not only polite, but it was also shrewd—what I might call the cushion of her courtesy blunts our swords.
This may not be an entirely bad Bill in itself but it is not a good one and it paves the way for worse things to come. Its passage unchanged demonstrates that the Government are not listening to what the British people want. On this Bill and on any future proposed privatisation I believe that we speak for the British people. They do not want the privatisation of coal or rail.
The Earl of Caithness: My Lords, many of your Lordships may be forgiven for forgetting that this is a short Bill with a simple purpose; that is, to confer on British Rail and British Coal powers to enable them to prepare for the implementation of government proposals for the restructuring and privatisation of their industries. That is one reason why the two were linked together. Although it is a short Bill, your Lordships have recognised that it represents an important first legislative step paving the way for the main privatisation legislation to come forward at a later date.
However, the actual provisions of this paving Bill have generated little debate in your Lordships' House. Rather, our debates have in large part had an eye on future legislation which will be necessary for the actual implementation of the Government's proposals. In this respect my noble friend Lady Denton and I have made every effort to answer the points that have been raised. Indeed many of the debates had absolutely nothing to do with the amendments tabled. But we certainly went out of our way to try to answer the points that were raised. It is characteristic of the nature of the noble Lords, Lord Donoughue and Lord Ezra, to have thanked us for that. Those thanks are gratefully received. I agree with the noble Lord, Lord Ezra. We did not meet all his concerns but we certainly try to answer his questions.
Many of the issues raised by your Lordships are of direct relevance to the main legislation that will come to your Lordships' House for consideration in due course. Certainly, the 22-minute harangue of the noble Lord, Lord Clinton-Davis, against our proposals for privatisation falls into that category. Your Lordships will then have further opportunities to consider these matters when they are fully developed and in their proper contexts. The arguments of the noble Lord, Lord Donoughue, for separate Bills when we come to the main legislation have force. There will be separate Bills for each industry. But his arguments had little force for a paving Bill of two clauses.
I was interested to hear that my noble friend Lord Boyd-Carpenter, who has great experience in these matters, was in a state of some emotion. I hope it will not be long before he is in a state of something more than some emotion when we introduce the full privatisation Bill for British Rail.
On behalf of my noble friend Lady Denton I thank your Lordships for the contributions that have been made on the coal aspects of the Bill. There is an enormous amount of knowledge of the coal industry in this House which has been amply demonstrated in the discussions on the Bill. We have certainly benefited from the enormous experience of the noble Lord, Lord Ezra, and we have taken careful note of the points that he raised. The noble Lord, Lord Mason of Barnsley, will understand that now is perhaps not the time to have a general debate on the coal industry. I could not help but think when the noble Lord talked of pit closures that it was indeed Labour Governments which closed 313 pits, with a consequential reduction in manpower of 200,000.
On the rail industry too there is a great depth of knowledge which has contributed to some very

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interesting debates on the Government's rail privatisation strategy as well as a number of more specific aspects of the Government's privatisation proposals. In this context I should like to mention my noble friend Lord Teviot. Indeed I will continue the policy of trying to answer all the questions put by your Lordships in these debates even though they go wide of the mark. In doing that I wish to answer two points raised by the noble Lord, Lord Clinton-Davis. One related to the services procurement directive. I understand that the directive does not apply to concessions and would not therefore apply to franchises. Our policy of not allowing BR to bid for franchises would therefore not contravene the requirements of the directive. The noble Lord's second point concerned the acquired rights directive. He will of course recall that, contrary to what he said, I replied to him in letter form on 14th December answering the points that he raised on 30th November. I have a copy of the letter before me.
In all our deliberations the House has shown its usual courtesy to my noble friend and to me. For that we are grateful. We have much appreciated the constructive and knowledgeable contributions to the debates we have had. Our debates have provided ample demonstration of the interest in the future of the coal and rail industries and also the depth of experience in your Lordships' House. All those who have been following our proceedings will now have a clearer understanding of the issues.
I should like to thank all those who have helped us. I thank the noble Lords, Lord Clinton-Davis, Lord Donoughue and Lord Ezra, for their kindness and generosity. I look forward with great enthusiasm to the main rail privatisation Bill on which I can expect the same high quality of debate.
On Question, Bill passed.

Bankruptcy (Scotland) Bill
6.46 p.m.
Report received.
Clause 2 [Appointment and functions of interim trustee]:
The Minister of State, Scottish Office (Lord Fraser of Carmyllie)The Minister of State, Scottish Office (Lord Fraser of Carmyllie) moved Amendment No. 1:
Page 4, line 38, leave out from ("shall") to ("appoint") in line 40.
The noble and learned Lord said: My Lords, it will be noted that some of the amendments before the House are in identical terms to those tabled by noble Lords opposite. That is because they deal with the same points of concern which have recently been drawn to our attention by the Institute of Chartered Accountants of Scotland. It may be helpful if I outline the objectives behind the amendments I have tabled. In so doing I hope to persuade noble Lords opposite that there is no need to proceed with their amendments or a number of other amendments which appear on the Marshalled List in their name.
I have considered the representations that have been made to me regarding the potential difficulties that could arise for some categories of debtors, particularly those in business, by any delay in the
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award of sequestration. I understand that a debtor in those circumstances may be constrained from carrying on his business as a going concern and would wish the early appointment of the interim trustee to safeguard his estate for the general body of creditors. An interim trustee would be able to carry on a business for that purpose. While in some cases this problem can be resolved by the debtor granting a trust deed, that solution is not suitable in every instance.
Accordingly, the first amendment proposed for Clause 4 would remove the potential difficulties I have outlined by ensuring that sequestration may be awarded forthwith after the presentation of a debtor's petition. I still consider it important, however, and consistent with the policy of the Bill, that, following a debtor's petition, the Accountant in Bankruptcy should have an early opportunity to apply for a certificate of summary administration. Accordingly, I propose an amendment to Clause 4(3), in respect of new Section 12(1A), which should have the effect of enabling the accountant to apply for a certificate of summary administration no later than seven days from the date of the award of sequestration.
The government amendments proposed for Clauses 2 and 6 within this grouping are purely consequential on those proposed for Clause 4. They recognise that in future the Accountant in Bankruptcy would not be able to apply for a certificate of summary administration prior to the award of sequestration following a debtor's petition and remove any reference thereto.
I urge your Lordships to support these amendments. With that brief explanation I hope that noble Lords opposite will feel able to withdraw the amendments they have tabled to cover what are essentially the same points.
Lord Macaulay of Bragar: My Lords, I am grateful to the Minister for that explanation of the approach taken by the Government. He has my assurance that we shall adopt the line that he has suggested and accordingly withdraw the amendments.
On Question, amendment agreed to.
Lord Macaulay of Bragar Lord Macaulay of Bragar had given notice of his intention to move Amendment No. 2:
Page 5, line 24, leave out ("by a creditor or a trustee acting under a trust deed").
Lord Fraser of Carmyllie: My Lords, we have already debated this amendment and Amendment No. 16 in Committee when I explained that the Government agreed with the Scottish Law Commission that the requirements which may lead the court to appoint an interim trustee in advance of granting an award of sequestration arise only in creditor and trustee petitions. That remains our view.
The concerns expressed by the noble Lord were that under the Bill a debtor's petition was now to be considered after eight days and not dealt with forthwith as in the 1985 Act. There was therefore no means by which a debtor could secure the immediate appointment of a trustee to continue operating his business.

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As I have explained in terms of the first group of amendments, I consider that the amendments are unnecessary. I hope that it may be possible for noble Lords opposite to signal their agreement to that.
[Amendment No. 2 not moved.]
Lord Lyell Lord Lyell moved Amendment No. 3:
Page 5, line 42, at end insert:
("(8) Where the petition for sequestration was presented by a creditor or a trustee acting under a trust deed, and the appointment of interim trustee is made under subsection (5) above, the petitioner shall effect service of the petition forthwith on the debtor." ").
The noble Lord said: My Lords, your Lordships will be aware that at an earlier stage in Committee I moved an amendment at this point in our consideration of the Bill. I hope that this evening's proposal will not be seen necessarily as a variation 0on this theme.
At the outset the first thing that I should like to ask your Lordships to do—and especially my noble and learned friend on the Front Bench—is to consult Section 12(2) of the original Act. I am referring to page 12 of the 1985 Act where one can find the details about the formal service of a petition which, as is stated in Section 12,
"shall be … not less than 6 nor more than 14 days after the date of the citation",
which I understand is called the "calling date" in a court.
The main thrust of my amendment comes in its last line which refers to the,
"service of the petition forthwith on the debtor".
I stress the word "forthwith". It is essential that your Lordships appreciate that when the court has made an early appointment under a trust deed it is very often the case that the interim trustee will immediately try to contact the debtor to inform him of the situation. However, I am advised that in many cases the interim trustee arrives on the debtor's doorstep (perhaps to assume control of the business for the benefit of all the creditors), but the debtor might not necessarily have received full notice that a trust deed has been signed and that the interim trustee has legitimate business on his premises. I am advised that there are provisions that cover the gist of what I am seeking in this amendment under the arrangements for corporate and company liquidations. I am not entirely clear whether they are covered under the acts of sederunt which we mentioned at an earlier stage but I think that there are precedents for this. I understand also that when sheriff court officers call upon a debtor they know the drill and exactly what procedure to carry out.
I hope that my noble and learned friend and the Government will be able to see that there is every reason why the minimum of six days, which is specified in Section 12 of the original Act, is perfectly legitimate, but that there are also very good reasons for having more than 14 days before the actual date when the petition is presented. There may be problems in particular courts and delays if a court takes petitions only on a certain day of the week. I am advised that the practitioners and others involved in this sad business often wish that there could be
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notification by an interim trustee a little more than 14 days before the case is called and that this amendment would have some benefit. With that, I beg to move.
Lord Fraser of Carmyllie: My Lords, I have listened carefully to what my noble friend has said. It was interesting to hear the circumstances that he outlined and the difficulties that he believes might occur. I am bound to say, however, that they are not difficulties that have been brought to my attention previously. I understand that his amendment seeks to ensure that, whenever an interim trustee is appointed prior to an award of sequestration, the debtor is informed of the existence of the petition as soon as possible thereafter. As my noble friend emphasised, the word "forthwith" appears in his amendment.
As my noble friend clearly appreciates, Section 12(2) of the existing Act provides that when a creditor or trustee presents a petition for a debtor's sequestration, the court grants a warrant to cite the debtor to appear before it at a date usually not less than six days or more than 14 days from the date of citation. What I must emphasise to my noble friend—I am sure that he appreciates this already —is that such a warrant has attached to it a copy of the petition itself. In this way the debtor receives notice of the petition and accordingly should have the time to prepare a defence against the petition and the appointment of the interim trustee, if necessary.
If for any reason the petitioner fails properly to serve the warrant on the debtor then the sequestration will not proceed. I agree with my noble friend that from time to time it may prove impossible to serve the original warrant to cite in time and a fresh warrant is obtained. However, this does not affect the fact that until such a warrant is properly served, the case cannot proceed.
Present procedures should ensure that the debtor receives a copy of the petition before the court hearing. I venture to suggest that that is the critical feature. I can see that there may be circumstances where, if someone acting on behalf of the interim trustee (or the interim trustee himself) should appear before the debtor has any knowledge of it, there might be some difficulty. However, what appears to me to be more critical is that the service of the petition should have been secured. That is necessary before there can be any court hearing.
If we were to introduce yet a further complication I should be anxious if there had to be an earlier service of the petition. As I think that my noble friend will appreciate, it might be difficult if "forthwith" had to be given a precise legal definition and if procedures had to be repeated unnecessarily. I hope that that explains the position to my noble friend and that he might consider withdrawing his amendment.
Lord Lyell: My Lords, I am grateful to my noble and learned friend for spelling out the complications on his side and in the statute. He is right that there could be serious problems in precisely defining the meaning of "forthwith".
My noble and learned friend took on board one of my points and said that there might be "difficulties" where the interim trustee appeared before the warrant

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had been served. I am advised that on one particular occasion a young lady attended a farm—not in the area that is known to my noble and learned friend and myself—to he met by the farmer with a shotgun, saying that the interim trustee had no business there and would she kindly clear his land—or words to that effect. That was in the nature of the "difficulty" that was so tactfully referred to by my noble and learned friend.
I appreciate that there will be "difficulties" (as my noble and learned friend put it), but I wonder whether I might study what he has said, especially as he might have said that there was a chance of having a second presentation. Did he say that there would be a repeat warrant? Therefore, I wonder whether the gap might be longer than 14 days and whether the hearing could he held anything up to 28 days later because of the pressure on the court.
That was the main thrust of my amendment. I wondered whether there might be some slight relaxation of the 14-day limit. My noble and learned friend has given me an explanation and I should like to read it. I thank him for what he has said and at this stage I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
7 p.m.
Clause 3 [Petitions for sequestration]:
Lord Macaulay of Bragar Lord Macaulay of Bragar moved Amendment No. 4:
Page 6, line 26, leave out from ("that") to end of line 28 and insert:

("(i) he has granted a trust deed; or

(ii) he has given notice to his creditors as mentioned in paragraph (b) of section 7(1) of this Act, other than if the debtor has been in "business" as defined by section 73 of this Act.").

The noble Lord said: My Lords, before I say anything about the content of the amendment, perhaps I may say that it is unhappily drafted. Nonetheless, there is a point to be made. The purpose behind the amendment is to allow a trading debtor to present his own petition for sequestration even if his apparent insolvency, as defined by the principal Act, is attributed solely to him giving written notice to his creditors that he has ceased to pay his debts in the ordinary course of business.
The view of insolvency practitioners is that the Bill has been formulated to prevent a consumer debtor being in a position to secure an award of sequestration, with the consequent discharge from his liabilities, without there being any notification to or involvement of the creditors. The question is whether a trading debtor who realises his own position should be given the option of going for his own sequestration. In other words, should a debtor be entitled to self-certify his, or her, own apparent insolvency? The amendment seeks to distinguish the position of the trading debtor from that of the consumer debtor. It is believed that the definition of "business" contained in Section 73 of the 1985 Act is a clear and simple test to distinguish the category of a debtor who is presenting his own petition.
The honest debtor, and most trading debtors are honest—it is all a question of percentages, so let us say
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that 80 per cent. of trading debtors are honest debtors —cannot have his or her business wound up in an orderly manner by trust deed. If a person running a business realises that he is not running it profitably, then he may be guilty of fraud; for example, by trading when he knows that he cannot meet his debts. That has various consequences. In particular, if the trading debtor cannot go to the court and say, "It is hands up time, my business is not doing well", he loses, among other things, the goodwill of the business. That disappears as he waits for a creditor-led sequestration. That has other knock-on effects.
I am advised by insolvency practitioners that the insolvency provisions of the Employment Protection Act afford protection to employees in the event of a formal insolvency —for example, sequestration—but not if the business merely ceases to trade. There are factors such as arrears of wages, accrued holiday pay, redundancy and so forth. The Minister has been given notice of this matter. The amendment has been included to protect the position not just of the trading debtor who wants to put his affairs in order but that of creditors and to give them the benefit of the position in which the trader might unfortunately find himself in the present economic climate. For example, if a major company goes into liquidation, as happened last week, the trading debtor further down the line may find himself out of business because the major trader has gone. The joiner, the plumber and others may be left waiting for money from the major firm to pay their own debts. They may find themselves in a position which will lead only to insolvency. The amendment has a social purpose behind it. It is designed to assist the trading debtor and the creditor. I beg to move.
Lord Fraser of Carmyllie: My Lords, the amendment seeks to reverse an amendment to the Bill which the Government introduced at a comparable stage in another place. It was an amendment which, I understand, was accepted without division or opposition. Having said that, it may he useful to take the opportunity to explain more fully what lies behind the government amendment. It is to make it clear that a debtor who was in business could not simply rely on sending a written notice to his creditors that he had ceased to pay his debts, as the means of establishing his apparent insolvency for the purposes of a petition being made by him. The Government's view is that some more objective criterion of his financial position is required, such as his failure to meet a statutory demand for payment, before a debtor could bring a petition for sequestration without the consent of a creditor.
It is worth recalling that under the 1985 Act a business debtor may petition for sequestration only if a qualifying creditor agrees to the petition. The only other remedy available to the insolvent business debtor is to grant a trust deed and secure the appointment of a trustee to run the business for creditors.
Both such remedies still remain under the Bill. A business debtor can either seek the agreement of his creditors to his sequestration or he can grant a trust deed. However, in addition he can bring a petition without the agreement of his creditors if he can

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demonstrate his apparent insolvency, other than by having given a notice to his creditors that he has ceased to pay his debts, or if he has granted a trust deed, but sufficient creditors have objected so as to prevent it becoming a protected trust deed. This widens the options available to the debtor, rather than restricts them as the noble Lord suggests.
As I understand it, the central point of the noble Lord's argument is that it is in the interests of creditors generally to allow a business debtor to proceed quickly to sequestration. If the creditors agree with that assessment in any individual case, then there is nothing to stop one or more qualified creditors concurring in the debtor's petition and the result sought by the noble Lord can be achieved. If, however, the creditors are not prepared to concur in the petition, then one must assume that they have not accepted the argument that the sequestration of that debtor is in their overall interest, or indeed his or her overall interest.
I do not believe that it is appropriate or practical to try to draw a distinction between "business" and "consumer" debtors as the noble Lord seeks to do in the amendment. Such a distinction could rapidly become blurred and, in any event, runs contrary to the approach taken in the 1985 Act that all individual debtors are subject to the same procedures.
The Bill provides a business debtor with the means to reorganise his financial affairs for the benefit of his creditors. It retains the rights which such debtors presently have under the 1985 Act, but builds on them in certain respects, subject to safeguards to protect the interests of creditors.
I believe that the Bill, as amended in another place, strikes the right balance between debtor and creditors' interests. It is always a difficult balance to strike, but I believe that it has been struck. With that explanation, I hope that the noble Lord will consider withdrawing the amendment.
Lord Macaulay of Bragar: My Lords, I am grateful to the Minister for giving that explanation of the Government's approach to this aspect of insolvency and sequestration. I am not sure that I agree with everything that he has said, but no doubt those involved in these matters will read his words with interest. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Deputy Speaker (Baroness Lockwood): My Lords, if Amendment No. 5 is agreed to, I cannot call Amendment No. 6 because it will have been pre-empted.
Lord Fraser of Carmyllie Lord Fraser of Carmyllie moved Amendment No. 5:
Page 7, line 8, leave out from first ("a") to ("and") in line 10 and insert ("statement of assets and liabilities").
The noble and learned Lord said: My Lords, I appreciate that the provisions in this group of amendments may seem substantive and daunting. I apologise for not giving a longer period in which to examine them. I assure your Lordships that they contain only three matters of a technical nature. A
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number of them were urged on me at an earlier stage in the Bill not least by my noble friend Lord Mackay of Ardbrecknish. However, the changes have led to a considerable number of consequential amendments.
The first point of note to which I draw your Lordships' attention arises in the new Section 19(1), which is substituted in paragraph 6 of Schedule 1 to the Bill. That now places an obligation on the debtor petitioner who has nominated an interim trustee to send to such trustee a statement of his assets and liabilities within seven days of the trustee's appointments. Under the 1985 Act a debtor petitioner is required to send this information to the interim trustee. That was omitted from the Bill because it was anticipated that the Accountant in Bankruptcy would be appointed interim trustee in all cases. However, noble Lords who have followed the passage of the Bill through both Houses will appreciate that that original assumption no longer applies. The position is rectified in new Section 19(i), as provided in the amendment.
The second point of significance is the definition of the statement of assets and liabilities, which appears in the amendment relating to page 25 line 17. That is now defined as containing a list of the debtor's assets and liabilities, a list of his income and expenditure and such other information as may be prescribed. In particular, I draw your Lordships' attention to the second item. As I have indicated, on an earlier occasion my noble friend Lord Mackay of Ardbrecknish tabled an amendment to Clause 3 which had a similar effect. He again tables that amendment at this stage. The amendment which I propose includes a list of the debtor's income and expenditure as an item which must be provided in the statement of assets and liabilities. Moreover, the amendment provides a general definition for application throughout the Bill.
Many of the textual amendments in the group are consequential on the insertion of the new term as defined. I am sure that my noble friend will appreciate that often what at first blush appears to be a short, simple and sensible amendment requires in its train a considerable number of consequential amendments. The amendment is a clear example of that phenomenon.
Finally, the amendments recast the offence provisions which relate to any failure by the debtor to comply with his obligations to supply a statement of assets and liabilities or to supply accurate information. The provisions also set up more appropriately the defences which would be available to the debtor in any criminal proceedings raised against him in respect of the statement of assets and liabilities. Offence provisions in the same terms as those contained in the new Section 19 are also provided under the amendments to Clause 3 in respect of the statement of assets and liabilities, which is to be provided to the Accountant in Bankruptcy. That presentation ensures that petitioners are fully aware of the position on offences at the outset.
Amendment is also made to Section 68 of the 1985 Act to bring the time limits for commencement of summary proceedings into line with those normally available for such proceedings in Scotland. I

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appreciate that is a technical explanation of the amendments, but I believe that in principle they will assist debtors and those advising them fully to understand the scope of their obligations and the related offence provisions which will apply if they fail to observe them. I trust that the way in which the Government have presented them will be acceptable to the House and will allow some noble Lords to withdraw their amendments, in particular Amendment No. 6 standing in the name of my noble friend Lord Mackay of Ardbrecknish.
7.15 p.m.
Lord Mackay of Ardbrecknish: My Lords, I am grateful to my noble and learned friend for accepting, as he did in Committee, my argument about the need to include the words "income and expenditure" on the face of the Bill. I apologise for the fact that my three simple words have been expanded to a fair number of words and amendments. However, my noble and learned friend has explained the position and I am grateful to him.
It is sensible that in devising legislation the Government should pat as much material as possible on the face of the Bill and as little as possible in the rules and regulations, which are "extra-parliamentary". I warmly welcome my noble and learned friend's amendments and I shall not move my Amendment No. 6.
Baroness Carnegy of Lour: My Lords, I add my thanks because I too raised the points referred to by my noble friend Lord Mackay. The Government appear to have proceeded in a complicated way; but I take my noble and learned friend's word that it is the simplest way which he could devise and that my noble friend's easier-to-understand amendment is not correct.
On Question, amendment agreed to.
[Amendment No. 6 not moved.]
Lord Fraser of Carmyllie Lord Fraser of Carmyllie moved Amendments Nos. 7 and 8:
Page 7, line 12, leave out from ("Bankruptcy") to end of line 13 and insert ("such statement of assets and liabilities as was lodged in court in pursuance of paragraph (a) above").
Page 7, line 13, at end insert:
("( ) After subsection (8) there shall be inserted the following subsections—
"(9) If the debtor—

(a) fails to send to the Accountant in Bankruptcy in accordance with subsection (6A) (b) above such statement of assets and liabilities; or

(b) fails to disclose any material fact in such statement of assets and liabilities; or

(c) makes a material misstatement in such statement of assets and liabilities,

he shall be guilty of an offence and liable on summary conviction to a fine not exceeding level 5 on the standard scale or to imprisonment for a term not exceeding 3 months or to both such fine and imprisonment.
(10) In any proceedings for an offence under subsection (9) above, it shall be a defence for the accused to show that he had a reasonable excuse for—

(a) failing to send to the Accountant in Bankruptcy in accordance with subsection (6A) (b) above such statement of assets and liabilities; or

(b) failing to disclose a material fact; or

(c) making a material misstatement."").

The noble and learned Lord said: My Lords, I spoke to Amendments Nos. 7 and 8 when moving Amendment No. 5. I beg to move.
On Question, amendments agreed to.
Lord Lyell Lord Lyell moved Amendment No. 9:
After Clause 3, insert the following new clause:
("Sequestration of other estates: amendment
.—(1) Section 6 of the 1985 Act (sequestration of other estates) shall be amended as follows.
(2) For subsection (4) there shall be substituted the following subsections—
"(4) The sequestration of the estate of a partnership shall be on the petition of—

(a) the partnership, if either subsection (4A) or 4B) below applies to the partnership;

(b) a qualified creditor or qualified creditors, if the partnership is apparently insolvent; or

(c) the trustee acting under a trust deed granted by the partnership if, and only if, one or more of the conditions in subsection (4C) below is satisfied.

(4A) This subsection applies to the partnership if a qualified creditor or qualified creditors concur in the petition.
(4B) This subsection applies to the partnership where—

(a) the total amount of the debts of the partnership (including interest) at the date of presentation of the petition is not less than £1,500;

(b) the partnership either—

(i) is apparently insolvent; or

(ii) has granted a trust deed and the trustee has complied with the requirements of sub-sub-paragraphs (a) to (c) of paragraph 5(1) of Schedule 5 to this Act but has received notification as mentioned in sub-sub-paragraph (d) of that paragraph;

and for the purposes of this paragraph a partnership shall not be apparently insolvent by reason only that the partnership has granted a trust deed.

(4C) The conditions mentioned in subsection (4)(c) above are—

(a) that the partnership has failed to comply—

(i) with any obligation imposed on the partnership under the trust deed with which the partnership could reasonably have complied; or

(ii) with any instruction or requirement reasonably given to or made of the partnership by the trustee for the purposes of the trust deed; or

(b) that the trustee avers in his petition that it would be in the best interests of the creditors that an award of sequestration be made." ").

The noble Lord said: My Lords, I hope that my noble and learned friend will not be too worried—knowing me, he probably will not—when he sees that I seek to insert a new clause. I hasten to assure him and your Lordships that the clause raises no complications. I seek to place partnerships on the same basis as sole traders as set out in Clause 3.
The measures contained in the Bill allow an individual debtor, which includes a sole trader, to present a petition to the court for his own sequestration without the need for a concurring creditor. Your Lordships will see that that is provided for in Clause 3(2B).
I propose the new clause because I wonder whether there is any reason why other trading entities and forms of corporate bodies—I am thinking of the husband and wife partnership and other small

785
partnerships which could be sequestrated—are not entitled to the same relaxation of the provisions for self-sequestration. It is equally important to a partnership with a trade which one would hope would continue to be allowed to protect the assets of the going concern for the benefit of all the creditors by having the ability to petition for sequestration if the partnership is insolvent.
Secondly, I wish to introduce the provision which was not incorporated in the 1985 Act. It has not been possible for a trustee under a partnership trust deed to petition on any grounds for the sequestration of the partnership. I am advised that that has caused problems since the passing of the 1985 Act. There have been occasions on which one creditor has been able to effect what we call "diligence" against the partnership in order to obtain a preference and a higher place in the queue perhaps over other equally qualified creditors. I am advised that sequestration cuts down on diligence. That may be one of the intentions. However, the Scottish Law Commission report on bankruptcy and related aspects of insolvency and liquidation suggested that cutting down on diligence should be the main reason for a trustee to be converted to sequestration.
The main thrust of the amendment is that there appears to be no reason why the partnership's assets should not be protected from diligence in the same way as the assets of a sole trader. For that reason, we believe that a trustee under a partnership trust deed should be able to petition for the sequestration of the partnership subject to the criteria which your Lordships will see in subsection (4C). Those are fairly severe and replicate what we have in Clause 3. This appears to be a fairly lengthy and complicated new clause but I hope that I have simplified matters as far as possible. I beg to move.
Lord Fraser of Carmyllie: My Lords, I have listened with great interest to what my noble friend said. I acknowledge immediately that there is some force behind the argument that the petition rights in respect of a business which is a partnership should, in general terms, be equivalent to those available in respect of a business run by an individual debtor. Although the proposed new clause is fairly lengthy and complicated, I should say to my noble friend that he has explained the situation with great clarity and I acknowledge what he wishes to say. However, there is one important aspect of the noble Lord's new clause which would create a disparity between the circumstances in which an individual debtor could petition for his sequestration and the circumstances in which a partnership could do so. For that reason, I regret to say that I cannot accept the amendment. I refer to the tailpiece to new Section 5(2B) (c), as inserted by Clause 3(2) of the Bill which provides that, for the purposes of a debtor's petition the debtor shall not be apparently insolvent by reason only that he has given notice to his creditors, under Section 7(1) (b) of the 1985 Act, that he has ceased to pay his debts.
I have no doubt that my noble friend listened to the exchange on Amendment No. 4 when I explained to the noble Lord, Lord Macaulay of Bragar, why the
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Government felt it to be inappropriate to allow such notice to be the cause of the presentation of a petition. Such a qualification is not present, however, in the equivalent provision of new subsection (4B) of Section 6 as inserted by the new clause. I am sure that my noble friend will accept that government policy is important as regards this matter. I cannot accept the new clause. It is a complicated clause but, as I say, I understand the force of my noble friend's argument. However, because of that very important point, I cannot accept the amendment.
Lord Lyell: My Lords, I am grateful to my noble and learned friend. Perhaps I may ask him whether Section 7(1) (b) of the 1985 Act is the only reason he cannot accept the amendment.
Lord Fraser of Carmyllie: My Lords, that is an objection of such an overwhelming character that I must indicate that I cannot accept the amendment. I repeat that there is some force behind my noble friend's argument, but I am not anxious to indicate that, if that point alone were to be removed, the amendment would then be wholly acceptable. I must found my refusal to accept the amendment on that single objection. Perhaps my noble friend will reflect on that point.
Lord Lyell: My Lords, I am grateful to my noble and learned friend. I listened carefully to what he said and I am gratified that he believes that there is some force behind the arguments which I have put forward. I shall reflect on what he said and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Macaulay of Bragar Lord Macaulay of Bragar moved Amendment No. 10:
After Clause 3, insert the following new clause:
("Meaning of apparent insolvency
.—(1) Section 7 of the 1985 Act (meaning of apparent insolvency) shall be amended as follows.
(2) In subsection (1) delete "£750" and substitute "£1,500".").
The noble Lord said: My Lords, this is a technical amendment to delete the figure of £750 in Section 7(1) (d) and to substitute the figure of £1,500. The amendment is presented to your Lordships to seek to increase the limit of debt in respect of which a creditor can serve a statutory demand and is consequent upon the amendments made to Section 5 of the Act in Clause 3 of the Bill.
At present a creditor can petition for sequestration only if the debt due to him is not less than £750. That is increased by the amendments made in Clause 3 to £1,500. It appears that the Bill does not similarly increase the limit of debt in respect of which a creditor is entitled to serve a statutory demand. If that view is correct, the effect would be that a creditor having a debt of between £750 and £1,500 might serve a statutory demand in the prescribed form on the debtor and that would threaten sequestration when that creditor would have no entitlement by virtue only of the service of the statutory demand to present a petition for sequestration. On one reading of the matter, it appears that something has gone wrong. The

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amendment is tabled to achieve a measure of consistency in the application of the upper limit of £1,500. I beg to move.
Lord Fraser of Carmyllie: My Lords, the noble Lord has a pleasingly tidy mind on these matters. He is quite correct to draw your Lordships' attention to the fact that under the 1985 Act the same limit of £750 applies to both the statutory demand procedure and to the definition of a qualifying creditor for the purpose of presenting a petition for a debtor's sequestration.
I would, however, invite the noble Lord to consider the differences between the two procedures. Under Section 5(4) of the 1985 Act, as amended by Clause 3(3) of the Bill, two or more creditors may combine together to meet the now £1,500 limit of debt required before a petition for sequestration can be brought by them as "qualified creditors". Thus two creditors, each owed £800, will be able to act together to secure the debtor's sequestration.
However, the statutory demand procedure is restricted to a single creditor. In the example to which I have referred, if the amendment were accepted, neither creditor could take advantage of the statutory demand procedure to establish the debtor's apparent insolvency. They would be forced either to wait until one or other of their debts increased to £1,500, or take the more expensive option of raising a court action to establish the debtor's apparent insolvency. This could significantly limit the options available to a small creditor.
I do not think that a strong case has been made for such a limitation to be imposed on creditors. However, should such a change appear necessary in the future, then my right honourable friend the Secretary of State for Scotland has the option of increasing the present £750 limit by regulations made under new Section 72A.
I hope that my arithmetic is sufficiently accurate for the noble Lord to be able to understand the point that I make. With that explanation, I hope that he will feel able to withdraw the amendment.
7.30 p.m.
Lord Macaulay of Bragar: My Lords, I am obliged to the Minister for his complimentary remarks towards me. Of course I would never accuse any Minister in your Lordships' House of being devious, but what I could say is that the argument is ingenious. I shall look with interest as time goes on at how this particular clause works. I am not quite convinced by the argument. Nevertheless, in view of the undertaking given by the noble and learned Lord as to a review in future as the Act comes into practice, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Deputy Speaker (Baroness Lockwood): My Lords, I must point out that, under the pre-emption rule, if Amendment No. 11 is agreed to, I cannot call Amendment No. 12.
[Amendment No. 11 not moved.]
Lord Fraser of Carmyllie Lord Fraser of Carmyllie moved Amendment No. 12:
Page 7, line 20, leave out from ("shall") to ("award") in line 21.
The noble and learned Lord said: My Lords, I spoke to Amendment No. 12 with Amendment No. 1. I beg to move.
On Question, amendment agreed to.
[Amendment No. 13 not moved.]
Lord Fraser of Carmyllie Lord Fraser of Carmyllie moved Amendment No. 14:
Page 7, line 33, leave out ("of presentation of the petition") and insert ("on which sequestration is awarded").
The noble and learned Lord said: My Lords, again when I spoke to Amendment No. 1 I spoke to Amendment No. 14. I beg to move.
On Question, amendment agreed to.
Lord Macaulay of Bragar Lord Macaulay of Bragar moved Amendment No. 15:
Page 8, line 16, at end insert:
("(3B) Where sequestration is not awarded in pursuance of subsection (3) above, the court shall recall the appointment of an interim trustee appointed under section 2(5) of this Act and may grant such interim trustee a certificate of discharge which certificate of discharge shall have the same effect as if granted under section 27(5) of this Act." ").
The noble Lord said: My Lords, this amendment has been suggested by the insolvency practitioners. It seeks to provide that, where a sequestration petition is dismissed prior to the award of sequestration, an interim trustee previously appointed by the court will have his appointment formally recalled and a certificate of discharge granted. The position appears to be that, where a creditor presents a petition for sequestration, it is competent for the court, prior to sequestration, to appoint an interim trustee on cause shown.
In many cases the appointment of an interim trustee on warrant to cite will have the effect of prompting the debtor, in order to avoid sequestration, to make arrangements to pay the creditors' debt. If that is done the petitioning creditor will simply move at the sequestration hearing for the petition to be dismissed. However, one of the apparent deficiencies in the 1985 Act is that in this situation, which can also occur where a debtor puts forward a successful defence to a petition under the Act, there is no formal provision for recall of the interim trustee's appointment and for the interim trustee's discharge.
As the Act presently stands, an interim trustee can only get a discharge if sequestration is awarded and a permanent trustee is subsequently elected or appointed. It is pointed out that, in the absence of a nominated trustee who has submitted a letter of undertaking, the provisions of the Bill in Clause 2(6) (b) allow the Accountant in Bankruptcy to be appointed as interim trustee. This amendment would also apply to that particular event. I beg to move.
Lord Fraser of Carmyllie: My Lords, the noble Lord has indicated that an interim trustee can be discharged from liability only if sequestration is awarded and a permanent trustee is subsequently elected or appointed. While I accept that this is true, I am not aware of difficulties having emerged in practice as a consequence of the lack of any specific provision.

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Furthermore, the amendment would require the court to grant the interim trustee a certificate of discharge if it dismissed a petition for an award of sequestration without any opportunity for objections to be considered in Section 27 of the 1985 Act, which contains the provisions relating to the discharge of an interim trustee. Where sequestration has been awarded, the interim trustee applies to the Accountant in Bankruptcy for a certificate of discharge. The debtor and creditors have the opportunity to lodge objections to the discharge and the Accountant has discretion whether or not to grant such discharge. I consider that any amendment would have to allow the court the right not to grant a certificate of discharge if the circumstances of a particular case warranted such a decision.
The amendment also does not address other issues which may be appropriate if specific statutory provision were to be made on the termination of the interim trustee's functions in these circumstances, including how the interim trustee's remuneration should be determined and what rights other interested parties should have to challenge the award of discharge to the trustee. Provision of that kind is made in Sections 26 and 27 of the 1985 Act.
The problem that the amendment seeks to address does not arise out of the Bill, but rather from an alleged deficiency in the 1985 Act. If this amendment had been brought to our attention at an earlier stage it may have been possible to consider amendment to the Bill in order to achieve the aim desired by the noble Lord. However, the issue raises other potentially complex matters, which frankly I doubt that we could resolve in the time remaining to us. In those circumstances, I hope that the noble Lord can withdrawn his amendment.
Lord Macaulay of Bragar: My Lords, I am grateful to the noble and learned Lord for his explanation. It seems extraordinary that we have reached this stage in the Bill and looking through the Marshalled List we find that the Government have put down Amendments 24 to 39, no doubt having had a rethink about the matters that have been raised. I see no justification for the Government not taking this particular issue on board with a view to making amendments before the Third Reading of the Bill.
It appears from what the noble and learned Lord has said that he accepts that the interim trustee is really being left in an administrative limbo over which he has no control. If that is so, it would be helpful if the Minister would at least give an undertaking that he will take it away and think about it in principle and, if possible, come back with an amendment that no doubt can be agreed with those interested in this type of activity. In the meantime, having heard what the noble and learned Lord has to say, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 16 not moved.]
Lord Carmichael of Kelvingrove Lord Carmichael of Kelvingrove moved Amendment No. 17:
After Clause 4, insert the following new clause:
("Amendment ofs. 16 of 1985 Act
.—(1) Section 16 of the 1985 Act (petition for recall of sequestration) shall be amended as follows.
(2) After subsection (3) there shall he inserted the following subsection—
"(3A) Where a copy of the petition is served in accordance with paragraph (2) above, the interim trustee or permanent trustee shall forthwith notify every creditor known to him, stating that a petition has been presented under this section and that any creditor may lodge answers to the petition within 14 days of the date of the notice from the interim trustee or permanent trustee.")
(3) In subsection (4), paragraph (a) after "of" there shall be inserted "the award of.").
The noble Lord said: My Lords, Amendment No. 17 is a highly complicated amendment. As those of your Lordships who have been listening will have realised, most of the procedures under this Bill have been rather complicated and specialised. There is no complaint about that. I believe that it is the only way we can get a full understanding into the Bill.
In this particular case I have another worry. I am sure that it is my fault and no one else's. In this amendment I would have preferred that the new clause had been divided, and that there was a new clause taking in subsections (1) and (2), and a second new clause, perhaps Amendment No. 17A, taking in subsection (3). I think it was probably my fault, or the fault of someone acting on my behalf, that that was not done. Unfortunately, I therefore find it necessary to take longer than I am sure the House would like me to at this time, but it is a complicated business and very important.
Although I understand its broad outline, it is too technical, without my reading it out, for me to give a clear explanation that would help the Minister to make his reply. The new clause sets out a requirement to advise all known creditors of the presentation of a petition for recall of sequestration. At present Section 16(3) of the 1985 Act requires the petitioner for recall to publish a notice in the Edinburgh Gazette stating that a petition has been presented and that any person having an interest may lodge answers within 14 days of the publication of the notice in the Gazette. A petition for recall is of such significance that there should be a statutory requirement for all known creditors to be notified of the presentation of such a petition.
The insertion of a notice in the Edinburgh Gazette cannot really be regarded on its own as sufficient notification. There have in the past been several instances of recall petitions being granted by the court outwith the knowledge of the creditors. Very often the creditors remain unpaid and will not know their future payment prospects. That outcome must be quite unjust to creditors who may otherwise have lodged an objection to the recall petition, unless they have been assured of repayment.
In practice the interim or permanent trustee is the only party who is aware of the names and addresses of all known creditors. It is known that some trustees will at present notify creditors merely as a courtesy, but this is neither a statutory requirement nor are there any guidance notes to this effect. In Committee a similar amendment was tabled which required the petitioner to ensure that all creditors are advised of the

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petition for recall. One of the answers given by the Government was that the persons most likely to have an interest in lodging answers would be the petitioning creditor, the interim or permanent trustee and the Accountant in Bankruptcy. It is difficult to know why the Government made that assumption. All creditors are surely interested to know whether their interests are being protected by a continuing sequestration or whether they will remain an unpaid creditor after recall is granted.
The second point made by the Government was that the whole procedure for the recall of an award of sequestration could be held up by additional notification requirements. This fresh amendment attempts to achieve the same result but to impose the obligation on the interim or permanent trustee who will be in possession of the names and addresses of creditors. If a debtor has allowed himself to be sequestrated, there is a strong argument that any small delay to allow all creditors to be notified, and any additional time costs incurred by the trustee, should have to be accepted by the debtor as a necessary part of the proceedings. It is only the debtor who is being disadvantaged, whereas at present the creditors are being disadvantaged.
It has also been suggested by the Government that the responsibility lies on the interim or permanent trustee to lodge answers on behalf of the general body of creditors if he considers that they are to be disadvantaged. It is believed that recall of sequestration is of sufficient importance not to rely on a trustee to act for individual creditors and for individual creditors each to have their individual right to lodge answers, if appropriate. Consideration would have to be given as to the procedure or means by which the interim or permanent trustee could certify that the notice had been issued to creditors since the petition for recall may be by the debtor or a creditor. There is also the necessity for the trustee to comply rigidly with the term "forthwith" or unnecessary delays may be incurred. The third point is whether the period of 14 days is realistic; perhaps 21 would be more appropriate. I hope the Minister will consider that.
It is therefore acknowledged that this amendment can produce procedural problems as regards implementation. It is, however, considered necessary to overcome these minor problems in order to ensure that all creditors in a sequestration are given an individual right to lodge answers by being made aware of the recall petition. Again it is emphasised that the creditors should be given notice of the recall petition and the availability to lodge answers, if appropriate. With such an important issue this responsibility should not be delegated to a trustee who may from a cost point of view be unwilling to incur costs to lodge answers. Legislation at present protects the debtor to the detriment of the creditor and this amendment seeks to redress the balance.
I again apologise to the House for the length of my speech. However, this is rather an important amendment. Perhaps it may be possible to return to this matter at a later stage of the Bill. The effect of new subsection (3) of the proposed new clause is to increase the time limit given to a debtor wishing to present a
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petition for recall of sequestration on certain grounds from 10 weeks from the date of sequestration to 10 weeks from the date of the award of sequestration.
A debtor may present a petition for recall of sequestration at any time if he brings it on grounds that, first, he has paid his debts in full or has given sufficient security for their payment; or, secondly, a majority in value of creditors reside in a country other than Scotland and it is more appropriate for the estate to be administered in that other country; or, thirdly, that one or more other awards of sequestration of the estate or analogous remedies (as defined in Section 10(5) of the Bankruptcy (Scotland) Act 1985) has been granted.
Where, however, the debtor wishes to bring a petition for recall of sequestration on other grounds a time limit applies. Such other grounds might include challenging jurisdiction, the regularity of service or otherwise the competency of the petition. The present time limit is 10 weeks from the date of sequestration. However, running time forward from the date of sequestration creates problems. In a creditor's petition the date of sequestration is the date when the court grants authority to serve a petition for sequestration on the debtor. Thereafter there will be a sequestration hearing which could be as much as four to six weeks after that date. If for some reason the petitioner was not able to serve the petition on the debtor, he would require to ask for warrant for re-service and a fresh sequestration hearing date would be fixed. In that situation the 10 weeks could easily have elapsed before the debtor even had a chance to challenge the petition in court.
In addition, if the debtor is served with the petition in time for the sequestration first fixed by the court and challenges the petition there could he sundry procedure before the court makes a decision. In that situation the time limit could also have elapsed. What is the debtor to do? This situation arose in a case which I am sure will be familiar to the noble and learned Lord, that is the case of Wright v Tennent Caledonian Breweries Limited 1991 SLT823. The result was that a petition had to be made to the three judges of the Inner House of the Court of Session for, in effect, leave to bring the petition late, there being no other remedy under the Act. The court granted the petition, but it is a time-consuming, expensive and unnecessary procedure for a debtor to have to present a petition to the nobile officium in such circumstances. I and my noble friends believe it makes more sense for the time limit to run from the date when sequestration is actually awarded rather than an earlier date.
As I said earlier, I am sorry I have taken so long to explain the amendment. I take full responsibility for the mix-up to which I have already referred. I feel the Minister will accept the second part of my argument concerning new subsection (3). I beg to move.
Lord Fraser of Carmyllie: My Lords, as the noble Lord has reminded us, we had a useful discussion on the procedures leading to the recall of a petition for sequestration during the Bill's Committee stage. I acknowledge that the amendment before your Lordships reflects some of the criticisms I voiced on that occasion. The noble Lord will accordingly

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appreciate that I have some sympathy with the idea that the interim or permanent trustee should alert creditors to the existence of a petition for recall. I have greater difficulty, however, in accepting that such notification should become a formal part of the recall procedures.
A particular difficulty raised by the amendment is that it would force the petitioner seeking a recall to be dependent on the actions of a third party, namely the interim or permanent trustee, to notify all the creditors known to him. If for any reason that interim or permanent trustee failed to notify creditors promptly and in the permitted timescale, or, worse, by some accidental error failed to send a notice to a creditor, then the petitioner could find his case delayed or, worse still, dismissed as incompetent because there had been a flaw in the procedure caused by a third party over whom he had no control. The noble Lord will appreciate that such a result would be extremely unfair to the petitioner and could have serious consequences. I do not believe that it is necessary or desirable to run such a risk. Instead, I suggest that the objective sought by the noble Lord might be achieved by less formal means.
As I mentioned at the outset, I have some sympathy with the proposal that the interim or permanent trustees should alert creditors to the existence of such a petition. I understand that some practitioners already notify creditors as a matter of courtesy and good sense. If the relevant professional bodies feel that that practice should be further encouraged, then I would be happy to invite the Accountant in Bankruptcy to address this matter in the notes for guidance which he provides to all interim and permanent trustees. In that way we can ensure that creditors have an alternative route by which they can be made aware of their right to lodge answers to the petition for recall without further complicating the procedures for the petitioner.
I have to take responsibility for a number of matters but I do not take responsibility for the form in which amendments are tabled by the Opposition Front Bench. Within the amendment the noble Lord has included a minor technical change to Section 16(4) of the 1985 Act to allow the period during which a petitioner may bring a petition for the recall of the sequestration to run from the date of the award of sequestration. For the reasons which I have spelt out, I have either to accept or reject the amendment which has been tabled in its entirety. I have to invite the House to reject the amendment in its totality, although I understand the logic which lies behind the noble Lord's approach to that minor tailpiece to his larger amendment.
With that slightly cryptic end to my explanation, I hope that the noble Lord will withdraw the amendment.
Lord Carmichael of Kelvingrove: My Lords, I am grateful to the noble and learned Lord for indicating that he is willing to consider the possibility of notifying the appropriate bodies in Scotland of the
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advantages and good practice of notifying people individually in the circumstances which we have discussed.
I keep returning to the matter of the Edinburgh Gazette. I cannot help feeling in relation to the recent tragic apparent bankruptcy in Scotland of Lilley that few of the company's creditors, perhaps sitting in Portakabins, would have the Edinburgh Gazette delivered to them every morning to let them know how Lilley was doing. Some of those firms had probably been dealing with Lilley for three generations at least and had no idea that that would happen.
However, I can understand some of the problems which the Minister has mentioned and accept that the matter will be considered by the appropriate bodies. I am sorry that it took so long but it was important to place the issue on the record.
As to the last part of the Minister's remarks, I am trying to make some sense of his cryptic comment and wondering whether there is some other meaning in it. I shall certainly consider the matter with great care before the next stage of the Bill to see how we can deal with it, either in this House or in another place.
I am grateful to the Minister for the time he has given to the matter and for his understanding of my rather longwinded presentation. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Macaulay of Bragar Lord Macaulay of Bragar moved Amendment No. 18:
After Clause 4, insert the following new clause:
("Amendment of s. 17 of 1985 Act
.—(1) Section 17 of the 1985 Act (recall of sequestration) shall be amended as follows—
(2) In subsection (3) after paragraph (b) there shall be inserted—
"(bb) shall recall the appointment of the interim or permanent trustee as the case may be and shall grant a certificate of discharge to the interim or permanent trustee as the case may be which certificate of discharge shall have the effect of discharging the interim trustee or permanent trustee as the case may be from all liability (other than any liability arising from fraud) to the creditors or to the debtor in respect of any act or omission of the interim trustee or permanent trustee as the case may be in exercising the functions conferred on him by this Act"").
The noble Lord said: My Lords, this is a rather technical amendment which is intended to enable the court to make specific provision where sequestration is recalled for the recall of the appointment of the interim trustee or the permanent trustee, as the case may be, and to grant such trustee a discharge.
It appears that as matters presently stand, while the Court of Session may do a great many things, there is no specific provision for the recall of the appointment of the trustee or for him to be granted a discharge. It has been suggested that the Court of Session should be requested to make reference to the discharge of a trustee when recalling the interlocutor, but there is no provision for that in primary legislation. It is suggested that if the court did so it might be acting outwith its powers. Therefore the amendment has been tabled in order to give the court the power in legislation to deal with the matter specifically. I beg to move.
Lord Fraser of Carmyllie: My Lords, I am going through a sympathetic phase at the moment because again I have sympathy with the motives behind the amendment. However, I do not believe that it is necessary to introduce a provision which specifically requires the Court of Session to recall the appointment of an interim or permanent trustee and to grant an automatic certificate of discharge to the interim or permanent trustee on the recall of an award of sequestration.
A power enabling the court to grant a discharge already exists and has its statutory basis in Section 17(3)(c) of the 1985 Act. That provides that the court may make any such orders as it considers necessary or reasonable in all the circumstances of the case. I would advance the proposition that that power is sufficiently widely drawn to deal with the problem which the noble Lord has correctly identified. Moreover, it avoids the difficulty inherent in the amendment which obliges the court to grant a discharge without considering whether it is warranted. The substantive provisions in the 1985 Act relating to the discharge of the interim and permanent trustees provide for objections to the discharge to be considered and, if upheld, a discharge may not be granted. It would seem unreasonable, in contrast, to deny any discretion at all to our supreme court, the Court of Session, having heard representations from interested parties as to the discharge, as the amendment would provide.
I agree with the noble Lord that the power in Section 17(3) (c) may not be utilised as much as it could be in this context. I say to the noble Lord, echoing somewhat what I said in relation to Amendment No. 17, that the Accountant in Bankruptcy has indicated his willingness to draw practitioners' concerns to the attention of the supreme court and to invite it to consider how greater use might be made of Section 17(3) (c) in order to provide a discharge for the trustee in recalled sequestrations.
I believe that that is a more appropriate response to the problem than the amendment proposed, and therefore invite the noble Lord to withdraw the amendment.
Lord Macaulay of Bragar: My Lords, I am grateful to the Minister. We are in danger of being submerged by waves of sympathy. I have no doubt that the words of the noble and learned Lord will be considered with care by those who work in the field of insolvency. Having heard his full explanation, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
8 p.m.
Lord Lyell Lord Lyell moved Amendment No. 19:
After Clause 4, insert the following new clause:
("Amendment of s. 21 of 1985 Act
.In section 21 of the 1985 Act (calling of statutory meeting) for subsection (1) there shall be substituted the following subsection—
"(1) The interim trustee shall call a meeting of creditors (in this Act referred to as "the statutory meeting") to be held within 60 days, or such longer period as the Sheriff on cause shown may allow, after the date of the award of sequestration." ").
The noble Lord said: My Lords, the proposed new clause is set out with commendable brevity. My noble and learned friend and practitioners will be aware that at present under Section 21 of the 1985 Act the interim trustee has only 28 days after the date of the award to hold the statutory meeting. Under the terms of Section 21 of the 1985 Act he has to give not less than seven days' notice to the creditors. That reduces the timescale to 20 days. With weekends or a bank holiday, it is reduced to about 18 days.
The appointment of the interim trustee is normally made at the same time as the award of sequestration is granted. My noble and learned friend will be aware that I touched on the matter in an earlier amendment at Committee stage. The appointment is often not notified to the interim trustee until several days after the event, in particular in the case of a creditor's petition. My noble and learned friend replied mildly at the last stage. However, he will appreciate that by a reduction to 18 days the entire process involves a short timescale in which to obtain all the names and addresses of creditors and to give them not less than seven days' notice of the statutory meeting.
Section 23 of the 1985 Act requires that the interim trustee shall chair that meeting. The difficulties of timescale that I have sought to point out cause problems for the interim trustee who may have congestion of time through his own activities, let alone those of the courts.
In the present Bill, where the Accountant in Bankruptcy is the trustee, Clause 5 allows him not 28 days but 60 days—88 days in all—after the date of sequestration in which to hold the statutory meeting. In the majority of his cases the Accountancy in Bankruptcy would have full knowledge of names and addresses of creditors since the majority of the cases will be debtors' petitions. The debtor will have lodged with the petition a copy of the list of his assets and liabilities.
I hope that I can persuade my noble and learned friend that, while it is reasonable for the Accountant in Bankruptcy to be allowed a fairly long period, it is also reasonable that the private practitioner should be allowed at least equal opportunity. The Accountant in Bankruptcy will already have available to him the addresses of creditors.
If the amendment were to be considered favourably by my noble and learned friend, we do not believe that the extension from 28 to 60 days would prejudice the position of any creditors. For many reasons the interim trustee would wish to assume the role of the permanent trustee as soon as possible. That would be in his own interests and in the interests of the creditors and the debtors. We do not believe that advantage would be taken of the 60-day period. It would be a valuable buffer and of considerable help to many of the private insolvency practitioners, in particular in the event of problems in obtaining names and addresses of creditors. There is also the problem of the chairing of the statutory meeting by the interim trustee due to congestion in his own affairs, in those of the courts and of the creditors and debtors.
I hope that my noble and learned friend will consider the extension of 28 days to 60 days. I do not

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propose the full 88 days that the Accountant in Bankruptcy needs. We believe that 60 days would provide a valuable benefit to the private practitioner. I beg to move.
Lord Fraser of Carmyllie: My Lords, there is no limit to my receptiveness to reasoned argument. Indeed, I entirely accept the contention that the time limit allowed to insolvency practitioners before a statutory meeting must be held should be increased to avoid burdening the courts with applications to extend the present 28 days. I have no objections in principle to his suggestion—he has argued it carefully—that the limit should be extended to 60 days.
However, I am afraid I cannot accept the amendment tabled. While my noble friend has used Section 21 of the present 1985 Act as the model for the amendment, I regret to say that paragraph 9 of Schedule 1 to the Bill amends that provision in a way which is incompatible with my noble friend's amendment.
However, I accept the merits of the amendment in principle. My noble friend will be aware that new Section 72A provides my right honourable friend the Secretary of State with powers to amend by regulation any reference in the Act to periods of time. I am therefore happy to give to my noble friend an undertaking that the Government will amend the time limit by regulation in early course.
I hope that that is a sufficient degree of victory for my noble friend, and that with that explanation he will agree to withdraw the amendment.
Lord Lyell: My Lords, my noble and learned friend was kind enough to refer to victory. As a long-time supporter of Forfar Athletic, the victory is marvellous. I am grateful to accept my noble and learned friend's assurance. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 6 [Summary administration]:
[Amendment No. 20 not moved.]
Lord Fraser of Carmyllie Lord Fraser of Carmyllie moved Amendment No. 21:
Page 11, line 15, leave out from ("Bankruptcy") to ("as") in line 19 and insert ("and the court has appointed").
The noble and learned Lord said: My Lords, I spoke to this amendment with Amendment No. 1. I beg to move.
On Question, amendment agreed to.
[Amendment No. 22 not moved.]
Lord Mackay of Ardbrecknish Lord Mackay of Ardbrecknish moved Amendment No. 23:
After Clause 7, insert the following new clause:
("Amendment of s. 39 of 1985 Act
.In section 39 of the 1985 Act (management and realisation of estate), after subsection (8), there shall be inserted the following subsection—
"(9) The permanent trustee shall, until the debtor is discharged under this Act, at the end of—

(a) the period of six months beginning with the date of sequestration; and

(b) each subsequent period of six months,

require the debtor to give an account in writing of his current state of affairs."").
The noble Lord said: My Lords, Clause 6 of the Bill introduces the summary administration procedure where the duties of the permanent trustee are modified by the new Schedule 2A. The modified duty in Schedule 2A(2) is an additional statutory obligation to what is the present position; namely, to require the debtor to give an account in writing every six months of his current state of affairs. There has never before been a statutory obligation on any permanent trustee to write to the debtor to request a current state of affairs.
It appears somewhat peculiar that the Bill places an obligation on permanent trustees under the modified procedure but that this obligation does not extend to permanent trustees in sequestrations where the summary procedure does not apply. It would seem that there is more justification for that obligation to be applied in non-summary cases. There would almost certainly be more likelihood of income from employment in non-summary cases.
Although many permanent trustees are quite assiduous regarding the question of contributions from income, it is very much left to the discretion of the individual permanent trustee. Recent statistics from the Accountant in Bankruptcy's department indicate that 35 per cent. of debtors are in employment but that only 5 per cent. are contributing from the income of that employment. That would suggest that certain insolvency practitioners may not be addressing the question of contributions and may not even know the current employment status of the debtor. While the debtor is normally advised to inform the permanent trustee of any change in income circumstances, there is no formal mechanism at present to overcome either the lack of knowledge by the permanent trustee or lack of communication by the debtor. That problem has been tackled in the Bill in the modified procedures. My amendment would extend that requirement to all sequestrations. I beg to move.
Lord Fraser of Carmyllie: My Lords, I have listened to the argument that has been impressed upon the House by my noble friend. I accept his argument that there is no reason why this obligation should be incumbent on a permanent trustee and a debtor in a summary case, but not in a non-summary sequestration. Indeed, the Government had expected that it would already be the norm for permanent trustees to invite debtors to provide them with details of their current state of affairs periodically.
I find it difficult to understand how a permanent trustee is able to perform his existing function of recovering, managing and realising the debtor's estate without routinely monitoring the debtor's circumstances. I presume some trustees simply rely on the obligation on the debtor in Section 32(7) to inform them of any new assets or significant change in the debtor's financial circumstances, while others I expect take a more pro-active role. Whichever approach is adopted, I would agree that some monitoring is needed even in summary cases, which is why the Bill allows the permanent trustee no discretion in that instance.

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If the relevant professional bodies feel that it is necessary to spell this out as a duty of the permanent trustee, then I am willing to invite the Accountant in Bankruptcy to deal with it as I have suggested in relation to another matter, in his notes for guidance.
I hope that that is helpful to my noble friend and that what I have said will be studied by those relevant professional bodies which have concerned themselves with the Bill.
Lord Mackay of Ardbrecknish: My Lords, I thank my noble and learned friend for his response to my amendment and to the points that I made in introducing it. I very much appreciate that it is good practice to do exactly what my amendment seeks to enshrine in legislation. I am pleased to hear that he is prepared to listen to the relevant professional bodies on the matter. If he feels that further action is required, then that could be incorporated in the notes for guidance. With that, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
8.15 p.m.
Clause 11 [Amendments and repeals]:
Lord Fraser of Carmyllie Lord Fraser of Carmyllie moved Amendment No. 24:
Page 14, line 6, leave out ("subsection") and insert ("section").
The noble and learned Lord said: My Lords, this is a very important, if apparently minor, amendment which is required to cure a defect in Clause 11 of the Bill. I can elaborate if anyone wishes me to do so, but with the assurance that it is important, if minor, I beg to move.
On Question, amendment agreed to.
Clause 12 [Short title, interpretation, commencement and extent]:
Lord Fraser of Carmyllie Lord Fraser of Carmyllie moved Amendment No. 25:
Page 14, line 23, at end insert ("section 8").
The noble and learned Lord said: My Lords, this is a technical amendment, with the simple purpose of enabling Clause 8 of the Bill to come into force on Royal Assent. This is necessary to ensure that there is a continuation of the underlying power for the Secretary of State to prescribe fees payable to the Accountant in Bankruptcy in respect of functions performed by him under the bankruptcy legislation. I beg to move.
On Question, amendment agreed to.
Schedule 1 [Miscellaneous amendments of the 1985 Act]:
Lord Mackay of Ardbrecknish Lord Mackay of Ardbrecknish moved Amendment No. 26:
Page 15, line 4, at end insert:
(".In section 3 (duties of the permanent trustee), there shall be inserted at the end of subsection (1) (d)—
"and to report to the debtor's creditors on the debtor's current state of affairs."").
The noble Lord said: My Lords, there have been representations from many creditor bodies resulting in
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amendments in this House and in the other place with a view to the creditors having an opportunity to apply to court for a contribution order against the debtor.
To date, the Government have not been inclined to accept such amendments, believing that the permanent trustee alone is in a position to determine, on behalf of the general body of creditors, whether or not a contribution is appropriate.
The amendment sets out to impose a statutory obligation on the permanent trustee to report to creditors on whether the debtor is in a position to contribute to the sequestrated estate. While the Government may not accept that a creditor has an entitlement to apply to the court for a contribution order, this amendment will at least require the permanent trustee to keep the creditors advised of the situation regarding the debtor's ability to contribute to the sequestrated estate.
In some ways, the amendment can be read in conjunction with my Amendment No. 23 which we discussed a few minutes ago and the new proposals on page 11 of the Bill for modified procedures dealing with the debtor being required to tell the trustee every six months what his present position is. It seems to me that even though my noble and learned friend persuaded me to withdraw my amendment, we shall have good practice in addition to what is in the summary procedure which will mean that permanent trustees will know of the debtors' situation every six months or so. They will be in a position to tell the creditors what is the current situation.
My amendment makes it obligatory that such information should be reported to the creditors by the permanent trustee, as he deems it appropriate. As the creditor is a very interested party in any sequestration, it seems only correct that he be kept informed of the debtor's position. That is the objective of my amendment. I beg to move.
Lord Fraser of Carmyllie: My Lords, I entirely agree with my noble friend that creditors should be kept informed of any significant developments in relation to the debtor's financial circumstances. However, I do not consider that the amendment now before the House is the most appropriate means by which to achieve that objective. I hope that my noble friend will allow me a moment in which to explain my anxieties.
If the debtor's circumstances change in the six months between his previous report and the latest one, then it seems reasonable that the permanent trustee should convey this information on to the creditors. If there is no such change in the debtor's circumstances, however, then such a requirement becomes a costly and valueless burden. My worry would be that the wording of the amendment, rather than allowing a discretion, would in fact require the permanent trustee to report to creditors, whether or not there was anything of value to report. Indeed, this obligation may be imposed more often than every six months, since the amendment refers to the "current" state of affairs. Whenever there was any change in the debtor's current state of affairs, it would be a function, and thus duty, of the permanent trustee to inform creditors of that change, if he had knowledge of it.

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I would be anxious that we would thereby increase the cost of administering sequestrations in this way. I consider it more appropriate to encourage permanent trustees to inform creditors of the debtor's current state of affairs when there is something relevant to report. In deciding whether a change in circumstances should be reported—and I am sure my noble friend would agree - flexibility and discretion are vital. I believe that these objectives can best be achieved by encouraging good practice, as he said. I believe that, as I said in relation to earlier amendments, good practice could be best encouraged through guidance from the Accountant in Bankruptcy, offering a greater degree of flexibility than a provision on the face of the statute.
I am happy to give to my noble friend and to the House the undertaking that I shall ask the Accountant in Bankruptcy to consider the circumstances where a permanent trustee should or should not be required to report the debtor's latest state of affairs to the creditors and to issue notes of guidance to permanent trustees accordingly.
With that undertaking and the brief explanation of what I see to be the defects in the amendment, I hope that my noble friend will feel that he can withdraw it.
Lord Mackay of Ardbrecknish: My Lords, I thank my noble and learned friend for his response to my amendment. I fully accept and understand the defects in it that he has highlighted. I am grateful to him for the point that he has taken on board that when circumstances change, it is only right and proper that the creditors be informed.
I am delighted that this short debate has led at least to the assurance that the Accountant in Bankruptcy will be asked to look at this, and if necessary put some wording into the notes for guidance which will bring about this good practice. With that, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Fraser of Carmyllie Lord Fraser of Carmyllie moved Amendment No. 27:
Page 16, line 1, after ("one") insert ("(other than the Accountant in Bankruptcy)").
The noble and learned Lord said: My Lords, this amendment seeks to cure a defect in new Section 13 which would disqualify the Accountant in Bankruptcy from acting as an interim trustee in a sequestration. Subsection (6) of Section 13 currently prohibits any person from acting as interim trustee who would be disqualified from acting as permanent trustee by virtue of subsection (2) of Section 24. That provision in Section 24 is itself amended by paragraph 11(3) of Schedule 1 to the Bill to prevent the Accountant in Bankruptcy from being eligible for election by creditors as permanent trustee. The Government believe that where there are sufficient assets in a case to allow creditors to proceed to an election it is right and proper that private sector insolvency practitioners should undertake the work rather than a public official.
While it is, therefore, appropriate that the accountant should be ineligible for election as permanent trustee and should be appointed to that
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position only in those cases where a permanent trustee is not elected by a meeting of creditors, it is a fundamental tenet of this Bill that the accountant should be empowered to act as interim trustee. As presently drafted, Section 13(6) flies in the face of this principle. This amendment, though small, is central to the essence of the Bill and I commend it to the House. I beg to move.
On Question, amendment agreed to.
Lord Fraser of Carmyllie Lord Fraser of Carmyllie moved Amendments Nos. 28 to 33:
Page 16, line 35, leave out from beginning to end of line 8 on page 17 and insert:
("Statement of assets and liabilities
.—(1) For section 19 (requirement on debtor to deliver list of assets and liabilities) there shall be substituted the following section—
"Statement of assets and liabilities etc.
19.—(1) Where the petitioner for sequestration is the debtor he shall, not later than 7 days after the appointment of the interim trustee (where he is not the Accountant in Bankruptcy), send to the interim trustee such statement of assets and liabilities as was lodged in court in pursuance of section 5(6A) (a) of this Act.
(2) Where the petitioner for sequestration is a creditor or a trustee acting under a trust deed, the debtor shall, not later than 7 days after having been notified by the interim trustee as mentioned in section 2(7) of this Act, send to the interim trustee a statement of assets and liabilities.
(3) If the debtor—

(a) fails to send to the interim trustee in accordance with subsection (1) or (2) above such statement of assets and liabilities; or

(b) fails to disclose any material fact in such statement of assets and liabilities; or

(c) makes a material misstatement in such statement of assets and liabilities,

he shall be guilty of an offence and liable on summary conviction to a fine not exceeding level 5 on the standard scale or to imprisonment for a term not exceeding 3 months or to both such fine and imprisonment.
(4) In any proceedings for an offence under subsection (3) above, it shall be a defence for the accused to show that he had a reasonable excuse for—

(a) failing to send to the interim trustee in accordance with subsection (1) or (2) above such statement of assets and liabilities; or

(b) failing to disclose a material fact; or

(c) making a material misstatement."").

Page 17, line 10, leave out from beginning to ("after") in line 19 and insert:
(".—(1) Section 20 (duty to prepare statement of debtor's affairs) shall be amended as follows.
(2) For subsection (1) there shall be substituted the following subsection—
"(1) When the interim trustee has received the statement of assets and liabilities, he shall, as soon as practicable, prepare a statement of the debtor's affairs so far as within the knowledge of the interim trustee and shall indicate in the statement of the debtor's affairs whether, in his opinion, the debtor's assets are unlikely to be sufficient to pay any dividend whatsoever in respect of the debts mentioned in paragraphs (e) to (h) of section 51(1) of this Act."
(3) In paragraph (a) of subsection (2) for the words "a copy of the debtor's list" there shall be substituted the words "the statement".
(4)").
Page 17, line 44, leave out from ("the") to ("his") in line 1 on page 18, and insert ("statement of assets and liabilities; and (ii)").
Page 19, line 8, at end insert:
("( ) In subsection (1) for the words from "a" to "liabilities" there shall be substituted the words "the statement of assets and liabilities, and a copy".").
Page 19, line 24, leave out from ("including") to end of line 26 and insert ("the statement of assets and liabilities").
Page 24, line 47, at end insert:
("Commencement of summary proceedings
.—(1) Section 68 (summary proceedings) shall be amended as follows.
(2) In subsection (1)—

(a) at the beginning there shall be inserted the words "Subject to subsection (1A) below,"; and

(b) for the word "6" there shall be substituted the word "12".

(3) After subsection (1) there shall be inserted the following subsection—
"(1A) No such proceedings shall be commenced by virtue of this section more than three years after the commission of the offence."
(4) In subsection (2) for the words "subsection (1) above" there shall be substituted the words "this section".").
The noble and learned Lord said: My Lords, in moving Amendment No. 1, I spoke also to Amendments Nos. 28, 29, 30, 31, 32 and 33. I beg to move these amendments en bloc.
On Question, amendments agreed to.
Lord Fraser of Carmyllie Lord Fraser of Carmyllie moved Amendment No. 34:
Page 24, leave out lines 48 to 50.
The noble and learned Lord said: My Lords, this is a simple technical amendment removing from the Bill paragraph 26 of Schedule 1. The provision is no longer relevant as a consequence of the introduction to the Bill in another place of a right for a petitioner to nominate an insolvency practitioner to act as interim trustee in a sequestration in place of the Accountant in Bankruptcy. I beg to move.
On Question, amendment agreed to.
Lord Fraser of Carmyllie Lord Fraser of Carmyllie moved Amendment No. 35:
Page 25, line 16, after ("(4)") insert ("In subsection (1) in the definition of "statutory meeting"").
The noble and learned Lord said: My Lords, this again is a technical amendment required to clarify paragraph 28(4) of Schedule 1 to the Bill. I beg to move.
On Question, amendment agreed to.
Lord Fraser of Carmyllie Lord Fraser of Carmyllie moved Amendment No. 36:
Page 25, line 17, at end insert:
("( ) In subsection (1) after the definition of "standard scale" there shall be inserted the following—
""statement of assets and liabilities" means a document (including a copy of a document) in such form as may be prescribed containing—

(i) a list of the debtor's assets and liabilities;

(ii) a list of his income and expenditure; and

(iii) such other information as may be prescribed"").

The noble and learned Lord said: My Lords, in moving an earlier set of amendments I indicated that spoke to them in relation to Amendment No. 1. I
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should have said that I spoke to them in relation to Amendment No. 5. I also spoke to Amendment No. 36 when I moved Amendment No. 5. I beg to move.
On Question, amendment agreed to.
Lord Fraser of Carmyllie Lord Fraser of Carmyllie had given notice of his intention to move Amendment No. 37:
Page 29, line 16, at end insert:
("( ) After paragraph 5 there shall be inserted the following paragraph—
"5A.—(1) A person is not qualified to act as trustee under a trust deed at any time unless at that time—

(a) he would be qualified under Part XIII of the Insolvency Act 1986 to act as permanent or interim trustee in the sequestration of the estate of the debtor who granted the trust deed; or

(b) he belongs to such class or classes of persons as may be prescribed,

and he satisfies such conditions as may be prescribed; and different conditions may be prescribed for different classes of persons.
(2) A person who acts as trustee under a trust deed at a time when he is not qualified as mentioned in sub-paragraph (1) above shall be guilty of an offence and liable—

(a) on conviction on indictment, to a fine or to imprisonment for a term not exceeding 2 years or to both such fine and imprisonment;

(b) on summary conviction, to a fine not exceeding the statutory maximum or to imprisonment for a term not exceeding 6 months or to both such fine and imprisonment."").

The noble and learned Lord said: My Lords, as noble Lords will know, it has been a constant theme of the Government in the Bill to encourage the greater use of trust deeds as an alternative to sequestration. Wherever possible we have sought to remove any barriers which might artificially restrict their use. The amendments before your Lordships (Amendments Nos. 37 to 39) follow that theme and would enable my right honourable friend to take action it the present limitations on who may act as a trustee under a trust deed prove to be a restriction of choice in practice rather than an assurance of equality. They would also permit the introduction of greater competition if the costs of operating trust deeds proved excessive.
I am, however, very conscious that there has been very little time available to those most concerned to consider these proposals. While even in that brief time they have gathered some support, I am also conscious that reservations have been expressed as to whether the Government may be proceeding too quickly. Although I have tabled these amendments, on reflection I believe that further consideration of this matter would be beneficial. I do not therefore propose to move the amendments at this time, nor, indeed, when the Bill returns to the House at Third Reading. I wish to place that on the record.
If we find in practice that problems arise from this source I will not hesitate to return to the matter when a suitable opportunity arises.
[Amendment No. 37 not moved.]
Schedule 2 [Repeals]:
[Amendments Nos. 38 and 39 not moved.]

Royal Assent
8.24 p.m.
The Chairman of Committees (Lord Ampthill): My Lords, I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified her Royal Assent to the following Acts:
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Gas (Exempt Supplies) Act,
British Coal and British Rail (Transfer Proposals) Act.

Gas (Exempt Supplies) Bill [H.L.]
Returned from the Commons earlier this day agreed to.
House adjourned at twenty-five minutes past eight o'clock.