HL Deb 04 May 1995 vol 563 cc1529-44

6.30 p.m.

Lord Slynn of Hadley rose to ask Her Majesty's Government whether, in the light of the Second Report of the European Communities Committee on the Hallmarking of Precious Metals (HL Paper 7), recent negotiations on the directive in the Council suggest that sufficient consideration has been paid to the consumer interest.

The noble and learned Lord said: My Lords, in this country, at any rate since the reign of Edward I, the importance of protecting purchasers of gold and silver products has been recognised. All that glisters is not gold, Often have you heard that told", may only have been written some 300 years later, but it explains why the Goldsmiths Company at its hall, and subsequently for six centuries in total, other assay offices throughout the country have been astute to verify that gold and silver objects were up to the standards required.

The presence of the hallmark has been an assurance of that standard. Since 1973 the Hallmarking Act, which gives effect to the 1972 Vienna Convention on the control and marking of articles of precious metal, has laid down rules requiring the presence of certain marks on gold and silver objects. Your Lordships are very familiar with those marks and therefore I do not need to identify them.

Other member states of the European Union have different rules. Largely they are strict rules which seek to provide adequate protection for customers. But they vary in their certification procedure, in their standards of fineness and in their inspection procedures. It is with the certification procedure that my Question is firstly concerned.

Some states have, as we and France have, a system of compulsory marking by a third party. Others such as Belgium provide that there is an option to have gold and silver products marked by an independent party. Yet others permit marking by the manufacturers, as does Germany.

It is generally accepted that in an internal market these different practices and procedures are capable of providing a barrier to the free movement of goods. They are barriers to the traders and to the would-be purchasers of the goods. There is widespread, if not universal, support for the view that the harmonisation of these procedures in the member states would help to remove those difficulties and barriers and that a directive is the best way to achieve that.

The question, however, is: what is the best method to adopt and how much discretion should be given to manufacturers, to sponsors, in the various member states which is consistent with—that is the important point—adequate protection of the customer? The Commission produced a draft directive initially putting forward three options for manufacturers and importers to adopt. I mention that because it is necessary to understand why the matter has become of importance. The first is that manufacturers should set up a quality inspection system which would have to be approved by a certification body.

Their systems would be subject to regular inspection by the certification body and they would put their mark and the fineness mark on their products.

The second proposed method is that the manufacturer should strike the mark on the gold and silver objects once his protection methods have been accepted as achieving the requirements of the directive. He would not have to allow regular inspections. There would be only random inspections by a certification body and he would only have to produce records to show that his methods complied with the directive.

The third proposed method is that the manufacturer should be able to submit to an independent body every one of his products for testing, or he might supply a percentage of those products on a statistical basis. He would put on his manufacturer's, or his sponsor's, mark. The body carrying out the checks would put on the fineness mark. Your Lordships will readily recognise that the third option comes closest to the assay system which we have known for so long in this country.

The Select Committee, which looked at the directive, reminded itself that under the Treaty of Rome, as amended by the Single European Act and the Maastricht Treaty, measures of approximation of national legislation must contribute to: the attainment of a high level of consumer protection". The Commission appears to be proceeding on the basis that the three options give the same degree of protection. The Select Committee reached the opposite view; it does not consider that the three methods give the same degree of protection. It is satisfied that the verification by an independent body—by an assay office or a similar body— gives a higher degree of protection.

It is important that any directive which is adopted by the Community should not require the abandonment by any member state of its existing high standards of consumer protection. Secondly, it should require throughout the Community a sufficiently high degree of protection to the purchasers and dealers in gold and silver products and, of course, products in other precious metals.

The second proposal that I have described, which is known as Annex IV, plainly is not the equivalent of the hallmarking system or of a system of independent checks. Like the European Parliament Committee on Consumer Protection, the Select Committee recommended that that should be deleted from the directive as an option.

The first proposal chronologically, Annex III, gives more protection in that the quality control system envisaged requires prior approval and is subject to regular inspection. However, the Select Committee believes that it is essential that there should be added protection if the mark of the notified body, the supervising body, were also struck by the manufacturer. That is objected to on the basis that it would reveal the national origin of the goods. We consider that when dealing with articles of precious metal that is wholly justified.

Furthermore, we believe that it is essential that the supervisory body, called the notified body, should be subject to approval or accreditation and that that should be provided for in the directive. It is possible that a system of mutual recognition can be set up as an alternative. However, the Select Committee believes—and it is almost incontrovertible—that if that were done a plethora of questions would be raised as to the marks and the fineness standards.

Negotiations have been proceeding since the directive was first published. Members of the Select Committee and I are extremely grateful to the noble Earl, Lord Ferrers, for his replies to our report and our recommendations and for the way in which he has kept us informed. The matter is of great concern to manufacturers and traders in gold and silver products as well as to those who purchase them. The need for their protection is paramount and I have tabled this Question this evening in order that the House may be informed of the developments in relation to those negotiations and as to the success of attempts to ensure adequate customer protection.

6.40 p.m.

The Viscount of Oxfuird

My Lords, we are grateful to the noble and learned Lord, Lord Slynn, for initiating this important debate. I would also like to congratulate Sub-committee E of the European Communities Select Committee, which he chairs, for producing such an excellent report on the hallmarking of precious metals, which has helped to cast light onto some extremely complex and seemingly controversial issues.

Before I start my remarks I should declare an interest in that I hosted last year a reception for the British jewellery industry to mark the centenary of the National Association of Goldsmiths. I do not, however, hold any brief for the jewellery industry nor do I receive any remuneration from it. This happens to be a trade and industry subject in which I have an interest.

Noble Lords who have read the evidence submitted to the sub-committee will have noted a divergence in the views of the assay offices and the jewellery industry representatives. It is in support of the viewpoint of the industry that I should like to speak tonight, though I shall confine my remarks primarily to the issue of consumer protection, which is the subject of the noble and learned Lord's Question.

The whole matter of hallmarking was considered in great detail in the Stone Report that was published in 1959 at a time when serious consideration was given to abolition of statutory hallmarking, leaving the consumer to rely, as is normal for most consumer products, on existing trade descriptions legislation. At that time the jewellery industry in the United Kingdom strongly supported the assay offices in their fight for the retention of statutory hallmarking, which led to the Hallmarking Act 1973 and the establishment in 1974 of the British Hallmarking Council.

So what has happened to cause the industry to change its position? There are three main reasons. The first is the creation since then of our single European market and the need arising from that to harmonise all such legislation on a European-wide basis.

The second is a realisation that came about during the Thatcher years that it is wrong to protect manufacturing industry in the UK behind artificial trade barriers and it must be recognised that the British compulsory hallmarking system does impose a very real barrier to trade. It is greatly to the credit of the jewellery manufacturers in this country that they reject such featherbedding.

The final reason is a series of European Court of Justice judgments, most recently the Houtwipper judgment of 15th September 1994, which have put United Kingdom legislation out of line with European legislation. That has led to great confusion for jewellery retailers and consumers since the law is no longer clear. It has also placed the regulatory authorities in an almost impossible position.

I should like to quote from two paragraphs of advice given by the trading standards body, LACOTS, on 20th October 1994: Authorities will therefore need to have mind to the decision in Houtwipper when exercising their enforcement responsibilities under the 1973 Act. In particular, authorities will need to be aware that articles imported from other member states may be put straight onto the market without re-marking if they have been equivalently marked by an independent body in the originating member state. Obviously it will be for the courts to decide what constitutes an equivalent mark. LACOTS believes that the current absence of any definition as to the equivalence of different marking arrangements is likely to complicate the enforcement task. When the law is unclear, and the enforcement task is therefore difficult, the consumer is at risk. The Houtwipper judgment probably means, subject to a ruling from our courts, that goods marked in EU states with an established statutory hallmarking system—that is, France, Ireland, Spain, Portugal, the Netherlands, Austria and Finland—or that have been marked by a third party in states with a voluntary hallmarking system—that is, Sweden, Belgium and Denmark—can now be sold legally in the UK.

For the consumer that presents great difficulty. Pre-Houtwipper it was possible to explain our hallmarking regime as defined by the 1973 Act on a single A4-sized notice that is displayed by law in every retail outlet. Now the consumer is potentially faced with literally hundreds of different marks—all of them apparently legal—for which there is no single reference work. Indeed, one needs a small library of reference works, many of them very difficult to obtain, to begin to get a clear picture.

Under those circumstances the possibility of fraud is very greatly increased and that concerns established jewellery retailers very much because it might bring their whole trade into disrepute.

Those who argue for the retention of compulsory hallmarking only, as some noble Lords may do this evening, claim that they do so to protect the consumer but, as I hope I have demonstrated already, our law has now become so confused that just preserving the status quo actually leaves the consumer at risk.

The United Kingdom jewellery industry has come to the view that the only way forward is to seek a European directive on precious metal marking as quickly as possible and its case was argued very strongly in a letter from the chief executives of the British Jewellers' Association and the National Association of Goldsmiths that was published in The Times on 30th March.

Work has been proceeding in Brussels and in the European Parliament for three or four years now to find a directive acceptable to all EU member states. Much of that work was considered at a key meeting of the Council of Consumer Affairs Ministers on 30th March where the United Kingdom was represented by my noble friend the Minister. At that meeting a text was considered which represented a great deal of work that had been undertaken by the current French EU Presidency, the Commission and others.

One of the main areas within the proposed directive which is proving difficult is the question of manufacturers' marking. That is the system employed in the home markets of Europe's two largest jewellery manufacturers—Italy and Germany. Already the Germans and Italians have conceded that manufacturers' marking with no intervention by a third party—the system which they currently utilise in their home markets—will be outlawed under the directive since manufacturers' marking would be regulated by notified bodies appointed by the EU governments. The debate is now centred around the wording of the directive annex that defines the degree of notified body regulation. Of course, the text that was considered on 30th March was a compromise text which gave nobody everything that they wanted.

I believe, however, that the text that was put forward was probably more favourable to the United Kingdom than to any other member state of the Union because it allowed us to retain our traditional hallmarks under a voluntary rather than a compulsory regime so the traditional marks that we have grown to know and love for upwards of 700 years would not disappear; it allowed us to retain all of our traditional finenesses with the exception of Britannia silver, which is hardly used today; and it proposed a regime of notified body regulation so that unrestricted manufacturers' marking would not have been possible.

I realise that my noble friend the Minister is in the middle of a series of extremely difficult and complex negotiations with our European partners and I do not wish to say anything this evening that will make his task more difficult. Indeed, I should like to congratulate him on the progress that he and his predecessors have already made in negotiating a draft that takes into account many of the issues that troubled us in the United Kingdom when the first Commission draft was published in 1993.

In conclusion, however, I urge the Minister not to hold out for too long and to suggest to him that, by accepting a form of wording for the directive broadly similar to that which was tabled on 30th March, he will have done consumers in this country a great service since he will have removed a major area of confusion which at this very moment is putting their interests at risk.

6.50 p.m.

Lord Broadbridge

My Lords, tonight's debate is very timely coming so soon after the visit of the noble Earl, Lord Ferrers, to Europe on 30th March. I thank the noble and learned Lord, Lord Slynn of Hadley, for introducing the debate. I also congratulate him as chairman, together with his colleagues, on an excellent and explanatory Select Committee report on hallmarking published last January.

I declare an interest in that I am an amateur silversmith and have had a hallmark registered at the London Assay Office for some 20 years. I am a Liveryman of the Goldsmiths Company (whose Clerk tells me that he is gratified by the firm line taken in Europe by the noble Earl, Lord Ferrers, after our visit to him at the DTI), and I collect early English spoons on a modest budget.

Hallmarking has been with us in this country since, as we have heard, 1300 when a statute passed by Edward I required that all silver articles were to be of the sterling standard, the same as the coinage, but also that they were to be assayed or tested by the wardens of the Goldsmiths Guild, as it then was, and marked with a leopard's head before they left the hands of the workers. Further, gold articles were to be 19 and one-fifth carats. That was 695 years ago, and assaying and hallmarking have continued here ever since.

As a general principle, it is surely with some trepidation that hallowed practices should be abandoned and then only if they do not meet present requirements. Hallmarking's primary purpose, as we have heard, is to protect the consumer interest, and surely the present is the very age of consumer protection—a time when every-day labelling is becoming more informative. Indeed, in the retail grocery market, manufacturers and own labels are falling over each other to try to give the most information. Last month the Co-operative Society announced a radical advance with an intention to give environment information too. How perverse it would be, therefore, to abandon a 695 year-old hallmarking system which does just that. Not only does it protect the consumer interest, but it serves the interest of the trade itself as it creates a favourable image and shields the honest manufacturer from unfair practice by less scrupulous competitors, both at home and from overseas imports.

A hallmark is a complete fingerprint. In 1300 the place of assay mark was first made with the leopard's head. In 1363, distinctive and registered makers' marks were added. In 1478 a date letter, changed annually, was added. Finally, in 1544, a sterling mark of quality was added: a lion passant, but rampant for the Edinburgh Assay Office. Thus in that year of 1544, 451 years ago, the four distinctive marks of the fingerprint were in place—town, maker, standard of metal and date.

In general terms there are, as we know, three possible options as a starting point for a draft EC directive, although things have changed a little, as the noble and learned Lord, Lord Slynn of Hadley, said. First, the marking of articles by the manufacturer; secondly, testing and marking by an independent laboratory—the equivalent of a state assay office; and, thirdly, marking by the manufacturer following testing or quality control surveillance by an independent laboratory. Of these, only the second option fully accords with the UK criteria for hallmarking; that is, compulsory independent testing and marking.

I believe that in general there are two principal criteria for consumer protection: a statement of what the article consists of and a statement of who made it. Applied to precious metals—that is, gold, silver and platinum—and the consumer interest, I believe that there are two essential aspects to the marking of those metals; first, what the marks are and, secondly, who puts them on and under what conditions. I start first with what the marks are. To my mind, our present system in this country is ideal. It lacks nothing and nothing could reasonably be added that would be beneficial. But a number of EC countries do not mark precious metals nearly so informatively. I would argue to the Government, who seem to be sympathetic, that anything less than our full set of four marks would be to the detriment of the protection of the public and the trade.

It is one of those curious accidents of fate that a system started as long ago as post-medieval times is nonetheless ideally suited to modern times and the requirements that a manufactured article should clearly state what it is made of, who made it, and where and when. Anything less is partial and, for all practical purposes, ranges between the flawed and the totally inadequate. I urge Her Majesty's Government to strive to continue the complete fingerprint which historically has been, and continues to be, the glory of English silver and gold and, more recently, of platinum.

My other concern is who does the marking. The alternatives are an independent authority as in this country, at present in London, Birmingham, Sheffield and Edinburgh, or by the manufacturer. It is to me regrettable that in a number of EC countries, such as Italy and Germany, the maker also does the marking. Human nature does not change, and very large sums of money are involved. I take just one element of the total market to illustrate the point. If the, say, 30 million adults in this country buy the customary gold ring for the man and an engagement and wedding ring for the lady, spending, say, £300 between them, that represents £9 billion over about 50 years, or £180 million a year.

To put that into context, I wish to speak of baked beans. At my local supermarket, the current price of a standard-sized tin of baked beans is 24 pence. So that expenditure is equivalent to 750 million tins. If just 1 per cent. of those were substandard—an approximation to the Assay Office experience, coming mainly from imported goods—that would amount to 7,500,000 tins and give rise to a very great commotion, or what the French in an admirable word call "brouhaha".

As I was saying, with the marking of precious metals very large sums of money are involved. That is endorsed by the fact that, today, counterfeiting or transposing a hallmark carries a maximum penalty of 10 years' imprisonment. The penalty for infringement of the laws of hallmarking has always been severe. At one period in the 18th century, the death penalty could be invoked for forgery, although the pillory combined with the severing of ears was more common. My point is that if makers have been prepared to take great risks in the past, surely in an unregulated market they will do so now in view of the sums of money involved.

Moreover, marking one's own production is to me an unregulated market. For example, if one of your Lordships buys a fairly heavy signet ring for £200 in the belief that it is 18-carat gold and it is in fact only 9 carat, then he has only half the gold that he expected. He has been swindled out of approximately £100 and an unscrupulous maker has pocketed it. But how many of us by simple inspection could tell 18 carat from 9 carat? Ah, but there are watchdogs, some of us may feel. Yes, indeed; but, first, the London Assay Office alone has handled around 50,000 items a day. Secondly, such consumer watchdogs are hardly geared to the examination of precious metals, an extremely exacting art developed over centuries. For example, the Consumers' Association laboratories may be well equipped to examine a tin of a baked beans or the fireproofness of a sofa. But are they really likely to be prepared to equip themselves with furnaces and crucibles and, more important, the skills to use them correctly? I am sure that they are not.

I deprecate maker marking even with independent quality control surveillance because I believe that, in the real world, some people are always prepared to take risks to make money at the expense of the public where large sums are involved and the public are unable to judge the quality of what they are being offered. That is the observed position throughout history and, surely, the present-day City financial pages, and others, almost daily attest to the fact that human weakness continues.

In conclusion, therefore, I once again urge Her Majesty's Government to maintain our present practice of independent Assay Office testing and marking the quality of precious metals offered for sale rather than the various alternatives. The latter is to offer temptation to the unscrupulous, and offering temptation is bad law.

7 p.m.

Lord Lawrence

My Lords, I would like to thank the noble and learned Lord, Lord Slynn, for asking this Question, and for producing this report with his committee as it enables me to sing the praises of the Assay Office. I have a slight interest to declare because I particularly like early metal and also antique base metal. I possess a passing interest in hallmarks. It is always fascinating to look at a hallmark and to discern the year an article was made, its town of origin and possibly its maker.

However, the most important mark on the hallmark is the standard. Britain has produced a long tradition of absolutely marvellous quality control with silver, gold and precious metals. In Europe other countries with a high standard are Ireland, Holland and France. France has a hallmarking system that has been going even longer than the British one. Although the French have impossible hallmarks, they have a system of producing fine metal. Portugal, Spain, Italy and Germany are traditionally much less careful with their metal control. They have a city state tradition and guilds which were started comparatively early on but which have not been running for a continuous period of time. Augsburg is a good example in Germany where the craftsmen displayed craftsmanship of superior quality. The masterpieces which they presented to the guild to become a master were absolutely terrific but their quality control in the metals was doubtful. There has been a long tradition in this area of wonderful craftsmanship but not terribly good quality control of the metals used. Perhaps that has something to do with the attitude of Germany today as regards wanting to produce peculiar metal standards but marvellous workmanship.

The English guilds have, on the other hand, had a tradition whereby the master works presented to become a guild member were not necessarily as beautiful and wonderful as those produced in Augsburg, but they were always of the highest possible standard. I hope that the ability to take articles to an independent body to be marked and assessed will continue. There seems to be a fraught effort to try to organise inspection of factories and places of manufacture. That process seems to be incapable of monitoring factory outputs at all times.

I am afraid that previous speakers have already said most of the comments that I wish to make. However, after 700 years of a guild that became the Assay Office and which has produced a high standard of work in this country, I hope very much that that will be allowed to continue for many years to come.

7.3 p.m.

The Viscount of Falkland

My Lords, I wish to congratulate the noble and learned Lord on his clear introduction to his Question and indeed on the quality of the report of his committee. I cannot claim to match the expertise that has already been shown in this debate. This is rather a sensitive issue for me in that I have had two burglaries and have lost almost all of the little that remained of my family's silver, some of which went back a considerable time. I was, however, left, to my relief, with four rather attractive wall sconces of the 18th century.

It was rather a case of shutting the door after the horse had bolted but I went to have them valued for insurance purposes. To my surprise they were valued rather low. The jeweller who did the valuation told me that they should not be offered for sale because they had not been assayed. What had apparently happened was that silver plates in the family had been given to a local jeweller who had made them into attractive wall sconces. Without the assay mark it is illegal to offer those pieces for sale. The jeweller told me that if I wished to sell them I would, of course, have to submit them to the Assay Office and that would be a long, involved and perhaps costly business. I had no intention of selling them so I returned them to where they now hang on the wall. I hope that the next burglars who come to my home do not take them. Whether the previous burglars left them because they were so expert that they knew they could not sell them, or whether they were just hung rather high on the wall, I do not know. But let us hope the burglars do not read Hansard.

I have some familiarity with the markings on precious metals. As a young man I was able to supplement a meagre income working in a publisher's office. Someone who was an old soldier in the field of heraldry told me that there was a good way of finding out how pieces of silver had originated, whether they had been given as wedding presents and at what time. I learnt how to use the books on heraldry in the British Museum library. That, together with a basic knowledge of hallmarking, enabled me to offer a service to jewellers. I offered a service for £20 a time and that covered one page of information in small print. Provided there was some crest or armorial bearings on the piece of silver and a hallmark that I could read, I was able to tell a jeweller pretty accurately the occasion on which that piece of silver had been given, whether it was given as a wedding present, a christening present or whatever. The fact that I was given £20 in the late 1950s for such work suggests to me that the information I provided added significantly to the value of the items.

But, to return to the subject that we are discussing this evening, the draft directive is, quite understandably, an attempt to harmonise trade in this area and to reduce the barriers to trade in precious metals. The European Commission has produced three options which were so well described by the noble and learned Lord, but none of them is satisfactory. I think that noble Lords have been very kind in their remarks. None of the options suggested reaches, in any measure, the high level of protection for consumers that we already have. Perhaps the European Commission considers that that protection is too high. The noble Lord, Lord Broadbridge, highlighted the fact that no protection is too high in the area of precious metals, and I agree with that. There is too much opportunity for dishonesty and fraud. As the noble Lord so rightly pointed out, we have developed over 700 years a system which is demonstrably the best in protecting consumers against receiving short measure in this area of trade.

I am sure that the noble Earl will be able to reply to this Question to our satisfaction. I know that he has put a lot of work into it. Perhaps he will be able to reassure us as regards the future of the attractive lion passant which appears on sterling silver. I understand that that is under some threat if the European Commission's intentions are taken to the extremes that we fear. The marks which appear on antique silver particularly and antique gold items are not merely fingerprints—as I believe other noble Lords have said—but are extremely attractive. They have heritage value. I say that as heritage spokesman on these Benches. They add interest and value to these items.

The Vienna Convention of 1975, which has been signed by about 10 countries, has worked satisfactorily with agreement on equivalent standards. However, the European Commission has not recognised that fact.

This has been a most informative and expert debate. The report itself will become a classic of its kind. I have not read all of it in detail, but I was greatly impressed by those parts that I have read. I expect that it will become standard reading for students of antique silver, gold and other metals.

I look forward to the noble Earl's reply. Speaking personally, even if I do not speak entirely for colleagues on these Benches, I hope that we shall be able to retain our distinctive, valued and attractive hallmarking system, at least for the foreseeable future and perhaps for much longer than that.

7.11 p.m.

Lord Peston

My Lords, I too wish to thank the noble and learned Lord, Lord Slynn of Hadley, for asking this Unstarred Question. I join with other noble Lords in congratulating him on the excellent report of his committee.

My interest in this subject is not of long standing. It started with a Question which the noble Baroness, Lady Gardner of Parkes, asked on 3rd March 1994. She asked what was happening. To quote my own words—if that is in order —I said then: I am stupefied by the suggestion of a desire for some form of harmonisation. Does the Minister not recognise that we have an extremely satisfactory system of hallmarking in this country which protects the consumer?"—[Official Report, 3/3/94; col. 1127.] I understood from the Minister's reply that that was also his view. If I read paragraph 23 of the Select Committee's report correctly, that is also the DTI's view. This is a rare occasion on which I wish strongly to support the view of the Minister's department. As I understand it, the department is not convinced of the need for a directive. That is still my view. As noble Lords know, I speak as a very ardent pro-European.

I do not accept—and I was surprised that the noble Viscount, Lord Oxfuird, accepted—that our high standards of hallmarking are a barrier to trade. I have spent most of my academic life studying the economics of free trade and sometimes the flaws associated with it. However, the notion that a country setting a high standard of consumer protection is acting in restraint of trade is simply ridiculous. It is wrong. I normally agree with most of what the noble Viscount says on most subjects, but I was surprised that he said that our system led to featherbedding. I do not accept that for one moment. I believe that the noble Lord, Lord Broadbridge, was right when he said that it led to high standards and consumer protection. Indeed, the noble Viscount himself made the valid argument, which I believe to be overwhelmingly correct, that if we go down the path the Community wants, that will lead to a state of affairs which is so complex that the consumer will cease to be protected.

If it were up to me, I would maintain the status quo. I would do so on the grounds of good free trade and good consumer protection. However, if I read the Select Committee's report correctly, we shall not be allowed to keep the status quo. The Select Committee recommends: continued efforts to negotiate an acceptable Directive with a really effective method of control so as to protect the consumer". I accept that, and I would welcome it if I thought it were possible. However, I do not believe that it is possible. Therefore, although I do not want anything that I say to be interpreted as remotely undermining the very hard task facing the Minister, I believe that it is all a waste of time. If I had my way we would simply retain the present system, which is of long standing and offers protection to consumers in our country.

I pay tribute to the work of the local authority trading standard officers who enforce the hallmarking legislation. Their work is supported by the technical and analytical expertise of the assay offices. That is allied to point-of-sale information available to the consumer. In other words, in terms of consumer protection, what we have is what we want and what we need.

The problem for the Minister—and this is why I look forward to his reply—is whether, in negotiating with his colleagues, he can find an approach which does not water down the system we have and which does not lead to an outcome which is so complicated that the consumer ends up with a worse state of affairs than we started with.

As I understand it, there is still everything to play for. I ask the Minister whether I am right that there is everything to play for and that we have so far made no concessions. If that is true, I urge him, first, not to make any concessions; and, secondly, to prolong the process as long as he possibly can. Prolonging the process indefinitely would be the best way of approaching the matter.

Harmonisation is desirable in many areas. However, a form of madness is overwhelming the Community so that harmonisation has to be achieved in everything. Free trade is prayed in aid, as if it were the same as harmonisation. As an academic economist, I can assure your Lordships that it is not.

We should not be bewitched by the desire for harmonisation. For once, we ought to argue strongly that consumer protection in this area is paramount. Protection against fraud is of the greatest importance. The British system is precisely the one which achieves those desirable ends.

7.17 p.m.

The Minister of State, Department of Trade and Industry (Earl Ferrers)

My Lords, the House will be grateful to the noble and learned Lord, Lord Slynn of Hadley, for asking this Question this evening. I know how much our hallmarking regime is valued by people in this country. I share that respect for the system.

The House will also be grateful to the noble and learned Lord for having chaired, with his legendary clarity and competence, the Select Committee which considered the handling of precious metals and which produced such a valuable report. As the noble Viscount said, it will-be a classic. He is right.

The noble and learned Lord explained the position concerning hallmarking admirably. An interesting aspect of your Lordships' House is that there is always someone who is an expert. We have heard from several experts this evening. I knew that it was not unknown for some Members of your Lordships' House to own a bit of gold or a bit of silver. I knew that it was not unknown for some of your Lordships to know a bit about gold or silver. However, until the noble Lord, Lord Broadbridge, spoke, I did not know that we had a practising silversmith in your Lordships' House. That is an added advantage. The noble Lord is lucky to be a member of such a distinguished livery company as the Goldsmiths Company. I was fascinated that in his advocacy of the hallmarking of gold and silver he should enter into the realm of baked beans. It was rather difficult to understand the analogy, although I realise that it was an imaginative way of making a point.

The noble Lord, Lord Peston, in his usual succinct way, said that the whole thing was a waste of time. I thought that that was a little—not facile—perhaps simple. I do not mean that the noble Lord is simple, merely that his argument was simple. He asked whether there was everything to play for. The answer is that there is. He asked whether any concessions were made. The answer is no. The position is that the directive has been taken away and is being considered by the Commission, as a result of the discussion which was held in March. The noble Lord, Lord Peston, said, in his curiously avant-garde way, "Let's take it away for ever and not see it again". Life is not as simple as that, as I hope to show him.

The marking of articles which are made from precious metals, in order to indicate their precious metal content and who made them, is one of the oldest forms of consumer protection we have. A number of noble Lords said that the tradition had been practised in the United Kingdom for 700 years, going back to the reign of Edward I. Your Lordships' Select Committee put it succinctly, stating that the purpose was, in order to discourage goldsmiths from deceiving the public". So they did pretty funny things in those days too.

A number of other European member states also enjoy a long-established tradition of independent hallmarking. Other member states have equally long traditions but ones which are totally different from ours where the manufacturer marks his own products. The two traditions are in fact diametrically opposed. One is hallmarking carried out independently of the manufacturer and the other is marking by the manufacturer himself. The proposed directive seeks to find a way of accommodating those extremes. Even if it did not satisfy the noble Lord, Lord Peston, it would satisfy the jewellery industry about which my noble friend Lord Oxfuird was concerned and to which he rightly drew your Lordships' attention. Trying to accommodate those extremes is not easy. We can accept and, indeed, prefer independent hallmarking. We can accept manufacturers' marking provided that the process used has been assessed and has been approved by an independent body and provided that the process is subject to regular inspections. What we cannot accept is marking by the manufacturer without any prior approval by an independent third party of the methods which he uses and where the process is subject only to random inspection.

The difficulty arises in Europe because those countries which have traditionally had a manufacturers' system of marking with which they are content view the imposition of the approval of their methods by an outside certifying body as an appalling and additional bureaucratic burden. They will have to create, in their view, a new tier in their states.

We are always saying that we want less bureaucracy in Europe. Oddly enough, they say exactly the same. But we are the ones who, in their eyes, are pushing for more bureaucracy in their states. That is the difficulty. United Kingdom marks are known the world over and they are universally regarded as marks of excellence. Assay Office marks—the leopard's head for London, the anchor for Birmingham, the rose for Sheffield and the castle for Edinburgh—are held in considerable affection and esteem. They impart their own cachet to a particular article which has been made from a precious metal.

I believe that I can satisfy the noble Viscount, Lord Falkland, that the lion passant would be allowed to continue as the directive allows for traditional marks as long as they do not confuse. United Kingdom hallmarking requirements are governed by the provisions of the Hallmarking Act 1973. Under that Act no article may be offered for sale in the United Kingdom which is described as gold, silver or platinum unless it bears an approved hallmark. That means a mark which is struck by one of the four United Kingdom assay offices; a mark which was struck in Dublin before 1st April, 1923; or a mark which is struck in accordance with the provisions of the International Hallmarking Convention. That convention provides a mutual recognition of marks which is based on rigorous criteria, such as methods of marking and assaying. But not all European Union member states are party to the International Hallmarking Convention.

There are three approved hallmarks. They are the Assay Office mark; the standard of fineness mark; and a date letter. There are four recognised standards for gold, two for silver and one for platinum. In addition, all articles must bear a sponsor's mark. This will indicate who is the manufacturer or the sponsor—for example, the importer. The sponsor's mark may be struck either by the sponsor or by the Assay Office. The sponsor's mark must in any event be registered with the Assay Office.

The draft European Union directive seeks to harmonise the arrangements in the various member states for marking precious metal articles. It is an Article 100a directive, which is about the free movement of goods between member states. It does not invoke Article 129a of the Treaty of Rome, which is all about consumer protection. That is important and it is the reason we think that the directive is fundamentally flawed.

My noble friend Lord Oxfuird said that hallmarking was a barrier to trade. That is a perfectly tenable argument, but the European Court has recognised that barriers to trade can be justified in the interests of consumer protection. Recently, there was a celebrated case to which my noble friend referred—the Houtwipper case—which involved a Dutch trader who attempted to sell unmarked silver articles which had been imported from another member state in contravention of Dutch hallmarking law. In its judgment, the European Court of Justice said that the marking or re-marking of such articles by the importing member state was not contrary to Article 30 of the Treaty of Rome. It also said that member states which themselves practised independent marking were obliged to accept, without marking or re-marking, articles which had been marked on a similar basis in another member state. That was an important judgment.

The proposed draft directive is what is called a "new approach" directive. This form of directive has been applied to products such as toys and weighing machinery. We do not think that the new approach directive is suitable in the case of precious metal articles. We are not concerned here with whether an article meets established standards such as standards of safety with a notified body which acts as the supervisory authority. What matters in the hallmarking issue is, first, that the article should be of the quality which is ascribed to it; and, secondly, that the consumer receives a watertight guarantee of that quality.

The Government cannot accept that self-certification by manufacturers would offer United Kingdom consumers an adequate level of guarantee. It would lack the imprimatur of an independent body behind it. It would be seen by United Kingdom consumers as a backward step and a marked lowering of standards and of consumer protection. It is for those reasons that the Government rejected the current draft of the directive at the Consumer Council on 30th March. Subsequent correspondence which has, curiously enough, found its way into my office has confirmed that the public on the whole believe that it was the right thing to do.

The noble and learned Lord's committee has produced a thorough scrutiny of the European Commission's proposal. I wish to offer the Government's thanks to the noble and learned Lord and his committee for having done that in a remarkable way. It was a most welcome contribution to the debate on an important subject. It was particularly helpful that it provided valuable support for the Government's negotiating position. I have already made a response to the noble and learned Lord's report, but there are just two points which I wish to highlight. First, there is the need for a directive which provides "a really effective system of consumer protection". The Government are determined to argue vigorously for that and we will not approve measures which compromise the high standards which are present in the United Kingdom.

The second point is related to that and concerns the question of the alternative manufacturer marking system—the system which is approved by and regularly inspected by an outside body. That system is incorporated in the directive and is based on product quality assurance. That is a matter which we would be prepared to consider further, especially if it were to include the stamping of the mark of the notified body on the metal and if there were to be established criteria for the assessment of notified bodies.

I agree with the noble and learned Lord, Lord Slynn, that a mark by a notified body would add to transparency and would make it easier to trace articles. Unfortunately—it is a regrettable factor—this option does not seem to command much support among those member states which already practise manufacturers' marking.

The Government's position on the directive is not totally negative. For example, there are advantages in harmonising the standards of fineness used throughout Europe. That was one of the recommendations of the noble and learned Lord's committee.

I was glad, if I may say so, that my noble friend Lord Oxfuird put the position of the jewellery industry so clearly. We understand the desire of the British jewellery industry to enjoy the clarity which harmonisation would bring whereby jewellery imported from another member state does not have to be subject to a further test. Without harmonisation—it is a point the noble Lord, Lord Peston, may like to consider—there is always the danger, as my noble friend said, of confusion as to what does and does not need to be hallmarked as well as to what different hallmarks mean. There is advantage for harmonisation provided that the harmonisation does not lower the quality of the consumer protection.

At present, under United Kingdom law, unless jewellery which is imported from member states carries the mark of the International Hallmarking Convention, it has to be subjected to further certification before it can be sold in United Kingdom shops. The judgment of the European Court in the Houtwipper case will mean that jewellery imported from member states which have an independent hallmarking system can now be sold without additional certification. Jewellery which is imported from other member states must continue to be subject to further certification by a United Kingdom assay office. That is obviously untidy; some might think it wrong. The difficulty arises in trying to find a fair and equitable solution. In the Government's view the protection of the consumer must remain the prime concern. We do not believe that the directive, as currently drafted, addresses that concern adequately. We will not agree to any directive which falls short of that important principle.

House adjourned at twenty-seven minutes before eight o'clock.