Lords Sitting of 10 December 1996

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

The Lord Bishop of Ely
Stephen Whitefield, Lord Bishop of Ely—Was (in the usual manner) introduced between the Lord Bishop of Lichfield and the Lord Bishop of Norwich.

Turkey: Human Rights
2.42 p.m.
Lord Hylton Lord Hylton asked Her Majesty's Government:
Whether they will propose in the relevant international fora that Common Article 3 of the Geneva Conventions applies to the armed conflict widespread in Turkey since 1984.
The Minister of State, Foreign and Commonwealth Office (Baroness Chalker of Wallasey): My Lords, whether a state of internal armed conflict for the purpose of Common Article 3 of the Geneva Conventions exists at any given time is a question of fact to be determined in the light of all the circumstances. It is not a matter for other governments to propose or dispose. We will continue to urge the Turkish Government to take a multi-faceted approach to the conflict in the south east.
Lord Hylton: My Lords, I thank the noble Baroness for that reply. I am not quite sure what is meant by "multi-faceted". However, is not this article, which bans torture and murder of suspects and detainees, quite essential in view of the poor progress in improving basic human rights in Turkey, as was agreed when Turkey entered a customs union with the European Union? Will the Government work to obtain access for the International Committee of the Red Cross to Turkish prisons and police stations?
Baroness Chalker of Wallasey: My Lords, first I should say that the multi-faceted approach means taking everything into consideration. I used the lawyers' words because I was told that they would be non-controversial. But this is a serious matter and I jest not. The issue which the noble Lord, Lord Hylton, raised is quite correct. The ban on torture and murder is a correct ban and it is high time that the government of Turkey, and the governments of some other nations too, having signed up to the matter, adhere to it.
We believe that the ICRC will continue to try to gain access to the prisons; to operate in the emergency region on an ad hoc basis; and certainly it has a unique role to play as the guardian of international humanitarian law. We shall support it in that role. It can act as an
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intermediary in a way that no other body can, but every government in the European Union and in the Council of Europe should be giving their best support to the ICRC in doing that work.
Lord Avebury: My Lords, in that case, why did the Government see fit not to raise this matter at the recent human dimension review conference of the OSCE or at the Lisbon summit when there would have been an opportunity to take up that matter under the question of Turkish compliance with the code of conduct of the politico-military aspects of security? Do the Government and other states in Europe accept Turkey's denial that Common Article 3 applies to that conflict? Will the Government impress on Turkey that it is essential to give a favourable reply to the request for admission by the ICRC which has been renewed every year since 1983?
Baroness Chalker of Wallasey: My Lords, there is absolutely no doubt from what I said in answer to the noble Lord, Lord Hylton, that we believe that Common Article 3 should be applied properly, but the factual situation in the area is confused. From this Dispatch Box I cannot take a view on the applicability of Common Article 3 of the Geneva Conventions. I do not believe that anybody in your Lordships' House can do so. That can be done only by the lawyers in the light of all the circumstances. We have frequent discussions in the OSCE about that. Further to that, we take up those matters with leading Turkish politicians, including the Foreign Minister, Mrs. Ciller, when she was in London last week.
Lord Rea: My Lords, I hold no brief for any organisation whose activities result in the deaths of innocent civilians. Does the Minister agree, however, that the leader of the PKK, Abdullah Oçalan, has recently declared that he would adhere to Common Article 3 and is willing to enter into negotiations with no fixed agenda? Is it not time for the Government to urge the Turkish Government to enter into genuine negotiations with that armed opposition group?
Baroness Chalker of Wallasey: My Lords, I do not believe that many of your Lordships would do anything but support Turkey in its efforts to combat terrorism. Let us be quite clear about this. The PKK is an organisation which is certainly not at all benign in its activity. There are political parties and we believe that some action taken against the Kurdish political party—the HADEP—was probably over the top. But the point is that unless Turkey can combat terrorism, it will never overcome the problems that it has.
The noble Lord referred to the leader of the PKK, Mr. Abdullah Oçalan. The last that I heard from him was on a recent Med TV broadcast. I am sure that most noble Lords will share my disgust of a broadcast in which Mr. Oçalan condoned the suicide bombers' actions. That is really not the behaviour of a leader of a party which is seeking to bring about some form of dialogue. Terrorism is not dialogue; it will never be dialogue. That is why Turkey is right as a government to make efforts to combat terrorism.
Lord Bridges: My Lords, regarding the original Question, can the Minister tell the House a little more about the way in which a determination under Article 3 of the Convention is arrived at? The noble Baroness seemed to suggest that some collective discussion between lawyers was necessary. Would that take place between the signatories of the convention, or in some other forum? It would be helpful to know a little more in that respect.
Baroness Chalker of Wallasey: My Lords, I must admit to the House that I cannot answer the noble Lord with absolute precision. I would rather write to him on this occasion. I do believe that this is a matter for lawyers, because it is only in a legal framework that this can be fully applied. I shall write to the noble Lord and place a copy of that letter in the Library of the House.
Baroness Blackstone: My Lords, given the fact that Turkey gave certain assurances on human rights when it joined a customs union with the European Union, do the Government now support the call for a freeze on financial assistance that is linked to the customs union (which was passed by an overwhelming majority in the European Parliament a few months ago) in the light of Turkey's poor record on human rights since that time?
Baroness Chalker of Wallasey: My Lords, as the noble Baroness knows, the European Union has always felt it better to maintain a dialogue with Turkey on political issues, including human rights. However, the Council of Ministers has frequently urged the Turkish Government to make a great deal more progress. There is concern and that was expressed in the Commission's October report on the customs union and in two European Parliament resolutions. I understand that the matter is to come before the European Union's Council of Ministers shortly. I am quite certain that the matter will be taken further.

Swiss Bank Deposits: Secrecy
2.52 p.m.
Lord Dubs Lord Dubs asked Her Majesty's Government:
What discussions have taken place with the Swiss Government, either directly or through the European Union, regarding banking secrecy and its implications for deposits allegedly made by Nazis and, more recently, by others such as Presidents Marcos and Ceausescu.
Baroness Chalker of Wallasey: My Lords, my right honourable friend the Foreign Secretary discussed unclaimed wartime deposits in Swiss banks with the Foreign Minister in Berne in September. My right honourable friend is fully satisfied with the Swiss authorities' conduct of these inquiries. We have had no exchanges with the Swiss Government about deposits by former Presidents Marcos and Ceausescu.
Lord Dubs: My Lords, I thank the Minister for that Answer. Does she agree that a quick resolution of these
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difficulties is urgent? If that is not achieved, victims of the Holocaust who have some claim to the money in Swiss banks will find payment coming through too late for them to derive any benefit. Further, in the interests of their own international reputation will the Minister urge the Swiss Government that they ought to investigate the way in which dictators of poor countries deposit money in Swiss banks—money which may frequently have been misappropriated or stolen from their own people?
Baroness Chalker of Wallasey: My Lords, in answer to the noble Lord's first supplementary, it is a matter of note—and certainly of relief—that the Swiss Government have wasted no time in getting their legislation on the way towards the statute book. I understand that it is likely to be operational from 1st January next, thereby entering into effect faster than any other Swiss legislation that I can remember in recent times. There is no hesitation in going forward with this as quickly as possible to help people who might be so compensated.
The noble Lord's second question goes a little wider. However, from my contacts with other parts of the world, the noble Lord may well imagine that deposits in secret Swiss bank accounts by people who are not in fact depositing their own money are a matter of grave concern. I know that it is a matter of concern to Foreign Minister Cotti, just as much as it is to any noble Lords in this House.
Baroness Blackstone: My Lords, can the Minister tell the House whether any progress has been made in discussions with the US and French Governments on steps to renegotiate the 1946 Washington Agreement? Is it not vital to reopen that agreement, given the fact that the Swiss Government have said that it could take as long as five years to report on the matter?
Baroness Chalker of Wallasey: My Lords, I do not wish to appear difficult to the noble Baroness, Lady Blackstone, but, until the investigation is under way, I really cannot see grounds for reopening the 1946 Washington Agreement. If the investigation into the Swiss financial institutions before and during World War II brings to light new information, we would consider further action in consultation with the Swiss, the US and the French Governments. I do not believe that the five-year period mentioned by the noble Baroness is realistic; indeed, I believe that it will be done rather faster than that. There is great deal of concern in Switzerland to get on with the matter and to resolve it once and for all.
Lord Mackie of Benshie: My Lords, can the Minister tell us why it has taken 50 years for anything to be done?
Baroness Chalker of Wallasey: No, my Lords, I cannot do so. I think that I am just as impatient as the noble Lord.
Viscount Waverley: My Lords, can the Minister tell the House what is being done to attack the ill-gotten

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wealth of drug traffickers whose funds are suspected of being in secret accounts? For example, is the information being shared with the authorities in producing countries?
Baroness Chalker of Wallasey: My Lords, the noble Viscount may know that a very substantial effort has been made, particularly by Commonwealth countries, both to trace the ill-gotten gains of drug traffickers and, indeed, money involved in money laundering. It is a matter of great concern at an international level, not only as regards Swiss bank accounts but also in the banking world as a whole. Some progress has already been made; more needs to be made. I believe that we are moving in a positive direction to get people to at least be honest about this money.
Lord Hylton: My Lords, with regard to moneys deposited before or during the Second World War, will Her Majesty's Government ensure that the legitimate interests of European gypsies are not overlooked?
Baroness Chalker of Wallasey: My Lords, I shall certainly bring the noble Lord's question to the notice of those authorities who are considering the matter. I cannot give the noble Lord an undertaking because I am not part of the investigation team. However, it seems to be a point of consideration which should be taken into account.
Lord Wallace of Saltaire: My Lords, given the fact that a large number of offshore banking centres are under British jurisdiction both around the British Isles and in the Caribbean, is the Minister satisfied that our rules are now tight enough to cope with money laundering, and so on, in those centres?
Baroness Chalker of Wallasey: My Lords, a major effort has been made over the past few years to tighten up the legislation in all dependent territories and, indeed, in other territories where there is offshore banking. I am not really confident that we have ever gone quite far enough. All I know is that the authorities in the countries concerned, who we suspect suffer from illicit deposits in offshore banks, are very much aware of the point. They have asked for assistance in working out how to combat the situation. We shall give that assistance whenever we possibly can.

Chronic Fatigue Syndrome
2.58 p.m.
Earl Baldwin of Bewdley Earl Baldwin of Bewdley asked Her Majesty's Government:
What steps they propose to take in the aftermath of the recent report of the medical Royal Colleges on chronic fatigue syndrome.
The Parliamentary Under-Secretary of Sate, Department of Health (Baroness Cumberlege): My Lords, the report of the medical Royal Colleges has contributed to the debate about the nature and treatment
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of chronic fatigue syndrome, also known as ME. Until there is a diagnostic test or robust evidence of an effective treatment, we shall continue to fund research and to support the voluntary sector. This will help to ensure that patients receive the best possible advice and treatment available within the current state of our scientific knowledge.
Earl Baldwin of Bewdley: My Lords, I am grateful to the noble Baroness for her reply and, in particular, for her reference to the need for more research. Will the Minister agree that a crucial first step in which her department could take a leading role is to get the message across to doctors, especially GPs in the front line, that chronic fatigue syndrome is a very real condition: it is not all in the mind and needs skilful and sympathetic management?
Baroness Cumberlege: Yes, my Lords; I entirely agree with the noble Earl, Lord Baldwin. In fact, I was discussing with the Chief Medical Officer this morning the best way of getting the message across to general practitioners. He has agreed to include an article in the monthly CMO's Update which goes to every GP in the country.
Lord Dean of Beswick: My Lords, if the necessary research into this condition were to be dramatically increased, can the Minister tell the House where the funding would come from, bearing in mind the fact that the trusts which provide such services have very little money to devote to that kind of activity?
Baroness Cumberlege: My Lords, the noble Lord will be aware that this Government have given a commitment to put more resources into the health service year on year on year on year on year for five years.
Lord Rea: My Lords, I agree with the report of the Royal Colleges that the main care for this condition should be provided by primary healthcare and by general practitioners. However, does the Minister agree that the initial diagnosis and the teasing out of this condition is complicated because it could be described as a multi-faceted condition? Is the Minister satisfied that facilities are available in hospitals throughout the country to make an accurate initial diagnosis to guide general practitioners who will then carry on with the treatment?
Baroness Cumberlege: My Lords, the noble Lord is absolutely right. There is no agreed diagnostic criteria at the moment which makes it a difficult condition to combat. There is still a debate about what other factors should be taken into account in determining the nature of the disease and also its treatment. We believe that it is increasingly being dealt with more sympathetically and that provision is made for these patients in hospital. Indeed we have no reason to believe otherwise.
Lord Mackie of Benshie: My Lords, is the Minister aware that it is widely thought that the Government are suffering from this syndrome?
Baroness Cumberlege: My Lords, the Government are strong, healthy and prepared to go on for another five years.
The Countess of Mar: My Lords, is the Minister aware of the work that has been done at Glasgow University on the effects of organophosphates on chronic fatigue syndrome? Is she aware that there would appear in some cases to be a link, and that perhaps chronic fatigue syndrome has not only one cause but a number of causes?
Baroness Cumberlege: My Lords, we are aware of the research that is being carried out at the University of Glasgow. Indeed I believe that officials visited the author of the work only last week. We have not yet seen the full report.
Lord Clark of Kempston: My Lords, does my noble friend accept that the Government have increased in real terms the money available for the National Health Service? The Opposition, who criticise the funding of the National Health Service, would be better advised to say where they would get the money from if they reformed it.
Baroness Cumberlege: Yes, my Lords, of course.
Baroness Jay of Paddington: My Lords, I follow that simple point with another one. Are the Government concerned that one of the suggestions of the Royal Colleges is that this whole business should be handed to general practitioners, and that the care of people with this syndrome should rest in the hands of family doctors? Is it not the exact opposite of the whole policy of evidence based medicine that this complicated work is being handed to general practice at a time when that service is in flux and, as we understand it, may well end up in the hands of private pharmacologists?
Baroness Cumberlege: My Lords, the noble Baroness is right to say that this is a complex area. That is why we are putting more resources into research on it. One of the two projects that we are funding at the moment to the tune of £65,000 concerns looking at whether GPs are best placed to manage this condition.
Earl Baldwin of Bewdley: My Lords, would not the noble Baroness agree that, in line with the Government's stated policy of putting patients first, patient organisations should now be actively involved with the medical profession in taking the agenda forward, which is something which has not necessarily happened in the past?
Baroness Cumberlege: Yes, my Lords, that is very much in tune with the whole of our philosophy about involving patients with their care.

Theatre Finances
3.4 p.m.
Lord Donoughue Lord Donoughue asked Her Majesty's Government:
Whether they agree with the conclusions of the report The Theatre Commission: a Report on Subsidised Theatre in the United Kingdom.
The Parliamentary Under-Secretary of State, Department of National Heritage (Lord Inglewood): My Lords, Ministers only received a copy of the report a week ago, so I am not yet in a position to comment on its many detailed conclusions and recommendations which are addressed to a wide range of organisations. I can, however, wholeheartedly endorse its comments on the high quality of United Kingdom theatre.
Lord Donoughue: My Lords, I thank the Minister for that terse reply. I think we all understand that the Government have not had a great deal of time for the outside theatre in the past week, presumably being absorbed in their own internal dramas. I am not sure whether it is one of the Whitehall farces of my noble friend Lord Rix or "Julius Caesar". Is the Minister aware that the subsidised theatre, one of our cultural jewels and one of the few areas where we still reign supreme internationally, generating huge revenue from tourists, is suffering severe problems on the revenue side? Although it receives help from the lottery for capital, its revenues have suffered severe real cuts in recent years. Indeed, dozens of theatres are faced with closure because of their deficits. Has the Minister any words of comfort for that great side of the British theatre?
Lord Inglewood: My Lords, the noble Lord paints a picture of the theatrical scene in this country. While it contains a grain of truth, I should not wish to describe it in the terms he has used. The important point to appreciate is that the Arts Council is now looking carefully at the state of drama in this country. In October this year it published a policy paper on drama which is to be followed next year by a plan for the next three years indicating its proposals. There are a number of problems facing the theatre. The noble Lord, Lord Donoughue, is right to point out the particular importance of the subsidised theatre in the wider theatrical scene. The solution to the difficulties is not necessarily simply to give public money.
Lord Jenkins of Putney: My Lords, we know that the noble Lord's heart is in the right place in this matter, but what is necessary is the urgent provision of resources. My noble friend is right to point out that whereas the bricks and mortar problem is now healthier than it has been for a long time, the problem of revenue funding is grave, urgent and serious. I believe there are even problems in the Secretary of State's own constituency. The extraordinary fact is that this activity, which I believes generates about £2,000 million a year, could be saved by £10 million given to the Arts Council now. The matter is urgent. Will the Minister recommend that step, or ask the Secretary of State to consider it?
Lord Inglewood: My Lords, as regards the proposals in the Theatre Commission's report, as I said, we are not yet in a position to comment on any specific points. In the context of the problems that face the theatre, it is important to realise that through the lottery a pilot arts stabilisation round is currently being discussed. That may provide a solution to some of the problems that some theatres may face. In addition, as a result of the lottery arts for everyone policy, it is now possible for youth and voluntary groups to receive assistance to visit the theatre, which in turn will help the cash flow income of all theatres including the subsidised theatre. I cannot emphasise too much that this is a problem which does not lend itself to one liner replies.
Lord Rix: My Lords, I declare an interest as I served on the Theatre Commission. In view of the deterioration in funding for the subsidised theatre over the past 10 years, does the Minister agree that this appears to have coincided with the diminution of the arm's length principle betwixt the Government and the various funding bodies over that 10-year period?
Lord Inglewood: My Lords, in talking about public money going into subsidised theatre it is important to be clear that the details of any allocations are matters for the Arts Council. The Arts Council is at arm's length from the Government. Whatever the detail of allocations over any particular period of time, one cannot link the two matters together, as the noble Lord tempts me to suggest might have happened.
Baroness O'Cathain: My Lords, is it possible for the Government at some stage to consider the great success of the unsubsidised theatre both internationally and nationally? Can some lessons be learnt from that as to how the subsidised theatre should manage with the vast amount of money it receives?
Lord Inglewood: My Lords, the noble Baroness makes a good point. Of course the subsidised theatre should consider the successful aspects of the commercial theatre to see what lessons it can learn. I understand that the two sides of the industry—if I may put it that way—are in discussion.
Lord Donoughue: My Lords, the last question did not seem to be asked with much love for the theatre. Will the Minister confirm that in recent years the Arts Council grant to the subsidised theatre has been cut in real terms by virtually 4 per cent.?
Lord Inglewood: My Lords, on the basis of the figures I have, in 1987-88 the subsidised theatre received £35.8 million which represented 30.8 per cent. of the total disbursements of the Arts Council. In 1995-96 the total amount made available was £52 million which represented 27.5 per cent. The amount of money available has risen in real terms while the percentage of the Arts Council budget, which in real terms has increased over the same period, has marginally declined.
Lord Jenkins of Putney: My Lords, does the noble Lord agree that the old enmity between the subsidised and commercial theatre is over? They now work well together and support each other. Any suggestion to the contrary is extremely old hat.
Lord Inglewood: My Lords, I do not go back far enough to know about great enmity between the two sides of the theatre. However, I understand that they are working together. That is entirely desirable because each benefits and can learn from the other.

Business
3.10 p.m.
Lord Strathclyde: My Lords, at a convenient moment after 3.30 p.m. my noble friend Lord Howe will, with the leave of the House, repeat a Statement that is to be made in another place on Gulf War illness.

Merchant Shipping and Maritime Security Bill [H.L.]
The Parliamentary Under-Secretary of State, Department of Transport (Viscount Goschen): 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 9,
Schedule 1,
Clauses 10 to 12,
Schedule 2,
Clause 13,
Schedule 3,
Clauses 14 to 23,
Schedule 4,
Clause 24,
Schedule 5,
Clauses 25 to 27,
Schedules 6 and 7,
Clauses 28 and 29.—(Viscount Goshen.)
On Question, Motion agreed to.

Horserace Totalisator Board Bill [H.L.]
Read a third time, and passed, and sent to the Commons.
Theft (Amendment) Bill [H.L.]
Read a third time, and passed, and sent to the Commons.

Social Security (Recovery of Benefits) Bill [H.L.]
3.13 p.m.
The Minister of State, Department of Social Security (Lord Mackay of Ardbrecknish): My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, That the House do now resolve itself into Committee.—(Lord Mackay of Ardbrecknish.)
On Question, Motion agreed to.
House in Committee accordingly.
[The CHAIRMAN OF COMMITTEES in the Chair.] Clause I agreed to.
Schedule 1 [Compensation payments]:
[Amendment No. 1 not moved.]
Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 2:
Page 17, line 27, at end insert—
(". Any payment made

(a) in consequence of an action under the Fatal Accidents Act 1976; or

(b) in circumstances where, had an action been brought, it would have been brought under that Act.

. Any payment made to or for the injured person in respect of a liability arising by virtue of section I of the Damages (Scotland) Act 1976.

. Without prejudice to section 6(4) of the Vaccine Damage Payments Act 1979 (which provides for the deduction of any such payment in the assessment of any award of damages), any payment made under that Act to or for the injured person.

. Any award of compensation made to or for the injured person by the Criminal Injuries Compensation Board or Criminal Injuries Compensation Authority under the Criminal Injuries Compensation Act 1995.

. Any payment made out of property held for the purpose of the charitable trust called the Macfarlane Trust and established partly out of funds provided by the Secretary of State to the Haemophilia Society for the relief of poverty or distress among those suffering from haemophilia.

. Any compensation payment made by British Coal in accordance with the NCB Pneumoconiosis Compensation Scheme set out in the schedule to an agreement made on 13 September 1974 between the National Coal Board, the National Union of Mineworkers, the National Association of Colliery Overmen, Deputies and Shot-firers and the British Association of Colliery Management.

. Any payment made to or for the injured person in respect of sensorineural hearing loss where the loss is less than 50db in one or both ears.

. Any contractual amount paid to the injured person by his employer in respect of a day of incapacity for work.

. Any payment made by the Macfarlane (Special Payments) Trust established on 29 January 1990 partly out of funds provided by the Secretary of State for the benefit of certain persons suffering from haemophilia.

. Any payment made by the Macfarlane (Special Payments) (No. 2) Trust established on 3 May 1991 partly out of funds provided by the Secretary of State for the benefit of certain persons suffering from haemophilia and other beneficiaries.

. Any payment made under the National Health Service (Injury Benefits) Regulations 1974 or the National Health Service (Scotland) (Injury Benefits) Regulations 1974;

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. Any payment made to or for the injured person to compensate him for the cost of medical treatment and incidental expenses for medication and travel for medical treatment.

. Any payment made to or for the injured person to compensate him for damage to property including (but not limited to) damage to or loss of a motor vehicle and expenses incidental to such damage or loss, damage to or loss of clothing or jewellery and damage to or loss of physical aids used by the injured person.").

The noble Baroness said: Schedule 1 to the Bill is concerned with the exemptions to recoupment under the terms of the Bill. The list of exemptions contained in Schedule 1, Part I, is not as extensive as in the existing law. Section 81(3) of the Social Security Administration Act 1992 sets out a series of exempt payments. Contained in that list, but missing from the list in the Bill, are the following, which perhaps I may summarise: the 1992 Act; the Fatal Accidents Act; Section 1 of the Damages (Scotland) Act 1976; the Vaccine Damage payments; criminal injuries compensation payments, now under the Criminal Injuries Compensation Act 1995. That is extremely important, given the statutory basis of the new criminal injuries scheme and the new criminal injuries compensation authority.
I understand that the existing regulations also provide for a number of exclusions. For example, there are payments to haemophiliacs—surely a most important consideration. There are payments under the pneumoconiosis compensation scheme. Again that is very important since pneumoconiosis, as Members of the Committee know, affects many miners even after they have left the industry. There are low level deafness cases. There is contractual sick pay and payments under the National Health Service (Injury Benefits) Regulations. There is also discretion to exclude, under existing provisions of legislation, a number of other items which are also exempt, including damages for insurance policy excess; damage to a vehicle; replacement of property—for example, clothing and jewellery—and reimbursement of private medical expenses.
I understand that the Government did not intend to reduce the list of exclusions, but that remains to be confirmed formally by the Government. For the sake of clarity, it seems to us that the list of exclusions should be included in the Bill. I beg to move.
Lord Mackay of Ardbrecknish: Schedule 1 to the Bill sets out that certain compensation payments will be exempt from benefit recovery, and it makes provision for others to be exempted by regulations. The amendment adds a number of other payments to the list already in the Bill, as has been explained by the noble Baroness.
Perhaps I may make clear from the outset that our intention is that payments which are exempt in the current scheme shall continue to be exempt in the reformed scheme. However, we need first to ensure that the payments we wish to exempt from benefit recovery are not already exempt in practice because they do not fall within the provisions of the Bill. For example, the noble Baroness lists in her amendment payments under the Fatal Accidents Act 1976; Section 1 of the Damages (Scotland) Act 1976; the Vaccine Damages Payments Act 1979; and the Criminal Injuries Compensation Act 1995. I fully

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understand her reasons for doing so. Those appear in primary legislation under the current scheme but do not appear on the face of the Bill.
The reason for the apparent omission is that the parliamentary draftsman is confident that the payments to which I have referred cannot fall within the provisions of the Bill because those payments are allowed for in statute and therefore are free, so to speak, from the provisions of the Bill.
I have dealt with the four specific Acts referred to by the noble Baroness. The remainder of the provisions listed by the noble Baroness are to be found in regulations in the current scheme. We intend that those payments will continue to be exempt in the new scheme. However, it may be that some of those payments would not be caught by the provisions of the Bill for the reasons that I gave regarding the four Acts which I have discussed. It is a matter which departmental lawyers are considering carefully. If they conclude that exempt payments which are currently in regulation could be caught by the Bill, then such payments will be made exempt when we regulate next year.
I hope that that gives the noble Baroness sufficient assurance for her to withdraw the amendment.
Baroness Turner of Camden: I thank the Minister for that explanation. It makes the issue much clearer. I am glad that the department's lawyers are to consider the whole matter. In the circumstances, there is no point in proceeding with the amendment at this stage of the Bill. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Earl Russell Earl Russell moved Amendment No. 3:
Page 17, leave out lines 28 to 41.
The noble Earl said: First, I apologise to the Committee, the Minister, and the noble Baroness, Lady Turner of Camden, for having made such a precipitate arrival. I have been engaged in duties in another place—I hasten to add, not the proverbial "other place". There are times when I could wish that the Strand was a little shorter than it actually is.
We are concerned here with what the Government's attitude may be to the question of the small payments limit. We understand that there is no provision in the Bill for a small payments limit. On the other hand, under the terms of Schedule 1 there is the rather confusing provision that they might be capable of reinstating one. Under Schedule 1, Part II, paragraph 9(1) there is provision for excluding payments which do not exceed the prescribed sum. We are thus back again with regulation and the matter of prescription. It sounds remarkably like a trip to the chemist.
I do not quite understand why that provision is contained in the Bill. To ask whether or not the Government have a small payments limit, reminds me of the time when my father rang Gilbert Murray's door and the maid answered and said, "I think they're in, unless they're out"; but in this case the situation seems to be, "I think they're out, unless they're in".
We on these Benches would prefer it to be absolutely clear that there will not be a small payments limit. If the Minister can give me a reassuring answer on that now, I will not develop the argument further. If it is to be developed further, I shall develop it in reply to the amendment to be moved by the noble Viscount, Lord Chelmsford, which I understand is to be spoken to shortly. I beg to move.
The Chairman of Committees (Lord Boston of Faversham): I should inform the Committee that, if Amendment No. 3 is agreed to, I cannot call Amendment No. 4.
Baroness Hollis of Heigham: I wish to speak to Amendments Nos. 1, 3 and 5 and also to Amendment No. 4, which I shall seek to move.
We support the Bill and what we understand to be the Government's position on the small payments limit. Unlike those on the Liberal Democrat Benches, we wish to retain a permissive power for the Secretary of State to introduce a small payments limit, if it should prove necessary and in the light of experience. We hope—and we accept the Government's arguments on this—that such a small payments limit will not prove necessary, but we think that for it to be included as a permissive power is a useful fail-safe. The disability groups with whom I have spoken would welcome it as a backstop should, in the light of experience, a small payments limit prove a useful way for many disabled people to avoid going through the trauma of contested claims. We would not wish to see that permissive power removed from the schedule and we therefore oppose Amendments Nos. 1 and 3.
The aim of Amendment No. 4 is to ensure that, should there be a small payments limit in future, there will be consultation at that time. The Minister might therefore be willing to accept an amendment, either now or at Report stage, to the effect that, should a small payments limit be contemplated in future, its level would only be agreed after consultation with the appropriate organisations. I hope that the Minister can meet us on that point. I do not think we disagree on it.
That means that we disagree very strongly with Amendment No. 5 to be moved by the noble Viscount, Lord Chelmsford, which, in our view, would result in the worst of all possible worlds. I believe that the Government will oppose that amendment. The figure included in it is too small to reflect pain, hardship and damages; a figure of perhaps £5,000 or £10,000 might be appropriate. If the figure mentioned is meant to represent a de minimis figure, it is almost certainly too large; a de minimis figure should probably be no more than £250. The figure introduced in this amendment is too small to be realistic compensation, but too large to be an effective de minimis payment. We therefore believe that this figure is inappropriate and strongly resist the amendment. If the noble Viscount, Lord Chelmsford, were minded to move it at considerable length, we, like the noble Earl, Lord Russell, may want to return to it to argue in greater detail our resistance to a small payments figure of such a size.

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We support the provision of the Bill to the effect that there should be no small payments limit in primary legislation. The Government have a permissive power, should it prove necessary, to introduce one at a later stage. If they were minded to do so at a later stage, two or three years hence, we hope that it would be accompanied by a regulation which would allow full consultation with all interested parties.
Earl Russell: The noble Baroness talks about a small payments limit in case it should prove necessary. Could she explain further what kind of circumstances might convince her that it was necessary?
Baroness Hollis of Heigham: I had hoped that I had made that clear; I apologise to the Committee if I failed to do so. The disability groups, represented by the Disability Income Group which I have spoken to on this matter, felt that one advantage of a small claims exemption limit, whether it be £2,500, £5,000 or whatever, would be to allow their disabled clients with moderate injury to avoid the problems, trauma and stress of a contested case. They fear that, with the abolition of the small payments limit, insurers may be more willing to contest cases and therefore disabled people may face that situation. They are not sure that that will necessarily be the case, but they would feel more comfortable with a permissive power in the legislation allowing Government to introduce a small payments limit should insurers act in that way, though we believe and trust that they will not do so. I hope that that meets the noble Earl's point.
The Chairman of Committees: As Amendment No. 5 is now being spoken to, I should also inform the Committee that if Amendment No. 3 is agreed to, I cannot call Amendment No. 5.
Viscount Chelmsford: In speaking to Amendment No. 5, I would remind the Committee that at Second Reading I referred to the insurance industry's doubts on the wisdom of deleting the small payments limit entirely. Prior to the enactment of the Bill, statutory sick pay was the main element in the SPL, not subject to claw-back if the SPL was deleted. I believe that quite a number of claims under £2,500 are in fact statutory sick pay only. Post enactment of this Bill, claims under £2,500 not subject to claw-back if SPL is deleted will include both statutory sick pay and amounts representing pain, suffering and loss of amenity. I believe that that will have two consequences. To the extent that the claim is not challenged, it further reduces the Government's scope for claw-back due to the deletion of the small claims limit because there will be fewer claims capable of being clawed back. To the extent that either government or insurer challenges a claimant's assumption that part of the sum paid, up to £2,500, represents PSLA, it adds administrative costs to the Government, the insurer and possibly to the courts.
Up till now the insurance industry has tended to turn a blind eye to the validity or make-up of claims settled within the SPL. If the SPL is removed, the facts will have to be reviewed, however small the claim.
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In the Minister's response at Second Reading, he offered to consider a de minimis limit if a good case could be made; but he added that the ABI had not produced convincing evidence. He also rejected the suggestion that the terms of reference of his compliance cost assessment did not take full account of all the consequences of ring-fencing PSLA and deleting the SPL. No, the ABI cannot offer hard evidence, but neither, I suggest, can the Minister's department. No one has previously been particularly interested in the make-up of, or even the justification for, claims settled by the industry on the basis that they did not exceed £2,500. I suggest that, if the Minister waits to collect evidence of the need for a small payments limit before making one by regulation, the period in which such evidence is collected will have hurt his department just as much as it hurts insurers. His additional costs will rise well above the extra £2 million per annum which he expects, if the evidence stands up.
So surely it makes much more sense to approach the problem from the other way round and to use the powers progressively to lower the SPL towards zero stage by stage, stopping either when expenses start to rise above expectations or when sufficient data on the make-up of small claims exist to allow an intelligent forecast of the future of small claims. I note, incidentally, that I am not alone in advising the Government to retain some form of SPL. I understand that the Law Society does so also, but perhaps for rather different reasons, reasons which the noble Baroness, Lady Hollis, touched on.
My amendment suggests halving the current SPL to £1,250, but it is in fact a probing amendment. I hope that the Minister accepts that there is a scarcity of evidence on the results of deleting the SPL and will consider the prudence first or the stage-by-stage type arguments that I offer.
3.30 p.m.
Lord Mackay of Ardbrecknish: The Committee is perhaps more accustomed to hearing the noble Baroness, Lady Hollis of Hingham, and myself in gladiatorial combat over the Dispatch Box and blinking as it discovers this afternoon that, by and large, we are in agreement over most of these issues. On this particular group of amendments, we shall start off certainly by agreeing, if not on the detail, at least on the principles.
Let me turn first to the amendments by the noble Earl, Lord Russell, and my noble friend Lord Chelmsford and then, lastly, to the amendment in the name of the noble Baroness.
In my speech on Second Reading, I said that we could not allow the fact that a disproportionate number of compensation payments have been pitched at or around the current small payments limit of £2,500. This clustering of settlements in the current scheme was identified by independent consultants who researched the compliance cost assessment. To prevent a similar effect occurring in the reformed scheme, we do not intend to set a small payments limit. This intention was first signalled in the consultation document issued in response to the report of the Select Committee in

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another place and it remains our firm intention now. However, in the light of experience, it might be that one would prove useful and workable. For that reason, I say to the noble Earl we have decided to retain the power to set one. We consider that it is wise to retain the power, although at present we have no intention of using it. But it is a backstop which we think that a government of the future might feel that they need in order to set a limit.
I turn to the amendment by my noble friend. It provides for a limit of £1,250, which is half the current limit. If the Committee accept this amendment, it would mean that where a compensation payment was made at or below that level, there would be no liability for the compensator to repay recoverable benefits. Furthermore, by prescribing the amount of the small payments limit on the face of the Bill and removing the power to set one in regulations, the limit can only be changed by primary legislation. This would mean that the flexibility to change the amount from time to time in the light of experience would certainly be lost.
I have already said that we do not plan to set a small payments limit. The compliance cost assessment revealed that, under the current scheme, the small payments limit is being used as a way of avoiding benefit repayment. We cannot allow that situation to continue; and, if we were to accept this amendment, it is by no means certain that a small payments limit of £1,250 would not be manipulated and clustering would occur around it. However, if an appropriate level could be identified which would avoid unnecessary administrative effort while still affording sufficient protection to the taxpayer, we would be prepared to give the issue further consideration. In fact, if insurers are prepared to work with the department in monitoring the operation of the reformed scheme, I suspect it would prove possible to identify a suitable point at which to set a revised small payments limit within a reasonable timescale following implementation. If insurers agree to work constructively with the Government on this matter, we would be prepared to take matters forward in the way I have described. But in general terms, we feel that the arguments in favour of not having a limit are quite compelling and we should have to be convinced that there were administrative savings without any downsides to setting a limit in the future.
I turn to the question of consultation. We have a number of amendments along the same lines as we go through the Bill. I may well attempt not to repeat the argument during the course of further amendments.
We do intend to consult with interested parties in drawing up the details of all the regulations to be made under the provisions of this Bill. We consulted on the Select Committee report and the compliance cost assessment and have demonstrated, by introducing this Bill, that we wish to reform the compensation recovery scheme and that we have listened to what people are saying, although occasionally, as governments do, we sometimes have had to balance conflicting opinions. We are not able to please all of the people all of the time. But in respect of compensation recovery, we certainly have a good record on consultation.
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It may not be immediately obvious on the face of the Bill, because the detail is hidden in the raft of consequential amendments in Schedule 3, but regulations made under this provision of the Bill are to be subject to referral to the Social Security Advisory Committee. As the Committee knows, one of the functions of that committee is to scrutinise regulations and to consider whether they should be subject to wider consultation. This means that a consultative mechanism is already in place via the SSAC.
The Committee has the assurance that we intend to consult on the first set of regulations and the fact that regulations made subsequently will fall to be referred to the Social Security Advisory Committee. The effect of the amendment from the noble Baroness would be to introduce an unwieldy, expensive and unnecessarily bureaucratic consultative mechanism which would inevitably slow down the regulation-making process. It would not seem to be in the interests of either the Government or the other interested parties, particularly accident victims, if we were to slow down any necessary changes that we feel need to be made via regulations. If this amendment were accepted, we could in fact face consultation where the department was required to go out around the various organisations listed and then have that duplicated by the Social Security Advisory Committee.
Amendments of this nature are not unknown to me in that almost every Bill that I have taken through this Chamber has had amendments suggesting a list of people whom we consult. My arguments are normally fairly standard; namely, that the Government can be trusted to consult and in any case there are always people not on the list who may require to be consulted and if they are not on the list, there is a danger that the Government will not in fact ask the question, "Whom should we consult?", and will just obey the letter of the Act.
I can assure the noble Baroness that we have every intention of consulting widely on these and any other regulations regarding this Bill and indeed, the Social Security Advisory Committee will be in a position to consult as well. So I hope that she can withdraw her amendment. I hope, with my explanation of why I think it wise to keep the power, that the noble Earl will be able to withdraw his amendment. With my explanation of why I do not believe that setting a limit of £1,250 is sensible, I also hope that my noble friend will be able to withdraw his amendment.
Lord McCarthy: We shall return to this point and I should like to get the Minister's position clear. He mentioned the SSAC. Is his position that the Government would not want to have anything on the face of the Bill because it leaves matters to the SSAC, so that even if the SSAC decided not to consult, it would be perfectly all right for the Government?
Lord Mackay of Ardbrecknish: I did not say that or mean that at all. Certainly, I did not intend to do so. If I did, it was a mistake on my part in wording my sentences. The SSAC does have the right to consult and these regulations under this Bill have to go to it. I also

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said—I hope that I gave the assurance quite clearly—that we have a very good record of consultation. If we come to make any changes, we shall consult with those people who in our view have an interest in this matter, and then the SSAC will act as a backstop and perhaps introduce a further consultation process, if they feel it necessary.
Baroness Hollis of Heigham: Following the question of my noble friend Lord McCarthy, am I correct in understanding the Minister to say that, if the Social Security Advisory Committee does not feel the need to consult, the Government give an undertaking that it will?
Lord Mackay of Ardbrecknish: As the noble Baroness may know, things are done in a rather different order to the one she suggests. What I was saying—as I have said during the passage of a number of pieces of legislation that I have taken through your Lordships' Chamber—is that we fully intend to consult, and do consult, when we make up regulations. Indeed, I am in the middle of the most elaborate consultations in relation to the Pensions Act, where these arguments arose from time to time. So we fully intend to consult.
But it is after we have consulted and drawn up the regulations that they go to the Social Security Advisory Committee. We cannot do what the noble Baroness suggests, therefore; that is to say, allow the Social Security Advisory Committee to decide and, if it does not consult, neither would we. We would consult before sending any regulations to the committee.
Baroness Hollis of Heigham: Most of the provisions in this Bill will be welcomed by the Committee in an aura of sweetness and light. One of the few areas of sharp disagreement is over the issue of a small payments limit and therefore there is a high degree of potential controversy surrounding it should the Government, at some point in the future, be minded to make use of their permissive powers to introduce such a limit. Because it is the most controversial issue in the Bill, it would seem wise not merely for the Government to give a verbal undertaking that they expect to consult, but, on this issue at least, to put on the face of the Bill in the schedule that, should the Government be minded to go for a small payments limit in the future, they will consult about its level.
I repeat that this is probably one of the two most contentious issues in a Bill which otherwise will be widely welcomed. To avoid any acrimony, it would be helpful if the Minister could allay our fears on this. The insurance industry may also welcome the knowledge that it will be involved in the consultation.
Lord Mackay of Ardbrecknish: Having said that we were going to agree, I do not want to start disagreeing on the first amendment. I should like to think that, when the noble Baroness reads Hansard, she will be reassured that the assurances I have given are definite and answer the question she raised without the need to put the list of bodies we should consult on the face of the Bill. As your Lordships know, I usually successfully resist such a suggestion.
3.45 p.m.
Earl Russell: I agree with the noble Baroness about the importance of this issue in a generally welcome Bill. It is my impression that the negotiating process which is proper to the Committee stage is still capable of going a little further than it has. Therefore, while I warmly welcome some of the comments made by the Minister in his reply, perhaps I may take the opportunity to probe a few of the other points he made in order to understand a little better what the position behind them is.
The Minister said—this I warmly welcome—that the Government,
"do not intend to set a small payments limit".
And he added,
"and it remains our firm intention now".
Those I am sure were carefully chosen words. He said that there may be situations where the Government will wish to do otherwise. He did not give us any clear indication of what those situations might be. There was a reference which I found intriguing in its ambiguity as to what might happen if the insurers were to work constructively with the Government. I shall be interested to know exactly what those words mean.
As it stands, the determination to keep a power in the Bill just because it might be needed at some time is the school of legislation which is analogous to the famous five reasons for drinking:
"Good wine—a friend—or being dry—
Or lest we should he by and by—
Or any other reason why".
It is not the first time I have known the Minister to put powers in the Bill because there may be some other reason why they may be wanted. The real and serious argument arises behind this issue relating to parliamentary control of legislation. I am sure the Committee will be relieved that I do not intend to enter into the depths of that at the moment. However, I hope the Minister will take those issues as read. I should therefore like to understand under what circumstances he might be persuaded otherwise about the small payments limit.
In reply to the noble Viscount, Lord Chelmsford, to whom I listened with great interest, there is an issue of cost involved. I was interested to hear the Minister say that the small payments limit has been used as a way of avoiding recoupment. That is also my understanding and the point is of some importance.
We on these Benches are a great deal more concerned than the Minister is sometimes aware to keep down the cost of government in ways we believe have a realistic chance of achieving that objective. I have received advice that a small payments limit could save the Government £40 million. Governments can find plenty of uses for £40 million. But the more important issue to these Benches is the great inequality between the contestants when an injured person is negotiating with an insurance company.
When it comes to reading technical documents, I am slightly more battle-hardened than some. But when I receive communications from my insurance company I read them with great care. I regret to confess that I do not always understand them. What is true of me may

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perhaps be true on many occasions of others. Between a great institution and a small person perhaps of limited standards of literacy or perhaps with damaged eyesight, there is a real inequality of power. The pressure to settle low, if it comes from an insurance company, may therefore be hard to resist.
At this point I take up the comment made by the noble Baroness, Lady Hollis of Heigham. I understand why the noble Baroness takes the line she does. I respect the decisions that she has taken, though I do not entirely agree with them. I understand the pain it may be, especially for people who have a disability, to go through a contest. My view is that they cannot avoid going through a contest. If it does not happen in the courts, it happens with the insurance company. The only question is with whom the contest will be and what the issue will be. If I thought the noble Baroness was correct in her premise that a contest could be avoided altogether, then her argument would have been entirely persuasive. I am not at present convinced that that is the case. We therefore have another argument why it might be better to do without the power to have a small payments limit altogether.
In relation to consultation I take the point about the Social Security Advisory Committee. I am extremely grateful for it. I have a great deal of confidence in that committee. However, I would welcome the proposal more warmly if the Government were to accept the advice of that committee a little more often than it does at present. Before we take this matter further, I should be grateful if the Minister could answer some of the questions I have been putting to him, because they are of importance.
Viscount Chelmsford: Before the Minister replies, I must rise to suggest that the existence of a small payments limit actually operates in a way opposite to that suggested by the noble Earl. If anything, it increases the amount of the settlement because of the administrative factor of arguing against it. Part of the whole case I am putting to the Committee is that, when there is a small payments limit, it is simpler in many cases for the insurer to accept the amount rather than to argue about it. That is why we are seeing what the Minister referred to as "clustering".
Lord Mackay of Ardbrecknish: Perhaps I may say a little more. The noble Earl is probing the need for the power and whether, deep down, I intend to use it. I hope I illustrated to him that, deep down, I have no intention of using it. Equally, I hope I explained that it is sensible to retain it in case, as the new scheme develops, it becomes obvious that it may be sensible to introduce a small payments limit. It is simply something that we may need to use in the light of experience once the new scheme beds down.
I believe I described the principal situation that might arise if we were to be convinced that we should use the power to institute a small payments limit; that is, if we could identity a limit—it would not be anything like £1,250—which would avoid unnecessary administrative effort and expense while at the same time affording sufficient protection to the taxpayer. That would stop a new cluster occurring which would be to the disadvantage of the victim, but the amount would be just below the level
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at which the taxpayer was losing out. I hope the noble Earl can accept at face value what I am saying to him and accept from me that his suspicions that I may actually have some proposals in the back drawer which I will whip out in a year or two's time are quite unfounded. This really is a fail-safe, just in case, in the light of experience, we decide it would be sensible. I cannot help but notice that the, noble Baroness agrees with me. Dare I suggest that if the noble Baroness and I are on the same side, then it must be right.
Earl Russell: That is a slightly determinist view of the matter. We have more conversation to exchange, but I am not sure that we need to keep the Chamber listening to us while we do it. I would like to ask the Minister one more question before leaving the matter, if he will forgive me. If he is absolutely determined to keep the power to impose a small payments limit, would he consider fixing that limit in terms of the amount of benefit to be recouped rather than in terms of the amount of damages awarded because that would not have all the effects that we, on these Benches, are worried about in relation to a small payments limit. Is that a situation that the Minister might be prepared to discuss?
Lord Mackay of Ardbrecknish: I would have to think about that and take some advice. These matters are complex. One of the problems arising at £2,500 is that in fact it tempts people to fix the payment there, or near the limit, and pretend there is no benefit in it. One has to be a little cautious and protect the taxpayer. I shall consider what the noble Earl has said, and I have no doubt that we shall return to the matter at the next stage.
Earl Russell: I thank the Minister. "I require notice of this question" is a good traditional ministerial reply. I give him notice of the question, thank him for considering it and beg leave to withdraw my amendment.
Amendment, by leave, withdrawn.
[Amendment No. 4 not moved.]
Viscount Chelmsford Viscount Chelmsford had given notice of his intention to move Amendment No. 5:
Page 17, line 33, leave out ("the prescribed sum") and insert ("£1,250").
The noble Viscount said: I rise simply to say that to the best of my knowledge the insurance industry was delighted to consult constructively with the Government on the question of what is an appropriate limit, if there is a limit.
[Amendment No. 5 not moved.]
Schedule 1 agreed to.
Clause 2 agreed to.
Lord Lucas: I beg to move that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

Gulf War Illness
3.54 p.m.
The Parliamentary Under-Secretary of State, Ministry of Defence (Earl Howe): My Lords, with the leave of the House, I should like to repeat a Statement being made in another place by the Minister of State for the Armed Forces. The Statement is as follows:
"With permission, Madam Speaker, I should like to make a Statement on Gulf War illness and I apologise for the length.
"As the House will remember with great pride, six years ago some 50,000 British troops deployed to the Gulf as part of the allied coalition to liberate Kuwait.
"The Government's and the Chief of Staff's prime concern and duty—now as then—was the safety and welfare of our service personnel, and the commanders on the ground took every possible step to minimise the risk faced by our troops.
"The House will recall that British troops were facing an aggressor who had formidably well-equipped armed forces, and whom we assessed correctly as possessing, and being capable of using, weapons of mass destruction.
"The Gulf campaign was, by any standards a brilliant feat of arms. The number of British servicemen killed or wounded in action was, mercifully, much smaller than had at one stage been feared.
"Illness among our troops in the desert was much lower than that experienced during earlier conflicts, a reflection of the steps taken to maintain very high standards in the face of unfamiliar, difficult and sometimes unhealthy conditions.
"Since the conflict, a small number of those who served have become ill. Some of these are ill with clearly recognisable symptoms for which they are receiving appropriate treatment; others are suffering from sickness which medical science has so far found it difficult readily to explain.
"There have been suggestions that some of those unwell are afflicted by a specific syndrome caused by service in the Gulf.
"Madam Speaker, I want to make it plain yet again that as much as we were anxious for the welfare of our troops during the conflict, so we remain no less concerned about the health of our Gulf veterans both serving and retired. In our search for answers we have throughout been guided by the best medical and scientific advice available in this country. In 1993 we established a medical assessment programme to try to diagnose the reasons why some Gulf War veterans were ill. In order to establish the professional independence and integrity of this work, the methodology of the programme was audited, at my request, by the Royal College of Physicians and was endorsed by it in July 1995.
"So far, some 921 veterans have been examined and have been referred for appropriate further treatment where necessary. While the results have not produced any evidence of a new pattern of illness, the
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Government retain an open mind on whether there is generally more illness among our veterans than should be expected, and whether there are Gulf-service related factors at work which remain to be discovered. It is now clear that the medical assessment programme alone cannot answer these questions.
"On the advice, therefore, of the Royal College of Physicians, we have asked the Medical Research Council to establish a major, independent, peer-reviewed, research programme.
"The MRC has considered in great detail a large number of research proposals. It advises that the only scientifically sound way to proceed is by conducting epidemiological studies to address two specific questions: are British Gulf veterans suffering more ill health than they would have done had they not served in the Gulf, and, if so, what is the nature and magnitude of the phenomenon?; and are British veterans finding disproportionate difficulties in having children or are their offspring suffering from an unusual number of birth defects? If so, what is the nature and magnitude of the risk?
"Its recommendation is to proceed with two studies, which I am pleased to be able to announce today. They will be led by Professor Nicola Cherry at Manchester University and by Dr. Patricia Doyle of the London School of Hygiene and Tropical Medicine. The costs, which will amount to some 1.3 million, will be met by the MoD. I should, at this stage, like to express my thanks to Professor Alan McGregor, of King's College Medical School for his work as chairman of the Medical Research Council committee examining these matters.
"The Medical Research Council advises that if the studies are to be rigorously and scientifically conducted they will take some three years to complete. The Medical Research Council tells us that the research programme should find the answers we seek. The projects will be carefully co-ordinated with a major US-funded epidemiological study which is being conducted in parallel at King's College, London by Dr. Simon Wessely.
"Madam Speaker, the Government have throughout worked very closely with the US authorities on Gulf War-related health research. From the start there has been extensive—indeed, almost daily—contact between the medical teams involved on both sides. We are most grateful for this assistance.
"I visited the United States recently to discuss these matters in detail. I want the House to know that we are as one with the Americans, and that they have agreed to allow us unfettered access to the results of the extensive research programme they have in hand. I attach the greatest importance to this extremely valuable co-operation.
"So as to consolidate these links further, I have appointed a British medical liaison officer to work within the United States Department of Defense research programme.

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"I should add also that a British officer already sits on the US research working group, affording us a valuable insight into their ongoing work.
"Meanwhile, at the request of the American authorities, the Medical Research Council has agreed to review research which has been carried out there. This will enable us to establish the relevance of any of their studies to the health of our veterans and whether there are any obvious gaps.
"The Government are also taking further steps to remind veterans of the existence of the medical assessment programme. At the same time, we are writing to all the GPs of those who have been seen by the medical assessment programme so as to improve our knowledge of the medical progress of retired servicemen.
"There has been much speculation that explanations for illness among Gulf veterans can be found in the various hazards which faced our troops during the campaign. The Government wish to be entirely open about what happened during the Gulf conflict, and I wish to stress, Madame Speaker, that we have nothing to hide and indeed absolutely no reason to do so.
"In this connection, as I promised, I am now able to update the House on the use of pesticides in the protection of our forces during the campaign, an issue which has understandably given rise to genuine concern in recent weeks.
"The House will recall that I made public on 4th October that there had been wider use of organophosphate chemicals in the Gulf than had previously been thought, or we had previously been advised. I have already apologised to the House for this and expressed my profound regret and anger that this ran counter to earlier information given in utmost good faith by Ministers in answer to parliamentary Questions. I subsequently told the House that a comprehensive investigation had been commissioned to discover the facts and I promised to report the outcome as soon as it was known.
"My noble friend the Lord Privy Seal told another place on 4th December that we expected the results before Christmas. I received the report of this investigation, which covers two separate areas, on 6th December.
"On the first, which is what actually happened in the Gulf, the investigation team discovered that OP pesticides were indeed used by our troops in the Gulf to deal with the threat posed by fly-borne diseases on a much wider scale than previously reported; secondly that, with the exception of the possibly small scale use of pesticides obtained incorrectly, there is no evidence that they were improperly used. There is also the question of the dusting powder used to delouse Iraqi prisoners of war, where the inquiry has found that the number of Iraqi prisoners involved ran to hundreds rather than the 50 previously reported to the House. Again, I very much regret that Ministers, and therefore the House, should have been inadvertently misinformed.
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"I am making arrangements for this section of the report to be published in full and a copy is being placed in the Library of the House.
"The House will understand that, given the extraordinary pressure of work generated by the vast and complex preparations for a sustained period of high intensity conflict, and at a distance of six years, we simply cannot be sure of all the details. There may be individual veterans who have further information to add to the story: if so we would welcome it. We are as anxious as anyone else to establish what happened. I want the House to be wholly confident that we are absolutely determined to establish what happened.
"The second part of the investigation deals with the question of how parliamentary Questions were answered. The key finings here are that the first parliamentary Question in July 1994 was answered incorrectly because Ministers were given flawed advice arising from a failure within one area of the department; and that the original flawed advice was repeatedly resubmitted in answer to further parliamentary Questions.
"On the question of how Ministers became aware of the mistake that had been made, detailed investigation has found that the possible local purchase of OP pesticides was mentioned in background material to a written parliamentary Question answered in October 1995. In June 1996, officials on one occasion suggested possible difficulties over the standard briefing line on pesticide use. In July a note included in briefing material mentioned OP pesticide purchase and use. But it was not until 25th September that Ministers were given clear, written advice on the wider use of OP pesticides during the Gulf War, and that previous Answers needed to be corrected.
"I must explain again, Madame Speaker, that Minsters at no stage knowingly misled the House on this matter, nor would they ever have done so and I again unreservedly apologise to the House that this should have come to pass.
"The evident failures in providing proper and timely advice to Ministers are a matter of serious concern. It is essential that the reasons are examined in detail. Accordingly, a separate investigation, overseen by the Permanent Under-Secretary, is being set in hand. Because of its potential implications for individuals, arising from the possibility of disciplinary or administrative action affecting careers, it would be against natural justice to publish the detailed information gathered so far on these matters. I can assure honourable Members that the further investigation will be completed as soon as possible and the findings made available to the House at the first opportunity.
"This is, Madam Speaker, a serious matter, and I felt it important to report the facts as soon as they became available.
"I now turn to the issue of the vaccination programme against possible biological weapons attacks in the Gulf. There has been concern that these

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vaccinations might have contributed to some of the sickness reported, although there is at present no evidence to support this.
"I am sure that the House will understand the need for the greatest care to be taken over the release of the details of our response to a biological or chemical threat. This could clearly be of value to potential future aggressors. However, following a detailed review, we now judge that, six years on and in the light of further developments since the Gulf conflict, knowledge of the steps we took then is now less sensitive. I am therefore today able to provide a full account of the vaccination programme which was carried out, and to this end I am placing a detailed memorandum in the Library of the House.
"It makes clear that the MoD acted swiftly to offer the best protection available to our forces—on a voluntary basis—in the face of a clearly-assessed potentially lethal threat: an assessment since wholly vindicated by the findings of the UN Special Commission.
"Saddam Hussein did not—thank God—in the event use his biological weapons. But no responsible government could have ignored the very real possibility that he might well have done so, and accordingly taken appropriate precautions.
"Finally, Madam Speaker, my department has been keeping a very careful watch on the many reported incidents of chemical and biological weapons use in the Gulf. We have so far traced around 100 such claims, all of which have proved unfounded. But it does seem likely that some chemical weapons material may have been released, after hostilities ceased, by the destruction of the Iraqi ammunition dump at Bunker 73 at Al-Khamisiyah. As the House has already been told, there were at the time no UK units in the footprint of potential danger since identified by the US authorities. I am today placing in the Library of the House a copy of a map showing the exact location of our units at the time the destruction took place.
"In conclusion, the Government spared no effort to protect our troops in the Gulf War. Their immunisation and environmental health programmes were solely directed to this end.
"We have of course every sympathy for those veterans who are ill, and we retain an open mind about the question of whether there is or is not a Gulf War Syndrome. Whatever the case, we are determined to get to the bottom of it, as I very much hope this Statement has demonstrated."
My Lords, that concludes the Statement.
4.8 p.m.
Lord Williams of Elvel: My Lords, the House will be grateful to the noble Earl for repeating the Statement made by the Minister of State in another place. My first question is very brief. Who is responsible for the Ministry of Defence? Is it not the Secretary of State? Why did not the Secretary of State himself make this very important and serious Statement? He may be away
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engaged on all kinds of other things, but I should like to know the answer to that question before I get on to the detail of the Statement.
Over the years Ministers have been pursued on the matter of the Gulf War illness not least—and I pay tribute to her—by the noble Countess, Lady Mar. It is possibly thanks to the noble Countess that this Statement has been made today. It is all very well for Ministers who give misleading answers in Parliament both in Written Questions and in Oral Questions to blame civil servants. But my understanding of our constitution is that Ministers are responsible for their departments. If my understanding is wrong, no doubt the noble Earl will correct me. I wonder whether, in the politest possible way, Ministers have actually considered their position in this matter. In this House it is not a convention to ask for resignations, and I understand that, but Ministers, notably the noble Earl and indeed the noble Lord, Lord Henley, might wish to reflect on the matter.
The Statement says,
"Since the conflict, a small number of those who served have become ill".
Is it the case that 10,000 medical records have been wiped off the MoD computer? If that is the case, how do we know that it is only a small number of people who have become ill? If, as the Statement says, we are so
"anxious for the welfare of our troops during the conflict",
why have not the parliamentary Questions put repeatedly by the noble Countess and supported by me, been taken more seriously? Why have we been brushed off with these replies?
The Statement says,
"In our search for answers we have throughout been guided by the best medical and scientific advice available in this country".
Perhaps I may suggest to the noble Earl that the best medical and scientific advice was available in this House from the noble Countess, Lady Mar. She was the person who identified the problem which the Government now seem to be taking seriously. We welcome all these new inquiries by independent "peer-reviewed" bodies and the rest. But it seems very odd that there should be a team, as I understand it, in the Ministry of Defence at the moment which is investigating these matters and which, as we discussed at Question Time the other day, seems to be—I repeat, "seems to be"—trying to bully people into giving evidence. Will the noble Earl confirm that there is no such team, or if there is, that it is going to be disbanded forthwith?
The Statement goes on to say that the Government,
"are writing to all GPs".
I hope that it is perfectly clear that GPs can only submit evidence to the Government on the medical condition of their patients with their authority. Therefore, why do not the Government write to the patients rather than the GPs? Is there some hidden agenda here that there will be a court order put on GPs to abandon what is normally known as the Hippocratic Oath and to submit evidence that will contribute to the Government's study of the matter?

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The Statement goes on to say,
"The Government wish to be entirely open".
If I may say so, the Government have not been entirely open over the past few years. The noble Earl says that they have, but they simply have not. They have tried to obscure the truth.
Earl Howe: My Lords, no, they have not. I hope that the noble Lord will think better of that comment. He said that the Government have tried to obscure the truth. I believe that that implies a conscious effort to withhold information from this House. That is emphatically not what has happened.
Lord Williams of Elvel: My Lords, the Government are represented by Ministers in this House, not the MoD. The Ministers in this House have consistently obscured the truth of what the noble Countess, Lady Mar, and others of us knew to be the truth. If the noble Earl wishes to intervene, he can do so.
Earl Howe: My Lords, is the noble Lord saying that we have done that deliberately or inadvertently?
Lord Williams of Elvel: My Lords, I am saying quite clearly, as I shall say to the noble Earl when I come to the end of the matter, that it is ministerial responsibility to make sure that the truth is known to this House. As for advertently or inadvertently, either they do it advertently, in which case they are dishonest or they do it inadvertently because they are incompetent. That is the truth of the matter.
The Statement continues,
"we had previously been advised"
who is "we"?—Ministers? The Statement goes on:
"My noble friend … told another place"
the House of Lords—
"that we expected the results before Christmas."
A report of this investigation was made on 6th December, which was well before the Question Time which we had the other day as regards the Gulf War syndrome. The Statement goes on:
"I very much regret that Ministers, and therefore the House, should have been inadvertently misinformed".
Again, I put the question to the noble Earl. Who is responsible for the Ministry of Defence? Is it Ministers or is it civil servants acting somewhere or other? The Statement continues:
"the first parliamentary Question in July 1994 was answered incorrectly because Ministers were given flawed advice arising from a failure within one area of the department".
The original flawed advice was repeatedly—repeatedlyresubmitted in answer to further parliamentary Questions. Ministers in this House and in another place did not bother to go back and ask, "Is this really right because we have had a lot of flak in this House from a lot of people?". The Statement says that it has now been found out on detailed investigation,
"that the possible local purchase of OP pesticides was mentioned in background material to a written parliamentary Question answered in October 1995".
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I again quote from the Statement,
"In June 1996 officials on one occasion suggested possible difficulties over the standard briefing line on pesticide use".
The Statement continues:
"In July a note included in briefing material mentioned OP pesticide purchase and use. But it was not until 25th September"—
I repeat, 25th September
"that Ministers were given clear, written advice on the wider use of OP pesticides during the Gulf War and that previous Answers need to be corrected".
I have no doubt that Ministers will set up a separate investigation overseen by the Permanent Under-Secretary of the Ministry of Defence to find out what went wrong. But when we come to natural justice the real problem is what is the responsibility of Ministers in this matter? It is all very well for Ministers to say. "We were not told by our civil servants that something was wrong. They obscured things: there was a cover-up and we want to know where that was". But the fact of the matter is that this House and another place were seriously misled. It was only thanks to the noble Countess, Lady Mar, that this matter came to a head. I would like to know from the noble Earl, when he replies, what he believes to be ministerial responsibility for his department.
Lord Mayhew: My Lords, the noble Lord. Lord Williams, has asked the question whether Ministers misled the House inadvertently or knowingly. But there is a third possibility. It occurs sometimes when one is in a very difficult position and when one is briefed with an Answer that is particularly precise and reassuring. The question then comes: does one buy it or does one make inquiries? If I had to say, I would say that that is a more likely account and no less culpable on the part of Ministers.
I believe that the first time that the Government grossly misled Parliament was in their response to a Written Question by Mr. Tyler in the other place on 3rd November 1994. The reply of Mr. Soames was as follows:
"I am aware of only 10 British service personnel who would have been involved with organophosphorus pesticides used by United Kingdom forces during the Gulf conflict. These 10 were members of a medical team involved in delousing some 50 Iraqi troops".— [Official Report, Commons, 3/11/94; col. 1235.]
Here is a Minister on the spot being pressed on all sides; here one has a beautifully precise and reassuring reply. A good Minister will say that it is too precise and reassuring. He will make inquiries and see his civil servants. That is what the Government are to do at long last. At the end of his Statement the noble Earl said that the Permanent Secretary at the Ministry would ask precisely that question. He will see this Written Question and look at the minutes and the memorandum. He will be able to decide which of the three explanations is right: the two explanations suggested by the noble Lord, Lord Williams, that Ministers knowingly and avowedly misled Parliament, that they were themselves deceived and misled Parliament inadvertently, or that Ministers did not sufficiently examine the briefs that they were given by civil servants in a manner which an efficient and alert Minister should do.

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When listening to the Statement of the noble Earl, for which I am grateful, I thought how much better all of those positive recommendations would have sounded had they been made five years ago. A great inquiry is to begin ab initio. The first of the two questions that it is to ask is whether British Gulf veterans are suffering greater ill-health than they would have done had they not served in the Gulf. If so, what is the nature and magnitude of the phenomenon? That is a good question. It is one that a commander should ask himself after every engagement. Indeed, every platoon commander should ask that question. The Government should have asked themselves that question at the end of the Gulf War. Here we are six years later asking the question and calmly announcing that the answer will arrive in about three years—nine years after the Gulf War. I do not find the Statement reassuring. Now all of the questions are to be asked and every conceivable inquiry is to be made in every direction, but it is too late. It takes place far later than it should take place. I am not clear about the nature of ministerial involvement.
The Government do not have a good record in handling the human problems of servicemen and women, and this will not add anything to their reputation.
Earl Howe: My Lords, I find myself in a little difficulty in answering the noble Lord, Lord Williams. I am sure that I shall appear to him to be giving him a lecture on the British constitution. That ill befits someone like me who is of leaner years than the noble Lord, Lord Williams.
My clear view of the way in which Parliament and government work is that civil servants are accountable to Ministers and Ministers are accountable to Parliament. To be accountable to Parliament means that Ministers owe a responsibility to give an account of their respective departments' activities and decisions to Parliament and to defend them where appropriate, and to be taken to task, if that is necessary, on such matters. That does not mean that Ministers are personally responsible for every single action of their departments. Ministers are personally responsible for those actions over which they have direct control or of which they have direct knowledge. Ministers are perfectly entitled to rely on the advice of civil servants on matters of fact where those matters of fact are outwith their personal experience.
In the case that is best known to me—namely, the questions which were referred to me for answer to your Lordships' House—I relied on factual advice about matters which had occurred some years ago and on which I believed there was a reservoir of knowledge among my officials. I believe that Ministers consider their positions when they have acted discreditably in some way. I do not believe that either I or my colleagues have been negligent in the way that we have approached our duties. If I did, I should be severely troubled.
There is no question of your Lordships' House or another place having been deliberately or wilfully misled by Ministers. It is a matter of profound regret to
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me and my ministerial colleagues that incorrect information should have been supplied to your Lordships and to Members of another place. I apologise without qualification for the mistakes that were made. But apologies are, however, only half the penance. Having discovered the mistakes, we have endeavoured as diligently as we can to discover the truth of the matter. Not all of the detail has yet come to light. We hope that it will. We also hope that those in possession of relevant information will furnish us with it. The report that we have published presents findings and provides pointers to follow-up action. I shall keep the House informed of any further findings of significance.
The noble Lord, Lord Mayhew, asked why it had taken this long to commission research. We recognise that we could have acted sooner in commissioning research, but it was only during 1995 that sufficient numbers of veterans came forward for examination in the medical assessment programme in order to see whether there was a pattern of diagnoses similar to that found in the United States. If we compare ourselves with the United States, although much research has been carried out in that country, the Department of Defense research programme was launched only in July of this year. Veterans came forward only very slowly at the beginning of the programme. By the end of 1993 only two individuals had been examined. By the end of 1994 the figure had risen to just 65. By July 1995 the figure was 301. The figure was 337 by the end of December 1995. It rose rapidly until by the end of August of this year 710 had been examined.
When first alerted to allegations of ill-health among Gulf veterans, the MoD had no information on which to base an assessment of the perceived problem. It was vital to collect information about the illnesses being experienced. Once the number of patients examined reached a certain size—several hundred—it became apparent that no single factor or condition was dominant. We recognised the need for larger scale studies to ascertain whether there was an excess of ill-health among Gulf veterans overall. That crucial question—I trust the noble Countess in particular will welcome the fact that we have grasped this—will be addressed by the epidemiological studies that I have announced today. The noble Lord, Lord Williams, asked me a number of questions. However, I hope that I have addressed the nub of his concerns which relate to ministerial responsibility, and that he will agree with the broad definitions and statements that I have provided.
4.30 p.m.
The Countess of Mar: My Lords, before addressing my questions to the noble Earl, I wish to ask the noble Viscount the Leader of the House whether I am correct in my understanding that we have only 40 minutes for Statements. I notice that we have already used 37 minutes.
The Lord Privy Seal (Viscount Cranborne): My Lords, if it be of assistance to the House I can confirm to the noble Countess that the Companion advises that we have 20 minutes for questions after both Front-Benchers have received replies from the Minister.

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During that time other Members of your Lordships' House can ask questions and I assume that the clock will not be running during this exchange.
The Countess of Mar: My Lords, I am grateful to the noble Viscount. While I do not contend that organophosphates are the only cause of the so-called Gulf War illness, I believe that there are many parallels with the illness that has been suffered by sheep farmers. An increasing amount of evidence shows that approximately 9 per cent. of northern Europeans are particularly vulnerable to the effect of OPs. They affect the central nervous system, the peripheral nervous system, the autonomic nervous system, the immune system, the endocrine system, the reproductive system, the bones and the bone marrow. There is evidence of effects on foetuses of a cocktail of pesticides—and a cocktail of pesticides was certainly used in the Gulf War.
The Statement indicates that there is no evidence that OPs were improperly used. The operatives of the machinery, such as the bowsers, asked whether they could have protective clothing while they were working. They were told that there was none. They asked whether they could use their chemical and biological suits and were told no, they might damage them. The spraying of personnel in the NAAFI—men sitting on latrines because they had contracted diarrhoea—and, using Saudi labour, the spraying of tents, clothing and streets with pesticides, which at that time were not known, was not, according to the Government, the misuse or improper use of OP pesticides.
Spraying took place every two to three weeks. Organophosphates have been used in farming because of their long-term effectiveness. They are known to last in a sheep's fleece for 10 weeks. Therefore, spraying every two or three weeks was excessive. I know of one case in which operatives were mixing pesticides at the rate of 19 parts to one part of pesticide when it should have been 40 parts to one part of pesticide. The mistake was made because the pesticides had been purchased locally and the instructions were in Arabic. That was spraying over human beings. All the instructions on sheep dip containers state that the dips should not be sprayed while eating, drinking or smoking.
In 1991 a list of products was prepared for senior officers in the Gulf. It contained all the OPs that had been used there. In 1995 the MoD was advised by a solicitor that there was a list of OPs used in the Gulf with photographs of bowsers spraying the walkways. The individuals who have that information have been bullied, as the noble Earl knows from my Question yesterday. They are not prepared to part with the information unless they are promised that their military careers will not be affected.
Why have not the Government had a list of the OPs which were taken from Germany? They were shipped to the Gulf and should have appeared on the ship's manifest as dangerous chemicals. I understand that many of the OPs that were used in the initial stages were banned in this country due to the severity of their effectiveness.
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I wish to ask the Minister three questions. First, may we have an absolute assurance that the men who were in the field using the pesticides will not be bullied, will not suffer a lack of promotion, and will not be denied the right treatment because they have information? They are prepared to come forward with the information but not under the present terms. Secondly, is the Minister aware that treatment, not research, is needed now? Some of the men are extremely ill. How does the wife of Ian Hill, who is 50 and who has been told that he may not see next Christmas, tell their six year-old daughter that her daddy will not see next Christmas'?
Finally, why has Group Captain Coker been transferred? He had the trust of all the men. I pay tribute to him. Bill Coker was respected by every one of the Gulf troops who had been to see him. He tried to help them as much as he possibly could within the constrictions of the Ministry of Defence. Who will replace him?
Earl Howe: My Lords, the noble Countess has been instrumental in prompting my department in many of the areas that we have been discussing. I have in the past expressed by gratitude to her and I do so again because I believe that she has done us all a service.
The report, which is now in the Library, reveals broadly the following about organophosphate insecticides. One organophosphate residual insecticide, a fenitrothion-based product, was in standard service stock at the time. It was taken to the Gulf and used routinely. There is no evidence of the improper use of that product. Two OP insecticide flybaits, azamethiphos-based, were obtained locally in Saudi Arabia and used extensively. Again, there is no evidence that those were used improperly. However, some other residual insecticide was obtained locally, probably on a small scale. It came without English instructions and may have been used improperly as a result.
I did not wish to imply to the noble Countess that the Government were denying that some chemicals had been used improperly. The evidence seems to suggest that some, albeit on a small scale, were not used as they should have been. Most residual insecticide use was carried out by servicemen from the environmental health cadre of the RAMC. They are specialists in collective hygiene matters including pest control. Some pesticides would have been used by regimental hygiene duties-trained servicemen in each unit. The new flybait was issued to individual unit hygiene staff with instructions for use.
Environmental health personnel and regimental hygiene duties-trained staff are trained to use personal protection equipment at all times when using pesticides. The investigation noted the allegation that no personal protective equipment was available, but it noted also that the allegation could not be substantiated. The investigation did not find any contemporary documents which substantiated that particular allegation. If there are documents that do so they may not be contemporary with the events.
The unidentified residual insecticides procured locally do not appear to have had instructions or safety data sheets in English, as I said. That is why it was incorrect

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either to obtain or to use them. Residual insecticide is not used on people, as I am sure the noble Countess is aware. It is applied to the outside of tents, but the procedures require the tents to be empty while that is being done. Some servicemen have indicated that they were personally sprayed. Veterans may be confusing spraying with a practice known as swing-fogging. Swing-fogging is the use of a fog smoke-containing pesticide to knock down flying insects. It uses pyrethroid-based insecticides which are not OP compounds. They are often used in domestic aerosols.
We have sought the foremost medical and scientific advice in this country in order to study further Gulf War health issues. The advice of the Medical Research Council has been that the most appropriate way to take forward the research is to carry out epidemiological studies. Those will look at a large sample of those deployed to the Gulf and compare them with an equivalent control sample who were not there in order to determine whether there is any pattern of illness among Gulf veterans which is not present in the general military population. So far, as I said, there is no evidence which can tell us whether a problem exists. That is why we are carrying out the studies I have outlined.
We do not dispute that some personnel who have returned from the Gulf subsequently became ill. But we cannot tell, without carrying out research, whether or not most of those cases arose because of service in the Gulf. Clearly, some cases of ill health are Gulf-related; for example, some cases of post traumatic stress disorder. Where those are clear cut and the illness has resulted in a level of disability, that individual is entitled to receive a war pension.
The noble Countess has asked several questions; the second concerned the need for treatment. I could not agree with her more wholeheartedly that those who feel that they are ill as a result of their service should be treated. They should have access to proper medical care and attention. Many of those who have come forward are receiving such care and attention. We should like to hear from anyone else who feels that he may be suffering as a result of his Gulf War service. So far, however, we have heard from a comparatively small number of people but the effort to alert others will continue.
The noble Countess asked me to confirm that the men who come forward to provide information will not suffer bullying or be denied the treatment which is due to them. I give her that categoric assurance. As I said to her yesterday, it is unacceptable for men to be coerced into providing information. The noble Countess alleged yesterday that the investigation team looking into the use of OP pesticides in the Gulf War had behaved improperly. This morning I personally interviewed the head of the team about those matters. As a result I can tell the House that I am entirely satisfied that the team arranged interviews in an appropriate and amicable manner without putting unreasonable demands on those they saw. Some of
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those interviews were rather long but, as noble Lords will see from the report, there was a great deal of ground to cover.
As regards the team seeking to obtain privileged documents, I am satisfied that they were properly seeking access to relevant material. As the report notes, such documents were not obtained. It might have assisted this investigation if they had been. Subsequent to her supplementary question, the noble Countess spoke to me privately about the case of one individual in particular and I shall write to her concerning that specific situation.
Lord Craig of Radley: My Lords, I thank the Minister for repeating the Statement. It covers a very serious matter and one which is perhaps too important to become lost in any constitutional niceties about the way that proceedings are carried out in this House. Many noble Lords and I have challenged and questioned the cuts in the defence medical services which have been instigated over the past few years. Do the Government not acknowledge now that without those cuts we should have been in a far better position to help all those veterans who have come forward with illness? We should have been able to deal with their worries in a much more expeditious and satisfactory fashion than has been achieved so far.
Earl Howe: My Lords, I know of the noble and gallant Lord's concern for the defence medical services. I do not believe that the assessment of those coming forward has been impeded by lack of medical personnel. Those who have put forward their names for diagnosis and assessment have been seen with reasonable speed. I do not believe that we should have necessarily drafted in more medical personnel. Had we wished to do so, we could have done so. However, as I understand it, the need was not a pressing one. Doubtless, much can be said about the reductions in the defence medical services which have taken place over recent years but that perhaps is for another day.
Lord Bruce of Donington: My Lords, many of us have listened to the noble Earl's very long Statement with a great deal of interest. We note that in connection with his latest replies, he is entirely satisfied about the nature and extent of the activities of the investigation team to which the noble Countess and I referred yesterday. Will he take note that in the light of his reply, we shall reserve our position in the light of correspondence which both the noble Earl and we have seen? We reserve our position to raise that matter again.
In the meantime, I have only one question to ask to which the noble Earl can give a simple answer. Is it true or not that 10,000 medical records have disappeared from the MoD computer? I use the figure of 10,000 loosely because it may be 9,999 or

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something of that order. But is it true that a substantial number, thought to be 10,000, medical records have disappeared from the MoD computer?
Earl Howe: My Lords, while transferring data at the Defence Analytical Services Agency from an old to a new computer system, it was found that 10,000 or so event records, not medical records, could not be attributed to particular individuals in the way which the new system required. Those records were not wiped off the computer and the data are still held. Very few—we estimate about 250—of the 10,000 events will have referred to veterans of the Gulf War. Therefore, the problem identified by the noble Countess was not quite as presented to your Lordships. Those were statistical records reflecting vaccinations and other such medical events to which service personnel may have been subject. That is a far cry from saying that somebody's entire medical record has been lost. As I understand it, that is not the case.
Lord Bruce of Donington: My Lords, the noble Earl is still not able to define the number of those records which are attributable to those who were in the Gulf War. He says that it is about 250. Surely, the computer system should be able to show with precision exactly which personnel were involved in the Gulf War.
Earl Howe: My Lords, as I understand it, those 250 represent about 2 per cent. of the veterans who were in the Gulf War.
Lord Monkswell: My Lords, convention requires us to thank the Minister for repeating a Statement. It is very difficult to do that following today's Statement but I shall do so because it is the convention. The Minister suggests that the best scientific advice has been acted upon. I wonder whether we are going through a period of what may be described as scientific conservatism. I remind the Government that we had a period of scientific socialism which may not bear close scrutiny in comparison. The Minister asks us to accept that what the Government are now saying is the full truth and that everything that they know is, indeed, the truth. However, we still have the discrepancy between the description of events by the Minister and that from the noble Countess, Lady Mar. I for one—and I am sure that I speak for a great many in this House—know which of those two Members I would believe.
Noble Lords: Oh dear!
Lord Monkswell: My Lords, I have one question for the Minister. On the last occasion when the Government came forward with such problems the only threat was to the liberty of citizens. However, on this occasion, we are talking about the future health and life of our citizens, members of our Armed
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Forces. What steps are the Government taking to ensure that there is an independent inquiry into all these matters?
Earl Howe: My Lords, I very much regret that the noble Lord chose to put the matter in that way. I am sure that the noble Countess, Lady Mar, will acknowledge that there have been occasions in the past when I have been able to clarify or correct some misunderstanding which she has had. It is not simply a case of the noble Countess being right all the time and of my being wrong. I believe that there is a place for me in the process to find out the truth and to come to your Lordships' House, as I have done today, to clarify matters. Independent scientific advice is the only way forward. We are taking that route. I trust that the House will have confidence in the research programme that we have put in place.

Social Security (Recovery of Benefits) Bill [H.L.]
4.52 p.m.
House again in Committee.
Clause 3 ["The relevant period"]:
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 6:
Page 2, line I I, at end insert ("or the disease in question was first diagnosed").
The noble Baroness said: In moving the above amendment, I shall, with the leave of the Committee, speak also to Amendment No. 7. The amendments refer to Clause 3 and the issue of disease. As it stands, the Bill persists in distinguishing in its benefit recovery rules between the treatment of injury on the one hand and, on the other hand, the treatment of disease. With injury the clock starts ticking from the point when the injury occurs, but with disease the clock starts ticking from when the victim makes a benefit claim and not from when the disease is first diagnosed.
On this side of the Committee we do not believe that it is fair or reasonable to distinguish between the two, as is the case currently with the Bill. Therefore, the two amendments are designed jointly to bring the treatment of illness and the treatment of injury into parallel so that the period for a disease case should run from when the disease was first diagnosed, not from when the claimant first made a claim for listed benefits.
Why are we moving such amendments? First, the Bill assumes that there is a clear and easily discernable difference between the two and that, therefore, they should be treated differently. Very often that is indeed the case, but it is not always so. On Second Reading, the noble Earl, Lord Russell, raised the question of radiation and asked whether that was an illness or an injury. Yet another example is that of a poisoning case—Gluteraldhyde. I understand that this is a chemical which is widely used for sterilising instruments in hospitals and dental practices. Breathing in the fumes of that chemical can cause appalling sensitisation which may lead to asthma-type respiratory

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conditions. That sensation may occur from one extreme case which one might then regard as an injury, but, more probably, it may be the result of repeated exposure over time. Is that repeated exposure a series of injuries, or is the victim suffering from a disease brought about by a continuing work practice to which he or she is particularly susceptible?
I shall give the Committee a further example; namely, the asbestosis sufferer. The starting of recoupment from the date of benefit claim rather than from when the illness was diagnosed could, theoretically, lead to more losses for the sufferer. At present, in an asbestosis claim case, the date of claim is regularly backdated by two years from the actual date of claim to give the claimant more benefit. But, having received more benefit, he is likely to face a larger recoupment when the case is finished. If an injury case takes two years to settle, the victim only loses two years of benefit and recoupment; but, if an asbestosis case takes two years, the sufferer will lose not only the two years of claim but also two years of backdated benefit, totalling four years' worth. If we treat disease cases from the date of diagnosis for recoupment, they will be brought into line with injury cases. That is why we believe that they should be treated similarly.
The Government may argue that it is difficult to do that in practice. However, I suggest that that is not so. The date of diagnosis is easily determined by the medical certificate of a GP, analogous to a date of injury claim. Equally, the Government may argue that this would cost the taxpayer more money. Again, that is not so: the burden would still be passed to the compensator under the general principles of the Bill. Precisely because the definition of what is an injury and what is a disease can widely overlap and because to treat them in similar ways will raise neither practical difficulties nor additional financial cost to the taxpayer, I very much hope that the Government will accept the amendments. I beg to move.
Earl Russell: I am happy to support both amendments. My name is attached to Amendment No. 6 and it is also attached, in spirit, to Amendment No. 7. The two amendments are linked. In arguing the case that it is difficult to have a clear line of distinction between disease and injury, I cannot help alluding to the Statement to which we have just listened. The damage—to avoid using anything other than a neutral word—involved in those cases is one that I would hesitate with any confidence to classify either as an illness or as an injury. However, if briefed, I could make a case for either.
As the Bill stands it will make a colossal difference to those affected, some of whom may also be civilians, as regards which definition will be applied to their case. For so fine a philosophical point, I do not think that it ought to make a very severe difference to what the claimant recovers which way the coin happens to fall. The purpose of the amendment is to bring the two cases closer together. As the noble Baroness explained very
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clearly, at present things are weighted against the illness in favour of the injury. We want that gap to be narrowed.
Obviously there will be objections about the difficulty of finding the date upon which the illness was first diagnosed. However, I believe that the noble Baroness's answer to that is conclusive. After all, that answer will have to stand whatever procedure is used to deal with personal injury. I say that because in litigation and, indeed, in dealings with insurance companies—as the noble Viscount, Lord Chelmsford, will probably confirm—it is necessary to have a GP's certificate to say when an illness first began. That will be necessary no matter which procedure is used. Therefore, why do we not use the suggested procedure to avoid committing an injustice and also to avoid letting the Government in for a great deal of unnecessary litigation at public expense?
5 p.m.
Lord Mackay of Ardbrecknish: Clause 3 defines the period during which benefits, paid in consequence of an accident, injury or disease for which compensation is claimed, may be recovered. Subsection (2) provides for the relevant period in cases of accident or injury, and subsection (3) provides for the relevant period in cases of disease. In the case of disease—the subject of the amendment—unless a settlement is reached beforehand, the relevant period ends five years after the day on which the claimant first claims a listed benefit in consequence of the disease.
As the noble Baroness and the noble Earl have explained, the amendments proposed would change the "relevant period" in disease cases so that it would be counted not from the date of claim, but from the date of diagnosis of the disease. They have argued that this would bring the treatment of diseases under the scheme more in line with that of accidents where the period of recovery runs from the date of the accident.
However, on reflection, the Committee might agree that industrial diseases often arise many years after exposure, and symptoms increase gradually over time. The date of diagnosis of a disease may not be the same as the point at which, owing to the disease, the victim is no longer able to work and therefore claims a social security benefit. Nor will the date of diagnosis always be a clear and indisputable date; for example, where a second opinion is sought or where a considerable number of tests have to be carried out because of the difficulty of diagnosis. By contrast, the date of claim can be easily identified, as indeed can the date of an accident.
In most cases the date of claim gives a reasonable indication of the point at which the victim's suffering as a result of the disease has caused him to be unable to work. This is broadly comparable to the way in which accident victims are treated. If there is to be a stage following his accident during which a victim is unable to work, this will usually commence immediately after the accident, and lead to a benefit claim at that point. I think that that is quite logical. If one has an accident, it does not take months or years for one to reach a point

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at which one ceases to work and claims a benefit. It is likely that the date of an accident and the commencement of a claim more or less coincide.
Use of the date of claim to determine the relevant period has worked well since the inception of the current scheme in 1990. I believe that there would be significant dangers for the smooth operation of the scheme if the amendments were accepted. 1 hope I have explained to the Committee why I do not think the comparison made by the noble Baroness and the noble Earl is the correct one. The correct comparison between accident and disease is much more closely related to the date on which someone with a disease has to make a claim. I hope that with that explanation the amendment will be withdrawn.
Earl Russell: If the Minister will forgive me, it is not quite so simple. He suggests that one can distinguish between an accident and an illness by the date after the injury at which evil effects begin to appear. There are old war wound cases, notably cases of a bullet being lodged in some portion of the anatomy, where severe ill effects begin to occur a long time after the bullet was lodged. Is the Minister telling us that those cases will therefore be classified as illnesses?
Lord Mackay of Ardbrecknish: The noble Earl—as often happens—has made a false comparison. Cases such as the one he mentioned would not fall under this legislation at all. They would fall under the war pensions legislation. Under that legislation the case itself determines whether benefits should be backdated.
Earl Russell: If the Minister thinks all bullets are fired in war, he has never listened to the Home Secretary.
Lord Mackay of Ardbrecknish: The noble Earl's question concerned someone who was injured in war. I thought I was therefore answering his question.
Baroness Hollis of Heigham: The Minister has been less than helpful on this matter. He made the point that there might be technical difficulties associated with the date of diagnosis as regards consultants, first and second opinions and so on. That was a smokescreen. We all know that after consultation the Government can agree a recommended point at which the clock begins to tick. For example, that may be at the point of first diagnosis, or when a medical certificate is signed by a GP. Whatever appears to be sensible and reasonable to the Government could constitute the guiding line and everyone would know where they stood. That is a simple, technical matter to overcome. The Minister and I know that that could be sorted out in three minutes flat.
The Minister also made the point that the date at which someone has incurred an injury would coincide with the date of drawing benefit for that injury. Perhaps the Minister would like to revise that view in the light of statutory sickness pay being now an employer's benefit and not something that would normally be
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recouped by government. Therefore there would tend normally to be a six months' discrepancy. I do not think his argument on that point is valid.
Further, the Minister made the point about benefits being linked to loss of work. That, of course, is not true as regards many of the disability benefits which are linked to the degree of disability and not to the point at which someone ceases work. To reinforce the point made by the noble Earl, Lord Russell, I should add that the Minister in no sense dealt with our substantive problem which is that while at extremes there is a clear distinction between an illness and an injury, nonetheless there is a major problem of overlap. For example I referred to chemical poisoning due to the nature of someone's work. In such cases it seems only fair and reasonable that treatment should be similar whether one labels a case injury or illness. The treatment should he parallel in terms of the benefit recoupment system. Will the Minister respond to those points?
Viscount Chelmsford: Before the Minister responds, I must refer to one point that the noble Baroness made; namely, the three minutes to agree the date of diagnosis of an illness. The courts are littered with claims concerning the problems arising out of manifestation of illness. I can assure her it is not a question of deciding these matters in three minutes.
Lord Mackay of Ardbrecknish: I thank my noble friend for underlining a point I was going to make. The noble Baroness makes it look a simple matter to decide the date of diagnosis of an illness. I used a shorthand form when I talked about unemployment benefit, or benefit related to being unemployed—that would be JSA now—because, of course, there are other benefits which are covered in Schedule 2. A person may not have had to give up his job but may still be claiming benefit. From that date the situation is timed and measured. I suggest that is a comparable date to the date on which an accident occurs.
On the question of the six months' delay to payments of recoverable benefit related to SSP, that, of course, applies both to accidents and to disease. Therefore there is not a distinction between the two, such as the noble Baroness sought to make. I am reasonably convinced that, as I have explained it, the position between accidents and disease is broadly comparable in the way the Bill outlines it. If the Committee were tempted to move in the direction the noble Baroness asks—I am not tempted to do that—there would be a considerable mismatch between the possible treatment of disease victims and the possible treatment of accident victims.
Baroness Hollis of Heigham: The Minister referred to statutory sick pay as regards both disease and injury cases and to the six-month period. Therefore, he said, the two conditions were treated in the same way. That was the point I was seeking to establish. The Minister helps me make my point more elegantly than I was able to do. We could argue about the diagnosis point but I am sure that one could produce a straightforward bureaucratic—as I would term it—procedure so that people knew where they stood. However, the basic issue

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remains that there is considerable overlap in some areas—for example, poisoning—of diseases and injuries. The Minister has at no point addressed that matter. He says that if we were to accept this amendment greater disparities would arise than is currently the position under the Bill. To enable me to reflect on what he said and to determine whether we wish to revisit this issue on Report, will the Minister write to me explaining in what way he believes that greater disparities and greater injustices would arise if the amendment were accepted? That would be a helpful basis on which to consider whether we wish to revisit the matter.
Lord Mackay of Ardbrecknish: Yes.
Baroness Hollis of Heigham: The Minister has said yes. In the light of that, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 7 not moved.] Clause 3 agreed to.
Clause 4 [Applications for certificates of recoverable benefits]:
Lord Mackay of Ardbrecknish Lord Mackay of Ardbrecknish moved Amendment No. 8:
Page 2, line 24, after ("person") insert ("("the compensator")").
The noble Lord said: In moving Amendment No. 8 I wish to speak also to Amendment No. 10. Clause 4 is intended to provide for the issue of, and applications for, certificates of recoverable benefit. We have introduced these two amendments to make it clear that it is the duty of the compensator to apply for a certificate of recoverable benefit, and that when an application is received from a compensator a certificate must be issued within the prescribed period. Under Clause 5 the Secretary of State must copy certificates to victims when they are issued. That mirrors the position under the current scheme. I commend the two amendments to the Committee. I shall listen to what the noble Baroness has to say about Amendment No. 11 and respond after that. I beg to move.
Baroness Turner of Camden: As the Minister said, the clause sets out the arrangements for the compensator to obtain a certificate of benefit paid from the DSS. I do not believe that we on this side of the Chamber have any objection to the two amendments that he moved.
However, we believe that it is necessary for all the parties concerned to know exactly where they stand, including, most importantly from our viewpoint, the accident victim. We do not believe that the clause is clear as to the right of the claimant to be entitled to apply for a certificate and to receive it within a given period, on much the same basis as does the compensator. I believe that the period is four weeks. Unless the right is allowed to the victim, he and his advisers—his union and lawyers—would be in a disadvantageous position relative to the compensator in planning the strategy to be followed in dealing with the claim.
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The issue is revisited in Amendment No. 14. Unless the right is allowed to the complainant, we believe that he will be disadvantaged. While we have no objections to the amendments just moved by the Minister, we believe it necessary for there to be an arrangement that the claimant has an entitlement on the same basis as the compensator. Those are the reasons for the amendment.
Lord Mackay of Ardbrecknish: I am grateful to the noble Baroness for explaining her amendment. Perhaps I may explain how the situation will work. Under the present scheme only the compensator may apply for the certificate. However, victims are sent copies of the certificates issued by the unit at the same time as they are sent to the compensator. Therefore the victim receives a copy of the same certificate as does the compensator, at the same time.
The compensation recovery unit also runs a benefit inquiry service which can provide victims with details of all benefits that have been paid with the exception of statutory sick pay. The unit has an internal target to respond to a benefit inquiry within 30 days of receipt.
It would seem unnecessarily bureaucratic to add to the scheme the further complication that certificates of recoverable benefit—a document with legal force—must also be issued to victims on demand. I am concerned that the implications of such a change would require significant consequential changes to be made to other clauses of the Bill. For example, we would need to make similar requests of victims concerning the provision of information to those placed on a compensator. Certain obligations are placed on the compensator which are not placed on the victim. It seems inappropriate to create such a raft of duplicated procedures when victims are copied certificates at the same point as compensators.
We are not aware that the present arrangements cause any particular difficulties. Nor are we aware that victims are failing to obtain all the information they need about recoverable benefits. Indeed the Select Committee's inquiry revealed widespread satisfaction with the service provided by the compensation recovery unit.
In summary, a victim can contact the benefit inquiry service and have details provided. However, perhaps more important is the fact that if the compensator applies for a certificate, when that certificate is sent to the compensator it is also automatically sent to the victim without the victim having to make an application or to do anything else.
With that explanation and assurance on how the system works, I hope that the noble Baroness will withdraw her amendment.
Baroness Turner of Camden: I thank the Minister for that explanation. However, I can see no reference in the Bill to the procedures to which the Minister referred. I do not see it stated anywhere that the victim receives a copy. Presumably, if the victim does not receive a copy, he can do something about it; he has some status from which to complain, or whatever. If he receives a copy, he at least knows the situation. I am glad that the Minister accepts that the victim has to know at the same

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time as the compensator. I am a little worried that that provision does not appear in the Bill so far as I can see. I should like to consider what the Minister said.
Lord Mackay of Ardbrecknish: Perhaps I can help the noble Baroness, having quickly found the right place in the Bill, I think. As the noble Baroness knows from previous discussions on legal matters, I am always a little reticent to act as a great legal authority in case my surname becomes confused with others who are in a better position.
Baroness Hollis of Heigham: The collective Lords Mackay!
Lord Mackay of Ardbrecknish: Yes, the collective Lords Mackay. I thank the noble Baroness.
Clause 5(5) states:
"Where the Secretary of State issues a certificate of recoverable benefits, he must provide the information contained in the certificate to (a) the person who appears to him to he the injured person".
I believe that that is the right place in the Bill. I hope that it reassures the noble Baroness.
Baroness Turner of Camden: I am much obliged for that explanation.
On Question, amendment agreed to.
5.15 p.m.
Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 9:
Page 2, line 25, at end insert—
("( ) As soon as practicable after receipt of an application for a certificate of recoverable benefits, the Secretary of State shall issue a written acknowledgement of receipt of the application.").
The noble Baroness said: Amendment No. 9 ensures that the Secretary of State issues a written acknowledgment of receipt of the application as soon as practicable after receipt of an application form.
Clause 21 refers to the requirement for an acknowledgment. The intention is to make it incumbent on the Secretary of State to issue a written acknowledgment as soon as is practicable for him to do so. I can see no other reference in this section of the Bill to acknowledgment being necessary.
I note that the Minister's Amendment No. 12 has the same effect. The only difference is that in our amendment we state,
"As soon as practicable after receipt of an application".
Therefore I prefer the wording of Amendment No. 9 to that of Amendment No. 12. However, I am willing to listen to what he says on the issue. I beg to move.
Lord Mackay of Ardbrecknish: Perhaps I may respond to the noble Baroness and speak to my three amendments which are grouped with Amendment No. 9.
As the noble Baroness said, the amendment requires the Secretary of State to issue an acknowledgment of the receipt of an application for certificates of recoverable benefits. Under the current scheme the regulations make a similar requirement.
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However, it has been suggested, and the Government have agreed, that it would be more appropriate that the requirement to issue an acknowledgment be provided on the face of the legislation, and the three amendments in my name are designed to achieve that. I am sure that the Committee will have noted that the Government amendments do not include a requirement that an acknowledgment should be issued as soon as practicable. However, we do not believe that it is necessary to set out such a requirement on the face of the Bill since the compensation recovery unit already has an internal target to issue acknowledgments within seven days.
Amendment No. 12 makes clear on the face of the Bill that the Secretary of State is obliged to issue an acknowledgment of a compensator's application for a certificate. That is exactly what the noble Baroness asks me to do. Under the present scheme, this requirement is provided in regulations.
Under Clause 21 of the Bill, which relates to cases where the Secretary of State has failed to issue a certificate, it is one of the conditions for a payment to be exempt from benefit recovery process that a compensator must have in his possession an acknowledgment of receipt of his application for a certificate. It has been suggested, and we agree. that it would be appropriate, therefore, for the requirement to issue an acknowledgment also to be provided on the face of the legislation. Amendment No. 12 meets that concern.
Amendment No. 44 removes the regulation-making power relating to acknowledgments from Clause 21. I trust that a regulation-making power biting the dust will please the noble Earl.
Amendment No. 45 corrects a reference in Clause 21 to the amended Clause 4.
I am not inserting quite the words that the noble Baroness seeks. However, I hope that she accepts that I am taking on board the spirit of her amendment. With the assurance that the internal target for the compensation recovery unit is within seven days, I hope that she will withdraw her amendment and that the Committee can accept my amendment.
Earl Russell: Before the noble Baroness replies, without entering into the question of which form of words is better in a perfect world, I am extremely glad to see the Minister's amendment. I thank him warmly for tabling it.
Baroness Turner of Camden: I thank the Minister for his explanation and for the statements he made in moving his amendment. In view of that, I am willing to withdraw my amendments and shall support Amendment No. 12 when it is moved by the Minister.
Amendment, by leave, withdrawn.
Lord Mackay of Ardbrecknish Lord Mackay of Ardbrecknish moved Amendment No. 10:
Page 2, line 26, leave out ("a person") and insert ("the compensator").
The noble Lord said: I have already spoken to this amendment. I beg to move.
On Question, amendment agreed to.
[Amendment No. 11 not moved.]
Lord Mackay of Ardbrecknish Lord Mackay of Ardbrecknish moved Amendment No. 12:
Page 2, line 27, after ("must") insert
("(a) send to him a written acknowledgement of receipt of his application, and
(b) subject to subsection (6),").
The noble Lord said: I have already spoken to this amendment. I beg to move.
On Question, amendment agreed to.
Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 13:
Page 2, line 37, leave out ("may") and insert ("shall").
The noble Baroness said: This is a simple amendment which places an obligation upon the Minister by putting "shall" instead of "may" in this section of the Bill. I hope the Minister will be prepared to accept it. I beg to move.
Earl Russell: I warmly support this amendment, which is a point of some importance. Drafting of legislation must not become too permissive or it fails to serve its purpose as legislation. I very much hope that the Minister can accept the case for this amendment, which I do not think would do him any harm and would do a lot of other people a great deal of good.
Lord Mackay of Ardbrecknish: I am in a little difficulty because Amendment No. 13 is grouped with some others. I do not know whether the noble Baroness wishes to take them separately. I will deal with Amendment No. 13 which, as the noble Baroness said, would require the Secretary of State to issue replacement certificates of recoverable benefits whenever existing certificates expired.
There are many circumstances when it would be completely unnecessary to issue such a certificate, perhaps the best example being when the negotiating parties have already agreed a settlement and no further certificate is therefore required. I am concerned that such an amendment might lead to a never-ending series of certificates issued by the recovery unit, at significant administrative expense and to no practical purpose.
Clause 4(2) of the Bill places an obligation on the Secretary of State to respond to an application for a certificate within a set period. This arrangement will facilitate the settlement process without adding unacceptable administrative burdens. I believe it is properly a case of "may" because, particularly in the circumstances of subsection (5)(b), one would not want the Minister to have to do that in all cases and have an obligation upon him. There will be certain cases in which he may wish to do it, but I do not
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think we should impose an obligation. There is quite enough bureaucracy around without adding to it. What we have here is perfectly reasonable and will allow us to respond immediately when an application is made. I do not believe we need to go that little bit further and replace "may" with "shall".
Earl Russell: The Minister has made a perfectly serious point, which I take on board; but the noble Baroness, Lady Turner, has also made a perfectly serious point. At present, there is not quite a correct fit between those two points. The Minister's "may" stretches a little too far. It does not only cover the cases to which he referred, where there is no reason for such a certificate to be issued; it extends to any case whatsoever, as I understand it. In any circumstance, the Secretary of State might, perhaps through sheer inadvertence, perhaps because something else has happened that day, fail to get round to issuing a certificate.
Is it possible that we might find a form of words that could bridge the gap between these positions? Perhaps we could think about some form of words as follows: "The Secretary of State must either issue a certificate or show good cause why he has not done so". That is a tentative, on-the-spur-of-the-moment suggestion. Does it come anywhere near bridging the gap?
Lord Mackay of Ardbrecknish: I am not sure if there is a very big gap here. The real problem is that, where a compensator applies for a certificate, the Secretary of State, under subsection (2), must issue a certificate before the end of the following period, as it says on the face of the Bill. That seems to cover the point. The "may" is much more relevant to subsection (5)(b), where no application has been made.
I will look at what the noble Earl says and see whether there is some mismatch in the construction here; I do not think there is any mismatch about what we aim to achieve.
Baroness Turner of Camden: I thank the Minister for that explanation and the noble Earl, Lord Russell, for his intervention. There is a point to be made here, but I think that perhaps we should be better advised to think about it and have another look at it at Report stage. I think that what the Minister said has some relevance to our discussions and I am prepared to accept what he said. On the other hand, there may be occasions when a certificate ought to have been issued but has not been and to have a stronger wording here might be more helpful. I should like to think about what has been said. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 14 and 15 not moved.]
The Deputy Chairman of Committees (Lord Aberdare): I should tell Members that, if Amendment No. 16 is agreed, I cannot call Amendment No. 17.
Lord Mackay of Ardbrecknish Lord Mackay of Ardbrecknish moved Amendment No. 16:
Page 2, line 41, leave out subsection (6) and insert—
("(6) Where the compensator applies for a fresh certificate while a certificate ("the existing certificate") remains in force, the Secretary of State must issue the fresh certificate before the end of the following period.
(6A) The period is—

(a) the prescribed period, or

(b) if there is no prescribed period, the period of four weeks,

which begins with the day following the day on which the existing certificate ceases to be in force.").
The noble Lord said: This amendment relates to Clause 4(6). In the present draft of Clause 4(6), as is the case under the present scheme, no application for a fresh certificate may be made while any existing certificate remains in force. This can in some cases lead to a slight delay between the expiry of a certificate and the issue of the next certificate, which can be inconvenient to the negotiating parties. The amendment in my name addresses this problem by allowing an application to be made before the expiry of an existing certificate. However, certificates may remain in force for a considerable period of time. If the Secretary of State were obliged to issue such a replacement certificate during the same time limit as that set out in subsection (3) of this clause, some overlapping confusion as to the proper recoverable amount would result. The amended subsection (6) therefore sets the time limit for the issue of a certificate to run from the date of the expiry of the old certificate, although replacement certificates may be issued as soon as the original certificate expires. I commend the amendment to your Lordships. I beg to move.
Baroness Turner of Camden: I thank the Minister for that explanation of his amendment. On the other hand, I must say that I prefer my own amendment, Amendment No. 17, because there is no definition of "prescribed period" for the purpose of this clause. The purpose of our amendment is to ensure that there is continuity from certificate to certificate. The Government's amendment does not deal with the fundamental criticism which we make of the existing Clause 4, which is that there can be a substantial hiatus between the expiry of one certificate and the issue of a new certificate. We suggest that the certificate must be issued within the period provided for in Amendment No. 17. A hiatus could delay a settlement and leave the parties in limbo, particularly where a case is coming up for trial. We therefore think that our amendment, which is very clear and attempts to cover the hiatus in Clause 4, is preferable to the Minister's amendment.
Lord Mackay of Ardbrecknish: Amendments Nos. 16 and 17 tackle a similar problem but in a different way. Amendment No. 17, which the noble Baroness has just discussed, would allow applications to be made for certificates up to four weeks before the expiry of a current certificate. We believe that the effect of this amendment would be rather inflexible
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because it does not allow for the prescription of shorter periods for the issue of certificates, as may become possible in the future with developing technology. In addition, since the compensation recovery unit is required under Clause 4(3) to issue certificates within four weeks of the receipt of a request, this amendment might cause considerable administrative difficulties where a request was received close to four weeks before the expiry of a certificate.
In order to meet their legal obligation to issue certificates within four weeks, the unit might have to issue a new certificate before the expiry of the certificate in force. It might therefore be difficult to avoid having two conflicting certificates in force at the same time, which is the point I made when I spoke to my own amendment. I believe that my amendment will allow an application for a certificate to be made during the currency of an earlier certificate but will not give rise to the possibility of conflicting certificates being in circulation at the same time. I have little doubt that the noble Baroness will be content to accept my amendments. If she wants to go a little further, perhaps she can reflect on what I have said and see that I have gone some way to meeting her concerns.
5.30 p.m.
Earl Russell: I wonder whether I have followed this point correctly. I should be grateful for a little more clarification. What the Minister has provided is that one may apply for a fresh certificate while the old one is in force. But he has not closed the gap, so that the fresh certificate must arrive before the expiry of the old one.
The Minister's fear is that there may be two certificates in force at one time, which I should have thought could have been perfectly successfully dealt with on the same principle as is used in the making of wills: "This will revokes all former wills"—"This certificate revokes all former certificates". I wonder whether the Minister has perhaps seized here on a purely imaginary danger that there is a rational way of providing for it.
Let me put the point about a gap, even if it is a very small one. Under the Minister's amendment, I understand that it must be less than four weeks. Let us suppose that that four weeks comes, as the noble Baroness, Lady Turner, suggested, when a High Court case is about to come to trial. We heard a great deal yesterday in the Civil Procedure Bill about the amount of confusion that can be caused if court listings go wrong and the cost to public funds that may result from it. If indeed, we achieve anything like a civil justice commission, it might well have views to express on this matter.

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So I wonder whether the Minister is perhaps being not sufficiently careful of the public funds of another department and whether some further thought here might be worthwhile.
Baroness Turner of Camden: I shall study very carefully what the Minister said. But again I return to the point that I made in moving the amendment. The Minister's amendment says:
"The period is—… the prescribed period".
But there is no definition of that period. The amendment goes on:
"or … if there is no prescribed period, the period of four weeks".
I cannot understand why the noble Lord objects to the amendment that I moved. I cannot believe that the problem of double certification is insuperable, as the noble Earl, Lord Russell, said. If there is ambiguity in legislation—for example, the definition of a "prescribed period", lack of clarity and so on—it can lead to difficulties in the future. I am not terribly happy with what the Minister said. I am willing to look at it, but I am quite certain—
Lord Mackay of Ardbrecknish: When I studied this particular problem, I myself had some difficulty in working out how the gaps occurred and so on. The certificate itself can be seamless in that when the first certificate (if I may so call it) comes to the end of its day—say, for the sake of discussion, the end of November—the next certificate, although it may not be issued on 1st December, may well run from 1st December. But I see the problem of the gap. In fact we had a discussion about it this morning.
I know that the noble Baroness will not press the point. She will think about what I have said and I equally will think about the points that have been made, especially about the possibility of a court perhaps meeting after a certificate has gone and without a new one. I can quite see that point.
On Question, amendment agreed to.
[Amendment No. 17 not moved.]
Clause 4, as amended, agreed to.
Clause 5 agreed to.
Clause 6 [Liability to pay Secretary of State amount of benefits]:
Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 18:
Page 3, line 35, at end insert—
("( ) Subsection (2) shall not apply to an interim payment or payments paid before the final settlement of the claim which is or, where more than one interim payment has been made, are in total below an amount or amounts specified in regulations made pursuant to this subsection.").
The noble Baroness said: The amendment before the Committee under Clause 6 deals with the rather difficult question of interim payments. Admittedly, this matter can sometimes be rather complicated. As those who have dealt with industrial injury cases are aware, it is very common, in a case which could be lengthy
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because of the condition of the accident victim, to negotiate an interim payment in advance of the final settlement.
The present practice is for insurers to require the interim payment to be allocated to special rather than general damages. Interest rates on special damages are higher than on general damages. Thus, by making an interim payment allocated to special damages, the insurer potentially saves money on the final settlement. The original recoupment provisions added a complication to interim payments in that any interim payment had not only to deal with the needs of the accident victim but also any recoupment incurred to date. That meant that an interim payment often had to be applied for in a much larger sum than might at that time be needed and could push towards the final value of the claim.
In smaller cases that was not so much of a problem because of the small payments limit of £2,500. In bigger cases, however, the impact on recoupment could dramatically cut back on the interim payment, often eating into the final compensation. We believe that some thought should be given to the problem of interim payments and that is what our amendment is intended to do. It makes clear that subsection (2) should not apply to an interim payment made before the final settlement of the claim which is below, or in the case of a second or subsequent interim payments are below, an amount or amounts specified in regulations to be made pursuant to this section.
We say essentially that this needs to be looked at; hence the suggestion that we have made about regulations. We no longer have the small payments limit of £2,500 in the Bill. This amendment makes provision for the Secretary of State to specify how much recoupment can be deferred to protect a small interim payment. The kind of payments likely to be involved are those relating to partial earnings loss to be made up by an interim payment. I hope that the Minister will be prepared to agree that there is something quite serious to talk about here and that he will be prepared to accept what we have to say. I beg to move.
Lord Mackay of Ardbrecknish: The noble Baroness is quite right in saying that this is a rather complicated issue. I hope that what I have to say can allay her concerns, which I understand, about this matter. I also understand that under the old system these matters sometimes did turn out in the way that she suggested.
The noble Baroness's amendment would exempt interim payments from benefit recovery, where their total fell below a prescribed limit.
I understand that the amendment is in response to a genuine concern that, after recovery is made from an interim payment, the victims may not, in the short term, be left with the funds that they need, for whatever reason the interim payment was being granted. I think that the suggested amendment is unnecessary. It would probably introduce a potential loophole into the reformed scheme, although I understand the problem as it occurred in the old scheme.

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Under the reformed benefit recovery scheme, although we propose to continue the present arrangements that benefits may be recovered in respect of interim payments, the rules of the new scheme will only allow the victim's compensation to be reduced pound for pound in respect of benefits already paid to meet a corresponding need. So it should not be possible for benefit recovery to lead to a reduction in an interim payment that has been made, say, for private medical expenses.
That is because benefits are not paid to meet such expenses. If an interim payment is made for the purpose described, it could not be reduced on account of any benefit repayment that the compensator was obliged to make at that time.
However, if an interim payment would fall to be reduced under the provisions of Clause 8, it is up to the victim's representative to negotiate a payment with that reduction in mind. Under the present scheme, we have no evidence that the courts ignore the effects of recoupment when they award interim payments.
An attempt has been made by the noble Baroness to limit the extent to which the amended clause could be used to avoid benefit recovery by making provision for a limit below which recovery would not be triggered. Our knowledge of the way in which the small payments limit has been manipulated under the present scheme makes me fear that the taxpayer's interest, if we introduced a similar limit and applied it to interim payments, might not be protected. Of course, it might be possible to introduce a limit at such a low level that manipulation was almost impossible. However, this would make an interim payment made within such a limit all but worthless to the victim.
I appreciate that victims' representatives would rather not have to negotiate an interim payment with benefit recovery in mind; but I do not see any alternative if the taxpayer is to be properly protected. I hope that my pointing out that the reform scheme is different from the old scheme and that payments given for other than benefit will not be recoverable against, reassures the noble Baroness that the kind of scenario she painted (which definitely could arise under the old scheme) is not likely to arise under the new one. I appreciate that these are complicated issues. However, I hope the noble Baroness can withdraw her amendment. I appreciate that she may wish to consider the issue. If she wants to come back to me in writing, I shall be happy to respond to her.
Earl Russell: I am grateful to the Minister for his last assurance to the noble Baroness. I take the points that he is making. However, he did not say anything to meet the point about the difference between the treatment of general and special damages. If the noble Lord does not want to meet that issue by way of the amendment, perhaps he will consider some other way of meeting it. Indeed, before the next stage of the Bill he may want to consult his noble and learned clansman on the matter.
Baroness Turner of Camden: I am obliged to the Minister for his explanation. As he rightly said, this is a complicated matter. However, there are still issues of concern to be resolved for those of us on this side of the
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Chamber. The noble Earl, Lord Russell, referred to the difference between general and special damages. I am concerned also that there may now be a situation in which the representatives of an injured person may not go for an interim payment at all if they feel that recoupment is to be made from it. That would be a disadvantage. Many legal cases arising from accidents at work tend to be long and drawn out. As I said in moving the amendment, it is usual in such instances to try to negotiate an interim payment to try to look after the interests of the injured person.
I am well aware that the taxpayer needs to be protected. On the other hand, we are also concerned with the interests of the person who suffered the injury. Therefore, as the Minister rightly assumed, I will look carefully at what he said. It may be a good idea to revisit the whole issue at Report stage. I am not happy about what he said this afternoon. However, the matter is complicated and we need to give it a great deal of consideration. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 6 agreed to.
Clause 7 [Recovery of payments due under Section 6]:
Lord McCarthy Lord McCarthy moved Amendment No. 19:
Page 4, line 4, leave out ("may") and insert ("shall").
The noble Lord said: We return to the fascinating notion put forward by the Minister of the "seamless certificate", and the question of whether or not it will materialise. We are raising this question again in relation to Clause 7 in order to hear what he says.
Clause 7 deals with the recalcitrant compensator who fails to apply for a certificate of benefit or fails to make a payment even if he has a certificate. It gives the Secretary of State certain powers, presumably in order to force the recalcitrant compensator to compensate. It stipulates that the Secretary of State "may"—our amendment would change that to "shall"—issue another certificate, issue a copy of a certificate or, in either case, issue a demand for payment immediately. I suppose that would be, in certain circumstances, without a certificate.
We would like to know why, as the Minister explained in relation to a previous amendment, the issue of the certificate should be discretionary rather than mandatory. It is surely fairer to the compensator that he should know how the demand is calculated, and if he has lost the certificate, he should have another. He is more likely to pay if he obtains another certificate. Both sides will want to know and be clear about what the certificate contains.
That is what we are asking. In other words, what are the circumstances in which the Secretary of State may not issue a certificate or may not recover the amount? What are the circumstances in which he may demand the amount without a certificate or issue a certificate and not demand the amount. It would surely be better if the matter was clear and he issued the certificate in all circumstances. I beg to move.
5.45 p.m.
Lord Mackay of Ardbrecknish: Over such great disagreements as "may" and "shall" are parliamentary battles made. As I did earlier, I hope to be able to assure the noble Lord, Lord McCarthy, that there is nothing suspicious in the use of "may" rather than "shall"; indeed, it allows some flexibility which is useful for the Secretary of State and the Compensation Recovery Unit.
Amendment No. 19 would require the Secretary of State to issue copies of certificates and demands for payment in any case where a compensator had made a compensation payment but had not applied for a certificate or had not made a payment to the Secretary of State within the allotted time. The amendment would make the provisions of Clause 7 much more inflexible for the Compensation Recovery Unit to operate.
In many cases, although the compensator may not have applied for a certificate, he may co-operate with the unit when contacted. Or, although the compensator was in possession of a certificate and the unit had not received payment, the compensator may indicate when contacted that he was about to make payment. In either case it would be unnecessarily bureaucratic and a poor use of the time of officials as well as of funds to issue a formal demand for payment or a copy of the certificate. That is what the word "shall" would do. The Secretary of State would be obliged to issue a certificate even though he knew that the compensator intended to pay and was in contact with him. That is unnecessary.
The word "may" means that the unit can act when it knows that the compensator is not playing ball and is just being difficult. I hope therefore that the explanation that there is nothing sinister in the use of the word "may" and that it is simply a better way of allowing the Compensation Recovery Unit to proceed rather than to oblige it to send out a copy of a certificate or a formal demand in every case, whether or not it needs to, is enough to allow the noble Lord to withdraw his amendment.
Earl Russell: Without taking issue with the Minister's general argument, perhaps I can give him a little friendly advice. If he wants to persuade us, perhaps he should invoke the argument of flexibility slightly less often. While that is a great virtue, Ministers—I do not refer only to the noble Lord present but to Ministers as a generic species—think of flexibility as entirely their own flexibility; they do not often think enough about the flexibility of other people. Therefore, if the Minister wishes to persuade us, he should perhaps stick more to the practical points without the theoretical implication, which is not always as persuasive as perhaps sometimes it should be.
Lord McCarthy: Perhaps the Minister can clarify a point. He seemed to be saying that the certificate itself was optional. I took the view that it is optional in Clause 7 because the compensator may have lost the first certificate. The Minister says that if he has lost the certificate, he may know what it said and therefore another one need not be issued. However, at one point the Minister appeared to be saying that the issue of the
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certificate was a voluntary matter and if one had reason to believe that the compensator knew what he had to pay, one did not need to issue a certificate. Was the Minister really saying that?
Lord Mackay of Ardbrecknish: I do not think I was saying that. The easier one to look at is the formal demand for payment. If "shall" is placed there, a formal demand for payment has to be sent, even though the unit knows, because it has contacted the compensator, that the payment is coming as it should do. In the case of the certificate, it is the copy of the certificate which is optional. The original certificate, of course, is obligatory on request. It is the copy part that is optional. My point is that I do not think that we should oblige the unit to send a copy certificate if it knows, because it has made a telephone call or whatever, that that is not necessary. That is why I think that "may" is a happier word for a better administration of the system than "shall". I am taking the noble Earl's strictures to heart.
Lord McCarthy: We shall have to go away and look at this and maybe we shall come back again. There is a substantial difference between "may" and "shall". You may be shot or you shall be shot. There is a very substantial difference. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 7 agreed to.
Clause 8 agreed to.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 20:
After Clause 8, insert the following new clause
OFFERS OF COMPENSATION PAYMENT: HEADS OF COMPENSATION
(". A person who makes an offer of a compensation payment (whether by payment into court or otherwise) which takes account of a reduction calculated in accordance with section 8 shall state—

(a) the gross amount of the offer;

(b) the amount allowed in the offer for each head of compensation listed in column 1 of Schedule 2; and

(c) the name and amount of each recoverable benefit it is proposed to deduct from each of those heads of compensation.").

The noble Baroness said: We should like to insert a new clause into the Bill. Clause 8 deals with heads of compensation. Our amendment would specify for the claimant—that is the victim—the basis on which the compensator has determined his final sum. We believe that the claimant, the victim, needs to be able to assess whether an offer by the compensator for settlement is reasonable. To do this the victim clearly needs all relevant information that is entered into the compensator's calculation. This amendment requires the compensator to provide a breakdown of an offer into the separate heads of damages so that the claimant can learn, for example, how much of the damages have been allocated to each head of damage.
The Government at Second Reading resisted this, and I am still quite baffled as to why they did so. The compensator has to make this breakdown for his own internal purposes. Why should he not pass that

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information to the claimant and his lawyers? It is simpleC and straightforward. The claimant surely has the right to know how much of his proposed damages are for pain and suffering and how much to cover benefits already received. Without that information, how can the victim decide whether the heading for pain and suffering, which should be ring-fenced, for example, is reasonable? Otherwise, the claimant might suspect that the compensator is overloading one head of damages to reduce the liability to pay excessive benefit claims.
The compensator, we know, has a vested interest in increasing the offset amount, as this reduces the excess he must pay. His interests conflict with those of the claimant. It is important for the claimant to know on what formal basis of division between heads of damages the compensator is operating.
The Government may repeat, as they said at Second Reading, that the claimant's lawyers will have made that assessment. So they will; that is the basis of their claim. But surely it is sensible and reasonable to see whether their estimates and assumptions—the estimates and assumptions of the claimant's lawyers—coincide with those of the compensator. It cannot be right that the victim is denied key information that the compensator is working on, on the basis of which the compensator is offering a settlement.
I hope the Government will agree that it is reasonable that there be an agreed basis of information on which both parties are negotiating. I beg to move.
Earl Russell: I once looked up the word "Dutch" in the dictionary of English slang. I shall not amuse the Committee with some of the things I found there, but I am concerned at the moment with the words "a Dutch account". That is the sort of account that says "to services rendered, £5,000". It is awfully hard to query an account like that. It is quite important under what heads various sums are awarded, since damages for pain and suffering are ring-fenced from the operation of the courts. That is one of the most welcome things in the whole Bill. It means that it is important to the victim to know which damages are put under which head. Indeed, if the victim wishes to argue with that, as has been known from time to time, it is essential that he should know exactly what it is with which he wishes to argue. This is a decision which will be of legal significance.
There is a long judicial tradition, stretching back to the 17th century, recently re-asserted by the noble and learned Lord, Lord Woolf, that there must be reasons given for decisions with a judicial input, otherwise they cannot be challenged. There must be records made and reasons given. The two things are inter-dependent. The courts have, for a long time, tended to find any breach of those propositions a breach of the principles of natural justice.
I understand that the Government do not want the growth of judicial review to go too far. Many on the Bench would also hope that it would not. That depends on certain care in the drafting of legislation as well as on the operation of the judiciary. This is a case where the amount of judicial review in the future might very
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well be kept down by accepting the noble Baroness's amendment, and for that reason I am extremely happy to support it.
Viscount Chelmsford: I am afraid I must oppose this amendment. It ignores the way in which settlement negotiations which do not reach the courts actually take place. Surely it is true that initially each party will seek to emphasise the substance, or the lack of such substance, to each heading of the claim. There will not be too many heads where even approximately agreement on the quantum is going to be admitted initially. The gap between what the claimant's representative wants and what the defendant's representative offers will be wide initially. If these two representatives do succeed in getting their clients to agree on an award out of court, then this agreement will be in the aggregate. No agreement will have been reached on the make up of the individual parts. Whether they need the amendment of the noble Baroness, Lady Hollis, to be agreed, it would undoubtedly reduce the number of out of court settlements significantly and, correspondingly, increase the number of contested cases that will reach court. I must assume that all parts of the Committee would consider that to be retrograde.
Baroness Hollis of Heigham: I wonder whether the noble Viscount, Lord Chelmsford, would help me further. I have noted his words and I am baffled by them. He said that there probably would be no agreement on parts, even if both parties had agreement on the total sum. How could they have agreement on the total sum if they did not agree on how that total sum was arrived at? I do not understand his thinking on that.
Viscount Chelmsford: In my experience, that frequently is the case: after a lengthy negotiation, without agreeing on the parts, there is agreement on a compromise between the aggregate requirements of one party and the other.
Baroness Hollis of Heigham: If the Minister would allow me, how would that aggregate compromise work? Part of the settlement would be for pain and suffering, which is to be ring-fenced, and part for damages for loss of earnings and the like, which are part of the recoupment procedure. How can you agree a total figure if you cannot agree on those two elements, one of which is protected from recoupment and the other is not? This is a new world into which we are moving, and I do not understand how the noble Viscount's thinking applies to this new world.
Earl Russell: I should like to reinforce the point the noble Baroness makes about a new world. I understand that you can reach a settlement in aggregate, and that you can divide that up afterwards. In this new world, in which one part of the settlement is subject to recoupment and another part is not, it will make a great deal of difference to what the victim actually receives under which head those damages are being awarded. Therefore, the effect of what the noble Viscount is proposing may be the opposite of what he suggests.

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He is concerned about the incentive to settle and so, I hope, are we all. I can certainly imagine a litigant being extremely reluctant to settle if he does not in fact understand under which heads he is getting the damages and what they are going to be worth to him when he gets them. That is a question which tends to interest litigants, very naturally. There may be a better chance of getting settlements if litigants do understand exactly what they are getting under which head of damages, and therefore what is going to be recouped and what is not. I thought that might be another possible way of looking at it, and I would be very interested to hear what the Minister has to say about it.
6 p.m.
Lord Mackay of Ardbrecknish: First, I should make clear that we are talking about out of court settlements. We are not talking about court settlements. My noble friend Lord Chelmsford has brought the real world to our proceedings. That real world was evidenced before the Select Committee of another place. It was told that offers of compensation and resultant settlements are very often not broken down into their component parts in out of court settlements. Some 90 per cent. are out of court settlements.
My noble friend Lord Chelmsford is right to say that nothing we do in the Bill should lead to more cases going to court. That would be in no one's interest. The Select Committee was told that offers of compensation and resultant settlements are very often not broken down into their component parts. That was confirmed by my noble friend.
The product of negotiations is a global settlement; that is to say, a single sum of money is offered which represents compensation for all losses suffered. In such negotiations there is rarely a distinction drawn between the separate elements of compensation which may be included; loss of earnings, the cost of care, pain and suffering, and so on. The negotiating parties may very often disagree on the amounts of compensation which they believe should properly be payable in respect of each of these elements. But while their minds may never meet on those issues, they may, nevertheless, be able to agree on an overall sum in settling the claim.
I believe it would be entirely wrong for the operation of the reformed benefit recovery scheme to interfere with that process. Indeed, there is no need for it to do so. Under the reformed scheme it will be possible for both victim and compensator to calculate the amount of compensation they believe should be paid in respect of the losses which the victim has sustained. They will also take a view on the reductions that should be made under the scheme for each of those categories. Each side will therefore have an anticipated net figure or indeed probably a range within which such a net figure should fall. When both parties are satisfied that the offer conforms with their projections, they will settle.
It would be excessively bureaucratic and unnecessary to require compensators to set out all the elements suggested in the amendment when they come to such an agreement—or rather when they are negotiating such an
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agreement, because I presume that that is actually what would happen. Furthermore, it would place them at a disadvantage in the negotiations since the amendment would place no corresponding requirement on victims to set out their calculations for the information of the compensators. I doubt whether representatives of victims would complain if the amendment were carried but I believe that we have to be even handed and be seen to be even handed. In essence, the benefit recovery process must not exert an excessive influence on the way in which compensation settlements are negotiated. It should certainly not exercise an influence which would lead to more cases going to court because the parties could not agree with the component parts, although they might be able to agree the total figure.
That is the nub of my argument. It is an argument about the real world where these negotiations happen and where we all want to see settlements satisfactory to both parties agreed in out of court settlements. I suggest to the noble Baroness and to the noble Earl that they might look at what the Select Committee of another place was told about these out of court settlements not being broken down and that they heed what my noble friend Lord Chelmsford, who understands how this part of the world works, has said. With that explanation, I hope they will agree that it would not be to the benefit of victims, compensators and to the speedy out of court settlement of claims if we went down the road suggested in the amendment.
Earl Russell: It is not quite as simple as the Minister suggests. When he talks about the real sum on which he hopes the two will settle, he is perhaps importing an unjustified adjective. Until they know which parts of that sum are liable to recoupment, and which are not, there is not any real sum involved. What we are dealing with is a notional sum. It is like being paid a salary and not knowing whether it is before or after tax. It makes a considerable difference.
I do not dispute what the Minister and the noble Viscount say about the real world as it has been hitherto. But the Bill is fundamentally changing the situation. Our job as legislators is not to legislate for the real world as it was yesterday; it is to legislate for the real world when the Bill is in force. Those are very different things. I am not a lawyer but I cannot help being tempted to imagine that if I were and I were dealing with a case of this kind, I would very strongly advise my client not to settle until he knew what part of his damages was liable to recoupment and what part was not.
Lord Mackay of Ardbrecknish: I explained a little while ago that even if no certificate has been asked for, the victim is able to telephone the inquiry line to get some idea of the totality of benefits that may be recoverable. Indeed, I should have thought that the compensator is equally in that position. It will fall to the compensator to make the payment. The victim and the compensator will both know the kind of parameters they are working within. The concern of victims at the moment, and the one which we are addressing in the Bill, is that benefit recovery can eat into pain and suffering. If the victim sees that all his award will be

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removed because of benefit recovery and nothing has been allowed for pain and suffering he will not agree to the deal.
As so often happens, these debates are nicely theoretical but they do not deal with the real world where people have a rough idea of what they are going to settle for. That is the sum we are talking about and that is the sum they are going to agree on. So they will know what the benefit recovery is.
Baroness Hollis of Heigham: The Minister said that in the real world people have a rough idea of what they will get. Why should they have only a rough idea?
Lord Mackay of Ardbrecknish: I said that more in relation to where the victim decides to telephone for benefit advice. He will then get an idea. That does not tell him exactly what will be on the certificate, if and when it is applied for. But the moment the certificate is applied for, both the compensator and the victim, who gets a copy of that, know exactly what the benefit recovery unit is likely to be looking at.
Baroness Hollis of Heigham: I genuinely do not follow the Minister's reasoning. Normally, when the Minister opposes an amendment or produces one of his own, we understand where he is coming from and we understand the nature of the argument. We may agree or disagree with some of the information he brings to bear or his ideological concerns, but at least we know his shape of the argument. I am utterly baffled. I know this is a technical Bill; but I do not understand where the Minister is coming from.
In the amendment we are asking that the claimant should have the right to know what are the parts that make up the total which is up for negotiation. Why should not the victim—the claimant—have the right to know? The Minister has not argued that this is a hugely complex matter and that it would generate an unreasonable bureaucracy because he accepts, as we argued, that the compensator has to make that assessment himself as well. What we are saying is that the victim should share the information that the compensator has.
After all, it was the approach of the noble and learned Lord, Lord Woolf, that there should be cards on the table and an agreement of the data. It may well be that the damages are ring-fenced for pain and suffering but there is also the public policy interest which is to ensure that both parties can police the question of recoupment and avoid overloading onto one head of damages so that the compensator is relieved from paying back to the government what he otherwise should. It is in the public policy interest that all parties should know the building blocks to a final settlement. I cannot understand why the Government are resisting that sharing of that basis of information. It goes against everything that the noble and learned Lord, Lord Woolf, has said. He wants more discovery of information, particularly by the plaintiff, so that there is a level playing field and a shared basis of information. Why this concealment and vocabulary of secrecy as though somehow the
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real world needs secrecy in which to operate? Will the Government explain to someone who is utterly baffled, why should the victim not share the same building blocks of information on which the compensator is operating and making his offer?
Lord Mackay of Ardbrecknish: I am afraid that I am in the same position as the noble Baroness. I am baffled by her inability to see the point which had been made clearly by myself, I thought, but perhaps abundantly clearly by my noble friend Lord Chelmsford and which was clearly made to the Select Committee.
Baroness Hollis of Heigham: The Select Committee was dealing with the difficulties of the present situation and the real world of yesterday and not the situation that we shall be faced with once this Bill becomes law. Therefore, it does not help the Minister's case to keep referring back to the world that we are departing from.
Lord Mackay of Ardbrecknish: The real world is one in which I hope most settlements will continue to be reached out of court. I say to the noble Baroness that if her amendment were passed I strongly suspect that the argument would become more than it is at the moment and that more cases would at least take longer to settle because people would be arguing about the component parts when they were actually perfectly content to come to an agreement on the whole.
It is not as though people are going to be in ignorance, because both the victim and the compensator will have certificates which set out the benefits. In Schedule 2 they will be able to read quite clearly the allowable reductions. It is not as though there is going to be a great mystery about that part of it: it is going to be quite clear. The victim will be able to see quite clearly what he or she is going to get in his or her hand. I believe that that is the point that the noble Baroness is arguing about. They will be able to see what they are going to get because it will be known from the certificate what is likely to be paid to the Government. It will be possible to see what is the net offer. That is the point at which, I suggest, in the real world, as my noble friend said, they will settle. I do not begin to comprehend the huge argument that has been made by the noble Baroness about this.
Lord McCarthy: Perhaps I can help the noble Lord. He said he thought that the victims might like this amendment. I can understand that. But at other times he seemed to be saying that nobody would like it. I could understand it if the Minister said that it would help the other side if we did not have this amendment because people would not know precisely what the situation was. It may be that if they do not know what the situation is it is more likely that they will settle, but not necessarily because it may be that if they do not know they will refuse to settle. In fact, at one stage I believe that the

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Minister said that. Surely he is right when he says that the victims would like our amendment and that is why the Government oppose it.
Earl Russell: Before we leave this matter, perhaps I may ask the Minister not to assume that it is only the noble Baroness who is concerned about this point. It is very definitely both of us.
Baroness Hollis of Heigham: It is clear that there appears to be not only no meeting of minds, but actual confusion as to what is in each other's minds. That may be the source of the problem. The situation as I read it, and as I am advised, is exactly the opposite of what the Minister says and is as my noble friend Lord McCarthy has said—that is to say, the victim or claimant is more likely to settle if all the information is above board and in the open and if he knows the split between the recoupment from damages and the excess to be paid by the insurers. He needs to know that he is not being ripped off and therefore feels secure and sure that what is in his hand, net, is fair and reasonable under the circumstances.
All I can suggest at this stage is that we perhaps see whether we can resolve this difficulty in discussion outside this Chamber. I simply remain unable to follow the Minister's reasoning on this matter. It may be that I have misunderstood some basic principle of law, but I am advised that the situation is almost certainly the opposite of what the Minister has suggested, and that comes from people who are practising in the field. In the light of profound misapprehension, confusion and misunderstanding, I beg leave to withdraw this amendment. I suspect that we may have to revisit it if we cannot find some meeting of minds in the meantime.
Amendment, by leave, withdrawn.
6.15 p.m.
Schedule 2 [Calculation of compensation payment]:
Lord Mackay of Ardbrecknish Lord Mackay of Ardbrecknish moved Amendment No. 21:
Page 18, line 6, column 2, leave out ("and gratuity") and insert ("payable under section 103 of the 1992 Act).
The noble Lord said: In moving this amendment, I shall speak also to Amendments Nos. 22, 24 and 27. Schedule 2 does not allow for any reduction of compensation payable in respect of pain and suffering. The general principle is that any reduction of compensation should be only in respect of a corresponding benefit. So, for example, compensation for the cost of care may only be reduced where a benefit designed to contribute to the cost of care has been paid during the relevant period.
This will mean that any compensation paid for which there is no corresponding benefit, such as a payment for the cost of an operation—which I believe takes me back to some of the points that we were making in the discussion between the noble Baroness, Lady Turner,
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and myself, as regards interim payments—could not be reduced on account of the repayment of benefit by the compensator.
The compensation listed in column I of the schedule as available for reduction is that paid to compensate the victim for losses incurred during the same period for which benefits are recoverable. For example, compensation for future loss of earnings or for future loss of mobility in the labour market would not be available for reduction.
The benefits listed in column 2 of Schedule 2 are intended to reflect the benefits listed as recoverable in the Social Security (Recoupment) Regulations, with some minor changes so that the relevant elements of the benefits appear opposite the appropriate category of compensation in the table. Amendments Nos. 21, 22, 24 and 27 make some minor corrections to the list which relates to components payable with disablement benefit. I commend the amendments to your Lordships.
On Question, amendment agreed to.
Lord Mackay of Ardbrecknish Lord Mackay of Ardbrecknish moved Amendment No. 22:
Page 18, line 14, column 2, at end insert—
("Unemployability supplement")
On Question, amendment agreed to.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 23:
Page 18, line 17, column I, after ("care") insert ("by way of personal assistance").
The noble Baroness said: In moving this amendment, I shall speak also to Amendment No. 25, with which it is grouped. These are probing amendments at this stage. Our difficulty is that the headings or descriptions in Schedule 2 are very abbreviated. I hope that the Government will be the first to accept that they perhaps need to improve on the wording so that we can make the law more clearly reflect the Government's and our intentions. Therefore, we are suggesting, for example, with Amendment No. 23, that where it says under "Head of compensation" and,
"compensation for cost of care",
that that should be,
"by way of personal assistance",
because we know that that is a much more specific definition.
Similarly, as regards Amendment No. 25, where we are talking about mobility, we need such additional phrases as we suggest there; namely,
"through the provision of an adapted motor vehicle or for additional travelling expenses for social purposes".
We are not suggesting that the wording of these amendments cannot be changed, but we are saying that Schedule 2 is going to be vitally important. It is too abbreviated and it is not helpful. It needs clarification. We hope that the Minister will say that they are going to consult about this matter and come back with more comprehensive definitions. I beg to move.
Lord Mackay of Ardbrecknish: In Schedule 2 and the two columns "Head of compensation" and "Benefit", these two systems are not a mirror image of one another. Compensation is paid to recompense for losses sustained, whereas social security benefits are paid to meet need.
What the parliamentary draftsman has sought to do in Schedule 2 is to set out the points at which both systems intersect and where as a result it is reasonable for the compensator to make a reduction in the settlement or award that would otherwise be payable.
I understand the sentiment behind the attempt that has been made to clarify the terms of Schedule 2 to the Bill. However, I believe that there is a danger in seeking to define more precisely the elements of compensation that are reducible on account of recoverable benefits. If the attempted clarification did not capture all the circumstances in which a reduction could take place, there would be a consequent risk that any omission on the part of the Government would be taken by practitioners to be a deliberate one. It seems better to provide a series of generic descriptions of reducible heads of compensation, which could, if necessary, be amended later in the light of practical experience.
Against this background, as noble Lords will have observed, Clause 23 gives the power to amend Schedule 2 by secondary legislation, with regulations subject to the affirmative procedure. If it emerged that the interests of the negotiating parties were not fully recognised by the current wording of Schedule 2 it would be a relatively simple matter to amend it at a later date. The noble Baroness suggested that I might think about amendments to be tabled between now and later stages of the Bill. All noble Lords look for ways to improve legislation as it passes through the House. That we shall do. It is not intended that it should not be possible at a later stage to reform these matters in Schedule 2 other than by primary legislation if it is found that the system does not work as we all hope it will. In those circumstances, we shall be able to deal with the problem by way of an affirmative order.
I understand what the noble Baroness has said. However, we must be careful not to tie down the definitions of the heads of compensation to such an extent that we begin to create problems for those who have to deal with these matters from the point of view of the victim or the compensator. I prefer to leave the words as set out in the Bill, that is,
"Compensation for cost of care incurred during the relevant period",
and not qualify them by referring to "by way of personal assistance", or to qualify mobility in the way that the noble Baroness suggests. I believe that it is better left in the more general terms in which it is expressed here under the heads of compensation.
Baroness Hollis of Heigham: I understand the wish of the Minister for generic terms and flexibility. However, given that so many of the court cases will hinge on such definitions, if the Minister is not willing to see these matters defined on the face of the Bill the courts will certainly do the job for him. The courts may determine an intention which is not of the Minister's mind. However,
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having listened to the Minister, we will consult and see whether we need to press the matter further. It may be that in this area we have to accept that it should remain broadly drawn. I am slightly fearful because the interlocking of that matter with the regulatory powers may not necessarily be to the advantage of the victim, particularly when court cases are pursued. However, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Mackay of Ardbrecknish Lord Mackay of Ardbrecknish moved Amendment No. 24:
Page 18, line 18, column 2, at end insert
("Disablement pension increase payable under section 104 or 105 of the 1992 Act")
The noble Lord said: I have already spoken to Amendment No. 24. I beg to move.
On Question, amendment agreed to.
[Amendment No. 25 not moved.]
Lord Mackay of Ardbrecknish Lord Mackay of Ardbrecknish moved Amendment No. 26:
Page 18, line 26, at end insert ("or paid concurrently with each of those benefits by means of an instrument for benefit payment").
The noble Lord said: I beg to move Amendment No. 26. The amendment corrects the wording of the note which follows the table in Schedule 2 to allow for the fact that benefits may be paid either by an instrument for payment—an order book or girocheque—or an instrument of payment, that is, a benefit payment card. Although the benefit payment card will eventually take the place of most instruments for payment, both methods will exist in parallel for some time to come and so must be provided for in the Bill. I commend the amendment to your Lordships.
On Question, amendment agreed to.
Lord Mackay of Ardbrecknish Lord Mackay of Ardbrecknish moved Amendment No. 27:
Page 18, line 33, at end insert
("3. In this Schedule "the 1992 Act" means the Social Security Contributions and Benefits Act 1992.").
The noble Lord said: I have already spoken to Amendment No. 27. I beg to move.
On Question, amendment agreed to.
Schedule 2, as amended, agreed to.
Clause 9 agreed to.
Clause 10 [Review of certificates of recoverable benefits]:
Lord McCarthy moved Amendment Lord McCarthy moved Amendment No. 28:
Page 6, line 10, at end insert—
("( ) Nothing in subsection (3) shall permit any additional amount of benefit to be recovered from the person to whom the compensation payment is made if that person provided to the Secretary of State or to the person making the compensation payment information which was?

(a) correct; and

(b) sufficient to allow the correct calculation of his entitlement to a recoverable benefit.").

The noble Lord said: Clause 10 is all about the review of certificates of recoverable benefits where mistakes have been made. Subsection (3) provides:
"The Secretary of State may not vary the certificate so as to increase the total amount of the recoverable benefits unless it appears to him that the variation is required as a result of the person who applied for the certificate supplying him with incorrect or insufficient information".
The issue is what is incorrect or insufficient information, who is responsible and who should pay the difference. We suggest that the following addition should be made to the clause:
"Nothing in subsection (3) shall permit any additional amount of benefit to be recovered from the person to whom the compensation payment is made"—
the victim—
"if that person provided to the Secretary of State or to the person making the compensation payment information which was … correct: and … sufficient to allow the correct calculation of his entitlement to a recoverable benefit".
That appears to us to be only fair. It could be that when the settlement was made the victim was told that he had, say, £20,000 left. He might subsequently find that instead of having £20,000 left he had £10,000 more to pay. That might occur some time after he thought that he had £20,000 left. That is an obvious shock. It could be a disaster. It could happen long after the victim had spent all of the money. If it can be shown that it derives from a mistake for which the victim is culpable that is only fair. If he or she gives the wrong information to the compensator, who is the person who must apply for the certificate under Clause 4, that is fair enough. The clause as it stands provides, quite fairly, that if it is the fault of the Secretary of State the victim is not to blame.
However, as I understand it, the normal procedure is that the compensator will ask the claimant for details. He will ask the victim to tell him the date of the accident, the nature of the injury, the DSS number and so forth. It is not clear on the face of the Bill exactly what information must be provided. Presumably, the Minister will tell us that all of that will be in the regulations. We suggest that if the correct information was provided in sufficient detail to enable a proper calculation to be made but nevertheless a mistake was made somewhere and as a result further money had to be given that would be unfair.
This evening noble Lords have been asked not to speak about theories but to talk about the real world. Therefore, when we were approached about tabling an amendment of this kind we asked for a concrete example. Those who feel that this amendment is only natural justice were asked to give a concrete example. They suggested the following. Suppose that a claimant tells the compensator that he has an injury to back and foot and the compensator gets it wrong and simply puts down "foot". Once the foot heals, the victim continues to receive benefit in relation to the back, but the DSS issues a certificate of recovery in relation only to the foot. As a result, the certificate is based upon a mistake that has been made by the compensator. The victim believes that what he gets is his to keep. After he has spent a large part of it or some of it—probably to get out of debt—he discovers that there is more to come.
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We do not believe that that is fair and that something should be done about it. This amendment is supposed to be the way to do it. I beg to move.
Earl Russell: Surely, it is fair that an error should be corrected if it is discovered in a certificate no matter who is responsible for creating it. The powers of an Act of Parliament are very sweeping. If Parliament enacts that an error should be uncorrectable it is extremely difficult to do anything about it. That happened in the case of the Bude and Torrington railway, although I shall not regale the Minister with the details.
The noble Lord, Lord McCarthy, is right about the danger of all the money having been spent. The Minister may care to ponder the sad case of the woman who was bankrupted by being left £1 million in shipping shares. She inherited the shares in April 1929 and duty was payable in October 1929.
One does not need such drastic circumstances to create a situation in which recovery is being attempted when there is nothing to recover. Surely it is worth correcting errors in a certificate quickly before that happens, no matter who is responsible for creating them.
6.30 p.m.
Lord Mackay of Ardbrecknish: The amendment would prevent a compensator from making a further reduction to a compensation payment in the situation where, because of a mistake or misleading information in an application for a certificate of recoverable benefits, the amount specified in it was increased on review but the victim had supplied the correct information to the compensator or Secretary of State. The noble Earl added to the opinion by giving one or two examples of a parallel nature. Perhaps in railway terms that is an appropriate expression.
I am not unsympathetic to the view that, because of someone else's mistake, a victim should not lose out by a further reduction to his compensation payment. However, the amendment as drafted could have the effect that the Secretary of State became involved in disputes between the compensator and the victim about who gave what information to whom. We would not wish to be drawn into that argument. Clearly, an important aspect is that if the victim gave wrong information upon which we acted it would be reasonable for that to be corrected and for action to be taken. Conversely, if the victim gave the correct information and the compensator did not pass it on correctly, that is a different issue.
We would like to consider the matter further and to consult with the interested parties involved. That may not be possible before the Bill is passed. Furthermore, some Members of the Committee may have noticed that the clause does not contain regulation-making powers. However, never fear, regulation-making powers are always to hand to a Minister who looks carefully for them. The regulation-making powers in Clause 14 contain powers for making the necessary adjustments to payments that have been made when a certificate of recoverable benefits is subsequently altered on review

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or appeal. The issue raised by the amendment could therefore be looked at in detail when drawing up those regulations.
I have already said that we will consult interested parties when we are working out the details of the regulations. As regards this matter, I certainly undertake that we will consult on the issue. If action is required after the passing of the Bill, as I suspect will be the case, we have the tools of regulation under Clause 14 to rectify any problem that has arisen along the lines mentioned by the noble Lord and the noble Earl.
Lord McCarthy: I thank the Minister for that reply which I must read carefully. I cannot agree that we will not come back with a better form of words. Many of the points that he made against our amendment are fair. I do not want to get the department involved in an argument about who is to blame. We want to say who is to blame and then we want that person to pay the money. That may be possible by regulation. However, on Report we may have another go. If necessary the Minister can tell us that that is wrong too. In the meantime, I thank him very much and beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 10 agreed to.
Clause 11 [Appeals against certificates of recoverable benefits]:
Lord McCarthy Lord McCarthy moved Amendment No. 29:
Page 6, line 23, leave out subsection (3).
The noble Lord said: Under the provisions of the Bill the victim cannot appeal against the assessment of what is to be paid in recoverable benefits until he has finally disposed of his arguments and debates with the compensator. Therefore, the liability to repay the recoverable benefits is finally discharged.
That appears to us to place the victim in a double bind. When he is negotiating, litigating or arguing a claim against the employer, a third party or whoever, he cannot be sure whether the certificate of recoverable benefits is correct, too high or too low. He may assume that it is correct, and in nine cases out of 10 it will be correct. However, if he has reason to believe that it is not correct he must wait and see and take the settlement. When he receives the settlement he must try to persuade the department that his appeal is sustained. We do not believe that that is fair.
Perhaps I may give another example. Let us suppose that as a result of an accident a victim is put out of work and claims benefit for four years. Let us suppose that the defendant claims that the victim had some of the symptoms before the accident and offers compensation for only two years. We could refer to the previous example relating to backs and feet. In the meantime, the DSS want four years' benefit returned. If, as a result of an early appeal, the victim can get that reduced to two years he might wish to settle at the defendant's offer out of court. He will save the court liability and time and he will save money. If he loses on appeal to the DSS perhaps he will not accept the settlement and will fight on to see what he can get in court. Either way, he needs
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to know his total liabilities finally and irreversibly and in certain circumstances before he can decide what to do in relation to any offer. If he does not have that chance we do not believe that that is natural justice. We believe that it is unfair. I beg to move.
Earl Russell: I listened carefully to what the Minister said in answer to an earlier amendment about the importance of encouraging out of court settlements. I agree with him entirely. However, it seems to me that it will be very difficult to get people to settle out of court if there is a big dispute about how much of the benefit is recoverable and how much is not. It would be much easier to reach an agreement if parties could be clear what they are being asked to agree.
I do not believe that the Minister has entirely taken on board how much the provisions of the Bill will alter the processes of negotiating for a settlement and, indeed, of arguing for a settlement in court if no agreement is to be reached.
One must have a settlement on the basis of all the material information. If all the material information is not taken into account there must be a risk that the whole issue is likely to be reopened. There will be cross litigation and usually some other point can be brought into issue. Conditions worsen and new grounds of action might arise. Is it not a mistake to continue with erroneous information knowing perfectly well that it is so? Is it not like saying that you cannot stop to mend your brakes because you have to get to the end of the journey? Would it not be better to put it right quickly?
Lord Mackay of Ardbrecknish: Of course, if it is agreed, there is provision to put it right quickly. That is not a great problem in the terms outlined by the noble Earl. However, we enter into this field when there is no agreement. The purpose of the amendment is to remove the requirement that before any appeal can be brought against a certificate of recoverable benefits compensation payment must be made and any liability to pay recoverable benefits discharged. The noble Lord, Lord McCarthy, and the noble Earl, Lord Russell, have argued that the inability to appeal against a certificate until the compensation payment has been made can create difficulties for the victim in seeking to pursue a claim for damages. It is suggested that, because he disputes the certificate, the victim can be placed in an uncertain position about the outcome of his claim despite the fact that the settlement has taken place.
However, the provisions in the Bill were put in place in order to prevent an appeals system being used as a way in which to delay benefit payment recovery. If an appeal against a certificate were accepted before final settlement, even though the amount of the award and certificate could still be revised at that time, a further appeal could also be made subsequent to settlement. That would not just affect the Secretary of State in benefit recovery terms but it could lead to a further build-up of benefits which would in turn affect the size of the victim's payment.
In short, I do not believe that this amendment would remove uncertainty in the negotiating process. It could actually affect the victim because the benefit payment

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period would run on and the recovery could run on during that period if the settlement were delayed. Also, it could lead to delays. Therefore, while I understand the point that is being made, I think that in the, I hope, very few cases where such an appeal will prove necessary, the current arrangements whereby the matter must be settled, compensation paid and then an appeal can be entered is the best way to make sure that the appeals system is not used as a means of delaying final settlement.
Earl Russell: I think the Minister is rather unwise to assume that this may be necessary in only a very few cases. It is always unwise to legislate on the assumption that there is no such thing as human error, because if that were, by any remarkable chance, to be true, a great deal of the legislative process would become entirely redundant. Therefore, that is an extremely unwise assumption.
I take the point which the Minister makes that the amendment might not remove the uncertainty and might move it in some cases to another place. But the point that remains of substance in the amendment is the hope that, in the end, the uncertainty should come to an end. It will not do so unless both a certificate of recoverable benefits and the amount of damages are completed.
The Minister has not taken on board the fact that with recoupment, especially recoupment under some heads and not others, there will be an inter-relationship between the amount of recoupment and the amount of damages awarded. Litigants on both sides being human, I cannot see how that can be otherwise. Therefore, we really need to achieve an agreed certificate of recoverable benefits before the case can be properly settled. I cannot see how the Minister can answer that point.
6.45 p.m.
Lord McCarthy: Nor can I. There are many questions arising from what the Minister said. I am not sure why the Minister thinks that the victim would wish to delay the final settlement. If you are a victim, you want a settlement. I can understand why the insurers may wish to delay the settlement but I cannot understand why a victim should wish to do so. The quickest way to have the issue disposed of is, if there is any debate about the recovery, to go to an appeal and have that settled. It would be much more likely that there would be a quick settlement and a settlement out of court. That is my first question. I do not understand why the Minister says that the victim would wish to delay settlement and we must not do anything to encourage that.
Secondly, I am not sure that I follow what the Minister seems to regard as an infinite redress. In my situation, there is no settlement. There may be negotiations but there is no settlement. The victim goes to appeal and the appeal either goes in favour of him or against him. The Minister seemed to be saying that, if as a result of the appeal the victim were dissatisfied with the result of the appeal and subsequently settled, he would in some way have a right to another appeal.
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I should not have thought that there would be much chance of that. I should have thought that he would have one opportunity to put forward his argument that there had been a miscalculation or wrong information and that the department would make a decision accordingly. I do not understand why the Minister does not accept the amendment.
Lord Mackay of Ardbrecknish: I am not sure if I am being invited to try again but I shall certainly do that. One point that I make is that, as the period of recoverable benefit ends with the payment of compensation, there cannot be an agreement on the recoverable benefit before that point is reached.
The provisions of the Bill are there to prevent an appeal being made before a compensation payment has been paid and the liability to repay benefit discharged. It mirrors the current provisions. I am reminded that I should think about future as well as current provision. The rule was drawn up deliberately in order not to delay the negotiating process while an appeal was being determined and to prevent the possibility of a series of appeals being made. Unless five years have elapsed between the date of the accident or injury and the date from which the victim first claimed a relevant benefit in case of disease, benefits paid up to the date of the settlement or award are recoverable. Thus it is possible, without provision to prevent an appeal being made before the end of that period, to appeal against the certificate and have it amended on appeal only for the Secretary of State to be compelled to review it again when the details of the settlement are known and for an appeal to be brought against that reviewed certificate. We believe that that would be costly in administrative terms and could delay the negotiating process to the detriment of the victim.
I accept fully that this is a difficult area. It does not cover many cases. I am told that no more than 100 cases a year reach this situation. However, I understand what the noble Lord, Lord McCarthy, is saying. Because we are going to a new system, we should not look back too often at the previous system. However, in this case we can do so because the new system does not materially alter the particular issue which we are discussing. We should keep what we have and incorporate it in this new Bill rather than move to a new system which would have the disadvantages which I have outlined. I accept fully that it may have some of the advantages which the noble Lord has outlined but, as is so often the case, one must make a decision and on balance I still prefer the Bill as it stands rather than the noble Lord's amendment.
Earl Russell: I understand the Minister's fear of delays but it is my hope, as I am sure it is his, that this Bill will reduce considerably the incentive to delay. We are not concerned with legislating for tomorrow only; we are concerned with legislating for the day after tomorrow. When the Civil Procedure Bill is complete and the new system being introduced under the auspices of the noble and learned Lord, Lord Woolf, is in place, I hope that there will be still further incentive to expedition. Therefore, many of the arguments which the Minister uses will be very much out of date.

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It is important that the fit should be right for the world of the day after tomorrow. Before we are through with this Bill, will the Minister consult on some of these disputed points not only with his noble and learned clansman on the Woolsack but also with the noble and learned Lord, Lord Woolf, himself because it is important that these matters fit together and where better to go for that than the horse's mouth, if I may so describe the noble and learned Lord, Lord Woolf?
Lord Mackay of Ardbrecknish: I always reflect on what has been said in Committee and I shall certainly reflect on whether I should consult my noble and learned clansman about these matters.
Lord McCarthy: I thank the noble Lord for that. I shall read very carefully what he said. I believe that he accepts that there is an injustice here. I believe that he accepts that there is something wrong with the face of the Bill. He does not like the way in which we suggest it should be changed and points to certain real and practical difficulties. It is up to us to take away the amendment and think about that. But I feel that there is room in which to make the point, because it is unjust that the victim should be forced, induced or persuaded to make a decision before he is in full possession of all the facts. We want to find some way of enabling the victim to be in full possession of the facts without fouling up the system and without promoting more litigation while facilitating settlements out of court in an equitable way. I shall go away and think about it. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Mackay of Ardbrecknish Lord Mackay of Ardbrecknish moved Amendment No. 30:
Page 6, line 36, after ("made,") insert—
("( ) as to the procedure to be followed where such an appeal is made,").
The noble Lord said: This is a technical amendment to allow regulations to be made as to the procedure to be followed when a person lodges an appeal against a certificate of recoverable benefit under the provisions of this clause. The amendment is necessary because, by re-enacting the current provisions relating to benefit recovery in their entirety—including appeal rights—it follows that provisions contained in the Social Security Administration Act no longer apply to the Bill. Regulations made under this provision will, for example, require the appellant or other person affected by the appeal to submit evidence required in connection with that appeal. I commend the amendment to the Committee. I beg to move.
On Question, amendment agreed to.
Lord McCarthy Lord McCarthy moved Amendment No.31:
Page 6, line 41, at end insert—
("() Before making regulations under subsection (5)(b), the Secretary of State shall consult interested persons, including persons who appear to him to he representative of employers, employees. disabled people, consumers, the insurance industry, lawyers and other persons providing advice services.").
The noble Lord said: I shall not detain Members of the Committee too long with this amendment. We return to our old friend, consultation. I know that we shall not be able to persuade the Minister to agree to what we say. He has already told us that the Government will not put this provision on the face of the Bill because they do it anyway. He has also told us that they will not put it on the face of the Bill because they may not want to do it; and, indeed, he has told us that the Government will not put it on the face of the Bill because the SSAC often does it. In any case, the noble Lord does not like lists. Therefore, we do not have much chance of getting through to the Minister on the matter. However, I merely point out that, although I am moving Amendment No. 31 and speaking also to Amendments Nos. 34 and 41, I shall deal separately with Amendments Nos. 42 and 46 because they raise rather different, wider issues. I beg to move.
Lord Mackay of Ardbrecknish: The noble Lord rightly predicts that I shall make the same speech I made earlier today in response to a similar amendment moved by the noble Baroness, Lady Hollis. As the noble Lord did not weary Members of the Committee with a repeat of his speech, I shall not weary noble Lords with a repeat of mine. I simply underline the fact that it is our intention, as always, to consult interested parties where appropriate before the first set of regulations under the provisions of the Bill are made. Thereafter, the SSAC comes into play for any changes made after the period of six months from the date of commencement of the regulation-making powers.
Those are the normal procedures. I like to think, especially in regard to the pensions legislation, if I may say so, that the assurances I give about consultation are carried out. On the subject of the pensions Act, I can assure Members of the Committee that they most assuredly are being carried out.
Lord McCarthy: In the circumstances, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 11, as amended, agreed to.
Clause 12 [Reference of questions to medical appeal tribunal]
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 32:
Page 7, line 10, leave out subsection (3) and insert—
("( ) In determining any question referred to it under subsection (I), the tribunal shall be bound by any decision of a court relating to the same issue and must take into account any decision of a court relating to a similar issue arising in connection with the accident, injury or disease in question.").
The noble Baroness said: We turn now to a fresh issue. In Clause 12 there are two, so to speak, parallel jurisdictions: the courts and the medical appeal tribunal, and they may on similar information come to different decisions. There are, therefore, two separate

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considerations in Clause 12(2)(a) and (b). Under subsection (3) the medical appeal tribunal is to hear appeals from both and,
"must take into account any decision of a court relating to the same [case]".
However, just to "take into account"—that is, to give due weight to it—does not mean to say that the tribunal is bound by it and, indeed, it may come to a different decision from that of the court. We believe that that is a recipe for conflicting judgments and contradictory findings. Hence the amendment which requires the medical appeal tribunal not just to take into account but to be "bound" by the findings of the court on the same case and also to "take into account" the findings of the courts on similar cases.
What sort of case might we be talking about? Well, the typical case is one involving a pre-existing medical condition; for example, a back injury. The plaintiff has a pre-existing problem with his back, such as spondylosis. Inevitably this will have troubled the plaintiff at some stage in his life and he has, say, received benefit for four years. He claims damages on the basis of four years' exacerbation of his back condition—namely, that the symptoms came on four years earlier than would otherwise have been the case. He has medical evidence to support that contention. At trial, the insurance company produces medical evidence to say that the exacerbation was only for two years, and that any continuing symptoms after two years were down to the underlying back condition and not to the effects of the accident. The judge compromises and decides that the exacerbation was for three years. The claimant is thus compensated by the court for three years' worth of loss; but, as he has received benefit for four years, the DSS demands four years' worth of recoupment.
The claimant appeals and, as the clause is presently drafted, the medical appeal tribunal could come to a different decision from that of the court. That would be unfair to the claimant as the point has already been tried at court. When making that decision, the judge will have had before him the medical reports of consultants called by both sides and the benefit of hearing the doctors giving evidence under cross-examination. However, the medical appeal tribunal will have had the benefit of medical reports but will not necessarily have called the doctors to give evidence. The doctors in court would have been leading consultants, whereas the doctors appearing at the medical appeal tribunal are likely to be two local GPs who may have a general knowledge of the condition in question but they will not necessarily have the specialist knowledge of the consultants whom the judge has heard.
Therefore, we may have a bizarre situation in which the medical appeal tribunal comes to a different decision from that of the court, even though it had, so to speak, inferior and less expert information on which to base its judgement. We feel it right that the medical appeal tribunal should be bound by any finding of the court on the same issue, given the fact
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that the latter is likely to be in possession of superior and more expert information and judgment. I beg to move.
Earl Russell: If I do not repeat the arguments put forward by the noble Baroness, I hope that she will take it for granted that it is for no other reason than that I agree with them entirely. I want to take the matter on another front. I want to take up the words in subsection (3) of the clause; namely,
"the tribunal must take into account any decision of a court".
It reminds me of an incident which took place, I believe, on my second day in this Chamber. The Copyright, Design and Patents Act was being debated. It was almost totally unintelligible to nearly everyone in this place. A Division was called. I looked to see who had moved the amendment and discovered that it had been moved by my own Front Bench. Unwisely I uttered the words, "Ah, that helps". However, I was told, "No, it doesn't help; that settles it".
I cannot help thinking that if I were a judge and I looked at this provision in the Bill I might feel very much the same way as the person who was advising me on that day. In a country subject to the rule of law, you do not take into account decisions of courts; you abide by them. This is a very unwise and, I am sure, entirely inadvertent piece of wording in the Bill which I believe we might be wise to correct.
The Minister may well remember—if not, I am sure that his department will—the judgment of Lord Justice Millett in the Court of Appeal in the case of Bate v. Chief Adjudication Officer. It is a case that I have been with in various capacities since the second Bill that I led on in 1990. I know that that judgment has been overturned by the Appellate Committee of this Chamber, but it steered round the reasoning of that judgment without ever directly rejecting it. That judgment dealt with a provision in the 1990 Act which required courts to judge as if past judgments had not been made. In an area where precedents rule, the Court of Appeal thought that this was to require the judges to judge contrary to law, which was contrary to their judicial oaths and which they could not do. Those are the kind of areas that we are extremely unwise to explore. I do not think it should be suggested that tribunals should be so cavalier as merely to take into account court judgments; I think that they ought to be bound by them. Before we go into other fundamental, far-reaching cases, the Minister might be wise to amend the Bill accordingly.
7 p.m.
Lord Mackay of Ardbrecknish: The purpose of this amendment is to bind a medical appeal tribunal to a decision of the court where that decision relates to the same question in respect of the accident, injury or disease at issue. In some cases where the courts have decided an issue it will be clear that the tribunal should follow that decision. However, there will be occasions where the evidence before the tribunal shows that the decision of the court should not necessarily be followed. For example, where the court has decided that the

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effects of an injury should no longer be apparent after a certain period but the injured person nevertheless continues to claim a benefit for the same medical reason beyond that time, it should be open to the tribunal to take all these facts into account. If it is to be bound by the decision of the court in such cases, the effect will be that the Secretary of State will not be entitled to recover benefits which have been paid in respect of the accident, injury or disease in question and the compensator may gain from his own negligence as a consequence.
If the tribunal decides not to follow the decision of the court, it is important to view this scenario in its proper context. Under Clause 6 the liability for repayment of recoverable benefits falls on the compensator. If the court decides that damages should only be awarded for a fraction of the period for which benefits have been paid, the scope for the compensator to make a corresponding reduction in those damages under Clause 8 will be reduced. Furthermore, damages for pain and suffering will be paid in full in any event.
It is also important to remember that the decision of a medical appeal tribunal can be the subject of an appeal to a social security commissioner, with leave, and on a point of law. If a decision of a medical appeal tribunal is far removed from the decision of the court without apparent justification, it is possible that leave to appeal would be granted. It is also the case that the victim may appeal against the amount of compensation awarded to a higher court if he does not agree with the decision of the lower court.
In summary, I believe the problem is the difference in this case between the current and the new scheme. Some Members of the Committee are naturally concerned that, as with the present scheme, the money recovered could bite into the pain and suffering payment, whereas in future that will not be possible. With that provision removed, I believe that the concerns which lie behind this amendment do not apply. Therefore we do not need to bind a medical appeal tribunal in the manner which is suggested. I hope with that explanation the noble Baroness will be able to withdraw her amendment.
Earl Russell: I accept the Minister has a good intention—he has a real problem—but he knows what happens to good intentions. I do not think his speech has done his case much good. The Minister has said that without this form of words in the Bill the Secretary of State will be unable to recover sums of benefit which court judgments prevent him from recovering. That comes close—I say no more than that—to authorising the Secretary of State to break the law. That is not something that this House can or should view with equanimity. If the Minister has—as I think he has—a perfectly laudable and proper objective, I must ask him to consult the parliamentary draftsman and find a way of achieving that objective which is not quite so directly contemptuous of the authority of the courts. It is a kind of challenge which I cannot imagine any authority with
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any self-respect failing to rise to. The Minister should not go round waving red rags at the courts. I hope that he will think again.
Baroness Hollis of Heigham: I, too, was disappointed by the Minister's comments. Normally the Minister gives a good imitation of being persuaded by his own case. However, I am not at all sure that this was one such example. The example that he elaborated where the courts and a medical appeal tribunal might disagree and where it was right for the medical appeal tribunal not to be bound by the courts, seemed to me—I was listening as carefully as I could—to relate to a different issue which is not the subject of this amendment; namely, a case of over claiming. The two substantive points I sought to make in the amendment were not addressed by the Minister. Indeed, as regards the first point, he confirmed my concerns. He said that there was an appeal, beyond the medical appeal tribunal, to the social security appeals system, and there was an appeal from the lower courts to the higher courts. That merely confirms the point that he is running together two parallel sets of jurisdictions.
We instituted in the 19th century—as I am sure the noble Earl, Lord Russell, will confirm—a court of common law. Wherever that was harsh, it was overruled by a court of equity, particularly as regards matters such as married women's property settlements. It took Gladstone to realise that that was an absurdity because it meant that the rich had one system of law because they could mitigate the effects of common law by appealing to the court of equity, but the poor could not because they were lumbered with common law. As I say, it took Gladstone through the judicature Act to integrate the two and bring us one system of law. It seems to me that the Minister is unscrambling what Gladstone wisely put together and running parallel jurisdictions. The result will be conflicting judgments, confusion and the real problem of what courts in future may be bound by if it is discovered that the courts are coming to a different decision from that of the medical appeal tribunals. The Government should seek to avoid conflicting judgments and non-concurrent jurisdictions wherever they possibly can. We invite the Minister to do that.
The second point that the Minister failed to address was that the courts are likely to have superior and not inferior information to that which the medical appeal tribunal has. Nonetheless, on the basis of less adequate, less accurate, less informed and less specialist information, the medical appeal tribunal appears to be in a position to overrule the court's decision relating to the same issue. The Minister did not address that point at all in his reply. However, if he wishes to do so now, I would welcome that.
Lord Mackay of Ardbrecknish: I should point out an incontrovertible fact; namely, that the person has continued to claim benefit after the date on which the court said that his injury—if it was an injury—was no longer such that he ought to receive damages. He either

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will continue to claim benefit after that point, or he will not. That is an incontrovertible piece of evidence on which to base this issue.
Baroness Hollis of Heigham: The question at issue is not whether he has continued to claim benefit, but rather to what degree the claiming of benefit is related to the medical condition on the basis of which he is receiving benefit. The medical appeal tribunal has inferior evidence to that of the court in determining the degree to which the disease, the illness or the injury has generated a condition to which benefit is attached. The Minister makes my point for me. I ask the Minister to think again about this matter because the case that he made against me relates to a different issue which is one of over-claiming. That is not germane to this amendment.
I offered him two arguments; namely, that we shall continue to have conflicting jurisdiction in the same case, and that a decision of a medical appeal tribunal will be binding irrespective of the decision of the courts. The Minister did not address that point. The courts—the first body to hear the evidence—may well have superior information to that of the medical appeal tribunal because it is based on specialist information and the cross-interrogation of the doctors concerned. The Minister has not addressed that point either. I hope that the Minister will therefore say that he will want to think about what we have said, as we must do. I invite the Minister to make that offer to us.
Lord Mackay of Ardbrecknish: As was the case with one or two of the previous amendments, I am not sure that we are not talking at cross purposes to some extent. We are talking about someone who continues to claim benefit and has a medical certificate which states the basis on which the benefit continues to be paid. In that case the medical appeal tribunal may decide that the recovery of benefit should encompass that period as well, even though the original court judgment indicated that no compensation award was to be given for that period because the man is now cured of his injury. If he is still applying for benefit because of that injury, clearly there is a contradiction. Perhaps the noble Baroness invites me to put down a clause which states that after the court makes its decision anyone who claims for any benefit related to these issues will not obtain it. However, I do not think that she wishes to be as harsh as that.
Earl Russell: Might it be helpful if the Minister consulted with his noble and learned clansman on this issue? If a compromise is to be found, I believe that the noble and learned Lord is capable of finding it. It is better to do it that way if we can.
Baroness Hollis of Heigham: I believe that we are talking at cross purposes. We must continue this debate outside the Chamber. We have in mind, for example, a disabled individual who may well be entitled to benefit. Whether or not the disablement is due to an accident, the issue relates to the extent of damages against which he can recoup.
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However, we have probably pressed the issue enough. We fail to have a meeting of minds. I do not recognise the Minister's example; and he does not seem to recognise our concerns. Perhaps the issue needs to be explored outside the Committee. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Mackay of Ardbrecknish Lord Mackay of Ardbrecknish moved Amendment No. 33:
Page 7. line 25, leave out from ("provision") to end of line 26 and insert—
("(a) as to the manner in which, and the time within which, a reference under subsection (I) is to be made, and
(b) as to the procedure to be followed where such a reference is made.
() Regulations under subsection (6)(b) may (among other things) provide for the non-disclosure of medical advice or medical evidence given or submitted following a reference under subsection (1).").
The noble Lord said: This is a technical amendment which enables regulations to be made for referring questions to a medical appeal tribunal in a prescribed form and within a prescribed time limit and for the procedures to be followed by the tribunal. It is necessary because similar provisions in the Social Security Administration Act will not apply as a matter of course if this Bill is enacted. The amendment will provide, for example, for the precise format in which an appeal will be referred by the Secretary of State to an appeal tribunal and for appeals to be decided by majority decision.
The amendment also makes provision for non-disclosure of medical information submitted following an appeal. This will be used to prescribe that medical information will not be disclosed where it is in the interests of the victim not to do so, for example, where he is unaware that his condition has become terminal. I beg to move.
Lord McCarthy: Towards the end of the Minister's speech, I began to see the argument. However, perhaps he will spell it out. There may be another way of achieving the aim.
I object to the last part of his amendment, which states,
"Regulations under subsection (6)(b) may (among other things) provide for the non-disclosure of medical advice or medical evidence given or submitted following a reference under subsection (1)".
No doubt the situation is quite common but it is not my chosen area and I could think of no reason why the individual should not have this information available to him. It seemed to me unfair. I would go so far as to say that it is contrary to the principles of natural justice. A claimant should have available to him or her the medical evidence which is before a medical appeal tribunal so that appropriate submissions on that medical evidence can be made. It is surely not fair to the claimant that decisions are made on information which he or she has not seen and cannot comment upon, including, for example, rebutting any factual inaccuracies.

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I understand that in the interests of mercy there may be a case for not telling people information of the kind that the Minister mentioned. But surely there are many other cases which do not involve that problem, where it would be in the interests of the victim to be told the full medical evidence and what the tribunals have said about him. I ask the Minister to explain that matter.
Earl Russell: Perhaps the Minister will also tell us who decides what is in the interests of the victim.
7.15 p.m.
Lord Mackay of Ardbrecknish: As I mentioned in introducing the amendment, the Bill re-enacts Part IV of the Social Security Administration Act in its entirety. Members of the Committee will remember that I said that that was a decision that the draftsman advised us to take. Rather than having a Bill which amended another Bill, we would have one Bill which encompassed not only what we were amending but also those parts which we were not amending. That means that procedures to be followed on appeal will have to be included in the Bill although they make no changes to the existing situation.
The amendment allows us to make provision for a number of procedural aspects: the precise format in which an appeal can be referred to a tribunal; the time limits for referring appeals; the ability of a tribunal chairman to strike out an appeal where the appellant has failed to attend a hearing without good cause; the time allowed for submitting evidence; the tribunal hearings to proceed with the agreement of the appellant in the absence of one of its members; majority decisions to be made by the tribunal; the tribunal chairman to give directions for the disposal of an appeal where he is satisfied that the tribunal does not have jurisdiction to hear it; and the ability to withhold medical information from a person where that information shows that the person is suffering from an illness which he does not know is terminal.
I believe that it is the last point which concerns Members of the Committee. The provision exists already; it is used very rarely indeed. It would be used only where the tribunal was aware of the fact that the victim did not know that his illness was terminal. I do not believe that any noble Lords would consider that it would be up to a tribunal to give such information to a person.
These are fairly sensitive areas. It would be quite wrong for a tribunal to be forced to give information which a person's doctor or family had decided, for whatever reason, they would prefer that he did not have.
I hope that that explanation will satisfy Members of the Committee. The provision is very rarely used but it is a humane provision that should be in the Bill.
On Question, amendment agreed to.
Clause 12, as amended, agreed to.
Clause 13 agreed to.
Clause 14 [Reviews and appeals: suppletnentary]:
[Amendment No. 34 not moved.]
Clause 14 agreed to.
Clause 15 [Court orders]:
Lord Mackay of Ardbrecknish Lord Mackay of Ardbrecknish moved Amendment No. 35:
Page 8, line 27, leave out from beginning to second ("in") in line 28 and insert—
("(1) This section applies where a court makes an order for a compensation payment to be made in any case, unless the order is made with the consent of the injured person and the person by whom the payment is to he made.
(2) The court must,").
The noble Lord said: Clause 15 imposes a duty on courts, when making an order for compensation, to specify in that order what amount, if any, of such compensation is in respect of loss of earnings, cost of care or loss of mobility as we have already discussed. These are the categories of compensation set out under Schedule 2, which may be reduced following repayment of recoverable benefit.
Where a court is asked to make a consent order—an order whose terms have been agreed by the parties—it would not be appropriate for the courts to be required to break down the settlement in this way, since the terms themselves would not have been determined by the court.
Amendment No. 35 exempts consent orders from the requirement otherwise placed on courts to specify compensation payable under the categories of compensation listed in Schedule 2.
The provision relates to a small number of cases where, for whatever reason—a minor may be involved—an agreement has been made, but the parties have to go to court. In those cases, they do not have to break down the settlement in the way that they would for normal cases going to court.
On Question, amendment agreed to.
Clause 15, as amended, agreed to.
Clause 16 [Payments into court]:
Earl Russell Earl Russell moved Amendment No. 36:
Page 8, line 32, leave out subsection (1).
The noble Earl said: In the first instance this is a probing amendment. I am concerned with Clause 16 (1), which is a Henry VIII provision superficially of a fairly extreme sort. It states:
"Regulations may make provision (including provision modifying this Act) for any case in which a payment into court is made".
In fact, it gives the Minister power by regulations to alter the primary legislation.
I am aware that the Delegated Powers Scrutiny Committee made no objection to this clause. I am also aware that it is intended to deal with an extremely complicated situation with regard to overpayments into court, complicated also by a case which I am handicapped in discussing because it is, or was until recently, sub judice. Nevertheless, this power is very widely drawn.
I gave notice to the Minister that I intended to put down this amendment, first to try to obtain some indication of what he wanted to do with this power and, secondly, to ask whether the drafting could in some way be made tighter so as to tie the Government and any successors more carefully to the specific intention of

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Parliament as it exists today. We cannot pass Cambises clauses which provide that, like Cambises, King of Persia, the Secretary of State may do whatever he likes. I am sure that that is not the Minister's intention. If he can define his intention, maybe we can tighten the clause to fit the intention. That would seem a rather more reasonable way to go about it. I beg to move.
Lord Mackay of Ardbrecknish: The noble Earl's amendment, as he explained it, is put down because of his concern about the operation of the regulation-making powers in Clause 16 of the Bill. These regulation-making powers are intended to deal with circumstances currently provided for in Section 93 of the 1992 Act. These circumstances concern where a payment into court is made. These are the circumstances encompassed by the regulations. Provision is needed to make it clear how the reformed scheme will operate in respect of such payments. Such provision will essentially concern issues of procedure which we think are more appropriately dealt with under secondary legislation.
The noble Earl pointed out that the Seventh Report of the Select Committee on Delegated Powers and Deregulation reported on this Bill and did not draw any adverse inference from the inclusion of these regulation-making powers. I hope that that reassures the noble Earl and that my explanation of the narrow circumstances surrounding payments into court allays his fears.
Earl Russell: I thank the Minister for the reply. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 37:
Page 8, line 42, at end insert ("and must make provision to ensure that the amount of recoverable benefits is disregarded when the issue of costs arises for consideration by a court").
The noble Baroness said: This, too, is an amendment to the clause of the Bill relating to payments made into court. At the moment Clause 16(3) reads:
"Rules of court may make provision governing practice and procedure in such cases".
In this amendment we seek to insert at the end:
"and must make provision to ensure that the amount of recoverable benefits is disregarded when the issue of costs arises for consideration by a court".
It is my understanding that there have been problems about payments into court in the past, and there may very well be in the future unless we have an amendment to this effect in the Bill. As I understand it, there is a case outstanding at the present time, the case of McCaffrey, in which the claimant has ended up with a net figure less than the payment into court once DSS benefits are deducted; moreover, the claimant was ordered to pay the costs from the date of the payment into court. As I understand it, that case is currently before the Court of Appeal. It indicates clearly that there can be injustices to accident victims in such instances.
Amendment No. 37 is grouped with Amendment No. 38, the intention of which is to apply the same procedures to Scotland, because, as the Bill is currently drafted, as it says here:
"This section does not extend to Scotland".
In this amendment we seek to insert the following:
"Any reference in this section to 'payment into court' shall be construed as if the word 'tender' was inserted in its place, in relation to any case being pursued in a court in Scotland".
That is because "tender" is the wording usually used in relation to payment into court in Scotland.
I hope that the Minister will accept that what we propose here is to the benefit of claimants and will prevent injustice of the kind indicated in the McCaffrey case occurring in future. I beg to move.
Lord Mackay of Ardbrecknish: The first issue raised by the noble Baroness cuts across departmental boundaries and relates to the rules of court, which are generally the responsibility of my noble clansman, the Lord Chancellor.
As the noble Baroness has pointed out, this is an issue which was recently appealed to the Court of Appeal in the case of McCaffrey v. Datta. We shall want to study the judgment in that case before contemplating any amendment to the clause. In any event, the regulation-making powers provided in Clause 16 give us considerable flexibility. Subsection (3), in particular, allows for the rules of court to make provision governing practice and procedure in cases involving benefit recovery and payment into court. I therefore do not think it necessary to set out on the face of the Bill any of the rules for determination of costs where a payment into court is made. We shall want to study the Court of Appeal judgment in the case to which the noble Baroness referred to see if we require to do anything.
Turning to Amendment No. 38, the noble Baroness asked me about the position in Scotland and pointed out that the clause does not extend to Scotland. That is quite deliberate; indeed, it does not extend to Scotland. The reason is that the Scottish procedures are a little different from the English procedures. In Scotland there is no provision for payment into court; instead, a minute of tender may be lodged, fulfilling a similar function to a payment into court. As I understand it, the lodging of a minute of tender does not require the defendant to make payment at that time; he makes an offer, but no money changes hands. It is necessary to make special provision in relation to payment into court in England and Wales in the Bill as it is possible that the payment into court may be accepted and ultimately become a compensation payment, triggering liability for the full amount of benefit. If a minute of tender is accepted in Scotland, however, it will still be the case that no payment is made into court. Any payment will be made to the party who accepts the offer in the minute of tender. Once the offer has been accepted, settlement takes place. It is only when such a payment is made that any liability will be triggered.

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I am grateful to the noble Baroness for drawing this matter to the Committee's attention. I hope that I have been able to reassure her about the Scottish position and that no provision is required in respect of minutes of tender.
Baroness Turner of Camden: I thank the Minister for that explanation. I am not familiar with the procedures in Scotland and we shall have to consider what he said. Our advice is that we do not need to do anything in the Bill in relation to minutes of tender in Scotland, for the reasons that the Minister stated.
I am glad that the Minister says that it is the intention to study the Court of Appeal decision in relation to the McCaffrey case. I am sure that he understands that we do not want to have, as a result of there being no provision in the Bill to cover payments into court, a situation in which claimants end up with no money at all because of the costs. I shall consider carefully what the Minister said. I am glad that he will give consideration to what we have said in Committee. I do not intend to press the matter further at this stage. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 38 not moved.]
Clause 16 agreed to.
Clause 17 [Benefits irrelevant to assessment of damages]:
Lord McCarthy Lord McCarthy moved Amendment No. 39:
Page 9, line 4, leave out subsection (2).
The noble Lord said: The Minister has conducted a wonderful tutorial tonight. He has given us all kinds of information—things that we did not know before. It has been most enlightening. I hope the Minister will be enlightening with regard to this amendment.
We come now to Clause 17, Amendment No. 39. This amendment deals with Clause 17 which refers to:
"Benefits irrelevant to assessment of damages".
Clause 17(1) says, quite sensibly and realistically:
"In assessing damages in respect of any accident, injury or disease, the amount of any listed benefits paid or likely to be paid is to he disregarded".
That seems sensible. One might as well ask the court to take into account money left by Auntie Margaret or the chance of marrying well in the future. If ever something in the assessment should be taken out, it should be "listed benefits". I should have thought that was an unqualified statement except, of course, that it is qualified. It is qualified in subsection (2) and I hope that the noble Lord will enlighten me. Subsection (2) says:
"This section is subject to any"?
—it does not say that there is one and perhaps the Minister does not know where it is—
"contrary provision in any other enactment".
My question is: Goodness gracious me! What enactment is that? I beg to move.
7.30 p.m.
Earl Russell: This is a very curious passage in the Bill:
"This section is subject to any contrary provision in any other enactment".
Saving your Lordships' presence, I cannot help but be reminded of the Abbé Sieyès' comment on the Second Chamber: either it is useless or else it is pernicious. Either there is no such enactment, in which case this is a quite extreme example of belt and braces and in that case one might well remember the observations of the noble and learned Lord, Lord Simon of Glaisdale, on the danger of cluttering up the statute book; or it is a way of saying that the provisions of this Act in effect will be governed by some previous enactment or other which the Minister has not specified to us. Thinking of the noble and learned Lord, Lord Simon of Glaisdale, I am reminded of his famous example of the company formed during the South Sea Bubble "for a purpose hereafter to be disclosed". So if the Minister knows of any such enactment, I hope that he will disclose it while there is still time for us to do something about it.
The passage also infringes the principles of statutory construction. Normally, unless there is some clear reason to the contrary, I believe I am right in saying that the latest statute takes precedence over the earlier one. Why, in this particular case, should a well established rule of statutory construction be disregarded? It is the kind of thing that tends to cause courts considerable practical difficulty.
One may do that for well considered reasons and compelling motives but I feel that the Minister ought either to tell us what those compelling reasons are, so that we can judge them, or to withdraw the clause if it is belt, braces and chainmail all rolled into one.
Lord Mackay of Ardbrecknish: I am pleased that the noble Lord, Lord McCarthy, appreciates that we have had an enlightening tutorial this afternoon. I thought that giving enlightenment was exactly what Minsters were for. I was deeply grateful to him for confirming that I had been successful.
The noble Lord and the noble Earl invited me to explain the circumstances in which I envisage that this particular fail-safe provision would be needed. I am afraid that I cannot do so. Therefore, I accept the noble Lord's amendment.
Lord McCarthy: Let me take one second to thank the Minister. It is quite remarkable. The noble Earl, Lord Russell, was reminded of various people. I am reminded of Macbeth who discovers too late about the significance of the Burnham Wood clause. We seem to have ruled that out and it is a very good thing. I thank the Minister.
On Question, amendment agreed to.
Clause 17, as amended, agreed to.
Lord Lucas: On that high note, I beg to move that the House be resumed. In moving the Motion, I suggest that we move immediately to the Port of Tyne Authority (Transfer of Undertaking) Order, with the agreement of

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all parties—although I note that not everyone who wishes to speak on that order is present—and that the Committee stage begin again when consideration of the order is completed, but in any event not earlier than 8.35 p.m.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

Port of Tyne Authority (Transfer of Undertaking) Order 1996
7.34 p.m.
Viscount Goschen Viscount Goschen rose to move, That the draft order laid before the House on 6th November be approved [5th Report from the Joint Committee].
The noble Viscount said: My Lords, I beg to move the Motion standing in my name on the Order Paper.
The order will enable the Secretary of State to effect the transfer of assets, rights, liabilities and duties of the Port of Tyne Authority to a company whose shares will be offered for sale. All property, rights and liabilities of the authority, and all functions conferred or imposed on the authority by any local statutory provision, will be transferred to the successor company already set up by the authority when the order comes into force. The most important of those obligations and functions will be those of continuing to operate and maintain the Port of Tyne.
It may be helpful if I start by briefly setting this order in the context of the Government's policy on ports. Our objective for the ports industry has been and is that it should be capable, innovative and self-sufficient and we have sought to encourage that by promotion of competition. The Transport Act 1981 provided for the privatisation of the British Transport Docks Board and Sealink. The first became Associated British Ports, and the four former Sealink ferry ports were also transferred to the private sector. Those privatisations, effected more than 10 years ago, have been successful. The Government have therefore removed subsidies, deregulated—notably in abolishing the Dock Labour Scheme—and promoted privatisation. As a result of those policies, port operations across the board in the UK have been greatly improved; efficiency gains have been made in the use of manpower; labour relations have improved; and substantial investments have been made.
The Ports Act 1991 was introduced as an enabling measure to provide a simpler and quicker mechanism than the Private Bill procedure for trust ports to privatise themselves and to take advantage of private sector input and practice, such as the investment of private capital. Six ports have used the voluntary privatisation procedure in the Ports Act: in 1992, Tees and Hartlepool, Forth, Clyde, Medway and Tilbury; and in 1995, Dundee. It is too early to comment in detail on Dundee, but it is clear that the earlier privatisations have been successful.
Tees and Hartlepool achieved an increase in turnover between 1992 and 1995 of over 20 per cent. and an increase in pre-tax surplus over the same period approaching 100 per cent.
Between 1992 and 1995 the turnover and tonnage of the Port of Clyde increased by 33 per cent. and pre-tax profits by 58 per cent. The company has this year acquired an extensive waterfront facility which will provide increased opportunities for expansion and diversification. Commenting on this acquisition, Lloyd's List said:
"In 1992 Clydeport considered closing its Greenock operation due to lack of business … now the group is more concerned it will run out of capacity at Greenock and has therefore bought a neighbouring site".
At Forth, during the same period turnover increased by 32 per cent. to reach £47.3 million and in 1995 profit before tax was £15.3 million, up from £13.9 million in 1994.
Again, Lloyd's List has recently noted:
"At one time damned by an image of crumbling infrastructure and fractious labour relations, Tilbury has re-emerged over the past few years to mount an increasing challenge to its more recently developed competitors".
There are a number of such examples. We know that the ports privatisations have been successful, and we should expect similar benefits to follow from the privatisation of Tyne.
It is important to note that privatisation does not reduce the responsibilities of port authorities. All their obligations under general law continue, and the Ports Act provides that all functions conferred or imposed on an authority by any particular statutory provision are transferred to any successor company. The Act also specifically provides that the TUPE—(Transfer of Undertakings) (Protection of Employment) Regulations 1981—apply to transfers under the Ports Act.
The users of the port will continue to benefit, as do all users of UK ports, from the Harbours Act 1964, which gives a statutory right of appeal to the Secretary of State against unreasonable port dues. The right is rarely used and has never been exercised for any of the former trust ports since they were privatised. The fact that the power is now so little used is closely related to the promotion of competition between the UK ports to which I referred earlier. I should also refer to the provisions in the Act that provide for a clawback levy on all disposals of land in the first 10 years following a Ports Act privatisation.
With that background on the Government's ports policy and the Ports Act, I should now like to turn to the privatisation of the Port of Tyne Authority. I acknowledge that the authority has made considerable efforts to adapt the port to the changing situation created by the decline of traditional trades. I note also that the authority has taken steps to remove some of the constraints inherent in the trust status. It is to be commended for that. But I am not persuaded that taking the port into the private sector will undermine what has been achieved; indeed, I believe the opposite to be true.
Our intention in seeking the privatisation of the Port of Tyne Authority is to create the opportunity for the port to share the benefits from the entrepreneurial and

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innovative approach more generally found in the private sector. The Port of Tyne Authority said, in its response of September 1995 to the consultation about compulsory privatisation, that it welcomed the provisions of the Ports Act that enable voluntary privatisation; and even accepted that compulsory privatisation may be needed in certain circumstances. It did not however consider that its port would benefit.
With all respect, and in no spirit of criticism, I have to say that it cannot be disinterested, and it is only natural for it, and others connected with the port, to see the proposed privatisation as a criticism or a threat. It is neither. The general experience, in this country and elsewhere, is that privatisation brings a change of culture that benefits and improves overall performance. Taking the Port of Tyne into the private sector will not undermine what the authority has achieved. Rather, it will open up more opportunities for innovation and entrepreneurial development to the benefit of port users and Tyneside as a whole. Privatisation can be expected to lead to a more dynamic approach to investment, exploiting more fully the authority's financial capacity to the benefit of the region.
Some concern was expressed about privatising the port at a time when it is facing uncertainties, mainly due to the decline in the coal trade. It is not surprising that there have been positive and negative developments in the trade of the port in recent years. But all ports have to deal with changes in business and if we had to wait for a steady state, no port would ever be privatised. Potential purchasers and their advisers should have no substantial difficulty in assessing and allowing for any uncertainties in the future business of Tyne. The port has indeed shown that it can adapt to changing trade patterns.
The powers of compulsion in Section 10 of the Ports Act enable the Secretary of State to compulsorily privatise any trust port with a turnover exceeding £5 million at 1991 prices, following consideration of the responses to a succession of consultation exercises, and with the consent of Parliament. The previous Secretary of State consulted the Port of Tyne Authority in June 1995 to ascertain its views on privatisation. The authority was opposed, but the present Secretary of State was not convinced by its arguments. He therefore wrote to the chairman on 15th November 1995 to direct the authority to form a company and to prepare a transfer scheme to enable the authority to transfer all its property, rights, liabilities and functions to that company. A model transfer scheme was provided to the authority.
The authority set up the company and submitted a scheme. That scheme, although based on the model provided, included a number of additional provisions which would have been likely to constrain the operation and development of the port and which the Secretary of State therefore did not feel able to accept. Since, in his view, it would not have been possible to amend the scheme so as to accord with the advice he had previously given, he considered making his own scheme, as provided for in Section 12 of the Act. He
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consulted the authority and considered its views before advertising and inviting representations on his proposed scheme.
Following his consideration of the representations he then received, he is still minded to proceed with his proposed scheme, which forms the schedule to the order which is before the House today. It follows closely the transfer schemes used in previous privatisations and the model provided to the authority. The omission of the additional provisions proposed in the authority's scheme was the main focus of representations on the scheme proposed by the Secretary of State.
Those provisions raised an important and difficult issue. A transfer scheme is to do with the transfer of property, rights, liabilities and statutory functions of the port authority to a successor company. It is not appropriate for such a scheme to contain provisions which are not directly connected with the transfer itself, but are instead intended to impose new on-going commitments on the successor company. There is even a question whether such on-going provisions would be intro vires. Those doubts, and the difficulty and inappropriateness of each of the proposals, led the Secretary of State to omit those provisions from his own scheme and he was therefore unable to accept them as modifications.
Pension and employee rights is an important subject. The authority's proposals covered aspects of pension and employee rights. There is general protective legislation in these matters which will apply to the successor company, and there is no case for imposing further legal obligations on that company. I do though understand that those matters can be of concern and the Secretary of State indicated that he will be prepared to consider with the authority what might be included in the sale objectives to allow prospective purchasers' intentions to be considered in the evaluation of bids.
There was no justification in the Government's view for the authority's proposed consultative committee with its wide range of powers. It would have shackled any new management in a totally unacceptable way. That committee, under the authority's proposals. would have held a special share in the Port of Tyne plc—the new company. Subject to parliamentary approval of this draft order, we shall direct that the relevant article, Article 30, be deleted from the company's articles of association, that other consequential amendments be made, and that a few minor amendments, to bring the company documents into line with Companies Acts regulations, also be made.
Subject to the House's approval today of this draft order, the sale of the port will be undertaken by the Port of Tyne Authority and its advisers. We intend therefore to discuss straightaway with the chairman the process and the timetable. We will want to cover the desirability of encouraging a management employee buy-out offer—a MEBO—with substantial employee share ownership.
I hope that, following the detailed explanation that I have given of the Government's reasoning and desire to effect the privatisation of the Port of Tyne, the House

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will be able to accept that this will be a beneficial measure not only for the port but also for the whole area. I commend the order to the House.
Moved, That the draft order laid before the House on 6th November be approved. [5th Report from the Joint Committee].—(Viscount Goschen.)
7.49 p.m.
Lord Berkeley: My Lords, the Minister spent more than three-quarters of his time defending privatisation of ports. There was little justification of the necessity for the scheme and why the Port of Tyne's own scheme was said to be less good. It is a sad story of a government who have lost their way and who are drowning in a sea of dogma. The Government are committed to consultation, but do not listen to those whom they consult.
I shall give a little bit of history. The 1991 Ports Act established a number of trust ports to be privatised voluntarily—Tees and Hartlepool, Forth, Clyde, Medway, Tilbury and, later, Dundee. In June 1995 the then Secretary of State wrote to the Chairman of three more trust ports, Tyne, Dover and Medway, to consult on whether the Secretary of State should issue directions to privatise those ports.
The port of Dover, assisted by Her Majesty the Queen Mother and Vera Lynn, objected. There were too many problems with forecasting traffic with the Channel Tunnel. One could say the same about Tyne and the coal traffic. So the Government withdrew it, allegedly because they were frightened that the Port of Dover would be sold to Calais. They are quite happy to sell off two passenger rail companies to the French, but apparently not Dover. I would like to ask the Minister to explain the difference between selling a port and selling two railway companies.
In July of the same year the noble Lord the Minister set out in a speech some policy objectives for the development of ports under privatisation. I shall list them briefly: to enable ports fully to develop their potential in a commercial environment; to give them access to share capital as well as loan capital; to make them more attractive to companies looking at joint ventures; to enable them to stimulate the development and/or disposal of land surplus to their requirements which, under current legislation, they are sometimes unable to do; to make it easier for them to diversify their activities, thereby ensuring their viability in years to come; to make them more accountable;, and to introduce the prospect of employee share ownership.
Those were the Minister's objectives. The Port of Tyne responded that it did not see any benefit in moving to privatisation because it already met the above objectives. It operates successfully in an intensely commercial environment, it has been successful in attracting new business, such as the Nissan car terminal, and it continues to develop against the difficult background of the collapse in the coal trade. Its financial position was such that it had no need to obtain share capital. In fact, it has commented that the size of the authority's reserve is thought to be a reason why potential bidders may have sought to persuade the Government to force through privatisation. That point is interesting.
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The authority had already been given by Parliament, in 1989, the widest powers of any trust port to join in joint ventures. So that is under control. The authority had already successfully taken steps to secure regeneration of virtually all its developable surplus land, and Parliament had already given the authority wide powers to allow it to diversify into non-port related activity. The authority is already accountable to its customers, which, many people believe, is more important than being accountable to shareholders.
Notwithstanding the view of the authority that it already complied with these criteria, the Secretary of State, as the Minister has said, gave notice of intention to proceed with privatisation and, as we have heard, did so. The authority considered the problems in privatising a port at that time, and the uncertainties about the existing and future business, and felt it was right to give as much protection as possible to the port users, the workforce and the region generally. It produced the scheme which included the provisions which the Minister has listed.
I should like to comment on them in a little more detail: they included the protection of port users from excessive increases in dues within five years of privatisation—that is very important; a requirement for the new owner to maintain the port to at least the same high standards as before and to prevent port profits being siphoned off for non-port purposes; the safeguarding of the terms and conditions of employment of employees; protection of the pensions and pension rights—I shall come back to that—and giving port users, local authorities and other interested bodies a voice in the privatised port through a consultative committee. They feel that they own it and it is perfectly reasonable that they should have a voice in it—as they have said, "a golden share" to ensure that the company's owners cannot act in a way that is detrimental to the port.
On 13th June the Secretary of State rejected the authority's scheme and determined to make his own scheme without any protection for the users, the employees and the region as the authority's scheme had done. This was the first time such a privatisation had been done compulsorily as opposed to voluntarily. Perhaps the Minister will explain why. It is certainly the view of the authority that the Secretary of State has not addressed the particular circumstances of the Port of Tyne, the benefits as well as the harmful effects of privatisation, or how it is possible, in the present circumstances, to find a satisfactory valuation of the port, as he is required to do, before making a scheme under Section 12 of the 1991 Act. Generalised statements about the benefits of privatisation are not sufficient. Can the Minister please explain what was specifically wrong with the authority's scheme?
Turning now to some of the items which appear in the authority's scheme but are omitted from that of the Secretary of State, I should like to go through three examples. The first is consultation. The Government have criticised the approach of the consultative committee proposed by the authority as,
"shackling any new management in a totally unacceptable way".

1023
Why? The authority's scheme provided for,
"local interests with a voice in the Port, following privatisation, thereby ensuring that the privatised company's owners could not act in various ways which could he detrimental to the Port and the region as a whole".
It was,
"a simple but effective mechanism for ensuring that the interests of the Port and its users cannot be subordinated to the interests of shareholders on matters of vital concern … The only restraint which would be imposed on the successor company would be in respect of activities which are harmful to the Port and its users".
I do not think that that is a particularly onerous objective to put on the new company. However, we then move on to other consultations. The consultation on privatisation for the government scheme resulted in 98 per cent. of those who took part opposing the sell-off. The Government even got the consultation wrong itself and, according to the Joint Committee on Statutory Instruments, forgot to advertise for two successive weeks in local newspapers. They were in such a hurry to get this out before the general election that they forgot to advertise in the local newspapers. So much for their commitment to the future Port of Tyne. They could not even get the consultation right. The whole thing is dogged with ineptitude and uncertainty which is hurting the port and is not enhancing its business prospects.
I turn now to pensions, because the Minister has discussed pensions. The inclusion of a special pension provision by the authority has been rejected by the Government. There is a bit of a tacky track record on pensions in privatised utilities. I quote from the Independent yesterday, which referred in respect of privatised regional electricity companies to a ruling by,
"the pensions Ombudsman which called for electricity employers to hand back surplus cash removed from their pension schemes".
A figure of £44 million is quoted. Perhaps the Minister will explain why the same thing could not happen here. I am no expert on pensions, but I believe that there are significant similarities between this one and many other privatised utilities.
Moving now to the port users, Mitsui, who are one of the major Port users in Tyneside, are very concerned about the privatisation and the lack of certainty about the onward business. I quote:
"We firmly believe that the massive inward investment and commitment to the economy of the North East of England by Nissan"—
with which Mitsui is tied up?
"and other Japanese companies has been dependant on the understanding and mutual trust of all concerned resulting in stable and effective working relationships such as we have built up with yourselves".
Mitsui is very concerned. R J B Mining, who are the people who have taken over some of the Coal Board's businesses and are exporting coal, say:
"I know that you understand that both the choice of port and the viability of the shipment business remain on something of a knife edge, and that your charges play a significant part in this".
RJB is very concerned about the charges.
Mitsui is now using the new container berth and storage compound opened by the authority in 1991 to provide, just in time, services to Nissan and other important users in the region. The major Japanese K line
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selected the Tyne as its UK terminal for feeder services to the Continent. The port is now handling 22,000 containers a year.
I shall give one or two other comments from the users, because they are the people who will keep the port going. The managing director of DFDS has stated:
"We would not welcome the possibility of a new owner, with the likelihood of increased costs and therefore would hope that the authority will seek to retain the status quo".
Keith Jarrow of Banks has stated:
"As far as we are concerned the status quo is more than satisfactory and any change would only be to the benefit of others resulting in higher port costs".
Mr. Sharp, the managing director of the Northern Rock Building Society, has stated:
"It seems self evident to me that at such a crucial time, nothing should be proposed which might destabilise that delicate transition".
In summary, what did the consultation process demonstrate? Several hundred members of the public and port employees voted against port privatisation, but, if they had to have it, they very much preferred the authority's scheme to that of the Department of Transport. All the port users who responded—and most of the other organisations—responded in the same way. Even the South Shields Conservative Association recommended that the Minister should have regard to the view of the port users. That is quite an achievement! The only ones who were in favour were the four prospective bidders, presumably because they see the chance of making windfall profits.
The windfall profits constitute one of the crucial factors. With some of the other ports these profits have been mouthwatering. Medway Ports was privatised for £39 million and sold within two years for a reported £108 million. That is an almost three-fold increase in two years. The Port of Forth share price has leapt from 110p to 650p since privatisation. Those are just two examples of the profits being syphoned off to shareholders rather than reinvested in the port to keep the rates competitive. Is it then surprising that the authority, with the unanimous support of its users, wished to include in its scheme for privatisation some protection for the users, employees and the region?
Why is the Secretary of State doing it at all rather than accepting the authority's scheme? After all, Harwich Haven, Aberdeen, Belfast, Milford Haven, Poole, Lerwick, Blyth and of course Dover have turnovers above the £5 million limit and therefore come within the terms of the Act, but privatisation has not been forced on them. What have these other ports done to avoid privatisation? Why have the Government chosen Tyneside?
The Port of Tyne has the widest powers to seek private investment and to participate in joint ventures for the benefit of the port users. Its profits before tax have grown from £3.8 million in 1993 to £5.2 million in 1995, which is a higher percentage increase than that for the Port of Clyde quoted by the Minister. It paid off its last chunk of debt last year and this year announced a £8 million investment plan without recourse to borrowing for capital work to tackle the problem of the decline in traditional trade. If it is to go through the

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pains of privatisation, why not accept the scheme proposed by the authority? What is so wrong with encouraging employee share ownership? I seem to remember that the Government were in favour of that at one time. What is wrong with a scheme which is accountable to its customers and staff and which provides for proper pensions for its workforce? What is wrong with a consultative committee with a requirement to locate the registered office locally?
I have not heard one good reason for the Government to reject the authority's scheme in favour of their own. The local community, business and elected members support the authority's scheme if there has to be one at all. They wish to remain involved and they are proud of their port. If the Government do not even listen to their local Conservative Association, there is indeed a problem. I can only assume that they have information that the profit from the sale will be split nicely between the Treasury and the private company, with a consequent loss of investment, confidence and jobs in Tyneside.
I trust that this is the last in a sad list of legislation, without policy, without direction but, luckily, not without end. The Government have given up caring about anything except winning the next election. No doubt the electors of Tyneside will bear this all in mind while they wait during the next few months for the opportunity to express their view at the ballot box.
8.5 p.m.
Lord Redesdale: My Lords, we on these Benches oppose the order. The Government have decided to force through the privatisation of the Port of Tyne which is opposed by almost everyone. Indeed, as the noble Lord. Lord Berkeley, has already pointed out, the only people who support it are those who will bid for the Port of Tyne. This privatisation promises little benefit to those who use the Port of Tyne. The short-term prospects of the port have already been damaged by the uncertainties that the proposals have caused. I speak specifically of the change in investment policy brought about through the ferry companies DFDS and Color Lines.
The success of the Port of Tyne is well documented and has taken place in the face of the loss of the coal trade. It is worth remembering that at the height of that trade more than 22 million tonnes of coal were shipped through the Port of Tyne. That led to the phrase "coals to Newcastle". That phrase will become anachronistic very shortly because it is quite possible that within two or three years there will be no coal trade going through the Port of Tyne. The loss of the coal trade has had a significant effect on trade going through the port. However, there has been recent growth. That must be down to the ability of the port to diversify into other areas. The container terminal, which started a mere four years ago, is already shipping 22,000 containers. The upgrading of the ferry facilities cannot be underestimated because it has such an enormous knock-on effect on the economy of the North East. Anyone who lives in the North East and has had to fight his way into the Metro Centre for some shopping cannot
1026
but notice that a large number of Norwegian tourists use the Metro Centre. Indeed, the ferry services are now attracting people from as far away as Germany.
The success of the Port of Tyne has also been in attracting inward investment. The car terminal for Nissan, which was won from other privatised ports, is a good demonstration of that. However, in his introduction, the Minister compared the Port of Tyne to other privatised ports. I notice that he did not mention the figures concerning the Port of Tyne, such as the 172 per cent. growth in pre tax surplus or the £20 million of capital investment. He also failed to allude to the Port of Dover. It should be noted that the Port of Dover is in a Conservative marginal seat. That should not be overlooked. If the Port of Tyne was in a Conservative marginal seat I am quite certain that this order would not be before Parliament today.
I do not think I need go any further into debate on this issue. The Government have already ignored the entire consultation process so I feel that it is very unlikely that the Minister will suddenly see the light as a result of any speech of mine. However, he mentioned other privatisations that took place some time ago. That was in a period when the ports were ripe for investment and ripe for changes in working practices. The Port of Tyne is not such a monolith. The workforce has already fallen from 500 to 200. It will be difficult for any privatised company to make further efficiency gains in that area. It is an efficient and streamlined port.
We have to look at why people would want to privatise it and what the effect will be. The winning bid for the Port of Tyne will have to claw back the money that is spent on the initial bid, and that will have to come through the raising of port charges. That is causing a great deal of concern, especially in the ferry business. If the ferry business is made unprofitable, it will fold. That will have an effect on the whole economy of the North East.
8.9 p.m.
Lord Brabazon of Tara: My Lords, I differ from the previous two speakers. I most warmly welcome the order that has been laid before the House this evening by my noble friend. As an island, we are still dependent on 90 per cent. of our trade going through the ports. This Government have achieved unqualified success in their ports policy over the years, as my noble friend outlined. I was privileged to be part of it for a certain time. We started by privatising the former British Transport Docks Board which became Associated British Ports and with that the former Sealink ports. We then moved on to the reform of pilotage, which I do not believe my noble friend mentioned. That also made a distinct difference to the operation of ports. It was followed by what one might describe as the jewel in the crown—the abolition of the dock labour scheme, which had a most significant effect on our ports industry. After that came the Ports Act 1991 from which this order stems.
We now have probably the most competitive ports industry anywhere in the world. But every single one of those measures was, to a greater or lesser extent,

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opposed by the party opposite. Tonight's order is absolutely no different. I therefore ask myself: who is right in this matter? Our side or the other side?
Lord Graham of Edmonton: What is the answer?
Lord Brabazon of Tara: The answer is very clear, as history shows. We are clearly right in what has been our ports policy until now. This order is no different. The noble Lord, Lord Redesdale, laughs. He has no experience whatever of the ports industry; none at all. I have been involved in it for a certain number of years. The noble Lord, Lord Redesdale, sits there and grins, but he has absolutely no idea what goes on in the industry. I admit that the noble Lord's party did not oppose the abolition of the dock labour scheme. That was to its credit. However, if I recall rightly, it moved a number of amendments which would have made the abolition quite tricky. But, never mind, it did not.
The order before us tonight will lead to the privatisation of another port; namely, the Tyne. What is wrong with that? Noble Lords opposite say that consultation was wrong and apparently the users do not approve of it. If one is running a port at the moment the users are probably going to say, "We would like to keep in with the operators of this port now. Therefore we won't say anything against them at the moment just in case this order doesn't go through."
Lord Graham of Edmonton: Is that how it is done?
Lord Dormand of Easington: You can do better than that!
Lord Brabazon of Tara: I am sure that the users will be happy to operate with whoever happens to be operating the port in the future. We have all heard the old arguments about pensions and so on. They are trotted out time and time again whenever a privatisation is proposed. Yet how much do we hear about them now after the event? Not a lot, really. Obviously, everything works in the end. It is an argument to be used, but it is not one which has much credibility.
My noble friend mentioned what has happened to the five trust ports which have been privatised so far. Is it not the case that profitability has increased dramatically; that tonnage and throughput have also increased dramatically; that turnover has grown; and that capital investment has expanded beyond the wildest dreams of what a former trust port would have been able to achieve? Why should that not happen with the Port of Tyne? Of course it will happen with that port. I believe that I have attracted some controversy from noble Lords opposite. I see some of them indicate that I have. I have reinforced my noble friend's case for the measure.
I shall make one further point. No trust port can achieve what has been government policy in this area, and that is to give employees a stake in the business. Employees' share ownership is a very important issue. It cannot happen within a trust port at the moment. But it can happen with privatisation. If nothing else, that is a good reason to go ahead. I wholeheartedly support the order.
8.15 p.m.
Lord Murray of Epping Forest: My Lords, the noble Lord, Lord Brabazon, has invited us to present our credentials for commenting on the port's situation. All I can say is that the national marine, aviation and transport shipping officers, who have an unrivalled knowledge of the port and of the services that it provides—they sail ships in and out regularly—are utterly and totally opposed to this measure on the grounds that it is based on dogma and not on the needs of the port.
I apologise to the noble Viscount for arriving a minute or two late. I am so sorry about that. However, I listened with care to what he had to say. In the maritime industry the Minister has something of a reputation for being prepared to listen to, but not always accept, a reasonable argument and to weigh it in the balance. I fear that he has fallen very short of that in this instance. The proposal before us is in total contrast to his approach on many issues where both of us have been involved. As my noble friend Lord Berkeley said, he has conspicuously failed or refused to listen to the views of the Port of Tyne Authority or—and this was part of the burden of my noble friend's complaint—to the industrial users and the customers. Whatever happened to the injunctions to listen to the market and to let it decide and guide our commercial decisions?
The noble Lord, Lord Berkeley, comprehensively disposed of the order under the generalised arguments advanced by the Minister. They are arguments which in turn were picked up by the noble Lord, Lord Brabazon. They are not directed to the ways in which the port services could, should and would be improved by such a change. That is not my view but that of the people who actually use the port. Four people have put in representations in favour of the Secretary of State's scheme. Almost without exception the rest of the 326 representations oppose privatisation, the departmental scheme, but support the scheme of the Port of Tyne Authority. One might expect that of the 173 employees who sent in representations or of their unions. That would not be surprising. But we find in their number not only Mitsui O.S.K. Lines, but the Institute of Chartered Ship Brokers, the Tyne Port Users' Association, Trinity House, Tyne Pilots Limited, the Chartered Institute of Transport, Fords and the Northumbrian Tourist Board. These are people who have spoken, but to whom the Minister has signally refused to listen. That is the voice of the market and of the customers and users. Regrettably, the Secretary of State brushed our objections aside in favour of a dogmatic approach. The best thing that he can do with this order is to give it exactly the same treatment because of our attachment to a commercial and economic approach.
8.20 p.m.
Lord Elliott of Morpeth: My Lords, I begin by declaring a past interest. For eight years I served as a non-executive director on the board of the Port of Tyne Authority, and I was very proud to do so. My appointment was made when I ceased to be a Member of another place. In that other place I worked with a

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number of others, some of whom are present this evening, to effect the industrial regeneration of that region.
In the past the port was always looked upon as the engine room of the region's well being, as indeed it was. For many years coal was exported from the Tyne in large quantities. The Tyne is the queen of all rivers. It is interesting to note that in 1923 22 million tonnes of coal were shipped from the Tyne. Last year the quantity was two million tonnes. At that time iron ore was also brought into the Tyne. That is no longer the case.
These changes represent an enormous challenge to the Port of Tyne Authority. I should like to indicate how the port has played its part in the regeneration of the region. In more recent times the port authority has prospered as the region has steadily replaced old industry with new. Happily, comparative prosperity has returned to the North East. As I am no longer a member of the authority I consider that I am free to speak of the considerable part that the port has played in that regeneration. The authority has had an excellent efficiency record in recent years. It has been highly successful in finding new customers. My close association puts me in a good position to describe the authority and its activities. It has officials of the highest quality. In my experience they were dedicated in their various roles. Labour relations, particularly since the repeal of the Dock Labour Scheme, have been excellent. The North's best-known and respected trade union leader is currently vice-chairman of the board. Relations with customers were good when I served on the board, and I am sure that they are very good today.
In my time on the board there were regular and systematic contacts with customers. There were also regular contacts with local authorities in the catchment area.
Now, as in the past, board membership is representative of principal businesses and professional life in the region. There has been significant development in recent years. A contract to export Nissan cars has been won. There is also a modern grain-handling plant, and a new container terminal has been opened. The Port of Tyne operates successfully in an intensively commercial environment. Investment has been steady and continues.
What of the proposed privatisation? The authority has not ruled it out. Indeed, it welcomed the Ports Act which enabled voluntary privatisation to occur. I believe in privatisation, which has been very successful wherever it has been introduced, including its introduction into those ports which have already been listed this evening. Privatisation, wherever it is undertaken, brings increased business, profit and investment every time. Privatisation does not and will not reduce the responsibilities of port authorities. After privatisation and the emergence of a new company all obligations under the general law pass to that new company.
I support this order. I hope that the new company that emerges will benefit greatly from what has been achieved by the Port of Tyne Authority and that in future Tyneside will know even greater prosperity than it knows now.
8.24 p.m.
Lord Monkswell: My Lords, the House has just listened to a very eloquent tribute to the Port of Tyne Authority. One of the matters to emerge from the debate is the complete absence of criticism of what the authority has done and is doing at the present time. We are not talking simply about the Port of Tyne or one small commercial enterprise. We are referring to a well-run national asset. The Minister looks quizzically at me. I describe the Port of Tyne as our gateway to Scandinavia. He may not be aware of that kind of relationship in shipping terms. We have heard from some of the newer users that it goes wider than that. Not only is it a well run national asset, but it has very strong respect for the local community, including the business community that uses it and, in turn, it is respected by that community.
One of the intriguing aspects of the proposal is that the very object of privatisation which the Government extol is opposed by the authority itself. Its members are good law-abiding citizens of this country and, as a result of the legislation under which this order is proposed, they are obliged to propose a scheme of their own which the Government have torn up and put asunder. It is of interest to ponder the fact that all the non-executive members of the authority are nominees of the Secretary of State. We have heard that the local Conservative association is opposed to it. Even the Secretary of State's own nominees on the authority oppose it.
Given that scenario, we should look at the risks associated with this privatisation. In the Minister's introduction he stated that one of the concerns registered was that privatisation was taking place at a time of uncertainty. I believe that the Minister has got it wrong. One of the problems is that privatisation creates uncertainty. As far as one can gather, that is the signal reason why DFDS has pulled out of the Port of Tyne. There are other risks to the future prospects of other areas associated with privatisation.
Another such risk is that this national jewel may be captured by a foreign power. We heard that the Port of Dover was withdrawn from the privatisation programme because of the risk of it falling into French ownership. As far as one understands it, there is no restriction on the Port of Tyne being owned by a foreign power. Obviously, that foreign power would have no interest in either the region associated with the port or the British national interest. Another risk of privatisation is that, almost by definition, shareholders who invest in the privatised port will want a return on their investment and to take money out of the Port of Tyne. We have also heard that at the moment the port generates its own capital needs from revenue and does not need to borrow outside. All of the money that it raises locally is spent locally. If it is privatised a good deal of that money will go out of the region.
I was interested to hear the comments of the noble Lord, Lord Elliott of Morpeth. He suggested—I do not know whether I heard him aright—that everything was all right in the North East and it had a booming economy. I hope that that is true, but that is not my impression. Surely, to take money out of the economy would not be good for the area.

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I am glad to note that the noble Lord, Lord Dormand, is to speak after me. I await his remarks with eager anticipation.
8.30 p.m.
Lord Dormand of Easington: My Lords, perhaps I may explain to the House why I am speaking even though my name is not on the list. Your Lordships will know that it is not common practice to issue a speakers list for an order. When as late as this afternoon I saw that a list was in operation I was more than surprised, I was shocked, because I wished to contribute to the debate. Furthermore, I am not "speaking in the gap", as it is called, although it appears so from the list. I am advised by the Table that there is an opportunity for me to make a speech which is not time limited. However, the good news is that I shall make a short speech, which I am sure is the wish of the House.
Any Government, and this one in particular, would seek assurances on a number of criteria before coming to a decision on a matter as important as privatisation. What are those criteria? They are efficiency, profitability, proper and full consultation, adequate investment and innovative diversification when necessary.
As was briefly referred to, there is one other criterion which the Government may not accept; namely, local pride. Tynesiders are very proud of their river and the activities on it, including the way in which the port is managed. Of the criteria that I have mentioned, perhaps I may demonstrate some of the successes achieved by the port authority. It will in part be a repetition of what has already been said tonight, but I believe that in some cases repetition can serve for emphasis.
First, the port authority's financial position is sound. It has had no need to obtain share capital, nor has it had any difficulty in borrowing. Last year the port paid off its debts. Its diversification has been what can be described only as spectacular. Nissan has its terminal there, despite severe competition from the privatised Tees and Hartlepool Authority. As the deputy chairman of the Teesside Development Corporation, I have some idea of the intensity of that competition. The port deals with more than 22,000 containers a year, all developed in recent years. They are only two of the many examples which could be quoted.
As regards consultation, the Government simply cannot argue about what has been revealed. I shall refrain from quoting what was said by the chief executive of Mitsui OSK Lines—my noble friend Lord Berkeley referred to it—and by RJB Mining because the Minister knows their comments. Views do not come any more important than those two. As regards RJB Mining, it is well known that for a long time the port of Tyne had as its main trade the exporting of coal. Of course, the coal industry has disappeared from the North East, but to get the manager, R.J. Budge, to comment in the terms that he has must surely have an effect on the Government and their proposals.
My honourable friend Andrew Smith in another place has said that of the 330 representations made to the Secretary of State only four were in favour and—
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surprise, surprise—they came from prospective bidders. All the authority's board members oppose privatisation, as do all the local authorities in the area. Furthermore, most of the region's MPs strongly oppose the proposal.
Of the many objectors to the scheme, surely the most important is the Tyne Port Users Association. It has a membership of 37 companies with 8,000 employees. They are at what these days is called "the sharp end". They are the people who see the workings of the port authority literally every day. They see its faults and its strengths and they say:
"We are extremely concerned about the Government's privatisation scheme".
That view must surely be recognised by the Government.
I always hesitate to use the words "political dogma", because those of us who are members of political parties believe in certain principles which we would like to see implemented. But where there is an overwhelming case against specific proposals, adhering to certain actions is not only ludicrous but unwise, and I believe that it is happening in this case.
Perhaps I may refer briefly to the strong speech made by the noble Lord, Lord Brabazon of Tara, who was a highly respected transport Minister. The thrust of his argument was: why should it not apply to the port of Tyne when it has happened everywhere else? As I have said, the answer is that there are special circumstances which simply cannot be overridden because of the success which was mentioned by the noble Lord, Lord Elliott of Morpeth. That is the reason and the answer to his question, and that is the force of the argument from these Benches.
My honourable friends in another place and noble Lords in this House have demonstrated conclusively that the Government's own criteria have been met and that privatisation in this instance is not only irrelevant but unnecessary. The Tory Party takes pride in saying that it is a pragmatic party. It has comprehensively rejected that description in this proposal. Perhaps I may refer briefly to a comment made by my noble friend Lord Berkeley about the mistake made in the advertising process. He was a little too kind in saying that the Government were in such a rush to get the measure through. That is one ingredient, but another is that they were just incompetent. The group of northern Labour MPs who, as the Minister knows, have followed the matter carefully, found that that was the case, and that should not be forgotten.
As a result of the circumstances that I described at the beginning of my speech I felt it necessary to be much briefer than I had intended. However, I hope that my brevity has not given the impression that I feel any less strongly than the 98 per cent. of the people on Tyneside who protested so strongly about the measure.
8.36 p.m.
Viscount Goschen: My Lords, I wish to thank all noble Lords who have taken part in this interesting debate. We all recognise the success that the ports industry has enjoyed in the United Kingdom in recent years. As my noble friend Lord Brabazon so rightly

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pointed out in his powerful intervention, our ports are now highly competitive. They are the envy of Europe in terms of their ability to move goods efficiently and at very competitive prices. They do that unsubsidised by the Government, unlike many of our competitors in Europe who pour huge quantities of money into their ports for few results because they cannot achieve what has been achieved in this country.
From some of the contributions we have heard tonight, and the forecasters and prophets of doom, one would not recognise the modern, thriving ports industry which exists in this country. There is no reason whatever to believe that by moving an organisation into the private sector it will be unable to benefit from all the advantages that that brings in terms of the ability to generate increased investment, innovation and so forth.
I understand the concerns that have been put forward. They are entirely natural. When a significant structural change is proposed people are concerned that any departure from the status quo will bring dangers. However, some of those concerns, although sincerely felt, have been overstated and there has to some extent been a campaign to put some thoughts into the minds of users and employees without, I suggest, the equivalent balance that we have heard tonight.
The checks and balances that we have heard have not featured often in the public debate around the issue. For example, on the issue of port charges, in his notable attack on private enterprise the noble Lord, Lord Redesdale, suggested that the first thing which a private sector company does is to seek to price itself out of the market and chase away all its customers and that moving into the private sector means automatic price increases.
Lord Harris of Greenwich: My Lords, if the noble Viscount makes a statement which is demonstrably untrue, he should withdraw it.
Viscount Goschen: My Lords, I shall in no way withdraw that statement. I listened with very great care to the speech of the noble Lord, Lord Redesdale, and that is precisely what he implied.
However, I make no apology whatever for majoring on the success which the privatised port sector has enjoyed. Those companies have not chased away their customers by instantly whacking up their port charges so that no one wishes to use the ports any more. That is a quite unreasonable suggestion. People who are putting money into ports have every incentive to make sure that they receive a profitable return. That is done by keeping the customers happy. That must be the first lesson of private enterprise.
The second point which was not referred to but which I made in my opening remarks is in relation to the statutory protection which exists in terms of charges and the statutory right of appeal against unreasonable port dues. I mentioned that although that right has been in existence for some time, it has not been exercised by any of the former trust ports since they were privatised. Therefore, a right of appeal exists against excessive and unreasonable charges but that right has not been exercised.
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The issue of pensions was raised. That is always an interesting topic to discuss in relation to privatisation measures. I can be quite categoric. The pension rights of former and existing employees are protected by generally applicable pensions legislation, principally the Pension Schemes Act 1993 and the Pensions Act 1995. In addition, at Tyne, the pension fund set up by the port authority is controlled by independent trustees. The noble Lord, Lord Berkeley, had some concerns on the subject. The funds are not and will not be at the disposal of the owner of the port even to the extent that there may be a surplus beyond anticipated requirements. I hope that that explanation and categoric assurance allays the fears of the noble Lord.
Noble Lords had fun on the subject of Dover and there was a lot of speculation. In fact, the Secretary of State has accepted Dover's arguments against privatisation before the impact of the Channel Tunnel can be better assessed. Dover's trade is almost exclusively ferry-based and about 90 per cent. of tonnage is ferry-related. But the important point, which perhaps those who spoke so vigorously on the subject of Dover have not realised or taken on board, is that the Dover board has also undertaken to privatise voluntarily and to bring forward plans in 1997. That categoric assurance must be taken into account.
Some comments were made about the increase in the value of ports since privatisation. The management of newly privatised ports has greatly improved efficiency and profitability, thus contributing to a significant increase in the underlying value of the ports since privatisation. I am sure that when the noble Lord, Lord Berkeley, invests, if he does, in companies from time to time, he would wish them to increase in value. That would be seen as an indication of the success rather than failure of the company.
There was considerable debate on a number of the provisions which the port authority wished to include in the scheme. In my opening remarks I covered the reasons why the Secretary of State felt that it is not appropriate to include those provisions; for example, there is no justification for a consultative committee since the successor company will be just as able as the port authority to continue good relations with local interests. Of course, as I mentioned, it will be in its commercial interests to do so as evidenced by what has already happened in the private sector.
I believe that the noble Lord, Lord Redesdale, in his series of remarks, talked about a 172 per cent. profit increase.
Lord Redesdale: My Lords, 1 referred to it as a pre-tax surplus.
Viscount Goschen: My Lords, that huge increase in the surplus must be looked at very carefully. Like must be compared with like. Tyne's pre-tax profit before exceptional items increased by only about 7 per cent. between 1992 and 1994. There was a large exceptional item in the accounts for 1992—£3 million shown as a charge for accelerated depreciation. By quoting an artificially low figure for 1992, it is possible to make subsequent years look very impressive by comparison. That must be taken into account.

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Much was made of the representations, and rightly so. We look carefully at all representations made whether or not they are in a standard format. Some one-third of the representations were in a standard format while the remainder made very similar points using very similar words. That must be viewed in the light of the very strong campaign which was mounted by the Port of Tyne Authority. Notwithstanding that, all representations received were carefully considered before a final decision was made to proceed with the laying of the draft order. Much was said about the concerns of port users, heightened, I suggest, by not particularly balanced information on the subject.
I join my noble friend Lord Elliott of Morpeth in commending the authority past and present on its achievements. He was right to draw attention, as did the noble Lord, Lord Monkswell, to the achievements that have been made in Tyneside as a whole and the regeneration which has occurred there. If the noble Lord, Lord Monkswell, is not familiar with it, I suggest that he should make himself familiar with it because it is a very impressive achievement.
Lord Monkswell: My Lords, I did not say that I was not familiar. I said that the picture painted by the noble Lord, Lord Elliott of Morpeth, was not the picture with which I was familiar.
Viscount Goschen: My Lords, we could argue all night but I believe that most informed commentators recognise that a very difficult situation in the north-east has benefited substantially from considerable regeneration. I believe that the noble Lord, Lord Dormand of Easington, recognised that in his remarks. I know that he has been a strong supporter of the regeneration which has taken place in the past.
Lord Dormand of Easington: My Lords, I have said in a number of contributions in this Chamber that there have been improvements. It is difficult to say otherwise. However, the Government always refuse to recognise that the rate of unemployment in the northern region remains the highest in the United Kingdom outside Northern Ireland. That is something which the Government do not really tackle with the ferocity they should.
Lord Brabazon of Tara: My Lords, before my noble friend replies to that, I should like to refer to the remarks made by the noble Lord, Lord Monkswell. He is so opposed, apparently, to foreign ownership of the port of Newcastle and yet we see the trade through that port improved considerably by Japanese investment. Does my noble friend have any views on that?
Viscount Goschen: My Lords, I do not think that it is ever for me to try to deduce the reasoning behind the intervention of other noble Lords.
Perhaps I may return to the subject. I was very glad to hear the noble Lord, Lord Dormand of Easington, give his endorsement of the situation and
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of the progress and improvements which have been made in the north-east. They are recognised widely. We have had exchanges in the past on other matters concerning mining issues on which there has been agreement.
I turn again to the speech of my noble friend Lord Elliott. He recognised the improvements which have been made in the north-east and the part which the Port of Tyne has played in that regeneration. However, my noble friend recognised the protection which exists in the transfer. He recognised that greater investment and innovation will come with the transfer of the port to the private sector. I sincerely hope that the House will recognise the advantages that will come from the transfer of the Port of Tyne into the private sector. I commend the Motion to your Lordships.
8.50 p.m.
On Question, Whether the said Motion shall be agreed to?
Their Lordships divided: Contents, 56; Not-Contents, 13.

Division No. 1

CONTENTS

Addison, V.

Howe, E.

Aldington, L.

Inglewood, L.

Anelay of St. Johns, B.

Jenkin of Roding, L.

Ashbourne, L.

Kingsland, L.

Attlee, E.

Lawrence, L.

Balfour, E.

Long, V.

Blatch, B.

Lucas, L.

Bowness, L.

Luke, L.

Brabazon of Tara, L.

Mackay of Ardbrecknish, L.

Brentford, V.

Massereene and Ferrard, V.

Byford, B.

Miller of Hendon, B.

Cadman, L.

Milverton, L.

Carnock, L.

Monteagle of Brandon, L.

Coleridge, L.

Mottistone, L.

Courtown, E. [Teller.]

O'Cathain, B.

Cranborne, V. [Lord Privy Seat]

Park of Monmouth, B.

Crickhowell, L.

Peyton of Yeovil, L.

Cross, V.

Renton, L.

Dean of Harptree, L.

Sanderson of Bowden, L.

Denham, L.

Seccombe, B.

Ellenborough, L.

Stodart of Leaston, L.

Elliott of Morpeth, L.

Strathclyde, L. [Teller.]

Elton, L.

Strathcona and Mount Royal, L.

Ferrers, E.

Taylor of Warwick, L.

Fraser of Carmyllie, L.

Thomas of Gwydir, L.

Goschen, V.

Trumpington, B.

Hayhoe, L.

Ullswater, V.

Henley, L.

Whitelaw, V.

NOT-CONTENTS

Addington, L.

Thomas of Gresford, L.

Geraint, L.

Thomas of Walliswood, B.

Hamwee, B.

[Teller.]

Harris of Greenwich, L.

Thomson of Monifieth, L.

Mackie of Benshie, L.

Tordoff, L.

Redesdale, L. [Teller.]

Wallace of Saltaire, L.

Russell, E.

Whaddon, L.

Resolved in the affirmative, and Motion agreed to accordingly.

Social Security (Recovery of Benefits) Bill [H.L.]
8.58 p.m.
House again in Committee.
Clause 18 [Lump sum and periodical payments]:
Lord Mackay of Ardbrecknish Lord Mackay of Ardbrecknish moved Amendment No. 40:
Page 9, line 10, at end insert ("in consequence of the same accident, injury or disease").
The noble Lord said: The amendment makes it clear that the provisions of Clause 18, dealing with cases where more than one compensation payment is made to the same victim, concern only payments in respect of the same accident, injury or disease. The amendment makes clear our intentions to carry forward existing provisions as far as is possible. I commend the amendment to the Committee. I beg to move.
Earl Russell: The Minister has given us a very welcome clarification, for which I thank him. I am happy to support the amendment.
On Question, amendment agreed to.
[Amendment No. 41 not moved.]
Clause 18, as amended agreed to.
Clause 19 [Payments by more than one person]:
9 p.m.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 42:
Page 10, line 13, at end insert—
("( ) Regulations under this section shall he made only after consultation by the Secretary of State with interested persons, including persons who appear to him to be representative of employers, employees, disabled people, consumers, the insurance industry, lawyers and other persons providing advice services.")
The noble Baroness said: At an earlier stage in the evening Amendments Nos. 42 and 46 were ungrouped from the cluster beginning with Amendment No. 31. I apologise if that was not made clear.
Amendment No. 42 is, I hope, a simple, straightforward amendment. It deals with a situation where there is more than one defendant or compensator. Normally at the moment they get together and one acts for the other, and the victim and the DSS get their money in the appropriate way. As the clause stands, it looks as if the DSS is asking for each compensator—when there are several involved—to be separately billed, so to speak. Why is that necessary?
Lord Mackay of Ardbrecknish: I am grateful to the noble Baroness for giving way. We are on Amendment No. 42, which is about consultation. I rather think that because the amendment has been discussed rather late the noble Baroness is now speaking to her intention to oppose Clause 19.
Baroness Hollis of Heigham: That is absolutely true but we have to discuss what is wrong with the clause before we can then say—if the Government are not
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willing to reconsider the clause—that we can at least encircle it with regulations. We are asking whether Clause 19 is necessary. If it is not necessary, we shall ask for regulations. As the clause stands, it looks as if the DSS is asking for each compensator to be separately billed. We do not understand why the clause is necessary. As long as the DSS gets its money, does it need to alter the well established practice that the various defendants sort the matter out themselves? Why add to the work, the paper and the bureaucracy? Are the Government aware of any problems that the present arrangements do not adequately cover? What we are proposing—we have to do it this way round—or the matter on which I seek to probe the Minister, is whether he needs Clause 19. If he insists that Clause 19 must stand part of the Bill, we shall go through our usual hoops and suggest that we need consultation on it because we do not understand why it is necessary or why the existing arrangements need to be altered. I beg to move.
Earl Russell: Like the noble Baroness, I am not sure why this provision is needed. I can see the Minister arguing perhaps that there must be some way of providing for a situation where the parties are unable to reach an agreement with each other. If he would consider redrafting the clause to make it a reserve power, to operate in that eventuality only, that might be a little more acceptable than this blanket, bureaucratic intervention in a bottom up procedure which normally works perfectly well.
Lord Mackay of Ardbrecknish: The problem I have is encapsulated by the noble Earl's final point. He said that the procedure normally works perfectly well. Unfortunately we have to try to take account of the abnormal situation where it may not work perfectly well. That is the problem here. Whether or not we have regulations, and how I should consult on them, are matters that are intertwined. I shall say a few words about Clause 19 and then discuss whether or not I should be obliged to consult along the lines suggested in the amendment.
Clause 19 provides for regulations to be made where compensation payments are made by more than one person to the same injured person in respect of the same accident, injury or disease. Under the present scheme, recovery is always made from the victim's compensation. It is therefore straightforward to calculate the amount recoverable from a later payment by taking into account any amounts recovered from earlier payments. Therefore it is fairly straightforward at the present moment because we do not make the divisions that we intend to make hereafter. Under the reformed scheme, however, the expense of the recovery of benefits may be met in part by both the compensator and the victim in varying proportions, depending on the claim in question. It will not always be known to the Secretary of State, nor even agreed between the negotiating parties, what proportion of the cost of benefit recovery expense has to be met by each party.
Under the reformed scheme, it will therefore be a more complex matter to determine fair and workable rules to govern the movement of funds where more than

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one lump sum compensation payment is made. In most cases it will be agreed between the compensators what proportion should be paid by each, and they may even collaborate to make a single payment.
Where the parties agree—as the noble Earl pointed out, that is normally the case—the normal procedure is that one of the parties makes the single payment for both. In those circumstances there is no problem and Clause 19 would not come into play at all because the Secretary of State has no desire to become involved in matters which are primarily the concern of the negotiating parties. However, it is possible that left to their own devices those parties may not always negotiate an amicable settlement. This clause provides scope to deal with that situation.
The intention is that the regulation-making powers in the clause should be used to facilitate the creation of such rules. Regulations made under the clause should mirror as far as possible the current provisions in the 1992 Act. The regulations will be subject to the negative procedure. That is why we feel we need Clause 19. It is not a measure we believe will be used often, but in a limited number of circumstances it is possible that two or more compensators may not be able to agree on the recovery part of the settlement.
If I have to have this clause, it has been suggested that I should incorporate the amendment moved by the noble Baroness as regards consultation with a number of different interested parties. That comes well within the remarks I made at the beginning of our Committee stage today on the general subject of consultation. The regulations made under the provisions of this Bill will be subject in the longer term to referral to the Social Security Advisory Committee. I have also signalled our intention to consult interested parties where appropriate before the first set of regulations under the provisions of the Bill is made. I can give the Committee an assurance that we shall consult with all these people who seem to us to have an interest and involvement in these matters. We shall take their advice and opinion before we come to a conclusion about the format of any regulations under the clause.
I seem to say this on every occasion, but I hope that with that assurance the noble Baroness will feel it unnecessary to put on the face of the Bill a list of people whom the Secretary of State might consult in the circumstances of the regulations.
I hope that I have explained why we believe that it is necessary to have Clause 19, in the event, in certain limited cases, of the compensators not being able to agree and the Secretary of State therefore being in a difficult position on the recovery of benefits as regards which one and how much.
Earl Russell: I am grateful to the Minister for that reply. The Committee stage seems to be working, as it should, towards narrowing the differences between us.
I am extremely grateful that the Minister accepts that there is no need for the Secretary of State to intervene in an arrangement reached between the parties which works. I am grateful that he accepts that that is normally the way it works. But what he says is a great deal more
1040
acceptable than the clause as drafted. If it were possible to narrow the gap between those two, I should find it thoroughly acceptable.
My next question is this. Why does the Secretary of State have to impose order as regards those cases where clearly something must be done where agreement is not reached voluntarily; and why not the courts? Why does it need to be an Executive authority when it might have been a judicial one? No doubt there is a reason in the Minister's mind. However, I must admit that at present that reason is obscure to me.
Lord Mackay of Ardbrecknish: I believe that we are discussing cases where so far as concerns the victim there is no need to go to court, but the compensators cannot agree among themselves about how the recovery of benefit will be divided up and paid. I understand the noble Earl's point that the Secretary of State could then go to court. But I am not sure that that would not then drag in the victim. I shall have to think about it. Clearly the court may well say, "Surely we should have some indication about how these matters should be divided up in order to allow the recovery of benefit from the appropriate compensator".
As always I shall give some thought to what the noble Earl says. I accept that as regards the limited number of cases about which we speak I appear to be dealing with the issue in a fairly cumbersome way. Equally, I suspect that if we were to refer these matters to the court, even on the infrequent occasions that they occur, the courts might think that to a certain extent we were passing the buck.
However, as I have been invited to do on a number of occasions, I can discuss these matters with my noble and learned clansman's department.
Baroness Hollis of Heigham: We thank the Minister for his responses. At least we have the consultation, even if we still have the clause.
On a point of clarification, will the Minister confirm his reply that where the compensators agree that one should act for all of them, that is fine, and that the provision comes into play only as a safety network? I understand that to be the case.
If there is no agreement between the defendants, the defendants sue each other. I do not think that the assumption was that the Secretary of State would sue the compensators separately. The defendants will sue each other and the court would sort it out either through third party proceedings or through a contribution notice. Will the Minister take away the issue? I do not have strong views but clearly neither the victim nor the DSS is involved in disputes between insurers. They agree to sue each other and the courts sort it out between them. That may be a more appropriate procedure than the one the Minister envisaged. I do not feel strongly about it. It is a question of what is expeditious and reliable in these cases. Does the Minister wish to comment?
Lord Mackay of Ardbrecknish: On thinking about it, it seems to me that in those circumstances in which we are involved and wishing to recover benefit. we have

1041
the problem of which compensator to recover the benefit from. I am not sure how the compensators would decide who sues whom.
However, I am content to reflect on the issue. I believe that we are agreed that in the small number of cases in which those circumstances are likely to come about, we need some provision so that the Secretary of State can recover the money.
Baroness Hollis of Heigham: I agree with the Minister that we must have a fail-safe situation. In the light of his undertaking to review and consider whether there is a more effective and expeditious way to resolve the problem, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 19 agreed to.
Clause 20 [Amounts overpaid under section 6]:
9.15 p.m.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 43:
Page 10, line 34, at end insert—
("( ) Regulations under this section shall be made only after consultation by the Secretary of State with interested persons, including persons who appear to him to be representative of employers, employees, disabled people, consumers, the insurance industry, lawyers and other persons providing advice services.").
The noble Baroness said: The amendment concerns overpayment. It touches on an issue, although with different parties, with which we dealt in Amendment No. 28. I hope that we shall have the same helpful, conciliatory, supportive and understanding response from the Minister as we happily enjoyed then.
We are not entirely clear about the intention of this clause; perhaps the Minister can help us. It seems to suggest that if someone—the compensator, I presume—has overpaid moneys to the DSS, the DSS may (though not necessarily must) repay the overpayment. Is that correct? If so, why is it not "must"? If that is a correct reading of the intention of the clause, why should the Government keep the excess?
Similarly, where the DSS has overpaid benefit to the victim—or the claimant—the DSS may claim back deductions after the event. We are rather uneasy about that. Clearly, if the victim has been obviously negligent or fraudulent in the giving of information, there should be a complete right of recovery; but I do not think that the situations of the compensator being repaid by the DSS and the victim repaying the DSS are analogous or comparable.
If the DSS has overcharged the compensator, that is the fault of the DSS and it should make good the compensator's loss. If the DSS has overpaid the victim, where there is no negligence or fraudulent intent on the part of the victim, possibly, for example, because a pension was awarded on the basis of a 20 per cent. disability and it turns out that the person has only a 15 per cent. disability, the victim will in good faith have lived off that money and may well not have the resources to refund the difference.
It is worth labouring the point because all the evidence shows that the DSS is notoriously inaccurate in its delivery of benefits. I recognise the fact that a lot of the benefits are complicated; they are means-tested and circumstances change. But the Minister will surely not challenge the fact that something like 30 per cent. of CSA cases are still wrongfully assessed and the latest auditor's report shows that something like 25 per cent. of all income support calculations are inaccurate, faulty or wrong. Similar rates of negligence apply to other means-tested areas of benefit, including family credit. The Minister knows that; I know that; the information is in the public domain.
We believe that the DSS is likely to be more careful in its calculations if it knows that, if it makes a mistake where the victim is neither negligent nor fraudulent, it may be stuck with the consequences. We accept that this is a difficult and delicate point and that discretion needs to apply as to what is reasonable under the circumstances. Clearly, in some cases the victim should repay; in other cases it would generate real hardship. Where it is the fault of the DSS, it should be stuck with its mistake.
If that is what the Government propose, it is essential that there be consultation about regulations to ensure that the victim is not left in considerable uncertainty and ultimately, through having to repay benefit, in considerable hardship. I beg to move.
Lord Mackay of Ardbrecknish: In looking at the question of consulting on the regulations, perhaps I may say a few words about this clause. It deals with complex and difficult situations. It might help the noble Baroness in deciding what to do about her amendment if I go through them.
The clause deals with the situation whereby, other than as a result of a review or an appeal on a benefit recovery issue, the amount of recoverable benefits paid to the Secretary of State is in excess of the amount for which the compensator is liable.
Under the current scheme there is provision for treating a deduction from the victim's compensation payment as a recovery of benefit overpayment. This provision also enables the Secretary of State to make a refund where no recoverable benefit overpayment is outstanding.
The situation under the reformed scheme will not be so straightforward because it will usually not be clear whether an overpayment or recoverable benefit can be treated as a recovery of benefit overpayment; neither will it always be clear whether the overpayment of recoverable benefit has effectively been made wholly by the victim, wholly by the compensator, or partly by both. There are two areas where the situation may not be entirely clear.
Subsections (1), (2) and (3) of the clause provide for regulations to be made to enable the Secretary of State to treat the amount overpaid as a recovery of an overpayment or to refund an overpayment of recoverable benefits to the compensator, the victim, or both.

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Subsection (4) provides that the regulations may also provide for a recalculation of the amount of the reduction of the compensation payment, for giving credit for any amount already paid and for the payment of any balance to, and the recovery of any excess from, any person.
Subsection (5) clarifies that the provision does not apply where a certificate of recoverable benefit has been revised on review or appeal. These are the kinds of cases we dealt with under Clause 14.
I am sure that Members of the Committee will agree that these matters are complex; the scenarios we are discussing are complex and give rise to a range of complex situations. We want to ensure that we introduce rules which are both fair and workable. We shall indeed consult with interested parties before deciding on the details of how the regulations will work.
I hope that what I have said will be helpful. I am quite prepared to believe that it might be more helpful once the noble Baroness has a chance to read it tomorrow. Some parts of my explanation were hard to follow, even as I was reading them, because of overpayments of recoverable benefits and recovery of benefits overpayment. I hope that what I said helps the noble Baroness. Added to that, I give her the assurance that I have given on a number of occasions that of course we shall be consulting interested parties before deciding the details of the regulations. For all the usual reasons, I should prefer to leave it at that assurance rather than put it on the face of the Bill.
Baroness Hollis of Heigham: I thank the Minister. I shall look forward to reading his elegant prose when I read Hansard tomorrow. The Minister has explained Clause 21 and its purport in what I had intended to call more transparent prose, but I am not sure about that because it has sometimes been more opaque. I take his substantive point that this is not something that can be laid down other than to say that there may be a "may" clause; that is to say that areas of discretion may come into play. We also take his assurance about the regulations.
I am still concerned about the situation of a recovery of overpayment to the victim when the DSS has been at fault in its assessment and where the victim was neither negligent nor fraudulent, and in good faith received the money and perhaps in good faith has lived off it. Under what circumstances in that situation would the Minister envisage recovery? What would he expect to do where hardship resulted? Can we have some guidance on that situation?
Lord Mackay of Ardbrecknish: When it comes to benefits in general, if we are at fault and we overpay then the recovery does not usually trigger in. I suspect that the same situation would occur in this case. Indeed, I am right to make that transposition from what I know to be the situation as regards benefits in general to this particular case where one is recovering a benefit
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overpayment almost at second hand. If we make a mistake, we—as we do in the benefit system—just live with it.
Baroness Hollis of Heigham: I thank the Minister for that response. If there are other loose threads on this issue I do not doubt that we shall return to them at Report stage. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 20 agreed to.
Clause 21 [Compensation payments to be disregarded]:
Lord Mackay of Ardbrecknish Lord Mackay of Ardbrecknish moved Amendments Nos. 44 and 45:
Page 10, line 42, leave out ("sent to him in accordance with regulations").
Page 11, line 5, leave out ("4(2)") and insert ("4").
The noble Lord said: I have already spoken to these two amendments. I beg to move them en bloc.
On Question, amendments agreed to.
Clause 21, as amended, agreed to.
Clause 22 agreed to.
Clause 23 [Power to amend Schedule 2]:
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 46:
Page 12, line 10, at end insert—
("( ) Regulations under this section shall be made only after consultation by the Secretary of State with interested persons, including persons who appear to him to be representative of employers, employees, disabled people, consumers, the insurance industry, lawyers and other persons providing advice services.").
The noble Baroness said: This amendment also visits the issues in Schedule 2 on which we touched earlier; namely, the heads of compensation and the lists of benefits which may be deducted for them. As they stand, we have no problem. They are obviously sensible.
We are worried that the Bill gives the Secretary of State the power to change the heads of compensation and the benefits to be deducted accordingly. I understand that the Government need some reserve powers when benefits change and there is movement from, for example, family credit to a different kind of benefit, from invalidity to incapacity benefit or from income support to JSA, and so on.
We are not just worried about renaming when there are genuinely new benefits on the schedule of benefits that the DSS has in its repertoire. We are concerned with something rather different; namely, that the Bill gives the Secretary of State the power to change the heads of compensation and the benefits to he deducted accordingly. We fear that it is in the Government's interest to increase the heads and therefore to increase benefit clawback. We are worried that it might be abused.
As I said, it is obviously sensible to have some flexibility. Another government might want to introduce, for example, a partial disability benefit and would need to be able to amend the schedule. So that the schedule is not amended malevolently in order to increase recoupment and clawback, we again urge that

1045
any such changes be based on regulations which have been subject to extensive consultation. Perhaps the Minister will give his view on that issue. I beg to move.
Earl Russell: The noble Baroness made an important point in relation to altering the heads of compensation, and I am grateful to her for bringing it to our attention. I am sure that the noble Baroness remembers, as I do, the regulations we had in the last Session on benefit for single parents. They allowed the Minister to vary the heads of premium for single parents without any further recourse to this Chamber, save through the uprating instrument which, as we both reminded the Minister, is practically impossible to oppose.
The Minister assured us, as I am sure he remembers well, that the Government had no present intention of abolishing the separate premium for single parents. Those words, carefully construed, I accept were perfectly true. But we now know that that is not a complete enumeration of the story. We now know what has been done with those words, as indeed I felt might be the case, which was the reason I divided the Chamber at that time.
Do we here have another blanket power given to the Secretary of State whereby he could, if he were strapped for cash—as Secretaries of State are from day to day—vary one of the basic principles of the whole Bill? That would cause many of us a great deal of concern. This also relates to the long-standing difficulties that exist at the moment between the Government and the courts.
I have drawn attention before to the exceptionally permissive style of drafting which is creeping into legislation. Basically, under the principle of the Cambises clause, the Secretary of State may do whatever he likes. This is an example of a Cambises clause. The Secretary of State may do a great many things under it and he cannot be directly challenged under the words of the statute. But that means that the only way a power exercised under a statute drafted so loosely can be challenged is through judicial review.
I have heard Ministers in this Chamber complaining about judicial review. I wonder whether this is a case of John Stuart Mill's remark about the inability of the analytical mind to recognise its own handiwork. If legislation is this loosely drafted, how else can it be challenged?
Lord Mackay of Ardbrecknish: The point of Clause 23 is that it allows the Government and Parliament on some future occasion to make amendments specifically to Schedule 2 of the Bill. Indeed, when we discussed at an earlier stage an amendment from the noble Baroness regarding the second head under compensation, I pointed out that if any problems arose along the lines she mentioned and these heads of compensation were found, in the light of experience, to need some change, then the clause we are discussing gives us the ability to make that change.
In the memorandum we sent to the Delegated Powers Scrutiny Committee we clearly pointed out and accepted that this was a Henry VIII clause, providing as it does
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for amendment to primary legislation by secondary legislation. But we have done that so that the schedule can be kept up to date without the need to pass further primary legislation. The two columns—the head of compensation awarded to victims and the other column, the benefits which correspond to them—may change over time.
This regulation power will be used to deal with that eventuality. In that way it should be possible to avoid the difficulties which arose under the post-1948 scheme. That scheme was an inflexible one under which changes to benefits needed to be provided for by amendment to primary legislation. The need for such amendments was sometimes missed and unequal treatment of claims resulted. It is true that whatever happens in the future everyone knows that it is unlikely that the benefits on column two will remain exactly as named. There may be changes to those benefits, there may be additional benefits or variations of one kind or another. It seems to me eminently sensible that we have the power by secondary legislation to amend that column.
On column one I go back to the point I made earlier, where, by the light of experience, if it is discovered that there are real problems with the heads of compensation, again it seems sensible that we should be able, by secondary legislation, to change the composition of the paragraphs on the head of compensation column.
I fully accept that these are Henry VIII clauses, so we have made them subject to an affirmative order of the House, and I can assure the Committee that, as I have already done, I can easily confirm that it would be our intention to consult interested parties, where appropriate, in the event of any possible change needing to be made. Indeed, on the first set of regulations under this Bill we will be consulting pretty widely.
I hope I have explained why we need the power. It is quite narrow. There is a very good case for it. I fully appreciate that it is a Henry VIII power. I have given my assurance that we will be consulting on any changes we propose to make in the future on these matters. At the end of the day the House has the stronger secondary legislation of an affirmative order to discuss, to deal with and indeed, as the other place certainly does, to divide on these matters.
I hope that that explanation and assurance will allay the fears of both the noble Baroness, when it comes to consultation, and the noble Earl, when it comes to the Henry VIII matter.
9.30 p.m.
Earl Russell: I am grateful to the Minister for what he has said about the power to divide on these matters. If points of this nature are to be dealt with by secondary legislation then that power is going to be necessary. When the Minister refers to it being found by experience, can he tell us whose experience?
Lord Mackay of Ardbrecknish: If it is the second column, then a government in the future will have changed the benefit, and it will be a fairly straightforward matter. They will want to change either the name of the benefit or add a benefit to column two.

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As far as the experience is concerned, that will be what the consultation will be about. As the genesis of this Bill has been the Select Committee in another place, it might well be, if problems were to arise, that that Select Committee or a Select Committee of your Lordships' House might look at it, or indeed that people might come to government and say: "It isn't working in the way that was intended and there are problems". Maybe even the courts might say that they think that the Government ought to have a look at this. There are number of places where, so to speak, we might find a trigger mechanism for beginning the thought process that might lead to this. Ultimately, we are very clear and I hope that I have made it absolutely clear that we would consult widely if we were to make any change.
Baroness Hollis of Heigham: I thank the Minister for that response. First, we welcome his commitment about consultation. Secondly, of course, he is right that one needs flexibility through regulation to align the new benefits that may be introduced in the future to displace some of the benefits that are currently listed. I entirely accept that. That may be one of those situations where regrettably a Henry VIII issue does come into play.
I am much more concerned, not about the need for some flexibility because benefits are continually being monitored, reviewed and altered, but that the Government may more malevolently seek to realign or introduce further heads of compensation, to increase the degree of clawback, and thus subvert the good intent of this Bill. To give an example, the Government, as I understand it, have indicated informally that they are not expecting to recoup for medical expenses if they have been paid for privately, but suppose a future government wanted to offset an award for medical expenses perhaps against free medical prescriptions. That would be a major change to the Bill, one that was unwelcome to claimants and compensators, and one, I suggest to the Minister, that could be made under his regulatory powers, not in the name of simple flexibility, but in a rather more malevolent way, to increase clawback and payments and compensators. As the Bill stands, the Minister could do that by regulation. Frankly, I do not think he should be allowed to do so.
Lord Mackay of Ardbrecknish: Perhaps I may help the noble Baroness and show that I have no malevolent intention. We fully intend that any changes made to Schedule 2 under this power should in any case follow the broad principle that compensation should be reduced only if a corresponding benefit has been paid as a consequence of the same accident, injury or disease. I hope that allays the noble Baroness's fear.
Baroness Hollis of Heigham: We shall reflect on it. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 23 agreed to.
Clauses 24 to 28 agreed to.
Clause 29 [Regulations and orders]:
Earl Russell Earl Russell moved Amendment No. 47:
Page 14, line 33. leave out subsection (2) and insert—
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("( ) A statutory instrument containing the first regulations or first order under any section of this Act (other than an order under section 33) shall not be made unless a draft of the instrument has been laid before and approved by resolution of each House of Parliament.
( ) A statutory instrument containing subsequent regulations or a subsequent order under any section of this Act (other than regulations under section 23) shall be subject to annulment in pursuance of a resolution of either House of Parliament.").
The noble Earl said: This amendment again deals with the regulation making power. Perhaps I may clarify matters a little for the Minister. I understand perfectly clearly that there are some situations where the regulation making power is needed and indeed is the only appropriate way of dealing with things. My concern is that the power should be subject to parliamentary control. In that respect I am extremely grateful to the Minister for what he has already said. However, what is covered by this amendment is the affirmative/negative distinction. The amendment seeks to provide that the first regulations under each of the powers in the Bill shall be affirmative in order to find out exactly what is being done and how the power is being exercised. Since the debates on the Jobseekers Bill it has been an increasingly common principle in this House to apply that way of dealing with the regulation making power to new examples of its creation. I wonder whether this is a case in point.
I appreciate that the distinction between the affirmative and the negative is not quite as crucial in this place as it is in another because in another place very often what is negative really cannot practically be debated at all. But if, as happens in this wicked world, people find more need for legislation, it is not impossible that the body of regulations might go on increasing, as over the past few years it has done. I have already had the experience in this Chamber of wanting to pray against regulations and finding it impossible to get down a prayer within the requisite number of days. I am sure the Minister remembers the last case that happened, which I think was as recently as last July. One avoids that danger, which I believe is likely to be an increasing one, by the use of the affirmative procedure for the first example of the use of a new regulation making power. That is what the amendment attempts to do. I beg to move.
Lord Mackay of Ardbrecknish: This amendment refers to the first regulations under the Act; in other words, to the regulations that will have to be brought forward in the next Session of Parliament in order to allow us to get the Bill up and running and into implementation for victims as quickly as we possibly can. I shall return to my reason for making that point, but it is an important one to make.
The regulations we are talking about are not regulations some time down the road when, perhaps after the Act has been working for a while, we decide we need to consider some changes. They are the regulations which will be needed in order to get the new scheme up and running. I hope I have made it clear on a number of occasions that the consultation exercise we shall undertake will be all embracing and will include all those people who have an interest—I had better not

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say "legitimate interest" because it may sound as if I am going to pick only the people who agree with me: I certainly do not intend that—in the matters before us when we come to consider the regulation making power. I believe that we have been very open in our discussions with the various parts of the industry and those people who work in this field. That will certainly continue.
We are asked to make all the regulations the first time round—in other words, in the next Session of Parliament—by affirmative regulations. As the noble Earl rightly pointed out, there was a previous piece of legislation where we decided to do it that way. I do not believe that that would be a very good use of parliamentary time because I and my colleagues certainly have every intention of keeping both Houses very busy in the first Session of the new Parliament with some splendid legislation, which I have no doubt we shall bring forward. The first year of a new Parliament is always particularly busy.
Therefore, I believe it is a little unnecessary to go for the affirmative regulations which inevitably mean that they absolutely have to be debated in both Houses, unlike negative regulations where they have to be debated only if somebody in the House does not feel very happy about them and wants to have an issue aired. I would like to believe that, after we have consulted, many of the regulations will be perfectly acceptable to absolutely everybody and therefore we shall be able to pass them without necessarily taking up the time of Parliament. Indeed, as I have said, even if we deal with the matter by negative procedure, which is what I propose, with the exception of the matter that we have talked about a few moments ago, there is a mechanism for Parliament to challenge their implementation.
With that explanation I hope that the noble Earl does not believe that I am being underhand. As many of the regulations will be pretty close to the ones in the current scheme, I believe that it would be imposing an undue burden to ask for them all to be dealt with by affirmative regulations in what inevitably will be a very busy Session of Parliament.
Earl Russell: I would not dream of accusing the Minister of being underhand on the issue. In fact, he is quite remarkably frank and perhaps slightly franker at moments than he realises. I take the point about consultation, and I am extremely glad to hear it. But the Minister should stop and listen for a moment to what he has just been saying. He said that it will be possible, in a crowded Session, to make new laws—and these were his actual words—"without taking up the time of Parliament". If the Minister were to listen to those words from the Back Benches I wonder what he would hear. However, I shall not make a further issue of the point tonight. I beg leave to withdraw my amendment.
Amendment, by leave, withdrawn.
Clause 29 agreed to.
Clause 30 agreed to.
Clause 31 [Power to make transitional, consequential etc. provisions]:
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 48:
Page 15, line 25, leave out subsection (2).
The noble Baroness said: In moving this amendment I shall speak also to Amendment No. 49 standing in the name of my noble friend Lady Turner. This is a probing amendment. We want to get on the record the Government's interpretation. Obviously, the clause deals with transitional arrangements. Our first amendment is to delete entirely subsection (2) because we fear that, as it reads, the principle of retrospectivity contained in Clause 2 could be undermined. We do not believe that that is the Government's intention, but we believe that they need to spell out what their intentions are. We are giving the Minister an opportunity which I am sure he will warmly embrace.
Should the first amendment fail, our second amendment provides for consultation on any regulations which attempt to disapply Clause 2. I beg to move.
Earl Russell: Clause 31(2) is worth a little of our attention. It is our old friend the Humpty-Dumpty clause where words mean whatever I say they mean. Let us consider the clause for a moment:
"Regulations under this section may (among other things) provide

(a) for compensation payments in relation to which, by virtue of section 2, this Act does not apply to be treated as payments in relation to which this Act applies,

(b) for compensation payments in relation to which, by virtue of section 2, this Act applies to be treated as payments in relation to which this Act does not apply".

It is clear how this clause got the name Humpty-Dumpty. I am sure the Minister remembers well his baptism of fire over the Humpty-Dumpty clause in the Jobseekers Bill. As I recollect it, it was Clause 6. That clause was recommitted and had to be redrafted. Why is it that when this Committee, the Delegated Powers Scrutiny Committee and a good many others outside the Chamber express themselves so forcefully about this means of legislation not very much later we see a practically identical formula?
I am reminded of an incident shortly after I joined the House. The noble Baroness, Lady Darcy, was looking at the qualifications for members of the Universities Funding Council. She asked that there be deleted a provision that people should not be qualified to sit if they were disabled or otherwise incapacitated from doing their job. Very reasonably, she argued that that provision was entirely redundant. The Minister deleted it without a moment's hesitation. The identical words came back in another Bill and were deleted. They came back in another Bill and were deleted, until the noble Lord, Lord Carter, asked where these words came from. It was discovered that there existed a series of model articles for drafting Bills in which those words were included. Thanks to the noble Baroness and the noble Lord, Lord Carter, those words were taken out of the model articles and we have had no trouble with them since. Cannot the same thing happen to the Humpty-Dumpty clause?
9.45 p.m.
Lord Mackay of Ardbrecknish: I am grateful to the noble Earl. When I studied this Bill I indicated to my advisers—I might even have taken on a small wager—that the noble Earl would undoubtedly raise this matter. They promptly took me on. (I will now have to make up what the wager was.) I could not have remembered that it was Section 6 of the Jobseekers Act. I marvel at the memory of the noble Earl in all these matters.
The intention of this amendment is to prevent the making of regulations under Clause 31 of the Bill which might modify Clause 2 which applies the reformed scheme to agreements or awards made on or after the point of change. I would like to assure the noble Baroness and the noble Earl that we have no intention of using the regulation-making powers in Clause 31 in such a way. The provision for transitional or consequential arrangements and savings are a common feature of social security legislation. They enable cases to which the new provisions do not apply to be dealt with under previous legislation. In any event, I have already said that we intend to consult on the detail of regulations to be made. I give that commitment to consult.
If one has a situation in which a payment has been agreed prior to the date on which the new procedures come in but it has not yet been paid and perhaps an appeal is to be made, there must be a method for working out under what rules the appeal is to proceed. Does it take place under the old regulation or the new regulation? In such cases we require regulations to make sure either that all cases can be treated as new cases, although they appear to be pretty close to settlement before the new date, or that new cases can be treated as old cases. That is why this Humpty-Dumpty clause, as the noble Earl has described it, appears here. I hope he accepts that this simply allows for the difficult point of transfer from the old to the new scheme. There may be cases so far advanced that the old rules have to be kept, although in other circumstances one may decide that the new rules should apply, or vice versa. There is nothing more sinister than that in it. I fully accept that it is a complex way to do it, but I can assure the noble Baroness and the noble Earl that we will consult about the exact detail in the regulations to do with the cases which are at that critical stage in their path towards settlement when the due date of the commencement of the new proposals comes in.
I hope that that explanation will allay any fears and perhaps the next time I have a piece of legislation I shall ask the draftsman to draft it slightly differently.
Earl Russell: I thank the Minister warmly for that last line. I was never worried about his intentions. When one drafts a clause one sends out a piece of legislation like a rocket into space. One does not know where it may go nor what it may meet. Leaving loose powers around is as bad as leaving unexploded mines, so I was extremely glad to hear the Minister's final comment and I thank him.
Baroness Hollis of Heigham: I may wish to dissociate myself slightly from the noble Earl's comment. I believe that there is a lot to be said for loose powers under differing circumstances and I would not regard that as a Humpty-Dumpty statement. The previous occasion
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on which we engaged in a debate on Section 6 of the JSA brought forward some notorious lie that all income can be treated as capital and all capital can be treated as income, whichever the Secretary of State prefers at the time. I remember that we had some fun with that argument. We understood that the provision related to the transitional stage during which cases had not completed their passage and therefore there was a need to continue to operate the old system. We welcome the Minister's clarification of that point and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 49 not moved.]
Clause 31 agreed to.
Clause 32 agreed to.
Schedule 3 [Consequential amendments]:
Lord Mackay of Ardbrecknish Lord Mackay of Ardbrecknish moved Amendment No. 50:
Page 18, leave out lines 39 to 44 and insert ("subsections (1), 1A), (3) and (6) are omitted.").
The noble Lord said: In moving Amendment No. 50 I shall speak also to Amendments Nos. 57 and 58. Amendments Nos. 50 and 57 remove an outdated provision which allows a compensator to reduce a compensation payment by 50 per cent. of the value of any industrial injuries benefit, industrial disablement benefit or sickness benefit paid in the defined period where the amount of the compensation payment is below the small payments limit and is not therefore subject to the current recoupment provisions.
As I have explained, we do not propose to set a small payments limit in the reformed scheme. Should we decide to do so in the light of experience once the reformed scheme is operational, compensators will no longer be allowed to reduce compensation payments which are below that limit. This means that victims who have received sickness benefit, industrial injuries benefit or industrial disablement benefit will be in the same position as all other victims who have received state benefit and who do not have their compensation payments reduced in the circumstances I have described.
The third amendment is a technical one which repeals a provision in the Jobseekers Act 1995 which is no longer required because of the provisions of this Bill. I commend the amendments. I beg to move.
On Question, amendment agreed to.
Lord Mackay of Ardbrecknish Lord Mackay of Ardbrecknish moved Amendment No. 51:
Page 19, line 29, leave out ("(aa)") and insert ("(ab)").
The noble Lord said: In moving Amendment No. 51 I shall speak also to Amendments Nos. 52 to 56, which are of a similar algebraic nature. The amendments are technical and merely substitute correct subparagraph numbers into amendments to Section 170 of the Social Security Administration Act made in the current draft of the Bill. I beg to move.
On Question, amendment agreed to.
Lord Mackay of Ardbrecknish Lord Mackay of Ardbrecknish moved Amendments Nos. 52 to 56:
Page 19, line 31, leave out ("(ab)") and insert ("(ac)").
Page 19, line 32, after ("1997") insert ("; and").
Page 19, line 34. leave out ("(aa)") and insert ("(ab)").
Page 19, line 35, leave out ("(ab)") and insert ("(ac)").
Page 19, line 37. at end insert ("; and").
On Question, amendments agreed to.
Schedule 3, as amended, agreed to.
Schedule 4 [Repeals]:
Lord Mackay of Ardbrecknish Lord Mackay of Ardbrecknish moved Amendments Nos. 57 and 58:
Page 20, line 4, at end insert—

("1948 c. 41.

The Law Reform (Personal Injuries) Act 1948.

In section 2, subsections (1), (1A), (3) and (6).

1985 c. 66.

The Bankruptcy (Scotland) Act 1985.

In section 31(8), the words "and to section 89(2) of the Social Security Administration Act 1992".")

Page 20, line 23, column 3, leave out ("paragraph 52") and insert ("paragraphs 52 and 54")
On Question, amendments agreed to.
Schedule 4, as amended, agreed to.
Clause 33 [Short title, commencement and extent]:
Earl Russell Earl Russell moved Amendment No. 59:
Page 15, line 43, at end insert—
("( )Any day appointed by the Secretary of State under subsection (2) shall be on or before 1st November 1997.").
The noble Earl said: I am sure that the Committee will be thankful that this is the last amendment but it is worth just a few words.
Again, this deals with what was described recently as a loose power. This is the commencement clause which provides that a number of the sections are to come into force:
"on such day as the Secretary of State may by order appoint".
My attention was first drawn to that as a general issue by a memorandum submitted by Professor Sir William Wade which was quoted in the first report of the Delegated Powers Scrutiny Committee in 1993. He drew attention to the open-ended commencement in the 1988 Criminal Justice Act and pointed out that that was a potentially arbitrary power. In the light of what has happened to that Act since, those observations can only be regarded as prophetic.
I raised that point briefly on Second Reading. The Minister replied as usual by defending his intentions. With apologies to the noble Baroness, I do not wish to argue about the Minister's intentions. I accept entirely that he intends to bring this Act into force. But what is happening now is that the Minister or any subsequent Minister—and I assure the noble Baroness that I am not worrying about her intentions either but we never know what might happen in the future—could decide in circumstances which no one could now foresee that he did not want to bring this Act into force at all. Therefore, I should like there to be a terminus ante quern in this clause to say that this Act must be brought into force before a certain date.
In the amendment I have provided the date of 1st November 1997. The Minister said that he intends to bring the Act into force by October. If the Minister were to tell me that the amendment is too tightly drawn and that because a lot of what needs to be done is technical and might take longer, I should listen to that argument and come back on Report with a slightly more distant date which I hope would allow the Minister the necessary flexibility because I accept that there are cases in which flexibility is needed.
I want to have a firm date. If the Minister does not like this date, I should like to have another which suits him better. But I am not happy with leaving the situation open-ended. I beg to move.
Lord Mackay of Ardbrecknish: I am sure that the noble Baroness and I are both very grateful that the noble Earl has indicated that whatever happens at the next election, he is sure that whichever one of us stands here—and of course, I expect to stand here—he would obey. I notice that he did not explore the scenario that he might stand here.
Earl Russell: I thought that was implied in my tabling of the amendment by which I would expect to be bound, just like everyone else.
Lord Mackay of Ardbrecknish: I think we should leave that matter where it is and turn to the amendment. As the noble Earl pointed out, the amendment would place on the face of the Bill the fact that the scheme would have to come into force no later than 1st November 1997. The noble Earl has already accepted that I have indicated quite firmly that it is our intention that the reform scheme should come into force in October 1997. Clause 33 is a standard commencement clause. It will allow the Secretary of State to appoint a suitable date for implementation of the reformed scheme.
I believe that the noble Earl rather predicted my arguments. Nonetheless, I believe that they are valid. There could be difficulties in pinning a particular date for the implementation of the Act because, for reasons that I cannot foresee, difficulties could arise which might make it impossible to implement the scheme on the time-scale proposed—namely, 1st October next—whereas the noble Earl would tie me to 1st November 1997. If that were to happen, we would require further primary legislation in order to amend the commencement provision before the Act could be brought into force. Otherwise, the Government might be in breach of their statutory duty if they failed to implement before 1st November.
I appreciate the noble Earl's legitimate concerns about the implementation of the Bill; indeed, he has raised the issue on a number of previous occasions, although I do not believe that he has ever tabled such a tightly-worded amendment. With my assurance that it is our absolute and firm intention that the reform scheme should come into force in October and that any delays would be for the most exceptional reason, I hope that the noble Earl will feel able to withdraw his amendment.

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I have to say that I shall resist the temptation to even suggest an alternative later date which the noble Earl might be tempted to bring forward on Report.
Earl Russell: I accept what the Minister said about the possibility of unexpected delays and obstacles. However, I am awfully sorry that he is not going to accept the temptation to think about a later date which might allow for such possibilities. I also accept what the Minister said as regards this being a standard commencement clause. But that is precisely what worries me. The Minister assumes throughout that the decisions will all be made in his office. Indeed, that has been his attitude about the regulation-making power and many other such matters. The idea that Parliament makes the law is very much on its last legs. I appreciate that there are difficulties in keeping it going, but I would miss it. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 33 agreed to.
House resumed: Bill reported with amendments.

HMY "Britannia"
10.3 p.m.
Lord Ashbourne Lord Ashbourne rose to ask Her Majesty's Government what arrangements have been made to replace HMY "Britannia" when she is decommissioned in 1997.
The noble Lord said: My Lords, I am glad of this opportunity to debate the prospect of a successor to the present Royal Yacht, Her Majesty's yacht "Britannia". I must begin by thanking all noble Lords who are taking part in the debate, in particular my noble friend the Minister who will reply on behalf of the Government. I must declare an interest as the chairman of the All-Party Parliamentary Royal Yacht Group which was formed in July 1995 with a view to stimulating discussion on the future of the Royal Yacht in the hope of persuading Her Majesty's Government of the need to design and build a successor to "Britannia" for the dual roles of export promotion and royal duties.
We have spoken to and corresponded with a number of Cabinet Ministers with an interest in the yacht and have pointed out to them the merits of the vessel and the importance to the country of replacing the present yacht. Our secretary, Cyril Townsend (the Member for Bexleyheath) introduced adjournment debates in another place on 9th December 1994 and 10th July of this year. I am extremely grateful to him for those initiatives.
We see the Royal Yacht as a national yacht, which is both a status symbol for Britain and, indeed, a symbol of British excellence. There are not many things we do better than anyone else in the world, but ceremonial is one. Whether it is Trooping the Colour on Horseguards, the Lord Chancellor and Madam Speaker greeting a foreign head of state in the Royal Gallery or Westminster Hall, or the Royal Marines beating retreat on the Padang at Singapore, the precision and timing are superb. The Royal Yacht presents a wonderful opportunity to display these skills in the presence of the
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monarch and at prestige venues around the world. As head of the Commonwealth, Her Majesty is able to use the yacht as her mobile palace and visit her subjects around the globe.
When launching "Britannia" on the Clyde in 1953, Her Majesty observed,
"My father felt most strongly, as I do, that a yacht was a necessity, and not a luxury, for the head of our Great British Commonwealth, between whose countries the sea is no barrier, but the natural highway".
Henry Catto, US ambassador to the Court of St. James from 1989 to 1991, who in 1976 found himself US chief of protocol, charged with preparing for the Queen's State visit to America, wrote,
"I was literally besieged with people wanting invitations to the various functions on hoard. Corporate moguls would devise outlandish reasons as to why they should be invited; society matrons would throw themselves at me. In short, that ship was a superb tool for British industry and the British nation, and to let her go and not replace her would be a great pity, sending a had message to the world".
In 1993 in Bombay the Department of Trade and Industry and British Invisibles conducted a trade initiative on board "Britannia". This was the Indo-British partnership initiative, followed up by the Prime Minister's visit in 1992. During that visit, contracts worth £1.3 billion to Britain were signed. It was publicly agreed that those contracts would not have been signed in anything like the short time it took if it had not been for the presence of the Royal Yacht. That figure is in the public domain and is over 12 times the cost of building a new Royal Yacht. Or, put another way, at an annual running cost of, say, £10 million, is equivalent to running the new Royal Yacht for over 100 years. In 1994, Sir Robert Woodard, one time flag officer Royal Yachts, informed a Portsmouth audience that "Britannia" had helped Britain to secure hundreds of millions of pounds worth of business, compared with annual running costs of between £10 and £12 million.
The All-Party Royal Yacht Parliamentary Group takes the view that the Government should have a new Royal Yacht designed and built for the dual roles of export promotion and royal duties, and that it should ideally be largely funded by public money, broken down into payments by the various departments which benefit from her. Thus the main contributors might be the Department of Trade and Industry and the Foreign and Commonwealth Office, with smaller contributions, where appropriate, from the Scottish Office, the Welsh Office, the Northern Ireland Office and the Ministry of Agriculture, Fisheries and Food. If Her Majesty wished to use the yacht privately, say for the Western Isles cruise which has historically taken place after Cowes each year, the Palace would be charged for those events. Thus one might end up with a vessel largely funded by public money, with a contribution from the Palace for non-governmental royal use, where appropriate.
If the Government can see the advantages of building a successor to the present yacht, but are not minded to raise the £80 million or so of public money to fund her, the necessary funding could be raised commercially, possibly on a private finance initiative or similar basis. Indeed the parliamentary maritime group has within the past few months submitted a scheme involving a bare

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boat charter. The money, we are informed, will be raised by a private consortium which would lease the yacht to Her Majesty's Government for a period of some 15 or 20 years. She would be manned by a Royal Navy crew and would fly the White Ensign like any other naval vessel. The taxpayer would be required to fund only, say, £5 million or £10 million per annum for 15 or 20 years, similar to a private finance initiative scheme.
We take the view that the Royal Yacht could and should be used much more in the commercial role, as determined by the President of the Board of Trade. We agree with the House of Commons Defence Committee which, in its seventh report dated 17th July 1996, states in paragraph 86:
"The withdrawal from service of HMY 'Britannia' will relieve the defence budget of a significant burden. In view of the important ceremonial, diplomatic and trade functions which will otherwise go by default, we recommend that an appropriate replacement vessel, flying the white ensign and manned by the Royal Navy, be built by a British shipyard by the year 2000".
The yacht's programme would require careful, long-term planning involving the Palace, the Ministry of Defence, and the Foreign and Commonwealth Office as well as the Department of Trade and Industry.
Our views are strongly supported by the British Exporters Association. Once people can see the Royal Family and Her Majesty's Government working together in tandem to boost British exports and stimulate inward investment, we feel that this is likely to raise the esteem in which Her Majesty and her family are held by the nation as a whole.
Perhaps I may share one letter from many hundreds about the Royal Yacht. It states:
"Britannia is the most beautiful yacht afloat. She doesn't just belong to the Queen but is the pride and joy of all Britons. Wherever she sails she takes a little bit of Britain with her. She is our shopwindow, our heritage—and we are losing too much of that already … Let the Queen keep Britannia".
The letter is signed by Hilda Liptrott, from Bolton in Lancashire. I merely share it, as one of many, from ordinary people who have caught the vision of what the Royal Yacht does and could continue to do even more effectively for Britain.
To return to one-time US Ambassador Catto. He wrote in the Daily Mail of 27th July 1994:
"I remember my farewell call on the Queen, as I left my post as Ambassador to the Court of St. James. We chatted about a number of things, Britannia included. Jokingly, I told her if the day ever came when there were parliamentary hearings to decide whether or not to build a new Britannia, I would be glad to come and testify. For a foreigner, I have had a unique experience with the grand old vessel. I know what she has done for Britain, and for the world for that matter. In a time of increasing public ugliness, of ethnic strife, of endless drabness, Britannia is a point of light and beauty, a symbol of British greatness, in which I, for one, am still a believer".
Have not the Government sat on the fence for long enough? They have repeatedly stated that all options are being considered, and that a decision will be made in due course. With a general election approaching, is it not timely that the Government should announce the findings of the Cabinet committee which has been considering the issue and say whether public money is to be used for this venture or whether private money
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should be raised? We feel that if this is handled sensitively, it could be a real vote winner, as well as a boost for the esteem in which the Royal Family is held.
I trust that the noble Lord the Minister will see that we are trying to help the Government, and that he will at least respond by announcing that the Government are in principle in favour of a new Royal Yacht provided that satisfactory funding arrangements can be made.
10.14 p.m.
Lord Charteris of Amisfield: My Lords, I have listened with the greatest interest to the noble Lord, Lord Ashbourne, and agree with much of what he says.
I presume to take part in this debate because I have been fortunate enough to spend many weeks at sea in "Britannia", and have been able to experience at first hand the effect she has when she sails into any port in any part of the world wearing the Royal Standard.
The Royal Yacht is, and has been for 42 years, a priceless asset for this country, principally because she adds an extraordinary dimension to visits by the Queen to foreign or Commonwealth countries, something which is not enjoyed by any other head of state. The effect of "Britannia" is electric.
To understand the effect the yacht has, you need to be on board on a Sunday morning when "Britannia" passes through the Sydney Heads in Australia and sails up the harbour, trailing a thousand yachts behind her like a comet's tail. You should be with her sailing into Philadelphia for what the Americans called their Bicentennial; or in Brazil, in Salvador and Rio; or sailing down the Elbe from Hamburg after the Queen's first triumphant visit to Germany in 1964. I cannot speak with authority of recent years, of course, because I was not there, but my friends in the Household—old-time colleagues—assure me that it was as it has always been in South Africa and St. Petersburg. The old magic never fails.
Although "Britannia" was called a yacht for perfectly sound historical reasons, I think it was a pity that she was so called, because the name "yacht" gives a completely wrong impression. When you speak of a yacht nowadays, I think you conjure up pictures of hot, idle days in the Mediterranean, the popping of champagne corks, and illicit love affairs. I can assure you that that is simply not the form in HMY "Britannia". "Britannia" is a custom-built vessel designed to carry our Sovereign, who is also Queen of the Commonwealth, around the world as she does her business. The ship has first-class communications and the ability to lay on impressive ceremonial, to provide dinner for 50 and a reception for 250, things which are essential for a state visit, and also, incidentally, extremely useful when you are visiting places like Papua New Guinea or the New Hebrides.
And there is another thing. As the noble Lord, Lord Ashbourne, said, through the years "Britannia" has more and more been used for the promotion of trade, providing a place where British businessmen can meet their opposite numbers in whatever country the ship

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visits. I have not the slightest doubt that in this way "Britannia" has earned very many millions of pounds for Britain.
I need hardly say that I hope very much indeed that Her Majesty's Government will decide to build a replacement. If by any chance those who are now on the Opposition Benches should come to power, I hope they will remember that "Britannia", that splendid national asset, was built by the Labour Government under Mr. Attlee, as Prime Minister. If the opportunity comes to them, I hope that they will do it again. I hope that the Government themselves build a new yacht or ship without allowing Barclays Bank or anyone else to do it. The ship should be able to do what "Britannia" has done for so many years; and she should be manned by the Royal Navy and fly the White Ensign.
10.20 p.m.
Lord Elton: My Lords, we have heard from a former naval officer, the chairman of an expert group and from a former private secretary to Her Majesty with close relevant experience. It might be helpful now to hear how the problem seems to a layman watching Her Majesty's Government ask themselves whether they can afford a replacement for the Royal Yacht. I speak as a layman with some commercial interests and entirely on my own behalf.
I see the Royal Yacht as a ship with two functions, each of which benefits the other. I think most of us do so. "Britannia" is an efficient and well appointed trade centre and trade promotion centre. By operating out of that environment on overseas visits, Her Majesty reminds every newscaster, every reporter and every viewer and reader that she is the head of a modern trading state, offering opportunities to everyone prepared to do business with it. It is a superlative advertisement for UK plc.
"Britannia" is also an efficient and well appointed residence, available to the Queen in any country in the world with a usable harbour for the purpose of state visits. By inviting potential trading partners to meet them on board, British business organisations offer an inducement which many find it very hard indeed not to accept. That is a superlative advantage for UK plc. The combination of roles emphasises to those trading partners the importance which our Government and country accord to their success and therefore the success of the trading partners. Take away trade from those two functions and one is left with very little more than a very big state coach. Take away the Royal Standard from the maintop and one has nothing more than a very small office block. The first point to make, therefore, is that, whatever its other attractions, a replacement vessel that does not do both those things will do neither of them half as well.
I said that Her Majesty operates out of, rather than travels in, "Britannia" because travel is no longer a function of that vessel. Its function is to provide a highly effective centre of operations to use on arrival, a centre that is detached, secure and British staffed, providing an incomparable setting for diplomacy as well as trade. A string quartet in an ambassador's drawing room cannot
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hold a candle to the Royal Marines beating retreat floodlit at the dockside. Nor could one produce the phenomenal volume of contracts that my noble friend Lord Ashbourne, to whom I hasten to add my thanks for beginning this debate, referred to during the South African visit by flying the equivalent of Air Force 1 into Capetown or Johannesburg and leaving it within the perimeter fence. It also accords a fitting dignity to our Sovereign, one of our nation's greatest assets, and it adds materially to the respect in which in consequence our country is held abroad.
Such a resource is valuable but it is also expensive. It is cost that is bringing the ship's career to an end—not just the cost of refit but the cost of running the ship, which was designed when there was National Service, a large naval reserve and an urgent need to provide seagoing experience to as many hands as possible. The need, therefore, is for neither a refit nor a replica but for a new ship with the same high standards of accommodation, services and communications and heavily reduced manning costs.
That brings us not just to the capital cost but to paying for the running of the vessel. Plainly, its use by the head of state should be paid for by the state of which he is head. Clearly also the direct costs of commercial users should be paid for by them in expectation of the resultant profit. But the value of increased trade benefits the nation and will be returned, at least in part, out of taxes and excise.
To many of us, and therefore to many members of the public, it still seems that the exercise should be funded entirely by central government out of taxation. Whatever the source of funds, they must he efficiently used. The use of the ship must be subject to efficient planning and management structures, which must maximise its use and carefully integrate the diplomatic and commercial interests with Her Majesty's own exacting programme of work. The annual costs should be apportioned between departments—presumably with the Ministry of Defence in the lead—and ring-fenced against virement and cost-cutting rounds, not to permit inefficiency, but to avoid the greater inefficiency of aborted forward programmes. If there are to be outside funders, there can be an MoD agency to work with them on a contractual basis. If there is to be a civil list element at all, it should be sufficient only to ensure that Her Majesty's interest is formally protected in both planning and management stages.
So, commercially and diplomatically, Britain needs "Britannia"; so does Her Majesty's Government, who are sitting not on the fence but on the taffrail—and we know what lies on one side of that. "Britannia" is a piece of history. Her very name is emotive, a reminder of a noble past. To consign her now to the scrapyard with no successor nominated, just as the Government are straining every nerve to assure the country that Britain will not be subsumed into a grey Europe, but will remain vibrant, individual and itself, will surely be seriously inept. The question is not, can Her Majesty's Government afford to replace "Britannia"? It is, can they afford not to?
10.26 p.m.
Lord Amherst of Hackney: My Lords, I should like to thank the noble Lord, Lord Ashbourne, for raising this important question. The concept of the all-party yacht replacement committee is a fine one, but it would appear that we are not all toeing the party line. However, the aim is very much one that we all have in common.
I speak as somebody who has worked a lifetime in maritime London. I believe that the "Britannia" is immensely important to maritime London. When the "Britannia" was built in 1953, the British flag fleet was the third biggest fleet in the world. Now the British flag fleet is the 33rd biggest. Even this year, as your Lordships may be aware, Cunard and the QE2 went into Norwegian control and P & 0 transferred the management of its substantial container fleet to Holland.
Almost the last vestige of our once great maritime prowess is vested in the "Britannia". I should like the concept of rebuilding her to be thoroughly examined. Without doubt she has a silhouette that is the best-known of any ship in the world, with the possible exception of the QE2 which is no longer under British control. The "Britannia" and her shape are unique.
Nowadays one can find cruise liners which are over 40 years old, some in excess of 25, still trading. They have been rebuilt and rebuilt again to comply with fire and safety regulations; modernised for modern passengers' needs and they are still effective, still trading and still competitive. Surely it is possible to thoroughly refit, refurbish and revamp the "Britannia". We could give her conference and exhibition rooms; she could be totally re-engined, modernised and automated. Once again we would see that superbly beautiful shape, but as a 1997-98 built ship with perhaps another 40 years in front of her.
I find it inconceivable that one could combine the role of a Royal Yacht with a passenger cruise vessel. I do not believe that there would ever be the grandeur or the celebrity status on a, so to speak, combined yacht-cruise liner, because anyone would then know that they could go on that cruise liner by taking a Caribbean cruise. It would be as simple as that.
If it is not possible to rebuild and revamp "Britannia", then I would at least recommend that the Government should consider—and I believe certainly maritime London would be contributors—something that is original and unlikely to be confused with a small cruise liner or something built by an Arab potentate. It could be along the lines of the Cadland design of a square-rigger; very original, rather romantic, very much a ship for the nation and particularly a ship for the nation's youth.
My Lords, I should like to conclude with the thought that 1995 saw the Norwegian Royal Yacht grace Cowes Roads, and 1996 saw the Danish Royal Yacht grace Cowes Roads. Are we really going to be belittled by those magnificent and admirable, but numerically tiny, countries?
10.31 p.m.
Lord Strathcona and Mount Royal: My Lords, this is a timely debate. As from next July a 330 year-old tradition will be broken. For the first time we shall not have a Royal Yacht either in existence or building. Let us not lose heart. If we make an early decision we could have a successor to the Royal Yacht appearing at Greenwich in the year 2000. But it does require an early decision.
Unfortunately, we have the impression of governmental indecision. The Government have been accused of sitting on the fence. I sincerely hope that they have not sat on the fence so long that the iron has entered into their souls, as someone once said. I believe there is widespread public and commercial support for a successor. As already stated, the concept stands up to hard-nosed assessment of the benefits to both commerce and national prestige.
It is not a royal plaything. As my noble friend Lord Ashbourne said, the contribution of "Britannia" to our export performance is difficult to assess. It has been put at £2 million for an investment of £12 million a year, which surely justifies the support which the British Exporters Association gives to the idea.
Furthermore, there are indication of generous gifts being available which might very well support something like half of the £80 million which is generally accepted as the ballpark figure for a suitable successor. But industry and the City are looking for a lead from government. Lest the Minister should say, "I am terribly sorry, it is a great idea, but we do not have any money", let me make the point, which I think my noble friend Lord Ashbourne has already made, that there is no need to find the upfront capital. This could be made into a bankable proposition if the Government were prepared to commit themselves to using the yacht, on a charter basis, for around 40 days a year. If that cost £2 million, £3 million, £4 million or £5 million, it should not be overlooked that £1 million would be saved in what might be called the alternative hotel costs. There is also the other advantage, to which the noble Lord, Lord Elton, and others referred, of the sheer ambience that the yacht brings with it.
Critical to reducing the cost of royal or government usage of the yacht is keeping her gainfully employed. At the moment "Britannia" spends around six months a year tied up alongside the wall in Portsmouth. That is no way to treat a valuable asset. In that regard, I pick up a point made by the noble Lord, Lord Amherst. It is here that the concept of the Royal Sail Training Ship impacts. I have been associated with that, although I hasten to add that I have no pecuniary interest to declare. This was an idea of Maldwin Drummond, who at the time was the Commodore of the Royal Yacht Squadron. Of course royal duties would always have to take precedence, but the Cadland concept is that one would have a university of the sail training world turning out 3,000 Queen's cadets a year, thus involving youth in the promotion of the country's interests and looking after our interests abroad.

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There would be other advantages. The presence of a tall ship would capture public attention, the "green" idea of sails fits with the Rio conference of 1992, the nature of the work is character forming, and the sails offer stability and distinction from other super yachts. This is no tea-clipper dinosaur.
I should like to refer to the technical capabilities of the boat but I am running out of time. I merely say that this is not a definitive proposal, but I hope it is an illustration of what might be done. I sincerely hope that the Minister will be able to tell us that the Government will look at all these suggestions before, for preference, Christmas; if not, we shall give them another chance by having a Royal Yacht stand at the Boat Show at Earl's Court in January.
10.38 p.m.
Lord Mottistone: My Lords, I thank my noble friend Lord Ashbourne for introducing this debate and thank all noble Lords who have spoken. I strongly support the principle of having a Royal Yacht, roughly as described by my noble friend Lord Ashbourne. I shall not go into the varieties but on the whole I am against the sail training solution. We want something like the "Britannia" but a modern vessel. I should not have thought it worth trying to preserve "Britannia" into the indefinite future. She is such an old ship now that there really is a need for something new. It is important that the country as a whole, and the Government and their officials in particular, not to mention the Navy, appreciate the importance of this vessel to a whole range of people who do not make themselves as well known as they could do.
I was pleased to hear my noble friend Lord Ashbourne quote from the letters that he had received. What the vessel represents among other things is a demonstration of respect for Her Majesty the Queen. I very much fear that there has been a lot of thinking along the lines that, "We cannot afford to keep "Britannia" going for another couple of years until 2002 when the Queen will have been on the throne for 50 years and because the odd few million pounds have to be found" and not enough listening to the engineering department of the ship which says that it can keep it going much more efficiently than is credited by officials ashore.
There is a great lack of respect for this vessel and for the monarch of this country. There is a lack of respect for this country, what it stands for, what it has been and what it looks like if one is abroad. I have not been abroad very much recently, but when I do go I always find that people respect this country much more than the few characters who sit around in Whitehall and Westminster. It is sad. It is important that we have a vessel roughly like "Britannia", certainly for trading purposes. I agree that six months in the year is not really enough. I am sure that there are other things that can be done both for royal people as well as for trading.
More importantly, we should have a vessel which provides a home and a base, as the noble Lord, Lord Charteris, described so eloquently. If only his contribution were more widely spread. I hope that all
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the newspapers will pick it up in a big way. We really need a home and a base for Her Majesty the Queen and other royal persons when they are officially going abroad. We need to respect their need for such a facility.
I shall touch on two other matters. Whatever size the vessel is in modern terms, it would need a much smaller ship's company which would be in the order of 120 or so people instead of 220. That would mean that out of the total strength of the Royal Navy and the Royal Marines of, I believe, around 40,000—they have been squeezed down and the figure may be lower—a ship's company of 120 people, most of whom are highly specialised for the task, would represent a tiny fraction of the charge on the Ministry of Defence.
The other factor is that one has heard—and I suspect that some naval officers have taken it too much to heart—that people have said, "The Treasury will do you out of a frigate if you have the Royal Yacht because they will cost roughly the same to build and run". That is not true, but that is the kind of thing which is said. That is tragic. This is not the moment to comment on it except in passing. We have far too few frigates and destroyers to do the duties that we have cast on ourselves over many years, including the immediate present. Therefore, the Royal Navy is very sensitive to this question.
It is quite wrong that anybody should not see this vessel as a tribute to the Queen's authority, and as a vessel which can be provided for Her service; which represents Her Government's and people's respect for Her and which, when it is not doing those things, can be used to expand trade in the way that the noble Lord, Lord Charteris, said. We need to look at the matter from that point of view. During the past five or six years that I have been involved in this argument, I believe that the Government have behaved like a crowd of lily-livered ladies of ill-repute.
10.45 p.m.
Viscount Addison: My Lords, I begin by declaring an interest as treasurer of the All-Party Royal Yacht Parliamentary Group. As a yachtmaster, one of the most important tasks that I perform prior to passage-making is passage planning, which includes: knowledge of past weather and weather predictions; poring over charts; plotting a course; negotiating hazards; consulting tide tables and tidal streams; considering time at sea and options to take in the event of severe weather; checks of equipment and safety equipment; the ability of the crew; and notification of the coastguard (the authorities) before embarking on the passage. Fog must not cloud the issue. Careful planning in advance is of the essence. The option for "Britannia" and her replacement must be planned in much the same way.
We are barely three years away from a new century and a new millennium. Yet we must move with the times. A successor to "Britannia" should be a modern solution and a forward-looking one—one that demonstrates British excellence, design and craftsmanship, shows that Britain is again a leader in building the finest ships in the world, reinvigorates our maritime heritage and enhances national pride. In short, this should be a Britannic project.

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Let us use this opportunity to promote British interests worldwide by building the Royal Family ships that set new standards in elegance and taste. As with the current Royal Yacht, these ships should be available to promote Britain throughout the world when not in use by the Royal Family. Both the British Exporters Association and British Invisibles are most keen to see a replacement and freely acknowledge the past benefit to British trade and industry from trade missions undertaken by "Britannia". But, as ships move slowly, distances are great and daily operating costs high. When not in use by the Royal Family or British exporters, these new ships should also be made available to the world's most discerning travelers: world opinion formers, the best potential buyers of British products.
I did say "ships". If we build two ships and base one in each of the eastern and western hemispheres we shall cut logistical costs, double the impact and produce key benefits for Britain. Our export industry will be able to carry out more overseas promotions in the most powerful of settings possible and at far lower cost. Our passenger shipbuilding industry will construct two of the finest ships in the world and re-establish its position in a market which has seen some 55 new ships ordered in the past three years alone. Leading shipbuilders are ready, willing and most certainly able. The revenue generated when not in Royal use means that the Royal Family can enjoy ships built to a higher standard than any other proposed solution, complete with helicopter pad and a specially-designed Royal tender for transport from ship to shore when at anchor. Naturally, the Royal apartments would be reserved exclusively for Royal use.
I propose that the ships should fly the Red Ensign, giving a much-needed boost to our Merchant Navy and providing opportunities for training new generations of British seafarers. There are precedents. For example, the Queen travelled around the world in 1952 on a merchant ship, "Gothic", and was accompanied by a rear admiral as flag officer. These ships would be entirely privately financed. British banks and other individuals and organisations are ready to provide the finance needed. Thus, there is no need for taxpayers' money for the construction, future necessary refits or refurbishment, or operating costs. The only public cost would arise in Royal use, and that is estimated to be no more than 15 per cent. of the current yacht's annual cost.
The ships will be an immense source of pride for Britain and a showcase for British excellence. In short, let us plan for the future and not live in the past. I commend the Britannic project to the House. I urge the Government to give this proposal immediate consideration and support.
10.49 p.m.
The Earl of Balfour: My Lords, like I am sure most people, I want to see another Royal Yacht to replace the present one. However, I believe that she must be powered by modern diesel engines, because that is by far the most economic method. In fact, I suggest that she burns the kind of oil as is used in the commercial ships which sail around the world.
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Her Majesty's yacht "Britannia" was built in such a way as to be convertible into a hospital ship. That fact should be considered but, equally, she should be as flexible as possible in order to cover the important trade functions for which she will be needed. That too should definitely be borne in mind.
It has been suggested that the yacht should be made into a sailing vessel. I speak from my own experience as a naval seaman on one of the last commercial sailing ships—I admit, way back in 1947—in saying that the cost of the sails, rigging and so forth make such ships totally uneconomic.
This country's future lies in electronics, silicon chips and very sophisticated computer-ware. One of the great advantages of having a Royal Yacht is that such products can be displayed on board the ship, which will boost trade. That would be done almost on home base and would introduce the commercial side.
During the past 40 years all commercial ships have become bigger and therefore perhaps we should not rule out the idea of the replacement ship being bigger than the 5,000-tonne "Britannia". I hope that the Government will look sympathetically on the proposal. If they give it a boost I am sure that many of this country's important businesses will back it completely.
10.52 p.m.
The Earl of Effingham: My Lords, I thank the noble Lord, Lord Ashbourne, for introducing this debate in your Lordships' Chamber. It is inconceivable that a replacement yacht should not be built. As a nation we excel at pomp, ceremony and showing the flag and "Britannia" has been a superb diplomat for Britain abroad. The impact as she enters harbour, dressed overall, is incredible and while overseas she is a wonderful flagship for tourism both outwards and into the UK.
The yacht has been a unique and potent advertisement for Britain, particularly in its trade mission role. From this comes contacts and even contracts, and it has been quoted widely that some £500 million-worth of export deals are clinched every year on her decks. A new ship, with strong commercial links, must be developed.
Foreign statesmen and business leaders enjoy the ambience of being entertained on the yacht and as a symbol of Britain's prestige, surely it cannot be bettered. The yacht costs £21,000 a day, or £7.7 million a year, to run and her fate was sealed when it was announced that she needed a £ l 7 million refit which the Government, at the time, were not prepared to approve.
Last year "Britannia", while representing a very secure base from where the monarch can fulfil her state functions, had Royal Family members on board for 22 days and spent a further 14 days on trade missions. But I am sure your Lordships are aware that she has to spend far greater time on passage, positioning herself worldwide to enable her to undertake these duties.
I believe also that the yacht provides a unique capability of hydrographic and oceanographic support and research on the lesser used navigational routes.

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The Royal Yacht was not used in the Falklands because she was incompatible with the tasks and nature of the war and lacked a modern helicopter capability. But the "Britannia" was used very effectively for evacuating about 1,000 people from Aden in 1986.
I believe that a new Royal Yacht must have a significant and well-defined wartime role; for example, casualty reception, operating theatre, disaster relief and evacuation. Taxpayers would want to see money spent wisely. At least four serious proposals for a new vessel have been aired, from a sail training ship to a luxury cruise liner. Various consortia claim to be able to raise all the necessary funding. Doubtless a small contribution from the lottery would not go amiss.
I understand that an outline specification for a replacement yacht costing in the region of £80 million has been drawn up but awaits government approval. A new vessel is not an £80 million problem but an £80 million asset, a vision for the future. The immense value of the Royal Yacht is demonstrated by her forthcoming and final deployment and plans have been drawn up to send the "Britannia" on an extensive tour of the Far East in a combination of royal visits and trade missions. That will culminate in a visit to Hong Kong with the Prince of Wales for the hand over of the colony to China next July.
I have no doubt that the royal and commercial roles are of vital importance. Both are compatible and give a very good return for one's money. A new national vessel with a clear war-time role should not be just a Royal Yacht but a ship for the nation. I believe that she deserves ministerial support. Now is the time for her to be given a fair wind and I hope a political head of steam is building up for a decision on her replacement.
10.57 p.m.
Lord Monteagle of Brandon: My Lord, first, I thank my noble friend Lord Ashbourne for bringing this important topic to your Lordship's notice, and I should like to reiterate what he said. However, I fear that much of what I wanted to say has already been said by other noble Lords.
Two and a half years ago, I was lucky enough to be taken on a conducted tour of the "Britannia". It was a most memorable day which I shall never forget. From then on, I started to take an interest in the future of the yacht, particularly as just before my visit it was announced that she was due to be decommissioned in 1997. It seemed to me that the yacht has such tremendous style and charisma and is such a national asset that it would be a tragedy if she were allowed to disappear without trace.
Obviously with a ship of this age, there are a number of disadvantages and problems compared with more modern ships: because of her old-fashioned design, she needs a very large crew; she is not suitable to be used as a hospital ship; and I understand that all the food has to be manhandled up three flights of stairs. Those are just a few of the problems.
Therefore, it could be said that she is past her sell-by date and that considerable embarrassment would be caused if, for example, she were to break down or have
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a fire at sea. However, one of the options for her future is that it may be possible to refurbish and refit her to present day standards and incorporate modern technology and equipment. However, the consensus of opinion seems to be that that would be astronomically expensive and that even if that were done, at the end of the day her shelf life would not be very long.
Another option is that a new yacht should be built, and there the problems start. First, there is the cost and who should pay for her; what type and size she should be; how her usage could be shared by the Royal Family, business interests, export promotion and a host of others. However, the building of a new yacht would bring tremendous prestige and employment to whatever shipyard was chosen.
It is to my mind a very great pity that a certain section of opinion seems to think that the yacht is just a private gin palace of the Royal Family and that it has no other uses. Nothing could be further from the truth. It is used on many occasions to show the flag abroad, and every year there are a number of "sea days", as they are called, where receptions for businessmen are held.
On my visit to the yacht we were told that at a reception in Bombay in 1993 orders worth over £1 billion were given to British companies that evening. It is difficult to quantify exactly how much of that was attributable to "Britannia"; but I venture to suggest that if the reception had been held in a Bombay hotel, the result would not have been nearly so spectacular. What a new yacht may cost—and a figure has already been mentioned of approximately £80 million—pales into insignificance compared with the income that she could generate.
Since my visit to the yacht I have kept most of the relevant press cuttings from the Daily Telegraph and the Daily Mail. The majority opinion is that the yacht should be kept in some shape or form. I should also like to quote Mr. Henry Catto, whom my noble friend Lord Ashbourne mentioned. He was host at a state visit by the Queen to America in 1976. During the visit, "Britannia" was also used for commercial purposes. Mr. Catto says:
"What the British did was, I thought, clever. The great ship was used as a floating promotion for British industry and never was that industry projected in a more glamorous or effective way".
Mr. Catto goes on to say:
"Why on earth would this symbol of Britain be put to rest. If she is too old and too expensive, for heaven's sake replace her with a 21st century ship, replete with good engineering and good design".
A yachtsman serving on "Britannia" wrote in July this year:
"We have so little to shout about these days, yet we attack the things that are unique to us, in the vain belief that their liquidation will result in hard cash. The total of such losses will always be far greater than any noticeable financial gain".
There are numerous other letters and articles expressing the same sentiments; but there are far too many for me to mention here tonight.
I have no need to bore your Lordships with examples of waste or unnecessary use of public money and there is frequent evidence of this. I gather that the proposed millennium dome in London is expected to cost in the

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region of £360 million—enough to buy four new Britannias with something to spare! I would implore the Government to keep the question of replacing "Britannia" in perspective and make a positive decision without any further delay.
11.3 p.m.
Viscount Massereene and Ferrard: My Lords, I should like, first, to thank my noble friend Lord Ashbourne for initiating tonight's debate. It is now apparent that the current Royal Yacht "Britannia" needs to be replaced. Even if she were refurbished, she would be extremely expensive to run, having been built for a different age. However, it is most important that she has a dignified end—possibly, as a floating museum—but I personally feel that the best solution would be for her to be scrapped. Then there would be no question of her being exploited in the future.
Regarding a replacement, some very good ideas have been aired; but there are a number of points which need to be worked out, in particular the role of the Royal Navy in the enterprise especially if there is also to be the possibility of a passenger element.
In conclusion, the design of the new yacht should be a mix of the best of the old and the best of the new—plenty of teak, brass and leather with very little plastic and Formica. We do not want her appearance to resemble a giant speedboat as is the case with some of these modern yachts or cruise liners. I believe that the noble Lord, Lord Amherst of Hackney, mentioned the silhouette of the "Britannia", which is well known, so perhaps her replacement could represent something similar in that respect.
11.4 p.m.
Lord Williams of Elvel: My Lords, I am afraid that I may appear something of a spectre at what has been rather an emotional feast, but I echo the words of the noble Viscount, Lord Addison, when I say that we must live in the future and not in the past. I think the future is something that we have to discuss.
This Question of the noble Lord, Lord Ashbourne, is for the Ministry of Defence. I find it rather curious to see that the Ministry of Defence is involved in this particular enterprise. It could be, as I read in my Mail on Sunday, that Barclays Bank is prepared to put up all sorts of funds and underwrite all sorts of things for a replacement for the Royal Yacht. That would seem to me to be a Department of Trade and Industry question. I have also heard from the noble Lord, Lord Ashbourne, that the Welsh Office might contribute some of the costs of the new Royal Yacht. I find that a rather bizarre suggestion. I have also heard from the noble Lord, Lord Ashbourne, that this would be a vote winner for the Government if they agreed to spend money from the Foreign and Commonwealth Office, the Ministry of Defence, the Department of Trade and Industry, the Scottish Office and the Welsh Office; that is, taxpayers' money. Therefore I am, I am afraid, a little doubtful about the response that I can make to the Question put by the noble Lord, Lord Ashbourne.
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It is perfectly clear, as many noble Lords have said, that the Royal Yacht is an export bonus. I do not think anyone who has been involved in exports would deny that. Personally I have never had the honour of being invited on the Royal Yacht, but then 55 million other people in this country have equally had the honour of not being invited on the Royal Yacht, and so I share that with the majority of the population. No doubt noble Lords opposite are invited the whole time, but I am afraid I am not. But I have no doubt that there is an export potential in the Royal Yacht, or in a Royal Yacht. I thought the noble Lord, Lord Ashbourne, was rather reticent in not quoting what he was reported as saying to the financial section of the Mail on Sunday; namely, that Barclays Bank was prepared to put up all the money and underwrite everything, and there would be an export potential and that would be absolutely fine and dandy. If that is the case, that is not a Ministry of Defence matter; it is a trade and industry matter. Noble Lords who have spoken have said this is important for exports. That is a trade and industry matter. I cannot for the life of me—I say this seriously to the noble Earl—see how a Royal Yacht in any conception that any noble Lord has put forward could be a matter of the defence of the United Kingdom. It obviously was not suitable for—
Lord Mottistone: My Lords, if the noble Lord will allow me to intervene, how about the defence of Her Majesty the Queen?
Lord Williams of Elvel: My Lords, Her Majesty the Queen can probably look after herself.
Noble Lords: Oh!
Lord Williams of Elvel: My Lords, when Her Majesty goes on official visits I can understand that there is a requirement for a protection from the Ministry of Defence. That is perfectly obvious, but that is a small part of what the Royal Yacht, as I understand it, is about, unless the noble Earl can tell me that I am wrong. Where I have a difficulty is in perceiving this as a MoD matter rather than a DTI matter. I look forward to hearing what the noble Earl has to say.
11.10 p.m.
Earl Howe: My Lords, I commend my noble friend Lord Ashbourne for bringing this important issue to the attention of the House. I know that the future of the Royal Yacht is a subject which he follows closely, not least through his membership of the All-Party Parliamentary Royal Yacht Group. I can assure him that he is joined by a great many others in Parliament and across the country, for barely a week goes by without press interest in the Royal Yacht's past, present and future.
Lord Williams of Elvel: My Lords, it is not exactly the major talking point in Middleton Street in Llandrindod Wells.
Earl Howe: My Lords, that is a matter for regret. I believe that interest in the Royal Yacht is fully

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deserved. Since "Britannia" was launched over 40 years ago, she has served Her Majesty and this country with the highest distinction. She has been all the things that noble Lords tonight have said that she is. In addition to her splendid service as a royal residence and setting for Her Majesty's official entertainment, she has lent her unique prestige to the promotion of British exports and trade across the world. These duties, including the undertaking of hundreds of state visits, have led her to travel over 1 million miles and visit almost every accessible part of the United Kingdom at least once. Her programme last year included a central role in the VJ day celebrations. Then, as ever, "Britannia" drew plaudits as a distinguished and graceful embodiment of all that is best about Britain.
It must, however, be recognised that the world has changed greatly since "Britannia" entered service. Unlike the 1950s, travel by sea is no longer the most practical and convenient way to undertake long journeys overseas. Indeed, the opposite is true. Technology has moved forward apace. "Britannia", measured against all reasonable yardsticks, is now an elderly ship. Her 1940s technology includes steam-powered engines, now rare in the Royal Navy. Her complement is larger than that of a modern Royal Navy frigate. The age of "Britannia" makes her difficult to maintain, and this means that she is an expensive vessel to run.
My noble friend Lord Strathcona bemoaned the fact that "Britannia" spends extended periods alongside in Portsmouth. I am afraid that there is no avoiding the fact that a vessel of her age requires such periods for maintenance and repair, to say nothing of the need to permit her crew their well-earned leave ashore.
"Britannia" was released from her defence role in 1992 when we concluded that she was no longer suitable for use as a hospital ship during wartime. Without a defence role, with ever-increasing upkeep costs, and with, frankly, more efficient means of royal travel available, we needed to take a long hard look at the future of "Britannia".
We began by estimating the cost of running her on and found that a £17 million refit would give her a mere five-year life extension—not, in our view, good value for money. We therefore decided with great sadness that "Britannia" should be decommissioned in 1997 at the natural end of her operational life. I am convinced that this decision was correct.
And what of her future, post-decommissioning? Clearly we need, if we can, to ensure that she continues to serve a useful purpose, reflecting her many years of distinguished service. It is too early to say what that might be, though we have received a number of proposals from both public and private bodies all over Britain for her future use. Most envisage the preservation of "Britannia" as a heritage attraction. However, I am aware that opinions vary about this. We have heard tonight the view that she should be scrapped. We are actively considering all options, but I can assure noble Lords that once a decision has been made a statement will he made in the House.
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My noble friend Lord Ashbourne has asked specifically about the Government's arrangements for replacing "Britannia". Noble Lords will appreciate that this is a decision which cannot be arrived at lightly.
The Government are committed to securing value for money from the resources that we spend and we have to be absolutely convinced that there is a requirement for a replacement. These days, for example, the Royal Family rarely use "Britannia" as a means of transport, though state occasions do still take place aboard. With increasing pressures on the Royal diary, it usually makes more sense for Her Majesty the Queen to travel by air. Your Lordships will be aware that, when the announcement to decommission "Britannia" was made in 1994, Her Majesty made it known that she no longer believed that a Royal Yacht was required for the purposes of royal travel alone.
Let me be clear also that there is no defence requirement for a replacement Royal Yacht. "Britannia", when built, had a secondary task as a hospital ship in wartime, but circumstances never conspired to permit her to fulfil that role. After we decided in 1992 that she was no longer suitable for service as a Primary Casualty Receiving Ship, her primary tasks were representation of the United Kingdom overseas, provision of a setting for state occasions, and promotion of trade. These roles, rather than any defence tasks, provide the focus for the Government's deliberations on a replacement. If there is to be a replacement, my department will, of course be involved—for example, if it seems likely that the Royal Navy would crew the vessel—but defence by no means drives the requirement.
The noble Lord, Lord Williams, questioned the appropriateness of the running costs of "Britannia" falling to the defence budget at all. I can understand the point of view he has expressed. I have mentioned "Britannia's" erstwhile defence role as a reserve hospital ship, and largely we are looking at a historical carryover of practice from years gone by. Were there to be a replacement, and were there to be a Royal Naval crew, doubtless that element of the running costs would still fall to the defence budget.
Against these considerations we need to weigh very carefully the other purposes for which a yacht might be used. There is first the role a Royal Yacht can play in promoting British trade and industry. The success of "Britannia" in assisting British companies to win business overseas hardly needs repeating by me. Sea Days have been a highly valuable tool in enabling British businesses to meet potential overseas customers, and many important contracts have been signed on board, as noble Lords have mentioned. Though the contribution of "Britannia" to trade promotion is difficult to quantify, I have no doubt that a replacement Royal Yacht would continue to perform this well established function.
I touched a moment ago on the question of manning the Royal Yacht. I should like to take the opportunity offered by the debate to mention the first-rate contribution of those who serve aboard "Britannia", both members of the Permanent Royal Yacht Service and the Royal Naval officers and ratings. Their dedication and

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professionalism represent the best traditions of the Royal Navy and are the foundation of "Britannia's" unique standing and success. The Secretary of State for Defence has already made it clear that it would be difficult to envisage a new Royal Yacht without a Royal Navy crew. I would, however, stress again that no decisions have been taken and this issue must await the conclusion of our deliberations on whether a new yacht should be procured.
My noble friend took the Government to task for not having taken a decision yet. I hope I have explained that the range and complexity of the issues that need to be resolved before a judgment can be reached are considerable. Without the absolute need for a Royal Yacht for royal travel which existed when "Britannia" was first commissioned, the balance of arguments is a much finer one than it was 40 years ago, despite all the arguments advanced this evening, to which I have listened very carefully. As I have indicated, the Government need to consider carefully whether the expense of a new yacht can be justified on representational and trade promotion grounds. I can assure noble Lords that a statement will be made in the House once a decision has been taken.
The noble Lord, Lord Amherst of Hackney and my noble friend Lord Strathcona mentioned a possible training role for a new Royal Yacht. I was, of course, aware that the idea of a joint Royal Yacht and sail training vessel had been proposed. I am sure that noble Lords will be most familiar with the Cadland Committee proposal. The sail training option is one of a number under consideration by Ministers. But, as I said, no decision has been made on the question of a new Royal Yacht and, until such a decision is taken, it would be premature for me to comment on any particular design idea.
In fact, the Government have continued to receive many innovative proposals for the design and running of a new yacht. Some of these have mentioned—as did my noble friend Lord Addison—the possible use of private finance to fund the construction of the vessel. I
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have listened sympathetically to the pleas from other noble Lords that construction should be supported from public funds. The question of finance is one of the many issues being addressed by the Government in our consideration of a replacement. Other proposals combine the functions of a Royal Yacht with other roles. But this is a complex issue that demands detailed study. It would therefore be premature to venture an opinion either on the overall question of a replacement or on a particular option.
I hope I have given a fair summary of the complex and delicate issues before us. The future of the Royal Yacht is not a subject that this Government treat lightly. Decisions on both "Britannia" and a potential replacement for her will be taken only after careful consideration of all the options available to us. I can assure my noble friend Lord Ashbourne that the role of the Royal Yacht in trade and export promotion, on which noble Lords have placed particular emphasis this evening, will be a key consideration.
In conclusion, "Britannia" has served this country with great dignity for more than 40 years. I am convinced that we are right to decommission her next year and that our deliberations on her future, and on her replacement, will lead us to a way forward befitting the place of "Britannia" in the nation's affections.
Lord Williams of Elvel: My Lords, before the noble Earl sits down, can he say whether he expects an announcement on the future replacement of "Britannia", if any, to take place before 1st May 1997?
Earl Howe: My Lords, I should like very much to give an indication to the House as to when a decision might be taken. Unfortunately, I think it would be somewhat rash of me to do so. These are very complex matters, as I indicated, and there are a great many government departments and Ministers looking at this question. While it might be desirable to do so, I can unfortunately give no promises.
House adjourned at twenty-three minutes past eleven o'clock.