Lords Sitting of 25 March 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 St. Edmunsbury and Ipswich.

Prisoners in Hospital
Baroness Hayman Baroness Hayman asked Her Majesty's Government:
Whether they consider that the right balance between security and humanity, referred to by the Home Secretary in the Statement on prisoners in hospital made on 18th January (H.L. Deb. col. 724), was achieved in the case of a woman prisoner shackled at her baby's funeral in the chapel of Great Ormond Street Hospital.
The Minister of State, Home Office (Baroness Blatch): My Lords, the Statement of 18th January of my right honourable friend the Home Secretary modified the arrangements for pregnant women prisoners visiting hospital. In the case to which this Question refers, the balance between security and humanity appears to have been struck. However, I understand from the Director General of the Prison Service that he has asked the area manager for Holloway to investigate the matter, and I shall write to the noble Baroness when that investigation has been completed.
Baroness Hayman: My Lords, I am grateful to the Minister for that reply. However, does she accept that the funeral of a child is so awful an occasion that it should not be made worse by handcuffing the parent unless there are overwhelming security reasons? As this mother was not adjudged to be such a security risk that she had to be handcuffed when visiting the child in intensive care, is it not clear that a misjudgment was made? Can the Minister assure us that in future common sense and common decency will prevail in such situations?
Baroness Blatch: My Lords, the noble Baroness is right in that this lady visited her baby each day, and that was because the room the baby was in was secure. Consideration was given to her application to attend the funeral of her baby but her attitude, her behaviour, her threats and an assault on a member of staff, coupled with her aggressive and emotional state, meant that she was too great a risk to attend without handcuffs. She assaulted staff while in hospital. The chapel at the hospital was not considered to be secure. The staff of the Prison Service have a difficult job in balancing security considerations against those of humanity and dignity.
Lord Williams of Mostyn: My Lords, was the child 10 days' old when it died? Did the minister of religion in the chapel ask for the shackles to be removed? Can there really be any justification for such barbaric conduct?
Baroness Blatch: My Lords, the baby was 10 days' old and I believe someone did ask for the shackles to be removed. The father was allowed temporary release from prison to attend the funeral of his child. He was considered not to be a risk. A proper risk assessment was carried out and the woman was considered to be a risk as her behaviour was abusive, she assaulted a member of the prison staff and she was in a highly emotional and aggressive state. It was not considered suitable to remove the shackles. A decision could have been taken not to allow her to attend her child's funeral, but it was considered that she should attend the funeral and be handcuffed.
Baroness Gardner of Parkes: My Lords, in reply to the previous supplementary question, did my noble friend say that the father was also a prisoner but was not shackled when he attended the funeral?
Baroness Blatch: Yes, my Lords, I did say that. He was considered suitable for temporary release, but the mother was considered unsuitable for temporary release.
Lord Allen of Abbeydale: My Lords, will a copy of the reply to the noble Baroness be put in the Library of the House as a number of us would be interested to see it?
Baroness Blatch: Yes, of course, my Lords.
Baroness Hayman: My Lords, is it not correct that at the time this incident occurred after the Parkhurst breakout last year, there was such overwhelming concern as regards blanket impositions of high security on prisoners that misjudgments were made across a range of cases involving women prisoners? That was admitted in the case of pregnant women prisoners and women prisoners who were in labour. Is it not true that four members of the staff at Great Ormond Street complained to the Prison Service after this incident? Those who know the chapel at Great Ormond Street know that it is easy to keep secure.
Baroness Blatch: My Lords, if a misjudgment has occurred in this case, that will be revealed as part of the investigation. However, I should add that since 1988 there have been 26 escapes from funeral escorts, 23 escapes from hospital visits while handcuffed, and 150 escapes from hospital visits while escorted but without being handcuffed. This is a difficult matter for the Prison Service staff. At the end of the day they have to consider the security of the public, the security of the staff, and sometimes even the security of the prisoners themselves. In the case of the lady we are discussing, she had a record of being abusive to, and assaulting, staff.
Lord Avebury: My Lords, were the allegations which have been made against the prisoner this afternoon the subject of adjudications? If so, could the record of those adjudications be placed in the Library with the letter?
Baroness Blatch: My Lords, what I have said is a matter of record. Those events are noted as part of the daily record in the prison.
There was an appeal against an extra sentence that the lady was given. I do not have the result of the appeal, but I shall ensure that it is part of the information that I give to the noble Baroness.

Mr. Humphrey Errington
2.43 p.m.
Lord Peyton of Yeovil Lord Peyton of Yeovil asked Her Majesty's Government:
Whether they will place in the Library of the House copies of the judgments by Sheriff Allan on the application by the Clydesdale District Council against Mr. Humphrey Errington delivered on 5th December 1995 and 28th February 1996.
The Earl of Courtown: My Lords, I have arranged for copies of both Sheriff Allan's judgments on the application by the Clydesdale District Council against Mr. Humphrey Errington to be placed in the Libraries of both Houses.
Lord Peyton of Yeovil: My Lords, is the noble Earl aware that the second judgment is still on the missing list? It is not yet in the Library. I am sure that the noble Earl has read the judgments. Has he noted in particular the reference made by the sheriff to the litigious pugnacity demonstrated by the council and the fact that the council had not been able to adduce any evidence whatever of a related illness? Is my noble friend aware that, as a result of this bullying, Mr. Errington has been obliged to spend £150,000 in his own defence and that despite those two cogent and devastating judgments he has not yet received a penny piece from the council?
The Earl of Courtown: My Lords, I thank my noble friend for letting me know that he visited the Library just before lunch and that the second judgment was not available. I had arranged for it to be in the Library last week; perhaps it has gone missing. My noble friend commented on certain aspects of the judgment. To say the least, it makes interesting reading. However, we must be clear on one point. Sheriff Allan concluded in his judgment that it was reasonable for the applicants to take the initial steps with a view to bringing the matter before the justice of the peace, or the sheriff, essentially as regards safety, and to obtain appropriate advice. I understand what the noble Lord added. As regards payment of fees, I understand that at present the final figure is being negotiated between the two parties—the legal adviser to Clydesdale District Council and Mr. Humphrey Errington's legal
1466
adviser. If they cannot come to an agreement on those figures, I believe that the auditor of court will make a decision.
Lord Bancroft: My Lords, does the noble Lord agree, to quote an elegant variation of the sheriff's judgment from that cited by the noble Lord, Lord Peyton, that this litigiously pugnacious approach by the district council shows that its zeal for a conviction outran its zeal to establish the facts? Does he further agree that it is faintly reprehensible for a district council to let it be known on the wireless that it is determined to continue to pour out public money in order to secure a conviction against Mr. Errington?
The Earl of Courtown: My Lords, many questions need to be asked concerning the judgment. The issue will be taken into account when we consider the statutory codes of practice which are being reviewed at present.
Lord Monkswell: My Lords, will the Minister clarify the circumstances of the case? Not all Members of your Lordships' House will understand what is being talked about. Can he confirm that it is right in the present circumstances for a district council to pursue the subject of food hygiene and safety with the utmost zeal?
The Earl of Courtown: My Lords, the noble Lord makes an interesting second point. It is quite right that environmental health departments have best views in mind for their council tax payers when they consider such problems. We would need a considerable time to go through all the facts of the case. When the judgments are available in the Library—as I hope they now are—I suggest that the noble Lord reads them.
Lord Peyton of Yeovil: My Lords, I am sure that all noble Lords are grateful to the noble Lord, Lord Monkswell, for his efforts to explain. Perhaps my noble friend will advise the noble Lord to take the opportunity to read the judgments before he enters into the matter further. Does my noble friend appreciate that I completely follow the sheriff's judgment in saying that it was perfectly reasonable for the council to bring this matter before the court? What was grossly improper—I hope that my noble friend will agree—was to exhibit the litigious pugnacity which the sheriff attributed to the council.
The Earl of Courtown: My Lords, as I said, I have read the judgment. It is quite graphic in its description in various areas. I believe I suggested that the noble Lord, Lord Monkswell, might read the judgment. However, one other point has not been made. In his supplementary question, my noble friend Lord Peyton asked why the accounts between the legal advisers had not yet been settled. He stated that Mr. Errington was out of pocket by whatever the amount of his costs. I do not believe that that is true. The accounts will be settled

1467
direct between the local authority, its legal adviser and the legal adviser acting for Mr. Errington. Mr. Errington will not have to be out of pocket on his legal fees.
Lord Stoddart of Swindon: My Lords, if Clydesdale District Council is shown to have acted improperly, will the people who acted improperly be liable to surcharge?
The Earl of Courtown: My Lords, I read the noble Lord's supplementary question when the matter last came before the House. I am by no means an expert on the subject but I understand that to be liable for surcharge someone must have acted ultra vires. I believe that nothing has been said in the judgments to suggest that anyone is outside the law.
Lady Saltoun of Abernethy: My Lords, can the noble Earl say how much the local authority has spent of council tax payers' money in prosecuting Mr. Errington?
The Earl of Courtown: My Lords, the figures have not been finalised.

Iraq: Ministerial Replies
2.50 p.m
Lord Jenkins of Putney Lord Jenkins of Putney asked Her Majesty's Government:
Whether, in the light of their recast first paragraph of Questions of procedure for Ministers, they will review all replies given on the subject of exports to Iraq since January 1989, and whether they will issue a statement correcting errors in accordance with the background note Ministerial Accountability and the Release of Information on Defence Related Exports issued by the Chancellor of the Duchy of Lancaster.
The Parliamentary Under-Secretary of State, Ministry of Defence (Earl Howe): My Lords, the Government take the view that the Howe Guidelines were not changed and do not consider that a statement on replies to questions on exports to Iraq is necessary.
Lord Jenkins of Putney: My Lords, will the noble Earl agree that paragraphs E6 and E7 of the Scott Report, Volume II, reveal that the Government appear to have used Saudi Arabia as a conduit country for licensing prohibited lethal defence exports to Iraq; and Portugal as a conduit country for Iran? In a Written Answer to my Question of 24th May 1993 at col. WA1 of Hansard, the noble Baroness, Lady Chalker, said:
"No lethal defence equipment has been supplied from the UK to Iran since 1979".
Will the Government agree that they must have known that that was not the case and that a huge quantity of ammunition was, for example, being exported to Portugal under licence, greatly in excess of what the Portuguese military could possibly have used? It was actually en route to Iran. For accuracy, I quote—
Noble Lords: Reading!
Lord Jenkins of Putney: One can, according to the Companion, quote in such circumstances. Was the information known to the noble Baroness, Lady Chalker, or was it retained at Cabinet level, thus making a junior Minister an innocent party to the deception? May I say—
Noble Lords: No!
Lord Jenkins of Putney: My Lords, is the House aware that I have informed the noble Baroness of my intention to mention the matter this afternoon?
Earl Howe: My Lords, I reject the noble Lord's suggestions. There would have been no difficulty about amending ministerial letters or Written Answers had such. changes been warranted. However, we have checked all the replies on the topic. We still believe that they are fair and accurate, and we therefore see no need for corrections.
Lord Tebbit: My Lords, will my noble friend agree that since it was the consensus of all the senior lawyers in this House that Sir Richard Scott did not understand the law, which is his speciality, it is pretty unlikely that he could get right matters of administration, which are not his speciality?
Earl Howe: My Lords, it is not for me to criticise Sir Richard Scott's working methods, but my noble friend makes a powerful point.
Lord Bruce of Donington: My Lords, is the noble Earl aware that it will do the history of the Government and Parliament no good if continued efforts are made to bury the matter without thorough corrections being made? Has not a deliberate effort been made to rubbish Sir Richard Scott's findings? It will not do. Sooner or later the records will have to be corrected, if only for the recovery of the Government's honour in the matter.
Earl Howe: My Lords, with respect to the noble Lord, to suggest that we have tried to rubbish Sir Richard Scott's report is absolute nonsense. We have accepted the criticism levelled by Sir Richard Scott on the distribution of intelligence material. We have accepted his criticism about export controls and licensing procedures. We accept the principle of the need for greater supervision, by the office of the Attorney-General, of Customs and Excise prosecutions and many of Sir Richard's other recommendations.
Lord Renton: My Lords, is my noble friend aware that even the greatest top lawyers sometimes disagree?
Earl Howe: Yes, my Lords.
Lord Avebury: My Lords, the Minister claims that he has not rubbished Scott but he is happy to accept the rubbishings of Scott by persons on the Benches behind him. Is it not the practice not to attack judges, except by means of substantive resolutions? Does that not

1469
equally apply to judges who are appointed to conduct inquiries on behalf of the Government, such as Sir Richard Scott?
Earl Howe: My Lords, I made a particular point not to rubbish Sir Richard Scott in response to my noble friend's question. I reject what the noble Lord says.
Lord Richard: My Lords, is the Minister aware that I do not understand the Answer he gave to my noble friend Lord Jenkins? This has nothing to do with the Howe Guidelines; it is to do with Questions of procedure for Ministers. The Question was directed at that. Sir Richard Scott examines the procedure in relation to Ministers answering Questions in Parliament and reaches certain conclusions. One conclusion was:
"The justification for a refusal to answer Parliamentary Questions on sales of arms or defence-related equipment to other countries requires, in my opinion, to be re-examined".
Do the Government accept that? Are they re-examining the matter? If so, when will we know the result?
Earl Howe: My Lords, the Government have prepared a memorandum setting out their understanding of ministerial accountability and the conventions governing the provision of information by government to Parliament. That document has been placed in the Library. As indicated in the debate on 26th February, the Government are willing to consider the matter positively and hope that the memorandum will provide the basis for a constructive discussion.
Lord Richard: My Lords, will the Minister answer the question I put to him? Do the Government accept Sir Richard Scott's statement:
"The justification for a refusal to answer Parliamentary Questions on sales of arms or defence-related equipment to other countries requires, in my opinion, to be re-examined"?
For ease of reference, that is taken from page 1803, K8.8. Do the Government accept that or not?
Earl Howe: My Lords, I had hoped that my reply just now would have answered the noble Lord's question directly. It was intended to do so. The position is that the Public Service Committee is currently looking at questions of ministerial accountability and openness. The Government are co-operating fully. That speaks for itself.
Lord Jenkins of Putney: My Lords, is that not a case, not only of a refusal to answer, but of giving an answer which was inaccurate when, according to Scott, an accurate answer should have been given? Is it not in accordance with the Government's statement in the background note from the Chancellor of the Duchy of Lancaster that the Government intend to correct any mis-statements of that kind? Is the noble Earl saying that they are not now doing what they agreed to do in the statement?
Earl Howe: My Lords, it is fair to say that this Government have done more than any other to improve transparency and openness. There will always be accepted reasons why, in some areas, full information
1470
cannot be made public. That has been a convention of successive governments. However, we have said that we will look positively at Sir Richard Scott's views on ministerial accountability. We are doing just that.
Lord Campbell of Alloway: My Lords, will my noble friend agree that the noble Lord, Lord Jenkins, is failing to draw the fundamental distinction between the supply of lethal equipment and non-lethal equipment? Will he further agree that no lethal equipment was supplied and that the non-lethal equipment was supplied under Guideline 3 which had an in-built discretion?
Earl Howe: My Lords, I am grateful to my noble friend. He highlights a point that is often glossed over in the debate. The Government at no time licensed the export of lethal weapons to Iraq. No arms were exported to that country from the UK from 1980 onwards.

Privatisation of Parliamentary Operations
3 p.m.
Lord Wallace of Saltaire Lord Wallace of Saltaire asked Her Majesty's Government:
What other aspects of the operations, staffing or property of Parliament or of the Palace of Westminster may be affected by further steps towards privatisation, beyond the printing of parliamentary papers through HMSO and the recruitment of Clerks and other staff through Recruitment and Assessment Services.
Earl Howe: My Lords, the only other service currently provided to Parliament by OPS bodies in the course of privatisation is the supply of stationery and office equipment by HMSO. There are currently no plans to privatise other OPS agencies having a direct bearing on services to Parliament.
Lord Wallace of Saltaire: My Lords, I thank the Minister for that reply. I note that he says "currently". Will he give a categorical assurance that, if the Government consider further steps towards privatisation, there will be the earliest possible consultation with the House? Will he agree that it was constitutionally improper to set towards privatisation areas that are covered by the Palace of Westminster and its operations? Does he accept it as incompatible with the doctrine of parliamentary sovereignty and constitutionally subversive of the proper balance between Parliament and government?
Earl Howe: My Lords, it would be impossible for me to commit the Government, or successive governments, indefinitely. As I acknowledged during our debate the other day on Recruitment and Assessment Services, it was indeed unfortunate that the Answer given in another place was not also repeated in this House. Parliamentary scrutiny of any privatisation is possible, as recent debates in this House and in another place proved. But it is equally important that Parliament should be consulted in its role as customer. The privatisation of

1471
HMSO depends on the House authorities agreeing a satisfactory contract. That in itself may involve a debate and a vote. I suggest to the noble Lord that the legitimate interests of Parliament are fully protected.
Lord Bruce of Donington: My Lords, will the noble Earl give the House an assurance, in the light of the debate that took place in this House comparatively recently, that the Government will now abandon any question of the privatisation of Recruitment and Assessment Services?
Earl Howe: My Lords, I am aware that terms of reference have been recommended for a Select Committee on the public service, and that it has been suggested that such a committee might first report on the Government's plans for the future of Recruitment and Assessment Services. The Government will wish to consider further their response to the opinion expressed by the House on this matter in the light of that. We have undertaken to come back to the House with that response and we expect to do so shortly.
Lord Wallace of Saltaire: My Lords, given the interest expressed in leasing various palaces and various sales of government property, will the Minister assure the House that any proposals from companies interested in the purchase, or even the lease, of property of the Palace of Westminster itself will be dismissed out of court?
Earl Howe: Yes, my Lords, I can give that assurance.

Business
3.3 p.m.
Lord Strathclyde: My Lords, at a convenient moment after 3.45 p.m., my noble friend Lady Cumberlege will, with the leave of the House, repeat a Statement that is to be made in another place on the health aspects of BSE. This will be followed by my noble friend Lord Lindsay, who will, again with the leave of the House, repeat a Statement on the agricultural aspects of BSE.

City of Westminster Bill [H.L.]
The Chairman of Committees (Lord Boston of Faversham): My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That the Commons Message of 21st March be now considered; and that, notwithstanding anything in the Private Business Standing Orders or practice of the House, the promoters of the Bill, which originated in this House in Session 1993–94, and which has passed all its stages in this House but not in the Commons, may proceed with the Bill in the present Session;
That the Petition for the Bill be deemed to have been deposited;
That all Standing Orders applicable be deemed to have been complied with;
1472
That the Bill be deposited in the Office of the Clerk of the Parliaments not later than 3 p.m. on Thursday 28th March next with a declaration annexed, signed by the agent, stating that it is the same in every respect as the Bill passed by this House;
That the proceedings on the Bill in the present Session be pro forma and that no new fees be charged.—(The Chairman of Committees.)
On Question, Motion agreed to, and it was ordered that a Message be sent to the Commons to acquaint them therewith.

Education (Student Loans) Bill
3.4 p.m.
Report received.
Clause 1 [Subsidy in respect of private sector student loans]:
Lord Peyton of Yeovil Lord Peyton of Yeovil moved Amendment No.1:
Page 1, line 8, at beginning insert ("Subject to section 1(3) of the Education (Student Loans) Act 1996,")
The noble Lord said: My Lords, the debate that we had in Committee on similar points to those to be raised today was rather lost in the wash of a Statement. I think that not all noble Lords who were present that evening had the opportunity to hear any explanation of what it was about.
To begin on a friendly note, my noble friend has earned the gratitude of the House, and certainly my own, on two particular points. First, he provided us with a print-out of the 1990 Act as it would be with the present Bill superimposed upon it. Secondly, he gave the appearance of taking very seriously the points that were raised about parliamentary control. With private sector institutions taking part for the first time, Parliament ought at least to know the quantity of public money that those institutions will be handling in any one year, subject to what general terms funds will be made available to students, and what arrangements will he made for repayment.
As my noble friend has said on a number of occasions, the Bill is enabling legislation. It is therefore bound to attract—and ought to attract—some measure of critical examination, and particularly in this respect. As I understand it, the Bill enables the Government to make such arrangements as they think fit—and so far as I can see they have made few, if any, arrangements for telling Parliament what they have done.
I accept—or rather, I think I accept (I should like my noble friend's advice on this point)—that the amendments tabled in the name of my noble friend Lady Park and myself could have the effect of making it very difficult, if not impossible, either for the Government to finalise arrangements with those private sector institutions that are showing an interest, if there are any, or even for arrangements to be reached with individual students. It is no part of our purpose either to frustrate those negotiations or even to make them difficult. What we should like is an opportunity for Parliament to be told precisely what those arrangements are.
I do not particularly want to press this amendment to a vote. I did not want to press the amendments to a vote the other day in Committee. It was partly due to my increasing awareness that the department was not taking this point at all seriously. Then, if I may weary the House with one brief quotation, we reached the stage when my noble friend used these words:
"I mentioned the detailed information that will be available in the department's annual report. That, as I understand it, is always published and made available to Parliament. Parliament has a chance to scrutinise that annual report and"—
mark the words—
"certainly can find time to do so".—[Official Report, 12/3/96; col. 784.]
If I were seeking safe custody for some piece of sensitive information, I could not think of any more intelligent thing to do than to include it in a departmental annual report. It would be safe from reading by anyone, save perhaps a few eccentrics or those of unsound mind. There is no way that Parliament can be satisfied with facts which should be made available to it being made available solely through the medium of a departmental annual report.
I am most grateful to my noble friend in that since the vote the other day he has moved his position. He was kind enough to write me a letter promising a separate Statement to Parliament. He has not yet said precisely what that Statement would contain, but I take it that at the top of the list would be a clear indication of the total cost of the moneys spent during a financial year.
Let me again make it absolutely clear to my noble friend that I do not want in any way to add to his difficulties. We have no desire to frustrate the Government in achieving the purposes which Parliament has given it the authority to pursue. We want to be told in general terms what the Government are up to. Am I right in thinking that, with the Bill as drafted, there will be no need for further regulations and that therefore any reference to affirmative resolution is by the way? There is no point in it. That is one of the reasons why I am a little unenthusiastic about my amendments.
I want to make it abundantly clear to my noble friend, whose courtesy and attention I greatly appreciate, that in my view, at a time when the Government are to provide private sector institutions with substantial sums of money to enable them to grant loans on favourable terms to students, we need to know how much money is involved and for what period in general it is being given. In his letter to me my noble friend said that he is perfectly prepared to let us have sight of the general contract but not of particular cases. That we accept totally. But I believe that Parliament has every right to know the sums of money that are being made available, on what general conditions and what arrangements will be made for their repayment.
As I said, I am not at all anxious to divide the House this afternoon. I very much hope that, as a minimum, my noble friend will take back this matter—I do not expect him to accept the amendments—and give it serious thought before Third Reading. I hope he will then bring forward some alternative arrangement for
1474
giving to Parliament the information for which it is entitled to ask and set out the form of the Statement which he would make to Parliament in pursuance of that new arrangement. I beg to move.
3.15 p.m.
Baroness Park of Monmouth: My Lords, I support the amendments. I recognise that the Minister is trying very hard to move in our direction and allay some of our concerns about what will still be a blank cheque. Also, because we are not dealing with regulations, the application of the affirmative resolution procedure is not appropriate. I thank my noble friend the Minister for his very helpful text showing what the full, amended Bill looks like. Nevertheless, I believe it proper and necessary to reiterate in this debate the provision already contained in the 1990 Act and repeated in our amendment.
I recognise that in this Bill there are genuine problems about commercial confidentiality, once we are talking about private money secured by competitive tender. But I want to know from the Minister when and in what way Parliament will be told once the contracts are signed; who is doing the lending, if anyone; what the total administrative and other costs will be compared with the costs of the existing system of the public borrowing facility through the Student Loans Company; and what is the length of the contract. Maybe we cannot be told all that but I certainly should like to know most of it. My right honourable friend the Minister said in another place on at least one occasion that in due course the Student Loans Company would probably fade away, presumably meaning that all loans would be paid through the private sector. That makes my curiosity even greater.
In the debates on the original 1990 Act, the Government spoke about top-up loans. The White Paper made a commitment that the maximum top-up loan would be 50 per cent. of the original maintenance grant. Is that still the policy? Will that policy apply to loans from the private sector? I continue to be unhappy also about the permissive nature of the provision for making payments to governing bodies. Will those be negotiated directly by the private institutions? It is already a scandal that the universities are paid only £4 for each student application processed instead of the £8 which it costs them, and they are thus subsidising the student loans system to the tune of £2 million per annum. That is a fact that has caused considerable concern in the Public Accounts Committee, which rightly points out that the money is being paid out at the expense of higher education priorities.
Thus, I believe that it is absolutely essential for; the Government, once the contracts have been concluded, to make an early Statement to Parliament saying what the scheme is to cost in the round so that it can be compared with the cost of the existing public sector arrangements; telling us which institutions are participating—after all, students themselves will need to know that in good time; the duration of the initial scheme—for instance, is it to be reviewed after an initial period of five or 10 years; and the arrangements, as they are called, as they affect the universities—indeed, I hope

1475
that, having failed utterly to consult the CVCP when the Bill was first brought forward, the Government will talk to it now at least about the financial and administrative implications of the scheme for it. After all, it is one more task being placed on its already overloaded and underfunded administration.
In view of all that, I should not be at all happy—any more than the House was happy in 1990—unless a method of informing Parliament which offers a proper opportunity for debate on the Floor of the House is envisaged. For that reason I should have wished to make the debate on the report of the first year of operation of the scheme subject to the affirmative resolution procedure. But, as they are not regulations but presumably orders, that cannot be. I do not believe that a technicality of that kind should be allowed to negate Parliament's power to consider properly the cost and effectiveness of the new arrangements once the requirements of commercial confidentiality have been satisfied and the contracts signed and respected.
I wait with interest to hear from my noble friend the Minister how it is proposed to ensure that the necessary information on which to base a judgment of the value and propriety of the new arrangements can be obtained and the blank cheque justified.
Lord Morris of Castle Morris: My Lords, it is a pleasure to support Amendments Nos. 1 and 2, which have been grouped together, so cogently and felicitously proposed by the noble Lord, Lord Peyton of Yeovil, and the noble Baroness, Lady Park of Monmouth, to whom it is always as delightful as it is improving to listen.
After reading with care and with profit our exchanges on this subject at Committee stage, and hearing again today the eloquent and persuasive pleas of noble Lords opposite, and after scrupulously reconsidering the Minister's words throughout the Committee stage, especially his final reply to his noble friend—given after some considerable pressure—I can only say, with the poet George Meredith, in his poem "Modern Love", stanza 50,
"Ah, What a dusty answer gets the soul
When hot for certainties in this our life".
It is the uncertainty of all this that lies behind so much of our unease with the whole of this unnecessary little Bill. Phrases like, "the blank cheque" and "no payee, no date, no amount", run like a gay refrain through all of our discussions. I am bound to say that, so far, we have been given remarkably little reassurance.
The noble Baroness, Lady Park, made our concerns pellucidly clear when she said at Committee stage, and I quote her with pleasure,
"the Government will not know who has tendered and on what terms until at least after Easter. Nor, we understand, will the private institutions know until then what will be the cost of rejigging their computer technology and training their staff. Nor will the Government be able, until then, to cost the relationship between the universities, which must still do all the paperwork, and two funding mechanisms rather than one".—[Official Report, 12/3/96; col. 778.]
I could not have put that better myself, and I wish I had. It is only when we are certain what the arcane arrangements are to be that we shall be able properly to exercise the powers of your Lordships' House. It is our
1476
duty to do that and, until we have that information, we are unable to do so. The Minister, in his carefully worded reply, could offer us only,
"the normal channels of the appropriation accounts, and … the department's annual report".—[col. 784.]
I shall treasure the description of "the department's annual report" given by the noble Lord, Lord Peyton of Yeovil, and I can echo it having been, through the courtesy of the Minister, presented with a copy of it just before last weekend. I forgot to weigh it. All I can say is that the report which has just been issued feels as though it is heavier than the one it replaced. But it is still the departmental annual report. That is hardly consistent with what we heard earlier this afternoon—minutes ago—about this Government's commitment to open and transparent transactions. Few things are less transparent than a departmental annual report. All that the Minister could offer us therefore was cold comfort, too little and too late.
The appropriation accounts and the departmental annual report are retrospective documents. They simply describe how money has been spent and we, when we receive them, may approve or loudly disapprove. But there is nothing whatever we can do about them. They do not provide a means of prior approval.
It is extremely difficult to see why the Government are so violently resisting that approach when they conceded it in the 1990 Education (Student Loans) Bill. That, surely, is a good, apposite and relevant precedent, and the Government should follow it by accepting the amendment.
Lord Beloff: My Lords, I had not expected to be in the House this afternoon but it seemed a pity to leave before the Statements after Question Time, and therefore I find myself in the curious position of retrogressing in time. In 1990, as has been referred to, we had the original Education (Student Loans) Act. I ventured to tell your Lordships that it would not work; that it would be a source of major inconvenience to students and to universities. The fact that it is now being amended proves, if proof were necessary, that my prophecy was entirely correct.
I mentally made another prophecy, which was the reason I did not intend to take part in today's proceedings any more than in the preceding stage of the Bill. I privately prophesied that all argument about this Bill was quite unnecessary, a taking up of your Lordships' time, because it will never happen. There is no reasonable possibility of any private institution, unless run by people demonstrably unfit to run such an institution, taking on this burden. We cannot make private people do things, even by bribes, unless, on the whole, they believe that there is something in it for them. Apart from discouraging any student from banking with them in their future careers, it is difficult to see what effect the Bill could have.
There is another, more important, point. It is perfectly clear—the Minister is as well aware of this as any other Member of this House—that the whole question of financing universities and students is now in the melting pot. The Dearing Committee is seeking to find an appropriate new method of funding higher

1477
education. To my mind it is unthinkable that any government would rush into another complicated mechanism of this kind when the whole idea of student loans in their original form may be jettisoned as a result of the Dearing Report.
I cannot understand why, when we are always told how little time this House has for important discussions—for instance, we are told that we cannot have two or three days of debate on the IGC, which is an important event—time can be found for a Bill which has no dignity of ancestry and no hope of progeny.
Lord Tope: My Lords, I follow that intervention with some trepidation and mindful of what the noble Lord, Lord Beloff, says about the unnecessary taking up of your Lordships' time. As I made clear at Second Reading, I share his view that this Bill should never have been born in the first place and, with the announcement of the Dearing review, should have been withdrawn. Nevertheless, it is before us and I rise briefly to put on record the support of myself and my colleagues for the intentions of the amendments before us.
I cannot speak as eloquently as the movers of the amendment and the noble Lord, Lord Morris of Castle Morris; nevertheless, we wish to echo all the comments made on the amendment. It has been said many times that the Government are seeking, through this Bill, a blank cheque; we do not know the payee nor any of the details. It was suggested at an earlier stage that it was a rather novel approach to be conducting our sensitive commercial negotiations through Parliament. That is not what is proposed. We are requesting the opportunity for Parliament at least to exercise its authority to express its view and judgment on the negotiations when they are completed, but not when they are a fait accompli.
Others are much more familiar than I am with departmental reports. I believe the noble Lord, Lord Peyton, described them at an earlier stage of the Bill as being totally indecipherable and in a boring form. If he says so, it must be true. Nevertheless, they are an extremely difficult and belated way for your Lordships to find out what has been agreed by the arrangements. The amendment therefore is right in seeking some form of parliamentary scrutiny of the arrangements that are reached with such institutions as may be entering into agreements, if and when they do. I hope that we are about to hear from the Minister how he proposes to meet the wishes that are widely held in this House.
Baroness Farrington of Ribbleton: My Lords, I support the amendments and ask the Minister to give an assurance that the total cost of the loan under these proposals will be no greater than the total cost of a similar loan through the Student Loans Company. I appreciate that the Government may wish to reduce the public sector borrowing requirement, but surely any responsible government would want to give an indication—for example, to the Chancellor—that the students in question will not be paying a total cost per loan that is greater as a result of this legislation. Whether the student loan in question is classified as a
1478
public sector loan or a private sector loan, that, plus the proposed subsidy, should not put a greater burden on the general public, including those students who repay.
Are we really to understand that the Government have decided that this legislation should go through whatever the cost to the public purse? I find it hard to believe that the Chancellor takes that approach. Can the Minister remind the House why the Government are proposing in the Bill to subsidise the private sector at all? Surely the private sector is there to provide loans. If the Government's view is that students should be able to get loans from the private sector, why should the public subsidise? Is it that the private sector is not prepared to embark on this scheme without some form of carrot?
3.30 p.m.
The Minister of State, Department for Education and Employment (Lord Henley): My Lords, perhaps I may answer the noble Baroness's last point first. The simple reason is to allow the private sector to offer loans on the same basis as the Student Loans Company will also be offering them. We made that clear on a number of occasions at earlier stages of the Bill.
I start by agreeing with the noble Lord, Lord Morris of Castle Morris, when he paid tribute to the eloquence of my two noble friends. I hope and trust that he always takes such notice of what they have to say. However, he seemed to be moving on from their amendment. My noble friends, I think rightly, following the decision in Committee, have amended their amendment, moving away from the prior approval for which their earlier amendment seemed to be looking. The noble Lord, Lord Morris, it seems, is still looking for prior approval by Parliament of the contract. That, as I have made clear, is not acceptable to the Government and would be a constitutional innovation of a rather extraordinary kind.
Perhaps I may explain why we do not think that the amendment is the right way forward and try to allay some of my noble friends' fears. I shall describe how we hope to get the appropriate information to Parliament in order to meet the concern of both my noble friends that this should be forthcoming. Our first objective is to get for the student and the taxpayer the benefits of what the private sector does best, not only in personal lending generally but in the service, marketing and product standards that choice and competition bring. It would be futile to involve the private sector and then regulate away the advantages that that brings. The operation of choice in a competitive and diverse market is a far better safeguard than a raft of regulations.
Secondly, as made clear at an earlier stage, we could not possibly negotiate with the private sector tenderers within a straitjacket which an amendment like this could impose. I think my noble friend accepts that. I think he accepts that it could make the negotiations themselves inflexible, unwieldy and somewhat time consuming. Thirdly, we understand and accept noble Lords' concerns about the need for parliamentary scrutiny of the private loans scheme but we believe that the steps we are proposing to take will be appropriate for such scrutiny. A draft of the invitation to tender documents, as the House well knows, has been placed in the Library

1479
of the House. Those documents set out in some detail how the scheme will work. We have also made clear that we shall announce the names of the successful tenderers and do so to Parliament when the contracts are signed. I believe I made clear to my noble friend in the letter I wrote to him on 21st March that that could be by means of a separate statement to Parliament.
I appreciate that my noble friend has considerable concerns about what form that statement takes—whether it would be appropriate to make an oral statement or whatever. I have a sneaking feeling that an oral statement would be somewhat over-egging the pudding. Whether we respond by means of answering a Question put by my noble friend or someone else might be something we could address. I want to make clear that we intend that the statement to the House—to Parliament—will include broad details of the agreement we have reached with the tenderers. We shall give information on the financial institutions involved, the total value of the subsidies and the number of loans, the general nature of the arrangements, and the general details of repayment arrangements. However, the House will accept, I believe, that commercially sensitive information cannot be included. We shall ensure that the benefits of the private sector involvement will be realised as cost effectively as possible.
Although it is possible to give some sort of figure as to what the total cost will be after we have signed the contract, I think, again, that it would be wrong for me to respond to the noble Baroness, Lady Farrington, by giving a top figure in advance. Parliament will have its opportunity in due course to scrutinise and to check when it considers the annual appropriation accounts. The National Audit Office will be following in our footsteps. Not only will it have access to our books; it will also have access to the private lenders' books. I believe that parliamentary scrutiny is safeguarded at an appropriate level. I do not believe that the amendment adds anything; it would possibly make the negotiations somewhat harder.
My noble friend Lady Park ranged more widely and talked about going beyond 50 per cent. of students' maintenance as currently allowed for by the 1990 Act. I can give an assurance that if we wanted to go beyond 50 per cent. an affirmative resolution of both Houses would be required. That is not a matter to consider now but certainly the Dearing committee of inquiry will address it in its study beginning some time after Easter and continuing over the coming months.
I hope that I have given my noble friend sufficient cause to feel that his pressure has been successful. I hope that I have moved a reasonable degree and that my noble friend accepts that I speak in good faith when I say that we shall make sure that information, in whatever appropriate form, is made available to the House.
Lord Peyton of Yeovil: My Lords, I am most grateful to my noble friend for his courtesy and for the genuine attempt he has made to understand our difficulties. I was deeply touched by the moving tribute paid to me by the noble Lord, Lord Morris of Castle Morris. To say that I had improved him was indeed
1480
attributing to me almost miraculous powers. Persuaded, as I partially am, that I possess them, I shall certainly endeavour to pursue this high purpose in the future. I hope that the noble Lord will benefit from my efforts.
Our problem today is that there is a trebly blank cheque: payee, amount and date are left open. There will, I understand, be no new regulations called for. Therefore, there will be no opportunities under laid-down procedures for Parliament to scrutinise what has occurred.
My noble friend Lord Beloff, in one of those splendid interventions which are always so welcome, declared that we were all wasting our time because it will never happen. I am sure that my noble friend will agree that, if because a thing was unlikely to happen we did not take due precautions against the event, that would be to let governments loose in a way which I am sure that he would be the first to deplore. He said that it will never happen and that it has no "dignity of ancestry". What a splendid phrase! I am grateful to my noble friend for not inquiring into the dreadful possibilities of what that ancestry may be if it were revealed.
I made it quite clear to your Lordships the other day that I divided the House in anger and protest because the Government did not seem to understand the point at which the amendments were aimed. Today my noble friend has shown that he has moved quite a long way and that he understands the need for parliamentary scrutiny. I am not quite clear whether he understands that parliamentary scrutiny does not just involve being told; it also involves the opportunity to express an opinion. Therefore, I am still much concerned about the form that this special statement will take. An entry in the appropriation accounts does not have a deep or sufficient appeal to move me all that much.
What worries me very much is that Parliament will have less scrutiny when we have possibly new arrangements coming into being than it had when the old Student Loans Company had the handling of the matter. As I said to my noble friend, I have no desire to divide the House this afternoon. But I ask him, as a reward for my restraint, for an undertaking to take this matter away, look at it again and have sensible discussions with us as to the form that the arrangements which he has in mind might take. I hope that he will regard that as free from any aggressive intent.
Lord Henley: My Lords, with the leave of the House, and this being Report stage, I give an undertaking that the noble Lord and myself can have further discussions between now and next Monday.
Lord Peyton of Yeovil: My Lords, I welcome the opportunity of seeing my noble friend so soon. As regards free and meaningful discussions, I ask him to give a clear undertaking that they will have as a firm objective finding some acceptable form in which the special announcement can be made. We have had discussions before.
Lord Henley: My Lords, again with the leave of the House, I do not believe that my noble friend will expect me to set out my negotiating position in advance of

1481
those discussions. I made a promise to my noble friend and the House that we shall find some way of making a statement to the House after we have made the contracts. I gave some indication as to what information I believe could be available in that. I do not believe that I can go much further than that, other than to say that I am prepared to have discussions with my noble friend, should he so wish, between now and the next stage of the Bill.
Lord Peyton of Yeovil: My Lords, I am the first to sympathise with my noble friend for the shackles imposed on him from elsewhere which restrain him from doing what he would obviously accept is the right thing to do. In the circumstances I do not wish to divide the House because I have some burgeoning confidence—I may yet be proved an idiot—that in the course of the week we may be able to shift the Government into a more acceptable position. I beg leave to withdraw the amendment.
Noble Lords: No!
The Chairman of Committees: My Lords, the Question is, That this amendment be agreed to. As many as are of that opinion will say "Content"?
Noble Lords: Content.
The Chairman of Committees: To the contrary, "Not-content"?
Noble Lords: Not-content.
The Chairman of Committees: My Lords, I believe that the "Not-contents" have it.
Noble Lords: Content.
3.45 p.m.
On Question, Whether the said amendment (No. 1) shall be agreed to?
Their Lordships divided: Contents, 95; Not-Contents, 119.

Division No 1

contents

Ackner, L.

Dean of Thornton-le-Fylde, B.

Allen of Abbeydale, L.

Diamond, L.

Ashley of Stoke, L.

Donaldson of Kingsbridge, L.

Avebury, L.

Donoughue, L.

Barnett, L.

Dormand of Easington, L.

Beloff, L.

Dubs, L.

Berkeley, L.

Elis-Thomas, L.

Blease, L.

Ezra, L.

Blyth, L.

Falkender, B.

Borrie, L.

Farrington of Ribbleton, B.

Bruce of Donington, L.

Gallacher, L.

Carter, L.

Gladwin of Clee, L.

Castle of Blackburn, B.

Grey, E.

Chalfont, L.

Hanworth, V.

Charteris of Amisfield, L.

Harris of Greenwich, L.

Cledwyn of Penrhos, L.

Haskel, L.

Cocks of Hartcliffe, L.

Hayman, B.

David, B.

Healey, L.

1482

Hilton of Eggardon, B.

Nicol, B.

Hollis of Heigham, B.

Oliver of Aylmerton, L.

Howie of Troon, L.

Park of Monmouth, B.

Ilchester, E

Peston, L.

Jay of Paddington, B.

Peyton of Yeovil, L.

Jenkins of Putney, L.

Prys-Davies, L.

Kilbracken, L.

Rea, L.

Kirkwood, L

Redesdale, L.

Laing of Dunphail, L.

Richard, L.

Lauderdale, E

Sainsbury, L.

Lester of Herne Hill, L.

Seear, B.

Lockwood, B.

Serota, B.

Lovell-Davis, L.

Sharples, B.

McCarthy, L.

Shaughnessy, L.

McIntosh of Haringey, L.

Shepherd, L.

Mackie of Benshie, L.

Stoddart of Swindon, L.

McNair, L.

Strabolgi, L.

Mallalieu, B.

Taverne, L.

Mason of Barnsley, L.

Taylor of Blackburn, L.

Mayhew, L.

Thomson of Monifieth, L.

Merlyn-Rees, L.

Tope, L. [Teller.]

Merrivale, L.

Tordoff, L.

Milner of Leeds, L.

Turner of Camden, B.

Molloy, L.

Wallace of Saltaire, L.

Monkswell, L.

Wedderburn of Charlton, L.

Moore of Wolvercote, L.

White, B.

Morris of Castle Morris, L. [Teller.]

Williams of Elvel, L.

Williams of Mostyn, L.

Murray of Epping Forest, L.

Winchilsea and Nottingham, E.

Nelson, E.

Winston, L.

NOT-CONTENTS

Aberdare, L.

Gerard, L.

Addison, V.

Goschen, V.

Ailesbury, M.

Granard, E.

Alexander of Tunis, E.

Gray of Contin, L.

Allenby of Megiddo, V.

Haig, E.

Belhaven and Stenton, L.

Hailsham of Saint Marylebone, L.

Blaker, L.

Halsbury, E.

Blatch, B.

Hamilton of Dalzell, L.

Bledisloe, V.

Harding of Petherton, L.

Boardman, L.

Hayhoe, L.

Boyd-Carpenter, L.

Hayter, L.

Brabazon of Tara, L.

Henley, L.

Brougham and Vaux, L.

HolmPatrick, L.

Cadman, L.

Howe, E.

Campbell of Alloway, L.

Hylton-Foster, B.

Campbell of Croy, L.

Inglewood, L.

Carnock, L.

Jenkin of Roding, L.

Chelmsford, V.

Johnston of Rockport, L.

Chesham, L. [Teller.]

Kimball, L.

Chorley, L

Kintore, E.

Clanwilliam, E.

Kitchener, E.

Cockfield, L.

Knollys, V.

Constantine of Stanmore, L.

Lane of Horsell, L.

Courtown, E.

Lindsay, E

Cranborne, V. [Lord Privy Seal.]

Long, V. [Teller.]

Crawshaw, L.

Lucas, L.

Cuckney, L.

Lyell, L.

Cullen of Ashbourne, L.

McConnell, L.

Cumberlege, B.

Mackay of Ardbrecknish, L.

Davidson, V.

Mackay of Clashfern, L. [Lord Chancellor.]

De Freyne, L.

Dean of Harptree, L.

Mackay of Drumadoon, L.

Denham, L

Manton, L.

Derwent, L.

Mersey, V.

Dixon-Smith, L.

Miller of Hendon, B.

Elibank, L.

Milverton, L.

Ellenborough, L.

Mountevans, L.

Elles, B.

Moyne, L.

Elliott of Morpeth, L.

Munster, E.

Forbes, L.

Murton of Lindisfarne, L.

Fraser of Kilmorack, L.

Noel-Buxton, L.

Gage, V.

Norrie, L.

Gainford, L.

O'Cathain, B.

[Amendment No. 2 not moved.]

BSE (Health)
3.54 p.m.
The Parliamentary Under-Secretary of State, Department of Health (Baroness Cumberlege): My Lords, with the leave of the House, I should like to repeat a Statement made by my right honourable friend the Secretary of State for Health in another place. Before doing so, I should like to declare an interest: my husband manages a dairy and beef-producing farm; there have been cases of BSE; we have no share in the farm's assets.
The Statement is as follows:
"With permission, Madam Speaker, I would like to make a further Statement about the advice which the Government have received from the Spongiform Encephalopathy Advisory Committee.
"I begin by reminding the House briefly of the background. The advisory committee brings together leading experts in neurology, epidemiology and microbiology to provide scientifically based advice on the implications for animal and human health of different forms of spongiform encephalopathy. As I have repeatedly stressed, its members are not government scientists; they are leading practitioners in their field, and it is the function of the advisory committee to allow them to pool their expertise to assess the latest scientific evidence that is available.
"Both the Opposition health spokesman and the Leader of the Opposition stressed last week the importance of reaching decisions on the basis of the scientific evidence. I agree with them. I also agree that it is important that both the evidence on which the committee reaches its recommendations and the recommendations themselves should be made public as soon as practicable. That is why I published the committee's recommendations last Wednesday and it is why I have today put copies of its latest recommendations, accompanied by a statement from the Chief Medical Officer, in the Vote Office. I can confirm to the House that arrangements are in hand
1484
to ensure that the evidence on which these recommendations are based will be published in the scientific journals within the next four to six weeks.
"Science is not a substitute for political or personal choice—but it is the only basis on which an informed judgment about these issues can be reached.
"Last Wednesday I informed the House of the advisory committee's conclusions about 10 new cases of Creutzfeldt-Jakob disease. The statement which the committee approved at its weekend meeting emphasises that there are only 10 cases of this previously unrecognised variant of CJD that have yet been identified, and that the committee is not in a position to confirm whether or not there is a causal link between BSE and the human disease. The committee did however repeat its view that the most likely explanation at present of this new form of CJD is that these cases are linked to exposure to BSE before the introduction of the specified offals ban in 1989.
"Following receipt of its advice last week, I asked the committee to consider as a matter of urgency the implications of its findings for children. In considering this question the committee was joined by three leading experts in the field of paediatrics, gastroenterology, and immunology. The committee considered carefully its knowledge of the transmissible spongiform encephalopathies and considered the evidence available from the 10 identified cases. Taking all that into account, the committee concluded,
'if human infection with the BSE agent occurs, infants and children are not likely to be more susceptible to that infection than are adults'.
"The committee also considered the possibility of increased susceptibility among patients in hospital, pregnant women and people who are taking immunosuppressive drugs. Once again it concluded that
'if human infection with a BSE agent occurs, none of these groups is likely to have any increased susceptibility to infection'.
"The statement issued by the committee goes on:
'Parents are naturally concerned about the risks to their own children. No human activity is without some risk; if the Government rigorously enforces the current and newly recommended controls we believe that this risk is likely to be extremely small; however the Committee recognises that parents will often chose to reduce risk to their children beyond that which they are prepared to accept for themselves.
'It is important to be aware that many foods are associated with health risks and that changing from beef to non-beef products is not necessarily without risk'.
"In the light of the scientific evidence, there is clearly no reason for the Government to advise local education authorities to withdraw beef from school menus. I understand however from my right honourable friend the Secretary of State for Education and Employment that it is customary for schools to provide a choice of menu to accommodate different dietary and cultural preferences. The Government believe this choice should continue. Local education authorities will be sent copies of the advisory committee's statement so that they can be aware of the precise terms of its findings.

1485
"The committee reconfirmed the recommendations which were published last Wednesday concerning the deboning of cattle carcasses aged over 30 months, and has made a number of other relatively minor recommendations concerning the treatment of specified bovine offal. My right honourable and learned friend the Minister of Agriculture will deal with these questions in his Statement.
"The committee also made two recommendations concerning research. First, it recommended the reinforcement of the CJD Surveillance Unit at Edinburgh University, and, secondly, it recommended the commitment of substantial additional resources to long-term basic and applied research to improve our understanding of these diseases. The Government accept these recommendations. We already have plans in hand to strengthen the CJD Surveillance Unit. In addition I have today instructed Professor John Swales, the NHS Director of Research and Development, to prepare a directed programme of research in this field involving the Department of Health, the Ministry of Agriculture, Fisheries and Food, the Medical Research Council and the Biotechnology and Biological Sciences Research Council.
"Against the background of these findings the Advisory Committee reports two central conclusions. First, it reasserts that, provided the restrictions which it recommends are fully implemented and sustained, any BSE-related risk from eating beef or beef products is likely to be extremely small. Secondly, the committee's statement concludes with the words,
'the Committee does not believe that additional measures are justified at this stage but the situation needs to be kept under careful review so that additional significant information can be taken into account as soon as it becomes available'.'
"Throughout their consideration of these questions the Government have made it clear that it is their policy to base their decisions on an up-to-date assessment of the scientific evidence. We have also made clear our commitment to making that evidence public. That remains the position. In that connection I am authorised by my right honourable friend the Lord President to inform the House that it is the Government's intention to arrange for a debate on these matters on a Motion for the Adjournment on Thursday 28th March at 7 p.m.
"The statement of the advisory committee which I am publishing this afternoon makes clear recommendations both to the Government and to the public. The Chief Medical Officer is taking steps today to communicate this new advice to all doctors. The Government accept the recommendations and will act upon them."
My Lords, that concludes the Statement.
4.3 p.m.
Baroness Jay of Paddington: My Lords, these Benches welcome the Statement from the Department of Health. It is a step forward from the somewhat inconclusive views offered in last Wednesday's
1486
Statements. Perhaps it would have been better for everyone—parents, school authorities, farmers and the meat trade—if this position had been reached and this guidance had been available before the Government decided to go public on the advice that it had last week. In spite of Ministers' assurances last week that all would be well—the noble Earl, Lord Lindsay, said in reply to my noble friend Lord Carter that there was a large and healthy degree of optimism in the Statement—there has been obvious and destructive turmoil in the past few days. However, these Benches welcome what is now said, even though we and, I suspect, the general public are bound to treat some of the pronouncements on this issue with a degree of scepticism. We welcome the CMO's statement and the publication of the report from SEAC. We are particularly pleased that these have been available at the same time as the Statement has been made.
It is important that children, pregnant women, patients and those who are immuno-compromised are judged not to have increased susceptibility to this infection. In the case of children, the issue may not simply be the setting of an absolute average age to measure vulnerability or to establish absolute risk. Surely, increased or decreased sensitivity to infections at a certain age is not the point when one is talking about children. It is the long-term incubation that perhaps makes children more vulnerable. As the noble Baroness, Lady Robson, put it so gracefully last week, for many elderly people there might be little threat, because with a 10 or 15-year incubation period for CJD the elderly perhaps would be unlikely to survive to suffer the effects. But for children it is totally different. I would be grateful if the Minister would comment on that issue in her response. As the Minister has said and the SEAC statement recognises, parents will often choose to reduce the risk to their children beyond that which they are themselves prepared to accept.
I should like to return to some of the questions that remain relevant which were raised by me and other noble Lords last week. The Minister did not answer them then, and they are not answered by this new Statement. First, are there any specific foodstuffs, particularly those that contain beef products rather than pure beef, which families with children should now avoid? Are there particular methods of preparation that make those products more or less risky? For example, it has been suggested by the media over the weekend that the preparation of some products in microwave ovens may increase vulnerability. Very importantly, noble Lords in all parts of the House last week during the Statement asked whether it was clear what the relative risks were of eating offal products and products derived from offal products. I understand that these can extend to such products as gelatine and jelly babies. Is that risk quantifiable? What is the relative risk of eating such products as against eating what may be described as obvious beef cuts? In addition, what specific guidance is given by the Department of Health to general practitioners and family doctors, who will be inundated with requests for guidance from anxious families, about the early signs of CJD and how they should be dealt with?

1487
My noble friend Lord Winston last week raised a very precise question about the pattern of disease in the relevant suspect 10 cases and how it had been established. What is it about these cases that makes them of particular concern to the scientific body? What is the evidence to suggest that they, and they alone, may have a link with BSE? I understand that that may be published in the learned journals, but it will be useful to have some guidance now.
As we gradually learn more about the situation it becomes apparent that mistakes have been made by people in authority. Though it is not primarily a matter for the Department of Health—I know that my noble friend Lord Carter will wish to return to it—there is particular concern about the inadequate compensation offered to farmers for infected cattle during the crucial period between the time when BSE was diagnosed and when the abattoir regulations came in. There is also concern about the food safety regulations and the separate MAFF regulations. It is always easy to be wise with hindsight. However, if, as the Labour Party had suggested, a separate food standards organisation entirely independent of MAFF had been established some of these problems might never have arisen. There is also a question about whether all of these issues should be seen in the context of the dogmatic drive towards deregulation in every aspect of our lives which has been conducted by the Government.
In the past few days we have heard repeatedly that the Government rely on the expert advisory committee and the scientists to tell them what to do next. Surely, this is a failure of political leadership. I am glad that the Secretary of State has said that science is not a substitute for personal or political choice, but if there has been a failure surely the failure to distinguish between scientific evidence and political judgment is culpable. If in the past Ministers had made the political judgment that public health was of paramount importance the story might have been different. It would then have been possible to deal with the recognition of the threat of BSE without loss of public confidence and the potential agricultural disaster that we all face today, which I believe the Statement will do little to alleviate.
4.9 p.m.
Lord Harris of Greenwich: My Lords, I also thank the noble Baroness for having repeated the Statement. I received a copy of the Statement after her right honourable friend rose to his feet in the House of Commons. She will be aware that there are long-standing arrangements for making Statements available to representatives of the Opposition. That did not happen in this case. I hope that complaints of this kind will not have to be repeated in future, particularly on a matter as important as this. We are faced with an almost complete collapse of public confidence in British-produced beef.
I should like to put the following question, to which I know the noble Baroness will reply that it is a matter for the usual channels. First, if there is a debate on this matter in the House of Commons on Thursday of this week, I ask that there should he a similar opportunity for an early debate in this House to discuss these
1488
questions of great public importance. I believe that the House will welcome the opportunity to have such a debate.
Secondly, is the Minister aware that SEAC's statement makes two points of considerable importance? One is the assertion of the need for medium and long-term research which will require substantial additional resources. The Minister indicated that there will be such improvement in financial allocations to those concerned. The committee adds that there should be no delay due to difficulty in obtaining resources. Can the House assume therefore that adequate resources will be made available and that SEAC itself will pronounce judgment as to whether the additional resources made available are adequate?
Is the Minister aware that SEAC's recommendation is that it is necessary to ensure that all the restrictions proposed on 20th March and those in this document are implemented fully and are sustained? Is she aware that there is some public concern that a number of the recommendations have not yet been implemented? The concern is widespread. I hope that the Minister will be able to tell us when those recommendations will be implemented fully.
Baroness Cumberlege: My Lords, first, I thank the noble Baroness for her welcome for the Statement. I am sorry that she felt that last week we went public too early. The whole tenor of the Government is to be as open and frank as possible with the public. We felt that as soon as the research became available it was right that it should be made known to the general public.
Regarding the risk to children, SEAC is firm about that. In its report, taking all the above into account, it concludes:
"If human infection with the BSE agent occurs, infants and children are not likely to be more susceptible to that infection than are adults".
I do not believe there is anything I can add. SEAC's statement is clear.
The noble Baroness asked whether certain foodstuffs should be avoided. Again, SEAC has addressed the issues of milk and gelatine. It comes out with clear statements that there is no reason to avoid eating those products. The committee also concludes that it does not believe that additional measures are justified at this stage but the situation needs to be kept under careful review so that additional significant information can be taken into account as soon as it becomes available. I want to stress that at this time it does not feel that additional measures are justified.
The noble Baroness asked about advice to doctors. That is contained in the letter issued last week to all doctors by the Chief Medical Officer. Today he has issued an additional statement which picks up the information that SEAC has addressed concerning children and those groups which are thought to be vulnerable.
The noble Lord, Lord Harris of Greenwich, asked why he had not received the Statement earlier. I apologise for that. I understand the frustration which was felt last week also. I shall take up the matter.

1489
I understand too the noble Lord's wish for a debate. I will convey that wish to the appropriate channels. He asked questions about research. I have said that the Government accept all the SEAC recommendations. That includes those regarding resources for research.
Finally, I should like to address one comment made by the noble Baroness. She felt that the Government were hiding behind research. I find that a very, very strange statement. I believe that it is up to governments to put forward the facts. In these sensitive situations it is not up to governments to hypothesise or put forward their views, which may be erroneous. We have to base all our information on research facts.
4.15 p.m.
Lord Boyd-Carpenter: My Lords, I hope that my noble friend will go further than she did just now in response to the request of the noble Lord, Lord Harris of Greenwich, for your Lordships' House to have an opportunity to debate this immensely important matter. For your Lordships' House not to debate it will almost sign off its being part of Parliament. To say that the request will go to the usual channels, does not necessarily convey very much. As many of us realise, the usual channels often become blocked.
Baroness Cumberlege: My Lords, I take into account what my noble and distinguished friend says. I am sure that the channels will listen, read Hansard, and take note of his view. Whatever aspirations I have, clearly I cannot put them into action. The matter has to go through the usual channels.
Lord Winston: My Lords, I thank the Minister for her Statement. Perhaps I may point out that as a registered practitioner, I still have not received the letter which has been promised. Six days have elapsed. There is considerable anxiety: we are being approached continually by all sorts of people. We should be informed as a matter of urgency. I accept that my question may need an answer in writing. Can the Minister tell us what research has been funded in the past by the Medical Research Council or within agricultural research on prions, the protein particle which causes this and related disorders? It was basic research before; it is now applied research. I think the Minister can understand why we see the need for this type of basic research to continue.
Baroness Cumberlege: My Lords, I am surprised by what the noble Lord says about not receiving the letter because I met some consultants that evening and they had already received the Chief Medical Officer's letter through the EPINET system. I wonder whether the problem lies in the internal channels within his hospital. The noble Lord was free to request the information if he was so anxious to obtain it. With regard to the division of research moneys between the MRC and the agricultural research, I am afraid that I do not have that information. I shall gladly write to the noble Lord about it.
Lord Winston: My Lords, perhaps I may say that I telephoned my office to confirm that it had not received
1490
anything as recently as 15 minutes ago. I received this morning's post at home. There has been nothing in the post to date.
Viscount Waverley: My Lords, the Minister referred to 10 cases. Can she identify how many cases there are on the Continent?
Baroness Cumberlege: My Lords, the prevalence rate in this country is about the same as that on the Continent. It is one in 1 million. However, we also know that on the Continent, although there are no instances of BSE, there are cases of CJD, which is interesting.
Lord Hamilton of Dalzell: My Lords, I too welcome my noble friend's Statement. I hope that it does something to restore confidence in the beef industry. I speak as a beef producer. Does her, or SEAC's, advice to doctors underline the importance of protein in the diet of children? The advice of the Government's advisers is that parents should have the choice of whether or not they feed beef to their children. Beef represents an extremely valuable and important source of protein. With people taking to living on lettuce and green vegetables, there are already signs of rickets reappearing in children. The danger of the panic is the bad effect it will have on children's health because they are not eating enough good meat.
Baroness Cumberlege: My Lords, I have to concur personally. I think a great deal of what my noble friend says is absolutely right. But the Government feel that it is not for them to tell people what to eat or to tell parents what to give their children to eat. We try to give the public information and firm facts; it is then for people to make their own-decisions.
Lord Cledwyn of Penrhos: My Lords, for the sake of clarification, will the Minister confirm that she is saying that her department sees no objection to people of all ages in this country eating beef without exceptions?
Baroness Cumberlege: My Lords, we go back to the information and advice we have received from SEAC. It states at this moment that there is a very minimal risk. The words that it uses are "an extremely small risk". At the moment we know that the link is theoretical; it has not been proved. However, bearing in mind the 10 cases, SEAC felt that there could possibly be some kind of a link. At the moment it states that it is not in a position to confirm whether there is a causal link between BSE and the human disease and it suggests that eating beef carries a very, very small risk.
Lord Campbell of Alloway: My Lords, can the Minister confirm that the criticism made of the Government and, by implication, of my right honourable friend the Minister of Agriculture is not at all well conceived? Does she agree that politically a Statement should have been made and was made when concern arose and that that was a courageous and correct decision and in no way open to political criticism?
Baroness Cumberlege: My Lords, I thank my noble friend for his support. Reading one of the many editorials

1491
written about the matter, I was pleased to see that The Times described the Government in this instance as honourable.
The Countess of Mar: My Lords, the Minister will be aware of a school of thought which links organophosphates with BSE and other spongiform encephalopathies. I am aware of work carried out by the Medical Research Council on the effects of organophosphates directly on prime protein. However, as Burkitt's lymphoma relies on the mosquito before it erupts, will the Government ask the researchers to look at a possible catalystic connection between OPs and the spongiform encephalopathies because there could well be a connection in some way or another?
Baroness Cumberlege: My Lords, as the noble Countess will be aware, research is initiated by protocols and by submissions from different researchers who believe that a matter needs probing and exploring. They must put forward their submissions. It would be totally wrong of me to pre-empt that process. It has held good for a very long time. I have no doubt that if a suitable protocol receives priority from the MRC or the body judging the different research submissions it will not be ruled out.
Lord Shepherd: My Lords, does the Minister agree that the funds of the MRC are very tight, if not limited, and that therefore flexibility to undertake a major form of research would prove nearly impossible unless new resources were made available? Will she consider perhaps with the MRC what funds would be necessary if such research were to be undertaken by it on behalf of her department?
Baroness Cumberlege: My Lords, last Wednesday in this House and in another place Statements were made by myself and by my right honourable friend indicating that new money would be coming forward for research into this matter. The figure mentioned was £4.5 million. Today SEAC made specific recommendations as regards research and we have accepted those recommendations. They deal with the question of resources and the fact that there should be sufficient resources for research into this matter.
Lord Peyton of Yeovil: My Lords, arising from that question, is my noble friend aware that a notable research effort is being conducted at St. Mary's Hospital, Paddington, under the auspices of Imperial College?
Baroness Cumberlege: My Lords, I am grateful to my noble friend. I would hate your Lordships to believe that research is not being carried out. Indeed, research into this matter is taking place in different parts of the country. My right honourable friend the Secretary of State recognises the concern that exists and in no way would he wish to stand in the way of suitable, tested further research schemes.
Lord Monkswell: My Lords, I too thank the Minister for repeating the Statement. The Government have laid great stress on their obtaining advice from the scientific community. I hope that they are aware that some members of that community have disagreed with their colleagues
1492
about this situation. Can we be assured that the scientific research suggested by those in the scientific community who have disagreed with the consensus will now receive government support?
Baroness Cumberlege: My Lords, I am aware that the scientific community is composed of extremely intelligent, bright people—perhaps the cream in the land. Naturally, they have different opinions and views which are widely debated and discussed. We must go back to peer review. Where protocols are coming forward it is up to the experts in the field to decide whether a protocol warrants resources and whether the research is pertinent and appropriate and should go forward. As I said, my right honourable friend stated that he will ensure that the question of resources will not stand in the way if appropriate research is mooted.
Lord Stoddart of Swindon: My Lords, I wish to ask the Minister two questions. First, is she aware that today two cases of BSE have been reported in France, which was one of the first countries to ban the import of British beef? Does France have the same stringent controls on matters BSE and does it take the same kind of notice of the scientific community and the scientific advice that it receives as do we in this country?
My second question relates to the attitude of the Secretary of State for Health over the weekend. He said that if the scientific community made any recommendation the Government would accept it straightaway. In that case, I wonder why on earth we have Secretaries of State. Secondly, he said that if the advice that he received was to destroy all British cattle—there are 11 million—the Government would act on that advice. Before he made that statement did he seek advice from all other Ministers, from the Cabinet and, in particular, from the Chancellor of the Exchequer who on behalf of taxpayers must meet the enormous costs, both internal and external, that that will bring about?
Baroness Cumberlege: My Lords, I believe that my right honourable friend the Secretary of State has acted with extreme integrity and has come over very strongly. He has taken scientific advice on which he has based all his facts. That is absolutely right and proper. However, he has also said that if options are open, quite properly the Government will consider them all.
As regards cattle, the beef industry, and those issues, I do not believe that I should answer but that my noble friend who is representing the Ministry of Agriculture, Fisheries and Food this afternoon should take on those issues.

BSE (Agriculture)
4.30 p.m.
The Parliamentary Under-Secretary of State, Scottish Office (The Earl of Lindsay): My Lords, with the leave of the House, I shall now repeat a Statement on

1493
the beef industry which is being made in another place by my right honourable friend the Minister of Agriculture, Fisheries and Food. The Statement is as follows:
"With permission, Madam Speaker, I wish to make a statement about the beef industry.
"My right honourable friend the Secretary of State for Health has informed the House of the advice we have received from SEAC earlier today. I hope that this will help to reassure consumers as to the safety of British beef and that this in turn will lead to an improvement in market conditions.
"Some of the SEAC recommendations are for the agriculture departments to take forward. In particular, SEAC has given advice on the treatment of trimmings from cattle over 30 months of age, on meat and bonemeal; and on the status of heads from animals over six months of age. The Government have accepted these recommendations in full and I will bring orders before the House as soon as possible. Because of the nature of the advice given by SEAC, these require consultation with the interests concerned. However, I propose to proceed as expeditiously as possible.
"The House will appreciate that the orders will be complicated since, in particular, a new system of licensing for plants authorised to bone out animals over 30 months of age will be required.
"However, the House will also be concerned about the effect of recent alarm on the beef market and on the livelihoods of the many thousands employed in the several industries connected with it. As I made clear to the House last week, a number of mechanisms exist within the common agricultural policy to support the beef market. These include intervention on young male animals, including safety net intervention if prices fall to particularly low levels, export refunds, and other measures such as aids to private storage, and aid for the slaughter of young male calves from dairy herds.
"Obviously the precise use we wish to make of these, or other, mechanisms will depend upon the extent of the market reaction. It is too early to judge this with confidence, but I am in touch with the Commission so that measures can be put in place as soon as it is clear that they are justified.
"Madam Speaker, I believe that, second to putting in place the necessary measures recommended by SEAC, the most important task is to rebuild consumer and market confidence, a process helped by today's Statement from SEAC. However, confidence is fragile. I shall monitor it with scrupulous care and I shall not hesitate to come before the House with further measures if it is clear that they are justified by the circumstances".
My Lords, that concludes the Statement.
Lord Carter: My Lords, I thank the Minister for repeating the Statement which was made in another place by his right honourable friend the Minister for
1494
Agriculture, Fisheries and Food. I should also declare an interest as a director and shareholder of a farming company which has dairy cattle.
As we said last week, this is a very serious matter. Despite all the problems of the agriculture industry, public health must come first. However, if we are in the situation in which agriculture in this country faces what is potentially the worst crisis in its post-war history, a combination of complacency and hand-wringing will just not do. There has been a catalogue of incompetence, misjudgment and inertia. But that can be dealt with on another occasion and I hope that time will be given for a debate on that. But I trust that all of us who must deal with this matter will act responsibly and do our utmost to allay public alarm.
I start with a simple question. Will the research findings, when they are finally published, explain why the incidence of BSE in this country is 422 times the incidence in the rest of the world put together? Can we have an answer to that?
Last week I referred to the fact that I am sure that a contributory factor to the introduction of animals into the food chain is the obstinate refusal of the Government to pay full compensation on animals—only 50 per cent. compensation was paid—for over three years. The saving to public funds was £4 million. That may be the most expensive £4 million that any government have ever saved. Even in January 1994, there was a further reduction in the compensation paid on affected animals.
Perhaps I may give an example of the seriousness with which the Government took the situation in 1990. When the announcement was made that compensation would be increased to 100 per cent., it was carefully timed by the Minister at the time, Mr. John Gummer, to be released on the afternoon of the evening on which Mr. Neil Kinnock was to make his speech to the annual dinner of the National Farmers Union. If Ministers spent less time in childish headline massaging and more time in responding to their responsibilities for the safety of public health, we might not be in this situation today. By refusing to pay full compensation, the Government gave a perverse incentive against eradication from the food chain.
We must have the strictest controls in our slaughterhouses. We know that the random investigation by the State Veterinary Service last year revealed a worrying state in which controls were not being enforced. Perhaps I may refer to the statement from the SEAC which states:
"Other bones do not need to be treated as SBO"—
that is, specified bovine offal—
"if they can be separated from the vertebral column, without cross contamination.
"It is also recommended that the whole head of animals aged over 6 months of age, except for the tongue (provided that it is removed without contamination), should be treated as specified".
Have those people ever been anywhere near an abattoir? Who is supposed to exercise and enforce those controls?
We entirely agree with the banning of the use of offals in meat and bonemeal but there will be a major problem of waste disposal of those offals. What plans do the Government have to deal with that?

1495
The Statement refers to intervention but I understand that, for intervention to apply, meat has to be saleable. Is there an undertaking that if the meat cannot be sold, it will be accepted into intervention? I was told only this morning of a major slaughterhouse which is losing £100,000 per day at present because of lack of sales. It is having to stockpile everything. If there is to be compensation, who pays? Will it be the British taxpayer, the European Commission or both?
The Statement refers to export refunds. What exports are the refunds to be paid on? Will the Government now accept the argument which we have made since the mid-1980s that there should be an independent food standards agency which is responsible for the quality and safety of the nation's food, whether imported or home produced? Every time these matters are discussed, there is divided responsibility. There is always this unique situation of a joint statement by the Department of Health and the Ministry of Agriculture. This shows that divided responsibility must be ended. Consumer safety must be separated from producer protection.
Perhaps I may refer to the health Statement which speaks of:
"other relatively minor recommendations concerning the treatment of specified bovine offal".
We do not want "relatively minor recommendations". We want serious recommendations to deal with the problem which faces us.
The statement from the Chief Medical Officer states that:
"The term safe is not the same as zero-risk".
That will do for a degree in philosophy but how will that run in McDonald's and Burger King?
Will the Minister undertake to ban from human and animal food the specified offal of calves? We do not accept that it is wise to continue to allow offal from cattle under the age of six months into the food chain. The Minister made much of the fact that the Government have listened to the outcome of research by scientists. Will the Government consider random testing for BSE in the brains of cattle routinely sent for slaughter, as recommended by the Tyrrell Committee in 1989? Will he reconsider the safety of MRM— mechanically recovered meat—in the light of the new concerns?
For the sake of both farmers and consumers alike, I make it clear to the Minister that only when consumers are satisfied that they are protected by rigorous regulations which are properly enforced will there be confidence that our beef is as safe as any other beef in Europe.
The enforcement of all the BSE controls and legislation is crucial. I remind the Minister that as recently as last summer the State Veterinary Service found that BSE control rules in abattoirs were being flouted. Will the Minister give the House an assurance today that the State Veterinary Service and the Meat Hygiene Service will be given all the resources and all the statutory authority that they require to execute their duties?
1496
As regards the new steps that the Minister has announced today, will he confirm that if a carcass, or part of a carcass, is believed to have been contaminated in the slaughterhouse, or in any other part of the chain, with specified offal, that carcass, or part of a carcass, is to be prohibited from entering the human or the animal food chain? Can the Minister tell us who will be responsible for taking the decision that this action is necessary, and who will be responsible for enforcing it? Will the Minister consider ensuring that all cull cows are slaughtered and destroyed? Does the Minister agree with the statement of the former Prime Minister, the noble Baroness, Lady Thatcher, that advisers advise but Ministers decide?
Lord Mackie of Benshie: My Lords, it is difficult to follow the noble Lord, Lord Carter, in that he has specified a great many matters that are wrong. I believe that great harm was clone because the Government were not sure what the advice was from SEAC. They then set it to work for a weekend, after making the announcement which destroyed our beef trade in Europe, and they then make this Statement now which could have reassured a great number of people if they had not been totally upset and terrified by statements, such as that which emanated from the Minister of Agriculture when he said that, if necessary, he would kill every cow in Britain. It appears to everyone that great harm has been done to the industry by the handling of the announcement which the Government made last week.
As regards the Statement made today, I was going to urge that the Government do nothing for publicity's sake, such as slaughtering large numbers of animals, but the Statement now includes such phrases as proposing to proceed as expeditiously as possible. That is hardly likely to do immense good on the Continent where people are waiting to see what energetic steps the Government are to take. Will the Minister assure us that instructions have already been issued to every slaughterhouse to ensure that they tighten up, and that inspectors are working overtime to ensure that they do so? That is an absolute necessity at the present time. Will the Minister also assure us that every cattle beast which has been found to have BSE is slaughtered and destroyed and does not enter the meat chain at all? Will the Minister tell us how soon he thinks licences can be issued to slaughterhouses to bone out completely, and does he think that any interim steps should be taken before that is done? There might well be a case for slaughter and destruction until the slaughterhouse is ready to carry out the instructions and the recommendations of SEAC.
Will the Minister also assure us that all the necessary staff will be put in place to carry out these stiff recommendations? Will he make a statement to assure the public at large that milk has never had any connection with any infection put forward? Finally, can he tell us what exactly is the position in Europe, not as regards the number of BSE cases but as regards the precautions that they are taking? That might do something to help. The damage has already been done. There is reference in the Statement to the measures that could be taken if prices fall to particularly low

1497
levels. If the Minister had read the agricultural papers, he would know that the prices in Aberdeen have fallen by £100 per head. I hope that that fact will be taken into consideration and will not be regarded as a necessary sacrifice by the farming community.
The Earl of Lindsay: My Lords, I was grateful when the noble Lord, Lord Carter, acknowledged the fact that public health is being put first. However, the other allegations he made were wide of the mark and were somewhat extraordinary at times given his knowledge of the industry and of some of the complexities of the industry. There has been no complacency in the handling of this matter. We have been guided for the best part of a decade now by the leading experts on this subject. We introduced orders in 1989 and in 1990. We have tightened those controls since. All the time we have sought to reduce a small risk. We have increased the research. We have researched both CJD and BSE. The arrangements, the restrictions and the controls we have had in this country to date have been approved both by European veterinary experts and indeed by the World Health Organisation. They have led to the comment that they go beyond the controls that those bodies might otherwise have expected of us. Therefore, according to those bodies, we have exceeded the minimum threshold.
As regards why the incidence of BSE in the UK is so much higher, there are a number of factors which occur together uniquely in the UK which has meant that BSE has entered the cattle food chain. However, as the noble Lord will know as well as I, there are still more unanswered questions about BSE's pathway than there are answers. I remind the House that there is still no direct evidence that there is a connection between BSE as it is found in bovine offals and human diseases such as CJD.
The noble Lord returned to a favourite subject of his—compensation. I remind him that the Select Committee in another place did not find evidence that paying less than 100 per cent. compensation led to under-reporting. The history of notifiable cattle diseases is that less than 100 per cent. compensation was paid in such instances. The House may be interested to know that when the Government raised the compensation level from 50 per cent. to 100 per cent. the number of reported cases of BSE per annum levelled off. It did not continue to rise as it had under the 50 per cent. compensation level.
We have, and want, the strictest controls on slaughterhouses. Where the Meat and Hygiene Service has direct responsibility for administering those controls, and where the State Veterinary Service checks the MHS's control of the orders, there is, as it were, a belt and braces approach. I can assure the noble Lord that the disposal of SBOs involves incineration. It would be premature to go into the details of intervention at the moment should that be triggered. After just a few days the market is still fluid and to establish a rescue package when the market is still unstable would be premature.
1498
The noble Lord returned to a subject which he raised last week; namely, that of calves. The SEAC experts are convinced that calves up to the age of six months remain safe. The research it has undertaken involves contaminating calves and then checking them after a 12-month period. It found that the brain of a calf at 18 months has still not become infected, despite the calf being infected with BSE at an earlier age. It is the experts who advise us on these matters. If they had any doubts about this, they would have told us.
I turn to the points made by the noble Lord, Lord Mackie. Perhaps I may make this basic point. The first interim report of SEAC involved some vital information. Considerable extra scrutiny was required to come up with the recommendations on that information. But to have had that information spill into the public domain, as it were through informal means, in the middle of last week without the Government presenting the information formally would have been grossly irresponsible. Speculation resulting from such informal leaking of information would have done incalculable damage. It was better in every way that we were absolutely open about the fact that the information had been presented to us in an interim format and that SEAC would make specific recommendations as soon as they had been finalised.
The speed at which we shall introduce the new regulations is laid down in the Food Safety Act. It requires consultation. The consultation will be immediate and it will be quick. The Food Safety Act specifies that that initial consultation must take place, however brief. There are emergency procedures. But again it is worth the House keeping matters in perspective. We are not looking at an emergency threat to human health. We are looking at a focus that the SEAC experts have adopted of a temporary exposure during the 1980s. They are not doubting current beef and beef-related products. Their focus has been on an historic and not a current exposure.
I reiterate, as I did last week, that milk is absolutely safe.
The noble Lord also asked about Europe. I believe—I shall need to double check the fact—that Denmark and Ireland have not banned our products, but many other European member states have banned our products. There is no scientific basis for that ban. It is unnecessary. It is, therefore, an overreaction; and because of the lack of justice in that ban we have taken up the matter with the Commission.
4.52 p.m.
Lord Cledwyn of Penrhos: My Lords, 27 years ago I had the responsibility of dealing with two outbreaks; namely, an outbreak of foot and mouth disease and of rabies. I know and appreciate how difficult these days are for Ministers in charge of this matter.
This is a more serious outbreak, with all its implications, and I welcome the steps that the Government are taking. However, I have a certain doubt about whether or not the Government are going far enough in dealing with the matter. The implications of a further major outbreak would he disastrous not only

1499
for the farming industry but for the community in general. There has been advice in newspapers from other experts in this field. One of them thought that cattle over the age of two and a half years should be slaughtered; that that would give security from the possibility of a major outbreak. Has that proposal been considered? What was the reaction of the Government? What was the advice of their experts on the proposal?
The Earl of Lindsay: My Lords, I am grateful for the memories of the noble Lord, Lord Cledwyn, on issues with which he had to deal in the same area of policy.
I stress to the House that this is not an outbreak. We have 10 cases of a new variant of CJD. There is no direct evidence linking this new variant of CJD, or indeed any CJD, with BSE, bovine offal and, least of all, beef flesh or beef meat. We do not have an outbreak. It is also not infectious in any way. That may further reassure the noble Lord.
Have we gone far enough? Should we be slaughtering all cattle over the age of two and a half years? The SEAC experts, and the experts they commissioned to cover different angles, have the option to recommend to us whatever they think will be necessary in order to tackle the problem, as they see it, which relates to a brief period of exposure during the 1980s. They see no scientific justification whatsoever for slaughtering any cattle except those which are currently slaughtered. At present, we slaughter any cattle that are suspected of having BSE. But there is no scientific justification for slaughtering any other age range or type of cattle.
Lord Moran: My Lords, how soon will the measures to which the Government are now committed be brought in? The Minister of Agriculture said over the weekend that some of them would require under statute a period of consultation. It would be helpful to know how long it will be before those measures are in force.
I think that all noble Lords will have welcomed the immense thoroughness with which SEAC, and those it brought in for consultation, have addressed the problem. They will have paid particular attention to the conclusion that those experts did not believe that additional measures are justified at this stage. If it is decided at any future period that we need to go further and to have a slaughter policy, will the Government be clear that that slaughter policy should apply only to herds which have BSE and should not be, as has been suggested, indiscriminate, applying to herds which have never had BSE and cattle fed entirely on grass, hay and silage?
The Earl of Lindsay: My Lords, the noble Lord asks how soon the new measures will be introduced. As I believe I said to the noble Lord, Lord Mackie, we shall consult immediately; we shall consult briefly. The industry has a vested interest in seeing these measures installed as fast as possible. As soon as the necessary legislation can be brought before the House at the end of the short consultation, it will become law. I would guess—everyone involved hopes—that we are talking of a matter of weeks and no longer.
1500
If and when a wider slaughter policy becomes necessary—as I said, the experts in this area see absolutely no justification for that at present—we would be guided by the evidence behind such a recommendation on how that slaughter policy should operate. I cannot speculate on that point at the moment.
Lord Rea: My Lords, will the noble Earl confirm or deny a report in a newspaper on Saturday that a microbiologist, Dr. Narash Harang, who is an expert on spongiform encephalopathies, working with the public health laboratory service in Newcastle, was in the process in the early 1990s of developing a test which could detect BSE in infected cattle before the disease manifested itself, and that his research was not further funded? The speculation is that the discovery of such a test would have been awkward. It would have been expensive to have slaughtered and incinerated all the cases, and potential cases, of BSE that the test would have detected.
The Earl of Lindsay: My Lords, I am familiar with the work of Dr. Harang and am aware of the claims that he has made. I am also aware that no details of the tests that he has carried out have been published in peer reviewed scientific journals, which is one of the usual pathways towards validation of such tests.
The SEAC experts are also aware of the work that the doctor is carrying out. They have access to all thinking and researches in the field. MAFF is also working to develop a test to detect BSE in live cattle. There is some promising progress in that area, but it will take time to develop and to put into practice effectively in the field.
Lord Monson: My Lords, as British animal husbandry has been singled out for attack, can the noble Earl say whether we are meant seriously to believe that all beef produced on the continent of Europe is automatically safe for human consumption? As has been mentioned, a number of continental herds have suffered from BSE. Can the noble Earl confirm reports in the weekend press to the effect that one-third of Belgian cattle have been fed or injected with illegal growth hormones which pose a danger to human health?
The Earl of Lindsay: My Lords, I cannot immediately confirm the extent to which hormones are used, legally or illegally. I can confirm that there is BSE in other countries but not to nearly the same extent as we have it in this country. In some of those other countries—for example, France—there are no specified bovine offal restrictions or controls, unlike this country.
All that lends weight to the fact that the experts reckon that beef is safe to eat as long as it has been processed subject to the regulations and controls. The only speculation in which scientists are indulging is on the possible link between offal and human diseases such as CJD, not between beef meat, beef muscle and CJD. Two pieces of common sense came out in the SEAC statement this morning, from the scientists. One was the remark that,
"no human activity is without some risk".

1501
That may help put into perspective the 10 people who suffered from a disease which may or may not be connected with beef. The second piece of common sense from the SEAC statement is the following:
"It is important to be aware that many foods are associated with health risks, and that changing from beef to non-beef products is not necessarily without risk".
That underlines the point that there is a small, defined area of concern. I regret that the way in which the matter has been handled by some of the media has blown it up into proportions that are not justified by the facts.
Baroness Farrington of Ribbleton: My Lords, will the Minister expand on his statement that there is no evidence or no ground for thinking that failure to pay full compensation from the beginning affected the attitude of farmers? Many people, particularly those of us from areas where hill farmers are struggling to make a living, would find that statement hard to believe. If the Government feel that there is no connection between failure to pay full compensation and the desperation of farmers in those circumstances, is it likely to affect the Government's policy?
The Earl of Lindsay: My Lords, the noble Baroness has raised that important issue again. I repeat that not only did the Select Committee in another place not find any evidence that the 50 per cent. compensation paid between 1988 and 1990 led to under-reporting; but also in retrospect we have no belief that that was the case. It is based largely on the fact that the reported figures rose each year with the 50 per cent. compensation. In February 1990, 100 per cent. compensation was introduced. That was over six years ago. The number of reported cases suddenly levelled off. Then the SBO regulations, brought in in 1989, began to take effect and since then the levels of BSE have been falling.
Lord Hamilton of Dalzell: My Lords, I was grateful for what the Minister said about taking the matter up with the European Commission. It is extremely important for our industry that we should re-establish our export markets and also prevent imports pouring in. They may well include meat which is less safe than ours in this country.
There is general agreement in this shady area that the disease was promoted by feeding animal compounds to cattle. The compounders who put animal products in the feed refused to tell the farming industry that they had done so because of commercial confidentiality in a highly competitive market. I cannot believe that, since we are in such a highly competitive market and the single market, the compounds were only fed to British cattle. Has my noble friend at his fingertips or can he discover how many compounders are international companies and what were the imports and exports of compounds during the relevant period? From that we may establish that British beef is still the best.
The Earl of Lindsay: My Lords, I feel certain that British beef is still the best. However, I do not have with me the final batch of statistics which my noble friend Lord Hamilton requested. He raised serious issues but
1502
ones which cannot be defined with speed or certainty. In world export markets the level of competition may tempt some of our competitors to use scientific or other public health claims in order to disrupt our access to those markets. I am certain that many in such countries which have temporarily suspended the import of British beef have genuine cause for concern about their consumers. But if they examine the facts produced by SEAC and acknowledge the clean bill of health that both the World Health Organisation and European vets have given to our controls, there is no need for them to remain concerned. There may well be others in those countries with commercial interests in maintaining a ban on our products, underneath a scientific guise.
Baroness Seear: My Lords, can the Minister say what has happened to the price of beef in countries banning our exports? It could be profitable for them to ban our exports. I entirely agree that in normal circumstances and under normal policies it is right that experts advise and Ministers decide. However, in this matter I agree with the Secretary of State who said that the Government rely entirely on what the scientists say. The last thing I wish is for non-scientific, ignorant Ministers to make decisions without scientific backing. That also goes for unscientific, ignorant members of the media.
The Earl of Lindsay: My Lords, the noble Baroness raises two extremely good points on which noble Lords could ponder with merit. The soundbite which the noble Lord, Lord Carter, carefully built into the end of his speech about experts advising and Ministers deciding was erroneous and misleading. In such a complex area of science and knowledge, it is much better that the experts advise Ministers and tell them what they recommend be done. The consequences of erroneous policy making, with political considerations upsetting scientific recommendations, could be dangerous. To an extent, the media made a lamentable effort to look at the calm language of the chief medical officers north and south of the Border and the SEAC statements last week. One or two newspapers saw the real reassurances which came through in the statements, but for most, the opportunity to grab short headlines on a scaremongering basis was regrettable. It will have long-term consequences, unless the media desist soon.
The price of beef in other countries where British beef has been banned is a question which I cannot answer immediately. Last week I promised that I would write to the noble Baroness on a matter which she raised and I will write to her on both questions.
The Earl of Clanwilliam: My Lords, my noble Friend said that we are dealing with a historical event, that arrangements put in place at the time have been effective and British beef is safe. The only declaration of interest that I have to make is that I am too old to care. Did not the problem originate from intensive systems of farming which have been nurtured by the common agricultural policy? Is it not time to encourage more extensive methods of farming in the British community?
The Earl of Lindsay: My Lords, my noble friend Lord Clanwilliam touches on extensive farming. A number of schemes and incentives are available to land managers and farmers of all types to take up more extensive methods of farming. The effort and prominence which the Government attach to the schemes are growing every year and I hope that the noble Earl will take comfort from that. Noble Lords and others outside the House of all ages are justified in taking the issue seriously, but at the same time whether one is a father, grandfather or whatever, the reassurances which the experts are able to give us are solid.
Lord Crawshaw: My Lords, we are very grateful that the incidence of this disease is definitely now on the wane. From my own experience I have figures to support that. If, in the end, some form of slaughter policy is decided upon, If wonder whether the Minister will agree that the right approach would be to look at the dairy herd in general, particularly the older cattle in the dairy herd, and see that somehow, when their useful life had finished, they were disposed of through the ministry and did not somehow get into the food chain. By doing that we could avoid mass slaughter, which could do the country's health a great deal more harm than BSE itself. On those grounds I very much support the restrained and responsible approach that the Minister and the ministry showed both yesterday on television and this afternoon. I congratulate them on that approach.
I hope also that we can avoid the sort of situation that we got into with eggs and salmonella a few years ago. Quite honestly, that did not help anybody, and put 4,000 small egg producers out of business.
Finally, will the Minister agree that in one sense we have time on our side? We now face the seven easiest months of the year in terms of feeding and managing the herds of cattle. We should make use of that time to best possible advantage.
The Earl of Lindsay: My Lords, we will waste no time in establishing what needs to be established, acting on the recommendations and carrying out that which needs to be done. We will not waste time.
The policy on slaughter, which I partly explained to the noble Lord, Lord Moran, is that until the experts tell us there is a reason to extend our slaughter policy, it is hard to know or to speculate as to the exact detail of such a policy. We should be reluctant to do it unless it were justified. I reassure the noble Lord that the exact details of any such policy will be worked out very carefully indeed with all those who are expert in such matters.
Incineration is the approved method of disposal. From one end of the industry to the other there is a vested interest in ensuring very high compliance. That will continue to be the final disposal route of all contaminated matter. I will pass on the congratulations of the noble Lord to my right honourable friend the Minister on the way he has handled this matter.

Education (Student Loans) Bill
5.13 p.m.
Consideration of amendments on Report resumed on Clause 1.
Lord Morris of Castle Morris Lord Morris of Castle Morris moved Amendment No. 3:
Page 1, line 15, at end insert—
("( ) This section is subject to section (Commencement) below.").
The noble Lord said: My Lords, in moving Amendment No. 3, I will speak also, if I may, to Amendment No. 9, if only to cover the inevitable susurrus of the exiters.
I am sorry to have to revisit this issue, which we debated (albeit briefly) in Committee. At Committee stage I promised the noble Lord the Minister that I would read most carefully what he had said in his characteristically brisk and efficient fashion. I have done so; and I have to say that in the cold light of a Peak District Saturday morning and in the pristine print of the official record, his arguments seem to me slightly less convincing than when he performed them orally.
He began by saying:
"we are not here to discuss Dearing this evening".—[Official Report, 12/3/96; col. 829.]
That was true, but utterly irrelevant, because no one had offered to discuss Dearing's recommendations since there are none to discuss. But it is relevant and important to acknowledge the imminent existence of the Dearing Committee and its terms of reference. We cannot ignore it; and we would be wise to plan in advance to make its work easier rather than harder. Why should we not?
The Minister went on to take up my point about the constituency to which the Bill would apply, and the difficulties faced by part-time, postgraduate and FE students. He agreed that the Bill does not address them, and added that,
"the 1990 Act does just that".—[col. 829.]
He added:
"we could extend provisions for student loans … However … it would have major implications for public expenditure".—[col. 829]
We—
Lord Henley: My Lords, I wonder if I might just assist the noble Lord. I think I misled the House briefly on the last occasion, and then corrected myself later on. We could not extend it to FE students by means of the 1990 Act. We could cover the other groups that the noble Lord mentioned.
Lord Morris of Castle Morris: My Lords, I am grateful to the noble Lord for making that correction. He did in fact say both of those things, one a little later than the other.
We had taken on board the assurances he gave about those groups of students. Indeed, we had realised it; it had occurred to us. But it does not answer our questions as to why the Bill should not allow some or all of those students to take out private sector loans. How much

1505
would it cost? Would not postgraduates be a much better bet for banks than undergraduates? I hope the Minister may be able to elucidate this problem a little.
He then asserted confidently that the Dearing Committee will need,
"to take into account … our intention"—
(by that I take it that he means the Government's intention) —
"to introduce private finance into the loans scheme".—[Official Report, 12/3/96; col. 830.]
Indeed, it will. But will it not also need to take into account the Opposition's implacable opposition to this Bill as it stands? Looking at the opinion polls, will the Dearing Committee not need to give at least as much weight to the Opposition's case as to the Government's?
I am quite unable to accept the Minister's statement:
"I do not believe that it would be in the students' interests to delay implementation of the Bill".—[col. 830.]
By what right is he a better judge of the students' interests than they themselves are? They approve of the delay. They would prefer to see the Bill withdrawn. They would like the Government to scrap it. They have said so; and they have threatened to boycott any bank that goes along with it. Is the Minister really saying that they do not know what is best for them and that, "Daddy knows best what is good for you, my child. Just sit there and accept it quietly"? It is to give the Minister a final chance to think again about these matters that we bring this amendment back today. I hope he will take the opportunity. I beg to move.
5.15 p.m.
Lord Tope: My Lords, briefly, I support these amendments. The case was made very well by the noble Lord, Lord Beloff, in speaking to an earlier amendment. It may well be that the Bill itself should not have come forward. But, as it happens, the announcement of the Dearing inquiry coincided with the Second Reading debate in this House.
I hope, as the noble Lord, Lord Morris of Castle Morris, just said, that now the Minister has had time to reflect he will recognise that it seems quite absurd to be setting up a far-reaching inquiry such as the Dearing inquiry, and at the same time extending a scheme which many on all sides of this House, and certainly very many in the student world, believe to he deeply flawed.
The very least we should do is allow Dearing to carry out his investigations and make his recommendations to us. Then we should be given time to consider those recommendations in so far as they apply to the financing of students. Only then should we consider whether or not it is appropriate to go ahead with the provisions of the Bill. We made clear earlier our view on whether or not it is ever likely to be appropriate to go ahead with the provisions of the Bill. But at the very least, we should await the outcome of the Dearing recommendations, and not extend the present scheme at the very time when Dearing is looking into just these matters.
Lord Henley: My Lords, the amendment offers nothing more than further delay to the benefits of the
1506
Bill to both students and taxpayers. It has nothing—dare I say it to the noble Lord, Lord Morris of Castle Morris?—to do with extensions to part-time students, postgraduates or whatever. I shall say a word or two about that towards the end of my remarks. Quite simply, the amendment prevents students and the taxpayer from receiving these benefits until at least 1998–99. That cannot be justified.
I made our position clear at Committee stage on a similar amendment. That was read in the cold light of a Peak District morning by the noble Lord, Lord Morris of Castle Morris. I take more interesting reading, I am afraid, to the cold light of the Peak District. But let us leave the matter there. As I said on that occasion, the Dearing inquiry into higher education will need to take account, as we made clear, of our intention to introduce private financing of loans. But I do not believe that there is any case for delaying the Bill while the inquiry proceeds. Our proposals were first put forward when the review of higher education was already under way and already under way within our department. To that extent the announcement of the committee of inquiry does not change our position.
The inquiry's conclusions will inevitably take some time to implement, particularly if legislation is required. I do not believe that it would be in students' interests—I add that, following the Bill, those students will have a choice between the private sector and the Student Loans Company—to delay the implementation until the end of the inquiry.
As noble Lords are aware, the Bill has a very limited effect. It will not alter the eligibility criteria or broaden the scope of the 1990 Act. But neither will it prevent the Dearing inquiry from looking at those issues. Indeed, the department looks afresh at relevant issues each year in considering whether to make changes to the Education (Student Loans) Regulations, changes that could bring in coverage of more people, delay repayments or whatever.
We have not yet signed any contracts. I expect that the inquiry will be a matter of interest to those with whom we shall negotiate—the private lenders. Before any contracts are signed there will be detailed discussions with them. Whatever happens, we shall meet our obligations in full.
During Committee stage in another place, we announced that the implementation of the twin-track was to be delayed until 1997. We did that because the banks and building societies were concerned that they would be unable to get schemes up and running by the next academic year. I believe that further delay could not possibly be justified.
The noble Lord spoke about extending the benefits of the student loans Act to part-timers, postgraduates or whatever. As he made clear, we could do that by means of the 1990 Act. He asked whether I could quantify the cost of extending those benefits of the 1990 Act, should we extend them, to this particular Bill, which in due course will, I hope, become the 1996 Act. I find it rather difficult, if not impossible, to quantify the cost. It would depend very much on the assumptions about which postgraduates took out loans, for how much and for how

1507
long. Obviously they would be significant. We already have various means of support for postgraduates, for example, career development loans and other assistance can be provided for others.
The basic point is that the powers are there in the 1990 Act to extend to those classes that I mentioned earlier. Obviously, should it be necessary we could do so, just as we could make alterations to the length of the repayment period or whatever. I hope that that explanation—I appreciate, not in the cold light of a Peak District morning—is sufficient for the noble Lord. I hope that on this occasion he will feel able to withdraw his amendment.
Lord Morris of Castle Morris: My Lords, I am grateful to the noble Lord for that reply. I was fortified and convinced by the wise words of the noble Lord, Lord Tope, especially when he prayed in aid the words of the noble Lord, Lord Beloff. I am sorry not to see the noble Lord in his place because I wish to say how, on this occasion as on many others, I find myself totally in agreement with what he said about universities and students and all that is therein.
Sadly, I am unimpressed by the reply that the Minister was able to give. It is simply a fact that the banks are not and have not been interested in the Bill and students are not in any ugly rush to demand the minimum piece of choice which this would force before them. On this occasion, the Minister was not able to offer us a single crumb of comfort or indeed to move any way towards the purpose of the amendment. So I have no alternative but to ask the House to express an opinion on it.
5.24 p.m.
On Question, Whether the said amendment (No. 3) shall be agreed to?
Their Lordships divided: Contents, 79; Not-Contents, 122.

Division No 1

contents

Ackner, L.

Dean of Thornton-le-Fylde, B.

Allen of Abbeydale, L.

Diamond, L.

Ashley of Stoke, L.

Donaldson of Kingsbridge, L.

Avebury, L.

Donoughue, L.

Barnett, L.

Dormand of Easington, L.

Beloff, L.

Dubs, L.

Berkeley, L.

Elis-Thomas, L.

Blease, L.

Ezra, L.

Blyth, L.

Falkender, B.

Borrie, L.

Farrington of Ribbleton, B.

Bruce of Donington, L.

Gallacher, L.

Carter, L.

Gladwin of Clee, L.

Castle of Blackburn, B.

Grey, E.

Chalfont, L.

Hanworth, V.

Charteris of Amisfield, L.

Harris of Greenwich, L.

Cledwyn of Penrhos, L.

Haskel, L.

Cocks of Hartcliffe, L.

Hayman, B.

David, B.

Healey, L.

1482

Hilton of Eggardon, B.

Nicol, B.

Hollis of Heigham, B.

Oliver of Aylmerton, L.

Howie of Troon, L.

Park of Monmouth, B.

Ilchester, E

Peston, L.

Jay of Paddington, B.

Peyton of Yeovil, L.

Jenkins of Putney, L.

Prys-Davies, L.

Kilbracken, L.

Rea, L.

Kirkwood, L

Redesdale, L.

Laing of Dunphail, L.

Richard, L.

Lauderdale, E

Sainsbury, L.

Lester of Herne Hill, L.

Seear, B.

Lockwood, B.

Serota, B.

Lovell-Davis, L.

Sharples, B.

McCarthy, L.

Shaughnessy, L.

McIntosh of Haringey, L.

Shepherd, L.

Mackie of Benshie, L.

Stoddart of Swindon, L.

McNair, L.

Strabolgi, L.

Mallalieu, B.

Taverne, L.

Mason of Barnsley, L.

Taylor of Blackburn, L.

Mayhew, L.

Thomson of Monifieth, L.

Merlyn-Rees, L.

Tope, L. [Teller.]

Merrivale, L.

Tordoff, L.

Milner of Leeds, L.

Turner of Camden, B.

Molloy, L.

Wallace of Saltaire, L.

Monkswell, L.

Wedderburn of Charlton, L.

Moore of Wolvercote, L.

White, B.

Morris of Castle Morris, L. [Teller.]

Williams of Elvel, L.

Williams of Mostyn, L.

Murray of Epping Forest, L.

Winchilsea and Nottingham, E.

Nelson, E.

Winston, L.

NOT-CONTENTS

Aberdare, L.

Gerard, L.

Addison, V.

Goschen, V.

Ailesbury, M.

Granard, E.

Alexander of Tunis, E.

Gray of Contin, L.

Allenby of Megiddo, V.

Haig, E.

Belhaven and Stenton, L.

Hailsham of Saint Marylebone, L.

Blaker, L.

Halsbury, E.

Blatch, B.

Hamilton of Dalzell, L.

Bledisloe, V.

Harding of Petherton, L.

Boardman, L.

Hayhoe, L.

Boyd-Carpenter, L.

Hayter, L.

Brabazon of Tara, L.

Henley, L.

Brougham and Vaux, L.

HolmPatrick, L.

Cadman, L.

Howe, E.

Campbell of Alloway, L.

Hylton-Foster, B.

Campbell of Croy, L.

Inglewood, L.

Carnock, L.

Jenkin of Roding, L.

Chelmsford, V.

Johnston of Rockport, L.

Chesham, L. [Teller.]

Kimball, L.

Chorley, L

Kintore, E.

Clanwilliam, E.

Kitchener, E.

Cockfield, L.

Knollys, V.

Constantine of Stanmore, L.

Lane of Horsell, L.

Courtown, E.

Lindsay, E

Cranborne, V. [Lord Privy Seal.]

Long, V. [Teller.]

Crawshaw, L.

Lucas, L.

Cuckney, L.

Lyell, L.

Cullen of Ashbourne, L.

McConnell, L.

Cumberlege, B.

Mackay of Ardbrecknish, L.

Davidson, V.

Mackay of Clashfern, L. [Lord Chancellor.]

De Freyne, L.

Dean of Harptree, L.

Mackay of Drumadoon, L.

Denham, L

Manton, L.

Derwent, L.

Mersey, V.

Dixon-Smith, L.

Miller of Hendon, B.

Elibank, L.

Milverton, L.

Ellenborough, L.

Mountevans, L.

Elles, B.

Moyne, L.

Elliott of Morpeth, L.

Munster, E.

Forbes, L.

Murton of Lindisfarne, L.

Fraser of Kilmorack, L.

Noel-Buxton, L.

Gage, V.

Norrie, L.

Gainford, L.

O'Cathain, B.

Oppenheim-Barnes, B.

Strange, B.

Orkney, E.

Strathclyde, L.

Oxfuird, V.

Sudeley, L.

Pearson of Rannoch, L.

Swinfen, L.

Pender, L.

Tebbit, L.

Pilkington of Oxenford, L.

Terrington, L.

Plummer of St. Marylebone, L.

Teviot, L.

Rankeillour, L.

Thomas of Gwydir, L.

Rawlings, B.

Tollemache, L.

Rees, L.

Trefgarne, L.

Renton, L.

Trumpington, B.

Romney, E.

Vivian, L.

St. Davids, V.

Westbury, L.

Seccombe, B.

Whitelaw, V.

Shaw of Northstead, L.

Willoughby de Broke, L.

Skidelsky, L.

Wise, L.

Stanley of Alderley, L.

Young, B.

Resolved in the negative, and amendment disagreed to accordingly.

Division No. 2

CONTENTS

Ashley of Stoke, L.

Hanworth, V.

Beaumont of Whitley, L.

Harris of Greenwich, L.

Berkeley, L.

Haskel, L.

Blackstone, B.

Hayman, B.

Blease, L.

Healey, L.

Borrie, L.

Hilton of Eggardon, B.

Brooks of Tremorfa, L.

Hollis of Heigham, B.

Castle of Blackburn, B.

Holme of Cheltenham, L.

Cledwyn of Penrhos, L.

Howie of Troon, L.

Cocks of Hartcliffe, L.

Hughes, L.

David, B.

Irvine of Lairg, L.

Dean of Thornton-le-Fylde, B.

Jay of Paddington, B.

Diamond, L.

Jenkins of Putney, L.

Donaldson of Kingsbridge, L.

Kennet, L.

Donoughue, L.

Kilbracken, L.

Dormand of Easington, L.

Kirkwood, L.

Dubs, L.

Lester of Herne Hill, L.

Falkender, B.

Lockwood, B.

Farrington of Ribbleton, B.

Longford, E.

Fitt, L.

Lovell-Davis, L.

Gallacher, L.

McCarthy, L.

Gladwin of Clee, L.

McIntosh of Haringey, L.

Gregson, L.

Mackie of Benshie, L.

Grey, E.

McNair, L.

1508

Mallalieu, B.

Seear, B.

Mason of Barnsley, L.

Sefton of Garston, L.

Merlyn-Rees, L.

Serota, B.

Milner of Leeds, L.

Shepherd, L.

Mishcon, L.

Smith of Gilmorehill, B.

Molloy, L.

Stoddart of Swindon, L.

Monkswell, L.

Strabolgi, L.

Morris of Castle Morris, L. [Teller]

Thomson of Monifieth, L.

Tope, L. [Teller]

Murray of Epping Forest, L.

Tordoff, L.

Nicol, B.

Turner of Camden, B.

Prys-Davies, L.

Wedderburn of Charlton, L.

Rea, L.

White, B.

Redesdale, L.

Williams of Elvel, L.

Richard, L.

Williams of Mostyn, L.

Ripon, Bp.

Winchilsea and Nottingham, E.

NOT-CONTENTS

Abinger, L

HolmPatrick, L.

Addison, V.

Inglewood, L.

Alexander of Tunis, E.

Jenkin of Roding, L.

Ashbourne, L.

Johnston of Rockport, L.

Astor of Hever, L.

Kimball, L.

Belhaven and Stenton, L.

King of Wartnaby, L.

Blaker, L.

Laing of Dunphail, L.

Blatch, B.

Lane of Horsell, L.

Blyth, L.

Lauderdale, E.

Bowness, L.

Lawrence, L.

Boyd-Carpenter, L.

Leigh, L.

Brabazon of Tara, L.

Lindsay, E

Brigstocke, B.

Lucas, L.

Brookes, L.

Lyell, L.

Brougham and Vaux, L.

Lytton, E.

Butterworth, L.

McConnell, L.

Cadman, L.

Mackay of Ardbrecknish, L.

Caldecote, V.

Mackay of Clashfern, L. [Lord Chancellor.]

Campbell of Croy, L.

Carnock, L.

Mackay of Drumadoon, L.

Chelmsford, Bp.

Marlesford, L.

Chesham, L. [Teller.]

Massereene and Ferrard, V.

Clanwilliam, E.

Merrivale, L.

Clark of Kempston, L.

Mersey, V.

Colwyn, L.

Miller of Hendon, B.

Courtown, E.

Milverton, L.

Craig of Radley, L.

Monk Bretton, L.

Cranborne, V. [Lord Privy Seal.]

Mountevans, L.

Crickhowell, L.

Moyne, L.

Cumberlege, B.

Munster, E.

Davidson, V.

Murton of Lindisfame, L.

Dean of Harptree, L.

Northesk, E.

Denham, L.

Oppenheim-Barnes, B.

Dilhorne, V.

Orr-Ewing, L.

Dixon-Smith, L.

Pearson of Rannoch, L.

Dundonald, E.

Pender, L.

Elibank, L.

Peyton of Yeovil, L.

Ellenborough, L.

Pilkington of Oxenford, L.

Elles, B.

Plummer of St. Marylebone, L.

Elliott of Morpeth, L.

Rankeillour, L.

Elton, L.

Rawlings, B.

Ferrers, E.

Rees, L.

Goschen, V.

Rennell, L.

Granard, E.

Renton, L.

Gray of Contin, L.

Renwick, L.

Greenway, L.

Romney, E.

Haig, E.

St. Davids, V.

Hailsham of Saint Marylebone, L.

Saltoun of Abernethy, Ly.

Hamilton of Dalzell, L.

Seccombe, B.

Harding of Petherton, L.

Sharples, B.

Harlech, L

Shaw of Northstead, L.

Harmsworth, L.

Strange, B.

Harrowby, E.

Strathclyde, L. [Teller.]

Hayhoe, L.

Sudeley, L.

Henley, L.

Tebbit, L.

Hertford, M.

Teviot, L.

Holderness, L.

Thomas of Gwydir, L.

1509

Trumpington, B.

Whitelaw, V.

Ullswater, V.

Wilcox, B.

Willoughby de Broke, L.

Vivian, L.

Wise, L.

Wade of Chorlton, L.

Young, B.

Resolved in the negative, and amendment disagreed to accordingly.
5.33 p.m.
Lord Morris of Castle Morris Lord Morris of Castle Morris moved Amendment No. 4:
After Clause 1, insert the following new clause—
LEVEL OF SUBSIDY
(". The subsidy paid in respect of each private sector student loan to any person in pursuance of arrangements under this Act shall not exceed the amount required by that person to reimburse the cost of—

(a) any administration relating to the loan; and

(b) the difference between the interest rate agreed with the eligible student receiving the loan and the rate of interest which the bank would otherwise have charged.").

The noble Lord said: My Lords, if there is one thing in this Bill on which we are all agreed it is that the subsidy is at the heart and centre of the Bill—indeed, it is probably the only thing on which we agree. I need not apologise unduly therefore for returning to it with a fresh suggestion for improving the Bill's vagueness on the subject and making it a bit more comprehensible to the students who may be affected and the banks who still could, theoretically, be induced to compete for it—though as the days go by that seems to be an increasingly unlikely possibility.
The Minister was correct in saying in his reply at Committee stage that the 10 per cent. figure we then proposed was more of a "probe" than a "proposition". However, it failed to elicit much useful information from the Minister and the whole matter remains shrouded in what seems to us to be unnecessary secrecy. The Minister failed completely to answer several points made by my noble friend Lord Desai. I should like to give him the opportunity today to repair that omission and I shall speak for a little longer than may otherwise be tolerable in order to give him time to make a few notes and, if necessary, refresh his memory on what my noble friend said.
In an attempt to help him in that respect, I can tell him that my noble friend asked why the Government were not proposing long-term loans so that insurance companies and others who made actuarial calculations would be the more willing to participate. There was no reply. My noble friend pointed out that the banks,
"would like a high subsidy but I reiterate that there is no economic case for such a subsidy".—[Official Report, 12/3/96; col. 742.]
Can the Minister explain to us now the economic case for whatever subsidy is agreed? Further, my noble friend suggested the merits of a long-term loan which could be deductible from the national insurance surcharge. Why is that not a preferable option to one which requires so substantial a subsidy to succeed, even though we have no idea what that subsidy will look like?
The Minister has been kind enough to write to me on the subject of a subsidy since the Committee stage. I am grateful for his attempt to clarify the concept and its
1510
workings. Unfortunately, his letter—which I read most carefully—raises more new problems than it solves of the old ones. He begins by saying that,
"The purpose of the subsidy is not to persuade private lenders to lend money".
When I read that, I felt like Macbeth as he entered after discovering the body of Duncan and said:
"Confusion now hath made his masterpiece".
"The purpose of the subsidy is not to persuade private lenders to lend money",
In the most obvious sense of those words it is. The subsidy is there to persuade them to lend money because, if they were not provided with a subsidy, they would be unlikely to lend any money. But, as I thought about it, revolved it, turned the sentence over in my mind and considered it in relation to the next sentence, I began to see a glimmer of light on what may be in the Minister's mind. He went on:
"It is to enable them to lend their own money"—
"their own money"; I do not see how they can lend anybody else's money—
"on the preferential terms which are central to the loans scheme, whether public or private, to student borrowers with little credit history".
There at least we surface and light shines. On these Benches we have been concerned to protect the creditworthiness of students, though so far with little success. The letter goes on to state,
"the subsidy level which the financial institutions will set out in their tenders to reflect the benefits to them of getting privileged access to this market".
If we ask the question, "What is in it for the banks?", the answer is the benefits of,
"privileged access to this market".
I should like the Minister even now to explain to us what exactly those "benefits" are which by this subsidy may be obtained and which would not be obtainable without the subsidy. Banks have been lending to students for a long time. Why should this subsidy, whatever its level may be, make such an enormous difference that banks or anybody else will want to take it up?
A few more difficult terms are introduced in that paragraph. The Minister says:
"Obviously, the form and level of subsidy which we offer to the private lenders may differ from the resources which we currently provide for the Student Loans Company".
I do not understand what is meant by the distinction between "form" and "level". What does it mean? A subsidy is a subsidy. It can only, so far as I know, mean money. But the noble Lord talks here of the "form and level" of the subsidy. I should be grateful for an explanation of the difference between "form" and "level" in terms of subsidy and how those two terms relate to the resources which we currently provide for the Student Loans Company. What are those resources apart from financial resources—apart from money?
The noble Lord then says one thing which I found very helpful:
"We are in the process of testing the market and if none of the bids are acceptable we shall not proceed".

1511
The word "are" might be replaced in that sentence by "is" since the subject is singular and that might add a pleasing touch of literacy to it. But I get the point. It is a welcome reassurance. Not so the next sentence:
"But we have no intention of setting out our reserve price".
We have never asked anyone to set out a reserve price. We would be perfectly satisfied with some indication of an order of magnitude. What kind of sum are we talking about? I find it difficult to believe that that is too much to ask.
I was grateful for the clear description in the letter of the flexibility permitted to the banks or other financial houses, though I do not approve of it, for the letter says:
"The private lenders will have the flexibility, with the agreement of the borrower, to charge interest at a rate below that set out in the regulations governing public loans, with a corresponding reduction in the repayment period".
Good; I understand that. It is what we have all believed along the way in any case. But it is good to have it thus set down and spoken out. It does, of course, favour the rich against the poor and to that extent we find it less than totally acceptable. But I am at least grateful for the clarity.
Apart from that, the Minister's letter obfuscated as much as it clarified to my grammarian's mind and so I felt that we were obliged to come back with this amendment which seeks to establish a clear and fair basis for the subsidy and to remove the totally unacceptable element of latitancy and secrecy from it. I beg to move.
Lord Henley: My Lords, for upsetting the distinguished grammarian I can only unreservedly apologise to the House. It is one of the dangers of serving in the Department for Education and Employment that one has to examine one's letters and one's speeches with much greater care than is perhaps the case with the slightly more robust approach taken, for example, in the Ministry of Defence or other departments I could mention.
I have a degree of sympathy for the principle behind the amendment, not that I think the noble Lord specifically spoke to the amendment as such. I suspect that to some extent it was a further probing amendment. As I made clear in my letter—I hope that this will not cause the noble Lord the confusion that he said it caused him—we shall not be paying subsidy to the private lenders simply in order that they may lend money. They can do that perfectly well without our help. We are paying subsidy to the private lenders—those private lenders who sign up—so that they can offer loans on similar preferential terms to those offered by the Student Loans Company. It is as simple as that.
They are already in the position where they can lend money to students or to whomsoever they so wish. We are paying subsidy so that they can do it on similar terms to those offered by the SLC. They are like the fishmongers, mentioned by my noble friend Lord Beloff on a number of occasions, who are not just selling fish but are selling it at special offer prices. I am concerned, just as this amendment is concerned, to ensure that the benefits of subsidy will go to the student borrowers
1512
themselves. But those same special terms mean that the subsidy arrangements will be somewhat more complicated than the amendment envisages.
The subsidy will need to take into account the fact that owing to the special deferment arrangements lenders will be expected to service unprofitable loans for long periods. Lenders may have to wait a long time for loans to be paid off and they can begin to treat borrowers as ordinary profitable customers. There is also a risk attached to lending, not least where the lending is to students with very little credit history. Those are all factors which may be taken into account when the financial institutions are putting together their bids.
As to the noble Lord's worries about "form" and "level" of subsidy, I should have thought that the words there are perfectly clear. The "level" of subsidy the noble Lord understands; "form" might mean, for example, the manner in which it was paid—whether it was paid all at once or spread out over the year, or whatever. But it is up to the financial institutions themselves to put together fair bids and then to negotiate with the department. But I can reassure the noble Lord, as I think I have done on a number of occasions, that we will only accept bids which offer a cost-effective deal for the taxpayer and which offer real choice for the student.
The noble Lord also asked whether we might not consider making use of the national insurance scheme to repay student loans. Others have suggested making use of the tax system. These matters have been considered on a number of occasions and other countries have pursued similar lines. However, I have to say that there are considerable complications in making use of the national insurance system that would not necessarily bring about the simplicities which the noble Lord desires. The Student Loans Company and what we are suggesting—the extension to the banks—keep matters relatively simple. But, as always, I can give an assurance that Dearing—Dearing Mark III, if we can call it that—will be addressing or can address these matters as the inquiry feels fit.
The private lenders will naturally want a return on their money and that will be reflected in their tenders. As I have emphasised, we shall not sign any contracts unless we are convinced that they will realise the full benefits to the students and the full benefits to the taxpayer of private sector involvement, and those full benefits cost effectively. Again I repeat—the noble Lord repeated it for me but I repeat it again—that if we are not convinced of this we shall not sign contracts. The private lender subsidies will be settled on the basis of competitive tenders. We have, as noble Lords will know, a number of financial institutions which are interested. I expect those tenders to take into account the long-term benefits to them as financial institutions of being selected for subsidised loans to the students.
I hope I have dealt with most of the points put by the noble Lord but I shall certainly look carefully at what he has had to say and particularly at some of the points made in my letter of 19th March to which he referred.
Certainly, I should be more than happy to have a further

1513
discussion with the noble Lord on these matters between now and Third Reading should he so wish. However, as regards the amendment itself, I do not believe it is necessarily a practical way forward and I hope therefore that he will withdraw it.
5.45 p.m.
Lord Morris of Castle Morris: My Lords, I am grateful to the Minister for what he has said and for answering a selection of my questions. The distinction which he draws between "form" and "level" in his letter still puzzles me and I find the distinction which the Minister makes between the two terms pleasingly poetic. We shall come to the question of the repayment mechanism later but I am grateful to him for opening it out at this stage. I shall ponder what he says when other noble Lords are speaking to other amendments and return to it in its proper place. His offer of discussions is a welcome one to me. If, after I have had the opportunity tomorrow to read in Hansard what everyone has said, I feel it is necessary to ask for a half hour of his time, I am grateful that I shall not be turned away. With that said, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Morris of Castle Morris Lord Morris of Castle Morris moved Amendment No. 5:
After Clause 1 insert the following new clause—
REFUSAL OF STUDENT LOAN NOT REFUSAL OF CREDIT
(". A refusal to an eligible student of a private sector student loan shall not be regarded as a refusal of credit for any purpose and may not be required to be declared in any other application for credit.").
The noble Lord said: My Lords, when we discussed the whole matter of creditworthiness in relation to this Bill at Committee stage, my noble friend Lord Williams of Mostyn (whose forensic skills have no superior and few rivals) succeeded in eliciting from the Minister clarifications and concessions which we found helpful. Chief among them was the answer to my noble friend's question as to whether a student who had been refused a private loan and then applied for a Student Loans Company loan would be obliged to report the refusal in his SLC application. The Minister said:
"I do not see that there would be any obligation to report to the Student Loans Company the fact that the student had been refused a loan elsewhere".
That is clear, unequivocal, welcome, helpful and, indeed, goes a little beyond what was requested.
I hope that the Minister will not be offended by our seemingly insatiable appetite for further and further concessions over and above what he has already given, but the words of this amendment are precise:
"may not be required to be declared in any other application for credit".
That is not just to the Student Loans Company but "any other application for credit".
We are pursuing this because students must now apply for loans and any refusal of credit is an extremely serious and continuous handicap long after they have ceased to be students. It can last for the rest of their lives. The student refused credit may find that the
1514
remembrance of it is grievous unto him or her and that the burden of it is intolerable. Once to be refused credit may be to carry that for the rest of one's financial life. The student may well say, with Coleridge's Ancient Mariner,
"Instead of a Cross the Albatross
About my neck was hung".
I beg to move.
Lord Williams of Mostyn: My Lords, perhaps I may simply add a syllable or two. The real mischief here—and putting one's eye to Amendment No. 7—is that if there is no obligation to give a reason for refusal, serious unfairness may result which has in effect a financial penal consequence for the rest of the student's adult life. A refusal of a loan may well be made on non-financial grounds. If that were so, without the obligation for giving a reason for refusal, injustice could creep in. The loan might be refused, for instance, because the lending institution does not seek to support a particular discipline. It might come to the reasoned view that there was a superabundance of professors of English literature around and about the place and it might not want to fund any more. It might think, for instance, that the wage levels in the intended profession were too low, and the institution did not want to lend on that basis. It might ask someone what they have in mind as regards future employment. The institution might think that the prospects are very poor. A student who said, for instance, that he was hoping to become a Conservative Member of Parliament might well be refused a loan on the basis that his employment prospects were dismal in the extreme for the next 10 years or so.
It is important that a student who is obliged, as the noble Lord, Lord Morris of Castle Morris, said, to look for loan facilities should not be penalised in later life and particularly—if I may repeat again at the risk of tedium—if no reason is required to be given. Therefore, there cannot be a safeguard for the student, and that is capable of doing him or her an injustice for a very long time.
Lord Tope: My Lords, the case for this amendment has been well made. Anxiety was expressed at earlier stages in the consideration of the Bill about the probable, certainly possible, effect on creditworthiness of students in their future life. This amendment addresses the point very well, particularly the proposal that it:
"may not be required to be declared in any other application for credit".
That is the nub of it. On that basis I am happy to support this amendment.
Baroness Farrington of Ribbleton: My Lords, there is one further point that I would like to put to the Minister for his consideration and that is the fact that at the end of the course the student may be caught between the devil and the deep blue sea. If the student is unable to ascertain why a loan has been refused, or if the reason has nothing to do with his or her personal creditworthiness but rather the course, as has been said, were the student to fail to declare that fact, unless he is legally exempt from having to do so, on some future

1515
occasion the student could be accused of fraud. For example, I think of someone joining the police force who takes a degree in a subject such as philosophy which the private sector loan arrangement authority decides is not relevant to a career. The student then applies to join the police. Such a student should be exempt from having to declare that a loan has been refused because there is no doubt that a lack of creditworthiness may influence the opportunity to get a job, let alone the ability to raise credit, for example, for a mortgage.
Lord Henley: My Lords, as the House will recall, I resisted a similar amendment at Committee stage, putting forward what I believed to be very good reasons. I am still not persuaded of the need for such an amendment.
It would have serious and, I believe, impractical implications beyond the student loans scheme. The proposal seeks to regulate not only the private lenders of student loans but private lenders of every kind. They would obviously be affected by the first part of the amendment; namely,
"A refusal to an eligible student of a private sector student loan shall not be regarded as a refusal of credit".
In other words, it would have to be taken into account. The amendment seeks to allow a student who has been turned down for a loan from a private lender to withhold that information whenever he applies for a loan in future. I understand the concern put forward by various noble Lords about students who may be turned down, for whatever reason, for loans from private lenders that they may find it hard to get badly needed credit in future to buy a house, a car or whatever. However, financial institutions, whether lending money to students or house buyers, must be allowed commercial freedom in their decisions. We could not possibly require a bank or a building society, when considering an application for a mortgage, to make a special exemption for an applicant because he was refused a student loan by another institution.
Further, I do not believe that we should assume that future prospective lenders will be greatly interested in knowing that an applicant was refused a student loan in the past—perhaps many years in the past—and perhaps for a reason which, as noble Lords have said, is not a good one. They all have their own methods of assessing applications and their own different, commercial preferences. It is misleading to attribute too much weight to past information. I do not believe that the banks or building societies themselves are that short-sighted.
Further, I remind the House that the refusal of a student loan from a private sector institution is not the last word. There is always the absolute right, which I have mentioned on a number of occasions and which I repeat today, for that individual student to go to the Student Loans Company. Therefore, there will always be the availability of a loan for the student if he or she complies in all other ways. Therefore,
1516
I hope that the noble Lord will feel that his amendment is not necessary and will withdraw it on this occasion.
Lord Morris of Castle Morris: My Lords, we know full well that the private sector loan is not the position of last resort and that a student can always go to the SLC to get his or her loan. But that is surely not the point. Here we are talking not about that question but about what happens if a student is refused a loan. Does that count as credit and, if so, is that going to appear on every computer in the land and work against that student for the rest of his or her life? The proposed new clause would cost nothing. It would encourage students to apply and it would give them a bit more hope if they were applying to a bank, knowing that if they were turned down that would be an end of it and it would not be a permanent stain on their character, as it were.
We put this amendment forward in no destructive sense whatever; we genuinely believe that it will improve the Bill. But it appears that the Minister is still not persuaded. I find his arguments on thus amendment even weaker than those on most of the matters that he has opposed so far. Nevertheless, much though I would welcome the opportunity to divide the House on this amendment, I am unlikely to command a vast amount of support. Therefore, at this time, and without any prejudice towards bringing the matter back at a later stage, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
6 p.m.
Lord Morris of Castle Morris Lord Morris of Castle Morris moved Amendment No. 6:
After Clause 1, insert the following new clause—
INDEPENDENT ASSESSOR
(". The Secretary of State shall establish an independent assessor to investigate and adjudicate upon disputes between an eligible student and any person by whom private sector student loans are made.").
The noble Lord said: My Lords, the purpose of this amendment is to extend the power of an independent assessor to the private loans company which is now proposed. In Schedule 2(3)(5), the Education (Student Loans) Act 1990 provided for an independent person, the assessor, to investigate and report on disputes between borrowers or intending borrowers and the body making the loans. Only complaints which are not resolved by the Students Loans Company or which are not replied to within three months can be referred to the assessor.
The Bill as it stands will not, as far as I can see, extend that provision to the new private loans scheme. There will be no independent mechanism for resolving disputes in the new scheme. That may well deter students from applying and it gives the lender what we consider to be an unnecessary power. The amendment would therefore work to the benefit of the Government because it would not deter students from at least attempting to get a loan from a bank or whatever body they are dealing with.
It is important that there should be an independent mechanism for dealing with disputes that cannot be resolved through the usual complaints procedures, because students may very well be in their final year at school when they have to go through the process of starting negotiations about a loan. It means that young persons of the age of 17 or thereabouts will be involved in negotiating what for them will probably be the first step of their financial lives and to say to them, "caveat emptor" seems to us to be rather more harsh than is necessary.
The Bill would be improved by the appointment of an independent assessor to give aid and comfort in such situations. The role of the assessor will be particularly important in the new private scheme in disputes between intending borrowers and lenders. Students who, for one reason or another, are refused loans by private sector lenders will benefit from an independent mechanism for complaint if they feel that they have been unfairly treated. At Report stage in another place, Mr. Stephen Byers argued that although there is a banking ombudsman, his terms of reference prevent him being involved in commenting on a bank's commercial judgment about lending. We have taken on board what the Minister said at previous stages about what the ombudsman can and cannot do, but I think that it is still true to say that he cannot comment on a bank's commercial judgment when lending. We feel that someone should have that power. Surely the lack of such a power disables the ombudsman and seriously weakens his powers.
It is true that the number of complaints not resolved by the Students Loans Company and referred to the assessor has been relatively small. In 1993 a customer survey commissioned by the Student Loans Company found that less than 5 per cent. were aware of the company's complaints procedure. In response to those findings the company took steps to publicise its complaints procedure in its customer service policy and annual report.
However, there has come into my possession—I found it on my desk; I do not know how it got there but I do not think that the Minister kindly placed it on my desk—the 13th report of the Committee of Public Accounts, entitled The Operations of the Student Loans Company Ltd. Browsing quietly through it, I find these words in subsection (vii) of paragraph 4 on the main conclusions and recommendations:
"We are surprised that up to the end of the 1994/95 academic year, only eight complaints had been referred to the independent Assessor, despite the widespread difficulties experienced by students. We note that a customer survey has suggested that there is only a limited awareness by borrowers of the Company's complaints procedure. We recommend that efforts should continue to publicise the complaints procedure more widely".
Surely students opting for the new private scheme—if it ever comes into being and if there ever are any—should receive the same protection as already exists for students and graduates who have loans from the public sector scheme. I beg to move.
Lord Henley: My Lords, again, I believe that this is an unnecessary amendment. I assume that the noble
1518
Lord is seeking to create another independent assessor, similar to the independent assessor for the Student Loans Company, to offer assistance with loans taken out with private sector institutions.
I think that I have made it clear, in speaking to a similar amendment at an earlier stage—colleagues have made it clear in another place when dealing with other amendments—that there is no need for the establishment of an additional complaints procedure to cover private sector lenders. The Banking and Building Societies Ombudsmen are already there to do just that job. I see no point in wasting the taxpayer's money simply to duplicate them.
Officials in my department have spoken to the Banking Ombudsman. They have learnt first-hand, and reported to me, what powers he does and does not have. He has emphasised to my officials that he sees absolutely no reason why complaints about loans from banks under the twin-track scheme should not be within his remit.
The ombudsman will look into any personal complaint of substance about a bank's business. That is how wide-ranging his powers are. In particular, he has assured us that he will always look into a complaint about a loan rejection if the complainant has some evidence to back up his complaint. Any student with a genuine complaint will have that evidence. The ombudsman can demand from a lender whatever information he needs in order to make a decision about the complaint, including, in the case of a loan rejection, supporting evidence for the lender's original refusal. If the lender refuses to give him any of this information, he is forced to assume that they had insufficient evidence to refuse the loan in the first place and his recommendation would thus be in the customer's favour.
I believe that the ombudsman will offer an independent safeguard of exactly the sort which the noble Lord requires for private sector applicants and borrowers, and one which all the major high street banks and building societies, which fund the ombudsman schemes, are fully signed up to. Therefore, I believe that the amendment is unnecessary and I hope that the noble Lord will find it possible to withdraw it.
Lord Morris of Castle Morris: My Lords, yes, I shall. That is the best reply that I have had from the Minister during our several hours of debate. The Minister has given us some information. He has taken the trouble to rouse his officials and to get them out, asking the ombudsman exactly what he does. The Minister has put on the record exactly what we have been asking for all along. I would have been happy to be assured that we could have either a new assessor or the extended powers of the assessors of the Student Loans Company. As far as I was able to jot them down, the Minister's words that the ombudsman will look into any complaint, that he can demand information from any lender, and that he can take action if he is not satisfied go a very long way towards giving me what I want. I cannot think that I could want any more. I am grateful to the Minister and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Tope Lord Tope moved Amendment No. 7:
After Clause 1, insert the following new clause—
STATEMENT OF REASONS
(". The Secretary of State shall require any person to whom subsidy is to be paid who refuses to make a private sector student loan to an eligible student to provide the student with a statement of reasons for the refusal.").
The noble Lord said: My Lords, the statement which the Minister has just made helps considerably with this amendment, but I should like to press and probe him a little further. The amendment seeks to provide that the student, the borrower, should be given the reasons for the refusal. A similar amendment was moved in Committee by the noble Lord, Lord Morris of Castle Morris, in response to which the Minister said:
"It would be quite wrong to impose particular rules on how private companies should deal with loan applications … They must be free to reject applications; and they must be free to decide what to tell such applicants".—[Official Report, 12/3/96; cols. 791–2.]
I am not sure that I accept that such companies "must be free". We have talked much in previous debates and in this debate about possible effects on creditworthiness. I think that it is desirable to require lenders to give to applicants a simple statement of their reasons for refusal. I do not think that request would be too onerous for the lenders.
I turn now to the position of the ombudsman, which the Minister helpfully clarified and elucidated. I believe that I heard him say just now—perhaps he will clarify this when he replies—and he said in Committee that the ombudsman will look into complaints about an institution's refusal to offer a loan provided that the complainant has a piece of evidence of substance that the institution acted unfairly or illegally with regard to the granting of a loan. I believe that the Minister referred just now to a complaint having to be one "of substance". While one does not wish to encourage frivolous complaints, one is bound to ask how a complainant can establish whether or not his complaint has substance if he has been given no reason for the refusal of his application.
I believe that it would be entirely consistent if the Minister went a little further in the assurances just given and agreed that in the first place applicants, not just the ombudsman, should be given such a statement so that before they made their complaints to the ombudsman they could judge whether or not they had complaints of substance. The ombudsman could then decide whether or not to take the matter on from there.
In moving the amendment, I remind the noble Lord, Lord Morris of Castle Morris, that this matter can be taken just a little further. One can ask for a little more. I look forward to receiving the Minister's assurances. I beg to move.
Lord Williams of Mostyn: My Lords, I believe that the noble Lord, Lord Tope's, arguments are correct. There is no reason in principle why commercial lenders should not be subject to some discipline other than that of the bare marketplace. In a large number of different activities commercial organisations have to do just
1520
that—for instance, in terms of how they treat the disabled who apply for employment or who work for them.
More fundamentally, this money comes in part from public funds. If the Government are committed to openness and transparency, there can be no sensible reason why, if a student has the bitter blow of a refusal of a private sector student loan, he or she should not know the reason for it. There are many reasons for that. First, if the lender who has to come to a decision is obliged to give reasons, the mere fact that reasons have to be given normally improves the decision-making process. Secondly, since this is in part public money (by virtue of the subsidy component) it should be seen to be dealt with in an open and appropriate way. Thirdly, a student is entitled as of right to know why he or she has been turned down. Fourthly, to underline what the noble Lord, Lord Tope, has said, without knowing the reason for the refusal the student is wholly disabled from mounting a sensible appeal.
Baroness Farrington of Ribbleton: My Lords, I speak in support of the amendment. I should like to ask the Minister how the Government seek to resolve the conflict between their replies on many occasions, which indicate that commercial judgment is at the heart of this legislation, and the oft repeated reply that it is a matter of student choice. This amendment will ensure that, where students are deprived of that choice by a decision, the reason for it is open and clear to those students concerned.
I should also like the Minister to explain how students may defend themselves on a future occasion. Given that the Government have refused to allow students to refrain from giving information on future occasions when they apply for jobs, mortgages or further credit at other stages in their careers, how can they defend themselves if they are not given details of the reasons for the refusal? That would be the only defence that students would have to protect them from a lifetime of possible discrimination by other credit facilitators, and those other fields as well.
6.15 p.m.
Lord Henley: My Lords, I deal first with the question of student choice. I do not accept the argument of the noble Baroness that there is any discrepancy in the case that we have put forward. I take a similar situation. Students have a choice about which university they go to. That is obviously dependent on the choice that the universities or institutions make about the students. The choice can never be total. Similarly, the student has a choice about going to one or more private sector institutions for a student loan. If he or she fails there, as a last resort there will be the choice of going hack to the Student Loans Company.
I should like to deal with the point that the noble Lord, Lord Tope, made about the ombudsman and his worries, echoed to some extent by the noble Lord, Lord Williams, that students had to produce evidence for their complaints. The noble Lord quoted my words at Committee stage. I cannot remember my precise words, but this afternoon the words that I have used are "the complainant has some evidence to hack up his complaint". The noble Lord, Lord Williams, says that if

1521
no reason is given the student can have no evidence. I do not accept that that is the case. For instance, there may be evidence of the application being treated in a frivolous manner by the institution. The mere lack of written reasons provided by the bank does not mean that it is impossible for the individual to produce any evidence to make his case to the ombudsman. Having said that, I am grateful that the noble Lord, Lord Tope, with the noble Lord, Lord Morris of Castle Morris, recognises the advantages of the banking ombudsman's writ running here and the fact that it deals with the earlier problem.
The case advanced by noble Lords opposite as to our reasons why student applicants should not be given this information is not valid. That is not our argument. We say that this must be very much a matter for private lenders to decide. They are the ones who, in the main, risk their own money. They must be free to reject applications and decide what to tell such applicants. What we want is the normal lending arrangement between the lender and borrower. That, rather than extensive regulation, is the best way to get the benefits of the improved service standards that will flow from private sector involvement. I said that in the main they were lending their own money. Noble Lords opposite have said that we are talking about public money in subsidy. But the money risked on loan will be largely that of private lenders. The best safeguards for students lie in the operation of choice in a diverse and competitive market. Student borrowers will have a choice. If they have concerns similar to those of the noble Lords, they can always take out public loans through the Student Loans Company.
Lastly, I reiterate that private lenders will not commit themselves to the twin-track approach unless they are keen to be major lenders to students. Therefore, they will be committed to ensuring that they get a large share of that market. I do not believe that they will achieve that by being over-selective or secretive in their dealings with student applicants. Therefore, I believe that it would be unreasonable and unnecessary to place on private lenders the restrictions in the new clause. I hope that the noble Lord will feel able to withdraw his amendment.
Lord Morris of Castle Morris: My Lords, can the Minister explain how a student can go to the ombudsman with a complaint if he does not know why his loan has been refused?
Lord Henley: My Lords, I made that perfectly clear. I do not believe that it is absolutely necessary to have written evidence from the institution to make that complaint. There are other forms of evidence which will be available, such as the attitude of the institution. That evidence may be sufficient for the student to take the complaint to the ombudsman.
Lord Tope: My Lords, the Minister said that lenders must be free to decide whether to accept or reject loan applications. Nobody disputes that. What we are saying is that they must give a reason if they reject the application. I believe that the noble Lord, Lord Williams
1522
of Mostyn, is right. Usually, decisions are better made if those who make them know that they will have to justify them in public. Therefore, the fact that they have to give a simple statement of reasons for refusal is likely to lead to better considered decisions.
I return to the point that noble Lords have been pressing. How does an applicant apply to the ombudsman and prove that he has a substantial case? It may be that the bank manager was rude to the applicant when he went to see him; it may be that he had to stand in a queue for a long time; it may be any number of those reasons, but, as the Minister said, if the institutions are keen to make loans, that is probably unlikely, and, frankly, rather frivolous. If we are asking people to feel that they may put a case to the ombudsman, to say that they will have no written reason and will need no written reason, is not good enough. We have not had a sufficient answer to this. The Minister has not justified why there should not be a written reason. Indeed the case for having a written reason when making a submission to the ombudsman is overpowering. We shall need to consider this matter further, but, in the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Tope Lord Tope moved Amendment No. 8:
After Clause 1, insert the following new clause—
ASSESSMENT CRITERIA
(". No subsidy may be paid by the Secretary of State under subsection 1(1A) of the Education (Student Loans) Act 1990 unless the Secretary of State is satisfied that the person by whom the private sector student loan will be made has ensured that the assessment criteria to be used in assessing applications by eligible students do not include consideration of the applicant's course of study or the institution he attends.").
The noble Lord said: My Lords, this is another what is termed "cherry picking" amendment. It bears some resemblance to an amendment with which we dealt in Committee. We are trying to ensure that, when choosing a course and an institution at which to take that course, a student should determine that solely upon academic merit, individual choice, and vocational merit, and should not be put into the position of having to give any consideration as to whether the course or institution would prove creditworthy for a private sector student loan. That is the essence of the amendment.
In Committee, and previously, the Minister has said that the tender document seeks from prospective private lenders details of their policies and processes for considering applications, and asks for an estimate of the proportion of applicants they might reject.
I hope that the Minister will assure us today that when they look seriously at those tender documents, as he has assured us they will, and we accept that they will, they will ensure that there is no possibility of any discrimination or decisions being based upon disapproval of a type of course or upon a judgment about the merits or otherwise of a particular learning institution. That is what the amendment seeks to address. I beg to move.
Lord Morris of Castle Morris: My Lords, it is a pleasure to support the noble Lord, Lord Tope, in the

1523
amendment, especially as he has supported me so stoutly in many another I trust that he will feel able to do so for the rest of the Bill, and, indeed, many a Bill hereafter.
I have read and re-read what the Minister had to say on this question when we discussed it in Committee in—I must agree with the noble Lord, Lord Tope—very much the same terms as those in which we have brought it back. The Minister spoke at 8.45 p.m. Perhaps he, and we, and all of us, were becoming rather tired, but I am bound to say that sadly it was not, in my view, the very best reply that he gave in Committee. I hope that he will be able to improve on his performance today. He said—I paraphrase—that there was little that he could add to his previous responses. He said that bank managers were honourable persons; that lawyers were also good fellows; and that the Dearing terms of reference were a matter for a another occasion; and, then, getting to the point, that the Government had asked prospective private lenders for—both the noble Lord, Lord Tope, and I seem to have noticed this—details of their policies and processes for considering applications and an estimate of what proportion of applicants they thought that they might reject. That is not good enough, nor is it true.
Bankers are in a tough, harsh, unforgiving, competitive business these days. No longer is your typical bank manager a wise, experienced, mellow and beneficent pipe-smoking patriarchal sort of a fellow. She is more likely to be a smart and street-wise lady under stern instructions from head office to jerk up the percentage profit this year, otherwise she will be out on her ear. Banks have changed. So far as I can see, they seem to have changed a great deal since the Minister last went into one.
My noble friend Lord Ponsonby of Shulbrede, who has the advantage of being younger than most Of us, exemplified that point, and the point that the amendment strives to make, when he told us that when he was taking his postgraduate degree in petroleum engineering he was regularly harassed—he used the word "harassed"—by his bank with offers of more and more complicated loans: "Take out another loan—any kind of conditions you like. Petroleum engineers are bound to be important fellows before very long, and these people are worth having on our books". He said in Committee that banks make such calculations, and I believe him. He is right. They have to.
A student of fine art, or a student from a former polytechnic whose excellence has not yet been fully established—I have chosen that phrase with great care to avoid trouble from half the country's universities—may well seem less attractive a prospect than my noble friend Lord Ponsonby of Shulbrede, for a wide variety of reasons.
Private institutions need no protection or defence. The private individual (the young student) needs both. That is why I strongly support the amendment.
Baroness Farrington of Ribbleton: My Lords, first, perhaps I may ask the House to note that in my experience the most usual bank manager is still male,
1524
and not female. I can only assume that female bank managers have all gone to the Principality, and that circumstances there are different.
There is a great deal of prejudice about the types of course that students take at university. The employment potential of people on arts courses may be misunderstood. It is unlikely that a bank manager in a part of the country where a particular course is not available will know the details, for example, of courses in technical illustration and the possibility of a 100 per cent. placement in employment.
The second point upon which I would ask the Minister to comment is that one of his government's Secretaries of State in the early 1980s—a person for whom I had great respect on many occasions—once made a statement about there being no need to provide so many sociology and psychology courses. The Secretary of State had to correct that misunderstanding when it was explained to him that psychology was essential if people wanted to become the educational psychologists who would be needed in ever-increasing numbers to implement the Government's special educational needs legislation. That is a type of prejudice.
Can the Minister say that a uniform policy will be applied by institutions, if they change their minds and bid for this type of work; that a student applying in Aberdeen for a psychology course will be treated in the same way as a student applying in Edinburgh, Cardiff or Lancashire? It is important that the policy is clear. Before the Minister says that this is a matter purely of commercial judgment, perhaps I may remind him that, throughout, the Government's statements have been about student choice. What choice is there if, from a basis of ignorance, lack of knowledge or prejudice, someone precludes certain students from access to loans merely because of the type of course they are taking?
6.30 p.m.
Lord Henley: My Lords, I received 10 out of 10 from the noble Lord, Lord Morris of Castle Morris, for one of my earlier answers. However, I expect that the response I gave in Committee at 8.45 p.m. did not receive 10 out of 10 from him but possibly only one or two out of 10. We shall see whether I can improve on that. However, in speaking to the amendment in Committee I had addressed a number of similar amendments and I believed that I should be wasting the Committee's time if I spoke at great length. That is why I opened my innings by saying that I was not sure that there was much more I could add to what I had said earlier in response to other similar amendments. On this occasion I shall try to respond at greater length, this being the only amendment in that group to return.
Perhaps I may make it clear that we neither want nor expect the private lenders to assess applications in the way noble Lords fear. On the contrary, we want to involve the private sector so that all students have opportunities to get the benefits of its expertise in personal lending. But to get these benefits we need to put in place a system which allows the banks and building societies to operate efficiently along normal commercial lines. The instinct of noble Lords opposite to regulate would prevent that.

1525
Secondly, as I said on a number of occasions, the financial institutions will be lending their own money and bearing most of the risk in so doing. In these circumstances, decisions on whether to lend to a particular applicant must be left to them.
We could, of course, require that private lenders accept any application from an eligible student. But that kind of provision would work against the grain of the private sector's approach. It is doubtful whether it would be acceptable to the banks and building societies. And, frankly, we see nothing to be gained by compelling first their involvement and then their acceptance of any eligible application.
Thirdly, while I understand noble Lords' concerns that some students might suffer rejection because of their course or institution, I believe that possibility to be exaggerated. If the banks and building societies tender for the right to offer subsidised loans, they will do so because of the advantages of being in this market in a substantial way. Once in, why should they take a restrictive view of applicants' credit-worthiness? The incentive will be to maximise their share of the market. There will be strong competition. They will be competing against other private lenders. They will also be competing against the Student Loans Company, which will also have a substantial share of the market. The private lenders will have market share to build up and reputations to protect. Why should they want to get involved in this scheme and then court adverse publicity by rejecting a large number of applicants?
As I made clear in Committee, we have asked prospective private lenders to include in their tenders details of their policies and processes for considering applications. We have also asked for an estimate of what proportion of applicants they might reject. I can assure the noble Lord, Lord Tope, that in evaluation of the tenders we shall look carefully at their responses. I can give an assurance that we shall take into account any tenders which appear to be designed to exclude large classes for peculiar reasons. If we are not satisfied that will be a factor in our decision on which tenders to accept.
However, I do not believe that it would be right to follow the policy advocated by the noble Baroness, Lady Farrington, of insisting on a uniform policy for all banks and institutions wherever they are in the country. As I said earlier, that must be a matter for them.
I accept that the amendment is well intentioned but it goes against the grain of what we are trying to achieve with the private sector. Therefore, I hope that the noble Lord will feel able to withdraw it.
Lord Tope: My Lords, I thank the Minister for his assurance, which was welcome. I am not sure that I wish to follow the noble Lord, Lord Morris, in awarding marks, but perhaps six out of 10 would be high. Perhaps the Minister should be awarded five out of 10.
It is not our purpose to regulate the private sector for the sake of doing so or to restrict its responsibilities. In moving the amendments our purpose is to protect
1526
students who must find themselves in increasingly vulnerable positions as some form of loan becomes a way of life in higher education.
I am sorry that the Minister did not feel able to go further. I continue to be concerned that if we have no obvious assurance that there will not be discrimination on the basis of course or institution, and if students are given no reason for refusal of an application, we could be heading into a situation in which students are treated unfairly. However, I am grateful for the assurance that the Minister gave in response to my opening comments. On that basis, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 9 not moved.]
Schedule [Consequential amendments]:
Lord Morris of Castle Morris Lord Morris of Castle Morris moved Amendment No. 10:
Page 3, line 21, after ("student",") insert—
("(aa) after sub-paragraph (1)(c) insert—
"(d) make provision for the level of sums paid by the person borrowing in respect of repayment of a loan to be linked to the income of the person borrowing",").
The noble Lord said: My Lords, in Committee my noble friend Lord Desai attempted to encourage discussion about long-term loans versus short-term loans. We have not yet had that discussion. The idea did not commend itself to the Minister nor to his colleagues in government, but it will not go away because it can so easily and often cause hardship. The mortgage style repayments provided for in the Bill mean that graduates must repay loans within a short period at a time when their income will be at its lowest level. Loans from the Student Loans Company must be repaid over 60 months once the student's earnings reach 85 per cent. of the national average. Private sector loans will not differ vastly.
On Second Reading in the other place the Minister of State claimed that the average repayment was £18 a month (Official Report, Commons, 27/11/95; col. 945.). That is based on the repayments being made now by students who took out loans in the early years of the scheme's operation when loans made up a smaller percentage of the total support package. As the loan becomes half of the package in 1996–97 debts and the size of repayments will increase.
Researchers at the University of Northumbria—a university which has established its excellence in many areas and upon whose work we can certainly rely—has estimated that the growth of student loan debt based on the current five-year repayment period will mean that students graduating after a three-year course in 1997 must pay £75 a month. After a four-year course the estimated figure is £100 a month.
That seems to us to be an unnecessarily heavy burden on young people at a crucial period of their financial lives. Can the Minister give us an idea of how much it would cost to ease the burden for people in that position, as described by researchers at the University of Northumbria? If debt is too onerous it brings default. As I said earlier, it is difficult for young people in their final year at school, or in their first year at university

1527
when they are probably scared out of their wits that they will fail their first year examinations, to work out what they will honestly be able to afford to repay in several years' time. They have no experience on which to base that estimate. The people whom they will be consulting will be people in the private sector who are legitimately in that business for the sordid motive of private profit. They are not there to help the students in the first instance. They are there to satisfy their shareholders; to do a decent job for the banks; and to make money. The bottom line is private profit. Those people are not giving disinterested advice; and disinterested advice for students in that position is not easily come by.
Default is a real possibility. As at 31st July 1995, 435,000 borrowers were due to make loan repayments, of which 187,000 were granted deferment for a year, and of the 248,000 liable to make payments, 9,000 were in arrears and 35,000 were in default. That is not a brilliant record.
The problems caused by the current mortgage-style repayment scheme are widely recognised, and not simply by noble Lords on all of these Benches on this side of the House. The Minister cannot brush under the carpet the fact that the Conservative Political Centre National Policy Group on Higher Education, to which I referred earlier and on which he congratulated me on having got its statements right and on reading—
Lord Henley: My Lords, I was wondering whether the noble Lord was going to refer to his colleague, Mr. Field.
Lord Morris of Castle Morris: My Lords, no, but I could do. However, the Conservative Political Centre National Policy Group has identified a number of disadvantages with the mortgage loan scheme and has found advantages in an income-contingent loan scheme where repayments can be collected through the national insurance and income tax system. The Minister must realise that one of his principal advisers is very much on our side in this regard. We are not making a party-political point. It just seems simple common sense.
In Committee the Minister said that he had no wish to pre-empt the Dearing inquiry on that issue. But regulations for the existing scheme could easily be changed to allow income-related payments. He does not have to defer the decision to or beyond Dearing, and in any event he cannot have Dearing both ways.
The DFEE has written to the Committee of Vice-Chancellors and Principals listing reasons why alternative repayment schemes are absolutely out of the question, beyond the pale and not possible. I have seen that letter and I am deeply unimpressed by its arguments. They are redolent of a fixed determination not to find a way out of this and not to find any way in which change could be considered.
If the Minister does nothing else as a result of today's discussions, I invite him to think again about this problem and to find a way to meet us on the question of repayment methods, about which students are deeply
1528
concerned. If it can be done in other countries, there is no reason why, if the will is there, it cannot be done in the United Kingdom. I beg to move.
Lord Tope: My Lords, I spoke on Second Reading about repayments and I support this amendment. We should be and need to be looking at some form of income-contingent repayment scheme. As I understand it, that is what this amendment seeks to achieve. I commend it to the Minister in the terms in which it was moved by the noble Lord, Lord Morris of Castle Morris.
Baroness Park of Monmouth: My Lords, I should like to repeat what I have said many times, including on Second Reading, about the sound common sense of having an income-contingent repayment system. Among other things, it might actually get back some money for the Treasury, and I sorely doubt whether the present system will achieve that within the next 10 years. That is one point.
I hope that at the very least, when the Minister returns to the department he will ensure that when the question of support for students is considered by the Dearing Committee, that letter is not taken as the only briefing to the committee on the line to take. I hope that there will be serious examination of all options by the Dearing Committee.
6.45 p.m.
Lord Henley: My Lords, we are going somewhat beyond the Bill in debating income-contingent schemes. As I made clear on another occasion, these are matters which should properly be left to the Dearing Committee.
The system that we have at present is in part income-contingent. It does not begin to bite, as the noble Lord, Lord Morris, put it, until earnings reach 85 per cent. of average earnings, currently £15,204. That figure can be changed by means of order under the 1990 Act. That 85 per cent. figure can be changed by means of regulation under the 1990 Act, as can the time taken to repay. A great deal can be done under the powers provided by the 1990 Act.
The noble Lord, Lord Morris of Castle Morris, quoted my honourable friend in another place as saying that the current average repayment is only some £18. I should have to look at the figures given by the University of Northumbria to see whether that is right. That figure will increase over the years and each year, as the necessary regulations are brought forward, Ministers will have to consider whether the repayment period should be lengthened or whether the level of average earnings should be adjusted upwards and so on. But those matters can be addressed each year.
Introducing a greater degree of income-contingency would introduce unnecessary complexity into the scheme. Having said that, I hope that that is a matter which Sir Ron will look at as part of his inquiry. But it could be time-consuming and labour intensive to check the income of all borrowers. It would also he costly. Either students or taxpayers would have to pay for that.

1529
I should like to pose one or two questions to the noble Lord about his amendment. I should like to know whether noble Lords opposite intend that the amount collected by the scheme should be increased by charging students more or whether they intend that repayments should be reduced and that the taxpayer should pay more. They certainly cannot have both. It is not possible both to reduce the financial burden on students and to increase the amount of money collected by the scheme.
Perhaps the noble Lord intends, as the amendment would allow, that students should pay more than they actually borrowed by means of a graduate tax. I am sure that students would wish to know whether that is the intention of the amendment. Whatever is the case, if noble Lords are advocating a more generous scheme, I should like to know how they propose to fund that and whether that has been included in their spending plans.
I believe that the present scheme achieves an extremely good balance between the costs of higher education both for the taxpayer and the student. Therefore, we intend that the current repayment arrangements will apply to private sector loans. But, as I said, if we believe that the burden on the students is increasing unnecessarily, we have the means to address that problem.
Lord Morris of Castle Morris: My Lords, I am grateful to the Minister for his reply. He referred once again to the 1990 Act and said that the time taken to repay can be varied by that Act. He has said that before, and I agree with him; it could. Why then is it not varied? Here is an opportunity. Why does the Minister not take that opportunity? The least that I should like him to do this evening is to accept the principle that an income-contingent loan is better than the mortgage repayment scheme and to take away the idea and think about it hard. I ask him to consult the officials who advise him so well and come back on Third Reading with further and better particulars and a better idea than the one we have at present.
The Minister asked me what we should do. My answer is the regular one, that we should not be here in the first place. We should not have got ourselves into this fix. If we had been discussing the matter of loans over a period of years, we should not have found ourselves in the position in which the student bodies are entirely against us and where there does not seem to be a bank, building society, finance house or even Shylock the moneylender who will take us seriously and come to our aid.
Repayments could be over a longer period. This is something that we would certainly want to discuss with student bodies and with the Committee of Vice Chancellors and Principals. I notice that the Minister has still not said anything whatever about the virtue of long-term loans versus short-term loans; I can only conclude that it is something he is determined not to have anything to do with. Our point is that a student should be given a choice about the kind of repayment structure he prefers. That is what we would build into any plans we might have for student loans if it appeals to us, and if and when—and especially when, and may
1530
it be soon—we come into power. I hope that that will convince the Minister that we on these Benches certainly take the matter extremely seriously and that we have our plans which I am not prepared to divulge in detail at this stage, or over this Dispatch Box, as he will readily understand. He can look forward, concealing his curiosity and his impatience as best he can, to reading what is put forward on these matters by my noble friends and my right honourable friend in the Labour Party's manifesto for the next general election which cannot come too soon. Having said that, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Morris of Castle Morris Lord Morris of Castle Morris moved Amendment No. 11:
Page 3, line 30, leave out from ("above") to ("steps") in line 32 and insert ("shall include provision for defraying in full expenses incurred by institutions at which eligible students are attending courses in respect of").
The noble Lord said: My Lords, I, or we, or all of us, got into a state of mild confusion about this amendment at Committee stage, for which I apologise. I have returned to the matter with the Committee of Vice-Chancellors and Principals between then and now and I hope that I have the facts correctly listed. My understanding is that as originally drafted there was no provision in the Bill for the reimbursement of universities' costs in processing the new private sector loans. In response to CVCP pressure a government amendment was tabled at Committee stage which allowed reimbursement of universities' costs in processing both public and private student loans. That, so far as it went, was welcome.
The amendment before us is designed to ensure that universities are fully reimbursed. Under the existing public sector scheme universities are only partially recompensed for processing loans. The point was powerfully put by the noble Baroness, Lady Park of Monmouth, whom I seem to be complimenting all through the proceedings this evening. However, she seemed to me to make such splendid contributions at Committee stage that I cannot resist doing so. Universities want the duty to reimburse them in full to cover the full costs of processing loans made mandatory rather than permissive. Universities would like to see the Bill amended so that there is, first, a firm duty to meet administration costs and, secondly, an agreement that those costs have to be met in full.
Universities are subsidising the Student Loans Company at present to the tune of some £2 million. As we know from the debate that we had on the capital funding of universities and the cut made in it last year, universities are in no position to do this, and there is no reason why they should. It is entirely unjust and unfair that universities, out of money which comes to them from the Treasury, should be handing money back to the Treasury to do something which the Treasury has compelled them to do in the first place. This is economics gone crazy. They should not have to subsidise private sector financial institutions at all. In

1531
their current financial state they simply cannot afford to do so. It would be absolutely the last straw. I beg to move.
Lord Henley: My Lords, the amendment would require the Secretary of State to meet the full administrative costs of the higher education institutions which are responsible for the certification of eligibility for student loans. However, the duty to reimburse an institution for expenses incurred would not allow for the payment of a fixed fee which might well exceed the level of a purely compensatory payment. Institutions would also need to justify their claim for expenses, particularly in the manner proposed in the amendment. The system which the provision in the Bill is designed to preserve is potentially more generous than the one proposed by the amendment.
However, I understand the noble Lord's concern. It was one raised in another place and one which gave rise to government amendments which were accepted during Committee stage. We made clear that it is our intention that higher education institutions should be paid for the work they do certifying eligibility for both public sector and private sector loans. The level of the current fee for the certification of eligibility is a matter for the higher education institutions and the Student Loans Company to determine. It is for the higher education institutions to put their case forward if they think the fee they receive is not sufficient. The HEIs' role in relation to public sector loans will not change; they will continue to be reimbursed by the Student Loans Company. I see no reason to change the fee setting arrangements. I believe that the arrangements ensure a good deal for the taxpayer and a quality service for students.
As far as private sector loans are concerned, it is our intention that higher education institutions should agree with private lenders the terms and fees of any certification work they do. However, we hope that most applications will be handled without specific reference to the higher education institutions. This will mean that the Bill does not create any additional work for them; indeed we expect their workload to decrease. Where such work is required by regulation, we shall ensure that the regulations provide for the payment of fees. That was the reason behind the amendments I brought forward at Committee stage. I believe that these arrangements will complement and enhance the current arrangements for the determination of fees and will ensure that the loans scheme continues to deliver a good deal for both students and the taxpayer.
Lord Morris of Castle Morris: My Lords, before the noble Lord sits down, I am delighted by part of what he said. He said at the very end that where private sector loans involved higher education institutions the latter would receive payment of fees. Does that mean full payment of fees?
Lord Henley: My Lords, as I made clear, the amendment proposed by the noble Lord is defective in the way it refers to expenses. That would create more trouble for the institutions because they would have to itemise the expenses and then justify them. We believe that a fee system is much better. Under the arrangements
1532
for the Student Loans Company it is for the higher education institutions and the SLC to negotiate an appropriate level of fees. Where fees are necessary in relation to the private sector, we believe that regulations will be the appropriate way to provide for payment of fees. Fees are the better way forward rather than expenses, which is what the noble Lord's amendment is asking for if he can accept the distinction between the two. Expenses would create a major problem for the higher education institutions, and one I think they would come to regret.
Lord Morris of Castle Morris: My Lords, I am grateful to the noble Lord. The distinction between expenses and fees is one which I shall have to consider, but in so far as the payment of fees means the full payment of fees I am content with what he said which seems to be more or less "yes", or at least a categorical "may be". It is important that we should be as clear as possible and as we are juggling several terms together I reserve the right to come back to the matter at Third Reading when I have read our exchanges carefully in the cold light of dawn. It is rather wet in the Derbyshire Peak District at the moment. I need to be satisfied on this point. In the meantime I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.

Trusts of Land and Appointment of Trustees Bill [H.L.]
7 p.m.
The Lord Chancellor (Lord Mackay of Clashfern): 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.—(The Lord Chancellor.)
On Question, Motion agreed to.
House in Committee accordingly.
[The DEPUTY CHAIRMAN OF COMMITTEES (Baroness Lockwood) in the Chair.]
Clauses 1 to 5 agreed to.
Clause 6 [General powers of trustees]:
Lord Mishcon Lord Mishcon moved Amendment No. 1:
Page 3, line 13, at end insert—
("( ) Subsection (2) is subject to the restrictions imposed by the Trustee Act 1925 on the number of trustees and where there are more than foul beneficiaries entitled as mentioned in subsection (2) any conveyance pursuant to that subsection shall be to such of the beneficiaries as the beneficiaries may unanimously request, failing which to such of them as the trustees may think fit, and in either case in trust for all the beneficiaries.").
The noble Lord said: Perhaps I may make a few remarks before dealing with the amendment. First, I believe that the Lord Chancellor's Department has been assisted, as I hope it always will be, by the Law Society in dealing with the technical matters relating to this otherwise uncontroversial Bill. I personally should like to pay my tribute to the Land Law and Succession Committee of the Law Society, and in particular to my

1533
colleagues, Mr. Donald Lockhart and Mr. C.M. Jarman, who are responsible for whatever learning I may show in the course of the amendments that I shall move.
Secondly, I do not have the slightest intention, despite the House being so full, of pressing any of the amendments that I shall move. The intent of them is to help. If the Lord Chancellor, with his usual courtesy, would care to give his views on them tonight, possibly accepting some of them, or, if he sees fit, between now and Report stage, we can have a useful Report stage if that be necessary. Some amendments may be carried over. On the other hand, we may find that we have reached agreement and that the Report stage can, therefore, be properly brief.
I turn to Amendment No. 1. Clause 6(6) and 6(8) appear to apply the general rule that in a private trust there shall be no more than four trustees of land. The amendment states that in clear terms and provides how the four are to be identified since, if the land is to be conveyed to the beneficiaries, they will hold as trustees for themselves, and if they are more than four in number a selection will be necessary. I beg to move.
The Lord Chancellor: So far as it is within my power, perhaps I may match the opening words of the noble Lord, Lord Mishcon, and thank the committee of the Law Society which has been extremely helpful in this technical area of the law. My officials have found it extremely useful to discuss these matters with it.
On the amendments that the noble Lord proposes tonight, my attitude will be that all of them require to be considered carefully. We can put on record the matters which require to be considered in the hope that by the next stage we shall have resolved them.
It is difficult to see why Amendment No. 1 is considered necessary. The principal provision is Clause 6(1), which confers on trustees of land for the purpose of exercising their functions as trustees all the powers of an absolute owner in relation to the land. There is nothing in Clause 6(2) to suggest that a power is being conferred on trustees of land to create a trust of land with more trustees than an absolute owner could appoint.
There is also nothing in Clause 6(2) to suggest that that is not subject to the provisions of Section 34 of the Law of Property Act 1925 as amended by the Bill, which provides, among other things, for a conveyance of land to more than four persons in undivided shares to operate as a conveyance to the first four named in the conveyance on trust for all of them. That already enables the trustees to exercise a degree of control, by selecting the first four names and, given that the power in Clause 6(2) is not dependent on the beneficiaries asking for it to be exercised, it is questionable what benefit is to be gained by empowering the beneficiaries to specify which four of them shall be trustees for the others.
1534
There may, however, be further points to be taken into account and, therefore, I am willing to consider the matter further. But at the moment, the amendment appears in my humble view not to be necessary.
Lord Mishcon: I am most grateful to the noble and learned Lord. Together with others, I shall consider what he said. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 6 agreed to.
Clause 7 agreed to.
Clause 8 [Exclusion and restriction of powers]:
The Lord Chancellor The Lord Chancellor moved Amendment No. 2:
Page 4, line 8, leave out from ("trust") to end of line 10 and insert ("makes provision requiring any consent to be obtained to the exercise of any power conferred by section 6 or 7, the power may not be exercised without that consent.
( ) Subsections (1) and (2) have effect subject to any enactment which prohibits or restricts the effect of provision of the description mentioned in them.").
The noble and learned Lord said: Amendment No. 2 arose out of concern that a particular provision concerning occupational pension schemes should not inadvertently be thwarted, but it has been drafted in more general terms so as to ensure that similar provisions which may exist in other fields are also not adversely affected. Clause 8 allows the powers of trustees of land to be restricted, excluded or made subject to consent by the disposition creating the trust. Section 35(4) of the Pensions Act 1995, however, prevents the powers of occupational pension scheme trustees being fettered by reference to requirements to obtain the consent of the employer, and it is right that this specific provision, aimed at a particular need in defined circumstances, should not be overridden by the general provisions of Clause 8. The same principle is applicable to specific provisions in other enactments which prohibit restriction on trustees' powers in certain circumstances, and the provision inserted into Clause 8 by Amendment No. 2 has been drafted so as to apply to all such provisions, not just the pensions legislation.
I think I should add at this point that my officials have been considering with others what amendments might be necessary elsewhere in the Bill to ensure that it does not cut across the scheme of the Pensions Act 1995. The greatest cause for concern, I believe, was Part II of the Bill, concerning appointment of trustees, but I hope that the amendments already tabled to that part of the Bill will ensure that the provisions of Part II will not affect pension schemes.
There is also concern that Clause 9 and Clauses 11 to 13 are inappropriate for pension schemes, and that argument has some force. There is some difficulty, however, in seeing how those clauses would apply to pension schemes, since they apply only in relation to beneficiaries who are beneficially entitled to an interest in possession in land subject to the trust, and it is not easy to see how pension beneficiaries can be said clearly to have such an interest. It is for that reason that I have not tabled amendments to exclude pension schemes specifically from the ambit of those clauses, but I should

1535
be happy to bring forward such amendments if satisfied that the clauses, as presently drafted, apply to pension scheme beneficiaries. I think it right to raise the point at this stage in case on reading these proceedings your Lordships or others may think that there is room for further improvement. With that explanation, I beg to move.
Lord Mishcon: I have noted what the noble and learned Lord said. As he well knows, his remarks will be of great interest to those who are concerned about pension schemes and generally in regard to the matters of which he spoke.
On Question, amendment agreed to.
Clause 8, as amended, agreed to.
Clause 9 [Delegation by trustees]:
The Lord Chancellor The Lord Chancellor moved Amendment No. 3:
Leave out Clause 9 and insert the following new Clause—
DELEGATION BY TRUSTEES
(" .—(1) The trustees of land may, by power of attorney, delegate to any beneficiary or beneficiaries of full age and beneficially entitled to an interest in possession in land subject to the trust any of their functions as trustees which relate to the land.
(2) A power of attorney under subsection (1) shall be given by all the trustees jointly and may be revoked by any one or more of them.
(3) Where a function is delegated to a beneficiary by a power of attorney under subsection (1), it is revoked if he ceases to be beneficially entitled to an interest in possession in land subject to the trust; but where a function is delegated by such a power to a number of beneficiaries jointly it is not revoked in accordance with this subsection unless each ceases to be beneficially entitled to such an interest.
(4) A delegation under subsection (1) may be for any period or indefinite.
(5) A power of attorney under subsection (1) cannot be an enduring power within the meaning of the Enduring Powers of Attorney Act 1985.
(6) Beneficiaries to whom functions have been delegated under subsection (1) are, in relation to the exercise of the functions, in the same position as trustees (with the same duties and liabilities); but such beneficiaries shall not be regarded as trustees for any other purposes (including, in particular, the purposes of any enactment permitting the delegation of functions by trustees or imposing requirements relating to the payment of capital money).
(7) Where any function has been delegated to a beneficiary or beneficiaries under subsection (1), the trustees are jointly and severally liable for any act or default of the beneficiary, or any of the beneficiaries, in the exercise of the function if, and only if, it was not reasonable for the trustees to delegate the function to the beneficiary or beneficiaries.
(8) Neither this section nor the repeal by this Act of section 29 of the Law of Property Act 1925 (which is superseded by this section) affects the operation after the commencement of this Act of any delegation effected before that commencement.").
The noble and learned Lord said: Clause 9 is an important part of the new trusts of land scheme. It allows a degree of flexibility which will enable those who think it appropriate to do so to reproduce the functional equivalent of a strict settlement, but without the attendant complexity of the Settled Land Act scheme, by delegating as appropriate their functions as trustees in relation to land subject to the trust to a beneficiary who is beneficially entitled to an interest in possession in that land. A number of points of concern
1536
have arisen during the process of considering the Bill, however, and in order to deal with those points it seemed that the most satisfactory approach would be, instead of tabling numerous amendments to the existing Clause 9, to replace it with a redrafted version taking all the necessary changes on board and refining the drafting into the bargain.
The major area of concern about the clause as it stands is in relation to the liability of trustees for the acts and defaults of a beneficiary to whom they have delegated any of their functions. Subsection (7) presently makes the trustees strictly liable, on a joint and several basis. While this accords with the position under Section 25 of the Trustee Act 1925 allowing temporary delegation in a trustee's absence abroad, and would give the trustees a clear incentive to adopt a supervisory role, it has been criticised on three main grounds.
The first is that the stringent liability, while reasonable in the exceptional circumstances of Section 25 of the Trustee Act 1925, would discourage the use of the power to delegate indefinitely conferred by Clause 9, making the clause a white elephant. The second is that the Law Commission's report envisaged the possibility of a settlor who wishes to get as close as possible to the philosophy of the Settled Land Act actually obliging the trustees to delegate to the income beneficiary, and that this would make it much less likely that anyone would accept a trusteeship in such circumstances (where he could be made liable for the conduct of someone he might have no right to control). The third is that trustees might be forced by a court order to delegate to a beneficiary in the event of dispute, and to hold the trustees liable for a subsequent default by the beneficiary-delegate in those circumstances would be inequitable.
These points have been cogently argued by a variety of commentators both academic and professional, and subsection (7) of the new version of Clause 9 seeks to meet them. The new subsection limits the liability of trustees who delegate to circumstances where it was not reasonable for them to delegate to the beneficiary or beneficiaries in question, requiring them to consider whether they should in fact delegate, but freeing them from liability if they are obliged by settlor or court to do so. This narrowing of the liability of trustees is balanced, in the interests of other beneficiaries, by provision in the new subsection (6) for the beneficiary-delegate to be in the position of a trustee, with the concomitant duties and liabilities, in relation to the functions delegated.
A related point of concern is that delegation to a beneficiary should not affect the statutory machinery for overreaching, so that capital money must still be paid to or by the direction of two trustees or one trustee being a trust corporation, and the beneficiary is not to be taken as a trustee, or acting by the direction of trustees, for these purposes simply by reason of having had functions delegated to him. Subsection (6) of the new version of Clause 9 accordingly provides for a beneficiary not to be regarded as a trustee for the purposes of any enactment imposing requirements relating to the payment of capital money. It also ensures that a beneficiary cannot

1537
sub-delegate functions delegated to him, by providing that he is not to be regarded as a trustee for those purposes either, which closes off, for example, the possibility of sub-delegation by an enduring power of attorney.
Finally, the new version of Clause 9 limits the circumstances in which delegation of functions by trustees to a beneficiary will automatically be revoked. By virtue of subsection (3) of the new version of Clause 9, this will now happen only if the beneficiary in question ceases to have the requisite interest in the land subject to the trust, and where the delegation was made jointly and severally to more than one beneficiary, the delegation will remain effective in relation to the others as long as they retain their qualifying interest. Where there is a change in trustees, this will revoke the delegation only if it results in their ceasing to be unanimous that the delegation should continue. These changes will prevent delegations being revoked unnecessarily and having to be re-effected with the attendant risk both to beneficiaries and to third parties acting in reliance on the delegation. I beg to move.
7.15 p.m.
Lord Mishcon: I apologise in advance if what I have to say, respectfully, to the noble and learned Lord, about the clause is somewhat lengthy. I shall not cover the points that he has raised which have led to the new clause, on which representations have been made which have been listened to carefully by his department. One can see the result of them in the clause. I hope that I shall only refer to matters that have not been covered by the noble and learned Lord.
The new version of the clause meets a number of concerns that have been expressed by the Law Society, but some points have not quite been covered. Perhaps the noble and learned Lord, in regard to the arrangement which exists between us on this occasion, could give his views or ensure that his department gives its views on those matters before Report stage.
The principle seems to be that if a beneficiary is appointed as attorney for the trustees under the clause, his appointment should automatically terminate if he ceases to have a beneficial interest sufficient to qualify him for appointment under the clause. That is quite straightforward, where only one beneficiary is appointed.
I am not sure that the next point that I make, arising out of that, was covered by the noble and learned Lord's remarks, but he will correct me if I am wrong. Where more than one is appointed, the appointment could be either joint or joint and several. Where it is joint, one appreciates that the attorneys can only act if all of them join in doing so. In those circumstances, the government amendment provides that the appointment is only revoked if all the beneficiaries concerned cease to have the relevant beneficial interests.
What is the position where there is a joint and several arrangement by way of appointment? Any one of the attorneys is able in those circumstances to act alone,
1538
without the concurrence or necessarily even the knowledge of the other beneficiary attorneys. The clause makes no provision for that situation, as I see it, but in principle if a beneficiary has ceased to hold his interest he ought not to be able to act on his own under the power of attorney. I pose the question and I ask for an answer, not now necessarily, but between now and Report stage, if that is deemed to be a valid point.
I turn to subsection (2). The principle of the subsection is that all the trustees must at all times be happy with the delegation. A power of attorney must be given by all of them and any one of them can at any time revoke the power under subsection (2). If a new trustee is appointed to the trust, title to the land will become vested in him jointly with the continuing trustees. Any transaction with third parties will therefore show his name as a party along with his co-trustees. In order for a purchaser to be satisfied that the beneficiary purporting to act on the trustees' behalf is empowered to do so, it will be necessary to show that he was appointed by all the current trustees. That will require either an additional provision in the Bill, as I see it, deeming the existing power of attorney to be adopted by a new trustee automatically by virtue of the appointment; or else that the new and continuing trustees grant a renewed power of attorney at or after the time when the appointment of the new trustee takes effect.
Bearing in mind the principle underlying subsection (2) to which I referred, I respectfully suggest that it is the latter alternative that would be more appropriate, in order that the matter is not overlooked by the new trustee. Could we have clarification that a power of attorney under Clause 9 automatically loses its effect on the appointment of any new or additional trustee? For my part, I would be quite content that the power of attorney will retain its validity if a trustee simply dies or retires from the trust, because in those circumstances there is no reason to suppose that the continuing trustees will necessarily wish the power to terminate at that time, which seems to be implicit in the amended clause. However, perhaps I may ask the noble and learned Lord if he can confirm that the Government regard that as being the effect.
I turn to subsection (7), to which the noble and learned Lord referred specifically in his remarks. Subsection (7) of the original version of Clause 9 would have made the trustees answerable to the beneficiaries for the acts of the life tenant to whom they had delegated their powers. As the noble and learned Lord pointed out, that would reverse both the existing rule in Section 29(3) of the Law of Property Act 1925 and the practical position of Settled Laud Act trustees. The prospect of vicarious liability would have created a major barrier to the use of the power. I am informed that this point was put to the noble and learned Lord's department on behalf of the Law Society with the suggestion that it would be preferable to replicate Section 29(3) of the Law of Property Act and that a trustee making a delegation should not be liable for the acts or defaults of the person to whom the power was delegated, but that

1539
the person to whom a delegation was made would be deemed to be in the position and to have the duties and liabilities of a trustee.
The amendment now put forward by the Government will, in subsection (6), make the delegate liable as a trustee, thus meeting one of the concerns expressed on behalf of the Law Society, and will partly meet the other concern in that, under subsection (7), the delegated trustees will be liable for the act or default of the delegate beneficiary (or beneficiaries), but now,
"if, and only if, it was not reasonable for the trustees to delegate",
the function in question to the beneficiary or beneficiaries.
I submit that that will leave the trustees in a very unsatisfactory position, and there will therefore still be a disincentive to trustees to use these new powers. Although the burden of proving that a trustee acted unreasonably will be on those who allege it, the amendment would nevertheless lead to uncertainty and increase the possibility of litigation. What is to be regarded as "reasonable"? Do the trustees have to consider whether delegation per se is reasonable—surely the clause assumes that it must be, even for a general delegation of all the trustees' functions regarding the land—or do they have to consider narrower issues, such as whether it is reasonable to delegate that power to that particular beneficiary at that particular time? Does the test apply only at the time of delegation, or over the entire period of delegation?
As the noble and learned Lord appreciates, trustees are not normally subject to a statutory obligation to act "reasonably"; the general law requires a very high standard of conduct by trustees in any event. This amendment contains a nebulous test, and while the burden of proof may be on the person making the allegation, the proposed test will significantly increase the risk of acrimonious dispute between beneficiaries and trustees—probably at the expense of the trust fund—while at the same time opening the trustees to personal risk of having to meet costs if the court holds against them. Is that a position which any trustee would find satisfactory?
Is it not possible simply to rely on the duties of trustees under the general law as to how they exercise their powers (in this case the power to delegate under this clause), without an express provision which may serve to confuse the extent of the trustees' responsibility? I ask this question not entirely rhetorically. Do the Government consider that Section 29(3) of the Law of Property Act 1925, which does not incorporate an equivalent to this subsection (7), has failed to protect beneficiaries?
The Lord Chancellor: I say at once that I wish to consider carefully all the matters that the noble Lord mentioned. Perhaps I may very briefly give my initial reactions to some of the points he made.
The first question was: what happens where the delegation is a several one? In that case I should have said that the first part of subsection (3) means that the beneficiary in question is no longer subject to the power of attorney in subsection (1). It is revoked if he ceases
1540
to be beneficially entitled to an interest in possession in land subject to the trust. That is his position. So far as the others are concerned, they are not affected.
On the other hand, in so far as it is a joint provision, the second part of subsection (3) operates to affect it. On rather a brief examination, I believe that the point the noble Lord made is met in that way. But my officials will look further at the question with those who are interested in these matters.
Turning to the noble Lord's second question, my impression is that the clause as drafted would have the effect that retirement or death of a trustee should not revoke automatically the delegation that the trustee has made. That would seem to be the right answer. Again, I will take advice on whether that desirable objective is attained by the present drafting.
Thirdly, the question is raised as to whether subsection (7) gives the desirable test. It was thought wise to have some possibility of the trustees being called to account if they were to exercise the power to delegate in a way that might cause damage to the subject matter of the trust; for example, by delegating to a beneficiary who was weak or feckless. The idea was that the test in Speight v. Gaunt, that trustees should exercise the care expected of a reasonably prudent map of business, should apply to this. We will certainly consider carefully what the noble Lord said, and see whether further provision is required. In the meantime, perhaps in the light of that explanation the noble Lord will feel able to withdraw his amendment.
Lord Mishcon: I am most grateful to the noble and learned Lord. In the circumstances he mentions, I certainly beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
New Clause 9 agreed to.
Clause 10 agreed to.
Clause 11 [Consultation with beneficiaries]:
The Lord Chancellor The Lord Chancellor moved Amendment No. 4:
Page 5, line 22, leave out ("if provision to the effect that it is not") and insert ("unless provision to the effect that it is").
The noble and learned Lord said: In moving this amendment, I speak also to Amendments Nos. 5, 6 and 8, which are relevant to it.
Amendment No. 4 is the first of a group of amendments affecting the transitional provisions of Clause 11. Clause 11 presently provides for trustees of land so far as possible to consult the beneficiaries of full age and capacity and beneficially entitled to an interest in possession in land subject to the trust, and so far as consistent with the general interest of the trust to give effect to the wishes of those beneficiaries or the majority of them. This carries through the present effect of Section 26(3) of the Law of Property Act 1925, with the difference that the new provision applies unless a contrary intention is expressed, whereas Section 26(3) does not apply to an express trust for sale unless specific provision to that effect is made in the disposition. The original draft Bill made no transitional provision, but subsections (3)and (4) of Clause 11 allow for the person or persons who created the trust, or such of them as are

1541
alive and of full capacity, to "opt out" by a deed during the transitional period of one year beginning with the date of commencement, and for beneficiaries who do not want to be consulted to opt themselves out (and bind their successors) in the same way.
These provisions have been reconsidered in the light of representations from the legal profession, pointing out that a trust cannot be "opted out" if there is at commencement no settlor living and of full capacity. A settlor who has died or lost capacity might well have set up the trust in the knowledge that beneficiaries would not have the opportunity to control trustees' decisions in this way unless he spelt out the intention that they should have it; and it is therefore argued that the present transitional provisions will have the effect of changing the terms of some trusts but not others on a capricious basis. There has also been criticism of the provision for opting out for beneficiaries on the basis that it adds complication for little benefit. No one would wish to do that. These arguments were echoed to an extent by the noble Lord, Lord Mishcon, at Second Reading, and in my view they have considerable force.
This group of amendments accordingly replaces the provisions for opting out for existing express trusts of land, offering instead the possibility to opt in, on the same conditions as are already provided for in subsection (3), so that the consultation requirement of subsection (1) does not apply to an existing express trust of land unless provision to the effect that it is to apply is made by a deed executed during the transitional period by the person or persons who created the trust or such as are still alive and of full capacity. This will reduce to the minimum the number of cases in which the provision could be said to be changing the terms of any trust. As a consequence, the provision for beneficiaries to opt out in subsection (4) will become superfluous, and so it is deleted. I beg to move Amendment No. 4.
Lord Mishcon: I appreciate very much the noble and learned Lord's courteous reference to what I said at Second Reading. I say at once that I agree with the amendments.
On Question, amendment agreed to.
7.30 p.m.
The Lord Chancellor The Lord Chancellor moved Amendments Nos. 5 and 6:
Page 5, line 30, leave out subsection (4).
Page 5, line 39, leave out ("subsections (3) and (4)") and insert ("subsection (3)")
The noble and learned Lord said: With leave of the Committee, I shall move Amendments Nos. 5 and 6 together. I have already spoken to them with Amendment No. 4. I beg to move.
On Question, amendments agreed to.
The Deputy Chairman of Committees (Baroness Lockwood): I should point out that there is a printing error in Amendment No. 7, which should read:
"Page 5, leave out line 41, and insert".
Lord Mishcon Lord Mishcon moved Amendment No. 7:
Page 5, leave out line 41, and insert—

("(i) before the commencement of this Act by disposition, or

(ii) by a will made before the commencement of this Act even if the testator dies after the commencement of this Act (unless the will is republished by a codicil made after such commencement which expressly provides that subsection (1) shall apply) or by an assent under such a will; and").

The noble Lord said: I move the amendment as amended. The effect of the clause, as amended by the Government, is that the new rule in subsection (1) (which extends Section 26(3) of the Law of Property Act 1925) applies to trusts of land created by a disposition after commencement of the Act, subject to a right for the settlor to opt out for the trust; to "existing express trusts of land" created by a disposition before commencement of the Act only if the settlor is living and of full capacity and opts in for his trust during a one-year transitional period; and automatically to all trusts not created by a disposition, whether they arise before or after commencement of the Act.
The suggested amendment is concerned with the definition of what is an "existing express trust of land" in the context of trusts created by someone's will. Because wills are frequently made long before the testator's death, the amendment proposes that a trust created by a will of a person dying after commencement of the Act should count for this purpose as an existing trust unless the will itself was made after commencement or republished after commencement by a codicil which expressly adopts the new rules. This avoids an inadvertent application of the rules simply because, for example, a testator has made a short codicil altering the amount of one legacy. I beg to move.
The Lord Chancellor: This amendment obviously requires careful consideration. I undertake to give it that consideration between now and Report stage.
Lord Mishcon: I appreciate what the noble and learned Lord said. In view of his remarks, I ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Lord Chancellor The Lord Chancellor moved Amendment No. 8:
Page 5, line 44, leave out ("or (4)")
The noble and learned Lord said: I spoke to this amendment with Amendment No. 4. I beg to move.
On Question, amendment agreed to.
Clause 11, as amended, agreed to.
Clauses 12 and 13 agreed to.
Clause 14 [Applications for order]:
The Lord Chancellor The Lord Chancellor moved Amendment No. 9:
Page 7, line 8, leave out ("a beneficiary under") and insert ("has an interest in property subject to").
The noble and learned Lord said: In moving this amendment I shall speak also to Amendments Nos. 10 and 11.
Amendment No. 9 is the first of a small group which together correct a problem with the description in Clause 14(1) of persons who may apply for an order. The problem that these amendments address is that the wording of Clause 14(1) presently appears to exclude a secured creditor of a beneficiary (notwithstanding the express reference to such persons in Clause 15(1)(d)) since such a person's interest does not arise "under the trust" as required by the definition of "beneficiary" in Clause 23(1).
The present provision of Section 30 of the Law of Property Act which Clauses 14 and 15 replace and which refers to "any person interested" certainly covers persons with charging orders, and it seems the apparent narrowing of the range of applicants came about because of the desire to ensure a wider range by including those interested in personalty under a mixed trust changing the reference to an interest in land to a reference to an interest under the trust.
Amendments Nos. 9 and 10 accordingly substitute for the references in Clause 14 to a beneficiary or a beneficiary's interest under the trust references to a person interested in the property subject to the trust and a person's interest in property subject to the trust.
Amendment No. 17 does the same for the reference to a beneficiary in Clause 17(2) which deals with the application of Clause 14 to trusts of the proceeds of sale of land. I beg to move.
On Question, amendment agreed to.
The Lord Chancellor The Lord Chancellor moved Amendment No. 10:
Page 7, line 16, leave out ("beneficiary's interest under") and insert ("person's interest in property subject to")
The noble and learned Lord said: I have already spoken to this amendment. I beg to move.
On Question, amendment agreed to.
Clause 14, as amended, agreed to.
Clauses 15 and 16 agreed to.
Clause 17 [Application of provisions to trusts of proceeds of sale]:
The Lord Chancellor The Lord Chancellor moved Amendment No. 11:
Page 8, line 37, leave out from ("to") to ("of") in line 40 and insert ("a trust of proceeds of sale of land and trustees of such a trust as in relation to a trust of land and trustees")
The noble and learned Lord said: I spoke to this amendment with Amendment No. 9. I beg to move.
On Question, amendment agreed to.
Clause 17, as amended, agreed to.
Clause 18 agreed to.
Clause 19 [Notice to beneficiaries of proposed appointment of trustee]:
The Lord Chancellor The Lord Chancellor moved Amendment No. 12:
Page 9, leave out line 37 and insert ("in a case where the beneficiaries are of full age and capacity and are absolutely entitled to the property subject to the trust.")
The noble and learned Lord said: Amendment No. 12 is the first of a group of amendments which together limit the application of Part II of the Bill in response to concerns expressed at Second Reading, in particular by
1544
the noble Lord, Lord Mishcon. With the Committee's leave, therefore, I think it is appropriate for me to speak to that whole group, Amendments Nos. 12, 14 and 18 together.
Part II of the Bill has been seen as a source of difficulty, occasioned mainly by the fact that, as presently drafted, it applies very widely, and will accordingly apply to trusts with large numbers of beneficiaries as it does to small trusts where the beneficiaries are co-owners, with no provision for trusts to opt out. The Law Commission's original intention, evidenced by very early instructions, was that these provisions, giving a priority right to the beneficiaries to direct the trustees to appoint trustees of the beneficiaries' own choosing in certain circumstances, were intended to apply not to all trusts but only where the beneficiaries are all of full age and capacity and together absolutely entitled to the whole beneficial interest under the trust so as to be able to bring the trust to an end in any event.
Ensuring that Part II of the Bill applies only in that situation seems apt to deal with the principal area of concern and so Amendments Nos. 12, 14 and 18 each replace the present qualifying condition that the beneficiaries are ascertained as being of full age and capacity with the condition that they must be of full age and capacity and that together they are absolutely entitled to the whole beneficial interest under the trust. Amendment No. 12 does that in the case of Clause 19, Amendment No. 14 for Clause 20 and Amendment No. 18 for Clause 21. I beg to move.
Lord Mishcon: I hope the noble and learned Lord will not regard my comments as anything other than gratitude for what has been done. They are an attempt to point out something that may have been overlooked.
The wording requiring that the beneficiaries,
"are of full age and capacity and are absolutely entitled to",
the trust property is, in substance, identical to wording in Clause 6(2). It is believed that the intention in Clause 6(2) is that each of the beneficiaries in question must be absolutely entitled, so that if there are several beneficiaries it must be on the basis of concurrent interests; that is, as joint tenants or tenants in common. But in Clauses 19, 20 and 21—I am assuming for this purpose that my next attendance at the Dispatch Box fails to cut out Clause 19 from the Bill—the beneficiaries' interests need not be concurrent so long as together they account for the entire beneficial interest, with no other parties being actually or potentially interested.
If that is correct, the noble and learned Lord may on consideration feel that it is unsatisfactory that effectively the same expression should be used in two places in the Bill with different meanings. I respectfully ask that the Government consider coming forward on Report with an amendment to clarify that matter; for example, inserting the word "together" before the words "absolutely entitled" into the amended wording now proposed.
The Lord Chancellor: I am grateful for those comments and will obviously wish to consider them

1545
carefully. I am particularly grateful for the drafting suggestion, which I shall commend to those advising me. In the meantime, I believe the noble Lord is agreeable that the amendment should be made part of the Bill, subject to further consideration.
On Question, amendment agreed to.
7.45 p.m.
On Question, Whether Clause 19, as amended, shall stand part of the Bill?
Lord Mishcon: As I understand the intention behind Part II of the Bill, which we have now reached, it is to reverse a 1948 court decision—Re Brockbank, Ward v. Bates [1948] Ch206—that, even if beneficiaries are together absolutely entitled to trust property and therefore able to put an end to the trust, they cannot control the appointment of trustees without bringing the trust to an end. The problem is that the bringing of the trust to an end may have adverse tax consequences and thus be a high price for the beneficiaries to pay for securing a change in the trusteeship.
The Bill, as clarified by the government amendments to Clauses 19, 20 and 21—if I may look ahead a little—seeks to address that situation by allowing the beneficiaries in those circumstances to direct the trustees whom to appoint where a vacancy exists or where there is power to appoint additional trustees. I interpose here to say that the Law Commission rightly points out that the right needs to be expressed in that way rather than as a direct power to appoint trustees; otherwise third parties will have to inquire into the circumstances of the trust in order to establish whether they are dealing with properly appointed trustees.
Curiously, that proposal would not go all the way to meet the difficulty arising from the 1948 case, as it would arise only if there was a vacancy and would only secure the appointment of one or more new trustees without necessarily involving the departure of those with whom the beneficiaries do not see eye to eye. One remembers, of course, that trustees of a private trust cannot act by a majority.
The proposals in the Bill are confined by two requirements which I am happy to support. The first is that they will not apply where the power to appoint trustees is vested in someone nominated for that purpose in the trust instrument. It would be wrong to apply those rules, for example, where the settlor had reserved to himself the power to appoint trustees, as that would involve potentially defeating the settlor's intention for his trust.
Secondly, the beneficiaries must all be of age and between them absolutely entitled to the trust property so as to be able to terminate the trust by unanimous agreement if they so choose. Similarly, the right to act under the proposed new provisions is, rightly, given only where the beneficiaries are unanimous.
The central concern with the proposals in the Bill relates to the insistence in Clause 19 that, where the two requirements to which I have just referred exist, the
1546
trustees cannot make an appointment without giving written notice to all the beneficiaries. The sanction for getting it wrong, even inadvertently, is the invalidity of an appointment of trustees. That could have serious implications for the actual or purported trustees and, indeed, for third parties dealing with them. Even without that section, the notice system would create all manner of problems for practitioners and potential expense in a wide variety of trust situations without necessarily achieving any benefit at all.
Perhaps I may give some examples. First, it is not clear to whom notice should be given if a beneficiary has died but no grant of probate or letters of administration have yet been made. That is addressed by government Amendment No. 21, but that may not necessarily assist—again if I may look ahead—if the beneficiary is domiciled abroad and a foreign law governs the devolution of his estate.
Secondly, the provisions depend heavily on the dates when different notices are given, yet nothing is said to fix those dates where, for example, notices are sent by post. Thirdly, the trustees may not have been notified of some disposition of a beneficiary's interest or of his death, thus invalidating any notice sent to the original beneficiary and with it anything done in reliance on the notice.
Fourthly, if a beneficiary cannot be traced or if it is not known whether he is still alive, the power to appoint trustees could become inoperable. Fifthly, the trustees may already know full well that the beneficiaries could not achieve unanimity; for example, where one of the trustees is himself a beneficiary. But the Bill would nonetheless require the expense of serving notices to be incurred anyway.
Sixthly—and the Committee will be pleased to know that this is my last example—the provision for protection of third parties dealing with the trustees is defective as it is confined to transactions with trust land so that under the Bill as drafted all manner of outsiders would have to inquire in detail into whether the circumstances of the trust were such as to fall within these rules; and if so, as to the steps taken to comply with them.
All these difficulties, I respectfully submit, go away if the notice procedure as set out in Clause 19 is removed, and provisions depending on it are removed. The government amendment—Amendment No. 21—meets at most only the first two of the problems I have described. Our three amendments therefore set out to remove the notice procedure and its attendant provisions. Even if my Amendment No. 16 is not adopted, the only situation in which beneficiaries, assuming them to be unhappy with the existing state of affairs and unanimous as to what to do about it, might be unable to require a new trustee to be appointed, if not given notice of the position by the trustees, would be if there were only four trustees or fewer than four but including a trust corporation—that is the maximum allowed—and one of them was proposing to retire with a new appointment being made in his place without the

1547
beneficiaries necessarily being aware of this. If Amendment No. 16 is adopted, there is no need for notice provisions in any event.
I have given as clearly as possible my main reason for saying that Clause 19 as it now stands should not be adopted and hope that the matter may have some consideration.
The Lord Chancellor: The noble Lord has explained clearly the position that he suggests that we should adopt. The present scheme of Part II does not go as far as the noble Lord's and it is true that, if one were going to go the whole distance of getting rid of the effects of Brockbank v. Bates, one would go this length. We had taken a rather less radical approach and one of the consequences of that approach is the need for notices to which the noble Lord has referred.
My impression of this is that there is a good deal to be said for the view that if the right to direct appointment or retirement would be exercisable at the beneficiaries' instigation—that is, qualified as a whole—there would be no need for the trustees to serve notice on the beneficiaries of their intention to appoint a new trustee and therefore Clause 19 would become superfluous with certain other advantages as well.
This is a fairly substantial change in the underlying proposals of this part of the Bill. I am sure the noble Lord will not be surprised that I would wish an opportunity to consider these proposals, which are affected not only by this Motion but also by later amendments. In the meantime, I wish to propose the amendments, which have the effect of making our own proposals better than they have been, but reserving to the noble Lord the result of consideration of his more radical proposal, which would have quite considerable effects on the wording of Part II.
Lord Mishcon: In the light of those remarks, it is with considerable pleasure that I say that I have no intention of moving that Clause 19 shall not stand part of the Bill.
Clause 19, as amended, agreed to.
Clause 20 [Appointment of trustee at instance of beneficiaries]:
Lord Mishcon Lord Mishcon moved Amendment No. 13:
Page 10, leave out lines 13 to 15 and insert—
("(a) there is no person (living and ascertained) nominated for the purpose of appointing new or additional trustees by the instrument, if any, creating the trust, and").
The noble Lord said: This amendment sets out to express, if I may say so respectfully, more clearly than in the existing paragraph (a) the circumstances in which the beneficiaries' power is to exist. I say that with very great deference because I believe that the noble and learned Lord, in view of his general remarks on other occasions, might agree with what I am now going to say. The referential drafting of the paragraph in the Bill is not helpful to the reader, the practitioner or indeed a member of the public who belongs to neither category. One aspect of the existing
1548
drafting which is not covered by the amendment is the fact that an additional, as opposed to a replacement, trustee may not be appointed where a trust corporation is in office. But that is covered, I suggest, by part of Amendment No. 16. I refer to it at this stage because it may abbreviate the discussion.
As your Lordships will see, instead of the reference as made in the Bill and in the amendments of the noble and learned Lord, we are asking that the matter be clarified, without a reference to another Act, by the clear wording of the clause. I beg to move.
The Lord Chancellor: I am very happy to consider this matter.
Lord Meston: I rise only to say that, in case this becomes an entirely private dialogue, I support the amendment.
The Lord Chancellor: I am sure that that will make my consideration of it even more careful.
Lord Mishcon: I am delighted to have the assistance of the noble and learned Lord the Lord Chancellor and equally—he is, if I may say so, entitled to the description of learned—of the noble Lord, Lord Meston. In the circumstances, I ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Lord Chancellor The Lord Chancellor moved Amendment No. 14:
Page 10, leave out line 16 and insert—
("(b) the beneficiaries are of full age and capacity and are absolutely entitled to the property subject to the trust.").
The noble and learned Lord said: I spoke to this amendment with Amendment No. 124, I beg to move.
On Question, amendment agreed to.
Lord Mishcon Lord Mishcon moved Amendment No. 15:
Page 10, line 17, leave out subsection (2) and insert—
("(2) The beneficiaries may give either or both of the following written directions—

(a) a direction to the person of persons entitled to exercise the power conferred by subsection (1) or (where none of the trustees is a trust corporation) subsection (6) of section 36 of the Trustees Act 192.5 to exercise the power by appointing the person or persons specified in the direction;

(b) a direction to one or more of the existing trustees to retire from the trust.").

The noble Lord said: This amendment extends the proposal in Clause 20(2) by giving the beneficiaries not just power to direct the appointment of trustees where circumstances allow but also in the same defined circumstances, and acting unanimously, to require one or more of the existing trustees to resign. Although this is a little more radical than the Bill as drafted would seem to be, it meets the 1948 court decision of Brockbank v. Bates, to which I referred previously, more directly. It is to be remembered that

1549
the right only arises where the beneficiaries could instead anyway insist on the trust being wound up and distributed at their direction. I beg to move.
The Deputy Chairman of Committees: I should point out that there are two printing errors in the amendment. Line 3 of the amendment should read,
"a direction to the person or persons",
and line 5 should end,
"section 36 of the Trustee Act".
8 p.m.
The Lord Chancellor: This is a fundamental amendment of the scheme to which the noble Lord referred in connection with the Question of Clause 19 standing part of the Bill. I have certainly undertaken to consider it. It is more radical than the basic proposals under Part II of the Bill, but it has certain advantages, as the noble Lord explained, in relation to the giving of notice. I would like to have the opportunity of considering that further.
Lord Mishcon: I am grateful to the noble and learned Lord. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Mishcon Lord Mishcon moved Amendment No. 16:
Page 10, line 19, at end insert—
("( ) Subject to sections 22(3) and 22(5), any person to whom the direction is given shall join in executing any necessary deeds to comply with it unless before he has done so one or more of the beneficiaries by whom it is given gives to that person a written retraction of his direction or of his participation in a joint direction.").
The noble Lord said: This amendment allows for a retraction of the direction by any of the beneficiaries who joined in giving it, whereupon, since a direction must be unanimous, it would cease to be effective. The point stems from concern as to the risk of undue influence, which could easily arise if beneficiaries are indeed to be given the right to require trustees to resign. An example could be where there is one dominant beneficiary who, perhaps by misrepresenting the history, induces the others—perhaps his children who have recently come of ageߞto sign a direction requiring the resignation of a trustee and perhaps the replacement of that trustee by the dominant beneficiary himself, when that trustee has in fact been resolutely standing up for their interests against the unreasonable demands of the dominant beneficiary.
Having given that example, I considered with my colleagues whether one should have a direct reference in this part of the Bill to potential, undue influence. I decided, with my colleagues, against that. That would implicitly put trustees on inquiry on this issue in all cases even where it is not suspected in fact. If a trustee suspects that one or more of the beneficiaries may not be well served by the change to which they had put their signatures, he will wish to explore the matter with them and perhaps encourage them to take fully independent advice on it. A mechanism to allow them to retract is important to avoid claims by other dominant
1550
beneficiaries that once the direction is given it is binding and the recipient is irrevocably bound to act on it. I beg to move.
The Lord Chancellor: No solution proposed to the problems sought to be addressed in Part II of the Bill is completely free from some degree of concern. The concern that underlies this amendment is something that we would want to consider carefully in considering whether this more radical solution should be adopted. With these perhaps slightly less encouraging words than some I have used earlier, the noble Lord may feel able to leave this matter with us for further consideration.
Lord Mishcon: I have found the words sufficiently encouraging to beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Mishcon Lord Mishcon had given notice of his intention to move Amendment No. 17:
Page 10, line 20, leave out subsections (3) and (4)
The noble Lord said: This amendment follows from what I said about Clause 19. In the circumstances I do not propose to move it.
[Amendment No. 17 not moved.]
Clause 20, as amended, agreed to.
Clause 21 [Appointment of substitute for incapable trustee]:
The Lord Chancellor The Lord Chancellor moved Amendment No. 18:
Page 10, leave out line 34 and insert—
("(c) the beneficiaries are of full age and capacity and are absolutely entitled to the property subject to the trust.").
The noble and learned Lord said: I spoke to this amendment with Amendment No. 12. I beg to move.
On Question, amendment agreed to.
Lord Mishcon Lord Mishcon had given notice of his intention to move Amendment No. 19:
Page 11, line 1, after ("(4)") insert ("and sections 22(3) and 22(5)")
The noble Lord said: This amendment is really consequential, despite being separate, to my Amendments Nos. 21 and 22. In the circumstances I believe that it is appropriate for me not to speak to the amendment now but to wait until Amendments Nos. 21 and 22 are reached.
[Amendment No. 19 not moved.]
Clause 21, as amended, agreed to.
Clause 22 [Appointments: supplementary]:
The Lord Chancellor The Lord Chancellor moved Amendment No. 20:
Page 11, line 14, at end insert—
("(2A) A notice under section 19 shall be taken to have been given to a person by having been left at, or sent by registered post to, his last known place of residence or business in the United Kingdom; and sections 17 and 18 of the Law of Property (Miscellaneous Provisions) Act 1994 (provisions about notices where intended recipient is dead) apply to the giving of such a notice as they apply to the service of a notice affecting land.
(2B) A direction under section 20 or 21 shall be taken to have been given to a person by having been left or sent as specified in subsection (2A) unless he proves that he did not receive it.").
The noble and learned Lord said: Amendment No. 20 is the first of a series of amendments which deal with points concerning the practical operation of the provisions of Part II of the Bill. With the leave of the Committee, I believe it appropriate to speak to that group of amendments together; namely, Amendments Nos. 20, 23 and 25.
Amendment No. 20 makes provision as to the service of the notice which the trustees must give the beneficiaries under Clause 19 so that they have the opportunity to direct appointment of a trustee of their choice, and of the beneficiaries' direction to the trustees under Clause 20 or 21.
The trustees' notice may be given by leaving it at, or sending it by registered post to, each beneficiary's last known place of residence or business, and advantage is taken of the provisions of the Law of Property (Miscellaneous Provisions) Act 1994 so that service is not invalidated where a beneficiary has died but the trustees are not aware of the death. In the case of the beneficiaries' direction, leaving or posting the direction is not conclusive, but rather, in line with Section 196 of the Law of Property Act 1925 and similar provisions, raises a rebuttable presumption of proper service. This difference is justified by the fact that in one case the donor of the notice is under a duty to give it, and in the other that the recipient of the direction is under a duty to act on it.
Amendments Nos. 23 and 25, taken together, make provision to similar effect as is now made in respect of Clause 11. They ensure that Part II will not apply if the disposition creating the trust indicates a contrary intention, and that it does not apply to existing trusts unless steps to ensure that it applies are taken by the set law within a year of the commencement of the Act. Therefore, wherever Part II would be inappropriate, even though the trust would qualify, it will be possible to ensure that it does not apply. I beg to move.
Lord Mishcon: The remarks I ventured to make as regards Clause 19 are pertinent to this amendment and to other amendments which the noble and learned Lord mentioned.
On Question, amendment agreed to.
Lord Mishcon Lord Mishcon moved Amendment No. 21:
Page 11, line 19, at end insert ("or in contravention of the restrictions imposed by the Trustee Act 1925 on the number of trustees")
The noble Lord said: This amendment is merely intended to make clear that the restrictions imposed by the Trustee Act 1925 on the number of trustees are to apply and will not be overridden by the provisions of the Bill. The provision of Clause 20(4) and Clause 21(3), as originally drafted, could otherwise be argued to produce an exception to the normal rules in that regard. I respectfully refer that to the noble and learned Lord to see whether, on consideration, he agrees with the amendment. I beg to move.
The Lord Chancellor: The advice I have from parliamentary counsel at present is that the provisions of Part II of the Bill, as presently drafted, cannot
1552
properly be said to override the general restrictions on the number of trustees since those restrictions are set out on the face of the power which the trustees are directed by the beneficiaries to exercise in Section 36 of the Trustee Act 1925. One sees these expressly in Section 36(1) just before paragraph (a) and again clearly set out in the concluding words of subsection (6). However, I am happy to reconsider the objection to that advice before Report stage. In the meantime it is my advice that the amendment is not necessary.
Lord Mishcon: I listened carefully to what the noble and learned Lord said. He was kind enough to say that he will look at the amendment in the intervening period before Report stage. In those circumstances I ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Mishcon Lord Mishcon had given notice of his intention to move Amendment No. 22:
>Page 11, line 20, leave out subsection (4)
The noble Lord said: I believe that this amendment too is covered by my observations on Clause 19. In the circumstances I do not move the amendment.
[Amendment No. 22 not moved.]
The Lord Chancellor The Lord Chancellor moved Amendment No. 23:
Page 11, line 22, at end insert—
("( ) This Part does not apply in relation to a trust created by a disposition in so far as provision that it does not apply is made by the disposition.").
The noble and learned Lord said: I spoke to this amendment with Amendment No. 20. I beg to move.
On Question, amendment agreed to.
Lord Mishcon Lord Mishcon moved Amendment No. 24:
Page 11, line 23, leave out subsection (5) and insert—
("(5) No appointment pursuant to a direction under section 20 or 21 shall prejudice any proper lien or other rights of any person in relation to property subject to the trust or interests under the trust nor, if to do so would prejudice any such lien or rights of his, shall any person to whom a direction to retire is given under section 20(2)(b) be obliged to comply with it until reasonable arrangements have been made for the preservation of his lien or otherwise for the protection of his rights.").
The noble Lord said: I venture to suggest that this is rather an important amendment. Its purpose is to protect the proper rights of existing trustees who may have taxation liabilities in connection with the trust fund or who may quite properly have incurred contractual liabilities to third parties in dealing with the trust property. The point is even stronger, I suggest, if the direction is to appoint non-resident trustees, which action would trigger a capital gains tax disposal of the entire trust fund. The amendment makes it clear that they retain any proper lien and are not bound to join in complying with the beneficiary's direction until they are reasonably protected. That could be relevant where trust investments are held in a nominee name such that as soon as a trustee retires the trust assets, to which

1553
otherwise he might have legitimate recourse to satisfy his liabilities, are entirely outside his control. I beg to move.
The Deputy Chairman of Committees: I must advise the Committee that if Amendment No. 24 is agreed to, I cannot call Amendment No. 25 on the pre-emption rule.
The Lord Chancellor: The object of Amendment No. 24 is desirable in principle. Our doubt is about whether it is necessary in all the circumstances of Part II. However, as we are to reconsider Part II in any event, I shall reconsider this amendment also.
Lord Mishcon: Not only because of what the noble and learned Lord has said, but also because of what the Chairman has said—or have I to say "Chair"?>
Baroness Trumpington: Never!
Lord Mishcon: I am so glad not to have to say that. In those circumstances, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Lord Chancellor The Lord Chancellor moved Amendment No. 25:
Page 11, line 23, leave out from ("Part") to end of line 24 and insert ("does not apply in relation to an existing express trust unless provision to the effect that it is to apply is made by a deed executed during the transitional period—

(a) in a case in which the trust was created by one person and he is of full capacity, by that person, or

(b) in a case in which the trust was created by more than one person, by such of the persons who created the trust as are alive and of full capacity.

( ) In subsection (5)—

(a) "an existing express trust" means a trust created before the commencement of this Act by a disposition, and

(b) "the transitional period" means the period of one year beginning with the commencement of this Act.

( ) A deed executed for the purposes of subsection (5) is irrevocable.").
The noble and learned Lord said: I have already spoken to this with Amendment No. 20. I beg to move.
Lord Mishcon Lord Mishcon moved, as an amendment to Amendment No. 25, Amendment No. 26:
Line 12, after ("disposition,") insert ("or
("(ii) by a will made before the commencement of this Act even if the testator dies after the commencement of this Act (unless the will is republished by a codicil made after such commencement which expressly provides that subsection (1) shall apply) or by an assent under such a will;").
The noble Lord said: Government Amendments Nos. 23 and 25 introduce the right to opt out of the Part II rules in new trusts created after the Bill comes into effect and exclude the operation of those rules for existing trusts unless their settlor opts in within a one-year transitional period. As with Clause 11, I venture to propose that a trust created by a will of a person dying after commencement should count for that purpose as an existing trust unless the will itself was made after commencement or republished after
1554
commencement by a codicil which expressly adopts the new rules. That would avoid an inadvertent application of the rules simply because, for example, the testator made a short codicil—I have used those words before—altering the amount of just one legacy. I beg to move.
The Lord Chancellor: I am as content to consider this amendment as I was to reconsider the earlier amendment which it substantially replicates, but in a different connection.
Lord Mishcon: I am trying to find new words to say that I ask leave to withdraw the amendment, but I cannot think of any for the moment, so perhaps I may use the same words again and beg leave to withdraw the amendment.
Amendment No. 26, as an amendment to Amendment No. 25, by leave, withdrawn.
On Question, Amendment No. 25 agreed to.
8.15 p.m.
Lord Mishcon Lord Mishcon had given notice of his intention to move Amendment No. 27:
Page 11, line 24, at end insert—
("( ) This part does not apply to any trust scheme within the meaning of Part I of the Pensions Act 1995.").
The noble Lord said: The noble and learned Lord referred earlier to consideration that he was giving to the Pensions Act 1995 and generally in regard to pension matters. I tabled this amendment to meet concerns expressed during our Second Reading debate, as the noble and learned Lord knows. In the circumstances and in view of what the noble and learned Lord has said, I do not intend to move Amendment No. 27.
[Amendment No. 27 not moved.]
Clause 22, as amended, agreed to.
Clauses 23 to 28 agreed to.
Schedule 1 [Provisions consequential on section 2]:
The Lord Chancellor The Lord Chancellor moved Amendment No. 28:
Page 14, line 34, leave out ("the chargee") and insert ("giving effect to the charge")
The noble and learned Lord said: Amendments Nos. 28 to 30 effect technical changes to the provisions of Schedule 1, and I propose to speak to all three amendments together. Schedule 1, which is consequential on Clause 2, makes provision for cases which presently result in a strict settlement being imposed under the Settled Land Act and provides that after commencement those cases will instead result in a trust of land under the new regime. Amendment No. 28 clarifies paragraph 3, which deals with family charges; that is, cases where land is charged in consideration of marriage or by way of family arrangement with a rentcharge for a person's life or with capital, annual or periodical sums for any person. Any such charge made by an instrument coming into effect after commencement of the Act will have effect as a declaration of trust in favour of the chargee.

1555
Amendment No. 28 makes it clear that the land is held on trust, not for the chargee as such, but rather so that effect may be given to the charge.
Amendments Nos. 29 and 30 clarify the position where, after commencement of the Act, a person purports to create an entailed interest. It will not be possible under the new regime to create entailed interests, and paragraph 5 provides for the attempt to grant such an interest to any person to take effect as a declaration that the property is held in trust for that person. Amendment No. 29 makes it clear that the property is to be held in trust absolutely for that person absolutely, so that he or she, if of full age and capacity, can have the property transferred to him or her. Amendment No. 30 closes a possible loophole; namely, where a person attempts to create an entailed interest not by granting it direct to another but by declaring himself a trustee in tail. In that case, the declaration of trust in tail is simply ineffective, and the effect may be illustrated by an example. If A purports to declare himself trustee in tail for B, he will simply remain the owner; and if he purports to declare himself trustee for B for life and C in tail thereafter, B's life interest will not be affected, but the property will simply revert to A, or his estate, when that life interest ceases. I beg to move.
Lord Meston: I am slightly concerned about the drafting, if not the result, of Amendment No. 28. As presently drafted, the last line of paragraph 3 reads:
"the instrument operates as a declaration that the land is held in trust for the chargee".
As amended, it would read, "the instrument operates as a declaration that the land is held in trust for giving effect to the charge". In other words, the provision would refer to the purpose of the trust rather than to the individual beneficiary. I find that clumsy and I am not sure that I understand it. Will the noble and learned Lord confirm that it is intended that the instrument shall be treated as operating as a declaration that the land is held in trust solely to give effect to the charge? If that is the intention, I wonder whether the wording can be reconsidered.
The Lord Chancellor: The intention is that the land should be held so that effect may be given to the charge. However, I am happy to reconsider the wording.
On Question, amendment agreed to.
The Lord Chancellor The Lord Chancellor moved Amendments Nos. 29 and 30:
Page 15, line 6, after ("trust") insert ("absolutely").
Page 15, line 8, at end insert—
("( ) Where a person purports by an instrument coming into operation after the commencement of this Act to declare himself a tenant in tail of real or personal property, the instrument is not effective to create an entailed interest.").
The noble and learned Lord said: I have already spoken to these amendments with Amendment No. 28 and, with the leave of the Committee, I beg to move them en bloc.
On Question, amendments agreed to.
Schedule 1, as amended, agreed to.
Schedule 2 [Amendments of statutory provisions imposing trust for sale]:
The Lord Chancellor The Lord Chancellor moved Amendment No. 31:
Page 17, line 15, leave out from ("subsection") to end of line 20 and insert ("(2)—

(a) after "a trust" insert "for the persons who (but for this Act) would from time to time be entitled to the ownership of the land by virtue of its reverter with a power, without consulting them,", and

(b) for the words "upon trust" onwards substitute "in trust for those persons; but they shall not be entitled by reason of their interest to occupy the land.").

The noble and learned Lord said: Amendment No. 31 is part of a group, comprising also Amendments Nos. 32 and 37, which seeks to minimise the possibility of practical problems in the peculiar circumstances of cases arising under the Reverter of Sites Act 1987. With your Lordships' leave, I shall speak to all three amendments together.
Section 1 of the Reverter of Sites Act 1987 concerns any enactment (such as the School Sites Act) which provides for land to revert to the ownership of a particular person where that land was made available for particular purposes and has ceased to be used for those purposes. The land, instead of reverting, vests on trust in the persons in whom it was vested before the particular use ceased; and the trust in question is an express trust to sell the land and hold the net profits until sale and the net proceeds after costs and expenses on trust for the people who would, but for these provisions, be entitled to the land on reverter. The present amendments in paragraph 6 of Schedule 2 substitute for this trust for sale a trust of land, with a power to sell and to retain, and a duty to consult certain beneficiaries. Practitioners in this specialised area—as undoubtedly it is—have, however, alerted my department to possible practical problems with this approach which the present group of amendments sets out to rectify.
The great advantage of the present provisions of Section 1 of the Reverter of Sites Act 1987 is that they make the position of the trustees very clear and simple in cases where there are often no beneficiaries, only people claiming to be beneficiaries whose entitlement may be difficult to sort out. Irrespective of the identity of the beneficiaries, the trustees can sell the land and, out of the proceeds of sale, deduct all their costs and expenses and meet the capital gains tax liability which they have as trustees. They can sort out the difficult question of entitlement later, if necessary going to court for directions with the proceeds of sale available to cover their costs of doing so in good faith. Under the Reverter of Sites Act, as amended by the Bill at present, however, the question of sale is neutral and there is a duty to consult.
The difficulty which has been identified is that the trustees are put at risk if they sell against the wishes of a claimant who asks for the land to be conveyed to him in specie but whose entitlement is in doubt. If that claimant's entitlement is subsequently established in court proceedings, he may sue for loss as a result of the land being sold rather than conveyed to him in specie. Trustees will also be faced with the difficulty that if

1557
claimants do not wish them to sell and there are difficult issues which need the directions of the court, they may have to incur the costs out of their own resources before they have any proceeds of sale out of which they can be paid.
In view of the fact that the trustees in reverter of sites cases have the trust thrust upon them and will often be such persons as the incumbent and churchwardens (particularly in the case of school sites), there appears to be a strong case for treating this as a special case, rather analogous to the position of personal representatives of a person who dies intestate. Amendments Nos. 31, 32 and 37 accordingly change the existing amendments which the Bill makes to the Reverter of Sites Act so as to ensure that the trust imposed permits the trustees to sell the land and hold the proceeds for the putative beneficiaries without being required to consult them or allow them to occupy the land, and with provision for meeting necessary costs, expenses and taxes. I beg to move.
On Question, amendment agreed to.
The Lord Chancellor The Lord Chancellor moved Amendment No. 32:
Page 17, line 22, at end insert—
("( ) In accordance with the amendments made by this paragraph, in the sidenote, for "trust for sale" substitute "trust".").
The noble and learned Lord said: I spoke to this with Amendment No. 31. I beg to move.
On Question, amendment agreed to.
Schedule 2, as amended, agreed to.
Schedule 3 [Minor and consequential amendments]:
The Lord Chancellor The Lord Chancellor moved Amendment No. 33:
Page 19, line 28, leave out from ("section") to second ("the") in line 29 and insert ("does not apply to capital money arising under").
The noble and learned Lord said: Amendment No. 33 seeks to correct a mistake that appears to have come about by an oversight in the process of updating the minor and consequential amendments made by the Bill to other enactments. That has the inadvertent effect of narrowing the power of advancement in Section 32(2) of the Trustee Act 1925. The amendment changes the provisions in the Bill so that the power of advancement will continue to be available in respect of property other than capital money under the Settled Land Act, including interests under a trust of land. I beg to move.
Lord Mishcon: The noble and learned Lord has already explained how this amendment comes about. I add one comment in the hope that it will be of assistance. The amendment appears to those learned in these matters to be adequate so far as it protects the existing position of Settled Land Act trusts. The question that arises is whether it is wholly adequate in respect of new trusts of land. As I understand it, the argument is that where land is involved the availability of Section 32 of the Trustee Act 1925 depends upon the words of Section 32(1). In that connection, I believe that there is a decided case which is relevant here, Re Collard's Will Trusts [1961] Ch. 293, the words of which will not be amended by the Bill. Accordingly, the proposed amendment to Section 32(2) has the desired
1558
effect of maintaining the availability of the statutory power of advancement in respect of trusts of land. I know that practitioners will regard it as very helpful to have the assurance that that is the intended effect of the amendment and that the effect is there.
The Lord Chancellor: I believe that it is right for me to consider the matter and give an answer with deliberation. My impression is that the effect is as stated, but I believe that it is wise for me to look at it as part of the consideration of these matters.
On Question, amendment agreed to.
Lord Mishcon Lord Mishcon moved Amendment No. 34:
Page 19, line 50, at end insert—
("( ) In section 36(1)—

(a) after "trusts or powers reposed in or conferred on him" insert "or declares that he has been directed to retire therefrom under section 20 of the Trusts of Land and Appointment of Trustees Act 1996", and

(b) after "desiring to be discharged," insert "declaring that he has been directed to retire".

( ) In section 39(1)—

(a) after "is desirous of being discharged from the trust" in both places where these words occur insert "or has been directed to retire therefrom under section 20 of the Trusts of Land and Appointment of Trustees Act 1996", and

(b) after "the trustee desirous of being discharged" insert "or directed to retire.".").

The noble Lord said: Amendment No. 34 makes minor changes to the Trustee Act 1925 which are consequential upon what I have said in regard to Amendment No. 15 to give the beneficiaries a right in certain circumstances to direct a trustee to retire. I beg to move.
The Lord Chancellor: I will consider the amendment, which is consequential upon the noble Lord's other amendment, along with the main thrust of the amendments.
Lord Mishcon: I still cannot find an alternative way of putting it. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Lord Chancellor The Lord Chancellor moved Amendment No. 35:
Page 25, leave out lines 28 to 31.
The noble and learned Lord said: Amendments Nos. 35 and 36 together correct an unintended effect of the present consequential amendment and repeal effected by the Bill in the Inheritance Tax Act 1984. With your Lordships' leave, I shall speak to them together. The amended provision concerns the Revenue's charge over certain assets for the purpose of recovering unpaid tax. At present, interests under a trust for sale are excluded from the charge, and the consequential amendment substitutes for the reference to interests under a trust for sale a reference to interests under a trust of land. That has the effect of significantly reducing the range of assets to which the charge may attach and is inconsistent with the intention underlying Section 237(3), which was to exclude interests in personalty from the charge, the reference to interests under trusts for sale being included because such

1559
interests are presently regarded as personalty by virtue of the doctrine of conversion. Since the Bill abolishes the doctrine of conversion, an interest under a trust of land will be an interest in land, not personalty, and should not come within the exclusion in Section 237(3). Amendment No. 35 accordingly removes the substituted reference to trust of land, while Amendment No. 36 adds to the consequential repeal some words in Section 237(3) which have no meaning once the reference to trusts for sale has gone but which were missed first time around. I beg to move.
On Question, amendment agreed to.
Schedule 3, as amended, agreed to.
8.30 p.m.
Schedule 4 [Repeals]:
The Lord Chancellor The Lord Chancellor moved Amendment No. 36:
Page 32, line 34, column 3, at end insert—
(", whether statutory or not,"")
The noble and learned Lord said: I spoke to this with the previous amendment. I beg to move.
On Question, amendment agreed to.
The Lord Chancellor The Lord Chancellor moved Amendment No. 37:
Page 32, leave out lines 44 to 48.
The noble and learned Lord said: I have already spoken to this amendment. I beg to move.
On Question, amendment agreed to.
Schedule 4, as amended, agreed to.
House resumed: Bill reported with amendments.

Deregulation (Special Hours Certificates) Order 1996
8.32 p.m.
The Earl of Courtown The Earl of Courtown rose to move, That the draft order laid before the House on 19th February be approved [13th Report from the Delegated Powers Scrutiny Committee].
The noble Earl said: My Lords, the order is to be made under the powers provided in the Deregulation and Contracting Out Act 1994. It relates to two aspects of the provision of facilities for drinking alcohol at late night dances.
The order makes two substantive changes to existing laws. First, it provides for the reinstatement of the hour which would otherwise be lost to both operators and patrons of establishments which are authorised under the licensing laws to open into the small hours when the clocks go forward at 1 a.m. at the start of summer time. Secondly, it introduces a new arrangement, that of granting these special hours certificates on a provisional basis. This provision will provide a parallel with existing arrangements for the grant of standard liquor licences.
The order has received the usual comprehensive examination since it was first laid before Parliament in draft form in November. No changes to the order have been proposed, and it has been reported by the Delegated Powers Scrutiny Committee as in a form satisfactory to be submitted to this House for affirmative resolution. I beg to move.
Moved, That the draft order laid before the House on 19th February be approved [13th Report from the Delegated Powers Scrutiny Committee].—(The Earl of Courtown.)
Lord Haskel: My Lords, we on this side of the House have no objection to the order and give it our support. We have just one question. What happens when the clocks go back in the autumn?
The Earl of Courtown: My Lords, when the clocks go back in the autumn, the Government have decided not to attempt to extract a quid pro quo. The hour which is presently gained when summer time ends will not be taken away from those wanting to dance into the early hours.
Lord Haskel: My Lords, it is not our wish to be killjoys. We have no objection to the Motion.
On Question, Motion agreed to.

Food Protection (Emergency Prohibitions) (Oil and Chemical Pollution of Fish and Plants) Order 1996
8.34 p.m.
Lord Lucas Lord Lucas rose to move, That the order laid before the House on 29th February be approved [I2th Report from the Joint Committee].
The noble Lord said: My Lords, this order prohibits all fishing activities in the area designated in it which are or may be affected by oil and other chemical pollutants as a result of the grounding of the oil tanker "Sea Empress". The order also prohibits the harvesting of edible seaweed—laver, dulse and caragheen—and a plant commonly known as samphire or glasswort. It is important that we are clear about the purpose of the order. It is made under the Food and Environment Protection Act 1985 and its purpose is to protect the consumer from potential danger from eating contaminated seafood.
I recognise that fishermen welcome the order because they believe that a statutory ban strengthens their case for compensation. But the legislation does not permit us to impose the order for that purpose and the extent of the area affected is dictated by the needs of consumer safety.
With that in mind, I am extremely grateful to the local fishermen for their responsible attitude in imposing a voluntary ban on fishing as soon as the incident occurred. That gave us the time to designate the area on the basis of scientific analysis of samples of fish and shellfish from the area and on computer modelling of the likely spread of the oil. Had we not been given that

1561
time for study and analysis, the area of the ban would have been much more indiscriminate. The designated area covers about 810 square miles and extends from St David's Head to Port Eynon Point.
Your Lordships may also be aware that we made a separate order on 20th March banning fishing for salmon and migratory trout in all rivers discharging into the area. It proved too complicated to negotiate a voluntary ban and consumer safety demands that we ensure that no contaminated fish enter the food chain. That order will be debated in this House on a later occasion.
We are continuing to monitor levels of hydrocarbons in fish and shellfish both inside and outside the area of the current ban. The analysis of total hydrocarbons is being undertaken by the Directorate of Fisheries Research at Burnham on Crouch. It is using samples collected under the guidance of the Sea Fisheries Inspectorate at Milford Haven.
The inspectors have been closely involved from the start, both in liaison with local fishermen on behalf of the Government and in the co-ordinated response to the incident by all agencies. I am grateful to them and to all those involved in the Joint Response Centre for their hard and effective work.
Enforcement of this order is being undertaken by environmental health officers from the local authorities, by the Milford Haven Port Health Authority and by officials of the South Wales Sea Fisheries Committee. All those have been issued with the appropriate authorisation to supplement the role of the Sea Fisheries Inspectorate. I pay tribute to their efficiency and willingness to undertake this work. We have also increased the number of surveillance flights over the affected area and sea fisheries protection vessels have increased the frequency of their visits.
Your Lordships will wish to know how long we expect the order to stay in place. I cannot yet answer that question. As I have said, we are continuing to monitor levels of contamination both inside and outside the area. We will use those results to determine whether the area should be amended or whether the ban should be lifted on certain species.
At present, levels of total hydrocarbons in fin-fish and crustacea are comparatively low. However, the water is cold and feeding activity is probably low. We need to check whether the levels rise as the water warms up. There also remains a possibility of further contamination from the large quantities of dispersed oil in the water column. In addition, the beached and landed oil is being remobilised. The order must remain in force until it is clear how these situations are developing. It seems likely, however, that it will be possible to lift the ban on fishing for fin-fish and crustacea first. We will have to consider whether that needs to be confined to specific areas in the light of the scientific analysis.
That analysis does not only include testing total hydrocarbons; we are also looking for polycyclic aromatic hydrocarbons (PAHs). That is a more complicated and time-consuming procedure, but as
1562
some of these substances are known or suspected human carcinogens, it is vital that we determine their concentrations before the ban is lifted.
I well recognise the effect that this ban is having on both commercial and leisure fishing. When the effect is fully known, the insurers of the "Sea Empress" and the International Oil Pollution Compensation Fund will meet all valid claims for economic loss. Meanwhile the insurers are paying hardship cases immediately; I understand that cheques have already been issued to seven of the nine fishermen who have submitted claims. I am grateful to the insurers for their willingness to help in this way.
In the longer term, of course, we need to ensure that consumers are confident that fish from Wales is of high quality and good to eat. We will be exploring how to do that with the industry and with relevant promotion bodies.
The order is designed to ensure the safety of consumers. I appreciate that many leisure and sport fishermen return their catch to the sea and that it does not enter the human food chain. Nevertheless, I make no apology for our caution over this or over the order in general; we are not prepared to take risks with consumer safety. I beg to move.
Moved, That the order laid before the House on 29th February be approved.—[12th Report from the Joint Committee].—(Lord Lucas.)
Lord Williams of Mostyn: My Lords, I am grateful to the Minister for explaining the difficult circumstances which obtain. He has already answered some of the questions that I had intended to ask. The situation is disastrous, as he indicated. An area of no less than 810 square miles is subject to a prohibition order for an indefinite period.
One tends to forget the effect that the disaster has had on west Wales. The order extends the prohibition from St. David's in the west to the Gower Peninsula at Port Eynon Point. The loss affects not only sea fishermen—because the Minister mentioned consequential prohibitions on salmon and sewin fishing. For instance, the coracle fishermen in Carmarthen have had to stop. I endorse his comment that the fishermen have behaved with extraordinary fortitude and generosity of heart. However, I am bound to say that many of them believe that the Government might have reciprocated with a full public inquiry along the lines of that of the noble and learned Lord, Lord Donaldson, into the "Braer" disaster. It appears that the consequences of this catastrophe will be greater than those of the "Braer".
I was pleased to hear the Minister say that, with the assistance of his persuasive powers, the insurers have behaved in a more flexible way than many insurers behave. It is most heartening to hear that seven of the nine claims have already been paid. However, that is limited to fishermen. There will be a colossal knock-on effect on the tourist industry. Will those claims also be paid by the insurers? Has any

1563
estimate yet been put on the number of people who will be affected economically, either directly or indirectly? Has any estimate been made of the likely financial loss which will arise out of the imposition of this order? I understand that the Minister might legitimately say that it is too early to comment. However, I should like as much precision as he can give, not for my own specific purposes but because of the deep worries of many people I know in the area. I have known the area well for many years and I know that people are seriously worried about the future of their lives and their livelihoods in that beautiful part of Wales.
Of course, the order, or something like it, is necessary and there will be no objection from us. However, alas, one hears the clang of the stable door banging shut long after the horse has galloped away over the horizon.
Lord Lucas: My Lords, I am grateful for what thanks were contained in the noble Lord's remarks. I share the tributes that he paid to all those involved locally who have helped so much in making the best of a very unfortunate incident, to put it mildly. I can confirm that the compensation fund is open to those other than fishermen. Indeed, I believe that the first person to claim ran a windsurfing school. However, the immediate fund of £2 million is restricted to the hardship which people suffer rather than to the extent of their economic loss. As yet we have no current estimate of the eventual economic loss. We have yet to see the opening of the tourist season. It is confidently predicted that the beaches will be clear by Easter, but the effect of the scare on tourism has yet to be seen.
We hope that fishing will return to normal reasonably rapidly but, drawing analogies from the "Braer" disaster, the shellfish fisheries may be affected for many years. Shellfish do not metabolise hydrocarbons—they do not expel them from their bodies—and one must wait until the shellfish which have ingested them die.
There is nothing that I can add in answer to the noble Lord. I commend the order to the House.
Lord Williams of Mostyn: My Lords, before the Minister sits down, I am grateful for the assistance that he has given and I recognise that there are limits. However, he said that it was hoped that the beaches would be clear by Easter, which is only a couple of weeks away. I should declare a limited interest, having attempted to catch fish on the River Towy for some years. Is there any indication of when the river fishing might return to normal, including coracle fishing?
Lord Lucas: My Lords, in order to establish that the sewin and the salmon are not polluted we must first catch some. We are trying to do so through the use of established nets near the river mouths. As yet, none has been caught because the fish do not appear to have returned. It will be a matter of, it is to be
1564
hoped, as few weeks as possible before we can establish that they are free from pollution. We will then open the fisheries immediately.
Lord Williams of Mostyn: My Lords, I am grateful.
On Question, Motion agreed to.

Deregulation (Friendly Societies Act 1992) Order 1996
8.45 p.m.
The Minister of State, Department of Social Security (Lord Mackay of Ardbrecknish)The Minister of State, Department of Social Security (Lord Mackay of Ardbrecknish) rose to move, That the draft order laid before the House on 12th February be approved [13th Report from the Delegated Powers Scrutiny Committee].
The noble Lord said: My Lords, I beg to move. I shall speak also to the Deregulation (Credit Unions) Order 1996. I am pleased to commend both orders to your Lordships tonight.
As your Lordships might recall, the Deregulation (Building Societies) Order 1995 was debated in this House last November. The draft orders presently before the House continue the theme of promoting economic growth, widening competition and enhancing the future of mutual institutions by removing rules and regulations which place unnecessary burdens on them.
Under the Deregulation (Friendly Societies Act 1992) Order, friendly societies will benefit, in particular, from more flexible regulatory and accounting requirements. Other changes include extending the activities of branches of incorporated societies; removing the need for societies to draw up a statement of life assurance business every five years if they carry out an annual valuation; and making it easier and quicker for societies to apply for confirmation of amalgamation, transfer or conversion.
The Deregulation (Credit Unions) Order will provide a new opportunity for growth in the movement by extending the possible scope of their activities and introducing a new qualification for membership. The maximum shareholding is also increased. It will allow those credit unions which can demonstrate satisfactory management and systems greater flexibility in the use of their funds by increasing the limits on loans to members and the maximum allowable repayment periods.
The credit unions themselves have asked for the changes that this order will give them. They find that they are operating under far too many restrictions at the moment and this order goes a long way to freeing them from bureaucracy while keeping in place the necessary protection for members. I commend the order to the House.
Moved, That the draft order laid before the House on 12th February be approved [13th Report from the Delegated Powers Scrutiny Committee].—(Lord Mackay of Ardbrecknish.)
Viscount Chandos: My Lords, I thank the Minister for his clear and succinct summary of the two orders. We

1565
debated the deregulation of building societies a few months ago and I was able to say that we on this side of the House very much wish to encourage the widest possible range of legal structures for businesses and other enterprises, subject to best management and governance practice.
We therefore welcome the measures contained in both orders. They will enable friendly societies and credit unions to widen and improve their services to their policy holders and other customers and to strengthen their competitive position vis-à-vis limited companies while still maintaining the paramount protection of consumer interests. I believe that the proposals have those objectives and I commend them to your Lordships' House.
On Question, Motion agreed to.

Deregulation (Credit Unions) Order 1996
8.48 p.m.
Lord Mackay of Ardbrecknish Lord Mackay of Ardbrecknish rose to move, That the draft order laid before the House on 19th February be approved [13th Report from the Delegated Powers Scrutiny Committee].
The noble Lord said: My Lords, I have already spoken to the order. I beg to move.
Moved, That the draft order laid before the House on 19th February be approved [13th Report from the Delegated Powers Scrutiny Committee].—(Lord Mackay of Ardbrecknish
On Question, Motion agreed to.
House adjourned at eleven minutes before nine o'clock.